Exhibit 10.4
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is made as of the ___ day
of September, 1997 (the "Effective Date"), between AURA SYSTEMS, INC., a
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Delaware corporation ("Aura"), and XXXXXX, INC., a Delaware corporation
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("XxxXxx").
RECITALS:
A. Aura is an existing corporation duly organized and in good standing
under the laws of the State of Delaware with its principal executive offices
located in El Segundo, California.
X. XxxXxx is an existing corporation duly organized and in good standing
under the laws of the State of Delaware with its principal executive offices
located in Westlake Village, California.
C. Each of the parties to this Agreement has obtained all necessary
corporate approvals for the execution and delivery of this Agreement.
D. Each of the parties to this Agreement intend to conduct their
relationship hereunder on an arm's length basis.
E. Aura currently owns more than ninety percent (90%) of the outstanding
common stock of XxxXxx. XxxXxx is currently considering an initial public
offering (the "IPO") of its securities, including approximately 1.7 million
shares of its common stock, $0.001 par value per share (the "Common Stock").
F. In connection with the execution and delivery of this Agreement, Aura
and XxxXxx have entered into (1) a Common Stock Redemption Option Agreement of
even date herewith (the "Redemption Option Agreement"), (2) a Tax Sharing
Agreement of even date herewith (the "Tax Sharing Agreement"), (3) a Corporate
Services Agreement of even date herewith (the "Services Agreement"), (4) a
Registration Rights Agreement of even date herewith (the "Aura Rights
Agreement") and (5) a Sublease Agreement of even date herewith (the "Sublease").
The Redemption Option Agreement, Tax Sharing Agreement, Services Agreement, Aura
Rights Agreement and Sublease are herein collectively referred to as the
"Related Agreements."
G. Noncompetition and Grant of License. In connection with the IPO, Aura
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and XxxXxx have agreed that Aura will not compete with XxxXxx in certain
businesses and that Aura will grant to XxxXxx a license on certain products and
technology pursuant to the terms hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of their
mutual
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promises and obligations herein contained, intending to be legally bound, the
parties do hereby agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Affiliate" means any entity as to which Aura shall control more than
fifty percent (50%) of the outstanding voting power for the election of
directors (or similar officials) of such entity, other than XxxXxx.
1.2 "Aura" shall mean Aura and all corporations, partnerships, joint
ventures, associations and other entities (other than XxxXxx) in which Aura
beneficially owns (directly or indirectly) fifty percent (50%) or more of the
outstanding voting stock, voting power or similar voting interests.
1.3 "XxxXxx" shall mean XxxXxx and all corporations, partnerships, joint
ventures, associations and other entities in which XxxXxx beneficially owns
(directly or indirectly) fifty percent (50%) or more of the outstanding voting
stock, voting power or similar voting interests.
1.4 "PC Communication Products Business" shall mean the development,
design, manufacture, marketing and sale of personal computer communication
products including, without limitation, external and internal data/fax and voice
modems, ISDN modems, cable modems, ADSL modems and Internet communication
appliances.
1.5 "PC Multimedia Products Business" shall mean the development, design,
manufacture, marketing and sales of multimedia products for the personal
computer market including, without limitation, add-in subsystems, upgrade kits
and Internet access kits that incorporate one or more components including CD-
ROM drives, speakers, soundcards, modems, microphones and other telephony and
sound solutions, including DVD CDR (read/write) and CDR-MPEG (video encoding and
decoding) drives and 3-D graphics cards.
1.6 "Related Entities" means any entity as to which XxxXxx shall control
more than fifty percent (50%) of the outstanding voting power for the election
of directors (or similar officials) of such entity.
ARTICLE 2 - NONCOMPETITION
2.1 Noncompetition by Aura. In anticipation that XxxXxx will cease to be
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an over ninety percent (90%) owned subsidiary of Aura, but that Aura will remain
a significant stockholder of XxxXxx, Xxxx covenants and agrees that for the term
of this Agreement, neither Aura nor any Affiliate will directly or indirectly
compete with XxxXxx in the PC Communication Product Business or the PC
Multimedia Products Business in any jurisdiction in any country worldwide. The
parties hereby acknowledge and agree that the time and scope of the covenants
set forth in this Section are reasonable in light of the nature, business,
operations and prospects of the PC Communication Products Business or the PC
Multimedia Products Business.
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2.2 Scope of Businesses. The determination as to the scope of the PC
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Communication Products Business and the PC Multimedia Products Business shall be
mutually agreed upon by the parties. Absent such mutual agreement, such
determination shall be settled pursuant to the provisions of Article 5.
ARTICLE 3 - LICENSE
3.1 License. Aura hereby grants to XxxXxx and XxxXxx hereby accepts an
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exclusive, fully paid, royalty free, worldwide license to make, use or sell any
technology or products developed or offered by Aura during the term of this
Agreement, which technology or products are within the scope of the PC
Communication Products Business or the PC Multimedia Products Business (the
"License").
3.2 Irrevocability of License. The License granted in Section 3.1 shall
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be irrevocable during the term of this Agreement.
ARTICLE 4 - TERM AND TERMINATION
4.1 Term. The term of this Agreement shall commence on the Effective Date
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and shall continue for three (3) years thereafter, unless terminated earlier
pursuant to Section 4.2 or extended by the mutual agreement of the parties.
4.2 Termination. Either party shall have the right to terminate this
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Agreement upon the occurrence of any of the following events:
(a) A breach of this Agreement by Aura or any of its Affiliates that is
not cured within thirty (30) days after receipt of written notice of such breach
from XxxXxx; or
(b) Aura ceases to beneficially own Common Stock representing at least
twenty percent (20%) of the outstanding shares of Common Stock of XxxXxx.
ARTICLE 5 - RESOLUTION OF DISPUTES
5.1 Arbitration. Any controversy or claim between Aura and XxxXxx arising
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out of or relating to this Agreement or any agreements or instruments relating
hereto or delivered in connection herewith, will, at the request of any party be
determined by arbitration conducted in Los Angeles, California.
(a) The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association. The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether an issue
is arbitrable shall be determined by the arbitrator(s). The award rendered by
the arbitrator(s) shall set forth findings of facts and conclusions of law and
shall be final, and the judgment may be entered in any court having jurisdiction
thereof. A failure by the arbitrator(s) to make findings of fact and conclusions
of law shall be
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grounds for overturning the award. The institution and maintenance of an action
for judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(b) In any arbitration proceeding, the arbitrator(s) is (are) authorized
to apportion costs and expenses, including investigation, legal and other
expenses, which may include, if applicable, a reasonable estimate of allocated
costs and expenses of in-house legal counsel and legal staff. Such costs and
expenses are to be awarded only after the conclusion of the arbitration and will
not be advanced during the course of such arbitration.
ARTICLE 6 - MISCELLANEOUS PROVISIONS
6.1 Confidentiality. Each of the parties hereto further agrees and
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warrants that, during and after the term of this Agreement, neither Aura nor any
of its Affiliates nor NewCom nor any Related Entities, will at any time,
directly or indirectly, except as may be required by law, divulge, furnish or
make accessible to anyone, or appropriate to its own use, or to the use of any
third party, any knowledge or information with respect to secret, confidential,
or proprietary information concerning the PC Communication Products Business or
the PC Multimedia Products Business.
6.2 Remedies for Breach. Both parties recognize that any breach of this
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Agreement hereof at any time could result in irreparable damage to XxxXxx in an
amount difficult to ascertain. Accordingly, in addition to any other relief to
which XxxXxx may be entitled, XxxXxx shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction,
either in law or in equity, to obtain damages for such breach of this Agreement,
to enforce the specific performance of the terms and conditions of this
Agreement by Aura or an Affiliate.
6.3 Several Promises. The parties hereto intend that the covenants set
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forth in Section 2.1 hereof shall be construed as a series of separate promises,
each promise for each jurisdiction to which this Agreement may apply. Except
for such geographic coverage, each such separate promise shall be deemed
identical in terms. It is the desire and intent of the parties that the
provisions of this Agreement shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. If any particular provisions or portion of this
Agreement shall be adjudicated to be invalid or unenforceable by a court of
competent jurisdiction, this Agreement shall be deemed amended to delete
therefrom such provision or portion adjudicated to be invalid or unenforceable,
such amendment to apply only with respect to the operation of this paragraph in
the particular jurisdiction in which such adjudication is made.
6.4 Governing Law. This Agreement shall be governed by and construed
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under the laws of the State of California without regard to principles of
conflicts of laws.
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6.5 Notices. Any notice permitted or required by this Agreement shall be
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deemed given when sent by personal service, by certified or registered mail
return receipt requested, postage prepaid, by facsimile transmission or by
overnight delivery by a nationally recognized courier and addressed as follows:
If to XxxXxx:
President and Chief Executive Officer
00000 Xxx Xxxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
If to Aura:
President or Chief Executive Officer
0000 Xxxxxx Xxxxxx
Xx Xxxxxxx, XX 00000
Fax: (000) 000-0000
6.6 Counterparts. This Agreement may be executed in two or more
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counterparts, each of which, when executed by both parties to this Agreement,
shall be deemed to be an original, and all of which counterparts together shall
constitute one and the same instrument.
6.7 Entire Agreement. This Agreement constitutes the entire agreement of
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the parties with respect to its subject matter, superseding all prior oral and
written communications, proposals, negotiations, representations,
understandings, courses of dealing, agreements, contracts, and the like between
the parties.
6.8 Amendments. This Agreement may be changed, amended, modified, or
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rescinded only by an instrument in writing signed by the party against which
enforcement of such change, amendment, modification or rescission is sought.
6.9 Waivers. The provisions of this Agreement may be waived only by a
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written instrument executed by the party so waiving. Except as expressly set
forth herein, the failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect such
party's right at a later time to enforce the same. No waiver by any party of
any condition, or breach of any provision of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of any other condition
or of the breach of any other provision of this Agreement.
6.10 Relationship. Nothing in this Agreement shall be deemed to create a
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partnership, joint venture or agency relationship between the parties. Both
parties are independent contractors and neither party is to be considered the
agent or legal representative of the other for any purpose whatsoever.
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6.11 Successors and Assigns. This Agreement shall bind and inure to the
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benefit of the parties and their respective successors and assigns, except that
no obligation under this Agreement may be delegated, nor may this Agreement be
assigned, without the prior written consent of the other party. Any such
purported assignment of this Agreement without the prior written consent of the
other party shall be void and without effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
AURA SYSTEMS, INC.
By______________________________
Its_____________________________
XXXXXX, INC.
By______________________________
Its_____________________________
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