1
EXHIBIT 10.9
SYNON CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
JULY 16, 1991
2
TABLE OF CONTENTS
Page
----
SECTION 1 Authorization, Sale and Conversion of Preferred Stock 1
1.1 Authorization 1
1.2 Sale of Series D Preferred Stock 1
1.3 Conversion of Preferred Stock 1
1.4 Waiver of Interest 1
SECTION 2 Closing Date; Delivery 2
2.1 Closing Date 2
2.2 Subsequent Closings 2
2.3 Delivery 2
SECTION 3 Representations and Warranties of the Company 2
3.1 Organization and Standing; Certificate of Incorporation and
Bylaws; Minutes 2
3.2 Corporate Power 3
3.3 Subsidiaries . 3
3.4 Authorization . 4
3.5 Governmental Consent, etc 4
3.6 Capitalization 5
3.7 Registration Rights 6
3.8 Stockholder Agreements 6
3.9 Financial Statements 6
3.10 No Material Liabilities 7
3.11 Absence of Changes 7
3.12 Title to Properties and Assets; Liens, etc 8
3.13 Material Contracts and Commitments 8
3.14 Insurance 9
3.15 Patents, Trademarks, etc 9
3.16 Compliance with Other Instruments, None Burdensom, etc 10
3.17 Litigation, etc. 10
3.18 Employees 11
3.19 Employee Agreements 11
3.20 Employee Compensation Plans 11
3.21 Certain Transactions 11
3.22 Tax Returns, Payments and Elections 12
3.23 FIRPTA 12
3.4 Offering 12
3.25 Brokers or Finders; Other Offers 12
-i-
3
TABLE OF CONTENTS
(continued)
Page
----
SECTION 4 Representations and Warranties of the Investors 13
4.1 Investment Representations and Covenants of the
Investors 13
4.2 No Public Market 14
4.3 Receipt of Information 14
4.4 Authorization 15
4.5 Brokers or Finders 15
4.6 Tax Advisors 15
SECTION 5 Conditions to Closing of the Investors 15
5.1 Representations and Warranties Correct 15
5.2 Covenants 15
5.3 Compliance Certificate 16
5.4 Legal Opinion 16
5.5 Blue Sky 16
5.6 Amended and Restated Certificate of Incorporation . 16
5.7 Legal Matters 16
5.8 Amendment No. 1 to Stockholders' Agreement 16
SECTION 6 Conditions to Closing of Company 16
6.1 Representations 16
6.2 Blue Sky 16
6.3 Amended and Restated Certificate of Incorporation 17
6.4 Legal Matters 17
6.5 Board and Stockholder Approval 17
6.6 Amendment No. 1 to Stockholders' Agreement 17
SECTION 7 Affirmative Covenants of the Company and the Investors 17
7.1 Financial Information 17
7.2 Assignment of Rights to Financial Information 18
7.3 Confidentiality of Information 18
7.4 Right to Exchange 18
7.5 Termination of Covenants 19
SECTION 8 Miscellaneous 19
8.1 Governing Law 19
8.2 Survival 19
8.3 Successors and Assigns 19
-ii-
4
TABLE OF CONTENTS
(continued)
Page
----
8.4 Entire Agreement; Amendment 19
8.5 Notices, etc 20
8.6 Delays or Omissions 20
8.7 California Corporate Securities Law 21
8.8 Expenses 21
8.9 Counterparts 21
8.10 Severability 21
EXHIBITS
A. Schedule of Investors
B. Amended and Restated Certificate of Incorporation
C. Amendment No. 1 to Stockholders' Agreement
D. Schedule of Exceptions
E. Compliance Certificate
F. Legal Opinion
-iii-
5
SYNON CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 16, 1991 by and among Synon
Corporation, a Delaware corporation (the "Company"), with its principal office
at 1100 Larkspur Landing Circle, Larkspur California 94939, and each of the
persons listed on the Schedule of Investors attached hereto as Exhibit A (the
"Investors").
SECTION 1
AUTHORIZATION, SALE AND CONVERSION OF PREFERRED STOCK
l.l AUTHORIZATION. The Company has authorized the issuance of up to
3,618,269 shares of its Series D Preferred Stock (the "Series D Preferred"),
having the rights, privileges and preferences as set forth in the Amended and
Restated Certificate of Incorporation (the "Certificate") in substantially the
form attached to this Agreement as Exhibit B.
1.2 SALE OF SERIES D PREFERRED STOCK. Subject to the terms and
conditions hereof, the Company will severally issue and sell to the Investors up
to 3,134,329 shares of Series D Preferred (the "Sale Shares") and the Investors
will severally purchase from the Company, at the Closing (as defined below), the
respective number of shares of Series D Preferred indicated on the Schedule of
Investors at a purchase price of $3.35 per share, for the aggregate purchase
price for each Investor as indicated thereon.
1.3 CONVERSION OF PREFERRED STOCK. In connection with the sale of the
Series D Preferred, the Company will also convert 1,000,000 shares of Series B
Preferred Stock currently held by General Atlantic Partners II, L.P. ("GA"), one
of the Investors, into 483,940 shares of the Company's Series D Preferred Stock
and 1,800,000 shares of Series C Preferred Stock currently held by GA into
343,158 shares of the Company's Series A Preferred Stock (the "Conversion").
(The shares of Series D Preferred Stock and Series A Preferred Stock to be
issued pursuant to the Conversion are referred to herein as the "Conversion
Shares"). The Conversion will be effected pursuant to and effective upon the
filing of the Certificate with the Delaware Secretary of State.
1.4 WAIVER OF INTEREST.
By execution of this Agreement, GA hereby agrees to forgive any and all
accrued but unpaid dividends and interest on the Series B Preferred Stock held
by GA.
6
7
SECTION 2
CLOSING DATE; DELIVERY
2.l CLOSING DATE. The initial closing of the sale and purchase of Sale
Shares hereunder shall be held at the principal office of the Company at 2:00
p.m., local time, on July 16, 1991 (the "First Closing") or at such other time
and place upon which the Company and the Investors shall agree. (The date of the
First Closing is hereinafter referred to as the "First Closing Date".)
2.2 SUBSEQUENT CLOSINGS.
The closing of the sale and purchase of additional Sale Shares
hereunder may take place at one or more additional closings subsequent to the
First Closing (the "Subsequent Closing") which shall be held at such time(s) and
place(s) as the Company may specify, except that no Subsequent closing may occur
after September 30, 1991. At each Subsequent Closing, the Schedule of Investors
attached hereto as Exhibit A shall be amended to list the Investors purchasing
Sale Shares at such Subsequent Closing. The number of Sale Shares issued at the
First Closing and at all Subsequent Closings shall not exceed in the aggregate
3,134,329 shares of Series D Preferred Stock. The First Closing and any
Subsequent Closings shall be referred to herein as the "Closings." The First
Closing Date and the date of any Subsequent Closings shall be referred to herein
as "Closing Dates."
2.3 DELIVERY.
At the Closing, the Company will deliver to each Investor an executed
counterpart of this Agreement, together with a certificate, registered in such
Investor's name, representing the number of Sale Shares to be issued on the
Closing Date as set forth beside such Investor's name on the Schedule of
Investors, against delivery of an executed counterpart of this Agreement,
together with payment of the purchase price for the Sale Shares by check payable
to the Company or wire transfer per the Company's instructions.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit D attached hereto, which exceptions
shall be deemed representations and warranties hereunder, the Company hereby
represents and warrants to the Investors as follows:
3.l ORGANIZATION AND STANDING; CERTIFICATE OF INCORPORATION AND
BYLAWS; MINUTES.
8
(a) The Company is a corporation duly organized and existing
under, and by virtue of, the laws of the State of Delaware and is in good
standing under such laws. The Company has requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as presently conducted. The Company is duly qualified to do business as
a foreign corporation in each jurisdiction in which the ownership or leasing of
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the Company's business as now conducted.
(b) The Company has furnished Paul, Weiss, Rifkind, Wharton &
Garrison, special counsel to the Investors ("Special Counsel"), with copies of
its Certificate of Incorporation and Bylaws, as amended. Said copies are true,
correct and complete and contain all amendments through the First Closing Date.
(c) The minute books of the Company relating to all
proceedings of its stockholders and the Board of Directors made available to the
Special Counsel are true, correct and complete copies of the minute books of the
Company. The minute books of the Company provided to Special Counsel contain
minutes and actions by written consent of all meetings and actions of directors
and stockholders since the Company's incorporation and the minutes and actions
by written consent reflect all transactions referred to accurately in all
material respects.
3.2 CORPORATE POWER.
The Company will have at the Closing Date all requisite legal and
corporate power and authority to execute and deliver this Agreement, to amend
the Stockholders Agreement dated December 5, 1990 among the Company, the
Investors and certain other parties (the "Stockholders' Agreement") by Amendment
No. 1 to Stockholders' Agreement ("Amendment No. 1") in substantially the form
attached hereto as Exhibit C, to effect the Conversion, to sell and issue the
Sale Shares hereunder, to issue the Conversion Shares (the Sale Shares and the
Conversion Shares collectively referred to herein as the "Shares"), to issue the
Common Stock issuable upon conversion of the Shares and to carry out and perform
its obligations under the terms of this Agreement.
3.3 SUBSIDIARIES.
The Company has the following subsidiaries: Synon Europe, Ltd., a
Delaware corporation, Synon Limited, a corporation incorporated under the laws
of the United Kingdom, Synon, Inc., an Illinois corporation, Synon Consulting,
Inc., an Illinois corporation, Synon Pty Ltd., an Australian corporation, Synon
Canada Ltd., a Canadian corporation, and Synon France S.A.R.L., a French
corporation. The Company's subsidiaries are duly organized and existing under,
and by virtue of, the laws of their respective places of incorporation or
organization and
-3-
9
each is in good standing under the laws of its place of incorporation or
organization. Each of the Company's subsidiaries has the requisite corporate
power and authority to own and operate its properties and assets, and to carry
on its business as presently conducted. The Company has no other subsidiaries or
affiliated companies and does not otherwise own or control, directly or
indirectly, any equity interest in any corporation, association or business
entity.
3.4 AUTHORIZATION.
All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and Amendment No. 1 by the Company, the
authorization and effectuation of the Conversion, the authorization, sale (in
the case of the Sale Shares), exchange (in the case of the Conversion Shares),
issuance and delivery of the Shares (and the Common Stock issuable upon
conversion of the Shares), and the performance of all of the Company's
obligations hereunder has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered by the Company, shall constitute a valid
and binding obligation of the Company, enforceable in accordance with its terms,
subject to 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 Sale Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable, and will have the rights, preferences and privileges
described in the Certificate. The Conversion Shares have been duly and validly
reserved and, when issued pursuant to the filing of the Certificate with the
Delaware Secretary of State, will be validly issued, fully paid and
nonassessable, The Common Stock issuable upon conversion of the Shares has been
duly and validly reserved and, when issued in compliance with the provisions of
this Agreement and the Certificate, will be validly issued, fully paid and
nonassessable; and, the Shares and the Common Stock issuable upon the conversion
of the Shares will be free of any liens or encumbrances, other than any liens or
encumbrances created by or imposed upon the holders through no action of the
Company; provided, however, that the Shares (and the Common Stock issuable upon
conversion thereof) may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein. Except as set forth herein
or in the Certificate or Bylaws, the Shares are not subject to any preemptive
rights or rights of first refusal.
3.5 GOVERNMENTAL CONSENT, ETC.
No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required in
connection with the valid execution and delivery of this Agreement, the
effectuation of the Conversion, the offer, sale (in the case of
-4-
10
the Sale Shares), exchange (in the case of the Conversion Shares) or issuance of
the Shares (and the Common Stock issuable upon conversion of the Shares) or the
consummation of any other transaction contemplated hereby, except (a) the filing
of the Certificate with the Delaware Secretary of State and (b) qualification
(or taking such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale (in the case of the Sale
Shares) and exchange (in the case of the Conversion Shares) of the Shares (and
the Common Stock issuable upon conversion of the Shares) under applicable Blue
Sky laws, which filings and qualifications, if required, will be accomplished in
a timely manner.
3.6 CAPITALIZATION
(a) The authorized capital stock of the Company consists or,
upon the filing of the Certificate, will consist of 25,000,000 shares of Common
Stock, par value $.001 per share, 6,519,684 of which are issued and outstanding
as of the First Closing Date, and 10,000,000 shares of Preferred Stock with par
value, $.001 per share (the "Preferred"), 2,554,620 of which are designated
Series A Preferred Stock (the "Series A Preferred") and 3,618,269 of which are
designated Series D Preferred Stock (the, "Series D Preferred"). Of the
2,554,620 authorized shares of Series A Preferred, 343,158 shares were issued
upon the filing of the Certificate with the Delaware Secretary of State in
exchange for the cancellation of 1,800,000 shares of Series C Preferred Stock of
the Company, and all of the shares are issued and outstanding as of the First
Closing Date. Of the 3,618,269 authorized shares of Series D Preferred, 483,940
shares were issued upon the filing of the Certificate with the Delaware
Secretary of State in exchange for the cancellation of 1,000,000 shares of
Series B Preferred Stock, and 483,940 shares are issued and outstanding As of
the First Closing Date. No other series of Preferred Stock has been designated.
(b) The outstanding shares have been duly authorized and
validly issued, and are fully paid and nonassessable.
(c) The Company has reserved (i) 3,134,329 shares of Series D
Preferred for issuance hereunder, (ii) 2,554,620 shares of Common Stock for
issuance upon conversion of the Series A Preferred, (iii) 3,618,269 shares of
Common Stock for issuance upon conversion of the Series D Preferred, (iv)
5,000,000 shares of Common Stock for issuance to officers, directors and
employees of the Company upon exercise of options granted under the Company's
1990 Stock Option Plan (the "US Option Shares") (of which stock options to
purchase 811,420 have been granted and are currently outstanding, and an
additional 4,188,580 remain available for future grant),(v) 5,000,000 shares of
Common Stock for issuance to
-5-
11
officers, directors and employees of the Company upon exercise of options
granted under the Company's Executive Shares Option Scheme (the "UK Option
Shares") (of which stock options to purchase 103,100 have been granted and are
currently outstanding, and an additional 4,896,900 remain available for future
grant), and (vi) 325,215 shares of Common Stock for issuance to Simon Haigh
pursuant to an outstanding nonstatutory stock option.
(d) The Series D Preferred shall have the rights, preferences,
privileges and restrictions set forth in the Certificate.
(e) Except as contemplated herein or in the Certificate or
Bylaws, there are no options, warrants, conversion privileges, preemptive rights
or rights of first refusal or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the capital stock or
other securities of the Company, nor any agreements or understandings with
respect thereto.
3.7 REGISTRATION RIGHTS.
Except as provided in the Stockholders' Agreement as amended on even
date herewith by Amendment No. 1, the Company is not obligated to register under
the Securities Act of 1933, as amended (the "Securities Act"), any of its
presently outstanding securities or any of its securities that may subsequently
be issued.
3.8 STOCKHOLDER AGREEMENTS.
There are no agreements or arrangements between the Company and any of
the Company's stockholders, or to the knowledge of the Company, among any of the
Company's stockholders, which grant registration, voting or other special rights
with respect to any shares of the Company's capital stock, except as
contemplated herein and in the Stockholders' Agreement, as amended on even date
herewith by Amendment No. 1.
3.9 FINANCIAL STATEMENTS.
The Company has delivered to each Investor the Company's audited
financial statements, including a balance sheet as of December 31, 1990 and an
income statement for the period ended December 31, 1990 (the "December Financial
Statements") which are complete and correct in all material respects and were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis for the period indicated.
The Company has delivered to each Investor the Company's unaudited
financial statements, including a balance sheet as of March 31, 1991 and an
income statement for the period ended March 31, 1991 (together with the December
Financial Statements, the "Financial Statements") which are complete and correct
in all material respects and were prepared in accordance with generally
-6-
12
accepted accounting principles applied on a consistent basis for the period
indicated, subject to year-end adjustments and the omission of footnotes.
The Financial Statements accurately set out and describe the financial
condition and operating results of the Company as of the respective dates and
for the respective periods indicated. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
3.10 NO MATERIAL LIABILITIES.
The Company has no material liabilities or obligations, other than: (a)
liabilities and obligations disclosed in the Financial Statements; (b)
liabilities incurred in the ordinary course of business; (c) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
financial statements; (d) leases for operating headquarters and branches of the
Company; and (e) any other obligations which are not in any case material to the
financial condition or operating results of the Company.
3.11 ABSENCE OF CHANGES.
Since December 31, 1990:
(a) there has not been any change in the assets, liabilities,
financial condition or operations of the Company from that reflected in the
December Financial Statements, except changes in the ordinary course of business
which have not been, either in any case or in the aggregate, materially adverse.
(b) the Company has not entered into any transaction which is
not in the ordinary course of business;
(c) there has been no material adverse change in the condition
(financial or otherwise), property, assets or liabilities of the Company other
than changes in the ordinary course of business, none of which, individually or
in the aggregate, has been materially adverse;
(d) there has been no damage to, destruction of or loss of
physical property (whether or not covered by insurance) materially adversely
affecting the business or operations of the Company;
(e) there has not been any waiver by the Company of a valuable
right or of a material debt owed to it;
(f) the Company has not declared or paid any dividend or made
any distribution on its stock, or redeemed, purchased or
-7-
13
otherwise acquired any of its stock other than repurchases of employee stock in
connection with termination of employment;
(g) the Company has not increased the compensation of any of
its officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business;
(h) there has been no resignation or termination of employment
of any officer or key employee of the Company;
(i) there has been no labor dispute involving the Company or
its employees and none is pending or, to the best of the Company's knowledge,
threatened, which would have a material adverse effect on the Company;
(j) there has not been any change, except in the ordinary
course of business, in the contingent obligations of the Company, by way of
guaranty, endorsement, indemnity, warranty or otherwise; and
(k) other than as disclosed herein, there has not been any
change or amendment to a material contract by which the Company or any of its
assets or properties is bound or subject, which would have a material adverse
effect on the Company.
3.12 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC.
The Company has good and marketable title to all its properties and
assets, and has good title to all its leasehold interests, in each case subject
to no mortgage, pledge, lien, lease, encumbrance or charge, other than (i) the
lien of current taxes not yet due and payable, (ii) possible minor liens and
encumbrances which do not in any case materially detract from the value of the
property subject thereto or materially impair the operations of the Company, and
which have not arisen otherwise than in the ordinary course of business, and
(iii) liens created in the ordinary course of business in connection with the
granting of purchase money security interests for the acquisition of capital
equipment. With respect to property and assets leased by the Company, the
Company is in compliance with all related lease agreements and has valid lease
hold interests in such property, free and clear of any liens, claims or
encumbrances.
3.13 MATERIAL CONTRACTS AND COMMITMENTS.
All of the contracts, mortgages, indentures, agreements, instruments
and transactions to which the Company is a party or by which it is bound which
involve:
a. the granting to any third party of exclusive
-8-
14
development, manufacturing or distribution rights in or to the Company's
products or services;
b. original equipment manufacturing agreements;
c. the license of any patent, copyright, source code, trade
secret or other proprietary right to or from the Company (except (i) end-user
licenses from the Company, (ii) object code licenses granted to distributors and
end-users in the ordinary course of the Company's business, and (iii)
commercially available, noncustomized software obtained by the Company for its
internal use);
d. the joint development or joint ownership of technology;
e. indemnification by the Company with respect to
infringements of proprietary rights;
f. all agreements between the Company and its officers and
directors;
g. forms of agreements between the Company and its employees
andconsultants which involve obligations of, or payments to, the employee or
consultant in excess of One Hundred Thousand Dollars ($100,000) per annum.; and
h. obligations of, or payments to, the company in excess of
Five Hundred Thousand Dollars ($500,000)
(collectively, the "Material Contracts") are valid, binding and in full force
and effect in all material respects and are enforceable by the Company in
accordance with their respective terms in all material respects, subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of creditors'
rights and rules or laws concerning equitable remedies. The Company is not in
material default under any Material Contract. To the best of the Company's
knowledge, no other party to any Material Contract is in material default
thereunder.
3.14 INSURANCE.
The Company has in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed.
3.15 PATENTS, TRADEMARKS, ETC.
The Company owns and possesses or is licensed under all patents, patent
applications, licenses, trademarks, trade names, brand names, inventions and
copyrights employed in or necessary to the operation of its
-9-
15
business as now conducted and as proposed to be conducted (collectively, the
"Intellectual Property"), with no infringement of or conflict with the rights of
others respecting any of the same. The Company is not obligated to make any
payments by way of royalties, fees or otherwise to any owner or licensor of any
patent, trademark, trade name, copyright or other intangible asset, with respect
to the use thereof or in connection with the conduct of its business, or
otherwise. The Company has not granted to any third party any option, license or
other right of any kind to its Intellectual Property. The Company does not
license any technology from any third party other than for internal use. The
Company has not received any communications alleging that it has violated or, by
conducting its business as proposed, would violate any patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity, nor is the Company aware of any basis for
the foregoing. The Company is not aware of any violation or infringement by a
third party of any of its Intellectual Property.
3.16 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC.
The Company is not in violation of any term of its Certificate of
Incorporation or Bylaws as amended to date, or in any material respect of any
term or provision of any material mortgage, indenture, contract, agreement,
instrument, judgment, order or decree, and is not in violation in any material
respect of any statute, rule or regulation applicable to the Company. The
execution, delivery and performance of and compliance with this Agreement and
Amendment No. 1, the effectuation of the Conversion and the issuance of the
Shares (and the Common Stock issuable upon conversion of the Shares) have not
resulted and will not result in any violation of, or conflict with, or
constitute a default under any of the foregoing, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company; and there is no such violation or default which
materially and adversely affects the business of the Company as conducted or any
of its properties or assets.
3.7 LITIGATION, ETC.
There are no actions, suits, proceedings or investigations pending or,
to the Company's knowledge, threatened, against the Company or its properties
before any court or governmental agency, nor is the Company subject to any writ,
injunction or order of any court or government agency (nor, to the Company's
knowledge, is there any basis therefor or threat thereof), which, either in any
case or in the aggregate, might result in any material adverse change in the
business, prospects, financial condition or equity ownership of the Company or
any of its properties or assets, or in any material impairment of the right or
ability of the Company to carry on its business as now conducted, or in any
material liability on the part of the Company, and none which questions the
validity of this Agreement or any action taken
-10-
16
or to be taken in connection herewith, The foregoing includes, without
limitation, employee related claims or actions, claims relating to the prior
employment of any employee or any claims relating to obligations of any such
employee under any agreement.
3.18 EMPLOYEES.
To the Company's knowledge, no employee of the Company is or will be in
violation of any judgment, decree or order, or any term of any employment
contract, patent disclosure agreement or any other contract or agreement
relating to the relationship of any such employee with any other party because
of the nature of the business conducted by the Company or to the utilization by
the employee of his best efforts with respect to such business, The Company does
not have any collective bargaining agreements covering any of its employees. The
Company does not believe it will utilize any inventions of any of its employees,
or people it currently intends to hire, made prior to their employment by the
Company. All of the Company's employees are terminable at Will.
3.19 EMPLOYEE AGREEMENTS.
Certain current employees of the Company have executed forms of
confidentiality and/or proprietary rights agreements. To the Company's
knowledge, neither the execution nor delivery of such agreements, nor the
carrying on of the Company's business as employees by such persons, nor the
conduct of the Company's business as currently conducted, will conflict with or
result in a breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which any of such
persons is now obligated.
3.20 EMPLOYEE COMPENSATION PLANS.
Other than as set forth on Exhibit D hereto, the Company is not a party
to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation agreement.
3.21 CERTAIN TRANSACTIONS.
Other than loans to employees made in connection with relocations and
stock purchases, the company is not indebted, either directly or indirectly, to
any of its officers, directors or holders of Common Stock or to their respective
spouses or children, in any amount in excess of $50,000, other than for payment
of reasonable expenses; none of such officers or directors or, to the knowledge
of the Company, holders of capital stock or any members of their immediate
families, are indebted to the Company in an amount in excess of $50,000 or have
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship
which is material to the company, or any firm or corporation which competes with
the Company. To the Company's knowledge, no officer, director or holder of any
of its capital stock or any member of their immediate
-11-
17
families, is, directly or indirectly, interested in any contract with the
Company which is material to the Company. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
3.22 TAX RETURNS, PAYMENTS AND ELECTIONS.
The Company has filed all tax returns and reports as required by law.
These returns and reports are true and correct in all material respects. The
Company has paid all taxes and other assessments due. The provision for taxes of
the Company as shown in the Financial Statements is adequate for taxes due or
accrued as of the date thereof. The Company has not elected pursuant to the
Internal Revenue Code of 1986 ("Code") to be treated as a Subchapters
Corporation or a collapsible corporation pursuant to Section 341(f) or Section
1362(a) of the Code, nor has it made any other election pursuant to the Code
(other than elections which relate solely to methods of accounting, depreciation
or amortization) which would have a material effect on the Company, its business
or any of its properties or material.
3.23 FIRPTA.
The Company is not a "foreign person" within the meaning of Section
1445 of the Code.
3.24 OFFERING.
Subject to the accuracy of the Investors' representations in Section 4
hereof and in written responses to the Company's inquiries (if any), the offer,
sale (in the case of the Sale Shares), conversion (in the case of the Conversion
Shares) and issuance of the Shares to be issued in conformity with the terms of
this Agreement and the Certificate constitute transactions exempt from i) the
registration requirements of Section 5 of the Securities Act, and (ii) the
qualification requirements of Section 25110 of the California Corporations Code
or similar state securities laws; and the issuance of the Common Stock to be
issued upon conversion of the Shares will constitute transactions exempt from
(i) the registration requirements of Section 5 of the Securities Act, and (ii)
the qualification requirements of Section 25110 of the California Corporations
Code or similar state securities laws provided there is no change in such laws
from the date of this Agreement.
3.25 BROKERS OR FINDERS; OTHER OFFERS.
The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.
-12-
18
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants to the Company with
respect to its purchase of the Shares as follows:
4.l INVESTMENT REPRESENTATIONS AND COVENANTS OF THE INVESTORS.
(a) This Agreement is made by the Company with each Investor
in reliance upon such Investor's representations and covenants made in this
Section 4, which by its execution of this Agreement the Investor hereby
confirms. Each Investor represents that the Shares to be received will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting any participation in or otherwise
distributing the same. Each Investor further represents that it does not have
any contract, undertaking, agreement or arrangement with any person (other than
certain partners and employees of Investor and its affiliates) to sell, transfer
or grant participations to such person or to any third person, with respect to
any of the Shares or any Common Stock acquired on conversion thereof.
(b) Each Investor understands and acknowledges that the
offering of the Shares pursuant to this Agreement will not, and any issuance of
Common Stock on conversion thereof may not, be registered under the Securities
Act on the ground that the sale provided for in this Agreement and the issuance
of securities hereunder is exempt pursuant to section 4(2) of the Securities
Act, and that the Company's reliance on such exemption is predicated on the
Investors' representations set forth herein.
(c) Each Investor covenants that in no event will it make any
disposition of any of the Shares, or any Common Stock acquired upon the
conversion thereof, except in accordance with the Stockholders' Agreement as
amended by Amendment No. 1 and the Company's Bylaws. Each Investor further
covenants that it will not make any sale, transfer or other disposition of the
Shares or the Common Stock issuable upon conversion thereof in violation of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules of the Securities and Exchange Commission (the "Commission")
promulgated thereunder.
(d) Each Investor represents that it is capable of evaluating
the merits and risks of its prospective investment in the Company, and has the
ability to bear the economic risks of the investment.
-13-
19
(e) Each Investor acknowledges and understands that the
Shares, and any Common Stock acquired upon the conversion thereof, must be held
indefinitely unless it is subsequently registered under the Securities Act or an
exemption from such registration is available, and that, except as otherwise
provided in the Stockholders' Agreement, the Company is under no obligation to
register either the Shares or Common Stock.
(f) Each Investor acknowledges that it has reviewed a copy of
Rule 144 promulgated under the Securities Act, which permits limited public
resales of securities acquired in a non public offering, subject to the
satisfaction of certain conditions. Each Investor understands that before the
Shares, or any Common Stock issued upon conversion thereof, may be sold under
Rule 144, the following conditions must be fulfilled: (i) certain public
information about the Company must be available, (ii) the sale must occur at
least two years after the Investor purchased and paid for the Shares, (iii) the
sale must be made in a broker's transaction and (iv) the number of Shares sold
must not exceed certain volume limitations. Each Investor understands that the
current information referred to above is not now available and there can be no
assurances that the Company will make such information available in the future.
(g) Each Investor acknowledges that in the event the
applicable requirements of Rule 144 are not met, registration under the
Securities Act, compliance with the Commission's Regulation A or another
exemption from registration will be required for any disposition of its stock.
Each Investor understands that although Rule 144 is not exclusive, the
Commission has expressed its opinion that persons proposing to sell restricted
securities received in a private offering other than in a registered offering or
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales and
that such persons and the brokers who participate in the transactions do so at
their own risk.
(h) Each Investor represents that such Investor is an
"accredited investor" as defined in Rule 501 of Regulation D promulgated under
the Securities Act.
4.2 NO PUBLIC MARKET.
Investor understands that no public market now exists for any of the
securities issued by the Company and that there can be no assurance that a
public market will ever exist for the Shares.
4.3 RECEIPT OF INFORMATION.
Investor has received and reviewed this Agreement and all exhibits
hereto. Investor and its counsel have had access to and an opportunity to review
all docu-
-14-
20
ments and other materials requested of the Company; Investor and its counsel
have been given an opportunity to ask any and all questions of, and receive
answers from, the Company concerning the terms and conditions of the offering
and to obtain all information it or they believe necessary or appropriate to
evaluate the suitability of an investment in the Company.
4.4 AUTHORIZATION.
This Agreement, when executed and delivered by the Investor, will
constitute a valid and legally binding obligation of the Investor, enforceable
in accordance with its terms, subject to 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.
4.5 BROKERS OR FINDERS.
The Company has not, and will not, incur, directly or indirectly, as a
result of any action taken by any Investor any liability for brokerage or
finders' fees or agents commissions or any similar charges in connection with
this Agreement.
4.6 TAX ADVISORS.
Each Investor has reviewed with its own tax advisors the federal,
state, local and foreign tax consequences of this investment, where applicable,
and the transactions contemplated by this Agreement. Each Investor is relying
solely on such advisors and not on any statements or representations of the
Company or any of its agents with respect to such tax consequences and
understands that it (and not the Company) shall be responsible for the
Investor's own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.
SECTION 5
CONDITIONS TO CLOSING OF THE INVESTORS
The Investors' obligations to purchase the Shares at the Closing are,
at the option of the Investors, subject to the fulfillment of the following
conditions:
5.l REPRESENTATIONS AND WARRANTIES CORRECT.
The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing
Date.
5.2 COVENANTS.
All covenants, agreements and conditions contained in this Agreement to
be performed or complied with by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
-15-
21
5.3 COMPLIANCE CERTIFICATE.
The Company shall have delivered to the Investors a certificate of the
Company in the form of Exhibit E hereto, executed by the Secretary of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 LEGAL OPINION.
The Investors shall have received from Wilson, Sonsini, Goodrich &
Rosati, P.C., counsel to the Company, an opinion addressed to the Investors,
dated the Closing Date, in substantially the form attached as Exhibit F.
5.5 BLUE SKY.
The Company shall have obtained all necessary Blue Sky law permits and
qualifications, or have the availability of exemptions therefrom, required by
any state for the offer, sale (in the case of Sale Shares) and exchange (in the
case of Conversion Shares) of the Shares and the Common Stock issuable upon
conversion of the Shares.
5.6 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
The Certificate shall have been filed with the Delaware Secretary of
State.
5.7 LEGAL MATTERS.
All material matters of a legal nature which pertain to this Agreement
and the transactions contemplated hereby shall have been reasonably approved by
special counsel to the Investors.
5.8 AMENDMENT NO. 1 TO STOCKHOLDERS' AGREEMENT.
The Company and persons listed on the signature pages to Amendment No.
1 shall have entered into Amendment No. 1.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares pursuant to
Section 1.2 hereof is, at the option of the Company, subject to the fulfillment
as of the Closing Date of the following conditions:
6.1 REPRESENTATIONS.
The representations made by the Investors in Section 4 hereof shall be
true and correct when made, and shall be true and correct on the Closing Date.
6.2 BLUE SKY.
The Company shall have obtained all necessary Blue Sky law permits and
qualifications, or have the availability of exemptions therefrom, required by
any state for the offer, sale (in the case of Sale Shares), exchange (in the
case of Conversion
-16-
22
Shares) of the Shares and the Common Stock issuable upon conversion of the
Shares.
6.3 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
The Certificate shall have been filed with the Delaware Secretary of
State.
6.4 LEGAL MATTERS.
All material matters of a legal nature which pertain to this Agreement
and the transactions contemplated hereby shall have been reasonably approved by
counsel to the Company. At the time of the Closing, the purchase of the Shares
shall be legally permitted by all laws and regulations to which each Investor
and the Company are subject.
6.5 BOARD AND STOCKHOLDER APPROVAL.
All approvals of the Company's Board of Directors and stockholders
necessary for performance of the transactions contemplated by this Agreement
shall have been obtained.
6.6 AMENDMENT TO STOCKHOLDERS' AGREEMENT.
The Company and each person listed on the signature pages to Amendment
No.1 shall have entered into Amendment No. 1.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY AND THE INVESTORS
The Company hereby covenants and agrees as follows:
7.l FINANCIAL INFORMATION.
The Company will furnish the following reports to each Investor for so
long as such Investor holds 175,000 shares of Series D Preferred or Common Stock
issued upon conversion thereof, as appropriately adjusted for recapitalization,
stock splits, stock dividends and the like:
(a) As soon as practicable after the end of each fiscal year,
and in any event within 120 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by independent public accountants of
reputable standing selected by the Company.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year
-17-
23
of the Company and in any event within 60 days thereafter, unaudited
consolidated statements of income and consolidated statements of changes in
financial condition of the Company and its subsidiaries for such period and for
the current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception of footnotes, all in reasonable detail
and signed, subject to changes resulting from year-end audit adjustments, by the
principal financial or accounting officer of the Company.
(c) With reasonable promptness, such other information and
data with respect to the Company and its subsidiaries as any such holder may
from time to time reasonably request; provided, however, that the Company shall
not be obligated pursuant to this Section 7.1(c) to disclose or provide any
information that it reasonably considers to be a trade secret or to contain
confidential proprietary information.
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION.
The rights granted pursuant to Section 7.1 may not be assigned or
otherwise conveyed by an Investor or by any subsequent transferee of any such
rights without the prior written consent of the Company; provided, however, that
an Investor may assign such rights to any transferee, other than a competitor or
potential competitor (as reasonably determined by the Company's Board of
Directors) of the Company, and after giving notice to the Company, who acquires
at least 175,000 shares (subject to appropriate adjustment for stock splits,
dividends, subdivisions, combinations, recapitalizations and the like) of the
Series D Preferred and/or Common Stock issued upon conversion thereof.
7.3 CONFIDENTIALITY OF INFORMATION.
Each Investor (including for purposes of this Section 7.3 each
transferee pursuant to Section 7.2) agrees that any information obtained by such
Investor pursuant to Section 7.1 which is, or would reasonably be perceived to
be, proprietary to the company (in that such information is not generally made
available to third parties without restrictions to ensure confidentiality) will
not be disclosed without the prior written consent of the Company. This Section
7.3 shall not apply to any information obtained by an Investor as a result of
such Investor's membership on the Board of Directors of the Company; provided,
however, that the foregoing is not intended to diminish or abrogate such Board
member's fiduciary obligations to the Company.
7.4 RIGHT TO EXCHANGE.
In the event that on or after the First Closing the Company issues
additional equity securities or debt securities which are convertible into
equity securities (other than equity securities issued (i) pursuant to any stock
benefit plan or stock option agreement, (ii) pursuant to an acquisition of
-18-
24
shares in the Company's subsidiaries in exchange for shares in the company,
(iii) upon conversion of shares of Preferred Stock of the Company pursuant to
Section 4 of the Certificate, as amended, (iv) pursuant to a public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, (v) pursuant to any sales, technology license or distribution
agreements or other strategic relationships approved by the Board of Directors,
or (vi) pursuant to any acquisition approved by the Board of Directors in
exchange for shares in the Company), the Investors shall have the right to
exchange their shares of Series D Preferred Stock for shares of such new
security, up to the total number of new securities to be issued. The rate of
exchange shall be one share of Series D Preferred for that number of shares of
the new security which is obtained by dividing $3.35 by the per share purchase
price of the new security.
7.5 TERMINATION OF COVENANTS.
The covenants set forth in Sections 7.1, 7.2 and 7.4 shall terminate
and be of no further force or effect upon the earlier to occur of the closing of
a firm commitment underwritten public offering registered under the Securities
Act or such time as the Company is required to file reports pursuant to Section
13 or 15(d) of the Exchange Act.
SECTION 8
MISCELLANEOUS
8.1 GOVERNING LAW.
This Agreement shall be governed in all respects by the laws of the
State of California.
8.2 SURVIVAL.
The representations, warranties, covenants and agreements made herein
shall survive any investigation made by the Investor and the closing of the
transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS.
Except as otherwise provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and adminstrators of the parties hereto, provided, however, that the
rights of an Investor to purchase the Shares shall not be assignable without the
consent of the Company,
8.4 ENTIRE AGREEMENT; AMENDMENT.
This Agreement and the other documents delivered pursuant hereto at the
Closing constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
Except as expressly provided herein,
-19-
25
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated, on behalf of all holders, upon the written consent of the Company
and the holders of a majority of the Common Stock issued or issuable upon the
conversion of the Series D Preferred and provided, however, that the Company may
from time to time amend this Agreement without the consent of the Investors to
add as parties to this Agreement any Investors in any Subsequent Closing
pursuant to Section 2 hereof.
8.5 NOTICES, ETC.
All notices and other communications required or permitted hereunder
shall be in writing and shall be mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to an
Investor, to such Investor's address set forth on the Schedule of Investors, or
at such other address as the Investor shall have furnished to the Company in
writing, or (b) if to any other holder of any Shares, at such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Shares who has so furnished an address to the Company, or (c) if
to the Company, one copy should be sent to its address set forth at the
beginning of this Agreement and addressed to the attention of the President of
the Company, or at such other address as the Company shall have furnished to the
Investors, with a copy to Wilson, Sonsini, Goodrich & Rosati, Two Palo Alto
Square, Palo Alto, California 94306, Attn: Mark A. Bertelsen.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
8.6 DELAYS OR OMISSIONS.
Except as expressly provided herein, no delay or omission to exercise
any right, power or remedy accruing to any holder of any Shares, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy of such holder nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any
-20-
26
provisions or conditions of this agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, OR SUCH EXEMPTION BEING AVAILABLE.
8.8 EXPENSES.
The Company and the Investors shall bear their own expenses and legal
fees incurred with respect to this Agreement and the transactions contemplated
hereby except that the Company shall pay up to a maximum aggregate of $25,000 in
legal fees and expenses incurred by the Investors.
8.9 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and all of which together shall constitute one instrument.
8.10 SEVERABILITY.
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
-21-
27
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
SYNON CORPORATION
By:/S/ SIGNATURE UNREADABLE
Title: VICE PRESIDENT
"INVESTORS"
GENERAL ATLANTIC PARTNERS II, L.P.
By: General Atlantic Partners
General Partner
By:/S/ SIGNATURE UNREADABLE
Title: GENERAL PARTNER
-22-
28
The foregoing Series A Stock Purchase Agreement is hereby executed as
of the date first above written.
"COMPANY"
SYNON CORPORATION
By:____________________________________
Title:_________________________________
"INVESTORS"
GENERAL ATLANTIC PARTNERS II, L.P,
By: General Atlantic Partners
General Partner
By:____________________________________
Title:_________________________________
THE TA ENTITIES
ADVENT VI L.P.
By: TA Associates VI L.P.
General Partner
By: /S/ Brian J. Conway
Brian J. Conway
Partner
-22-
29
ADVENT ATLANTIC AND PACIFIC
LIMITED PARTNERSHIP
By: TA Associates AAP Limited
Partnership
General Partner
By: TA Associates AAP Venture
Limited Partnership
General Partner
By: /s/ Brian J. Conway
Brian J. Conway
Partner
CHESTNUT III LIMITED PARTNERSHIP
By: TA Associates VI L.P.
Its Attorney-in-Fact
By: /s/ Brian J. Conway
Brian J. Conway
Partner
ADVENT INDUSTRIAL II L.P.
By: TA Associates VI L.P.
General Partner
By: /s/ Biran J. Conway
Brian J. Conway
Partner
-23-
30
DESIFTA LIMITED
By: TA Associates V Limited
Partnership
Its Attorney-in Fact
By: /s/ Brian J. Conway
Brian J. Conway
Authorized Signator
TA VENTURE INVESTORS LIMITED
PARTNERSHIP
By: /s/ Brian J. Conway
Brian J. Conway
Partner
TA ASSOCIATES PARTNERS PROFIT
SHARING TRUST F/B/O
MICHAEL R. COLLINS
By: /s/ Katherine S. Cromwell
Name: Katherine S. Cromwell
Title: Plan Administrator
-24-
31
Exhibit A
---------
SCHEDULE OF INVESTORS
No. of Shares Aggregate
Name and Address Purchased Purchase Price
- ---------------- --------- --------------
First Closing: July 16, 1991
General Atlantic Partners II, L.P. 2,776,120 $ 9,300,002.00
125 East 56th Street
New York, NY 10022
Attn: David Hodgson
Second Closing: September 5. 1991
THE TA ENTITIES
Advent VI L.P, 238,797 $ 799,969.05
Advent Atlantic and 51,796 173,516.60
Pacific L.P.
Chestnut III L.P. 26,907 90,138.45
Advent Industrial II L.P. 25,561 85,629.35
Desifta Limited 11,112 37,225.20
TA Venture Investors L.P. 3,749 12,559.15
TA Associates Partners Profit 287 961.45
Sharing Trust f/b/o Michael
R. Collins
All TA Entities c/o:
TA Associates
45 Milk Street
Boston, MA 02109
Attn: Brian Conway
-25-
32
EXHIBIT D
---------
SCHEDULE OF EXCEPTIONS
----------------------
This Schedule of Exceptions is deemed confidential by the Company and
may not be furnished to any third party without the prior written consent of the
Company.
The following are the exceptions to the representations and warranties
of Synon Corporation (the "Company") set forth in Section 3 of the Series D
Preferred Stock Purchase Agreement dated as of July 16, 1991 (the "Agreement")
to which this is an exhibit. The section numbers below correspond to the section
numbers in the Agreement. Each exception applies to each section of the
Agreement to which it pertains, whether or not the specific section numbers are
indicated below, All capitalized terms used and not otherwise defined herein
shall have the meanings given them in the Agreement.
Section 3.1 -- Organization and Standing; Certificate of Incorporation and
Bylaws;
Minutes.
The Company is not qualified to do business in Massachusetts because
another company was using the name "Synon" in the state prior to the time the
Company started conducting business there. The Company's registration of the
name "Synon" predates the other company's filing, The Company has a single
employee in the state and is appropriately withholding state payroll taxes, is
collecting and remitting sales tax and will file a state franchise/income tax
return for this year,
Section 3.2 -- Corporate Power.
None.
Section 3.3 -- Subsidiaries.
l. Synon Ltd. has two subsidiaries incorporated under the laws of
England, Synon U.K. Limited and Synon International Limited, which subsidiaries
are currently inactive.
2. Strategic Information Systems Pty, an Australian company, is
affiliated with Synon Pty Ltd.
Section 3.4 -- Authorization.
All shares of capital stock issued by Synon Corporation are subject to
the rights of first refusal currently set forth in the Company's Bylaws.
33
Section 3.5 -- Governmental Consent, etc.
None.
Section 3.6 -- Capitalization.
None.
Section 3.7 -- Registration Rights.
None.
Section 3.8 -- Shareholder Agreements.
None.
Section 3.9 -- Financial Statements.
None.
Section 3.10 -- No Material Liabilities.
Provision has been made for Leases and Agreements to Lease for
properties closed down as a consequence of redundant facilities acquired in the
U.K.
Section 3.11 -- Absence of Changes.
(h) Michael Sheridan resigned as an officer and director of the Company
effective July 2, 1991. Pursuant to a Settlement Agreement dated July 2,. 1991
between Synon Limited, Synon Corporation and Mr. Sheridan, Mr. Sheridan shall
receive certain compensation payments and his options to purchase shares of
Common Stock of the Company have been terminated.
Section 3.12 -- Title to Properties and Assets; Liens, etc.
1. Security Agreement dated October 16, 1990, among Synon, Inc., Synon
Consulting Inc. (the "Borrowers") and Midland Bank Plc -- Bank has first
priority security interest in accounts receivable of the Borrowers in return for
establishing $3,500,000 letter of credit facility for Borrowers. Facility also
guaranteed by Synon Ltd
2. Various loan and security agreements among Synon Ltd., Synon U.K.
Limited, Synon International Limited and Midland Bank Plc. (the "Bank") provide
that the Bank has a first priority security interest in the assets, accounts
receivable and goodwill of those companies, Each company guarantees the
obligations of the other companies under such agreements.
-2-
34
3. The Company leases all of the real property it uses. Rents for the
properties leased in the United Kingdom are guaranteed by Midland Bank Plc. The
Company also leases cars and certain computer and other office equipment
pursuant to written lease agreements which contain terms standard to such
agreements,
4. IBM Development Incentive Agreement dated October 5, 1990, with
Synon, Inc. grants lien and security interest to IBM for source code in the
event Synon Inc., is liquidated.
Section 3.13 -- Material Contracts and Commitments.
1. It is currently the intention of the Company that Synon Ltd. be
liquidated and its assets transferred to a dual resident corporation (the
"DRC"). Many of the contracts entered into by Synon Ltd. and governed by the
laws of England are not assignable and/or terminate upon liquidation of Synon
Ltd. Therefore Synon Ltd. will need to obtain the consent of the other parties
to those contracts to the liquidation of Synon Ltd. and/or the assignment of the
contracts to the DRC. See the letter written to the Synon Ltd. Board of
Directors by Kim Nicholson of Baileys Shaw and Gillett dated November 30, 1990.
The liquidation of Synon Ltd. would also result in the release of the source
code of two of Synon's principal products (Synon 1 and Synon 2) to several U.K.
distributors pursuant to source code agreements entered into between Synon Ltd.
and such distributors. (The release of the source code to the distributors would
be for maintenance and enhancement of the source code only and all intellectual
property rights would remain with Synon Ltd.) Therefore, the consent of such
distributors and the source code escrow agent would also be required in the
event Synon Ltd. is liquidated.
2. Many of the lease agreements entered into by Synon Ltd. require the
consent of the other party thereto for a change in control. The change in
control provisions may have been triggered by the share exchange effected in
December 1990, and no consents to such share exchange were obtained. See the
letter to Michael Sheridan from Tom Shaw of Baileys, Shaw and Gillett dated
November 30, 1990.
3. The Company has a multi-currency overdraft facility (the "Facility")
with Midland Bank Plc. The Company has defaulted in certain respects under the
Facility. Midland Bank Plc has agreed to renew the Facility up to 3,000,000
pending completion of the Series D Preferred Stock financing.
-3-
35
Section 3.14 -- Insurance.
None.
Section 3.15 -- Patents, Trademarks, etc.
1. The Company has entered into the following agreements regarding the
use of technology owned by third parties in Synon products:
a. Sublicense Agreement dated June 15, 1990, between Synon, Inc. and
Interactive Images, Inc. -- granting Synon right to market Easel Runtime System
(DOS and OS/2 versions) for use on Synon/2 and Synon/2E in return for license
fee.
b. Agreement dated October 19, 1990, between Synon, Inc. and Easel
Corporation (formerly Interactive Images, Inc.) -- granting Synon right to use
the EASEL Communications Licensed Program to develop new program, which new
program Synon will own, and granting Easel Corporation a perpetual,
non-exclusive, worldwide royalty-free, transferable license to use, copy, modify
and grant sublicenses with respect to the new program.
c. License Agreement dated Jun 21, 1990, between Synon Ltd.
and International Business Machines Corporation -- granting Synon right to
incorporate Extended Source Format into an undefined add-on software product
that attaches to its application generator software product in return for
royalties to IBM equal to 25% of revenues received from the add-on product plus
5% of revenues received from all application generator products when licensed or
sold after the add-on product has been licensed or sold to that enterprise.
2. The Company and its subsidiaries have in the ordinary course of
business granted licenses to its products to end-users to use and copy the
products and to distributors to distribute, sublicense and support the products.
3. The Company has licensed the source code to Synon 2 to Toppan Moore
to translate Synon 2 into Japanese (i.e. create a Kanji version). The title to
the Kanji version of Synon 2 is to remain with the Company. Perfection of title
to the Kanji version in the company awaits copyright registration of the Kanji
version in Japan.
4. The Company has in the past contracted with technical authors who
have created much of the architecture for the Synon products. Except as noted
below, all such contracts provided that all intellectual property developed
pursuant to such contracts belonged to the Company, Peter Wilson, one of the
principal
-4-
36
technical architects, was not subject to an intellectual property agreement from
August 1, 1987 until March 1, 1989, during which time he was only a consultant
to Limited and not doing any development work.
5. The Company has granted powers of attorney with respect to its
intellectual property to attorneys in Japan and Taiwan for the purposes of
taking the procedures necessary in such countries to protect such intellectual
property.
6. Trademark Registration Issues:
a. Japan, Sweden and Argentina - The "Synon" trademark is
opposed by Japanese company Chinon Kabushiki Kaisha who believes that the
"Synon" trademark may be confused with their trademark "Chinon."
b. Germany - The "Synon" trademark is opposed by Seicon
Limited.
c. Spain - The "Synon" trademark is opposed by Syntex
Pharm AG.
d. Sweden - Objections raised by owners of registered
trademarks Simon, Syntron, Symons, Sunion and Chinon.
Section 3.16 -- Compliance with Other Instruments, None Burdensome, etc.
None.
Section 3.17 -- Litigation, etc.
1. The following claims for development and delay costs related to the
non-delivery of the SMA Financials package have been made against the Company:
a. By letter dated 25th September 1990 Balfour Beatty claimed
total costs (including costs anticipated up to September 1991) of 159,479. Synon
replied denying liability, which reply has been followed by an inconclusive
exchange of correspondence with a view to seeking an amicable resolution of the
dispute.
b. By letter dated 18th October 1990, Pioneer submitted a
claim for 74,093. Synon has rejected in writing any liability for the costs
claimed. There has since been an inconclusive exchange of correspondence with a
view to seeking an amicable resolution of the dispute.
-5-
37
2. The Company and its subsidiaries terminated a number of employees
during the past year. The Company is not aware of any material outstanding claim
against the Company or its subsidiaries or any member of the group in this
respect.
Section 3.18 -- Employees.
Some employees in the United Kingdom are terminable upon three months
notice.
Section 3.19 -- Employee Agreements.
None.
Section 3.20 -- Employee Compensation Plans.
1. The Company and its subsidiaries have the following forms of
employment agreements:
a. Form of Employment Agreement entered into by all employees
of the Canadian branch of Synon, Inc. in connection with the transfer of Synon,
Inc.'s Canadian operations to Synon Canada Ltd.
b. Form of Employment Agreement - Synon Canada Ltd.
c. Form of Employment Agreement for Application Consultant -
Synon, Inc. (Dallas).
d. Form of Employment Agreement for Application Consultant
Synon Advanced Applications, Inc.
e. Form of Employment Agreement for Application Consultant -
Synon Consulting Inc. (New York)
f. Form of Employment Agreement for Marketing Representative -
Synon, Inc. (Washington, D.C.)
2. Employment Agreement between Synon, Inc. and John de Wit, dated May
10, 1989.
3. Employment Agreement between Synon, Inc. and Jim Smith, dated June
1, 1989.
4. All employees of Synon Ltd. and Synon Pty. have employment
contracts, Some employees in the UK are terminable on three months notice.
5. Synon Ltd. makes contributions to the personal pension funds of
United Kingdom employees pursuant to their employment
-6-
38
contracts. There is one pension plan for regular employees and one for senior
management.
6. Superannuation (pension) fund for Synon Pty. employees is funded by
employee contributions.
7. Employment letter between Synon Corporation and Paul Wilde dated
March 27, 1991.
8. The Company has made an offer of employment to Ronald W. Braniff
pursuant to an offer letter dated June 24, 1991.
9. Stock Option Plans.
a. Synon corporation 1990 Stock Option Plan (for employees
residing in the U.S., Canada or Australia).
b. Synon Corporation Executive Share Option Scheme (for
employees residing in the United Kingdom).
Section 3.21 -- Certain Transactions.
1. The Company and John de Wit entered into a Loan Agreement, dated
April 15, 1991, whereby the Company agreed to establish a term loan facility in
the principal amount of $100,000 for Mr. de Wit (the "de Wit Loan"). Interest
accrues at the rate of 1% per annum above the floating base rate established by
Midland Bank Plc (i.e. the same rate that is applicable to borrowings under
Synon Inc.'s line of credit facility). Accrued interest and principal are due on
April 15, 1992. Various provisions provide for acceleration of the maturity date
in the event Mr. de Wit ceases to be employed by the Company or declares
insolvency, and for the receipt of certain financial and tax information of Mr.
de Wit by the Company. The de Wit Loan is secured by those shares of the
Company's Common Stock now held or later acquired by Mr. de Wit (currently
22,247 shares with options to purchase an additional 88,988 shares), pursuant to
the terms of a Pledge Agreement executed as of the same date.
2. The Company and Christopher Herron entered into a Loan Agreement,
dated May 31, 1991 (the "Herron Loan"), on substantially similar terms as the de
Wit Loan. The principal amount of the term credit is $250,000. Interest accrues
at the same rate as on the de Wit Loan and accrued interest and principal are
due on May 31, 1992. The Herron Loan contains the same acceleration provisions
and information requirements as the de Wit loan. The Herron Loan is secured by
250,000 shares of Common Stock of the Company currently held by Mr. Herron,
pursuant to the terms of a Pledge Agreement executed as of the same date.
-7-
39
3. Employment Agreements - see Section 3.20.
4. Guarantees:
a. See Section 3.12 for guarantees among the Company's
subsidiaries with regard to the Midland Bank letter of credit.
b. Synon Ltd. is a guarantor to Midland Bank Plc for a letter
of credit issued by Midland to ANZ Bank, Melbourne, Australia to cover debts due
to ANZ Bank from Strategic Information Systems Pty Ltd. for the sum of AUS
D605,000 as of April 30, 1991. Neither Synon Ltd. nor its subsidiary, Synon Pty
Ltd., owns a majority interest in Strategic.
c. The Company has in the ordinary course of business
guaranteed the repayment of debt of its other direct and indirect subsidiaries.
Section 3.22 - Tax Returns, Payments and Elections.
Synon Ltd. has not paid the Advance Corporation Tax of 1,133,333 due on
April 14, 1990. It has been fully provided for in the consolidated financial
statements.
Section 3.23 -- FIRPTA.
None.
Section 3.24 -- Offering.
None.
Section 3.25 -- Brokers or Finders; Other Offers.
None.
-8 -