ESCROW AGREEMENT

        AGREEMENT made as of March 26, 1999 among Aura Systems, Inc. ("Seller"),
a Delaware  corporation  with a place of  business  at 2335  Alaska  Avenue,  El
Segundo,   California  90245,  Yoshikazu  Masayoshi,  Sadao  Masayoshi,   Sachie
Masayoshi  and Kazuaki  Masayoshi  (jointly and  severally,  "Purchaser"),  each
having an address  c/o Sadao  Masayoshi,  990 West 190th,  Suite 210,  Torrance,
California  90502,  and WOLF  HALDENSTEIN  ADLER FREEMAN & HERZ LLP (the "Escrow
Agent"),  a New York limited  liability  partnership with a place of business at
270 Madison Avenue, New York, New York 10016.

                              W I T N E S S E T H:

         WHEREAS, Seller has sold to Purchaser, and Purchaser has purchased from
Seller, two hundred eighty (280) shares (the "Shares") of stock of MYS K.K. (the
"Corporation"),  in  consideration  of, inter,  alia two (2) certain  promissory
notes  (collectively,  the  "Note"),  one in the  original  principal  amount of
$1,000,000 and one in the original principal amount of $3,200,000; and

         WHEREAS,  Purchaser is delivering  certificate(s) of stock representing
the Shares into escrow, together with unattached stock power(s) duly endorsed by
Purchaser in blank, as collateral to secure against a Default (as defined in the
Note) by Purchaser under the Note; and

         WHEREAS,  the parties are delivering into escrow such other instruments
and agreements as are described in this Agreement; and

         WHEREAS, the Escrow Agent has agreed to act as escrow agent pursuant to
the terms and conditions set forth in this Agreement.

         NOW, THEREFORE, thc parties agree as follows:

         1.       Deposit of the Shares and Other Items.

                  1.1 Initial Certificate(s).  Simultaneously with the execution
of this  Agreement,  Purchaser has  deposited  with the Escrow Agent the Shares,
represented by certificate(s) of stock of the Corporation  issued in the name of
Purchaser,  together  with stock  power(s)  duly  endorsed  in blank (the "Stock
Power").

                  1.2 Subsequent Deposits. Any additional shares of stock of the
Corporation  hereafter  issued with respect to the Shares,  whether due to stock
split,  stock dividend or otherwise,  or any certificates for shares of stock of
the Corporation or another entity  hereafter issued to replace or supplement the
Shares, whether due to merger, consolidation, reorganization or otherwise, shall
be deposited with the Escrow Agent,  together with appropriate stock powers duly
endorsed in blank and such stock shall be considered part of the Shares and such
stock powers shall be considered part of the Stock Power.

                  1.3 Other  Items.  Simultaneously  with the  execution of this
Agreement, thc following items (collectively, the "Other Escrow Items") are also
being depositing with the Escrow Agent:

               1.3.1 Resignations. Blank dated resignations (the "Resignations")
               from Purchasers with respect to their directorships,  offices and
               employment with the Corporation, its subsidiaries and affiliates.

               1.3.2 Bank Letters.  Blank dated letters from the  Corporation to
               its banks  advising of the change of its  authorized  signatories
               (the "Bank Letters").

         2.  Acceptance by the Escrow  Agent.  The Escrow Agent agrees to accept
delivery  of  the  Shares,   the  Stock  Power  and  the  Other   Escrow   Items
(collectively.  the "Escrow  Items"),  and agrees to hold the same in accordance
with the terms and conditions of this Agreement.

         3. Release from Escrow.  The Escrow Agent will hold the Escrow Items in
its  possession  until  authorized  hereunder  to deliver  the  Escrow  Items in
accordance with one of the following provisions:

                  3.1 Delivery to Purchaser. Upon full payment of the amount due
pursuant to the Note,  including,  without limitation,  any accrued interest, an
affidavit (the "Payment  Affidavit") made by, or on behalf of, Purchaser setting
forth that full payment has been made shall be  delivered  to the Escrow  Agent.
The Escrow Agent shall,  promptly after actual receipt of the Payment Affidavit,
give notice to Seller of the  existence of the Payment  Affidavit,  which notice
shall include a copy of the Payment  Affidavit.  Unless the Escrow Agent in fact
receives an affidavit (the "Seller's Disputing  Affidavit") by, or on behalf of,
Seller of a dispute  with  respect to the  recitation  in the Payment  Affidavit
within  twenty (20) days after the Escrow  Agent  gives  notice to Seller of the
existence of the Payment Affidavit,  then, promptly after the expiration of such
twenty (20) day period,  the Escrow Agent shall  deliver to Purchaser the Escrow
Items.

                 3.2 Delivery to Seller. Upon Default, as defined in either Note
(including the expiration of any grace period which must elapse before a Default
arises),  under either Note, an affidavit (the "Default  Affidavit") made by, or
on behalf of, Seller setting forth such Default shall be delivered to the Escrow
Agent.  The Escrow Agent  shall,  promptly  after actual  receipt of the Default
Affidavit,  give notice to Purchaser of the existence of the Default  Affidavit,
which notice shall  include a copy of the Default  Affidavit.  Unless the Escrow
Agent in fact receives an affidavit (the "Purchaser's  Disputing Affidavit") by,
or on behalf of,  Purchaser of a dispute with respect to the  recitation  in the
Default Affidavit within twenty (20) days after the Escrow Agent gives notice to
Purchaser of the existence of the Default  Affidavit,  then,  promptly after the
expiration  of such twenty (20) day period,  the Escrow  Agent shall  deliver to
Seller the Escrow Items to be held by Seller in accordance  with the  provisions
of  section  4. The  monetary  obligations  which  arise out of or relate to the
Default  which  is  the  basis  of the  Default  Affidavit,  including,  without
limitation,  any  acceleration  of principal and  interest,  any increase in the
continuing  interest  rate,  any  right  to  recover  costs or  expenses  or any
penalties  accruing  under  the  Note,  are  hereinafter   referred  to  as  the
"Obligations."

                  3.3 Dispute  Resolution.  In the event,  of the Escrow Agent's
timely  receipt of either the Seller's  Disputing  Affidavit or the  Purchaser's
Disputing Affidavit, the Escrow Agent shall (except as provided in the remainder
of this section 3.3 or in section 5) continue to hold the Escrow Items until the
dispute is resolved.  Any dispute that may arise under this  Agreement  shall be
settled by one of the  following  methods:  (1) mutual  agreement of the parties
concerned (evidenced by appropriate instructions in writing to the Escrow Agent,
signed by all of the parties to such dispute),  (2) a binding  arbitration award
pursuant to an  agreement  signed by the parties to such  dispute to submit such
dispute to arbitration or (3) by a final order, decree or judgment of a court of
competent  jurisdiction  in the United  States of  America  (the time for appeal
having expired and no appeal having been  perfected).  The Escrow Agent shall be
under no duty whatsoever to institute or defend any such  proceedings,  but may,
in its  discretion,  deposit the Escrow  Items and any funds or other  documents
held by it with a court of competent  jurisdiction pending the resolution of any
dispute.

         4. Rights of the Parties in the Shares.

                  4.1  Dividends.  Until the date of the  receipt of the Default
Affidavit by the Escrow Agent (the "Notice  Date"),  the Shares shall be treated
as if they are owned  outright by Purchaser and  Purchaser  shall be entitled to
receive any and all dividends or other distributions which may be paid, provided
that any such dividends or  distributions,  including,  but not limited to those
paid in stock,  are to be deposited  with the Escrow Agent as  additional  Other
Escrow Items.

                  4.2 Voting.  Until the Shares have been  delivered from escrow
to Seller  (the  "Delivery  Date"),  the Shares  shall be treated as if they are
owned  outright by Purchaser and Purchaser  shall be entitled to vote the Shares
for all purposes.  From and after the Delivery Date,  Seller or its  transferees
shall have the right to vote the Shares for all purposes  unless and until legal
title to the Shares is  re-conveyed  to the Purchaser in resolution of a dispute
pursuant to section 3.3 or after cure by Seller pursuant to section 4.5.

                  4.3 Sale. Subject to the right to cure hereinafter  described,
Seller may cause the Shares  delivered  to it pursuant to section 3.2 to be sold
in a  commercially  reasonable  manner  upon ten (10)  days  written  notice  to
Purchaser of such sale, setting forth the time and place thereof.  Seller may be
the  purchaser  at such sale.  The monies so received by Seller shall be applied
first  to the  payment  of the  cost and  expense  of such  sale and then to the
payment of the Obligations.  Purchaser shall remain liable for any deficit,  and
any surplus monies shall be paid to Purchaser. Purchaser acknowledges and agrees
that the ten (10) day notice provided in this section 4.3 constitutes reasonable
notice of a proposed sale.

                  4.4 Right to Retain the  Shares.  Subject to the right to cure
hereinafter  described,  Seller  may elect to  retain  ownership  of the  Shares
delivered  to it  pursuant to section  3.2 by giving  thirty  (30) days  written
notice  to  Purchaser  of  such  election.  Such  retention  shall  be  in  full
satisfaction  of the  Obligations.  Purchaser  acknowledges  and agrees that the
thirty (30) day notice  provided  in this  section  4.4  constitutes  reasonable
notice of a proposed retention of the Shares.

                  4.5 Right to Cure.  Prior to or during the ten (10) thirty day
notice  period  described  in section 4.3 or the thirty  (30) day notice  period
described  in  section  4.4,  or, if Seller  does not sell or take  title to the
Shares upon the expiration of such ten (10) or thirty (30) day period,  prior to
such sale or taking title, Purchaser may cure the Default by making full payment
to Seller with  respect to all of the  Obligations;  in which event Seller shall
deliver the Shares, the Stock Power and the Other Escrow Items to Purchaser free
of this  Agreement and any liens or interests of Seller  relating to the Note or
the Obligations.

                 4.6 Remedies Not Exclusive. The aforesaid remedies upon Default
shall not be exclusive,  and Seller shall have all other  remedies  permitted by
law,  including,  without  limitation,  the  right to  bring  suit  against  any
Purchaser.

         5.       Concerning the Escrow Agent.

                  5.1  Reliance  Upon  Instrument.  The Escrow  Agent may act in
reliance,  and is  protected  in so relying,  upon any  writing,  instrument  or
signature  which it, in good faith,  believes to be genuine,  and may assume the
validity and accuracy of any statement or assertion  contained in such a writing
or  instrument,  and may assume that any person  purporting to give any writing,
notice, advice or instructions in connection with the provisions hereof has been
duly authorized to do so.

                  5.2 Reliance Upon Counsel. The Escrow Agent may act or refrain
from acting in respect to any matter  referred to herein in full  reliance  upon
and by and with  the  advice  of  counsel  selected  by it,  and  shall be fully
protected in so acting or in refraining from acting upon such advice of counsel.
It is intended that the Escrow Agent,  if an attorney or law firm, may choose to
act as its own counsel.

                  5.3 Exclusive  Duties.  This Agreement sets forth  exclusively
the duties of the Escrow  Agent with  respect to any and all  matters  pertinent
hereto,  and no implied duties or obligations  shall be read into this Agreement
against the Escrow Agent.

                  5.4  No  Representations.   The  Escrow  Agent  shall  not  be
considered  to  have  made  any  representations  as  to  the  validity,  value,
genuineness  or  collectibility  of any  instrument  or  other  item  held by or
delivered to it.

                  5.5 Termination of Duties. Upon final delivery,  in accordance
with this Agreement,  of the Escrow Items and any other items held by the Escrow
Agent,  the  responsibilities  of the Escrow  Agent  shall  cease and  terminate
without any further obligation or liability on its part.

                  5.6 No Liability. The Escrow Agent shall not be responsible or
liable for any mistake of fact or error of judgment,  or for any act or omission
on its  part in the  performance  of its  duties  as  escrow  agent  under  this
Agreement except as such mistake, error, act or omission constitutes intentional
misconduct, bad faith, gross negligence or fraud.

                  5.7      Reimbursement.

     5.7.1 In General. Seller and Purchaser each, jointly and severally,  hereby
agrees to  reimburse  all of the  reasonable  expenses  (including  legal fees),
disbursements  and advances  incurred or made by the Escrow Agent in performance
of its duties  hereunder.  Legal  fees,  as  reimbursable  hereunder,  expressly
include  legal fees charged by the Escrow  Agent  itself.  Seller and  Purchaser
shall be solely  responsible to allocate such expenses  among  themselves and to
seek such contribution  among themselves as may be appropriate.  Notwithstanding
anything in this  Agreement to the contrary,  the Escrow Agent (1) shall have no
obligation  to release  any of the Escrow  Items or any other  items held by the
Escrow Agent unless and until it has been fully reimbursed or received  adequate
assurance  (determined in its sole  discretion) that it will be fully reimbursed
for all of its reasonable expenses,  (2) shall have no liability for any failure
or  refusal to release  any of the Escrow  Items or any other  items held by the
Escrow  Agent in  accordance  with clause (1) of this  sentence  and (3) may pay
itself from any cash held by it in escrow the amount of its reasonable expenses.

          5.7.2  Indemnity.  Except in cases of the Escrow  Agent's  intentional
     misconduct, bad faith, gross negligence or fraud, the other parties to this
     Agreement agree,  jointly and severally,  to indemnify the Escrow Agent and
     hold it harmless  from any and all claims,  liabilities,  losses,  actions,
     suits or proceedings at law or in equity,  or any other  expenses,  fees or
     charges of any character or nature which the Escrow may incur or with which
     it may be  threatened  by reason of the  Escrow  Agent's  actions as escrow
     agent  under this  Agreement,  including,  without  limitation,  reasonable
     attorneys'  fees and expenses  (including,  but not limited to all fees and
     costs  incident  to any  appeals  which may  result).  Notwithstanding  the
     foregoing, as between themselves, the other parties to this Agreement agree
     that the party responsible for any such loss to the Escrow Agent shall bear
     the full share thereof.

                  5.8 Actions by Escrow Agent/Indemnity.  The Escrow Agent shall
not be required to institute or defend any action involving any matters referred
to herein or which affects its duties or liabilities  hereunder  unless or until
requested  to do so by a party to this  Agreement  and then only upon  receiving
full indemnity,  in character  satisfactory to the Escrow Agent, against any and
all claims,  liabilities and expenses in relation  thereto  (including,  without
limitation,  reasonable  attorneys  fees). In the event of any dispute among the
parties  hereto with relation to the Escrow Agent or its duties,  (1) the Escrow
Agent may act or refrain from acting in respect to any matter referred to herein
in full reliance  upon and by and with the advice of counsel  selected by it and
shall be fully  protected  in so acting or in  refraining  from  acting upon the
advice of such counsel (it is intended that the Escrow Agent,  if an attorney or
law firm,  may choose to act as its own  counsel)  or (2) the  Escrow  Agent may
refrain from acting until  required to do so by an order of a court of competent
jurisdiction.

                  5.9 Substitution.  The Escrow Agent may resign as escrow agent
at any time provided that it first  designates a substitute or successor  escrow
agent  acceptable  to Seller and  Purchaser who agrees in writing to be bound by
the terms of this  Agreement and to assume the  obligations of the Escrow Agent.
The  Escrow  Agent may be  removed  as escrow  agent at any time by notice  from
Seller and  Purchaser  specifying  such  removal  and naming the  substitute  or
successor  escrow  agent who has  agreed in  writing to be bound by the terms of
this Agreement and to assume the obligations of the Escrow Agent.  Upon delivery
by the Escrow  Agent of the Escrow  Items and any other items held by the Escrow
Agent to the substitute or successor  Escrow Agent,  such person shall be deemed
for  all  purposes  to be the  Escrow  Agent  and  the  responsibilities  of the
predecessor   Escrow  Agent  shall  cease  and  terminate  without  any  further
obligation or liability on its part.

                  5.10 Escrow Agent as Counsel. The parties acknowledge that the
Escrow Agent is a law firm that has  previously  represented  Seller,  including
with respect to matters relating to the transactions  underlying this Agreement.
Notwithstanding Escrow Agent's function as escrow agent, the parties acknowledge
and agree that the Escrow Agent may continue to represent Seller, including with
respect to any  dispute  arising out of or  relating  to this  Agreement  or the
transactions underlying this Agreement.

         6.  Entire  Agreement.  This  Agreement  represents  the entire  escrow
agreement among the parties and cannot be modified or terminated, nor may any of
its provisions be waived,  except by a written  instrument  signed by all of the
parties.  Any waiver by any party of the strict performance of any of the terms,
conditions and  provisions of this Agreement  shall not be construed as a waiver
thereof for the future,  but shall be considered a waiver only in the particular
instance,  for the particular purpose,  and at the time when and for which it is
given. There are no other agreements and no other representations, warranties or
covenants  with  respect  to the  subject  matter  of this  Agreement  except as
expressly set forth in this Agreement.

         7.       Miscellaneous.

                  7.1 Captions.  Headings  contained in this Agreement have been
inserted for reference  purposes only and shall not be construed as part of this
Agreement.

                  7.2      Governing Law/Consent to Jurisdiction.

          7.2.1  Governing Law. This Agreement has been made and entered into in
     the State of California and shall be governed by and construed and enforced
     in  accordance  with  the  internal   substantive  laws  of  the  State  of
     California, without regard to principles of conflicts of laws.

               7.2.2 Consent to Jurisdiction. The parties irrevocably consent to
          the  jurisdiction  of the courts of the State of  California  (and the
          Federal courts having  jurisdiction  in the State of  California)  for
          purposes  of  any  judicial  proceeding  which  may be  instituted  in
          connection   with  any  matter  arising  under  or  relating  to  this
          Agreement.

                  7.3 Notice.  Any notice or other  communication  given or made
pursuant  to this  Agreement  must be in writing and shall be  delivered  to the
person to whom intended at the address set forth above (or at such other address
as such  person  may  designate  by proper  notice)  by  personal  delivery,  by
telecopier,  by nationally),  recognized courier (Federal Express, DHL, etc.) or
by certified or registered mail, postage prepaid, and shall be deemed given when
personally  delivered  or sent by  telecopier  or two (2)  business  days  after
deposit with a courier or five (5) business days after mailing. The Escrow Agent
shall be given copies of all notices.

                  7.4 Severability.  The invalidity or  unenforceability  of any
provision of this Agreement shall not affect the validity or  enforceability  of
any other provisions of this Agreement.

                  7.5 Successors in Interest.  This  Agreement  shall be binding
upon and inure to the  benefit  of the  respective  parties,  their  successors,
assigns,  heirs, legatees,  executors,  administrators and legal representatives
("Successors").  Whenever  a  party  is  referred  to in  this  Agreement,  such
reference shall include reference to such party':; Successors.



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                  7.6 Counterparts. This Agreement may be executed in any number
of  counterparts,  each of which  shall be deemed an  original  and all of which
together shall be deemed to be one and the same instrument. This Agreement shall
become effective when one or more  counterparts  have been signed by each of the
parties and delivered to each of the other parties.

         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
day and year first above written.


SELLER:                                      PURCHASER:

AURA SYSTEMS, INC.


By:
         Name:                               Yoshikazu Masayoshi
         Title:

                                             Sadao Masayoshi


                                             Sachie Masayoshi


                                             Kazaki Masayoshi



ESCROW AGENT:

WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP


By:
                           A Partner



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