Case 1:20-cv-00607-UNA Document 1 Filed 05/04/20 Page 1 of 9 PageID #: 1
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`ORKHAN GULIYEV,
`Plaintiff,
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`v.
`DAVID SANDBERG, W. CARL DREW,
`DANIEL GILL, PATRICK GOEPEL,
`CHARLES LATHROP, JR., BRADFORD
`OBERWAGER, BJORN REYNOLDS, and
`ASURE SOFTWARE, INC.,
`Defendants.
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`C.A. No. _________
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`COMPLAINT FOR VIOLATION OF FEDERAL SECURITIES LAWS
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`Plaintiff Orkhan Guliyev (“Plaintiff”) brings this Complaint for Violation of Federal
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`Securities Laws (“Complaint”) against Asure Software, Inc. (“Asure” or the “Company”) and the
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`members of its board of directors (the “Board”), namely: David Sandberg (“Sandberg”), W. Carl
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`Drew (“Drew”), Daniel Gill (“Gill”), Patrick Goepel (“Goepel”), Charles Lathrop, Jr. (“Lathrop”),
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`Bradford Oberwager (“Oberwager”), and Bjorn Reynolds (“Reynolds”) (collectively, the
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`“Director Defendants” and, together with Asure, “Defendants”). Plaintiff’s allegations are based
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`upon the knowledge of Plaintiff as to himself and upon information and belief, including the
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`investigation conducted by his undersigned attorneys and a review of public information, including
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`news reports and documents filed with the U.S. Securities and Exchange Commission (“SEC”), as
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`to all other matters.
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`INTRODUCTION
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`1.
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`Plaintiff, an Asure stockholder, brings this action against the Company and its
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`Board in connection with their solicitation of stockholder approval of an amendment to the
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`Restated Certificate of Incorporation of Asure Software, Inc. (the “Certificate”). If approved, the
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`proposed amendment would increase the total number of authorized shares of Asure’s capital stock
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`Case 1:20-cv-00607-UNA Document 1 Filed 05/04/20 Page 2 of 9 PageID #: 2
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`from 23,500,000 to 45,500,000 and the number of authorized shares of Asure’s common stock
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`from 22,000,000 to 44,000,000 (the “Certificate Proposal”).
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`2.
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`The Board has solicited stockholder approval of the Certificate Proposal through
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`issuance of a proxy statement filed by Asure with the SEC on April 27, 2020 (the “2020 Proxy”),
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`in which it recommends that stockholders vote in favor of the Certificate Proposal at the annual
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`meeting of stockholders scheduled to be held on May 27, 2020 (the “2020 Annual Meeting”).
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`3.
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`In the 2020 Proxy, the Company claims that approval of the Certificate Proposal
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`“requires the affirmative vote of the shares which are present or represented by proxy at the Annual
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`Meeting.”
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`4.
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`This assertion is wrong. The Delaware General Corporation Law (“DGCL”)
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`specifies a statutory standard for amendments to corporate charters like that contemplated by the
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`Certificate Proposal, to wit: “a majority of the outstanding stock entitled to vote thereon”. 8 Del.
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`C. § 242(b)(1) (“Section 242(b)(1)”). A corporation may adopt a higher voting standard. See 8
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`Del. C. § 102(b)(4) (providing that a certificate may contain a provision “requiring for any
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`corporate action, the vote of a larger portion of the stock . . . than is required by this chapter”).
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`However, nothing in the DGCL authorizes a corporation to adopt a lower voting standard.
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`5.
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`Because the disclosure in the Proxy concerning the threshold for approval of the
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`Certificate Proposal is at odds with the standard specified in the DGCL for stockholder approval
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`of amendments to corporate charters, the Proxy is materially false and misleading.
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`6.
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`Accordingly, Plaintiff brings this action, through which he seeks injunctive relief,
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`to correct the false and misleading disclosures in the Proxy and afford himself and other
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`stockholders complete and accurate information concerning the voting standard applicable to the
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`Certificate Proposal before Asure stockholders vote thereon.
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`JURISDICTION AND VENUE
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`7.
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`This Court has jurisdiction over the subject matter of this action pursuant to 28
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`U.S.C. § 1331 and § 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §
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`78aa].
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`8.
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`Personal jurisdiction exists over each Defendant because each Defendant either
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`conducts business in or maintains operations in this District or is an individual who is either present
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`in this District for jurisdictional purposes or has sufficient minimum contacts with this District as
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`to render the exercise of jurisdiction over each Defendant by this Court permissible under
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`traditional notions of fair play and substantial justice.
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`9.
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`Venue is proper because many of the acts and conduct complained of herein
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`occurred in this District, Asure is incorporated in this District, and the Director Defendants are
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`Asure directors.
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`10.
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`This Court has supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a) over all
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`other claims that are so related to claims in the action within such original jurisdiction that they
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`form part of the same case or controversy under Article III of the United States Constitution. This
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`action is not a collusive action designed to confer jurisdiction on a court of the United States that
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`it would not otherwise have.
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`I.
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`PLAINTIFF
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`PARTIES
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`11.
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`Plaintiff is, and has continuously been, an Asure stockholder at all relevant times,
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`and is entitled to vote at the 2020 Annual Meeting.
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`II. DEFENDANTS
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`12.
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`Nominal Defendant Asure is a Delaware corporation which maintains its principal
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`executive offices at 3700 N Capital of TX Hwy, Suite 350, Austin, Texas 78746.
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`13.
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`Defendant David Sandberg has been an Asure director since 2009. Sandberg
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`currently serves as Chairman of the Board.
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`14.
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`Defendant W. Carl Drew has been an Asure director since the Board increased its
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`size on April 1, 2020.
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`15.
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`16.
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`17.
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`18.
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`19.
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`Defendant Daniel Gill has been an Asure director since 2017.
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`Defendant Patrick Goepel has been an Asure director since 2009.
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`Defendant Charles Lathrop, Jr. has been an Asure director since 2019.
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`Defendant Bradford Oberwager has been an Asure director since 2018.
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`Defendant Bjorn Reynolds has been an Asure director since the Board increased its
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`size on April 1, 2020.
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`FURTHER SUBSTANTIVE ALLEGATIONS
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`20.
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`Asure was founded in 1985 and organized under the laws of Delaware in 1989. In
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`its most recent annual report, the Company described itself as “a leading provider of cloud-based
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`Human Capital Management . . . software and services”.
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`21.
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`The present iteration of Asure’s Certificate authorizes up to 23,500,000 shares of
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`capital stock, comprising 22,000,000 shares of common stock and 1,500,000 shares of preferred
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`stock. As of April 22, 2020, 15,743,199 shares of the Company’s common stock were outstanding,
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`net of 384,159 treasury shares, and no shares of preferred stock were outstanding.
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`22.
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`Of the remaining pool of authorized common stock, (i) 1,214,647 shares of
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`common stock were reserved for reserved stock units and issuance upon exercise of outstanding
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`stock options, (ii) 1,898,555 shares of common stock were reserved for future issuance under the
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`Company’s equity incentive plan, and (iii) 300,605 shares of common stock were available for
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`future issuance under our Asure’s Amended Purchase Plan. Accordingly, as of April 22, 2020,
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`there were 2,458,835 shares of common stock unreserved and available for future issuance.
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`23.
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`Through the Proxy, the Board has solicited shareholders to approve the Certificate
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`Proposal to increase the number of authorized shares of common stock:
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`We are focused on growing our customer base as well as adding complimentary
`products to increase our recurring revenue. Increasing the number of authorized
`shares will enable us to have sufficient shares for our foreseeable future growth
`plans, including any potential financings, equity offerings, strategic acquisition
`opportunities, the continued issuance of equity awards to recruit, retain and
`motivate key employees without spending a large amount of cash, and for other
`proper corporate purposes. From time to time, we evaluate and engage in
`discussions relating to possible opportunities for raising additional capital or
`entering into other transactions that may involve the issuance of additional shares
`of common stock.
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`(Proxy at 12).
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`24.
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`In soliciting stockholder approval of the Certificate Proposal, Defendants misstated
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`the threshold of affirmative votes necessary for approval of the Certificate Proposal:
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`The proposal to approve an amendment to our Restated Certificate of Incorporation
`requires the affirmative vote of the shares which are present or represented by proxy
`at the Annual Meeting. Each of the remaining proposals must be approved by a
`majority of the shares of common stock present in person or represented by proxy
`at the Annual Meeting and voting thereon, including our proposal to approve an
`amendment to our Restated Certificate of Incorporation.
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` (Id. at 2 (setting forth the “Incorrect Standard”) (emphasis added)).
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`25.
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`The actual, statutory standard is specified by the DGCL. Section 242(b)(1) requires
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`that, excepting the changing of a corporation’s name or deletion of vestigial or ministerial
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`language, a higher threshold must be satisfied:
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`At the meeting a vote of the stockholders entitled to vote thereon shall be taken for
`and against any proposed amendment that requires adoption by stockholders. If . .
`. a majority of the outstanding stock entitled to vote thereon . . . has been voted in
`favor of the amendment, a certificate setting forth the amendment and certifying
`that such amendment has been duly adopted in accordance with this section shall
`be executed, acknowledged and filed and shall become effective in accordance with
`§ 103 of this title.
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`((Emphasis added); see generally Third Amended and Restated Bylaws of Asure Software, Inc. §
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`7 (“Except as otherwise required by statute, . . . any matters, other than the election of directors,
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`coming before any meeting of the stockholders shall be decided by the vote of the holders of a
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`majority of the shares of capital stock of the Corporation present in person or by proxy at such
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`meeting and voting thereon, a quorum being present.” (emphasis added))).
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`26.
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`Plaintiff and the Company’s stockholders have not been accurately apprised of the
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`applicable statutory standard that must be satisfied for the Certificate Proposal to carry.
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`Stockholders are entitled to disclosure of this material fact. Absent such disclosure, they will be
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`unable to cast a fully informed vote on the Certificate Proposal.
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`27.
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`The Board authorized the dissemination of the Proxy, which sets forth an Incorrect
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`Standard which conflicts with Section 242(b)(1), and has thereby taken action at direct odds with
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`the DGCL. Stockholders’ voting rights are at imminent risk of being compromised through the
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`Board’s disclosure of the Incorrect Standard and not the standard specified by Section 242(b)(1).
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`CLAIMS FOR RELIEF
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`COUNT I
`Violations of Section 14(a) of the Exchange Act and Rule 14a-9 Promulgated Thereunder
`(Against All Defendants)
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`28.
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`29.
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`Plaintiff realleges each allegation pleaded above.
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`The Director Defendants disseminated the false and misleading Proxy, which
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`contained statements that, in violation of Section 14(a) of the Exchange Act and Rule 14a-9, in
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`light of the circumstances under which they were made, improperly disclosed the Incorrect
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`Standard. Asure is liable as the issuer of these statements.
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`30.
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`The Proxy was prepared, reviewed, and/or disseminated by the Director
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`Defendants, who were aware of the information set forth therein. By virtue of their positions
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`within the Company, the Director Defendants had a duty to disclose accurate information in the
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`Proxy.
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`31.
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`The Director Defendants were at least negligent in filing the Proxy with the
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`materially false and misleading Incorrect Standard.
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`32.
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`The omission of the correct, DGCL standard and inclusion of the false and
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`misleading Incorrect Standard in the Proxy are material in that a reasonable stockholder will
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`consider them important in deciding how to vote on the Certificate Proposal. In addition, a
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`reasonable investor will view a full and accurate disclosure as significantly altering the total mix
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`of information made available in the Proxy and in other information reasonably available to
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`stockholders.
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`33.
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`The Proxy is an essential link in causing Plaintiff and the Company’s stockholders
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`to approve the Certificate Proposal.
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`34.
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`By reason of the foregoing, defendants violated Section 14(a) of the Exchange Act
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`and Rule 14a-9 promulgated thereunder.
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`35.
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`Because of the false and misleading statements in the Proxy, Plaintiff and the
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`stockholders are threatened with irreparable harm.
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`COUNT II
`BREACH OF FIDUCIARY DUTY
`(against the Director Defendants)
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`Plaintiff realleges each allegation pleaded above.
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`The Director Defendants owe fiduciary duties to Asure stockholders, including the
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`36.
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`37.
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`duties of care, disclosure, good faith, and loyalty.
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`38.
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`By virtue of their positions as directors of Asure and/or their exercise of control
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`and ownership over the business and corporate affairs of the Company, the Director Defendants
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`have, and at all relevant times during their respective tenures on the Board had, the power to control
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`and influence and did control and influence and cause the Company to engage in the practices
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`complained of herein. Each Director Defendant was required to cause the Company to comply
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`with Delaware law when issuing disclosures.
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`39.
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`The Director Defendants breached their fiduciary duties by issuing the Proxy,
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`which contains the materially false Incorrect Standard, and thereby denying Plaintiff and the
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`stockholders full and accurate information about the Certificate Proposal.
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`40.
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`As a result of these actions of the Director Defendants, Plaintiff and the
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`stockholders have been and will be injured.
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`41.
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`Plaintiff has no adequate remedy at law.
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`COUNT III
`DECLARATORY RELIEF
`(against All Defendants)
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`42.
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`43.
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`Plaintiff incorporates by reference and realleges each allegation set forth above.
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`The facts and circumstances pleaded herein have given rise to an actual controversy
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`which currently exists between Plaintiff, on one hand, and Defendants, on the other hand,
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`concerning their respective rights and duties under Delaware law.
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`44.
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`By improperly disclosing the Incorrect Standard and failing to disclose the
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`applicable standard under Section 242(b)(1) of the DGCL, Defendants have denied Plaintiff and
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`the stockholders full and accurate disclosure of information material to their vote on the Certificate
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`Proposal.
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`45.
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`Plaintiff desires a judicial determination and declaration that the Proxy is false and
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`misleading.
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`46.
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`A judicial declaration is necessary and appropriate at this time under the
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`circumstances so that Plaintiff and the stockholders will receive full and accurate disclosures
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`concerning the Certificate Proposal prior to the stockholder vote set to take place at the Annual
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`Meeting.
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff requests entry of an order:
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`A. Declaring that the description of the Incorrect Standard in the Proxy is false and
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`misleading;
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`B. Enjoining the stockholder vote on the Certificate Proposal until such time as Defendants
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`have corrected the Incorrect Standard and otherwise made full disclosure of all information
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`material to stockholders’ vote on the Certificate Proposal;
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`C. Finding the Director Defendants liable for breaching their fiduciary duties;
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`D. Awarding Plaintiff the costs and disbursements of this action, including attorneys’,
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`accountants’, and experts’ fees; and
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`E. Awarding such other and further relief as is just and equitable.
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`Dated: May 4, 2020
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`OF COUNSEL:
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`FIELDS KUPKA & SHUKUROV LLP
`William J. Fields
`Christopher J. Kupka
`1370 Broadway, 5th Floor – #5100
`New York, New York 10018
`(T) 212.231.1500
`(F) 646.851.0076
`wfields@fksfirm.com
`ckupka@fksfirm.com
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`Respectfully submitted,
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`FARNAN LLP
`
`/s/ Michael J. Farnan
`Brian E. Farnan (Bar No. 4089)
`Michael J. Farnan (Bar No. 5165)
`919 N. Market St., 12th Floor
`Wilmington, DE 19801
`(302) 777-0300
`bfarnan@farnanlaw.com
`mfarnan@farnanlaw.com
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`Attorneys for Plaintiff
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