EXHIBIT 10.5
REDEMPTION OPTION AGREEMENT
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THIS REDEMPTION OPTION AGREEMENT (the "Agreement") shall be effective as of
September __, 1997, by and among ▇▇▇▇▇▇, INC., a Delaware corporation
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("▇▇▇▇▇▇"), and AURA SYSTEMS, INC., a Delaware corporation ("Aura").
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RECITALS:
▇. ▇▇▇▇▇▇ proposes to complete an initial public offering (the "IPO") of
Units, each Unit to consist of one share of ▇▇▇▇▇▇ Common Stock, $0.001 par
value per share (the "Common Stock"), and one Common Stock Purchase Warrant
("Warrant"). After the IPO, Aura will be the record and beneficial owner of
approximately seventy-five percent (75%) of the issued and outstanding shares of
Common Stock.
B. Pursuant to the IPO, ▇▇▇▇▇▇ will sell up to _________ Warrants. Each
Warrant entitles the holder thereof to purchase one share of Common Stock at an
exercise price equal to one hundred fifty percent (150%) of the IPO price of
each Unit (the "Warrant Exercise Price") until the date five (5) years from the
date of the final prospectus for the IPO. A complete description of the terms
of the Warrant is contained in the Form of Warrant attached hereto as Exhibit A.
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C. Aura wishes to acquire the option to sell to ▇▇▇▇▇▇, and to require
▇▇▇▇▇▇ to redeem from Aura, up to _____________ shares [70% of total number of
Warrants sold in the IPO] of Common Stock held by Aura (the "Redeemable Shares")
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. Grant of Option.
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(a) Subject to the terms and conditions of this Agreement, Aura, from time
to time following each Exercise Period (as defined in Section 3) shall have the
option, exercisable in Aura's sole discretion (the "Redemption Option"), to sell
to ▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall redeem from Aura, up to that number of Redeemable
Shares as is determined by the Redemption Formula set forth in Section 2 hereof.
(b) If Aura exercises timely its Redemption Option following any Exercise
Period, ▇▇▇▇▇▇ agrees to redeem from Aura, and Aura agrees to sell to ▇▇▇▇▇▇, up
to that number of Redeemable Shares as is determined by the Redemption Formula
at the Redemption Price (as defined below).
(c) The "Redemption Price" per share for the Redeemable Shares shall be
equal to the Warrant Exercise Price.
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2. Redemption Formula. The number of shares of Common Stock subject to
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Aura's Redemption Option is equal to the quotient of (a) seventy percent (70%)
of the total amount of Net Proceeds (as defined below) received by ▇▇▇▇▇▇ from
Warrants exercised during the applicable Exercise Period, divided by (b) the
Redemption Price; provided, however, that any fractional share of Common Stock
resulting from the Redemption Formula shall not be redeemed and shall be carried
over to the following Exercise Period. For purposes of this Agreement, "Net
Proceeds" shall mean (i) the product of (A) the Warrant Exercise Price,
multiplied by (B) the number of Warrants exercised, less (ii) the amount of any
commissions, if any, paid by ▇▇▇▇▇▇ to a broker, dealer or underwriter in
connection with such exercise.
3. Exercise Period and Monthly Notice. To facilitate the orderly
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redemption of the Redeemable Shares, for each full calendar month (an "Exercise
Period") after the effective date of this Agreement in which one or more
Warrants are exercised, ▇▇▇▇▇▇ shall notify Aura in writing (the "Monthly
Notice") by the fifth (5th) business day of the following month of (a) the total
number of Warrants exercised in such Exercise Period and (b) the aggregate
amount of Net Proceeds received by ▇▇▇▇▇▇ therefrom.
4. Exercise of Redemption Option. After receiving the Monthly Notice, if
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Aura wishes to exercise its Redemption Option, Aura shall notify ▇▇▇▇▇▇ in
writing (a "Redemption Notice") within thirty (30) calendar days of receipt of
the Monthly Notice of (a) Aura's exercise of its Redemption Option and (b) the
number of Redeemable Shares Aura wishes to have redeemed (the "Redeemed
Shares"); provided, however, that such number of Redeemed Shares shall not
exceed the number of Redeemable Shares that Aura is permitted to sell to ▇▇▇▇▇▇
at that time based on the Redemption Formula.
5. Redemption of Redeemable Shares. Within five (5) business days of
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receipt by ▇▇▇▇▇▇ of a Redemption Notice, ▇▇▇▇▇▇ shall tender to Aura an amount
equal to the product of (a) the number of Redeemed Shares multiplied by (b) the
Redemption Price against delivery by Aura of properly endorsed share
certificates representing the Redeemed Shares.
6. Representations and Warranties of Aura. Aura hereby represents and
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warrants that:
(a) Aura is the owner of the Redeemable Shares, free and clear of any
encumbrances or rights of third parties; and
(b) Aura has the power and authority to enter into this Agreement and to
perform the same, and is not a party to or obligated under or restricted by any
contract or other provision, which has not been waived, that will be violated
in any material respect by entering into and performing this Agreement.
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7. Representations and Warranties of ▇▇▇▇▇▇. ▇▇▇▇▇▇ hereby represents and
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warrants that:
(a) ▇▇▇▇▇▇ has full power and is duly authorized by law to obligate itself
to redeem the Redeemable Shares; and
(b) ▇▇▇▇▇▇ is not a party to or obligated under or restricted by its
articles of incorporation, bylaws, any contract or other provision, which has
not been waived, that will be violated in any material respect by making and
performing this Agreement.
8. Governing Law; Survival of Rights and Assignability; Severability.
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This Agreement shall be governed in all respects by the laws of the State of
Delaware without regard to the conflicts of law provisions thereof, and shall
bind and inure to the benefit of the successors and assigns of the parties
hereto; provided, that neither party hereto may assign or delegate any of their
rights or obligations hereunder without the express written consent of the other
party hereto. If any provision of this Agreement shall be held to be invalid,
the remainder of this Agreement shall not be affected thereby.
9. Entire Agreement. This Agreement constitutes the entire agreement
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among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
10. Captions. The paragraph titles or captions contained in this
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Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof.
11. No Waiver. The failure of any party to seek redress for violation, or
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to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
12. No Third Party Beneficiary. Nothing expressed or implied in this
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Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective permitted successors and assigns, any rights
or remedies under or by reason of this Agreement.
13. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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14. Notices. All notices, consents, requests, instructions, approvals
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and other communications provided for herein and all legal process in regard
hereto shall be in writing and shall be deemed to have been duly given, when
delivered by hand or three (3) days after deposited in the United States mail,
by registered or certified mail, return receipt requested, postage prepaid, as
follows:
If to ▇▇▇▇▇▇:
▇▇▇▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇
With a copy to:
L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Pillsbury Madison & Sutro LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Aura:
Aura Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
_____________________________
_____________________________
_____________________________
15. Expenses. Each of the parties hereto agrees to pay all of the
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respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
16. Attorneys' Fees. In the event any suit or other legal proceeding is
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brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees (and sales taxes thereon, if any), including
attorneys' fees for any appeal, and costs incurred in bringing such suit or
proceeding.
17. Agent. Neither party is hereby constituted an agent or legal
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representative of the other party hereto and neither is granted any right or
authority hereunder to assume or create any
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obligation, express or implied, or to make any representation, covenant,
warranty, or guaranty, except as expressly granted or made in this Agreement.
18. Other Documents. The parties hereto shall cooperate in the
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effectuation of the transactions contemplated hereby and shall execute any and
all additional documents and shall take such additional actions as shall be
reasonably necessary or appropriate for such purposes.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
▇▇▇▇▇▇, INC., a Delaware
corporation
By ________________________________
Title _____________________________
AURA SYSTEMS, INC., a Delaware
corporation
By ________________________________
Title _____________________________
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