EXHIBIT 10.1
PARENT COMPANY AGREEMENT
THIS PARENT COMPANY AGREEMENT, dated as of November 30, 1998,
by and among AURA SYSTEMS, INC., a Delaware corporation ("Aura"), XXXXXX, INC.,
a Delaware corporation (the "Company"), and the holders of Common Shares (as
defined below) named on the signature pages hereto (the "Original Holders").
W I T N E S S E T H:
WHEREAS, pursuant to the several Subscription Agreements,
each dated as of November 30, 1998, by and between the Company and the Original
Holders (the "Subscription Agreements"), the Company has agreed, upon the terms
and subject to the conditions of the Subscription Agreements, to issue to the
Original Holders, and the Original Holders have agreed to purchase from the
Company, shares (the "Common Shares") of Common Stock, $.001 par value (the
"Common Stock"), of the Company and in connection therewith the Company has
agreed to issue certain Repricing Rights (as defined in the Subscription
Agreements) and Common Stock Purchase Warrants (the "Warrants") to the Original
Holders;
WHEREAS, Aura beneficially owns a majority of the
outstanding Common Stock of the Company; and
WHEREAS, as a condition precedent to the respective
obligations of the Original Holders to purchase the Common Shares and acquire
the Repricing Rights and the Warrants, the Original Holders require the
execution and delivery of this Agreement by Aura and the Company;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. (a) The following terms shall have the
following meanings (such meanings to be equally applicable to both
the singular and plural forms of the terms defined):
"Aura Affiliate" means any Aura Transferee or any Affiliate,
officer, director, security holder or lender of Aura or any Aura Transferee.
"Aura Transferee" means any Person to whom any Company
Obligations are sold, transferred, assigned or pledged.
"Company Obligations" means (i) all Indebtedness of the
Company, whether now existing or hereafter created, owed to Aura or any Aura
Affiliate, including without limitation the Company's promissory note, dated
September 17, 1998, due to Aura in the principal amount of $17,000,000 (the
"Existing Note") and (ii) all other financial obligations and liabilities of the
Company, whether now existing or hereafter created, owed to Aura or any Aura
Affiliate.
"Holders" means the Original Holders and each other holder of
Repricing Rights and Warrants.
"Indebtedness" as used in reference to any Person means all
indebtedness of such Person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with generally accepted accounting principles and
shall include all such indebtedness guaranteed in any manner by such Person or
in effect guaranteed by such Person through a contingent agreement to purchase
and all indebtedness for the payment or purchase of which such Person has
contingently agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such Person, although such Person
has not assumed or become liable for the payment of such indebtedness, and, for
all purposes hereof, such indebtedness shall be treated as though it has been
assumed by such Person.
"Net Operating Cashflow" means for any period the lesser of
(i) the Company's earnings before interest, taxes, depreciation and amortization
(EBITDA) and (ii) the Company's cash flow from operating activities, in each
case as determined in accordance with generally accepted accounting principles,
as consistently applied by the Company in preparing its audited financial
statements.
(b) Capitalized terms defined in the introductory paragraph
or the recitals to this Agreement shall have the respective meanings therein
provided. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Subscription Agreements.
2. Payment of Company Obligations. (a) Except as permitted by
Section 2(b), Aura and the Company agree that during the period commencing on
the date hereof and ending on the 545th day after the date hereof, the Company
may only pay Company Obligations due to Aura or any Aura Affiliate from the
Company's Net Operating Cashflow, if any, in any calendar month and no other
source of funds may be used by the Company to pay Company Obligations. Aura
agrees that it will not accelerate, commence any legal action or take any other
action to compel payment by the Company of any Company Obligations if the
Company's failure to pay any amount of Company Obligations when due results from
insufficient Net Operating Cashflow in any calendar month. After the date
hereof, Aura shall not transfer, assign or pledge any Company Obligations unless
each such Aura Transferee agrees in writing to be bound by this Section 2.
Within two Business Days after the end of each calendar month while this Section
2(a) is applicable, the Company shall deliver to each Holder a compliance
certificate in the form of Exhibit A attached hereto.
(b) Notwithstanding the restrictions in Section 2(a), if the
Company receives net proceeds from (i) a secured, non-convertible debt
refinancing by a third party institutional lender after deducting all amounts
required to pay off the Indebtedness being refinanced, up to $3,000,000 of such
proceeds may be used to pay Company Obligations or (ii) an unsecured,
non-convertible debt refinancing by a third party institutional lender after
deducting all amounts required to pay off the Indebtedness being refinanced, all
of such proceeds may be used to pay Company Obligations.
3. Proposed Issuance of Convertible Notes. The Company and
Aura have advised the Original Holders that up to $3,000,000 principal amount of
outstanding Indebtedness of the Company owed to Aura represented by the Existing
Note, is proposed to be canceled and exchanged for new promissory notes of the
Company (the "Convertible Notes") in the same principal amount which will be
convertible into Common Stock. The Company and Aura agree that the Convertible
Notes (i) will not have a principal amount in excess of $3,000,000, (ii) will
bear interest at a rate not to exceed 10% per annum and (iii) will be
convertible at a conversion price of not less than $5.00 of principal amount of
such Convertible Note for each share of Common Stock.
4. Sales of Common Stock. The Company may register for resale
under the 1933 Act up to 3,000,000 shares of Common Stock held by Aura. Aura
agrees that during the period commencing on the date hereof and ending one year
after the date hereof (regardless of the number of shares beneficially owned at
any time by Aura), Aura will not sell such shares pursuant to the registration
statement filed in connection with such registration unless each such sale (i)
is at a price of at least $6.00 per share and (ii) is made in blocks of at least
100,000 shares.
5. Equitable Adjustments. All amounts with respect to shares
of Common Stock stated in dollars and numbers of shares in Section 3 and Section
4 shall be subject to equitable adjustments from time to time on terms
reasonably acceptable to the Holders for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events occurring
after the date hereof.
6. Representations and Warranties. Aura and the Company
hereby jointly and severally represent and warrant to, and covenant and agree
with, the Holders as follows:
.c.(a) Organization and Authority;. Aura is a corporation duly
organized and validly existing under the laws of Delaware, and has all requisite
corporate power and authority to (i) own, lease and operate its properties and
to carry on its business as now being conducted, and (ii) to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
.c.(b) Parent Company Agreement. This Agreement has been duly
and validly authorized, executed and delivered by Aura and this Agreement is a
valid and binding obligation of Aura enforceable in accordance with its 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.(c) Non-contravention;. The execution and delivery by Aura
of this Agreement and the consummation by Aura of the transactions contemplated
by this Agreement, 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 Aura, (ii) conflict with or result in
a breach by Aura or the Company of any of the terms or provisions of, or
constitute a default under, or result in the modification, amendment,
termination or cancellation of, result in the acceleration of any obligation of
Aura or the Company under, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Aura or the Company pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which Aura or the Company is a party or by which Aura
or the Company or any of their respective properties or assets is bound or
affected, or (iii) violate or contravene any applicable law, rule or regulation
or any applicable decree, judgment or order of any court, United States federal
or state regulatory body, administrative agency or other governmental body
having jurisdiction over Aura or the Company or any of their respective
properties or assets.
.c.(d) Approvals;. No authorization, approval or consent of,
or filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the security holders of or lenders
to Aura, or any other third party, is required to be obtained or made by Aura or
the Company for the execution, delivery and performance by Aura and the Company
of this Agreement and by the Company of the Subscription Agreements and the
other agreements, transactions and instruments contemplated hereby and thereby.
.c.(e) 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.
As of November 30, 1998, the aggregate amount of outstanding Indebtedness of the
Company owed to Aura and Aura Affiliates is $19,099,256.26.
7. Term. This Agreement shall become effective on the date
hereof and shall continue in full force and effect until the Holders no longer
beneficially own any Securities.
.c.8. 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.
.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 Holders, Aura or the Company therefrom shall in any event be
effective unless the same shall be in writing and signed by the party to be
charged with enforcement, and then shall be effective only in the specific
instance and for the purpose for which given; provided, however, this Agreement
may be amended on behalf of the Holders by written consent of those Holders
holding a majority of both the outstanding Shares and the outstanding Repricing
Rights. 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 the Subscription Agreements,
Attention: Chief Executive Officer (telephone line facsimile transmission number
(000) 000-0000), in the case of Aura addressed to Aura at 0000 Xxxxxx Xxxxxx, Xx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Chief Financial Officer (telephone line
facsimile transmission number (000) 000-0000) or, in the case of each Original
Holder, at its address or telephone line facsimile transmission number shown on
the signature page of this Agreement or, in the case of any Holder who is not an
Original Holder, to such address as such Holder shall have provided in writing
to the Company and Aura for such purpose or, in each such case, such other
address or telephone line facsimile transmission number as a party shall have
provided by notice to the other parties in accordance with this provision.
.c.(h) Assignment;. Each Original Holder shall have the right
to assign its rights and obligations under this Agreement to any party to whom
it assigns its rights under its Subscription Agreement. Each Holder shall be
entitled to the rights and benefits of the Original Holders under this
Agreement.
.c.(i) Survival of Representations and Warranties;. The
respective representations, warranties, covenants and agreements of Aura and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of payment
for the Initial Shares pursuant to the Subscription Agreements and shall remain
in full force and effect regardless of any investigation made by or on behalf of
them or any Person controlling or advising any of them.
.c.(j) Entire Agreement;. This Agreement and the Subscription
Agreements and the agreements and instruments contemplated thereby 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.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto by their respective officers or other representatives
thereunto duly authorized as of the date first set forth above.
AURA SYSTEMS, INC.
By:______________________________
Name:
Title:
Xxxxxx, INC.
By:______________________________
Name:
Title:
[ORIGINAL HOLDERS]
By:______________________________
Name:
Title:
Address:
Facsimile No.:
Exhibit A
XXXXXX, INC.
COMPLIANCE CERTIFICATE
TO: The Holders
Pursuant to the Parent Company Agreement, dated as of
November 30, 1998, by and among XxxXxx, Inc. (the "Company"), Aura Systems, Inc.
("Aura") and the holders of Common Shares named therein (the "Agreement"; all
capitalized terms used herein without definition have the meanings given to them
in the Agreement), the undersigned Chief Executive Officer or Chief Financial
Officer of the Company hereby certifies as follows:
(1) As of the last day of the month of __________ (the "Designated
Month"), _____ [INSERT YEAR], the aggregate amount of outstanding Company
Obligations is $____________;
(2) During the Designated Month, the Company paid a total of
$__________ of Company Obligations; and
(3) The Company is in compliance with its obligations under Section 2
of the Agreement and knows of no reason why it will not be in compliance with
Section 2 for the month following the Designated Month.
Dated:
Name:
Title:
