SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, dated as of May __, 2000, is made and
given by AURA CERAMICS, INC., a Delaware corporation and AURA SYSTEMS, INC., a
Delaware corporation (jointly and severally, the "Junior Creditor") in favor of
EXCEL BANK, a Minnesota state banking corporation (the "Senior Creditor").
RECITALS:
A. Alpha Ceramics, Inc., a Minnesota corporation (the "Borrower") is or
may hereafter become indebted to the Junior Creditor pursuant to Section 2.4 of
that certain Asset Purchase Agreement, dated as of February 29, 2000, between
the Junior Creditor and the Borrower (the "Asset Purchase Agreement") and/or
pursuant to other documents or instruments executed in connection therewith
and/or by reason of loans or other extensions of credit or other financial
accommodations now or hereafter made or to be made by the Junior Creditor to the
Borrower (collectively, the "Subordinated Agreements").
B. The Borrower is now, or may hereafter be, indebted to the Senior
Creditor as a result of the advance of monies and other extensions of credit by
the Senior Creditor to the Borrower under a Revolving Credit and Term Loan
Agreement dated as of May ___, 2000 (as the same may be amended, restated or
otherwise modified from time to time hereafter, the "Credit Agreement") between
the Borrower and the Senior Creditor and under other agreements or arrangements
for the extension of financial accommodations now, heretofore or hereafter in
effect.
C. The Junior Creditor acknowledges that the loan or advance of monies
or other extensions of any financial accommodation or credit to the Borrower by
the Senior Creditor is of value to the Junior Creditor.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged by the Junior Creditor, and in order to induce the Senior
Creditor to make loans or extend credit or any other financial accommodation to
or for the benefit of the Borrower, or to grant such renewals or extension
thereof as the Senior Creditor may deem advisable, and to better secure the
Senior Creditor in respect of the foregoing, the Junior Creditor hereby agrees
as follows:
Section 1. Definitions, Rules of Constructions.
(a) For purpose of this Agreement, the following terms shall
have the following meanings:
"Asset Purchase Agreement" shall have the meaning given to
that term in Recital A above, and shall include any amendments,
modifications or restatements thereto or thereof (but nothing in this
definition shall be deemed to waive the provisions of Section 11 below
requiring the Senior Creditor's prior written consent to any change in
the Asset Purchase Agreement).
"Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et seq., as amended from
time to time.
"Borrower" shall mean Alpha Ceramics, Inc. and any successor
(including a debtor-in-possession under the Bankruptcy Code), assignee,
receiver, trustee or estate thereof.
"Credit Agreement" shall have the meaning given to that term
in Recital B above, and shall include any amendments, modifications or
restatements thereto or thereof and any credit agreement hereafter
entered into in replacement thereof.
"Default" shall mean any event which with the giving of notice
or lapse of time, or both, would become an Event of Default.
"Event of Default" shall mean (i) any Event of Default (as
therein defined) under the Credit Agreement, (ii) any failure of the
Borrower to pay when due (whether at the date scheduled therefor or
earlier upon acceleration), or when demanded (with respect to any
obligation payable on demand), any item constituting Senior Debt, or
(iii) any event shall occur or condition shall exist and shall continue
for more than the period of grace, if any, applicable thereto and shall
have the effect of causing, or permitting the Senior Creditor or any
subsequent holder of Senior Debt to cause, any item of Senior Debt to
become due prior to its stated maturity or to realize upon any
collateral given as security therefor.
"Junior Creditor" shall mean each of Aura Ceramics, Inc. and
Aura Systems, Inc., and any successor thereto (including a
debtor-in-possession under the Bankruptcy Code), assignee, receiver,
trustee or estate thereof, jointly and severally.
"Permitted Payments" shall have the meaning given in Section 3 below.
"Person" shall mean an individual, corporation, association,
partnership, limited partnership, trust, organization, individual or
government or any governmental agency or any political subdivision
thereof.
"Senior Creditor" shall mean Excel Bank, and its successors
and its assignees with respect to any of the Senior Debt.
"Senior Debt" shall mean all liabilities and obligations of
the Borrower to the Senior Creditor howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising or incurred,
including, without limitation, all of the Borrower's obligations to the
Senior Creditor under the Credit Agreement and any note or notes
executed by the Borrower thereunder, and all other obligations under
any other agreement between the Borrower and the Senior Creditor now or
hereafter in effect, and also including, without limitation, any and
all interest accruing on any of the Senior Debt after the commencement
of any proceedings referred to in Section 5 below, notwithstanding any
provision or rule of law which might restrict the rights of the Senior
Creditor, as against the Borrower or anyone else, to collect such
interest.
"Subordinated Debt" shall mean all obligations, liabilities
and indebtedness of the Borrower to the Junior Creditor, howsoever
arising or evidenced, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising or
incurred, under any written or unwritten agreement, including, without
limitation, the Subordinated Agreements.
"Subordinated Agreements" shall have the meaning given to such
term in Recital A above, and shall include any amendments,
modifications, substitutions or restatements thereto or thereof and any
note or agreement hereafter entered into in replacement thereof (but
nothing in this definition shall be deemed to waive the provisions of
Section 11 below requiring the Senior Creditor's prior written consent
to any change in any instrument or agreement evidencing Subordinated
Debt).
(b) In this Agreement, in the computation of a period of time
from a specified date to a later specified date, unless otherwise
stated the word "from" means "from and including" and the word "to" or
"until" each means "to but excluding."
(c) Other terms may be defined in other parts of this
Agreement. All references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments
thereto or changes therein entered into in accordance with their
respective terms, and all references to Persons shall be deemed to
include their permitted successors and assigns. Unless the context in
which used herein otherwise clearly requires, "or" has the inclusive
meaning represented by the phrase "and/or." All incorporations by
reference of covenants, terms, definitions or other provisions from
other agreements are incorporated into this Agreement as if such
provisions were fully set forth herein, and include all necessary
information and related provisions from such other agreements, and all
such covenants, terms, definitions or other provisions from other
agreements incorporated into this Agreement by reference shall survive
any termination of such other agreements until the Senior Debt has been
paid in full and all financing arrangements between the Borrower and
the Senior Creditor shall have been terminated.
Section 2. Standby; Subordination. The payment and performance of the
Subordinated Debt is hereby subordinated to the payment and performance in full
of the Senior Debt, and, except as set forth in Section 3 below, the Junior
Creditor will not ask, demand, xxx for, take or receive from the Borrower or any
other Person liable for all or any part of the Senior Debt, by setoff or in any
other manner, the whole or any part of the Subordinated Debt, or any monies
which may now or hereafter be owing in respect of the Subordinated Debt (whether
such amounts represent principal or interest, or obligations which are due or
not due, direct or indirect, absolute or contingent), including, without
limitation, taking any security for any of the foregoing, or the taking of any
negotiable instrument therefor, unless and until all of the Senior Debt shall
have been fully paid and satisfied and all financing arrangements between the
Borrower and Senior Creditor have been terminated. The Junior Creditor warrants
and represents that the Subordinated Debt is unsecured and agrees that (a) the
Junior Creditor hereafter will not accept any security therefor from the
Borrower, or from any third Person for the benefit of the Borrower; and (b) in
the event the Junior Creditor does obtain any security for the Subordinated
Debt, (i) all liens and security interests of the Junior Creditor in any assets
of the Borrower or any assets securing the Senior Debt shall be and hereby are
subordinated to the rights and interests of the Senior Creditor, if any, in
those assets, (ii) the Junior Creditor shall have no right to possession of any
such assets or to foreclose upon any such assets, whether by judicial action or
otherwise, unless and until all the Senior Debt shall have been fully paid and
satisfied and all financing arrangements between the Borrower and Senior
Creditor have been terminated, and (iii) at the request of the Senior Creditor,
the Junior Creditor shall execute and deliver to the Senior Creditor such
termination statements and releases as the Senior Creditor shall reasonably
request to release the Junior Creditor's security interest in or lien against
such property. The Junior Creditor, prior to the payment in full and discharge
of the Senior Debt and the termination of all financing arrangements between the
Borrower and the Senior Creditor, shall have no right to enforce any claim with
respect to the Subordinated Debt, or to take any action against the Borrower or
the property of the Borrower or of any other Person liable for all or any part
of the Senior Debt for the benefit of the Borrower. The Junior Creditor
acknowledges and agrees that, to the extent the terms and provisions of this
Agreement are inconsistent with any agreement or understanding between the
Junior Creditor and the Borrower, such agreement or understanding shall be
subject to this Agreement.
Section 3. Permitted Payments. Notwithstanding the provisions of
Section 2 above, until the Senior Creditor gives the Junior Creditor written
notice (in the manner set forth below) of the occurrence of an Event of Default
or a Default, and provided that:
(i) there shall not then exist any breach of this
Agreement by the Junior Creditor which has not been
waived, in writing, by the Senior Creditor,
(ii) at the time of the payment described below no Event
of Default exists and is continuing,
(iii) the payment described below, if made, would not give
rise to the occurrence of any Event of Default, and
(iv) none of the events described in Section 5 has occurred,
the Borrower may pay to the Junior Creditor, and the Junior Creditor may accept
from the Borrower, interest and principal payments when due (without
acceleration) as provided in Section 2.4 of the Asset Purchase Agreement (the
"Permitted Payments").
Section 4. Subordinated Debt Owed Only to the Junior Creditor. The
Junior Creditor warrants and represents that the Junior Creditor has not
previously assigned any interest in the Subordinated Debt, that no other Person
owns an interest in the Subordinated Debt (whether as joint holders of
Subordinated Debt, participants or otherwise) and that the entire Subordinated
Debt is owing only to the Junior Creditor. The Junior Creditor further covenants
that the entire Subordinated Debt shall continue to be owing only to the Junior
Creditor unless it is assigned with the prior written consent of the Senior
Creditor to a Person who agrees with the Senior Creditor to be bound by the
subordination provisions set forth herein.
Section 5. Priority. In the event of (a) any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of the Borrower or the proceeds
thereof to the creditors of the Borrower or to their claims against the
Borrower, or (b) any readjustment of the debt or obligations of the Borrower,
whether by reason of liquidation, bankruptcy, arrangement, receivership,
assignment for the benefit of creditors or any other action or proceeding
involving the readjustment of all or any part of the Senior Debt or Subordinated
Debt, or the application of the assets of the Borrower to the payment or
liquidation thereof, or (c) the dissolution or other winding up of the business
of the Borrower, or (d) the sale of all or substantially all of the assets of
the Borrower, then, and in any such event, the Senior Creditor shall be entitled
to receive payment in full of all of the Senior Debt prior to the payment of all
or any part of the Subordinated Debt.
Section 6. Grant of Authority to Senior Creditor. In order to enable
the Senior Creditor to enforce its rights hereunder in any of the actions or
proceedings described in Section 5, the Senior Creditor is hereby irrevocably
authorized and empowered, in its discretion, to file and present for and on
behalf of the Junior Creditor such proofs of claims or other motions or
pleadings as the Senior Creditor may deem expedient or proper to establish the
Senior Creditor's entitlement of payment from, or on behalf of, the Junior
Creditor with respect to the Subordinated Debt and to vote such proofs of claims
in any such proceeding and to demand, xxx for, receive and collect any and all
dividends or other payments or disbursements made thereon in whatever form the
same may be paid or issued and to apply the same on account of any of the Senior
Debt. The Junior Creditor irrevocably authorizes and empowers the Senior
Creditor to demand, xxx for, collect and receive each of the payments and
distributions described in Section 5 above and give acquittance therefor and to
file claims and take such other actions, in the Senior Creditor's own name or in
the name of the Junior Creditor or otherwise, as the Senior Creditor may deem
necessary or advisable for the enforcement of this Agreement. To the extent that
payments of distributions are made in property other than cash, the Junior
Creditor authorizes the Senior Creditor to sell such property to such buyers and
on such terms as the Senior Creditor, in its sole discretion, shall determine.
The Junior Creditor will execute and deliver to the Senior Creditor such powers
of attorney, assignments and other instruments or documents, including
debentures (together with such assignments or endorsements as the Senior
Creditor shall deem necessary), as may be reasonably requested by the Senior
Creditor in order to enable the Senior Creditor to enforce any and all claims
upon or with respect to any or all of the Subordinated Debt and to collect and
receive any and all payments and distributions which may be payable or
deliverable at any time upon or with respect to the Subordinated Debt, all for
the Senior Creditor's own benefit.
Section 7. Payments Received by the Junior Creditor. Except for
Permitted Payments, if the Junior Creditor receives any payment or distribution
or security or instrument or proceeds thereof upon or with respect to the
Subordinated Debt prior to the payment in full of the Senior Debt and
termination of all financing arrangements between the Borrower and the Senior
Creditor, the Junior Creditor shall receive and hold the same in trust, as
trustee, for the benefit of the Senior Creditor and shall forthwith deliver the
same to the Senior Creditor in precisely the form received (except for the
endorsement or assignment by the Junior Creditor where necessary), for
application on any of the Senior Debt, due or not due and, until so delivered,
the same shall be held in trust by the Junior Creditor as the property of the
Senior Creditor. In the event of the failure of the Junior Creditor to make any
such endorsement or assignment to the Senior Creditor, the Senior Creditor, or
any of its officers or employees, is hereby irrevocably authorized to make the
same.
Section 8. Continuing Nature of Subordination. This Agreement shall be
effective and may not be terminated or otherwise revoked by the Junior Creditor
until the Senior Debt shall have been fully paid and discharged and all
financing arrangements between the Borrower and the Senior Creditor have been
terminated. This is a continuing agreement of subordination and the Senior
Creditor may continue, at any time and without notice to the Junior Creditor, to
extend credit or other financial accommodations and loan monies to or for the
benefit of the Borrower in reliance hereon. No obligation of the Junior Creditor
hereunder shall be affected by the dissolution, liquidation, death or incapacity
of, or written revocation by, the Junior Creditor or any other subordinated
party, pledgor, endorser, or guarantor, if any.
Section 9. Additional Agreements Between Senior Creditor and Borrower.
The Senior Creditor, at any time and from time to time, may enter into such
agreement or agreements with the Borrower as the Senior Creditor may deem
proper, increasing the amount of, extending the time of payment of or renewing
or otherwise altering the terms of all or any of the Senior Debt or affecting
any security underlying any or all of the Senior Debt, and may exchange, sell,
release, surrender or otherwise deal with any such security, without in any way
thereby impairing or affecting this Agreement.
Section 10. Bankruptcy Issues. If the Borrower becomes the subject of
proceedings under the Bankruptcy Code and if the Senior Creditor desires to
permit the use of cash collateral or to provide financing to the Borrower under
either Section 363 or Section 364 of the Bankruptcy Code, the Junior Creditor
agrees that adequate notice of such financing to the Junior Creditor, if
required under applicable law, shall have been provided if the Junior Creditor
receives notice two (2) business days prior to entry of any order approving such
cash collateral usage or financing. Notice of a proposed financing or use of
cash collateral shall be deemed given upon the sending of such notice to the
Junior Creditor in the manner specified in Section 16, below. All allocations of
payments between the Senior Creditor and the Junior Creditor shall continue to
be made after the filing of a petition under the Bankruptcy Code on the basis
provided in this Agreement. In the event that the Junior Creditor at any time
acquires any security for the Subordinated Debt, the Junior Creditor agrees not
to assert any right the Junior Creditor may have to "adequate protection" of the
Junior Creditor's interest in such security in any Bankruptcy proceeding, or to
seek to have the Junior Creditor's claims in such Bankruptcy proceeding treated
as "secured claims" under Section 506(a) of the Bankruptcy Code, without the
prior written consent of the Senior Creditor. The Junior Creditor waives any
claim the Junior Creditor may now or hereafter have against the Senior Creditor
arising out of the Senior Creditor's election, in any proceeding instituted
under Chapter 11 of the Bankruptcy Code, of the application of Section
1111(b)(2) of the Bankruptcy Code, and/or any borrowing or grant of a security
interest under Section 364 of the Bankruptcy Code by the Borrower, as debtor in
possession, or by a trustee. To the extent that the Senior Creditor receives
payments on, or proceeds of any collateral for, the Senior Debt which are
subsequently avoided, invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any Bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the Senior Debt, or
part thereof, intended to be satisfied shall be revived and continue in full
force and effect as if such payments or proceeds had not been received by the
Senior Creditor.
Section 11. Instrument Legend; No Amendments to Subordinated
Instruments. Any agreement or instrument evidencing the Subordinated Debt, or
any portion thereof, which has been or is hereafter executed by the Borrower
will, on the date hereof or the date of execution, be inscribed with a legend
conspicuously indicating that payment thereof is subordinated to the claims of
the Senior Creditor pursuant to the terms of this Agreement. The original of any
such agreement or instrument will be delivered to the Senior Creditor within
five (5) Business Days after the date hereof or the date of its execution. The
Junior Creditor will not agree to any amendment, restatement or other
modification of any such instrument or agreement or any other agreement or
document evidencing the Subordinated Debt, including, without limitation, the
Asset Purchase Agreement and the other Subordinated Agreements, without the
prior written consent of the Senior Creditor.
Section 12. Waivers. The Senior Debt shall be deemed to have been made
or incurred in reliance upon this Agreement. The Junior Creditor expressly
waives all notice of the acceptance by the Senior Creditor of the subordination
and other provisions of this Agreement and all other notices not specifically
required pursuant to the terms of this Agreement whatsoever, and the Junior
Creditor expressly waives reliance by the Senior Creditor upon the subordination
and other agreements as herein provided. The Junior Creditor agrees that the
Senior Creditor has made no warranties or representations with respect to the
due execution, legality, validity, completeness or enforceability of the Credit
Agreement, or the collectability of the Senior Debt, and that the Senior
Creditor shall be entitled to manage and supervise its loans and other financial
accommodations to the Borrower without regard to the existence of any rights
that the Junior Creditor may now or hereafter have in or to any of the assets of
the Borrower. The Junior Creditor agrees that the Senior Creditor shall have no
liability to the Junior Creditor for, and waives any claim which the Junior
Creditor may now or hereafter have against, the Senior Creditor arising out of
any and all actions which the Senior Creditor in good faith takes or omits to
take (including, without limitation, actions with respect to any security for
the Senior Debt, actions with respect to the occurrence of an Event of Default,
actions with respect to the foreclosure upon, sale, release, or depreciation of,
or failure to realize upon, any security for the Senior Debt and actions with
respect to the collection of any claim for all or any part of the Senior Debt
from any guarantor or other party) with respect to or any other agreement
related to any Senior Debt or to the collection of the Senior Debt or the
valuation, use, protection or release of any security for the Senior Debt.
Section 13. Senior Creditor's Waivers. No waiver shall be deemed to be
made by the Senior Creditor of any of its rights hereunder unless the same shall
be in writing signed on behalf of the Senior Creditor, and each waiver, if any,
shall be a waiver only with respect to the specific instance involved and shall
in no way impair the rights of the Senior Creditor or the obligations of the
Junior Creditor to the Senior Creditor in any other respect at any other time.
Section 14. Financial Condition of Borrower; Other Actions by the
Senior Creditor. The Junior Creditor hereby assumes responsibility for keeping
informed of the financial condition of the Borrower, any and all endorsers and
any and all guarantors of the Subordinated Debt and of all other circumstances
bearing upon the risk of nonpayment of the Senior Debt and/or the Subordinated
Debt that diligent inquiry would reveal. The Junior Creditor hereby agrees that
the Senior Creditor shall have no duty to advise the Junior Creditor of
information known to the Senior Creditor regarding such condition or any such
circumstances. In the event the Senior Creditor, in its sole discretion,
undertakes, at any time or from time to time, to provide any such information to
the Junior Creditor, the Senior Creditor shall be under no obligation (i) to
provide any such information to the Junior Creditor on any subsequent occasion,
(ii) to undertake any investigation not a part of its regular business routine,
or (iii) to disclose any information which, pursuant to its usual practices, the
Senior Creditor wishes to maintain confidential. The Junior Creditor hereby
agrees that all payments received by the Senior Creditor may be applied, in
whole or in part, to any of the Senior Debt, as the Senior Creditor, in its sole
discretion, deems appropriate and assents to any extension or postponement of
the time of payment of the Senior Debt or to any other indulgence with respect
thereto, to any substitution, exchange or release of collateral which may at any
time secure the Senior Debt and to the addition or release of any other Person
primarily or secondarily liable therefor.
Section 15. Subrogation. When the Senior Debt shall have been fully
paid and discharged and all financing arrangements between the Borrower and the
Senior Creditor have been terminated, the Junior Creditor shall be subrogated to
the rights of the Senior Creditor to receive payments or distribution of assets
of the Borrower made on such Senior Debt until the principal of and premium, if
any, and interest on (and any other amounts due with respect to) the
Subordinated Debt shall be paid in full. For the purposes of such subrogation,
no payments or distributions to the Senior Creditor of any cash, property or
securities to which the Junior Creditor would be entitled except for these
provisions shall, as between the Borrower, its creditors other than the Senior
Creditor, and the Junior Creditor, be deemed to be a payment by the Borrower to
or on account of Senior Debt, it being understood that these provisions in this
Section are used, and are intended, solely for the purpose of defining the
relative rights of the Junior Creditor, on the one hand, and the Senior
Creditor, on the other hand.
Section 16. Notices. All communications and notices provided under this
Agreement to any party shall be given in writing by manual delivery, facsimile
transmission, overnight courier or United States first class mail to such
party's address shown on the signature page hereof, or to any party at such
other address as may be designated by such party in a notice to the other
parties. All periods of notice shall be measured from the date of delivery
thereof if manually delivered, from the date of sending if sent by facsimile
transmission, from the first business day after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed.
Section 17. Governing Law and Construction. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES
THEREOF.
Section 18. Consent to Jurisdiction. AT THE OPTION OF THE SENIOR
CREDITOR, THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE JUNIOR CREDITOR CONSENTS TO
THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE
IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE JUNIOR CREDITOR COMMENCES ANY
ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE SENIOR CREDITOR AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED
TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER
CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 19. Waiver of Jury Trial. THE JUNIOR CREDITOR, AND THE SENIOR
CREDITOR BY ITS ACCEPTANCE HEREOF, IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY CREDIT
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 20. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 21. Miscellaneous.
(a) This Agreement and the terms, covenants and conditions
hereof shall inure to the benefit of the Senior Creditor and its
successors and assigns. Nothing contained in this Agreement, expressed
or implied, is intended to confer upon any Person other than the
parties hereto and thereto any rights, remedies, obligations or
liabilities hereunder or thereunder.
(b) This Agreement sets forth the entire understanding of the
parties hereto relating to the subject matter hereof, and all prior
understandings and negotiations, written or oral, are merged into and
superseded by this Agreement. Any modification, amendment or waiver of
this Agreement or any provision herein shall be binding upon the Senior
Creditor only if contained in a writing signed by or on behalf of the
Senior Creditor. No failure on the part of the Senior Creditor to
exercise and no delay in exercising any power or right hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise
of any power or right preclude any other or further exercise thereof or
the exercise of any other power or right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.
(c) The Junior Creditor hereby acknowledges that (i) it has
been advised by counsel in the negotiation, execution and delivery of
this Agreement, (ii) the Senior Creditor has no fiduciary relationship
to the Junior Creditor, and (iii) no joint venture exists between the
Junior Creditor and the Senior Creditor.
(d) The section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
(e) All covenants, agreements, representations and warranties
made in this Agreement and in any certificates or other papers
delivered by or on behalf of the Junior Creditor pursuant hereto shall
be deemed to have been relied upon by the Senior Creditor and shall
survive the execution and delivery of this Agreement, and shall
continue in full force and effect so long as any Senior Debt remains
outstanding and unpaid or any financing arrangement between the
Borrower and the Senior Creditor remains in effect. All statements of
fact relating to the Junior Creditor contained in any certificate or
other paper delivered to the Senior Creditor at any time after the date
hereof by or on behalf of the Junior Creditor pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the undersigned hereunder.
(f) This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart.
(The signature page follows.)
IN WITNESS WHEREOF, this Subordination Agreement has been signed as of
the date first set forth above.
AURA CERAMICS, INC.
By_________________________________
Its:_____________________________
AURA SYSTEMS, INC.
By_________________________________
Its:_____________________________
Address for Notice:
Aura Systems, Inc.
Aura Ceramics, Inc.
Xxxxxxx X. Froch
Office of the General Counsel
0000 Xxxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
EXCEL BANK
By_________________________________
Its:_____________________________
Address for Notice:
Excel Bank
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxxxx
Fax: (000) 000-0000
ACCEPTANCE AND ACKNOWLEDGMENT
The Borrower named above hereby accepts, and acknowledges receipt of a
copy of, the foregoing Subordination Agreement and agrees that it will not pay
any of the "Subordinated Debt" (as defined in the foregoing Agreement) or grant
any security therefor, except as the foregoing Agreement provides.
ALPHA CERAMICS, INC.
By_________________________________
Its:_____________________________
