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Exhibit 3.2
SHAREHOLDERS' VOTING AGREEMENT
THIS SHAREHOLDERS' VOTING AGREEMENT (the "Agreement") is dated August 31,
1997 but is intended by the parties to be effective as of January 1, 1997, among
Scottsdale Technologies-I, Ltd., a Delaware limited partnership (the
"Partnership"), WO Consulting, Inc., a Delaware corporation (the "Company"),
Sound Industries, Ltd., a Utah corporation ("Sound") and the individuals whose
names appear on the signature page hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Company has an authorized capitalization of 6,000,000 shares
of capital stock, par value $.01 per share consisting of 6,000,000 shares of
common stock (the "Company Common Stock").
WHEREAS, the Company has issued to the Partnership that certain 12% Senior
Convertible Promissory Note payable to the Partnership (as amended, supplemented
or restated the "Note") and has entered into that certain Note and Warrant
Purchase Agreement dated as of the date hereof (the "Note Purchase Agreement")
by and between the Company and the Partnership, a condition of which is the
execution of this Agreement by the Company and the Shareholders;
WHEREAS, the Company has entered into that certain Plan and Agreement of
Reorganization (the "Reorganization Agreement") with Sound, Sound Acquisition
Corp., a Utah corporation (the "Subsidiary"), Xxxxxx X. Xxxxx, the Partnership,
Xxxx X. Xxxxxxxxx and Scottsdale Technologies, Inc., a Delaware corporation,
pursuant to which the Company will merge with the Subsidiary, and the Company
will be the surviving corporation of such merger and a wholly-owned subsidiary
of Sound;
WHEREAS, Sound has an authorized capitalization of 50,000,000 shares of
capital stock, par value $.001 per share consisting of 50,000,000 shares of
common stock (the "Sound Common Stock");
WHEREAS, the Shareholders have determined that their execution, delivery
and performance of this Agreement directly benefit and are in the best interest
of the Company, Sound and the Shareholders and each of them desires to promote
their mutual interests and benefits by imposing certain restrictions,
limitations and obligations with respect to the voting of the shares of Company
Common Stock and Sound Common Stock now owned or hereafter acquired by them and
with respect to certain other matters pertaining to the Company, Sound and the
Partnership;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties herein contained, and for other
valuable consideration, the receipt
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and sufficiency of which are hereby acknowledged by the parties here-to, the
Company, Sound and the Shareholders hereby agree as follows:
ARTICLE I.
VOTING AGREEMENT
1.01 Nomination of Certain Directors.
(a) The Bylaws of the Company provide that the Board of Directors of
the Company shall consist of at least one (1) but no more than seven (7)
members, which number shall be fixed by the Board of Directors, but shall never
be less than one (1), provided, however, that no decrease shall effect the
shortening of the term of any incumbent Director.
(b) The Bylaws of Sound provide that the Board of Directors of Sound
shall consist of at least three (3) but no more than seven (7) members, which
number shall be fixed by the Board of Directors, but shall never be less than
one (1), provided, however, that no decrease shall effect the shortening of the
term of any incumbent Director.
(c) During the term of this Agreement, the Company, Sound and
Shareholders covenant and agree that at all times the Board of Directors of the
Company and Sound shall each consist of five (5) members, three (3) of which
shall be designated by the Partnership pursuant to Sections 1.02 and 1.03 hereof
unless the Company or Sound has suffered an Event of Default pursuant to the
terms of the Note Purchase Agreement, in which case the Board of Directors of
both the Company and Sound shall consist of seven (7) members, five (5) of which
shall be designated by the Partnership pursuant to Sections 1.02 and 1.03
hereof.
1.02 Nomination of Directors. The Company and Sound, on each occasion at
which directors of the Company or Sound are elected by shareholders, shall
nominate for election as directors of the Company or Sound, as the case may be,
such persons designated by the Partnership as provided for in this Section 1.02
or Section 1.03 below. Each of the Company and Sound agrees to solicit from its
shareholders proxies for such nominees and to direct the persons who have been
appointed to act as attorneys-in-fact and proxies by the Company and Sound to
vote all proxies solicited and received by the Company and Sound in favor of
such nominees except for such proxies that specifically indicate to the
contrary. If any director of the Company and Sound designated by the Partnership
shall cease to be a director of the Company or Sound for any reason whatsoever,
the Board of Directors of the Company or Sound, as the case may be, shall
promptly upon the request of the Partnership elect a person designated by the
Partnership to replace such director. If the total number of seats on the Board
of Directors of the Company or Sound is increased at any time, the Board of
Directors of the Company or Sound, as the case may be, shall cause all necessary
action to be taken to elect such number of persons designated by the Partnership
so that at all times after such increase in the number of seats the proportion
of the Partnership's designees to the total number of seats on the Board of
Directors is not decreased by such increase in total number of seats (although
such proportion may increase as a result of such election of additional nominees
of the Partnership).
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1.03 Designation of Candidates by the Partnership. The number of persons
designated by the Partnership that shall be nominated by the Company and Sound
for election as directors at each meeting of shareholders of the Company or
Sound, as the case may be, at which such directors are elected or that shall
otherwise be elected or appointed as director of the Company or Sound shall be
as follows: (i) so long as the Partnership and/or any Affiliated Persons (as
defined in Section 4.01 below) of the Partnership hold all or any portion of the
Note, then the number of nominees the Partnership shall be entitled to designate
under the terms of this Agreement shall be three (3); except (ii) following such
time as the Company or Sound has suffered an Event of Default under the terms of
the Note and until such default is cured pursuant to the terms of the Note, the
Partnership shall be entitled to designate five (5) nominees (out of a total of
seven (7) directors).
1.04 Committees of the Board of Directors. The Company and Sound shall at
all times include at least two of the Partnership's designees (the identity of
which shall be selected by the Partnership) on each committee of the Board of
Directors and shall fill vacancies caused by such nominees in the manner set
forth in Section 1.02 with respect to vacancies filled by the Board of Directors
of the Company or Sound, as the case may be. It is agreed that each committee of
the Board of Directors will initially consist of three members. In the event
that the number of members of any committee of the Board of Directors of the
Company or Sound is increased, the Board of Directors of the Company or Sound,
as the case may be, shall cause all necessary action to be taken to appoint an
additional director, if any, designated by the Partnership to such committee if
necessary to prevent the proportion of the Partnership's designees on such
committee from falling below the proportion of the Partnership's designees on
the Board of Directors as a whole.
1.05 Voting by Shareholders. During the term of this Agreement, the
Shareholders hereby agree to vote their shares of Company Common Stock and Sound
Common Stock held by them in favor of those persons designated by the
Partnership pursuant to the terms hereof on each occasion at which such
directors of the Company or Sound are elected by shareholders and shall not vote
for the removal of any such person.
1.05 Additional Shares. Unless waived in writing by the Partnership, when
and if additional shares of Company Common Stock or Sound Common Stock are
issued to new shareholders in addition to, rather than as transferees of, the
Shareholders, the Company, Sound and the Shareholders shall require that such
new shareholders shall be required to become parties hereto and subject to the
terms hereof. In such event, this Agreement shall be amended in writing and
signed by all shareholders to reflect the same, and the term "Shareholder" as
used herein shall thereafter include such new shareholders.
1.06 Termination of Right to Designate Directors. Notwithstanding anything
herein to the contrary, the covenants set forth in this Article I shall
automatically terminate (a) at the end of the one year period during which the
registration statement to be filed by Sound with the SEC registering the resale
of the Note Shares and Warrant Shares (as such terms are defined in the Note
Purchase Agreement) following the conversion of the Note or exercise of the
Warrants issued pursuant to the Note Purchase Agreement, as applicable, has been
continuously effective
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and Sound has been subject to the reporting requirements under Section 12 of the
Exchange Act or, if earlier, (b) the date on which Sound closes an underwritten
public offering of at least $1,500,000 where the public offering price was at
least $5.00 per share if the terms of such offering permit the Partnership
and/or the partners thereof to sell the Note Shares and Warrant Shares in
connection therewith and the underwriter objects in writing to the right of
Software Funding Corp. and the holders of the Note to select members of the
Board of Directors of Sound and/or the Company.
ARTICLE II.
STANDSTILL AND ANTI-DILUTION PROVISIONS
2.01 Standstill Provision. So long as any amount is outstanding under the
Note, (i) Sound shall not provide any information to or negotiate with any other
party with respect to the merger, acquisition, or sale of all or substantially
all of the assets or the capital stock of Sound or with respect to obtaining any
financing, whether debt or equity, (ii) Sound agrees to notify the Partnership
immediately of any unsolicited acquisition proposals or third-party financing
proposals and provide reasonable detail as to the identity of the proposed
acquiror and the nature of the proposed transaction, and (iii) the Partnership
shall have the right to have a representative present at any presentation made
by a third-party to Sound or its stockholders.
2.02 Anti-Dilution Provision. So long as any amount is outstanding under
the Note, Sound shall not, except to the extent expressly permitted in the Note
Purchase Agreement, issue any equity securities, or any options, warrants or
convertible securities exercisable for or convertible into such equity
securities, of Sound or any subsidiary of Sound, without the mutual consent of
Sound and the Partnership; provided, however, that Sound may issue Sound Common
Stock for not less than $5.00 per share without the consent of the Partnership.
Notwithstanding the foregoing, following the merger of the Company with the
Subsidiary pursuant to the Reorganization Agreement, and at the end of the
ninety day period following the effective date of such merger the Partnership
has not provided the Company and/or Sound with the aggregate, cumulative amount
of $1,200,000 pursuant to the Note Purchase Agreement and the transactions
contemplated thereby, then Sound may, without the consent of the Partnership,
issue shares of Sound Common Stock at $1.50 per share in connection with an
equity financing that raises an amount equal to the difference between
$1,200,000 and the aggregate, cumulative amount actually provided by the
Partnership pursuant to the Note Purchase Agreement and the transactions
contemplated thereby.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.01 Representations and Warranties of Shareholders. Each Shareholder
represents and warrants to all other Shareholders as of the date hereof that,
as to such Shareholder:
(a) the shareholder is the owner of record and beneficially of the
number of shares of Company Common Stock and Sound Common Stock set
forth below the signature of the Shareholder on the signature page
of this agreement;
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(b) the Shareholder has not pledged, hypothecated or granted any
security interest in such shares to any Person other than the
Partnership;
(c) the Shareholder has not granted to any Person any right to purchase
or otherwise acquire any interest in such shares;
(d) the Shareholder owns such shares free and clear of any liens,
claims, options, charges, encumbrances or rights (other than
possible community property rights of a spouse) of other Persons
except the Partnership; and
(e) the Shareholder has the right to enter into this Agreement without
the consent or approval of any other Person.
For purposes of this Agreement, "Person" means a natural person or any legal,
commercial or governmental entity, such as, but not limited to, a business
association, corporation, general partnership, joint venture, limited
partnership, limited liability company, trust or any person acting in a
representative capacity.
ARTICLE IV.
TRANSFERS
4.01 Successors and Assigns; Transfers to Affiliates. The right to
designate persons for nomination as directors of the Company and Sound set forth
in this Agreement shall be personal to the Partnership and shall not inure to
the benefit of any successor, assignee or transferee of the Partnership, except
that the Partnership may distribute the Note to its partners and this Agreement
and the rights and benefits hereunder shall inure to the benefit of such
partners receiving all or any portion of the Note (an "Affiliated Person"). This
Agreement shall be binding upon and, except as otherwise provided in the
preceding sentence, shall inure to the benefit of and be enforceable by and
against the transferees, successors and assigns of the parties hereto. Until the
termination of the covenants set forth in Article I, each of the Shareholders
agrees that he or it will not transfer any shares of Company Common Stock or
Sound Common Stock owned by it to any Person unless such Person agrees to be
bound by the terms of this Agreement to the same extent as if it were the
Shareholder. Except as provided in the next preceding sentence, nothing herein
shall restrict the transfer of such Company Common Stock or Sound Common Stock.
Whenever shares of Company Common Stock or Sound Common Stock or any portion of
the Note have been transferred to a Person or an Affiliated Person, as
applicable, as provided herein and thereafter any designation, consent or other
determination under the terms of this Agreement is required or permitted to be
made by the Partnership or a Shareholder, such designation, consent or other
determination shall be made by the Partnership or such Shareholder so long as
the Partnership or such Shareholder continues to hold the Note or shares of
Company Common Stock or Sound Common Stock, as applicable.
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ARTICLE V.
MISCELLANEOUS
5.01 Notices. All notices, consents, waivers or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been received on the date of confirmed telecopy transmission or personal
delivery, or two (2) business days after the date of deposit with the United
States Postal Service, and shall be sufficiently given if delivered personally,
sent by confirmed telecopy or other confirmed electronic transmission, or sent
by certified mail, return receipt requested, postage prepaid and addressed to
the address set forth next to each party's name on the signature page.
5.02 Specific Performance. Inasmuch as the Partnership has purchased and
held the Note in part in consideration of the provisions herein contained, the
parties acknowledge and agree that irreparable damage would result if this
Agreement were not specifically enforced. Therefore, the rights and obligations
set forth herein shall be enforceable in any court of equity of competent
jurisdiction by decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith.
5.03 Expenses and Attorneys' Fees. In the event that any party hereto
shall find it necessary to resort to litigation to enforce its rights hereunder,
the parties hereto agree that the party prevailing in such litigation shall also
be entitled to recover its reasonable expenses actually incurred in connection
therewith, including reasonable attorneys' fees.
5.04 Governing Law. All provisions of this Agreement shall be construed
according to the laws of the State of Delaware exclusive of any such laws under
which the laws of any other jurisdiction would apply.
5.05 Headings. The headings used in this Agreement are inserted for
convenience only and are not intended to be a part of, nor shall they be used in
interpreting, this Agreement.
5.06 Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement or the
application thereof to any person or circumstance is for any reason and to any
extent in-valid or unenforceable, the remainder of this Agreement and the
application of such provision to the other persons or circumstances will not be
affected thereby, but rather are to be en-forced to the greatest extent
permitted by law.
5.07 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
[SIGNATURE PAGES TO FOLLOW]
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EFFECTIVE as of the date set forth above.
PARTNERSHIP:
Scottsdale Technologies-I, Ltd.
By: Software Funding Corp., its general partner
By: /s/ XXXXXX X. XXXXX
----------------------
Name: XXXXXX X. XXXXX
Title: General Partner
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
COMPANY:
WO Consulting, Inc.
By: /s/ XXXXXX X. XXXXX
----------------------
Name: XXXXXX X. XXXXX
Title: Vice President
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
SOUND:
Sound Industries, Ltd.
By: /s/ XXXXXX X. XXXXX
----------------------
Name: XXXXXX X. XXXXX
Title: Vice President
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
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SHAREHOLDERS:
/s/ XXXX X. XXXXXXXXX
--------------------------
Xxxx X. Xxxxxxxxx
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Number of Shares: 1,648,574
/s/ C. XXXXXXX XXXXXXXX
--------------------------
C. Xxxxxxx XxXxxxxx
Address: 00000 X. Xxxxxxxx Xx.
Xxxxxxxxxx, Xxxxxxx 00000
Number of Shares: 184,175
/s/ XXXXXXX X. XXXXXX
--------------------------
Xxxxxxx X. Xxxxxx
Address: 00000 X. 00xx Xx.
Xxxxxxxxxx, Xxxxxxx 00000
Number of Shares: 134,344
/s/ XXXXXX X. XXXXX
--------------------------
Xxxxxx X. Xxxxx
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Number of Shares: 420,265
/s/ XXXXX X. XXXXXX
--------------------------
Xxxxx X. Xxxxxx
Address: 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Number of Shares: 667,000
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