EXHIBIT 10.25

                              SETTLEMENT AGREEMENT
                          AND MUTUAL RELEASE OF CLAIMS


         This   Settlement   Agreement   and  Mutual   Release  of  Claims  (the
"Agreement")  is entered  into and  effective  as of this 26th day of  February,
2002, by and between INFINITY INVESTORS LIMITED, a Nevis West Indies corporation
("IIL"),  GLACIER CAPITAL LIMITED, a Nevis West Indies corporation  ("Glacier"),
SUMMIT  CAPITAL  LIMITED,  a Nevis West Indies  corporation  ("Summit"),  GLOBAL
GROWTH LIMITED, a Nevis West Indies corporation  ("Global") and HW Partners,  LP
("HP")  (collectively  referred to herein as the  "Holders")  and AURA  SYSTEMS,
INC., a Delaware corporation ("Aura").

                                 R E C I T A L S

         WHEREAS,  the  Holders  are  holders of  certain  secured  notes  dated
February  22,  2000 and  issued by the  Company  with an  aggregate  outstanding
principal balance of  $12,000,000.00 as of February 26, 2002 (the "Notes").  The
Notes are secured by a security agreement and guaranteed by a guaranty agreement
each dated as of February 22, 2000 (collectively the Notes).  Security Documents
and other rights identified in that agreement  entitled  Assignment and Transfer
of Notes  and  Security  Documents  and  Related  Rights.  The  Notes,  Security
Documents and Related Rights are heretofore referred to as the "Documents".

         WHEREAS, the Holders have assigned all of their respective right, title
and  interest  in and to the  Documents  to Lawrence  A.  Diamant,  as agent for
various investors ("Agent") for a cash payment to which Aura has consented.

         WHEREAS,  by entering into this Agreement,  the Holders and Aura desire
to avoid the risks,  uncertainties and costs of litigation and to buy peace, and
to fully compromise and settle any and all disputes,  known or unknown,  between
them,  which arise from any and all prior  dealings  and  associations  with one
another,  including,  but not limited to obligations arising under the Documents
or as a result of the termination thereof.

         NOW,  THEREFORE,  in consideration  of the above stated  premises,  the
mutual  promises and agreements  contained  herein,  and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

     1. Releases.

          (a) Each Holder hereby releases,  acquits and forever  discharges Aura
     and  its  current  and  former  affiliates,   subsidiaries,   stockholders,
     employees, consultants, managers, agents, attorneys, officers and directors
     (collectively the "Aura Released Parties"), from all claims, counterclaims,
     demands,  causes of action,  obligations,  express and implied  warranties,
     suits,   debts,   damages,   punitive  and   exemplary   damages,   expense
     reimbursements, common law and statutory penalties, liens, attorneys' fees,
     judgments,  interest and expenses of any type whatsoever,  whether known or
     unknown,  in any manner,  arising out of, related to, or connected with the
     prior dealings of Aura and such Holder through the date hereof,  including,
     without  limitation,  the  purchase  and  sale  of  the  Documents  or  the
     assignment  thereof  occurring  prior  to and  through  the  date  of  this
     Agreement.  IIL acknowledges that no Aura Released Party owes any amount to
     IIL or its  affiliates  under the  Documents as a result of the  assignment
     thereof to Agent.  Nothing herein releases  Aura's  obligation to pay Agent
     the sums payable under the Notes.

          (b) Aura hereby releases,  acquits and forever  discharges each Holder
     and  their  respective   current  and  former   affiliates,   subsidiaries,
     stockholders,   employees,   consultants,   managers,   agents,  investment
     advisors, attorneys, officers and directors from all claims, counterclaims,
     demands,  causes of action,  obligations,  express and implied  warranties,
     suits,  debts,  damages,  punitive and  exemplary  damages,  common law and
     statutory  penalties,  liens,  attorneys'  fees,  judgments,  interest  and
     expenses of any type whatsoever,  whether known or unknown,  in any manner,
     arising out of,  related to, or connected  with the prior  dealings of Aura
     and any Holder through the date hereof,  including without limitation,  the
     purchase and sale of the  Documents  or the  assignment  thereof  occurring
     prior to and through the date of this Agreement.

     2.  Intention of Parties.  It is expressly  understood  and agreed that the
terms hereof are  contractual  in nature and not merely  recitals,  and that the
agreements  and  releases  contained  herein  are  made  and  given  in order to
compromise and settle doubtful and disputed claims,  to avoid the cost, risk and
uncertainty of litigation and to buy peace. It is further  understood and agreed
that no term,  provision  or  agreement  contained  herein shall be construed or
interpreted  as an admission  of liability by or on behalf of any party  hereto,
all such liability being expressly denied.

     3.  Confidentiality  of Settlement.  The parties hereto agree that they and
their heirs,  assigns,  agents,  employees and attorneys  shall not disparage or
make any derogatory remarks whatsoever about any of the other parties thereto or
their heirs, assigns, agents, officers, directors, employees and attorneys.

     4. Binding  Effect.  This  Agreement and the releases  granted herein shall
inure to the  benefit of and be binding  against  the  parties  hereto and their
respective heirs, successors and assigns.

     5.  Governing  Law.  This  Agreement  shall be governed by and construed in
accordance with the laws of Delaware.

     6. Voluntary  Agreement.  Each of the parties hereto acknowledges that this
Agreement has been executed freely and voluntarily, without economic compulsion,
and with full knowledge of its legal significance and consequences.

     7. Ownership of Claims.  Each of the parties hereto represents and warrants
that it is the sole owner and holder of the various  claims and causes of action
released  herein  and that it has not  sold,  assigned,  conveyed  or in any way
transferred  any of its  rights in and to any of the claims and causes of action
to any third party.

     8. Severability.  This Agreement is intended to be severable.  If any term,
covenant,  condition,  or provision hereof is illegal,  invalid or unenforceable
for any reason whatsoever, such illegality, invalidity or unenforceability shall
not affect the legality,  validity or  enforceability  of the remaining parts of
this Agreement.

     9.  Counterparts.  This Agreement may be executed in  counterparts  or with
detachable signature pages and shall constitute one agreement,  binding upon all
parties hereto as if all parties signed the same document.

     10.  Headings.  The headings used in this Agreement are intended solely for
the  convenience  of  reference,  and should not in any manner  amplify,  limit,
modify or otherwise be used in the  interpretation  of any of the  provisions of
this Agreement.

     11. Entire Agreement.  This Agreement  constitutes the entire understanding
and  agreement  of the parties and  supersedes  and  replaces all prior oral and
written agreements with respect to the subject matter hereof.  There are no oral
agreements between the parties hereto.



EXECUTED as of the date first above written.

AURA:

AURA SYSTEMS, INC., a Delaware corporation


By:
Name:
Title:


HOLDERS:


INFINITY INVESTORS LIMITED, a Nevis West Indies corporation

James Loughran, Director


GLACIER CAPITAL LIMITED, a Nevis West Indies corporation

By:
Name:
Title:


SUMMIT CAPITAL LIMITED, a Nevis West Indies corporation

By:
Name:
Title:


GLOBAL GROWTH LIMITED, a Nevis West Indies corporation

By:
Name:
Title:


HW PARTNERS, LP

By:
Name:
Title: