LOAN AGREEMENT

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”), is executed as of April, 2007, by and between AuraSound, Inc. a California corporation (the “Company”), and Clearview Partners, LLC, a Nevada limited liability corporation (the “Lender”).

WHEREAS, the Company is preparing to conduct a private placement offering (the “Private Placement”) simultaneously with a reverse merger (the “Merger”) with a publicly traded shell company (the “Public Company Parent”) whereby the Company will become a wholly-owned subsidiary of the Public Company Parent upon the consummation of the Merger;

WHEREAS, in order to fund the Company’s operations until such Private Placement and Merger are completed, the Company wishes to borrow $500,000 from the Lender as a short-term bridge loan to be repaid upon the consummation of the Private Placement and the Merger;

WHEREAS, the Lender is willing to provide such financing on terms and conditions as set forth herein; and

WHEREAS, the Loan (as defined below) will not be secured by any of the assets of the Company.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Lender, intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS

1.1 Defined terms. Certain capitalized terms used in this Agreement shall have the specific meanings defined below:

“Business Day” shall mean a day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required by law to close.

“Common Stock” shall mean the common stock of the Company.

“Default Rate” shall mean the higher of (a) the highest prime rate of interest per annum published in the Money Rate Table of the Western Edition of The Wall Street Journal, as adjusted on a daily basis, plus twelve and one-quarter percent (12.25%) per annum, or (b) 20.00% per annum, in either case compounded annually. From and after the occurrence of any Event of Default, the Default Rate shall apply.

“Equity Securities” shall mean the capital stock of such person or entity and/or any Stock Equivalents of such person or entity.

“Interest” has the meaning set forth in Section 2.1.

“Interest Rate” shall mean 12.00% compounded annually.

“Loan Closing Date” shall mean the date upon which the Loan is made to the Company.

“Stock Equivalents” of any person or entity shall mean options, warrants, calls, rights, commitments, convertible securities and other securities pursuant to which the holder, directly or indirectly, has the right to acquire (with or without additional consideration) capital stock or equity of such person or entity.

“Warrant” has the meaning set forth in Section 7.1.

ARTICLE 2

THE LOAN

2.1 Loan. According to the terms and subject to the conditions of this Agreement, the Lender shall make a loan to the Company on the Loan Closing Date in the amount of $500,000 (the “Loan”). The Loan shall be evidenced by a promissory note in the form attached hereto as Exhibit A (the “Note”), duly executed on behalf of the Company and dated as of the Loan Closing Date.

2.2 Interest. The Loan shall bear interest (“Interest”) from the Loan Closing Date until the Maturity Date (as defined below) at the Interest Rate (calculated on the basis of the actual number of days elapsed over a year of 360 days). Interest is payable by the Company on a monthly basis in arrears on the first Business Day of the month. Notwithstanding anything to the contrary, in no event shall the Interest Rate be less than 12.00% per annum, nor shall the Interest Rate be adjusted to exceed the maximum amount permitted by applicable law.

2.3 Prepayment of the Loan. The Company may from time to time prepay all or any portion of the Loan without premium or penalty of any type. The Company shall give the Lender at least three Business Days prior written notice of its intention to prepay the Loan, specifying the date of payment and the total amount of the Loan to be paid on such date. Once any portion of the Loan has been repaid, the funds may not be re-borrowed.

2.4 Maturity Date. Unless the Loan is earlier accelerated pursuant to the terms hereof, the Loan and all accrued Interest thereon shall be due and payable in full on the earlier of (i) the date that is one hundred and twenty (120) days following the Loan Closing Date; and (ii) the date on which the Company has received an aggregate of $7,000,000 from the sale(s) of its Equity Securities, from and after the Loan Closing Date, in one or a series of transactions (the “Maturity Date”).

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ARTICLE 3

CONDITIONS PRECEDENT TO THE LOAN

3.1 Conditions on the Loan Closing Date. The obligation of the Lender to make the Loan pursuant to Section 2.1 shall be subject to the satisfaction, on or before the Loan Closing Date, of the conditions set forth in this Section. If the conditions set forth in this Section are not met on or prior to the Loan Closing Date, the Lender shall have no obligation to make the Loan.

(a) The Company shall have duly executed and delivered to the Lender the Note representing the Loan.

(b) There shall exist no material adverse change in the condition (financial or otherwise), results of operations, assets, properties or prospects of the Company since September 30, 2006, the date of the most recent financial statements provided to Lender, except for the Company’s receipt of bridge loans totaling $2 million which are to repaid out of the proceeds of the Private Placement along with the Loan.

(d) The Company shall be in material compliance with all applicable laws.

(e) The Company shall have retained Gemini Partners or GP Group, LLC as its exclusive financial advisor in connection with the Merger, and shall provide evidence of such engagement.

(f) The Lender shall have received such other documents, certificates, or other materials as it reasonably requests from the Company with respect to the transaction contemplated by Agreement and the Note.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1 Due Incorporation and Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California with full and adequate power to carry on and conduct its business as presently conducted, and is duly licensed or qualified in all foreign jurisdictions wherein the failure to be so qualified or licensed would reasonably be expected to have a material adverse effect on the business of the Company.

4.2 Due Authorization. The Company has full right, power and authority to enter into this Agreement, to make the borrowings hereunder and execute and deliver the Note as provided herein and to perform all of its duties and obligations under this Agreement and the Note. The execution and delivery of this Agreement and the Note will not, nor will the observance or performance of any of the matters and things herein or therein set forth, violate or contravene any provision of law or the Company’s bylaws or certificate of incorporation. All necessary and appropriate corporate action on the part of the Company has been taken to authorize the execution and delivery of this Agreement and the Note. Concurrently with the execution of this Agreement, the Company will deliver to the Lender a copy of the minutes of the meeting of the Company’s Board of Directors authorizing the Company to enter into this Agreement and the Note , to make the borrowings as provided herein, and to perform all of its duties and obligations under this Agreement and the Note and the .

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4.3 Enforceability. Each of this Agreement and the Note has been validly executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company enforceable against it in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ right and to the availability of the remedy of specific performance.

4.4 Capitalization. All of the Company’s authorized and outstanding Equity Securities are identified on Schedule A attached hereto. Other than as set forth on Schedule A, there are no outstanding shares of capital stock or any options, warrants or other preemptive rights, rights of first refusal or similar rights to purchase Equity Securities of the Company.

4.5 Subsidiaries. The Company owns no securities of any other entity, and there are no outstanding shares of capital stock or any options, warrants or other preemptive rights, rights of first refusal or similar rights to purchase equity securities of any other entity.

4.6 Compliance with Laws. The nature and transaction of the Company’s business and operations and the use of its properties and assets do not, and during the term of this Agreement shall not, violate or conflict with in any material respect any applicable law, statute, ordinance, rule, regulation or order of any kind or nature.

4.7 Absence of Conflicts. The execution, delivery and performance by the Company of this Agreement and the Note, and the transactions contemplated hereby and thereby, do not constitute a breach or default, or require consents under, any agreement, permit, contract or other instrument to which the Company is a party, or by which the Company is bound or to which any of the assets of the Company is subject, or any judgment, order, writ, decree, authorization, license, rule, regulation, or statute to which the Company is subject, except as contemplated in Section 3.1(b) hereof.

4.8 Litigation and Taxes. There is no litigation or governmental proceeding pending, or to the best knowledge of the Company after due inquiry, threatened, against the Company. The Company has duly filed all applicable income or other tax returns and has paid all material income or other taxes when due. There is no controversy or objection pending, or to the best knowledge of the Company after due inquiry, threatened in respect of any tax returns of the Company.

4.9 No Omissions or Misstatements. None of the information included in this Agreement, other documents or information furnished or to be furnished by the Company contains any untrue statement of a material fact or is misleading in any material respect. Copies of all documents referred to herein have been delivered or made available to the Lender and constitute true and complete copies thereof and include all amendments, schedules, appendices, supplements or modifications thereto or waivers thereunder.

4.10 Financial Statements. The financial statements of the Company provided to the Lender are complete and correct as of the dates thereof and for the periods specified therein, have been prepared from the books and records of the Company in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except for changes specified therein and except that unaudited financial statements are not accompanied by notes, and present fairly the financial condition, results of operations, shareholders’ equity and changes in financial position of the Company as of the dates thereof and for the periods specified therein.

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4.11 Company Knowledge and Experience. The Company (together with its accountants, legal counsel and other representatives with whom it has consulted in connection with this Agreement) has such knowledge, experience and access to professional advice in financial and business matters, including loans like the Loan, to be capable of evaluating the risks and merits of receiving the Loan pursuant to this Agreement, and the Company has obtained such professional third-party advice concerning the Loan and the transactions contemplated hereby as it has desired and deemed prudent.

ARTICLE 5

COVENANTS

5.1 Negative Covenants of the Company. The Company covenants and agrees that, from the Loan Closing Date until the Maturity Date (and, in any event, during such time as any portion of the Loan or any Interest thereon is outstanding), without the consent of the Lender, the Company will not:

(a) except for the Merger, merge or consolidate with or into any other corporation or sell or otherwise convey 25% or more of its assets;

(b) in a single transaction or series of related transactions, effect a significant acquisition of any business or entity (for purposes hereof, a “significant” acquisition shall be determined in accordance with Instructions 2, 3 and 4 or Item 2 of Form 8-K of the Securities and Exchange Commission);

(d) declare, set aside or pay any dividend or other distribution on any of its capital stock;

(e) engage in any transaction with any Affiliate (as such term is defined in Rule 501(b) of the Securities Act of 1933, as amended) on terms less favorable to the Company than could be obtained from an unrelated party;

(f) amend its Articles of Incorporation or Bylaws in any manner that adversely affects the rights associated with this Agreement or the Note; or

The Company will give notice to the Lender of any default under any provisions of this Agreement within three business days after the discovery by the Company of such default.

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5.2 Affirmative Covenants of the Company. The Company covenants and agrees that, from the Loan Closing Date until the Maturity Date (and, in any event, during such time as any portion of the Loan or any Interest thereon is outstanding), the Company shall:

(a) operate its business only in the ordinary course, maintain its properties and assets in good repair, working order and condition, and conduct all transactions with third parties, including affiliates of the Company, on an arm’s length basis;

(b) cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and all material licenses, authorizations and permits necessary to the conduct of its businesses;

(c) comply with all applicable laws, rules and regulations of all governmental authorities, the violation of which could reasonably be expected to have a material adverse effect on its business, properties or prospects;

(d) deliver to the Lender within 45 days of the end of each fiscal quarter unaudited consolidated financial statements (including balance sheets, statements of income and loss, statements of cash flow and statements of shareholders’ equity) all in reasonable detail, fairly presenting the financial position and the results of operations of the Company as of the end of and through such periods, prepared in accordance with generally accepted accounting principles, consistently applied in the United States and consistent with past practice; .

(e) deliver to the Lender within five days after they are available (but in any event within ninety days after the end of each of its fiscal years) the Company’s audited annual financial statements and the Company’s annual budget, and allow the Lender reasonable access during normal business hours to visit the Company and inspect the financial records of the Company; and

ARTICLE 6

DEFAULT

6.1 Events of Default. The occurrence of any of the following events (each an “Event of Default”), not cured in the applicable cure period, if any, shall constitute an Event of Default of the Company:

(a) a breach of any representation, warranty, covenant or other provision of this Agreement, or the Note, which, if capable of being cured, is not cured within seven days following the earlier of (i) notice thereof to the Company and (ii) the Company becoming aware of such breach;

(b) the failure to make when due any payment described in this Agreement or the Note, whether on or after the Maturity Date, by acceleration or otherwise;

(d) (i) the application for the appointment of a receiver or custodian for the Company or the property of the Company, or (ii) the entry of an order for relief or the filing of a petition by or against the Company under the provisions of any bankruptcy or insolvency law, (iii) any assignment for the benefit of creditors by or against the Company.

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6.2 Effect of Default. Upon the occurrence of any Event of Default that is not cured within any applicable cure period, the Lender may elect, by written notice delivered to the Company, to (i) declare this Agreement terminated and the outstanding amounts under the Note to be forthwith due and payable, whereupon the entire unpaid Loan, together with accrued and unpaid Interest thereon, and all other cash obligations hereunder, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Company, anything contained herein or in the Note to the contrary notwithstanding, and (ii) exercise any and all other remedies provided hereunder or available at law or in equity upon the occurrence and continuation of an Event of Default. In addition, from and after the expiration of the applicable cure period following the first Event of Default until the entire unpaid principal amount of the Loan and all unpaid interest thereon is paid or the Event of Default is cured if susceptible to cure, Interest on the entire unpaid principal amount of the Loan and all unpaid interest thereon shall accrue at the Default Interest Rate.

ARTICLE 7

WARRANT

7.1 Issuance of Warrant. The Company shall cause the merger agreement for the Merger between the Company and Public Company Parent to include a covenant of the Public Company Parent that it will issue to the Lender at the closing of the Merger a Common Stock Purchase Warrant (the "Warrant"), in form and substance reasonably acceptable to the Lender and the Company, having substantially the following terms:

(a) The number of shares for which the Warrant shall be exercisable shall be equal to: (i) 750,000 multiplied by (ii) a fraction, the numerator of which is $1.00 and the denominator of which is the Lowest Equity Price. However, in the event that all or any portion of the Loan, all accrued Interest thereon and all other sums due hereunder, have not been received by Lender on or before the date that is one hundred twenty (120) days following the Loan Closing Date the number of shares for which the Warrant shall be exercisable shall be equal to: (i) 1,500,000 multiplied by (ii) a fraction, the numerator of which is $1.00 and the denominator of which is the Lowest Equity Price.

(b) The Initial Exercise Price (as defined in the Warrant) shall be the Lowest Equity Price, rounded to the nearest cent;

(d) The date of the Warrant shall be the closing date of the Merger.

For purposes of this Agreement, the "Lowest Equity Price" shall mean the lowest price per share at which the Public Company Parent issues Equity Securities from the date hereof until the closing of the Merger in a transaction the primary purpose of which is to raise capital

7.2 Public Company Parent Issuance. The Company shall cause the Public Company Parent to issue the Warrant to the Lender upon the closing of the Merger and will not allow the Public Company Parent to take any action that will interfere with the issuance of the Warrant on the terms set forth in this Agreement.

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7.3 Warrant Obligations. The Company shall cause the Public Company Parent to comply on a timely basis with each and every obligation under the Warrant.

7.4 Failure to Complete Merger. If the Merger has not been completed before 270 days from the Loan Closing Date:

(a) The number of shares for which the Warrant shall be exercisable shall be equal to: (i) 750,000 multiplied by (ii) a fraction, the numerator of which is $1.00 and the denominator of which is the lesser of (a) the Lowest Equity Price and (b) the last price per share paid for the Company’s Common Stock prior to the Loan Closing Date in a transaction the primary purpose of which was to raise capital, rounded to the nearest whole share;

(b) The Initial Exercise Price (as defined in the Warrant) shall be the lower of (a) the Lowest Equity Price and (b) the last price per share paid for the Company’s Common Stock prior to the Loan Closing Date in a transaction the primary purpose of which was to raise capital, rounded to the nearest cent;

7.5 Registration Rights. The Lender shall have substantially the same registration rights with respect to the Warrant shares as provided to the investors in the Private Placement.

ARTICLE 8

MISCELLANEOUS

8.1 Successors and Assigns; Participations. Subject to the exceptions specifically set forth in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. This Agreement may be assigned solely by the Lender to any person that is not a competitor of the Company. Furthermore, although this Agreement and the Note name the Lender as the holder thereof and/or the lender thereunder, the Lender is authorized to sell participation interests in the Loan to one or more other persons or entities that do not compete with the Company and that does not have an adverse claim against the Company. The Company agrees that: (a) each holder of a participation interest will be entitled to rely on the terms of this Agreement and the Note as if such holder had been named as an original party hereto and thereto; and (b) the Lender is authorized to provide all information furnished by the Company to the Lender to each holder of a participation interest.

8.2 Titles and Subtitles. The titles and subtitles of the Sections of this Agreement are used for convenience only and shall not be considered in construing or interpreting this agreement.

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8.3 Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be delivered personally or by facsimile (receipt confirmed electronically) or shall be sent by a reputable express delivery service or by certified mail, postage prepaid with return receipt requested, addressed as follows:

if to Borrower, to:

Xxxxxx Xxx

AuraSound, Inc.

00000 Xxxx Xxxxx Xxx

Xxxxx Xx Xxxxxxx, XX 00000

with a copy to:

Xxxxx Xxxxxxxxx

Xxxxxxxxxx & Xxxxx, LLP

The Chrysler Building

000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx

Xxx Xxxx, XX 00000

if to the Lender, to:

Xxxx Xxxxxx

Clearview Partners, LLC

00000 Xxxxxx Xxxxx

Xxx Xxxxxxx, XX 00000

with a copy to:

Xxxxxxx Xxxxxxx

Xxxxxxx Xxxxx LLP

000 Xxxxxxxx Xxxxxx

Xxxxx 0000

Xxxxxx, Xxxxx 00000

Either party hereto may change the above specified recipient or mailing address by notice to the other party given in the manner herein prescribed. All notices shall be deemed given on the day when actually delivered as provided above (if delivered personally or by facsimile, provided that any such facsimile is received during regular business hours at the recipient’s location) or on the day shown on the return receipt (if delivered by mail or delivery service).

8.4 Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Any action arising out of this Agreement or the Note shall be brought in a state or federal court sitting in the City of Los Angeles, California.

8.5 Waiver and Amendment. Any term of this Agreement may be amended, waived or modified with the written consent of the Company and the Lender.

8.6 Remedies. No delay or omission by the Lender in exercising any of its rights, remedies, powers or privileges hereunder or at law or in equity and no course of dealing between the Lender and the undersigned or any other person shall be deemed a waiver by the Lender of any such rights, remedies, powers or privileges, even if such delay or omission is continuous or repeated, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise thereof by the Lender or the exercise of any other right, remedy, power or privilege by the Lender. The rights and remedies of the Lender described herein shall be cumulative and not restrictive of any other rights or remedies available under any other instrument, at law or in equity.

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8.7 Expenses. The Company shall pay all customary costs and expenses incurred by the Lender in connection with the negotiation and preparation of the documents contemplated by this Agreement and the Loan closing (including the Lender’s reasonable attorneys’ fees), not to exceed $10,000.

8.8 Integration. This Agreement, along with the Note, constitutes the complete and exclusive agreement between the Company and the Lender with respect to the subject-matter herein and replaces and supersedes any and all other prior written and oral agreements or statements by such parties hereto relating to such subject-matter.

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IN WITNESS WHEREOF, the Company has caused this Loan Agreement to be signed in its name on the date first set forth above.



	By:	/s/ Xxxx Xxxxxx
		Xxxx Xxxxxx Managing Director Clearview Partners, LLC



	By:	/s/Xxxxxx Xxx
		Xxxxxx Xxx Chief Executive Officer Aura Sound, Inc.

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SCHEDULE A

CAPITALIZATION OF THE COMPANY

AuraSound Capitalization Table

	Outstanding Shares		Issued Options/Warrants		TOTAL
Pre-Offering Shareholders
Xxxxxx Xxx		10,647,071		-		10,647,071
Xxx Xxxxxxxx		824,319		-		824,319
Xxxxx Xxxx		368,412		-		368,412
Hazlaut Investment		354,241		-		354,241
Art Xxxxxxxx		240,883		-		240,883
Xxxxxx Xxxxxxx		212,544		-		212,544
Xxxxxx Xxxxx		184,205		-		184,205
Xxxx Xxxxxxx		174,995		-		174,995
Xxxxxx Xxxxxxxx		143,114		-		143,114
Xxxxxxx Xxxxxxx		141,696		-		141,696
Xxxxxxxx Xxxxx		69,077		-		69,077
Gemel		68,014		-		68,014
TOTAL		13,428,571		-		13,428,571

The Company’s authorized capital stock consists of 100,000,000 shares of Common Stock, no par value per share.

Schedule A-1

EXHIBIT A

PROMISSORY NOTE

See attached.

Exh B-1

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LOAN AGREEMENT

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