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Exhibit 4.5
EXECUTION COPY
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the 10th day of April, 1996, by and among
Intelligroup, Inc., a New Jersey corporation (the "Company"), those persons
listed on Schedule 1 hereto (the "Current Shareholders") and those persons
listed on Schedule 2 hereto (the "Investors" and, with the Current Shareholders,
the "Shareholders") and those other persons who acquire shares of capital stock
of the Company from time to time as described in Section 18 hereof (the "Other
Shareholders").
WHEREAS, the Investors are acquiring warrants (the "Warrants") to
purchase an aggregate of 23.63636 shares of Common Stock, no par value, at a
price per share equal to $.01 (the "Common Stock"), which shall initially
constitute 20.8% of the Company's fully diluted capital stock, pursuant to the
terms of a Debenture and Warrant Purchase Agreement dated as of April 10, 1996
by and among the Company, the Investors, Ashok Pandey, Rajkumar Koneru, Nagarjun
Valluripalli (the "Purchase Agreement"); and
WHEREAS, it is a condition to the obligations of the Current
Shareholders and the Investors under the Purchase Agreement that this Agreement
be executed by the parties hereto, and the parties are willing to execute this
Agreement and to be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares" shall mean
and include all shares of Common Stock now owned or hereafter acquired by the
Shareholders and the Other Shareholders and all shares of Common Stock issued or
issuable upon exercise of the Warrants. Other terms used as defined terms herein
and not otherwise defined shall have the meanings set forth in the Purchase
Agreement.
2. Prohibited Transfers. No Current Shareholder shall sell, assign,
transfer, pledge, hypothecate, mortgage, encumber or dispose of all or any of
his Shares except in compliance with the terms of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, (a) any
Current Shareholder may transfer without the necessity of prior approval all or
any of his Shares by way of gift to his spouse, to any of his lineal descendants
or ancestors, or to any trust for the benefit of any one or more of such Current
Shareholder, his spouse or his lineal descendants or ancestors, (b) any Current
Shareholder may transfer all or any of his Shares by will or the laws of descent
and distribution (c) any Current Shareholder may pledge Shares to the Company as
collateral security pursuant to the Stock Pledge Agreement, dated March 22,
1996, executed by such Current Shareholder in favor of Summit Ventures IV, L.P.;
or (d) any Current Shareholder may transfer up to an aggregate of thirty percent
(30%) of the Shares owned by him on the date hereof to any one or
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more of his siblings or to one or more of the other Current Shareholders;
provided that any such transferee under clauses (a), (b) or (d) of this Section
2 shall agree in writing with the Company and the other Shareholders, as a
condition to such transfer, to be bound by all of the provisions of this
Agreement to the same extent as if such transferee were the Current Shareholder
transferring such Shares; provided, further, that upon foreclosure of the pledge
described in clause (c) of this Section 2, the pledgee shall agree in writing
with the Shareholders, as a condition to such foreclosure, to be bound by all of
the provisions of this Agreement to the same extent as if such pledgee were a
Current Shareholder.
3. Right of First Refusal on Dispositions.
(a) If at any time a Current Shareholder (a "Selling Current
Shareholder") desires to sell or otherwise transfer all or any part of his
Shares pursuant to a bona fide offer from a third party (the "Proposed
Transferee"), the Selling Current Shareholder shall submit a written offer (the
"Offer") by delivering the Offer to the Company and the other Current
Shareholders and Investors to sell such Shares (the "Offered Shares") to the
Company and the other Current Shareholders and Investors on terms and
conditions, including price, not less favorable than those on which the Selling
Current Shareholder proposes to sell such Offered Shares to the Proposed
Transferee. The Offer shall disclose the identity of the Proposed Transferee,
the number of Offered Shares proposed to be sold, the total number of Shares
owned by the Selling Current Shareholder, the terms and conditions, including
price, of the proposed sale, and any other material facts relating to the
proposed sale. The Offer shall further state (i) that the Company and the other
Current Shareholders and Investors may acquire, in accordance with the
provisions of this Agreement, all but not less than all, of the Offered Shares
for the price and upon the other terms and conditions set forth therein and (ii)
that if all such Offered Shares are not purchased by the Company and the other
Current Shareholders and Investors, the Investors may exercise their rights
provided pursuant to Section 4 hereof.
(b) Within fifteen (15) days after receipt of the Offer, the
Company shall advise the Selling Current Shareholder and the Other Current
Shareholders and the Investors as to the number of Shares specified in the
Offer, if any, which the Company wishes to purchase.
(c) To the extent that the Company does not elect under
subparagraph (b) to purchase all of the Offer Shares, the other Current
Shareholders and the Investors shall have the right to purchase all, but not
less then all, of the remaining Offer Shares. Each Current Shareholder and
Investor who has the right to purchase all Offer Shares under this subparagraph
(c) shall have the right to purchase his or its pro rata fraction of the Offer
Shares, determined by multiplying the number of Offer Shares available for
purchase times a fraction, the numerator of which shall be the number of Shares
then owned by such other Current Shareholder or Investor (including Shares
issuable upon exercise of any options or warrants held by such person), and the
denominator of which shall be the aggregate number of
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Shares (including Shares issuable upon exercise of any options or warrants held
by such persons) then owned by all other Current Shareholders and Investors who
elect to purchase the Offered Shares. The amount of such Offered Shares that
other Current Shareholder or each Investor is entitled to purchase under this
Section 3(c) shall be referred to as its "Pro Rata Fraction".
(d) The other Current Shareholders and Investors shall have a
right of oversubscription such that if any other Current Shareholder or Investor
fails to accept the Offer as to its full Pro Rata Fraction, the remaining other
Current Shareholders and Investors shall, among them, have the right to purchase
up to the balance of such Offered Shares not so purchased. Other Current
Shareholders and Investors may exercise such right of oversubscription by
accepting the Offer as to more than their Pro Rata Fraction. If, as a result
thereof, such oversubscriptions exceed the total number of the Offered Shares
available in respect of such oversubscription privilege, the oversubscribing
other Current Shareholders and Investors shall be cut back with respect to over
subscriptions on a pro rata basis in accordance with their respective Pro Rata
Fractions or as they may otherwise agree among themselves.
(e) Those other Current Shareholders and Investors who desire
to purchase all or any part of the Offered Shares shall communicate in writing
their election to purchase to the Selling Current Shareholder, which
communication shall state the number of Offered Shares said other Current
Shareholders and Investors desire to purchase and shall be provided to the
Selling Current Shareholder within 45 days of the date the Offer was made. Such
communication shall, when taken in conjunction with the Offer, be deemed to
constitute a valid, legally binding and enforceable agreement for the sale and
purchase of such Offered Shares (subject to the aforesaid limitations as to the
right of the Investors to purchase more than their Pro Rata Fraction). Sales of
such Offered Shares to be sold to the other Current Shareholders and Investors
pursuant to this Section 3 shall be made at the offices of the Company within 60
days following the date the Offer was made.
(f) If the Company, the other Current Shareholders and the
Investors do not purchase all of the Offered Shares, all of the Offered Shares
may be sold by the Selling Current Shareholder at any time within 120 days after
the date the Offer was made, subject to the provisions of Section 4. Any such
sale shall be to the Proposed Transferee, at not less than the price and upon
other terms and conditions, if any, not more favorable to the Proposed
Transferee than those specified in the Offer. Any remaining Offered Shares not
sold within such 120-day period shall continue to be subject to the requirements
of a prior offer pursuant to this Section 3. If Offered Shares are sold pursuant
to this Section 3 to any purchaser who is not a party to this Agreement, the
purchaser of such Offered Shares shall execute a counterpart of this Agreement
as a precondition of the purchase of such Offered Shares and any Offered Shares
sold to such purchaser shall continue to be subject to the provisions of this
Agreement.
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4. Right of Participation in Sales.
(a) If at any time a Selling Current Shareholder desires to
sell all or any part of the Shares owned by it or him to a Proposed Transferee,
and those Shares to be transferred have not been purchased by the Investors
under Section 3, each of the Investors (other than those who have elected to
purchase Shares pursuant to Section 3) shall have the right to sell to the
Proposed Transferee, as a condition to such sale by the Selling Current
Shareholder, at the same price per share and on the same terms and conditions as
involved in such sale by the Selling Current Shareholder, a pro rata portion of
the amount of Shares proposed to be sold to the Proposed Transferee. Subject to
the following sentence, the "pro rata portion" of Shares which an Investor shall
be entitled to sell to the Proposed Transferee shall be that number of Shares as
shall equal the number of Shares proposed to be sold to the Proposed Transferee
multiplied by a fraction, the numerator of which is the aggregate of all of
Shares which are then held by the Investor (including Shares issuable upon
exercise of any options or warrants held by the Investor), and the denominator
of which is the aggregate of all Shares which are then held by the Selling
Current Shareholder and all Investors (including Shares issuable upon exercise
of any options or warrants held by such persons) wishing to participate in any
sale under this Section 4. In the event that the Selling Current Shareholder is
the holder of a number of Shares which equals or exceeds the aggregate number of
Shares held by all of the Investors, and the Investors elect to participate as
Participating Shareholders in such sale in the manner provided herein, then the
"pro rata portion" of the amount of Shares which the Investors (treating the
Investors as one group), on the one hand, and the Selling Current Shareholder,
on the other hand, shall each be entitled to include in such sale to the
Proposed Transferee shall be equal to fifty percent (50%) of the number of
Shares proposed to be sold to the Proposed Transferee.
(b) Each Selling Current Shareholder who wishes to make a sale
to a Proposed Transferee which is subject to this Section 4 shall, after
complying with the provisions of Section 3, give to each Investor (other than
those who have elected to purchase Shares pursuant to Section 3) notice of such
proposed sale, and stating that all Offered Shares were not purchased pursuant
to the Offer as discussed in Section 3. Such notice shall be given at least 20
days prior to the date of the proposed sale to the Proposed Transferee. Each
Investor (other than those who have elected to purchase Shares pursuant to
Section 3) wishing to so participate in any sale under this Section 4 shall
notify the Selling Current Shareholder in writing of such intention within 15
days after such Investor's receipt of the notice described in the preceding
sentence.
(c) The Selling Current Shareholder and each Investor eligible
and wishing to participate in the proposed sale shall sell to the Proposed
Transferee all, or at the option of the Proposed Transferee, 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 Proposed Transferee than
those in the notice provided by the Selling Current Shareholder under
subparagraph (b) above; provided, however, that any purchase of less than all of
such Shares
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by the Proposed Transferee shall be made from the Selling Current Shareholder
and each Investor pro rata based upon the relative number of the Shares that the
Selling Current Shareholder and each Investor is otherwise entitled to sell
pursuant to Section 4(a).
(d) If any Shares are sold pursuant to this Section 4 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions of
this Agreement.
5. Election of Directors. At each annual meeting of the shareholders of
the Company, and at each special meeting of the shareholders of the Company
called for the purpose of electing directors of the Company, and at any time at
which shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders shall vote
all Shares owned by them for the election of a Board of Directors consisting of
not more than seven directors (as may be increased as provided in Section 5(d)
below), designated in the manner set forth below.
(a) two directors shall be designated by the Investors (which
designees shall initially be Thomas S. Roberts and Kevin P. Mohan); and
(b) three directors shall be designated by the Current
Shareholders, provided that collectively the Current Shareholders own fifty-one
percent (51%) of the Common Stock of the Company (which designees shall be Ashok
Pandey, Rajkumar Koneru, and Nagarjun Valluripalli). In the event that at any
time the Current Shareholders shall collectively own less than fifty-one percent
(51%), but more than twenty-five percent (25%) of the Common Stock of the
Company they may designate two directors, and at any time the Current
Shareholders shall collectively own twenty-five percent (25%) of the Common
Stock of the Company they may designate one director;
(c) the remaining directors (if any), one of whom shall not be
an employee or affiliate of the Company (the "Independent Director"), shall be
designated by the holders of the Common Stock.
(d) if at any time the Company shall (i) default in the
payment of any principal of or interest on its Debentures due April 10, 2001,
when the same becomes due and payable (whether at maturity or at the date fixed
for mandatory or optional redemption or prepayment or by acceleration or
otherwise); or (ii) default for any reason in its obligation to repurchase the
Warrants or Shares held by the Investors pursuant to the terms of the Redemption
Agreement, or (iii default under any of the covenants contained in Articles IV
and V of the Purchase Agreement (each of such defaults described in clauses (i),
(ii) and (iii) being hereinafter referred to as a "Default"), and in the case of
those Defaults described in clause (iii) such Default shall not have been caused
by an Uncontrollable Action (as such term is defined below) and shall not have
been remedied within 30 days after written notice thereof
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shall have been received by the Company from the Investors, then the number of
directors constituting the Board of Directors shall be increased to either
eleven or to a lesser number selected by the Investors and the Investors shall
be entitled to designate four additional directors in the event that the number
of directors constituting the Board of Directors shall be increased to eleven
or, if the Investors designate a smaller Board, such lesser number of additional
directors as would allow the Investors to hold a majority of the directorships
on the Board of Directors (which directors shall be designated by the Investors
owning at least a majority of the Shares held by all Investors), and such right
may be exercised at any annual meeting or at any special meeting call for such
purpose or at any adjournment thereof, or by written consent of the Company's
shareholders. The Shareholders agree to promptly take such action as shall be
required to fix the number of directors at not more than eleven and for the
election of not more than four additional directors as shall be designated by
the Investors. The rights of the Investors to elect a majority of the Board of
Directors pursuant to this Section 5(d) shall continue until the curing of the
Default which gave rise to such right at which time such right shall terminate,
subject to the revesting thereof; provided that if the Investors exercise their
right to elect a majority of the Board of Directors a second time, such right
shall continue regardless of any subsequent cure.
For purposes of this section, an "Uncontrollable Action" shall mean
acts of God, war or insurrection, civil commotion, destruction of production
facilities or materials by earthquake, fire, flood, or storm, labor
disturbances, epidemic, or failure of suppliers, public utilities or common
carriers.
(e) Expenses. The Company shall reimburse the members of the
Board of Directors for all direct out-of-pocket expenses incurred by any
director in attending such meetings. Such expenses shall not exceed the costs
incurred in providing coach air fare between Boston, Massachusetts and Newark,
New Jersey, ground transportation to and from airports and meals. Hotel
accommodations will be provided if the time for a Board of Directors meeting
requires an overnight stay before or after the meeting.
6. Compensation Committee. There shall be established at all times
during the term of this Agreement a Compensation Committee of the Board of
Directors (the "Compensation Committee") which shall be comprised of three
directors as follows: one of whom will be a director designated under Section
5(a); one of whom will be a director designated under Section 5(b), and one of
whom will be the Independent Director designated under Section 5(c). The
Compensation Committee will determine the compensation of the Current
Shareholders and all senior management employees of the Company (including
salary, bonus, equity participation and benefits) and will administer the Option
Plan, as such term is defined in the Purchase Agreement.
7. Term. This Agreement shall terminate immediately prior to the first
to occur of (a) the consummation of the first Qualified Public Offering
(provided that the provisions of Section 4 hereof shall continue until the first
to occur of the events described in clauses (b) and
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(c) of this Section 7, (b) the tenth anniversary of the date of this Agreement,
or (c) at such time that the Investors no longer own the Warrants or the Warrant
Shares and the Debentures have been paid in full. Notwithstanding the foregoing,
at such times as the Investors have sold or conveyed to the Company or other
unaffiliated entities such number of shares of Common Stock such that after
giving effect to such sale or conveyance the Investors shall own or have the
right to acquire less than seventy-five percent (75%) of the shares of Common
Stock which they initially had the right to acquire upon exercise of the
Warrants (after giving effect to any adjustment to the number of Warrant Shares
issuable, as set forth in the Warrant Agreement), all of the provisions of this
Agreement shall terminate.
8. Failure to Deliver Shares. If a Current Shareholder becomes
obligated to sell any Shares to another Shareholder under this Agreement and
fails to deliver such Shares in accordance with the terms of this Agreement,
such other Shareholders may, at their option, in addition to all other remedies
they may have, send to the defaulting Current Shareholder the purchase price for
such Shares as is herein specified. Thereupon, the Company, upon written notice
to the defaulting Current Shareholder, (a) shall cancel on its books the
certificate or certificates representing the Shares to be sold and (b) shall
issue, in lieu thereof, in the name of such other Shareholder, a new certificate
or certificates representing such Shares, and thereupon all of the defaulting
Current Shareholder's rights in and to such Shares shall terminate.
9. Specific Enforcement. Each Shareholder expressly agrees that the
other Shareholders and the Company may be irreparably damaged if this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by any Shareholder, the other
Shareholders and the Company shall, in addition to all other remedies, each be
entitled to apply for a temporary or permanent injunction, and/or a decree for
specific performance, in accordance with the provisions hereof.
10. Legend. Each certificate evidencing any of the Shares now owned or
hereafter acquired by the Current Shareholders shall bear a legend substantially
as follows:
"Any sale, assignment, transfer or other disposition of the shares
represented by this certificate is restricted by, and subject to,
the terms and provisions of a certain Shareholders' Agreement dated
as of April 10, 1996. A copy of said Agreement is on file with the
Secretary of the Corporation."
11. Rights as Shareholder. The Investors shall have any and all rights
held by any shareholder of the Company, as if the Warrant Shares were converted
to Common Stock, to vote as a class on any and all matters affecting the value
of the Warrant Shares or the Debentures, including, but not limited to, a
Liquidity Event or an Extraordinary Common Stock Event, as such terms are
defined in the Warrant Agreement.
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12. 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
certified or registered mail, return receipt requested, to the party being
notified at his or its address specified on the applicable schedule hereto or
such other address as the addressee may subsequently notify the other parties of
in writing.
13. Entire Agreement and Amendments. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto;
provided, however, that Investors owning at least a majority of the Shares owned
by all Investors may effect any such waiver, modification, amendment or
termination on behalf of all of the Investors and the Current Shareholders
owning at least a majority of the Shares owned by all Current Shareholders may
effect any such waiver, modification, amendment or termination on behalf of all
of the Current Shareholders. Each of the Shareholders represents that he or it
is not a party to any other agreement which would prevent him or it from
performing his or its obligations hereunder. 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.
14. Governing Law; Successors and Assigns. This Agreement shall be
governed by the internal laws of the Commonwealth of Massachusetts without
giving effect to the conflicts of laws principles thereof and, except as
otherwise provided herein, shall be binding upon the heirs, personal
representatives, executors, administrators, successors and assigns of the
parties.
15. 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 provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
16. Captions. Captions are for convenience only and are not deemed to
be part of this Agreement.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18. Other Shareholders. The term "Other Shareholders" shall refer to (a)
employees of the Company who acquire shares of Common Stock upon exercise of
stock options granted by the Company, and (b) all other Persons who shall own
five percent (5%) or more of the shares of Common Stock then outstanding. Shares
of capital stock issued to such Other
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Shareholders shall constitute "Shares" for purposes of this Agreement and, upon
issuance of any such Shares to any such Other Shareholder, such Other
Shareholder shall, as a condition to such issuance, execute a counterpart to
this Agreement as evidence of such Other Shareholder's agreement to be bound by
all of the provisions of this Agreement to the same extent as the Current
Shareholders are bound hereunder.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
COMPANY:
INTELLIGROUP, INC.
By:
-------------------------------------
Name: Ashok Pandey
Title: President
CURRENT SHAREHOLDERS:
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Ashok Pandey INVESTORS:
SUMMIT VENTURES IV, L.P.
By: Summit Partners IV, L.P.,
- ---------------------------------- its general partner
Rajkumar Koneru
By: Stamps, Woodsum & Co. IV,
its general partner
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Nagarjun Valluripalli
By:
-------------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By:
-------------------------------------
Authorized Signatory
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Schedule 1
Name and Address
Ashok Pandey
c/o Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
Rajkumar Koneru
c/o Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
Nagarjun Valluripalli
c/o Intelligroup, Inc.
5 Lincoln Highway, Suite 4
Edison, New Jersey 08818
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Schedule 2
Name and Address
Summit Ventures IV, L.P.
600 Atlantic Avenue
Suite 2800
Boston, MA 02210
Summit Investors III, L.P.
600 Atlantic Avenue
Suite 2800
Boston, MA 02210
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