Exhibit "A"
ESCROW AGREEMENT
This ESCROW AGREEMENT (the "Agreement") is made as of the 6th day of
March, 2000, by and among Aura Systems, Inc. (the "Company"), Xxxxx & Associates
(the "Escrow Agent"), located at 0000 Xxxxxxx Xxxx Xxxx, Xxxxx Xxxxx, Xxx
Xxxxxxx, XX 00000-0000 and The Isosceles Fund Limited ("ISOSCELES"), located at
Bahamas Financial Center, 0xx Xxxxx, Xxxxxxx & Xxxxxxxxx Xxxxxxx, Xxxxxx,
Xxxxxxx with reference to the following facts:
W I T N E S S E T H:
WHEREAS, the Company has previously issued to ISOSCELES a Convertible
Note dated October 27, 1998, in the original principal amount of $1,000,000 (the
"Convertible Note") pursuant to a certain Securities Purchase Agreement between
ISOSCELES and the Company dated as of October 27, 1998, (the "Purchase
Agreement"), which Convertible Note is presently owned by ISOSCELES; and
WHEREAS, the obligations of the Company under the Note are secured by a
certain Security Agreement dated as of October 27, 1998; and
WHEREAS, ISOCELES and the Company have entered into a Settlement
Agreement and Release of Claims dated as of March 6, 2000, as supplemented by a
certain Addendum to Settlement Agreement and Release of Claims dated as of March
6, 2000 (the Settlement Agreement, as supplemented, is referred to herein as the
"Settlement Agreement"), in order to provide for (1) the issuance to ISOSCELES
of Three Million (3,000,000) shares of the Company's Common Stock (the
"Conversion Shares") pursuant to the Convertible Note, (iii) the issuance by the
Company to ISOSCELES of a warrant entitling ISOSCELES from time to time to
purchase Thousand (50,000) shares of the Company's Common Stock at an exercise
price of $0.375 per share (the "Settlement Warrants"), (iv) the surrender and
cancellation of the Convertible Note, (iv) the release by ISOSCELES and the
Company of claims against each other, including all rights under the 400,000
Warrants issued by the Company in October 1998 (the "Note Warrants"); and
WHEREAS, pursuant to the Settlement Agreement and a certain
Subscription Agreements ISOSCELES has agreed to purchase an aggregate of 150,000
restricted shares of the Company's Common Stock (the "Restricted Shares") for
the aggregate consideration of $300,000; and
WHEREAS, in order to implement the terms of the Settlement
Agreement and the Subscription Agreement the parties are entering into this
Escrow Agreement (the "Escrow Agreement") with Xxxxx & Associates, as escrow
agent ("Escrow Agent") to facilitate the consummation of the transactions
contemplated by this Agreement and the Subscription Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, it is hereby agreed by and between the parties as follows:
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The Company and ISOSCELES hereby severally appoint the Escrow Agent
as escrow agent, and the Escrow Agent hereby accepts such appointment for the
purpose and on the terms and conditions set forth in this Escrow Agreement.
2. The Escrow Agent will accept from ISOSCELES the Escrow Funds representing the
subscription amount for the Restricted Shares, and will accept the documents and
certificates enumerated in Section 3(i)-(vi) below.
3. The Company and ISOSCELES hereby instruct the Escrow Agent as follows: On the
Closing Date the Escrow Agent shall:
(i) release payment of the $300,000 of Subscription proceeds to the Company or
as otherwise directed by the Company;
(ii) deliver to ISOSCELES a certificate evidencing 150,000 Restricted Shares,
respectively;
(iii) deliver to ISOSCELES a certificate evidencing the 3,000,000 Conversion
Shares,
(iv) deliver to ISOSCELES a legal opinion from the Company's counsel in the form
of Exhibit B attached hereto;
(v) deliver to ISOSCELES certificates evidencing 50,000 Settlement Warrants,
respectively;
(vi) deliver to the Company a letter from ISOSCELES stating that
the Convertible Note and the Note Warrants were never
delivered to ISOSCELES,
(vii) deliver to the Company executed UCC-2 Termination Statements
to be furnished by ISOSCELES to Escrow Agent.
The Closing Date shall be deemed to occur upon satisfaction of the
following conditions:
(a) Escrow Agent shall have received duly executed
counterparts of this Agreement from the Company and ISOSCELES and shall
have received duly executed counterparts of the Subscription Agreement,
(b) Escrow Agent shall have received each of the items
enumerated in Paragraph 3(i)-(vii) inclusive.
If the Closing Date shall not have occurred for any reason by March 17,
2000, the Escrow Agent shall return Subscriptions proceeds, certificates and
documents to the person furnishing such items to Escrow Agent.
4. It is understood and agreed by the parties to this Agreement as
follows:
(a) The Escrow Agent is not and shall not be deemed to be a
trustee for any party for any purpose and is merely acting as a
depository and in a ministerial capacity hereunder with the limited
duties herein prescribed.
(b) The Escrow Agent does not have and shall not be deemed to
have any responsibility in respect of any instruction, certificate or
notice delivered to it other than faithfully to carry out the
obligations undertaken in this Agreement and to follow the directions
in such instruction or notice provided in accordance with the terms
hereof.
(c) The Escrow Agent is not and shall not be deemed to be
liable for any action taken or omitted by it in good faith and any rely
upon, and act in accordance with, the advice of its counsel without
liability on its part for any action taken or omitted in accordance
with such advice. In any event, its liability hereunder shall be
limited to liability for gross negligence, willful misconduct or bad
faith on its part.
(d) The Escrow Agent may conclusively rely upon and act in
accordance with any certificate, instruction notice, letter, telegram,
cablegram, fax transmission or other written instrument believed by it
to be genuine and signed by the Company and ISOSCELES.
(e) The Company and ISOSCELES agree to save harmless,
indemnify and defend the Escrow Agent for, from and against any loss,
damage, liability, judgment, cost and expense whatsoever, including
attorney's fees, suffered or incurred by it by reason of, or on account
of, any misrepresentation made to it or as to its status for activities
as Escrow Agent under this Agreement except for any loss, damage,
liability, judgment, cost or expense resulting from gross negligence,
willful misconduct or bad faith on the part of the Escrow Agent.
(f) The Escrow Agent shall not be required to defend any legal
proceeding which may be instituted against it in respect of the subject
matter of this Agreement. If any such legal proceeding is instituted
against it, the Escrow Agent agrees promptly to give notice of such
proceeding to the Company and ISOSCELES. The Escrow Agent shall not be
required to institute legal proceedings of any kind. Any legal
proceedings arising out of or relating to the subject matter of this
Agreement shall be brought in a court of competent jurisdiction in Los
Angeles County, California, U.S.A.
(g) The Escrow Agent shall not, by act, delay, omission or
otherwise, be deemed to have waived any right or remedy it may have
either under this Agreement or generally, unless such waiver be in
writing, and no waiver shall be valid unless it is in writing, signed
by the Escrow Agent, and only to the extent expressly therein set
forth. A waiver by the Escrow Agent under the terms of this Agreement
shall not be construed as a bar to, or waiver of, the same or any other
such right or remedy which it would otherwise have on any other
occasion.
(h) The Escrow Agent may refrain from taking any action other
than keeping all property held by it in Escrow if it is uncertain concerning its
duties or rights under this Escrow Agreement or receives claims or demands from
any person or entity or receives a final judgment by a court of competent
jurisdiction if it deems that necessary or advisable.
(i) The parties acknowledge and agree that Escrow Agent
is acting as legal counsel
to the Company in this transaction and expects to continue to act as legal
counsel for the Company in the future. ISOSCELES acknowledges that the Escrow
Agent shall have no duty or obligation to disclose any information to any party,
it being understood that Escrow Agent's duties are ministerial in nature only.
5. Communication to and from the Escrow Agent shall be delivered by
messenger or forwarded by facsimile transmission, regular, or certified mail,
and shall be effective when received.
6. The Escrow Agent's obligations under this Escrow Agreement shall
terminate on the date it shall no longer hold any of the funds, documents or
instruments delivered in escrow pursuant to the terms of this Agreement.
7. This Escrow Agreement shall be governed by and construed in
accordance with the laws of the State of California.
8. This Escrow Agreement may be executed in several counterparts by
facsimile signature, each of which shall be original, and such counterparts
shall together constitute but on and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement effective as of the date and year first written above.
AURA SYSTEMS, INC.
By:
Title:
Escrow Agent:
Xxxxx & Associates
By:
Xxxxxx X. Xxxxx
THE ISOSCELES FUND LIMITED
By___________________________________
Title:_________________________________
EXHIBIT "B"
The Isosceles Fund Limited
Bahamas Financial Centre
0xx Xxxxx, Xxxxxxx & Xxxxxxxxx Xxxxxxx
Xxxxxx, Xxxxxxx
March [__] 2000
Ladies and Gentlemen,
We have acted as Counsel to Aura Systems Inc., a Delaware Corporation
(the "Company"), in connection with the issuance of 3,000,000 shares of the
Company's Common Stock under a certain Convertible Note dated October 27, 1998.
In so acting we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, agreements,
documents, and other instruments, and such certificates or comparable documents
of public officials and of officers and representatives of the Company, and have
made such enquiries of such officers and representatives of the Company as we
have deemed relevant and necessary as a basis for the opinions hereinafter set
forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certifies or photo static and the authenticity of
the originals of such latter documents. As to questions of fact material to this
opinion that have not been independently established, we have relied upon
certificates or comparable documents of officers and representatives of the
Company.
Based on the foregoing, and subject to the qualifications stated herein, we are
of the opinion that:
1. The Conversion Shares have been duly authorized and have been
validly issued, and are fully paid and non-assessable.
2. For purposes of determining the holding period of the Conversion
Shares under Rule 144(d) under the Securities Act of 1933, the
holding period of the Conversion Shares commenced on the date of
issuance of the Convertible Note on October 27,1998
3. The Company currently meets the current public information
requirements under Rule 144 (c) under the Securities Act of 1933.
The opinions expressed herein are limited to U.S. law and the corporate
laws of the State of Delaware and we express no opinion as to the effect on the
matters covered by this letter of the law of any other jurisdiction
Very truly yours,
