Aura Systems, Inc. (OTCMKTS:AUSI) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
On January 24, 2017, the Registrant entered into a Debt
Refinancing Agreement (the Refinancing Agreement) with Warren
Breslow (Breslow) and the Survivors Trust Under the Warren L.
Breslow Trust (the Breslow Trust) (Breslow and the Breslow Trust
are hereinafter sometimes referred to herein as the Breslow
Parties), and a related Unsecured Convertible Promissory Note
(the Note) with the Breslow Trust. Breslow is a director of the
Registrant and beneficially owns approximately 6% of Registrants
Common Stock. In addition, Breslow is a trustee of the Breslow
Trust.
to the Refinancing Agreement, the parties thereto agreed that, as
of the date thereof, the Registrant owed the Breslow Trust an
aggregate of $23,872,614.47 (the Aggregate Debt), of which
$8,890,573.95 represented accrued interest (including penalties
of any nature, the Accrued Interest). The Aggregate Debt included
indebtedness by the Registrant to Breslow, Active Mortgage Corp.,
and Overland Financial Co., which indebtedness the Breslow
Parties represent was transferred previously to the Breslow
Trust.
to the Refinancing Agreement, the Breslow Parties have canceled
and forgiven all Accrued Interest through the date of the
Refinancing Agreement (the Waived Interest), and have warranted
that, to their knowledge, other than the Aggregate Debt, no other
debts, liabilities or obligations of any nature existed as of the
date thereof with respect to the payment of any amount owed (or
alleged to be owed) to either Breslow Party by the Registrant to
any document or instrument evidencing, securing or otherwise
pertaining to any indebtedness to any of the Breslow Parties. In
addition, the Breslow Parties have waived all existing events of
default relating to the Aggregate Debt, and have agreed that all
instruments or other agreements evidencing or pertaining to the
Aggregate Debt shall be deemed cancelled and shall be superseded
and replaced in their entirety by the Note. However, the
Refinancing Agreement stipulates that, if Stockholder Approval
(as hereinafter defined) is not obtained within twelve months
after the date of the Refinancing Agreement, the Refinancing
Agreement and the Note shall be deemed rescinded by the parties
and shall be of no further force or effect, provided that the
Breslow Parties vote all of the voting securities of the
Registrant beneficially owned by them in favor of the Resolutions
(as hereinafter defined).
The Refinancing Agreement defines Stockholder Approval as the
affirmative approval by Registrants stockholders of resolutions
(the Resolutions) approving (i) an amendment to the Certificate
of Incorporation to effect a 1-for-7 reverse stock split of the
Registrants Common Stock (Reverse Stock Split) and (ii) if
required by applicable law, the issuances granted to the Breslow
Trust to the Refinancing Agreement.
to the Refinancing Agreement, the Breslow Parties have jointly
and severally agreed to indemnify and hold the Registrant and its
past and present stockholders, officers, directors, employees,
attorneys, agents, successors, and other representatives
(collectively, the Indemnitees) from and against any and all
actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys fees and
disbursements (the Indemnified Liabilities), incurred by any
Indemnitee as a result of, or arising out of, any breach of any
representation, warranty or covenant of the Breslow Parties set
forth in the Refinancing Agreement. Any indemnification payment
by the Breslow Parties may be in the form of a cash payment by
the Breslow Parties or, provided that the ownership by the
Breslow Trust of the Aggregate Debt or the Note has not been
invalidated or is then in dispute and the right and power of the
Breslow Trust to enter into the Refinancing Agreement has not
been invalidated or is then in dispute, an assignment of or the
surrender and cancellation of the Note and any shares of
Registrants Common Stock issued upon conversion thereof and then
held by the Breslow Parties, or any combination of the foregoing,
as determined in the Breslow Parties discretion.
Concurrently with the execution of the Refinancing Agreement, the
Registrant has delivered to the Breslow Trust the Note in the
amount of $14,982,040.52, which is equal to the Aggregate Debt
reduced by the Waived Interest (the Restructured Principal). The
Note bears interest on the unpaid Restructured Principal at a
rate equal to zero percent per annum for the first six months,
and 5% per annum thereafter. However, in the event of an event of
default on the Note, the interest rate shall become 18% per
annum. The entire unpaid balance of the Note is due on the
60th month anniversary of the date of issuance, and
may be prepaid or redeemed in whole or in part without premium or
penalty.
Immediately upon the Reverse Stock Split becoming effective,
$11,982,041 of the Restructured Principal shall automatically be
converted into 7,403,705 shares of the Registrants Common Stock.
In addition, at any time after the effective date of the Reverse
Stock Split, and so long as any portion of the Note remains
unpaid and outstanding, the holder of the Note shall be entitled
to convert any portion of the Note then outstanding (together
with accrued and unpaid interest) into shares of Common Stock,
based on a Voluntary Conversion Price of $0.20 per share, subject
to adjustment from time to time to the provisions of the Note.
The Voluntary Conversion Price will be adjusted to reflect any
stock split, reverse stock split or similar subdivision or
combination, other than the Reverse Stock Split.
The following constitute events of default with respect to the
Note: failure to pay, within 5 business days of the due date, any
principal amount of the Note; the Registrant breaches or fails to
pay interest or any other amount under the Note within 5 business
days after the due date thereof; the Registrant breaches or fails
to perform, comply with or observe, or be in default under, any
other covenant or obligation required to by formed by it under
the Note, unless cured (if subject to cure) within 10 business
days after the receipt of written notice that such breach or
failure has occurred; an involuntary case is commenced against
the Registrant seeking the liquidation or reorganization under
the bankruptcy laws or similar proceeding, or an involuntary case
or proceeding seeking the appointment of a receiver, custodian or
similar official for it, or to take possession of all or a
substantial portion of its property or to operate all or a
substantial portion of its business, and any of the following
occur: (i) the Registrant consents to such involuntary case or
proceeding is not timely controverted, (ii) the petition
commencing the involuntary case or proceeding is not timely
controverted, or (iii) the petition commencing the involuntary
case or proceeding remains undismissed or unstayed for 60 days,
or (iv) an order for relief shall have been issued or entered
therein or a receiver, custodian, trustee or similar official
appointed; or the Registrant institutes a voluntary case seeking
liquidation or reorganization under the bankruptcy laws or any
similar proceeding, or shall consent thereto, or shall take
similar actions. With certain exceptions, if an event of default
occurs and is continuing, the holder of the Note may, without
notice, declare all outstanding principal and accrued and unpaid
interest to be immediately due and payable.
Copies of the Refinancing Agreement and the Note are attached
hereto as Exhibits 10.1 and 10.2, and are incorporated herein by
this reference.
SECTION 3 SECURITIES AND TRADING MARKETS
Item 3.02 Unregistered Sales of Equity
Securities.
The information set forth in Item 1.01 with respect to the Note
is hereby incorporated herein by this reference. The issuance of
the Note has not been registered under the Securities Act of
1933, as amended, by virtue of the exemption from registration
provided by Section 4(2) of the Act and/or Rule 506 of Regulation
D promulgated thereunder.
SECTION 8 OTHER EVENTS
Item 8.01 Other Events.
The Registrant currently is delinquent in filing its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, and
consequently neither the narrative nor the financial information
contained in the most recent such reports should be relied upon
as presenting a materially accurate description of the current
business or financial condition of the Registrant. The Registrant
will seek to become current in its filings with the Securities
and Exchange Commission as soon as reasonably practicable.
SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and
Exhibits
(d) Exhibits
The following exhibits are filed as part of this Current Report
on Form 8-K:
| 10.1 |
Debt Refinancing Agreement dated January 24, 2017 by and between Aura Systems, Inc., on the one hand, and Warren Breslow and the Survivors Trust Under the Warren L. Breslow Trust, on the other hand |
| 10.2 |
Unsecured Convertible Promissory Note dated January 24, 2017 by and between the Survivors Trust Under the Warren L. Breslow Trust and Aura Systems, Inc. |
Aura Systems, Inc. (OTCMKTS:AUSI) Recent Trading Information
Aura Systems, Inc. (OTCMKTS:AUSI) closed its last trading session at with 10,025 shares trading hands.