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GUARANTY
 
This Guaranty (the “Guaranty”) is made this [____] day of [_________] 20[__], by
such guarantors listed on the signature pages hereof (collectively, jointly and
severally, “Guarantors,” and each, individually, a “Guarantor”), in favor of
[_______________] (together with its successors, assigns, endorsees and
transferees, “Buyer”).
 
RECITALS

WHEREAS, pursuant to that certain Securities Purchase Agreement dated as of
September 26, 2011 (as amended, restated, supplemented, or otherwise modified
from time to time, including all schedules thereto, the “Securities Purchase
Agreement”) by and among Aura Systems, Inc., a Delaware corporation (“Parent”),
Buyer and each of the other investors listed on the Schedule of Buyers attached
thereto (together with Buyer, “Buyers”), Parent sold, and Buyers each purchased,
severally and not jointly, certain Notes and Warrants; and
 
WHEREAS, each Guarantor is a direct or indirect wholly-owned Subsidiary of
Parent and has derived and will continue to derive substantial direct and
indirect benefits from the purchase by Buyers of the Notes and Warrants; and
 
WHEREAS, in order for Parent to comply with its obligations under the Notes,
Guarantors have agreed to jointly and severally guaranty all of Parent’s
obligations under and with respect to the Notes, the Securities Purchase
Agreement and the other Transaction Documents; and
 
WHEREAS, in connection herewith, Guarantors have joined and became party to that
certain Security Agreement previously entered into by Parent and Buyers dated as
of September 26, 2011 (as amended, restated, supplemented, or otherwise modified
from time to time, including all schedules thereto, the “Security Agreement”),
pursuant to which Guarantors and Parent (Guarantors and Parent, collectively,
“Obligors” and each, individually, an “Obligor”) have granted each of the Buyers
continuing security interests in all assets of each Obligor, as more fully set
forth in the Security Agreement.
 
AGREEMENTS
 
NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, each Guarantor hereby agrees as follows:
 
1. Definitions
 
. All capitalized terms used herein that are not otherwise defined herein shall
have the meanings given them in the Security Agreement.
 
2. Guaranteed Obligations
 
. Guarantors jointly and severally hereby irrevocably and unconditionally
guaranty to Buyer the due and punctual Satisfaction in Full of the Guaranteed
Obligations (as defined below). “Guaranteed Obligations” means, collectively,
all of the present and future payment and performance obligations of each
Obligor arising under the
 

 
 

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3. Securities Purchase Agreement, any and all Notes payable to Buyer, the
Security Agreement and the other Transaction Documents, including, without
limitation, attorneys’ fees and expenses and any interest, fees, or expenses
that accrue after the filing of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any Insolvency
Proceeding.
 
4. Guarantors’ Representations and Warranties
 
. Each Guarantor represents and warrants to Buyer that such Guarantor expects to
derive substantial benefits from the purchase by Buyers of the Notes and
Warrants and the other transactions contemplated hereby and by the other
Transaction Documents. Buyer may rely conclusively on a continuing warranty,
hereby made, that such Guarantor continues to be benefited by this Guaranty and
Buyer shall have no duty to inquire into or confirm the receipt of any such
benefits, and this Guaranty shall be effective and enforceable by Buyer without
regard to the receipt, nature or value of any such benefits.
 
5. Unconditional Nature
 
1. . No act or thing need occur to establish any Guarantor’s liability
hereunder, and no act or thing, except Satisfaction in Full of the Guaranteed
Obligations (as defined below), shall in any way exonerate any Guarantor
hereunder or modify, reduce, limit or release any Guarantor’s liability
hereunder. This is an absolute, unconditional and continuing guaranty of payment
of the Guaranteed Obligations and shall continue to be in force and be binding
upon each Guarantor until Satisfaction in Full of the Guaranteed Obligations.
Each Guarantor agrees that this Guaranty is a guaranty of Satisfaction in Full
of the Guaranteed Obligations and not of collection, and that its obligations
under this Guaranty shall be primary, absolute and unconditional.  In addition
to the terms set forth herein, it is expressly understood and agreed that, if,
at maturity and at any time during the continuance of an Event of Default, the
outstanding amount of the Guaranteed Obligations under the Transaction Documents
(including, without limitation, all accrued interest thereon, all accrued late
charges thereon and all premiums due in respect thereof) is declared to be
immediately due and payable, then Guarantors shall, upon notice of such
acceleration, without further demand, pay to Buyer the entire outstanding
Guaranteed Obligations due and owing to Buyer.
 
6. Subrogation
 
. No Guarantor will exercise or enforce any right of contribution,
reimbursement, recourse or subrogation available to such Guarantor as to any of
the Guaranteed Obligations, or against any Person liable therefor, or as to any
collateral security therefor, unless and until Satisfaction in Full of the
Guaranteed Obligations.
 
7. Enforcement Expenses
 
. Each Guarantor shall pay or reimburse Buyer for all costs, expenses and
attorneys’ fees paid or incurred by Buyer in endeavoring to collect and enforce
the Guaranteed Obligations and in enforcing this Guaranty.
 
8. Obligations Absolute
 
.  Each Guarantor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than Satisfaction in Full of the Guaranteed Obligations. In
furtherance of the foregoing and without limiting the generality thereof, each
Guarantor agrees that none of its obligations hereunder shall be affected or
impaired by any of the following acts or things (which Buyer is expressly
authorized to do, omit or suffer from time to time, without consent or approval
by or notice to
 

 
 

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9. any Guarantor): (a) any acceptance of collateral security, guarantors,
accommodation parties or sureties for any or all of the Guaranteed Obligations;
(b) one or more extensions or renewals of the Guaranteed Obligations (whether or
not for longer than the original period) or any modification of the interest
rates, maturities, if any, or other contractual terms applicable to any of the
Guaranteed Obligations or any amendment or modification of any of the terms or
provisions of any of the Transaction Documents; (c) any waiver or indulgence
granted to Parent or any other Obligor, any delay or lack of diligence in the
enforcement of the Guaranteed Obligations, or any failure to institute
proceedings, file a claim, give any required notices or otherwise protect any of
the Guaranteed Obligations; (d) any full or partial release of, compromise or
settlement with, or agreement not to sue, Parent, any other Obligor or any other
Person liable in respect of any of the Guaranteed Obligations; (e) any release,
surrender, cancellation or other discharge of any evidence of the Guaranteed
Obligations or the acceptance of any instrument in renewal or substitution
therefor; (f) any failure to obtain collateral security (including rights of
setoff) for the Guaranteed Obligations, or to see to the proper or sufficient
creation and perfection thereof, or to establish the priority thereof, or to
preserve, protect, insure, care for, exercise or enforce any collateral
security; or any modification, alteration, substitution, exchange, surrender,
cancellation, termination, release or other change, impairment, limitation, loss
or discharge of any collateral security; (g) any collection, sale, lease or
disposition of, or any other foreclosure or enforcement of or realization on,
any collateral security; (h) any assignment, pledge or other transfer of any of
the Guaranteed Obligations or any evidence thereof; (i) any manner, order or
method of application of any payments or credits upon the Guaranteed Obligations
or (j) Buyer not being a Permitted Secured Party. Each Guarantor waives any and
all defenses and discharges available to a surety, guarantor or accommodation
co-obligor.
 
10. Waivers by Guarantors
 
.  Each Guarantor waives any and all defenses, claims, setoffs and discharges
of, and/or against, Parent, or any other Obligor or Person (including, without
limitation, Buyer), pertaining to the Guaranteed Obligations, except the defense
of discharge by indefeasible satisfaction and discharge in full.  Without
limiting the generality of the foregoing, no Guarantor will assert, plead or
enforce against any Buyer any defense of waiver, release, discharge or
disallowance in any Insolvency Proceeding, statute of limitations, res judicata,
statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury,
illegality or unenforceability which may be available to Parent or any other
Obligor or Person liable in respect of any of the Guaranteed Obligations, or any
setoff available to any Buyer against Parent or any other such Obligor or
Person, whether or not on account of a related transaction. Each Guarantor
expressly agrees that such Guarantor shall be and remain liable for any
deficiency remaining after foreclosure of any mortgage or security interest
securing the Guaranteed Obligations, whether or not the liability of Parent or
any other Obligor or Person for such deficiency is discharged pursuant to
statute or judicial decision.  The liability of each Guarantor shall not be
affected or impaired by, and each Guarantor waives and agrees it shall not at
any time insist upon, plead or in any manner claim or take the benefit of, any
voluntary or involuntary liquidation, dissolution, sale or other disposition of
all or substantially all of the assets, marshalling of assets and liabilities,
any valuation, appraisal, stay, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition or
readjustment of, or other similar event or proceeding affecting, Parent or any
of its assets.  No Guarantor will assert, plead or enforce against any Buyer any
claim, defense or setoff available to such Guarantor against Parent.  Each
Guarantor waives presentment, demand for payment, notice of dishonor or
nonpayment and protest of any instrument evidencing the
 

 
 

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11. Guaranteed Obligations. Buyer shall not be required first to resort for
payment of the Guaranteed Obligations to Parent or any other Person, or their
properties, or first to enforce, realize upon or exhaust any collateral security
for the Guaranteed Obligations, before enforcing this Guaranty.
 
12. If Payments Set Aside, etc
 
.  If any payment applied by Buyer to the Guaranteed Obligations is thereafter
set aside, recovered, rescinded or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of
Parent or any other Obligor or Person), the Guaranteed Obligations to which such
payment was applied shall for the purpose of this Guaranty be deemed to have
continued in existence, notwithstanding such application, and this Guaranty
shall be enforceable as to such Guaranteed Obligations as fully as if such
application had never been made.
 
13. Additional Obligation of Guarantors
 
. Each Guarantor’s liability under this Guaranty is in addition to and shall be
cumulative with all other liabilities of such Guarantor to Buyer as guarantor,
surety, endorser, accommodation co-obligor or otherwise of any of the Guaranteed
Obligations, without any limitation as to amount.
 
14. No Duties Owed by Buyer
 
.  Each Guarantor acknowledges and agrees that Buyer (a) has not made any
representations or warranties with respect to, (b) does not assume any
responsibility to such Guarantor for, and (c) has no duty to provide information
to such Guarantor regarding, the enforceability of any of the Guaranteed
Obligations or the financial condition of Parent or any other Obligor or Person.
Each Guarantor has independently determined the creditworthiness of Parent and
the enforceability of the Guaranteed Obligations and until Satisfaction in Full
of the Guaranteed Obligations will independently and without reliance on Buyer
continue to make such determinations.
 
15. Miscellaneous
 
.
 
(a) This Guaranty may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. In the event that any signature is delivered by facsimile transmission or
by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such signature page were an
original thereof. Any party delivering an executed counterpart of this Guaranty
by facsimile or other electronic method of transmission also shall deliver an
original executed counterpart of this Guaranty but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Guaranty.
 
(b) Any provision of this Guaranty which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.
 

 
 

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(c) Headings used in this Guaranty are for convenience only and shall not be
used in connection with the interpretation of any provision hereof.
 
(d) The pronouns used herein shall include, when appropriate, either gender and
both singular and plural, and the grammatical construction of sentences shall
conform thereto.
 
(e) Unless the context of this Guaranty or any other Transaction Document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the terms “includes”
and  “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Guaranty or
any other Transaction Document refer to this Guaranty or such other Transaction
Document, as the case may be, as a whole and not to any particular provision of
this Guaranty or such other Transaction Document, as the case may be. Section,
subsection, clause, schedule, and exhibit references herein are to this Guaranty
unless otherwise specified.  Any reference in this Guaranty or in any other
Transaction Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). “Satisfaction in Full of the
Guaranteed Obligations” shall mean the indefeasible payment in full in cash and
discharge, or other satisfaction in accordance with the terms of the Transaction
Documents and discharge, of all Guaranteed Obligations in full. “Satisfaction in
Full of the Secured Obligations” shall mean the indefeasible payment in full in
cash and discharge, or other satisfaction in accordance with the terms of the
Transaction Documents and discharge, of all Secured Obligations in full. Any
reference herein to any Person shall be construed to include such Person’s
permitted successors and permitted assigns.
 
(f) This Guaranty shall be effective upon delivery to Buyer, without further
act, condition or acceptance by Buyer, shall be binding upon each Guarantor and
the successors and assigns of each Guarantor, and shall inure to the benefit of
Buyer and its participants, successors and assigns. This Guaranty may not be
waived, modified, amended, terminated, released or otherwise changed except by a
writing signed by each Guarantor and Buyer.
 
(g) The language used in this Guaranty will be deemed to be the language chosen
by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. For clarification purposes, the
Recitals are part of this Guaranty.
 
(h) All dollar amounts referred to in this Guaranty and the other Transaction
Documents (as defined in the Securities Purchase Agreement) are in United States
Dollars (“U.S. Dollars”), and all amounts owing under this Guaranty and all
other Transaction Documents shall be paid in U.S. Dollars. All amounts
denominated in other currencies shall be converted into the U.S. Dollar
equivalent amount in accordance with the Exchange Rate on the date of
calculation. “Exchange Rate” means, in relation to any amount of currency to be
converted into U.S. Dollars pursuant to this Guaranty, the U.S. Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
 

 
 

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(i) Judgment Currency.
 
(i) If for the purpose of obtaining or enforcing judgment against any Guarantor
in any court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 12(i) referred
to as the “Judgment Currency”) an amount due in U.S. Dollars under this Guaranty
or any other Transaction Document, the conversion shall be made at the Exchange
Rate prevailing on the Trading Day (as defined in the Securities Purchase
Agreement) immediately preceding: (1) the date actual payment of the amount due,
in the case of any proceeding in the courts of New York or in the courts of any
other jurisdiction that will give effect to such conversion being made on such
date or (2) the date on which the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 12(i)(i) being hereinafter referred
to as the “Judgment Conversion Date”).
 
(ii) If in the case of any proceeding in the court of any jurisdiction referred
to in Section 12(i)(i) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of U.S. Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
 
(iii) Any amount due from any Guarantor under this provision shall be due as a
separate debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of this Guaranty or any other Transaction
Document.
 
(j) Taxes.
 
(i) Any and all payments by any Guarantor hereunder or under any other
Transaction Document shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, imposed under any
applicable law (collectively referred to as “Taxes”) unless the applicable
Guarantor is required to withhold or deduct any amounts for, or on account of,
Taxes pursuant to any applicable law. If such Guarantor shall be required to
withhold or deduct any Taxes from or in respect of any sum payable hereunder to
Buyer, (i) the sum payable shall be increased by the amount by which the sum
payable would otherwise have to be increased (the “tax make-whole amount”) to
ensure that after making all required withholdings and deductions (including
deductions applicable to the tax make-whole amount) Buyer would receive an
amount equal to the sum it would have received had no such deductions been made,
(ii) such Guarantor shall make such deductions and (iii) such Guarantor shall
pay the full amount withheld or deducted to the relevant governmental authority
within the time required.
 
(ii) In addition, each Guarantor agrees to pay to the relevant governmental
authority in accordance with applicable law any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or in connection with the
execution, delivery, registration or performance of, or otherwise with respect
to, this Guaranty and the other Transaction Documents (“Other Taxes”).
 
(iii) Each Guarantor shall deliver to Buyer official receipts, if any, in
respect of any Taxes and Other Taxes payable hereunder promptly after payment of
such Taxes and Other Taxes or other evidence of payment reasonably acceptable to
Buyer.
 
(iv) If a Guarantor fails to pay any amounts in accordance with this Section
12(j), such Guarantor shall indemnify Buyer within ten (10) calendar days after
written demand therefor, for the full amount of any Taxes or Other Taxes, plus
any related interest or penalties, that are paid by Buyer to the relevant
governmental authority or other relevant governmental authority as a result of
such failure.
 
(v) The obligations of each Guarantor under this Section 12(j) shall survive the
termination of this Guaranty and the Satisfaction in Full of the Guaranteed
Obligations.
 
16. Notices
 
. All notices and other communications provided for hereunder shall be given in
the form and manner, and delivered to such addresses, as specified in the
Security Agreement.
 
17. Governing Law; Jurisdiction; Service of Process; Jury Trial
 
. All questions concerning the construction, validity, enforcement and
interpretation of this Guaranty shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each Guarantor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper; provided, however, any suit seeking enforcement of this Guaranty may
be brought, at Buyer’s option, in the courts of any jurisdiction where Buyer
elects to bring such action. Each Guarantor hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Guaranty and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Without limitation of
the foregoing, each Guarantor hereby irrevocably appoints Parent as such
Guarantor’s agent for purposes of receiving and accepting any service of process
hereunder. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. EACH GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
[signature page follows]

 
 

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IN WITNESS WHEREOF, this Guaranty has been duly executed by each Guarantor as of
the date set forth above.
 

 
[______________________], a [_____________]
 
 
By:                                                                
Name:                                                                           
Title:                                                                
 

 
 

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