EXHIBIT 10.18
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH NOTE WHICH IS EFFECTIVE UNDER SUCH
ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES. IN THE
CASE OF TRANSFERS OR OTHER DISPOSITIONS MADE OTHERWISE THAN PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, THE HOLDER SHALL, AT DEBTOR'S
REQUEST, PROVIDE OPINION OF COUNSEL SATISFACTORY TO DEBTOR THAT SUCH
REGISTRATION IS NOT REQUIRED.
AURA SYSTEMS, INC.
SECURED PROMISSORY NOTE
$250,000 No._________
September 4, 2001
Los Angeles, California
AURA SYSTEMS, INC., a Delaware corporation (the "Debtor"), for
value received hereby promises to pay to The Xxxx Xxxxxx Trust dated July 7,
1991, Xxxx Xxxxxx, Trustee, or its registered assigns (the "Holder"), the sum of
Two Hundred Fifty Thousand Dollars ($250,000), or such lesser amount as shall
then equal the outstanding principal amount hereof and any unpaid accrued
interest hereon, as set forth below, which shall be due and payable on the
earliest to occur of (a) (1) February 28, 2002, (2) receipt by Debtor from
Telemac Corporation of at least Two Hundred Sixty Thousand Dollars ($260,000)
pursuant to that certain Cancellation Agreement, dated November 30, 1998, with a
remaining amount due to Debtor of One Million Two Hundred Fifty Thousand Dollars
($1,250,000) plus all accrued and unpaid interest, or (3) receipt by Debtor from
CRS of at least Two Hundred Sixty Thousand Dollars ($260,000) of the past-due
amount of Eight Hundred Thousand Dollars ($800,000) due to Debtor (the earliest
to occur of (1), (2) and (3) being the "Maturity Date") or (b) when declared due
and payable by Holder subsequent to the occurrence of an Event of Default.
1. Interest and Payment. This Note shall bear interest on the
unpaid principal balance hereof at a rate of ten percent (10%) per annum (the
"Interest Rate"), compounded monthly on the first day of each month. Interest
shall be calculated on the basis of a 360 day year and charged for the actual
number of days elapsed. Interest on the unpaid principal balance of this Note
shall be due and payable on the Maturity Date or at the time of any prepayment
permitted hereunder. Payment of the principal of, and interest on, this Note
shall be made in cash, in lawful money of the United States of America, at such
address as Holder shall designate; provided that if no later than the Maturity
Date or five (5) days prior to any prepayment permitted hereunder, as
applicable, Debtor and Holder have agreed upon the value of options to purchase
shares of Debtor's common stock (the "Interest Options") or a procedure for
valuing the Interest Options, then Holder may elect (in lieu of cash) to receive
payment of the principal of, or interest on, this Note (or both) in Interest
Options.
2. Events of Default. If any of the events specified in this Section 2
shall occur (herein individually referred to as an "Event of Default"), the
Holder of the Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable, by
notice in writing to Debtor:
(a) If Debtor shall have failed to pay the full amount of
outstanding principal due under this Note and any unpaid accrued
interest hereon, as of 5:00 p.m. Los Angeles, California time on
the Maturity Date; or
(b) The institution by Debtor of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or
the filing by it of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by it
to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official
of Debtor, or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or
the taking of corporate action by Debtor in furtherance of any
such action; or
(c) If, (i) within sixty (60) days after the commencement of
an action against Debtor (and service of process in connection
therewith on Debtor) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, such action
shall not have been dismissed or all orders or proceedings
thereunder affecting the operations or the business of Debtor
stayed, or (ii) the stay of any such order or proceeding shall
thereafter be set aside, or (iii) within sixty (60) days after
the appointment without the consent or acquiescence of Debtor or
any trustee, receiver or liquidator of Debtor or of all or any
substantial part of the properties of Debtor, such appointment
shall not have been vacated.
3. Remedies. Upon the occurrence of an Event of Default, and so long as
such Event of Default continues, the entire balance of principal together with
all accrued interest shall bear interest at the Interest Rate plus three percent
(3%). No delay or omission on the part of the Holder in exercising any right
under this Note or the Security Agreement (as defined below) will operate as a
waiver of such right.
4. Attorneys' Fees. Debtor shall pay the reasonable fees and expenses of
counsel to Holder in connection with the preparation and execution of this Note
and the Security Agreement. If this Note is not paid when due or if any Event of
Default occurs, Debtor shall pay all costs of enforcement and collection,
including without limitation, reasonable fees and expenses of counsel, whether
or not any action or proceeding is brought to enforce the provisions hereof.
5. Security. This Note is secured by the Security Agreement of even date
herewith, by and between Debtor and Holder (the "Security Agreement"), under
which Holder has been granted a first priority security interest in the Initial
Collateral (as defined in the Security Agreement).
6. Exchange of Note. Holder shall be entitled to exchange this Note for
another Note representing the same rights, upon surrender of this Note at the
principal office of Debtor. Also, on receipt of evidence reasonably satisfactory
to Debtor of the loss, theft, destruction or mutilation of the Note, and in the
case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory to Debtor or, in the case of mutilation, on surrender
and cancellation of the mutilated Note, Debtor at its expense shall execute and
deliver, in lieu of the Note, a new Note of the same form and amount.
7. Prepayment. Debtor may, without premium or penalty, prepay all or a
portion of the outstanding principal balance due under this Note, provided that
each such prepayment is accompanied by accrued interest on the amount of
principal repaid calculated to the date of such prepayment.
8. Waiver. Debtor hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and nonpayment of this Note, and expressly agrees
that, without in any way affecting the liability of Debtor hereunder, Holder may
extend the Maturity Date, accept additional security, release any party liable
hereunder and release any security now or hereafter securing this Note. Debtor
further waives, to the extent permitted by law, the right to plead any and all
statutes of limitations as a defense to any demand on this Note, or on the
Security Agreement or any deed of trust, security agreement, lease agreement,
guaranty or other agreement now or hereafter securing this Note.
9. Amendment. All amendments to this Note require the written consent of
Debtor and Holder.
10. Interest Rate Limitation. It is the intent of Debtor and Holder in the
execution of this Note and the Security Agreement that the loan evidenced hereby
be exempt from the restrictions of the usury laws of the State of California
pursuant to Section 25118 of the California Corporations Code. Debtor and Holder
stipulate and agree that none of the terms and provisions contained herein or in
the Security Agreement shall ever be construed to create a contract for the use,
forbearance or detention of money requiring payment of interest at a rate in
excess of the maximum interest rate permitted to be charged by the laws of the
State of California. If Holder collects monies which are deemed to constitute
interest which would otherwise increase the effective interest rate on this Note
to a rate in excess of the maximum rate permitted to be charged by the laws of
the State of California, all such sums deemed to constitute interest in excess
of such maximum rate will, at the option of Holder, be credited to the payment
of the sums due hereunder or returned to Debtor.
11. Signatures. If this Note bears the signatures of individuals who were
the proper officers of Debtor at the time of signing, such signatures shall bind
Debtor, notwithstanding that any such individuals shall have ceased to hold such
offices prior to the delivery of this Note.
12. Notices. All notices to Debtor under this Note shall be in writing and
addressed to Debtor at 0000 Xxxxxx Xxxxxx, Xx Xxxxxxx, Xxxxxxxxxx 00000, Attn:
General Counsel and Corporate Secretary, or to other such address of Debtor as
Debtor may notify Holder.
13. Governing Law. This Note shall be construed, interpreted and governed
by the laws of the State of California, without regard to its conflicts-of-law
provisions.
14. Headings. All headings used herein are used for convenience only and
shall not be used to construe or interpret this Note.
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In witness whereof, Debtor has caused this Note to be executed by its
Chairman and attested by its Secretary, as of this 4th day of September, 2001.
Aura Systems, Inc.
By ______________________________
Xxxxx Xxxxxxxx
Chairman and CEO
By ______________________________
Xxxxxxx Froch
Secretary