EXHIBIT 10.20
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._________
January 23, 2002
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 upon written
demand by the Holder to the Debtor (the "Maturity Date").
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 together with such
amounts due and payable under Section 3 hereof, 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 first business day following
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 23rd day of January,
2002.
Aura Systems, Inc.
By ______________________________
Xxxxx Xxxxxxxx
Chairman and CEO
By ______________________________
Xxxxxxx Froch
Secretary