EXHIBIT 10.27
CONVERTIBLE DEMAND NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF
EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT
AURA SYSTEMS, INC.
as the Borrower
$60,000.00 El Segundo, California
February 24, 2003
FOR VALUE RECEIVED, the undersigned, AURA SYSTEMS, INC., a Delaware
corporation (herein called the "Borrower"), whose principal office is located at
0000 Xxxxxx Xxxxxx, Xx Xxxxxxx, Xxxxxxxxxx 00000, hereby irrevocably and
unconditionally promises to pay to the order of ARIES GROUP, LTD. (the
"Holder"), at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx
00000, or to its successors and registered assigns, in lawful money of the
United States of America, in immediately available funds, the principal sum of
Sixty Thousand Dollars ($60,000.00) plus all accrued and unpaid interest, all on
demand, but in no event later than May 31, 2003. Interest payable hereunder
shall be calculated at the rate of five percent (5.00%) per annum on the
principal amount outstanding on the basis of a 360-day year and the actual
number of days elapsed. Accrued but unpaid interest shall be payable, in cash,
on May 31, 2003.
All amounts due hereunder shall be paid to the Holder in U.S. Dollars and
in immediately available funds before 1:00 p.m., Los Angeles time, on demand,
or, if later, on the due date, May 31, 2003, at:
Bank: US Bank
ABA Number: 000000000
Credit: Aries Group, Ltd.
Account Number: 153492113995
or as otherwise directed in writing by the Holder.
This Note is issued in conjunction with the letter agreement dated January
27, 2003 which contemplated funding from investors represented by Xxxxxx as
their agent (the "Investors") to be used to retire certain debts of Borrower.
Per the terms of that agreement, the Investors and Borrower have agreed that
this Note shall be converted into shares of Xxxxxxxx's Convertible Redeemable
Preferred Stock ("Preferred Stock") with each dollar of this Note being
converted into $2.20 of Preferred Stock.
In the event that any amount of principal of or interest on this Note is
not paid when due, then interest on any such past due amount shall be payable at
a rate per annum equal to the greater of the following: (i) fifteen percent
(15%), or (ii) the rate announced by Citibank, N.A., New York branch, as of the
relevant date as "prime" plus five percent (5%).
Upon the occurrence of any default or breach by the Borrower under the
Note, the entire principal amount hereof and the interest thereon to the date of
payment shall become immediately due and payable without further notice, and the
Borrower hereby waives all rights to notice and presentment.
The Borrower hereby waives diligence, presentment, demand, protest and
notice of every kind, and warrants to the Holder of this Note that, as to
itself, all actions and approvals required for the execution and delivery of
this Note as the legal, valid and binding obligation of the undersigned,
enforceable in accordance with the terms hereof, have been duly taken and
obtained. The non-exercise by the Holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance. A manually signed copy of this Note shall be evidence of
the rights of the Holder of this Note. This Note shall be binding upon the
Borrower and its successors and assigns and inure to the benefit of the holder
of this Note and its successors and permitted assigns.
I. REPRESENTATIONS AND WARRANTIES
X. Xxxxxxxx represents and warrants to the Holder that:
(i) Borrower has all requisite corporate power and authority to
deliver and perform its obligations under this Note.
(ii) The execution, delivery, and performance by Borrower of this
Note has been duly authorized by all necessary corporate
action of Borrower and does not and will not (A) contravene
the terms of the Certificate of Incorporation or Bylaws of
Borrower or result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other
agreement, lease, or instrument to which Borrower is a party
or by which it or its assets may be bound or affected, (B)
violate any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree or like instrument
binding on or affecting Borrower, or (C) result in, or
require, the creation or imposition of any lien upon or with
respect to any of the assets of Borrower.
(iii)This Note constitutes a legal, valid, and binding
obligation of Borrower, enforceable against Borrower in
accordance with its terms.
(iv) No authorization, consent, approval, license, exemption of,
or filing or registration with, any governmental authority,
or approval or consent of any other person, is required for
the due execution, delivery, or performance by Borrower of
this Note, except for the filing of the Certificate of
Designation attached hereto with the Delaware Secretary of
State.
(v) Borrower has a pre-existing relationship with Xxxxxx and, by
reason of its business and financial experience, Borrower
has the capacity to protect its own interests in connection
with the Note and related transactions.
X. Xxxxxx represents and warrants to Borrower that:
(i) Holder is acquiring the shares (the "Securities") for its
own account, for investment and not with a view to resale or
distribution. Holder has not offered or sold any portion of
its Securities and has no present intention of dividing its
Securities with any third party or of reselling or otherwise
disposing of any portion thereof either currently or after
the passage of a fixed or determinable period of time or
upon the occurrence of non-occurrence of any predetermined
event or circumstance.
(ii) Holder is aware that the Securities are speculative and that
it may lose its entire investment and it can afford to bear
the risks of an investment in Borrower's company ("Borrower"
or the "Company"), including the risk of losing its entire
investment.
(iii) Holder:
(a) Has been provided an opportunity to obtain information
concerning the Company and any other relevant matters
as Xxxxxx has requested; and
(b) Has been given the opportunity to ask questions of and
receive answers from the Company concerning the
Securities.
(iv) Holder is aware that it must bear the economic risk of its
investment in the Securities for an indefinite period of
time because: (1) the Securities have not been registered
under the Securities Act of 1933, as amended (the "Act"), or
qualified under the California Corporate Securities Law of
1968 or any other state securities laws, and therefore
cannot be sold, assigned or otherwise disposed of unless
appropriate exemptions from such registration or
qualification requirements are available; (2) Borrower will
place a legend on the certificates evidencing the Securities
(unless and until a Registration Statement covering the
Securities is in effect) stating that the Securities have
not been registered under the Act or any state securities
laws and setting forth the limitations on resale contained
above and Borrower will also require that its registrar and
transfer agent make a notation of such restrictions in its
appropriate records and (3) there is no public market for
Preferred Shares. Xxxxxx further understands and agrees that
the Borrower will not honor any attempt by Holder to sell,
transfer of otherwise dispose of the Securities in the
absence of either an effective Registration Statement and
qualification under applicable Blue Sky laws or exemptions
therefrom.
(v) Holder acknowledges that a legend will be placed on any
certificates or instruments evidencing the Securities for as
long as necessary to comply with the Act and applicable
state securities laws.
(vi) Holder is an "accredited investor" as such term is defined
in Regulation D under the Act. Holder is knowledgeable and
experienced with respect to investment matters such as a
proposed purchase of Securities. Holder has such knowledge
and experience in business and financial matters as to be
capable of evaluating the merits and risks of this
investment and has the capacity to protect its own interests
in connection with this investment.
(vii)Holder has decided to acquire the Securities on the basis
of its own independent investigation and has relied on no
oral statements, representations or warranties of the
Company, including its agents, consultants or employees, as
to the quality of the investment in the Securities.
(viii) Holder shall be entitled to registration rights for the
resale of the Securities on the terms set forth in the
Company's Certificate of Designation as filed with the State
of Delaware and subject to the letter agreement set forth
above.
(ix) In the event of a stock split, reverse stock split or other
recapitalization, appropriate adjustments shall be made in
the number of shares and/or per share price in order to
effect the intent and purpose of the applicable provisions
iI. Miscellaneous
Notices. Notice to Holder shall be deemed to be provided on the day it
is posted by email, fax and overnight mail to the Holder's address on file
with Borrower. Holder shall use its best efforts to insure Holder actually
receives on a timely basis any notice provided hereunder.
Successors and Assigns. The rights and obligations of Borrower and the
Holder of this Note shall be binding upon and inure to the benefit of the
successors, assigns and transferees of the parties.
Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the written consent of Xxxxxxxx and the Holder.
Assignment by Xxxxxxxx. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Borrower, without the prior written
consent of the Holder.
Expenses; Waivers. If Borrower defaults in the performance of its
obligations under this Note, then Borrower shall pay all costs and expenses
incurred by Holder in connection with the collection of amounts due and the
enforcement of Holder's rights hereunder and under the Security Agreement
including, without limitation, reasonable attorneys' fees and costs.
Consent to Jurisdiction. Borrower hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts in and for the
County of Los Angeles, California, for the purposes of any suit, action or
proceeding arising out of or relating to this Note and hereby waives, and
agrees not to assert in any such suit, action, or proceeding, any claim
that it is not personally subject to the jurisdiction of such courts, that
the suit, action or proceeding is brought in an inconvenient forum, or that
the venue of the suit, action or proceeding is improper. Borrower consents
to process being served in any suit, action or proceeding by overnight
mail, next business day delivery, by a commercially recognized overnight
mail delivery service, of a copy thereof to Borrower at the address set
forth on the first page of this Note, and Borrower agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing in this paragraph shall affect or limit any right to serve process
in any other matter permitted by law.
No Impairment. Borrower will not avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by
Xxxxxxxx, but will at all times in good faith carry out the provisions of
this Note.
Governing Law. This Note shall in all respects be governed by, and
construed in accordance with, the laws of the State of California including
all matters of construction, validity and performance, without reference to
principles of conflicts of law.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed by a duly authorized officer on the day and the year first above
written.
AURA SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior VP / CFO
