Document:

exhibit 10.48

exhibit
  10.48

SECURITIES PURCHASE
  AGREEMENT

This
  SECURITIES PURCHASE AGREEMENT ("Agreement") is dated as of August 19,
  2004, by and between AURA SYSTEMS, INC., a Delaware corporation (the "Company"),
  and the purchasers identified on the signature page of this Agreement ( each,
  a "Purchaser," and together with such other investors who participate
  in the "Offering" described below, "Purchasers")
  with regard to the following:

RECITALS

A.       
  The Company is offering for sale (the "Offering") to accredited
  investors in a private placement a minimum of Five Million Dollars ($5,000,000.00)
  (the "Minimum Offering Amount") and a maximum of Fifteen Million
  Dollars ($15,000,000) (the "Maximum Offering Amount") of its units ("Units")
  at a purchase price of One Thousand Dollars ($1,000) per Unit, each Unit consisting
  of (i) Two Hundred (200) shares of Series B Preferred Stock (the "Series
  B Shares") having the rights, preferences and privileges set forth in the
  Certificate of Designations of Series B Cumulative Preferred Stock of Aura Systems,
  Inc., annexed as Exhibit "A" attached hereto (the "Certificate of
  Designations"), which Series B Shares are convertible into shares (the "Conversion
  Shares") of the Company's Common Stock, par value $.005 per share (the "Common
  Stock"), and (ii) Series B Warrants in the form of Exhibit "B" attached
  hereto (the "Series B Warrants"), each warrant entitling the holder to
  purchase up to Twelve Thousand Five Hundred (12,500) shares of Common Stock. 
  The Minimum Offering Amount and the Maximum Offering Amount exclude the conversion
  of Intercreditor Creditor Bridge Loans and former Intercreditor Bridge Loans
  (as defined below) described herein.  The Warrants entitle the holder thereof
  to purchase the number of shares (the "Warrant Shares") of Common Stock
  as set forth above. The Series B Shares, the Conversion Shares, the Series B
  Warrants and the Warrant Shares being offered and sold to a Purchaser are each
  referred to as a "Security" and collectively the "Securities."

B.        
  Pursuant to the Offering, the Company desires to issue and sell to Purchasers,
  and Purchasers desires to purchase from the Company, the Units upon and subject
  to the terms and conditions hereinafter set forth.

C.       
  Contemporaneously with the "Closing" under this Agreement,
  the parties will be executing and delivering (i) a Registration Rights Agreement
  in the form attached hereto as Exhibit C (the "Registration Rights
  Agreement"), pursuant to which the Company agrees to provide certain registration
  rights under the Securities Act, the rules and regulations promulgated thereunder
  and applicable state securities laws, (ii) a Shareholder Agreement in the form
  attached hereto as Exhibit D (the "Shareholder Agreement"),
  pursuant to which the holders of the Series B Shares agree to certain voting
  arrangements, and (iii) an Escrow Agreement in the form attached hereto as Exhibit
  I (the "Escrow Agreement") by and among the Company, the Purchasers
  and Interwest Transfer Co, Inc. as Escrow Agent (the "Escrow Agent"), pursuant
  to which a portion of the purchased Units will be placed in escrow with the
  Escrow Agent until the purchase price for such Units has been paid as provided
  herein. 

D.       
  The Company and Purchasers are executing and delivering this Agreement in reliance
  upon the exemption from registration afforded by the provisions of Section 4(2)
  under the Securities Act of 1933 (the "Securities Act"), and
  Regulation D ("Regulation D"), as promulgated by the United
  States Securities and Exchange Commission (the "SEC").

NOW,
  THEREFORE, in consideration of their respective promises contained herein and
  other good and valuable consideration, the receipt and sufficiency of which
  are hereby acknowledged, the Company and Purchasers hereby agree as follows:

ARTICLE I 

PURCHASE AND SALE OF
  SECURITIES

1.1  Purchase of Units. Subject
  to the terms and the satisfaction or waiver of the conditions set forth in this
  Agreement, the Company and each Purchaser agree that on the Closing Date (as
  hereinafter defined) Purchaser will purchase from the Company, and the Company
  will issue and sell to such Purchaser, severally and not jointly with the other
  Purchasers, Units in the aggregate dollar amount equal to the Subscription Amount
  set forth on the signature page of this Agreement next to the Purchaser's name
  (the "Subscription Amount").  

1.2       Form and Terms of Payment.
  At the Closing, subject to the satisfaction or waiver of the conditions set
  forth in Articles VI and VII hereof, each Purchaser shall pay the Subscription
  Amount as follows: Each Purchaser shall pay the full Subscription Amount at
  Closing, which Subscription Amount consists of the Initial Payment (as hereinafter
  defined) and, for Purchasers who do not pay the full Subscription Amount on
  the Closing Date, the Purchaser's Promissory Note in the form attached hereto
  as Exhibit J ("Promissory Note") for the remaining balance of
  the Subscription Amount.  

a.         The Initial Payment shall
  be made by each Purchaser (i) in cash, by wire transfer to the Company in accordance
  with the Company's written wiring instructions, (ii) by credit against the purchase
  price for amounts previously advanced to the Company, in satisfaction thereof,
  and/or (iii) by conversion of outstanding indebtedness of the Company.  The
  type and amount of consideration constituting the Initial Payment for each Purchaser
  is set forth in the Funding Schedule attached hereto as Exhibit E (the
  "Funding Schedule"), and is referred to in this Agreement
  as the "Initial Payment."

b.        
  The Promissory Note for each Purchaser shall be dated the Closing Date, shall
  be in the principal amount equal to the Subscription Amount less the Initial
  Payment as set forth in the Funding Schedule, with principal payments due on
  the principal payment dates set forth for each Purchaser in the Funding Schedule,
  and otherwise containing the terms set forth in the Promissory Note. 

1.3      
  Delivery of Certificates at Closing; Escrow.       At the Closing, subject
  to the satisfaction or waiver of the conditions set forth in Articles VI and
  VII hereof, the Company shall deliver to each Purchaser certificates evidencing
  the number of Units paid for by the Initial Payment (i.e. the amount of the
  Initial Payment divided by the purchase price of One Thousand Dollars ($1,000)
  per Unit).  Certificates evidencing the remaining purchased Units shall be delivered
  by the Company to the Escrow Agent at the Closing, to be held by the Escrow
  Agent pursuant to the terms of the Escrow Agreement.

1.4       Closing Date. Subject
  to the satisfaction or waiver of the conditions set forth in Articles VI and
  VII below, the date and time of the issuance, sale and purchase of the Units
  pursuant to this Agreement shall be the date of this Agreement (the "Closing
  Date").

1.5      
  Option to Purchase the Option Stock.  The Company hereby grants to each
  of the Purchasers, severally and not jointly, an option ("Option") to
  purchase from the Company at any time on or before May 31, 2005, subject to
  the other provisions of this Agreement, including this Section 1.5, additional
  Units, with registration rights (collectively, the "Option Units"), in
  an aggregate amount up to 50% of the Units paid for by such Purchaser by the
  Initial Payment on the Closing Date or as principal payments received by the
  Company under the Promissory Note, and not to exceed, in the aggregate for any
  Purchaser, Fifty Percent (50%) of the number of Units subscribed for by such
  Purchaser under this Agreement as of the Closing Date, at a purchase price of
  One Thousand Dollars ($1,000) per Unit (the "Option Purchase Price")
  as follows:

a.        
  For Purchasers utilizing a Promissory Note to pay for securities, 

(i)        
  such Option shall be exercisable by a Purchaser at its sole election and without
  any obligation to do so, in whole or in part, on any "Note Principal Payment
  Date" (as set forth in the Funding Schedule) for a number of Units not to
  exceed the number of Units obtained by dividing fifty percent (50%) of the corresponding
  "Note Principal Payment Amount" (and any prepayments of principal, if
  any, made since the prior Note Principal Payment Date) by $1,000 (the Unit Price),
  provided however, that on the first Note Principal Payment Date, the Option
  shall be exercisable for an amount equal to (A) 50% of the Note Principal Payment
  Amount plus the amount of the Purchaser's Initial Payment and any prepayments
  of principal under the Promissory Note, (B) divided by 1,000 (the Unit Price).
  

(ii).      
  A Purchaser may exercise such Option by giving the Company written notice of
  such exercise ("Notice of Exercise") no later than five (5) business
  days prior to the applicable Note Principal Payment Date stating the number
  of Option Units proposed to be purchased.  In the event a Purchaser exercises
  such Option, upon and subject to the terms and conditions set forth herein and
  in exchange for payment by of the applicable portion of Option Purchase Price,
  the Company hereby agrees to issue and sell to each such Purchaser, and each
  such Purchaser shall thereby be deemed to agree to purchase from the Company,
  the applicable portion of the Option Units.

(iii)      
  The portion of an Option which was exercisable as of any Note Principal Payment
  Date, to the extent not exercised as of the Note Principal Payment Date, shall
  automatically expire.  If at any time on or after the Closing Date and prior
  to May 31, 2005, the Company shall obtain equity funding (other than pursuant
  to the Offering) or debt funding, or both, in an aggregate amount of not less
  than $2,000,000, then upon written notice by the Company to the Purchaser ("Option
  Termination Notice"), the unexercised portion of the Option shall expire
  at 5:00 p.m., Los Angeles time, on the fifth business day following the date
  of such notice (the "Option Termination Date"). Upon receipt of the Option
  Termination Notice the Option shall be exercisable by a Purchaser at its sole
  election and without any obligation to do so, in whole or in part, on the Option
  Termination Date for a number of Units not to exceed the number of Units obtained
  by dividing fifty percent (50%) of any principal prepayments, if any, made since
  the prior Note Principal Payment Date or to be made on the Option Termination
  Date (plus, if the first Note Principal Payment Date has not occurred prior
  to the Option Termination Date, the Initial Payment) by $1,000 (the Unit Price).

b.
  For Purchasers not utilizing a Promissory Note to pay for securities (i.e. cash,
  conversion of cash advances or conversion of notes) such Option shall be exercisable
  by a Purchaser at its sole election and without any obligation to do so, in
  whole or in part (i) in increments of 50% by December 31, 2004 and 50% by May
  31, 2005 and (ii) subject to earlier termination upon notice as set forth in
  Section 1.5(a)(iii) hereof but with the amount of the option exercisable under
  the circumstances described in Section 1.5(a)(iii) being equal to fifty percent
  (50%) of the unexercised portion of the original option.

c.        
  The terms of purchase of the Option Units at the closing thereof (an "Option
  Closing") thereof shall be the same as for the other Units purchased
  by a Purchaser, except that:

 (i)                 
   The Option Purchase Price shall be paid to the Company in cash
  at the Option Closing which shall be no later than 21 days following the applicable
  Option Termination Date or date of exercise. 

 (ii)               
   The terms and conditions in Sections 6.1 and 7.1 shall not be
  applicable to the Option Closing. 

 (iii)              
   An Option Closing shall be held on the applicable Note Principal
  Payment Date or the Option Termination Date (the "Option Closing Date"),
  as the case may be.

(iv)       At the Option Closing,
  the Company shall deliver to the Purchaser certificates evidencing the number
  of Option Units paid for by the Option Payment (i.e. the amount of the Initial
  Option Payment divided by the purchase price of One Thousand Dollars ($1,000)
  per Unit) against delivery of the full purchase price thereof.

ARTICLE
   II 

  PURCHASER'S REPRESENTATIONS AND WARRANTIES

 2.                    
   Representations, Warranties and Covenants of Each Purchaser. 
  Each Purchaser, severally but not jointly, hereby represents and warrants to
  the Company as follows, on and as of (i) the date of this Agreement, (ii) the
  Closing Date, and (iii) each Option Closing Date: 

2.1                
   Risk of Investment.  Such Purchaser understands that the purchase
  of the Securities involves a high degree of risk including, but not limited
  to, the following:  (i) only investors who can afford the loss of their entire
  investment should consider investing in the Company or the Securities, (ii)
  such Purchaser may not be able to liquidate its investment, (iii) transferability
  of the Securities is limited under applicable securities laws, and (iv) an investment
  in the Securities involves a high degree of risk, including those described
  in the SEC Reports. Such Purchaser acknowledges that the Company is not timely
  in its SEC filings and has a severe working capital deficit. 

2.2                
   Lack of Liquidity.  Such Purchaser confirms that it is able (i)
  to bear the economic risk of this investment, (ii) to hold the Securities for
  an indefinite period of time, and (iii) to afford a complete loss of its investment.

  2.3                
   Purchaser Capacity.  Such Purchaser hereby represents that such
  Purchaser, by reason of such Purchaser's business or financial experience, has
  the capacity to protect such Purchaser's own interests in connection with the
  transactions contemplated by the Agreements. 

2.4                
   Receipt of Information.  Such Purchaser hereby acknowledges that
  such Purchaser has reviewed the SEC Reports, including the Form 10-k for the
  year ended February 28, 2004 which was filed on August 18, 2004 and is available
  on the SEC website www.sec.gov and the Supplemental
  Disclosure Memorandum dated August 19, 2004, a copy of which is attached hereto
  as Exhibit "K," (the "Disclosure Memorandum"), and hereby represents
  that it has been furnished by the Company, during the course of this transaction,
  with all information regarding the Company which such Purchaser has requested,
  has been afforded the opportunity to ask questions of, and to receive answers
  from, duly authorized officers or other representatives of the Company concerning
  the terms and conditions of the Offering and the affairs of the Company and
  has received any additional information which such Purchaser has requested,
  it being understood that neither this nor any other representation or warranty
  by any such Purchaser is intended to reduce any representation or warranty by
  the Company. 

2.5                
   Reliance on Information.  Such Purchaser has relied upon the
  information provided by the Company in the SEC Reports, in this Agreement, the
  Disclosure Memorandum and information obtained in such Purchaser's own independent
  investigation in making the decision to invest in the Securities.  To the extent
  deemed necessary or advisable by it, such Purchaser has retained, at the sole
  expense of such Purchaser, and relied upon, appropriate professional advice
  regarding the investment, tax and legal merits and consequences of the this
  Agreement and an investment in the Securities.

2.6                
   No Solicitation.  Such Purchaser represents that no Securities
  were offered or sold to such Purchaser by means of any form of general solicitation
  or general advertising, and in connection therewith such Purchaser has not (i) received
  or reviewed any advertisement, article, notice or other communication published
  in a newspaper or magazine or similar media or broadcast over television or
  radio whether closed circuit, or generally available, or (ii) attended any seminar
  meeting or industry investor conference whose attendees were invited by any
  general solicitation or general advertising. 

2.7                
   Registration.  Such Purchaser hereby acknowledges that the Offering
  has not been reviewed by the Securities and Exchange Commission or any state
  regulatory authority, since the Offering is intended to be exempt from the registration
  requirements of Section 5 of the Securities Act pursuant to Section 4(2) and
  Regulation D thereunder.  Such Purchaser shall not sell or otherwise transfer
  the Securities unless a subsequent disposition is registered under the Securities
  Act or is exempt from such registration. 

2.8                
   Purchase for Own Account.  Such Purchaser understands that the
  Securities have not been registered under the Securities Act by reason of a
  claimed exemption under the provisions of the Securities Act which depends,
  in part, upon such Purchaser's investment intention.  In this connection, such
  Purchaser hereby represents that it is purchasing Securities for its own account
  for investment and not with a view toward the resale or distribution to others
  or for resale in connection with any distribution or public offering (within
  the meaning of the Securities Act), nor with any present intention of distributing
  or selling the same and such Purchaser has no present or contemplated agreement,
  undertaking, arrangement, obligation or commitment providing for the disposition
  thereof.  Such Purchaser was not formed for the purpose of purchasing the Securities. 
  Notwithstanding the foregoing, the disposition of such Purchaser's property
  shall be at all times within such Purchaser's own control, and such Purchaser's
  right to sell or otherwise dispose of all or any part of the Securities, including
  without limitation pursuant to any registration contemplated by the Registration
  Rights Agreement, shall not be prejudiced; provided that such Purchaser complies
  with applicable securities laws.  Nothing herein shall prevent the distribution
  of any Securities to any member, partner or stockholder, former member, partner,
  or stockholder of such Purchaser in compliance with the Securities Act and applicable
  state securities laws.  

2.9                
   Holding Period.  Such Purchaser understands that the Securities
  are subject to significant limitations on resale under applicable securities
  laws.  Such Purchaser understands that reliance upon Rule 144 under the Securities
  Act for resales of the Securities requires, among other conditions, a one-year
  holding period prior to the resale (such resale after such one year holding
  period being further subject to sales volume limitations).  Such Purchaser understands
  and hereby acknowledges that the Company is under no obligation to register
  any of the Securities under the Securities Act, any applicable state securities
  or "blue sky" laws or any applicable foreign securities laws, except as set
  forth in the Registration Rights Agreement.   

2.10            
   Legends.  Each such Purchaser consents to the placement of the
  legend set forth below, or a substantial equivalent thereof, on any certificate
  or other document evidencing the Securities: 

THE SECURITIES REPRESENTED
  BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
  ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES
  LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE
  TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
  TO THE SECURITIES UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE SECURITIES
  ACT.  ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE
  SECURITIES LAWS AND THE LAWS OF OTHER APPLICABLE JURISDICTIONS.

Such
  Purchaser further consents to the placement of one or more restrictive legends
  on any Securities issued in connection with this Offering as may be required
  by applicable securities laws.  Such Purchaser is aware that the Company will
  make a notation in its appropriate records with respect to the restrictions
  on the transferability of the Securities. 

 2.11            
   Residence of Purchaser.  Such Purchaser hereby represents that
  the address of such Purchaser furnished by such Purchaser on the signature page
  hereof is such Purchaser's principal business address and the residence of Purchaser
  furnished by Purchaser on the signature page hereof is such Purchaser's correct
  residence. 

2.12            
   Authorization; Enforceability.  Such Purchaser represents that
  such Purchaser has full power and authority (corporate, statutory and otherwise)
  to execute and deliver the Agreements and to purchase the Securities.  The Agreements
  have been duly executed and delivered by such Purchaser and constitute the legal,
  valid and binding obligations of such Purchaser, enforceable against such Purchaser
  in accordance with their terms, subject to laws of general application relating
  to bankruptcy, insolvency and the relief of debtors and rules of law governing
  specific performance, injunctive relief or other equitable remedies, and to
  limitations of public policy. 

2.13               
   Organization, Good Standing Qualification.  If an entity, such
  Purchaser is duly organized, validly existing and in good standing under the
  laws of the jurisdiction of its organization. 

2.14               
   Brokers.  Such Purchaser has not retained any person as a broker,
  finder or intermediary, directly or indirectly, and shall indemnify and hold
  harmless the Company from and against all fees, commissions or other payments
  owing to any Person acting or purporting to act on behalf of such Purchaser,
  directly or indirectly, as a broker, finder or intermediary.  

2.15               
   Accredited Investor.  Such Purchaser represents that it is an
  "accredited investor" as such term is defined in Rule 501 of Regulation D, which
  definition is set forth in Exhibit "L" attached to this Agreement.

2.16               
   Reliance on Representation and Warranties.  Such Purchaser understands
  that the Securities are being offered and sold to the undersigned in reliance
  on specific exemptions from the registration requirements of federal and state
  securities laws and that the Company is relying upon the truth and accuracy
  of the representations, warranties, agreements, acknowledgments and understandings
  of such Purchaser set forth herein in order to determine the applicability of
  such exemptions and the suitability of such Purchaser to acquire the Securities.

ARTICLE
   III 

  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 3.                       
   Representations, Warranties and Covenants of the Company. 
  The Company hereby represents, warrants and covenants to each Purchaser as follows,
  on and as of (i) the date of this Agreement, (ii) the Closing Date, and (iii)
  each Option Closing Date:
 3.1.                 
   Accuracy of Reports.  All reports required to be filed by the
  Company since and including the filing of the Company's Form 10-K for the fiscal
  year ended February 28, 2003  (collectively, the "SEC Reports")
  have been duly filed with the Securities and Exchange Commission,  except (i)
  certain of the SEC Reports were filed late and (ii) as of the date of this Agreement,
  the Company has not filed its Form 10-Q for the quarter ended May 31, 2004 which
  report will also be late. Except as set forth in the Schedule of Exceptions
  attached as Exhibit C to the Amendment and Conversion Agreement (as hereinafter
  defined): as of their respective dates, the SEC Reports complied in all material
  respects with the requirements of the Securities Act or the Securities Exchange
  Act, as the case may be, and the rules and regulations of the Securities and
  Exchange Commission promulgated thereunder applicable to the SEC Reports;  none
  of the SEC Reports contained any untrue statement of a material fact or omitted
  to state a material fact required to be stated therein or necessary in order
  to make the statements therein, in light of the circumstances under which they
  were made, not misleading; and the financial statements of the Company included
  in the SEC Reports complied as of their respective dates of filing in all material
  respects with applicable accounting requirements and the published rules and
  regulations of the Securities and Exchange Commission with respect thereto,
  have been prepared in accordance with generally accepted accounting principles
  (except, in the case of unaudited statements, as permitted by Regulation S-X
  promulgated by the Securities and Exchange Commission) applied on a consistent
  basis during the periods involved (except as may be indicated in the notes thereto),
  and fairly present the financial position of the Company as of the dates thereof
  and the results of its operations and cash flows for the periods then ended
  (subject, in the case of unaudited statements, to normal year-end audit adjustments). 
   

3.2.                 
   Organization, Good Standing and Qualification.  The Company is
  a corporation duly organized, validly existing and in good standing under the
  laws of the State of Delaware and has full corporate power and authority to
  conduct its business. 

3.3.                 
   Valid Issuance and Voting Rights.  The Securities have been duly
  and validly authorized and, when issued and/or paid for pursuant to the Agreements,
  will be validly issued, fully paid and non-assessable.  Except as set forth
  in the Agreements and as otherwise required by law, there are no restrictions
  upon the voting or transfer of the Securities pursuant to the Certificate of
  Incorporation, By-laws or other governing documents of the Company or any agreement
  or other instruments to which the Company is a party or by which the Company
  is bound. 

3.4.                 
   Authorization; Enforceability. The Company has all corporate
  right, power and authority to enter into the Agreements and to consummate the
  transactions contemplated by the Agreements.  The Agreements have been duly
  executed and delivered by the Company and constitute legal, valid and binding
  obligations of the Company, enforceable against the Company in accordance with
  their terms, subject to laws of general application relating to bankruptcy,
  insolvency and the relief of debtors and rules of law governing specific performance,
  injunctive relief or other equitable remedies, and to limitations of public
  policy.   

3.5.                 
   No Conflict; Governmental Consents.                           
  

(a)     The execution and delivery by
  the Company of the Agreements and the consummation of the transactions contemplated
  by the Agreements will not result in the violation by the Company of any law,
  statute, rule, regulation, order, writ, injunction, judgment or decree of any
  court or governmental authority to or by which the Company is bound, or of any
  provision of the Certificate of Incorporation, By-laws or other governing documents
  of the Company, and will not conflict with, or result in a breach or violation
  of, any of the terms or provisions of, or constitute (with due notice or lapse
  of time or both) a default under, any lease, loan agreement, mortgage, security
  agreement, trust indenture, securities purchase agreement, registration rights
  agreement or other agreement or instrument to which the Company is a party or
  by which it is bound or to which any of its properties or assets is subject,
  nor result in the creation or imposition of any lien upon any of the properties
  or assets of the Company, except for such violations, conflicts, breaches or
  violations which individually or in the aggregate will not have a material adverse
  effect on the Company.  The issuance and/or sale of the Securities contemplated
  by the Agreements will not give rise to any preemptive rights, rights of first
  refusal or anti-dilution pricing adjustment rights on behalf of any Person.

(b)          
  No consent, approval, authorization or other order of any governmental authority
  or other third party is required to be obtained by the Company in connection
  with the authorization, execution and delivery of the Agreements or with the
  authorization, issue and/or sale of the Securities, except such filings as may
  be required to be made with the Securities and Exchange Commission, or with
  any state or foreign blue sky or securities regulatory authority.  The Company
  shall make all such filings on a timely basis.  The Offering is exempt from
  the registration requirements of the Securities Act and applicable state or
  foreign blue sky or securities laws.  The Company is eligible to register the
  resale of the Securities as a secondary offering on a registration statement
  on Form S-1 under the Securities Act as contemplated (as an alternative form
  to Form S-3) by the Registration Rights Agreement.

 3.6.                 
   Licenses.  The Company has all licenses, permits and other governmental
  authorizations currently required for the conduct of its business or ownership
  of properties and is in all material respects in compliance therewith.

3.7.                 
   Capitalization.  The total authorized capital stock of the Company
  on the Closing Date (after giving effect to the transactions contemplated by
  the Agreements and any related transactions) consists of (i) 500,000,000 shares
  of Common Stock, subject to increase as contemplated herein, and (ii) 10,000,000
  shares of preferred stock, par value $.005 (the "Preferred Stock"). 
  Of such authorized Common Stock, 430,913,159 shares are issued and outstanding
  on the Closing Date.  Of such authorized Preferred Stock, 591,110 shares of
  Series A Preferred Stock are issued and outstanding on the Closing Date and
  no Series B Shares are outstanding (before giving effect to the transactions
  contemplated by the Agreements and any related transactions).  Except for (A)
  56,342,765 shares of Common Stock issuable upon exercise of stock options granted
  under the Company's stock option plans, (B) 54,457,190 shares of Common Stock
  issuable upon exercise of outstanding warrants, (C) the Securities issuable
  pursuant to the Amendment and Conversion Agreement or former Intercreditor Bridge
  Loans pursuant to this Agreement  (D) the Securities issuable pursuant to the
  Agreements, (E) the securities described in the Funding Schedule issuable in
  connection with the Settlement Agreement, the Real Estate Documents and to Meehan,
  (F) 13,790,924 shares of common stock to be issued to certain investors as described
  in the Company's SEC Reports and (G) 1,943,276 shares of common stock which
  also constitute Penalty Shares to be issued to holders who did not join the
  lawsuit, there are no outstanding securities convertible into or exchangeable
  for capital stock of the Company, there are no shares of capital stock of the
  Company that have been reserved for issuance and there are no outstanding options,
  warrants or other rights to subscribe for or purchase from the Company any shares
  of capital stock of the Company or any securities convertible into or exchangeable
  for capital stock of the Company as of the Closing Date (after giving effect
  to the transactions contemplated by the Agreements and any related transactions).
   

3.8.                 
   Brokers.  The Company has not retained any person as a broker,
  finder or intermediary, directly or indirectly, and shall indemnify and hold
  harmless the Purchasers from and against all fees, commissions or other payments
  owing to any Person acting or purporting to act on behalf of the Company, directly
  or indirectly, as a broker, finder or intermediary.  

3.9       Conversion of Intercreditor
  Bridge Loans.  Three Million Five Hundred Thousand Dollars ($3,500,000)
  of the Intercreditor Bridge Loans and former Intercreditor Bridge Loans have
  been converted into Series B Shares and Series B Warrants at or prior to the
  Closing, consisting of (i) Two Million Five Hundred Thousand Dollars ($2,500,000)
  of Intercreditor Bridge Loans which have been converted by the Intercreditor
  Bridge Lenders pursuant to an Amendment and Conversion Agreement in the form
  attached hereto as Exhibit F (the "Amendment and Conversion Agreement")
  and (ii) One Million Dollars ($1,000,000) of former Intercreditor Bridge Loans
  held by certain of the Purchasers which have been converted by them pursuant
  to this Agreement.

3.10     Extension of Intercreditor
  Bridge Loans.  The stated maturity of the remaining Intercreditor Bridge
  Loans has been extended to the first anniversary of the Closing Date pursuant
  to the Amendment and Conversion Agreement.  

3.11     Resolution of Real Estate
  Situation.  The Company and/or Aura Realty, Inc., a wholly owned subsidiary
  of the Company, have entered into (i) the Stocks Agreement dated as of May 30,
  2004 between certain parties to purchase the real estate and (ii) an Agreement
  dated as of May 28, 2004 to divide the proceeds of the sale of the real estate
  and (iii) upon closing of the sale which is currently in escrow, have agreed
  to enter into a Lease of the real estate in the forms attached hereto as Exhibit
  G (collectively, the "Sale-Leaseback Agreement")

3.12     Resolution of Former Management
  Situation.  The Company has entered into a global settlement agreement with
  former management pursuant to a Settlement Agreement in the form attached hereto
  as Exhibit H ( the "Settlement Agreement")  

3.13     Minimum Subscriptions. 
  At or prior to the Closing, the Company shall have sold Units in the Offering
  for an aggregate minimum Subscription Amount of Five Million Dollars  ($5,000,000),
  excluding the conversion of Intercreditor Bridge Loans pursuant to the Amendment
  and Conversion Agreement and conversion of former Intercreditor Bridge Loans
  pursuant to this Agreement. 

ARTICLE IV

COVENANTS

4.1        Best Efforts.
  Purchasers and the Company shall use their best efforts to timely satisfy each
  of the conditions precedent to their respective obligations described in Articles
  VI and VII, respectively, of this Agreement.

4.2        Securities Laws. The
  Company shall take such action as is necessary to sell the Securities to Purchaser
  in accordance with applicable securities laws of the states of the United States,
  and shall provide evidence of any such action so taken to Purchaser at its request.
  Without limiting any of the Company's obligations under this Agreement, the
  Registration Rights Agreement or the Securities, from and after the date of
  the Closing, neither the Company nor any person acting on its behalf shall take
  any action which would adversely affect any exemptions from registration under
  the Securities Act with respect to the transactions contemplated hereby.  

4.3      
  Use of Proceeds. The Company shall use the cash proceeds from the sale
  of the Securities for (i) payments to cure arrears on real estate defaults,
  (ii) the payment of $180,000 to Neal F. Meehan in satisfaction of the Company's
  severance payment obligation, and (iii) payment in satisfaction of the Settlement
  Agreement and (iv) working capital.

4.4      
  Increase in Authorized Common Stock.  Effective as of the Closing Date,
  the Company shall use its best efforts to take all necessary action to call
  a shareholders meeting and increase its authorized but unissued Common Stock
  as soon as practicable.  

4.5       Expenses. The Company
  shall pay to each Purchaser, or at its direction, at the Closing (or, with the
  prior agreement of the Company, such Purchaser may withhold from the portion
  of the Subscription Amount otherwise payable by such Purchaser at the Closing),
  the amount of fees and expenses of legal counsel to such Purchaser incurred
  in connection with the negotiation, preparation, execution, and delivery of
  this Agreement and the other Agreements, up to a total maximum amount for all
  Purchasers combined of Ten Thousand Dollars ($10,000). Other than as set forth
  in this Section 4.5 or the other Agreements, each party shall pay the fees and
  expenses of its advisors, counsel, accountants and other experts, if any, and
  all other expenses incurred by such party incident to the negotiation, preparation,
  execution, delivery and performance of this Agreement and the other Agreements.

4.6       D&O Insurance.  
  Effective on the Closing Date and for a period of five years, the Company shall
  either (i) maintain in effect directors and officers liability insurance (covering
  both current and former officers and directors) or (ii) purchase tail coverage
  covering both current and former officers and directors in such amounts which
  are not less than those currently in effect, . Each member of the Board of Directors
  as of August 17, 2004 is expressly made a third party beneficiary of this provision.

4.7      
  Indemnification.    The parties acknowledge that the Company has an indemnification
  agreement in place with each of its directors and each party acknowledges that
  these agreements remain in full force and effect. Further, the Company agrees
  that these agreements shall remain in effect and not be terminated.  Each member
  of the Board of Directors as of August 17, 2004 is expressly made a third party
  beneficiary of this provision.

ARTICLE
   V 

CERTAIN
  DEFINITIONS

   5.                 
   Certain Definitions.       For the purposes of this Agreement
  the following terms have the respective meanings set forth below:

5.1             
   "Agreements" means this Agreement, the Promissory Notes, the
  Registration Rights Agreement, the Shareholder Agreement, the Escrow Agreement
  and the Certificate of Designations. 

 5.2             
   "Intercreditor Bridge Loans" means the loans described in the
  Amendment and Conversion Agreement. 

5.3             
   "Intercreditor Lenders" means the Lenders named in the Amendment
  and Conversion Agreement. 

5.4             
   "Person" means any individual, sole proprietorship, partnership,
  limited liability company, joint venture, trust, unincorporated organization,
  association, corporation, institution, public benefit corporation, firm, joint
  stock company, estate, entity or governmental agency. 

5.5             
   "Regulation D" means Regulation D promulgated under the Securities
  Act. 

5.6             
   "Securities Act" means the Securities Act of 1933, as amended,
  or any similar federal law then in force. 

5.7             
   "Securities Exchange Act" means the Securities Exchange Act of
  1934, as amended, or any similar federal law then in force. 

5.8             
   "Securities and Exchange Commission" means the U.S. Securities
  and Exchange Commission or any governmental body or agency succeeding to the
  functions thereof. 

ARTICLE
   VI 

  CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL UNITS

6. 1        Conditions to the Closing. 
  The obligation of the Company hereunder to issue and sell the Series B Shares
  and Series B Warrants comprising the Units to a Purchaser at the Closing is
  subject to the satisfaction, as of the date of the Closing, of each of the following
  conditions, provided that these conditions are for the Company's sole benefit
  and may be waived by the Company at any time in its sole discretion:

( i )         Such
  Purchaser shall have executed the signature page to this Agreement, the Registration
  Rights Agreement, the Shareholder Agreement and the Escrow Agreement and shall
  have delivered the same.

( ii )        Such
  Purchaser shall have delivered the Initial Payment and its Promissory Note,
  if applicable, in the aggregate amount of the Subscription Amount.

( iii )       The
  representations and warranties of such Purchaser shall be true and correct as
  of each date when made as though made at that time, and such Purchaser shall
  have performed, satisfied and complied in all material respects with the covenants
  and agreements required by this Agreement to be performed or complied with by
  such Purchaser at or prior to the Closing.  Completion of the Closing shall
  constitute certification of these matters by such Purchaser.  

( iv )       No statute,
  rule, regulation, executive order, decree, ruling or injunction shall have been
  enacted, entered, promulgated or endorsed by any court or governmental authority
  of competent jurisdiction or any self-regulatory organization having authority
  over the matters contemplated hereby which restricts or prohibits the consummation
  of any of the transactions contemplated by this Agreement.

6. 2       
  Conditions to Option Closings. The obligation of the Company hereunder
  to issue and sell the Series B Shares and Series B Warrants comprising the Option
  Units to a Purchaser at any Option Closing is subject to the satisfaction, as
  of the date of the Option Closing Date, of each of the following conditions,
  provided that these conditions are for the Company's sole benefit and may be
  waived by the Company at any time in its sole discretion:

( i )         The Closing
  shall have been consummated. 

(ii)        The Purchaser
  shall not be in default under its Promissory Note.

( ii i)       Such Purchaser
  shall have delivered the applicable Option Purchase Price together with such
  other payments due and payable under the Promissory Note as of the Option Closing
  Date.

(iv)       The representations
  and warranties of such Purchaser shall be true and correct as of each date when
  made as though made at that time, and such Purchaser shall have performed, satisfied
  and complied in all material respects with the covenants and agreements required
  by this Agreement to be performed or complied with by such Purchaser at or prior
  to the date of the Option Closing.  Completion of an Option Closing shall constitute
  certification of these matters by such Purchaser.

(v)        No statute,
  rule, regulation, executive order, decree, ruling or injunction shall have been
  enacted, entered, promulgated or endorsed by any court or governmental authority
  of competent jurisdiction or any self-regulatory organization having authority
  over the matters contemplated hereby which prohibits the consummation of any
  of the transactions contemplated by this Agreement.

ARTICLE
   VII 

  CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE UNITS

7. 1        Conditions to the Closing.
  The obligation of a Purchaser hereunder to purchase the Series B Shares and
  Series B Warrants comprising the Units at the Closing is subject to the satisfaction
  of each of the following conditions, provided that these conditions are for
  each Purchaser's sole benefit and may be waived by a Purchaser at any time in
  a Purchaser's sole discretion: 

( i )         The
  Company shall have executed the signature page to this Agreement, the Registration
  Rights Agreement and the Escrow Agreement and delivered the same.

( ii )        The
  Company shall have delivered to such Purchaser and the Escrow Agent the Series
  B Shares and Series B Warrants comprising the Units being purchased by such
  Purchaser at the Closing, registered in the name of such Purchaser.

 ( iii )      The
  representations and warranties of the Company shall be true and correct as of
  each date when made as though made at that time and the Company shall have performed,
  satisfied and complied with the covenants and agreements required by this Agreement
  to be performed or complied with by the Company at or prior to the Closing.  Completion of the Closing shall
  constitute certification of these matters by the Company.

( iv )       No statute, rule, regulation,
  executive order, decree, ruling or injunction shall have been enacted, entered,
  promulgated or endorsed by any court or governmental authority of competent
  jurisdiction or any self-regulatory organization having authority over the matters
  contemplated hereby which prohibits the consummation of any of the transactions
  contemplated by this Agreement.

  (v)      Carl Albert,
  James S. Harrington and Lawrence Diamant shall have resigned as directors of
  the Company, the remaining directors shall have elected Raymond Yu, Dr. Fred
  Balister and Izar Fernbach, as three of the four nominees pursuant to the Shareholder
  Agreement, to serve in their place and stead as three of the four directors
  to be elected by the Series B Shares, effective as of the date of the Closing.

(vi)       Neal F.
  Meehan shall have (a) delivered his written resignation as Chief Executive Officer
  effective on the Closing Date and (b) agreed to a severance payment of $180,000
  payable in four equal monthly installments of $45,000 beginning on the Closing
  Date.

(vii)      The Company
  shall have filed the Certificate of Designations with the Delaware Secretary
  of State.

7.2       
  Conditions to the Option Closings. The obligation of a Purchaser hereunder
  to purchase the Series B Shares and Series B Warrants comprising the Option
  Units on each Option Closing Date is subject to the satisfaction of each of
  the following conditions as of the Option Closing Date, provided that these
  conditions are for a Purchaser's sole benefit and may be waived by a Purchaser
  at any time in Purchaser's sole discretion: 

( i )        
  The Closing shall have been consummated. 

( ii )       
  The Company shall have delivered to such Purchaser the Series B Shares and Series
  B Warrants comprising the Option Units being purchased by such Purchaser at
  the Option Closing, registered in the name of such Purchaser.

( iii )      
  The representations and warranties of the Company shall be true and correct
  as of each date when made as though made at that time and the Company shall
  have performed, satisfied and complied with the covenants and agreements required
  by this Agreement to be performed or complied with by the Company at or prior
  to the date of the applicable Option Closing.  Completion of an Option Closing
  shall constitute certification of these matters by the Company.

( iv
  )       No statute, rule, regulation, executive order, decree, ruling
  or injunction shall have been enacted, entered, promulgated or endorsed by any
  court or governmental authority of competent jurisdiction or any self-regulatory
  organization having authority over the matters contemplated hereby which prohibits
  the consummation of any of the transactions contemplated by this Agreement.

    

ARTICLE
   VIII 

  GOVERNING LAW; MISCELLANEOUS

8. 1        Governing
  Law; Jurisdiction. This Agreement shall be governed by and construed
  in accordance with the internal laws of the State of California applicable to
  contracts made and to be performed in the State of California. The parties hereto
  irrevocably consent to the jurisdiction of the United States federal courts
  located in the Central District in the State of California and the state courts
  located in the County of Los Angeles in the State of California in any suit
  or proceeding based on or arising under this Agreement or the transactions contemplated
  hereby and irrevocably agree that all claims in respect of such suit or proceeding
  shall be determined in such courts. The parties irrevocably waive the defense
  of an inconvenient forum to the maintenance of such suit or proceeding. The
  parties further agree that service of process upon a party mailed by the first
  class mail shall be deemed in every respect effective service of process upon
  such party in any suit or proceeding arising hereunder. Nothing herein shall
  affect a party's right to serve process in any other manner permitted by law.
  The parties hereto agree that a final non-appealable judgment in any such suit
  or proceeding shall be conclusive and may be enforced in other jurisdictions
  by suit on such judgment or in any other lawful manner. 

8. 2        Counterparts.  This
  Agreement may be executed in any number of counterparts and, notwithstanding
  that any of the parties did not execute the same counterpart, each of such counterparts
  (or facsimile copies thereof) shall, for all purposes, be deemed an original,
  and all such counterparts shall constitute one and the same instrument binding
  on all of the parties hereto.  Delivery of an executed counterpart of a signature
  page to this Agreement by facsimile shall be as effective as delivery of a manually
  executed counterpart of a signature page of this Agreement.

8. 3        Headings. The headings
  of this Agreement are for convenience of reference and shall not form part of,
  or affect the interpretation of, this Agreement.

8. 4        Severability.  In
  the event that any provision of this Agreement or the application of any provision
  hereof is declared to be illegal, invalid or otherwise unenforceable by a court
  of competent jurisdiction, the remainder of this Agreement shall not be affected
  except to the extent necessary to delete such illegal, invalid or unenforceable
  provision unless the provision held invalid shall substantially impair the benefit
  of the remaining portion of this Agreement. 

8. 5        Scope of Agreement; Amendments.
  

(a)        This Agreement and the other Agreements set forth
  the entire agreement and understanding between the parties as to the subject
  matter hereof and thereof and supersede all prior discussions, negotiations,
  agreements and understandings (oral or written) with respect to such subject
  matter.  This Agreement or any provision hereof may be (i) amended only by mutual
  written agreement of the Company and the Purchasers or (ii) waived only by written
  agreement of the waiving party.  No course of dealing between or among the parties
  will be deemed effective to modify, amend or discharge any part of this Agreement
  or any rights or obligations of any party under or by reason of this Agreement.
(b)       
  After an amendment or waiver becomes effective, it shall bind each holder of
  any Securities, regardless of whether such holder held such Securities at the
  time such amendment or waiver became effective, or subsequently acquired such
  Securities 

8. 6        Notice.     All notices,
  demands and other communications to be given or delivered under or by reason
  of the provisions of this Agreement shall be in writing and shall be deemed
  to duly given and received when delivered personally or transmitted by facsimile,
  one business day after being deposited for next-day delivery with a nationally
  recognized overnight delivery service, or three business days after being deposited
  as first class mail with the United States Postal Service, all charges or postage
  prepaid, and properly addressed to the party to receive the same at the address
  indicated below or at such other address as such party may have designated by
  advance written notice to the other parties. The addresses for such communications
  shall be:

If to the Company:

Aura Systems, Inc.

  2335 Alaska Avenue

  El Segundo, CA  90245

  Attention: Chief
  Financial Officer

  Facsimile No.: (310)
  643-8719

  

  

If to a Purchaser:

To the address designated
  by each Purchaser on the signature page of this Agreement, with a copy (which
  shall not constitute notice hereunder) to its counsel designated on the signature
  page, if any.

   

Each
  party shall provide notice to the other parties of any change in address. 

8. 7        Successors and Assigns.
  This Agreement shall be binding upon and inure to the benefit of the Company
  and its successors and assigns and each Purchaser and its successors and assigns. 
  The provisions hereof which are for each Purchaser's benefit as purchaser or
  holder of the Securities are also for the benefit of, and enforceable by, any
  subsequent holder of such Securities.

8. 8        Third Party Beneficiaries.
  Except as set forth in Sections 4.6 and 4.7 hereof, this Agreement is intended
  for the benefit of the parties hereto and their respective permitted successors
  and assigns and is not for the benefit of, nor may any provision hereof be enforced
  by, any other person.

8. 9        Survival. The representations
  and warranties of each Purchaser and the Company shall survive the Closings
  hereunder and the covenants of the parties shall survive the Closings.

8.10    
  Further Assurances. Each party shall do and perform, or cause to be done
  and performed, all such further acts and things, and shall execute and deliver
  all such other agreements, certificates, instruments and documents, as the other
  parties may reasonably request in order to carry out the intent and accomplish
  the purposes of this Agreement and the consummation of the transactions contemplated
  hereby.

8.11    
  Remedies. No provision of this Agreement providing for any remedy to
  any Purchaser shall limit any remedy which would otherwise be available to such
  Purchaser at law or in equity. Nothing in this Agreement shall limit any rights
  any Purchaser may have with any applicable federal or state securities laws
  with respect to the investment contemplated hereby. The Company acknowledges
  that a breach by it of its obligations hereunder will cause irreparable harm
  to a Purchaser and that the remedy at law for any such breach may be inadequate.
  The Company therefore agrees that, in the event of any such and breach or threatened
  breach, a Purchaser shall be entitled, in addition to all other available remedies,
  to an order of specific performance, without the necessity of showing economic
  loss and without any bond or other security being required.

8.12    
  Termination. In the event that the Closing shall not have occurred on
  or 

before
  August 31, 2004, unless the parties agree otherwise, this Agreement shall terminate.
  

8.13    
  Directly or Indirectly. Where any provision in this Agreement refers
  to action to be taken by any person, or which such person is prohibited from
  taking, such provision shall be applicable whether the action in question is
  taken directly or indirectly by such person.

8.14    
  Failure or Indulgence Not Waiver. No failure or delay on the part of
  a party in the exercise of any power, right or privilege hereunder shall operate
  as a waiver thereof, nor shall any single or partial exercise of any such power,
  right or privilege preclude other or further exercise thereof or of any other
  right, power or privilege.

8.15    
  Publicity.  As soon as is practicable following the Closing, the Company
  shall issue a press release with respect to the transactions contemplated hereby. 
  The Company shall provide a draft of the press release to each Purchaser for
  review and comment not less than 24 hours prior to its release to the public. 
  

 8.16         
   Independent
  Nature of Purchasers' Obligations and Rights.  The obligations of a Purchaser
  under any of the Agreements are several and not joint with the obligations of
  any other Purchasers, and each Purchaser shall not be responsible in any way
  for the performance of the obligations of any other Purchasers under any of
  the Agreements. The decision of each Purchaser to purchase Securities pursuant
  to this Agreement has been made by such Purchaser independently of any other
  Purchasers and independently of any information, materials, statements or opinions
  as to the business, affairs, operations, assets, properties, liabilities, results
  of operations, condition (financial or otherwise) or prospects of the Company
  or of any subsidiary which may have been made or given by any other Purchasers
  or by any agent or employee of any other Purchasers, and each Purchaser and
  its agents and employees shall have no liability to any other Purchasers (or
  any other person) relating to or arising from any such information, materials,
  statements or opinions.  Each Purchaser acknowledges that it has the sophistication
  and ability to look out for its own interests and has independently made its
  own decision to purchase the Securities pursuant to this Agreement based upon
  such evaluation and information as it has deemed appropriate. Nothing contained
  herein or in any of the Agreements, and no action taken by any Purchaser pursuant
  thereto, shall be deemed to constitute the Purchasers as a partnership, an association,
  a joint venture or any other kind of entity, or create a presumption that the
  Purchasers are in any way acting in concert or as a group with respect to the
  obligations contained in or the transactions contemplated by the Agreements.
  Each Purchaser acknowledges that no other Purchasers have acted as agent for
  such Purchaser in connection with making its investment hereunder and that no
  other Purchasers will be acting as agent of such Purchaser in connection with
  monitoring its investment or making any future investment decisions. Each Purchaser
  shall be entitled to independently protect and enforce its rights, including
  without limitation, the rights arising out of this Agreement or out of the other
  Agreements, and it shall not be necessary for any other Purchasers to be joined
  as an additional party in any proceeding for such purpose.  

8.17         
  Legal Representation.   

(a)               
   Each Purchaser acknowledge that (i) ICM Asset Management, Inc.
  has retained Paine, Hamblen, Coffin, Brooke & Miller LLP to represent only
  ICM Asset Management, Inc. and its affiliates (collectively "ICM") in connection
  with the Agreements and the transactions contemplated thereby, (ii) the
  interests of ICM may not necessarily coincide with the interests of any Purchaser
  or any other person, (iii) Paine, Hamblen, Coffin, Brooke & Miller
  LLP does not represent any person other than ICM, and (iv) each Purchaser
  has consulted with, or has had an opportunity to consult with, its own legal
  counsel and has not relied on Paine, Hamblen, Coffin, Brooke & Miller LLP
  for legal representation or advice in connection with the Agreements and the
  transactions contemplated thereby. 

 (b)              
     Each Purchaser acknowledges that (i) the Company has retained 
  Guth|Christopher LLP to represent only the Company in connection with the Agreements
  and the transactions contemplated thereby, (ii) the interests of the Company
  may not necessarily coincide with the interests of any Purchaser or any other
  person, (iii) Guth|Christopher LLP does not represent any person other
  than the Company, and (iv) each Purchaser has consulted with, or has had
  an opportunity to consult with, its own legal counsel and has not relied on 
  Guth|Christopher LLP for legal representation or advice in connection with the
  Agreements and the transactions contemplated thereby. 

8.18         
   Attorneys' Fees. 
  If any action at law or in equity is necessary to enforce or interpret the terms
  of this Agreement, the prevailing party shall be entitled to reasonable attorneys'
  fees, costs and necessary disbursements in addition to any other relief to which
  such party may be entitled.

8.19         
   Additional Investors.    
  Purchasers agree that at any time after the Closing until December 31, 2004,
  the Company shall have the right to continue the Offering to additional investors,
  up to the Maximum Offering Amount, provided that the terms and conditions for
  such investors are in no event more favorable to such investors than, the terms
  and conditions contained in this Agreement and provided that such purchases
  must be paid in full at the time of closing..

*** [NEXT PAGE IS SIGNATURE PAGE]***

  IN WITNESS WHEREOF, the undersigned Purchasers and the Company have caused this
  Securities Purchase Agreement to be duly executed as of the date first above
  written.

                                   
  COMPANY:

AURA SYSTEMS, INC.

By:_________________________________  

Name:                                                
                

Title:                                                                
    

[SIGNATURES
  OF PURCHASERS CONTINUED ON FOLLOWING PAGES]

  

  

   

	
    	
      "PURCHASER"

    
	
    	
       American friends
        of Karen Chava Bnai Levi

    
	
    	
    
	
    	
             By  _______________________________

    
	
    	
             Name: 
        ____________________________

    
	
    	
             Title:   
        ____________________________

    
	
    	
    
	
    	
      Subscription
        Amount (USD): $900,000.00

    
	
    	
      (900 Units @
        $1,000 per Unit)

    
	
    	
    
	
    	
      Address:  Aries
        Group attn: Z. Kurtzman

    
	
    	
                      
        12100 Wilshire Blvd. Suite 705 

    
	
    	
                      
        Los Angeles, CA 90025

    
	
    	
      Facsimile: (310)
        820-4118

    
	
    	
                   
        

      Residence:
        Canada

      "PURCHASER"

      TripleNet, LLC

      By ______________________________    
        Name: ___________________________

        Title:   ___________________________

      Subscription Amount (USD):  $500,000

        (500 Units @ $1,000 per Unit)

      Address:  800 W. Wieuca Road

                        Suite 150

                        Atlanta,
        GA 30342

      Facsimile: 
        (___) ___-____

      Residence: Georgia

    
	
    	
    

 
	
    	
      "PURCHASER"

    
	
    	
      _______________________________

    
	
    	
      Edgar Appleby

       

    
	
    	
      Subscription
        Amount (USD): $224,750.00

    
	
    	
      (224.75 Units
        @ $1,000 per Unit)

    
	
    	
    
	
    	
      Address:   Peacock
        Point

    
	
    	
                      
        Locust Valley, NY 11560

    
	
    	
      Facsimile: (516)
        674-3748

    
	
    	
                      
        

      Residence: 
        New York

    

	
    	
      "PURCHASER"

    
	
    	
       _______________________________

    
	
    	
       Yair Ben Moshe   

                             

    
	
    	
      Subscription
        Amount (USD): $1,909,155

    
	
    	
      (1909.155 Units
        @ $1,000 per Unit)

    
	
    	
    
	
    	
      Address:   

    
	
    	
                      
        7250 Wilshire Blvd. Suite 101

    
	
    	
                      
        Los Angeles, CA 90036

    
	
    	
      Facsimile: (323)
        954-8848

    
	
    	
                      
        

      Residence:
        California

    

 
	
    	
      "PURCHASER"

    
	
    	
       _______________________________

    
	
    	
       Zvi Kurtzman      

                          

    
	
    	
      Subscription
        Amount (USD): $909,155

    
	
    	
      (909.155 Units
        @ $1,000 per Unit)

    
	
    	
    
	
    	
      Address:   Aries
        Group attn: Z. Kurtzman

    
	
    	
                    
          12100 Wilshire Blvd. Suite 705

    
	
    	
                      
        Los Angeles, CA 90025

    
	
    	
      Facsimile: ____________________________

    
	
    	
                      
        

      Residence:
        California

    

	
    	
      "PURCHASER"

    
	
    	
       _______________________________

    
	
    	
      Cipora Lavut

    
	
    	
    
	
    	
      Subscription
        Amount (USD): $590,000.00

    
	
    	
      (590 Units @
        $1,000 per Unit)

    
	
    	
    
	
    	
      Address:   Aries
        Group attn: Cipora Lavut

    
	
    	
                      
        12100 Wilshire Blvd. Suite 705

    
	
    	
                      
        Los Angeles, CA 90025

    
	
    	
      Facsimile: (310)
        820-4118

    
	
    	
                      
        

      Residence:
        California

    

 
	
    	
      "PURCHASER"

    
	
    	
       _______________________________

    
	
    	
      Anton d'Espous

       

    
	
    	
      Subscription
        Amount (USD): $100,000.00

    
	
    	
      (100 Units @
        $1,000 per Unit)

    
	
    	
    
	
    	
      Address:   22
        Rue d'Bearn

    
	
    	
                      
        9200 St. Cloud, France

    
	
    	
                      
        92210

    
	
    	
      Facsimile: (___)
        ___-____

    
	
    	
                     
        

      Residence:
        France

    

	
    	
      "PURCHASER"

    
	
    	
       _______________________________

    
	
    	
      Arthur J Schwartz

       

    
	
    	
      Subscription
        Amount (USD): $200,000.00

    
	
    	
      (200 Units @
        $1,000 per Unit)

    
	
    	
    
	
    	
      Address:   Aries
        Group

    
	
    	
                      
        12100 Wilshire Blvd. Suite 705

    
	
    	
                      
        Los Angeles, CA 90025

    
	
    	
      Facsimile: (310)
        820-4118

    
	
    	
                      
        

      Residence: 
        California

    

 
	
    	
      "PURCHASER"

    
	
    	
      _______________________________

    
	
    	
      Neal Kaufman

       

    
	
    	
      Subscription
        Amount (USD): $100,000.00

    
	
    	
      (100 Units @
        $1,000 per Unit)

    
	
    	
    
	
    	
      Address:   Aries
        Group

    
	
    	
                      
        12100 Wilshire Blvd. Suite 705

    
	
    	
                      
        Los Angeles, CA 90025

    
	
    	
      Facsimile: (310)
        820-4118

    
	
    	
                      
        

      Residence: California

       

    

	 	
      "PURCHASER"

    
	 	
      _______________________________

    
	 	
      David Maimon

       

    
	 	
      Subscription Amount (USD): $2,109,155,

    
	 	
      (2,109.155 Units @ $1,000 per Unit)

    
	 	 
	 	Address:  
      
	 	
                       P.O. Box 1406

    
	 	
                       Studio City, CA
        91614

    
	 	
                       

    
	 	
      Facsimile: (323) 330-1390

    
	 	
                       

      Residence: California

    
	 	 

	 	
      "PURCHASER"

    
	 	
      _______________________________

    
	 	
      James F. Simmons

       

    
	 	
      Subscription Amount (USD): $50,288

    
	 	
      (50.288 Units @ $1,000 per Unit)

    
	 	 
	 	
      Address:  c/o ICM Asset Management,
        Inc.

    
	 	
                      601 W. Main Avenue,
        Suite 600

    
	 	                Spokane,
      WA 99201
	 	
                       

    
	 	
      Facsimile: (509) 444-4500

    
	 	
                       

      Residence: Washington

       

    
	 	 

	 	
      "PURCHASER"

    
	 	
      _______________________________

    
	 	
      Shmuel Ben Moshe

       

    
	 	
      Subscription Amount (USD): $200,000

    
	 	
      (200 Units @ $1,000 per Unit)

    
	 	 
	 	Address: 
	 	
                      7250 Beverly Blvd.,
        Suite 101

    
	 	                Los
      Angeles, CA 90036
	 	
                       

    
	 	
      Facsimile: (   )

    
	 	
                       

      Residence: Israel

       

    
	 	 

	 	
      "PURCHASER"

    
	 	
      _______________________________

    
	 	
       Izar Fernbach

       

    
	 	
      Subscription Amount (USD): $50,000

    
	 	
      (50 Units @ $1,000 per Unit)

    
	 	 
	 	Address:
	 	
                       7250 Beverly Blvd.,
        Suite 101

    
	 	                Los
      Angeles, CA 90036
	 	
                       

    
	 	
      Facsimile:   (   )

    
	 	
                       

      Residence: Isreal

       

    

	 	
      "PURCHASER"

    
	 	
      _______________________________

    
	 	
      Yaska Ginsberg

       

    
	 	
      Subscription Amount (USD): $75,000

    
	 	
      (75 Units @ $1,000 per Unit)

    
	 	 
	 	Address:
	 	
                       P.O. Box 1406.

    
	 	                Studio
      City, CA 91514
	 	
                       

    
	 	
      Facsimile:  (   )

    
	 	
                       

      Residence: California

    

 

                                                                                   
  

   

EXHIBIT A

CERTIFICATE OF DESIGNATIONS

   

EXHIBIT
  B

WARRANT

  

  

   

EXHIBIT
  C

REGISTRATION
  RIGHTS AGREEMENT

  

  

   

EXHIBIT
  D

SHAREHOLDER
  AGREEMENT

  

  

   

EXHIBIT
  E

FUNDING
  SCHEDULE

  

  

   

EXHIBIT
  F

AMENDMENT
  AND CONVERSION AGREEMENT

  

  

    

EXHIBIT
  G

SALE-LEASEBACK
  AGREEMENT

  

  

    

EXHIBIT
  H

SETTLEMENT
  AGREEMENT

  

  

    

EXHIBIT
  I

ESCROW
  AGREEMENT

  

  

    

EXHIBIT
  J

PROMISSORY
  NOTE

  

  

    

EXHIBIT
  K

SUPPLEMENTAL
  DISCLOSURE MEMORANDUM

The Company makes the following disclosures
  to supplement the information set forth in this Agreement and the SEC Reports:

 ·                   
   The Company
  has not filed with the SEC its Quarterly Report Form 10-Q for the first fiscal
  quarter ended May 31, 2004.

 ·                   
   The Company's
  common stock is listed on the OTC Bulletin Board under the symbol "AURA". 
  From June through August 2003, as a result of its inability to timely file its
  Form 10-K for fiscal 2003, the Company's trading symbol on the OTC Bulletin
  Board was changed to "AURAE", and the common stock continued to be
  listed.  Nasdaq held a hearing on August 18, 2004, to decide whether to terminate
  the listing on the OTC Bulletin Board.  The Company is awaiting Nasdaq's decision. 
  The Company's recent filing of the Form 10-K was a positive development but
  the continued delay in the filing of the Form 10-Q was a negative factor.  There
  can be no assurance that the common stock will continue to trade on the OTC
  Bulletin Board.

 ·                   
   The Company
  has exhausted its cash and working capital.  The Company has reduced operations
  to minimal levels and funded those operations with cash advances from prospective
  investors in this Offering.

 ·                   
   The Company
  plans to consummate this Offering concurrently with a sale a leaseback of its
  headquarters, the settlement of litigation with former management and the extension
  of certain outstanding notes.  The Company refers to these transactions in most
  recent Annual Report on Form 10-K as the "2004 Recapitalization Transactions." 
  Completion of the 2004 Recapitalization Transactions, including receipt of funding
  in this Offering, will provide the Company a more stable financial condition. 
  However, the Company will continue to require forbearance of several creditors
  as it seeks to grow sales, and may require further financing to remain solvent
  or be forced into bankruptcy.  

 ·                   
   Mr. David
  Rescino, the Company's interim CFO, resigned in July 2004.  Mr. Rescino has
  agreed to assist the Company on a very limited basis with the completion and
  filing of the 2003 Annual Report on Form 10-K.

 ·                   
   The
  Company expects Mr. Meehan, the Company's CEO, to depart shortly after completion
  of the Offering and has renegotiated his severance agreement.  His severance
  agreement originally called for one payment of $180,000 upon termination.  The
  revised severance agreement requires four equal monthly payments of $45,000
  each beginning on the Closing Date.  The Company also awarded Mr. Meehan a warrant
  to purchase 10,000,000 shares of common stock on the same terms and conditions
  as the investors in this Offering.

  

  

    

EXHIBIT
  L

ACCREDITED
  INVESTOR DEFINITION

The following persons are deemed to be "accredited investors,"
  and each Purchaser, by executing the within Securities Purchase Agreement, represents
  and warrants to the Company, that it is an accredited investor meeting one or
  more of the following criteria:

            (1)       
  Any natural person whose individual net worth, or joint net worth with that
  person's spouse, at the time of purchase exceeds $1,000,000, or any entity with
  total assets in excess of $5,000,000; or

            (2)       
  Any natural person who had an individual income in excess of $200,000 in each
  of the two most recent years or joint income with that person's spouse in excess
  of $300,000 in each of those years and has a reasonable expectation of reaching
  the same income level in the current year; or

            (3)       
  Any organization described in Section 501(c)(3) of the Internal Revenue Code,
  corporation, Massachusetts or similar business trust, or partnership, not formed
  for the specific purposed of acquiring Units, with total assets in excess of
  $5,000,000; or

            (4)       
  Any trust with total assets in excess of $5,000,000, not formed for the specific
  purpose of acquiring the securities offered, whose purchase is directed by a
  person who has such knowledge and experience in financial and business matters
  that he is capable of evaluating the merits and risks of an investment in the
  Units; or

            (5)       
  Any employee benefit plan within the meaning of the Employee Retirement Income
  Security Act of 1974 ("ERISA") if the investment decision is made by a plan
  fiduciary, as defined in section 3(21) of such Act, which is either a bank,
  savings and loan association, insurance company, or registered investment adviser,
  or if the employee benefit plan has total assets in excess of $5,000,000 or,
  if a self-directed plan, with investment decisions made solely by persons that
  are accredited investors.exhibit 10.49

exhibit
  10.49

SHAREHOLDER
  AGREEMENT

This SHAREHOLDER AGREEMENT (this "Agreement")
  is made as of August 19, 2004 by and among the parties listed on the signature
  page hereto (individually, a "Shareholder" and collectively, the "Shareholders").
  

PREAMBLE

            A.        Certain of the
  Shareholders are parties to that certain Securities Purchase Agreement of even
  date herewith (the "Securities Purchase Agreement") for the purchase of Series
  B Convertible Preferred Stock, par value $.005, (the "Series B Preferred Stock")
  of Aura Systems, Inc., a Delaware corporation (the "Company"), which
  is convertible into shares of common stock, par value $.005 (the "Common Stock")
  of the Company. 

            B.         Certain of
  the Shareholders are parties to that certain Amendment and Conversion Agreement
  of even date herewith (the "Amendment and Conversion Agreement") for
  the conversion of indebtedness of the Company into Series B Preferred Stock.

            C.        Certain of the
  Shareholders are parties to that certain Settlement Agreement dated as of August
  __, 2004 whereby certain shares of Series B Preferred Stock are being issued
  in settlement of litigation (the "Settlement").

            D.        

            E..        In connection
  with the Securities Purchase Agreement, Cipora Lavut, Maimon and Ben Moshe each
  have executed a Promissory Note dated the date hereof (the "Lavut Note",
  the "Maimon Note" and the "Ben Moshe Note", respectively)
  (individually, a "Note" and collectively, the "Notes").

            F.         To induce each
  other to enter into the Securities Purchase Agreement, the Amendment and Conversion
  Agreement and, the Settlement  the Shareholders have agreed to enter into this
  Agreement.

            E.         Capitalized
  terms which are not defined in this Agreement shall have the respective meanings
  ascribed thereto in the Securities Purchase Agreement or the Amendment and Conversion
  Agreement and , the Settlement

NOW, THEREFORE, in consideration of
  the premises and the mutual promises herein contained, the parties hereto hereby
  agree as follows: 

  SECTION
  1.     
  Board of Directors; Voting of Shares.

  1.1.           
   Board Size.     The Company's Certificate of Incorporation
  is silent on the size of the Board of Directors.  The Company's Bylaws, after
  giving effect to a recent amendment effective on the Closing Date, provide that
  the Board of Directors shall be seven in number.  The Shareholders shall use
  their best efforts to take all necessary action to cause the size of the Board
  of Directors of the Company at all times to remain set at seven directors. 
  
  

    1.2.           
     Director Designation Rights.  The Company's Certificate
    of Incorporation entitles the holders of the Series B Preferred Stock to elect
    four directors so long as any Series B Preferred Stock is outstanding.  Following
    the Closing Date the Shareholders agree to vote for directors for such four
    director positions, designated as follows: (i) Leverage shall have the right
    to designate one director; (ii) Cipora Lavut shall have the right to designate
    one director; (iii) Maimon shall have the right to designate one director;
    and (iv) Ben Moshe shall have the right to designate one director.  Such designees
    may be either the persons nominated by the Company's Board of Directors to
    serve as directors or such other persons as the Shareholder(s) may designate
    in accordance with the provisions of this Agreement. 
    
Upon the occurrence of (x) a Default
      (as defined in the Lavut Note), the director designation right of Lavut
      under this Agreement shall terminate, (y) a Default (as defined in the Maimon
      Note), the director designation right of Maimon under this Agreement shall
      terminate and (z) a Default (as defined in the Ben Moshe Note), the director
      designation right of Ben Moshe under this Agreement shall terminate.  In
      addition, if any Shareholder with designation rights under this Agreement
      ceases to hold any Series B Preferred Stock, the director designation right
      of such party shall terminate.  Any director designated by any Shareholder
      as an "Initial Director Designee" (as hereinafter defined) pursuant to this
      Section shall take and hold office only so long as the Shareholder designating
      such director is not in Default under its respective Note and, upon taking
      office shall submit a conditional resignation, effective automatically upon
      termination of such designating Shareholder's director designation rights. 
      If any Shareholder's director designation rights under this Agreement terminate,
      then any successor director shall be selected by the Board of Directors.

    As a condition to the Closing
      under the Securities Purchase Agreement, Carl Albert, James S. Harrington
      and Lawrence Diamant will submit their resignations as members of the Company's
      Board of Directors, effective as of the Closing Date.  The initial director
      designees (the "Initial Director Designee") of such Shareholders on the
      Closing Date are as follows:

                Leverage:        
      Neal Meehan   (Existing director)

                Lavut:   Raymond Yu
                     (New director)

                Maimon:          
      Dr. Fred Balister           (New director)

                Ben Moshe:      Izar
      Fernbach               (New director)

    Each Shareholder with director
      designation rights represents and warrants (i) that any director now or
      hereafter designated by such Shareholder under this Agreement is not (and
      will not be at the time of designation) a person of the type described in
      17 CFR 230.262(b), the text of which is attached hereto as Exhibit A,
      and (ii) that the director designation rights held by such Shareholder,
      the exercise thereof, and the voting for the election of such director do
      not (and will not) violate any applicable law, statute, rule or regulation
      or any applicable order or decree, including without limitation any federal
      or state securities law, statute, rule or regulation or any order or decree
      of the Securities Exchange Commission or state securities agency.

    For purposes of this Agreement,
      (i) rights and obligations under this Agreement with respect to voting as
      shareholders shall also include any shareholder action by written consent
      pursuant to Delaware law, and (ii) director designation rights under this
      Agreement shall include the right to designate an initial designee for election
      as director, as well as the right to change such designation by designating
      a replacement designee.

    Each Shareholder further acknowledges
      that, in the event of any subsequent vacancy on the Board of Directors (whether
      by resignation, removal or death of any such directors) or upon the expiration
      of a director's term of office, in addition to the right of the Shareholders
      to designate amongst themselves a successor director to fill such vacancy
      in accordance with the terms of this Agreement, the Board of Directors of
      the Company retains the unfettered discretion and right to appoint a director
      to fill any vacancy in accordance with the Bylaws and to nominate directors
      for the stockholders to approve at a stockholder meeting (including any
      action by written consent of the stockholders).

    
      1.3.           
       Board Composition.  Each Shareholder shall use their
      best efforts to cause the four directors who are elected by the Shareholders
      to be comprised at all times of the persons designated from time to time
      in accordance with the director designation rights.   
      

        1.4.           
         Voting and Other Actions to Effectuate.  Without
        limiting the generality of the foregoing: (i) each Shareholder shall vote
        all shares of stock of the Company currently owned or hereafter acquired
        by such Shareholder which are entitled to vote in any election or removal
        of such directors by the stockholders of the Company (whether at a stockholder
        meeting or by written consent) in accordance with the exercise of director
        designation rights; (ii) each Shareholder shall not vote any such stock
        or take any other action in any manner which is inconsistent with the
        terms of this Agreement, including without limitation amending or causing
        the amendment of the Certificate of Incorporation or Bylaws in any manner
        inconsistent with the terms of this Agreement; (iii) each Shareholder
        shall take or cause to be taken all other action necessary to effectuate
        or implement the director designation rights; (iv) each Shareholder shall
        also cause their affiliates to do the same. 
        

          SECTION
          2.     
          Increase in Authorized Shares; Voting of Shares.  If at any time
          the number of authorized but unissued shares of Common Stock shall not
          be sufficient to effect the conversion of all then outstanding shares
          of Series B Preferred Stock and exercise of all warrants issued in connection
          therewith, each Shareholder shall vote all shares of stock of the Company
          currently owned or hereafter acquired by such Shareholder which are
          entitled to vote on any increase of the authorized shares of Common
          Stock (whether at a stockholder meeting or by written consent) in favor
          of an increase to at least such number of shares as shall be sufficient
          for such purpose, including, but not limited to, voting in favor of
          any necessary amendment to the Company's Certificate of Incorporation. 
          Each Shareholder shall also cause their affiliates to do the same.

        
          SECTION
          3.     
          Intentionally Omitted

        
          SECTION
          4.     
          Legends on Stock Certificate.  In order to effectuate the terms
          of this Agreement, each certificate of stock issued to the Shareholders
          evidencing ownership of shares of Series B Stock of the Company currently
          owned or hereafter acquired by such Shareholder shall bear the following
          legend upon its face or legends of similar effect:

        "THE SHARES OF STOCK EVIDENCED
          BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING AGREEMENTS CONTAINED
          IN A SHAREHOLDER AGREEMENT DATED AS OF AUGUST 19, 2004, AS IT MAY BE
          AMENDED FROM TIME TO TIME."

        
          SECTION
          5.     
          Protective Provisions.  So long as any shares of Series B Preferred
          Stock held by the Shareholders shall be outstanding, this Agreement
          may not be amended or otherwise modified without the written consent
          of the four Shareholders having director designation rights under this
          Agreement which have not terminated.  Any amendment or modification
          effected in accordance with this Section shall be binding on all Shareholders.

        
          SECTION
          6.     
          Further Assurances.  Each Shareholder covenants and agrees (i)
          to vote, and otherwise use its best efforts to cause the Company to
          provide, the full rights and benefits contemplated by this Agreement
          and to fully comply with and perform each of its obligations contained
          in this Agreement and shall take any and all action as a stockholder
          of the Company as may be necessary to cause the Company to provide such
          rights and benefits and to comply with such obligations and (ii) to
          execute such further documents and take such further actions as may
          be necessary or appropriate to effectuate the purposes of this Agreement,
          including without limitation the granting of irrevocable proxies. 

        
          SECTION
          7.     
          Termination.  This Agreement shall terminate on the occurrence
          of any of the following events:

        
          (a)               
            As to any single
          Shareholder, when such Shareholder no longer own any shares of Series
          B Preferred Stock; or 

        
          (b)              
           As to all Shareholders,
          upon the execution of a written agreement by the four Shareholders having
          director designation rights under this Agreement which have not been
          terminated.

        
          SECTION
          8.     
          Miscellaneous. 

        
          8.1.           
           Notice.   Any notices, consents, waivers or other
          communications required or permitted to be given under the terms of
          this Agreement must be in writing and will be deemed to have been delivered
          upon transmittal by facsimile (provided confirmation of transmission
          is mechanically or electronically generated and kept on file by the
          sending party); or (iii) one business day after deposit with a nationally
          recognized overnight delivery service, in each case properly addressed
          to the party to receive the same.  Notice to a Shareholder shall be
          sent to its facsimile number or at the address set forth below or at
          such other address as may be furnished in writing to the notifying party:
          
          
American Friends of 

          Karen Chava Bnai Levi

          Aries Group attn:  Z. Kurtzman

          12100 Wilshire Blvd., Suite
            705

          Los Angeles, CA 90025

          Fax:  (310) 820-4118

                                                         
            Edgar Appleby

                                                         
            Peacock Point

                                                         
            Locust Valley, NY 11560

          Fax:      516-674-3748

          Yair Ben Moshe

          7250 Beverly Blvd., Suite
            101

          Los Angeles, CA 90036

          Fax:      323-954-8848

          Shmuel Ben Moshe

          __________________________

          __________________________

          __________________________

          Fax:      ____________________

          Anton d'Espous

          __________________________

          __________________________

          __________________________

          Fax:      ____________________

          Izar Fernbach

          __________________________

          __________________________

          __________________________

          Fax:      ____________________

          Yaska Ginsberg

          __________________________

          __________________________

          __________________________

          Fax:      ____________________

          Patrick Glen

          __________________________

          __________________________

          __________________________

          Fax:      ____________________

          Neal Kaufman

          Aries Group

          12100 Wilshire Blvd., Suite
            705

          Los Angeles, CA 90025

          Koyah Leverage Partners,
            L.P. 

            c/o ICM Asset Management, Inc.

            601 West Main Avenue, Suite 600

            Spokane WA 99201

            Attn: Robert Law

          Fax:  509-444-4500

          Koyah Partners, L.P. 

            c/o ICM Asset Management, Inc.

            601 West Main Avenue, Suite 600

            Spokane WA 99201

            Attn: Robert Law

          Fax:  509-444-4500

          Koyah Ventures LLC

          c/o ICM Asset Management,
            Inc.

          601 W. Main Avenue, Suite
            600

          Spokane, WA 99201

          Attn:  Robert Law

          Fax:  509-444-4500

          Zvi Kurtzman

          109 N. Kilkea Dr.

          Los Angeles, CA 90048

          Fax:      310-820-4118

          Cipora Lavut

          Aries Group attn: Cipora
            Lavut

          12100 Wilshire Blvd., Suite
            705

          Los Angeles, CA 90025

          Fax:  (310) 820-4118

          David Maimon

          P.O. Box 1406 

          Studio City, CA 91614

          Fax:      323-330-1390

                                 
            Prudent Bear Fund, Inc.

                                                         
            8140 Walnut Hill Lane, Suite 300

                                                         
            Dallas, TX  75206

                                                         
            Attn:     Gregg Jahnke

                                                         
            Fax:      214-696-5556

          Raven Partners, L.P.

          c/o ICM Asset Management,
            Inc.

          601 W. Main Avenue, Suite
            600

          Spokane, WA 99201

          Attn:  Robert Law

                                             
            Fax:  509-444-4500

          Arthur Schwartz

          Aries Group

          12100 Wilshire Blvd., Suite
            705

          Los Angeles, CA 90025

          Fax:  (310) 820-4118

          James Simmons

          c/o ICM Asset Management,
            Inc.

          601 W. Main Avenue, Suite
            600

          Spokane, WA 99201

                                             
            Fax:  509-444-4500

          TripleNet, LLC

          __________________________

          __________________________

          __________________________

          Fax:      ____________________

          Steven Veen

          __________________________

          __________________________

          __________________________

          Fax:      ____________________

          
            8.2.           
             Additional Shareholders.  Any additional persons
            or entities acquiring Series B Preferred Stock after the date hereof
            shall become additional parties to this Agreement with all of the
            rights and obligations of a Shareholder hereunder by executing and
            delivering an agreement joining in this Agreement in the form of the
            Joinder Agreement attached hereto as Exhibit B (a "Joinder
            Agreement").  In the event of any sale or other transfer of Series
            B Preferred Stock other than in an open market transaction, the transfer
            shall be on the condition that the transferee is bound by and subject
            to the terms of this Agreement, and the transferring Shareholder shall
            cause the transferee to confirm being bound by and subject to this
            Agreement by executing and delivering a Joinder Agreement unless such
            transferee is already a party to this Agreement. 
            

              8.3.           
               No Waiver. Failure of any party to exercise
              any right or remedy under this Agreement or otherwise, or delay
              by a party in exercising such right or remedy, shall not operate
              as a waiver thereof. 
              

                8.4.           
                 Governing Law; Jurisdiction. The Agreement
                shall be governed by and construed and interpreted in accordance
                with the law of the State of California, without regard to that
                state's conflict of laws principles. All disputes between the
                parties hereto, whether sounding in contract, tort, equity or
                otherwise, shall be resolved only by state and federal courts
                located in Los Angeles, California, and the courts to which an
                appeal therefrom may be taken.  All parties hereto waive any objections
                to the location of the above referenced courts, including but
                not limited to any objection based on lack of jurisdiction, improper
                venue or forum non-conveniens.  Notwithstanding the foregoing,
                any party obtaining any order or judgment in any of the above
                referenced courts may bring an action in a court in another jurisdiction
                in order to enforce such order or judgment.    
                

                  8.5.           
                   Severability.  If any provision of this
                  Agreement shall be invalid or unenforceable in any jurisdiction,
                  such invalidity or unenforceability shall not affect the validity
                  or enforceability of the remainder of this Agreement in that
                  jurisdiction or the validity or enforceability of any provision
                  of this Agreement in any other jurisdiction.   
                  

                    8.6.           
                     Entire Agreement.  This Agreement constitutes
                    the entire agreement among the parties hereto with respect
                    to the subject matter hereof and supersedes all prior agreements
                    and understandings among the parties hereto with respect to
                    the subject matter hereof. 
                    

                      8.7.           
                       No Liability.  No Shareholder with
                      director designation, rights makes any representation or
                      warranty as to the fitness or competence of such Shareholders
                      designee or shall incur any liability for the actions of
                      such designee; it being understood, however, that this Section
                      is not intended to reduce the representation and warranty
                      made by each Shareholder with director designation rights
                      contained in Section 1.2. 
                      

                        8.8.           
                         Specific Performance.  Each Shareholder
                        acknowledges that money damages for breach of this Agreement
                        are impossible to measure and would not adequately compensate
                        the other Shareholders for damages resulting from such
                        breach, and that the other Shareholders would suffer irreparable
                        harm from such breach.  Accordingly, each Shareholder
                        agrees that the other Shareholders shall be entitled to
                        specific enforcement of this Agreement (including a temporary
                        injunction or restraining order) and, in any action to
                        specifically enforce this Agreement, waives any claim
                        or defense that an adequate remedy exists at law and any
                        requirement to post a bond. 8.9.           
                         Attorneys Fees.  In any action to
                        enforce this Agreement, the prevailing party shall be
                        entitled to recover its reasonable costs and expenses,
                        including without limitation attorneys fees. 
                        

                          8.10.       
                           Successors and Assigns.  This
                          Agreement shall inure to the benefit of and be binding
                          upon the successors and assigns of each of the parties
                          hereto. 
                          

                            8.11.       
                             Headings. The headings in this
                            Agreement are for convenience of reference only and
                            shall not limit or otherwise affect the meaning hereof.
                            
                            

                              8.12.       
                               Counterparts. This Agreement
                              may be executed in identical counterparts, each
                              of which shall be deemed an original but all of
                              which shall constitute one and the same agreement. 
                              This Agreement, once executed by a party, may be
                              delivered by facsimile transmission of a copy of
                              this Agreement bearing the signature of the party
                              so delivering this Agreement. 
                              

                                8.13.       
                                 Construction.  The language
                                used in this Agreement 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. 
                                

                                  8.14.       
                                   No Third Party Beneficiaries.
                                  This Agreement is intended for the benefit of
                                  the parties hereto and their respective successors
                                  and assigns, and is not for the benefit of,
                                  nor may any provision hereof be enforced by,
                                  any other person or entity. 
                                  
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                                  IN
                                    WITNESS WHEREOF, this Agreement has been executed
                                    by the parties hereto as of the day and year
                                    first above written.

                                                                                                      
                                    SHAREHOLDERS:

                                                                                                      
                                    AMERICAN FRIENDS OF

                                                                                                         KAREN
                                    CHAVA BNAI LEVI 

                                    

                                    

                                                                                                          By:
                                             ______________________________

                                                                                                          Name:    
                                                                                               

                                                                                                       
                                      Title:                                                                   

                                    

                                                                                                      
                                    _______________                                

                                                                                                        
                                                EDGAR APPLEBY

                                                                                                      _______________                                

                                                                                                                    
                                    YAIR BEN MOSHE

                                                                                                      
                                    ______________________________

                                                                                                                    
                                    SHMUEL BEN MOSHE

                                                                                                      
                                    ______________________________

                                                                                                                    
                                    ANTON D'ESPOUS

                                                                                                      
                                    ____________________________

                                                                                                                    
                                    IZAR FERNBACH

                                                                                                      
                                    ____________________________

                                                                                                                    
                                    YASKA GINSBERG

                                                                                                      
                                    ____________________________

                                                                                                                    
                                    PATRICK GLEN

                                                                                                      
                                    ______________________________

                                                                                                                    
                                    NEAL KAUFMAN

                                                                                                      
                                    KOYAH LEVERAGE PARTNERS, L.P.

                                                                                                      
                                    By:    Koyah Ventures LLC, its general partner

                                                                                                      
                                    By:                                                         

                                                                                                        
                                    Name:     Robert J. Law

                                                                                                        
                                    Title:  Vice President

                                    

                                                                                                      
                                    KOYAH PARTNERS, L.P.

                                                                                                      
                                    By:    Koyah Ventures LLC, its general partner

                                                                                                      
                                    By:                                                         

                                                                                                        
                                    Name:     Robert J. Law

                                                                                                        
                                    Title:  Vice President

                                    

                                                                                                      
                                    KOYAH VENTURES LLC

                                                                                                      
                                    By:                                                         

                                                                                                        
                                    Name:     Robert J. Law

                                                                                                        
                                    Title:  Vice President

                                                                                                      
                                                                                                  

                                                                                                                    
                                    ZVI KURTZMAN

                                                                                                      
                                                                                                  

                                                                                                                    
                                    CIPORA LAVUT

                                                                                                      
                                                                                                  

                                                                                                        
                                                DAVID MAIMON

                                                                                                      
                                    PRUDENT BEAR FUND, INC.

                                                                                                      
                                    By:                                                                     
                                    

                                                                                                      
                                    Name:                                                                
                                    

                                                                                                      
                                    Title:                                                                   
                                    

                                                                                                      
                                    RAVEN PARTNERS, L.P.                             
                                    

                                                                                                      
                                    By:       Koyah Ventures LLC, its general
                                    partner

                                                                                                      
                                    By:                                                         

                                                                                                        
                                    Name:     Robert J. Law

                                                                                                      
                                    Title:  Vice President

                                                                                                      
                                    _______________________________

                                                                                                                    
                                    ARTHUR SCHWARTZ

                                                                                                      
                                    _______________________________

                                                                                                                    
                                    JAMES SIMMONS

                                                                                                      
                                    TRIPLENET, LLC

                                    

                                                                                                         By:                                                                  
                                              

                                                                                                        
                                    Name:                                                              

                                                                                                        
                                    Title:                                                                

                                                                                                      
                                                                                                  

                                                                                                        
                                                STEVEN VEEN

                                                                                                      
                                    

                                  ACKNOWLEDGMENT
                                    AND AGREEMENT

                                  The
                                    Company hereby acknowledges the existence
                                    of the foregoing Agreement, but is not a party
                                    to this Agreement and shall not have any obligations
                                    under this Agreement except as follows:  To
                                    effectuate the provisions of Section 8.2 of
                                    this Agreement, the Company hereby agrees
                                    that: (1) in the event of the issuance of
                                    any additional shares of Series B Preferred
                                    Stock after the date hereof, the Company shall
                                    require, as a condition of the issuance of
                                    certificates evidencing such shares, that
                                    the person or entity acquiring such shares
                                    execute and deliver to each of the other Shareholders
                                    a duly executed counterpart of this Joinder
                                    Agreement unless such person or entity is
                                    already a party to this Agreement, and (2)
                                    all such certificates shall be legended as
                                    set forth in Section 4 of the foregoing Agreement.

                                                                                                      
                                    AURA SYSTEMS, INC.

                                                                                                      
                                    By:                                                                     
                                    

                                                                                                      
                                    Name:                                                                
                                    

                                                                                                      
                                    Title:                                                             
                                    

                                   

                                  EXHIBIT
                                    A

                                  17
                                    CFR 230.262

                                  §§
                                    230.262   Disqualification provisions.

                                             
                                    Unless, upon a showing of good cause and without
                                    prejudice to any other action by the Commission,
                                    the Commission determines that it is not necessary
                                    under the circumstances that the exemption
                                    provided by this Regulation A be denied, the
                                    exemption shall not be available for the offer
                                    or sale of securities, if:

                                             
                                    (a) The issuer, any of its predecessors or
                                    any affiliated issuer:

                                             
                                    (1) Has filed a registration statement which
                                    is the subject of any pending proceeding or
                                    examination under section 8 of the Act, or
                                    has been the subject of any refusal order
                                    or stop order thereunder within 5 years prior
                                    to the filing of the offering statement required
                                    by §230.252;

                                             
                                    (2) Is subject to any pending proceeding under
                                    §230.258 or any similar section adopted under
                                    section 3(b) of the Securities Act, or to
                                    an order entered thereunder within 5 years
                                    prior to the filing of such offering statement;

                                             
                                    (3) Has been convicted within 5 years prior
                                    to the filing of such offering statement of
                                    any felony or misdemeanor in connection with
                                    the purchase or sale of any security or involving
                                    the making of any false filing with the Commission;

                                             
                                    (4) Is subject to any order, judgment, or
                                    decree of any court of competent jurisdiction
                                    temporarily or preliminarily restraining or
                                    enjoining, or is subject to any order, judgment
                                    or decree of any court of competent jurisdiction,
                                    entered within 5 years prior to the filing
                                    of such offering statement, permanently restraining
                                    or enjoining, such person from engaging in
                                    or continuing any conduct or practice in connection
                                    with the purchase or sale of any security
                                    or involving the making of any false filing
                                    with the Commission; or

                                             
                                    (5) Is subject to a United States Postal Service
                                    false representation order entered under 39
                                    U.S.C. §3005 within 5 years prior to the filing
                                    of the offering statement, or is subject to
                                    a temporary restraining order or preliminary
                                    injunction entered under 39 U.S.C. §3007 with
                                    respect to conduct alleged to have violated
                                    39 U.S.C. §3005. The entry of an order, judgment
                                    or decree against any affiliated entity before
                                    the affiliation with the issuer arose, if
                                    the affiliated entity is not in control of
                                    the issuer and if the affiliated entity and
                                    the issuer are not under the common control
                                    of a third party who was in control of the
                                    affiliated entity at the time of such entry
                                    does not come within the purview of this paragraph
                                    (a) of this section.

                                             
                                    (b) Any director, officer or general partner
                                    of the issuer, beneficial owner of 10 percent
                                    or more of any class of its equity securities,
                                    any promoter of the issuer presently connected
                                    with it in any capacity, any underwriter of
                                    the securities to be offered, or any partner,
                                    director or officer of any such underwriter:

                                             
                                    (1) Has been convicted within 10 years prior
                                    to the filing of the offering statement required
                                    by §230.252 of any felony or misdemeanor in
                                    connection with the purchase or sale of any
                                    security, involving the making of a false
                                    filing with the Commission, or arising out
                                    of the conduct of the business of an underwriter,
                                    broker, dealer, municipal securities dealer,
                                    or investment adviser;

                                             
                                    (2) Is subject to any order, judgment, or
                                    decree of any court of competent jurisdiction
                                    temporarily or preliminarily enjoining or
                                    restraining, or is subject to any order, judgment,
                                    or decree of any court of competent jurisdiction,
                                    entered within 5 years prior to the filing
                                    of such offering statement, permanently enjoining
                                    or restraining such person from engaging in
                                    or continuing any conduct or practice in connection
                                    with the purchase or sale of any security,
                                    involving the making of a false filing with
                                    the Commission, or arising out of the conduct
                                    of the business of an underwriter, broker,
                                    dealer, municipal securities dealer, or investment
                                    adviser;

                                             
                                    (3) Is subject to an order of the Commission
                                    entered pursuant to section 15(b), 15B(a),
                                    or 15B(c) of the Exchange Act, or section
                                    203(e) or (f) of the Investment Advisers Act
                                    of 1940 (15 U.S.C. 80b–1 et seq.);

                                             
                                    (4) Is suspended or expelled from membership
                                    in, or suspended or barred from association
                                    with a member of, a national securities exchange
                                    registered under section 6 of the Exchange
                                    Act or a national securities association registered
                                    under section 15A of the Exchange Act for
                                    any act or omission to act constituting conduct
                                    inconsistent with just and equitable principles
                                    of trade; or

                                             
                                    (5) Is subject to a United States Postal Service
                                    false representation order entered under 39
                                    U.S.C. §3005 within 5 years prior to the filing
                                    of the offering statement required by §230.252,
                                    or is subject to a restraining order or preliminary
                                    injunction entered under 39 U.S.C. §3007 with
                                    respect to conduct alleged to have violated
                                    39 U.S.C. §3005.

                                             
                                    (c) Any underwriter of such securities was
                                    an underwriter or was named as an underwriter
                                    of any securities:

                                             
                                    (1) Covered by any registration statement
                                    which is the subject of any pending proceeding
                                    or examination under section 8 of the Act,
                                    or is the subject of any refusal order or
                                    stop order entered thereunder within 5 years
                                    prior to the filing of the offering statement
                                    required by §230.252; or

                                             
                                    (2) Covered by any filing which is subject
                                    to any pending proceeding under §230.258 or
                                    any similar rule adopted under section 3(b)
                                    of the Securities Act, or to an order entered
                                    thereunder within 5 years prior to the filing
                                    of such offering statement.

                                  

                                      

                                  EXHIBIT
                                    B

                                  JOINDER
                                    AGREEMENT

                                  The
                                    undersigned, hereby agrees to become a party
                                    to the Shareholders Agreement dated as of
                                    August 19, 2004, relating to Aura Systems,
                                    Inc. as it may be amended from time to time,
                                    with all of the rights and obligations of
                                    a "Shareholder" thereunder, which
                                    obligations include without limitation the
                                    obligation to vote for directors as designated
                                    by certain parties to the Shareholders Agreement.
                                    This Joinder Agreement shall take effect and
                                    shall become a part of such Shareholders Agreement
                                    immediately upon execution. 

                                  Executed
                                    as of the date set forth below. 

                                  Dated: 
                                                                                               
                                                [Name of Joining Party]

                                                                                                                              
                                    By:                                             
                                    

                                                                                                                              
                                    Name:                                        
                                    

                                                                                                                              
                                    Title:                                           
                                    

                                                                                                                     
                                    Address:

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