EXHIBIT 10.23
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of December 28, 1998
(this "Agreement"), by and between XXXXXX, INC., a Delaware corporation (the
"Company"), with headquarters located at 00000 Xxx Xxxxxxx, Xxxxxxxx Xxxxxxx,
Xxxxxxxxxx 00000, and __________________________ (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase and the Company wishes
to sell to the Buyer, upon the terms and subject to the conditions of this
Agreement, a promissory note of the Company having the aggregate principal
amount set forth on the signature page of this Agreement and in connection
therewith the Company is to issue to the Buyer warrants to purchase shares of
Common Stock as provided in this Agreement;
WHEREAS, on the Closing Date, the Company and the Collateral
Agent (as defined herein), shall execute and deliver, one to the other, a
Security Agreement (as defined herein), in the form referred to herein which
provides for the grant to the Collateral Agent of a perfected security interest
in certain collateral upon the terms and with the effect provided as described
therein; and
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 of Regulation D as promulgated by the SEC (as
defined herein) under the 1933 Act (as defined herein);
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 agree as
follows:
.c.1. DEFINITIONS;.
(a) As used in this Agreement, the terms "Agreement," "Buyer"
and "Company" shall have the respective meanings assigned to such terms in the
introductory paragraph of this Agreement.
(b) All the agreements or instruments herein defined shall
mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Agreement.
(c) 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):
"Action" means an action, suit, proceeding, inquiry or
investigation before or by any court, public board or body, arbitrator or
governmental agency.
"Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the subject Person;
for purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Amendment Agreement" means the Amendment Agreement to be
entered into between and among the Company, Aura, the Buyer and the Other Buyers
in the form attached hereto as Annex V.
"AMEX" means the American Stock Exchange, Inc.
"Aura" means Aura Systems, Inc., a Delaware corporation.
"Aura Registration Rights Agreement" means the Registration
Rights Agreement to be entered into between and among Aura and the Buyer in the
form attached as Exhibit B to the Amendment Agreement.
"Board of Directors" or "Board" means the Board of Directors
of the Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Closing Date" means the date and time of the issuance and
sale of the Note and the issuance of the Warrants.
"Closing Date Price" means the arithmetic average of the
Market Price of the Common Stock on the five consecutive Trading Days ending on
the Trading Day prior to the Closing Date (when used after the Closing Date, the
Closing Date Price shall be subject to equitable adjustments from time to time
on terms reasonably acceptable to the Buyer for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events occurring
after the Closing Date).
"Closing Price" means the closing sale price of the Common
Stock on the principal securities market for the Common Stock, as reported by
Bloomberg, L.P.
"Collateral Agent" means P.R.I.F., L.P.
"Common Stock" means the Common Stock, $.001 par value, of
the Company.
"Company Proprietary Rights" means all patents, patent
applications, inventions, trademarks, trade names, applications for registration
of trademarks, service marks, service xxxx applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets which are material to the
businesses of the Company and the Subsidiary as now conducted, as proposed to be
conducted or as described in this Agreement.
"Equity Securities" means Common Stock or securities
convertible into, exchangeable for, or otherwise entitling the holder to
acquire, any Common Stock.
"Insufficient Share Amount" means, for each Warrant Share
which the Company is unable to issue in accordance with Section 5(k), an amount
equal to 3% of the Closing Price of such share on the date of exercise of the
Warrant.
"Joint Escrow Instructions" means the Joint Escrow
Instructions attached hereto as Annex III.
"Market Price" of the Common Stock on any date means the
closing bid price for one share of Common Stock on such date on the first
applicable among the following: (a) the national securities exchange on which
the shares of Common Stock are listed which constitutes the principal securities
market for the Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the
principal market for the Common Stock on such date, or (c) the Nasdaq SmallCap,
if the Nasdaq SmallCap constitutes the principal securities market for the
Common Stock on such date, in any such case as reported by Bloomberg, L.P.;
provided, however, that if during any Measurement Period or other period during
which the Market Price is being determined:
(i) The Company shall declare or pay a dividend or make a distribution
to all holders of the outstanding Common Stock in shares of Common Stock or fix
any record date for any such action, then the Closing Price for each day in such
Measurement Period or such other period which day is prior to the earlier of (1)
the date fixed for the determination of shareholders entitled to receive such
dividend or other distribution and (2) the date on which ex-dividend trading in
the Common Stock with respect to such dividend or distribution begins shall be
reduced by multiplying the Closing Price (determined without regard to this
proviso) for each such day in such Measurement Period or such other period by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the earlier of (1) the record date fixed
for such determination and (2) the date on which ex-dividend trading in the
Common Stock with respect to such dividend or distribution begins and the
denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution;
(ii) The Company shall issue rights or warrants to all holders of its
outstanding shares of Common Stock, or fix a record date for such issuance,
which rights or warrants entitle such holders (for a period expiring within
forty-five (45) days after the date fixed for the determination of shareholders
entitled to receive such rights or warrants) to subscribe for or purchase shares
of Common Stock at a price per share less than the Closing Price (determined
without regard to this proviso) for any day in such Measurement Period or such
other period which day is prior to the end of such 45-day period, then the
Closing Price for each such day shall be reduced so that the same shall equal
the price determined by multiplying the Closing Price (determined without regard
to this proviso) by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding at the close of business on the record date
fixed for the determination of shareholders entitled to receive such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Closing Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
on the close of business on such record date plus the total number of additional
shares of Common Stock so offered for subscription or purchase. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than the Closing Price (determined without regard
to this proviso), and in determining the aggregate offering price of such shares
of Common Stock, there shall be taken into account any consideration received
for such rights or warrants, the value of such consideration, if other than
cash, to be determined in good faith by a resolution of the Board of Directors
of the Company;
(iii) The outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Closing Price of the Common Stock for each
day in such Measurement Period or such other period which day is prior to the
earlier of (1) the day upon which such subdivision becomes effective and (2) the
date on which ex-dividend trading in the Common Stock with respect to such
subdivision begins shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Closing Price for each day in such Measurement
Period or such other period which day is prior to the earlier of (1) the date on
which such combination becomes effective and (2) the date on which trading in
the Common Stock on a basis which gives effect to such combination begins, shall
be proportionately increased;
(iv) The Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the Company
(other than any dividends or distributions to which clause (i) of this proviso
applies) or evidences of its indebtedness, cash or other assets (including
securities, but excluding any rights or warrants referred to in clause (ii) of
this proviso and dividends and distributions paid exclusively in cash and
excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation) (the foregoing hereinafter in this
clause (iv) of this proviso called the "Securities"), or fix a record date for
any such distribution, then, in each such case, the Closing Price for each day
in such Measurement Period or such other period which day is prior to the
earlier of (1) the record date for such distribution and (2) the date on which
ex-dividend trading in the Common Stock with respect to such distribution begins
shall be reduced so that the same shall be equal to the price determined by
multiplying the Closing Price (determined without regard to this proviso) by a
fraction, the numerator of which shall be the Closing Price (determined without
regard to this proviso) for such trade less the fair market value (as determined
in good faith by resolution of the Board of Directors of the Company) on such
date of the portion of the Securities so distributed or to be distributed
applicable to one share of Common Stock and the denominator of which shall be
the Closing Price (determined without regard to this proviso). If the Board of
Directors of the Company determines the fair market value of any distribution
for purposes of this clause (iv) by reference to the actual or when issued
trading market for any securities comprising all or part of such distribution,
it must in doing so consider the prices in such market on the same day for which
an adjustment in the Closing Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which clause (i) or (ii) of this
proviso applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital stock,
rights or warrants other than such shares of Common Stock or rights or warrants
to which clause (i) or (ii) of this proviso applies (and any Closing Price
reduction required by this clause (iv) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and any
further Closing Price reduction required by clauses (i) and (ii) of this proviso
with respect to such dividend or distribution shall then be made), except that
any shares of Common Stock included in such dividend or distribution shall not
be deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of clause (i) of this proviso;
(v) The Company or any subsidiary of the Company shall (x) by dividend
or otherwise, distribute to all holders of its Common Stock cash in (or fix any
record date for any such distribution), or (y) repurchase or reacquire shares of
its Common Stock (other than an Option Share Surrender) for, in either case, an
aggregate amount that, combined with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash after
the Closing Date and within the twelve (12) months preceding the date of payment
of such distribution, and in respect of which no adjustment pursuant to this
clause (v) has been made, (2) the aggregate amount of any cash plus the fair
market value (as determined in good faith by a resolution of the Board of
Directors of the Company) of consideration paid in respect of any repurchase or
other reacquisition by the Company or any subsidiary of the Company of any
shares of Common Stock (other than an Option Share Surrender) made after the
Closing Date and within the twelve (12) months preceding the date of payment of
such distribution or making of such repurchase or reacquisition, as the case may
be, and in respect of which no adjustment pursuant to this clause (v) has been
made, and (3) the aggregate of any cash plus the fair market value (as
determined in good faith by a resolution of the Board of Directors of the
Company) of consideration payable in respect of any Tender Offer by the Company
or any of its subsidiaries for all or any portion of the Common Stock concluded
within the twelve (12) months preceding the date of payment of such distribution
or completion of such repurchase or reacquisition, as the case may be, and in
respect of which no adjustment pursuant to clause (vi) of this proviso has been
made (such aggregate amount combined with the amounts in clauses (1), (2) and
(3) above being the "Combined Amount"), exceeds 10% of the product of the
Closing Price (determined without regard to this proviso) for any day in such
Measurement Period or such other period which day is prior to the earlier of (A)
the record date with respect to such distribution and (B) the date on which
ex-dividend trading in the Common Stock with respect to such distribution begins
or the date of such repurchase or reacquisition, as the case may be, times the
number of shares of Common Stock outstanding on such date, then, and in each
such case, the Closing Price for each such day shall be reduced so that the same
shall equal the price determined by multiplying the Closing Price (determined
without regard to this proviso) for such day by a fraction (i) the numerator of
which shall be equal to the Closing Price (determined without regard to this
proviso) for such day less an amount equal to the quotient of (x) the excess of
such Combined Amount over such 10% and (y) the number of shares of Common Stock
outstanding on such day and (ii) the denominator of which shall be equal to the
Closing Price (determined without regard to this proviso) for such day; or
(vi) A Tender Offer made by the Company or any of its subsidiaries for
all or any portion of the Common Stock shall expire and such Tender Offer (as
amended upon the expiration thereof) shall require the payment to shareholders
(based on the acceptance (up to any maximum specified in the terms of the Tender
Offer) of Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined in good faith by resolution of the
Board of Directors of the Company) that combined together with (1) the aggregate
of the cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Company), as of the expiration of
such Tender Offer, of consideration payable in respect of any other Tender
Offers, by the Company or any of its subsidiaries for all or any portion of the
Common Stock expiring within the 12 months preceding the expiration of such
Tender Offer and in respect of which no adjustment pursuant to this clause (vi)
has been made, (2) the aggregate amount of any cash plus the fair market value
(as determined in good faith by a resolution of the Board of Directors of the
Company) of consideration paid in respect of any repurchase or other
reacquisition by the Company or any subsidiary of the Company of any shares of
Common Stock (other than an Option Share Surrender) made after the Closing Date
and within the 12 months preceding the expiration of such Tender Offer and in
respect of which no adjustment pursuant to clause (v) of this proviso has been
made, and (3) the aggregate amount of any distributions to all holders of Common
Stock made exclusively in cash within 12 months preceding the expiration of such
Tender Offer and in respect of which no adjustment pursuant to clause (v) of
this proviso has been made, exceeds 10% of the product of the Closing Price
(determined without regard to this proviso) for any day in such period times the
number of shares of Common Stock outstanding on such day, then, and in each such
case, the Closing Price for such day shall be reduced so that the same shall
equal the price determined by multiplying the Closing Price (determined without
regard to this proviso) for such day by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding on such day multiplied by
the Closing Price (determined without regard to this proviso) for such day and
the denominator of which shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to shareholders
based on the acceptance (up to any maximum specified in the terms of the Tender
Offer) of all shares validly tendered and not withdrawn as of the last time
tenders could have been made pursuant to such Tender Offer (the "Expiration
Time") (the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on such day times the Closing
Price (determined without regard to this proviso) of the Common Stock on the
Trading Day next succeeding the Expiration Time. If the application of this
clause (vi) to any Tender Offer would result in an increase in the Closing Price
(determined without regard to this proviso) for any trade, no adjustment shall
be made for such Tender Offer under this clause (vi) for such day.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"1998 10-K" means the Company's Annual Report on Form 10-K
for the fiscal year ended February 28, 1998.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
"1933 Act" means the Securities Act of 1933, as amended, or
any successor statute.
"Note" means the Secured Promissory Note of the Company in
the principal amount set forth on the signature page of this Agreement having
the terms and conditions in the form thereof attached hereto as Annex I.
"NYSE" means the New York Stock Exchange, Inc.
"Option Share Surrender" means the surrender of shares of
Common Stock to the Company in payment of the exercise price or tax obligations
incurred in connection with the exercise of a stock option granted by the
Company to any of its employees, directors or consultants.
"Other Buyers" means each of the several buyers of promissory
notes of the Company named in the Other Note Purchase Agreements.
"Other Note Purchase Agreements" means the several Note
Purchase Agreements, dated as of the date hereof, between the Company and the
Other Buyers relating to the agreements of such buyers severally to purchase
promissory notes of the Company and acquire warrants on the same terms as
provided in this Agreement.
"Person" means an individual, partnership, corporation,
limited liability company, trust, incorporated organization, unincorporated
association or joint stock company.
"Purchase Price" means the purchase price payable for the
Note set forth on the signature page of this Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 30, 1998, between the Company and the Buyer, as
amended by the Amendment Agreement.
"Registration Statement" means the Registration Statement
required to be filed by the Company with the SEC pursuant to Section 2(a) of the
Registration Rights Agreement.
"Regulation D" means Regulation D promulgated by the SEC
under the 1933 Act.
"Rule 144" means Rule 144 promulgated by the SEC under the
1933 Act or any other similar rule or regulation of the SEC that may at any time
permit a holder of any securities to sell such securities to the public without
registration under the 1933 Act.
"SEC" means the United States Securities and Exchange
Commission.
"SEC Effective Date" means the date the Registration
Statement is first declared effective by the SEC.
"SEC Reports" means (1) the 1998 10-K, (2) the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended May 31, 1998 and
August 31, 1998, and (3) the Company's definitive proxy statement for its 1998
Annual Meeting of Stockholders, in each case as filed with the SEC.
"Securities" means the Notes, the Warrants, and the Warrant
Shares; provided, however, for purposes of the definition of the term "Market
Price" set forth in clause (iv) of the proviso to the definition of the term
"Market Price," Securities shall have the meaning set forth in such clause (iv).
"Security Agreement" means the Security Agreement by and
between the Company and the Collateral Agent in the form attached hereto as
Annex IV.
"Stockholder Approval" shall mean the approval by a majority
of the votes cast by the holders of shares of Common Stock (in person or by
proxy) at a meeting of the stockholders of the Company (duly convened at which a
quorum was present), or a written consent of holders of shares of Common Stock
entitled to such number of votes given without a meeting, of the issuance by the
Company of 20% or more of the Common Stock of the Company outstanding on the
Closing Date for less than the greater of the book or market value of such
Common Stock, as and to the extent required under the Stockholder Approval Rule.
"Stockholder Approval Rule" means Rule 4460(i) of the Nasdaq
as in effect from time to time or any successor, replacement or similar
provision thereof or of any other market on which the Common Stock is listed for
trading.
"Stockholder Nonapproval Price" means for each Warrant Share
issuable upon exercise of Warrants repurchased by the Company pursuant to
Section 5(j)(3), 110% of the Closing Date Price.
"Subscription Agreements" means the several Subscription
Agreements, dated as of November 30, 1998, by and between the Company and the
Buyer and each of the Other Buyers.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on whichever of (w) the national
securities exchange, (x) the Nasdaq, (y) the Nasdaq SmallCap or (z) such other
securities market, which at the time constitutes the principal securities market
for the Common Stock, is open for general trading of securities.
"Warrants" means the Common Stock Purchase Warrants to
purchase shares of Common Stock in the form attached hereto as Annex I.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
.c.2. PURCHASE AND SALE; PURCHASE PRICE;.
.c.(a) Purchase of Note; Issuance of Warrants;. The Buyer
hereby agrees to purchase, and the Company hereby agrees to sell to the Buyer, a
Secured Promissory Note in the principal amount set forth on the signature page
of this Agreement, having the terms and conditions in the form thereof attached
hereto as Annex I, for the Purchase Price. In connection with the purchase of
the Note by the Buyer, the Company shall issue to the Buyer, at the closing on
the Closing Date, Common Stock Purchase Warrants in the form attached hereto as
Annex II (the "Warrants") to purchase the number of shares of Common Stock set
forth on the signature page of this Agreement.
.c.(b) Deliveries and Form of Payment;. The Buyer shall pay
the Purchase Price by delivering good funds in United States Dollars to the
Escrow Agent identified in the Joint Escrow Instructions attached hereto as
Annex III. Such delivery of funds shall be made against delivery by the Company
of the Note and the certificate for the Warrants, registered in the name of the
Buyer. Promptly following payment by the Buyer to the Joint Escrow Agent of the
Purchase Price, but in any event prior to the Closing Date, the Company shall
deliver the Note and the certificate for the Warrants, registered in the name of
the Buyer or its nominee, to the Escrow Agent. By signing this Agreement, the
Buyer and the Company each agrees to all of the terms and conditions of, and
becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.
.c.(c) Method of Payment;. Payment of the Purchase Price
shall be made by wire transfer of funds to:
Citibank, N.A.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA#000000000
For credit to A/C#37179446
For credit to the account of Xxxxx X. Xxxxx Attorney Escrow Account
Reference:
Not later than 4:00 p.m., New York City time, on the date which is one Business
Day after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Escrow Agent an amount equal to the Purchase Price.
.c.3. BUYER REPRESENTATIONS, WARRANTIES, ETC;.
The Buyer represents and warrants to, and covenants and
agrees with, the Company as follows:
.c.(a)Purchase for Investment;. The Buyer is purchasing the
Note and acquiring the Warrants, for its own account for investment only and not
with a view towards the public sale or distribution thereof;
.c.(b)Accredited Investor;. The Buyer 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.(c) Reoffers and Resales;. All subsequent offers and sales
of the Securities by the Buyer shall be made pursuant to registration of the
Securities being offered and sold under the 1933 Act or pursuant to an exemption
from registration;
.c.(d) Company Reliance;. The Buyer understands that the
Notes are being offered and sold, the Warrants are being issued, and the Warrant
Shares are being offered, in each case to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Notes and the Warrants and to receive an offer of the Warrant
Shares;
.c.(e) Information Provided;. The Buyer and its advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Notes and the issuance of the Warrants and the offer of the Warrant Shares
which have been requested by the Buyer; the Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have received
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the SEC
Reports; and the Buyer understands that its investment in the Securities
involves a high degree of risk;
.c.(f) Absence of Approvals;. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities; and
.c.(g) Note Purchase Agreement;. The Buyer has all requisite
power and authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed or to be
executed by the Buyer in connection herewith and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, 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.
.c.4. COMPANY REPRESENTATIONS, WARRANTIES, ETC;.
The Company represents and warrants to, and covenants and
agrees with, the Buyer that:
.c.(a) Organization and Authority;. The Company is a
corporation duly organized and validly existing under the laws of Delaware, and
has all requisite corporate power and authority to (i) own, lease and operate
its properties and to carry on its business as described in the SEC Reports and
as now being conducted, and (ii) to execute, deliver and perform its obligations
under this Agreement, the Note, the Warrants, the Amendment Agreement, the
Security Agreement and the other agreements to be executed and delivered by the
Company in connection herewith, and to consummate the transactions contemplated
hereby and thereby. The Company 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 the Company. The Company has no
subsidiaries or equity investments in any Person.
.c.(b) Capitalization;. The authorized capital stock of the
Company consists of (a) 50,000,000 shares of Common Stock of which 11,337,953
shares of Common Stock were outstanding on December 22, 1998, all of which are
fully paid and nonassessable; and (b) 5,000,000 shares of Preferred Stock, $.001
par value, none of which are outstanding on December 22, 1998; and on the
Closing Date (x) there will be no material increase from December 22, 1998 in
the number of shares of Common Stock outstanding and (y) no issuances of any
other class or series of securities. As of December 22, 1998, the Company had
outstanding options, warrants and similar rights entitling the holders to
purchase up to 6,042,499 shares of Common Stock. Other than as set forth in the
preceding sentence, the Company 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
Common Stock, except as disclosed in the SEC Reports. The Company has duly
reserved from its authorized and unissued shares of Common Stock the full number
of shares required for (a) all options, warrants, convertible securities and
other rights to acquire shares of Common Stock which are outstanding and (b) all
shares of Common Stock and options and other rights to acquire shares of Common
Stock which may be issued or granted under the stock option and similar plans
which have been adopted by the Company. Each outstanding class or series of
securities, if any, for which any antidilution or similar adjustment arising by
reason of the issuance or exercise of the Warrants is identified on Schedule
4(b)-1 attached hereto, together with the amount of such antidilution
adjustment. The outstanding shares of Common Stock and outstanding options,
warrants and other securities convertible into, exchangeable for or otherwise
entitling the holder thereof to acquire shares of Common Stock have been duly
authorized and validly issued. None of such outstanding shares of Common Stock,
options, warrants and other securities has been issued in violation of the
preemptive rights of any security holder of the Company. The offers and sales of
the outstanding shares of Common Stock and such options, warrants and other
securities were at all relevant times either registered under the 1933 Act and
applicable state securities laws or exempt from such requirements. All
registration rights under the 1933 Act relating to any of the Company's
securities are described on Schedule 4(b)-2 attached hereto and, except as
described on such Schedule, no holder of any of the Company's securities has any
rights, "demand," "piggy-back" or otherwise, to have such securities registered
by reason of the intention to file, filing or effectiveness of the Registration
Statement.
.c.(c) Concerning the Warrant Shares and the Common Stock;.
The Warrant Shares have been duly authorized. The Warrant Shares, when
issued upon exercise of the Warrants 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 the Company or any other Person to acquire any of the Securities.
The Company has duly reserved 75,000 shares of Common Stock for issuance of the
Warrant Shares and the issuance of similar securities under the Other Note
Purchase Agreements, and such shares shall remain so reserved. The Common Stock
is listed for trading on the Nasdaq and (1) the Company and the Common Stock
meet the criteria for continued listing and trading on the Nasdaq; (2) the
Company 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 Common Stock is in effect.
The Company knows of no reason that the Warrant Shares will not be eligible for
listing on the Nasdaq.
.c.(d) Note Purchase Agreement; Note; Amendment Agreement;
Security Agreement; Warrants;. This Agreement, the Note, the Amendment
Agreement, the Registration Rights Agreement, the Security Agreement and the
Warrants and the other agreements and instruments contemplated hereby and
thereby have been duly and validly authorized by the Company, this Agreement has
been duly executed and delivered by the Company and this Agreement is, and the
Note, the Amendment Agreement, the Registration Rights Agreement, the Security
Agreement and the Warrants and such other agreements, when executed and
delivered by the Company, will be, valid and binding obligations of the Company
enforceable in accordance with their respective terms, 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.
.c.(e) Non-contravention;. The execution and delivery by the
Company of this Agreement and the other documents contemplated by this Agreement
and the consummation by the Company of the issuance of the Note and the Warrants
as contemplated by this Agreement, and the other transactions contemplated by
this Agreement, the Amendment Agreement, the Registration Rights Agreement, the
Security Agreement, the Note and the Warrants do not and will not, with or
without the giving of notice or the lapse of time, or both (i) result in any
violation of any terms of the Certificate of Incorporation or by-laws of the
Company, (ii) conflict with or result in a breach by 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 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 the Company pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company is a party
or by which the Company or any of its properties or assets is bound or affected,
(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 the Company or any of its properties or assets or (iv) have
any material adverse effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company to own or
lease and operate any of its properties or to conduct any of its business or the
ability of the Company to make use thereof.
.c.(f) 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 stockholders of the Company is
required to be obtained or made by the Company for (1) the execution, delivery
and performance by the Company of this Agreement, the Note, the Amendment
Agreement, the Registration Rights Agreement, the Security Agreement, the
Warrants and the other agreements and instruments contemplated hereby and
thereby, (2) the issuance and sale of the Note and the issuance of the Warrants
as contemplated by this Agreement and (3) the issuance of the Warrant Shares
upon the exercise of the Warrants, other than (w) the listing of the Warrant
Shares on the Nasdaq, (x) registration of the resale of the Warrant Shares under
the 1933 Act as contemplated by the Registration Rights Agreement, (y) as may be
required under applicable state securities or "blue sky" laws and (z) filing of
one or more Forms D with respect to the Shares as required under Regulation D.
.c.(g) Information Provided;. The information provided by or
on behalf of the Company to the Buyer in connection with the transactions
contemplated by this Agreement, including, without limitation, the information
referred to in Section 3(e) of this Agreement, 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 4(g), any statement contained in such information shall be deemed
to be modified or superseded for purposes of this Section 4(g) 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. The Company has
not filed any reports with the SEC under the 1934 Act since February 28, 1998
other than the SEC Reports.
.c.(h) Absence of Certain Changes; Liabilities;. Except as
disclosed in the 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 the Company. Except as and to the extent disclosed, reflected or
reserved against in the financial statements of the Company and the notes
thereto included in the SEC Reports, the Company 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, including without limitation any such liabilities or obligations to Aura,
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 SEC Reports.
.c.(i) Absence of Certain Proceedings;. Except as described
in the SEC Reports, there is no Action pending or, to the knowledge of the
Company, threatened against the Company, in any such case wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, condition (financial or other), results of operations or
prospects of the Company or the transactions contemplated by this Agreement or
any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents;
the Company does not have pending before the SEC any request for confidential
treatment of information and to the best of the Company's knowledge no such
request will be made by the Company prior to the time the Registration Statement
relating to the Warrant Shares which is contemplated by the Registration Rights
Agreement is first ordered effective by the SEC; and there has not been, and to
the best of the Company's knowledge there is not pending or contemplated, any
investigation by the SEC involving the Company or any current or former director
or officer of the Company.
.c.(j) Properties;. The Company has good title to all
property real and personal (tangible and intangible) and other assets owned by
it, free and clear of all security interests, charges, mortgages, liens or other
encumbrances, except such as are described in the SEC Reports or such as do not
materially interfere with the use of such property made, or proposed to be made,
by the Company. The leases, licenses or other contracts or instruments under
which the Company lease, hold or is entitled to use any property, real or
personal, are valid, subsisting and enforceable with only such exceptions as do
not materially interfere with the use of such property made, or proposed to be
made, by the Company. The Company has not received notice of any material
violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. The Company does not have any
knowledge of, and the Company has not given or received any notice of, any
pending conflicts with or infringement of the rights of others with respect to
any Company Proprietary Rights or with respect to any license of Company
Proprietary Rights. No action, suit, arbitration, or legal, administrative or
other proceeding or investigation is pending, or, to the best knowledge of the
Company, threatened, which involves any Company Proprietary Rights. The Company
is not subject to any judgment, order, writ, injunction or decree of any court
or any federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitrator, has not entered into and is not a party to any contract which
restricts or impairs the use of any such Company Proprietary Rights in a manner
which would have a material adverse effect on the use by the Company of any of
the Company Proprietary Rights. To the best knowledge of the Company, no Company
Proprietary Rights and no services or products sold by the Company, conflict
with or infringe upon any proprietary rights available to any third party. The
Company has not received written notice of any pending conflict with or
infringement upon such third-party proprietary rights. The Company has not
entered into any consent, indemnification, forbearance to xxx or settlement
agreement with respect to Company Proprietary Rights other than in the ordinary
course of business. No claims have been asserted by any Person with respect to
the validity of the Company's ownership or right to use the Company Proprietary
Rights and, to the best knowledge of the Company, there is no reasonable basis
for any such claim to be successful. To the best knowledge of the Company, the
Company Proprietary Rights are valid and enforceable. No registration relating
to the Company Proprietary Rights has lapsed, expired or been abandoned or
canceled or is the subject of cancellation or other adversarial proceedings, and
all applications therefor are pending and are in good standing, except for such
lapses, expirations, abandonments, cancellations, adversarial proceedings or
failures to be in good standing which would not, singly or in the aggregate,
have a material adverse effect on the business, properties, operations,
condition (financial or otherwise), results of operations or prospects of the
Company. The Company has complied, in all material respects, with its
contractual obligations relating to the protection of the Company Proprietary
Rights used pursuant to licenses. To the best knowledge of the Company, no
Person is infringing on or violating the Company Proprietary Rights.
.c.(k) Labor Relations;. No material labor problem exists or,
to the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
.c.(l) SEC Filings;. The Company 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.
.c.(m) Absence of Brokers, Finders, Etc;. No broker, finder
or similar Person is entitled to any commission, fee or other compensation by
reason of the transactions contemplated by this Agreement and the Company shall
pay, and indemnify and hold harmless the Buyer from, any claim made against the
Buyer by any Person for any such commission, fee or other compensation.
.c.(n) No Solicitation;. No form of general solicitation or
general advertising was used by the Company or, to the best of its knowledge,
any other Person acting on behalf of the Company, in respect of or in connection
with the offer and sale of the Note or the Warrants. Neither the Company nor, to
its knowledge, any Person acting on behalf of the Company has, either directly
or indirectly, sold or offered for sale to any Person the Note or the Warrants
or, within the six months prior to the date hereof, any other similar security
of the Company except as contemplated by this Agreement; and neither the Company
nor any Person authorized to act on its behalf will sell or offer for sale any
notes or warrants, or solicit any offers to buy any notes or warrants, so as
thereby to cause the issuance or sale of the Note or the issuance of the
Warrants to be in violation of Section 5 of the 1933 Act.
.c.(o) Certain Issuances of Securities; Rights of First
Refusal;. Except as set forth on Schedule 4(o) attached hereto, the Company has
not issued any shares of 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 Common Stock which are subject to the
Stockholder Approval Rule and which could be integrated with the issuance of the
Warrant Shares to the Buyer under the Stockholder Approval Rule. Except as
provided in the Subscription Agreements, no Person has any right of first
refusal or similar right to acquire any of the Company's securities. Since
December 1, 1998, the Company has not issued any Equity Securities other than
such Equity Securities described in the proviso to Section 5(i)(2).
.c.(p) Absence of Rights Agreement;. The Company has not
adopted a shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.
.c.5 CERTAIN COVENANTS AND ACKNOWLEDGMENTS;.
.c.(a) Transfer Restrictions;. The Company and the Buyer
acknowledge and agree that (1) the Note and the Warrants have not been and are
not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement with respect to the resale of the
Warrant Shares, the Warrant 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 Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, 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 the
Company nor any other Person is under any obligation to register the Securities
(other than registration of the resale of the Warrant Shares pursuant to the
Registration Rights Agreement) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder (other than pursuant to Section 5(d)
hereof and pursuant to the Registration Rights Agreement).
.c.(b) Restrictive Legends;.
(1) The Buyer acknowledges and agrees that the Note shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Note):
This Note has not been registered under the Securities Act of 1933, as amended.
This Note has been acquired for investment only and may not be sold, transferred
or assigned in the absence of registration of the resale thereof under the
Securities Act of 1933, as amended, or an opinion of counsel reasonably
satisfactory in form, scope and substance to the Company that such registration
is not required.
(2) The Buyer acknowledges and agrees that the Warrants shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Warrants):
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.
(3) The Buyer further acknowledges and agrees that until such
time as the Warrant Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
Warrant 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 Warrant 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.
(4) Once the Registration Statement required to be filed by
the Company pursuant to Section 2 of the Registration Rights Agreement has been
declared effective, thereafter (1) upon request of the Buyer the Company will
substitute certificates without restrictive legend for certificates for any
Warrant 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 Buyer and (2) the
Company shall not place any restrictive legend on certificates for any Warrant
Shares issued or impose any stop-transfer restriction thereon.
.c.(c) Security Agreement; Amendment Agreement;. On or before
the Closing Date, the parties hereto agree (i) to cause the Security Agreement
in the form attached hereto as Annex IV to be entered into by the Company and
the Collateral Agent and (ii) to enter into the Amendment Agreement in the form
attached hereto as Annex V. The Company shall prepare, and on or before the
Closing Date, file with the appropriate officials, Uniform Commercial Code
financing statements on Form UCC-1 relating to the collateral in which the
Company is granting a security interest to the Collateral Agent for the benefit
of the Buyer pursuant to the Security Agreement. The Company shall provide
evidence of such filings and customary search reports of the records of the
relevant Uniform Commercial Code filing offices on or prior to the Closing Date.
.c.(d) Form D;. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Buyer agrees to cooperate
with the Company in connection with such filing and, upon request of the
Company, to provide all information relating to the Buyer reasonably required
for such filing.
.c.(e) Authorization for Trading; Reporting Status;. Within
two Business Days after the Closing Date, the Company shall file a
notification for listing of additional shares with the Nasdaq relating to the
Warrant Shares and on or prior to such date shall provide evidence of such
filing to the Buyer. So long as the Buyer owns any of the Warrant Shares, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act and the Company 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.
.c.(f) Use of Proceeds;. The Company does not own or have any
present intention of acquiring any "margin stock" as defined in Regulation G (12
CFR Part 207) of the Board of Governors of the Federal Reserve System ("margin
stock"). The proceeds of sale of the Note will be used for general working
capital purposes and in the operation of the Company's business. None of such
proceeds will be used, directly or indirectly (1) to make any loan to or
investment in any other Person or (2) for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any indebtedness which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute the transactions
contemplated by this Agreement a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the transactions
contemplated hereby to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the 1934 Act, in each case as in effect now or as the same may hereafter be in
effect.
.c.(g) Blue Sky Laws;. On or before the Closing Date, the
Company shall take such action as and to the extent it shall be necessary or
required to qualify, or to obtain an exemption for, the Note for sale to the
Buyer and the Warrants for issuance to the Buyer pursuant to this Agreement, and
the Warrant Shares for issuance to the Buyer on exercise of the Warrants under
such of the securities or "blue sky" laws of jurisdictions as shall be
applicable to the sale of the Note and the issuance of the Warrants pursuant to
this Agreement, and the issuance to the Buyer of Warrant Shares on exercise of
the Warrants. 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.
.c.(h) Certain Expenses;. Whether or not any closing occurs,
the Company shall pay or reimburse the Buyer for all reasonable expenses
(including, without limitation, legal fees and expenses of counsel to the
Buyer), not in excess of $30,000 in the aggregate for the Buyer and the Other
Buyers, incurred by the Buyer in connection with this Agreement and the
transactions contemplated hereby, including without limitation compliance with
the Buyer's SEC beneficial ownership reporting obligations. The Company shall
pay on demand all expenses incurred by the Buyer, including reasonable
attorneys' fees and expenses, as a consequence of, or in connection with (1) the
negotiation, preparation or execution of any amendment, modification or waiver
of this Agreement, the Security Agreement, the Registration Rights Agreement,
the Amendment Agreement, the Note, the Warrants and the other agreements and
instruments contemplated hereby and thereby requested by the Company, (2) any
default or breach of any of the Company's obligations set forth in any of such
agreements or instruments and (3) the enforcement or restructuring of any right
of, including the collection of any payments due, the Buyer under any of such
agreements or instruments, including any action or proceeding relating to such
enforcement or any order, injunction or other process seeking to restrain the
Company from paying any amount due the Buyer, in which the Buyer prevails. The
Company shall pay all costs and expenses associated with the issuance and
delivery of the Securities (including offers, sales or transfers of Equity
Securities by Aura).
.c.(i) Certain Issuances of Securities;. (1) Unless the
Company obtains the Stockholder Approval or a waiver thereof from the Nasdaq,
the Company will not issue any shares of 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 Common Stock which would be
subject to the requirements of the Stockholder Approval Rule and which would be
integrated with the issuance of Warrant Shares to the Buyer for purposes of the
Stockholder Approval Rule.
(2) During the period from the date of this Agreement to the
date which is 180 days after the Closing Date, the Company shall not offer,
sell, contract to sell or issue (or engage any Person to assist the Company in
taking any such action) any Equity Securities (including offers, sales or
transfers of Equity Securities by Aura); provided, however, that nothing in this
Section 5(i) shall prohibit the Company from issuing securities (v) consisting
of up to 1,500,000 shares of Common issuable to trade creditors of the Company
which shares may not be registered for resale on a registration statement filed
with the SEC prior to 120 days after the issuance thereof, (w) as permitted by
Section 6(i)(4) of the Subscription Agreements, (x) pursuant to compensation
plans for employees, directors, officers, advisers or consultants of the Company
and in accordance with the terms of such plans as in effect as of the date of
this Agreement, (y) upon exercise of conversion, exchange, purchase or similar
rights issued, granted or given by the Company and outstanding as of the date of
this Agreement and disclosed in the SEC Reports or this Agreement or (z)
pursuant to the specific terms of the transaction described on Schedule
6(i)(2)attached hereto.
(3) Except for the transaction described on Schedule 6(i)(2),
during the period from the date of this Agreement to the date which is 180 days
after the Closing Date, the Company shall not discuss, negotiate or pursue any
debt or equity financing proposal with a third party without the prior written
consent of the Buyer.
.c.(j) Stockholder Approval;. (1) On or before January 29,
1999, the Company shall seek and use its best efforts to obtain, at a special
meeting of its stockholders called for such purpose or by written consent of the
Company's stockholders, Stockholder Approval of the issuance of the Warrant
Shares issued and issuable pursuant to this Agreement, all similar securities
issued and issuable pursuant to the Other Note Purchase Agreements, and the
securities issued and issuable pursuant to the Subscription Agreements. The
Company shall prepare and file with the SEC within 30 days prior to the
scheduled mailing of notice of such special meeting or proposed consent
preliminary proxy materials which set forth a proposal to seek such Stockholder
Approval. The Company shall provide the Buyer an opportunity to consult with the
Company regarding the content of such proxy materials insofar as it relates to
the Stockholder Approval by providing copies of such preliminary proxy materials
and any revised preliminary proxy materials to the Buyer a reasonable period of
time prior to their filing with the SEC. The Company shall furnish to the Buyer
and its counsel a copy of its definitive proxy materials for such special
meeting or action by written consent and any amendments or supplements thereto
promptly after the same are mailed to stockholders or filed with the SEC.
(2) Prior to the closing on the Closing Date, the Company
shall deliver to the Buyer irrevocable proxies, in form satisfactory to Buyer
and its counsel and duly executed by stockholders who own of record and
beneficially in excess of 51% of the outstanding shares of Common Stock on the
Closing Date, which proxies (x) grant Buyer or its designee the authority to
vote all of such stockholders' shares in favor of the Stockholder Approval
described in Section 6(j)(1) and (y) prohibit such stockholders from spelling or
otherwise transferring their shares prior to such Stockholder Approval being
obtained.
.c.(k) Reservation and Authorization of Common Stock;. The
Company (and any successor corporation) shall take all action necessary so that
a number of shares of the authorized but unissued Common Stock (or common stock
in the case of any successor corporation) sufficient to provide for the issuance
of all Warrant Shares issuable hereunder are at all times reserved by the
Company (or any successor corporation), free from preemptive rights. If the
Company shall issue any securities or make any change in its capital structure
which would change the number of shares of Common Stock issuable as Warrant
Shares as herein provided, the Company shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for issuance
of such Warrant Shares on the new basis. If at any time the number of authorized
but unissued shares or the number of reserved shares of Common Stock shall not
be sufficient to permit the issuance of all Warrant Shares issuable hereunder,
(1) the Company promptly shall seek, and use its best efforts to obtain and
complete, such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose and (2) for each 30-day
period or portion thereof while such insufficiency shall continue, the Company
shall pay the Buyer, at the end of each such 30-day period or portion thereof,
an amount equal to the Insufficient Share Amount for each Warrant Share for
which Warrants have been exercised which is not then issuable by reason of such
insufficiency. The payment provided in clause (2) of the foregoing sentence
shall be in addition to and shall not limit any other rights or remedies of the
Buyer under this Agreement and applicable law.
.c.(l) Suspension of Trading;. In addition to adjustments of
the Repricing Price and any other rights and remedies which the Buyer has under
this Agreement and under applicable law, for each Business Day on which trading
in the shares of Common Stock is suspended or prohibited on the principal
securities market for the Common Stock (including, if applicable, the OTC
Bulletin Board), the Company shall pay the Buyer an amount equal to 0.2% of the
product of (1) the number of Warrant Shares then held by the Buyer and (2) the
Closing Price of the Common Stock on the Trading Day prior to such suspension or
prohibition. The cumulative amount of such amounts which have accrued shall be
paid by the Company to the Buyer every seven Business Days after the date of
such suspension or prohibition.
.c.(m) Overdue Amounts;. Whenever any amount which is due by
the Company to any holder of Warrants or Warrant Shares, pursuant to the terms
of this Agreement, the Registration Rights Agreement, the Amendment Agreement or
the Warrants, is not paid to such holder when due, such amount shall bear
interest at the rate of 14% per annum (or such lesser rate as shall be the
maximum rate allowable by applicable law) until paid in full.
.c.(n) Transactions with Affiliates;. The Company will not,
and will not permit any subsidiary of the Company, directly or indirectly, to
pay any funds to or for the account of, make any investment (whether by
acquisition of stock or indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service, directly or
indirectly, any indebtedness, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with, any joint enterprise or other
joint arrangement with, any Affiliate of the Company (including without
limitation Aura, Aura's Affiliates, and their respective directors, officers and
stockholders), except, on terms to the Company or such subsidiary no less
favorable than terms that could be obtained by the Company or such subsidiary
from a Person that is not an Affiliate of the Company, as determined in good
faith by the Board of Directors.
.c.(o) Other;. So long as any Note, Warrant Shares or
Warrants are owned by the Buyer:
.c.(1) Payment of Obligations;. The Company will pay and
discharge, and will cause each subsidiary of the Company to pay and discharge,
when due all their respective obligations and liabilities which are material to
the Company and its subsidiaries taken as a whole, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
.c.(2) Maintenance of Property; Insurance;. (A) The Company
will keep, and will cause each subsidiary of the Company to keep, all material
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(B) The Company will maintain, and will cause each subsidiary
of the Company to maintain, with financially sound and responsible insurance
companies, insurance against loss or damage by fire or other casualty and such
other insurance, including but not limited to, product liability insurance, in
such amounts and covering such risks as is reasonably adequate for the conduct
of their businesses and the value of their properties.
.c.(3) Conduct of Business and Maintenance of Existence;.
The Company will continue, and will cause each subsidiary of the Company to
continue, to engage in business of substantially the same general type as
conducted by the Company and its operating subsidiaries on the date of this
Agreement, and will preserve, renew and keep in full force and effect, and will
cause each subsidiary of the Company to preserve, renew and keep in full force
and effect, their respective corporate existence and their respective material
rights, privileges and franchises necessary or desirable in the normal conduct
of business.\
.c.(4) Compliance with Laws;. The Company will comply, and
will cause each subsidiary of the Company to comply, in all material respects
with all applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and its subsidiaries taken as a whole.
.c.(5) Investment Company Act;. The Company will not be or
become an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8 of
the Investment Company Act of 1940, as amended, or any successor provision.
.c.(p) Best Efforts;. Each of the parties shall use its best
efforts timely to satisfy each of the conditions to the other party's
obligations to sell and purchase the Initial Shares set forth in Section 7 or 8,
as the case may be, of this Agreement on or before the Closing Date.
.c.6. CLOSING DATE;.
Subject to the satisfaction or waiver of the conditions set
forth in Sections 7 and 8, the Closing Date shall be 12:00 noon, New York City
time, on or before the date which is two Business Days after the date of this
Agreement, or such other mutually agreed to time. The closing of the sale of the
Note and the other transactions contemplated hereby shall occur on the Closing
Date at the offices of the Escrow Agent.
.c.7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
AND ISSUE;.
The Buyer understands that the Company's obligation to sell
the Note and issue the Warrants to the Buyer pursuant to this Agreement on the
Closing Date is conditioned upon the satisfaction of the following conditions
precedent on or before the Closing Date (any or all of which may be waived by
the Company in its sole discretion):
(1) The receipt and acceptance by the Company of this
Agreement as evidenced by execution of this Agreement by the Company and
delivery of an executed counterpart of this Agreement to the Buyer or its legal
counsel;
(2) Delivery by the Buyer to the Escrow Agent of good funds
as payment in full of an amount equal to the Purchase Price for the Note, in
accordance with Section 2(b) hereof; and
(3) The accuracy on the Closing Date of the representations
and warranties of the Buyer contained in this Agreement as if made on the
Closing Date and the performance by the Buyer on or before the Closing Date of
all covenants and agreements of the Buyer required to be performed on or before
the Closing Date.
.c.8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE;.
The Company understands that the Buyer's obligation to
purchase the Note and acquire the Warrants from the Company pursuant to this
Agreement on the Closing Date is conditioned upon the satisfaction of the
following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Buyer in its sole discretion):
(1) Delivery by the Company to the Escrow Agent of the
certificates for the Note and the Warrants in accordance with this Agreement;
(2) The accuracy on the Closing Date of the representations
and warranties of the Company contained in this Agreement as if made on the
Closing Date and the performance by the Company on or before the Closing Date of
all covenants and agreements of the Company required to be performed on or
before the Closing Date and receipt by the Buyer of a certificate, dated the
Closing Date, of the Chief Executive Officer or the Chief Financial Officer of
the Company confirming such matters and such other matters as the Buyer may
reasonably request;
(3) The receipt by the Buyer of a certificate, dated the
Closing Date, of the Secretary of the Company certifying (A) the Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date, (B)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby and
(C) such other matters as reasonably requested by the Buyer;
(4) The Collateral Agent shall have executed and delivered
the Security Agreement in the form attached hereto as Annex IV;
(5) Aura shall have executed and delivered (A) the Amendment
Agreement in the form attached hereto as Annex V and (B) the Aura Registration
Rights Agreement; and
(6) Receipt by the Buyer on the Closing Date of an opinion of
Xxxxx & Associates, counsel for the Company, dated the Closing Date, in form,
scope and substance reasonably satisfactory to the Buyer, to the effect set
forth in Annex VIattached hereto.
.c.9. MISCELLANEOUS;.
.c.(a) Governing Law;. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of California.
.c.(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. Although this Agreement is dated as of the date first
set forth above, the actual date of execution and delivery of this Agreement by
each party is the date set forth below such party's signature on the signature
page hereof. Any reference in this Agreement or in any of the documents executed
and delivered by the parties hereto in connection herewith to (1) the date of
execution and delivery of this Agreement by the Buyer shall be deemed a
reference to the date set forth below the Buyer's signature on the signature
page hereof, (2) the date of execution and delivery of this Agreement by the
Company shall be deemed a reference to the date set forth below the Company's
signature on the signature page hereof and (3) the date of execution and
delivery of this Agreement or the date of execution and delivery of this
Agreement by the Buyer and the Company shall be deemed a reference to the later
of the dates set forth below the signatures of the parties on the signature page
hereof.
.c.(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.
.c.(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 or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
.c.(e) Amendments;. No amendment, modification, waiver,
discharge or termination of any provision of this Agreement nor consent to any
departure by the Buyer 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 hereto
shall operate as an amendment of this Agreement.
.c.(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 an 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 thereof or exercise of any other right or power.
.c.(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 this Agreement, Attention:
Chief Executive Officer (telephone line facsimile transmission number (818)
597-1002), or, in the case of the Buyer, at its address or telephone line
facsimile transmission number shown on the signature page of this Agreement, or
such other address or telephone line facsimile transmission number as a party
shall have provided by notice to the other party in accordance with this
provision.
.c.(h) Assignment;. Prior to the Closing Date, the Buyer
shall have the right to assign its rights and obligations under this Agreement
with respect to the purchase of all or any portion of the Note and the issuance
of the Warrants to any Affiliate of the Buyer, provided any such assignee, by
written instrument duly executed by such assignee, assumes all obligations of
the Buyer hereunder with respect to the purchase of the portion of the Note or
the acquisition of the Warrants so assigned and makes the same representations
and warranties with respect thereto as the Buyer makes in this Agreement,
whereupon the Buyer shall be relieved of any further obligations,
responsibilities and liabilities with respect to the purchase of all or the
portion of the Note and the acquisition of the Warrants the obligation for the
purchase or acquisition of which has been so assigned. In the case of any such
assignment, the Company shall agree in writing with such assignee to make
available to such assignee the benefits of the Registration Rights Agreement
with respect to the Warrants and the Warrant Shares with respect to which the
purchase under this Agreement has been so assigned. Any transfer of the Warrants
or the Warrant Shares by the Buyer after the Closing Date shall be made in
accordance with Section 5(a). After the Closing Date, the Buyer shall have the
right to assign its rights and obligations under this Agreement in connection
with any transfer of the Buyer's rights under the Registration Rights Agreement
by compliance with the provisions of Section 9 of the Registration Rights
Agreement.
.c.(i) Survival of Representations and Warranties;. The
respective representations, warranties, covenants and agreements of the
Buyer 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 Initial Shares 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.
.c.(j) Entire Agreement;. This Agreement and its Schedules
and Annexes 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.
.c.(k) Termination;. The Buyer shall have the right to
terminate this Agreement by giving notice to the Company at any time at or prior
to the Closing Date if:
(1) the Company shall have failed, refused, or been unable at or prior
to the date of such termination of this Agreement to perform any of its
obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing of the sale of the Note shall not have occurred on a
Closing Date on or before December 29, 1998, other than solely by reason of a
breach of this Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
.c.(l) Further Assurances;. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
.c.(m) Public Statements, Press Releases, Etc;. The Company
and the Buyer shall have the right to approve before issuance any press releases
or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
(although the Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
.c.(n) Construction;. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
~ IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer and the
Company by their respective officers or other representatives thereunto duly
authorized on the respective dates set forth below.
PRINCIPAL AMOUNT OF NOTE:
PURCHASE PRICE:
NUMBER OF WARRANT SHARES:
[NAME OF BUYER]
By:________________________________
Name:
Title:
Date:
Address:
Facsimile No.:
XXXXXX, INC.
By:__________________________________
Name:
Title:
Date:
