Unassociated Document


    LOAN
      AGREEMENT

     

    THIS
      LOAN
      AGREEMENT (this “Agreement”),
      is
      executed as of January 29, 2007, by and between AuraSound, Inc. a California
      corporation (the “Company”),
      and
      Westrec Properties Inc. & Affiliated Companies 401(k) Plan (the
      “Lender”).

     

    WHEREAS,
      the Company is preparing to conduct a private placement offering (the
“Private
      Placement”)
      simultaneously with a reverse triangular merger (the “Merger”)
      with
      and into a wholly-owned subsidiary of a publicly traded company, whereby the
      Company will survive such Merger;

     

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

     

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

     

    WHEREAS,
      the Loan (as defined below) will be secured by all the assets of the Company
      pursuant to the terms of a Security Agreement, dated as of the date hereof
      (the
“Security
      Agreement”);

     

    WHEREAS,
      the Company and Mapleridge Insurance Services, a California S corporation
      (“Mapleridge”),
      have
      entered into a Loan Agreement dated as of December 29, 2006 (the “Mapleridge
      Loan Agreement”;
      and
      together with any note, security agreement, warrant, riders, addenda or other
      documents or agreements entered into in connection therewith, the “Mapleridge
      Loan Documents”);
      and

     

    WHEREAS,
      pursuant to the terms and conditions of the Mapleridge Loan Documents, the
      Company has granted to Mapleridge, a security interest in all personal property
      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 national banks
      in the United States are authorized or required by law to close.

     

    “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 eleven and three-quarters percent (11.75%)
      per
      annum, or (b) twenty percent (20.00%) per annum, in each case compounded
      annually. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    “Interest
      Rate”
shall
      mean 10.00% compounded annually.

     

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

     

    “Maturity
      Date”
has
      the
      meaning set forth in Section 2 of the Note.

     

    “Note”
has
      the
      meaning set forth in Section 2.1 of this Agreement.

     

    “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. 

     

    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 at the Interest Rate, or if and
      as
      applicable, at the Default Rate. Notwithstanding anything to the contrary
      herein, in no event shall the Interest Rate be less than 10.00% 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 Maturity Date.
      

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    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 before 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)  The
      Company shall have duly authorized, executed, and delivered to the Lender the
      Security Agreement, in the form attached hereto as Exhibit B,
      to
      secure the repayment of the Loan and granting the Lender a continuing security
      interest in all presently existing and hereafter acquired assets and property
      of
      the Company of whatever nature and wherever located, which security interest
      shall be senior to all other security interests or encumbrances against the
      assets and property of the Company, provided, however, that such security
      interest shall be pari
      passu
      to the
      security interest granted by the Company to Mapleridge.

     

    (c)  The
      Lender shall have received an Officer’s Certificate in the form attached hereto
      as Exhibit C,
      dated
      as of the Loan Closing Date. 

     

    (d)  The
      Lender shall have received executed originals of that certain Guaranty executed
      by Arthur Liu in favor of the Lender, in the form attached hereto as
Exhibit
      D.
      

     

    (e)  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 the Lender.

     

    (f)  There
      shall exist no material default in any of the Company’s obligations under any
      contract or agreement.

     

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

     

    (h)  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 in the form of a signed engagement letter.

     

    (i)  The
      Lender shall have received an executed original of the “Intercreditor
      Agreement”,
      in the
      form attached hereto as Exhibit
      E.
      

     

    (j)  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 this Agreement, the Note, and the Security
      Agreement. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    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,
      the Note, and the Security Agreement. The execution and delivery of this
      Agreement, the Note, and the Security Agreement 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, the Note and the Security Agreement. 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, the Note and the Security Agreement,
      to
      make the borrowings as provided herein, and to perform all of its duties and
      obligations under this Agreement, the Note and the Security Agreement.


     

    4.3  Enforceability.
      Each of
      this Agreement, the Note, and the Security Agreement 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 (including securities
      convertible into 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.
      Other
      than as described on Schedule
      B-1,
      the
      execution, delivery and performance by the Company of this Agreement, the Note,
      and the Security Agreement, 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
      are subject, or any judgment, order, writ, decree, authorization, license,
      rule,
      regulation, or statute to which the Company is subject.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    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 or omits to state any
      material fact. 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 are complete and correct, 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. Except as set forth in the balance sheet as of September 30, 2006
      included in such financial statements, or incurred in the ordinary course of
      business since September 30, 2006, or incurred pursuant to the Mapleridge Loan
      Documents, the Company has no indebtedness, obligation or liability, absolute,
      accrued, contingent or otherwise, and there has been no material adverse change
      in the condition (financial or otherwise), results of operations, assets,
      properties or prospects of the Company. The
      Company’s financial projections, delivered to the Lender, were prepared in good
      faith and in the ordinary course of the Company’s business using principles
      consistent with projections generated by the Company in the past for prior
      periods.

     

    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.

     

    4.12  Lender
      Security Interest.
      Assuming the filing of the Lender’s Form UCC-1 Financing Statement with the
      California Secretary of State’s Office on or prior to the date hereof, the
      Lender holds a perfected security interest in the Collateral (as defined in
      the
      Security Agreement).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    4.13  All
      Documents.
      The
      agreements listed on Schedule
      B-2
      constitute all agreements that are presently in effect respecting loans made
      to
      the Company, and indebtedness guaranteed by Arthur Liu.

     

    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)  create,
      incur, assume or suffer to exist, without the Lender’s prior written consent,
      which consent the Lender may withhold in its sole and absolute discretion,
      any
      secured indebtedness (other than that existing on the Loan Closing Date) or
      any
      other indebtedness (other than trade payables arising in the Company’s ordinary
      course of business) that is in any way senior or superior to this Agreement
      or
      the indebtedness represented hereby;

     

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

     

    (c)  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)  engage
      in
      any business other than the business conducted by the Company on the Loan
      Closing Date;

     

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

     

    (f)  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;

     

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

     

    (h)  increase
      the principal amount of the Company’s obligations to Mapleridge; or

     

    (i)  subject
      to the Intercreditor Agreement, voluntarily prepay in whole or in part, or
      modify, any indebtedness outstanding on the Loan Closing Date, prior to the
      repayment of the Note in full.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    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. 

     

    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 ten days after the end of each fiscal month and within
      thirty days of the end of each fiscal quarter, (i) 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; (ii) a statement of
      any
      litigation or legal action pending or threatened against the Company certified
      as true and correct by the Company’s Chief Executive Officer; and (iii) such
      other reports as the Lender may reasonably request.

     

    (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 Collateral and the financial records of the Company; 

     

    (f)  provide
      the Lender with copies of all minutes of any meeting of the Board of Directors
      of the Company promptly after they become available, but in no event more than
      four days after the date of any meeting; and

     

    (g)  if
      the
      Company fails to complete the Merger within one hundred twenty (120) days of
      the
      Loan Closing Date, permit
      a
      representative of the Lender to attend all meetings of the Board of Directors
      of
      the Company, without any right to vote at such meetings.  

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    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,
      the Note or the Security Agreement, which, if capable of being cured, is not
      cured within three 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, the Note
      or
      the Security Agreement, whether on or after the Maturity Date, by acceleration
      or otherwise; or 

     

    (c)  the
      (i)
      application for the appointment of a receiver or custodian for the Company
      or
      the property of the Company, (ii) 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) assignment for the benefit of creditors
      by or against the Company, or (iv) Company becomes insolvent.

     

    6.2  Effect
      of Default.
      Upon
      the occurrence of any Event of Default the Default Rate shall apply as set
      forth
      in Section 8.7 of the Note. In addition, 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 take any or all of the
      following actions: (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 or the Security Agreement 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, and subject to the Intercreditor Agreement, during the occurrence
      of
      any Event of Default, the Company shall not pay or make any payment on any
      other
      outstanding indebtedness of the Company.

     

    ARTICLE
      7

    [Intentionally
      Omitted]

     

    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. Furthermore,
      although this Agreement, the Note and the Security Agreement 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. The Company agrees that: (a) each holder of a participation interest
      will be entitled to rely on the terms of this Agreement, the Note and the
      Security Agreement 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

        
          

        

      

      
        
        

      

    

     

    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.

     

    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 the Company, to:

              Arthur
                Liu

              AuraSound,
                Inc.

              11839
                East Smith Ave

              Santa
                Fe Springs, CA 90670

              Fax:
                (562) 447-1788

               

            
	 	
              with
                a copy to:

              Kevin
                Friedmann

              Richardson
                & Patel, LLP

              The
                Chrysler Building 

              405
                Lexington Avenue, 26th Floor 

              New
                York, NY 10174

              Fax:
                (212) 907-6687

               

            
	 	
              if
                to the Lender, to:

              Westrec
                Properties Inc. & Affiliated Companies 401(k) Plan

              Att:
                Michael Sachs

              16633
                Ventura Blvd., 6th Floor

              Encino,
                CA  91436

              Fax:
                (818) 907-1104

               

            
	 	
              with
                a copy to:

              Heller
                Ehrman LLP

              333
                Hope Street, 39th
                Floor

              Los
                Angeles, CA 90071

              Att:
                Steven O. Weise, Esq.

              Fax:
                (213) 614-1868

            


    

     

    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).

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    8.4  Governing
      Law.
      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.

     

    8.5  Waiver
      and Amendment.
      No term
      of this Agreement may be amended, waived or modified without the prior written
      consent of both 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.


     

    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).

     

    8.8  Integration.
      This
      Agreement, along with the Note and the Security Agreement, 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.

     

    8.9 Prevailing
      Party.
      If
      either party hereto brings any legal suit, action or proceeding against another
      party arising out of, relating to, or concerning the interpretation or the
      enforcement of rights and duties hereunder or any transaction related hereto
      (collectively, an “Action”),
      the
      losing party shall pay to the prevailing party a reasonable sum for attorneys’
fees and shall reimburse all costs (whether or not such costs are otherwise
      recoverable under the provisions of the California Code of Civil Procedure
      or
      other statutory law of California or any other jurisdiction) incurred in
      connection with the prosecution or defense of such Action and/or enforcement
      of
      any judgment, order, ruling or award granted therein, all of which shall be
      deemed to have accrued on the commencement of such Action and shall be paid
      whether or not such Action is prosecuted to a judgment, order, ruling or award.
      “Prevailing
      Party”
within
      the meaning of this Section includes, without limitation, a party that agrees
      to
      dismiss an Action on the other party’s payment of some or all sums allegedly due
      or performance of some or all of the covenants allegedly breached, or which
      obtains substantially the relief sought by it.

     

    [Signature
      page follows]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the Company and the Lender have caused this Loan Agreement
      to
      be signed in their respective names on the date first set forth
      above.

     

    


    
      	
              AURASOUND,
                INC.

               

               

               

              By:/s/
                Arthur Liu_____________

              Arthur
                Liu

              President

            	
              WESTREC
                PROPERTIES INC. & 

              AFFILIATED
                COMPANIES 401(K) PLAN

               

               

              By:/s/
                Michael M. Sachs___________

              Michael
                M. Sachs, its Trustee

            


    

    


     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    SCHEDULE A

    CAPITALIZATION
      OF THE COMPANY

     

    
      
        	 	 	 	 	 	 	 	 
	
                AuraSound
                  Capitalization Table

              	 	 	 	 	 	 	 
	 	 	
                 

              	
                 

              	
                Issued

              	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                Outstanding
                  Shares

              	
                 

              	
                Options/Warrants

              	
                 

              	
                 TOTAL

              	 
	
                Pre-Offering
                  Shareholders

              	 	 	 	 	 	 	 
	
                Arthur
                  Liu

              	 	 	
                10,647,071

              	 	 	
                -

              	 	 	
                10,647,071

              	 
	
                Zvi
                  Kurtzman

              	 	 	
                824,319

              	 	 	
                -

              	 	 	
                824,319

              	 
	
                Steve
                  Veen

              	 	 	
                368,412

              	 	 	
                -

              	 	 	
                368,412

              	 
	
                Hazlaut
                  Investment

              	 	 	
                354,241

              	 	 	
                -

              	 	 	
                354,241

              	 
	
                Art
                  Schwartz

              	 	 	
                240,883

              	 	 	
                -

              	 	 	
                240,883

              	 
	
                Warren
                  Braslow

              	 	 	
                212,544

              	 	 	
                -

              	 	 	
                212,544

              	 
	
                Cipora
                  Lavut

              	 	 	
                184,205

              	 	 	
                -

              	 	 	
                184,205

              	 
	
                Neal
                  Kaufman

              	 	 	
                174,995

              	 	 	
                -

              	 	 	
                174,995

              	 
	
                Melvin
                  Gagerman

              	 	 	
                143,114

              	 	 	
                -

              	 	 	
                143,114

              	 
	
                Maurice
                  Zeitlin

              	 	 	
                141,696

              	 	 	
                -

              	 	 	
                141,696

              	 
	
                Jeanette
                  Avery

              	 	 	
                69,077

              	 	 	
                -

              	 	 	
                69,077

              	 
	
                Gemel

              	 	 	
                68,014

              	 	 	
                -

              	 	 	
                68,014

              	 
	
                TOTAL

              	 	 	
                13,428,571

              	 	 	
                -

              	 	 	
                13,428,571

              	 


      


       

      
        
          
          

        

        
          
            Schedule
              A

          

          
            

          

        

        
          
          

        

      

    

     

    SCHEDULE
      B-1

    AGREEMENTS
      REQUIRING CONSENT

    


     

    1. That
      certain Loan Agreement dated December 29, 2005, together with any note, security
      agreement, warrant, riders, addenda or other documents or agreements entered
      into in connection therewith. 

     

     

     

     

     

     

    
      
        
        

      

      
        
          Schedule
            B-1

        

        
          

        

      

      
        
        

      

    



    SCHEDULE
      B-2

    LIST
      OF ALL AGREEMENTS PRESENTLY IN EFFECT 

    RESPECTING
      LOANS MADE TO THE COMPANY AND INDEBTEDNESS GUARANTEED BY ARTHUR
      LIU

    


    


    1. That
      certain Loan Agreement dated December 29, 2005, together with any note, security
      agreement, warrant, riders, addenda or other documents or agreements entered
      into in connection therewith. 

     

    2. That
      certain Guaranty Agreement dated December 29, 2007 [sic,
      should
      read “2006”], made by Arthur Liu in favor of Mapleridge Insurance
      Services.

    


     

     

     

    
      
        
        

      

      
        
          Schedule
            B-2

        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT A

    PROMISSORY
      NOTE

    


     

    


     

    See
      attached.

     

    


    


    
      
        
        

      

      
        
          Exh
            A

        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT B

    SECURITY
      AGREEMENT BETWEEN 

    THE
      LENDER AND THE COMPANY

     

    


     

    See
      attached.

     

    


    


    


    
      
        
        

      

      
        
          Exh
            B

        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT C

    OFFICER’S
      CERTIFICATE

     

    See
      attached.

     

     

     

     

     

    
      
        
        

      

      
        
          Exh
            C

        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      D

    GUARANTY
      OF ARTHUR LIU

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        
          Exh
            D

        

        
          

        

      

      
        
        

      

    

     

     

    EXHIBIT
      E

    INTERCREDITOR
      AGREEMENT

    


    


    See
      attached.

    


    


    


    


    


    


    


    


    


    
      
        
        

      

      
        
          Exh
            E