EXHIBIT 10.25
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT, dated as of December 28, 1998, by
and among AURA SYSTEMS, INC., a Delaware corporation ("Aura"), XXXXXX, INC., a
Delaware corporation (the "Company"), and the holders of Securities (as defined
below) named on the signature pages hereto (the "Original Holders").
W I T N E S S E T H:
WHEREAS, pursuant to the several Subscription Agreements,
each dated as of November 30, 1998, by and between the Company and the Original
Holders (the "subscription Agreements"), the Company issued to the Original
Holders shares (the "Initial Shares") of Common Stock, $.001 par value ("the
Common Stock"), of the Company and in connection therewith the Company issued
certain Repricing Rights (as defined in the Subscription Agreements) and Common
Stock Purchase Warrants (the "Initial Warrants") to the Original Holders;
WHEREAS, pursuant to the several Note Purchase Agreements,
each dated as of December 28, 1998, by and between the Company and the Original
Holders (the "Note Purchase Agreements"), the Company has agreed, upon the terms
and conditions of the Note Purchase Agreements, to issue to the Original Holders
Secured Promissory Notes (the "Notes") of the Company and in connection
therewith the Company has agreed to issue additional Common Stock Purchase
Warrants (the "Additional Warrants") to the Original Holders; and
WHEREAS, Aura beneficially owns a majority of the outstanding
Common Stock of the Company and is a party to the Parent Company Agreement,
dated as of November 30, 1998, with the Company and the Original Holders; and
WHEREAS, as a condition precedent to the respective
obligations of the Original Holders to purchase the Notes and acquire the
Additional Warrants, the Original Holders require the execution and delivery of
this Agreement by Aura and the Company;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. (a) The following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Aura SEC Reports" means (1) Aura's Annual Report on Form
10-K for the fiscal year ended February 28, 1998, (2) Aura's Quarterly Reports
on Form 10-Q for the fiscal quarters ended May 31, 1998 and August 31, 1998, and
(3) Aura's definitive proxy statement for its 1998 Annual Meeting of
Stockholders, in each case as filed with the SEC.
"Holders" means the Original Holders and each other holder of
Repricing Rights and Securities.
"Securities" means the Initial Shares, Repricing Shares, the
Aura Repricing Shares, the Notes, the Initial Warrants and the Additional
Warrants.
(b) Capitalized terms defined in the introductory paragraph
or the recitals to this Agreement or in the amendments to the Subscription
Agreements and the Registration Rights Agreements made hereby shall have the
respective meanings therein provided. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth in the
Note Purchase Agreements and, if not defined therein, in the Subscription
Agreements.
2. Amendment of Subscription Agreements. Each of the
respective Subscription Agreements is hereby amended as follows:
(a) Section 1 is amended by adding the following new definitions:
"Amendment Agreement" means the Amendment Agreement, dated as of
December 28, 1998, between and among the Company, Aura, the Buyer and the Other
Buyers.
"Aura Common Stock" means the Common Stock, $.005 par value, of
Aura.
"Aura Repricing Rate" means the number of Aura Repricing Shares
issuable upon exercise of each Repricing Right pursuant to Section 3(I) equal to
(a) the product of (1) the Repricing Rate and (2) the Average Market Price of
the Common Stock on the Exercise Date divided by (b) the Average Market Price of
the Aura Common Stock on such Exercise Date (as if, for purposes of this clause
(b), the term "Average Market Price" referred to the Aura Common Stock).
"Aura Repricing Shares" means shares of Aura Common Stock issued or
issuable to a holder of Repricing Rights upon the exercise thereof.
"Cash Consideration" means the product of (a) the number of Aura
Repricing Shares issuable upon each exercise of Repricing Rights pursuant to
Section 3(l) and (b) the then current par value of the Aura Common Stock (which
is $.005 as of December 28, 1998).
"Cash Consideration Reserve" means the funds received by Aura from the
Buyer from time to time pursuant to Section 3(l), plus accrued interest thereon,
which are held in trust by Aura from the account of the Buyer unless and until
paid to Aura as Cash Consideration upon exercise of Repricing Rights for Aura
Repricing Shares.
"Note Purchase Agreements" means the several Note Purchase Agreements,
dated as of December 28, 1998, by and between the Company and each of the Buyer
and the Other Buyers.
"Notes" means the Secured Promissory Notes of the Company in the
aggregate principal amount of $1,000,000 issued to the Buyer and the Other
Buyers pursuant to the Note Purchase Agreements.
(b) Section 3 is amended to add a new Section 3(I) at the
end thereof as follows:
(I) Aura Repricing Shares. (1) Notwithstanding anything to the contrary
in this Agreement, the Buyer may elect in its sole discretion to receive shares
of Aura Common Stock in lieu of receiving shares of Common Stock of the Company
upon exercise of Repricing Rights pursuant to this Section 3. On each Exercise
Date, the Buyer shall be entitled to exercise any whole number of Repricing
Rights for fully paid and nonassessable Aura Repricing Shares at the Aura
Repricing Rate if upon each exercise the Buyer pays Aura, or has previously
deposited in the Cash Consideration Reserve for Aura, the applicable Cash
Consideration. Upon receipt of such Exercise Notice and such Cash Consideration,
Aura and the Company shall be obligated to deliver the certificates for the Aura
Common Stock representing such Aura Repricing Shares as and when required under
this Agreement.
(2) In order to make funds available to Aura to pay the Cash
Consideration if and when required, at the closing under the Note Purchase
Agreement the Buyer will deliver to Aura the sum of $1,000.00 to be held in
trust by Aura as the Cash Consideration Reserve. Upon each exercise of Repricing
Rights for Aura Repricing Shares, the Buyer hereby authorizes and directs Aura
to deduct from its Cash Consideration Reserve the Cash Consideration due with
respect to such exercise. Such deduction shall constitute payment in full to
Aura of the applicable Cash Consideration. The Buyer may from time to time
deposit additional funds in the Cash Consideration Reserve to provide adequate
funds to cover future exercises of Repricing Rights. Upon request, Aura will
provide the Buyer with a statement of the balance held in such Cash
Consideration Reserve. Aura shall return the balance of the Cash Consideration
Reserve, plus accrued interest thereon, to the Buyer within ten Business Days of
receiving a request therefor from the Buyer.
(3) To exercise Repricing Rights for full shares of Aura Common Stock
representing Aura Repricing Shares on any Exercise Date, the Buyer shall (A)
transmit by telephone line facsimile (or otherwise deliver), for receipt on or
prior to 11:59 p.m. Eastern Time, on such date, a copy of a fully executed
Exercise Notice, in the form attached hereto as Exhibit B to the Amendment
Agreements to Aura with a copy to the Company and (B) if there shall be
insufficient fund in the Cash Consideration Reserve, deliver by check, money
order of wire transfer to an account designated by Aura, the Cash Consideration
for such exercise. Upon receipt by Aura of an executed Exercise Notice and
payment of the Cash Consideration, which payment shall be deemed made on the
Exercise Date by reason of Aura's right to deduct the Cash Consideration from
the Cash Consideration Reserve if sufficient funds are available, Aura shall,
within three Trading Days following the Exercise Date, (A) issue and deliver to
the address specified in the Exercise Notice, a certificate, registered in the
name of the Buyer or its designee, for the number of Aura Repricing Shares to
which the holder shall be entitled, or (B) credit such aggregate number of Aura
Repricing Shares to the Buyer's or its designee's account with the Depository
Trust Company as specified in the Exercise Notice. The certificates for any Aura
Repricing Shares issued to the Buyer prior to the SEC Effective Date shall bear
the restrictive legend specified in Section 6(b). On and after the SEC Effective
Date all Aura Repricing Shares issued to or upon the order of the Buyer shall
not bear any restrictive legends or be subject to any stop-transfer
restrictions.
(4) The Person or Persons entitled to receive the Aura Repricing Shares
issuable upon an exercise of Repricing Rights shall be treated for all purposes
as the record holder or holders of such shares of Aura Common Stock on the
Exercise Date.
(5) If the Buyer shall have given an Exercise Notice for Aura Repricing
Shares as provided herein, Aura's obligation to issue and deliver the
certificates for Aura Common Stock representing the Aura Repricing Shares shall
be absolute and unconditional, irrespective of any action or inaction by the
Buyer to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to enforce
the same, any failure or delay in the enforcement of any other obligation of
Aura or the Company to the Buyer, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Buyer or any
other Person of any obligation to Aura or the Company or any violation or
alleged violation of law by the Buyer or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of Aura to
the Buyer in connection with the issuance and delivery of Aura Repricing Shares.
The number of Aura Repricing Shares to be issued in connection with a particular
Exercise Date is, absent manifest error, conclusively the number of Aura
Repricing Shares stated in the applicable Exercise Notice. If in connection with
a particular Exercise Date Aura determines that manifest error has been made by
virtue of the computation of Aura Repricing Shares or other information set
forth in the applicable Exercise Notice, Aura shall have the right within one
Trading Day after the Buyer gives such Exercise Notice to notify the Buyer of
such error, which notice shall state the number of Aura Repricing Shares in
dispute, and, notwithstanding such notice from Aura, Aura shall issue to the
Buyer the number of Aura Repricing Shares not in dispute as and when required by
this Agreement. If Aura shall have notified the Buyer of any such manifest
error, and Aura and the Buyer do not agree as to a resolution of such manifest
error on or before the date of such notice by Aura of an error in such Exercise
Notice, Aura shall on the date such notice is given submit the dispute to the
Auditors for determination and shall instruct the Auditors to resolve such
dispute and to notify Aura and the Buyer of their determination, which shall be
binding on all parties, within two Trading Days after such dispute is submitted
to the Auditors. Immediately after receipt of timely notice of the Auditors'
determination (but in any event within four Trading Days after the applicable
Exercise Notice is given to Aura), Aura shall issue to the Buyer any additional
Aura Repricing Shares to which the Buyer is entitled based on the determination
of the Auditors. If the Auditors shall fail to notify Aura of their
determination within four Trading Days after the applicable Exercise Notice is
given to Aura, then Aura shall within four Trading Days after receipt of the
applicable Exercise Notice, issue to the Buyer any additional Aura Repricing
Shares to which the Buyer is entitled based on the applicable Exercise Notice.
Such immediate and prompt action shall be taken by all the parties in order to
assure that there shall be full compliance with Aura's unqualified obligation
that all Aura Repricing Shares issuable upon each Exercise Date be issued and
delivered by the due dates therefor as provided herein.
(6) If within three Trading Days after the Company's receipt of the
Exercise Notice (or such longer period specified in Section 3(l)(5)) Aura shall
for any reason fail to issue a certificate (which shall be free of all
restrictive legends other than those required by Section 6(b)) for the number of
Aura Repricing Shares to which the Buyer is entitled or to credit the Buyer's or
its designee's account with the Depository Trust Company for such number of Aura
Repricing Shares to which the Buyer is entitled upon the Buyer's exercise of the
Repricing Rights, the Buyer shall have the right to rescind such exercise Notice
or, commencing seven Business Days after the Exercise Date, to deliver a copy of
the applicable Exercise Notice to the Repricing Escrow Agent with a notice that
the Buyer is requesting Common Stock in lieu of Aura Common Stock by reason of
Aura's failure to timely deliver Aura Repricing Shares in accordance with this
Section 3(l)(6). Promptly but not later than three Trading Days after its
receipt of such Exercise Notice, the Repricing Escrow Agent shall, in accordance
with the Escrow Agreement, release the Escrow Shares from escrow in the amount
of the Repricing Shares specified in such Exercise Notice and deliver such
shares in accordance with such Exercise Notice. In addition to such right to
receive Escrow Shares and all other available remedies which the Buyer may
pursue hereunder and under applicable law, Aura shall, on a weekly basis, pay as
additional damages (and not as a penalty) to such Buyer for each day after such
third Trading Day that such Aura Repricing Shares or Repricing Shares are not
timely delivered an amount equal to 0.2% of the product of (1) the sum of the
number of Aura Repricing Shares not issued to the Buyer on a timely basis
pursuant to Section 3(c)(2) and to which the Buyer is entitled and (2) the
Closing Price of the Aura Common Stock on such third Trading Day. In addition,
if in connection with such late delivery of Aura Repricing Shares the Closing
Price on the date of delivery is less than the Closing Price on such third
Trading Day when such shares were due, then Aura shall be required to pay the
Buyer, within two Trading Days after such late delivery, an amount equal to the
product of (A) the number of such Aura Repricing Shares and (B) the difference
between such respective Closing Prices. As used in this clause (6), the term
"Closing Price" shall refer to the closing sale price of the Aura Common Stock.
Any failure of the Repricing Escrow Agent to deliver shares to the Buyer shall
not relieve Aura of its obligations under this Section 3(l)(6).
(7) Notwithstanding anything to the contrary in this Agreement, in no
event shall the Buyer be entitled to exercise any Repricing Rights in excess of
that number of Repricing Rights upon exercise of which the sum of (x) the number
of shares of Aura Common Stock beneficially owned by the Buyer and all of its
Aggregated Persons (other than shares of Aura Common Stock deemed beneficially
owned through the ownership of unexercised Repricing Rights and the unexercised
or unconverted portion of any instrument which contains limitation similar to
those set forth in this sentence) and (y) the number of shares of Aura Common
Stock issuable or deliverable upon the exercise of the number of Repricing
Rights with respect to which the determination in this sentence is being made,
would result in beneficial ownership by the Buyer and all Aggregated Persons of
the Buyer of more than 9.9% of the outstanding shares of Aura Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the 1934 Act and Regulation 13D-G
thereunder, except as otherwise provided in clause (x) of the immediately
preceding sentence.
(8) Unless the Stockholder Approval shall have been obtained or waived
by the Nasdaq, Aura shall not be required to issue Aura Repricing Shares to the
extent such issuance would violate the Stockholder Approval Rule.
(d) Section 3(e)(2) is amended to add the following words at
the end of clause (x) thereof after the words "Section 3(g)(2)": "or Section
3(I)(7),. . . "
3. Amendment of Registration Rights Agreements. Each of the
respective Registration Rights Agreements is hereby amended, effective as of the
date of this Agreement, as follows:
(a) Section 1 is amended to add a new definition as follows:
"Note Purchase Agreements" means the several Note Purchase Agreements,
dated as of December 28, 1998, between the Company and each of the Initial
Investor and the Other Buyers.
(b) The term "Warrant Shares" as used in each Registration
Rights Agreement is amended to refer to the shares of Common Stock issuable upon
exercise of (i) the Warrants issued pursuant to the applicable Registration
Rights Agreement and (ii) the Common Stock Purchase Warrants issued in
connection with the applicable Note Purchase Agreement.
(c) For purposes of Section 2(f), the term "Purchase Price"
shall mean for each Investor the sum of (1) the Purchase Price for the Initial
Shares as defined in the applicable Registration Rights Agreement for such
Investor and (2) the Purchase Price for the Note as defined in the applicable
Note Purchase Agreement for such Investor.
4. Representations, Warranties, etc. by Original Holders.
Each of the Original Holders, severally and not jointly, represents and warrants
to, and covenants and agrees with, Aura as follows:
(a) Purchase for Investment. Upon issuance and delivery of
any Aura Repricing Shares, the Original Holder will acquire such Aura Repricing
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof;
(b) Accredited Investor;. The Original Holder is an
"accredited investor" as that term is defined in Rule 501 of the General Rules
and Regulations under the 1933 Act by reason of Rule 501(a)(3);
(c) Reoffers and Resales;. All subsequent offers and sales of
the Aura Repricing Shares by the Original Holder shall be made pursuant to
registration of the Aura Repricing Shares being offered and sold under the 1933
Act or pursuant to an exemption from registration; and
(d) Company Reliance. The Original Holder understands that
the Aura Repricing Shares are being offered to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that Aura is relying upon the truth and accuracy of, and the
Original Holder's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Original Holder set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Original Holder to receive an offer of the Aura Repricing Shares.
5. Aura Representations, Warranties, etc.
Aura represents and warrants to, and covenants and agrees
with, each Original Holder that:
(a) Organization and Authority;. Aura is a corporation duly
organized and validly existing under the laws of Delaware, and has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Aura Registration Rights Agreement and the other
documents and agreements delivered by Aura in connection herewith, and to
consummate the transactions contemplated hereby and thereby. Aura is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of Aura.
(b) Capitalization. The authorized capital stock of Aura
consists of 200,000,000 shares of Common Stock of which 91,181,259 shares of
Aura Common Stock were outstanding on December 27, 1998, all of which are fully
paid and nonassessable. Other than as set forth in the preceding sentence, Aura
does not have outstanding any material amount of securities (or obligations to
issue any such securities) convertible into, exchangeable for or otherwise
entitling the holders thereof to acquire shares of Aura Common Stock, except as
disclosed in the Aura SEC Reports. Aura has duly reserved from its authorized
and unissued shares of Aura Common Stock the full number of shares required for
(a) all options, warrants, convertible securities and other rights to acquire
shares of Aura Common Stock which are outstanding and (b) all shares of Aura
Common Stock and options and other rights to acquire shares of Aura Common Stock
which may be issued or granted under the stock option and similar plans which
have been adopted by Aura.
(c) Concerning the Aura Repricing Shares and the Aura Common
Stock. The Aura Repricing Shares and the Repricing Rights with respect thereto
have been duly authorized. The Aura Repricing Shares when issued in accordance
with this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive or similar rights of any
shareholder of Aura or any other Person to acquire any of the Aura Repricing
Shares. Aura has duly reserved 11,677,487 shares of Common Stock for issuance of
the Aura Repricing Shares and such shares shall remain so reserved. The Aura
Common Stock is listed for trading on the Nasdaq and (1) Aura and the Aura
Common Stock meet the criteria for continued listing and trading on the Nasdaq;
(2) Aura has not been notified since January 1, 1996 by the Nasdaq of any
failure or potential failure to meet the criteria for continued listing and
trading on the Nasdaq and (3) no suspension of trading in the Aura Common Stock
is in effect. Aura knows of no reason that the Aura Repricing Shares will not be
eligible for listing on the Nasdaq.
(d) Information Provided. The information provided by or on
behalf of Aura to the Original Holders in connection with the transactions
contemplated by this Agreement, including, without limitation, the information
contained in the Aura SEC Reports, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, it being understood that, for purposes of this Section 5(d), any
statement contained in such information shall be deemed to be modified or
superseded for purposes of this Section 5(d) to the extent that a statement in
any document included in such information which was prepared or filed with the
SEC on a later date modifies or replaces such statement, whether or not such
later prepared or filed statement so states.
(e) Absence of Certain Changes; Liabilities. Except as
disclosed in the Aura SEC Reports, since February 28, 1998, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or other), results of operations or
prospects of Aura. Except as and to the extent disclosed, reflected or reserved
against in the financial statements of Aura and the notes thereto included in
the Aura SEC Reports, Aura has no material (individually or in the aggregate)
liabilities, debts or obligations (including guaranties) whether accrued,
absolute, contingent or otherwise, and whether due or to become due, to any of
its officers, directors, security holders, or lenders or any of their respective
Affiliates. Subsequent to February 28, 1998, the Company has not incurred any
liabilities, debts or obligations of any nature whatsoever which are
individually or in the aggregate material to the Company other than those
incurred in the ordinary course of its business or disclosed in the Aura SEC
Reports.
(f) SEC Filings. Aura has timely filed all required forms,
reports and other documents required to be filed with the SEC under the 1934
Act. All of such forms, reports and other documents complied, when filed, in all
material respects, with all applicable requirements of the 1933 Act and the 1934
Act.
(g) No Solicitation. No form of general solicitation or
general advertising was used by Aura or, to the best of its knowledge, any other
Person acting on behalf of Aura, in respect of or in connection with the offer
of the Repricing Rights or the Aura Repricing Shares. Neither Aura nor, to its
knowledge, any Person acting on behalf of Aura has, either directly or
indirectly, sold or offered for sale to any Person any of the Aura Repricing
Rights or the Aura Repricing Shares or, within the six months prior to the date
hereof, any other similar security of Aura except as contemplated by this
Agreement; and neither Aura nor any Person authorized to act on its behalf will
sell or offer for sale any shares of Aura Common Stock or other securities, or
solicit any offers to buy any shares of Common Stock or other securities, so as
thereby to cause the issuance of any of the Aura Repricing Shares or the
issuance of the Repricing Rights to be in violation of Section 5 of the 1933
Act.
(h) Certain Issuances of Securities. Aura has not issued any
shares of Aura Common Stock or shares of any series of preferred stock or other
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire shares of Aura Common Stock which are subject to the Stockholder
Approval Rule and which could be integrated with the issuance of Aura Repricing
Shares to the Holders under the Stockholder Approval Rule.
(i) Absence of Rights Agreement. Aura has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Aura Common Stock or a change in control of Aura.
(j) Amendment Agreement. This Agreement has been duly and
validly authorized, executed and delivered by Aura and this Agreement is a valid
and binding obligation of Aura enforceable in Accordance with its term subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
(k) Non-contravention. The execution and delivery by Aura of
this Agreement and consummation by Aura of the transactions contemplated by this
Agreement, do not and will not, with or without the giving of Notice of the
lapse of time, or both (i) result in any violation of any terms of the
Certificate of Incorporation of by-laws of Aura, (ii) conflict with or result in
a breach by Aura or the Company of any of the terms or provisions of, or
constitute a result in a breach by Aura or the Company of any of the terms or
provisions of, or constitute a default under, or result in the modification,
amendment, termination or cancellation of, result in the acceleration of any
obligation of Aura or the Company under, or result in the creation or imposition
of any lien, security interest, charge or encumbrance upon any of the properties
or assets of Aura or the company pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which Aura or the Company is a party
or by which Aura or the Company or any of their respective properties or assets
is bound or affected, or (iii) violate or contravene any applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over Aura of the Company or any of their
respective properties or assets.
(l) Approvals. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the security holders of or lenders
to Aura, or any other third party, is required to be obtained or made by Aura or
the Company for the execution, delivery and performance by Aura and the Company
of this Agreement and by the Company of the Note Purchase Agreements and the
other agreements, transactions and instruments contemplated hereby and thereby.
6. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) Transfer Restrictions. Aura and the Original Holders
acknowledge and agree that (1) except as provided in the Aura Registration
Rights Agreement with respect to the resale of the Aura Repricing Shares, the
Aura Repricing Shares have not been and are not being registered for resale
under the 1933 Act, and the Securities may not be transferred unless (A)
subsequently registered for resale thereunder or (B) the holder shall have
delivered to Aura an opinion of counsel, reasonably satisfactory in form, scope
and substance to Aura, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any resale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any such resale of
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither Aura nor
any other Person is under any obligation to register the Securities (other than
registration of the resale of the Aura Repricing Shares pursuant to the Aura
Registration Rights Agreement) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder (other than pursuant to Section 6(d)
hereof and pursuant to the Aura Registration Rights Agreement).
(b) Restrictive Legends.
(1) Each Original Holder acknowledges and agrees that until
such time as the Aura Repricing Shares have been registered for resale under the
1933 Act as contemplated by the Aura Registration Rights Agreement, the
certificates for the Aura Shares may bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
the certificates for the Aura Repricing Shares):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be resold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act of
1933, as amended, or an opinion of counsel that registration is not required
under said Act.
(2) Once the Registration Statement required to be filed by
Aura pursuant to Section 2 of the Aura Registration Rights Agreement has been
declared effective, thereafter (1) upon request of an Original Holder Aura will
substitute certificates without restrictive legend for certificates for any Aura
Repricing Shares issued prior to the date such Registration Statement is
declared effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days after surrender of such certificates by the Original Holder
and (2) Aura shall not place any restrictive legend on certificates for any Aura
Repricing Shares issued or impose any stop-transfer restriction thereon.
(c) Aura Registration Rights Agreement. On or before the
Closing Date, Aura and each of the Original Holders agree to enter into a
separate Aura Registration Rights Agreement in the form attached hereto as
Exhibit A.
(d) Form D. Aura agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Original Holders promptly after such filing. The Original Holders agree to
cooperate with Aura in connection with such filing and, upon request of Aura, to
provide all information relating to the Original Holders reasonably required for
such filing.
(e) Authorization for Trading; Reporting Status. Within two
Business Days after the Closing Date under the Note Purchase Agreements, Aura
shall file a notification for listing of additional shares with the Nasdaq
relating to the Aura Repricing Shares and on or prior to such date shall provide
evidence of such filing to the Original Holders. So long as the Original Holders
own any of the Aura Repricing Shares or the Repricing Rights, Aura shall file
all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of
the 1934 Act and Aura shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.
(f) Blue Sky Laws. On or before the Closing Date, Aura shall
take such action as and to the extent it shall be necessary or required to
qualify, or to obtain an exemption for the Repricing Rights and the Aura
Repricing Shares for issuance to the Original Holders pursuant to this Agreement
under such of the securities or "blue sky" laws of jurisdictions as shall be
applicable to the issuance to the Original Holders of the Repricing Rights and
the Aura Repricing Shares pursuant to this Agreement. The Company shall furnish
copies of all filings, applications, orders and grants or confirmations of
exemptions relating to such securities or "blue sky" laws on or prior to the
Closing Date under the Note Purchase Agreement.
(g) Exercise Notice. Aura, the Company and the Original
Holders agree that the form of Exercise Notice attached as Annex VI to the
Subscription Agreements is hereby amended and replaced in its entirety by the
form of Exercise Notice annexed hereto as Exhibit B.
(h) Certain Issuances of Securities. Unless Aura obtains the
Stockholder Approval or a waiver thereof from the Nasdaq, Aura will not issue
any shares of Aura Common Stock or shares of any series of preferred stock or
other securities convertible into, exchangeable for, or otherwise entitling the
holder to acquire, shares of Aura Common Stock which would be subject to the
requirements of the Stockholder Approval Rule and which would be integrated with
the issuance of Repricing Rights or Aura Repricing Shares to the Buyer for
purposes of the Stockholder Approval Rule.
7. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
(b) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, all of which
together shall constitute one and the same instrument. A facsimile transmission
of this Agreement bearing a signature on behalf of a party hereto shall be legal
and binding on such party.
(c) Headings, etc. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity of enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge
or termination of any provision of this Agreement nor consent to any departure
by the Holders, Aura or the Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and for
the purpose for which given. No course of dealing between the parties thereto
shall operate as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, or any course of dealings between the parties, shall not
operate as a waiver thereof or any amendment hereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise there of exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be delivered personally (which shall
include telephone line facsimile transmission with answer back confirmation) or
by courier and shall be effective upon receipt, if delivered personally or by
courier, in the case of the Company addressed to the Company at its address
shown in the introductory paragraph of the Subscription Agreements, Attention:
Chief Executive Officer (telephone line facsimile transmission number (818)
597-1002), in the case of Aura addressed to Aura at 0000 Xxxxxx Xxxxxx, Xx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Chief Financial Officer (telephone line
facsimile transmission number (000) 000-0000) or, in the case of each Original
Holder, at its address or telephone line facsimile transmission number shown on
the signature page of this Agreement or, in the case of any Holder who is not an
Original Holder, to such address as such Holder shall have provided in writing
to the Company and Aura for such purpose or, in each such case, such other
address or telephone line facsimile transmission number as a party shall have
provided by notice to the other parties in accordance with this provision.
(h) Assignment. Each Original Holder shall have the right to
assign its rights and obligations under this Agreement to any party to whom it
assigns its rights under its Subscription Agreement, Note Purchase Agreement,
Registration Rights Agreement or Aura Registration Rights Agreement. Each Holder
shall be entitled to the rights and benefits of the Original Holders under this
Agreement.
(i) Survival of Representations and Warranties. The
respective representations, warranties, covenants and agreements of Aura and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of payment
for the Notes pursuant to the Note Purchase Agreements and shall remain in full
force and effect regardless of any investigation made by or on behalf of them or
any Person controlling or advising any of them.
(j) Effect of Amendments; Entire Agreement. Except to the
extent expressly amended hereby, the terms and provisions of the respective
Subscription Agreements and Registration Rights Agreements are hereby confirmed
and shall remain in full force and effect. This Agreement and, as so amended,
the other agreements and instruments contemplated hereby set forth the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, whether written or oral,
with respect thereto. Aura hereby becomes a party to the respective Subscription
Agreements in order to give effect to the provisions of this Agreement.
~
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto by their respective officers or other representatives
thereunto duly authorized as of the date first set forth above.
AURA SYSTEMS, INC.
By: ___________________________
Name:
Title:
XXXXXX, INC.
By:______________________________
Name:
Title:
[ORIGINAL HOLDERS]
By:______________________________
Name:
Title:
Address:
Facsimile No.:
Exhibit A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 28,
1998 (this "Agreement"), is made by and between AURA SYSTEMS, INC., a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Amendment Agreement, dated as
of December 28, 1998, between the Initial Investor, the other investors named
therein, XxxXxx, Inc., a Delaware corporation ("XxxXxx"), and the Company (the
"Amendment Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Amendment Agreement, to issue to the Initial Investor
shares of Common Stock, $.005 par value (the "Common Stock"), of the Company,
from time to time upon the exercise of certain Repricing Rights described in the
Amendment Agreement; and
WHEREAS, to induce the Initial Investor to execute and
deliver the Amendment Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Registrable Securities (as defined below) issuable to the Investors pursuant to
the Subscription Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Computation Date" means, if an event described in Section
2(f)(1) occurs, any of (1) the date which is 30 days after such event occurs, if
any such event is continuing on such date, (2) each date which is 30 days after
a Computation Date, if any such event is continuing on such date, and (3) the
date on which all such events cease to continue.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Initial Registration Amount" means 134% of the number of
Aura Repricing Shares issuable pursuant to the Amendment Agreement assuming (A)
all of the Buyer's Repricing Rights issued at the First Closing were exercised
on the SEC Filing Date (without regard to any limitations on exercise) and (B)
the Average Market Price on the SEC Filing Date was 50% of the lower of (x) the
Average Market Price on the Closing Date and (y) the Average Market Price on the
SEC Filing Date.
"Investor" or "Investors" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
"Nasdaq" means the Nasdaq National Market.
"Other Registration Rights Agreements" means the registration
rights agreements dated the date hereof between the Company and each of the
Other Buyers.
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
"Registrable Securities" means the Aura Repricing Shares.
"Registration Amount" means the sum of (i) the number of Aura
Repricing Shares previously issued pursuant to the Amendment Agreement plus (ii)
the number of Aura Repricing Shares issuable pursuant to all unexercised
Repricing Rights (without regard to limitations on exercise) equal to the
greater of (A) the number of such Aura Repricing Shares issuable as if the
Average Market Price on the date of determination of the Registration Amount was
66.7% of the lower of (x) the Average Market Price on the Closing Date and (y)
the Average Market Price on the SEC Effective Date and (B) the number of such
Aura Repricing Shares issuable based on the Average Market Price on the date of
determination of the Registration Amount.
"Registration Period" means the period from the Closing Date
to the earlier of (i) the date which is two years after the date on which the
last Aura Repricing Shares may be issued to the Investors pursuant to the
Subscription Agreement, (ii) the date on which each Investor may sell all of its
Registrable Securities (including Registrable Securities which may be issued
from time to time) without registration under the Securities Act pursuant to
Rule 144, without restriction on the manner of sale or the volume of securities
which may be sold in any period and without the requirement for the giving of
any notice to, or the making of any filing with, the SEC and (iii) the date on
which the Investors no longer beneficially own any Registrable Securities.
"Registration Statement" means a registration statement of
the Company under the Securities Act, including any amendment thereto.
"Rule 144" means Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit a holder of any securities to sell securities of the Company to the
public without registration under the Securities Act.
"SEC Effective Date" means the date the Registration
Statement is first declared effective by the SEC.
"SEC Filing Date" means the date the Registration Statement
is first filed with the SEC pursuant to Section 2(a).
"Subscription Agreement" means the Subscription Agreement,
dated as of November 30, 1998, between XxxXxx and the Initial Investor.
(b) Capitalized terms defined in the introductory paragraph
or the recitals to this Agreement shall have the respective meanings therein
provided. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Amendment Agreement and, if not
defined therein, in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare, and
not later than January 29, 1999, file with the SEC a Registration Statement on
Form S-3 which, on the date of filing with the SEC, covers the resale by the
Initial Investor or its assignees of a number of shares of Common Stock at least
equal to the Initial Registration Amount. If (i) at any time the number of
shares of Common Stock included in the Registration Statement required to be
filed as provided in the first sentence of this Section 2(a) shall be less than
the then applicable Registration Amount or (ii) the Second Tranche Shares and
the Aura Repricing Shares issuable upon exercise of the Second Tranche Repricing
Rights are not permitted to be included in the initial Registration Statement
filed pursuant to this Section 2(a), then promptly, but in no event later than
20 days after such insufficiency shall occur, the Company shall file with the
SEC an additional Registration Statement on Form S-3 (which shall not constitute
a post-effective amendment to the Registration Statement filed pursuant to the
first sentence of this Section 2(a)), covering such number of shares of Common
Stock at least equal to the difference between the Registration Amount and the
number of shares previously registered. For all purposes of this Agreement such
additional Registration Statement shall be deemed to be the Registration
Statement required to be filed by the Company pursuant to Section 2(a) of this
Agreement, and the Company and the Investors shall have the same rights and
obligations with respect to such additional Registration Statement as they shall
have with respect to the initial Registration Statement required to be filed by
the Company pursuant to this Section 2(a). No securities other than the
Registrable Securities and the securities registrable pursuant to the Other
Registration Rights Agreements may be included in any Registration Statement
filed pursuant to this Agreement.
(b) Certain Offerings. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company. The Investors who hold
the Registrable Securities to be included in such underwriting shall pay all
underwriting discounts and commissions and other fees and expenses of such
investment banker or bankers and manager or managers so selected in accordance
with this Section 2(b) (other than fees and expenses relating to registration of
Registrable Securities under federal or state securities laws, which are payable
by the Company pursuant to Section 5 hereof) with respect to their Registrable
Securities and the fees and expenses of such legal counsel so selected by the
Investors.
(c) Other Registrations. The Company will not file another
registration statement with the SEC covering shares of Common Stock prior to the
SEC Effective Date, other than registration statements on Form S-4 or S-8.
(d) Piggy-Back Registrations. If at any time the Company
shall determine to prepare and file with the SEC a Registration Statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Investor who is entitled to registration
rights under this Section 2(d) written notice of such determination and, if
within ten (10) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company, the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment, such
limitation is necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are not entitled by
right to inclusion of securities in such Registration Statement; and provided
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement, based on the number of securities for which registration
is requested except to the extent such pro rata exclusion of such other
securities is prohibited under any written agreement entered into by the Company
with the holder of such other securities prior to the date of this Agreement, in
which case such other securities shall be excluded, if at all, in accordance
with the terms of such agreement. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. The obligations of the Company under this
Section 2(d) may be waived by Investors holding a majority in interest of the
Registrable Securities and shall expire after the Company has afforded the
opportunity for the Investors to exercise registration rights under this Section
2(d) for two registrations; provided, however, that any Investor who shall have
had any Registrable Securities excluded from any Registration Statement in
accordance with this Section 2(d) shall be entitled to include in an additional
Registration Statement filed by the Company the Registrable Securities so
excluded. Notwithstanding any other provision of this Agreement, if the
Registration Statement required to be filed pursuant to Section 2(a) of this
Agreement shall have been ordered effective by the SEC and the Company shall
have maintained the effectiveness of such Registration Statement as required by
this Agreement and if the Company shall otherwise have complied in all material
respects with its obligations under this Agreement, then the Company shall not
be obligated to register any Registrable Securities on such Registration
Statement referred to in this Section 2(d).
(e) Eligibility for Form S-3. The Company meets the
requirements for the use of Forms S-3 for registration of the Registrable
Securities for resale by the Investors. The Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3.
(f) Certain Payments by the Company. (1) If (A) the Company
fails to file the Registration Statement with the SEC on or before January 29,
1999 or (B) the Registration Statement is not declared effective by the SEC on
or before March 30, 1999, the Company shall pay the Initial Investor an amount
in cash equal to 2.0% of the Purchase Price on the first Computation Date to
occur and 3.0% of the Purchase Price on each subsequent Computation Date (such
amounts to be pro rated for periods less than 30 days).
(2) If the Registration Statement shall cease to be available
for use by any Investor for the sale of any Registrable Securities for 15 or
more days (whether or not consecutive) for any reason (including without
limitation by reason of events described in Sections 3(f) and 3(g)), the Company
shall pay such Investor an amount in cash equal to 0.2% of the Purchase Price
for each day on which such unavailability occurs. Such payments shall be made in
arrears every 30 days after such unavailability first occurs.
(3) Any overdue payments required by this Section 3(f) shall
bear interest as provided in Section 6(o) of the Subscription Agreement. The
payments required by this Section 3(f) shall be in addition to any other rights
and remedies of the Investors under this Agreement, the Subscription Agreement
and applicable law.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than
January 29, 1999, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its best
efforts to cause each Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times during the
Registration Period; submit to the SEC, within three business days after the
Company learns that no review of the Registration Statement will be made by the
staff of the SEC or that the staff of the SEC has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request; notify the Investors of the
effectiveness of the Registration Statement on the date the Registration
Statement is declared effective; and the Company represents and warrants to, and
covenants and agrees with, the Investors that the Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered
effective by the SEC and at all times during which it is required to be
effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the end of the Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times during the Registration Period and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto (I) to qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its Certificate of
Incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
shareholders;
(e) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) as promptly as practicable after becoming aware of such
event or circumstance, notify each Investor of any event or circumstance of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, file such supplement or amendment with the SEC at
such time as shall permit the Investors to sell Registrable Securities pursuant
to the Registration Statement as promptly as practical, and deliver a number of
copies of such supplement or amendment to each Investor as such Investor may
reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
shareholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement;
(j) at the request of the Investors who hold a majority in
interest of the Registrable Securities being sold, furnish on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's own
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, at
such Investor's own expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the Nasdaq or
such other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded or (ii) if securities of
the same class or series as the Registrable Securities are not then listed on
Nasdaq or any such other securities market, to cause all of the Registrable
Securities covered by the Registration Statement to be listed on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market;
(m) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request; and, within three business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver to the transfer agent for the Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) an instruction substantially in the form attached hereto
as Exhibit 1 and shall cause legal counsel selected by the Company to deliver to
the Investors an opinion of such counsel in the form attached hereto as Exhibit
2 (with a copy to the Company's transfer agent);
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the Exchange Act; and
(p) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of the Registrable Securities
pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least four (4)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor but shall not
be relieved of its obligation to file a Registration Statement with the SEC
relating to the Registrable Securities of such Non-Responsive Investor promptly
after such Non-Responsive Investor provides the Requested Information;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of
the Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(f) or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession of the prospectus covering
such Registrable Securities current at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable with respect to its Registrable
Securities, in each case to the extent not payable by the Company pursuant to
the terms of this Agreement.
5. Expenses of Registration. All reasonable expenses, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company
and the Investors, shall be borne by the Company, provided, however, that the
Investors shall bear the fees and out-of-pocket expenses of the one legal
counsel selected by the Investors pursuant to Section 2(b) hereof.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Investor who holds such Registrable Securities,
the directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (I) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, the prospectus or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) with respect to any preliminary prospectus shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by any Indemnified Party in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the amount by which the net proceeds to such Investor from the sale of
Registrable Securities pursuant to such Registration Statement exceeds the cost
of such Registrable Securities to such Investor. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the amount by which the net amount of proceeds
received by such seller from the sale of such Registrable Securities exceeds the
purchase price paid by such seller for such Registrable Securities.
8. Reports under Exchange Act. With a view to making
available to the Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. Assignment of Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or all or any portion of the Repricing Rights) only if: (a)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In connection with any such transfer the
Company shall, at its sole cost and expense, promptly after such assignment take
such actions as shall be reasonably acceptable to the Initial Investor and such
transferee to assure that the Registration Statement and related prospectus are
available for use by such transferee for sales of the Registrable Securities in
respect of which the rights to registration have been so assigned. In connection
with any such assignment, each Investor shall have the right to assign to such
transferee such Investor's rights under the Amendment Agreement and the
Subscription Agreement by notice of such assignment to the Company. Following
such notice of assignment of rights under the Amendment Agreement and the
Subscription Agreement, the Company shall be obligated to such transferee to
perform all of its covenants under the Amendment Agreement and the Subscription
Agreement as if such transferee were the Buyer under the Subscription Agreement
and an original Holder under the Amendment Agreement.
10. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) (i) if to the Company, at 0000 Xxxxxx Xxxxxx, Xx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Chief Financial Officer, telephone line facsimile
transmission number (000) 000-0000, (ii) if to the Initial Investor, at
Attention:
, telephone line facsimile transmission number and (iii) if to any other
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company
to perform its obligations under this Agreement, including, without limitation,
the Company's obligations under Section 3(n), or any delay in such performance
could result in damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct and consequential
damages caused by any such failure or delay.
(j) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day
and year first above written.
XXXXXX, INC.
By:______________________________
Name:
Title:
[INITIAL INVESTOR]
By:________________________________
Name:
Title:
EXHIBIT 1
to
Registration
Rights
Agreement
[Company Letterhead]
[Date]
Interwest Transfer Company,
as Transfer Agent, Warrant Agent and Registrar
X.X. Xxx 00000
Xxxx Xxxx Xxxx, Xxxx 00000
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you to transfer or re-register the certificates for the shares of Common
Stock, $.005 par value (the "Common Stock"), of Aura Systems, Inc., a Delaware
corporation (the "Company"), represented by certificate numbers _______ and
_______ for an aggregate of _______ shares (the "Outstanding Shares") of Common
Stock presently registered in the name of [Name of Investors] upon surrender of
such certificate(s) to you, notwithstanding the legend appearing on such
certificates. The transfer or re-registration of the certificates for the
Outstanding Shares by you should be made at such time as you are requested to do
so by the record holder of the Outstanding Shares. The certificate issued upon
such transfer or re-registration should be registered in such name as requested
by the holder of record of the certificate surrendered to you and should not
bear any legend which would restrict the transfer of the shares represented
thereby. In addition, you are hereby directed to remove any stop-transfer
instruction relating to the Outstanding Shares. Certificates for shares of
Common Stock issued on or after the date hereof to the investors or their
assigns upon the exercise of certain Repricing Rights should not bear any
restrictive legend and should not be subject to any stop-transfer restriction.
Contemporaneously with the delivery of this letter, the Company is
delivering to you an opinion of Xxxxx & Associates as to registration of the
Outstanding Shares and the shares of Common Stock issuable upon the exercise of
certain Repricing Rights under the Securities Act of 1933, as amended.
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
AURA SYSTEMS, INC.
By:_____________________________
Name:
Title:
Enclosure
cc: [Names of Investors]
~ EXHIBIT 2
to
Registration
Rights
Agreement
, 1999
[Names and Addresses of Investors]
AURA SYSTEMS INC.
Shares of Common Stock
Ladies and Gentlemen:
We are counsel to Aura Systems, Inc., a Delaware corporation (the
"Company"), and we understand that the Company has issued to [Name of Investors]
(the "Holders") certain Repricing Rights to acquire shares (the "Common Shares")
of the Company's Common Stock, $.005 par value (the "Common Stock"). The
Repricing Rights were issued, to the Holders pursuant to the several
Subscription Agreements, dated as of November 30, 1998, between the Holders and
XxxXxx, Inc. a Delaware corporation (the "Subscription Agreements"), as amended
by the Amendment Agreement, dated as of December 28, 1998, among the Company,
XxxXxx and the Holders (the "Amendment Agreement"). Pursuant to the several
Registration Rights Agreements, dated as of December 28, 1998, between the
Company and the Holders (the "Registration Rights Agreements"), the Company
agreed with each Holder, among other things, to register for resale the Aura
Repricing Shares (as such term is defined in the Amendment Agreement) under the
Securities Act of 1933, as amended (the "1933 Act"), upon the terms provided in
the Registration Rights Agreements. Pursuant to the Registration Rights
Agreements, on , 1999 the Company filed a Registration Statement on Form S-3
(File No. 333-__________) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the Aura Repricing Shares, which
names the Holders as selling stockholders thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that:
(1) Since the Closing Date, the Company has timely filed with the SEC
all forms, reports and other documents required to be filed with the SEC under
the Securities Exchange Act of 1934, as amended (the "1934 Act"). All of such
forms, reports and other documents complied, when filed, in all material
respects, with all applicable requirements of the 1933 Act and the 1934 Act;
(2) The Registration Statement and the Prospectus contained therein (other
than the financial statements and schedules and other financial and statistical
information contained or incorporated by reference therein, as to which we have
not been requested to and do not express any opinion) comply as to form in all
material respects with the applicable requirements of the 1933 Act and the rules
and regulations promulgated thereunder; and
(3) The Registration Statement has become effective under the 1933 Act, and
to the best of our knowledge after due inquiry, no stop order proceedings with
respect thereto have been instituted or threatened by the SEC. The Aura
Repricing Shares have been registered under the 1933 Act and may be resold by
the respective Holders pursuant to the Registration Statement.
We have participated in the preparation of the Registration
Statement and the Prospectus, including review and discussions with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company, and your representatives at which the contents of
the Registration Statement and the Prospectus contained therein and related
matters were discussed, and, although we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus contained therein, on
the basis of the foregoing, nothing has come to our attention that leads us to
believe either that the Registration Statement at the time the Registration
Statement became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus contained in
the Registration Statement, as of its date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that we have not
been requested to and do not express any view with respect to the financial
statements and schedules and other financial and statistical data included or
incorporated by reference in the Registration Statement or the Prospectus
contained therein).
Paragraph (3) of this opinion may be relied upon by Interwest
Transfer Company, as Transfer Agent, Warrant Agent and Registrar (the "Transfer
Agent") as if addressed to the Transfer Agent.
Very truly yours,
cc: Interwest Transfer Company,
as Transfer Agent, Warrant Agent and Registrar
Exhibit B
EXERCISE NOTICE
TO: XxxXxx, Inc. Aura Systems, Inc.
31166 Via Colinas 0000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000 Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer Attention: Chief Financial Officer
Facsimile No.: (000) 000-0000 Facsimile No.: (000) 000-0000
This Exercise Notice is given pursuant to the terms of (i)
the Subscription Agreement, dated as of November 30, 1998, as amended (the
"Subscription Agreement"), by and between XxxXxx, Inc., a Delaware corporation
(the "Company"), and the undersigned (the "Buyer") and (ii) the Amendment
Agreement, dated as of December 28, 1998, by and among the Company, Aura
Systems, Inc. a Delaware corporation ("Aura"), the Buyer and the other parties
named therein. Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Subscription Agreement and the
Amendment Agreement. The Buyer hereby notifies the Company and, if the Buyer
elects to receive Aura Repricing Shares, Aura as follows:
(1) Exercise Date: _____________________
(2) No. of Initial Repricing Rights outstanding:
-----------------------
(3) No. of Initial Repricing Rights exercised hereby:
--------------------
(4) Repricing Price: ___________________
(5) Average Market Price: _______________
(6) Repricing Rate: ________________
(7) Number of Repricing Shares due to the Buyer upon
exercise of such Initial Repricing Rights:
(8) No. of Second Tranche Repricing Rights outstanding:
(9) No. of Second Tranche Repricing Rights exercised
hereby:
(10) Repricing Price:
(11) Average Market Price:
(12) Repricing Rate:
(13) Number of Repricing Shares due to the Buyer upon
exercise of such Second Tranche Repricing Rights:
(14) If the Buyer elects to receive Aura Repricing Shares
in lieu of Repricing Shares, items 14-16 are completed as follows:
the Average Market Price of the Aura Common Stock is
(15) the Aura Repricing Rate is
(16) the number of Aura Repricing Shares due to the Buyer
is:
(17) Please issue the number of Repricing Shares or Aura
Repricing Shares, as the case may be, stated in items 7 and 13 or 16,
as the case may be, in the name(s) and to the address or the account
specified immediately below or, if additional space is necessary, on
an attachment hereto:
Delivery Instructions
for Common Stock:
Address:
SS or Tax ID Number:
NAME OF BUYER:
Date:
By:________________________________
Name:
Title:
