10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 2010

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from              to             

Commission file number 1-33312

SALARY.COM, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	04-3465241
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

160 Gould Street, Needham, MA 02494

(Address of Principal Executive Offices, Including Zip Code)

(781) 851-8000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨ .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, par value $.0001 per share	17,835,355 shares
Class	Outstanding at August 10, 2010

SALARY.COM, INC. AND SUBSIDIARIES

INDEX

		Page
Part I. - Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets- June 30, 2010 (unaudited) and March 31, 2010	3
	Consolidated Statements of Operations- Three Months Ended June 30, 2010 and 2009 (unaudited)	4
	Consolidated Statement of Changes in Stockholders’ (Deficit) Equity Three Months Ended June 30, 2010 (unaudited)	5
	Consolidated Statements of Cash Flows – Three Months Ended June 30, 2010 and 2009 (unaudited)	6
	Notes to the Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
Part II. - Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signatures		32

2

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements:

SALARY.COM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	June 30, 2010			March 31, 2010
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	8,422		$	8,773
Accounts receivable, less allowance for doubtful accounts of $308 and $249, at June 30, 2010 and March 31, 2010, respectively		5,990			7,695
Prepaid expenses and other current assets		1,660			2,069
Assets of discontinued operations - held for sale		9,733			—
Total currents assets before funds held for clients		25,805			18,537
Funds held for clients		—			12,967
Total current assets		25,805			31,504
Property, equipment and software, net		1,328			2,094
Amortizable intangible assets, net		6,031			9,125
Other intangible assets		935			935
Goodwill		12,945			14,967
Restricted cash		1,126			1,126
Other assets		204			255
Total assets	$	48,374		$	60,006
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Revolving credit facility	$	2,525		$	2,525
Accounts payable		3,343			3,417
Accrued compensation		324			294
Accrued expenses and other current liabilities		5,421			6,251
Deferred revenue, current portion		27,028			29,356
Liabilities of discontinued operations - held for sale		8,240			—
Total current liabilities before client funds obligations		46,881			41,843
Client funds obligations		—			12,967
Total current liabilities		46,881			54,810
Deferred revenue, less current portion		3,377			2,812
Deferred income taxes		1,540			1,519
Other long-term liabilities		19			47
Total liabilities		51,817			59,188
Commitments and contingencies (Note 7)
Stockholders’ (deficit) equity:
Preferred stock, $.0001 par value; 5,000,000 shares authorized; none issued or outstanding		—			—
Common stock, $.0001 par value; 100,000,000 shares authorized; 16,944,074 and
16,705,853 issued and outstanding at June 30, 2010 and March 31, 2010, respectively		2			2
Additional paid-in capital		96,098			94,248
Accumulated deficit		(98,609	)		(92,688	)
Accumulated other comprehensive loss		(934	)		(744	)
Total stockholders’ (deficit) equity		(3,443	)		818
Total liabilities and stockholders’ (deficit) equity	$	48,374		$	60,006

See accompanying notes to the unaudited consolidated financial statements.

3

SALARY.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended June 30,
	2010			2009
	(unaudited)
Revenue:
Subscription revenues	$	8,918		$	8,972
Advertising revenues		786			913
Total revenues		9,704			9,885
Cost of revenues		2,395			2,451
Gross profit		7,309			7,434
Operating expenses:
Research and development		2,077			1,982
Sales and marketing		5,351			5,614
General and administrative		3,979			3,898
Amortization of intangible assets		450			470
Restructuring charges		1,110			—
Total operating expenses		12,967			11,964
Loss from continuing operations		(5,658	)		(4,530	)
Other income (expense):
Interest income		—			7
Other expense, net		(100	)		(99	)
Total other expense, net		(100	)		(92	)
Loss from continuing operations before taxes		(5,758	)		(4,622	)
Income tax expense		28			26
Loss from continuing operations		(5,786	)		(4,648	)
Loss from discontinued operations		(135	)		(500	)
Net loss	$	(5,921	)	$	(5,148	)
Net loss per share (basic and diluted):
Loss per share from continuing operations	$	(0.34	)	$	(0.29	)
Loss per share from discontinued operations		(0.01	)		(0.03	)
Net loss per share (1)	$	(0.34	)	$	(0.32	)
Weighted average shares outstanding used in computing per share amounts:
Basic and diluted		17,176			16,175

(1) Totals may not add due to rounding.

See accompanying notes to the unaudited consolidated financial statements.

4

SALARY.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

(in thousands, except share data, unaudited)

	Common Stock			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance at March 31, 2010	16,705,853	$	2	$	94,248		$	(92,688	)	$	(744	)	$	818
Issuance of common stock for warrant and options exercises	44,560		—		22			—			—			22
Vesting of early exercise stock options	19,674		—		4			—			—			4
Net restricted stock awards issued and vested	135,357		—		(228	)		—			—			(228	)
Issuance of common stock for employee stock purchase plan	38,630		—		101									101
Stock-based compensation expense	—		—		1,951			—			—			1,951
Comprehensive loss:
Cumulative translation adjustment	—		—		—			—			(190	)		(190	)
Net loss	—		—		—			(5,921	)		—			(5,921	)
Comprehensive loss														(6,111	)
Balance at June 30, 2010	16,944,074	$	2	$	96,098		$	(98,609	)	$	(934	)	$	(3,443	)

See accompanying notes to the unaudited consolidated financial statements.

5

SALARY.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three months ended June 30,
	2010			2009
Cash flows from operating activities:
Net loss	$	(5,921	)	$	(5,148	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of property, equipment and software		308			467
Amortization of intangible assets		882			1,152
Stock-based compensation		1,951			1,485
Board of Directors fees paid in common stock		—			217
Deferred income taxes		27			26
Provision for doubtful accounts		58			179
(Gain) Loss on sale or disposal of property, equipment and software		(16	)		12
Changes in operating assets and liabilities, net of acquisition:
(Increase) decrease in:
Accounts receivable		850			(28	)
Prepaid expenses and other current assets		300			(113	)
Other assets		(1	)		299
Increase (decrease) in:
Accounts payable		86			890
Accrued expense and other current liabilities		(554	)		(147	)
Other long-term liabilities		(29	)		(4	)
Deferred revenue		2,164			801
Net cash provided by operating activities		105			88
Cash flows from investing activities:
Cash paid for acquisition of data		—			(39	)
Cash paid for other intangible assets		—			(3	)
Increase in restricted cash		—			(1	)
Purchases of property, equipment and software		(49	)		(64	)
Proceeds on sale of property, equipment and software		253			1
Capitalization of software development costs		(35	)		(39	)
Net decrease in assets held to satisfy client funds obligations		9,145			10,619
Net cash provided by investing activities		9,314			10,474
Cash flows from financing activities:
Proceeds from revolving credit facility		—			6,975
Repayments of revolving line of credit and note payable		(72	)		(9,147	)
Proceeds from exercise of common stock options and warrants		23			87
Repurchase of unvested exercised stock options		(5	)		(9	)
Repurchase and retirement of common and restricted stock		—			(1,750	)
Net decrease in client funds obligations		(9,145	)		(10,619	)
Net cash used in financing activities		(9,199	)		(14,463	)
Effect of exchange rate changes on cash and cash equivalents		(119	)		(166	)
Net increase (decrease) in cash and cash equivalents		101			(4,067	)
Cash and cash equivalents, beginning of period		8,773			21,085
Cash and cash equivalents, end of period	$	8,874		$	17,018

Cash and cash equivalents on this statement of cash flows includes $452 of cash which is classified as discontinued operations in the June 30, 2010 Balance Sheet.

See accompanying notes to the unaudited consolidated financial statements.

6

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

Salary.com, Inc. (the “Company”) is a leading provider of on-demand compensation and talent management solutions in the human capital software-as-a-service (“SaaS”) market. The Company’s software, services and proprietary content help businesses and individuals manage pay and performance. The Company’s products include: CompAnalyst ^® , a suite of on-demand compensation management applications that integrates the Company’s data, third-party survey data and a customer’s own pay data with a complete analytics offering; TalentManager ^® , the Company’s employee lifecycle performance management software suite which helps businesses automate performance reviews, streamline compensation planning, perform succession planning, and link employee pay to performance; and IPAS ^® , a global compensation technology survey with coverage of technology jobs from clerk to chief executive officer in more than 90 countries. The Company also offers one of the largest libraries of leadership and job-specific competencies and a leading job-competency model to manage competencies by position. The Company was incorporated in Delaware in 1999 and its principal operations are located in Needham, Massachusetts. Since December 2006, the Company has operated a facility in Shanghai, China, primarily for research and development activities. In August 2008, the Company acquired Infobasis Limited, now known as Salary.com Limited, a competency-based skills management software company, located in Abingdon, United Kingdom. On December 17, 2008, the Company acquired Genesys Software Systems, Inc. (Genesys), a provider of on-demand HRMS, benefits and payroll services. In August 2010, the Company completed the divestiture of its payroll reporting unit which primarily consisted of Genesys. In June 2010, the Company shut down its telesales operation in Montego Bay, Jamaica which had operated there since February 2009. The Company conducts its business primarily in the United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company include, in the opinion of management, all adjustments (consisting of normal and recurring adjustments) necessary for a fair statement of the Company’s financial position, results of operations and cash flows at the dates and for the periods indicated. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years.

Pursuant to accounting requirements of the Securities and Exchange Commission (“SEC”) applicable to quarterly reports on Form 10-Q, the accompanying unaudited consolidated financial statements and these notes do not include all disclosures required by the General Principles Topic of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) for complete financial statements. Accordingly, these statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

During the quarter ended June 30, 2010, the Company approved plans to divest its payroll reporting unit. The payroll reporting unit primarily consisted of the Company’s enterprise payroll and human resource management software sold by the Company’s former Genesys subsidiary and its small business payroll products. In August 2010, the Company completed this divestiture. The decision to divest these businesses was based on the Company’s determination that its product offerings were too broad and its decision to focus its resources in the areas where the Company believes it has the greatest potential for profitable growth: compensation, talent management and consumer businesses. As a result, the Company began reporting its payroll reporting unit as a discontinued operation in the first quarter of fiscal 2011. See Note 4 for further information on the discontinued operations.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates these estimates and judgments, including those related to revenue recognition, valuation of long-lived assets, goodwill and intangible assets, acquisition accounting, discontinued operations, income taxes, allowance for doubtful accounts, stock-based compensation and capitalization of software development costs. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates.

7

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

Summary of Significant Accounting Policies

The accounting policies underlying the accompanying unaudited consolidated financial statements are those set forth in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2010, filed with the SEC on June 29, 2010, with the exception of the disclosure of potentially outstanding common stock, which is noted below.

Net Loss Attributable to Common Stockholders per Share

Net loss per share is presented in accordance with ASC 260, “Earnings per Share” (“ASC 260”), which requires the presentation of “basic” earnings (loss) per share and “diluted” earnings (loss) per share. Basic net loss attributable to common stockholders per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common stockholders per share includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock unless the effect is antidilutive.

The following summarizes the potential outstanding common stock of the Company as of the end of each period:

	June 30,
	2010	2009
Options to purchase common stock	1,345,139	1,652,276
Warrants to purchase common stock	1,400	53,612
Restricted stock awards	1,384,206	2,089,441
Total options, warrants and restricted stock awards exercisable or convertible into common stock	2,730,745	3,795,329

If the outstanding options and warrants were exercised or converted into common stock or the restricted stock awards were to vest, the result would be anti-dilutive. Therefore, basic and diluted net loss attributable to common stockholders per share is the same for all periods presented in the accompanying consolidated statements of operations.

As required by ASC 260, instruments granted in share-based payment transactions that met a certain criteria are considered to be participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method described in ASC 260. The Company determined that the restricted stock outstanding that is related to the early exercise of stock options are required to be included in the computation of earnings per share. As of June 30, 2010 and 2009, participating securities included in the earnings allocation in computing earnings per share were 354,000 shares and 577,000 shares, respectively.

8

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value and includes a framework for measuring fair value and disclosing fair value measurements in financial statements. Fair value is a market-based measurement rather than an entity-specific measurement and the fair value hierarchy makes a distinction between assumptions developed based on market data obtained from independent sources (observable inputs) and the reporting entity’s own assumptions (unobservable inputs). This fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, including notes payable and revolving credit facility approximate their fair value because of their short-term nature.

Recent Accounting Pronouncements

In September 2009, the FASB issued Accounting Standards Update 2009-13, “Revenue Recognition (Topic 605)—Multiple Deliverable Revenue Arrangements” (“ASU 2009-13’), which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The new guidance will be effective prospectively for revenue arrangements entered into or materially modified beginning in fiscal years on or after June 15, 2010. The Company expects this guidance may have a significant impact on the Company’s revenue recognition policy and financial statements; however, the Company has not determined the impact of adopting this standard on its consolidated financial statements as of June 30, 2010.

In September 2009, the FASB issued Accounting Standards Update 2009-14, “Software (Topic 985)—Certain Revenue Arrangements That Include Software Elements” (“ASU 2009-14’), which addresses the accounting for revenue transactions involving software. ASU 2009-14 amends ASC 985-605 to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. The new guidance will be effective prospectively for revenue arrangements entered into or materially modified beginning in fiscal years on or after June 15, 2010. The Company expects this guidance may have a significant impact on the Company’s revenue recognition policy and financial statements, however; the Company has not determined the impact of adopting this standard on its consolidated financial statements as of June 30, 2010.

3. GOODWILL AND OTHER INTANGIBLE ASSETS

Intangible assets as of June 30, 2010 and March 31, 2010 consist of the following:

	(in thousands)
	June 30, 2010						March 31, 2010
	Cost (a)		Accumulated Amortization (a)		Carrying Amount (a)		Cost		Accumulated Amortization		Carrying Amount
Amortizable intangible assets (a):
Non-compete agreements (5 years)	$	1,776	$	1,516	$	260	$	1,836	$	1,432	$	404
Customer relationships (5-7 years)		6,758		3,574		3,184		8,391		3,703		4,688
Developed technology (5-7 years)		1,536		476		1,060		3,184		1,143		2,041
Other intangible assets (5-18 years)		368		213		155		368		207		161
Trade name (5 years)		603		114		489		927		285		642
Data acquisition costs (1-3 years)		4,720		3,837		883		4,683		3,494		1,189
Total amortizable intangible assets		15,761	$	9,730		6,031		19,389	$	10,264		9,125
Unamortizable intangible assets:
Goodwill		12,945				12,945		14,967				14,967
Other indefinite lived intangible assets		935				935		935				935
Total goodwill and other indefinite lived intangible assets		13,880				13,880		15,902				15,902
Total intangible assets	$	29,641			$	19,911	$	35,291			$	25,027

(a) During the first quarter of fiscal 2011, amortizable intangible assets with costs of $3.7 million and carrying amounts of $2.2 million were reclassified to discontinued operations.

9

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s indefinite-lived acquired intangible assets consist of trade names and domain names. All of the Company’s finite-lived acquired intangible assets are subject to amortization over their estimated useful lives. No residual value is estimated for these intangible assets. Acquired intangible asset amortization for the three months ended June 30, 2010 and 2009 was approximately $857,000 and $1,152,000, respectively, of which $407,000 and $414,000, respectively, is included in cost of revenues. Amortization for the data acquisition costs begins once the acquired data is integrated into the related product and that product is available to the Company’s customers.

Estimated annual amortization expense for the next five years related to intangible assets is as follows:

	(in thousands)
	Year ending March 31,
2011	$	2,858
2012		1,857
2013		954
2014		488
2015		396

The changes in the carrying amount of goodwill for the three months ended June 30, 2010 are as follows:

	(in thousands)
Balance as of March 31, 2010	$	14,967
Reclassified to discontinued operations		(2,022	)
Balance as of June 30, 2010	$	12,945

4. DISCONTINUED OPERATIONS

In May 2010, the Company approved plans to divest its payroll reporting unit. The payroll reporting unit primarily consisted of the Company’s enterprise payroll and human resource management software sold by the Company’s former Genesys subsidiary and its small business payroll products. This divestiture was completed in August 2010 and the selling price, including estimated costs to sell, exceeded the carrying value of the unit as of June 30, 2010. The decision to divest this business was based on the Company’s determination that its product offerings were too broad and its decision to focus its resources in the areas where the Company believes it has the greatest potential for profitable growth: compensation, talent management and consumer businesses. Accordingly, results of this reporting unit have been classified as discontinued operations.

Operating results from our payroll/HRMS reporting unit for the three months ended June 30, 2010 and 2009 were as follows:

	(in thousands) Three months ended June 30,
	2010			2009
Total revenues	$	1,511		$	1,472
Cost of revenues		843			1,182
Operating expenses		803			790
Net loss		(135	)		(500	)

10

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company identified the following carrying amounts of major classes of assets and liabilities associated with the payroll reporting as of June 30, 2010 and March 31, 2010:

	(in thousands)
	June 30, 2010		March 31, 2010
Assets
Current assets	$	1,346	$	2,514
Funds held for clients		3,822		12,967
Total current assets		5,168		15,481
Intangible assets, net		2,249		2,274
Goodwill		2,022		2,022
Other non-current assets		294		299
Total assets	$	9,733	$	20,076
Liabilities
Deferred revenue, current portion	$	3,927	$	3,299
Other current liabilities		485		693
Client funds obligations		3,822		12,967
Total current liabilities		8,234		16,959
Non-current liabilities		6		13
Total liabilities	$	8,240	$	16,972

5. STOCK-BASED COMPENSATION

Stock-based compensation by line item in the statement of operations for the three months ended June 30, 2010 and 2009 was as follows:

	(in thousands)
	Three months ended June  30,
	2010		2009
Cost of revenues	$	147	$	225
Research and development		199		260
Sales and marketing		317		581
General and administrative		799		419
Restructuring charges		489		—
	$	1,951	$	1,485

Stock Options

Stock option activity, under all plans, during the three months ended June 30, 2010 was as follows:

	Number of Options		Weighted Average Exercise Price
Outstanding - beginning of period	1,265,307		$	6.390
Granted	179,487			1.950
Exercised	(44,560	)		0.499
Canceled	(55,095	)		4.549
Outstanding - end of period	1,345,139		$	6.071
Exercisable - end of period	1,030,364		$	6.969

11

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Under the Company’s 2000 Stock Option and Incentive Plan and 2004 Stock Option and Incentive Plan, option recipients (“Option Holders”) are permitted to exercise options in advance of vesting. Any options exercised in advance of vesting result in the Option Holder receiving restricted shares, which are then subject to vesting under the respective option’s vesting schedule. Restricted shares are subject to a right of repurchase by the Company and if any Option Holder who is an employee leaves the Company (either voluntarily or involuntarily), the Company has the right (but not the obligation) to repurchase the restricted shares at the original price paid by the Option Holder at the time the options were exercised. Because the Company has the right to repurchase the restricted shares upon the cessation of employment, the Company has recognized this potential liability for repurchase on the balance sheet as a subscription payable of $75,000 as of June 30, 2010, which is included in “Accrued expenses and other current liabilities.” Upon vesting of the restricted shares, the subscription payable is relieved and recorded in equity. As of June 30, 2010 and 2009, there were 327,176 and 577,594 restricted shares outstanding, respectively, which resulted from the exercise of unvested stock options.

The Company uses the Black-Scholes option-pricing model to value option grants and determine the related compensation expense. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates. During the three months ended June 30, 2010, the Company granted stock options to its Chief Executive Officer and President and also modified awards to its former Chief Executive Officer and President. The modification of the former executive’s awards consisted of an extension of the awards’ contractual period to exercise based on his continued services provided on the Board of Directors. The Company did not grant any new stock options during the three months ended June 30, 2009.

For the awards granted or modified during the years the three months ended June 30, 2010, the Company determined it has adequate historical data from its traded share price, as such, expected volatilities utilized in the model are based on the historic volatility of the Company’s stock price.

The risk-free interest rate used for each grant is equal to the U.S. Treasury yield curve in effect at the time of grant for instruments with a similar expected life.

The expected term of the options granted was determined based upon review of the period that the Company’s share-based awards are expected to be outstanding and is estimated based on historical experience of similar awards, giving consideration to the contractual term of the awards, vesting schedules and expectations of employee exercise behavior.

The Company does not intend to pay dividends on its common stock for the foreseeable future and, accordingly, uses a dividends yield of zero.

In accordance with the provisions of ASC 718, “Stock Compensation” (“ASC 718”), the Company recognizes compensation expense for only the portion of options that are expected to vest. Therefore, the Company has estimated expected forfeitures of stock options. In developing a forfeiture rate estimate, the Company considered its historical experience and its growing employee base. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

The following table provides the assumptions used in determining the fair value of the share-based awards granted for the three months ended June 30, 2010:

Risk-Free Rate	2.54	%
Expected Life	5 years
Expected Volatility	77.37	%
Expected Dividend Yield	0	%

Compensation expense related to stock options included in the consolidated statement of operations for the three months ended June 30, 2010 and 2009 was approximately $352,000 and $296,000, respectively. Compensation expense related to stock options is based on awards ultimately expected to vest and reflects an estimate of awards that will be forfeited. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

On February 20, 2010, the Company’s President and Chief Executive Officer resigned from his positions at the Company. As a result of the resignation, the Company accelerated the vesting of all outstanding stock options, restricted stock unit awards and any other equity awards held by this former executive. On May 20, 2010, the former executive’s stock option agreements were amended in order to extend the period in which the individual may exercise the awards to coincide with the former executive’s continuing service on the Board of Directors. As a result of this modification, the Company recognized a non-cash compensation charge of approximately $0.2 million in the quarter ended June 30, 2010.

12

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of June 30, 2010, there was approximately $1.0 million of total unrecognized compensation expense related to stock options. That cost is expected to be recognized over a weighted average period of 3.0 years.

Restricted Stock Awards

On January 12, 2007, the Compensation Committee of the Board of Directors of the Company approved a form of restricted stock agreement for use under the Company’s 2007 Stock Plan pursuant to which the Company has granted stock options and restricted stock awards. The shares of restricted stock awards have a per share price of $0.0001 which equals the par value. The fair value is measured based upon the closing NASDAQ market price of the underlying Company stock as of the date of grant. Compensation expense from the restricted stock awards is amortized over the applicable vesting period, generally 3 years, using the straight-line method. Unamortized compensation cost related to restricted stock awards was $3.2 million as of June 30, 2010. This cost is expected to be recognized over a weighted-average period of 1.3 years. The following table presents a summary of the restricted stock award activity for the three months ended June 30, 2010:

	Number of Awards		Weighted Average Grant Date Fair Value
Unvested balance - beginning of period	1,603,856		$	4.506
Awarded	309,796			3.015
Vested	(343,026	)		3.386
Canceled	(186,420	)		3.702
Unvested balance - end of period	1,384,206		$	4.560

The Company recorded compensation expense of approximately $1,589,000 and $1,143,000 related to restricted stock awards during the three months ended June 30, 2010 and 2009, respectively.

Shares Available for Grant

The following is a summary of all stock option and restricted stock award activity and shares available for grant under the 2007 Plan and for the three months ended June 30, 2010 and 2009.

	Three months ended June 30,
	2010		2009
Balance - beginning of period	2,095,545		2,483,409
Stock options granted	(179,487	)	—
Restricted stock awards granted	(309,796	)	(30,132	)
Stock options cancelled/forfeited	78,320		192,075
Restricted stock awards cancelled/forfeited	186,420		80,003
Balance - end of period	1,871,002		2,725,355

13

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Distribution and Dilutive Effect of Options and Restricted Shares

	Three months ended
	June 30,
	2010		2009
Shares of common stock outstanding	16,944,074		15,660,501
Stock options granted	179,487		—
Restricted stock awards granted	309,796		30,132
Stock options cancelled/forfeited	(78,320	)	(192,075	)
Restricted stock awards cancelled/forfeited	(186,420	)	(80,003	)
Net options/restricted stock granted	224,543		(241,946	)
Grant dilution (1)	1.3	%	-1.5	%
Stock options exercised	44,560		54,225
Restricted stock awards vested	361,959		369,603
Total stock options exercised/restricted stock awards vested	406,519		423,828
Exercised dilution (2)	2.4	%	2.7	%

(1) The percentage for grant dilution is computed based on net options and restricted stock awards granted as a percentage of shares of common stock outstanding.

(2) The percentage for exercise dilution is computed based on net options exercised as a percentage of shares of common stock outstanding.

Employee Stock Purchase Plan

On January 17, 2007, the Company’s Board of Directors and stockholders approved the adoption of the 2007 Employee Stock Purchase Plan (“ESPP”). Stock purchase rights are granted to eligible employees during six month offering periods with purchase dates at the end of each offering period. The offering periods generally commence each April 1 and October 1. Shares are purchased through payroll deductions at purchase prices equal to 90% of the fair market value of the Company’s common stock at either the first day or the last day of the offering period, whichever is lower. The Company recorded compensation expense of approximately $10,000 and $46,000 related to shares issued under our employee stock purchase plan for the three months ended June 30, 2010 and 2009, respectively.

Warrants

As of June 30, 2010, the Company had outstanding warrants to purchase 1,400 shares of common stock at an exercise price of $0.89 per share. The following table presents a summary of the warrant activity for the three months ended June 30, 2010:

	Number of Warrants		Weighted Average Exercise Price
Outstanding - beginning of period	35,527		$	0.321
Granted	—
Exercised	—			—
Canceled	(34,127	)		0.299
Outstanding - end of period	1,400		$	0.893
Exercisable - end of period	1,400		$	0.893

14

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock Repurchase Program

On December 15, 2008, the Board of Directors authorized the repurchase by the Company of up to $2.5 million of its common stock from time to time at prevailing prices in the open market or in negotiated transactions off the market. On April 17, 2009, the Company’s Board of Directors increased the size of its share repurchase program from $2.5 million to $7.5 million. During the three months ended June 30, 2009, the Company repurchased and retired 862,406 shares with a total value of approximately $1.6 million pursuant to this repurchase program. During the three months ended June 30, 2010, the Company did not repurchase any shares pursuant to this repurchase program. Since the inception of the repurchase program through June 30, 2010, 1,348,140 shares with a total value of approximately $2.8 million have been repurchased and retired by the Company.

6. COMMITMENTS AND CONTINGENCIES

Litigation and Claims

In December 2009, the Company lost a significant, but not material, payroll customer as a result of a breach of contract by the customer. As a result of the breach, the Company terminated its agreement with the customer and had commenced litigation procedures in order to recover certain amounts billed to the customer and uncollected as well as termination penalties. On May 5, 2010, the parties executed a Mutual Release and Settlement Agreement which both parties agreed to fully and finally settle and resolve the aforementioned litigation and disputes. As part of the settlement agreement and ancillary agreements, the payroll customer made a $1.2 million payment to the Company on May 12, 2010 related to outstanding billings associated with the previously terminated contract and future license and maintenance agreements.

In addition to the matters noted above, from time to time the Company is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, the amount of ultimate expense with respect to any other current legal proceedings and claims will not have a material adverse effect on the Company’s financial position or results of operations.

7. INCOME TAXES

The Company follows the provisions of ASC 740-10, “Income Taxes” (“ASC 740-10”), which clarifies the accounting for uncertainty in income taxes by prescribing the minimum recognition threshold and measurement requirements a tax position must meet before being recognized as a benefit in the financial statements. ASC 740-10 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting for interim periods and disclosures for uncertain tax positions.

The amount of unrecognized tax benefits as of June 30, 2010 was $118,000, which, if ultimately recognized, will reduce the Company’s annual effective tax rate. The Company does not expect any material change in unrecognized tax benefits within the next twelve months. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax positions as a component of income tax expense, if any. As of June 30, 2010, the Company has not accrued any interest and penalties for unrecognized tax benefits in its statement of operations.

As of June 30, 2010, the Company is subject to tax in the U.S. Federal, state and foreign jurisdictions. The Company is open to examination for tax years 2006 through 2009. As of June 30, 2010, the Company had net operating loss carryforwards of approximately $38.0 million for state and $42.4 million federal tax purposes which had a full valuation allowance against them. Since the Company has net operating loss and tax credit carryforwards available for future years, those years are also subject to review by the taxing authorities. The Company is not currently under examination by U.S. Federal and state tax authorities or the foreign taxing authorities.

15

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. REVOLVING CREDIT FACILITY

On August 8, 2008, the Company entered into a modification of its existing credit facility with Silicon Valley Bank to modify certain of the financial covenants and extend the term of the agreement to September 23, 2008. On September 17, 2008, the Company entered into a second modification of its credit facility to extend the term of the agreement to October 8, 2008. On October 8, 2008, the Company entered into a third modification of its credit facility to extend the term of this credit facility for two years to October 8, 2010 and increased the line of credit from $5.0 million to $10.0 million. On March 16, 2009, the Company entered into a fourth modification of its agreement, which added Genesys as a guarantor to the Company’s obligations under the credit facility. On June 29, 2009, the Company entered into a fifth modification to its agreement which increased the interest rate and certain fees payable, amended certain financial covenants, and increased the amount of stock the Company can repurchase under its repurchase plans. On October 15, 2009, the Company entered into a sixth modification to its agreement decreasing the line of credit to $5.0 million, modifying the interest rate and amending certain financial covenants. In addition, in August 2010, the Company modified the credit facility to remove the pledge on the stock of the Company’s former Genesys subsidiary. Following the sixth modification, up to $5.0 million is available under this credit facility and the facility is collateralized by substantially all of the Company’s assets and expires on October 8, 2010. The line of credit may be used to secure letters of credit and cash management services and the line of credit may be used in connection with foreign exchange forward contracts. The line of credit is subject to a financial covenant that requires the Company to maintain a ratio of assets to liabilities (net of deferred revenue) that is not less than 1.4 to 1. As of June 30, 2010, there was $2.5 million outstanding under the credit facility with a 4.5% interest rate. As of this date, the Company was not in compliance with its debt covenant; however, the Company had sufficient available cash to pay in full the outstanding amounts due on the facility without material consequence to the Company. The Company has received a waiver from Silicon Valley Bank for the month of June 2010 and is currently negotiating an amendment to its existing credit facility. The Company anticipates that the amendment will be completed during the second quarter of fiscal 2011 and that the Company would be in compliance with the covenants of such arrangement.

9. RESTRUCTURING CHARGES

On February 20, 2010, the Company’s President and Chief Executive Officer resigned from his positions at the Company. As a result of the former executive’s resignation, the Company recorded restructuring charges of approximately $1.6 million during the fourth quarter of fiscal 2010. The Company recorded an additional $0.4 million during the quarter ended June 30, 2010 associated with the former executive’s resignation which were comprised of $0.1 million of severance costs, $0.2 million in stock compensation charges associated with the modification of vested awards, and $0.1 million in external consulting costs. The Company also expects to incur an additional $0.9 million of charges in fiscal 2011 related to the transition process which primarily consists of $0.8 million of severance and $0.1 million of external consultant fees to assist with the process. The future severance payments will commence in August 2010 and be paid and expensed over an eighteen month period consistent with the non-compete agreement executed with the former executive.

During the quarter ended June 30, 2010, the Company also recorded restructuring charges of approximately $0.7 million related to severance payments of approximately $0.3 million to employees terminated by the Company, $0.3 million in related stock compensation charges, and an additional $0.1 million in external costs primarily consisting of legal and outplacement services.

Restructuring charges were as follows:

	(in thousands)
	Severance			Stock Compensation			Other			Total
Accrued restructuring balance at March 31, 2010	$	39		$	—		$	272		$	311
Restructuring charges		444			489			177			1,110
Cash payments		(329	)		—			(126	)		(455	)
Non-cash charges		—			(489	)		—			(489	)
Accrued restructuring balance at June 30, 2010	$	154		$	—		$	323		$	477

16

SALARY.COM, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. SEGMENT AND RELATED INFORMATION

The following tables summarize selected financial information of the Company’s operations by geographic locations as the Company operates as only one reportable segment:

Revenues by geographic location consist of the following:

	(in thousands) Three months ended June 30,
	2010		2009
Revenues:
United States	$	8,972	$	9,256
All other countries		732		629
Total Revenues	$	9,704	$	9,885

Long-lived assets as of June 30, 2010 and March 31, 2010 by geographic location consist of the following:

	(in thousands)
	June 30, 2010		March 31, 2010
Long-lived assets:
United States	$	16,831	$	22,218
United Kingdom		5,365		5,522
All other countries		373		762
Total long-lived assets	$	22,569	$	28,502

Long-lived assets at March 31, 2010 includes approximately $4.6 million of long-lived assets associated with the Company’s payroll reporting unit which have been reclassed to discontinued operations at June 30, 2010.

The Company restated its long-lived assets by geographic location for the United States to $22.2 million (a reduction of approximately $13 million) as of March 31, 2010 due to an error in the calculation of this segment information. In addition, the Company also noted that the March 31, 2009 disclosure should have been presented as $30.0 million (a reduction of approximately $13 million) due to the same calculation error. These errors did not have any impact on the respective consolidated balance sheets or other segment disclosures and management does not believe the errors are material to the consolidated financial statements taken as a whole.

11. SUPPLEMENTAL CASH FLOW INFORMATION

	(in thousands) Three months ended June 30,
	2010		2009
Supplemental cash flow information:
Cash paid for interest	$	34	$	65
Noncash operating activities:
Board of Directors fees paid in common stock	$	—	$	217

12. SUBSEQUENT EVENT

On August 11, 2010, the Company completed the sale of its former Genesys wholly-owned subsidiary. In the sale transaction the Company sold all of the shares of former Genesys Software Systems, Inc. in exchange for $2.5 million in cash consideration. The Company has retained liability for the additional consideration that had been earned by the former owners of Genesys of $2.0 million that were due to be settled in June 2010; however, the Company has filed an indemnification claim against the former owners of Genesys. On August 13, 2010, Lawrence J. Munini , individually and as agent and attorney-in-fact for the former shareholders and option holders of the Company’s former subsidiary, Genesys, filed suit against the Company in Massachusetts Superior Court in connection with the payment of this contingent consideration. See Part II, Item 1 “Legal Proceedings” in this Quarterly Report on Form 10-Q.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

This Quarterly Report on Form 10-Q contains or incorporates a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. Accordingly, you should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. We have identified below some important factors that could cause our forward-looking statements to differ materially from actual results, performance or financial condition:

• our ability to become profitable;

• the ability of our solutions to achieve market acceptance;

• a highly competitive market for compensation management and talent management;

• failure of our customers to renew their subscriptions for our products;

• our inability to adequately grow our operations and attain sufficient operating scale;

• our ability to execute on our strategic initiatives and realize their anticipated benefits;

• our ability to generate additional revenues from investments in sales and marketing;

• our ability to integrate acquired companies and businesses;

• our inability to effectively protect our intellectual property and not infringe on the intellectual property of others;

• our inability to raise sufficient capital when necessary or at satisfactory valuations;

• the loss of key personnel;

• unfavorable economic and market conditions caused by the recent financial crisis in the credit markets; and

• other factors discussed elsewhere in this report.

The risks and uncertainties described in this Quarterly Report on Form 10-Q are not the only ones we face. Additional risks and uncertainties, including those not presently known to us or that we currently deem immaterial, may also impair our business. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date of this report. Except as required by law, we assume no obligation to update any forward-looking statements after the date of this report.

Overview

We are a leading provider of on-demand compensation and talent management solutions in the human capital software-as-a-service (SaaS) market. Incorporated in 1999 as a Delaware corporation, we offer software and services that are tightly integrated with our proprietary data sets to help businesses and individuals manage pay and performance. Companies of all sizes turn to us to compensate, promote and manage their employees effectively and efficiently. With our help, companies can put the right talent in the right roles to deliver business objectives and individuals at all levels can determine their worth.

Our highly configurable software applications and proprietary content help executives, line managers and compensation professionals automate, streamline and optimize critical talent management processes, such as market pricing, compensation planning, performance management, competency management (a competency is a set of demonstrated behaviors, skills and proficiencies that determine performance in a given role) and succession planning. Built with compensation and competency data at the core, our solutions provide businesses of all sizes with the most productive and cost-effective way to manage and inspire their most important asset - their people.

18

We integrate our comprehensive SaaS applications with our proprietary content to automate the essential elements of our customers’ compensation and talent management processes. Our approach links pay to performance and aligns employees with corporate goals to drive business results. As a result, our solutions can significantly improve the effectiveness of our customers’ compensation spending and help them become more productive in managing their employees. We enable employers of all sizes to replace or supplement inefficient and expensive traditional approaches to compensation management, including paper-based surveys, consultants, internally developed software applications and spreadsheets. Our customers report that after using our solutions, they experience gains in productivity, reduction in personnel hours to administer pay and performance programs, and improvements in employee retention.

Our data sets contain base, bonus and incentive pay data for positions held by employees and top executives in thousands of public companies. Our flagship offering is CompAnalyst, an integrated suite of on-demand compensation benchmarking and pay analytics tools that integrate our data, third-party survey data and a customer’s own pay data with a complete analytics offering. We continue to build our IPAS global compensation technology survey with coverage of technology jobs in more than 90 countries.

Our on-demand talent management solutions offer managers and talent planners solutions so they can proactively respond to business conditions in planning the organization’s personnel needs, based on employees’ profiles, performance results and competencies. Salary.com’s TalentManager suite helps businesses automate performance reviews, streamline compensation planning and link employee pay to performance. TalentManager helps employers gain visibility into their performance cycle and drive employee engagement in the process through a configurable, easy-to-use interface that can be personalized by users. Using TalentManager, employers can improve their talent management systems and model the critical jobs skills they need to achieve their business goals.

With our fiscal 2009 acquisition of InfoBasis Limited, which during fiscal 2010 changed its legal name to Salary.com Limited, we now provide customers with competency-based skills management software for skills gap analysis and assessment. This acquisition further built on our acquisitions of the assets of ITG Competency Group and Schoonover & Associates in 2008. These acquisitions have helped us offer one of the largest libraries of leadership and job-specific competencies and a leading job-competency model to manage competencies by position and launch our full talent management suite, which integrates compensation, performance and succession functions around job-based competency content. Our on-demand system helps line managers improve their ability to engage, develop and deploy their talent with learning references, coaching tips and progress journals.

In addition to our on-demand enterprise software offerings, we also provide a selection of applications on the Salary.com website. The web applications deliver salary management comparison and analysis tools to individuals and small businesses on a cost effective, real-time basis. We offer a professional edition of our CompAnalyst product suite for smaller companies with less than 500 full-time employees in either report format or through subscription services. We market to individual consumers providing career services, financial information and premium compensation reports personalized to a consumer’s unique background.

From a market perspective, we continue to believe that the on-demand human resource categories are high growth markets. We believe that on-demand software and data is superior to legacy software and services offerings. Given the lower up-front cost and total cost of ownership, we believe that more companies will switch to on-demand human resource solutions, and that Salary.com is leading the way with its on-demand human resource offerings.

In the first quarter of fiscal 2011, we finalized plans to divest our payroll reporting unit and in August 2010, we completed this divestiture. The payroll reporting unit primarily consisted of our enterprise payroll and human resource management software sold by our former Genesys subsidiary and our small business payroll products. The decision to divest this business was based on our determination that our product offerings were too broad and our decision to focus our resources in the areas where we believe we have the greatest potential for profitable growth, our compensation, talent management and consumer businesses. As a result, we have reported our payroll reporting unit as a discontinued operation beginning in the first quarter of fiscal 2011.

Strategic Initiatives

During our planning for fiscal 2011, we conducted a comprehensive review of our business. Over the past few years, we have pursued top line growth, but this growth has come at the expense of cash flow. We have determined that our current product offerings are too broad for a company with our resources and that by focusing our resources on our compensation, talent management and consumer businesses in the human capital software marketplace, we believe that we can accelerate our return to positive cash flow. We believe that our go-forward strategy leverages our past successes and magnifies them by concentrating our resources in the areas where we believe we have the greatest potential for profitable growth. There are two principal components to our strategy:

First is to renew our focus on key strengths where we hold leadership positions that have demonstrated a track record of generating positive cash flow for us in the past.

19

Second is to significantly reduce our cost structure by removing the components of our business, including employee headcount, that we do not believe have the ability to contribute to cash flow in the very near future, even though that may come at the expense of top-line growth, and to reallocate certain resources as an investment in our continuing core businesses.

To achieve this strategy, the following is a detailed description of our initiatives for fiscal 2011:

• In terms of businesses and products where we expect to cease certain activities:

• We sold our payroll operations. We believe by completing the sale of this business, we will have additional working capital to invest in areas of growth.

• We will not make any further investment in our sales compensation business so that we can focus on our HR customers.

• We have ceased development efforts in longer-term projects such as learning and HRMS database development.

• We have exited lower-margin compensation consulting activities by outsourcing it to third party partners.

• We have shut down our Jamaica telesales operation.

• We expect to moderate our activities in the development of competency data and software included in our talent management suite.

• We expect to continue our development work on our CompAnalyst Executive suite of products, our IPAS survey business, and our core talent management suite.

• We expect to shift some resources, particularly our sales and marketing resources, to reinforce our CompAnalyst suite in order to accelerate growth and build on our leadership position in compensation management and to increase activity to enhance our consumer website business by investing in optimizing website traffic.

Since the end of fiscal 2010, we made substantial progress in executing on these initiatives. During this period, we completed the divestiture of our payroll operations, including selling Genesys, and shut down our sales compensation business, compensation consulting activities and Jamaica telesales operation. We believe that our reasons for pursuing this strategy have begun to show results, including increases in revenue and cash flows in the first quarter fiscal 2011 compared to the fourth quarter of fiscal 2010.

Sources of Revenues

We derive our revenues primarily from subscription fees and, to a lesser extent, through advertising on our website. For the three months ended June 30, 2010 and 2009, subscription revenues accounted for 92% and 91%, respectively, of our total revenues and for the three months ended June 30, 2010 and 2009, advertising revenues accounted for 8% and 9%, respectively, of our total revenues. We expect our subscription revenues will continue to account for an increasing percentage of our revenues as we continue to focus on subscription-based compensation management and performance management products.

Subscription revenues are comprised primarily of subscription fees from enterprise and small business customers who pay a bundled fee for our on-demand software applications and data products and implementation services related to our subscription products, sales of payroll perpetual licenses, maintenance and hosting services including related implementation and consulting services, as well as syndication fees from our website partners and premium membership subscriptions sold primarily to individuals. Subscription revenues are primarily recognized ratably over the contract period as they are earned. Our subscription agreements for our enterprise subscription customer base are typically one to five years in length, and as of June 30, 2010, approximately 55% of our contracts were more than one year in length. We generally invoice our customers annually in advance of their subscription (for both new sales and renewals), with the majority of the payments typically due upon receipt of invoice. Deferred revenue consists primarily of billings or payments received in advance of revenue recognition from our subscription agreements and is recognized over time as the revenue recognition criteria are met. Deferred revenue does not include the unbilled portion of multi-year customer contracts, which is held off the balance sheet. Changes in deferred revenue generally indicate the trend for subscription revenues over the following year as the current portion of deferred revenue is expected to be recognized as revenue within 12 months. To a lesser extent, subscription revenues also include fees for professional services which are not bundled with our subscription products, revenues from sales of job competency models and related implementation services and revenue from the sale of our Compensation Market Study and Salary.com Survey products, which are not sold on a subscription basis.

Advertising revenues are comprised of revenues that we generate through agreements to display third party advertising on our website for a fixed period of time or fixed number of impressions. Advertising revenues are recognized as the advertising is displayed on the website.

20

Cost of Revenues and Operating Expenses

Cost of Revenues. Cost of revenues consists primarily of costs for data acquisition and data development, fees paid to our network provider for the hosting and managing of our servers, related bandwidth costs, compensation costs for the support and implementation of our products, compensation costs related to our consulting and professional services business and amortization of capitalized software costs. We continue to implement and support our existing compensation and talent management products and to expand our data sets and, as a result, we expect to incur additional costs of revenues over the next few years. However, with our recent reductions in workforce and divestiture of our payroll business, we expect that costs of revenues will decrease as a percentage of revenue and on an absolute dollar basis in fiscal 2011 as compared to fiscal 2010.

Research and Development. Research and development expenses consist primarily of compensation for our software and data application development personnel. We have historically focused our research and development efforts on improving and enhancing our existing on-demand software and data offerings as well as developing new features, functionality and products. However, with our recent reductions in workforce and divestiture of our payroll business and focus on existing products, we expect that research and development will decrease as a percentage of revenue and on an absolute dollar basis in fiscal 2011 compared to fiscal 2010.

Sales and Marketing. Sales and marketing expenses consist primarily of compensation for our sales and marketing personnel, including sales commissions, as well as the costs of our marketing programs. The direct sales commissions for our subscription sales are capitalized at the time a subscription agreement is executed by a customer and we recognize the initial year sales commission expense ratably over one year. In the case of multi-year agreements, upon billing the customer for each additional year, we incur a subsequent sales commission and recognize the expense for such commission over the applicable year. Typically, a majority of the sales commission is recognized in the initial year of the subscription term. As a result of our reduction in workforce in the fourth quarter of fiscal 2009, we experienced a significant decrease in sales and marketing expenses during fiscal 2010. Consistent with fiscal 2010, we expect our sales and marketing expenses will decrease in fiscal 2011 as a result of our recent workforce reductions.

General and Administrative. General and administrative expenses consist of compensation expenses for executive, finance, accounting, human resources, administrative and management information systems personnel, professional fees and other corporate expenses, including rent and depreciation expense.

Results of Operations

The following table sets forth our total deferred revenue and net cash provided by operating activities for each of the periods indicated.

	Three months ended June 30,
	2010		2009
	(in thousands)
Total deferred revenue at end of period	$	30,405	$	29,296
Net cash provided by operating activities		105		88

Three Months Ended June 30, 2010 compared to Three Months Ended June 30, 2009

Revenues. Revenues for the first quarter of fiscal 2011 were $9.7 million, a decrease of $0.2 million, or 2%, compared to revenues of $9.9 million for the first quarter of fiscal 2010. Subscription revenues were $8.9 million for the first quarter of fiscal 2011, an decrease of $0.1 million, or 1%, compared to subscription revenues of $9.0 million for the first quarter of fiscal 2010. The decrease in subscription revenues was due primarily to a decrease of $0.2 million in revenues associated with our competency and human capital management products and services, a decrease of $0.2 million in our survey business and a $0.1 million decrease in our non-advertising consumer business, partially offset by a $0.4 million increase associated with our compensation and talent management products. Advertising revenues were $786,000 for the first quarter of fiscal 2011 compared to advertising revenues of $913,000 for the first quarter of fiscal 2010. The decrease in advertising revenues was primarily related to a reduction in volume within certain advertising programs during the first quarter of fiscal 2011 compared to the same period in fiscal 2010. Total deferred revenue as of June 30, 2010 was $30.4 million, representing an increase of $1.1 million, or 4%, compared to total deferred revenue of $29.3 million as of June 30, 2009, despite a reclassification of $3.9 million of deferred revenues to discontinued operations at June 30, 2010.

Cost of Revenues. Cost of revenues for the first quarter of fiscal 2010 was $2.4 million, a decrease of $0.1 million, or 2%, compared to cost of revenues of $2.5 million for the first quarter of fiscal 2010. The decrease in cost of revenues was primarily due to a decrease of $0.1 million in stock-based compensation as a result of the reduction in workforce implemented during the current fiscal quarter. As a percent of total revenues, cost of revenues remained consistent at 24% for the first quarter of fiscal 2011 and 2010.

21

Research and Development Expenses. Research and development expenses for the first quarter of fiscal 2011 were $2.1 million, an increase of $0.1 million, or 5%, compared to research and development expenses of $2.0 million for the first quarter of fiscal 2010. The increase in research and development expenses was primarily due to an increase of $0.1 million of payroll and benefit related costs attributable an increase in headcount at our corporate facility offset by a reduction of headcount at our Shanghai facility and an increase of $0.1 million associated with technology related service agreements partially offset by a $0.1 million decrease in depreciation expense based on the useful lives of certain assets. Research and development expenses increased from 20% of total revenues in the first quarter of fiscal 2010 compared to 21% of total revenues in the first quarter of fiscal 2011.

Sales and Marketing Expenses. Sales and marketing expenses for the first quarter of fiscal 2011 were $5.4 million, a decrease of $0.2 million, or 5%, compared to sales and marketing expenses of $5.6 million for the first quarter of fiscal 2010. The decrease was primarily due to decreases of $0.1 million and $0.3 million in payroll and benefit related costs and stock-based compensation, respectively, due to the reduction in workforce implemented in the current fiscal quarter and a decrease of $0.1 million of sales conference related costs, partially offset by an increase of $0.3 million in marketing trade show and webinar expenses. Sales and marketing expenses decreased from 57% of total revenues in the first quarter of fiscal 2010 to 55% of total revenues in the first quarter of fiscal 2011.

General and Administrative Expenses. General and administrative expenses were $4.0 million for the first quarter of fiscal 2011, an increase of $0.1 million, or 2%, compared to $3.9 million for the first quarter of fiscal 2010. The increase was primarily due to an increase of $0.4 million in legal costs primarily attributable to services provided related to the disposition of certain business activities and final resolution of our settlement with a former payroll customer, an increase of $0.4 million in stock-based compensation directly related to current quarter awards associated with our annual director’s compensation offset by decreases in stock-based compensation as a result of our current quarter headcount reduction. These increases were partially offset by decreases of $0.2 million in payroll and benefit related costs due to the reduction in workforce implemented in the current fiscal quarter, $0.2 million in accounting related costs, a net $0.2 million gain on the sale and disposal of assets associated with the closing of our former Montego Bay, Jamaica office and a $0.1 million decrease in depreciation expense based on the useful lives of certain assets. General and administrative expenses increased to 41% of total revenues in the first quarter of fiscal 2011 compared to 39% in the first quarter of fiscal 2010.

Restructuring Charges. Restructuring charges for the first quarter of fiscal 2011 were $1.1 million primarily as a result of the reduction in workforce experienced in May 2010 in additional to additional costs incurred associated with the resignation of our former Chief Executive Officer in the fourth quarter of fiscal 2010. The $1.1 million in restructuring charges consisted of $0.5 million of severance and payroll related costs, $0.5 million in stock compensation charges, and $0.1 million in external costs primarily consisting of consulting and outplacement services.

Amortization of Intangible Assets. Amortization of intangible assets for the first quarter of fiscal 2011 was $450,000 compared to $470,000 in the first quarter of fiscal 2010. The decrease in amortization was primarily due to intangible assets acquired as part of the ICR acquisition in May 2007 becoming fully amortized in the current fiscal quarter.

Other Income/Expense. Other expense for the first quarter of fiscal 2011 was $100,000 compared to other expense of $92,000 in the first quarter of fiscal 2010. Other expense for the first quarter of fiscal 2011 primarily consisted of corporate franchise taxes.

Provision for Income Taxes. The provision for income taxes for the first quarter of fiscal 2011 was $28,000 compared to $26,000 in the first quarter of fiscal 2010. The provision for income taxes consisted primarily of a deferred tax liability arising from timing differences between book and tax income related to goodwill and intangible asset amortization related to our business acquisitions.

Discontinued Operations. During the quarter ended June 30, 2010, the Company finalized its plans to divest its payroll reporting unit. As a result, the Company began reporting its payroll reporting unit as a discontinued operation beginning in the first quarter of fiscal 2011. Loss from discontinued operations, net of tax was approximately $0.1 million for the three months ended June 30, 2010 compared to $0.5 million for the three months ended June 30, 2009.

Acquisition of Business

Genesys Software Systems, Inc.

On December 17, 2008, we acquired all issued and outstanding shares of Genesys, a provider of on-demand and licensed human resources management systems and payroll solutions. Under the terms of the agreement, we paid the former owners of Genesys $6.0 million, net of cash acquired and converted approximately $1.1 million of options to purchase Genesys common stock into options to purchase approximately 519,492 shares of our common stock. In addition, the former Genesys security holders were eligible to earn additional consideration of up to $2.0 million which would be paid in cash or shares of our common stock, at our option, based on Genesys meeting certain performance targets. As of June 30, 2010, the $2.0 million of additional consideration had been earned and recorded as additional goodwill and was not included as part of the recent divestiture of the Genesys business. Such amounts were due to be settled in June 2010; however, we have filed an indemnification claim against the former owners of Genesys for breaches of representation and warranties made at the time of the acquisition. On August 13, 2010, Lawrence J. Munini, individually and as agent and attorney-in-fact for the former shareholders and option holders of Genesys filed suit against us in Massachusetts Superior Court in connection with the payment of this contingent consideration. See Part II, Item 1 “Legal Proceedings” in this Quarterly Report on Form 10-Q.

At June 30, 2010, the financial results and performance of Genesys have been classified as discontinued operations in our consolidated financial statements. In August 2010, we sold Genesys as part of the divestiture of our payroll business; however, we remain liable for any contingent consideration payable to the former owners of Genesys.

22

Liquidity and Capital Resources

At June 30, 2010, our principal sources of liquidity were cash and cash equivalents totaling $8.4 million and accounts receivable, net of allowance for doubtful accounts of $6.0 million, compared to cash and cash equivalents of $8.8 million and accounts receivable, net of allowance for doubtful accounts of $7.7 million at March 31, 2010. Our working capital as of June 30, 2010 was a negative $21.1 million compared to negative working capital of $23.3 million as of March 31, 2010. During the three months ended June 30, 2010, we did not borrow against our revolving credit facility and, as of June 30, 2010, we had an outstanding balance of $2.5 million against our line. While our discontinued operations contributed to our cash flow and liquidity during fiscal 2010 and the three months ended June 30, 2010, we do not expect the sale of our discontinued operations to have a material impact on our liquidity or cash flows going forward.

Cash provided by operating activities for the three months ended June 30, 2010 was $105,000. This amount resulted from a net loss of $5.9 million, adjusted for non-cash charges of $3.2 million and a $2.8 million net increase in operating assets and liabilities since the beginning of fiscal 2011. Non-cash items primarily consisted of $0.3 million of depreciation and amortization of property, equipment and software, $0.9 million of amortization of intangible assets and $2.0 million of stock-based compensation. The net increase in operating assets and liabilities since the beginning of fiscal 2011 of $2.8 million was primarily comprised of increases in deferred revenue of $2.2 million, partially offset by decreases of $0.9 million in accounts receivable, $0.6 million in accrued expenses and other current liabilities and $0.3 million in prepaid expenses and other current assets. The increase in deferred revenue since the beginning of fiscal 2011 is primarily the result of increased invoicing offset by reductions as we recognized revenue from our subscription customers for the three months ended June 30, 2010. The growth in invoicing was primarily due to increased subscription renewals and increased sales to existing customers. Currently, payment for the majority of our subscription agreements is due upon invoicing. Because revenue is generally recognized ratably over the subscription period, payments received at the beginning of the subscription period result in an increase to deferred revenue. Changes in deferred revenue generally indicate the trend for subscription revenues over the following year as the current portion of deferred revenue is expected to be recognized within 12 months. Although invoicing increased, accounts receivable decreased primarily due to the settlement reached with a former payroll customer and the collection of related outstanding balances. The decrease in accrued expenses and other current liabilities was primarily due to the timing of accrued payroll benefits in addition to payments to vendors. The decrease in prepaid expenses and other current assets was primarily due to the timing of prepaid marketing events and software licenses.

Cash provided by investing activities was $9.3 million and consisted primarily of a decrease of $9.1 million of funds obtained from payroll customers to be used in satisfying related obligations and proceeds from the sale of assets of $0.3 million, partially offset by $0.1 million of paid property, equipment and software and capitalized software costs. We intend to continue to invest in our content data sets, software development and network infrastructure to ensure our continued ability to enhance our existing software, expand our data sets, introduce new products, and maintain the reliability of our network.

Cash used in financing activities was $9.2 million, which consisted primarily of $9.1 million related to decreases in payroll customer related obligations and $0.1 million of repayments of notes payable.

On December 30, 2006, we entered into an agreement with a vendor to obtain additional data sets that runs for an initial one year term following the date of the initial delivery. The fee for the initial term was $1.5 million. On June 30, 2009, we terminated the agreement.

On August 3, 2007, we acquired the assets of ITG. Under the terms of the agreement, the former owners of ITG are eligible to earn up to $1.0 million in additional consideration based on meeting certain performance targets during the first two years after the closing of the acquisition, and can earn additional consideration if these targets are exceeded. $1.1 million of additional consideration had been earned and recorded as additional goodwill of which $0.9 million was paid to the owner of ITG in cash and shares during fiscal 2009, an additional $0.2 million was paid in cash and shares in fiscal 2010.

On December 21, 2007, we acquired the assets of Schoonover Associates, Inc. Schoonover will be eligible to earn additional consideration based on meeting certain performance targets during the first five fiscal years after March 31, 2008. The additional consideration, if earned, consists of cash payments of no more than $100,000 per year for 5 years and vesting on the 112,646 shares of common stock issued at the closing of the acquisition, which were valued at $1.5 million, and which are eligible to vest ratably over such five-year period. As of June 30, 2010, 100% of the issued shares had vested and $200,000 of the additional consideration has been earned. Of the additional consideration earned, $0.1 million was paid in fiscal 2010 and the remaining $0.1 million was paid in August 2010.

On June 27, 2007, we entered into a master equipment lease agreement (Leaseline #1) with a maximum commitment of $300,000. The lease term began on September 1, 2007 and runs for a term of 36 months. On August 13, 2007, we increased the maximum commitment of Leaseline #1 to $600,000. As of March 31, 2010, we had leased approximately $381,000 of equipment under the terms of Leaseline #1. On September 13, 2007, we entered into an additional lease commitment (Leaseline #2) with the same lender with a maximum commitment of $350,000. On December 4, 2007, we increased the maximum commitment of Leaseline #2 to $400,000. The lease term began on January 1, 2008 and runs for a term of 36 months. As of March 31, 2010, we had leased approximately $391,000 of equipment under the terms of Leaseline #2. On January 17, 2008, we entered into a third lease commitment (Leaseline #3) with the same lender with a maximum commitment of $350,000. The lease term began on April 1, 2008 and runs for a term of 36 months. As of March 31, 2010, we had leased approximately $250,000 of equipment under the terms of Leaseline #3. On April 17, 2008, we entered into an additional lease commitment (Leaseline #4) with a maximum commitment of $350,000. The lease term begins on July 1, 2008 and runs for a term of 36 months. As of March 31, 2010, we had leased approximately $173,000 of equipment under the terms of this leaseline. On July 24, 2008, we entered into a

23

leaseline agreement (Leaseline #5) with a maximum available commitment of $200,000. The lease term began on October 1, 2008 and runs for a term of 36 months. As of March 31, 2010, we had not leased any equipment under the terms of this leaseline. In addition, we have approximately $1.1 million, in a restricted cash account as collateral for equipment with a value of approximately $1.1 million in accordance with all of our master lease agreements.

In June 2008, we entered into an agreement with a vendor to finance the purchase of perpetual software licenses in the amount of approximately $738,000. We will make quarterly payments of approximately $64,000 for a term of 36 months.

On August 8, 2008, we entered into a modification of our existing credit facility with Silicon Valley Bank to modify certain of the financial covenants and extend the term of the agreement to September 23, 2008. On September 17, 2008, we entered into a second modification of our credit facility to extend the term of the agreement to October 8, 2008. On October 8, 2008, we entered into a third modification of our credit facility to extend the term of this credit facility for two years to October 8, 2010 and increased the line of credit from $5,000,000 to $10,000,000. On March 16, 2009, we entered into a fourth modification of our agreement, which added Genesys as a guarantor to our obligations under the credit facility. On June 29, 2009, we entered into a fifth modification to our credit facility which increased the interest rate and certain fees payable, amended certain financial covenants, and increased the amount of stock we can repurchase under our repurchase plans. On October 15, 2009, we entered into a sixth modification to our credit facility decreasing the line of credit to $5.0 million, modifying the interest rate and amending certain financial covenants. In addition, in August 2010, we modified our credit facility to remove the pledge on the sale of our former Genesys subsidiary. Following the sixth modification, up to $5 million is available under this credit facility and the facility is collateralized by substantially all of our assets and expires on October 8, 2010. The line of credit may be used to secure letters of credit and cash management services and may be used in connection with foreign exchange forward contracts. The line of credit is subject to a financial covenant that requires us to maintain a ratio of assets to liabilities (net of deferred revenue) that is not less than 1.4 to 1. As of June 30, 2010, there was $2.5 million outstanding under the credit facility. As of this date, we were not in compliance with our debt covenant; however, we had sufficient available cash to pay in full the outstanding amounts due on the facility without material consequence to us. We have received a waiver from Silicon Valley Bank for the month of June 2010 and are currently negotiating an amendment to our existing credit facility. We anticipate that the amendment will be completed during the second quarter of fiscal 2011 and that we would be in compliance with the covenants of such arrangement.

On August 21, 2008, we acquired the share capital of Salary.com Limited. Under the terms of the agreement, the former employee owners of Salary.com Limited will be eligible to earn additional consideration based on meeting certain performance targets during each of the five twelve month periods ending August 31, 2009, 2010, 2011, 2012 and 2013. The additional consideration, if earned, consists of cash payments of a maximum of $200,000 per year for 5 years, allocated proportionately amongst the former employee owners. As of June 30, 2010, no additional consideration had been earned.

In October 2008, we entered into a new office lease for our subsidiary in Shanghai, China. The lease is for approximately 2,900 square meters and has an initial term of three years, commencing in January 2009. We can extend the lease for an additional three years at the end of the initial term. Rental payments under the lease are 180,000 Chinese Yuan RMB per month (approximately $26,000 per month).

On December 15, 2008, the Board of Directors authorized the repurchase by us of up to $2.5 million of our common stock from time to time at prevailing prices in the open market or in negotiated transactions off the market. On April 17, 2009, our Board of Directors increased the size of its share repurchase program from $2.5 million to $7.5 million. As of June 30, 2010, we had repurchased and retired 1,348,140 shares with a total value of approximately $2.8 million pursuant to this repurchase program. We did not make any repurchases pursuant to this program in the three months ended June 30, 2010.

On December 17, 2008, we acquired all issued and outstanding shares of Genesys. Under the terms of the agreement, the Genesys shareholders and optionholders are eligible to earn additional consideration of up to $2.0 million, payable in cash or shares of our common stock, at our option, based on Genesys meeting certain performance targets during the first year after the closing of the merger. As of March 31, 2010, the $2.0 million of additional consideration had been earned and recorded as goodwill. Such amounts were due to be settled in June 2010; however, we have filed an indemnification claim against the former owners of Genesys for breaches of representations and warranties made at the time of the acquisition. On August 13, 2010, Lawrence J. Munini, individually and as agent and attorney-in-fact for the former shareholders and option holders of Genesys filed suit against us in Massachusetts Superior Court in connection with the payment of this contingent consideration. The suit seeks, among other things, attachment of $2 million of our available funds. See Part II, Item 1 “Legal Proceedings” in this Quarterly Report on Form 10-Q. In August 2010, we sold Genesys as part of the divestiture of our payroll business; however, we remain liable for any additional consideration due to the former owners of Genesys.

During the first quarter of fiscal 2011, we recorded restructuring charges of approximately $0.7 million related to severance payments of approximately $0.3 million to employees terminated by us, $0.3 million in related stock compensation charges, and an additional $0.1 million in external costs primarily consisting of legal and outplacement services.

In February 2009, we entered into a new office lease for our wholly foreign owned enterprise in Montego Bay, Jamaica. The lease is for approximately 511 square meters and has an initial term of two years, commencing in November 2008. In June 2010, we shut down our Jamaica telesales operation and terminated our office lease for no additional costs or penalties.

24

On February 20, 2010, our former President and Chief Executive Officer resigned from his positions at the Company. As a result of the former executive’s resignation, we recorded restructuring charges of approximately $1.6 million during the fourth quarter of fiscal 2010. We recorded an additional $0.4 million during the quarter ended June 30, 2010 associated with the former executive’s resignation which were comprised of $0.1 million of severance costs, $0.2 million in stock compensation charges associated with the modification of vested awards in fiscal 2011, and $0.1 million in external consulting costs. We also expect to incur an additional $0.9 million of charges in the remainder of fiscal 2011 related to the transition process which primarily consists of $0.8 million of severance and $0.1 million of external consultant fees to assist with the process. The future severance payments will commence in August 2010 and be paid and expensed over an eighteen month period consistent with the non-compete agreement executed with the former executive.

In April 2009, we entered into a new office sublease for our corporate offices in Needham, Massachusetts. The lease is for approximately 36,288 square feet and has an initial term of twenty-one months, commencing in May 2009. Rental payments under the lease are $54,000 per month.

Given our current cash and accounts receivable, we believe that we will have sufficient liquidity to fund our business and meet our contractual obligations for at least the next 12 months. However, we may need to raise additional funds in the future in the event that we pursue acquisitions or investments in complementary businesses or technologies or experience operating losses that exceed our expectations. If we raise additional funds through the issuance of equity or convertible securities, our stockholders may experience dilution. In the event that additional financing is required, we may not be able to obtain it on acceptable terms or at all.

During the three most recent fiscal years, inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.

Other than as discussed above, there have been no material changes to our contractual obligations, as disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

Off-Balance-Sheet Arrangements

As required by the General Principles Topic of Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC, certain obligations and commitments are not required to be included in the consolidated balance sheet. These obligations and commitments, while entered into in the normal course of business, may have a material impact on liquidity. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

We believe that of our significant accounting policies, which are described in the notes to our financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, the following accounting policies involve a greater degree of judgment, complexity and effect on materiality. A critical accounting policy is one that is both material to the presentation of our financial statements and requires us to make difficult, subjective or complex judgments for uncertain matters that could have a material effect on our financial condition and results of operations. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition. In accordance with ASC 605-20, “Services” (“ASC 605-20”), we recognize revenues from subscription agreements for our on-demand software and related services when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is probable and the amount of the fees to be paid by the customer is fixed or determinable. Amounts that have been invoiced are recorded in accounts receivable and deferred revenue. Our subscription agreements generally contain multiple service elements and deliverables. These elements include access to our software and often specify initial services including implementation and training. Except under limited circumstances, our subscription agreements do not provide customers the right to take possession of the software at any time.

25

In accordance with ASC 605-25, “Multiple-Element Arrangements” (“ASC 605-25”) and ASC 985-605, “Software Revenue Recognition” (“ASC 985-605”), we define all elements in our multiple element subscription agreements as a single unit of accounting, and accordingly, recognize all associated revenue over the subscription period, which is typically one to five years in length. In the event professional services relating to implementation are required, we generally do not recognize revenue until such implementation is complete. In applying the guidance in ASC 605-25 and ASC 985-605, we determined that we do not have objective and reliable evidence of the fair value of the subscription to our on-demand software after delivery of specified initial services. We therefore account for our subscription arrangements and our related service fees as a single unit. Additionally, we license software under non-cancelable license agreements and provide services including implementation, consulting, training services and postcontract customer support (PCS). On certain software license arrangements, we have established vendor-specific objective evidence (VSOE) for postcontract customer support, using the substantive renewal rate method. For arrangements for which we have established VSOE, we allocate revenue using VSOE for the postcontract customer support (PCS) and the residual method for the other elements and accounts for other elements as a single unit of accounting. The revenue related to the postcontract customer support for which we have established VSOE is recognized ratably from the delivery date of the license through the contract period. If we are not able to establish VSOE on postcontract customer support, and postcontract customer support is the only undelivered element, then all revenue from the arrangement is recognized ratably over the contract period. However, if VSOE is not established but PCS has been delivered, then all revenue from the arrangement is recognized ratably over the contract period once the last element is delivered.

Income Taxes . We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of all of the deferred tax asset will not be realized. The realization of the deferred tax assets is evaluated quarterly by assessing the valuation allowance and by adjusting the amount of the allowance, if necessary. As of June 30, 2010, we have a valuation allowance of $25.0 million against our deferred tax assets.

ASC 740-10 clarifies the accounting for uncertainty in income taxes by prescribing the minimum recognition threshold and measurement requirements a tax position must meet before recognized a benefit in the financial statements. ASC 740-10 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting for interim periods and disclosures for uncertain tax positions.

Software Development Costs . We capitalize certain internal software development costs under the provisions of ASC 350-40, “Internal Use Software” (“ASC 350-40”). ASC 350-40 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when the preliminary project stage is complete, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. These costs are amortized using the straight-line method over the estimated useful life of the software, generally three years.

Allowance for Doubtful Accounts . We maintain an allowance for doubtful accounts for estimated losses resulting from our customers’ inability to pay us. The provision is based on our historical experience and for specific customers that, in our opinion, are likely to default on our receivables from them. In order to identify these customers, we perform ongoing reviews of all customers that have breached their payment terms, as well as those that have filed for bankruptcy or for whom information has become available indicating a significant risk of non-recoverability. In addition, we have experienced significant growth in the number of our customers, and we have less payment history to rely upon with these customers. We rely on historical trends of bad debt as a percentage of total revenue and apply these percentages to the accounts receivable associated with new customers and evaluate these customers over time. To the extent that our future collections differ from our assumptions based on historical experience, the amount of our bad debt recorded may be different than our allowance.

Stock-Based Compensation .. We follow the provisions of ASC 718, “Compensation – Stock Compensation” (“ASC 718”), which requires that all stock-based compensation be recognized as an expense in the financial statements over the service period and that such expense be measured at the fair value of the award.

Determining the appropriate fair value model and calculating the fair value of stock-based payment awards requires the use of highly subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility. Beginning in fiscal year 2006, we have used the Black-Scholes option-pricing model to value our option grants and determine the related compensation expense. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

26

We have historically estimated our expected volatility based on that of our publicly traded peer companies as we determined that we did not have adequate historical data from our traded share price. Until February 2007, we were a private company and therefore lack sufficient company-specific historical and implied volatility information. We did not grant any new stock options during the fiscal years ended March 31, 2010 and 2009; however, previously granted stock option awards were modified in connection with our workforce reduction on January 7, 2009 and the resignation of our Chief Executive Officer on February 20, 2010. The modification of the awards consisted of acceleration of the respective awards’ vesting schedule. Additionally, during the first quarter of fiscal 2011, we granted stock options to our Chief Executive Officer and President and further modified options held by our former President and Chief Executive Officer. For the awards granted or modified in the three months ended June 30, 2010, as well as the modified awards issued during the years ended March 31, 2010 and 2009, we determined we have adequate historical data from our traded share price, as such, expected volatilities utilized in the model are based on the historic volatility of our stock price.

The stock price volatility and expected terms utilized in the calculation of fair values involve management’s best estimates at that time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the vesting period of the option. ASC 718 also requires that we recognize compensation expense for only the portion of options that are expected to vest. Therefore, we have estimated expected forfeitures of stock options with the adoption of ASC 718. In developing a forfeiture rate estimate, we have considered our historical experience, our growing employee base and the historical limited liquidity of our common stock. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

Valuation of Goodwill and Indefinite Lived Intangible Assets. We follow the guidance of ASC 350, “Intangibles—Goodwill and Other” (“ASC 350”). In accordance with ASC 350, goodwill and certain indefinite lived intangible assets are no longer amortized, but instead evaluated for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of the goodwill or intangible asset is greater than its fair value. Factors we consider important that could trigger an impairment review include significant underperformance relative to historically or projected future operating results, identification of other impaired assets within a reporting unit, the disposition of a significant portion of a reporting unit, significant adverse changes in business climate or regulations, significant changes in senior management, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, a significant decline in our stock price for a sustained period, a decline in our credit rating, or a reduction of our market capitalization relative to net book value. Determining whether a triggering event has occurred includes significant judgment from management.

Our annual impairment review is based on a combination of the income approach, which estimates the fair value of our reporting units based on a discounted cash flow approach, and the market approach, which estimates the fair value of our reporting units based on comparable market multiples. The determination of the fair value of the reporting units requires us to make significant estimates and assumptions. These estimates and assumptions primarily include but are not limited to; the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which we compete, the discount rate, terminal growth rates, forecasts of revenue and expense growth rates, changes in working capital, depreciation and amortization, and capital expenditures. Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates. Changes in assumptions concerning future financial results or other underlying assumptions would have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge.

Valuation of Long-Lived Assets . We assess the recoverability of our long-lived assets that are held for use, such as property, equipment and software and amortizable intangible assets in accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”) when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets or an asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or the asset group. Future undiscounted cash flows include estimates of future revenues, driven by market growth rates, and estimated future costs. Cash flow projections are based on trends of historical performance and our estimate of future performance. If the carrying amount of the asset or asset group exceeds the estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset or asset group exceeds its estimated fair value.

New Accounting Pronouncements

In September 2009, the FASB issued Accounting Standards Update 2009-13, “Revenue Recognition (Topic 605)—Multiple Deliverable Revenue Arrangements” (“ASU 2009-13’), which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The new guidance will be effective prospectively for revenue arrangements entered into or materially modified beginning in fiscal years on or after June 15, 2010. We expect this guidance may have a significant impact on our revenue recognition policy and financial statements, however, we have not determined the impact as of June 30, 2010.

27

In September 2009, the FASB issued Accounting Standards Update 2009-14, “Software (Topic 985)—Certain Revenue Arrangements That Include Software Elements” (“ASU 2009-14’), which addresses the accounting for revenue transactions involving software. ASU 2009-14 amends ASC 985-605 to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. The new guidance will be effective prospectively for revenue arrangements entered into or materially modified beginning in fiscal years on or after June 15, 2010. We expect this guidance may have a significant impact on our revenue recognition policy and financial statements, however, we have not determined the impact as of June 30, 2010.

28

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk . Substantially all sales to customers and arrangements with vendors provide for pricing and payment in United States dollars, thereby reducing the impact of foreign exchange rate fluctuations on our results. A small percentage of our consolidated revenues and operational expenses consist of international revenues and operational expenses which are denominated in foreign currencies. Exchange rate volatility could negatively or positively impact those revenues and operating costs. For the three months ended June 30, 2010 and 2009, we incurred foreign exchange gains of $0.1 million. Fluctuations in currency exchange rates could have a greater effect on our business in the future to the extent our expenses increasingly become denominated in foreign currencies.

Interest Rate Sensitivity . Interest income and expense are sensitive to changes in the general level of U.S. interest rates. However, based on the nature and current level of our investments, which are primarily cash and debt obligations, we believe that there is no material risk of exposure.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures . As required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (Exchange Act), we have evaluated, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (who serve as our principal executive officer and principal financial officer, respectively), the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and our management necessarily was required to apply its judgment in evaluating and implementing our disclosure controls and procedures. Based upon the evaluation described above, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal controls over financial reporting. We continue to review our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business. These efforts have led to changes in our internal controls over financial reporting. As a result of the evaluation completed by the Company’s management, and in which Messrs. Daoust and Chicoyne participated, the Company has concluded that there were no changes during the fiscal quarter ended June 30, 2010 in our internal controls over financial reporting, which have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

29

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

On August 13, 2010, Lawrence J. Munini, individually and as agent and attorney-in-fact for the former shareholders and option holders of our former subsidiary, Genesys, filed suit against us in Massachusetts Superior Court. Mr. Munini claims that we owe $2,000,000 in additional consideration to the former owners of Genesys in connection with acquisition of Genesys by us in December 2008. Mr. Munini seeks multiple damages and attorneys fees, and an immediate attachment of $2,000,000 in our funds. We have accrued $1.8 million of this additional consideration on our balance sheet as of June 30, 2010. We believe that we have valid counterclaims against the former owners of Genesys for breaches of representations and warranties made by them at the time of the acquisition and intend to vigorously defend this lawsuit; however, we are unable to currently determine the ultimate outcome of these matters or the potential exposure to loss, if any.

We are not currently subject to any other material legal proceedings. From time to time, however, we may be named as a defendant in legal actions arising from our normal business activities. These claims, even those that lack merit, could result in the expenditure of significant financial and managerial resources.

Item 1A. Risk Factors

Except as set forth below, we have not identified any material changes from the risk factors as previously disclosed in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

We may not realize the benefits of our exit from the HRMS/payroll solutions business.

We recently completed our exit from the HRMS/payroll solutions business. We did this in part because we believe that focusing on our compensation and talent management products provides the best prospects for the future. This belief is based on a number of assumptions that may vary materially from actual future results. We also incurred various expenses and recorded additional charges associated with the shut down of these businesses. Our core compensation and talent management businesses may not perform as well as we expect on a standalone basis and may not be sufficient to overcome the loss of revenue and additional expenses associated with our exit from the HRMS/payroll solutions business. As a result, we may not realize the anticipated benefits from our exit from the HRMS/payroll business and this exit may have an adverse effect on our future business, financial condition and results of operations.

In addition, as described in Part II, Item 1 “Legal Proceedings” of this Quarterly Report on Form 10-Q, we are the subject of litigation commenced on behalf of the former owners of Genesys in connection with the payment of contingent consideration from the original acquisition. Although we believe that we have valid counterclaims, we cannot determine the ultimate outcome of these matters or the potential exposure to loss, if any. If we are required to make these additional payments to the former owners of Genesys, it will substantially reduce or eliminate the proceeds from our sale of Genesys. In addition, even if we are successful in defending this claim and asserting our own counterclaims, we may incur significant legal costs and management’s attention may be diverted from the ongoing development of our business, which could adversely affect our business.

30

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Pursuant to the terms of our 2000 Stock Option Plan and our 2004 Stock Option Plan (collectively referred to as our Stock Plans), options may typically be exercised prior to vesting. We have the right to repurchase unvested shares from employees upon their termination, and it is generally our policy to do so. In addition, in December 2008, our Board of Directors authorized an ongoing stock repurchase program with a total repurchase authority granted to us of $2.5 million. The objective of the stock repurchase program is to improve stockholders’ returns. On April 17, 2009, our Board of Directors increased the size of our share repurchase program to $7.5 million. At June 30, 2010, approximately $4.7 million was available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased by us were retired as of June 30, 2010. Our credit facility with Silicon Valley Bank currently limits repurchases under our $7.5 million stock repurchase program to $2.5 million over a rolling twelve month period. The following table provides information with respect to purchases made by us of shares of our common stock during the three month period ended June 30, 2010:

Period	Total Number of Shares Purchased(1)(2)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2010 through April 30, 2010	—	—	—	$	4,707,467
May 1, 2010 through May 31, 2010	73,562	3.10	—	$	4,707,467
June 1, 2010 through June 30, 2010	25,182	0.45	—	$	4,707,467
Total	98,744	2.34	—	$	4,707,467

(1) Includes shares originally purchased from us by employees pursuant to exercises of unvested stock options. During the months listed above, we routinely repurchased the shares from our employees upon their termination of employment pursuant to our right to repurchase unvested shares at the original exercise price under the terms of our Stock Plans and the related stock option agreements.

(2) Includes shares reacquired in connection with the surrender of shares to cover the minimum taxes on vesting of restricted stock.

ITEM 5 — OTHER INFORMATION

On August 10, 2010, we completed the sale of all of the outstanding shares of capital stock of our wholly-owned subsidiary, Genesys Software Systems, Inc., to Genesys Acquisition Corp. Prior to this sale, Genesys operated our enterprise payroll and human resource management software business, which we decided to divest in fiscal 2011. The total consideration received by us for the disposition of Genesys was $2,500,000 payable in cash. Pursuant to the Stock Purchase and Sale Agreement, we have agreed to provide limited indemnification for 12 months following the closing for any breaches of representations or warranties by us. There is no material relationship, between us or any of our directors or officers (or any of their associates) and the buyer of Genesys or any of its affiliates, other than in respect of the transaction

The foregoing description is qualified in its entirety by reference to the Stock Purchase and Sale Agreement, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 2.1 and incorporated herein by reference.

ITEM 6 — EXHIBITS

The exhibits listed in the Exhibits Index immediately preceding such exhibits are filed as part of this report.

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SALARY.COM, INC.
Date: August 16, 2010	/S/    BRYCE CHICOYNE
	Bryce Chicoyne
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

32

EXHIBIT INDEX

Exhibit No.	Description
2.1	Stock Purchase and Sale Agreement, dated as of August 10, 2010, by and among Salary.com, Inc., Genesys Software Systems, Inc. and Genesys Acquisition Corp. (filed herewith).
10.1*	Employment Agreement, dated as of April 12, 2010, by and between Salary.com, Inc. and Paul Daoust (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 26, 2010, SEC File 001-33312).
10.2*	Retention Bonus Letter Agreement, dated as of April 20, 2010, by and between Salary.com, Inc. and Bryce Chicoyne (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed April 26, 2010, SEC File 001-33312).
10.3*	Form of Change in Control Agreement by and between Salary.com, Inc. and the Executive named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 25, 2010, SEC File 001-33312).
10.4*	Severance and Retention Bonus Agreement, dated as of July 7, 2010, by and between Salary.com, Inc. and Yong Zhang (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 12, 2010, SEC File 001-33312).
10.5	Waiver Agreement, dated as of June 22, 2010, by and between Salary.com, Inc. and Silicon Valley Bank (incorporated by reference to Exhibit 10.8.7 to the Company’s Annual Report on Form 10-K filed June 29, 2010, SEC File 011-33312).
10.6	Seventh Loan Modification Agreement, dated as of August 10, 2010, by and between Salary.com, Inc. and Silicon Valley Bank (filed herewith).
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
32.1	Certification of Chairman and Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

* Indicates a management contract or a compensatory plan, contract or arrangement.

33

EX-2.1

Exhibit 2.1

STOCK PURCHASE AND SALE

AGREEMENT

BY AND AMONG

SALARY. COM, INC.,

GENESYS SOFTWARE SYSTEMS, INC.

AND

GENESYS ACQUISITION CORP.

August 11, 2010

This Stock Purchase and Sale Agreement (the “Agreement”) contains representations and warranties that Salary.com, Inc. (“Salary”), Genesys Software Systems, Inc. (“Genesys”) and Genesys Acquisition Corp. (“Buyer”) made to one another. These representations and warranties were made only for the purposes of the Agreement and solely for the benefit of Salary and Buyer as of specific dates, may be subject to important limitations and qualifications agreed to by Salary and Buyer and included in confidential disclosure schedules provided by Salary to Buyer in connection with the signing of the Agreement, and may not be complete. Furthermore, these representations and warranties may have been made for the purposes of allocating contractual risk between Buyer and Salary instead of establishing these matters as facts, and may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of the filing of the Agreement by Salary with the Securities and Exchange Commission. Accordingly, you should not rely upon the representations and warranties contained in the Agreement as characterizations of the actual state of facts, since they were intended to be for the benefit of, and to be limited to, Buyer and Salary.

TABLE OF CONTENTS

		Page
Article I - DEFINITIONS; PURCHASE AND SALE		1
Section 1.1.	Definitions	1
Section 1.2.	Stock Purchase and Sale	4
Section 1.3.	Delivery of Stock	5
Section 1.4.	Closing	5
Article II - REPRESENTATIONS AND WARRANTIES OF THE SELLER ENTITIES		5
Section 2.1.	Organization, Good Standing and Qualification.	5
Section 2.2.	Capital Structure.	6
Section 2.3.	Corporate Authority; Approval.	6
Section 2.4.	Governmental Filings; No Violations; Certain Contracts.	6
Section 2.5.	Financial Statements; Bank Accounts; Tax and Payroll Account Audits.	7
Section 2.6.	No Undisclosed Liabilities.	8
Section 2.7.	Absence of Certain Changes.	8
Section 2.8.	Accounts Receivable.	10
Section 2.9.	Tax Matters.	11
Section 2.10.	Real Property.	12
Section 2.11.	Assets; Equipment.	13
Section 2.12.	Intellectual Property.	13
Section 2.13.	Litigation and Liabilities.	17
Section 2.14.	Product Warranties.	17
Section 2.15.	Compliance with Laws.	17
Section 2.16.	Licenses and Permits.	17
Section 2.17.	Material Contracts.	18
Section 2.18.	Interested Party Transactions.	19
Section 2.19.	Employees; Labor Matters.	19
Section 2.20.	Employee Benefits.	20
Section 2.21.	Environmental Matters.	22
Section 2.22.	Insurance.	23
Section 2.23.	Brokers and Finders.	23
Section 2.24.	Disclosure.	23
Section 2.25.	Customers.	23
Article III - REPRESENTATIONS AND WARRANTIES OF THE BUYER		24
Section 3.1.	Organization	24
Section 3.2.	Authorization	24
Section 3.3.	No Violation	24
Section 3.4.	Consents and Approvals of Governmental Authorities	24
Section 3.5.	Brokers’, Finders’ Fees, etc.	24
Section 3.6.	Litigation	25

i

Article IV - ADDITIONAL AGREEMENTS		25
Section 4.1.	Confidentiality.	25
Section 4.2.	Tax Matters.	25
Section 4.3.	Balance Sheet	28
Section 4.4.	Retention of Books and Records and Information.	28
Section 4.5.	Further Assurances	29
Article V - CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS		29
Section 5.1.	Representations and Warranties	29
Section 5.2.	Performance	29
Section 5.3.	No Injunction	29
Section 5.4.	Third Party Consent and Approvals; Silicon Valley Bank Release	30
Section 5.5.	Resignations	30
Section 5.6.	Employment Agreements	30
Section 5.7.	Transition Services Agreement	30
Section 5.8.	Data Distributors, Inc. Agreement Extension	30
Section 5.9.	Great Lakes Assignment.	30
Article VI - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER ENTITIES		30
Section 6.1.	Representations and Warranties	30
Section 6.2.	Performance	31
Section 6.3.	No Injunction	31
Article VII - INDEMNIFICATION		31
Section 7.1.	Indemnification of the Parent	31
Section 7.2.	Indemnification of the Buyer	31
Section 7.3.	Additional Indemnity Provisions	31
Section 7.4.	Defense of Third Party Claims	32
Section 7.5.	Survival of Representations and Warranties; Miscellaneous.	33
Article VIII - MISCELLANEOUS PROVISIONS		34
Section 8.1.	Amendment and Modification	34
Section 8.2.	Waiver of Compliance	34
Section 8.3.	Notices	34
Section 8.4.	Binding Nature; Assignment	35
Section 8.5.	Entire Agreement	35
Section 8.6.	Expenses	35
Section 8.7.	Press Releases and Announcements	36
Section 8.8.	Governing Law	36
Section 8.9.	Jurisdiction; Service of Process	36
Section 8.10.	Interpretation	36
Section 8.11.	Specific Performance	37
Section 8.12.	Severability	37
Section 8.13.	Counterparts	37
Section 8.14.	Release	37

ii

Schedule A	Company Stock
Exhibit A	Company Disclosure Schedules
Exhibit B	Transition Services Agreement

iii

STOCK PURCHASE AND SALE AGREEMENT

THIS STOCK PURCHASE AND SALE AGREEMENT (the “Agreement”) is made and entered into as of August 11, 2010, by and among Salary.com, Inc. a Delaware corporation (the “Parent”), Genesys Software Systems, Inc., a Massachusetts corporation (the “Company” and together with the Parent, the “Seller Entities”) and Genesys Acquisition Corp., a Delaware corporation (the “Buyer”).

RECITALS

A. The Parent owns the number of shares of capital stock of the Company set forth on Schedule A, which constitutes all of the issued and outstanding shares of capital stock of the Company (the “Company Stock”); and

B. Buyer desires to purchase from the Parent, and the Parent desires to sell to the Buyer, the Company Stock (the “Stock Sale”).

NOW THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants which are to be made and performed by the respective parties, it is agreed as follows:

Article I -

DEFINITIONS; PURCHASE AND SALE

Section 1.1. Definitions. The following terms when used in this Agreement have the meanings set forth below:

(a) “Affiliate” shall mean with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person.

(b) “Agreement” shall have the meaning set forth in the Preamble.

(c) “Business Day” shall mean any day ending at 11:59 p.m. (Eastern Time) other than a Saturday or Sunday or a day on which banks are required or authorized to close in the City of Boston.

(d) “Buyer Indemnified Parties” has the meaning set forth in Section 7.2.

(e) “Buyer Prepared Returns” has the meaning set forth in Section 4.2(a).

(f) “Claim” has the meaning set forth in Section 7.3(d).

(g) “Claim Certificate” has the meaning set forth in Section 7.3(d).

(h) “Closing” has the meaning set forth in Section 1.4.

(i) “Closing Date” has the meaning set forth in Section 1.4.

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

(k) “Company Common Stock” has the meaning set forth in Section 2.2.

(l) “Company Disclosure Schedules” has the meaning set forth in Article II.

(m) “Company Products” has the meaning set forth in Section 2.12(c).

(n) “Confidential Information” has the meaning set forth in Section 4.1.

(o) “Contract” has the meaning set forth in Section 2.4(b).

(p) “Data Laws” has the meaning set forth in Section 2.12(n).

(q) “Documents” include, without limitation, e-mails and attachments, financial books and records, client and/or customer lists, general ledgers, electronic and paper calendars, account statements, drafts, letters, memos, notes (handwritten or typed), reports and tables (either printed or on the computer), slides or other graphics, data stored on computer, audio or video tapes, “working” or other personal files, notes, guidelines and procedures and minutes.

(r) “Employee Benefit Plan” has the meaning set forth in Section 2.20.

(s) “Environmental Claim” has the meaning set forth in Section 2.22.

(t) “Environmental Law” has the meaning set forth in Section 2.22.

(u) “Equipment” has the meaning set forth in Section 2.11.

(v) “ERISA” has the meaning set forth in Section 2.20.

(w) “ERISA Affiliate” has the meaning set forth in Section 2.20.

(x) “Financial Statements” has the meaning set forth in Section 2.5

(y) “GAAP” means the United States generally accepted accounting principles.

(z) “Governmental Entity” has the meaning set forth in Section 2.4.

2

(aa) “Hazardous Material” has the meaning set forth in Section 2.22.

(bb) “Indemnified Party” means any party making a claim for indemnification pursuant to Article VII.

(cc) “Indemnifying Party” means any party against whom a claim for indemnification is being made pursuant to Article VII.

(dd) “Intellectual Property” has the meaning set forth in Section 2.12(a).

(ee) “IT Assets” has the meaning set forth in Section 2.12(n).

(ff) “knowledge of the Company” or “to the Company’s knowledge,” or language of similar effect shall mean, as concerns any matter in question, the actual knowledge of David Fiacco and Mike Hanninen, after reasonable inquiry.

(gg) “Laws” has the meaning set forth in Section 2.15.

(hh) “Lease Agreements” has the meaning set forth in Section 2.10(b).

(ii) “Leased Real Property” has the meaning set forth in Section 2.10(a).

(jj) “Liability” has the meaning set forth in Section 2.6.

(kk) “License Agreements” has the meaning set forth in Section 2.12(b).

(ll) “Lien” means any lien, charge, pledge, security interest, claim or other encumbrance.

(mm) “Loss” has the meaning set forth in Section 7.3(c).

(nn) “Loss Limit” has the meaning set forth in Section 7.3(a).

(oo) “Material Adverse Effect” has the meaning set forth in Section 2.1.

(pp) “Material Contract” has the meaning set forth in Section 2.17(b).

(qq) “Materiality Qualifiers” has the meaning set forth in Section 7.3(f).

(rr) “Parent Prepared Returns” has the meaning set forth in Section 4.2(a).

(ss) “Parent Tax Claim” has the meaning set forth in Section 4.2(f).

3

(tt) “Permits” has the meaning set forth in Section 2.16.

(uu) “Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity of any kind or nature.

(vv) “Pre-Closing Tax Period” means all taxable periods or portions thereof ending on or before the Closing Date.

(ww) “Pre-January 31 Tax Claims” has the meaning set forth in Section 4.2(c)(ii).

(xx) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether civil, criminal, administrative or investigative.

(yy) “Purchase Price” has the meaning set forth in Section 1.2.

(zz) “Seller Entities” has the meaning set forth in the Preamble.

(aaa) “Seller Indemnified Parties” has the meaning set forth in Section 7.1.

(bbb) “Special Indemnity Claims” has the meaning set forth in Section 7.3(a).

(ccc) “Special Indemnity Date” has the meaning set forth in Section 7.3(a).

(ddd) “Straddle Period” means any taxable period that includes (but does not end on) the Closing Date.

(eee) “Tax” has the meaning set forth in Section 2.9(a).

(fff) “Tax Returns” has the meaning set forth in Section 2.9(b).

(ggg) “Third Party Claim” has the meaning set forth in Section 7.4(a).

(hhh) “Threshold” has the meaning set forth in Section 7.3(a).

(iii) “Transfer Taxes” has the meaning set forth in Section 4.2(c).

(jjj) “Unaudited Balance Sheet” has the meaning set forth in Section 2.5

Section 1.2. Stock Purchase and Sale. Subject to the terms and conditions set forth herein, and in reliance on the representations and warranties of and covenants and agreements made by the Parent and the Company in this Agreement, the Buyer hereby purchases and

4

acquires from the Parent, and the Parent hereby sells, assigns, transfers and delivers to the Buyer free and clear of all Liens, the Company Stock for an aggregate cash purchase price equal to $2,500,000 (the “Purchase Price”), in immediately available funds by wire transfer to a bank account designated by the Parent.

Section 1.3. Delivery of Stock. At the Closing, the Parent will deliver to the Buyer the original certificate executed for transfer to the Buyer (or stock powers executed in blank) representing the Company Stock.

Section 1.4. Closing. The closing of the transactions contemplated hereby (the “Closing”) shall take place at 10:00 a.m. Eastern Time at the offices of Goodwin Procter LLP, Boston, Massachusetts on the date hereof (subject to the satisfaction of the conditions to be satisfied at Closing being satisfied at Closing), or such other date, time and place as the Buyer, the Company and the Parent shall agree whether orally or in writing (the day on which the Closing actually takes place, the “Closing Date”).

Article II -

REPRESENTATIONS AND WARRANTIES OF THE SELLER ENTITIES

Except as set forth in the corresponding disclosure schedules delivered to the Buyer by the Company (the “Company Disclosure Schedules”) and attached as Exhibit A, the Parent hereby represents and warrants to the Buyer that:

Section 2.1. Organization, Good Standing and Qualification. The Company is a legal entity duly organized, validly existing and in good standing under the Laws of the Commonwealth of Massachusetts and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation or other legal entity in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so organized, qualified or in good standing, or to have such power or authority, could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect (as defined below). The Company has made available to the Buyer complete and correct copies of the Company’s articles of organization and by-laws, each as amended to date, and each as so delivered is in full force and effect. The Company does not have any subsidiaries or any equity interest or other direct or indirect ownership interest in any other Person. As used in this Agreement, the term “Material Adverse Effect” with respect to the Company means a material adverse effect on the financial condition, properties, assets, liabilities, business, or results of operations of the Company taken as a whole other than any change, effect, event, circumstance, occurrence or state of facts relating to (a) the execution and delivery of this Agreement, the announcement of this Agreement or the transactions contemplated hereby, (b) changes relating to the industry or segment thereof in which the Company operates in general, (c) changes in applicable laws or regulations after the date hereof, (d) changes in GAAP or regulatory accounting principles after the date hereof, (e) an act of war or terrorism or similar calamity or any escalation or worsening of the same, (f) earthquakes, hurricanes or other natural disasters or

5

(g) any failure by the Company to meet any estimates of revenues or earnings for any period ending on or after the date of this Agreement; provided, however, that the exception in this clause (g) shall not prevent or otherwise affect a determination that any change, effect, circumstance or development underlying such failure has resulted in, or contributed to, a Material Adverse Effect.

Section 2.2. Capital Structure. As of the date hereof, the authorized capital stock of the Company consists of 275,000 shares of common stock, par value $0.001 per share (“Company Common Stock”), of which 100,000 are issued and outstanding. All of the outstanding shares of Company Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company to issue or sell any shares of capital stock or other securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company, and no securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or are convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter. There are no voting trusts, proxies, or other agreements or understandings with respect to the Company Stock. There are no agreements to which the Company is a party relating to the registration, sale or transfer (including agreements relating to rights of first refusal, co-sale rights or “drag-along” rights) of any Company Stock. Parent holds of record and owns beneficially all of the issued and outstanding Company Stock, free and clear of any restrictions on transfer (other than any restrictions under the Securities Act of 1933 and state securities laws), Taxes, Liens, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Parent is not a party to any option, warrant, purchase right, or other contract or commitment (other than this Agreement) that could require Parent to sell, transfer, or otherwise dispose of the Company Stock. Parent is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of the Company Stock.

Section 2.3. Corporate Authority; Approval. The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Stock Sale. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by principles of public policy and subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The Board of Directors of the Company has determined that the Stock Sale is in the best interests of the Company and its shareholder, approved this Agreement and the Stock Sale and the other transactions contemplated hereby and as of the date hereof has recommended adoption of this Agreement to the shareholder of the Company. The Board of Directors of the Parent has approved the Stock Sale and the other transactions contemplated hereby.

Section 2.4. Governmental Filings; No Violations; Certain Contracts.

(a) No notices, reports or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company or the Parent from, any domestic or foreign governmental or regulatory authority, agency, commission, body, court or other legislative, executive or judicial governmental entity (each a “Governmental Entity”), in connection with the execution, delivery and performance of this Agreement by the Company and the Parent and the consummation of the Stock Sale and the other transactions contemplated hereby, or in connection with the continuing operation of the business of the Company following the Closing Date.

6

(b) The execution, delivery and performance of this Agreement by the Company and the Parent do not, and the consummation of the Stock Sale and the other transactions contemplated hereby will not, constitute or result in (i) a breach or violation of, or a default under, their respective articles of organization or by-laws; (ii) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or default under, the creation or acceleration of any obligations under or the creation of a Lien on any of the assets of the Company or the Parent pursuant to any agreement, lease, license, contract, note, mortgage, indenture, arrangement or other obligation (each, a “Contract”) binding upon the Company or the Parent; (iii) with or without notice, lapse of time or both, a breach or violation of any Law to which the Company or the Parent is subject such as would have a Material Adverse Effect on the Company, assuming (solely with respect to performance of this Agreement and consummation of the Stock Sale and the other transactions contemplated hereby) compliance with the matters referred to in Section 2.4(a); or (iv) any change in the rights or obligations of any party under any Contract binding upon the Company or the Parent such as would have a Material Adverse Effect on the Company. Schedule 2.4(b) sets forth a correct and complete list of Material Contracts (as defined in Section 2.17(b)) pursuant to which consents, waivers or approvals are or may be required prior to consummation of the transactions contemplated by this Agreement.

(c) Except as set forth on Schedule 2.4(c), the Company is not a party to or bound by any non-competition Contracts or other Contract that purports to limit in any material respect either the type of business in which the Company (or, after giving effect to the Stock Sale, Buyer or its subsidiaries) may engage or the manner or locations in which any of them may so engage in any business.

Section 2.5. Financial Statements; Bank Accounts; Tax and Payroll Account Audits.

(a) The Company has delivered to the Buyer an unaudited balance sheet (the “Unaudited Balance Sheet”) as of June 30, 2010 (the “Unaudited Balance Sheet Date”), unaudited statements of income for the three-month and six-month periods ended June 30, 2010 (such balance sheet and statements of income are collectively referred to as the “Financial Statements”). The Financial Statements: (i) are in accordance with the books and records of the Company; (ii) present fairly, in all material respects, the financial position of the Company as of the date indicated and the results of its operations and cash flows for such periods; and (iii) have been prepared in accordance with GAAP consistently applied subject to the absence of footnote disclosure to year-end adjustments, which will not be material either individually or in the aggregate.

7

(b) Schedule 2.5(b) includes a list of all of the Company’s bank or brokerage accounts, client trust accounts and safe deposit accounts and the names of all authorized signatories thereon.

(c) Schedule 2.5(c) sets forth a copy of the tax and payroll account reconciliations for the client accounts maintained by the Company. The reconciliations are accurate and complete, and the Company has complied with all federal, state and local laws and regulations regarding withholding payroll taxes and similar withholdings and paying over withheld amounts to the appropriate federal, state or local governmental authority.

Section 2.6. No Undisclosed Liabilities. The Company has no financial liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any type or kind whatsoever, whether accrued, absolute, contingent, determined, determinable, matured, unmatured or otherwise (each, a “Liability”), except for any Liability (i) that has been reflected in the Unaudited Balance Sheet, (ii) that would be included in the Unaudited Balance Sheet but have arisen in the ordinary course of business consistent with past practices since the Unaudited Balance Sheet Date and prior to the date hereof, (iii) arising from obligations for performance (but not for breach) under any Contracts to which the Company is a party, or (iv) listed on Schedule 2.6 attached hereto.

Section 2.7. Absence of Certain Changes. Except as set forth in Schedule 2.7, since the Unaudited Balance Sheet Date, the Company has conducted its business only in the ordinary course consistent with past practice and there has not been, occurred or arisen any:

(a) amendment or change to the Company’s articles of organization or by-laws;

(b) amendment of any term of any outstanding security of the Company;

(c) capital expenditure, transaction or commitment by the Company exceeding $25,000 individually with respect to any single Person;

(d) payment, discharge, waiver or satisfaction of any material claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise of the Company), other than payments, discharges, waivers or satisfactions in the ordinary course of business or of liabilities reflected or reserved against in the Unaudited Balance Sheet or contained in any Contract to which the Company is a party;

(e) material employment dispute, including but not limited to, claims or matters raised by any individuals or any workers’ representative organization, bargaining unit or union regarding labor trouble or claim of wrongful discharge or other unlawful employment or labor practice or action with respect to the Company;

8

(f) change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by the Company other than as required by GAAP;

(g) change in any material election in respect of Taxes, adoption or change in any material accounting method in respect of Taxes, agreement or settlement of any material claim or assessment in respect of Taxes, or extension or waiver of the limitation period applicable to any material claim or assessment in respect of Taxes;

(h) revaluation by the Company of any of its material assets (whether tangible or intangible), including without limitation, writing down the value of inventory or writing off notes or accounts receivable;

(i) declaration, setting aside or payment of a dividend or other distribution (whether in cash, stock or property) in respect of any Company capital stock, or any split, combination or reclassification in respect of any shares of Company capital stock, or any issuance or authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of Company capital stock, or any direct or indirect repurchase, redemption, or other acquisition by the Company of any shares of Company capital stock (or options, warrants or other rights convertible into, exercisable or exchangeable therefor);

(j) increase in or other change to the salary or other compensation payable or to become payable by the Company to any of its officers, directors or employees, or the declaration, payment or commitment or obligation of any kind for the payment (whether in cash or equity) by the Company of a severance payment, termination payment, bonus or other additional salary or compensation to any such person, in each case, other than in the ordinary course of business;

(k) any establishment, adoption, entry into or amendment of any collective bargaining, bonus, profit sharing, thrift, compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement;

(l) sale, lease, license or other disposition of any of the material assets (whether tangible or intangible) or properties of the Company, including, but not limited to, the sale of any accounts receivable of the Company, or any creation of any security interest in such assets or properties, other than non-exclusive licenses of the Company Products by the Company in the ordinary course of business;

(m) loan by the Company to any Person, purchase by the Company of any debt securities of any Person, or capital contributions to investment in any Person;

(n) creation or other incurrence by the Company of any Lien on any of its asset, except for Liens for Taxes not yet due and payable;

(o) incurring by the Company of any indebtedness, amendment of the terms of any outstanding loan agreement, guaranteeing by the Company of any indebtedness, issuance or sale of any debt securities of the Company or guaranteeing of any debt securities of others;

9

(p) waiver or release of any right or claim of the Company under any Material Contract other than in the ordinary course of business;

(q) commencement or settlement of any lawsuit by the Company, the commencement, settlement, notice or written threat of any lawsuit or proceeding or other investigation against the Company;

(r) issuance, grant, delivery or sale by the Company of any shares of Company capital stock or securities convertible into, or exercisable or exchangeable for, shares of Company capital stock, or any securities, warrants, options or rights to purchase any of the foregoing;

(s) agreement or modification to any Contract pursuant to which any other party was granted exclusive marketing, distribution, development, or manufacturing rights with respect to any Company Products or Intellectual Property of the Company;

(t) event or series of events that have had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(u) agreement to purchase or sell any interest in real property, grant any security interest in any real property, enter into any lease, sublease, license or other occupancy agreement with respect to any real property or alter, amend, modify or terminate any of the terms of any lease agreement to which the Company is a party;

(v) acquisition or agreement to acquire by merging or consolidating with, or by purchasing any assets or equity securities of, or by any other manner, any business or corporation, partnership, association or other business organization or division thereof, or other acquisition or agreement to acquire any assets that are material, individually or in the aggregate, to the Company’s business, or other acquisition or agreement to acquire any equity securities of any Person; or

(w) cancellation, amendment or renewal of any insurance policy; or

(x) agreement by the Company to do any of the things described in the preceding clauses (a) through (w) of this Section 2.7 (other than negotiations with the Buyer and its representatives regarding the transactions contemplated by this Agreement).

Section 2.8. Accounts Receivable. Schedule 2.8 lists all accounts receivable of the Company as of the Unaudited Balance Sheet Date, together with an aging schedule indicating a range of days elapsed since invoice. Subject to any reserves set forth in the Unaudited Balance Sheet or, for receivables arising subsequent to the Unaudited Balance Sheet Date, as reflected on the books and records of the Company, all of the accounts receivable of the Company (a) are valid and existing and have arisen in the ordinary course of business, (b) are not subject to any Lien, and (c) are not subject to valid defenses, set-offs or counter-claims except as otherwise reserved. No request or agreement for a deduction or discount has been made with respect to any accounts receivable of the Company. No Person has any Lien on any of such receivables.

10

Section 2.9. Tax Matters.

(a) Definition of Taxes. For the purposes of this Agreement, the term “Tax” or, collectively, “Taxes” shall mean (i) any and all federal, state, local and foreign taxes, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes as well as social security and unemployment taxes, together with all interest, penalties and additions imposed with respect to such amounts, (ii) any liability for the payment of any amounts of the type described in clause (i) of this Section 2.9(a) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, and (iii) any liability for the payment of any amounts of the type described in clauses (i) or (ii) of this Section 2.9(a) as a result of any obligation to indemnify any other Person under any agreement or arrangement with any other Person with respect to such amounts and including any liability for taxes of a predecessor entity.

(b) Definition of Tax Returns. For the purposes of this Agreement, the term “Tax Returns” shall mean any return, declaration, report, information statement, or other filing relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, required to be filed with a governmental authority.

(c) Tax Returns and Audits. Except as set forth in Schedule 2.9(c):

(i) The Company has (A) prepared and timely filed all material federal, state, local and foreign Tax Returns required to be filed on or before the Closing Date and such Tax Returns are true and correct in all material respects and have been or will be completed in accordance with applicable law in all material respects and (B) timely paid in full all Taxes due and payable by the Company

(ii) The Company is not now delinquent in the payment of any Tax, nor is there any Tax deficiency outstanding, assessed or proposed against the Company. The Company has not executed any waiver of any statute of limitations that has not expired or extended the period for the assessment or collection of any Tax.

(iii) No audit, investigation or other examination of any Tax Return of the Company is presently in progress, nor has the Company been notified in writing of any request for such an audit, investigation or other examination.

(iv) The Company has not incurred any liability for Taxes that are not yet due and payable other than Taxes incurred in the ordinary course of business and other than any Taxes relating to the transactions contemplated by this Agreement.

11

(v) There are no Liens on the assets of the Company relating to or attributable to Taxes other than Liens for Taxes not yet due and payable.

(vi) The Company has not (A) ever been a member of an affiliated group (within the meaning of Code §1504(a)) filing a consolidated federal income Tax Return, other than a group the common parent of which is Parent, (B) ever been a party to any Tax sharing, indemnification or allocation agreement, and (C) no liability for the Taxes of any Person (other than Company) as a transferee or successor, by contract or agreement, or otherwise.

(vii) The Company is not and has not been, at any time, a “United States Real Property Holding Corporation” within the meaning of Section 897(c)(2) of the Code.

(viii) No adjustment relating to any Tax Return that has been filed by the Company and for which the period for the making of such adjustment has not expired by the application of a statute of limitation, has been proposed in writing to the Company by any Tax authority.

(ix) The Company has not granted a power of attorney (or similar authority) as to any matters regarding Taxes that will have effect as of the Closing Date.

The representations and warranties set forth in this Section 2.9 and the representations and warranties in Section 2.20 that specifically refer to Taxes shall constitute the exclusive source of representations and warranties by the Company with respect to Taxes.

Section 2.10. Real Property.

(a) The Company does not own any real property. Schedule 2.10 sets forth a list of all real property currently leased, subleased or licensed by the Company (the “Leased Real Property”), the name of the lessor, licensor, sublessor, master lessor or lessee, the date and term of the lease, license, sublease or other occupancy right and each amendment thereto and, with respect to any current lease, license, sublease or other occupancy right the aggregate annual rental payable thereunder.

(b) The Company has made available to the Buyer true and complete copies of all leases, lease guaranties, subleases, agreements for the leasing, use or occupancy of, or otherwise granting a right in or relating to each Leased Real Property, including all amendments, terminations and modifications thereof (“Lease Agreements”). All such Lease Agreements are valid and effective in accordance with their respective terms, and, with respect to the Company, there is not, under any of such Lease Agreements, any existing material default on the part of the Company or, to the knowledge of the Company, any event which with notice or lapse of time, or both, would constitute a material default. To the knowledge of the Company, no other party to any Lease Agreement is in default under any such Lease Agreement. The Company has not received any notice of a default with respect to any such Lease Agreement that has not been remedied. The Company currently occupies each Leased Real Property for the operation of its business. The Company does not owe any brokerage commission or finders fee with respect to any such Leased Real Property.

12

(c) The Leased Real Property is in good operating condition and repair, and to the knowledge of the Company, free from structural, physical and mechanical defects, ordinary wear and tear excepted, is maintained in a manner consistent with standards generally followed with respect to similar properties, and is otherwise suitable for the conduct of the Company’s business as presently conducted. To the knowledge of the Company, the operation of the Company on the Leased Real Property does not violate in any material respect any applicable building code, zoning requirement or statute relating to such property or operations thereon.

Section 2.11. Assets; Equipment. The Company has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets (tangible or intangible), personal and mixed, used or held for use in its business (other than real property), free and clear of any Liens, except (a) as reflected in the Unaudited Balance Sheet, (b) Liens for Taxes not yet due and payable, and (c) the Company’s standard customer agreements. Schedule 2.11 lists all material items of equipment (the “Equipment”) owned or leased by the Company, and such Equipment is (x) adequate for the conduct of the business of the Company as currently conducted, and (y) in good operating condition, subject to normal wear and tear.

Section 2.12. Intellectual Property.

(a) “Intellectual Property” means:

(i) any know-how, invention (whether patentable or unpatentable and whether or not reduced to practice), any improvements to any invention, and any patent, utility model, patent application, statutory invention registration or patent disclosure for the foregoing, together with any reissuance, division, continuation, continuation-in-part, revision, extension, or reexamination of any patent;

(ii) any trademark, service mark, trade dress, logo, trade name, corporate name, domain name, Uniform Resource Locator (URL) or other internet address, whether or not registered, together with any translation, adaptation, derivation, or combination and including any associated goodwill, and any application for registration, registration, or renewal of the foregoing;

(iii) any copyrightable work (including, but not limited to, advertising and promotional materials, catalogs, logo designs, software, compilations of data, and website content) and any copyright therefor, and any application for registration, registration or renewal of the copyright;

(iv) any trade secret or confidential or proprietary business information (including, but not limited to, any idea, research and development, know-how, formula, composition, manufacturing and production process or technique, technical data, design, drawing, specification, customer or supplier list, pricing and cost information, and business and marketing plan or proposal);

13

(v) any industrial designs and any registrations and applications therefor;

(vi) any computer software (whether in general release or under development), including, without limitation, source code, object code, files, records and databases and all related data and related documentation;

(vii) any other proprietary right including moral rights and waivers of such rights by others and the right to sue and recover damages, attorneys’ fees and costs for past infringement of any patent, trademark, copyright; and

(viii) any copies or tangible embodiment of any of the foregoing and all files relating thereto.

(b) Except as set forth on Schedule 2.12(b)(i), the Company owns or is licensed for, and in any event possesses sufficient and legally enforceable rights with respect to, all Intellectual Property that is used in, or that is necessary to conduct the business as is presently conducted. Schedule 2.12(b)(ii) sets forth, for the Intellectual Property owned by Company, a complete and accurate list of all (i) patents and patent applications, (ii) trademark and service mark registrations and applications therefor, (iii) unregistered trademarks and service marks, (iv) domain names, and (v) copyright registrations and applications therefor, indicating for each, where applicable, (A) the jurisdiction, (B) the patent, registration, or application number, (C) the date issued, and (D) the date filed. Schedule 2.12(b)(ii) also sets forth a complete and accurate list of all license agreements in effect on the date of this Agreement granting any right to use any Intellectual Property, whether the Company is the licensee or licensor thereunder, other than licenses for commercial “off-the-shelf” or “shrink-wrap” software that has not been modified or customized for the Company and outbound licenses for which maintenance payments are no longer made to the Company in connection therewith (collectively, the “License Agreements”).

(c) Schedule 2.12(c) contains a complete and accurate list of all products, software or service offerings of the Company that have been sold, distributed or otherwise disposed of by the Company since January 1, 2008 or which are subject to contracts with current customers or which the Company intends to sell, distribute or otherwise dispose during the fiscal year ending March 31, 2011 (collectively, the “Company Products”).

(d) The Company has all right, title, and interest in and to the Intellectual Property owned by the Company free and clear of any Liens other than applicable license agreements entered into in the ordinary course of business. No claim has been made, or to the knowledge of the Company threatened, against the Company based upon, challenging or seeking to deny or restrict the use by the Company of any of the Intellectual Property owned or licensed by the Company.

14

(e) The Company has made available to the Buyer true and complete copies of all License Agreements identified in Schedule 2.12(b). With respect to each of the License Agreements:

(i) the License Agreement is legal, valid, binding, and enforceable and in full force and effect and represents the entire agreement with respect to the subject matter of such License Agreement;

(ii) the License Agreement will continue to be legal, valid, binding, and enforceable and in full force and effect upon consummation of the transactions contemplated by this Agreement and the consummation of such transactions will not constitute a breach or default under such License Agreement, except as otherwise identified on Schedule 2.12(b);

(iii) the Company has not received any notice of termination or cancellation under any License Agreement, nor any notice of a breach or default under such License Agreement which has not been cured, and the Company has not itself sublicensed or granted any of the licensed rights to another party in violation of the License Agreement; and

(iv) neither the Company nor to the knowledge of the Company any other party to such license is in breach or default under the License Agreement, and to the knowledge of the Company, no event has occurred that, with notice or lapse of time would constitute such a breach or default.

(f) The Company has not licensed or sublicensed its rights in any Intellectual Property other than pursuant to the License Agreements and no royalties, honoraria or other fees are payable by the Company for the use of or right to use any Intellectual Property except pursuant to the License Agreements or as otherwise identified in Schedule 2.12(b).

(g) To the knowledge of the Company, no third party is infringing or violating any Intellectual Property owned or exclusively licensed by the Company.

(h) The use by the Company of the Intellectual Property owned or licensed by the Company does not infringe upon the rights of any third party (i) Intellectual Property rights, except for patents and (ii) to the knowledge of the Company, patents. No claim has been made, asserted or to the knowledge of the Company threatened, or is pending, against the Company so alleging. This Section 2.12(h) is the only representation and warranty in this Agreement with respect to the matters set forth in this Section 2.12(h).

(i) To the extent that any Intellectual Property used in connection with the Company’s business has been developed or created by any person or entity, a written agreement has been obtained by the Company with such person or entity with

15

respect thereto, and as a result of such agreement(s) the Company has (A) obtained ownership of, and is the exclusive owner of, all such Intellectual Property by operation of law or by valid assignment of any such rights or (B) has obtained a license under or to such Intellectual Property.

(j) The Company has taken reasonable and customary precautions to protect the secrecy, confidentiality and value of its trade secrets.

(k) The software products currently licensed by the Company to customers are in substantial conformance with applicable contractual commitments, express and implied warranties, specifications and the current documentation, whether electronically embedded, written or otherwise, available with such software products, except for errors and bugs of the type, scope and nature generally acceptable in the software industry for similar types of software products.

(l) All of the Company’s current and prior employees have executed valid intellectual property and confidentiality agreements for the benefit of the Company in a form which the Company has prior to the date of this Agreement provided to the Buyer for its review. Every contract or agreement under which Intellectual Property was developed for the Company assigns all rights to such Intellectual Property to the Company. To the Company’s knowledge, the Company’s employees’ performance of their employment activities does not violate any third party’s Intellectual Property rights or such employees’ contractual obligations to any third person.

(m) The IT Assets operate and perform in all material respects in accordance with their documentation and functional specifications and otherwise as required by the Company in connection with its business, including but not limited to requirements under agreements between the Company and its customers or partners to provide the Company Products on a hosted basis, and have not materially malfunctioned or failed within the past three (3) years. To the Company’s knowledge, no person has gained unauthorized access to the IT Assets. The Company has implemented reasonable backup and disaster recover technology consistent with the Company’s SAS 70 procedures and practices. “IT Assets” means the Company’s computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology equipment, and all associated documentation, including but not limited to the computers, servers and software operated on the Company’s behalf by Data Distributors, Inc.

(n) Data Privacy.

(i) The collection, use, transfer, import, export, storage, disposal, and disclosure by the Company of personally identifiable information, or other information relating to persons protected by law, has not violated and, if performed after Closing in substantially the same manner as performed immediately prior to Closing, will not violate in any material respect any applicable U.S. or foreign law relating to data collection, use, privacy, or protection (including, without limitation, any requirement arising under any

16

constitution, statute, code, treaty, decree, rule, ordinance, or regulation) (collectively, “Data Laws”). The Company has complied with in all material respects, and is presently in compliance with in all material respects, its privacy policies, which policies comply in all material respects with all Data Laws. The transactions contemplated by this Agreement will not result in the violation of any Data Laws, or the privacy policies of the Company.

(ii) (A) There is no complaint, audit, proceeding, investigation, or claim against or, to the knowledge of the Company, threatened against the Company by any governmental authority, or by any person respecting the collection, use, transfer, import, export, storage, disposal, and disclosure of personal information by any person in connection with the Company or its business and (B) to the Company’s knowledge, there have been no security breaches compromising the confidentiality or integrity of such personal information.

Section 2.13. Litigation and Liabilities. Except as set forth on Schedule 2.13, there is no action, suit, claim or proceeding of any nature pending or, to the knowledge of the Company, threatened against the Company or Parent relating to the Company’s business, its properties (tangible or intangible) or any of its officers or directors in their capacities as such. There is no investigation pending or, to the knowledge of the Company, threatened against the Company or any of its assets (tangible or intangible) or any of its officers or directors by or before any Governmental Entity. To the Company’s knowledge, there are no facts or circumstances that could reasonably be expected to (a) result in any claims against, or obligations or liabilities of, the Company, or (b) prevent, delay or impair the consummation of the transactions contemplated by this Agreement. The Company is not a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any Governmental Entity.

Section 2.14. Product Warranties. Schedule 2.14 contains the standard forms of product warranties and guarantees used in the Company’s business, and copies of all other material product warranties and guarantees, and a summary of all oral product warranties used by the Company if different from the foregoing. Except as specifically described on such schedule, during the three (3) year period prior to the date hereof no product warranty or similar claims have been made against the Company, and, to the Company’s knowledge, there is no basis therefor.

Section 2.15. Compliance with Laws. The Company has complied in all material respects with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of any Governmental Entity (collectively, “Laws”). The Company has not received a notice from any such Governmental Entity of any such violation or alleged violation, and the Company has not received a notice of any action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice which has been filed or commenced against the Company alleging any failure so to comply, and, to the Company’s knowledge, there is no basis therefor.

Section 2.16. Licenses and Permits. The Company has obtained and is in compliance with all material permits, licenses, certifications, approvals, registrations, consents,

17

authorizations, franchises, variances, exemptions and orders issued or granted by a Governmental Entity (“Permits”) necessary to conduct its business as presently conducted or as presently proposed to be conducted. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby do or will constitute or result in a default under or violation of any such Permit.

Section 2.17. Material Contracts.

(a) Except as set forth in Schedule 2.17, the Company is not a party to or bound by:

(i) any employment or consulting agreement, contract or commitment with an employee or individual consultant or salesperson (other than “at will” employment agreements entered into in the ordinary course of business), any agreement, contract or commitment to grant any severance or termination pay (in cash or otherwise) to any employee, or any consulting or sales agreement, contract, or commitment with a firm or other organization;

(ii) promissory notes, loans, indentures, evidences of indebtedness or other instruments relating to the lending of money, whether as borrower, lender or guarantor, in excess of $25,000;

(iii) license agreements, consulting services agreements, work authorizations, and software support agreements with customers that provide for annual payments in excess of $25,000 or cannot be terminated in less than one year;

(iv) equipment leasing agreements which individually provide for annual payments in excess of $25,000;

(v) agreements with suppliers (excluding purchase orders and sales orders in the ordinary course for amounts less that $10,000) with a remaining term of more than one year or a contract value of more than $25,000;

(vi) agreements with labor unions or other employee organizations;

(vii) consignment, distributorship and agency agreements;

(viii) guarantees and sureties granted with respect to any obligation of third parties;

(ix) joint venture agreements;

(x) agreements restricting the Company’s (or, after the Closing, Buyer’s) ability to compete or granting exclusive distribution rights to any product or in any territory; and

18

(xi) agreements or commitments (other than those covered above by clauses (i) through (x)) in excess of $25,000 or which cannot be terminated on three months’ notice or less without payment of compensation.

(b) True and complete copies of each Contract disclosed in Schedule 2.17 (each a “Material Contract” and collectively, the “Material Contracts”) have been made available to the Buyer. Each Material Contract to which the Company is a party or any of its properties or assets (whether tangible or intangible) is subject is a valid and binding agreement of the Company enforceable against each of the parties thereto in accordance with its terms, and is in full force and effect with respect to the Company, except as would not otherwise cause a Material Adverse Effect. The Company is in compliance in all material respects with and has not breached, violated or defaulted in any material respect under, or received written notice that it has breached, violated or defaulted in any material respect under, any of the terms or conditions of any such Material Contract. To the knowledge of the Company, no party obligated to the Company pursuant to any such Material Contract has breached, violated or defaulted under such Material Contract, or taken any action or failed to act, such that, with the lapse of time, giving of notice or both, such action or failure to act would constitute such a breach, violation or default under such Material Contract by any such other party.

Section 2.18. Interested Party Transactions. Except as set forth in Schedule 2.18, no employee, officer, shareholder or director of the Company (nor any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has or has had an interest) is financially indebted to the Company, and the Company is not financially indebted to any employee, officer, shareholder or director of the Company (nor any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has or has had an interest). Except as set forth in Schedule 2.18, since January 1, 2008, no officer or director, or, to the knowledge of the Company, shareholder or other employee of the Company (nor, to the knowledge of the Company, any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has or has had an interest), has or has had, directly or indirectly, (a) any interest in any entity that purchases from or sells or furnishes to the Company any goods or services, or (b) a beneficial interest in any Contract to which the Company is a party; provided, however, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed to be an “interest in any entity” for purposes of this Schedule 2.18.

Section 2.19. Employees; Labor Matters.

(a) Schedule 2.19 contains a list of all employees of the Company, along with the position and the annual rate of base compensation of each such employee. To the knowledge of the Company, no employee or group of employees has any plans to terminate employment with the Company.

(b) The Company is not a party to or otherwise bound by any collective bargaining agreement or other Contract with a labor union or labor organization, nor is the Company the subject of any material proceeding that asserts that

19

the Company has committed an unfair labor practice or that seeks to compel it to bargain with any labor union or labor organization nor is there pending or, to the knowledge of the Company, threatened, nor has there been any labor strike, dispute, walk-out, work stoppage, slow-down or lockout involving the Company. The Company has no knowledge of any organizational effort made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Company.

Section 2.20. Employee Benefits.

(a) For purposes of this Agreement, the following terms shall have the following meanings:

(i) “Employee Benefit Plan” means any of the following if currently maintained, or contributed to, by the Company for the benefit of its current or former employees or by an ERISA Affiliate for the benefit of its current or former employees (or, in each case, for the benefit of such employees’ respective beneficiaries): (1) an “employee pension benefit plan” (as defined in Section 3(2) of ERISA), (2) an “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and (3) any other written or oral plan, agreement or arrangement that can reasonably be expected to impose a material liability on the Company providing direct or indirect employment compensation to current or former employees of the Company or any ERISA Affiliate, including insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation.

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

(iii) “ERISA Affiliate” means any entity that is, or at any time during the past two (2) years was, treated as a single employer with the Company under Section 414 of the Code because such entity is, or during such period was, a member with the Company of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code).

(b) Schedule 2.20(b) contains a complete and accurate list of all Employee Benefit Plans. Complete and accurate copies of (i) all Employee Benefit Plans which have been reduced to writing, (ii) all related trust agreements, insurance contracts and summary plan descriptions, to the extent applicable, and (iii) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan financial statements for the last two plan years for each Employee Benefit Plan, to the extent required by applicable Law, have been delivered or made available to the Buyer. Each Employee Benefit Plan has been administered in all material respects in accordance with

20

its terms, the currently applicable provisions of ERISA and the Code and the regulations thereunder and other applicable Laws, and each of the Company and the ERISA Affiliates has in all material respects met its obligations with respect to such Employee Benefit Plan and has made all required contributions thereto not later than the applicable due date or has accrued such amounts on its financial statements. All filings and reports as to each Employee Benefit Plan required to have been submitted to the Internal Revenue Service or to the United States Department of Labor have been duly submitted.

(c) The Employee Benefit Plans that are intended to be qualified under Section 401(a) of the Code have either received determination letters from the Internal Revenue Service to the effect that such Employee Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, or such plans are adopted in the form of master, prototype or volume submitter arrangements that have received a favorable opinion letter.

(d) Neither the Company nor any ERISA Affiliate has maintained within the past five (5) years an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.

(e) At no time during the past five (5) years has the Company or any ERISA Affiliate contributed to or been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).

(f) There are no unfunded obligations under any Employee Benefit Plan providing benefits with respect to any period after termination of employment to any employee of the Company (or to any beneficiary of any such employee), including retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be provided under Section 4980B of the Code or other applicable Law.

(g) No act or omission has occurred and, to the knowledge of the Parent, no condition exists with respect to any Employee Benefit Plan that can reasonably be expected to subject the Company to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA (other than liabilities or benefits arising in the ordinary course or accrued under an Employee Benefit Plan) or the Code or (ii) any material liability payment under any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Employee Benefit Plan.

(h) Schedule 2.20(h) lists each: (i) agreement, plan, arrangement or understanding (written or oral) with any shareholder, director, officer, employee, consultant or independent contractor of the Company (A) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of the nature of any of the transactions contemplated by this Agreement, or (B) providing severance benefits or other benefits after the termination of employment of such director, officer or employee; and (ii) agreement,

21

plan, arrangement or understanding (written or oral) binding the Company, any of the benefits of which will be increased or vested, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.

Section 2.21. Environmental Matters. The Company has not generated, used, treated, stored, released, discharged or disposed of any Hazardous Materials on any Leased Real Property and, to the knowledge of the Company, no Hazardous Materials have been generated, used, treated or stored on, released, discharged or disposed of onto, from or under any Leased Real Property, in each case, except (a) in compliance in all material respects with Environmental Laws, or (b) in a manner that would not give rise to any Environmental Claim or to any material liability under Environmental Laws. The Company is and has been in compliance in all material respects with Environmental Laws with respect to the conduct of its business. There are no pending or, to the knowledge of the Company, threatened Environmental Claims against the Company. The Company has made available to the Buyer true and complete copies of any environmental reports and other documents in its possession or control that relate to Environmental Claims, the Company’s compliance with Environmental Law, or to the environmental condition of the Leased Real Property.

As used herein, the term “Hazardous Material” shall be construed to include any toxic or hazardous substance, material or waste or constituent thereof, and any other contaminant, pollutant, waste or by-product material whether liquid, solid, semisolid, sludge and/or gaseous, including without limitation, chemicals, compounds, pesticides, asbestos containing materials, petroleum or petroleum products, and polychlorinated biphenyls, the presence of which requires or may require investigation or remediation under any Environmental Laws or which are regulated, listed or controlled by, under or pursuant to any Environmental Laws, or which has been determined or interpreted by any Governmental Entity to be a hazardous or toxic substance regulated under any Environmental Laws, but shall not include ordinary and customary office cleaning or housekeeping products.

As used herein, the term “Environmental Law” means all federal, state, regional or local statutes, laws, rules, regulations, codes, ordinances, orders, plans, injunctions, decrees, rulings, licenses or judicial or administrative interpretations thereof, or similar laws, all as are currently in existence, issued, or promulgated, any of which govern, or relate to pollution, protection of the environment, public health and safety, air emissions, water discharges, waste disposal, hazardous or toxic substances, solid or hazardous waste, as any of these terms are or may be defined in such statutes, laws, rules, regulations, codes, orders, ordinances, injunctions, decrees, rulings, licenses, or judicial or administrative interpretations thereof, including without limitation: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC § 9601 et seq.; the Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901 et seq.; the Clean Water Act, as amended, 33 U.S.C. § 1311, et seq.; the Clean Air Act, as amended, 42 U.S.C. § 7401-7642 ; the Toxic Substances Control Act, as amended, 15 U.S.C. § 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. § 136-136y; the Emergency Planning and Community Right-to-Know Act of 1986 as amended 42 U.S.C. § 11001, et seq. (Title III of SARA) and similar or related state and local laws.

22

As used here in, the term “Environmental Claim” means all administrative, regulatory or judicial actions, suits, demands, demand letters, notice letters, claims, liens, notices of non-compliance or violation, investigations, actions or proceedings relating to Hazardous Materials, Environmental Laws or environmental permits by (a) governmental or regulatory authorities for enforcement, cleanup, cost recovery, removal, response, remedial or other actions or damages (including, but not limited to, natural resource damages) pursuant to any applicable Environmental Laws, and (b) any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.

Section 2.22. Insurance. Schedule 2.22 lists all insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company since January 1, 2008, including the type of coverage, the carrier, the amount of coverage, the term and the annual premiums of such policies. There is no claim by the Company pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed or that the Company has a reason to believe will be denied or disputed by the underwriters of such policies or bonds. In addition, there is no pending claim of which its total value (inclusive of defense expenses) will exceed the policy limits. All premiums due and payable under all such policies and bonds have been paid, and the Company is otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage).

Section 2.23. Brokers and Finders. Except as set forth in Schedule 2.23, the Company has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions, fees related to investment banking or similar advisory services or any similar charges in connection with the Agreement or any transaction contemplated hereby. The Company has made available to the Buyer a complete and accurate copy of all agreements pursuant to which any broker or agent listed on such schedule is entitled to any fees and expenses in connection with any of the transactions contemplated by this Agreement.

Section 2.24. Disclosure. To the knowledge of the Company, the representations and warranties contained in this Article II taken as a whole and together with the Company Disclosure Schedules do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained in this Article II misleading.

Section 2.25. Customers. Schedule 2.25(a) sets forth (i) a complete and accurate list of the names and addresses of the Company’s customers as of the date hereof, showing the approximate total sales in dollars to each such customer during the last twelve months. Except as set forth on Schedule 2.25(b), to the knowledge of the Company, there has been no adverse change in the business relationship of the Company with any customer or supplier named on Schedule 2.25(a) and the Company has not received any written communication from any customer or supplier named on Schedule 2.25(a) of any intention to return, terminate or materially reduce purchases from the Company.

23

Article III -

REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby represents and warrants to the Seller Entities as follows:

Section 3.1. Organization. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware.

Section 3.2. Authorization. The Buyer has full corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. The Buyer has taken all corporate action required to authorize the execution and delivery of this Agreement, the performance of the Buyer’s obligations hereunder and the consummation of the transactions contemplated hereby. No other corporate action on the part of the Buyer are necessary to authorize the execution, delivery and performance by the Buyer of this Agreement. This Agreement is a valid and binding agreement of the Buyer, enforceable against it in accordance with its terms except (a) as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally and (b) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

Section 3.3. No Violation. Neither the execution and delivery of this Agreement by the Buyer nor the performance by the Buyer of its obligations hereunder will violate any provisions of the certificate of incorporation or bylaws of the Buyer, or violate, or be in conflict with, or allow the termination of, or constitute a default under, or cause the acceleration of the maturity of, or create a lien under, any material debt or obligation pursuant to any material agreement or commitment to which the Buyer is a party or by which the Buyer is bound, or, to the knowledge of the Buyer, violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which the Buyer is subject.

Section 3.4. Consents and Approvals of Governmental Authorities. Except as set forth in Schedule 3.4, for consents, approvals or authorizations which if not received or declarations, filings or registrations which if not made, would not impede the consummation of the transactions contemplated by this Agreement by the Buyer in any material respect, no consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required to be made or obtained by the Buyer in connection with the execution and delivery of this Agreement by the Buyer or the performance by the Buyer of its obligations hereunder.

Section 3.5. Brokers’, Finders’ Fees, etc. The Buyer has not employed any broker, finder, investment banker or financial advisor as to whom the Buyer may have any obligation to pay any brokerage or finders’ fees, commissions or similar compensation in connection with the transactions contemplated hereby.

24

Section 3.6. Litigation. There is no action, proceeding or investigation pending or threatened against the Buyer, which, if adversely determined, would adversely affect the Buyer’s performance under this Agreement.

Article IV -

ADDITIONAL AGREEMENTS

Section 4.1. Confidentiality. Upon Closing, the Parent shall treat and hold, and shall cause its Affiliates to treat and hold, as confidential any information concerning the Company, including any notes, analyses, compilations, studies, forecasts, interpretations or other documents that are derived from, contain, reflect or are based upon any such information (the “Confidential Information”), refrain from using any of the Confidential Information, and deliver promptly to Buyer, at the request and option of the Buyer, all tangible embodiments (and all copies) of the Confidential Information which are in its possession or under its control. Notwithstanding the foregoing, Confidential Information shall not include information that is generally available to the public other than as a result of a breach of this Section 4.1 or other act or omission of the Parent or any of its Affiliates. In the event that the Parent or any of its Affiliates is requested or required to produce information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process to disclose any Confidential Information, such Person shall notify the Buyer promptly of the request or requirement so that the Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 4.1. If, in the absence of a protective order or the receipt of a waiver hereunder, the Parent or any of its Affiliates is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, such Person may disclose the Confidential Information to the tribunal; provided, that such disclosing Person shall use its reasonable efforts to obtain, at the request of the Buyer, an order or other assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed as the Buyer shall designate.

Section 4.2. Tax Matters. The following provisions shall govern the allocation of responsibility as between the Buyer and the Parent for certain tax matters following the Closing Date:

(a) Preparation and Filing of Tax Returns. The Parent shall timely prepare and file all foreign, federal, state and local income Tax Returns of the Company or that include the Company with respect to any taxable period ending on or before the Closing Date (“Parent Prepared Returns”). Each Parent Prepared Return shall be prepared in accordance with the Company’s existing procedures and practices and accounting methods. The Buyer shall cause the Company to prepare and timely file all Tax Returns that are filed after the Closing Date and that are not Parent Prepared Returns for all taxable years ending on or before the Closing Date and for Straddle Periods (the “Buyer Prepared Returns”). Each Buyer Prepared Return shall be prepared in accordance with the Company’s existing procedures and practices and accounting methods. Buyer Prepared Returns that show Taxes for which the Parent may be liable pursuant to Section 4.2(c) will be timely submitted to the Parent for its review and written approval, which approval shall not be unreasonably conditioned, delayed or withheld.

25

(b) Amended Tax Returns. Neither the Buyer nor any other party shall amend any Tax Return of the Company or that includes the Company (i) that relates to a taxable period ending on or prior to the Closing Date and/or (ii) for which the Parent may reasonably be expected to be liable pursuant to Section 4.2(c), without the prior written consent of the Parent, which consent shall not be unreasonably conditioned, delayed or withheld.

(c) Tax Indemnification.

(i) The Parent shall indemnify the Buyer Indemnified Parties and hold them harmless from and against any Losses attributable to all Taxes (or the non-payment thereof) of the Company for all Pre-Closing Tax Periods.

(ii) (A) With respect to such Tax claims arising (or becoming known to the Buyer or the Company) under Section 4.2(c)(i) and asserted in good faith on or prior to January 31, 2011 (“Pre-January 31 Tax Claims”), the Parent shall be liable to the Buyer Indemnified Parties for the total amount of the Losses related to such Pre-January 31 Tax Claims under Section 4.2(c)(i) from the first dollar and without regard to the Threshold; but in no event shall the aggregate liability of the Parent for such Losses for Pre-January 31 Tax Claims pursuant to Section 4.2(c)(i) exceed $1,250,000. With the exception of the first sentence of Section 7.3(a), the Parent’s indemnification obligation with respect to the Buyer Indemnified Parties for the Losses related to Pre-January 31 Tax Claims shall be governed by the mechanics set forth in Article VII. (B) With respect to all Tax claims under Section 4.2(c)(i), other than Pre-January 31 Tax Claims, asserted in good faith after January 31, 2011 and on or before the date twelve (12) months after the Closing Date, the Parent’s indemnification obligation with respect to the Buyer Indemnified Parties shall be governed by Article VII (including, without limitation, the Threshold and Loss Limit as set forth in Section 7.3(a) as well as the survival period as set forth in Section 7.5). For the avoidance of doubt, all Tax claims under Section 4.2(c)(i) other than Pre-January 31 Tax Claims shall be subject to the Threshold and Loss Limit. Except in connection with fraud, this Section 4.2 shall be the sole and exclusive remedy for any claims asserted under this Section 4.2.

In addition and notwithstanding anything to the contrary contained in this Agreement, with respect to any indemnity obligation under this Section 4.2(c), a Buyer Indemnified Party’s right to indemnification for Losses with respect to Taxes shall be limited to Taxes attributable to Pre-Closing Tax Periods of the Company.

(d) End of Tax Year; Straddle Period. To the extent permitted under applicable Law, the parties shall elect to have each Tax year of the Company end on the Closing Date and, if such election is not permitted or required in a jurisdiction such that the Company is required to file a Tax Return for a Straddle Period, the parties agree to

26

use the following conventions for determining the amount of Taxes attributable to the portion of the Straddle Period ending on the Closing Date: the amount of any Taxes based on or measured by income, gross receipts, sales, payroll, profits, withholding, recapture, employment as well as social security and unemployment taxes of the Company for a Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date and the amount of other Taxes of the Company for a Straddle Period that relates to a Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period.

(e) Cooperation on Tax Matters. The Buyer, the Company and the Parent shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Buyer, the Company and the Parent agree (i) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer, the Company or the Parent, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Tax authority, and (ii) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, the Buyer, the Company or the Parent, as the case may be, shall allow the other party to take possession of such books and records.

(f) Audits. If notice of any action, suit, investigation or audit with respect to Taxes of the Company shall be received by Buyer or the Company for which the Parent may reasonably be expected to be liable pursuant to Section 4.2(c) (a “Parent Tax Claim”), the notified party shall notify the Parent in writing of such Parent Tax Claim. The Parent will have the right to control the defense of such Parent Tax Claim, provided that Buyer shall have the right to participate, at its own expense, in any Parent Tax Claim which may have the effect of increasing a Tax liability of Buyer or the Company if such Tax liability is not eligible to be indemnified under Section 4.2(c), and the Parent shall not settle or compromise any such Parent Tax Claim without Buyer’s prior written consent if such settlement or compromise would have the effect of increasing a Tax liability of Buyer or the Company if such Tax liability is not eligible to be indemnified under Section 4.2(c). Such consent will not be unreasonably withheld or delayed.

(g) Refunds. The Parent shall be entitled to receive from the Buyer or the Company all refunds (or credits for overpayments) of Taxes, including any interest thereon, attributable to Pre-Closing Tax Periods. Promptly upon receipt of any such Tax refund (or credits for overpayment), and in no event later than five (5) Business Days

27

after receipt by Buyer and the Company, Buyer will, and will cause the Company to, deliver and pay over, by wire transfer of immediately available funds, such Tax refunds (or credits for overpayments), including any interest thereon, to the Parent, as of immediately prior to the Closing. Subject to Section 4.2(b), Buyer shall, as soon as is reasonably practicable, cause the Company to file amended Tax Returns or applications for Tax refunds in order to obtain a Tax refund (or credit for overpayment) that Parent is entitled to pursuant to this Section 4.2(g), and Buyer and the Company shall execute all other documents, take reasonable additional actions and otherwise reasonably cooperate as may be necessary for Buyer and the Company to perfect their rights in and obtain the Tax refunds contemplated by this Section 4.2(g).

(h) Tax Sharing Agreements. All tax-sharing agreements or similar agreements with respect to or involving the Company shall be terminated as of the Closing Date and, after the Closing Date, the Company shall not be bound thereby or have any liability thereunder.

(i) Transfer Taxes. The Parent agrees to cooperate with the Buyer in the filing of any returns with respect to any real property transfer or gains Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed on any of the Company, the Parent or the Buyer as a result of the transactions contemplated by this Agreement (collectively, “Transfer Taxes”), including promptly supplying any information in their possession reasonably requested by Buyer that is reasonably necessary to complete such returns. All such Transfer Taxes shall be paid one-half by the Buyer and one-half by the Parent.

Section 4.3. Balance Sheet. Within two (2) weeks of the Closing Date, the Parent shall deliver to the Buyer an unaudited balance sheet of the Company as of July 31, 2010 (the “July 31 Balance Sheet”). The representations and warranties made by the Parent in Section 2.5(a) shall apply to the July 31 Balance Sheet in the same manner as such representations and warranties apply to the Unaudited Balance Sheet as if such July 31 Balance Sheet had been delivered at the Closing.

Section 4.4. Retention of Books and Records and Information. The Parent and the Buyer agree that each shall preserve and keep the Documents held by it relating to the Company, Randy Cooper, Jessica Daudelin, Priscilla DiLuzio, David Fiacco, David Ladner, Ruth Ladner, Michael Hanninen, Lawrence Munini or Robert Pomerleau for a period of seven (7) years from the Closing Date and shall make such Documents and personnel available to the other as may be reasonably required by such party in connection with, among other things, LifePoint, AK Steel, any insurance claims by, Proceedings or Tax audits against or governmental investigations of the Parent, the Company or the Buyer or in order to enable the Parent or the Buyer to comply with their respective obligations relating in the transactions contemplated by this Agreement. In the event the Parent or the Buyer wishes to destroy such Documents after that time, such party shall first give thirty (30) days prior written notice to the other and such other party shall have the right at its option and expense, upon prior written notice given to such party within that thirty (30) day period, to take possession of the Documents within sixty (60) days after the date of such notice.

28

Section 4.5. Further Assurances. After the Closing, each party hereto shall cooperate with the others, and execute and deliver, or cause to be executed and delivered, all such other instruments, including instruments of conveyance, assignment and transfer, and use commercially reasonable efforts to take all such other actions as may be reasonably requested by the other parties hereto from time to time, consistent with the terms of this Agreement, to effectuate the purposes and provisions of this Agreement. Without limiting the foregoing, so long as such cooperation does not unreasonably interfere with the business operations of the Buyer or the Company, the Company and the Buyer shall cooperate with and assist the Parent, upon reasonable notice and during customary business hours, with any Proceeding in connection with that certain Agreement and Plan of Merger by and among the Parent, the Company, Cobalt Acquisition Corp. and Lawrence J. Munini, as Principal and Shareholder Representative, dated as of December 9, 2008 (the “Merger Agreement”). If the Company becomes a party to any Proceeding involving the Merger Agreement, the Company shall, so long as the Parent agrees that it is (i) responsible for all costs and expenses incurred by the Company or Buyer in connection with the Proceeding, and (ii) responsible for any damages for which the Company or the Buyer is responsible in connection with such Proceeding, allow the Parent to control and direct such Proceeding.

Article V -

CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS

The obligations of the Buyer under this Agreement shall be subject to the satisfaction, on or before the Closing, of each of the following conditions (any of which may be waived only by a specific writing executed by the Buyer):

Section 5.1. Representations and Warranties. Each representation and warranty of the Seller Entities set forth in this Agreement (and the Company Disclosure Schedules) (a) that is qualified as to “materiality” (or as to “Material Adverse Effect”) will be true and correct in all respects, and (b) that is not qualified as to “materiality” (or as to “Material Adverse Effect”) will be true and correct in all material respects, in each case as of the Closing (except for any such representations or warranties that were made as of a specific date, which representations and warranties will have been true and correct as of such date) and the Buyer shall have received at the Closing a certificate, dated the Closing Date, signed by a senior executive officer of the Company and a senior executive officer of the Parent to such effect.

Section 5.2. Performance. The Seller Entities shall have performed and complied, in all material respects, with all agreements, obligations and conditions required to be performed or complied with by them on or prior to the Closing; and the Buyer shall have received at the Closing a certificate, dated the Closing Date, signed by a senior executive officer of the Company and a senior executive officer of the Parent to such effect.

Section 5.3. No Injunction. No action or proceeding will have been instituted or threatened prior to or on the Closing Date before any Governmental Authority pertaining to the transactions contemplated by this Agreement, the result of which would prevent or make illegal the consummation of such transactions. No Governmental Authority will have enacted, issued,

29

promulgated, enforced or entered any statute, rule, regulation, injunction or other order (whether temporary, preliminary or permanent) that is in effect and has the effect of prohibiting the consummation of the transactions contemplated by this Agreement.

Section 5.4. Third Party Consent and Approvals; Silicon Valley Bank Release. The consents and approvals of other third parties listed on Schedule 5.4 shall have been obtained and the Buyer shall have received evidence reasonably acceptable to the Buyer that such approvals, consents and filings have been made or obtained, as appropriate. Silicon Valley Bank shall have released its security interest, if any, in the Company Stock and the assets of the Company, and shall have released the Company from any obligations under the credit agreement between the Parent and Silicon Valley Bank.

Section 5.5. Resignations. The Buyer shall have received resignations from all directors and officers of the Company effective as of the Closing Date.

Section 5.6. Employment Agreements. David Fiacco will have executed an offer letter and/or employment agreement in the form provided by the Buyer, will not have taken any action or expressed any intent to terminate or modify such acceptance, and will have in place all certifications, clearances and authorizations required to perform the duties of the specified position.

Section 5.7. Transition Services Agreement. The Parent shall enter into a Transition Services Agreement with the Buyer and the Company in the form attached as Exhibit B.

Section 5.8. Data Distributors, Inc. Agreement Extension. The Company shall have entered into a Services Agreement with Data Distributors, Inc. in a form reasonably acceptable to the Company, the Parent and the Buyer.

Section 5.9. Great Lakes Assignment. The Parent and the Company shall have entered into an assignment by the Parent to the Company of the TotalHR Master Subscription Agreement dated as of May 30, 2009 in a form reasonably acceptable to the Company, the Parent and the Buyer.

Article VI -

CONDITIONS PRECEDENT TO THE

OBLIGATIONS OF THE SELLER ENTITIES

The obligations of the Seller Entities under this Agreement shall be subject to the satisfaction, on or before the Closing, of each of the following conditions (any of which may be waived only by a specific writing executed by the Parent):

Section 6.1. Representations and Warranties. The representations and warranties of the Buyer contained herein shall be true and accurate in all material respects as of the Closing; and the Seller Entities shall have received at the Closing a certificate, dated the Closing Date, signed by a senior executive officer of the Buyer to such effect.

30

Section 6.2. Performance. The Buyer shall have performed and complied with, in all material respects, all agreements, obligations and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing and the Seller Entities shall have received at the Closing a certificate, dated the Closing Date, signed by a senior executive officer of the Buyer to such effect.

Section 6.3. No Injunction. There shall not be in effect any preliminary or permanent injunction or other order issued by any state or federal court which prevents the consummation of the transactions contemplated hereby.

Article VII - INDEMNIFICATION

Section 7.1. Indemnification of the Parent. After the Closing, the Buyer shall indemnify and hold harmless the Parent and its directors, officers, employees, agents, Affiliates, successors, and assigns (collectively, the “Seller Indemnified Parties”) from and against any and all Losses arising out of, related to or incurred with respect to (i) any breach of any or all of the Buyer’s representations and warranties in this Agreement or (ii) the breach or nonperformance of any covenant or obligation to be performed by the Buyer hereunder or under any agreement executed in connection herewith.

Section 7.2. Indemnification of the Buyer. After the Closing, the Parent shall indemnify and hold harmless the Buyer and the Company and their respective directors, officers, employees, agents, Affiliates, successors, and assigns (collectively, the “Buyer Indemnified Parties”) from and against any and all Losses arising out of, related to or incurred with respect to (a) any breach of any representation or warranty made by the Parent or the Company in this Agreement or in any schedule to this Agreement, or (b) the breach or nonperformance of any covenant or obligation to be performed by the Parent or Company hereunder.

Section 7.3. Additional Indemnity Provisions. After the Closing, the indemnification obligations hereunder shall be subject to the following terms and conditions:

(a) On and after the Closing Date, the liability under this Agreement shall be limited as follows: (i) except in connection with fraud, the Indemnifying Parties shall have no liability under Sections 7.1 or 7.2 and 4.2(c)(ii)(B), as the case may be, until the aggregate of all Losses claimed by the Indemnified Parties pursuant to Sections 7.1 or 7.2 and 4.2(c)(ii)(B), as the case may be, exceeds One Hundred Thousand dollars ($100,000) (the “Threshold”), whereupon the total amount of such Losses from the first dollar and without regard to the Threshold shall be recoverable by the Indemnified Parties in accordance with the terms hereof; and (ii) except in connection with fraud the aggregate liability of the Indemnified Parties after Closing for all Losses claimed by the Indemnified Parties pursuant to Sections 7.1 or 7.2 and 4.2(c)(ii)(B), as the case may be, shall not exceed $250,000 (the “Loss Limit”). Notwithstanding the foregoing, the Threshold shall not apply to indemnification related to Losses for claims asserted by any Buyer Indemnified Party on or prior to January 31, 2011 (the “Special Indemnity Date”) for any breach of Section 2.5(c) or Section 2.9 (the “Special Indemnity Claims”), and the aggregate liability of the Parent for such Losses for such Special

31

Indemnity Claims shall not exceed $1,250,000. For claims asserted after the Special Indemnity Date for Losses arising from a breach of Section 2.5(c) or Section 2.9, the Threshold and the Loss Limit shall apply in the manner provided in the first sentence of this Section 7.3(a).

(b) Except in connection with fraud or the breach of any covenant contained in Sections 4.1 or 4.2, after the Closing, the sole recourse and exclusive remedy of the Buyer Indemnified Parties and the Parent Indemnified Parties against each other arising out of this Agreement shall be to assert a claim for indemnification under the indemnification provisions of this Article VII and the remedies provided in Section 8.11.

(c) The term “Loss” or “Losses” shall mean any and all liabilities, claims, obligations, judgments, liens, penalties, fines, losses, damages (other than punitive or consequential damages) and reasonable costs and expenses, including but not limited to, reasonable attorneys’ fees and accounting fees and other expert fees (and other expenses related to litigation or other proceedings) and related disbursements.

(d) In the event that any party to this Agreement desires to make any claim for indemnification pursuant to this Article VII, the party making such claim (a “Claim”) shall promptly deliver on or prior to the date upon which the applicable representations and warranties or covenants expire pursuant to the terms of this Agreement, a certificate signed by the party making the claim (the “Claim Certificate”) to the Parent or the Buyer, whichever is applicable, which Claim Certificate shall: (i) state the occurrence giving rise to the claim and that the Loss has been incurred; (ii) specify the section of this Agreement under which such claim is made; and (iii) specify in reasonable detail each individual item of Loss, including the amount of such Loss to the extent reasonably ascertainable and the date such Loss was incurred. The party making the claim shall state only what is required in subsections (i)—(iii) above and shall not admit or deny the validity of the facts or circumstances out of which such claim arose.

(e) Any payments made as indemnification under Section 4.2(c), Section 7.1 or Section 7.2 shall, to the extent permitted by applicable law, be considered adjustments to the Purchase Price for all Tax purposes.

(f) The words “material,” “in all material respects,” “Material Adverse Effect” or words of similar import (collectively, “Materiality Qualifiers”) that qualify any representation, warranty or covenant in this Agreement shall be disregarded when calculating Losses under this Agreement (including for the purposes of determining whether the Threshold applies). For the avoidance of doubt, Materiality Qualifiers will be taken into account in determining whether a breach of this Agreement has occurred but will not limit the amount of Losses that can be recovered by a party to this Agreement in connection with any such breach.

Section 7.4. Defense of Third Party Claims.

(a) After the Closing, in the case of any third party claim (a “Third Party Claim”), if within ten (10) days after receiving the Claim the Indemnifying Party

32

gives written notice to the Indemnified Party stating that the Indemnifying Party would be liable under the provisions hereof for indemnity in the amount of such claim if such claim were valid and that the Indemnifying Party disputes and intends to defend against such claim, liability or expense at the Indemnifying Party’s own cost and expense, then counsel for the defense shall be selected by the Indemnifying Party and such Indemnifying Party shall not be required to make any payment to the Indemnified Party with respect to such claim, liability or expense as long as the Indemnifying Party is conducting a good faith and diligent defense at its own expense; provided, however, that the assumption of defense of any such matters by the Indemnifying Party shall relate solely to the claim, liability or expense that is subject or potentially subject to indemnification. If the Indemnifying Party assumes such defense in accordance with the preceding sentence, it shall have the right to settle all indemnifiable matters related to claims by third parties which are susceptible to being settled solely by payment of money by the Indemnifying Party pursuant to a settlement which includes a complete release of such Indemnified Party. The Indemnifying Party shall keep such Indemnified Party apprised of the status of the claim, liability or expense and any resulting suit, proceeding or enforcement action, shall furnish such Indemnified Party with all documents and information that such Indemnified Party shall reasonably request and shall consult with such Indemnified Party prior to acting on major matters, including settlement discussions. If no such notice of intent to dispute and defend is timely given by the Indemnifying Party, or if such diligent good faith defense is not being or ceases to be conducted, such Indemnified Party may undertake the defense of (with counsel selected by such Indemnified Party), and shall have the right to compromise or settle, such claim, liability or expense (exercising reasonable business judgment), all at the expense of the Indemnifying Party. If such claim, liability or expense is one that by its nature cannot be defended solely by the Indemnifying Party, then such Indemnified Party shall make available all information and assistance that the Indemnifying Party may reasonably request and shall cooperate with the Indemnifying Party in such defense.

Section 7.5. Survival of Representations and Warranties; Miscellaneous.

(a) The respective representations and warranties of the parties contained herein shall survive the Closing and shall expire and terminate on the date twelve (12) months from the Closing Date, except for claims for the breach of any representation or warranty herein made pursuant to Article VII on or prior to the expiration date of such representation or warranty, which claims shall survive until the liability is finally determined. Thereafter, no party shall be under any liability whatsoever with respect to any such representation or warranty. The covenants and agreements contained herein to be performed or complied with after the Closing shall survive in accordance with their respective terms or, absent a specific term, indefinitely.

(b) The amount of Losses otherwise recoverable pursuant to Section 4.2(c) and this Article VII shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar cash payment actually received by the Indemnified Parties from any third party with respect thereto. The Buyer hereby acknowledges the limitations under applicable Law related to the recovery of Losses that

33

the Buyer might have avoided with reasonable effort and without undue risk, expense or burden, and agrees that nothing in this Agreement shall supersede such provisions of applicable Law.

(c) Any Losses for which any Indemnified Party is entitled to indemnification under Section 4.2(c) and this Article VII shall be determined without duplication of recovery by reason of the state of facts giving rise to such Losses constituting a breach of more than one representation, warranty, covenant or agreement.

(d) Anything herein to the contrary notwithstanding, no breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right on the part of any party hereto, after the consummation of the transactions contemplated hereby, to rescind this Agreement or any of the transactions contemplated hereby.

Article VIII -

MISCELLANEOUS PROVISIONS

Section 8.1. Amendment and Modification. This Agreement may be amended, modified and supplemented only by written agreement of each of the parties hereto.

Section 8.2. Waiver of Compliance. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.

Section 8.3. Notices. All notices, requests, consents and other communications hereunder shall be deemed given: (a) when delivered if delivered personally (including by courier); (b) on the third day after mailing, if mailed, postage prepaid, by registered or certified mail (return receipt requested); (c) on the day after mailing if sent by a nationally recognized overnight delivery service which maintains records of the time, place, and recipient of delivery; or (d) upon receipt of a confirmed transmission, if sent by electronic mail, telecopy or facsimile transmission, in each case to the parties at the following addresses or to other such addresses as may be furnished in writing by one party to the others:

if to the Company or the Parent:

Salary.com, Inc.

160 Gould Street

Needham, Massachusetts 02494

Facsimile: (781) 851-8003

Attention: President

34

with a copy to:

Goodwin Procter LLP

Exchange Place

53 State Street

Boston, Massachusetts 02109

Facsimile: (617) 523-1231

Attention: Kenneth J. Gordon, Esq.

if to the Buyer to:

Genesys Acquisition Corp.

5881 Glenridge Drive, Suite 180

Atlanta, Georgia 30328

Facsimile: (312) 827-8000

Attention: Randy Cooper

with a copy to:

K&L Gates LLP

70 West Madison, Suite 3100

Chicago, Illinois 60602

Facsimile: (312) 345-9995

Attention: Jude M. Sullivan, Esq.

Section 8.4. Binding Nature; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and either party may assign this Agreement without the consent of the other. Nothing contained herein, express or implied, is intended to confer on any Person other than the parties hereto or their successors and permitted assigns, any rights, claims, benefits, remedies, obligations or liabilities under or by reason of this Agreement.

Section 8.5. Entire Agreement. This Agreement, along with the schedules and exhibits hereto, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.

Section 8.6. Expenses. Except as otherwise expressly provided herein, each party to this Agreement will pay its own costs and expenses in connection with the negotiation of this Agreement, the performance of its obligations hereunder, and the consummation of the transactions contemplated herein.

35

Section 8.7. Press Releases and Announcements. The Parent may issue a press release and make such filings with the Securities and Exchange Commission as it deems appropriate, provided that Parent shall provide a copy of any draft release to Buyer and allow Buyer a reasonable opportunity to comment on the text of the release. Subject to the preceding sentence, no other press release related to this Agreement or the transactions contemplated herein, or other public announcement or announcement to the employees, customers, or suppliers of the Company, will be issued without the joint approval of the Buyer and the Parent, except as otherwise required by law, in each case not to be unreasonably withheld, conditioned or delayed.

Section 8.8. Governing Law. This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without giving effect to any law or rule that would cause the laws of any jurisdiction other than the Commonwealth of Massachusetts to be applied.

Section 8.9. Jurisdiction; Service of Process. Each party to this Agreement, by its execution hereof, hereby (a) irrevocably submits to the exclusive jurisdiction of the state courts of the Commonwealth of Massachusetts, Suffolk County or the United States District Court located therein for the purpose of any and all actions, suits or proceedings arising in whole or in part out of, related to, based upon or in connection with this Agreement or the subject matter hereof, (b) waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such action brought in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other proceeding in any other court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by such court, and (c) agrees not to commence any such action other than before one of the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action to any court other than one of the above-named courts whether on the grounds of inconvenient forum or otherwise. Each party hereby (x) consents to service of process in any such action in any manner permitted by Massachusetts law; (y) agrees that service of process made in accordance with clause (x) or made by registered or certified mail, return receipt requested, at its address specified pursuant to Section 8.3 hereof, will constitute good and valid service of process in any such action; and (z) waives and agrees not to assert (by way of motion, as a defense, or otherwise) in any such action any claim that service of process made in accordance with clause (x) or (y) does not constitute good and valid service of process.

Section 8.10. Interpretation. All references to immediately available funds or dollar amounts contained in this Agreement shall mean United States dollars. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The parties acknowledge and agree that (a) each party and its counsel have reviewed the terms and provisions of this Agreement and have contributed to its revision, (b) the normal rule of construction, to the effect that any ambiguities are resolved

36

against the drafting party, shall not be employed in the interpretation of it, and (c) the terms and provisions of this Agreement shall be constructed fairly as to all parties hereto and not in favor or against any party, regardless of which party was generally responsible for the preparation of this Agreement. All references to schedules and exhibits refer to the schedules and exhibits of this Agreement, unless otherwise expressly provided. The term “including” means “including without limitation.”

Section 8.11. Specific Performance. Each of the parties hereto acknowledges and agrees that the other parties hereto would be irreparably damaged in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties hereto agrees that, in addition to any other remedy to which such party may be entitled at law or in equity, they each shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement, the terms and provisions hereof.

Section 8.12. Severability. If any provision of this Agreement or the application of any such provision to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. The parties further agree to replace any such invalid or unenforceable provisions of this Agreement with valid and enforceable provisions which will achieve, to the extent possible, the economic, business and other purposes of the invalid or unenforceable provisions.

Section 8.13. Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signature on each such counterpart were on the same instrument. Facsimiles or other electronic forms of signatures (including “pdf”) shall be deemed to be originals.

Section 8.14. Release. Parent hereby fully releases and discharges the Company and its officers, directors and employees from all rights, claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, which Parent now has against any such party arising out of or relating to events occurring at or prior to the Closing Date, provided that this release does not release claims of Parent related to (i) this Agreement or (ii) ongoing obligations to the Parent with respect to confidential information.

[The balance of this page intentionally left blank]

37

IN WITNESS WHEREOF, the parties have executed this Stock Purchase and Sale Agreement as of the date first written above.

COMPANY:
GENESYS SOFTWARE SYSTEMS, INC.
By:	/s/ Bryce Chicoyne
Name:	Bryce Chicoyne
Title:	Treasurer
PARENT:
SALARY. COM, INC.
By:	/s/ Bryce Chicoyne
Name:	Bryce Chicoyne
Title:	CFO & SVP
BUYER:
GENESYS ACQUISITION CORP.
By:	/s/ Randy Cooper
Name:	Randy Cooper
Title:	President

The following Schedules and Exhibits to the Stock Purchase and Sale Agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K.

SCHEDULES
Schedule A	Company Stock
EXHIBITS
Exhibit A	Company Disclosure Schedules
Exhibit B	Transition Services Agreement

Salary.com, Inc. will furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request; provided, however, that Salary.com, Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

EX-10.6

Exhibit 10.6

SEVENTH LOAN MODIFICATION AGREEMENT

This Seventh Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of August 10, 2010, by and between SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts 02462 (FAX 617-969-5965) (“Bank”) and SALARY.COM, INC., a Delaware corporation with offices at 160 Gould Street, Needham, Massachusetts 02494 (“Borrower”).

1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of August 10, 2006, evidenced by, among other documents, a certain Loan and Security Agreement dated as of August 10, 2006, between Borrower and Bank, as affected by a certain Waiver Agreement dated as of June 8, 2008, as amended by a certain First Loan Modification Agreement dated as of August 8, 2008, as further amended by a certain Second Loan Modification Agreement dated as of September 17, 2008, as further amended by a certain Third Loan Modification Agreement dated as of October 8, 2008, as further amended by a certain Fourth Loan Modification Agreement dated as of March 16, 2009, as further amended by a certain Fifth Loan Modification Agreement dated as of June 29, 2009, and as further amended by a certain Sixth Loan Modification Agreement dated as of October 15, 2009 (as affected and amended from time to time, the “Loan Agreement”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “Security Documents”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

A. Modifications to Loan Agreement.

1 The Loan Agreement shall be amended by deleting the following text, appearing in Section 6.6(a) thereof:

“Any Guarantor shall maintain all depository, operating and securities accounts with Bank, or SVB Securities; provided, however, Genesys Software Systems, Inc. may maintain depository, operating and/or securities accounts with Bank of America or Royal Bank of Canada so long as the aggregate cumulative amount in such accounts does not exceed One Million Dollars ($1,000,000.00) at any time (the “Permitted Accounts”). The investment of such funds of Genesis Software Systems, Inc. in the Permitted Accounts shall be considered Permitted Investments.”

and inserting in lieu thereof the following:

“Any Guarantor shall maintain all depository, operating and securities accounts with Bank, or SVB Securities.”

1

2 The Loan Agreement shall be amended by deleting the following definition, appearing in Section 13.1 thereof:

“ “Permitted Accounts” is defined in Section 6.6(a).”

3 The Loan Agreement shall be amended by deleting the following definitions, appearing in Section 13.1 thereof:

“ “Guarantor” is any present or future guarantor of the Obligations, including, without limitation, Salary.com Securities Corporation, Salary.com Jamaica Limited, and Genesys Software Systems, Inc.”

“ “Secured Guarantor” is any present or future guarantor of the Obligations that has granted a lien to Bank in all of its assets of the type described on Exhibit A, including, without limitation, Salary.com Securities Corporation and Genesys Software Systems, Inc.”

and inserting in lieu thereof the following:

“ “Guarantor” is any present or future guarantor of the Obligations, including, without limitation, Salary.com Securities Corporation and Salary.com Jamaica Limited.”

“ “Secured Guarantor” is any present or future guarantor of the Obligations that has granted a lien to Bank in all of its assets of the type described on Exhibit A, including, without limitation, Salary.com Securities Corporation.”

4 The Loan Agreement shall be amended by deleting the following text, appearing in the definition of “Permitted Investments” in Section 13.1 thereof:

“(c) Investments in Salary.com Securities Corporation and Genesys Software Systems, Inc.;”

and inserting in lieu thereof the following:

“(c) Investments in Salary.com Securities Corporation;”

5 The Loan Agreement shall be amended by deleting the following text, appearing in the definition of “Permitted Investments” in Section 13.1 thereof:

“(g) The investment of funds in the Permitted Accounts per the terms of this Agreement.”

and inserting in lieu thereof the following:

“(g) Intentionally omitted.”

4. FEES. Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.

5. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a certain Perfection Certificate dated as of June 29, 2009, between Borrower and Bank, and acknowledges, confirms and agrees the disclosures and information Borrower provided to Bank in the Perfection Certificate have not changed, as of the date hereof.

2

6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

7. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.

8. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.

9. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.

10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective only when it shall have been executed by Borrower and Bank.

[The remainder of this page is intentionally left blank]

3

This Loan Modification Agreement is executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the date first written above.

BORROWER:		BANK:
SALARY.COM, INC.		SILICON VALLEY BANK
By:	/s/ Bryce Chicoyne	By:	/s/ Thomas Kelly
Name:	Bryce Chicoyne	Name:	Thomas Kelly
Title:	SVP and CFO	Title:	Vice President

The undersigned, SALARY.COM JAMAICA LIMITED (“Salary.com Jamaica Guarantor”) hereby ratifies, confirms and reaffirms, all and singular, the terms and conditions of a certain Unconditional Guaranty (the “Guaranty”) dated as of December 19, 2008, executed and delivered by Salary.com Jamaica Guarantor, pursuant to which Salary.com Jamaica Guarantor unconditionally guaranteed the prompt, punctual and faithful payment and performance of all Obligations of Borrower to Bank. In addition, Salary.com Jamaica Guarantor acknowledges, confirms and agrees that the Guaranty shall remain in full force and effect and shall in no way be limited by the execution of this Loan Modification Agreement, or any other documents, instruments and/or agreements executed and/or delivered in connection herewith.

SALARY.COM JAMAICA LIMITED
By:	/s/ Nicholas Camelio
Name:	Nicholas Camelio
Title:	SVP HR

The undersigned, SALARY.COM SECURITIES CORPORATION (“Salary.com Securities Guarantor”) hereby ratifies, confirms and reaffirms, all and singular, the terms and conditions of (a) a certain Unconditional Guaranty (the “Guaranty”) dated as of October 8, 2008, executed and delivered by Salary.com Securities Guarantor, pursuant to which Salary.com Securities Guarantor unconditionally guaranteed the prompt, punctual and faithful payment and performance of all Obligations of Borrower to Bank, and (b) a certain Security Agreement (the “Security Agreement”) dated as of October 8, 2008, between Salary.com Securities Guarantor and Bank, pursuant to which Salary.com Securities Guarantor granted Bank a continuing first priority security interest in the Collateral (as the term is defined therein) to secure the payment and performance of the Obligations under the Guaranty in accordance with the terms of the Security Agreement. In addition, Salary.com Securities Guarantor acknowledges, confirms and agrees that the Guaranty and Security Agreement shall remain in full force and effect and shall in no way be limited by the execution of this Loan Modification Agreement, or any other documents, instruments and/or agreements executed and/or delivered in connection herewith.

SALARY.COM SECURITIES CORPORATION
By:	/s/ Bryce A Chicoyne
Name:	Bryce Chicoyne
Title:	CFO

4

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Paul R. Daoust, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Salary.com, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2010	/s/ Paul R. Daoust
	Paul R. Daoust President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Bryce Chicoyne, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Salary.com, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2010	/s/ Bryce Chicoyne
	Bryce Chicoyne Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Salary.com, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Paul R. Daoust, President and Chief Executive Officer of the Company and Bryce Chicoyne, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our best knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.

Date: August 16, 2010

/s/ Paul R. Daoust

Paul R. Daoust

President and Chief Executive Officer

Date: August 16, 2010

/s/ Bryce Chicoyne

Bryce Chicoyne

Senior Vice President and Chief Financial Officer