EXHIBIT 4.1
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT dated as of March 3, 1999 by and between
COMMERCIALWARE, INC., a Delaware Corporation (the "Company"), ASA INTERNATIONAL
LTD., a Delaware corporation ("Shareholder"), THE KK/SS PARTNERSHIP ("KK/SS"),
XXXXXX XXXXX ("Xxxxx"), XXXXXXX XXXXXXXXX ("Dioguardi"), XXXXXX XXXXXXX
("Xxxxxxx") and XXXXXXX XXXXX SECURITIES, INC. ("STSI") (KK/SS, Askin,
Dioguardi, Xxxxxxx and STSI are collectively referred to as the "ST Group").
WHEREAS, pursuant to that certain Asset Purchase Agreement made as of
even date by and among the Company and Shareholder (the "Asset Purchase
Agreement"), the Company has agreed to cause to be issued to Shareholder 30,000
shares of the Company's Stock (as defined below) and one (1) share of the
Company's Series A Preferred Stock (as defined below);
WHEREAS, pursuant to the Asset Purchase Agreement, Shareholder shall
receive a promissory note in the amount of $1,700,000 (the "Senior Note") and a
License Fee in the amount of $300,000 (the "License Fee");
WHEREAS, the Company has borrowed an aggregate of $5,000,000 from the
ST Group and the Shareholder, which indebtedness is evidenced by promissory
notes (the "Junior Notes");
WHEREAS, the Company desires that Xxxxxx X. Xxxxxxxx, President and
Chief Executive Officer of Shareholder, and certain other individuals each serve
as a Director of the Company; and
WHEREAS, the parties desire to provide for certain restrictions and
other matters relating to the transfer of the capital stock of the Company by
the ST Group and Shareholder;
NOW, THEREFORE, it is agreed as follows:
1. ISSUE OF STOCK. The Company hereby agrees to issue to the Shareholder,
and the Shareholder agrees to accept, 30,000 shares of the Company's Stock and
one (1) share of the Company's Series A Preferred Stock, each with rights and
preferences as set forth in the Company's Amended and Restated Certificate of
Incorporation, a copy of which is attached hereto as EXHIBIT A. Such shares and
any shares of capital stock of the Company acquired by the Shareholder as a
result of any subdivision, combination or reclassification of outstanding shares
of Stock into a greater or smaller number of shares, recapitalization,
reorganization, stock split, stock dividend or similar event, purchase (pursuant
to Section 5 below), issuance (pursuant to Section 7 below) or conversion (as
set forth on EXHIBIT A attached hereto) are referred to herein as the "Shares"
and such Shares are subject to the terms and conditions of this Agreement. For
purposes herein, "Fully Diluted" shall mean the sum of (i) all issued and
outstanding shares of the Company's common stock, par value $.01 per share (the
"Stock"), and (ii) the total maximum number of shares of Stock issuable upon (a)
the exercise of all Options, (b) the conversion or exchange of all Convertible
Securities, and (c) the conversion or exchange of all Convertible Securities
issuable upon the exercise of any Options. For purposes herein, "Options" shall
mean any rights to subscribe for or to purchase, or any options or warrants for
the purchase of, Stock, and "Convertible Securities" shall mean any stock or
securities convertible into or exchangeable for Stock (including the Series A
Preferred Stock).
2. DELIVERY OF SHARES. At the Time of Closing (as defined in the Asset
Purchase Agreement), the Company will issue and deliver to the Shareholder
certificates registered in the Shareholder's name representing the Shares.
3. INVESTMENT REPRESENTATIONS.
(A) REPRESENTATIONS OF SHAREHOLDER. This Agreement is made in reliance
upon the Shareholder's express representations that (i) the Shares are being
acquired for the Shareholder's own account for the purpose of investment and not
with a view to, or for sale in connection with, the distribution thereof, nor
with any present intention of distributing or selling the Shares, (ii) the
Shares will not be sold without registration under the Securities Act of 1933,
as amended (the "Securities Act"), or an exemption therefrom, (iii) the
Shareholder (and/or agents of the Shareholder) prior to the receipt of the
Shares has had the opportunity to ask questions of and receive answers from
representatives of the Company concerning the finances, operations and business
of the Company, and (iv) the Shareholder can bear the economic risk of losing
its investment in the Shares and has adequate means for providing for its
current financial needs and contingencies.
(B) SECURITIES LEGEND. Until such time as the Shares shall have been
registered under the Securities Act, or shall have been transferred in
accordance with an opinion of counsel satisfactory to the Company that such
registration is not required, stop transfer instructions shall be issued to the
Company's transfer agent, if any, or, if the Company transfers its own
securities, a notation shall be made in the appropriate records of the Company
with respect to the Shares, and the certificates representing the Shares shall
bear a legend substantially as follows:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 or applicable state securities laws.
These shares have not been acquired with a view to distribution or
resale, and may not be sold, mortgaged, pledged, hypothecated or
otherwise transferred without an effective registration statement for
such shares under the Securities Act of 1933 and any applicable state
securities laws, or an opinion of counsel satisfactory to the Company
that registration is not required under the Securities Act of 1933 or
under applicable state securities laws."
The Shareholder further understands and acknowledges that (i) there is
not now available, and may not be available when the Shareholder wishes to sell
its Shares, the adequate current public information with respect to the Company
which would permit offers or sales of the Shares pursuant to Rule 144
promulgated under the Securities Act, and, therefore, compliance with Regulation
A of the Securities Act or some other exemption from the registration and
prospectus delivery requirements of the Securities Act will be required for any
such offer or sale, and (ii) the Company is under no obligation to register the
Shares under the Securities Act or to make Rule 144 available.
4. TERM. This Agreement shall expire on the earlier to occur of: (i) the
closing of an underwritten public offering of shares of Stock of the Company
pursuant to an effective registration statement filed under the Securities Act
or any successor statute (the "Qualified Public Offering"), or (ii) the
occurrence of an Organic Change. For purposes of this Agreement, an "Organic
Change" shall include the transfer or sale of all, or substantially all, of the
capital stock or assets of the Company to any other person or entity, or the
merger or consolidation of the Company with another entity where such other
entity is the surviving entity (other than a merger or consolidation relating to
a change of state of incorporation of the Company). The Company shall give the
Shareholder thirty (30) days advance written notice of any anticipated Organic
Change.
5. SHAREHOLDER RIGHT OF FIRST REFUSAL.
If at any time during the term of this Agreement the Company proposes to
sell any Stock or any securities convertible or exercisable for any Stock to any
party (other than the issuance of Stock or the granting of Options from or in
respect of the Pool as set forth in Section 7 below) (the "Company Offer"), the
Company shall give written notice to the Shareholder (the "Shareholder Option
Notice") setting forth its desire to sell such Stock (the "Company Offered
Shares"), which Shareholder Option Notice shall be accompanied by a photocopy of
the original executed Company Offer and shall set forth at least the name and
address of the Offeror and the price and terms of such offer.
Upon the receipt of the Shareholder Option Notice, the Shareholder shall
have an option to purchase up to that amount of the Company Offered Shares which
will maintain Shareholder's proportionate ownership interest of Stock on a Fully
Diluted basis after the proposed sale to such Offeror (the "Shareholder
Portion"). Such option granted to Shareholder shall be exercisable by giving,
within 14 business days after the receipt of the Shareholder Option Notice (the
"Shareholder Exercise Period"), a counter-notice in writing to the Company. If
the Shareholder elects to purchase any of the Shareholder Portion, Shareholder
shall be obligated to purchase, and the Company shall be obligated to sell to
the Shareholder, such amount of the Shareholder Portion so elected at the price
(per share) and terms indicated in the Company Offer, within 14 days from the
date of the Shareholder's receipt of the Shareholder Option Notice.
The Company may sell any or all of such Company Offered Shares which the
Shareholder has not so elected to purchase during 90 days following the
expiration of the Shareholder Exercise Period, provided that such sale shall
only be made pursuant to the terms of the Company Offer. If any or all such
Company Offered Shares are not sold pursuant to the Company Offer within such
time period, the unsold Company Offered Shares shall remain subject to the terms
of this Agreement.
6. SHAREHOLDER RIGHT OF PARTICIPATION IN ST GROUP SALES.
If at any time any member of the ST Group ("Seller") desires to sell all or
any part of Seller's Stock and has received in writing a bona fide offer (the
"STC Bona Fide Offer") for the purchase of such Stock from an Offeror, Seller
shall give written notice to the Shareholder (the "Shareholder Participation
Notice") setting forth its desire to sell such Stock (the "STC Offered Shares"),
which Shareholder Participation Notice shall be accompanied by a photocopy of
the original executed STC Bona Fide Offer and shall set forth at least the name
and address of the Offeror and the price and terms of such offer.
Upon the receipt of the Shareholder Participation Notice, the Shareholder
shall have the right to sell to the Offeror, at the same price per share and on
the same terms and conditions as involved in such sale by Seller, that amount of
Stock which is equal to the lesser of the STC Offered Shares and the Shareholder
Participation Amount. For purposes herein, the "Shareholder Participation
Amount" shall be equal to the Shares multiplied by a fraction, the numerator of
which is the number of STC Offered Shares and the denominator of which is the
aggregate number of shares of capital stock of the Company owned by Seller,
calculated on a Fully Diluted basis.
Such right by Shareholder to sell the Shareholder Participation Amount
shall be exercisable by giving, within 30 business days after the receipt of the
Shareholder Participation Notice, a notice in writing to Seller of Shareholder's
desire to exercise such right.
The Shareholder and Seller shall sell to the Offeror all, or at the option
of the Offeror, any part of the shares proposed to be sold by them at not less
than the price and upon other terms and conditions, if any, not more favorable
to the Offeror than those in the STC Bona Fide Offer, provided however, that any
purchase of less than all of such shares by the Offeror shall be made from the
Shareholder and Seller PRO RATA based upon the relative amount of the shares
that each of the Shareholder and Seller is otherwise entitled to sell pursuant
to the foregoing provisions of this Section.
7. RIGHTS AS SHAREHOLDER; ADJUSTMENTS.
It is understood that the Shareholder has the right to vote all of the
Shares held by the Shareholder and that it shall be entitled to all dividends or
distributions made by the Company arising in respect of the Shares, in cash,
stock or other property, including warrants, options or other rights, and the
Company covenants that it shall treat all Stock equally in connection with any
such dividends or distributions. Upon the happening of any event described in
Section 1 above, the Company will provide a new certificate representing the
Shares as appropriately adjusted.
8. SUBORDINATION OF JUNIOR NOTES. The parties hereby agree that the payment
and performance covenants and obligations of the Company under the Junior Notes
shall be (i) subordinate in all respects, including, without limitation,
payment, lien and bankruptcy, to the covenants and obligations of the Company
under the Senior Note and the License Fee, and (ii) pari passu among the Junior
Notes. The parties hereto agree that no payments (including payments of interest
and/or principal), prepayments or other distributions will be paid or payable by
the Company under the terms of the Junior Notes until such time as the
obligations of the Company under the Senior Note and the License Fee have paid
and satisfied in full, at which time any payments to be made in respect of the
Junior Notes shall be made pari passu.
9. REGISTRATION RIGHTS. If at any time the Company shall determine to
register under the Securities Act any of its Stock, other than on Form S-4 or
Form S-8 or their then equivalents, it shall send to the Shareholder written
notice of such determination. Upon the written request from the Shareholder
within thirty (30) days after receipt of any such notice from the Company, the
Company, at the Company's expense, will use its best efforts to include in such
registration statement all or any part of the shares of Stock issuable upon the
conversion of the Shares that the Shareholder requests to be registered, except
that if, in connection with any offering involving an underwriting of Stock to
be issued by the Company, the managing underwriter shall impose a limitation on
the number of shares of such Stock which may be included in any such
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, and such limitation is imposed PRO RATA
among the holders of such Stock having an incidental right to include such Stock
in the registration statement according to the amount of such Stock which each
holder had requested to be included pursuant to such right, then the Company
shall be obligated to include in such registration statement only such limited
portion of the Shares with respect to which the Shareholder has requested
inclusion hereunder. In the event of such a PRO RATA limitation, no shares of
Stock held by persons not having such an incidental right may be included in the
registration statement.
10. BOARD OF DIRECTORS. During the term of this Agreement, the parties
hereto will take all necessary actions to ensure that Xxxxxx X. Xxxxxxxx, and so
long as each is an employee of the Company, each of Xxxxxx Xxxxx, Xxxx Xxx and
Xxxxx Xxxxx, each is elected as a member of the Company's board of directors.
11. ACCESS TO INFORMATION. The Company shall permit, upon reasonable
request and notice, the Shareholder or any agent or representative thereof, to
examine and make copies of and extracts from the records and books of account
of, and visit and inspect the properties of the Company, and to discuss the
affairs, finances and accounts of the Company with any of its officers,
directors, key employees, attorneys and independent accountants.
12. SPECIFIC ENFORCEMENT. Because the Shares cannot be readily purchased or
sold in the open market, and for other reasons, the parties hereby acknowledge
and agree that they may be irreparably damaged in the event that this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by either party, the other party
shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof.
13. LEGEND. All certificates evidencing any of the Shares subject to this
Agreement shall also bear a legend substantially as follows during the term of
this Agreement:
"The shares represented by this certificate are subject to
restrictions on transfer and may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except in accordance
with and subject to all the terms and conditions of a certain
Shareholder Agreement between the Company and the holder of this
certificate, a copy of which the Company will furnish to the holder of
this certificate upon request and without charge."
14. GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement shall be
construed in accordance with and governed by the internal laws of the State of
New York and shall be binding upon the heirs, personal representatives,
executors, administrators, successors and assigns of the parties.
15. NOTICES. Notices given hereunder shall be deemed to have been duly
given on the date of personal delivery or on the date of postmark, if mailed by
registered or certified mail, to the party being notified at his address
specified on the signature page hereof or such other address as he may
subsequently notify the other party in writing.
16. COMPENSATION. The Company covenants and agrees that it will not pay to
its management compensation in excess of that compensation customarily paid to
management in companies of similar size, of similar maturity, and in similar
businesses and all management compensation and all policies relating thereto
shall be approved in a advance by a majority of the members of the Company's
Board of Directors.
17. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and may not
be modified, amended or terminated except by an agreement signed by the parties
hereto.
18. WAIVERS. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
19. SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other severable provision
of this Agreement, and this Agreement shall be carried out as if any such
illegal, invalid or unenforceable provision were not contained herein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement has been executed as an instrument under
seal as of the date and year first above written.
COMMERCIALWARE, INC. ASA INTERNATIONAL LTD.
By: /s/ Xxxxxx Xxxxx By: /s/ Xxxxxxxx X. XxXxxxxx
Title: Chief Operating Officer Title: Vice President and Treasurer
THE KK/SS PARTNERSHIP XXXXXXX XXXXX SECURITIES, INC.
By:/s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxxx Xxxxxxxxx
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Title: Partner Title: President
/s/ Xxxxxx Xxxxx /s/ Xxxxxxx Xxxxxxxxx
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Xxxxxx Xxxxx Xxxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
