Additional Security Agreement
This Additional Security Agreement ("Agreement") is entered into on this
1st day of December 2002 between Aura Systems, Inc., a Delaware corporation
("Aura") and Purchaser (as defined in the Agreement for Sale and Leaseback
described below), with regard to the following:
RECITALS
A. In accordance with that certain Agreement for Sale and Leaseback dated
as of December 1, 2002, by and between Aura and Purchaser, to which a copy of
this Agreement is attached, Aura has agreed to lease from Aura Realty, Inc., a
Delaware corporation ("Aura Realty"), and Aura Realty has agreed to lease to
Aura those certain real properties commonly known as 0000 Xxxxxx Xxxxxx and 0000
Xxxx Xxxxxx, in El Segundo, California, by and pursuant to that certain lease
agreement dated as of December 1, 2002 (the "Lease"). Capitalized terms used and
not otherwise defined herein shall have the same meanings given such terms in
the Agreement for Sale and Leaseback.
B. Purchaser desires additional security from Aura to secure performance of
Aura's obligations under the Lease and, in the event that LaSalle does not
consent to the transfer of the Stock, performance of Aura's obligations under
the Agreement for Sale and Leaseback.
C. Aura is willing to assign as additional security for Aura's performance
of its obligations under the Lease and, in the event that LaSalle does not
consent to the transfer of the Stock, Aura's performance of its obligations
under the Agreement for Sale and Leaseback, its interest in that certain Asset
Purchase Agreement by and among Aura Ceramics, Inc., Aura Systems, Inc. and
Alpha Ceramics, Inc. ("Alpha") dated as of February 29, 2000 (as amended from
time to time, the "Alpha Agreement").
NOW, THEREFORE, in consideration of the Recitals and the mutual covenants,
conditions and agreements set forth herein, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties covenant, warrant, represent and agree as follows:
1. Representations and Warranties of Aura. Aura makes the following
representations, warranties and agreements each as of the this date unless
otherwise specified by the terms hereof, all of which shall survive the
execution and delivery of this Agreement.
A. Aura is a corporation duly incorporated validly existing and in
good standing under the laws of the State of Delaware with the requisite
corporate power and authority to own and use its properties and assets and
to transact the business in which it is engaged.
B. Aura is the sole and exclusive owner of all of the payment and
monies due from Alpha under the Alpha Agreement. There are no outstanding
rights, rights to acquire, calls, pledges, liens or commitments of any
character whatsoever relating to or giving any person or entity any right
to the payments and monies due to Aura under the Alpha Agreement. Until
such time as Aura has transferred all of the Stock to Purchaser, Aura shall
not transfer any of its rights in the Alpha Agreement.
C. To the best of Aura's knowledge, Alpha has not filed for bankruptcy
protection and Aura has no knowledge that Alpha has any intention to file
for bankruptcy. To the best of Aura's knowledge, no default currently
exists under the Alpha Agreement and Aura has no knowledge of any adverse
financial or other conditions at Alpha that may result in delays or
nonperformance on the Alpha Agreement.
D. Pursuant to the terms of the Alpha Agreement, Alpha is obligated to
pay Aura $2,700,000.00.
2. Representations and Warranties of Purchaser. Purchaser makes the
following representations, warranties and agreements each as of the this date
unless otherwise specified by the terms hereof, all of which shall survive the
execution and delivery of this Agreement.]
A. Purchaser is in receipt of a copy of the Alpha Agreement.
B. Purchaser is in receipt of and has reviewed the scheduled payments
and outstanding balance as of December 1, 2002 due and payable by Alpha
under the Alpha Agreement.
3. Additional Security.
A. Subject to Aura's rights under Section 3.D below, Aura hereby
unconditionally assigns its interest in the Alpha Agreement to Purchaser as
additional security for: (i) performance of Aura's obligations under the
Lease; (ii) in the event that LaSalle does not consent to the transfer of
the Stock, performance of Aura's obligation to (a) make payments under the
Secured Loan when due and payable, (b) make the $30,332 monthly payments
pursuant to Section 1.4 of the Agreement for Sale and Leaseback and (c)
repay the loan evidenced by the Aura Note; and (iii) in the event that
LaSalle does not consent to the transfer of the Stock, performance of
Aura's obligation to transfer the remaining balance of the shares of the
Stock to Purchaser on the date of the Second Closing, at which time this
Agreement shall secure performance of Aura's obligations under the Lease.
Aura further agrees that Purchaser may file a UCC-1 Financing Statement to
perfect its security interest in the Alpha Agreement.
B. An "Event of Default" shall mean (i) the failure of Aura to pay the
full rent under the Lease when due and payable in accordance with the terms
of the Lease including applicable notice and cure periods, (ii) in the
event that LaSalle does not consent to the transfer of the Stock, the
failure of Aura to make a payment under the Secured Loan when due and
payable by Aura in accordance with the terms of the Secured Loan and the
Agreement for Sale and Leaseback including applicable notice and cure
periods, (iii) in the event that LaSalle does not consent to the transfer
of the Stock, the failure of Aura to make a $30,332 monthly payment
pursuant to Section 1.4 of the Agreement for Sale and Leaseback when due
and payable in accordance with the terms of the Agreement for Sale and
Leaseback including applicable notice and cure periods, (iv) in the event
that LaSalle does not consent to the transfer of the Stock, the failure of
Aura to make a payment under the Aura Note when due and payable in
accordance with the terms of the Aura Note including applicable notice and
cure periods and (v) the failure of LaSalle to consent to the transfer of
the Stock, unless Aura transfers the remaining balance of the shares of the
Stock to Purchaser on the date of the Second Closing in accordance with the
terms of the Agreement for Sale and Leaseback. Notice of an Event of
Default will be given if any payment or Stock transfer obligation is not
satisfied by the tenth (10th) day after such obligation is due. Any partial
payment or Stock transfer will be deemed an acceptance on account only, and
the failure to satisfy the entire obligation due prior to such tenth (10th)
day shall be and continue to be an Event of Default.
C. Upon the occurrence and during the continuation of an Event of
Default, Aura's right to receive the payments due and payable by Alpha
under the Alpha Agreement will be assigned, conveyed and transferred to
Purchaser, and all additional payments from Alpha will be paid directly to
Purchaser in accordance with the attached Appendix A - "Assignment of
Payments" and credited by Purchaser against Aura's rent payment obligations
due under the Lease. If Xxxx Xxxxxx ceases to act as CEO of Aura, Aura will
deliver to Purchaser a replacement letter otherwise in the form of Appendix
A - "Assignment of Payments" duly executed by the then acting CEO of Aura.
Notwithstanding anything to the contrary contained in this Agreement, Aura
shall have the right to enforce all of its rights and interests under the
Alpha Agreement and, unless and until an Event of Default has occurred and
is continuing, directly receive and collect all monthly payments due and
payable to Aura thereunder.
D. Pursuant to Section 1.4 of the Agreement for Sale and Leaseback,
after the transfer of 100% of the Stock to Purchaser, Aura shall have the
right to substitute $670,000 in cash as the additional security (the
"Substitute Additional Security") in lieu of the security interest in the
Alpha Agreement granted hereunder and receive a termination and release of
the security interest in the Alpha Agreement. If, after the transfer of
100% of the Stock to Purchaser, (i) Aura has substituted $670,000 in cash
as the Substitute Additional Security and (ii) Aura has reported two (2)
consecutive quarters with breakeven cash flow from Aura's operations as
reported on its form 10Q or 10K filed with the SEC, the Substitute
Additional Security shall be reduced to $270,000 and Purchaser shall
release $400,000 of the Substitute Additional Security to Aura within five
(5) business days after written notice thereof to and confirmation by
Purchaser. If Aura reports three (3) consecutive quarters with breakeven
cash flow from Aura's operations as reported on its form 10Q or 10K filed
with the SEC, the Substitute Additional Security shall be further reduced
from $270,000 to $100,000 and Purchaser shall release an additional
$170,000 of the Substitute Additional Security to Aura within five (5)
business days after written notice thereof to and confirmation by
Purchaser. If Aura reports net positive cash flow from Aura's operations as
reported on its form 10K filed with the SEC in total for any four (4)
rolling quarters, the Alpha Assignment shall be terminated or the
Substitute Additional Security shall be reduced to $0 and Purchaser shall
release all of the Substitute Additional Security to Aura, as the case may
be, within five (5) business days after written notice thereof to and
confirmation by Purchaser. If Aura satisfies the foregoing, Purchaser shall
release its security interest in the Alpha Agreement and file a termination
of any UCC-1 Financing Statement filed in connection therewith.
4. Entire Agreement. This Agreement, together contains the entire
understanding of the parties with respect to the subject matter hereof.
5. Notices. Any and all notices or communications required or permitted
hereunder shall be in writing and shall be deemed given and effected if by
facsimile or personal delivery, on the date of transmission and if by mail, on
the third day after the postmark date. The addresses for such communications
shall be:
If to Aura: Aura Systems, Inc.
0000 Xxxxxx Xxxxxx
Xx Xxxxxxx, XX 00000
Attn: Xxxxxxx Froch
Facsimile No.: (000) 000-0000
If to Purchaser: c/o Aries Group Ltd.
00000 Xxxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn: Xxx Xxxxx
Facsimile No.: (000) 000-0000
6. Headings Descriptive. The headings herein are for convenience only and
do not constitute a party of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
7. Governing Law. This Agreement, and the rights and obligations of the
parties hereunder, shall be construed in accordance with and governed by the
laws of the State of California.
8. Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same Agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
AURA:
AURA SYSTEMS, INC., a Delaware corporation
By: /s/ Xxxx X. Xxxxxx
---------------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: CEO and Chairman of the Board of Directors
PURCHASER:
/s/ Xxx Xxxxxxxx
-------------------------------------
Xxx Xxxxxxxx, attorney-in-fact for the individuals listed on
Schedule 1 of the Agreement for Sale and Leaseback
/s/ Xxx Xxxxx
-------------------------------------
Xxx Xxxxx, attorney-in-fact for the individuals listed on
Schedule 2 of the Agreement for Sale and Leaseback
Appendix A
Appendix A
Assignment of Payments
__________________, 2002
Via Facsimile
Xxxxx X. Xxxxxx
Alpha Ceramics, Inc
0000 Xxxxxxxx Xxxxxx X
Xxxxxxxxxxx, XX 00000
Re: Asset Purchase Agreement
Dear Xx. Xxxxxx:
Reference is made to that certain Asset Purchase Agreement (the "Agreement")
dated as of February 29, 2000, between Alpha Ceramics, Inc., as Buyer, Aura
Ceramics Inc., as Seller, and Aura Systems, Inc. ("Aura"), as Stockholder. Until
further notice, effective immediately upon your receipt of this letter, please
send all future payments due under the Agreement made payable to:
Aries Group Ltd.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Thank you for your cooperation and please call me if you have any questions.
Best regards,
Xxxx X. Xxxxxx, CEO
