ESCROW AGREEMENT
AGREEMENT made as of March 26, 1999 among Aura Systems, Inc. ("Seller"),
a Delaware corporation with a place of business at 0000 Xxxxxx Xxxxxx, Xx
Xxxxxxx, Xxxxxxxxxx 00000, Yoshikazu Masayoshi, Sadao Masayoshi, Sachie
Masayoshi and Kazuaki Masayoshi (jointly and severally, "Purchaser"), each
having an address c/o Sadao Masayoshi, 000 Xxxx 000xx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxxxx 00000, and WOLF HALDENSTEIN XXXXX XXXXXXX & XXXX LLP (the "Escrow
Agent"), a New York limited liability partnership with a place of business at
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
W I T N E S S E T H:
WHEREAS, Seller has sold to Purchaser, and Purchaser has purchased from
Seller, two hundred eighty (280) shares (the "Shares") of stock of MYS K.K. (the
"Corporation"), in consideration of, inter, alia two (2) certain promissory
notes (collectively, the "Note"), one in the original principal amount of
$1,000,000 and one in the original principal amount of $3,200,000; and
WHEREAS, Purchaser is delivering certificate(s) of stock representing
the Shares into escrow, together with unattached stock power(s) duly endorsed by
Purchaser in blank, as collateral to secure against a Default (as defined in the
Note) by Purchaser under the Note; and
WHEREAS, the parties are delivering into escrow such other instruments
and agreements as are described in this Agreement; and
WHEREAS, the Escrow Agent has agreed to act as escrow agent pursuant to
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, thc parties agree as follows:
1. Deposit of the Shares and Other Items.
1.1 Initial Certificate(s). Simultaneously with the execution
of this Agreement, Purchaser has deposited with the Escrow Agent the Shares,
represented by certificate(s) of stock of the Corporation issued in the name of
Purchaser, together with stock power(s) duly endorsed in blank (the "Stock
Power").
1.2 Subsequent Deposits. Any additional shares of stock of the
Corporation hereafter issued with respect to the Shares, whether due to stock
split, stock dividend or otherwise, or any certificates for shares of stock of
the Corporation or another entity hereafter issued to replace or supplement the
Shares, whether due to merger, consolidation, reorganization or otherwise, shall
be deposited with the Escrow Agent, together with appropriate stock powers duly
endorsed in blank and such stock shall be considered part of the Shares and such
stock powers shall be considered part of the Stock Power.
1.3 Other Items. Simultaneously with the execution of this
Agreement, thc following items (collectively, the "Other Escrow Items") are also
being depositing with the Escrow Agent:
1.3.1 Resignations. Blank dated resignations (the "Resignations")
from Purchasers with respect to their directorships, offices and
employment with the Corporation, its subsidiaries and affiliates.
1.3.2 Bank Letters. Blank dated letters from the Corporation to
its banks advising of the change of its authorized signatories
(the "Bank Letters").
2. Acceptance by the Escrow Agent. The Escrow Agent agrees to accept
delivery of the Shares, the Stock Power and the Other Escrow Items
(collectively. the "Escrow Items"), and agrees to hold the same in accordance
with the terms and conditions of this Agreement.
3. Release from Escrow. The Escrow Agent will hold the Escrow Items in
its possession until authorized hereunder to deliver the Escrow Items in
accordance with one of the following provisions:
3.1 Delivery to Purchaser. Upon full payment of the amount due
pursuant to the Note, including, without limitation, any accrued interest, an
affidavit (the "Payment Affidavit") made by, or on behalf of, Purchaser setting
forth that full payment has been made shall be delivered to the Escrow Agent.
The Escrow Agent shall, promptly after actual receipt of the Payment Affidavit,
give notice to Seller of the existence of the Payment Affidavit, which notice
shall include a copy of the Payment Affidavit. Unless the Escrow Agent in fact
receives an affidavit (the "Seller's Disputing Affidavit") by, or on behalf of,
Seller of a dispute with respect to the recitation in the Payment Affidavit
within twenty (20) days after the Escrow Agent gives notice to Seller of the
existence of the Payment Affidavit, then, promptly after the expiration of such
twenty (20) day period, the Escrow Agent shall deliver to Purchaser the Escrow
Items.
3.2 Delivery to Seller. Upon Default, as defined in either Note
(including the expiration of any grace period which must elapse before a Default
arises), under either Note, an affidavit (the "Default Affidavit") made by, or
on behalf of, Seller setting forth such Default shall be delivered to the Escrow
Agent. The Escrow Agent shall, promptly after actual receipt of the Default
Affidavit, give notice to Purchaser of the existence of the Default Affidavit,
which notice shall include a copy of the Default Affidavit. Unless the Escrow
Agent in fact receives an affidavit (the "Purchaser's Disputing Affidavit") by,
or on behalf of, Purchaser of a dispute with respect to the recitation in the
Default Affidavit within twenty (20) days after the Escrow Agent gives notice to
Purchaser of the existence of the Default Affidavit, then, promptly after the
expiration of such twenty (20) day period, the Escrow Agent shall deliver to
Seller the Escrow Items to be held by Seller in accordance with the provisions
of section 4. The monetary obligations which arise out of or relate to the
Default which is the basis of the Default Affidavit, including, without
limitation, any acceleration of principal and interest, any increase in the
continuing interest rate, any right to recover costs or expenses or any
penalties accruing under the Note, are hereinafter referred to as the
"Obligations."
3.3 Dispute Resolution. In the event, of the Escrow Agent's
timely receipt of either the Seller's Disputing Affidavit or the Purchaser's
Disputing Affidavit, the Escrow Agent shall (except as provided in the remainder
of this section 3.3 or in section 5) continue to hold the Escrow Items until the
dispute is resolved. Any dispute that may arise under this Agreement shall be
settled by one of the following methods: (1) mutual agreement of the parties
concerned (evidenced by appropriate instructions in writing to the Escrow Agent,
signed by all of the parties to such dispute), (2) a binding arbitration award
pursuant to an agreement signed by the parties to such dispute to submit such
dispute to arbitration or (3) by a final order, decree or judgment of a court of
competent jurisdiction in the United States of America (the time for appeal
having expired and no appeal having been perfected). The Escrow Agent shall be
under no duty whatsoever to institute or defend any such proceedings, but may,
in its discretion, deposit the Escrow Items and any funds or other documents
held by it with a court of competent jurisdiction pending the resolution of any
dispute.
4. Rights of the Parties in the Shares.
4.1 Dividends. Until the date of the receipt of the Default
Affidavit by the Escrow Agent (the "Notice Date"), the Shares shall be treated
as if they are owned outright by Purchaser and Purchaser shall be entitled to
receive any and all dividends or other distributions which may be paid, provided
that any such dividends or distributions, including, but not limited to those
paid in stock, are to be deposited with the Escrow Agent as additional Other
Escrow Items.
4.2 Voting. Until the Shares have been delivered from escrow
to Seller (the "Delivery Date"), the Shares shall be treated as if they are
owned outright by Purchaser and Purchaser shall be entitled to vote the Shares
for all purposes. From and after the Delivery Date, Seller or its transferees
shall have the right to vote the Shares for all purposes unless and until legal
title to the Shares is re-conveyed to the Purchaser in resolution of a dispute
pursuant to section 3.3 or after cure by Seller pursuant to section 4.5.
4.3 Sale. Subject to the right to cure hereinafter described,
Seller may cause the Shares delivered to it pursuant to section 3.2 to be sold
in a commercially reasonable manner upon ten (10) days written notice to
Purchaser of such sale, setting forth the time and place thereof. Seller may be
the purchaser at such sale. The monies so received by Seller shall be applied
first to the payment of the cost and expense of such sale and then to the
payment of the Obligations. Purchaser shall remain liable for any deficit, and
any surplus monies shall be paid to Purchaser. Purchaser acknowledges and agrees
that the ten (10) day notice provided in this section 4.3 constitutes reasonable
notice of a proposed sale.
4.4 Right to Retain the Shares. Subject to the right to cure
hereinafter described, Seller may elect to retain ownership of the Shares
delivered to it pursuant to section 3.2 by giving thirty (30) days written
notice to Purchaser of such election. Such retention shall be in full
satisfaction of the Obligations. Purchaser acknowledges and agrees that the
thirty (30) day notice provided in this section 4.4 constitutes reasonable
notice of a proposed retention of the Shares.
4.5 Right to Cure. Prior to or during the ten (10) thirty day
notice period described in section 4.3 or the thirty (30) day notice period
described in section 4.4, or, if Seller does not sell or take title to the
Shares upon the expiration of such ten (10) or thirty (30) day period, prior to
such sale or taking title, Purchaser may cure the Default by making full payment
to Seller with respect to all of the Obligations; in which event Seller shall
deliver the Shares, the Stock Power and the Other Escrow Items to Purchaser free
of this Agreement and any liens or interests of Seller relating to the Note or
the Obligations.
4.6 Remedies Not Exclusive. The aforesaid remedies upon Default
shall not be exclusive, and Seller shall have all other remedies permitted by
law, including, without limitation, the right to bring suit against any
Purchaser.
5. Concerning the Escrow Agent.
5.1 Reliance Upon Instrument. The Escrow Agent may act in
reliance, and is protected in so relying, upon any writing, instrument or
signature which it, in good faith, believes to be genuine, and may assume the
validity and accuracy of any statement or assertion contained in such a writing
or instrument, and may assume that any person purporting to give any writing,
notice, advice or instructions in connection with the provisions hereof has been
duly authorized to do so.
5.2 Reliance Upon Counsel. The Escrow Agent may act or refrain
from acting in respect to any matter referred to herein in full reliance upon
and by and with the advice of counsel selected by it, and shall be fully
protected in so acting or in refraining from acting upon such advice of counsel.
It is intended that the Escrow Agent, if an attorney or law firm, may choose to
act as its own counsel.
5.3 Exclusive Duties. This Agreement sets forth exclusively
the duties of the Escrow Agent with respect to any and all matters pertinent
hereto, and no implied duties or obligations shall be read into this Agreement
against the Escrow Agent.
5.4 No Representations. The Escrow Agent shall not be
considered to have made any representations as to the validity, value,
genuineness or collectibility of any instrument or other item held by or
delivered to it.
5.5 Termination of Duties. Upon final delivery, in accordance
with this Agreement, of the Escrow Items and any other items held by the Escrow
Agent, the responsibilities of the Escrow Agent shall cease and terminate
without any further obligation or liability on its part.
5.6 No Liability. The Escrow Agent shall not be responsible or
liable for any mistake of fact or error of judgment, or for any act or omission
on its part in the performance of its duties as escrow agent under this
Agreement except as such mistake, error, act or omission constitutes intentional
misconduct, bad faith, gross negligence or fraud.
5.7 Reimbursement.
5.7.1 In General. Seller and Purchaser each, jointly and severally, hereby
agrees to reimburse all of the reasonable expenses (including legal fees),
disbursements and advances incurred or made by the Escrow Agent in performance
of its duties hereunder. Legal fees, as reimbursable hereunder, expressly
include legal fees charged by the Escrow Agent itself. Seller and Purchaser
shall be solely responsible to allocate such expenses among themselves and to
seek such contribution among themselves as may be appropriate. Notwithstanding
anything in this Agreement to the contrary, the Escrow Agent (1) shall have no
obligation to release any of the Escrow Items or any other items held by the
Escrow Agent unless and until it has been fully reimbursed or received adequate
assurance (determined in its sole discretion) that it will be fully reimbursed
for all of its reasonable expenses, (2) shall have no liability for any failure
or refusal to release any of the Escrow Items or any other items held by the
Escrow Agent in accordance with clause (1) of this sentence and (3) may pay
itself from any cash held by it in escrow the amount of its reasonable expenses.
5.7.2 Indemnity. Except in cases of the Escrow Agent's intentional
misconduct, bad faith, gross negligence or fraud, the other parties to this
Agreement agree, jointly and severally, to indemnify the Escrow Agent and
hold it harmless from any and all claims, liabilities, losses, actions,
suits or proceedings at law or in equity, or any other expenses, fees or
charges of any character or nature which the Escrow may incur or with which
it may be threatened by reason of the Escrow Agent's actions as escrow
agent under this Agreement, including, without limitation, reasonable
attorneys' fees and expenses (including, but not limited to all fees and
costs incident to any appeals which may result). Notwithstanding the
foregoing, as between themselves, the other parties to this Agreement agree
that the party responsible for any such loss to the Escrow Agent shall bear
the full share thereof.
5.8 Actions by Escrow Agent/Indemnity. The Escrow Agent shall
not be required to institute or defend any action involving any matters referred
to herein or which affects its duties or liabilities hereunder unless or until
requested to do so by a party to this Agreement and then only upon receiving
full indemnity, in character satisfactory to the Escrow Agent, against any and
all claims, liabilities and expenses in relation thereto (including, without
limitation, reasonable attorneys fees). In the event of any dispute among the
parties hereto with relation to the Escrow Agent or its duties, (1) the Escrow
Agent may act or refrain from acting in respect to any matter referred to herein
in full reliance upon and by and with the advice of counsel selected by it and
shall be fully protected in so acting or in refraining from acting upon the
advice of such counsel (it is intended that the Escrow Agent, if an attorney or
law firm, may choose to act as its own counsel) or (2) the Escrow Agent may
refrain from acting until required to do so by an order of a court of competent
jurisdiction.
5.9 Substitution. The Escrow Agent may resign as escrow agent
at any time provided that it first designates a substitute or successor escrow
agent acceptable to Seller and Purchaser who agrees in writing to be bound by
the terms of this Agreement and to assume the obligations of the Escrow Agent.
The Escrow Agent may be removed as escrow agent at any time by notice from
Seller and Purchaser specifying such removal and naming the substitute or
successor escrow agent who has agreed in writing to be bound by the terms of
this Agreement and to assume the obligations of the Escrow Agent. Upon delivery
by the Escrow Agent of the Escrow Items and any other items held by the Escrow
Agent to the substitute or successor Escrow Agent, such person shall be deemed
for all purposes to be the Escrow Agent and the responsibilities of the
predecessor Escrow Agent shall cease and terminate without any further
obligation or liability on its part.
5.10 Escrow Agent as Counsel. The parties acknowledge that the
Escrow Agent is a law firm that has previously represented Seller, including
with respect to matters relating to the transactions underlying this Agreement.
Notwithstanding Escrow Agent's function as escrow agent, the parties acknowledge
and agree that the Escrow Agent may continue to represent Seller, including with
respect to any dispute arising out of or relating to this Agreement or the
transactions underlying this Agreement.
6. Entire Agreement. This Agreement represents the entire escrow
agreement among the parties and cannot be modified or terminated, nor may any of
its provisions be waived, except by a written instrument signed by all of the
parties. Any waiver by any party of the strict performance of any of the terms,
conditions and provisions of this Agreement shall not be construed as a waiver
thereof for the future, but shall be considered a waiver only in the particular
instance, for the particular purpose, and at the time when and for which it is
given. There are no other agreements and no other representations, warranties or
covenants with respect to the subject matter of this Agreement except as
expressly set forth in this Agreement.
7. Miscellaneous.
7.1 Captions. Headings contained in this Agreement have been
inserted for reference purposes only and shall not be construed as part of this
Agreement.
7.2 Governing Law/Consent to Jurisdiction.
7.2.1 Governing Law. This Agreement has been made and entered into in
the State of California and shall be governed by and construed and enforced
in accordance with the internal substantive laws of the State of
California, without regard to principles of conflicts of laws.
7.2.2 Consent to Jurisdiction. The parties irrevocably consent to
the jurisdiction of the courts of the State of California (and the
Federal courts having jurisdiction in the State of California) for
purposes of any judicial proceeding which may be instituted in
connection with any matter arising under or relating to this
Agreement.
7.3 Notice. Any notice or other communication given or made
pursuant to this Agreement must be in writing and shall be delivered to the
person to whom intended at the address set forth above (or at such other address
as such person may designate by proper notice) by personal delivery, by
telecopier, by nationally), recognized courier (Federal Express, DHL, etc.) or
by certified or registered mail, postage prepaid, and shall be deemed given when
personally delivered or sent by telecopier or two (2) business days after
deposit with a courier or five (5) business days after mailing. The Escrow Agent
shall be given copies of all notices.
7.4 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement.
7.5 Successors in Interest. This Agreement shall be binding
upon and inure to the benefit of the respective parties, their successors,
assigns, heirs, legatees, executors, administrators and legal representatives
("Successors"). Whenever a party is referred to in this Agreement, such
reference shall include reference to such party':; Successors.
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7.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. This Agreement shall
become effective when one or more counterparts have been signed by each of the
parties and delivered to each of the other parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLER: PURCHASER:
AURA SYSTEMS, INC.
By:
Name: Yoshikazu Masayoshi
Title:
Sadao Masayoshi
Sachie Masayoshi
Kazaki Masayoshi
ESCROW AGENT:
WOLF HALDENSTEIN XXXXX XXXXXXX & XXXX LLP
By:
A Partner
