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                                                                  EXHIBIT  10.21

                                    TIER I
                                    ------
                              SEVERANCE AGREEMENT
                              -------------------


          THIS AGREEMENT, dated March 5th, 1998, is made by and between Aura
Systems, Inc., a Delaware corporation (the "Company"), and _________________
(the "Executive").

          WHEREAS, the Company considers it essential to the best interests of
its stockholders to foster the continued employment of key management personnel;
and

          WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and

          WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control.

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:

          1.  Defined Terms.  The definitions of capitalized terms used in this
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Agreement are provided in the last Section hereof.

          2.  Term of Agreement.  Subject to the provisions of Section 14
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hereof, the Term of this Agreement shall commence on the Effective Date and
shall continue in effect through the third anniversary of the Effective Date;
provided, however, that on each anniversary of the Effective Date during the
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Term of this Agreement, the Term shall automatically be extended for one
additional year unless, not later than 90 days prior to any such anniversary,
the Company or the Executive shall have given notice not to extend the Term; and
further provided, however, that if a Change in Control shall have occurred
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during the Term, the Term shall expire no earlier than twenty-four (24) months
beyond the month in which such Change in Control occurred.

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     3.  Company's Covenants Summarized.  In order to induce the Executive to
         ------------------------------                                      
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein.  Except as provided in Section 11
hereof, no Severance Payments shall be payable under this Agreement unless there
shall have been (or, under the terms of the second sentence of Section 6 hereof,
there shall be deemed to have been) a termination of the Executive's employment
with the Company following a Change in Control and during the Term.  This
Agreement shall not be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive and
the Company, the Executive shall not have any right to be retained in the employ
of the Company.

     4.  The Executive's Covenants.  The Executive agrees that, subject to the
         -------------------------                                            
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of the Company
until the earliest of (i) a date which is six (6) months from the date of such
Potential Change of Control, (ii) the date of a Change in Control, (iii) the
date of termination by the Executive of the Executive's employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination
by the Company of the Executive's employment for any reason.

     5.  Compensation Other Than Severance Payments.
         ------------------------------------------ 

          a.  Payment of Salary During Disability.  Following a Change in
              -----------------------------------                        
Control and during the Term, during any period that the Executive fails to
perform the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Company shall pay the
Executive's full salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period, until the
Executive's employment is terminated by the Company for Disability.

          b.  Accrued Salary.  If the Executive's employment shall be terminated
              --------------                                                    
for any reason following a Change in Control and during the Term, the Company
shall pay the Executive's full salary to the Executive through the Date of
Termination at the rate in effect immediately prior to the Date of Termination
or, if higher, the rate in effect immediately prior to the first occurrence of
an event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's compensation

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and benefit plans, programs or arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason.

          c.  Post-Termination Benefits.  If the Executive's employment shall be
              -------------------------                                         
terminated for any reason following a Change in Control and during the Term, the
Company shall pay to the Executive the Executive's normal post-termination
compensation and benefits as such payments become due.  Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the occurrence of the first event or circumstance constituting Good
Reason.

     6.  Severance Payments.
         ------------------ 

          a.  If (i) the Executive's employment is terminated following a Change
in Control and during the Term, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good Reason, or
(ii) the Executive voluntarily terminates his employment for any reason during
the one-month period commencing on the first anniversary of the Change in
Control, then, in either such case, the Company shall pay the Executive the
amounts, and provide the Executive the benefits, described in this Section 6
("Severance Payments") and Section 7, in addition to any payments and benefits
to which the Executive is entitled under Section 5 hereof.  For purposes of this
Agreement, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason, if (i) the Executive's employment is terminated by the Company
without Cause prior to a Change in Control (whether or not a Change in Control
ever occurs) and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation of which
would constitute a Change in Control, (ii) the Executive terminates his
employment for Good Reason prior to a Change in Control (whether or not a Change
in Control ever occurs) and the circumstance or event which constitutes Good
Reason occurs at the request or direction of such Person, or (iii) the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason and such termination or the circumstance or event
which constitutes Good Reason is otherwise in connection with or in anticipation
of a Change in Control (whether or not a Change in Control ever occurs). For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive

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shall be presumed to be correct unless the Company establishes to the Board by
clear and convincing evidence that such position is not correct.

               (1) Lump Sum Payment.  In lieu of any further salary payments to
                   ----------------                                            
     the Executive for periods subsequent to the Date of Termination and in lieu
     of any severance benefit otherwise payable to the Executive, the Company
     shall pay to the Executive a lump sum severance payment, in cash, equal to
     three times the sum of (i) the Executive's base salary as in effect
     immediately prior to the Date of Termination or, if higher, in effect
     immediately prior to the first occurrence of an event or circumstance
     constituting Good Reason, and (ii) the highest annual bonus earned by the
     Executive pursuant to any annual bonus or incentive plan maintained by the
     Company in respect of any of the three fiscal years ending immediately
     prior to the fiscal year in which occurs the Date of Termination or, if
     higher, immediately prior to the fiscal year in which occurs the first
     event or circumstance constituting Good Reason.

               (2) Continuation of Welfare Benefits.  For the thirty-six (36)
                   --------------------------------                          
     month period immediately following the Date of Termination, the Company
     shall arrange to provide the Executive and his dependents life, disability,
     accident and health insurance benefits substantially similar to those
     provided to the Executive and his dependents immediately prior to the Date
     of Termination or, if more favorable to the Executive, those provided to
     the Executive and his dependents immediately prior to the first occurrence
     of an event or circumstance constituting Good Reason, at no greater cost to
     the Executive than the cost to the Executive immediately prior to such date
     or occurrence; provided, however, that, unless the Executive consents to a
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     different method (after taking into account the effect of such method on
     the calculation of "parachute payments" pursuant to Section 7 hereof), such
     health insurance benefits shall be provided through a third-party insurer.
     Benefits otherwise receivable by the Executive pursuant to this Section
     6(a)(2) shall be reduced to the extent benefits of the same type are
     received by or made available to the Executive during the thirty-six (36)
     month period following the Executive's termination of employment (and any
     such benefits received by or made available to the Executive shall be
     reported to the Company by the Executive); provided, however, that the
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     Company shall reimburse the Executive for the excess, if any, of the cost
     of such benefits to the Executive over such cost immediately prior to the
     Date of Termination or, if more favorable to the Executive, the first
     occurrence of an event or circumstance constituting Good Reason.

               (3) Incentive Compensation.  Notwithstanding any provision of any
                   ----------------------                                       
     annual or long-term incentive plan to the contrary, the Company shall pay

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     to the Executive a lump sum amount, in cash, equal to the sum of (i) any
     unpaid incentive compensation which has been allocated or awarded to the
     Executive for a completed fiscal year or other measuring period preceding
     the Date of Termination under any such plan and which, as of the Date of
     Termination, is contingent only upon the continued employment of the
     Executive to a subsequent date, and (ii) a pro rata portion to the Date of
     Termination of the aggregate value of all contingent incentive compensation
     awards to the Executive for all then uncompleted periods under any such
     plan, calculated as to each such award by multiplying the award that the
     Executive would have earned on the last day of the performance award
     period, assuming the achievement, at the target level, of the individual
     and corporate performance goals established with respect to such award, by
     the fraction obtained by dividing the number of full months and any
     fractional portion of a month during such performance award period through
     the Date of Termination by the total number of months contained in such
     performance award period.

               (4) Accelerated Vesting of Stock Options.  All stock options held
                   ------------------------------------                         
     by the Executive under any stock option or incentive plan maintained by the
     Company shall immediately vest and become exercisable as of the Date of
     Termination, to be exercised in accordance with the terms of the applicable
     plan.

               (5) Outplacement Services.  The Company shall provide the
                   ---------------------                                
     Executive with outplacement services suitable to the Executive's position
     for a period of three years or, if earlier, until the first acceptance by
     the Executive of an offer of employment.

     7.  280G Gross Up Payments.
         ---------------------- 

          a.  Whether or not the Executive becomes entitled to the Severance
Payments, if any of the payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive's termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Person whose actions result
in a Change in Control or any Person affiliated with the Company or such Person)
(such payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the
Total Payments.

                                       5
<PAGE>
 

          b.  For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax
Counsel") reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company's
independent auditor (the "Auditor"), such payments or benefits (in whole or in
part) do not constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the
meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of
the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance
with the principles of sections 280G(d)(3) and (4) of the Code.  For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income tax at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the Date of Termination (or if there is
no Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 7), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.

          c.  In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within five (5) business days
following the time that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the amount of such
repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder in calculating the Gross-Up Payment (including by reason of
any payment the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus 

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<PAGE>
 

any interest, penalties or additions payable by the Executive with respect to
such excess) within five (5) business days following the time that the amount of
such excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.

          d.  Timing of Payments.  The payments provided in subsections (1) and
              ------------------                                               
(3) of Section 6 hereof and in Section 7 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
                                             --------  -------             
amounts of such payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive or, in the case of payments under Section 7 hereof,
in accordance with Section 7 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at 120%
of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the Date of Termination.  In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the Code).  At the time
that payments are made under this Agreement, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).

          e.  Legal Fees.  The Company also shall pay to the Executive all legal
              ----------                                                        
fees and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder.  Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.

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     8.  Non-Competition.  During the period in which Executive is receiving
         ---------------                                                    
Severance Payments, Executive shall not, directly or indirectly, without the
prior written consent of the Company, provide consultative services or otherwise
provide services to (whether as an employee or a consultant, with or without
pay), own, manage, operate, join, control, participate in, or be connected with
(as a stockholder, partner, or otherwise), any business, individual, partner,
firm, corporation, or other entity that is then a direct competitor of the
Company or its subsidiaries with respect to electromagnetic and electro-optical
technology (each such competitor a "Competitor of the Company"); provided,
however, that the "beneficial ownership" by Executive, either individually or as
a member of a "group," as such terms are used in Rule 13d of the General Rules
and Regulations under the Exchange Act, of not more than five percent (5%) of
the voting stock of any publicly held corporation shall not alone constitute a
violation of this Agreement.  It is further expressly agreed that the Company
will or would suffer irreparable injury if Executive were to compete with the
Company or any subsidiary in violation of this Agreement and that the Company
would by reason of such competition be entitled to injunctive relief in a court
of appropriate jurisdiction, and Executive further consents and stipulates to
the entry of such injunctive relief in such a court prohibiting Executive from
competing with the Company or any subsidiary of the Company in violation of this
Agreement.  Executive and the Company acknowledge and agree that the business of
the Company is national in nature, and that the terms of the non-competition
agreement set forth herein shall apply on a nationwide basis.

     9.  Termination Procedures and Compensation During Dispute.
         ------------------------------------------------------ 

          a.  Notice of Termination.  After a Change in Control and during the
              ---------------------                                           
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 12 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.

                                       8
<PAGE>
 

          b.  Date of Termination.  "Date of Termination," with respect to any
              -------------------                                             
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).

          c.  Dispute Concerning Termination.  If within fifteen (15) days after
              ------------------------------                                    
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 9(c)), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
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dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.

          d.  Compensation During Dispute.  If a purported termination occurs
              ---------------------------                                    
following a Change in Control and during the Term and the Date of Termination
is extended in accordance with Section 9(c) hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, salary) and continue
the Executive as a participant in all compensation, benefit and insurance plans
in which the Executive was participating when the notice giving rise to the
dispute was given, until the Date of Termination, as determined in accordance
with Section 9(c) hereof. Amounts paid under this Section 9(d) are in addition
to all other amounts due under this Agreement (other than those due under
Section 5(b) hereof) and shall not be offset against or reduce any other amounts
due under this Agreement.

     10.  No Mitigation.  The Company agrees that, if the Executive's employment
          -------------                                                         
with the Company terminates during the Term, the Executive is not required to
seek

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other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 hereof or Section 9(d) hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 6(a)(2) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.

     11.  Successors; Binding Agreement.
          ----------------------------- 

          a.  In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.  Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.

          b.  This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.  If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.

     12.  Indemnification.  The Company shall indemnify and hold Executive
          ---------------                                                 
harmless for acts and omissions in his capacity as an officer, director or
employee of the Company to the maximum extent permitted under applicable law.
The Company shall maintain a Director's and Officer's Liability Insurance
Policy, which shall provide liability coverage for Executive's benefit.

     13.  Notices.  For the purpose of this Agreement, notices and all other
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communications provided for in the Agreement shall be in writing and shall be
deemed

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<PAGE>
 

to have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed, if to the Executive,
to the address inserted below the Executive's signature on the final page hereof
and, if to the Company, to the address set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:

               To the Company:

               ------------------------

               ------------------------

               ------------------------
               Attention:

     14.  Miscellaneous.  No provision of this Agreement may be modified, waived
          -------------                                                         
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board.  No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.  This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either party;
provided, however, that this Agreement shall supersede any agreement setting
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forth the terms and conditions of the Executive's employment with the Company
only in the event that the Executive's employment with the Company is terminated
on or following a Change in Control, by the Company other than for Cause or by
the Executive other than for Good Reason.   The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.  All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed.  The obligations of the Company
and the Executive under this Agreement which by their nature may require either
partial or total performance after the expiration of the Term (including,
without limitation, those under Sections 6, 7, 8, and 9 hereof) shall survive
such expiration.

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     15.  Validity; Pooling.
          ----------------- 

          a.  Validity.  The invalidity or unenforceability of any provision of
              --------                                                         
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

          b.  Pooling.  In the event that the Company is party to a transaction
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which is otherwise intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent practicable, be
interpreted so as to permit such accounting treatment, and (B) to the extent
that the application of clause (A) of this Section 14(b) does not preserve the
availability of such accounting treatment, then, to the extent that any
provision of the Agreement disqualifies the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement), such provision
shall be null and void as of the date hereof.  All determinations under this
Section 14(b) shall be made by the accounting firm whose opinion with respect to
"pooling of interests" is required as a condition to the consummation of such
transaction.

     16.  Counterparts.  This Agreement may be executed in several counterparts,
          ------------                                                          
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

     17.  Settlement of Disputes; Arbitration.
          ----------------------------------- 

          a.  All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Board and shall be in writing.  Any
denial by the Board of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon.  The
Board shall afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to appeal to the
Board a decision of the Board within sixty (60) days after notification by the
Board that the Executive's claim has been denied.

          b.  Any further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Los Angeles,
California in accordance with the rules of the American Arbitration Association
then in effect; provided, however, that the evidentiary standards set forth in
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this Agreement shall apply.  Judgment may be entered on the arbitrator's award
in any court having jurisdiction.  Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek specific
performance of the Executive's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.

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<PAGE>
 

     18.  Definitions.  For purposes of this Agreement, the following terms
          -----------                                                      
shall have the meanings indicated below:

          a.  "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.

          b.  "Auditor" shall have the meaning set forth in Section 7 hereof.

          c.  "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.

          d.  "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.

          e.  "Board" shall mean the Board of Directors of the Company.

          f.  "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 9(a) hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise.  For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the Board by
clear and convincing evidence that Cause exists.

          g.  A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:

              (1) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially

                                       13
<PAGE>
 

owned by such Person any securities acquired directly from the Company or its
affiliates) representing 25% or more of the combined voting power of the
Company's then outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (i) of
paragraph (3) below; or

          (2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company) whose appointment or election by
the Board or nomination for election by the Company's stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or
recommended; or

          (3) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other corporation,
other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, at least 60% of the combined voting power of the
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding securities; or

          (4) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 60% of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale. Notwithstanding the
foregoing, a "Change in Control" shall not be deemed to have occurred by virtue
of the consummation of any transaction or series of integrated transactions

                                       14
<PAGE>
 

immediately following which the record holders of the common stock of the
Company immediately prior to such transaction or series of transactions continue
to have substantially the same proportionate ownership in an entity which owns
all or substantially all of the assets of the Company immediately following such
transaction or series of transactions. Notwithstanding the foregoing, a Change
in Control shall not include any event, circumstance or transaction occurring
during the six-month period following a Potential Change in Control which
Potential Change in Control results from the action of any entity or group which
includes, is affiliated with or is wholly or partly controlled by the Executive
(a "Management Group"); provided, however, that such action shall not be taken
                        --------  -------
into account for this purpose if it occurs within a six-month period following a
Potential Change in Control resulting from the action of any Person which is not
a member of a Management Group.

          Notwithstanding the foregoing, any event or transaction which would
otherwise constitute a Change in Control (a "Transaction") shall not constitute
a Change in Control for purposes of this Agreement if, in connection with the
Transaction, the Executive participates as an equity investor in the acquiring
entity or any of its affiliates (the "Acquiror").  For purposes of the preceding
sentence, the Executive shall not be deemed to have participated as an equity
investor in the Acquiror by virtue of (i) obtaining beneficial ownership of any
equity interest in the Acquiror as a result of the grant to the Executive of an
incentive compensation award under one or more incentive plans of the Acquiror
(including, but not limited to, the conversion in connection with the
Transaction of incentive compensation awards of the Company into incentive
compensation awards of the Acquiror), on terms and conditions substantially
equivalent to those applicable to other executives of the Company immediately
prior to the Transaction, after taking into account normal differences
attributable to job responsibilities, title and the like, or (ii) obtaining
beneficial ownership of any equity interest in the Acquiror on terms and
conditions substantially equivalent to those obtained in the Transaction by all
other stockholders of the Company.

          h.  "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.

          i.  "Company" shall mean Aura Systems, Inc. and, except in determining
under Section 17(g) hereof whether or not any Change in Control of the Company
has occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.

          j.  "Date of Termination" shall have the meaning set forth in Section
9 hereof.

                                       15
<PAGE>
 

          k.  "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.

          l.  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

          m.  "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.

          n.  "Executive" shall mean the individual named in the first paragraph
of this Agreement.

          o.  "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in clauses (ii) and (iii) of the second sentence of
Section 6 hereof (treating all references in paragraphs (1) through (7) below to
a "Change in Control" as references to a "Potential Change in Control"), of any
one of the following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described in paragraph (1),
(5), (6) or (7) below, such act or failure to act is corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof:

                    (1) the assignment to the Executive of any duties
          inconsistent with the Executive's status as a senior executive officer
          of the Company or a substantial adverse alteration in the nature or
          status of the Executive's responsibilities from those in effect
          immediately prior to the Change in Control;

                    (2) a reduction by the Company in the Executive's annual
          base salary as in effect on the date hereof or as the same may be
          increased from time to time except for across-the-board salary
          reductions similarly affecting all senior executives of the Company
          and all senior executives of any Person in control of the Company;

                                       16
<PAGE>
 

                    (3) the relocation of the Executive's principal place of
          employment to a location more than 50 miles from the Executive's
          principal place of employment immediately prior to the Change in
          Control or the Company's requiring the Executive to be based anywhere
          other than such principal place of employment (or permitted relocation
          thereof) except for required travel on the Company's business to an
          extent substantially consistent with the Executive's present business
          travel obligations;

                    (4) the failure by the Company to pay to the Executive any
          portion of the Executive's current compensation except pursuant to an
          across-the-board compensation deferral similarly affecting all senior
          executives of the Company and all senior executives of any Person in
          control of the Company, or to pay to the Executive any portion of an
          installment of deferred compensation under any deferred compensation
          program of the Company, within seven (7) days of the date such
          compensation is due;

                    (5) the failure by the Company to continue in effect any
          compensation plan in which the Executive participates immediately
          prior to the Change in Control which is material to the Executive's
          total compensation, including but not limited to the Company's stock
          option, bonus and other plans or any substitute plans adopted prior to
          the Change in Control, unless an equitable arrangement (embodied in an
          ongoing substitute or alternative plan) has been made with respect to
          such plan, or the failure by the Company to continue the Executive's
          participation therein (or in such substitute or alternative plan) on a
          basis not materially less favorable, both in terms of the amount or
          timing of payment of benefits provided and the level of the
          Executive's participation relative to other participants, as existed
          immediately prior to the Change in Control;

                    (6) the failure by the Company to continue to provide the
          Executive with benefits substantially similar to those enjoyed by the
          Executive under any of the Company's pension, savings, life insurance,
          medical, health and accident, or disability plans in which the
          Executive was participating immediately prior to the Change in Control
          (except for across the board changes similarly affecting all senior
          executives of the Company and all senior executives of any Person in
          control of the Company), the taking of any other action by the Company
          which would

                                       17
<PAGE>
 

          directly or indirectly materially reduce any of such benefits or
          deprive the Executive of any material fringe benefit enjoyed by the
          Executive at the time of the Change in Control, or the failure by the
          Company to provide the Executive with the number of paid vacation days
          to which the Executive is entitled on the basis of years of service
          with the Company in accordance with the Company's normal vacation
          policy in effect at the time of the Change in Control;
          or

                    (7) any purported termination of the Executive's employment
          which is not effected pursuant to a Notice of Termination satisfying
          the requirements of Section 9(a) hereof; for purposes of this
          Agreement, no such purported termination shall be effective.

          The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness.  The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.

          For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.

          p.  "Gross-Up Payment" shall have the meaning set forth in Section 7
hereof.

          q.  "Notice of Termination" shall have the meaning set forth in
Section 9 hereof.

          r.  "Pension Plan" shall mean any tax-qualified, supplemental or
excess benefit pension plan maintained by the Company and any other plan or
agreement entered into between the Executive and the Company which is designed
to provide the Executive with supplemental retirement benefits.

          s.  "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an

                                       18
<PAGE>
 

offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.

          t.  "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:

                    (1) the Company enters into an agreement, the consummation
          of which would result in the occurrence of a Change in Control;

                    (2) the Company or any Person publicly announces an
          intention to take or to consider taking actions which, if consummated,
          would constitute a Change in Control;

                    (3) any Person becomes the Beneficial Owner, directly or
          indirectly, of securities of the Company representing 15% or more of
          either the then outstanding shares of common stock of the Company or
          the combined voting power of the Company's then outstanding securities
          (not including in the securities beneficially owned by such Person any
          securities acquired directly from the Company or its affiliates); or

                    (4) the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

          u.  "Retirement" shall be deemed the reason for the termination by the
Executive of the Executive's employment if such employment is terminated in
accordance with the Company's retirement policy, including early retirement,
generally applicable to its salaried employees.

          v.  "Severance Payments" shall have the meaning set forth in Section 6
hereof.

          w.  "Tax Counsel" shall have the meaning set forth in Section 7
hereof.

          x.  "Term" shall mean the period of time described in Section 2 hereof
(including any extension, continuation or termination described therein).

                                       19
<PAGE>
 

          y.  "Total Payments" shall mean those payments so described in Section
7 hereof.



                              AURA SYSTEMS, INC.


                              By:
                                 ---------------------
                              Name: Gerald S. Papazian
                              Title: President


                              ---------------------------

                              ---------------------------

                              Address:

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                              ---------------------------
                              (Please print carefully)

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