SETTLEMENT AGGREEMENT
AND RELEASE OF CLAIMS
This Settlement Agreement and Release of Claims ("Agreement") dated as
of March 6, 2000, is made and entered into by The Isosceles Fund Limited, a
Bahamian company ("ISOSCELES"), and AURA SYSTEMS, INC., a Delaware company (the
"Company").
W I T H N E S S E T H:
WHEREAS, the Company has previously issued to ISOSCELES a Convertible
Debenture dated October 27, 1998, in the original principal amount of $1,000,000
(the "Convertible Debenture") pursuant to a certain Securities Purchase
Agreement between ISOSCELES and the Company dated as of October 27, 1998, (the
"Purchase Agreement"), which Convertible Debenture is presently owned by
ISOSCELES; and
WHEREAS, the obligations of the Company under the Debenture are secured
by a certain Security Agreement dated as of October 27, 1998; and
WHEREAS, the parties desire to enter into this Agreement in order to
provide for (i) the issuance to ISOSCELES of Three Million (3,000,000) shares of
the Company's Common Stock (the "Shares") pursuant to the Convertible Debenture,
(ii) the issuance by the Company to ISOSCELES of a warrant, in the form attached
hereto, entitling ISOSCELES from time to time to purchase Fifty Thousand
(50,000) shares of Company's Common Stock at an exercise price of $0.375 per
share (the "Settlement Warrant"), and (iii) the surrender and cancellation of
the Convertible Debenture; and
WHEREAS, contemporaneously with the execution of this Agreement the
parties are entering into an Escrow Agreement (the "Escrow Agreement") with
Guzik & Associates, as escrow agent ("Escrow Agent") to facilitate the
consummation of the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, it is hereby agreed by and between the parties as follows:
1. The Exchange. The Company shall notify ISOSCELES and the Escrow
Agent within two (2) business days of the date that the Company shall comply
with the current public information requirements of Rule 144(c) of the
Securities Act of 1933 (the "Securities Act"). Within five business days of the
date that the Company shall comply with the current public information
requirements of Rule 144(c) of the Securities Act of 1933 (the "Securities
Act"), the parties shall deliver to the Escrow Agent, 1800 Century Park East,
Fifth Floor, Los Angeles, California, to hold in escrow pending the consummation
of the exchange contemplated by this Section 1, the following: (A) the Company
shall deliver (i) a stock certificate evidencing the Shares, which are being
issued as a partial conversion of the Debenture, registered in the name of
ISOSCELES, together with a legal opinion of Escrow Agent to the effect that such
shares have been validly issued and may be resold under Rule 144 promulgated
under the Securities Act of 1933 and that the holding period for the Shares
under such Rule commenced on the date the Debenture was issued, (ii) the
Settlement Warrant, registered in the name of ISOSCELES, and (iii) two executed
originals of this Agreement; and (B) ISOSCELES shall deliver (i) the Convertible
Debenture, and (ii) two executed originals of this Agreement.
2. Closing. Subject to and in accordance with the Escrow Agreement,
Escrow Agent shall notify each of the Company and ISOSCELES when it shall have
received all of the items required to have been delivered by the parties
pursuant to Section 1 (each a "Closing Item" and collectively, the "Closing
Items"). Promptly thereafter, Escrow Agent shall deliver without liability or
other risk to any party, which is hereby waived, (A) to the Company: the
Convertible Debenture, and one executed original of this Agreement and (B) to or
as directed by ISOSCELES: the Settlement Warrant, the Shares (and the related
Rule 144 opinion) and one executed original of this Agreement (the date that all
of the Closing Items are received is the "Closing Date"). If Escrow Agent shall
not have received all of the Closing Items in satisfactory form on or before
March15, 2000, this Agreement may be terminated by either party as if it never
existed and Escrow Agent's sole duties and obligations shall be to return the
items deposited with it as set forth in the escrow agreement.
3. Warranties of ISOSCELES. ISOSCELES represents and warrants to the
Company as follows:
(a) Authorization; Enforcement. ISOSCELES has all requisite power and
authority to enter into and perform this Agreement and to consummate
the exchange contemplated hereby. This Agreement has been duly and
validly authorized by ISOSCELES. This Agreement has been duly executed
by ISOSCELES and upon full delivery of the Closing Items will
constitute the valid and binding obligation of ISOSCELES enforceable
against it in accordance with its terms.
(b) Information; Acknowledgment of Risk. The Company has furnished
ISOSCELES and its advisors, if any, with all materials relating to the
business, finances and operations of the Company which have been
requested by ISOSCELES and its advisors. ISOSCELES has been afforded
the opportunity to ask questions of the Company and has received
satisfactory answers to such questions concerning the terms of the
securities offered, sold or exchanged hereby. ISOSCELES is aware that
the Shares are speculative, that an investment in the Company involves
a high degree of risk, that it may lose its entire investment and
ISOSCELES can afford to bear the risks of an investment in the
Company. ISOSCELES is a sophisticated investor with considerable
experience in investments of this nature. ISOSCELES acknowledges that
the Company makes no representations or warranties with respect to the
Company, the Shares other than those representations or warranties set
forth in this Agreement, and ISOSCELES has in no way relied upon any
other statement made or information provided by the Company.
(c) Accredited Investor. ISOSCELES is an "accredited investor" within the
meaning of Regulation D of the Securities Act of 1933 (the "Securities
Act").
(d) Non-Affiliate Status. ISOSCELES is not presently or at any time within
the past three months, and on the Closing Date will not be an
"affiliate" of the Company as such quoted term is defined in the
Securities Act.
4. Warranties of the Company. The Company represents and warrants to ISOSCELES
as follows:
(a) Authorization; Enforcement. The Company has all requisite power and
authority to enter into and perform this Agreement and to consummate
the exchange contemplated hereby. This Agreement has been duly and
validly authorized by the Company. This Agreement has been duly
executed by the Company and upon full delivery of the Closing Items
will constitute the valid and binding obligation of the Company
enforceable against it in accordance with its terms.
(b) Ownership of Shares. On the Closing Date the Shares, when delivered to
ISOSCELES in accordance with the terms of this Agreement (i) will be
free and clear of any security interests, liens, claims or other
encumbrances, (ii) will have been duly and validly authorized and
delivered, full paid and nonassessable and will be valid and binding
obligations of the Company, (iii) will not have been, individually and
collectively, issued or sold in violation of any preemptive or other
similar rights of the holders of any securities or obligations of the
Company, (iv) will not subject the ISOSCELES to personal liability by
reason of being a shareholder, and (v) will be eligible for sale under
Rule 144 of the Securities Act.
(c) No Conflicts. The execution, delivered and performance of this
Agreement by the Company and the consummation by the Company of the
exchange contemplated hereby do not and will not (i) conflict with or
violate and provision of the company's certificate of incorporation or
bylaws, or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights or termination, acceleration or
cancellation (with or without notice, lapse of time or both) of any
agreement or other obligation of the Company, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or government authority to
which the Company is subject (including federal and state securities
laws and regulations).
(d) Filing, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with any court, other governmental
authority, person or entity in connection with the execution, deliver
and performance by the Company of this Agreement other than filings
required to be made by it under the Securities Exchange Act of 1934.
5. Release by ISOSCELES. Effective as of the Closing Date ISOSCELES,
for itself and for its employees, agents, predecessors and
successors-in-interest, hereby irrevocably and unconditionally releases and
forever discharges the Company and each of its subsidiaries, and each of their
respective officers, directors, employees, agents, attorneys, and shareholders,
former officers, directors, and employees, agents, attorneys and shareholders,
predecessors and successors-in-interest and each of them from any and all
claims, causes of action, demands, damages, attorneys fees, or charges of
whatever kind or nature known or unknown, suspected or unsuspected, fixed or
contingent, which they now have, own, hold or claim to have, or claim to own, or
which they at any time, heretofore had, owned, held, or claimed to have or
claimed to own, from the beginning of the world through the date of this
Agreement, including claims arising out of the Action.
6. Release by the Company. Effective as of the Closing Date the
Company, for itself, its subsidiaries and for its and their respective
employees, agents, predecessors and successors-in-interest, hereby irrevocably
and unconditionally releases and forever discharge ISOSCELES and each of its
officers, directors, employees, agents, attorneys, and shareholders, former
officers directors, and employees, agents, attorneys and shareholders,
predecessors, and successors-in-interest and each of them from any and all
claims, causes of action, demands, damages, attorneys fees, or charges of
whatever kind of nature know or unknown, suspected or unsuspected, fixed or
contingent, which they now have, own, hold, or claim to have, or claim to own,
or which they at any time heretofore had, owned, held, or claimed to have or
claimed to own, from the beginning of the world through the date of this
Agreement, including claims arising out of the Action.
7. Effect of General Release. It is the intention of the parties that
this Agreement shall be effective as a full and final accord and satisfactory
relief of each and every matter as specifically or generally referred to. In
furtherance of that intention, the parties hereby acknowledge that they are
familiar with Section 1542 of the California Civil Code which provides as
follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in its favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
The parties hereby waive and relinquish all rights and benefits which
they have or may have up to the date of this Agreement under Section 1542 of the
California Civil Code or the law of any other state or jurisdiction to the same
or similar affect to the full extent that they may lawfully wave all such rights
and benefits pertaining to the subject matter of this Agreement.
8. Subsequent Discoveries. The parties acknowledge that there is a risk
that subsequent to the execution of this Agreement, they will discover facts,
which are unknown or unanticipated at the time this Agreement is executed, which
if known by them on a date that this Agreement is executed, may have materially
affected their decisions to execute this Agreement. The parties expressly assume
the risk of discovery of such unknown and unanticipated facts and that this
Agreement shall be fully valid notwithstanding the discovery of any such facts.
9. No Assignment of Claims. Each party represents and warrants that
they have not assigned or otherwise transferred or subrogated any interest in
any claims which are the subject matter hereto.
10. Covenant Not to Sue. The parties covenant and agree not to sue or
bring any action, whether federal, state, or local, judicial or administrative,
now or at any future time, against each other or any of the released parties,
with respect to any claim released hereby. The parties represent and warrant and
represent that they have not commenced any such action or proceeding as of the
execution date of the Agreement except the Action.
11. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs, administrators, executors, successors, and the
assignees of each of the parties.
12. Miscellaneous. Whenever this Agreement so requires, the singular
number shall include the plural, the plural shall include the singular and the
masculine gender shall include feminine and neutral genders.
13. Severability. If any portion of this Agreement shall be held to be
illegal or invalid by a court of competent jurisdiction, the validity of the
remainder of this Agreement shall not be affected.
14. Entire Agreement. This Agreement and the agreements referenced
herein memorializes and constitutes the entire Agreement and understanding
between the parties and supersedes and replaces all prior negotiations, proposed
Agreements and Agreements whether written or unwritten. Each of the parties to
this Agreement acknowledges that no other party nor any agent or attorney of any
other party has made any promise, representation, or warranty whatsoever,
express or implied, which is not expressly contained in this Agreement. Each
party further acknowledges that it has not executed this Agreement in reliance
upon a collateral promise, representation, or warranty.
15. Governing Law. This Agreement shall be deemed to have been made in
the State of California and shall, for all purposes be governed by and construed
exclusively in accordance with the laws thereof, regardless of where any court
action or proceeding is brought in connection with this Agreement.
16. Counterparts. This Agreement may be executed in two or more
counterparts, and an executed facsimile copy or counterpart shall be binding and
enforceable in the same manner as the original.
IN WITNESS THEREOF, the parties have executed this Agreement effective
as of the date first written above.
AURA SYSTEMS, INC.
By: ____________________________
Zvi Kurtzman, CEO
ISOSCELES
By:_____________________________
Name;
Title:
<PAGE>
GENERAL POWER OF ATTORNEY
I, the undersigned Carl M. O'Connell, of the Western District of the
Island of New Providence, one of the Islands of the Commonwealth of the Bahamas,
in my capacity as Sole Director of International Business Companies organized
under and in accordance with the International Business Companies Act of 1989 as
amended, of the Commonwealth of The Bahamas, and whose Registered Office and
Registered Agent is situated at Citco Bank and Trust Company (Bahamas) Limited,
Bahamas Financial Centre, 3rd Floor, Charlotte & Shirley Streets, P.O. Box
CB-13136, Nassau, Bahamas, do hereby nominate, constitute and appoint:
Tarez Curry, Businesswoman, of Nassau, The Bahamas
And
Andrew Dipkin, Businessman, of Nassau, The Bahamas
as my true and lawful attorneys-in-fact, acting singly or jointly, with full
power to represent me in any and all dealings related to achieving the
objectives of any Company of which I am Sole Director, and to conduct business
on behalf of that Company as the said attorneys-in-fact my deem necessary or
desirable.
This Power-of-Attorney shall remain in effect for the period start of
business on March 6, 2000 through the close of business on March 7, 2000.
IN WITNESS WHEREOF, I, the said Carl M. O'Connell have hereunto set my
hand and seal at Nassau, New Providence in the Commonwealth of The Bahamas, on
this 3rd day of March, 2000.
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Carl M. O'Connell
