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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended November 30, 1998 Commission File Number 0-23079
NEWCOM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4485355
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
31166 Via Colinas
Westlake Village, CA 91362
(Address of principal executive offices)
Registrant's telephone number, including area code: (818) 597-3200
Former name, former address and former fiscal year, if changed since last
report: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at January 18, 1999
Common Stock, par value 11,337,953 Shares
$.001 per share
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<PAGE>
NEWCOM, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<S> <C>
Statement Regarding Financial Information 2
Condensed Balance Sheets as of November 30, 1998 and February 28, 1998
3
Condensed Statement of Operations for the Three Months and Nine
months Ended November 30, 1998 and 1997 4
Condensed Statements of Cash Flows for the Nine Months Ended November
30, 1998 and 1997 5
Notes to Condensed Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds 12
ITEM 3. Defaults Upon Senior Securities 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE>
NEWCOM, INC.
QUARTER ENDED NOVEMBER 30, 1998
PART I. FINANCIAL INFORMATION
The financial statements included herein have been prepared by Newcom, Inc. (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). As contemplated by the SEC under
Rule 10-01 of Regulation S-X, the accompanying financial statements and
footnotes have been condensed and therefore do not contain all disclosures
required by generally accepted accounting principles. However, the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K and
any amendments thereto for the year ended February 28, 1998 as filed with the
SEC (file number 0-23079).
<PAGE>
NEWCOM, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
November 30, February 28,
Assets 1998 1998
- ------ ------------ ---------------
<S> <C> <C>
Current assets
Cash and equivalents $ -- $ 1,982,436
Receivables-net 35,628,124 39,314,990
Inventories 29,457,329 41,223,718
Prepayments and deposits 4,018,437 7,463,622
Prepaid and deferred income taxes 1,600,000 1,156,220
Other current assets -- 296,214
---------------- ---------------
Total current assets 70,703,890 91,437,200
---------------- ----------
Property and equipment, at cost 3,629,813 3,461,435
Less accumulated depreciation
and amortization (1,987,646) (1,113,636)
----------------- ----------------
Net property and equipment 1,642,167 2,347,799
Engineering designs and drawings-net 108,384 216,768
Deferred tax asset -- 102,000
Long term investments 5,000,000 --
Other assets 1,398,775 2,023,249
---------------- ---------------
Total $ 78,853,216 $ 96,127,016
================ ===============
Liabilities and Stockholder's Equity
Current liabilities:
Bank overdraft $ 74,854 $ --
Line of credit 11,953,478 6,580,676
Accounts payable 21,733,649 32,734,140
Due to Aura 19,069,953 19,433,338
Accrued expenses 579,242 274,490
---------------- ---------------
Total current liabilities 53,411,176 59,022,644
Notes payable 9,515 21,583
COMMITMENTS AND CONTINGENCIES
Stockholders' equity
Common stock par value $.001 per share paid in
capital. Issued and outstanding 10,466,665
and 10,000,000 shares respectively. 33,866,394 32,223,221
Retained earnings (deficit) (8,433,869) 4,859,568
----------------- ---------------
Total stockholders' equity 25,432,525 37,082,789
---------------- ---------------
Total $ 78,853,216 $ 96,127,016
================ ==========
See accompanying notes to condensed financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEWCOM, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(Unaudited)
Three Months Nine Months
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross revenues $ 28,656,785 $ 36,588,449 $ 83,589,273 $ 79,962,672
Less discounts given 90,564 131,932 551,928 195,402
Less returns and allowances 8,051,799 6,282,310 16,973,208 11,836,651
-------------- -------------- --------------- ---------------
Net Revenues 20,514,422 30,174,207 66,064,137 67,930,619
Cost of revenues 28,219,083 21,604,389 59,966,810 47,227,900
---------- ---------- ---------- ----------
Gross Profit (7,704,661) 8,569,818 6,097,327 20,702,719
Expenses
Selling, general and administrative 9,114,611 4,299,283 18,575,397 10,445,669
-------------- -------------- -------------- --------------
Total costs and expenses 9,114,611 4,299,283 18,575,397 10,445,669
Income (loss) from operations (16,819,272) 4,270,535 (12,478,070) 10,257,050
Other (income) and expense
Other income (130,670) (55,333) (369,327) (102,554)
Interest expense-net 587,349 628,653 1,843,894 1,879,752
------------- ------------- -------------- -------------
Income (loss) before income taxes (17,275,951) 3,697,215 (13,952,637) 8,479,852
Provision (benefit) for income taxes (1,589,200) 970,715 (659,200) 2,438,114
--------------- ------------- ------------ --------------
Net income (loss) $(15,686,751) $ 2,726,500 $(13,293,437) $ 6,041,738
============ =============== ============ ===============
Net income (loss) per share-basic $ (1.55) $ .29 $ (1.32) $ .73
============== ============ ============= =============
Net income (loss) per share-diluted
$ (1.21) $ .23 $ (1.03) $ .66
============= ============ ============= ============
Average common and common equivalent shares
outstanding
Basic(a) 10,146,520 9,521,110 10,048,520 8,221,627
================ ================ ================ ================
Diluted(a) 13,016,095 11,804,470 12,918,095 9,160,668
================ ================ ================ ================
a-Adjusted to reflect a 7,578,947 for 1 stock split which occurred in September, 1997 in conjunction with the
Company's initial public offering.
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEWCOM, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
-------------- -------------
<S> <C> <C>
Net cash provided by (used) in operations $ (1,075,339) $ (17,931,739)
--------------- -----------------
Cash flows from investing activities:
Additions to property and equipment (168,378) (823,983)
Investment in stock (5,000,000) --
---------------- ----------------
Net cash provided by (used in) investing
activities (5,168,378) (823,983)
---------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,750,000 19,030,000
Financing and other fees paid (104,000) (2,959,877)
Net proceeds (payments) from borrowing 5,360,734 (162,555)
Cash advances from Aura 2,511,602 19,777,113
Cash repayments to Aura (5,257,055) (15,907,529)
---------------- ------------
Net cash provided by (used) in financing
activities: 4,261,281 19,777,152
-------------- --------------
Net increase (decrease) in cash and cash equivalents
(1,982,436) 1,021,430
Cash and cash equivalents at beginning of year 1,982,436 2,813,631
--------------- ---------------
Cash and cash equivalents at end of period $ -- $ 3,835,061
=============== ===============
Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest $ 742,326 $ 411,807
Income Tax 930,000 800
=============== ===============
In September 1997, $4,000,000 of payables to the company's parent, Aura Systems,
Inc. was converted into equity in conjunction with the Company's Initial Public
offering.
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
NEWCOM, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1) Management Opinion
The condensed financial statements include the accounts of Newcom, Inc.
(the "Company").
In the opinion of management, the accompanying condensed financial
statements reflect all adjustments (which include only normal recurring
adjustments) and reclassifications for comparability necessary to present fairly
the financial position and results of operations as of and for the three and
nine months ended November 30, 1998.
2) Significant Customers
The Company sold communication and multi-media products to three
significant customers during the nine months ended November 30, 1998. Sales of
communication and multi-media products to these major mass merchandisers
accounted for approximately $49.9 million in the nine months ended November 30,
1998. Sales to these customers in the comparable prior year period totalled
approximately $39.6 million.
None of the above customers are related or affiliated with the Company or
any customers of the Company. The Company has no reason to believe that sales to
any of these customers will not continue. Net revenues also declined in the
quarter as a result of declines in sales of one of NewCom's significant
customers to $1.5 million, compared to sales of $8 million in the immediately
preceding quarter.
3) Contingencies
The Company is engaged in legal actions arising in the ordinary course of
business. Provision for these matters has been made in the Company's financial
statements as deemed necessary.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Report may contain forward-looking statements, which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in such statements. Certain factors could also cause actual
results to differ materially from those discussed in such forward-looking
statements, including factors discussed in the Company's Form 10-K for the
period ended February 28, 1998, and factors discussed in this Report.
Results of Operations
The Company lost $15,686,751 after tax on net revenues of $20,154,422 for
the quarter ended November 30, 1998, compared to earnings of $2,726,500 after
tax on net revenues of $30,174,207 for the comparable prior year quarter. For
the nine months ended November 30, 1998, the Company lost $13,293,437 after tax
on net revenues of $66,064,137, compared to earnings of $6,041,738 after tax on
net revenues of $67,930,619 for the prior year nine month period.
The decrease in net revenues of $9,659,785 and $1,866,482 for the three and
nine month periods ended November 30, 1998 over the corresponding prior year
periods is largely a result of price pressure at the retail channel. Prices for
standard existing products such as 33.6K and 56K modems as well as 24X and 32X
CD ROM drives have declined from previous periods. This decline resulted in
lower revenues per item shipped. The Company is focusing on changing its product
mix over the next few months to higher value products. New products include the
E-CAM, a digital computer camera, DVD 3 systems, Thin Client Server (internet
computer system), wireless network system and USB product lines. The Company is
also preparing for the sale of ADSL and cable modems that will be available
later in the year. Net revenues also declined in the quarter as a result of
declines in sales of one of NewCom's significant customers to $1.5 million,
compared to sales of $8 million in the immediately preceding quarter.
Gross margins for the three months ended November 30, 1998 were a negative
$7,704,661 as compared to $8,569,818 in the prior year quarter. For the nine
month period, gross margins declined to $6,097,327 or 9.2% compared to
$20,702,718 or 30% in the previous year period. Excluding the effects of the
writedown of inventory of $10 million, the gross margins declined to 11.2% and
24.4% for the three and nine months ended November 30, 1998 as compared to 28.1%
and 30.5% in the prior year comparable periods. Gross margins decreased in the
quarter ended November 30, 1998, as a result of price pressure and a $10 million
writedown of inventory to reflect market conditions. Price protection programs
at the mass merchandiser retailers have put additional pressure on the Company's
margins. The Company has also focused on selling its existing inventory and
sacrificed margin in order to attempt to maintain market share. Additionally,
the Company focused on reducing its inventory to minimize exposure to future
price declines.
The Company has started a program to better control the flow of inventory
through the mass retail channel. To reduce exposure to price protection risks
the Company will attempt to limit inventory in the mass retail channel to less
than one month. This program is expected to take several months before it will
become effective.
Selling, general and administrative expense for the three and nine month
periods increased by $4,815,328 and $8,129,728 respectively, over the comparable
prior year periods. The increases are primarily a result of higher advertising
support such as co-op advertising, rebates and Merchandise Development Funds due
mainly to increased pressure from the major mass merchandisers for these type of
sales incentives. The Company is attempting to reduce these types of pressures
as it goes forward by focusing on changing its product mix to higher value
products, but expects them to continue for at least several months.
Additionally, depreciation and amortization has increased by approximately
$237,000 and $775,000 in the three and nine months ended November 30, 1998 over
the prior year comparable periods.
Net interest expense decreased by $18,234 from $628,653 and $12,788 from
$1,879,752 for the three and nine month periods ended November 30, 1998 due
primarily to a lower average level of borrowing on the Company's line of credit
offset partially by higher levels of borrowing from the Company's parent.
The Company had a tax benefit for the three and nine months ended November
30, 1998 of $1,589,200 and $659,200 compared to a provision for taxes of
$970,715 and $2,438,114 in the prior year periods.
Liquidity and Capital Resources
At November 30, 1998, the Company had no cash compared to a cash balance of
$1,982,436 at February 28, 1998. Subsequent to November 30, 1998, the Company
raised $4 million through equity and debt financings in December 1998. At
November 30, 1998, the Company had approximately $35.6 million of net
outstanding receivables compared to $39.3 million at February 28, 1998. The
decrease in receivables of $3,686,866 is due to the lower sales volume for the
quarter coupled with the increased levels of co-op advertising and Merchandise
Development Fund credits in the quarter as previously discussed. Accounts
payable and accrued expenses decreased by $11,000,491 from February 28,1998.
Cash flows used in operations were $1,075,339 compared to cash used in the
prior year nine months of $17,931,739. Working capital decreased to $17,292,714
from $32,414,556 at the fiscal year end with the current ratio decreasing to
1.32:1 from 1.55:1.
Historically, the Company's operations have been capital intensive due to
the nature of the Company's business and increasing sales volume since
inception. Financing has come from four principal sources: sales revenues, loans
from Aura, borrowings from commercial lending institutions and the sale of
Common Stock to the public and to private investors.
In order to generate additional working capital, in November and December
of 1998 the Company completed private placements of equity financings which
generated gross proceeds of $4.75 million. One of the placements included an
agreement to purchase an additional $1 million of the Company's equity in the
future, subject to certain conditions. The Company also borrowed $1 million from
a group of private investors in December 1998. For information regarding the
terms of these financings, see "Item 2. Changes in Securities and Use of
Proceeds" appearing elsewhere in this Report.
During the quarter ending November 30, 1998, the Company experienced
significant delays in the collection of its receivables. As a result of these
delays the Company has in turn been delayed in its ability to pay certain
obligations to trade creditors and has been limited in its ability to borrow
under its commercial line of credit with a secured lender, the availability of
which is determined based upon a formula percentage of eligible receivables. The
Company is now taking measures to reduce its overhead until cash flow improves.
The secured line of credit provided for available borrowings equal to 60%
of eligible accounts receivable, up to a maximum amount of $12 million. The line
is secured by substantially all of the operating assets of the Company. In
January 1999 the Company was notified by the lender that the Company was not in
compliance with the borrowing formula and, therefore, it would no longer
continue to advance funds under the line of credit and would require NewCom to
cooperate with it to repay the outstanding balance on an agreed upon basis. At
January 14, 1999, approximately $10.7 million of principal and interest was
outstanding under this facility. Subsequently, the lender advised NewCom that it
would consider allowing the Company to resume borrowing against the line of
credit at such time as NewCom reduced the outstanding balance under the line and
demonstrated improvement in its eligible receivables base.
Prior to NewCom's initial public offering in September 1997, Aura provided
a significant portion of NewCom's working capital requirements. In connection
with NewCom's initial public offering in September 1997 Aura indicated that it
would not continue to provide working capital to NewCom on a basis consistent
with past practices. Advances by Aura in the current fiscal year have been
limited to short term borrowings and are not expected to be a significant source
of working capital in the future. In addition, as discussed below, most of
NewCom's indebtedness to Aura is evidenced by an outstanding promissory note
which was due and payable in September 1998, which has been pledged by Aura to a
third party to secure Aura indebtedness which became due and payable in October
1998.
As of January 13, 1999, of approximately $20 million of intercompany
indebtedness due to Aura from NewCom, approximately $18.5 million was due to
Aura under a promissory note from the Company to Aura (the "Aura Note"), which
note was pledged by Aura to an Aura investor to secure indebtedness of Aura.
Because Aura's indebtedness to the Aura investor is due and payable, the Aura
investor retains the right to demand payment in full of the Aura Note if a
restructuring of this indebdtness does not occur. In September 1998 an agreement
in principle was reached among the Company, Aura and the Aura investor to
restructure the Aura Note. The agreement called for an initial cash payment and
the issuance by the Company of a $3 million convertible note to the Aura
investor. The note would bear interest at the rate of 9% per annum and the
Company would have the right to redeem the Aura Note on certain terms and
conditions. The agreement in principal was subject to certain conditions,
including obtaining financing from a third party lender and the execution of
definitive documents. As of the date of this Report, the Company had not
obtained a financing commitment from a third party lender. Unless and until the
restructuring among Aura, NewCom and the Aura investor is finalized, the Aura
investor could demand payment of the entire principal and accrued interest due
and payable. The investor has advised the Company that it has no present
intention of demanding payment under the Aura Note and intends to work with the
Company to complete a restructuring. There are no assurances however, that the
restructuring will be consummated.
In August 1998 the Company granted a junior security interest on its
inventory, equipment and accounts receivable to one of its suppliers of computer
components to secure payments due to the supplier. Subsequently, the Company
allowed the supplier to obtain a judgment against NewCom in the amount due of
approximately $13.6 million, of which approximately $12.6 million remains
outstanding as of the date of this Report. The Company is engaged in discussions
with the supplier to reach agreement on payment terms for the outstanding
indebtedness. However, there are no assurances that an agreement will be
reached. The supplier's lien is junior to the lien of the Company's commercial
lender which secures the line of credit.
In the past the Company's cash flow from operations has not been sufficient
to fully fund its working capital needs. The Company has also relied upon
external sources of financing, including advances from Aura, bank indebtedness
and equity financing. In order for the Company to maintain its present level of
operations it will be necessary for NewCom to resume borrowings under its line
of credit or obtain debt financing to repay the existing line of credit, and to
obtain additional working capital through external sources, including bank and
equity financings. There are no assurances that adequate funds will be available
at the times and in the amounts required, if at all. The failure to obtain
adequate funding as and when required would have a material adverse effect on
the business and operations of NewCom.
Year 2000
The Company relies heavily on computers in its internal and external
financial reporting systems. In addition, computers are used extensively
throughout the Company to perform critical operating activities including the
processing of payroll, accounts receivable and accounts payable and to perform
critical analyses. The Company also makes use of computers for efficient
communication with employees and customers, including extensive use of e-mail
systems and the Internet, and is expected to expand its use of such technology
in the future. Finally, embedded technology such as microcontrollers are
commonly found in equipment used throughout the Company's operations. The
complete failure of these systems could have a material negative impact on the
operations of the Company. In addition, most of the Company's major suppliers
and customers rely heavily on similar computer systems, and failures in such
systems could disrupt their operations.
The Company is substantially complete in assessing and addressing Year 2000
issues in its major computer systems. Most of the Company's major systems are
Year 2000 compliant or have been updated in the normal course of business with
applications that are Year 2000 compliant. No system replacements were made or
accelerated to comply with Year 2000 issues, but rather were made to address
other operating issues.
In addition to substantially addressing Year 2000 issues in its own
critical computer systems, the Company is in the process of contacting its major
customers and vendors to assess their progress in addressing their Year 2000
issues. The Company expects to have responses from these customers and vendors
by the first quarter of fiscal 2000. The Company believes that in making these
contacts it can minimize the risks associated with Year 2000 failures of such
vendors and customers. The Company can give no assurance that the systems of
other companies on which the Company's systems rely will be converted or
otherwise addressed on time, or that a failure to convert by another company
would not have a material adverse effect on the Company.
While the Company has and will continue to make efforts to address Year
2000 issues, the Company could experience disruptions in its operations as a
result of failures in its own systems and those of its major vendors or
customers.
To date, the total amount spent on Year 2000 issues has been less than
$25,000 and has not been material to the Company's operations or financial
condition. Based on current assessments, the Company expects to incur less than
$50,000 in additional expenditures to address Year 2000 issues. However, these
estimates are subject to revisions based on future assessments and responses
from vendors and customers.
Estimates of the costs or consequences of incomplete or untimely resolution
of Year 2000 issues would be speculative. The Company will continue to assess
and address Year 2000 issues and expects to fund such efforts through operating
cash flows and, if necessary, external sources of financing.
Forward Looking Statements
The Company wishes to caution readers that important factors, in some
cases, have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results for the third quarter of
Fiscal 1999, and beyond, to differ materially from those expressed in any
forward-looking statements made by, or on behalf of the Company.
Such factors include, but are not limited to, the following risks and
contingencies: changed business conditions in the consumer electronic industry
and the overall economy; increased marketing and manufacturing competition and
accompanying prices pressures; contingencies in initiating production at new
factories along with their potential underutilization, resulting in production
inefficiencies and higher costs and start-up expenses and; inefficiencies,
delays and increased depreciation costs in connection with the start of
production in new plants and expansions.
Relating to the above are potential difficulties or delays in the
development, production, testing and marketing of products, including, but not
limited to, a failure to ship new products and technologies when anticipated.
There might exist a difficulty in obtaining raw materials, supplies, power and
natural resources and any other items needed for the production of Company and
other products, creating capacity constraints limiting the amounts of orders for
certain products and thereby causing effects on the Company's ability to ship
its products. Manufacturing economies may fail to develop when planned, products
may be defective and/or customers may fail to accept them in the consumer
marketplace.
In addition to the above, risks and contingencies may exist as to the
amount and rate of growth in the Company's selling, general and administrative
expenses, and the impact of unusual items resulting from the Company's ongoing
evaluation of its business strategies, asset valuations and organizational
structures. Furthermore, any financing or other financial incentives by the
Company under or related to major infrastructure contracts could result in
increased bad debt or other expenses or fluctuation of profit margins from
period to period. The focus by some of the Company's business on any large
system order could entail fluctuating results from quarter to quarter.
The effects of, and changes in, trade, monetary and fiscal policies, laws
and regulations, other activities of governments, agencies and similar
organizations, and social and economic conditions, such as trade restrictions
impose yet other constraints on any Company statements. The cost and other
effects of any legal proceedings may impose another factor which may or may not
have an impact.
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
In November 1998 and December 1998 the Company completed equity and
debt financings. Following is a description of certain terms of these
financings.
The November 1998 Placement
In November 1998, the Company completed a private placement of its
Common Stock, Warrants and repricing rights pursuant to Regulation D of the
Securities Act of 1933 to a private investor. Under the terms of the placement
the Company received gross proceeds of $1.75 million in exchange for the
issuance of 466,665 shares of its Common Stock ("November Placement Shares"),
Warrants exercisable for up to 58,000 shares of Common Stock at an exercise
price of $4.87, and repricing rights (the "November Repricing Rights") for the
November Placement Shares.
Repricing Rights
The November Repricing Rights entitle the holder to purchase that
number of shares of Common Stock ("November Repricing Shares") determined by
multiplying the number of November Repricing Rights during a repricing period by
a fraction, the numerator of which is the November Repricing Price (as
determined below) minus the average market price (defined as the average of the
20 lowest bid prices in the 45 day period preceding the repricing date), and the
denominator of which is the average market price. 50% of the November Repricing
Rights are automatically exercised on the 45th and 90th days following the
effective date of a Registration Statement covering the Common Stock issued or
issuable in connection with the November 1998 Placement. If no shares are
issuable upon the exercise of the November Repricing Rights, the November
Repricing Rights terminate.
The "November Repricing Price" for the November Repricing Rights is $4.275
(114% of the initial per share purchase price) if the November Repricing Rights
are exercised on the 45th day following the effectiveness of the Registration
Statement; $4.35 (116% of the initial per share purchase price) if the November
Repricing Rights are exercised on 90th day following the effective date of the
Registration Statement.
Right of Redemption by NewCom
The Company is entitled to repurchase the November Placement Shares and
the Warrants for a purchase price equal to the amount of the original purchase
price of the securities plus 1.67% per month for each month following the
closing of the November 1998 Placement. The Company is also entitled to
repurchase the November Repricing Rights for the market value of the November
Repricing Rights.
Restrictions on Transfer of Purchased Securities
The securities issued or proposed to be issued in the November 1998
Placement are being issued under exemptions from registration afforded under
Regulation D of the Securities Act of 1933 and Section 4(2). The Company has
agreed to file a Registration Statement in order to register the Common Stock
acquired by the investors in the November 1998 Placement, including Repricing
Shares and shares issuable upon exercise of the Warrants.
The December 1998 Placement
On December 1, 1998 (the "Initial Closing Date"), the Company
consummated a private placement of its Common Stock, Warrants and Repricing
Rights pursuant to Regulation D of the Securities Act of 1933 to three private
investors. On the Initial Closing Date the Company received gross proceeds of $3
million in exchange for the issuance of 871,288 shares of its Common Stock,
Warrants exercisable for five years for up to 166,337 shares of Common Stock at
an exercise price of $4.545, and 792,088 Repricing Rights.
Under the terms of this financing the investors are committed to fund an
additional $1 million in exchange for Common Stock and Repricing Rights between
65-95 days after a Registration Statement covering the resale of the securities
issued in connection with the initial $3 million financing has been declared
effective by the Securities and Exchange Commission ("SEC"), subject to the
satisfaction of certain conditions (the "Second Closing"). These conditions
include the requirement that the average market price of NewCom's Common Stock
(defined as the two lowest closing bid prices during the 20 trading days
immediately preceding the Second Closing date) be at least $4.00 at the time of
the Second Closing.
At the Second Closing the investors are entitled to receive the number
of shares of Common Stock equal to 110% of the amount determined by dividing $1
million by the market value of the Common Stock at the time of the Second
Closing (the "Second Closing Date Price," which is equal to the average closing
bid prices for the five consecutive trading days ending on the day immediately
preceding the Second Closing date)(the "Second Closing Shares"). The investors
are also entitled to receive Repricing Rights at the Second Closing equal to
90.91% of the number of Second Closing Shares issued.
On December 28, 1998, the same investors consummated an additional
financing with NewCom and Aura whereby they advanced an aggregate of $1.0
million to NewCom pursuant to certain Notes secured by a junior lien on NewCom's
inventory and accounts receivable and issued an aggregate of 75,000 Warrants to
purchase NewCom Common Stock. The Notes bear interest at the rate of 10% and are
due and payable on the earlier of January 31, 1999, or the date on which NewCom
increases its existing line of credit. The 75,000 Warrants have a term of five
year and are initially exercisable for 75,000 shares of Common Stock at an
exercise price of $3.75. The exercise price is automatically adjusted six months
following their issuance to the lower of $3.75 or the market price of NewCom
Common Stock at such time, in accordance with a specified formula. References in
this Report to the December 1998 Placement include the financing consummated
on December 1, 1998 and the additional financing consummated on December 28,
1998.
Repricing Rights
The Repricing Rights entitle the holder to purchase that number of
shares of Common Stock ("Repricing Shares") determined by multiplying the number
of Repricing Rights by a fraction, the numerator of which is the Repricing Price
minus the Average Market Price (as defined below), and the denominator of which
is the Average Market Price (defined as the two lowest closing bid prices during
the 20 trading days immediately preceding the exercise date of the Repricing
Rights).
The "Repricing Price" for the 792,088 Repricing Rights received on the
Initial Closing Date is $4.32, being 114% of the Initial Closing Date Price of
$3.79 (computed based upon the average closing bid prices for the five
consecutive trading days ending on the day immediately preceding the Initial
Closing Date) if the Repricing Rights are exercised within 135 days of the
Initial Closing Date; $4.40, being 116% of the Initial Closing Date Price, if
the Repricing Rights are exercised between the 136th and 180th day of the
Initial Closing Date; and an additional 2% during each 45 day period following
180 days from the Initial Closing Date.
The "Repricing Price" for the Repricing Rights issuable at the Second
Closing is 114% of the Second Closing Date Price if the Repricing Rights are
exercised within 45 days of the Second Closing Date; 116% if the Repricing
Rights are exercised between the 46th and 90th day of the Second Closing Date;
and an additional 2% during each 45 day period following 180 days from the
Second Closing Date.
The Repricing Price is increased by 7.5% if the Common Stock is listed
for trading on the Nasdaq SmallCap Market, and 15% if the Common Stock is not
listed on a national stock exchange or the Nasdaq Stock Market or upon the
occurrence of a "Repurchase Event" as described below.
The investors also have the right to elect to receive shares of Aura
Common Stock ("Aura Repricing Shares") upon exercise of the Repricing Rights in
lieu of NewCom Common Stock, based upon the Average Market Price of Aura Common
Stock at the time of exercise of the Repricing Rights.
Restrictions On Exercise of Repricing Rights
During each consecutive 30 day period during which any Repricing Rights
first become exercisable until June 29, 1999, the investor may not exercise more
than 20% of the then issued Repricing Rights. Any unutilized Repricing Rights in
a 30 day period may be carried forward to subsequent periods. In no event may
Repricing Rights be exercisable if such exercise would result in the investor
and its affiliates beneficially owning more than 9.9% of the Company's
outstanding Common Stock.
Termination of Repricing Rights
Subject to certain terms and conditions, so long as the Company and Aura
are in compliance in all material respects with the terms of the financing
documents and a Registration Statement covering the Common Stock held by the
investors is in effect, 20% of the Repricing Rights shall terminate on the first
trading date in a calendar month if in the preceding month the average market
price during the preceding month is greater than $4.73 and the average daily
trading volume in such preceding month is greater than the average daily trading
volume for the 30 days prior to December 1, 1998.
Repurchase of Repricing Rights
The Company is entitled to repurchase exercised Repricing Rights under
certain conditions by paying to the holder an amount in cash equal to the
closing sale price of the Common Stock on the date of exercise multiplied by the
number of Repricing Shares otherwise required to be issued.
Repurchase Right of Investor
Upon the occurrence of a "Repurchase Event" described below, each
investor has been granted the right to require the Company to repurchase the
Common Stock and Repricing Rights acquired from the Company at the per share
price equal to the average of the closing sale prices of the Common Stock for
the five trading days ending on the trading day preceding the date of
repurchase. In addition, if the Company fails to obtain stockholder approval for
this financing on or before January 29, 1999, the investors are entitled to
require the Company to repurchase the Common Stock, Repricing Rights and
Warrants for the amount equal to the number of shares of Common Stock received
by the investor at the Initial Closing multiplied by $4.17, being 110% of the
Initial Closing Date Price.
For purposes of exercising the investor's repurchase right, a
Repurchase Event includes the following events: no closing bid prices are
reported for the Common Stock on a national securities exchange or the Nasdaq
Stock Market for five consecutive days; the Common Stock ceases to be listed for
trading on a national securities exchange or the Nasdaq Stock Market; a
Registration Statement covering the Common Stock issued or issuable to the
investors is not filed with the SEC by January 29, 1999, or the Registration
Statement is not declared effective by the SEC by March 31, 1999; the investor
is unable to sell shares under the Registration Statement for 30 or more days
after the Registration Statement becomes effective; the Company fails to issue
Repricing Shares as and when required; the Company fails to remove restrictive
legends from share certificates for the Common Stock as and when required; the
Company or Aura defaults under material obligations under the placement
documents and such default remains uncured for a period of 15 days after an
investor provides notice of the default to the Company; NewCom merges with or is
acquired by another company whose common stock is not listed for trading on a
national securities exchange or The Nasdaq Stock Market; or the Company amends
its certificate of incorporation or bylaws in a manner which materially and
adversely affects the rights of the investors.
Restrictions on Issuance of Additional Securities
The financing documents contain certain restrictions on the Company's
ability to issue additional securities. Specifically, the Company may not issue
any additional securities which would require stockholder approval under Nasdaq
rules without either obtaining a waiver from Nasdaq or obtaining stockholder
approval if such issuance would be deemed by Nasdaq to be part of the December
1998 Placement. In addition, until June 26, 1999, subject to certain exceptions,
the Company is prohibited from issuing its equity securities without the consent
of the investors. The investors have also been granted a right of first refusal
for any financings similar to the December 1998 Placement during the period from
the Second Closing Date to December 1, 1999, and for any other proposed
financings involving the sale of Common Stock at a discount during the period
between June 26, 1999 and December 1, 1999.
Restrictions on Transfer of Purchased Securities
The securities issued or proposed to be issued in the December 1998
Placement are being issued under exemptions from registration afforded under
Regulation D of the Securities Act of 1933 and Section 4(2). The Company has
agreed to file a Registration Statement in order to register the Common Stock
acquired by the investors in the December 1998 Placement, including Repricing
Shares and shares issuable upon exercise of the Warrants. Aura has also agreed
to use its best efforts to register Aura Common Stock issuable upon exercise of
the Repricing Rights.
ITEM 3. Defaults Upon Senior Securities
For information regarding defaults under outstanding indebtedness of
NewCom, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" appearing elsewhere in
this Report.
ITEM 6 Exhibits and Reports on Form 8-K
a) Exhibits:
See Exhibit Index
b) Reports On Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWCOM, INC.
(Registrant)
Date: January 18, 1999 By: /s/Steven C. Veen
------------------------------ ---------------------------
Steven C. Veen
Senior Vice President
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page No.
<S> <C>
EX 10.20 Form of Subscription Agreement dated as of November
30, 1998, by and between the Company and the Buyers.
EX 10.21 Form of Warrant issued on December 1, 1998.
EX 10.22 Parent Agreement dated as of November 30, 1998, by and
among the Company, Aura Systems, Inc. and the Original Holders
EX 10.23 Note Purchase Agreement dated as of November 30,
1998, by and between the Company and the Buyers.
EX 10.24 Form of Warrant issued on December 28, 1998.
EX 10.25 Amendment Agreement dated as of December 28, 1998, by
and among the Company, Aura Systems, Inc, and the Original
Holders.
EX-27 Financial Data Schedule
</TABLE>
EXHIBIT 10.20
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of November 30, 1998
(this "Agreement"), by and between NEWCOM, INC., a Delaware corporation (the
"Company"), with headquarters located at 31166 Via Colinas, Westlake Village,
California 91326, and ___________________________ (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, shares of Common Stock (such
capitalized terms and all other capitalized terms used in this Agreement without
definition having the respective meanings provided in Section 1), and in
connection therewith to receive certain Repricing Rights and to acquire warrants
to purchase shares of Common Stock as provided in this Agreement; 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
under the 1933 Act;
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.
"Adjustment Notice" means a notice given by the Buyer to the
Company in accordance with Section 10(d) increasing the Repricing Price upon the
occurrence of a Repurchase Event.
"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.
"Aggregated Person" means, with respect to any Person, any
Person whose beneficial ownership of shares of Common Stock would be aggregated
with the beneficial ownership of shares of Common Stock by such Person for
purposes of Section 13(d) of the 1934 Act, and Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
"Auditors" means Pannell Kerr Forster or such other firm of
independent public accountants of recognized national standing.
"Aura" means Aura Systems, Inc., a Delaware corporation.
"Parent Company Agreement" means the Agreement between and
among Aura, the Company, the Buyer and the buyers under the Other Subscription
Agreements in the form attached hereto as Annex V.
"Average Daily Trading Volume" for any security for any
period of days means, for all trades in such security on the principal
securities market for such security during such period, the quotient obtained by
dividing (x) the number of shares of such security traded in each trade, as
reported by Bloomberg, L.P. by (y) the number of Trading Days in such period.
"Average Market Price" for any Exercise Date or the Second
Closing Date, as the case may be, means the arithmetic average of the Market
Price on each of the two Trading Days, whether or not consecutive, during the
applicable Measurement Period having the lowest Market Prices.
"Base Shares" means the portion of the Initial Shares equal
to 90.91% of the Initial Shares, rounded up or down to the nearest whole share.
"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 Initial Shares and the issuance of the Initial Repricing Rights and
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.
"Common Shares" means the Initial Shares, the Second Tranche
Shares and the Repricing Shares.
"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 mark 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.
"Company Repurchase Notice" means a notice given by the
Company to the Buyer pursuant to Section 3(j) which states (1) that the Company
is exercising its right to repurchase all of the Buyer's Repricing Rights which
are exercised during the Repurchase Period, (2) the Company Repurchase Price or
the formula for determining the same, determined in accordance herewith and (3)
the applicable Repurchase Period.
"Company Repurchase Price" means, for each Exercise Notice
given during a Repurchase Period, the number of Repricing Shares required to be
issued multiplied by the Closing Price on the Exercise Date of such Exercise
Notice.
"Equity Securities" means Common Stock or securities
convertible into, exchangeable for, or otherwise entitling the holder to
acquire, any Common Stock.
"Escrow Agent" means the Escrow Agent named in the Joint
Escrow Instructions and any successor thereto.
"Escrow Agreement" means the Escrow Agreement to be entered
into by and between the Company, the Buyer, the Other Buyers and the Repricing
Escrow Agent in the form attached hereto as Annex III.
"Escrow Shares" means shares of Common Stock held in escrow
by the Repricing Escrow Agent pursuant to the Escrow Agreement which are
available to be delivered as Repricing Shares.
"Exercise Date" means the date on which an Exercise Notice is
received by the Company.
"Exercise Notice" means the Exercise Notice in the form
attached hereto as Annex VI.
"First Closing" means the closing of the sale of the Initial
Shares and the other transactions contemplated hereby in connection therewith on
the Closing Date.
"Initial Repricing Rights" means the Repricing Rights
issuable at the First Closing in accordance with Section 2(a).
"Initial Shares" means the number of shares of Common Stock
purchased by the Buyer on the Closing Date and set forth on the signature page
of this Agreement.
"Insufficient Share Amount" means, for each Repricing Share
or Warrant Share which the Company is unable to issue in accordance with Section
6(l), an amount equal to 3% of the Closing Price of such share on the Exercise
Date or the date of exercise of the Warrant, as the case may be.
"Joint Escrow Instructions" means the Joint Escrow
Instructions attached hereto as Annex II.
"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.
"Measurement Period" means, with respect to any date, the
period of 20 consecutive Trading Days ending on the Trading Day prior to such
date.
"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.
"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 shares of
Common Stock named in the Other Subscription Agreements.
"Other Subscription Agreements" means the several
Subscription Agreements, dated as of the date hereof, between the Company and
the Other Buyers relating to the agreements of such buyers severally to purchase
shares of Common Stock and acquire repricing rights and 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 aggregate purchase price payable
for the Initial Shares set forth on the signature page of this Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement to be entered into between the Company and the Buyer in the form
attached hereto as Annex IV.
"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.
"Repricing Escrow Agent" means the Repricing Escrow Agent
named in the Escrow Agreement and any successor thereto.
"Repricing Price" means:
(a) In connection with the exercise of any Initial Repricing
Rights,
(1) if the Exercise Date is on or prior to the 135th day after the
Closing Date, 114% of the Closing Date Price; and
(2) if the Exercise Date is after the 135th day after the Closing Date,
the Closing Date Price shall be multiplied by a percentage equal to the
percentage referred to in clause (a)(1) of this definition increased by two
percentage points for each period of 45 days after such 135th day (e.g., from
the 136th day through the 180th day after the Closing Date, the Repricing Price
is 116% of the Closing Date Price; from the 181st day through the 225th day
after the Closing Date, the Repricing Price is 118% of the Closing Date Price,
etc.); and
(b) In connection with the exercise of any Second Tranche
Repricing Rights,
(1) if the Exercise Date is on or prior to the 45th day after the
Second Closing Date, 114% of the Second Closing Date Price; and
(2) if the Exercise Date is after the 45th day after the Second Closing
Date, the Second Closing Date Price shall be multiplied by a percentage equal to
the percentage referred to in clause (b)(1) of this definition increased by two
percentage points for each period of 45 days after such 45th day (e.g., from the
46th day through the 90th day after the Second Closing Date, the Repricing Price
is 116% of the Second Closing Date Price; from the 91st day through the 135th
day after the Second Closing Date, the Repricing Price is 118% of the Second
Closing Date Price, etc.);
provided, however, the applicable percentage of the Closing Date Price and the
Second Closing Date Price referred to in this definition shall be increased by
(x) 7.5 percentage points from the percentage it otherwise would be on any day
on which the Common Stock is listed for trading on the Nasdaq SmallCap and (y)
15 percentage points from the percentage it otherwise would be (i) on any day on
which the Common Stock is not listed for trading on any of the Nasdaq, the
Nasdaq SmallCap, the NYSE or the AMEX, or (ii) for a period of 180 days after
the day the Buyer gives the Company an Adjustment Notice pursuant to Section
10(d).
"Repricing Rate" means the number of Repricing Shares
issuable upon exercise of each Repricing Right pursuant to Section 3(c)
determined according to the following formula; provided that if the result of
such formula is less than zero, then the result shall be deemed to be zero:
(Repricing Price Average Market Price)
Average Market Price
"Repricing Right" means a right of the holder thereof to
receive Repricing Shares upon the exercise of Initial Repricing Rights or Second
Tranche Repricing Rights in accordance with Section 3.
"Repricing Shares" means shares of Common Stock issued or
issuable to a holder of Repricing Rights upon the exercise thereof.
"Repurchase Date" means the date of repurchase of Shares and
Repricing Rights pursuant to Section 10.
"Repurchase Event" means any one of the following events:
(1) For any period of five consecutive Trading Days commencing on or
after the Closing Date there shall be no closing bid price of the Common Stock
on any national securities exchange, the Nasdaq or the Nasdaq SmallCap;
(2) The Common Stock ceases to be listed for trading on any of the
NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap;
(3) The Company fails to file the Registration Statement within 60 days
after the Closing Date;
(4) The Registration Statement is not effective within 120 days after
the Closing Date;
(5) After the SEC Effective Date, the inability for 30 or more days
(whether or not consecutive) of any holder of Shares to sell such shares
pursuant to the Registration Statement for any reason on each of such 30 days;
(6) The Company shall fail or default in the timely performance of any
obligation (A) to issue Repricing Shares as and when required by Section 3, (B)
to comply with Section 6(b)(3) regarding the removal of restrictive legends and
stop transfer restrictions with respect to the Shares or (C) any other material
obligation, in each case to a holder of Shares or Repricing Rights under the
terms of this Agreement, the Escrow Agreement, the Registration Rights
Agreement, the Parent Company Agreement, the Warrants or any other agreements or
documents entered into in connection with the issuance of the Shares, as such
instruments may be amended from time to time;
(7) The Company shall default in making any payment as and when due or
in the performance of any material obligation to Aura under any agreement or
instrument evidencing the Company's indebtedness to Aura;
(8) Aura shall fail or default in the timely performance of any
material obligation under the terms of the Parent Company Agreement;
(9) Any consolidation or merger of the Company with or into another
entity (other than a merger or consolidation of a subsidiary of the Company into
the Company or a wholly-owned subsidiary of the Company) where the common stock
of such surviving company is not listed for trading on the NYSE, the AMEX, the
Nasdaq or the Nasdaq SmallCap, or any sale or other transfer of all or
substantially all of the assets of the Company; or
(10) The Company amends its Certificate of Incorporation or by-laws,
without the consent of the Buyer, which amendment materially and adversely
affects the rights of any holder of Shares or Repricing Rights;
provided, that an event described in clauses 6(c), 7 or 8 of this definition
shall be a Repurchase Event only if such failure or default shall have continued
for a period of 15 days after notice thereof is given to the Company by the
Buyer or any Other Buyer.
"Repurchase Notice" means a notice from the Buyer to the
Company which states (1) that the Buyer is thereby requiring the Company to
repurchase Shares and Repricing Rights pursuant to Section 10, (2) in general
terms the Repurchase Event giving rise to such repurchase, and (3) the number of
Shares and Repricing Rights which are to be repurchased.
"Repurchase Period" means the period commencing seven Trading
Days after the Company gives a Company Repurchase Notice to the Buyer and ending
on the earlier of (x) 30 days thereafter or (y) two Trading Days after the
Company gives notice to the Buyer canceling such Company Repurchase Notice.
"Repurchase Price" means the arithmetic average of the
Closing Price for the five consecutive Trading Days ending on the Trading Day
prior to a Repurchase Date.
"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.
"Second Closing" means the closing of the sale of the Second
Tranche Shares and the other transactions contemplated hereby in connection with
such sale on the Second Closing Date.
"Second Closing Date" means the date and time of the issuance
and sale of the Second Tranche Shares and the issuance of the Second Tranche
Repricing Rights which shall occur on the first Business Day which is at least
65 days after the SEC Effective Date on which the conditions set forth in
Sections 8(b) and 9(b) have been satisfied or waived; provided, however, that
the Second Closing Date must occur on or before the date which is 95 days after
the SEC Effective Date.
"Second 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 Second Closing Date (when used after the Second
Closing Date, the Second 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 Second Closing Date).
"Second Tranche Base Shares" means the portion of the Second
Tranche Shares equal to 90.91% of the Second Tranche Shares, rounded up or down
to the nearest whole share.
"Second Tranche Purchase Price" means $500,000.
"Second Tranche Repricing Rights" means the Repricing Rights
issuable at the Second Closing in accordance with Section 2(b).
"Second Tranche Shares" means the number of shares of Common
Stock equal to the sum of (a) the quotient obtained by dividing $500,000 by the
Second Closing Date Price and (b) 10% of such number.
"Securities" means the Shares, the Repricing Rights and the
Warrants; 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).
"Shares" means the Common Shares and the Warrant Shares.
"Specified Securities" means any Equity Securities which are
Common Stock which are offered or sold, or which entitle the holder to acquire
any Common Stock, at a price below the market price of the Common Stock on the
date of such issuance or acquisition.
"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 Initial Share
repurchased by the Company pursuant to Section 6(j)(3), 110% of the Closing Date
Price.
"Tender Offer" means a tender offer or exchange offer.
"Total Repricing Rights" means the number of Repricing Rights
issued to the Buyer on the Closing Date and on the Second Closing Date.
"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. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE;.
.c.(a) First Closing;.
(1) At the First Closing on the Closing Date, the Buyer
hereby agrees to purchase from the Company the Initial Shares at the price per
share and for the aggregate purchase price set forth on the signature page of
this Agreement. The Purchase Price shall be payable in United States Dollars. In
connection with the purchase of the Initial Shares by the Buyer, the Company
shall issue to the Buyer, at the closing on the Closing Date, (A) the number of
Initial Repricing Rights set forth on the signature page of this Agreement equal
to one Initial Repricing Right for each Base Share issued as part of the Initial
Shares (which Initial Repricing Right shall be deemed incorporated and part of
each Base Share issued) and (B) Warrants in the form attached hereto as Annex I
to purchase the number of shares of Common Stock set forth on the signature page
of this Agreement.
(2) (A) The Buyer shall pay the Purchase Price for the
Initial Shares 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
certificates for the Initial Shares (which for purposes of the closing shall be
deemed to incorporate and include one Initial Repurchase Right for each Base
Share) and the Warrants registered in the name of the Buyer or its nominee.
Promptly following payment by the Buyer to the Escrow Agent of the Purchase
Price, but in any event prior to the Closing Date, the Company shall deliver
certificates for the Initial Shares and the Warrants, registered in the name of
the Buyer or its nominee, to the Escrow Agent for release by the Escrow Agent
pursuant to the Joint Escrow Instructions. The certificates for the Initial
Shares shall be delivered by the Company to the Escrow Agent on a delivery
against payment basis at the closing. 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 is set forth in full.
(B) Following the First Closing, the Initial Repricing Rights
issued thereat shall constitute separate rights under this Agreement independent
of the Base Shares. The subsequent sale or transfer of the Base Shares shall not
affect the Buyer's ownership of or rights with respect to such Initial Repricing
Rights.
(3) Payment of the purchase price for the Initial Shares and
the Second Tranche Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch Attorney Escrow Account
Reference: __________________
Not later than 4:00 p.m., New York City time, on the date which is three
Business Days 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 the aggregate purchase price for the
Initial Shares.
.c.(b) Second Closing;.
(1) At the Second Closing on the Second Closing Date, the
Buyer hereby agrees to purchase from the Company the Second Tranche Shares at
the Second Tranche Purchase Price. The Second Tranche Purchase Price shall be
payable in United States Dollars. In connection with the purchase of the Second
Tranche Shares by the Buyer, the Company shall issue to the Buyer, at the
closing on the Second Closing Date, the number of Second Tranche Repricing
Rights equal to one Second Tranche Repricing Right for each Second Tranche Base
Share issued as part of the Second Tranche Shares (which Second Tranche
Repricing Right shall be deemed incorporated and part of each Second Tranche
Base Share issued). The parties shall have no obligation to purchase and sell
the Second Tranche Shares after the date stated in the proviso to the definition
of "Second Closing Date".
(2) (A) The Buyer shall pay the Second Tranche Purchase Price
for the Second Tranche Shares 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 certificates for the Second Tranche Shares (which for purposes of
the Second Closing shall be deemed to incorporate and include one Second Tranche
Repurchase Right for each Second Tranche Base Share) registered in the name of
the Buyer or its nominee. Promptly following payment by the Buyer to the Escrow
Agent of the Second Tranche Purchase Price, but in any event prior to the Second
Closing Date, the Company shall deliver certificates for the Second Tranche
Shares, registered in the name of the Buyer or its nominee, to the Escrow Agent
for release by the Escrow Agent pursuant to the Joint Escrow Instructions. The
certificates for the Second Tranche Shares shall be delivered by the Company to
the Escrow Agent on a delivery against payment basis at the Second Closing.
(B) Following the Second Closing, the Second Tranche
Repricing Rights issued thereat shall constitute separate rights under this
Agreement independent of the Second Tranche Base Shares. The subsequent sale or
transfer of the Second Tranche Base Shares shall not affect the Buyer's
ownership of or rights with respect to such Second Tranche Repricing Rights.
(3) Payment of the Second Tranche Purchase Price for the
Second Tranche Shares shall be made by wire transfer of funds as provided in the
first sentence of Section 2(a)(3). On or before the Second Closing Date, the
Buyer shall deposit with the Escrow Agent the Second Tranche Purchase Price for
the Second Tranche Shares.
.c.3. REPRICING RIGHTS;.
.c.(a) Repricing Right;. Subject to the provisions of
Sections 3(g) and 3(h) below, at any time or times on or after the 91st day
after the Closing Date, the Buyer shall be entitled to exercise any whole number
of Repricing Rights for fully paid and nonassessable Repricing Shares in
accordance with Section 3(c), at the Repricing Rate. The Company shall not issue
any fraction of a share of Common Stock upon any exercise of Repricing Rights.
All Repricing Shares (including fractions thereof) issuable upon exercise of
more than one Repricing Right by a holder thereof shall be aggregated for
purposes of determining whether the exercise would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned aggregation,
the issuance would result in the issuance of a fraction of a share of Common
Stock, such fraction of a share of Common Stock shall be rounded up or down to
the nearest whole share.
.c.(b) Escrow;. Prior to the Closing Date, the Company and
the Buyer shall execute and deliver the Escrow Agreement in the form attached
hereto as Annex III. In accordance with the Escrow Agreement, on or prior to the
Closing Date the Company shall deposit into escrow such number of shares of
Common Stock equal to the aggregate number of Repricing Shares which would be
issuable assuming all of the Buyer's Repricing Rights were exercised on the
Closing Date and the Average Market Price was 70% of the Average Market Price on
the Closing Date. On the first Business Day of every calendar month after the
Closing Date, on the Second Closing Date after the Second Closing occurs, and at
such other times as the Buyer may request, the Company shall deposit additional
shares of Common Stock into escrow to the extent necessary to ensure that on
such date the number of Escrow Shares is at least equal to the aggregate number
of Repricing Shares which would be issuable assuming all of the Buyer's
outstanding Repricing Rights were exercised (without regard to any limitations
on exercise) on such date and the Average Market Price was 70% of the Average
Market Price on such date. Escrow Shares shall be released to the Company in
accordance with the terms of the Escrow Agreement.
.c.(c) Mechanics of Exercise of Repricing Rights;. The Buyer
may exercise such Repricing Rights at any time on or after the 91st day after
the Closing Date in accordance with the following terms:
(1) To exercise Repricing Rights for full shares of Common
Stock representing Repricing Shares on any Exercise Date, the Buyer shall
transmit by telephone line facsimile (or otherwise deliver), for receipt on or
prior to 11:59 p.m. Eastern Time, on such date, a copy of a fully executed
Exercise Notice in the form attached hereto as Annex VI to the Company.
(2) Upon receipt by the Company of an executed Exercise
Notice, the Company shall, within three Trading Days following the Exercise
Date, (A) issue and deliver to the address specified in the Exercise Notice, a
certificate, registered in the name of the Buyer or its designee, for the number
of Repricing Shares to which the holder shall be entitled, or (B) credit such
aggregate number of Repricing Shares to the Buyer's or its designee's account
with the Depository Trust Company as specified in the Exercise Notice. The
certificates for any Repricing Shares issued to the Buyer prior to the SEC
Effective Date shall bear the restrictive legend specified in Section 6(b). On
and after the SEC Effective Date all Repricing Shares issued to or upon the
order of the Buyer shall not bear any restrictive legends or be subject to any
stop-transfer restrictions.
.c.(d) Record Holder;. The Person or Persons entitled to
receive the Repricing Shares issuable upon an exercise of Repricing Rights shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock on the Exercise Date.
.c.(e) Duty to Deliver Repricing Shares; Dispute Resolution;.
If the Buyer shall have given an Exercise Notice as provided herein, the
Company's obligation to issue and deliver the certificates for Common
Stock representing the Repricing Shares shall be absolute and unconditional,
irrespective of any action or inaction by the Buyer to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Company to the Buyer, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Buyer or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Buyer or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Buyer in connection with the
issuance and delivery of Repricing Shares. The number of Repricing Shares to be
issued in connection with a particular Exercise Date is, absent manifest error,
conclusively the number of Repricing Shares stated in the applicable Exercise
Notice. If in connection with a particular Exercise Date the Company determines
that manifest error has been made by virtue of the computation of Repricing
Shares or other information set forth in the applicable Exercise Notice, the
Company shall have the right within one Trading Day after the Buyer gives such
Exercise Notice to notify the Repricing Escrow Agent and the Buyer of such
error, which notice shall state the number of Repricing Shares in dispute, and,
notwithstanding such notice from the Company, the Company shall issue to the
Buyer the number of Repricing Shares not in dispute as and when required by this
Agreement. If the Company shall have notified the Repricing Escrow Agent and the
Buyer of any such manifest error, and the Company and the Buyer do not agree as
to a resolution of such manifest error on or before the date of such notice by
the Company of an error in such Exercise Notice, the Company shall on the date
such notice is given submit the dispute to the Auditors for determination
and shall instruct the Auditors to resolve such dispute and to notify the
Company, the Repricing Escrow Agent and the Buyer of their determination, which
shall be binding on all parties, within two Trading Days after such dispute is
submitted to the Auditors. Immediately after receipt of timely notice of the
Auditors' determination (but in any event within four Trading Days after the
applicable Exercise Notice is given to the Repricing Escrow Agent and the
Company), the Company shall issue to the Buyer any additional Repricing Shares
to which the Buyer is entitled based on the determination of the Auditors. If
the Auditors shall fail to notify the Repricing Escrow Agent and the Company of
their determination within four Trading Days after the applicable Exercise
Notice is given to the Repricing Escrow Agent and the Company, then the Company
shall within four Trading Days after receipt of the applicable Exercise
Notice, issue to the Buyer any additional Repricing Shares to which the Buyer is
entitled based on the applicable Exercise Notice. Such immediate and prompt
action shall be taken by all the parties in order to assure that there shall be
full compliance with the Company's unqualified obligation that all Repricing
Shares issuable upon each Exercise Date be issued and delivered by the due dates
therefor as provided herein.
.c.(f) Company's Failure to Timely Deliver Repricing Shares;.
If within three Trading Days after the Company's receipt of the Exercise
Notice (or such longer period specified in Section 3(e)) the Company shall for
any reason fail to issue a certificate (which shall be free of all restrictive
legends other than those required by Section 6(b)) for the number of Repricing
Shares to which the Buyer is entitled or to credit the Buyer's or its designee's
account with the Depository Trust Company for such number of Repricing Shares to
which the Buyer is entitled upon the Buyer's exercise of the Repricing Rights,
the Buyer shall have the right, commencing seven Business Days after the
Exercise Date, to deliver a copy of the applicable Exercise Notice to the
Repricing Escrow Agent. Promptly but not later than three Trading Days after its
receipt of such Exercise Notice, the Repricing Escrow Agent shall, in accordance
with the Escrow Agreement, release the Escrow Shares from escrow in the amount
of the Repricing Shares specified in such Exercise Notice and deliver such
shares in accordance with such Exercise Notice. In addition to such right to
receive Escrow Shares and all other available remedies which the Buyer may
pursue hereunder and under applicable law, the Company shall, on a weekly basis,
pay as additional damages (and not as a penalty) to such Buyer for each day
after such third Trading Day that such shares are not timely delivered an amount
equal to 0.2% of the product of (1) the sum of the number of Repricing Shares
not issued to the Buyer on a timely basis pursuant to Section 3(c)(2) and to
which the Buyer is entitled and (2) the Closing Price of the Common Stock on
such third Trading Day. In addition, if in connection with such late delivery of
Repricing Shares the Closing Price on the date of delivery is less than the
Closing Price on such third Trading Day when such shares were due, then the
Company shall be required to pay the Buyer, within two Trading Days after such
late delivery, an amount equal to the product of (A) the number of such
Repricing Shares and (B) the difference between such respective Closing Prices.
Any failure of the Repricing Escrow Agent to deliver shares to the Buyer shall
not relieve the Company of its obligations under this Section 3(f).
.c.(g) Exercise Restrictions;. In addition to the termination
provisions set forth in Section 3(h), the right of the Buyer to exercise such
Repricing Rights pursuant to this Section 3 shall be limited as set forth below.
(1) During each consecutive period of 30 days commencing on
the date the Initial Repricing Rights first become exercisable, the Buyer may
not exercise more than the sum of (A) 20% of the Total Repricing Rights and (B)
any unexercised Repricing Rights which were permitted to be exercised in any
prior 30-day period. Accordingly, unused Repricing Rights in prior 30-day
periods may be carried forward to future periods on a cumulative basis, and all
Repricing Rights become exercisable without restriction under this Section
3(g)(1) commencing 211 days after the Closing Date.
(2) Notwithstanding anything to the contrary in this
Agreement, in no event shall the Buyer be entitled to exercise any Repricing
Rights in excess of that number of Repricing Rights upon exercise of which the
sum of (x) the number of shares of Common Stock beneficially owned by the Buyer
and all of its Aggregated Persons (other than shares of Common Stock deemed
beneficially owned through the ownership of unexercised Repricing Rights and
Warrants and the unexercised or unconverted portion of any instrument which
contains limitations similar to those set forth in this sentence) and (y) the
number of shares of Common Stock issuable or deliverable upon the exercise of
the number of Repricing Rights with respect to which the determination in this
sentence is being made, would result in beneficial ownership by the Buyer and
all Aggregated Persons of the Buyer of more than 9.9% of the outstanding shares
of Common Stock. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act
and Regulation 13D-G thereunder, except as otherwise provided in clause (x) of
the immediately preceding sentence.
.c.(h) Termination of Repricing Rights;. So long as (i) each
of the Company and Aura is in compliance in all material respects with its
obligations to the Buyer under this Agreement, the Registration Rights
Agreement, the Parent Company Agreement, the Warrants and the other agreements
and documents contemplated hereby (including following the cure of any prior
breach or noncompliance), (ii) no Repurchase Event shall have occurred and (iii)
the Registration Statement is effective and available for use by the selling
stockholders named therein, 20% of the Total Repricing Rights (or such lesser
remaining amount if more than 80% of the Total Repricing Rights have been
exercised) shall terminate on the first Trading Day of each calendar month if
for the immediately preceding calendar month (1) the Average Market Price on
each Trading Day during such preceding month is greater than 125% of the Closing
Date Price and (2) the Average Daily Trading Volume in such preceding month is
greater than the Average Daily Trading Volume for the 30-day period prior to the
Closing Date.
.c.(i) Taxes;. The Company shall pay any and all transfer
taxes which may be imposed with respect to the issuance and delivery of
Repricing Shares upon the exercise of the Repricing Rights.
.c.(j) Company's Right to Repurchase in Lieu of Issuing
Repricing Shares;. (1) Commencing seven Trading Days after giving a Company
Repurchase Notice to the Buyer, the Company may elect to repurchase all, but not
less than all, Repricing Rights exercised during the Repurchase Period in lieu
of issuing shares of Common Stock upon each such exercise. The Company shall
repurchase each Repricing Right exercised by paying the Company Repurchase Price
to the Buyer for each such Repricing Right within three Business Days after the
applicable Exercise Notice is given. The Company may cancel any Company
Repurchase Notice effective upon at least two Trading Days' prior notice to the
Buyer. Any Exercise Notices submitted after the cancellation of a Company
Repurchase Notice shall require the issuance of Repricing Shares in accordance
with this Section 3.
(2) If the Company fails to pay the Company Repurchase Price
within 15 Business Days after it becomes due, the Buyer may elect by giving
notice thereof to the Company (A) to require the Company to issue Repricing
Shares in lieu of such payment, (B) to cancel the applicable Exercise Notice
and/or (C) to prohibit the Company from giving any Company Repurchase Notice in
the future without the Buyer's prior consent.
.c.(k) Buyer's Assignment of Repricing Rights;. If a Buyer
intends to assign all or any portion of its Repricing Rights, then the Buyer
shall so notify the Company not less than ten Trading Days before any Exercise
Date for such Repricing Rights. Each such notice of assignment by a Buyer shall
specify the name(s) of the assignee(s) and the number of Repricing Rights to be
assigned thereto. Each such notice shall be executed by the assignee(s). From
and after the giving of such notice by such Buyer, the Buyer shall be deemed for
all purposes to have assigned to such assignee(s) the rights under this
Agreement with respect to the acquisition of the number of Repricing Rights
covered by such notice, and such assignee(s) shall be deemed a party to this
Agreement with respect to the acquisition of such number of Repricing Rights
upon the terms and subject to the conditions of this Agreement, and all
applicable references herein to the "Buyer" shall include such assignee(s).
.c.4.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
Initial Shares and acquiring the Repricing Rights and the Warrants, will
purchase the Second Tranche Shares, and upon issuance and delivery of any
Repricing Shares, will acquire such Repricing Shares, 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 Shares by the Buyer shall be made pursuant to registration of the Shares
being offered and sold under the 1933 Act or pursuant to an exemption from
registration;
.c.(d) Company Reliance;. The Buyer understands that the
Initial Shares and the Second Tranche Shares are being offered and sold, the
Repricing Rights and the Warrants are being issued, and the Repricing Shares 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 Initial Shares, the Second Tranche Shares, the Repricing Rights
and the Warrants and to receive an offer of the Repricing Shares and 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 Initial Shares and the Second Tranche Shares and the issuance of the
Repricing Rights and the Warrants and the offer of the Repricing Shares and 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) Subscription 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.5. 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 Warrants, the Registration Rights Agreement, the
Escrow Agreement, the Parent Company 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 10,466,665
shares of Common Stock were outstanding on November 30, 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 November 30, 1998; and on the
Closing Date (x) there will be no material increase from November 30, 1998 in
the number of shares of Common Stock outstanding and (y) no issuances of any
other class or series of securities. As of November 30, 1998, the Company had
outstanding options, warrants and similar rights entitling the holders to
purchase 5,850,184 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 of the Common Shares or the issuance or exercise of the
Warrants is identified on Schedule 5(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 5(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 Shares and the Common Stock;. The
Shares and the Repricing Rights have been duly authorized. The Initial Shares
and the Second Tranche Shares, when issued and paid for in accordance with this
Agreement, the Repricing Shares when issued in accordance with this Agreement,
and the Warrant Shares, when issued upon exercise of the Warrants, as the case
may be, 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 2,093,300 shares of Common Stock for issuance of the Initial
Shares, the Repricing Shares, the Second Tranche Shares and the Warrant Shares
and the issuance of similar securities under the Other Subscription 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 Shares will not be eligible for listing on the Nasdaq.
.c.(d) Subscription Agreement; Escrow Agreement; Registration
Rights Agreement; Parent Company Agreement; Warrants;. This Agreement, the
Escrow Agreement, the Registration Rights Agreement, the Parent Company
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 Escrow Agreement, the Registration Rights Agreement, the Parent
Company 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 Shares, the Repricing
Rights and the Warrants as contemplated by this Agreement, and the other
transactions contemplated by this Agreement, the Escrow Agreement, the
Registration Rights Agreement, the Parent Company Agreement 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 Escrow Agreement, the
Registration Rights Agreement, the Parent Company Agreement, the Warrants and
the other agreements and instruments contemplated hereby and thereby, (2) the
issuance and sale of the Initial Shares and the Second Tranche Shares and the
issuance of the Repricing Rights, the Repricing Shares and 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 Shares on the
Nasdaq, (x) registration of the resale of the 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 4(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 5(g), any statement contained in such information shall be deemed
to be modified or superseded for purposes of this Section 5(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 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 sue 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 other than WS
Marketing & Financial Services, Inc. and H&H Securities, and the Company shall
pay, and indemnify and hold harmless the Buyer from, any claim made against the
Buyer by such entities or any other 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 Shares, the Repricing Rights 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 any of the Shares, the Repricing Rights 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 shares of Common
Stock or Warrants, or solicit any offers to buy any shares of Common Stock or
Warrants, so as thereby to cause the issuance or sale of any of the Shares or
the issuance of the Repricing Rights and 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 5(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 sale of the
Initial Shares or the Second Tranche Shares to the Buyer or the issuance of
Repricing Shares or Warrant Shares to the Buyer under the Stockholder Approval
Rule. Except as provided in this Agreement and the Other Subscription
Agreements, no Person has any right of first refusal or similar right to acquire
any of the Company's securities.
.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.6. CERTAIN COVENANTS AND ACKNOWLEDGMENTS;.
.c.(a) Transfer Restrictions;. The Company and the Buyer
acknowledge and agree that (1) the Warrants and the Repricing Rights 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 Shares, the 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 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 6(d)
hereof and pursuant to the Registration Rights Agreement).
.c.(b) Restrictive Legends;.
(1) 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.
(2) The Buyer further acknowledges and agrees that until such
time as the Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
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
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.
(3) 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
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 or the
Repricing Escrow Agent acting at the request of the Buyer and (2) the Company
shall not place any restrictive legend on certificates for any Shares issued or
impose any stop-transfer restriction thereon.
.c.(c) Escrow Agreement; Registration Rights Agreement;
Parent Company Agreement;. On or before the Closing Date, the parties hereto
agree to enter into (i) the Escrow Agreement in the form attached hereto as
Annex III, (ii) the Registration Rights Agreement in the form attached hereto as
Annex IV and (iii) the Parent Company Agreement in the form attached hereto as
Annex V.
.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
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 Shares, the Repricing Rights or the
Warrants, 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 Initial Shares and the Second Tranche
Shares 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 Initial Shares and the
Second Tranche Shares for sale to the Buyer and the Warrants, the Repricing
Rights and the Repricing Shares 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 Initial Shares and the Second Tranche
Shares and the issuance of the Warrants pursuant to this Agreement, the issuance
to the Buyer of the Repricing Rights and the Repricing Shares 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 Escrow Agreement, the Registration Rights Agreement, the
Parent Company Agreement, 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 performance of the
Escrow Agreement, the fees and expenses of the Repricing Escrow Agent as
provided in the Escrow Agreement, and the issuance and delivery of the Shares.
.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 sale of the Initial Shares or the Second Tranche Shares or
the issuance of Repricing 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 Specified Securities; provided, however, that
nothing in this Section 6(i) shall prohibit the Company from issuing securities
(w) as permitted by Section 6(i)(4), (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 as permitted by Section 6(i)(4), during the period
commencing on the date which is 181 days after the Closing Date to the date
which is one year 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 Specified Securities without giving the Buyer the first
right to acquire the Specified Securities on the same terms as the Specified
Securities are to be offered to other investors. The Company shall give notice
to the Buyer of the detailed terms of the Specified Securities proposed to be
issued and, promptly after being requested by the Buyer, such other information
as requested by the Buyer. The Buyer may, by notice to the Company, exercise
such right of first refusal at any time until the later of (x) 10 Business Days
after such notice from the Company to the Buyer and (y) 5 Business Days after
the Company provides such additional information as shall have been requested by
the Buyer.
(4) During the period commencing on the day after the Second
Closing Date to the date which is one year after the Closing Date, if the
Company desires to offer and sell shares of Common Stock for an aggregate
consideration of up to $1,500,000 on substantially the same terms as the sale of
the Shares pursuant to this Agreement (including the issuance of repricing
rights and warrants in connection therewith), the Company shall first offer such
securities to the Buyer and the Other Buyers. The Company shall give notice to
the Buyer of the detailed terms of such securities proposed to be issued and,
promptly after being requested by the Buyer, such other information as requested
by the Buyer. The Buyer may exercise such right of first refusal by giving
notice to the Company on or before the second Business Day after receiving such
notice from the Company. If the Buyer fails to exercise such right, the Company
may complete the transaction on the same terms with other investors during the
following 30-day period. This Section 6(i)(4) shall only be effective if the
Second Closing Date has occurred.
.c.(j) Stockholder Approval;. (1) On or before the 60th day
after the Closing Date, 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 all Initial Shares, Second Tranche Shares and Repricing Shares
issued and issuable pursuant to this Agreement and all similar securities issued
and issuable pursuant to the Other 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 selling or
otherwise transferring their shares prior to such Stockholder Approval being
obtained.
(3) If for any reason the Company fails to obtain, or the
Company abandons its efforts to obtain, such Stockholder Approval within such 60
day period, on the earlier of (x) the Business Day which is 61 days after the
Closing Date and (y) the Business Day after such abandonment, the Company shall
repurchase all of the Initial Shares then held by the Buyer, together with all
of the Buyer's Repricing Rights and the Warrants, for an amount equal to the
number of Initial Shares held by the Buyer on the date of such repurchase
multiplied by the Stockholder Nonapproval Price.
.c.(k) Certain Trading Restrictions;. The Buyer agrees that
on the Closing Date it will have no short position in the Common Stock and shall
not engage in short sales relating to the Common Stock for 120 days thereafter.
After such 120th day, so long as (1) no Repurchase Notice has been given with
respect to which the applicable Repurchase Price has not been paid and (2) the
SEC Effective Date has occurred, the Buyer agrees that during the period from
the SEC Effective Date to the date on which the Buyer no longer owns any
unexercised Repricing Rights, the Buyer shall not engage in short sales relating
to the Common Stock; provided, however, the Buyer may engage in such short sales
to the extent the Buyer delivers an Exercise Notice in accordance with Section 3
within one Trading Day after entering into such short sale which Exercise Notice
provides for the delivery of a sufficient number of Repricing Shares to cover
such short sale.
.c.(l) 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 Second Tranche Shares, Repricing Shares and 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 Second Tranche Shares, Repricing
Shares or 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 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 Repricing Shares and
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 Repricing Share for which an Exercise Notice has been
given and for each Warrant Share for which Warrants have been exercised, as the
case may be, 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.(m) 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 Shares and Repricing Rights 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.(n) Consolidation, Merger, etc.; In case of any
consolidation or merger of the Company with any other corporation (other than a
wholly-owned subsidiary of the Company) in which the Company is not the
surviving corporation, or in case of any sale or transfer of all or
substantially all of the assets of the Company, or in the case of any share
exchange pursuant to which all of the outstanding shares of Common Stock are
converted into other securities or property, the Company shall make appropriate
provision or cause appropriate provision to be made so that each holder of
Repricing Rights then outstanding shall have the right thereafter to receive
Repricing Shares in the form of the kind of shares of stock and other securities
and property receivable upon such consolidation, merger, sale, transfer, or
share exchange by a holder of shares of Common Stock immediately prior to the
effective date of such consolidation, merger, sale, transfer, or share exchange
and on a basis which preserves the economic benefits of the rights of the
holders of Repricing Rights to receive Repricing Shares on a basis as nearly as
practical as such rights exist hereunder prior thereto. The Company shall not
effect any such transaction unless the provisions of this Section 7(n) have been
complied with. The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, or share exchanges.
.c.(o) Overdue Amounts;. Whenever any amount which is due by
the Company to any holder of Shares, Repricing Rights or Warrants, pursuant to
the terms of this Agreement, the Registration Rights 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.(p) 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.(q) Other;. So long as any Shares, Repricing Rights 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.(r) 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 8 or 9,
as the case may be, of this Agreement on or before the Closing Date.
.c.7. CLOSING DATE; SECOND CLOSING DATE;.
Subject to the satisfaction or waiver of the conditions set
forth in Sections 8(a) and 9(a), the Closing Date shall be 12:00 noon, New York
City time, on or before the date which is three Business Days after the date of
this Agreement, or such other mutually agreed to time. The closing of the sale
of the Initial Shares and the other transactions contemplated hereby shall occur
on the Closing Date at the offices of the Escrow Agent. The Second Closing shall
occur on the Second Closing Date at the offices of the Escrow Agent.
.c.8 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
AND ISSUE;.
.c.(a) First Closing.; The Buyer understands that the
Company's obligation to sell the Initial Shares and issue the Initial Repricing
Rights and 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 Initial
Shares, in accordance with Section 2(a)(2) 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.(b) Second Closing;. The Buyer understands that the
Company's obligation to sell the Second Tranche Shares and issue the Second
Tranche Repricing Rights to the Buyer pursuant to this Agreement on the Second
Closing Date is conditioned upon the satisfaction of the following conditions
precedent on or before the Second Closing Date (any or all of which may be
waived by the Company in its sole discretion):
(1) Delivery by the Buyer to the Escrow Agent of good funds
as payment in full of an amount equal to the Second Tranche Purchase Price, in
accordance with Section 2(b)(2) hereof; and
(2) The Average Market Price on the Second Closing Date is
equal to or greater than $4.00 (subject to equitable adjustments from time to
time on terms reasonable acceptable to the Buyer for stock splits, stock
dividends, combinations, recapitalizations, reclassifications, and similar
events occurring after the date of this Agreement).
.c.9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE;.
.c.(a) First Closing;. The Company understands that the
Buyer's obligation to purchase the Initial Shares and acquire the Initial
Repricing Rights and 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 Initial Shares and the Warrants in accordance with this
Agreement;
(2) Delivery by the Company to the Repricing Escrow Agent of
the number of Escrow Shares required to be so delivered in accordance with this
Agreement and the Escrow Agreement and receipt by the Buyer of written
confirmation thereof;
(3) 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;
(4) 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;
(5) The Escrow Agent shall have executed and delivered the
Escrow Agreement in the form attached hereto as Annex III;
(6) Aura shall have executed and delivered the Parent Company
Agreement in the form attached hereto as Annex V; and
(7) Receipt by the Buyer on the Closing Date of an opinion of
Guzik & 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 VIIattached hereto.
.c.(b) Second Closing;. The Company understands that the
Buyer's obligation to purchase the Second Tranche Shares and acquire the Second
Tranche Repricing Rights from the Company pursuant to this Agreement on the
Second Closing Date is conditioned upon the satisfaction of the following
conditions precedent on or before the Second 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 Second Tranche Shares in accordance with this Agreement;
(2) The Average Market Price on the Second Closing Date is
equal to or greater than $4.00 (subject to equitable adjustments from time to
time on terms reasonable acceptable to the Buyer for stock splits, stock
dividends, combinations, recapitalizations, reclassifications, and similar
events occurring after the date of this Agreement);
(3) Each of the Company and Aura shall be in compliance in
all material respects with its obligations to the Buyer under this Agreement,
the Registration Rights Agreement, the Escrow Agreement, the Parent Company
Agreement, the Warrants and the other agreements and instruments contemplated
hereby;
(4) No Repurchase Event, or any event with the giving of
notice or the lapse of time, or both, would constitute a Repurchase Event, shall
have occurred and be continuing; and
(5) The Registration Statement shall have been effective and
available for use by the selling stockholders named therein for at least 60
consecutive days prior to the Second Closing Date with respect to the Initial
Shares, and at least three consecutive days prior to the Second Closing Date
with respect to the other Shares.
.c.10. REPURCHASE AT OPTION OF THE BUYER;.
.c.(a) Repurchase Right;. If a Repurchase Event occurs, then,
in addition to any other right or remedy of the Buyer, the Buyer shall have the
right, at the Buyer's option, to require the Company to repurchase all of the
Buyer's Shares and Repricing Rights owned by the Buyer (which for purposes of
this Section 10 include any Repricing Shares due to the Buyer which have not
been delivered to the Buyer), or any portion thereof, on the date that is three
Business Days after the date the Buyer gives the Company a Repurchase Notice
with respect to such Repurchase Event at any time while any of the Buyer's
Shares or Repricing Rights are outstanding, at a price equal to the Repurchase
Price for (i) each Share being repurchased and (ii) each Repricing Share which
would otherwise be issuable upon exercise on the Repurchase Date of the
Repricing Rights being repurchased.
.c.(b) Notices; Method of Exercising Optional Repurchase
Rights, Etc.; (1) On or before the fifth Business Day after the occurrence of a
Repurchase Event, the Company shall give to the Buyer a notice of the occurrence
of such Repurchase Event and of the repurchase right set forth herein arising as
a result thereof. Such notice from the Company shall set forth:
(i) the date by which the optional repurchase right must be
exercised, and
(ii) a description of the procedure (set forth below) which the Buyer
must follow to exercise the Buyer's optional repurchase right.
No failure of the Company to give such notice or defect therein shall limit the
right of the Buyer to exercise the optional repurchase right or affect the
validity of the proceedings for the repurchase of the Buyer's Shares and
Repricing Rights.
(2) To exercise its optional repurchase right, the Buyer
shall deliver to the Company on or before the 30th day after the notice required
by Section 10(b)(1) is given to the Buyer (or if no such notice has been given
by the Company to the Buyer, within 40 days after the Buyer first learns of such
Repurchase Event) a Repurchase Notice to the Company. A Repurchase Notice may be
revoked by the Buyer giving such Repurchase Notice by giving notice of such
revocation to the Company at any time prior to the time the Company pays the
Repurchase Price to the Buyer.
(3) If the Buyer shall have given a Repurchase Notice, on the
date which is three Business Days after the date such Repurchase Notice is given
(or such later date as the Buyer surrenders the Buyer's certificates for the
Shares repurchased) the Company shall make payment in immediately available
funds of the applicable Repurchase Price for each Share being repurchased and
each Repricing Share which would otherwise be issuable upon exercise of each
Repricing Right being repurchased to such account as specified by the Buyer in
writing to the Company at least one Business Day prior to the applicable
Repurchase Date.
.c.(c) Other;. (1) In connection with a repurchase pursuant
to this Section 10 of less than all of the Shares evidenced by a particular
certificate, promptly, but in no event later than three Business Days after
surrender of such certificate to the Company, the Company shall issue and
deliver to the Buyer a replacement certificate for the Shares evidenced by such
certificate which have not been repurchased.
(2) A Repurchase Notice given by the Buyer shall be deemed
for all purposes to be in proper form unless the Company notifies the Buyer in
writing within three Business Days after such Repurchase Notice has been given
(which notice shall specify all defects in such Repurchase Notice), and any
Repurchase Notice containing any such defect shall nonetheless be effective on
the date given if the Buyer promptly undertakes to correct all such defects. No
such claim of error shall limit or delay performance of the Company's obligation
to repurchase all Shares and Repricing Rights not in dispute whether or not the
Buyer makes such undertaking.
.c.(d) Adjustment of Repricing Price;. For any Repricing
Rights not subject to a Repurchase Notice following the occurrence of a
Repurchase Event, the Buyer may elect to deliver an Adjustment Notice to the
Company to increase the Repricing Price as provided in the definition thereof in
Section 1. At any time the Buyer may terminate an Adjustment Notice by giving a
Repurchase Notice with respect to the applicable Repricing Rights.
.c.11. 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;. (1) 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.
(2) Notwithstanding any other provision of this Agreement, in
addition to the requirements of Section 11(e)(1), any amendment of (x) Section
3(g)(2), (y) the definition of the term Aggregated Person or (z) this Section
11(e)(2) shall require approval by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock, present in person or
represented by proxy at a duly convened meeting of stockholders of the Company,
and entitled to vote or the consent thereto in writing by holders of a majority
of the outstanding shares of Common Stock, and the stockholders of the Company
are hereby expressly made third party beneficiaries of this Section 11(e)(2).
.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 Initial Shares or the
Second Tranche Shares and the issuance of the Repricing Rights and 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 Initial Shares or the Second
Tranche Shares or the acquisition of the Repricing Rights and 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 Initial Shares or the Second Tranche
Shares and the acquisition of the Repricing Rights and 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 Initial Shares, the Second Tranche Shares,
the other Shares issuable in connection with this Agreement and the Warrants
with respect to which the purchase under this Agreement has been so assigned.
Any transfer of the Shares, the Warrants or the Repricing Rights by the Buyer
after the Closing Date shall be made in accordance with Section 6(a). After the
Closing Date, the Buyer shall have the right to assign its rights and
obligations under this Agreement (1) 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 and (2) as provided
in Section 3(k).
.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 Initial Shares shall not have
occurred on a Closing Date on or before December 4, 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.
NUMBER OF INITIAL SHARES:
PRICE PER SHARE:
AGGREGATE PURCHASE PRICE:
NUMBER OF INITIAL REPRICING RIGHTS:
NUMBER OF WARRANT SHARES:
[NAME OF BUYER]
By:__________________________________
Name:
Title:
Date:
Address:
Facsimile No.:
NEWCOM, INC.
By:
Name:
Title:
Date:
EXHIBIT 10.21
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.
Right to Purchase 79,208 Shares of Common
Stock of NewCom, Inc.
NEWCOM, INC.
Common Stock Purchase Warrant
No. W-1
NEWCOM, INC., a Delaware corporation (the "Company"), hereby
certifies that, for value received, P.R.I.F., L.P. or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after the date hereof, and before
5:00 p.m., New York City time, on the Expiration Date (as hereinafter defined),
79,208 fully paid and nonassessable shares of Common Stock (as hereinafter
defined) at a purchase price per share equal to the Purchase Price (as
hereinafter defined). The number of such shares of Common Stock and the Purchase
Price are subject to adjustment as provided in this Warrant.
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
"Common Stock" includes the Company's Common Stock, $.001 par value per
share, as authorized on the date hereof, and any other securities into which or
for which the Common Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" shall include NewCom, Inc. and any corporation that shall
succeed to or assume the obligation of NewCom, Inc. hereunder in accordance with
the terms hereof.
"Expiration Date" means December 1, 2003.
"Issuance Date" means the first date of original issuance of this
Warrant.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Securities" refers to any stock (other than Common Stock) and
other securities of the Company or any other person (corporate or otherwise)
which the Holder at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable
<PAGE>
or shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 4.
"Purchase Price" shall mean $4.545 per share, subject to adjustment as
provided in this Warrant.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 30, 1998, by and between the Company and the
original Holder of this Warrant, as amended from time to time in accordance with
its terms.
"Subscription Agreement" means the Subscription Agreement, dated as of
November 30, 1998, by and between the Company and the original Holder of this
Warrant, as amended from time to time in accordance with its terms.
"Trading Day" means a day on which the principal securities market for
the Common Stock is open for general trading of securities.
1. Exercise of Warrant.
1.1 Exercise. (a) This Warrant may be exercised by the Holder
hereof in full or in part at any time or from time to time during the exercise
period specified in the first paragraph hereof until the Expiration Date by
surrender of this Warrant and the subscription form annexed hereto (duly
executed by the Holder), to the Company's transfer agent and registrar for the
Common Stock, and by making payment, in cash or by certified or official bank
check payable to the order of the Company, in the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the Holder in the
subscription form by (b) the Purchase Price then in effect. On any partial
exercise the Company will forthwith issue and deliver to or upon the order of
the Holder hereof a new Warrant or Warrants of like tenor, in the name of the
Holder hereof or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, providing in the aggregate on the face or faces
thereof for the purchase of the number of shares of Common Stock for which such
Warrant or Warrants may still be exercised.
(b) Notwithstanding any other provision of this Warrant, in
no event shall the Holder be entitled at any time to purchase a number of shares
of Common Stock on exercise of this Warrant in excess of that number of shares
upon purchase of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and all persons whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder, (each such person other than the Holder an
"Aggregated Person" and all such persons other than the Holder, collectively,
the "Aggregated Persons") (other than shares of Common Stock deemed beneficially
owned through the ownership by the Holder and all Aggregated Persons of the
Holder of the unexercised portion of this Warrant and any other security of the
Company which contains similar provisions) and (2) the number of shares of
Common Stock issuable upon exercise of the portion of this Warrant with respect
to which the determination in this sentence is being made, would result in
beneficial ownership by the Holder and all Aggregated Persons of the Holder of
more than 9.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the 1934 Act and Regulation 13D-G thereunder,
except as otherwise provided in clause (1) of the immediately preceding
sentence.
1.2 Net Issuance. At any time after the earlier of April 1,
1999 or the effective date of the Registration Statement (as defined in the
Registration Rights Agreement) when the Registration Statement is not available
for use by the Holder for resale of all shares of Common Stock issuable upon the
exercise of this Warrant, notwithstanding anything to the contrary contained in
Section 1.1, the Holder may elect to exercise this Warrant in whole or in part
by receiving shares of Common Stock equal to the net issuance value (as
determined
<PAGE>
below) of this Warrant, or any part hereof, upon surrender of this Warrant to
the Company's transfer agent and registrar for the Common Stock the principal
office of the Company together with the subscription form annexed hereto (duly
executed by the Holder), in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:
X = Y (A-B)
A
Where: X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock as to which this Warrant
is to be exercised
A = the current fair market value of one share of Common Stock
calculated as of the last Trading Day immediately preceding the
exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as
of a specified date shall mean with respect to each share of Common Stock the
closing sale price of the Common Stock on the principal securities market on
which the Common Stock may at the time be listed or, if there have been no sales
on any such exchange on such day, the average of the highest bid and lowest
asked prices on the principal securities market at the end of such day, or, if
on such day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq System as of 4:00 p.m., New York City
time, or, if on such day the Common Stock is not quoted in the Nasdaq System,
the average of the highest bid and lowest asked price on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of five consecutive Trading Days consisting of the day as of which
the current fair market value of a share of Common Stock is being determined (or
if such day is not a Trading Day, the Trading Day next preceding such day) and
the four consecutive Trading Days prior to such day. If on the date for which
current fair market value is to be determined the Common Stock is not listed on
any securities exchange or quoted in the Nasdaq System or the over-the-counter
market, the current fair market value of Common Stock shall be the highest price
per share which the Company could then obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Common Stock shall be deemed to be the value received by the holders of
the Company's Common Stock for each share thereof pursuant to the Company's
acquisition.
2. Delivery of Stock Certificates, etc., on Exercise. As soon
as practicable after the exercise of this Warrant, and in any event within three
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder hereof, or as the Holder (upon payment by the Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise. Upon
exercise of this Warrant as provided herein, the Company's obligation to issue
and deliver the certificates for Common
<PAGE>
Stock shall be absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Company to the Holder, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other person of any obligation to the Company, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with such exercise. If the Company fails to
issue and deliver the certificates for the Common Stock to the Holder pursuant
to the first sentence of this paragraph as and when required to do so, in
addition to any other liabilities the Company may have hereunder and under
applicable law, the Company shall pay or reimburse the Holder on demand for all
out-of-pocket expenses including, without limitation, fees and expenses of legal
counsel incurred by the Holder as a result of such failure.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time, all the holders
of Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder, on the exercise hereof
as provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) which the Holder would hold on the
date of such exercise if on the date thereof the Holder had been the holder of
record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the case
referred to in subdivisions (b) and (c) of this Section 3) receivable by the
Holder as aforesaid during such period, giving effect to all adjustments called
for during such period by Section 4.
4. Exercise upon Reorganization, Consolidation, Merger, etc.
In case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c)
transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition of such reorganization,
consolidation, merger, sale or conveyance, the Company shall give at least 30
days notice to the Holder of such pending transaction whereby the Holder shall
have the right to exercise this Warrant prior to any such reorganization,
consolidation, merger, sale or conveyance. Any exercise of this Warrant pursuant
to notice under this Section shall be conditioned upon the closing of such
reorganization, consolidation, merger, sale or conveyance which is the subject
of the notice and the exercise of this Warrant shall not be deemed to have
occurred until immediately prior to the closing of such transaction.
5. Adjustment for Extraordinary Events. In the event that the
Company shall (i) issue additional share of Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide or reclassify its
outstanding share of Common Stock,
<PAGE>
or (iii) combine its outstanding share of Common Stock into a smaller number of
shares of Common Stock, then, in each event, the Purchase Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
Purchase Price in effect immediately prior to such event by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 5.
The Holder shall thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would be issuable on such
exercise immediately prior to such issuance by a fraction of which (i) the
numerator is the Purchase Price in effect immediately prior to such issuance and
(ii) the denominator is the Purchase Price in effect on the date of such
exercise.
6. Further Assurances. The Company will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens and charges with respect to the issue thereof, on the exercise of all or
any portion of this Warrant from time to time outstanding.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all of the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the 1933 Act, or a favorable vote of stockholders if either is required. Such
notice shall be mailed at least ten days prior to the date specified in such
notice on which any such action is to be taken or the record date, whichever is
earlier.
8. Reservation of Stock, etc., Issuable on Exercise of
Warrants. The Company will at all times reserve and keep available out of its
authorized but unissued shares of capital stock, solely for issuance and
delivery on the exercise of this Warrant, a sufficient number of shares of
Common Stock (or Other Securities) to effect the full exercise of this Warrant
and the exercise, conversion or exchange of any other warrant or security of the
<PAGE>
Company exercisable for, convertible into, exchangeable for or otherwise
entitling the holder to acquire shares of Common Stock (or Other Securities),
and if at any time the number of authorized but unissued shares of Common Stock
(or Other Securities) shall not be sufficient to effect such exercise,
conversion or exchange, the Company shall take such action as may be necessary
to increase its authorized but unissued shares of Common Stock (or Other
Securities) to such number as shall be sufficient for such purposes.
9. Transfer of Warrant. This Warrant shall inure to the
benefit of the successors to and assigns of the Holder. This Warrant and all
rights hereunder, in whole or in part, are registrable at the office or agency
of the Company referred to below by the Holder hereof in person or by his duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. Register of Warrants. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. Exchange of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by said Holder hereof at the time
of such surrender.
12. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Warrant Agent. On or before the Issuance Date, the
Company shall appoint Interwest Transfer Company, as Transfer Agent and
Registrar (the "Transfer Agent"), as the exercise agent for purposes of issuing
shares of Common Stock (or Other Securities) on the exercise of this Warrant
pursuant to Section 1. The Company may, by notice to the Holder, appoint an
agent having an office in the United States of America for the purpose of
exchanging this Warrant pursuant to Section 11 and replacing this Warrant
pursuant to Section 12, or either of the foregoing, and thereafter any such
exchange or replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at law
of the Holder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
15. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of the Holder for the Purchase Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
<PAGE>
16. Notices, etc. All notices and other communications from
the Company to the registered Holder shall be mailed by first class certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by the Holder or at the address shown for the Holder on the register
of Warrants referred to in Section 10.
17. Transfer Restrictions. By acceptance of this Warrant, the
Holder represents to the Company that this Warrant is being acquired for the
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling this Warrant or the Common Stock issuable
upon exercise of this Warrant. The Holder acknowledges and agrees that this
Warrant and, except as otherwise provided in the Registration Rights Agreement,
the shares of Common Stock issuable upon exercise of this Warrant (if any) have
not been (and at the time of acquisition by the Holder, will not have been or
will not be), registered under the 1933 Act or under the securities laws of any
state, in reliance upon certain exemptive provisions of such statutes. The
Holder further recognizes and acknowledges that because this Warrant and, except
as provided in the Registration Rights Agreement, the Common Stock issuable upon
exercise of this Warrant (if any) are unregistered, they may not be eligible for
resale, and may only be resold in the future pursuant to an effective
registration statement under the 1933 Act and any applicable state securities
laws, or pursuant to a valid exemption from such registration requirements.
Unless the shares of Common Stock issuable upon exercise of this Warrant have
theretofore been registered for resale under the 1933 Act, the Company may
require, as a condition to the issuance of Common Stock upon the exercise of
this Warrant (i) in the case of an exercise in accordance with Section 1.1
hereof, a confirmation as of the date of exercise of the Holder's
representations pursuant to this Section 17, or (ii) in the case of an exercise
in accordance with Section 1.2 hereof, an opinion of counsel reasonably
satisfactory to the Company that the shares of Common Stock to be issued upon
such exercise may be issued without registration under the 1933 Act.
18. Legend. Unless theretofore registered for resale under
the 1933 Act, each certificate for shares issued upon exercise of this Warrant
shall bear the following legend:
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.
19. Amendment; Waiver. This Warrant and any terms hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. Notwithstanding any other provision of this Warrant or
the Subscription Agreement, in addition to the requirements of the immediately
preceding sentence, any amendment of (x) Section 1.1(b), (y) the definition of
the term Aggregated Person or (z) this sentence shall require approval by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, present in person or represented by proxy at a duly convened
meeting of stockholders of the Company, and entitled to vote or the consent
thereto in writing by holders of a majority of the outstanding shares of Common
Stock, and the stockholders of the Company are hereby expressly made third party
beneficiaries of this sentence.
20. Miscellaneous. This Warrant shall be construed and
enforced in accordance with and governed by the internal laws of the State of
California. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: December , 1998 NEWCOM, INC.
By:______________________________
Title:
<PAGE>
FORM OF SUBSCRIPTION
NEWCOM, INC.
(To be signed only on exercise of Warrant)
TO: Interwest Transfer Company,
as Exercise Agent
P.O. Box 17136
Salt Lake City, Utah 84117
1. The undersigned Holder of the attached original, executed
Warrant hereby elects to exercise its purchase right under such Warrant with
respect to ______________ shares of Common Stock, as defined in the Warrant, of
NewCom, Inc., a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
o (a) elects to pay the aggregate purchase price for such shares of Common
Stock (the "Exercise Shares") (i) by lawful money of the United States or the
enclosed certified or official bank check payable in United States dollars to
the order of the Company in the amount of $___________, or (ii) by wire transfer
of United States funds to the account of the Company in the amount of
$____________, which transfer has been made before or simultaneously with the
delivery of this Form of Subscription pursuant to the instructions of the
Company;
or
o (b) elects to receive shares of Common Stock having a value equal to the
value of the Warrant calculated in accordance with Section 1.2 of the Warrant.
3. Please issue a stock certificate or certificates representing
the appropriate number of shares of Common Stock in the name of the undersigned
or in such other name as is specified below:
Name:
Address:
4. The undersigned Holder hereby represents to the Company that
the exercise of the Warrant elected hereby does not violate Section 1.1(b) of
the Warrant.
Dated: ____________ ___, ____
(Signature must conform to name of
Holder as specified on the face of
the Warrant)
(Address)
EXHIBIT 10.22
PARENT COMPANY AGREEMENT
THIS PARENT COMPANY AGREEMENT, dated as of November 30, 1998,
by and among AURA SYSTEMS, INC., a Delaware corporation ("Aura"), NEWCOM, 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
(818) 597-1002), in the case of Aura addressed to Aura at 2335 Alaska Avenue, El
Segundo, California 90245, Attention: Chief Financial Officer (telephone line
facsimile transmission number (310) 643-8719) 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.
<PAGE>
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:
Newcom, INC.
By:______________________________
Name:
Title:
[ORIGINAL HOLDERS]
By:______________________________
Name:
Title:
Address:
Facsimile No.:
<PAGE>
Exhibit A
NEWCOM, INC.
COMPLIANCE CERTIFICATE
TO: The Holders
Pursuant to the Parent Company Agreement, dated as of
November 30, 1998, by and among NewCom, 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:
EXHIBIT 10.23
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of December 28, 1998
(this "Agreement"), by and between NEWCOM, INC., a Delaware corporation (the
"Company"), with headquarters located at 31166 Via Colinas, Westlake Village,
California 91326, 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 mark 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.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch 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 sue 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
Guzik & 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.:
NEWCOM, INC.
By:__________________________________
Name:
Title:
Date:
EXHIBIT 10.24
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.
Right to Purchase ______ Shares of Common
Stock of NewCom, Inc.
NEWCOM, INC.
Common Stock Purchase Warrant
No. ____
NEWCOM, INC., a Delaware corporation (the "Company"), hereby
certifies that, for value received, _____________ or registered assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after the date hereof, and before
5:00 p.m., New York City time, on the Expiration Date (as hereinafter defined),
________ fully paid and nonassessable shares of Common Stock (as hereinafter
defined) at a purchase price per share equal to the Purchase Price (as
hereinafter defined). The number of such shares of Common Stock and the Purchase
Price are subject to adjustment as provided in this Warrant.
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
"Common Stock" includes the Company's Common Stock, $.001 par value per
share, as authorized on the date hereof, and any other securities into which or
for which the Common Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" shall include NewCom, Inc. and any corporation that shall
succeed to or assume the obligation of NewCom, Inc. hereunder in accordance
with the terms hereof.
"Expiration Date" means December 28, 2003.
"Issuance Date" means the first date of original issuance of this
Warrant.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Market Price" means the closing bid price of the Common Stock on the
principal securities market for the Common Stock, as reported by Bloomberg, L.P.
(subject to equitable adjustment from time to time for stock splits, stock
dividends, recapitalizations and similar transactions).
"Note Purchase Agreement" means the Note Purchase Agreement, dated as
of December 28, 1998, by and between the Company and the original Holder of this
Warrant, as amended from time to time in accordance with its terms.
"Other Securities" refers to any stock (other than Common Stock) and
other securities of the Company or any other person (corporate or otherwise)
which the Holder at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 4.
"Purchase Price" means
(a) for any date prior to the date which is 180 days after the Issuance
Date, $3.75; or
(b) for any date on or after the date which is 180 days after the Issuance
Date, the lesser of (1) $3.75 and (2) the arithmetic average of the Market Price
for the five consecutive Trading Days prior to the 180th day after the Issuance
Date;
in each case subject to adjustment as provided in this Warrant.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 30, 1998, by and between the Company and the
original Holder of this Warrant, as amended from time to time in accordance with
its terms (including without limitation as amended by the Amendment Agreement,
dated as of December 28, 1998, between the Company, the original Holder of this
Warrant and the other parties thereto).
"Trading Day" means a day on which the principal securities market for
the Common Stock is open for general trading of securities.
1. Exercise of Warrant.
1.1 Exercise. (a) This Warrant may be exercised by the Holder
hereof in full or in part at any time or from time to time during the exercise
period specified in the first paragraph hereof until the Expiration Date by
surrender of this Warrant and the subscription form annexed hereto (duly
executed by the Holder), to the Company's transfer agent and registrar for the
Common Stock, and by making payment, in cash or by certified or official bank
check payable to the order of the Company, in the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the Holder in the
subscription form by (b) the Purchase Price then in effect. On any partial
exercise the Company will forthwith issue and deliver to or upon the order of
the Holder hereof a new Warrant or Warrants of like tenor, in the name of the
Holder hereof or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, providing in the aggregate on the face or faces
thereof for the purchase of the number of shares of Common Stock for which such
Warrant or Warrants may still be exercised.
(b) Notwithstanding any other provision of this Warrant, in
no event shall the Holder be entitled at any time to purchase a number of shares
of Common Stock on exercise of this Warrant in excess of that number of shares
upon purchase of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and all persons whose beneficial ownership of
shares of Common Stock would be aggregated with the Holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the 1934
Act and Regulation 13D-G thereunder, (each such person other than the Holder an
"Aggregated Person" and all such persons other than the Holder, collectively,
the "Aggregated Persons") (other than shares of Common Stock deemed beneficially
owned through the ownership by the Holder and all Aggregated Persons of the
Holder of the unexercised portion of this Warrant and any other security of the
Company which contains similar provisions) and (2) the number of shares of
Common Stock issuable upon exercise of the portion of this Warrant with respect
to which the determination in this sentence is being made, would result in
beneficial ownership by the Holder and all Aggregated Persons of the Holder of
more than 9.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the 1934 Act and Regulation 13D-G thereunder,
except as otherwise provided in clause (1) of the immediately preceding
sentence.
1.2 Net Issuance. Notwithstanding anything to the contrary
contained in Section 1.1, the Holder may elect to exercise this Warrant in whole
or in part by receiving shares of Common Stock equal to the net issuance value
(as determined below) of this Warrant, or any part hereof, upon surrender of
this Warrant to the Company's transfer agent and registrar for the Common Stock
the principal office of the Company together with the subscription form annexed
hereto (duly executed by the Holder), in which event the Company shall issue to
the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
A
Where: X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock as to which this Warrant
is to be exercised
A = the current fair market value of one share of Common Stock
calculated as of the last Trading Day immediately preceding the
exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as
of a specified date shall mean with respect to each share of Common Stock the
closing sale price of the Common Stock on the principal securities market on
which the Common Stock may at the time be listed or, if there have been no sales
on any such exchange on such day, the average of the highest bid and lowest
asked prices on the principal securities market at the end of such day, or, if
on such day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the Nasdaq System as of 4:00 p.m., New York City
time, or, if on such day the Common Stock is not quoted in the Nasdaq System,
the average of the highest bid and lowest asked price on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of five consecutive Trading Days consisting of the day as of which
the current fair market value of a share of Common Stock is being determined (or
if such day is not a Trading Day, the Trading Day next preceding such day) and
the four consecutive Trading Days prior to such day. If on the date for which
current fair market value is to be determined the Common Stock is not listed on
any securities exchange or quoted in the Nasdaq System or the over-the-counter
market, the current fair market value of Common Stock shall be the highest price
per share which the Company could then obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by the Board of
Directors of the Company, unless prior to such date the Company has become
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Common Stock shall be deemed to be the value received by the holders of
the Company's Common Stock for each share thereof pursuant to the Company's
acquisition.
2. Delivery of Stock Certificates, etc., on Exercise. As soon
as practicable after the exercise of this Warrant, and in any event within three
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder hereof, or as the Holder (upon payment by the Holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, in such
denominations as may be requested by the Holder, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property (including cash, where applicable) to which the
Holder is entitled upon such exercise pursuant to Section 1 or otherwise. Upon
exercise of this Warrant as provided herein, the Company's obligation to issue
and deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the Holder to
enforce the same, any waiver or consent with respect to any provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Company to the Holder, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other person
of any obligation to the Company, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with such exercise. If the Company fails to issue and deliver the
certificates for the Common Stock to the Holder pursuant to the first sentence
of this paragraph as and when required to do so, in addition to any other
liabilities the Company may have hereunder and under applicable law, the Company
shall pay or reimburse the Holder on demand for all out-of-pocket expenses
including, without limitation, fees and expenses of legal counsel incurred by
the Holder as a result of such failure.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time, all the holders
of Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder, on the exercise hereof
as provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) which the Holder would hold on the
date of such exercise if on the date thereof the Holder had been the holder of
record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the case
referred to in subdivisions (b) and (c) of this Section 3) receivable by the
Holder as aforesaid during such period, giving effect to all adjustments called
for during such period by Section 4.
4. Exercise upon Reorganization, Consolidation, Merger, etc.
In case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c)
transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, as a condition of such reorganization,
consolidation, merger, sale or conveyance, the Company shall give at least 30
days notice to the Holder of such pending transaction whereby the Holder shall
have the right to exercise this Warrant prior to any such reorganization,
consolidation, merger, sale or conveyance. Any exercise of this Warrant pursuant
to notice under this Section shall be conditioned upon the closing of such
reorganization, consolidation, merger, sale or conveyance which is the subject
of the notice and the exercise of this Warrant shall not be deemed to have
occurred until immediately prior to the closing of such transaction.
5. Adjustment for Extraordinary Events. In the event that the
Company shall (i) issue additional share of Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide or reclassify its
outstanding share of Common Stock, or (iii) combine its outstanding share of
Common Stock into a smaller number of shares of Common Stock, then, in each
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the Purchase Price in effect immediately prior
to such event by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 5. The Holder shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive that number of
shares of Common Stock determined by multiplying the number of shares of Common
Stock which would be issuable on such exercise immediately prior to such
issuance by a fraction of which (i) the numerator is the Purchase Price in
effect immediately prior to such issuance and (ii) the denominator is the
Purchase Price in effect on the date of such exercise.
6. Further Assurances. The Company will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens and charges with respect to the issue thereof, on the exercise of all or
any portion of this Warrant from time to time outstanding.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all of the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the 1933 Act, or a favorable vote of stockholders if either is required. Such
notice shall be mailed at least ten days prior to the date specified in such
notice on which any such action is to be taken or the record date, whichever is
earlier.
8. Reservation of Stock, etc., Issuable on Exercise of
Warrants. The Company will at all times reserve and keep available out of its
authorized but unissued shares of capital stock, solely for issuance and
delivery on the exercise of this Warrant, a sufficient number of shares of
Common Stock (or Other Securities) to effect the full exercise of this Warrant
and the exercise, conversion or exchange of any other warrant or security of the
Company exercisable for, convertible into, exchangeable for or otherwise
entitling the holder to acquire shares of Common Stock (or Other Securities),
and if at any time the number of authorized but unissued shares of Common Stock
(or Other Securities) shall not be sufficient to effect such exercise,
conversion or exchange, the Company shall take such action as may be necessary
to increase its authorized but unissued shares of Common Stock (or Other
Securities) to such number as shall be sufficient for such purposes.
9. Transfer of Warrant. This Warrant shall inure to the
benefit of the successors to and assigns of the Holder. This Warrant and all
rights hereunder, in whole or in part, are registrable for transfer at the
office or agency of the Company referred to below by the Holder hereof or the
assignee of such Holder in person or by his duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto duly
executed by the Holder. Each assignee of this Warrant shall be entitled to all
of the rights and benefits of the original Holder under the Registration Rights
Agreement.
10. Register of Warrants. The Company shall maintain, at the
principal office of the Company (or such other office as it may designate by
notice to the Holder hereof), a register in which the Company shall record the
name and address of the person in whose name this Warrant has been issued, as
well as the name and address of each successor and prior owner of such Warrant.
The Company shall be entitled to treat the person in whose name this Warrant is
so registered as the sole and absolute owner of this Warrant for all purposes.
11. Exchange of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Holder hereof at the office or agency of the Company
referred to in Section 10, for one or more new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by said Holder hereof at the time
of such surrender.
12. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Warrant Agent. On or before the Issuance Date, the
Company shall appoint Interwest Transfer Company, as Transfer Agent and
Registrar (the "Transfer Agent"), as the exercise agent for purposes of issuing
shares of Common Stock (or Other Securities) on the exercise of this Warrant
pursuant to Section 1. The Company may, by notice to the Holder, appoint an
agent having an office in the United States of America for the purpose of
exchanging this Warrant pursuant to Section 11 and replacing this Warrant
pursuant to Section 12, or either of the foregoing, and thereafter any such
exchange or replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at law
of the Holder in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
15. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of the Holder for the Purchase Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
16. Notices, etc. All notices and other communications from
the Company to the registered Holder shall be mailed by first class certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by the Holder or at the address shown for the Holder on the register
of Warrants referred to in Section 10.
17. Transfer Restrictions. By acceptance of this Warrant, the
Holder represents to the Company that this Warrant is being acquired for the
Holder's own account and for the purpose of investment and not with a view to,
or for sale in connection with, the distribution thereof, nor with any present
intention of distributing or selling this Warrant or the Common Stock issuable
upon exercise of this Warrant. The Holder acknowledges and agrees that this
Warrant and, except as otherwise provided in the Registration Rights Agreement,
the shares of Common Stock issuable upon exercise of this Warrant (if any) have
not been (and at the time of acquisition by the Holder, will not have been or
will not be), registered under the 1933 Act or under the securities laws of any
state, in reliance upon certain exemptive provisions of such statutes. The
Holder further recognizes and acknowledges that because this Warrant and, except
as provided in the Registration Rights Agreement, the Common Stock issuable upon
exercise of this Warrant (if any) are unregistered, they may not be eligible for
resale, and may only be resold in the future pursuant to an effective
registration statement under the 1933 Act and any applicable state securities
laws, or pursuant to a valid exemption from such registration requirements. This
Warrant may only be assigned to an "accredited investor," as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act, and
in accordance with Section 9. Unless the shares of Common Stock issuable upon
exercise of this Warrant have theretofore been registered for resale under the
1933 Act, the Company may require, as a condition to the issuance of Common
Stock upon the exercise of this Warrant (i) in the case of an exercise in
accordance with Section 1.1 hereof, a confirmation as of the date of exercise of
the Holder's representations pursuant to this Section 17, or (ii) in the case of
an exercise in accordance with Section 1.2 hereof, an opinion of counsel
reasonably satisfactory to the Company that the shares of Common Stock to be
issued upon such exercise may be issued without registration under the 1933 Act.
18. Legend. Unless theretofore registered for resale under
the 1933 Act, each certificate for shares issued upon exercise of this Warrant
shall bear the following legend:
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.
19. Amendment; Waiver. This Warrant and any terms hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. Notwithstanding any other provision of this Warrant or
the Note Purchase Agreement, in addition to the requirements of the immediately
preceding sentence, any amendment of (x) Section 1.1(b), (y) the definition of
the term Aggregated Person or (z) this sentence shall require approval by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock, present in person or represented by proxy at a duly convened
meeting of stockholders of the Company, and entitled to vote or the consent
thereto in writing by holders of a majority of the outstanding shares of Common
Stock, and the stockholders of the Company are hereby expressly made third party
beneficiaries of this sentence.
20. Miscellaneous. This Warrant shall be construed and
enforced in accordance with and governed by the internal laws of the State of
California. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: December , 1998 NEWCOM, INC.
By:______________________________
Title:
<PAGE>
FORM OF SUBSCRIPTION
NEWCOM, INC.
(To be signed only on exercise of Warrant)
TO: Interwest Transfer Company,
as Exercise Agent
P.O. Box 17136
Salt Lake City, Utah 84117
1. The undersigned Holder of the attached original, executed
Warrant hereby elects to exercise its purchase right under such Warrant with
respect to ______________ shares of Common Stock, as defined in the Warrant, of
NewCom, Inc., a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
o (a) elects to pay the aggregate purchase price for such shares of Common
Stock (the "Exercise Shares") (i) by lawful money of the United States or the
enclosed certified or official bank check payable in United States dollars to
the order of the Company in the amount of $___________, or (ii) by wire transfer
of United States funds to the account of the Company in the amount of
$____________, which transfer has been made before or simultaneously with the
delivery of this Form of Subscription pursuant to the instructions of the
Company;
or
o (b) elects to receive shares of Common Stock having a value equal to the
value of the Warrant calculated in accordance with Section 1.2 of the Warrant.
3. Please issue a stock certificate or certificates representing
the appropriate number of shares of Common Stock in the name of the undersigned
or in such other name as is specified below:
Name:
Address:
4. The undersigned Holder hereby represents to the Company that
the exercise of the Warrant elected hereby does not violate Section 1.1(b) of
the Warrant.
Dated: ____________ ___, ____
(Signature must conform to name of
Holder as specified on the face of
the Warrant)
(Address)
<PAGE>
ASSIGNMENT FORM
NEWCOM, INC.
FOR VALUE RECEIVED, (the "Holder") hereby sells, assigns and
transfers to having an office at , the right to purchase Common Stock, par value
$.001 per share, of NewCom, Inc., a Delaware corporation (the "Company"),
represented by this Warrant Certificate to the extent of shares as to which such
rights are exercisable and does hereby irrevocably constitute and appoint
to transfer the same on the books of the Company with full power of
substitution in the premises.
Holder:
By:__________________________________
Name:
Title:
Dated: ,
EXHIBIT 10.25
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT, dated as of December 28, 1998, by
and among AURA SYSTEMS, INC., a Delaware corporation ("Aura"), NEWCOM, INC., a
Delaware corporation (the "Company"), and the holders of Securities (as defined
below) named on the signature pages hereto (the "Original Holders").
W I T N E S S E T H:
WHEREAS, pursuant to the several Subscription Agreements,
each dated as of November 30, 1998, by and between the Company and the Original
Holders (the "subscription Agreements"), the Company issued to the Original
Holders shares (the "Initial Shares") of Common Stock, $.001 par value ("the
Common Stock"), of the Company and in connection therewith the Company issued
certain Repricing Rights (as defined in the Subscription Agreements) and Common
Stock Purchase Warrants (the "Initial Warrants") to the Original Holders;
WHEREAS, pursuant to the several Note Purchase Agreements,
each dated as of December 28, 1998, by and between the Company and the Original
Holders (the "Note Purchase Agreements"), the Company has agreed, upon the terms
and conditions of the Note Purchase Agreements, to issue to the Original Holders
Secured Promissory Notes (the "Notes") of the Company and in connection
therewith the Company has agreed to issue additional Common Stock Purchase
Warrants (the "Additional Warrants") to the Original Holders; and
WHEREAS, Aura beneficially owns a majority of the outstanding
Common Stock of the Company and is a party to the Parent Company Agreement,
dated as of November 30, 1998, with the Company and the Original Holders; and
WHEREAS, as a condition precedent to the respective
obligations of the Original Holders to purchase the Notes and acquire the
Additional Warrants, the Original Holders require the execution and delivery of
this Agreement by Aura and the Company;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. (a) The following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Aura SEC Reports" means (1) Aura's Annual Report on Form
10-K for the fiscal year ended February 28, 1998, (2) Aura's Quarterly Reports
on Form 10-Q for the fiscal quarters ended May 31, 1998 and August 31, 1998, and
(3) Aura's definitive proxy statement for its 1998 Annual Meeting of
Stockholders, in each case as filed with the SEC.
"Holders" means the Original Holders and each other holder of
Repricing Rights and Securities.
"Securities" means the Initial Shares, Repricing Shares, the
Aura Repricing Shares, the Notes, the Initial Warrants and the Additional
Warrants.
(b) Capitalized terms defined in the introductory paragraph
or the recitals to this Agreement or in the amendments to the Subscription
Agreements and the Registration Rights Agreements made hereby shall have the
respective meanings therein provided. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth in the
Note Purchase Agreements and, if not defined therein, in the Subscription
Agreements.
2. Amendment of Subscription Agreements. Each of the
respective Subscription Agreements is hereby amended as follows:
(a) Section 1 is amended by adding the following new definitions:
"Amendment Agreement" means the Amendment Agreement, dated as of
December 28, 1998, between and among the Company, Aura, the Buyer and the Other
Buyers.
"Aura Common Stock" means the Common Stock, $.005 par value, of
Aura.
"Aura Repricing Rate" means the number of Aura Repricing Shares
issuable upon exercise of each Repricing Right pursuant to Section 3(I) equal to
(a) the product of (1) the Repricing Rate and (2) the Average Market Price of
the Common Stock on the Exercise Date divided by (b) the Average Market Price of
the Aura Common Stock on such Exercise Date (as if, for purposes of this clause
(b), the term "Average Market Price" referred to the Aura Common Stock).
"Aura Repricing Shares" means shares of Aura Common Stock issued or
issuable to a holder of Repricing Rights upon the exercise thereof.
"Cash Consideration" means the product of (a) the number of Aura
Repricing Shares issuable upon each exercise of Repricing Rights pursuant to
Section 3(l) and (b) the then current par value of the Aura Common Stock (which
is $.005 as of December 28, 1998).
"Cash Consideration Reserve" means the funds received by Aura from the
Buyer from time to time pursuant to Section 3(l), plus accrued interest thereon,
which are held in trust by Aura from the account of the Buyer unless and until
paid to Aura as Cash Consideration upon exercise of Repricing Rights for Aura
Repricing Shares.
"Note Purchase Agreements" means the several Note Purchase Agreements,
dated as of December 28, 1998, by and between the Company and each of the Buyer
and the Other Buyers.
"Notes" means the Secured Promissory Notes of the Company in the
aggregate principal amount of $1,000,000 issued to the Buyer and the Other
Buyers pursuant to the Note Purchase Agreements.
(b) Section 3 is amended to add a new Section 3(I) at the
end thereof as follows:
(I) Aura Repricing Shares. (1) Notwithstanding anything to the contrary
in this Agreement, the Buyer may elect in its sole discretion to receive shares
of Aura Common Stock in lieu of receiving shares of Common Stock of the Company
upon exercise of Repricing Rights pursuant to this Section 3. On each Exercise
Date, the Buyer shall be entitled to exercise any whole number of Repricing
Rights for fully paid and nonassessable Aura Repricing Shares at the Aura
Repricing Rate if upon each exercise the Buyer pays Aura, or has previously
deposited in the Cash Consideration Reserve for Aura, the applicable Cash
Consideration. Upon receipt of such Exercise Notice and such Cash Consideration,
Aura and the Company shall be obligated to deliver the certificates for the Aura
Common Stock representing such Aura Repricing Shares as and when required under
this Agreement.
(2) In order to make funds available to Aura to pay the Cash
Consideration if and when required, at the closing under the Note Purchase
Agreement the Buyer will deliver to Aura the sum of $1,000.00 to be held in
trust by Aura as the Cash Consideration Reserve. Upon each exercise of Repricing
Rights for Aura Repricing Shares, the Buyer hereby authorizes and directs Aura
to deduct from its Cash Consideration Reserve the Cash Consideration due with
respect to such exercise. Such deduction shall constitute payment in full to
Aura of the applicable Cash Consideration. The Buyer may from time to time
deposit additional funds in the Cash Consideration Reserve to provide adequate
funds to cover future exercises of Repricing Rights. Upon request, Aura will
provide the Buyer with a statement of the balance held in such Cash
Consideration Reserve. Aura shall return the balance of the Cash Consideration
Reserve, plus accrued interest thereon, to the Buyer within ten Business Days of
receiving a request therefor from the Buyer.
(3) To exercise Repricing Rights for full shares of Aura Common Stock
representing Aura Repricing Shares on any Exercise Date, the Buyer shall (A)
transmit by telephone line facsimile (or otherwise deliver), for receipt on or
prior to 11:59 p.m. Eastern Time, on such date, a copy of a fully executed
Exercise Notice, in the form attached hereto as Exhibit B to the Amendment
Agreements to Aura with a copy to the Company and (B) if there shall be
insufficient fund in the Cash Consideration Reserve, deliver by check, money
order of wire transfer to an account designated by Aura, the Cash Consideration
for such exercise. Upon receipt by Aura of an executed Exercise Notice and
payment of the Cash Consideration, which payment shall be deemed made on the
Exercise Date by reason of Aura's right to deduct the Cash Consideration from
the Cash Consideration Reserve if sufficient funds are available, Aura shall,
within three Trading Days following the Exercise Date, (A) issue and deliver to
the address specified in the Exercise Notice, a certificate, registered in the
name of the Buyer or its designee, for the number of Aura Repricing Shares to
which the holder shall be entitled, or (B) credit such aggregate number of Aura
Repricing Shares to the Buyer's or its designee's account with the Depository
Trust Company as specified in the Exercise Notice. The certificates for any Aura
Repricing Shares issued to the Buyer prior to the SEC Effective Date shall bear
the restrictive legend specified in Section 6(b). On and after the SEC Effective
Date all Aura Repricing Shares issued to or upon the order of the Buyer shall
not bear any restrictive legends or be subject to any stop-transfer
restrictions.
(4) The Person or Persons entitled to receive the Aura Repricing Shares
issuable upon an exercise of Repricing Rights shall be treated for all purposes
as the record holder or holders of such shares of Aura Common Stock on the
Exercise Date.
(5) If the Buyer shall have given an Exercise Notice for Aura Repricing
Shares as provided herein, Aura's obligation to issue and deliver the
certificates for Aura Common Stock representing the Aura Repricing Shares shall
be absolute and unconditional, irrespective of any action or inaction by the
Buyer to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to enforce
the same, any failure or delay in the enforcement of any other obligation of
Aura or the Company to the Buyer, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Buyer or any
other Person of any obligation to Aura or the Company or any violation or
alleged violation of law by the Buyer or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of Aura to
the Buyer in connection with the issuance and delivery of Aura Repricing Shares.
The number of Aura Repricing Shares to be issued in connection with a particular
Exercise Date is, absent manifest error, conclusively the number of Aura
Repricing Shares stated in the applicable Exercise Notice. If in connection with
a particular Exercise Date Aura determines that manifest error has been made by
virtue of the computation of Aura Repricing Shares or other information set
forth in the applicable Exercise Notice, Aura shall have the right within one
Trading Day after the Buyer gives such Exercise Notice to notify the Buyer of
such error, which notice shall state the number of Aura Repricing Shares in
dispute, and, notwithstanding such notice from Aura, Aura shall issue to the
Buyer the number of Aura Repricing Shares not in dispute as and when required by
this Agreement. If Aura shall have notified the Buyer of any such manifest
error, and Aura and the Buyer do not agree as to a resolution of such manifest
error on or before the date of such notice by Aura of an error in such Exercise
Notice, Aura shall on the date such notice is given submit the dispute to the
Auditors for determination and shall instruct the Auditors to resolve such
dispute and to notify Aura and the Buyer of their determination, which shall be
binding on all parties, within two Trading Days after such dispute is submitted
to the Auditors. Immediately after receipt of timely notice of the Auditors'
determination (but in any event within four Trading Days after the applicable
Exercise Notice is given to Aura), Aura shall issue to the Buyer any additional
Aura Repricing Shares to which the Buyer is entitled based on the determination
of the Auditors. If the Auditors shall fail to notify Aura of their
determination within four Trading Days after the applicable Exercise Notice is
given to Aura, then Aura shall within four Trading Days after receipt of the
applicable Exercise Notice, issue to the Buyer any additional Aura Repricing
Shares to which the Buyer is entitled based on the applicable Exercise Notice.
Such immediate and prompt action shall be taken by all the parties in order to
assure that there shall be full compliance with Aura's unqualified obligation
that all Aura Repricing Shares issuable upon each Exercise Date be issued and
delivered by the due dates therefor as provided herein.
(6) If within three Trading Days after the Company's receipt of the
Exercise Notice (or such longer period specified in Section 3(l)(5)) Aura shall
for any reason fail to issue a certificate (which shall be free of all
restrictive legends other than those required by Section 6(b)) for the number of
Aura Repricing Shares to which the Buyer is entitled or to credit the Buyer's or
its designee's account with the Depository Trust Company for such number of Aura
Repricing Shares to which the Buyer is entitled upon the Buyer's exercise of the
Repricing Rights, the Buyer shall have the right to rescind such exercise Notice
or, commencing seven Business Days after the Exercise Date, to deliver a copy of
the applicable Exercise Notice to the Repricing Escrow Agent with a notice that
the Buyer is requesting Common Stock in lieu of Aura Common Stock by reason of
Aura's failure to timely deliver Aura Repricing Shares in accordance with this
Section 3(l)(6). Promptly but not later than three Trading Days after its
receipt of such Exercise Notice, the Repricing Escrow Agent shall, in accordance
with the Escrow Agreement, release the Escrow Shares from escrow in the amount
of the Repricing Shares specified in such Exercise Notice and deliver such
shares in accordance with such Exercise Notice. In addition to such right to
receive Escrow Shares and all other available remedies which the Buyer may
pursue hereunder and under applicable law, Aura shall, on a weekly basis, pay as
additional damages (and not as a penalty) to such Buyer for each day after such
third Trading Day that such Aura Repricing Shares or Repricing Shares are not
timely delivered an amount equal to 0.2% of the product of (1) the sum of the
number of Aura Repricing Shares not issued to the Buyer on a timely basis
pursuant to Section 3(c)(2) and to which the Buyer is entitled and (2) the
Closing Price of the Aura Common Stock on such third Trading Day. In addition,
if in connection with such late delivery of Aura Repricing Shares the Closing
Price on the date of delivery is less than the Closing Price on such third
Trading Day when such shares were due, then Aura shall be required to pay the
Buyer, within two Trading Days after such late delivery, an amount equal to the
product of (A) the number of such Aura Repricing Shares and (B) the difference
between such respective Closing Prices. As used in this clause (6), the term
"Closing Price" shall refer to the closing sale price of the Aura Common Stock.
Any failure of the Repricing Escrow Agent to deliver shares to the Buyer shall
not relieve Aura of its obligations under this Section 3(l)(6).
(7) Notwithstanding anything to the contrary in this Agreement, in no
event shall the Buyer be entitled to exercise any Repricing Rights in excess of
that number of Repricing Rights upon exercise of which the sum of (x) the number
of shares of Aura Common Stock beneficially owned by the Buyer and all of its
Aggregated Persons (other than shares of Aura Common Stock deemed beneficially
owned through the ownership of unexercised Repricing Rights and the unexercised
or unconverted portion of any instrument which contains limitation similar to
those set forth in this sentence) and (y) the number of shares of Aura Common
Stock issuable or deliverable upon the exercise of the number of Repricing
Rights with respect to which the determination in this sentence is being made,
would result in beneficial ownership by the Buyer and all Aggregated Persons of
the Buyer of more than 9.9% of the outstanding shares of Aura Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the 1934 Act and Regulation 13D-G
thereunder, except as otherwise provided in clause (x) of the immediately
preceding sentence.
(8) Unless the Stockholder Approval shall have been obtained or waived
by the Nasdaq, Aura shall not be required to issue Aura Repricing Shares to the
extent such issuance would violate the Stockholder Approval Rule.
(d) Section 3(e)(2) is amended to add the following words at
the end of clause (x) thereof after the words "Section 3(g)(2)": "or Section
3(I)(7),. . . "
3. Amendment of Registration Rights Agreements. Each of the
respective Registration Rights Agreements is hereby amended, effective as of the
date of this Agreement, as follows:
(a) Section 1 is amended to add a new definition as follows:
"Note Purchase Agreements" means the several Note Purchase Agreements,
dated as of December 28, 1998, between the Company and each of the Initial
Investor and the Other Buyers.
(b) The term "Warrant Shares" as used in each Registration
Rights Agreement is amended to refer to the shares of Common Stock issuable upon
exercise of (i) the Warrants issued pursuant to the applicable Registration
Rights Agreement and (ii) the Common Stock Purchase Warrants issued in
connection with the applicable Note Purchase Agreement.
(c) For purposes of Section 2(f), the term "Purchase Price"
shall mean for each Investor the sum of (1) the Purchase Price for the Initial
Shares as defined in the applicable Registration Rights Agreement for such
Investor and (2) the Purchase Price for the Note as defined in the applicable
Note Purchase Agreement for such Investor.
4. Representations, Warranties, etc. by Original Holders.
Each of the Original Holders, severally and not jointly, represents and warrants
to, and covenants and agrees with, Aura as follows:
(a) Purchase for Investment. Upon issuance and delivery of
any Aura Repricing Shares, the Original Holder will acquire such Aura Repricing
Shares for its own account for investment only and not with a view towards the
public sale or distribution thereof;
(b) Accredited Investor;. The Original Holder is an
"accredited investor" as that term is defined in Rule 501 of the General Rules
and Regulations under the 1933 Act by reason of Rule 501(a)(3);
(c) Reoffers and Resales;. All subsequent offers and sales of
the Aura Repricing Shares by the Original Holder shall be made pursuant to
registration of the Aura Repricing Shares being offered and sold under the 1933
Act or pursuant to an exemption from registration; and
(d) Company Reliance. The Original Holder understands that
the Aura Repricing Shares are being offered to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that Aura is relying upon the truth and accuracy of, and the
Original Holder's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Original Holder set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Original Holder to receive an offer of the Aura Repricing Shares.
5. Aura Representations, Warranties, etc.
Aura represents and warrants to, and covenants and agrees
with, each Original Holder that:
(a) Organization and Authority;. Aura is a corporation duly
organized and validly existing under the laws of Delaware, and has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Aura Registration Rights Agreement and the other
documents and agreements delivered by Aura in connection herewith, and to
consummate the transactions contemplated hereby and thereby. Aura is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could have a material adverse effect on the business, properties,
operations, condition (financial or other), results of operations or prospects
of Aura.
(b) Capitalization. The authorized capital stock of Aura
consists of 200,000,000 shares of Common Stock of which 91,181,259 shares of
Aura Common Stock were outstanding on December 27, 1998, all of which are fully
paid and nonassessable. Other than as set forth in the preceding sentence, Aura
does not have outstanding any material amount of securities (or obligations to
issue any such securities) convertible into, exchangeable for or otherwise
entitling the holders thereof to acquire shares of Aura Common Stock, except as
disclosed in the Aura SEC Reports. Aura has duly reserved from its authorized
and unissued shares of Aura Common Stock the full number of shares required for
(a) all options, warrants, convertible securities and other rights to acquire
shares of Aura Common Stock which are outstanding and (b) all shares of Aura
Common Stock and options and other rights to acquire shares of Aura Common Stock
which may be issued or granted under the stock option and similar plans which
have been adopted by Aura.
(c) Concerning the Aura Repricing Shares and the Aura Common
Stock. The Aura Repricing Shares and the Repricing Rights with respect thereto
have been duly authorized. The Aura Repricing Shares when issued in accordance
with this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive or similar rights of any
shareholder of Aura or any other Person to acquire any of the Aura Repricing
Shares. Aura has duly reserved 11,677,487 shares of Common Stock for issuance of
the Aura Repricing Shares and such shares shall remain so reserved. The Aura
Common Stock is listed for trading on the Nasdaq and (1) Aura and the Aura
Common Stock meet the criteria for continued listing and trading on the Nasdaq;
(2) Aura has not been notified since January 1, 1996 by the Nasdaq of any
failure or potential failure to meet the criteria for continued listing and
trading on the Nasdaq and (3) no suspension of trading in the Aura Common Stock
is in effect. Aura knows of no reason that the Aura Repricing Shares will not be
eligible for listing on the Nasdaq.
(d) Information Provided. The information provided by or on
behalf of Aura to the Original Holders in connection with the transactions
contemplated by this Agreement, including, without limitation, the information
contained in the Aura SEC Reports, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, it being understood that, for purposes of this Section 5(d), any
statement contained in such information shall be deemed to be modified or
superseded for purposes of this Section 5(d) to the extent that a statement in
any document included in such information which was prepared or filed with the
SEC on a later date modifies or replaces such statement, whether or not such
later prepared or filed statement so states.
(e) Absence of Certain Changes; Liabilities. Except as
disclosed in the Aura SEC Reports, since February 28, 1998, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or other), results of operations or
prospects of Aura. Except as and to the extent disclosed, reflected or reserved
against in the financial statements of Aura and the notes thereto included in
the Aura SEC Reports, Aura has no material (individually or in the aggregate)
liabilities, debts or obligations (including guaranties) whether accrued,
absolute, contingent or otherwise, and whether due or to become due, to any of
its officers, directors, security holders, or lenders or any of their respective
Affiliates. Subsequent to February 28, 1998, the Company has not incurred any
liabilities, debts or obligations of any nature whatsoever which are
individually or in the aggregate material to the Company other than those
incurred in the ordinary course of its business or disclosed in the Aura SEC
Reports.
(f) SEC Filings. Aura has timely filed all required forms,
reports and other documents required to be filed with the SEC under the 1934
Act. All of such forms, reports and other documents complied, when filed, in all
material respects, with all applicable requirements of the 1933 Act and the 1934
Act.
(g) No Solicitation. No form of general solicitation or
general advertising was used by Aura or, to the best of its knowledge, any other
Person acting on behalf of Aura, in respect of or in connection with the offer
of the Repricing Rights or the Aura Repricing Shares. Neither Aura nor, to its
knowledge, any Person acting on behalf of Aura has, either directly or
indirectly, sold or offered for sale to any Person any of the Aura Repricing
Rights or the Aura Repricing Shares or, within the six months prior to the date
hereof, any other similar security of Aura except as contemplated by this
Agreement; and neither Aura nor any Person authorized to act on its behalf will
sell or offer for sale any shares of Aura Common Stock or other securities, or
solicit any offers to buy any shares of Common Stock or other securities, so as
thereby to cause the issuance of any of the Aura Repricing Shares or the
issuance of the Repricing Rights to be in violation of Section 5 of the 1933
Act.
(h) Certain Issuances of Securities. Aura has not issued any
shares of Aura Common Stock or shares of any series of preferred stock or other
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire shares of Aura Common Stock which are subject to the Stockholder
Approval Rule and which could be integrated with the issuance of Aura Repricing
Shares to the Holders under the Stockholder Approval Rule.
(i) Absence of Rights Agreement. Aura has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Aura Common Stock or a change in control of Aura.
(j) Amendment Agreement. This Agreement has been duly and
validly authorized, executed and delivered by Aura and this Agreement is a valid
and binding obligation of Aura enforceable in Accordance with its term subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
(k) Non-contravention. The execution and delivery by Aura of
this Agreement and consummation by Aura of the transactions contemplated by this
Agreement, do not and will not, with or without the giving of Notice of the
lapse of time, or both (i) result in any violation of any terms of the
Certificate of Incorporation of by-laws of Aura, (ii) conflict with or result in
a breach by Aura or the Company of any of the terms or provisions of, or
constitute a result in a breach by Aura or the Company of any of the terms or
provisions of, or constitute a default under, or result in the modification,
amendment, termination or cancellation of, result in the acceleration of any
obligation of Aura or the Company under, or result in the creation or imposition
of any lien, security interest, charge or encumbrance upon any of the properties
or assets of Aura or the company pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which Aura or the Company is a party
or by which Aura or the Company or any of their respective properties or assets
is bound or affected, or (iii) violate or contravene any applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over Aura of the Company or any of their
respective properties or assets.
(l) Approvals. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the security holders of or lenders
to Aura, or any other third party, is required to be obtained or made by Aura or
the Company for the execution, delivery and performance by Aura and the Company
of this Agreement and by the Company of the Note Purchase Agreements and the
other agreements, transactions and instruments contemplated hereby and thereby.
6. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) Transfer Restrictions. Aura and the Original Holders
acknowledge and agree that (1) except as provided in the Aura Registration
Rights Agreement with respect to the resale of the Aura Repricing Shares, the
Aura Repricing Shares have not been and are not being registered for resale
under the 1933 Act, and the Securities may not be transferred unless (A)
subsequently registered for resale thereunder or (B) the holder shall have
delivered to Aura an opinion of counsel, reasonably satisfactory in form, scope
and substance to Aura, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any resale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any such resale of
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither Aura nor
any other Person is under any obligation to register the Securities (other than
registration of the resale of the Aura Repricing Shares pursuant to the Aura
Registration Rights Agreement) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder (other than pursuant to Section 6(d)
hereof and pursuant to the Aura Registration Rights Agreement).
(b) Restrictive Legends.
(1) Each Original Holder acknowledges and agrees that until
such time as the Aura Repricing Shares have been registered for resale under the
1933 Act as contemplated by the Aura Registration Rights Agreement, the
certificates for the Aura Shares may bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
the certificates for the Aura Repricing Shares):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be resold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act of
1933, as amended, or an opinion of counsel that registration is not required
under said Act.
(2) Once the Registration Statement required to be filed by
Aura pursuant to Section 2 of the Aura Registration Rights Agreement has been
declared effective, thereafter (1) upon request of an Original Holder Aura will
substitute certificates without restrictive legend for certificates for any Aura
Repricing Shares issued prior to the date such Registration Statement is
declared effective by the SEC which bear such restrictive legend and remove any
stop-transfer restriction relating thereto promptly, but in no event later than
three Trading Days after surrender of such certificates by the Original Holder
and (2) Aura shall not place any restrictive legend on certificates for any Aura
Repricing Shares issued or impose any stop-transfer restriction thereon.
(c) Aura Registration Rights Agreement. On or before the
Closing Date, Aura and each of the Original Holders agree to enter into a
separate Aura Registration Rights Agreement in the form attached hereto as
Exhibit A.
(d) Form D. Aura agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Original Holders promptly after such filing. The Original Holders agree to
cooperate with Aura in connection with such filing and, upon request of Aura, to
provide all information relating to the Original Holders reasonably required for
such filing.
(e) Authorization for Trading; Reporting Status. Within two
Business Days after the Closing Date under the Note Purchase Agreements, Aura
shall file a notification for listing of additional shares with the Nasdaq
relating to the Aura Repricing Shares and on or prior to such date shall provide
evidence of such filing to the Original Holders. So long as the Original Holders
own any of the Aura Repricing Shares or the Repricing Rights, Aura shall file
all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of
the 1934 Act and Aura shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.
(f) Blue Sky Laws. On or before the Closing Date, Aura shall
take such action as and to the extent it shall be necessary or required to
qualify, or to obtain an exemption for the Repricing Rights and the Aura
Repricing Shares for issuance to the Original Holders pursuant to this Agreement
under such of the securities or "blue sky" laws of jurisdictions as shall be
applicable to the issuance to the Original Holders of the Repricing Rights and
the Aura Repricing Shares pursuant to this Agreement. The Company shall furnish
copies of all filings, applications, orders and grants or confirmations of
exemptions relating to such securities or "blue sky" laws on or prior to the
Closing Date under the Note Purchase Agreement.
(g) Exercise Notice. Aura, the Company and the Original
Holders agree that the form of Exercise Notice attached as Annex VI to the
Subscription Agreements is hereby amended and replaced in its entirety by the
form of Exercise Notice annexed hereto as Exhibit B.
(h) Certain Issuances of Securities. Unless Aura obtains the
Stockholder Approval or a waiver thereof from the Nasdaq, Aura will not issue
any shares of Aura Common Stock or shares of any series of preferred stock or
other securities convertible into, exchangeable for, or otherwise entitling the
holder to acquire, shares of Aura Common Stock which would be subject to the
requirements of the Stockholder Approval Rule and which would be integrated with
the issuance of Repricing Rights or Aura Repricing Shares to the Buyer for
purposes of the Stockholder Approval Rule.
7. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
(b) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, all of which
together shall constitute one and the same instrument. A facsimile transmission
of this Agreement bearing a signature on behalf of a party hereto shall be legal
and binding on such party.
(c) Headings, etc. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity of enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge
or termination of any provision of this Agreement nor consent to any departure
by the Holders, Aura or the Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and for
the purpose for which given. No course of dealing between the parties thereto
shall operate as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, or any course of dealings between the parties, shall not
operate as a waiver thereof or any amendment hereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise there of exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be delivered personally (which shall
include telephone line facsimile transmission with answer back confirmation) or
by courier and shall be effective upon receipt, if delivered personally or by
courier, in the case of the Company addressed to the Company at its address
shown in the introductory paragraph of the Subscription Agreements, Attention:
Chief Executive Officer (telephone line facsimile transmission number (818)
597-1002), in the case of Aura addressed to Aura at 2335 Alaska Avenue, El
Segundo, California 90245, Attention: Chief Financial Officer (telephone line
facsimile transmission number (818) 643-8719) or, in the case of each Original
Holder, at its address or telephone line facsimile transmission number shown on
the signature page of this Agreement or, in the case of any Holder who is not an
Original Holder, to such address as such Holder shall have provided in writing
to the Company and Aura for such purpose or, in each such case, such other
address or telephone line facsimile transmission number as a party shall have
provided by notice to the other parties in accordance with this provision.
(h) Assignment. Each Original Holder shall have the right to
assign its rights and obligations under this Agreement to any party to whom it
assigns its rights under its Subscription Agreement, Note Purchase Agreement,
Registration Rights Agreement or Aura Registration Rights Agreement. Each Holder
shall be entitled to the rights and benefits of the Original Holders under this
Agreement.
(i) Survival of Representations and Warranties. The
respective representations, warranties, covenants and agreements of Aura and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of payment
for the Notes pursuant to the Note Purchase Agreements and shall remain in full
force and effect regardless of any investigation made by or on behalf of them or
any Person controlling or advising any of them.
(j) Effect of Amendments; Entire Agreement. Except to the
extent expressly amended hereby, the terms and provisions of the respective
Subscription Agreements and Registration Rights Agreements are hereby confirmed
and shall remain in full force and effect. This Agreement and, as so amended,
the other agreements and instruments contemplated hereby set forth the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, whether written or oral,
with respect thereto. Aura hereby becomes a party to the respective Subscription
Agreements in order to give effect to the provisions of this Agreement.
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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:
NEWCOM, INC.
By:______________________________
Name:
Title:
[ORIGINAL HOLDERS]
By:______________________________
Name:
Title:
Address:
Facsimile No.:
Exhibit A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 28,
1998 (this "Agreement"), is made by and between AURA SYSTEMS, INC., a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Amendment Agreement, dated as
of December 28, 1998, between the Initial Investor, the other investors named
therein, NewCom, Inc., a Delaware corporation ("NewCom"), and the Company (the
"Amendment Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Amendment Agreement, to issue to the Initial Investor
shares of Common Stock, $.005 par value (the "Common Stock"), of the Company,
from time to time upon the exercise of certain Repricing Rights described in the
Amendment Agreement; and
WHEREAS, to induce the Initial Investor to execute and
deliver the Amendment Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Registrable Securities (as defined below) issuable to the Investors pursuant to
the Subscription Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Computation Date" means, if an event described in Section
2(f)(1) occurs, any of (1) the date which is 30 days after such event occurs, if
any such event is continuing on such date, (2) each date which is 30 days after
a Computation Date, if any such event is continuing on such date, and (3) the
date on which all such events cease to continue.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Initial Registration Amount" means 134% of the number of
Aura Repricing Shares issuable pursuant to the Amendment Agreement assuming (A)
all of the Buyer's Repricing Rights issued at the First Closing were exercised
on the SEC Filing Date (without regard to any limitations on exercise) and (B)
the Average Market Price on the SEC Filing Date was 50% of the lower of (x) the
Average Market Price on the Closing Date and (y) the Average Market Price on the
SEC Filing Date.
"Investor" or "Investors" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
"Nasdaq" means the Nasdaq National Market.
"Other Registration Rights Agreements" means the registration
rights agreements dated the date hereof between the Company and each of the
Other Buyers.
"register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
"Registrable Securities" means the Aura Repricing Shares.
"Registration Amount" means the sum of (i) the number of Aura
Repricing Shares previously issued pursuant to the Amendment Agreement plus (ii)
the number of Aura Repricing Shares issuable pursuant to all unexercised
Repricing Rights (without regard to limitations on exercise) equal to the
greater of (A) the number of such Aura Repricing Shares issuable as if the
Average Market Price on the date of determination of the Registration Amount was
66.7% of the lower of (x) the Average Market Price on the Closing Date and (y)
the Average Market Price on the SEC Effective Date and (B) the number of such
Aura Repricing Shares issuable based on the Average Market Price on the date of
determination of the Registration Amount.
"Registration Period" means the period from the Closing Date
to the earlier of (i) the date which is two years after the date on which the
last Aura Repricing Shares may be issued to the Investors pursuant to the
Subscription Agreement, (ii) the date on which each Investor may sell all of its
Registrable Securities (including Registrable Securities which may be issued
from time to time) without registration under the Securities Act pursuant to
Rule 144, without restriction on the manner of sale or the volume of securities
which may be sold in any period and without the requirement for the giving of
any notice to, or the making of any filing with, the SEC and (iii) the date on
which the Investors no longer beneficially own any Registrable Securities.
"Registration Statement" means a registration statement of
the Company under the Securities Act, including any amendment thereto.
"Rule 144" means Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit a holder of any securities to sell securities of the Company to the
public without registration under the Securities Act.
"SEC Effective Date" means the date the Registration
Statement is first declared effective by the SEC.
"SEC Filing Date" means the date the Registration Statement
is first filed with the SEC pursuant to Section 2(a).
"Subscription Agreement" means the Subscription Agreement,
dated as of November 30, 1998, between NewCom and the Initial Investor.
(b) Capitalized terms defined in the introductory paragraph
or the recitals to this Agreement shall have the respective meanings therein
provided. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Amendment Agreement and, if not
defined therein, in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare, and
not later than January 29, 1999, file with the SEC a Registration Statement on
Form S-3 which, on the date of filing with the SEC, covers the resale by the
Initial Investor or its assignees of a number of shares of Common Stock at least
equal to the Initial Registration Amount. If (i) at any time the number of
shares of Common Stock included in the Registration Statement required to be
filed as provided in the first sentence of this Section 2(a) shall be less than
the then applicable Registration Amount or (ii) the Second Tranche Shares and
the Aura Repricing Shares issuable upon exercise of the Second Tranche Repricing
Rights are not permitted to be included in the initial Registration Statement
filed pursuant to this Section 2(a), then promptly, but in no event later than
20 days after such insufficiency shall occur, the Company shall file with the
SEC an additional Registration Statement on Form S-3 (which shall not constitute
a post-effective amendment to the Registration Statement filed pursuant to the
first sentence of this Section 2(a)), covering such number of shares of Common
Stock at least equal to the difference between the Registration Amount and the
number of shares previously registered. For all purposes of this Agreement such
additional Registration Statement shall be deemed to be the Registration
Statement required to be filed by the Company pursuant to Section 2(a) of this
Agreement, and the Company and the Investors shall have the same rights and
obligations with respect to such additional Registration Statement as they shall
have with respect to the initial Registration Statement required to be filed by
the Company pursuant to this Section 2(a). No securities other than the
Registrable Securities and the securities registrable pursuant to the Other
Registration Rights Agreements may be included in any Registration Statement
filed pursuant to this Agreement.
(b) Certain Offerings. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company. The Investors who hold
the Registrable Securities to be included in such underwriting shall pay all
underwriting discounts and commissions and other fees and expenses of such
investment banker or bankers and manager or managers so selected in accordance
with this Section 2(b) (other than fees and expenses relating to registration of
Registrable Securities under federal or state securities laws, which are payable
by the Company pursuant to Section 5 hereof) with respect to their Registrable
Securities and the fees and expenses of such legal counsel so selected by the
Investors.
(c) Other Registrations. The Company will not file another
registration statement with the SEC covering shares of Common Stock prior to the
SEC Effective Date, other than registration statements on Form S-4 or S-8.
(d) Piggy-Back Registrations. If at any time the Company
shall determine to prepare and file with the SEC a Registration Statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Investor who is entitled to registration
rights under this Section 2(d) written notice of such determination and, if
within ten (10) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company, the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment, such
limitation is necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are not entitled by
right to inclusion of securities in such Registration Statement; and provided
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement, based on the number of securities for which registration
is requested except to the extent such pro rata exclusion of such other
securities is prohibited under any written agreement entered into by the Company
with the holder of such other securities prior to the date of this Agreement, in
which case such other securities shall be excluded, if at all, in accordance
with the terms of such agreement. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. The obligations of the Company under this
Section 2(d) may be waived by Investors holding a majority in interest of the
Registrable Securities and shall expire after the Company has afforded the
opportunity for the Investors to exercise registration rights under this Section
2(d) for two registrations; provided, however, that any Investor who shall have
had any Registrable Securities excluded from any Registration Statement in
accordance with this Section 2(d) shall be entitled to include in an additional
Registration Statement filed by the Company the Registrable Securities so
excluded. Notwithstanding any other provision of this Agreement, if the
Registration Statement required to be filed pursuant to Section 2(a) of this
Agreement shall have been ordered effective by the SEC and the Company shall
have maintained the effectiveness of such Registration Statement as required by
this Agreement and if the Company shall otherwise have complied in all material
respects with its obligations under this Agreement, then the Company shall not
be obligated to register any Registrable Securities on such Registration
Statement referred to in this Section 2(d).
(e) Eligibility for Form S-3. The Company meets the
requirements for the use of Forms S-3 for registration of the Registrable
Securities for resale by the Investors. The Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3.
(f) Certain Payments by the Company. (1) If (A) the Company
fails to file the Registration Statement with the SEC on or before January 29,
1999 or (B) the Registration Statement is not declared effective by the SEC on
or before March 30, 1999, the Company shall pay the Initial Investor an amount
in cash equal to 2.0% of the Purchase Price on the first Computation Date to
occur and 3.0% of the Purchase Price on each subsequent Computation Date (such
amounts to be pro rated for periods less than 30 days).
(2) If the Registration Statement shall cease to be available
for use by any Investor for the sale of any Registrable Securities for 15 or
more days (whether or not consecutive) for any reason (including without
limitation by reason of events described in Sections 3(f) and 3(g)), the Company
shall pay such Investor an amount in cash equal to 0.2% of the Purchase Price
for each day on which such unavailability occurs. Such payments shall be made in
arrears every 30 days after such unavailability first occurs.
(3) Any overdue payments required by this Section 3(f) shall
bear interest as provided in Section 6(o) of the Subscription Agreement. The
payments required by this Section 3(f) shall be in addition to any other rights
and remedies of the Investors under this Agreement, the Subscription Agreement
and applicable law.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than
January 29, 1999, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its best
efforts to cause each Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times during the
Registration Period; submit to the SEC, within three business days after the
Company learns that no review of the Registration Statement will be made by the
staff of the SEC or that the staff of the SEC has no further comments on the
Registration Statement, as the case may be, a request for acceleration of
effectiveness of the Registration Statement to a time and date not later than 48
hours after the submission of such request; notify the Investors of the
effectiveness of the Registration Statement on the date the Registration
Statement is declared effective; and the Company represents and warrants to, and
covenants and agrees with, the Investors that the Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein), at the time it is first filed with the SEC, at the time it is ordered
effective by the SEC and at all times during which it is required to be
effective hereunder (and each such amendment and supplement at the time it is
filed with the SEC and at all times during which it is available for use in
connection with the offer and sale of the Registrable Securities) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel, (1) promptly after
the same is prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, each letter written by or on behalf of the Company to the SEC or the
staff of the SEC and each item of correspondence from the SEC or the staff of
the SEC relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until the end of the Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times during the Registration Period and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto (I) to qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its Certificate of
Incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
shareholders;
(e) in the event that the Registrable Securities are being
offered in an underwritten offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering;
(f) as promptly as practicable after becoming aware of such
event or circumstance, notify each Investor of any event or circumstance of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, file such supplement or amendment with the SEC at
such time as shall permit the Investors to sell Registrable Securities pursuant
to the Registration Statement as promptly as practical, and deliver a number of
copies of such supplement or amendment to each Investor as such Investor may
reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of effectiveness of
the Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
shareholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold to review and comment on the Registration
Statement and all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC;
(i) make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement;
(j) at the request of the Investors who hold a majority in
interest of the Registrable Securities being sold, furnish on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters; and (ii) an
opinion, dated such date, from counsel representing the Company for purposes of
such Registration Statement, in form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors;
(k) make available for inspection by any Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company's own
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, at
such Investor's own expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the Nasdaq or
such other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded or (ii) if securities of
the same class or series as the Registrable Securities are not then listed on
Nasdaq or any such other securities market, to cause all of the Registrable
Securities covered by the Registration Statement to be listed on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market;
(m) provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(n) cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request; and, within three business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver to the transfer agent for the Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) an instruction substantially in the form attached hereto
as Exhibit 1 and shall cause legal counsel selected by the Company to deliver to
the Investors an opinion of such counsel in the form attached hereto as Exhibit
2 (with a copy to the Company's transfer agent);
(o) during the period the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of the
Investors to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the Exchange Act; and
(p) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of the Registrable Securities
pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least four (4)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor but shall not
be relieved of its obligation to file a Registration Statement with the SEC
relating to the Registrable Securities of such Non-Responsive Investor promptly
after such Non-Responsive Investor provides the Requested Information;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event Investors holding a majority in interest of
the Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(d) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(f) or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession of the prospectus covering
such Registrable Securities current at the time of receipt of such notice; and
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable with respect to its Registrable
Securities, in each case to the extent not payable by the Company pursuant to
the terms of this Agreement.
5. Expenses of Registration. All reasonable expenses, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions, incurred in connection
with registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company
and the Investors, shall be borne by the Company, provided, however, that the
Investors shall bear the fees and out-of-pocket expenses of the one legal
counsel selected by the Investors pursuant to Section 2(b) hereof.
6. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Investor who holds such Registrable Securities,
the directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (I) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, the prospectus or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) with respect to any preliminary prospectus shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and such Investor will reimburse
any legal or other expenses reasonably incurred by any Indemnified Party in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the amount by which the net proceeds to such Investor from the sale of
Registrable Securities pursuant to such Registration Statement exceeds the cost
of such Registrable Securities to such Investor. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel selected by the indemnifying party
but reasonably acceptable to the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the amount by which the net amount of proceeds
received by such seller from the sale of such Registrable Securities exceeds the
purchase price paid by such seller for such Registrable Securities.
8. Reports under Exchange Act. With a view to making
available to the Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9. Assignment of Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of all or any portion
of such securities (or all or any portion of the Repricing Rights) only if: (a)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In connection with any such transfer the
Company shall, at its sole cost and expense, promptly after such assignment take
such actions as shall be reasonably acceptable to the Initial Investor and such
transferee to assure that the Registration Statement and related prospectus are
available for use by such transferee for sales of the Registrable Securities in
respect of which the rights to registration have been so assigned. In connection
with any such assignment, each Investor shall have the right to assign to such
transferee such Investor's rights under the Amendment Agreement and the
Subscription Agreement by notice of such assignment to the Company. Following
such notice of assignment of rights under the Amendment Agreement and the
Subscription Agreement, the Company shall be obligated to such transferee to
perform all of its covenants under the Amendment Agreement and the Subscription
Agreement as if such transferee were the Buyer under the Subscription Agreement
and an original Holder under the Amendment Agreement.
10. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) (i) if to the Company, at 2335 Alaska Avenue, El Segundo,
California 90245, Attention: Chief Financial Officer, telephone line facsimile
transmission number (310) 643-8719, (ii) if to the Initial Investor, at
Attention:
, telephone line facsimile transmission number and (iii) if to any other
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company
to perform its obligations under this Agreement, including, without limitation,
the Company's obligations under Section 3(n), or any delay in such performance
could result in damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct and consequential
damages caused by any such failure or delay.
(j) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day
and year first above written.
NEWCOM, INC.
By:______________________________
Name:
Title:
[INITIAL INVESTOR]
By:________________________________
Name:
Title:
EXHIBIT 1
to
Registration
Rights
Agreement
[Company Letterhead]
[Date]
Interwest Transfer Company,
as Transfer Agent, Warrant Agent and Registrar
P.O. Box 17136
Salt Lake City, Utah 84117
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you to transfer or re-register the certificates for the shares of Common
Stock, $.005 par value (the "Common Stock"), of Aura Systems, Inc., a Delaware
corporation (the "Company"), represented by certificate numbers _______ and
_______ for an aggregate of _______ shares (the "Outstanding Shares") of Common
Stock presently registered in the name of [Name of Investors] upon surrender of
such certificate(s) to you, notwithstanding the legend appearing on such
certificates. The transfer or re-registration of the certificates for the
Outstanding Shares by you should be made at such time as you are requested to do
so by the record holder of the Outstanding Shares. The certificate issued upon
such transfer or re-registration should be registered in such name as requested
by the holder of record of the certificate surrendered to you and should not
bear any legend which would restrict the transfer of the shares represented
thereby. In addition, you are hereby directed to remove any stop-transfer
instruction relating to the Outstanding Shares. Certificates for shares of
Common Stock issued on or after the date hereof to the investors or their
assigns upon the exercise of certain Repricing Rights should not bear any
restrictive legend and should not be subject to any stop-transfer restriction.
Contemporaneously with the delivery of this letter, the Company is
delivering to you an opinion of Guzik & Associates as to registration of the
Outstanding Shares and the shares of Common Stock issuable upon the exercise of
certain Repricing Rights under the Securities Act of 1933, as amended.
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
AURA SYSTEMS, INC.
By:_____________________________
Name:
Title:
Enclosure
cc: [Names of Investors]
~ EXHIBIT 2
to
Registration
Rights
Agreement
, 1999
[Names and Addresses of Investors]
AURA SYSTEMS INC.
Shares of Common Stock
Ladies and Gentlemen:
We are counsel to Aura Systems, Inc., a Delaware corporation (the
"Company"), and we understand that the Company has issued to [Name of Investors]
(the "Holders") certain Repricing Rights to acquire shares (the "Common Shares")
of the Company's Common Stock, $.005 par value (the "Common Stock"). The
Repricing Rights were issued, to the Holders pursuant to the several
Subscription Agreements, dated as of November 30, 1998, between the Holders and
NewCom, Inc. a Delaware corporation (the "Subscription Agreements"), as amended
by the Amendment Agreement, dated as of December 28, 1998, among the Company,
NewCom and the Holders (the "Amendment Agreement"). Pursuant to the several
Registration Rights Agreements, dated as of December 28, 1998, between the
Company and the Holders (the "Registration Rights Agreements"), the Company
agreed with each Holder, among other things, to register for resale the Aura
Repricing Shares (as such term is defined in the Amendment Agreement) under the
Securities Act of 1933, as amended (the "1933 Act"), upon the terms provided in
the Registration Rights Agreements. Pursuant to the Registration Rights
Agreements, on , 1999 the Company filed a Registration Statement on Form S-3
(File No. 333-__________) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the Aura Repricing Shares, which
names the Holders as selling stockholders thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that:
(1) Since the Closing Date, the Company has timely filed with the SEC
all forms, reports and other documents required to be filed with the SEC under
the Securities Exchange Act of 1934, as amended (the "1934 Act"). All of such
forms, reports and other documents complied, when filed, in all material
respects, with all applicable requirements of the 1933 Act and the 1934 Act;
(2) The Registration Statement and the Prospectus contained therein (other
than the financial statements and schedules and other financial and statistical
information contained or incorporated by reference therein, as to which we have
not been requested to and do not express any opinion) comply as to form in all
material respects with the applicable requirements of the 1933 Act and the rules
and regulations promulgated thereunder; and
(3) The Registration Statement has become effective under the 1933 Act, and
to the best of our knowledge after due inquiry, no stop order proceedings with
respect thereto have been instituted or threatened by the SEC. The Aura
Repricing Shares have been registered under the 1933 Act and may be resold by
the respective Holders pursuant to the Registration Statement.
We have participated in the preparation of the Registration
Statement and the Prospectus, including review and discussions with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company, and your representatives at which the contents of
the Registration Statement and the Prospectus contained therein and related
matters were discussed, and, although we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus contained therein, on
the basis of the foregoing, nothing has come to our attention that leads us to
believe either that the Registration Statement at the time the Registration
Statement became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus contained in
the Registration Statement, as of its date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that we have not
been requested to and do not express any view with respect to the financial
statements and schedules and other financial and statistical data included or
incorporated by reference in the Registration Statement or the Prospectus
contained therein).
Paragraph (3) of this opinion may be relied upon by Interwest
Transfer Company, as Transfer Agent, Warrant Agent and Registrar (the "Transfer
Agent") as if addressed to the Transfer Agent.
Very truly yours,
cc: Interwest Transfer Company,
as Transfer Agent, Warrant Agent and Registrar
Exhibit B
EXERCISE NOTICE
TO: NewCom, Inc. Aura Systems, Inc.
31166 Via Colinas 2335 Alaska Avenue
Westlake Village, California 91326 El Segundo, California 90245
Attention: Chief Executive Officer Attention: Chief Financial Officer
Facsimile No.: (818) 597-1002 Facsimile No.: (310) 643-8719
This Exercise Notice is given pursuant to the terms of (i)
the Subscription Agreement, dated as of November 30, 1998, as amended (the
"Subscription Agreement"), by and between NewCom, Inc., a Delaware corporation
(the "Company"), and the undersigned (the "Buyer") and (ii) the Amendment
Agreement, dated as of December 28, 1998, by and among the Company, Aura
Systems, Inc. a Delaware corporation ("Aura"), the Buyer and the other parties
named therein. Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Subscription Agreement and the
Amendment Agreement. The Buyer hereby notifies the Company and, if the Buyer
elects to receive Aura Repricing Shares, Aura as follows:
(1) Exercise Date: _____________________
(2) No. of Initial Repricing Rights outstanding:
-----------------------
(3) No. of Initial Repricing Rights exercised hereby:
--------------------
(4) Repricing Price: ___________________
(5) Average Market Price: _______________
(6) Repricing Rate: ________________
(7) Number of Repricing Shares due to the Buyer upon
exercise of such Initial Repricing Rights:
(8) No. of Second Tranche Repricing Rights outstanding:
(9) No. of Second Tranche Repricing Rights exercised
hereby:
(10) Repricing Price:
(11) Average Market Price:
(12) Repricing Rate:
(13) Number of Repricing Shares due to the Buyer upon
exercise of such Second Tranche Repricing Rights:
(14) If the Buyer elects to receive Aura Repricing Shares
in lieu of Repricing Shares, items 14-16 are completed as follows:
the Average Market Price of the Aura Common Stock is
(15) the Aura Repricing Rate is
(16) the number of Aura Repricing Shares due to the Buyer
is:
(17) Please issue the number of Repricing Shares or Aura
Repricing Shares, as the case may be, stated in items 7 and 13 or 16,
as the case may be, in the name(s) and to the address or the account
specified immediately below or, if additional space is necessary, on
an attachment hereto:
Delivery Instructions
for Common Stock:
Address:
SS or Tax ID Number:
NAME OF BUYER:
Date:
By:________________________________
Name:
Title:
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<CIK> 0001042100
<NAME> NEWCOM, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 35,628,124
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<INVENTORY> 29,457,329
<CURRENT-ASSETS> 70,703,890
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<DEPRECIATION> (1,987,646)
<TOTAL-ASSETS> 78,853,216
<CURRENT-LIABILITIES> 53,411,176
<BONDS> 0
0
0
<COMMON> 33,866,394
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<TOTAL-LIABILITY-AND-EQUITY> 78,853,216
<SALES> 66,064,137
<TOTAL-REVENUES> 66,064,137
<CGS> 57,616,810
<TOTAL-COSTS> 20,925,786
<OTHER-EXPENSES> (369,327)
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<INTEREST-EXPENSE> 1,843,894
<INCOME-PRETAX> (13,952,637)
<INCOME-TAX> (659,200)
<INCOME-CONTINUING> (14,611,837)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,293,437)
<EPS-PRIMARY> (1.32)
<EPS-DILUTED> (1.03)
</TABLE>
