Agreement (00127507.DOC;2)

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GfZIZb2fKdHG2yT3UrwCU34i/ywzJZKtuSJoyEy6EYyY7GsMtbJ4KHAfNfz3bZbB AkEKEVgyZGmx/Qh0i9LtIQ== 0000935836-04-000112.txt : 20040318 0000935836-04-000112.hdr.sgml : 20040318 20040318155810 ACCESSION NUMBER: 0000935836-04-000112 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 28 FILED AS OF DATE: 20040318 GROUP MEMBERS: JAMES M. SIMMONS GROUP MEMBERS: KOYAH VENTURES, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AURA SYSTEMS INC CENTRAL INDEX KEY: 0000826253 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 954106894 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-39865 FILM NUMBER: 04677904 BUSINESS ADDRESS: STREET 1: 2335 ALASKA AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3106435300 MAIL ADDRESS: STREET 1: 2335 ALASKA AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ICM ASSET MANAGEMENT INC/WA CENTRAL INDEX KEY: 0000905608 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 911150802 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 601 W MAIN AVE STREET 2: SUITE 600 CITY: SPOKANE STATE: WA ZIP: 99201 BUSINESS PHONE: 5094553588 MAIL ADDRESS: STREET 1: 601 W MAIN AVE STREET 2: STE 600 CITY: SPOKANE STATE: WA ZIP: 99201 SC 13D 1 aura13d.htm SCHEDULE 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

OMB APPROVAL

OMB Number: 3235-0145

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SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. ___________)

Aura Systems, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

051526101

(CUSIP Number)

Ellyn Roberts, Esq.
Shartsis, Friese & Ginsburg LLP

One Maritime Plaza, 18^th Floor

San Francisco, California 94111
(415) 421-6500

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

March 8, 2004

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of sections 240.13d-1(e), 240.13d-1(f) or 140.13d-1(g), check the following box. [X]

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See section 240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).

ICM Asset Management, Inc.

2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) X
(b) ______

3. SEC Use Only

4. Source of Funds (See Instructions) (with respect to shares reported on lines 7 and 9) WC

(with respect to shares reported on lines 8 and 10) AF

5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ____

6. Citizenship or Place of Organization Washington

Number of Shares Beneficially Owned by Each Reporting Person With	7. Sole Voting Power 630,808
	8. Shared Voting Power 28,837,694
	9. Sole Dispositive Power 630,808
	10. Shared Dispositive Power 28,837,694

11. Aggregate Amount Beneficially Owned by Each Reporting Person 29,468,502

12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) ______

13. Percent of Class Represented by Amount in Row (11) 6.77%

14. Type of Reporting Person (See Instructions)

IA, CO

1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).

James M. Simmons

2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) X
(b) ______

3. SEC Use Only

4. Source of Funds (See Instructions) (with respect to shares reported on lines 7 and 9) PF

(with respect to shares reported on lines 8 and 10) AF

5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ____

6. Citizenship or Place of Organization U.S.A.

Number of Shares Beneficially Owned by Each Reporting Person With	7. Sole Voting Power 1,431,138
	8. Shared Voting Power 29,468,502
	9. Sole Dispositive Power 1,431,138
	10. Shared Dispositive Power 29,468,502

11. Aggregate Amount Beneficially Owned by Each Reporting Person 30,899,640

12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) ______

13. Percent of Class Represented by Amount in Row (11) 7.09%

14. Type of Reporting Person (See Instructions)

IN, HC

1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).

Koyah Ventures, LLC

2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) X
(b) ______

3. SEC Use Only

4. Source of Funds (See Instructions) AF

5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ____

6. Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With	7. Sole Voting Power 0
	8. Shared Voting Power 21,988,559
	9. Sole Dispositive Power 0
	10. Shared Dispositive Power 21,988,559

11. Aggregate Amount Beneficially Owned by Each Reporting Person 21,988,559

12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) ______

13. Percent of Class Represented by Amount in Row (11) 5.05%

14. Type of Reporting Person (See Instructions)

Item 1. Security and Issuer

This statement relates to shares of Common Stock (the "Stock") of Aura Systems, Inc. (the "Issuer"). The principal executive office of the Issuer is located at 2335 Alaska Avenue, El Segundo, California 90245.

Item 2. Identity and Background

The persons filing this statement and the persons enumerated in Instruction C of Schedule 13D and, where applicable, their respective places of organization, general partners, directors, executive officers and controlling persons, and the information regarding them, are as follows:

(a) ICM Asset Management ("ICM")
James M. Simmons
Koyah Ventures, LLC ("Koyah Ventures")
(collectively, the "Filers").

(b) The business address of the Filers is
601 W. Main Avenue, Suite 600, Spokane, WA 99201.

(c) Present principal occupation or employment or the Filers and the name, principal business and address of any corporation or other organization in which such employment is conducted:

ICM is an investment adviser registered with the Securities and Exchange Commission and is the investment adviser to investment limited partnerships and individual client accounts. Mr. Simmons is the president and controlling shareholder of ICM and the manager and controlling owner of Koyah Ventures. Koyah Ventures is the general partner of investment limited partnerships to which ICM is investment adviser.

(d) During the last five years, none of the Filers has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) During the last five years, none of the Filers was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Mr. Simmons is a United States citizen.

Item 3. Source and Amount of Funds or Other Consideration

The source and amount of funds used in purchasing the Stock were as follows:

Purchaser	Source of Funds	Amount
ICM	Funds under Management⁽¹⁾	$9,547,056.33
ICM	Working Capital	$ 159,093.10
Mr. Simmons	Personal Funds	$ 656,715.55

⁽¹⁾ Includes shares owned by investment limited partnerships of which Koyah Ventures is the general partner.

Item 4. Purpose of Transaction

The Filers acquired the Stock for investment purposes, and such purchases were made in the Filers' ordinary course of business. In pursuing such investment purposes, the Filers may further purchase, hold, vote, trade, dispose or otherwise deal in the Stock at times, and in such manner, as they deem advisable to benefit from changes in market price of the Stock, changes in the Issuer's operations, business strategy or prospects, or from sale or merger of the Issuer. The Filers have discussed with management of the Issuer and others financing and other options available to the Issuer. The Filers reserve the right to formulate other plans and/or make other proposals, and take such actions with respect to their investment in the Issuer, including any or all of the actions set forth in paragraphs (a) through (j) of Item 4 of Schedule 13D, and to acquire additional Stock or dispose of all the Stock beneficially owned by them, in public market or privately negotiated transactions. The Filers may at any time reconsider and change their plans or proposals relating to the foregoing.

Item 5. Interest in Securities of the Issuer

(a), (b), (d) The beneficial ownership of the Stock of each Filer at the date hereof is reflected on that Filer's cover page. ICM is an investment adviser with the power to invest in, vote and dispose of the Stock on behalf of its clients. Its clients have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Stock. No single client holds more than 5% of the outstanding Stock. Mr. Simmons is the president and controlling shareholder of ICM and the sole manager and controlling owner of Koyah Ventures. As such, ICM and Mr. Simmons share beneficial ownership of all shares of Stock held in ICM client accounts.

(c) ICM, on behalf of client accounts, effected the following transactions in the Stock in open market transactions on the dates indicated, and such transactions are the only transactions in the Stock by the Filers since 60 days before the date on the cover page of this Schedule 13D:

Name	Purchase or Sale	Date	Number of Shares	Price Per Share
ICM	Sale	03/17/04	917	$0.049
	Sale	03/17/04	23,100	$0.051

In addition, on March 10, 11 and 18, 2004, the Filers made loans to the Issuer in exchange for Convertible Promissory Notes that are convertible at the holders' option into securities of the Issuer at a 20% discount to the price paid in the Issuer's next financing. Because the conversion terms cannot yet be determined, the securities into which such Notes would be convertible are not included in the number of shares of the Stock shown above as being beneficially owned by the Filers. The Loan Agreements, Security Agreements and amendments thereto relating to those Notes are attached hereto as exhibits. See Item 7.

Item 6. Contracts, Arrangement, Understandings or Relationships with Respect to Securities of the Issuer

Koyah Ventures is the general partner of investment partnerships pursuant to agreements of limited partnership that grant to Koyah Ventures the authority, among other things, to invest the funds of such partnerships in the Stock, to vote and dispose of the Stock and to file this statement on their behalf. Pursuant to such agreements, Koyah Ventures is entitled to allocations based on assets under management and realized and unrealized gains.

ICM and some of the investment funds for which it serves as investment adviser and Koyah Ventures serves as general partner hold currently exercisable warrants to purchase the Stock. The securities for which such warrants are exercisable are included in the total shares of the Stock shown above as being beneficially owned by the Filers. The Warrant Amendment Agreement governing those warrants is attached hereto as an exhibit.

ICM and some of the investment funds for which it serves as investment adviser and Koyah Ventures serves as general partner also hold Convertible Promissory Notes that are convertible at the holders' option into securities of the Issuer at a 20% discount to the price paid in the Issuer's next financing. Because the conversion terms cannot yet be determined, the securities into which such Notes would be convertible are not included in the number of shares of the Stock shown above as being beneficially owned by the Filers. The Loan Agreements, Security Agreements and amendment thereto relating to those Notes are attached hereto as exhibits.

Item 7. Material to Be Filed as Exhibits

Exhibit A Agreement Regarding Joint Filing of Statement on Schedule 13D or 13G previously filed.

Exhibit B Agreement dated 7/24/03

Exhibit C Promissory Note (Term) - Koyah Partners, L.P. dated 7/24/03

Exhibit D Promissory Note (Term) - Koyah Leverage Partners, L.P. dated 7/24/03

Exhibit E Promissory Note (Multiple Advance) - Koyah Partners, L.P. dated 7/24/03

Exhibit F Promissory Note (Multiple Advance) - Koyah Leverage Partners, L.P. dated 7/24/03

Exhibit G Security Agreement dated 7/24/03

Exhibit H Amendment and Waiver Agreement dated 8/6/03

Exhibit I Additional Advance Agreement dated 8/18/03

Exhibit J Stock Pledge Agreement dated 8/18/03

Exhibit K Amendment Agreement dated 8/21/03

Exhibit L Second Amendment Agreement dated 9/18/03

Exhibit M Third Amendment Agreement dated 9/30/03

Exhibit N Fourth Amendment Agreement dated 10/16/03

Exhibit O Fifth Amendment Agreement dated 10/27/03

Exhibit P Sixth Amendment Agreement dated 11/11/03

Exhibit Q Seventh Amendment Agreement dated 11/25/03

Exhibit R Eighth Amendment Agreement dated 12/19/03

Exhibit S Ninth Amendment Agreement dated 01/08/04

Exhibit T Security Agreement Amendment dated 01/15/04

Exhibit U Warrant Amendment Agreement dated 01/08/04

Exhibit V Warrant Koyah Leverage Partners, L.P. dated 01/08/04

Exhibit W Warrant Koyah Partners, L.P. dated 01/08/04

Exhibit X Warrant James Simmons dated 01/08/04

Exhibit Y Warrant Raven Partners, L.P. dated 01/08/04

Exhibit Z Tenth Amendment Agreement dated 03/10/04

Exhibit AA Eleventh Amendment Agreement dated 03/11/04

Exhibit BB Twelfth Amendment Agreement dated 03/18/04

SIGNATURES

After reasonable inquiry and to the best of my knowledge, I certify that the information set forth in this statement is true, complete and correct.

Dated: March 18, 2004

/s/ James M. Simmons

ICM Asset Management, Inc.

By: /s/ Robert J. Law, Senior Vice President

Koyah Ventures, LLC

By: /s/ Robert J. Law, Senior Vice President

EX-1 3 exhb.htm AGREEMENT Agreement (00127507.DOC;2) AGREEMENT

THIS AGREEMENT (this "Agreement") is entered into as of July 24, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P. each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, the Company has requested that the Lenders make loans to the Company;

WHEREAS, in addition to this Agreement, the Company will be executing and delivering four Convertible Promissory Notes (the "Notes") and a Security Agreement (the "Security Agreement") (collectively the "Transaction Documents");

WHEREAS, in order to induce the Lenders to make such loans and in connection with the Company and the Lenders entering into the Transaction Documents, the parties wish to provide for certain related matters, on the terms and conditions set forth herein;

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

1. Representations and Warranties of the Company. The Company hereby represents and warrants to the Lenders as follows:

(a) The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of Delaware; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good standing under any foreign corporation laws in each jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have a material adverse effect on the business, assets, operations, prospects or financial or other condition of the Company.

(b) The execution, delivery and performance of the Transaction Documents by the Company and the performance and consummation by the Company of the transactions contemplated in the Transaction Documents have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the Transaction Documents or the performance or consummation of any of the transactions contemplated hereby.

(c) The Transaction Documents have been duly executed and delivered by the Company and constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability may be limited by bankruptcy and other laws affecting the rights and remedies of creditors generally and general principles of equity.

(d) The Company has taken or will take all necessary corporate action to authorize and reserve for issuance and to permit it to issue, upon conversion of the Notes, the shares issuable upon such conversion; all of such shares, upon their issuance and delivery in accordance with the terms of the Notes, will be validly issued, fully paid and nonassessable.

(e) The execution and delivery by the Company of the Transaction Documents and the performance and consummation of the transactions contemplated thereby, do not and will not: (i) violate the Company's Articles of Incorporation or Bylaws ("Charter Documents") or any material judgment, order, writ, decree, statute, rule or regulation applicable to the Company; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other person or entity to accelerate (whether after the giving of notice or lapse of time or both), any material mortgage, indenture, agreement, instrument or contract to which the Company is a party or by which it is bound; or (iii) result in the creation or imposition of any lien upon any property, asset or revenue of the Company or the suspension, revocation, impairment, forfeiture, or non-renewal of any material permit, license, authorization or approval applicable to the Company, its business or operations, or any of its assets or properties.

(f) No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or other person or entity (including, without limitation, the shareholders of any person or entity) is required in connection with the execution and delivery of the Transaction Documents by the Company and the performance and consummation of the transactions contemplated thereby.

(g) The Company is not in violation of or in default with respect to: (i) the Charter Documents or any material judgment, order, writ, decree, statute, rule or regulation applicable to the Company; or (ii) any material mortgage, indenture, agreement, instrument or contract to which such person or entity is a party or by which it is bound (nor is there any waiver in effect which, if not in effect, would result in such a violation or default).

(h) No actions (including, without limitation, derivation actions), suits, proceeds or investigations are pending or, to the knowledge of the Company, threatened against the Company at law or in equity in any court or before any other governmental authority that if adversely determined would: (i) (alone or in the aggregate) have a material adverse effect on the business, assets, operations, prospects or financial or other condition of the Company or (ii) enjoin, either directly or indirectly, the execution, delivery or performance by the Company of the Transaction Documents or the transactions contemplated thereby.

(i) The Company owns and has good and marketable title or a valid leasehold interest in all assets and properties as reflected in the most recent financial statements delivered to the Lenders and all assets and properties acquired by the Company since such date, free and clear of liens and encumbrances.

(j) The Company owns or possesses sufficient legal rights to all patents, patent applications, trademarks, service marks, trademark and service mark applications, trade names, copyrights, trade secrets, licenses, information, processes and other intellectual property rights ("Intellectual Property Rights") necessary for its business as now conducted and as proposed to be conducted, free and clear of any liens or encumbrances and without any conflict with, or infringement of the rights of, others.

(k) The financial statements of the Company that have been delivered to the Lenders: (i) are in accordance with the books and records of the Company, which have been maintained in accordance with good business practices; (ii) have been prepared in conformity with accounting principles generally accepted in the United States; and (iii) fairly present the consolidated financial position of the Company as of the dates presented therein and the results of operations, changes in financial positions or cash flows, as the case may be, for the periods presented therein. The Company does not have any contingent obligations, liability for taxes or other outstanding obligations that are material in the aggregate, except as disclosed in such financial statements. Since the date of such financial statements, there has been no material adverse change in the financial position, business, operations, assets, liabilities or prospects of the Company.

(l) The Company has total assets in excess of $2,000,000 according to its most recent financial statements, which are dated not more than ninety (90) days prior to the date of this Agreement and the loans contemplated hereby and were prepared (i) in accordance with generally accepted accounting principles (and on a consolidated basis if the Company has consolidated subsidiaries) or (ii) in accordance with the rulers and requirements of the Securities and Exchange Commission, whether or not required by law to be prepared in accordance with those rules and requirements. The Company, and its officers and directors, have a preexisting business relationship with the Lenders.

4. Survival. The representations and warranties and the covenants of the Company contained in this Agreement shall survive the closing of the transactions contemplated by the Transaction Documents.

5. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

6. Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein.

7. Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

8. Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

9. Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

10. Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

11. Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

12. The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the Notes, the Security Agreement, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by and the administration of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Notes. Notwithstanding that the Company is paying such costs and expenses, the Company acknowledges and agrees that such legal counsel is representing only the Lenders, and not the Company.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH LEVERAGE PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name: Robert J. Law

Title: Vice President

"Lender"

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name: Robert J. Law
Title: Vice President

I:\Spodocs\28601\00016\agree\00127507.DOC

EX-2 4 exhc.htm PROMISSORY NOTE Convertible Promissory Note (Term)- Koyah Partners (00127546.BKA;1) THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION, (B) THE TRANSFER IS MADE IN ACCORANCE WITH RULE 144 UNDER SUCH ACT, (C) THE BORROWER RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THE NOTE (CONCURRED IN BY LEGAL COUNSEL FOR THE BORROWER) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (D) THE BORROWER OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

CONVERTIBLE PROMISSORY NOTE

Principal Amount: $120,519.44 Spokane, Washington
Interest Rate: 10% July 24, 2003

FOR VALUE RECEIVED, the undersigned, AURA SYSTEMS, INC., a Delaware corporation ("Borrower"), hereby promises to pay to the order of KOYAH PARTNERS, L.P., a Delaware limited partnership ("Lender"), at such places and times and under the terms and conditions set forth below, the principal amount of this Convertible Promissory Note (this "Note") set forth above, together with interest thereon and any other amounts set forth herein.

Principal Payments. The entire principal balance of this Note shall be due and payable on October 24, 2003; provided, however, that if Borrower has not received at least Two Million Dollars ($2,000,000) debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable on January 24, 2004; provided, further, however, that if Borrower has still not received at least Two Million Dollars ($2,000,000) of debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable upon demand (the "Maturity Date").

Interest Rate and Payment. The outstanding principal balance of this Note shall accrue interest at the rate of ten percent (10%) per annum. Accrued interest under this Note shall be due and payable on the Maturity Date.

Prepayment. In light of the conversion feature of this Note and to protect Lender's right of conversion hereunder, Borrower shall not have the right to prepay the outstanding principal balance of this Note or accrued interest thereon, in whole or in part, prior to the Maturity Date without the prior written consent of Lender.

Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note or in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.

Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay interest (after as well as before judgment) at a rate of five percent (5%) per annum above the rate of interest which would otherwise have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.

Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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-convenes. 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.

Intended Beneficiaries. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.

Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Conversion of Note. In the event Borrower completes any debt or equity financing after the date hereof, then at the option of Lender, the outstanding principal balance of this Note and all accrued interest or other amounts payable under this Note, at any time prior to payment thereof, may be converted, in whole or in part, into the debt or equity securities or instruments issued in any such financing on the best terms offered to any lender or investor in such financing, but with a twenty percent (20%) discount in price from such best terms. In the event Borrower completes more than one debt or equity financing after the date hereof, then such right of conversion shall apply to each such financing.

Borrower shall give Lender prompt written notice of each such financing. Lender may exercise such conversion right by providing written notice of exercise to Borrower, together with delivery of this Note to the Company for surrender. In the event of any stock splits, stock dividends, recapitalizations or similar events after the date of such financing but prior to the date of conversion, then the number and kind of debt or equity securities issuable upon conversion shall be appropriately adjusted. Such conversion shall be effective immediately upon giving such notice and as of such date Borrower shall be treated for all purposes as the holder of the shares issuable upon conversion.

As soon as practicable after such conversion, Borrower, at its expense, shall cause to be issued in the name of and delivered to Lender the debt or equity securities or instruments to which Lender shall be entitled upon such conversion. Upon a partial conversion of this Note, this Note shall be surrendered by Lender and replaced with a new Note of like tenor for the remaining balance of the Note surrendered. The new Note shall be delivered to Lender as soon as practicable after such partial conversion. No fractional shares of stock shall be issued upon such conversion. If upon such conversion a fractional share results, the number of shares to be issued upon conversion shall be rounded upwards or downwards to the nearest whole number.

Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.

No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.

Security. This Note, together with other Convertible Promissory Notes executed by Borrower in favor of Lender and KOYAH LEVERAGE PARTNERS, L.P. (collectively, the "Affiliated Lenders"), shall be secured by a first-priority security interest in tangible and intangible personal property of Borrower pursuant to a Security Agreement being executed by Borrower (the "Security Agreement").

Defaults. Each of the following shall constitute a default under this Note (a "Default"):

Failure by Borrower to make any payment due under this Note or under any other agreement with the Affiliated Lenders when due; any representation or warranty by Borrower under this Note or any other agreement with the Affiliated Lenders shall be false or inaccurate in any material respect when made; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders;

Failure by Borrower to pay when due any other indebtedness or obligations in excess of fifty thousand dollars ($50,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;

Borrower makes a general assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of sixty (60) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver; or

(d) Lender shall fail to have a valid, perfected and first-priority security interest in any of the collateral covered by the Security Agreement.

Acceleration; No Exclusive Remedy. Upon any Default set forth in Section 13(c) above, all principal, interest and other amounts owing hereunder automatically shall become immediately due and payable. Upon any other Default, Lender may declare, by written notice to Borrower, that all principal, accrued interest and other amounts owing hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.

Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan
Fax: 310-643-8719

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

Miscellaneous.

No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.

Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.

Any payment hereunder shall first be applied to any enforcement or collections costs, then against accrued interest or late charges hereunder and then against the outstanding principal balance hereof.

All payments under this Note shall be made without set-off, deduction or counterclaim.

(e) Borrower and Lender intend to comply at all times with applicable usury laws. If at any time such laws would render usurious any amounts due under this Note under applicable law, then it is Borrower's and Lender's express intention that Borrower not be required to pay interest on this Note at a rate in excess of the maximum lawful rate, that the provisions of this section shall control over all other provisions of this Note which may be in apparent conflict hereunder, that such excess amount shall be immediately credited to the principal balance of this Note, and the provisions hereof shall immediately be reformed and the amounts thereafter decreased, so as to comply with the then applicable usury law, but so as to permit the recovery of the fullest amount otherwise due under this Note.

(f) This Note may be transferred or assigned by Lender in whole or in part if, on Borrower's reasonable request, Lender provides an opinion of counsel reasonably satisfactory to Borrower that such transfer does not require registration under the Securities Act of 1933, as amended, and applicable state securities law, except that this Note may be transferred by a Lender which is a partnership or limited liability company to a partner, former partner, member, former member or other affiliate of such partner or limited liability company, as the case may be, if (i) the transferee agrees in writing to be subject to the terms of this Note and (ii) Lender delivers notice of such transfer to Borrower. Any rights and obligations of Borrower and Lender under this Note shall be binding upon and inure to the benefit of their respective permitted successors, assigns, heirs, administrators and transferees.

(g) If at any time the number of authorized unissued shares of Borrower shall not be sufficient to effect the conversion of this Note, Borrower will take all such corporate action as may be necessary to increase its authorized but unissued shares to such number of shares as shall be sufficient for such purpose.

(h) Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of Borrower and Lender in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

(i) All shares issued upon conversion of this Note shall be validly issued, fully paid and non-assessable, and Borrower shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. Borrower shall not be required to pay any transfer tax or other similar charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Common Stock in any name other than that of Lender.

(j) Borrower will not, by amendment of its Certificate of Incorporation or Bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Lender under this Note against impairment. Without limiting the generality of the foregoing, Borrower (i) will not increase the par value of any shares issuable upon conversion of this Note above the amount payable therefore upon such exercise, and (ii) will take all such action as may be necessary or appropriate in order that Borrower may validly and legally issue fully paid and non-assessable shares upon conversion of this Note.

[remainder of page intentionally left blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

AURA SYSTEMS, INC.

By:

Name:

Title:

I:\Spodocs\28601\00016\agree\00127546.DOC

Convertible Promissory Note- Koyah Partners

EX-3 5 exhd.htm PROMISSORY NOTE Convertible Promissory Note (Term)- Koyah Leverage (00127545.DOC;1) THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION, (B) THE TRANSFER IS MADE IN ACCORANCE WITH RULE 144 UNDER SUCH ACT, (C) THE BORROWER RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THE NOTE (CONCURRED IN BY LEGAL COUNSEL FOR THE BORROWER) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (D) THE BORROWER OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

CONVERTIBLE PROMISSORY NOTE

Principal Amount: $482,077.78 Spokane, Washington
Interest Rate: 10% July 24, 2003

FOR VALUE RECEIVED, the undersigned, AURA SYSTEMS, INC., a Delaware corporation ("Borrower"), hereby promises to pay to the order of KOYAH LEVERAGE PARTNERS, L.P., a Delaware limited partnership ("Lender"), at such places and times and under the terms and conditions set forth below, the principal amount of this Convertible Promissory Note (this "Note") set forth above, together with interest thereon and any other amounts set forth herein.

Principal Payments. The entire principal balance of this Note shall be due and payable on October 24, 2003; provided, however, that if Borrower has not received at least Two Million Dollars ($2,000,000) of debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable on January 24, 2004; provided, further, however, that if Borrower has still not received at least Two Million Dollars ($2,000,000) of debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable upon demand (the "Maturity Date").

Interest Rate and Payment. The outstanding principal balance of this Note shall accrue interest at the rate of ten percent (10%) per annum. Accrued interest under this Note shall be due and payable on the Maturity Date.

Prepayment. In light of the conversion feature of this Note and to protect Lender's right of conversion hereunder, Borrower shall not have the right to prepay the outstanding principal balance of this Note or accrued interest thereon, in whole or in part, prior to the Maturity Date without the prior written consent of Lender.

Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note or in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.

Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay interest (after as well as before judgment) at a rate of five percent (5%) per annum above the rate of interest which would otherwise have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.

Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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-convenes. 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.

Intended Beneficiaries. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.

Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Conversion of Note. In the event Borrower completes any debt or equity financing after the date hereof, then at the option of Lender, the outstanding principal balance of this Note and all accrued interest or other amounts payable under this Note, at any time prior to payment thereof, may be converted, in whole or in part, into the debt or equity securities or instruments issued in any such financing on the best terms offered to any lender or investor in such financing, but with a twenty percent (20%) discount in price from such best terms. In the event Borrower completes more than one debt or equity financing after the date hereof, then such right of conversion shall apply to each such financing.

Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.

No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.

Security. This Note, together with other Convertible Promissory Notes executed by Borrower in favor of Lender and KOYAH PARTNERS, L.P. (collectively, the "Affiliated Lenders"), shall be secured by a first-priority security interest in tangible and intangible personal property of Borrower pursuant to a Security Agreement being executed by Borrower (the "Security Agreement").

Defaults. Each of the following shall constitute a default under this Note (a "Default"):

Failure by Borrower to make any payment due under this Note or under any other agreement with the Affiliated Lenders when due; any representation or warranty by Borrower under this Note or any other agreement with the Affiliated Lenders shall be false or inaccurate in any material respect when made; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders;

Failure by Borrower to pay when due any other indebtedness or obligations in excess of fifty thousand dollars ($50,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;

Borrower makes a general assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of sixty (60) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver; or

(d) Lender shall fail to have a valid, perfected and first-priority security interest in any of the collateral covered by the Security Agreement.

Acceleration; No Exclusive Remedy. Upon any Default set forth in Section 13(c) above, all principal, interest and other amounts owing hereunder automatically shall become immediately due and payable. Upon any other Default, Lender may declare, by written notice to Borrower, that all principal, accrued interest and other amounts owing hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.

Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan
Fax: 310-643-8719

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

Miscellaneous.

No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.

Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.

Any payment hereunder shall first be applied to any enforcement or collections costs, then against accrued interest or late charges hereunder and then against the outstanding principal balance hereof.

All payments under this Note shall be made without set-off, deduction or counterclaim.

[remainder of page intentionally left blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

AURA SYSTEMS, INC.

By:

Name:

Title:

I:\Spodocs\28601\00016\agree\00127545.DOC

Convertible Promissory Note- Koyah Leverage

EX-4 6 exhe.htm PROMISSORY NOTE Convertible Promissory Note (Multiple Advance)-KoyahLeverage (00127553.BKA;1) THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION, (B) THE TRANSFER IS MADE IN ACCORANCE WITH RULE 144 UNDER SUCH ACT, (C) THE BORROWER RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THE NOTE (CONCURRED IN BY LEGAL COUNSEL FOR THE BORROWER) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (D) THE BORROWER OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

CONVERTIBLE PROMISSORY NOTE

Principal Amount: $200,000 Spokane, Washington
Interest Rate: 10% July 24, 2003

FOR VALUE RECEIVED, the undersigned, AURA SYSTEMS, INC., a Delaware corporation ("Borrower"), hereby promises to pay to the order of KOYAH PARTNERS, L.P., a Delaware limited partnership ("Lender"), at such places and times and under the terms and conditions set forth below, the lesser of (i) the maximum principal amount of this Convertible Promissory Note (this "Note") set forth above and (ii) the aggregate principal amount advanced by Lender at its option from time to time under this Note, together with interest thereon and any other amounts set forth herein.

Principal Payments. The entire principal balance of this Note shall be due and payable on October 24, 2003; provided, however, that if Borrower has not received at least Two Million Dollars ($2,000,000) of debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable on January 24, 2004; provided, further, however, that if Borrower has still not received at least Two Million Dollars ($2,000,000) of debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable upon demand (the "Maturity Date").

Interest Rate and Payment. The outstanding principal balance of this Note shall accrue interest at the rate of ten percent (10%) per annum. Accrued interest under this Note shall be due and payable on the Maturity Date.

Prepayment. In light of the conversion feature of this Note and to protect Lender's right of conversion hereunder, Borrower shall not have the right to prepay the outstanding principal balance of this Note or accrued interest thereon, in whole or in part, prior to the Maturity Date without the prior written consent of Lender.

Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys fees, incurred by Lender in enforcing the terms of this Note or in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.

Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay interest (after as well as before judgment) at a rate of five percent (5%) per annum above the rate of interest which would otherwise have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.

Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, without regard to that states 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 Spokane, Washington, 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-convenes. 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.

Intended Beneficiaries. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.

Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Conversion of Note. In the event Borrower completes any debt or equity financing after the date hereof, then at the option of Lender, the outstanding principal balance of this Note and all accrued interest or other amounts payable under this Note, at any time prior to payment thereof, may be converted, in whole or in part, into the debt or equity securities or instruments issued in any such financing on the best terms offered to any lender or investor in such financing, but with a twenty percent (20%) discount in price from such best terms. In the event Borrower completes more than one debt or equity financing after the date hereof, then such right of conversion shall apply to each such financing.

Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lenders own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.

No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.

Security. This Note, together with other Convertible Promissory Notes executed by Borrower in favor of Lender and KOYAH LEVERAGE PARTNERS, L.P. (collectively, the "Affiliated Lenders"), shall be secured by a first-priority security interest in tangible and intangible personal property of Borrower pursuant to a Security Agreement being executed by Borrower (the "Security Agreement").

Defaults. Each of the following shall constitute a default under this Note (a "Default"):

Failure by Borrower to make any payment due under this Note or under any other agreement with the Affiliated Lenders when due; any representation or warranty by Borrower under this Note or any other agreement with the Affiliated Lenders shall be false or inaccurate in any material respect when made; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders;

Failure by Borrower to pay when due any other indebtedness or obligations in excess of fifty thousand dollars ($50,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;

Borrower makes a general assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of sixty (60) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver; or

(d) Lender shall fail to have a valid, perfected and first-priority security interest in any of the collateral covered by the Security Agreement.

Acceleration; No Exclusive Remedy. Upon any Default set forth in Section 13(c) above, all principal, interest and other amounts owing hereunder automatically shall become immediately due and payable. Upon any other Default, Lender may declare, by written notice to Borrower, that all principal, accrued interest and other amounts owing hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lenders pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.

Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan
Fax: 310-643-8719

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

Miscellaneous.

No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.

Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.

Any payment hereunder shall first be applied to any enforcement or collections costs, then against accrued interest or late charges hereunder and then against the outstanding principal balance hereof.

All payments under this Note shall be made without set-off, deduction or counterclaim.

(f) This Note may be transferred or assigned by Lender in whole or in part if, on Borrowers reasonable request, Lender provides an opinion of counsel reasonably satisfactory to Borrower that such transfer does not require registration under the Securities Act of 1933, as amended, and applicable state securities law, except that this Note may be transferred by a Lender which is a partnership or limited liability company to a partner, former partner, member, former member or other affiliate of such partner or limited liability company, as the case may be, if (i) the transferee agrees in writing to be subject to the terms of this Note and (ii) Lender delivers notice of such transfer to Borrower. Any rights and obligations of Borrower and Lender under this Note shall be binding upon and inure to the benefit of their respective permitted successors, assigns, heirs, administrators and transferees.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

AURA SYSTEMS, INC.

By:

Name:

Title:

I:\Spodocs\28601\00016\agree\00127553.DOC

Convertible Promissory Note -- Multiple Advance- Koyah Leverage

EX-5 7 exhf.htm PROMISSORY NOTE Convertible Promissory Note (Multiple Advance)-KoyahPartners (00127552.BKA;1) THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION, (B) THE TRANSFER IS MADE IN ACCORANCE WITH RULE 144 UNDER SUCH ACT, (C) THE BORROWER RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THE NOTE (CONCURRED IN BY LEGAL COUNSEL FOR THE BORROWER) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (D) THE BORROWER OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

CONVERTIBLE PROMISSORY NOTE

Principal Amount: $800,000 Spokane, Washington
Interest Rate: 10% July 24, 2003

FOR VALUE RECEIVED, the undersigned, AURA SYSTEMS, INC., a Delaware corporation ("Borrower"), hereby promises to pay to the order of KOYAH LEVERAGE PARTNERS, L.P., a Delaware limited partnership ("Lender"), at such places and times and under the terms and conditions set forth below, the lesser of (i) the maximum principal amount of this Convertible Promissory Note (this "Note") set forth above and (ii) the aggregate principal amount advanced by Lender at its option from time to time under this Note, together with interest thereon and any other amounts set forth herein.

Principal Payments. The entire principal balance of this Note shall be due and payable on October 24, 2003; provided, however, that if Borrower has not received at least Two Million Dollars ($2,000,000) of debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable on January 24, 2004; provided, further, however, that if Borrower has still not received at least Two Million Dollars ($2,000,000) of debt or equity financing by such date, then the entire principal balance of this Note instead shall be due and payable upon demand (the "Maturity Date").

Interest Rate and Payment. The outstanding principal balance of this Note shall accrue interest at the rate of ten percent (10%) per annum. Accrued interest under this Note shall be due and payable on the Maturity Date.

Prepayment. In light of the conversion feature of this Note and to protect Lender's right of conversion hereunder, Borrower shall not have the right to prepay the outstanding principal balance of this Note or accrued interest thereon, in whole or in part, prior to the Maturity Date without the prior written consent of Lender.

Collection Costs Borne by Borrower. Borrower agrees to pay all costs and expenses, including without limitation reasonable attorneys' fees, incurred by Lender in enforcing the terms of this Note or in collecting this Note, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.

Late Charge. If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, Borrower agrees to pay interest (after as well as before judgment) at a rate of five percent (5%) per annum above the rate of interest which would otherwise have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.

Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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-convenes. 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.

Intended Beneficiaries. Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.

Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Conversion of Note. In the event Borrower completes any debt or equity financing after the date hereof, then at the option of Lender, the outstanding principal balance of this Note and all accrued interest or other amounts payable under this Note, at any time prior to payment thereof, may be converted, in whole or in part, into the debt or equity securities or instruments issued in any such financing on the best terms offered to any lender or investor in such financing, but with a twenty percent (20%) discount in price from such best terms. In the event Borrower completes more than one debt or equity financing after the date hereof, then such right of conversion shall apply to each such financing.

Representations of Lender. By acceptance of this Note, Lender represents to Borrower that Lender is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and that this Note and any securities issuable upon any conversion thereof are being acquired for Lender's own account and for the purpose of investment and not with a view to, or for sale in connection with, the distribution of the same, nor with any present intention of distributing or selling the same.

No Shareholder Rights. This Note shall not entitle Lender to any voting rights or any other rights as a shareholder of Borrower until any conversion of this Note.

Security. This Note, together with other Convertible Promissory Notes executed by Borrower in favor of Lender and KOYAH PARTNERS, L.P. (collectively, the "Affiliated Lenders"), shall be secured by a first-priority security interest in tangible and intangible personal property of Borrower pursuant to a Security Agreement being executed by Borrower (the "Security Agreement").

Defaults. Each of the following shall constitute a default under this Note (a "Default"):

Failure by Borrower to make any payment due under this Note or under any other agreement with the Affiliated Lenders when due; any representation or warranty by Borrower under this Note or any other agreement with the Affiliated Lenders shall be false or inaccurate in any material respect when made; or failure by Borrower to comply with the provisions of any other covenant, obligation or term of this Note or any other agreement with the Affiliated Lenders;

Failure by Borrower to pay when due any other indebtedness or obligations in excess of fifty thousand dollars ($50,000) which shall continue after the applicable grace period, if any, specified in the agreement relating to such indebtedness or obligation; failure by Borrower to comply with the provisions of any other covenant, obligation or term of any agreement relating to such indebtedness or obligation which shall continue after the applicable grace period, if any, specified in such agreement if the effect of such failure is to accelerate, or permit the acceleration of, the due date of such indebtedness or obligation; or any such indebtedness or obligation shall be declared to be due and payable, or required to be prepaid, prior to the stated maturity date thereof;

Borrower makes a general assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions to any court for a receiver or trustee for Borrower or any substantial part of its property, commences any proceeding relating to the arrangement, readjustment, reorganization or liquidation under any bankruptcy or similar laws; there is commenced against Borrower any such proceedings which remain undismissed for a period of sixty (60) days; or Borrower by any act indicates its consent or acquiescence in any such proceeding or the appointment of any such trustee or receiver; or

(d) Lender shall fail to have a valid, perfected and first-priority security interest in any of the collateral covered by the Security Agreement.

Acceleration; No Exclusive Remedy. Upon any Default set forth in Section 13(c) above, all principal, interest and other amounts owing hereunder automatically shall become immediately due and payable. Upon any other Default, Lender may declare, by written notice to Borrower, that all principal, accrued interest and other amounts owing hereunder shall be immediately due and payable to Lender. Notwithstanding anything to the contrary herein, Lender shall be entitled to any and all remedies available to it in the event of a Default hereunder and Lender's pursuance of any particular remedy shall not preclude Lender from seeking any other remedies available to it at law or in equity.

Notices. Any notice under this Note shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan
Fax: 310-643-8719

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

Miscellaneous.

No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or of any other right under this Note.

Borrower hereby waives presentation for payment, demand, notice of demand and of dishonor and non-payment of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party. The pleading of any statute of limitations as a defense to any demand against the Borrower, any endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties to the extent permitted by law. Time is of the essence under this Note.

Any payment hereunder shall first be applied to any enforcement or collections costs, then against accrued interest or late charges hereunder and then against the outstanding principal balance hereof.

All payments under this Note shall be made without set-off, deduction or counterclaim.

[remainder of page intentionally left blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name by its duly authorized officer and dated the day and year first above written.

AURA SYSTEMS, INC.

By:

Name:

Title:

I:\Spodocs\28601\00016\agree\00127552.DOC

Convertible Promissory Note -- Multiple Advance- Koyah Partners

EX-6 8 exhg.htm SECURITY AGREEMENT Security Agreement re-saved version 2 (00127992.DOC;1) SECURITY AGREEMENT

This Security Agreement (this "Agreement") is entered into as of July 24, 2003, by AURA SYSTEMS, INC. a Delaware corporation (the "Debtor"), for the benefit of KOYAH LEVERAGE PARTNERS, L.P., a Delaware limited partnership in its capacity as collateral agent for the Lenders referred to below (the "Secured Party").

R E C I T A L S :

The Debtor has requested that KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P. (collectively, the "Lenders") extend loans to the Debtor.

Such loans are to be evidenced by Convertible Promissory Notes dated the date hereof made by the Debtor in favor of the Lenders (the "Notes").

The Lenders have required, as a condition of making such loans, that the Debtor grant a security interest in all of its personal property to secure such loans and any other present or future obligations of the Debtor to the Lenders.

In order to induce the Lenders to make such loans, the Debtor is willing to grant such security interest as further provided herein.

NOW, THEREFORE, the Debtor hereby agrees with the Secured Party as follows:

ARTICLE I. DEFINITIONS

Unless otherwise defined herein, any terms used herein (whether or not capitalized, such as "accounts," "inventory" and "equipment") which are defined in the Uniform Commercial Code as enacted in the State of Washington, as amended from time to time, shall have the meaning assigned to such term therein. Unless otherwise defined herein, any capitalized terms used herein which are defined in the Notes shall have the meaning assigned to them therein. In addition, the following terms shall have the meaning set forth below:

"Collateral" means all of the Debtor's personal property and fixtures of every nature (except in the case of (ii)(g) below which is limited to the specific property set forth therein), whether tangible or intangible and whether now owned or hereafter acquired, wherever located, including without limitation the following:

(i) (a) All goods; (b) all inventory, merchandise, and personal property held for sale or lease or furnished or to be furnished under contracts of service, all raw materials, work in process, or materials used or consumed in Debtor's business, wherever located and whether in the possession of the Debtor, a warehouseman, a bailee, or any other person; (c) all equipment, machinery, tools, office equipment, supplies, furnishings, furniture, or other items used or useful, directly or indirectly, in the Debtor's business, (d) all fixtures; and (e) all substitutes and replacements therefor, all accessions, attachments, and other additions thereto, all tools, parts and supplies used in connection therewith, all packaging, manuals, warranties and instructions related thereto, and all leasehold or equitable interests therein;

(ii) (a) All accounts, accounts receivable, contract rights, contracts receivable, purchase orders, notes, drafts, acceptances, and other rights to payment and receivables; (b) all chattel paper (whether tangible or electronic), documents and instruments (including promissory notes); (c) all money and deposit accounts; (d) all letter of credit rights (whether or not the letter of credit is evidenced by a writing), rights under security, guaranties or other supporting obligations, tort claims and proceeds, insurance claims and proceeds, and tax refund claims and proceeds; (e) all securities and other investment property; (f) all general intangibles and payment intangibles, (g) all patents and patent applications and registrations, trademarks and trademark applications and registrations, service marks and service mark applications and registrations, and copyrights and copyright applications and registrations which are related to the "AuraGen" based technologies or products (collectively the "Patents, Trademarks and Copyrights"), including without limitation the patents, patent applications, trademarks and trademark applications and copyrights and copyright applications owned by the Debtor listed on Schedule 1 hereto or licensed to the Debtor on Schedule 2 hereto; (h) all trade names, trade styles, goodwill, inventions, designs, methods, processes, technology, know-how, intellectual property, drawings, specifications, blue prints, confidential information, trade secrets, customer lists, supplier lists, software and computer programs, mask works, and mask work applications and registrations, goodwill, license agreements, franchise agreements and other licenses, permits, franchises, and agreements of every kind and nature pursuant to which the Debtor possesses, uses or has authority to possess or use any property (whether tangible or intangible) of the Debtor or pursuant to which others possess, use or have authority to possess or use any property (whether tangible or i ntangible) of the Debtor, and infringement and commercial tort claims; and (i) all business records, software, writings, plans, specifications, schematics, and other recorded data in any form; and

(iii) All products and proceeds of the foregoing and all other property received or receivable in disposition of or exchange of the foregoing.

"Event of Default" means any default in payment or performance of the Obligations.

"Obligations" means any and all obligations and liabilities of every nature of the Debtor to the Lenders or the Secured Party, whether now existing or hereafter incurred, including without limitation those arising out of or in connection with the Notes, this Agreement or any other agreements with the Lenders or the Secured Party. The Obligations shall specifically include any and all principal, interest (including without limitation interest that, but for the filing of a petition in bankruptcy, would accrue on such obligations), fees, expenses, indemnities or other obligations or liabilities, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created, or incurred, as well as any and all of such obligations or liabilities that are paid, to the extent such payment is avoided or recovered directly or indirectly from the Lenders or the Secured Party as a preference, fraudulent transfer, or otherwise, together with any and all amendments, modifications, extensions or renewals of the foregoing.

ARTICLE II. GRANT OF SECURITY INTEREST

To secure the payment and performance of the Obligations, the Debtor hereby grants a continuing security interest in the Collateral, and assigns the Collateral to, the Secured Party.

ARTICLE III. COVENANTS OF THE DEBTOR

The Debtor shall fully perform each of the covenants set forth below.

3.1 Further Documentation

Promptly upon request of the Secured Party and at the Debtor's expense, the Debtor (a) shall prepare, execute, deliver and file any financing statement, any filing with the Patent and Trademark Office, Copyright Office or other applicable office, and any renewal, substitution or correction thereof or any other document and shall take any such further action as the Secured Party may require in perfecting or protecting the security interested granted by the Debtor under this Agreement or in otherwise obtaining the full benefits of this Agreement and (b) authorizes the Secured Party to prepare, execute, deliver and file any such documents and to take any such actions on behalf of the Debtor.

3.2 Patents, Trademarks and Copyrights

Schedule 1 lists all Patents, Trademarks and Copyrights currently owned by the Debtor. Promptly upon any change in the Patents, Trademarks and Copyrights owned by the Debtor, the Debtor shall provide the Secured Party with an updated Schedule 1 listing all Patents, Trademarks and Copyrights then owned by the Debtor. Schedule 2 lists all Patents, Trademarks and Copyrights currently licensed to the Debtor by third parties. Promptly upon any change in the Patents, Trademarks and Copyrights licensed to the Debtor, the Debtor shall provide the Secured Party with an updated Schedule 2 listing all Patents, Trademarks and Copyrights then licensed to the Debtor.

3.3 Pledges

Promptly upon request of the Secured Party and at Debtor's expense, the Debtor shall deliver and pledge to the Secured Party, endorsed or accompanied by instruments of assignment or transfer satisfactory to the Secured Party, any Collateral consisting of instruments, investment property, documents, general intangibles or chattel paper.

3.4 Control

Promptly upon request of the Secured Party and at Debtor's expense, the Debtor shall cooperate with the Secured Party in obtaining control with respect to any Collateral consisting of deposit accounts, investment property, letter of credit rights and electronic chattel paper.

3.5 Maintenance of Records

The Debtor shall keep and maintain satisfactory and complete records of the Collateral including but not limited to a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral. The Debtor shall mark its books and records pertaining to the Collateral to evidence this Agreement and the security interest granted herein. Promptly upon request of the Secured Party, the Debtor shall deliver and turn over to the Secured Party all books and records pertaining to the Collateral at any time after the occurrence of an Event of Default.

3.6 Liens

Except for existing licenses of Patents, Trademarks and Copyrights by the Debtor to third parties set forth on Schedule 3 to this Agreement, the Debtor owns the Collateral free and clear of liens, charges, pledges, security interests, encumbrances or other claims or interests in the Collateral, and the Debtor will neither create nor permit the existence of any of the foregoing without the prior written consent of the Secured Party.

3.7 Disposition of Collateral

The Debtor shall not sell, license, lease, transfer or otherwise dispose of any of the Collateral without the prior written consent of the Secured Party, except for sales of inventory, collection of rights to payment, and disposition of equipment or inventory which is obsolete or being replaced, all in the ordinary course of business in accordance with past practices.

3.8 Limitations on Amendments, Modifications, Terminations, Waivers and Extensions of Contracts and Agreements Giving Rise to Accounts

Without the prior written consent of Secured Party, the Debtor will not (a) amend, modify, terminate, waive or extend any provision of any agreement giving rise to an account, general intangible, instrument, chattel paper or other right to payment, licensing any Patents, Trademarks or Copyrights to the Debtor or by the Debtor or otherwise relating to the Collateral, in any manner that could reasonably be expected to have a material adverse effect on the value of any Collateral or (b) fail to exercise promptly and diligently every material right that it may have under each such agreement, other than any right of termination (which shall only be exercised with the prior written consent of the Secured Party).

3.9 Indemnification

The Debtor agrees to pay, and to indemnify the Secured Party and hold the Secured Party harmless from, all liabilities, costs and expenses (including legal fees and expenses) in connection with protecting or realizing on the Collateral, enforcing any rights or remedies of the Secured Party or otherwise arising out of this Agreement. In any suit, proceeding or action brought by the Secured Party under any account or other right to payment to enforce payment of any sum owing thereunder or to enforce any provisions of any account or other right to payment, the Debtor will indemnify the Secured Party and hold the Secured Party harmless from all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment, reduction or liability whatsoever of any account debtor thereunder arising out of a breach by the Debtor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or its successors from the Debtor.

3.10 Further Identification of Collateral

The Debtor will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may request, all in reasonable detail.

3.11 Notices

The Debtor will advise the Secured Party promptly in reasonable detail (a) of any lien, charge, pledge, security interest, encumbrance or other claim or interest asserted against any of the Collateral and (b) of the occurrence of any other event that could reasonably be expected to have a material adverse effect on the Collateral.

3.12 Changes in Locations, Name, Etc.

The Debtor will not (a) change its state of organization, (b) change the location of its chief executive office/chief place of business or remove its books and records from the locations set forth in Schedule 4 to this Agreement or (c) change its name, identity or structure to such an extent that any financing statement filed by the Secured Party in connection with this Agreement would become ineffective or seriously misleading, unless it shall have given the Secured Party at least 30 days prior written notice thereof.

3.13 Further Assurances

The Debtor agrees to take all actions which the Secured Party may request to perfect or maintain the perfection of, or to otherwise protect, the security interest granted herein and the Debtor authorizes the Secured Party to take such actions on behalf of the Debtor, including without limitation (a) filing (including electronic or facsimile filing) financing statements describing the Collateral, which may include descriptions broader than as set forth in this Agreement and (b) filing any documents with the Patent and Trademark Office, Copyright Office or any other applicable office. The Debtor agrees that where allowed by law, a carbon, photographic or other reproduction of a financing statement or this Agreement is sufficient as a financing statement.

3.14 Insurance

The Debtor (a) will keep the Collateral continuously insured at its expense against fire, theft, and other hazards in amounts and with insurers as shall be sufficient to fully protect the Collateral, as reasonably approved by the Secured Party, (b) will include in such policies of insurance to the Secured Party clauses making any loss payable to the Secured Party as its interest may appear and agreeing to notify Secured Party of any cancellation or threatened cancellation not less than 30 days prior to the effective date of such cancellation and (c) will deliver copies of such policies of insurance to the Secured Party upon request.

ARTICLE IV. REPRESENTATIONS AND WARRANTIES

The Debtor hereby makes the following representations and warranties:

4.1 Title to Collateral

The Debtor has good and marketable title to all of the Collateral, free and clear of all liens, charges, pledges, security interests, encumbrances or other claims or interests.

4.2 No Impairment of Collateral

None of the Collateral shall be impaired or jeopardized because of the security interest granted herein.

4.3 Other Agreements

The execution and delivery of this Agreement, the consummation of the transactions provided for herein, and the fulfillment of the terms hereof will not result in the breach of any of the terms, conditions, or provisions of, or constitute a default under, or conflict with or cause any acceleration of any obligation under any agreement or other instrument to which the Debtor is a party or by which the Debtor is bound or result in the violation of any applicable law.

4.4 No Approvals

No approvals of any governmental entity or third party are required in connection with the security interest herein granted.

4.5 Authority

The Debtor has full power and authority to grant to the Secured Party a security interest in the Collateral.

4.6 Location of Records

The address(es) of the office where the books and records of the Debtor are kept concerning the Collateral is set forth on Schedule 4 to this Agreement.

4.7 State of Organization

The Debtor's state of organization is set forth on Schedule 4 to this Agreement.

4.8 Chief Executive Office

The Debtor's chief executive office and chief place of business is located at the address set forth on Schedule 4 to this Agreement.

4.9 Trade Names

The Debtor conducts its business only under its legal name except for any additional trade names set forth on Schedule 4 to this Agreement.

ARTICLE V. THE SECURED PARTY'S RIGHTS WITH RESPECT TO THE COLLATERAL

5.1 No Duty on the Secured Party's Part

The Secured Party and the Lenders shall not be required to realize upon any Collateral, except at their option upon the occurrence of any Event of Default; collect the principal, interest or payment due thereon or exercise any rights or options of the Debtor pertaining thereto; make presentment, demand or protest; give notice of protest, nonacceptance or nonpayment; or do any other thing for the protection, enforcement or collection of any Collateral. The powers conferred on the Secured Party and the Lenders hereunder are solely to protect the Secured Party's and the Lenders' interests in the Collateral and shall not impose any duty upon the Secured Party or the Lenders to exercise any such powers. The Secured Party and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers; and neither the Secured Party nor the Lenders shall be responsible to the Debtor for any act or failure to act hereunder.

5.2 Negotiations with Account Debtors

Upon the occurrence of any Event of Default, the Secured Party may, in its sole discretion, extend or consent to the extension of the time of payment or maturity of any instruments, accounts, chattel paper, general intangibles or other rights to payment.

5.3 Right to Assign

The Secured Party and the Lenders may assign or transfer the whole or any part of the Obligations and may transfer therewith as collateral security the whole or any part of the Collateral; and all obligations, rights, powers and privileges herein provided shall inure to the benefit of the assignee and shall bind the successors and assigns of the parties.

5.4 Duties Regarding Collateral

Beyond the safe custody thereof, the Secured Party shall not have any duty as to any Collateral in its possession or control, or as to any preservation of any rights of or against other parties.

5.5 Collection From Account Debtors

Upon the occurrence of any Event of Default, the Debtor shall, upon demand by the Secured Party (and without any grace or cure period), notify all account debtors to make payment to the Secured Party of any amounts due or to become due. The Debtor authorizes the Secured Party to contact the account debtors for the purpose of having all or any of them pay their obligations directly to the Secured Party. Upon demand by the Secured Party, the Debtor shall enforce collection of any indebtedness owed to it by account debtors.

5.6 Inspection

The Secured Party and its designees, from time to time at reasonable times, may inspect, audit and make copies of and extracts from all records and all other papers in the possession of the Debtor in connection with the Collateral.

ARTICLE VI. THE SECURED PARTY'S RIGHTS AND REMEDIES

6.1 Acceleration; Remedies

Upon the occurrence of any Event of Default, the Secured Party and the Lenders shall have all rights and remedies available to it under the Notes, this Agreement, and any other documents or agreements or available at law or in equity, including without limitation the Uniform Commercial Code. The Secured Party and the Lenders may proceed to enforce any or all of such rights and remedies or realize on any or all security or guaranties for the Obligations in any manner or order it deems expedient without regard to any equitable principes of marshaling or otherwise. No failure or delay on the part of the Secured Party or the Lenders in exercising any right, power or privilege hereunder and no course of dealing shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any right, power or privilege. The rights and remedies of the Secured Party and the Lenders are cumulative and not exclusive of any rights or remedies that the Secured Party or the Lenders would otherwise have. No notice to or demand on the Debtor, in any case, shall entitle the Debtor to any other or further notice or demand in similar or other circumstances or shall constitute a waiver of the right of the Secured Party or the Lenders to any other or further action in any circumstances without notice or demand.

6.2 Notice of Sale

The Debtor hereby acknowledges and agrees that written notice mailed to the Debtor at the address designated herein ten days prior to the date of public or private sale of any of the Collateral shall constitute commercially reasonable notice.

6.3 Disposition of Collateral

In addition to all other rights and remedies available to the Secured Party and the Lenders upon the occurrence of an Event of Default, the Secured Party may dispose of any of the Collateral at public or private sale in its then present condition or following such preparation and processing as the Secured Party deems commercially reasonable. Such sale may include licensing of the Collateral on an exclusive or non-exclusive basis, on a worldwide or geographically limited basis and on an all-uses or limited uses basis. For the purpose of enabling the Secured Party to exercise its rights and remedies hereunder, the Debtor hereby grants to the Secured Party an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Debtor) to use, license or sub-license any of the Collateral, including in such license access to all media in which any of the Collateral may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The Secured Party has no duty to prepare or process the Collateral prior to sale. The Secured Party may disclaim warranties of title, possession, quiet enjoyment and the like. Such actions by the Secured Party shall not affect the commercial reasonableness of the sale. Further, the Secured Party may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

ARTICLE VII. APPOINTMENT OF COLLATERAL AGENT

The Lenders hereby appoint KOYAH LEVERAGE PARTNERS, L.P. as their collateral agent to act as the Secured Party hereunder for all purposes in obtaining, maintaining, protecting and enforcing the security interest in the Collateral and hereby authorize KOYAH LEVERAGE PARTNERS, L.P., in its sole discretion, to enter into all such agreements and to take all such actions as KOYAH LEVERAGE PARTNERS, L.P. in its sole discretion, deems necessary or advisable in connection therewith. In so acting as collateral agent, KOYAH LEVERAGE PARTNERS, L.P. shall act for the ratable benefit of the Lenders and any amounts realized or costs incurred by the Secured Party in connection with this Agreement shall be ratably allocated between the Lenders.

ARTICLE VIII. GENERAL PROVISIONS

8.1 The Secured Party's Appointment as Attorney-in-Fact

(a) The Debtor hereby irrevocably constitutes and appoints the Secured Party and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Debtor and in the name of the Debtor or in its own name, from time to time in the Secured Party's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Agreement; and without limiting the generality of the foregoing, the Debtor hereby gives the Secured Party the power and right, on behalf of the Debtor, without consent by or notice to the Debtor, to do the following:

(i) upon the occurrence of any Event of Default, to transfer to the Secured Party or to any other person all or any of the Collateral, to endorse any instruments pledged to the Secured Party and to fill in blanks in any transfers of Collateral, powers of attorney or other documents delivered to the Secured Party;

(ii) to pay or discharge taxes and liens levied or placed on or threatened against the Collateral;

(iii) upon the occurrence of any Event of Default, (A) to take possession of, endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any account, instrument or general intangible or with respect to any other Collateral and (B) to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Secured Party for the purpose of collecting all such moneys due under any account, financial assets, instrument, investment property, or general intangible or with respect to any other Collateral whenever payable; and

(iv) upon the occurrence of any Event of Default, (A) to direct any party liable for any payment under any of the Collateral to make payment of all moneys due or to become due thereunder directly to the Secured Party or as the Secured Party shall direct; (B) to ask for, demand, collect and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Debtor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharge or releases as the Secured Party may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes; and to do, at the Secured Party's option and the Debtor's expense, at any time or from time to time, all acts and things that the Secured Party deems necessary to protect, preserve or realize upon the Collateral and the Secured Party's security interest therein and to effect the intent of this Agreement, all as fully and effectively as the Debtor might do.

(b) The Debtor hereby ratifies all that such attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.

(c) The Debtor also authorizes the Secured Party, at any time and from time to time, to execute, in connection with the sale provided for in Article VI hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

(d) The powers conferred on the Secured Party hereunder are solely to protect the Secured Party's interests in the Collateral and shall not impose any duty upon the Secured Party or the Lenders to exercise any such powers. The Secured Party and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Debtor for any act or failure to act hereunder.

(e) The Debtor shall pay or reimburse the Secured Party for all costs and expenses, including attorneys fees, incurred by the Secured Party while acting as the Debtor's attorney-in-fact hereunder.

8.2 Termination of Agreement

This Agreement shall remain in full force and effect until the Obligations have been fully and finally discharged.

8.3 Severability

If any provision of this Agreement is for any reason and to any extent determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement will be unaffected and interpreted so as best to reasonably effect the intent of the parties hereto. Such void or unenforceable provision of this Agreement shall be replaced with a valid and enforceable provision so as to achieve, to the greatest extent possible, the economic, business and other purposes of the void or unenforceable provision.

8.4 Waiver

No waiver by any party of any breach of any provision hereof shall constitute a waiver of any other breach of that or any other provision hereof.

8.5 Assignment

All rights, powers, privileges and immunities herein granted to the Secured Party and the Lenders shall extend to their successors and assigns and any other legal holder of the Obligations or this Agreement, with full right by the Secured Party and the Lenders to assign and/or sell the same.

8.6 Successors

The rights and obligations of the parties hereto shall inure to the benefit of, and be binding and enforceable upon, the respective successors and assigns of the parties.

8.7 Entire Agreement

This Agreement constitutes the entire agreement of the parties hereto concerning the subject matter hereof, all prior discussions, proposals, negotiations and understandings having been merged herein. This Agreement or any provision hereof may be (i) modified or amended, but only by a writing signed by all parties at such time or (ii) waived (either generally or in a particular instance, either retroactively or prospectively, either for a specified period of time or indefinitely, either with or without consideration), but only by a writing signed by the party granting such waiver.

8.8 Governing Law; Jurisdiction; Venue; Jury Trial

This Agreement shall be governed by, and interpreted under, the laws of the State of Washington applicable to contracts made and to be performed therein, without giving effect to the principles of conflicts of law. The parties hereby (i) agree that any legal suit, action or proceeding arising out of or relating to this Agreement must be instituted in a federal or state court located in the County of Spokane, State of Washington, (ii) irrevocably submit to the jurisdiction of any such court and waive any objection to the laying of venue in, or the inconvenience of, such forum and (iii) irrevocably waives all rights to trial by jury in any action, suit or proceeding arising out of or related to this Agreement, the Notes or any other agreement or document between the Debtor and the Secured Party or the Lenders.

8.9 Notices

All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with acknowledgment of complete transmission) to each party at the address (or at such other address for a party as shall be specified by like notice) set forth below; provided, however, that notices sent by mail will not be deemed given until received.

Aura Systems, Inc.

2335 Alaska Avenue

El Segundo, CA 90245

Attn: Neal Meehan

Fax: (310) 643-8719

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

8.10 Costs and Expenses

The Debtor hereby agrees to pay to the Secured Party and the Lenders upon demand all costs and expenses, including attorney's fees, incurred in connection with the administration of this Agreement, including without limitation all filings or other actions required by the Secured Party in connection with perfecting or otherwise protecting the security interest granted hereunder. In addition, the Borrower hereby agrees to pay to the Secured Party upon demand all costs and expenses, including attorney's fees, incurred in connection with the enforcement of this Agreement, collection of the Obligations and the protection, preservation, collection or sale of or other realization upon the Collateral, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.

8.11 Counterparts

This Agreement may be executed in any number of counterparts, each of each of which will be an original, but all of which together will constitute one and the same instrument.

8.12 Title and Subtitles

The titles of the sections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Debtor, the Secured Party and the Lenders have caused this Agreement to be duly executed as of the day and year first above written.

"Debtor"

AURA SYSTEMS, INC.

By:

Name:

Title:

"Secured Party" and "Lender"

KOYAH LEVERAGE PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name: Robert J. Law

Title: Vice President

"Lender"

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name: Robert J. Law

Title: Vice President

SCHEDULE 1

Patents and Patent Applications,

Trademark and Trademark Applications

and

Copyrights and Copyright Applications Owned by the Debtor

1. Patents.

Any and all domestic and foreign patent registrations, patent applications, patentable invention rights or patent-related rights to current and future interests owned by Debtor or assigned to Debtor, related to the "AuraGen" based technologies, including but not restricted to the following patent registrations and patent applications:

5,734,217	Induction Machine using Ferromagnetic Conducting Material in Rotor
6,157,175	Mobile Power Generation System
Pending	Mobile Power Generation System
Pending	Switched Reluctance Motor Delivering Constant Torque From Three Phase Sinusoidal Voltages
Pending	Bi-Directional Power Supply Circuit

2. Trademarks.

Any and all domestic and foreign trademark registrations, trademark applications, trade and service mark rights, or other trademark-related rights to current and future interests owned by Debtor or assigned to Debtor, relating generally to "AuraGen" based products, including but not restricted to the following trademark registrations and trademark applications:

Serial Number	Reg. Number	Word Mark

3. Copyrights.

Any and all domestic and foreign copyright registrations, copyright applications or other copyright-related rights to current and future interests owned by Debtor or assigned to Debtor, relating to the "AuraGen" based technologies or "AuraGen" products.

[Remainder of page intentionally left blank]

SCHEDULE 2

Patents and Patent Applications, Trademarks and Trademark Applications

and

Copyrights and Copyright Applications Licensed to the Debtor

None

SCHEDULE 3

Patents and Patent Applications

Trademarks and Trademark Applications,

And Copyrights and Copyright Applications

Licensed By the Debtor

None

SCHEDULE 4

Debtor Information

State of organization: Delaware

Address of
chief executive office: Aura Systems, Inc.

2335 Alaska Avenue

El Segundo, CA 90245

Address(es) where
books and records are kept: Same

Additional trade names: None

EX-7 9 exhh.htm AMENDMENT AND WAIVER AGREEMENT Amendment & Waiver (00129476.DOC;1) AMENDMENT AND WAIVER

AGREEMENT

THIS AMENDMENT AND WAIVER AGREEMENT (this "Agreement") is entered into as of August 6, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P. each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, in connection with loans to the Company by the Lenders, the Company and the Lenders entered into an Agreement dated as of July 24, 2003 (the "Agreement"), the Company executed in favor of the Lenders four Convertible Promissory Notes dated July 24, 2003 (collectively, the "Notes"), the Company executed in favor of Koyah Leverage Partners, L.P. (as collateral agent for the Lenders) a Security Agreement dated as of July 24, 2003 (the "Security Agreement" and together with the Agreement and the Notes, the "Transaction Documents");

WHEREAS, the Company has requested that the Lenders amend or waive certain provisions of the Transaction Documents and the parties wish to correct or clarify certain other provisions of the Transaction Documents; and

WHEREAS, the parties are entering into this Agreement to provide for such amendments and waivers, on the terms and conditions set forth herein.

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

1. Section 1(g)(ii) of Agreement. The Lenders hereby waive any breach of the Company's representation and warranty contained in Section 1(g)(ii) of the Agreement arising from the existing defaults set forth under the heading "Defaults" in the Schedule of Exceptions attached to this Agreement, so long as any creditor involved in such defaults takes no further actions and exercises no further remedies to collect on the obligations involved or enforce its related rights and the Company otherwise remains in compliance with all of the provisions of the Transaction Documents (as modified by the amendments and waivers set forth in this Agreement) and this Agreement.

2. Section 1(i) of Agreement. The Lenders hereby waive any breach of the Company's representation and warranty contained in Section 1(i) of the Agreement arising from the existing liens set forth under the heading "Liens" in the Schedule of Exceptions attached to this Agreement, so long as any creditor involved in such defaults takes no further actions and exercises no further remedies to collect on the obligations involved or enforce its related rights and the Company otherwise remains in compliance with all of the provisions of the Transaction Documents (as modified by the amendments and waivers set forth in this Agreement) and this Agreement.

3. Section 3(l) of Agreement. The word "rulers" contained in the first sentence of Section 3(l) of the Agreement hereby is amended to read "rules".

4. Section 3 of Notes. Section 3 of each Note hereby is amended in its entirety to read as follows:

In light of the conversion feature of this Note and to protect Lender's right of conversion hereunder, Borrower shall not have the right to prepay the outstanding principal balance of this Note or accrued interest thereon, in whole or in part, prior to the Maturity Date without the prior written consent of Lender; provided, however, that Borrower may prepay such principal balance or accrued interest, in whole only, prior to the Maturity Date without such consent if Borrower (i) gives Lender twenty (20) days prior written notice of such prepayment and (ii) together with and at the time of such prepayment, pays Lender a fee equal to twenty percent (20%) of the outstanding principal balance as compensation to Lender for the loss of its continued conversion rights (which fee Lender shall have the right, at its option, to convert pursuant to Section 9 below in lieu of payment thereof in the same manner as principal, interest or other amounts payable under this Note). The parties acknowledge and agree that the damages suffered by Lender in the event of the loss of its continued conversion right is difficult to determine and that the parties have set such fee as liquidated damages in an amount that they believe reasonably estimates such damages.

5. Section 5 of Notes. Section 5 of each Note hereby is amended in its entirety to read as set forth below:

If any payment of principal or interest under this Note shall not be made within five (5) days after the due date, this Note shall bear interest (after as well as before judgment) at a rate of five percent (5%) per annum above the rate of interest which would otherwise have been payable under this Note or the maximum rate of interest permitted to be charged by applicable law, whichever is less.

6. Section 9 of Notes. The first sentence of Section 9 of each Note hereby is amended to add ", fees" after the words "accrued interest" contained in such Section.

7. Section 13(b) of Notes. The Lenders hereby waive any breach of the event of default contained in Section 13(b) of each Note arising from the existing defaults set forth under the heading "Defaults" in the Schedule of Exceptions attached to this Agreement, so long as any creditor involved in such defaults takes no further actions and exercises no further remedies to collect on the obligations involved or enforce its related rights and the Company otherwise remains in compliance with all of the provisions of the Transaction Documents (as modified by the amendments and waivers set forth in this Agreement) and this Agreement.

8. Section 13(d) of Notes. The Lenders hereby waive any breach of the event of default contained in Section 13(d) of each Note arising from the existing liens set forth under the heading "Liens" in the Schedule of Exceptions attached to this Agreement, if any, which may cover collateral under the Security Agreement and have priority under applicable law over the security interest of the Security Agreement, so long as the Company otherwise remains in compliance with all of the provisions of the Transaction Documents (as modified by the amendments and waivers set forth in this Agreement) and this Agreement.

9. Section 16(g) of Notes. Section 16(g) of each Note hereby is amended to add at the end of such Section a new sentence which reads as follows:

The parties acknowledge that Borrower currently does not have any authorized but unissued shares of its common stock available for issuance and Borrower hereby agrees to use its best efforts to take action to call a shareholder meeting and increase its authorized but unissued common stock as soon as practicable.

10. Section 16(i) of Notes. Section 16(i) of each Note hereby is amended to delete the words "of Common Stock".

11. Section 3.5 of Security Agreement. The third sentence of Section 3.5 of the Security Agreement hereby is amended to read as follows:

Promptly upon request of the Secured Party, the Debtor shall deliver and turn over to the Secured Party copies of all books and records pertaining to the Collateral.

12. Section 3.6 of Security Agreement. The Lenders hereby waive any breach of the Company's covenant contained in Section 3.6 of the Security Agreement arising from the existing liens set forth under the heading "Liens" in the Schedule of Exceptions attached to this Agreement, so long as the Company otherwise remains in compliance with all of the provisions of the Transaction Documents (after giving effect to the amendments and waivers set forth in this Agreement) and this Agreement.

13. Section 4.1 of Security Agreement. The Lenders hereby waive any breach of the Company's representation and warranty contained in Section 4.1 of the Security Agreement arising from the existing liens set forth under the heading "Liens" in the Schedule of Exceptions attached to this Agreement, so long as the Company otherwise remains in compliance with all of the provisions of the Transaction Documents (after giving effect to the amendments and waivers set forth in this Agreement) and this Agreement.

14. Reaffirmation and Survival of Representations. The Company hereby re-affirms and re-makes all of the representations and warranties contained in the Transaction Documents as of the date hereof (as modified by the amendments and waivers set forth in this Agreement), and such representations and warranties shall survive the closing of the transactions contemplated by the Transaction Documents and this Agreement.

15. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

16. Entire Agreement. This Agreement, together with the Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the Transaction Documents shall remain unchanged and in full force and effect.

17. Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

18. Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

19. Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

20. Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

21. Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

22. The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by and the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Notes. Notwithstanding that the Company is paying such costs and expenses, the Company acknowledges and agrees that such legal counsel is representing only t he Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH LEVERAGE PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title:

Schedule of Exceptions

Liens

1. El Segundo real property and facilities are subject to a security interest related to mortgage financing and a pending sale/leaseback transaction.

2. Note receivable for approximately $1,000,000 under the Alpha Ceramics purchase agreement has been assigned as collateral to the purchasers in such sale/leaseback transaction.

3. Security interest in 177,000 shares of Telemac Corporate held as a long-term investment has been granted to a lender to secure a $200,000 note issued in May 2003.

Defaults

1. Shareholder litigation (Barovich/Chiau et al) judgment settlement for approximately $789,000 is in default. In April 2003, this creditor served Writs of Execution against one of the Company's bank accounts but has taken no further action.

2. Convertible notes issued in August October 2002 for a total principal amount of $625,000 are or may be in default.

EX-8 10 exhi.htm ADDITIONAL ADVANCE AGREEMENT Additional Advance Agreement (updated 8/18/03) (00131841.DOC;1) ADDITIONAL ADVANCE

AGREEMENT

THIS ADDITIONAL ADVANCE AGREEMENT (this "Agreement") is entered into as of August 18, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P., each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, in connection with loans to the Company by the Lenders, the Company and the Lenders entered into an Agreement dated as of July 24, 2003 (the "Agreement"), the Company executed in favor of the Lenders four Convertible Promissory Notes dated July 24, 2003 (collectively, the "Notes"), and the Company executed in favor of Koyah Leverage (as collateral agent for the Lenders) a Security Agreement dated as of July 24, 2003 (the "Security Agreement");

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003 (the "Amendment");

WHEREAS, the Lenders have made certain additional optional advances to the Company under (i) the Note in the favor of Koyah Leverage in the maximum principal amount of $800,000 and (ii) the Note in favor of Koyah in the maximum principal amount of $200,000 (collectively, the "Optional Advance Notes");

WHEREAS, the Company owns 177,777 shares (the "Telemac Shares") of common stock of Telemac Corporation, a Delaware corporation ("Telemac"), which are currently encumbered by a security interest granted to Judgment Acquisitions, Inc. ("Judgment Acquisitions") to secure a loan made to the Company by Judgment Acquisitions (the "Judgment Acquisitions Loan");

WHEREAS, the Company is in default under the Judgment Acquisitions Loan;

WHEREAS, the Company has requested that the Lenders make further additional optional advances under the Optional Advance Notes to pay off the Judgment Acquisitions Loan in full (the "Further Advances");

WHEREAS, in connection therewith, the Lenders are requiring, as a condition to making the Further Advances, that the Lenders receive a first-priority pledge of and security interest in the Telemac Shares; and

WHEREAS, the parties are entering into this Agreement to provide for the Further Advances and related matters, on the terms and conditions set forth herein.

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

Further Advances. The Company hereby requests that the Lenders make advances in the aggregate amount of (i) $215,047.03 if such advances are made on the date hereof or (ii) $215,047.03 plus an additional amount of $61.11 per day for each day after the date hereof if such advances are made after the date hereof (the "Further Advances"), as further additional optional advances under the Optional Advance Notes. The Company hereby directs the Lenders to disburse the Further Advances in the form of direct payment to Judgment Acquisitions in order to pay off the Judgment Acquisitions Loan in full.

Escrow Arrangements with Judgment Acquisitions. Prior to such disbursement of the Further Advances directly to Judgment Acquisitions, Judgment Acquisitions shall enter into escrow arrangements with the Lenders satisfactory to them, with Smith, Gambrell & Russell, LLP in Atlanta, Georgia acting as escrow agent (the "Escrow Agent"). Such escrow arrangements shall provide, among other things, for the Escrow Agent, upon receipt of confirmation of wire transfer(s) of the Further Advances to Judgment Acquisitions, to deliver to the Lenders (or their designee) (i) an acknowledgment from Judgment Acquisitions of satisfaction in full of the Judgment Acquisitions Loan and termination and release of any security interest in favor of Judgment Acquisitions in the Telemac Shares and (ii) stock certificate No. C2233 evidencing the Telemac Shares.

Pledge of Telemac Shares. In addition to the security interest in the Telemac Shares already arising under the Security Agreement, the Company shall execute and deliver a Stock Pledge Agreement satisfactory to the Lenders in favor of Koyah Leverage (as collateral agent for the Lenders) to further evidence and effectuate a first-priority pledge of and security interest in the Telemac Shares (the "Stock Pledge Agreement").

Amendment of Section 12 of Notes. Section 12 of each Note hereby is amended to add at the end of such Section the words "and a Stock Pledge Agreement being executed by Borrower (the "Stock Pledge Agreement")."

Amendment of Section 13(d) of Notes. Section 13(d) of each Note hereby is amended to add at the end of such Section the words "or in any of the collateral covered by the Stock Pledge Agreement."

Additional Representations and Reaffirmation of Prior Representations; Survival. In addition to making the additional representations and warranties contained in the Stock Pledge Agreement, the Company hereby re-affirms and re-makes all of the representations and warranties contained in the Agreement, the Notes and the Security Agreement as of the date hereof (as modified by the amendments and waivers set forth in the Amendment). For purposes of this Agreement as well as re-affirming the representations and warranties contained in the Agreement, the term "Transaction Documents" as used herein and therein shall mean the Agreement, the Notes, the Security Agreement, the Amendment, the Stock Pledge Agreement and this Agreement. All of such additional and re-affirmed representations and warranties shall survive the closing of the transactions contemplated by this Agreement and the other Transaction Documents.

Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the other Transaction Documents shall remain unchanged and in full force and effect.

Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

12. The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement (specifically including the costs and expenses of legal counsel in connection with prior discussions among the parties of a possible purchase of the Telemac Shares before a change in structure to the Further Advances instead), the other Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by such agreements (specifically including the costs and expenses of the Escrow Agent) and the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Optional Advance Notes. Notwithstanding that the Company is paying such costs and expenses, the Company acknowledges and agrees that such legal counsel is representing only the Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH LEVERAGE PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title:

EX-9 11 exhj.htm STOCK PLEDGE AGREEMENT Stock Pledge Agreement (updated 8/18/03) (00131853.DOC;1) STOCK PLEDGE AGREEMENT

This Stock Pledge Agreement (this "Agreement") is entered as of August 18, 2003, by and among AURA SYSTEMS, INC., a Delaware corporation (the "Pledgor"), KOYAH LEVERAGE PARTNERS, L.P., a Delaware limited partnership ("Koyah Leverage"), and KOYAH PARTNERS, L.P., a Delaware limited partnership ("Koyah" and together with Koyah Leverage, collectively the "Lenders"). Koyah Leverage in its capacity as collateral agent for the ratable benefit of the Lenders is hereinafter referred to as the "Pledgee".

RECITALS

WHEREAS, in connection with loans to the Pledgor by the Lenders, the Pledgor and the Lenders entered into an Agreement dated as of July 24, 2003 (the "Agreement"), the Company executed in favor of the Lenders four Convertible Promissory Notes dated July 24, 2003 (collectively, the "Notes"), and the Company executed in favor of Koyah Leverage (as collateral agent for the Lenders) a Security Agreement dated as of July 24, 2003 (the "Security Agreement");

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003; and

WHEREAS, pursuant to an Additional Advance Agreement dated the date hereof among the Pledgor and the Lenders (the "Additional Advance Agreement"), the Lenders are to receive a first-priority pledge of and security interest in certain shares of stock described herein and the Pledgor is to execute and deliver this Agreement to further evidence and effectuate such pledge and security interest.

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

AGREEMENT

Definitions.

Certificates. "Certificates" means the certificates evidencing ownership of the Collateral.

Collateral. "Collateral" means One Hundred Seventy-Seven Thousand Seven Hundred and Seventy-Seven (177,777) shares of common stock of the Company, together with any and all substitutions, additions and proceeds of the foregoing, whether now owned or hereafter acquired.

Company. "Company" means Telemac Corporation, a Delaware corporation.

Default. "Default" has the meaning set forth in the Notes.

Obligations. "Obligations" has the meaning set forth in the Security Agreement. For purposes of this Agreement and the Security Agreement, the term "Obligations" as used herein and therein shall specifically include any and all Obligations arising out of or in connection with the Additional Advance Agreement and this Agreement.

Pledge and Security Interest. To secure the full and punctual payment and discharge of the Obligations, the Pledgor hereby pledges the Collateral to the Pledgee and grants to the Pledgee a continuing security interest in the Collateral, for the ratable benefit of the Lenders.

Deposit of Collateral. The Pledgor shall (i) deliver the Certificate(s) to the Pledgee (or its designee) and (ii) deliver stock power(s), duly executed in blank, for the Collateral to the Pledgee (or its designee).

4. Warranties and Covenants of the Pledgor.

The Pledgor represents and warrants, covenants and agrees as follows:

Ownership of Collateral. The Pledgor has good, valid marketable title to the Collateral, free from any liens, charges, pledges, security interests, encumbrances, rights to purchase or other claim or interest of any kind, it being understood that the existing security interest in the Collateral in favor of Judgment Acquisitions, Inc. is being released concurrently herewith.

Liens. The Pledgor will neither create nor permit the creation of any lien charge, pledge, security interest, encumbrance, right to purchase or other claim or interest in the Collateral without the prior written consent of the Pledgee, it being understood that the existing security interest in the Collateral in favor of Judgment Acquisitions, Inc. is being released concurrently herewith.

First-Priority Security Interest. The Pledgee will at all times have a valid, perfected first-priority security interest in the Collateral, it being understood that the existing security interest in the Collateral in favor of Judgment Acquisitions, Inc. is being released concurrently herewith.

Valid Issuance. The Collateral consists of validly issued, fully paid and nonassessable shares.

Transfers. The Pledgor will neither make nor permit any transfer of the Collateral without the prior written consent of the Pledgee.

Reimbursement of Expenses. The Pledgor will reimburse Pledgee for any expenses reasonably incurred by the Pledgee in protecting or realizing on the Collateral.

Placement of Legend. If requested by the Pledgee, the Pledgor shall place a legend on the Certificates stating that the shares represented by the Certificates are subject to the restrictions imposed by this Agreement.

Payment of Taxes and Indebtedness. The Pledgor shall promptly pay all liens, taxes, assessments, or contributions required by law which may come due and which are lawfully levied or assessed with respect to the Pledgor or any of the Collateral.

Company Consent. The Pledgor has obtained any and all required consents of the Company for the transactions contemplated by this Agreement, including without limitation the pledge of the Collateral.

Margin Regulations. The Collateral is not "margin stock" within the meaning of the Regulation U promulgated by the Board of Governors of the Federal Reserve System, and no part of the proceeds of the loans evidenced by the Notes will be used, whether directly or indirectly, or whether immediately, incidentally or ultimately, (a) to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock" or to refund indebtedness incurred for such purpose or (b) for any purpose which entails a violation of, or is inconsistent with, the provisions of Regulations U or X promulgated by such Board of Governors.

5. Exercise of Shareholder Rights.

(a) Receipt of Dividends and Distributions. Prior to the occurrence of a Default, the Pledgor shall have the right to receive and retain any ordinary dividends or other distributions paid on the Collateral.

(b) Right to Vote. Prior to the occurrence of a Default, the Pledgor may vote the Collateral for all purposes allowed within the restrictions set by this Agreement. The Pledgor agrees not to vote the Collateral or otherwise to act in any way which will adversely affect the value of the Collateral.

Remedies Upon Default.

(a) Pledgee May Register Shares. Upon the occurrence of a Default, the Pledgee may cause the Collateral to be transferred to the Pledgee's name and may exercise any right normally incident to the ownership of the Collateral, including the right to vote and to receive all dividends or other payments.

(b) Collateral. Upon the occurrence of a Default, the Pledgee may sell all or any part of the Collateral at public or private sale. The Pledgee or any Lender may purchase all or any part of the Collateral at the sale. Proceeds of any sale shall be applied first to pay all costs and expenses related to the Default and sale of the Collateral, including all attorneys' fees, and second, to pay all amounts owed on the Obligations, with any excess to be returned to the Pledgor.

(c) Remedies Cumulative. Upon the occurrence of a Default, the Pledgee and the Lenders shall have all rights and remedies available to them at law or in equity, including all rights available under the Uniform Commercial Code, and all rights and remedies granted under this Agreement, the Notes, the Security Agreement and any other related documents or agreements. These rights and remedies shall be cumulative, and may be exercised singly or concurrently with all other rights and remedies the Pledgee or the Lenders may have.

(d) Order of Realization on the Collateral. The Pledgee may realize upon the Collateral, as well as any other collateral, in any order.

(e) Acknowledgments and Agreements of Pledgor. The Pledgor hereby acknowledges and agrees (i) that the Pledgor hereby waives all rights of redemption, stay, valuation and appraisal under any applicable laws, (ii) that ten (10) days prior written notice of the Pledgee's intention to make any sale of the Collateral is commercially reasonable notice, (iii) that the requirements of federal and state securities laws may limit the Pledgee's sale of all or part of the Collateral as well as the extent or manner in which any subsequent transferee could dispose of the same, (iv) in light of such restrictions, the Pledgee may effect a private sale to one or more purchasers who will agree, among other things, to acquire the Collateral for their own account, for investment, and not with a view to the distribution or resale thereof, (v) that the Pledgee may proceed to make such a sale whether or not a registration statement for the purpose of registering the Collateral sh all have been filed and may approach and negotiate with a single potential purchaser to effectuate such sale, (vi) any such sale might result in prices or other terms less favorable than if such sale were a public sale without such restrictions, and the Pledgee shall incur no liability for selling any Collateral under such circumstances, and (vii) the foregoing shall apply not withstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Pledgee sells.

(f) Registration. The Pledgor hereby assigns to the Pledgee, upon the occurrence of a Default, all registration rights the Pledgor now has or may hereafter acquire with respect to the Collateral. If the Pledgees desires to sell any of the Collateral at a public sale, the Pledgor will, upon request of the Pledgee, use its best efforts to cause the issuer of the Collateral to register the Collateral under federal and state securities laws and maintain the effectiveness of such registration, to the extent consistent with such registration rights. The Pledgor further agrees to indemnify, defend and hold harmless the Pledgee and the Lenders, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel and claims (including the costs of investigation) that they may incur in so far as such loss, liability, expense or claim arising out of or is based upon any alleged untrue statement of a material fact contained in any prospectus, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except in so far as they may have been caused by any untrue statement or omission based upon the information furnished in writing by the Pledgee or the Lenders expressly for use therein. The Pledgee will bear all costs and expenses of carrying out the foregoing obligations on its part. The Pledgor acknowledges and agrees that there is no adequate remedy at law for failure by it to comply with the provisions of this Section and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section may be specifically enforced.

7. Appointment of Collateral Agent. The Lenders hereby appoint Koyah Leverage as their collateral agent for all purposes in obtaining, maintaining, protecting and enforcing the pledge of and security interest in the Collateral and hereby authorize Koyah Leverage, in its sole discretion, to enter into all such agreements and take all such actions as Koyah Leverage, in its sole discretion, deems necessary or advisable in connection therewith. In so acting as collateral agent, Koyah Leverage shall act for the ratable benefit of the Lenders and any amounts realized or costs incurred by Koyah Leverage in such capacity shall be ratably allocated among the Lenders.

8. Termination of Agreement. This Agreement shall remain in full force and effect until the Obligations have been fully and finally discharged.

Miscellaneous.

(a) Waiver. No right or obligation under this Agreement will be deemed to have been waived unless evidenced by a writing signed by the party against which the waiver is asserted or by its duly authorized representative. Any waiver will be effective only with respect to the specific instance involved, and will not impair or limit the right of the waiving party to insist upon strict performance of the right or obligation in any other instance, in any other respect, or at any other time.

(b) Notice. Any notice or other communication required or permitted under this Agreement shall be in writing and shall addressed to the party to which it is directed at such party's address or fax number set forth in the Notes.

(c) Modifications to Be in Writing. To be effective, any modification to this Agreement must be in writing signed by all parties to the Agreement.

(d) Agreement Binding upon Successors and Assigns. This Agreement shall bind the Pledgor and its successors and assigns. All rights, privileges, and powers granted to the Pledgee under this Agreement shall benefit the Pledgee and its successors and assigns.

(e) Assignment of Agreement. At any time, the Pledgee may assign or transfer any of its rights or powers under this Agreement to any person or entity. The Pledgor may not transfer its rights, duties, or obligations under this Agreement without the prior written consent of the Pledgee.

(f) Further Assurances. Both the Pledgor and the Pledgee agree to take any further actions and to make, execute, and deliver any further written instruments which may be reasonably required to carry out the terms, provisions, intentions, and purposes of this Agreement.

(g) Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

(h) Costs and Expenses. The Pledgor hereby agrees to pay to the Pledgee and the Lenders upon demand all costs and expenses, including attorney's fees, incurred in connection with the administration of this Agreement, including without limitation all filings or other actions required by the Pledgee in connection with perfecting or otherwise protecting the security interest granted hereunder. In addition, the Pledgor hereby agrees to pay to the Pledgee upon demand all costs and expenses, including attorney's fees, incurred in connection with the enforcement of this Agreement, collection of the Obligations and the protection, preservation, collection or sale of or other realization upon the Collateral, including without limitation in any out-of-court workout, any court action, any appeal or any bankruptcy proceeding.

(i) Severability. If any provision of this Agreement or any application of any provision is determined to be unenforceable, the remainder of this Agreement shall be unaffected. If the provision is found to be unenforceable when applied to particular persons or circumstances, the application of the provision to other persons or circumstances shall be unaffected.

(j) Headings. Headings used in this Agreement have been included for convenience and ease of reference only, and will not in any manner influence the construction or interpretation of any provision of this Agreement.

(k) Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original and all of which together will constitute a single agreement.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

"Pledgor"

AURA SYSTEMS, INC.

By:

Name:

Title:

"Pledgee and Lender"

KOYAH LEVERAGE PARTNERS, L.P.

By: KOYAH VENTURES LLC,

its General Partner

By:

Name:

Title:

"Lender"

KOYAH PARTNERS, L.P.

By: KOYAH VENTURES LLC,

its General Partner

By:

Name:

Title:

I:\Spodocs\28601\00016\agree\00131853.DOC

EX-10 12 exhk.htm AMENDMENT AGREEMENT Amendment Agreement - V.2 - FINAL (00132572.DOC;2) AMENDMENT AGREEMENT

THIS AMENDMENT AGREEMENT (this "Agreement") is entered into as of August 21, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P. each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003 (the "Amendment");

WHEREAS, the Lenders have made certain additional optional advances to the Company under (i) the Note in favor of Koyah Leverage in the maximum principal amount of Eight Hundred Thousand Dollars ($800,000) and (ii) the Note in favor of Koyah in the maximum principal amount of Two Hundred Thousand Dollars ($200,000) (collectively, the "Optional Advance Notes");

WHEREAS, the Company and the Lenders also entered into an Additional Advance Agreement dated as of August 18, 2003 (the "Additional Advance Agreement") and the Company executed in favor of Koyah Leverage (as collateral agent for the Lenders) a Stock Pledge Agreement dated as of August 18, 2003 (the "Stock Pledge Agreement");

WHEREAS, in connection with the Additional Advance Agreement, the Lenders have made certain further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company has requested that the Lenders make still further additional optional advances under the Optional Advance Notes on the date hereof in the aggregate principal amount of Two Hundred Fifty-Five Thousand Dollars ($255,000);

WHEREAS, such further additional optional advances under the Optional Advance Notes on the date hereof would make the aggregate principal amounts advanced under the Optional Advance Notes exceed the maximum principal amount of the Optional Advance Notes; and

WHEREAS, the parties are entering into this Agreement to provide for the amendment of the maximum principal amount of the Optional Advance Notes and related matters, on the terms and conditions set forth herein;

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

Amendment of Maximum Principal Amount of Optional Advance Notes. The maximum principal amount of the Optional Advance Note in favor of Koyah Leverage hereby is amended to be One Million Two Hundred Thousand Dollars ($1,200,000) and the maximum principal amount of the Optional Advance Note in favor of Koyah hereby is amended to be Three Hundred Thousand Dollars ($300,000).

Company Acknowledgements. The Company confirms, acknowledges and agrees that (i) the Security Agreement and the Stock Pledge Agreement secure all of the Company's obligations under the Transaction Documents (as defined below) and (ii) any future additional advances to the Company by the Lenders under the Optional Advance Notes, or any other future financing of the Company by the Lenders, are at the option of the Lenders, in their sole discretion.

Further Assurances. If requested by the Lenders, the Company shall promptly execute and deliver amended and restated documents to replace the Optional Advance Notes or any other Transaction Documents and appropriately reflect the amendments of the Optional Advance Notes or any other Transaction Documents which are contained in this Agreement or any other Transaction Documents, as further evidence of the Company's obligations thereunder.

Reaffirmation and Survival of Representations. The Company hereby re-affirms and re-makes all of the representations and warranties contained in the Agreement, the Notes, the Security Agreement, the Amendment, the Additional Advance Agreement and the Stock Pledge Agreement (collectively, the "Prior Transaction Documents") as of the date hereof (as modified by the amendments and waivers set forth in certain of the Transaction Documents). For purposes of this Agreement as well as re-affirming the representations and warranties contained in the Prior Transaction Documents, the term "Transaction Documents" as used herein and therein shall mean the Prior Transaction Documents together with this Agreement. All of such representations and warranties shall survive the closing of the transactions contemplated by the Prior Transaction Documents and this Agreement.

Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

Entire Agreement. This Agreement, together with the Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the Transaction Documents shall remain unchanged and in full force and effect.

Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the other Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by such agreements, the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Optional Advance Notes. Notwithstanding that the Company is paying such costs and expenses, the Company acknowledges and agrees that such leg al counsel is representing only the Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH LEVERAGE PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title:

I:\Spodocs\28601\00016\agree\00132572.DOC

EX-11 13 exhl.htm SECOND AMENDMENT AGREEMENT Second Amendment Agreement - Clean 9/17/03 (00137349.DOC;1) SECOND AMENDMENT AGREEMENT

THIS SECOND AMENDMENT AGREEMENT (this "Agreement") is entered into as of September 18, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P. each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003 (the "Amendment");

WHEREAS, in connection with the Additional Advance Agreement, the Lenders have made certain further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS the Company and Lenders also entered into an Amendment Agreement dated as of August 21, 2003 (the "Amendment Agreement");

WHEREAS, in connection with the Amendment Agreement, the Lenders have made further additional optional advances to Company under the Optional Advance Notes;

WHEREAS , the Company has requested that the Lenders make still further additional optional advances under the Optional Advance Notes on the date hereof in the aggregate principal amount of Two Hundred Eighty -Eight Thousand Dollars ($288,000 );

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

Amendment of Maximum Principal Amount of Optional Advance Notes. The maximum principal amount of the Optional Advance Note in favor of Koyah Leverage hereby is amended to be One Million Four Hundred Forty Thousand Dollars ($1,440,000 ) and the maximum principal amount of the Optional Advance Note in favor of Koyah hereby is amended to be Three Hundred Sixty Thousand Dollars ($360,000 ).

Company Acknowledgements. The Company confirms, acknowledges and agrees that (i) the Security Agreement and the Stock Pledge Agreement secure all of the Company's obligations under the Transaction Documents (as defined below) and (ii) any future additional advances to the Company by the Lenders under the Optional Advance Notes, or any other future financing of the Company by the Lenders, are at the option of the Lenders, in their sole discretion.

Further Assurances. If requested by the Lenders, the Company shall promptly execute and deliver amended and restated documents to replace the Optional Advance Notes or any other Transaction Documents and appropriately reflect the amendments of the Optional Advance Notes or any other Transaction Documents which are contained in this Agreement or any other Transaction Documents, as further evidence of the Company's obligations thereunder.

Reaffirmation and Survival of Representations. The Company hereby re-affirms and re-makes all of the representations and warranties contained in the Agreement, the Notes, the Security Agreement, the Amendment, the Additional Advance Agreement, the Amendment Agreement and the Stock Pledge Agreement (collectively, the "Prior Transaction Documents") as of the date hereof (as modified by the amendments and waivers set forth in certain of the Transaction Documents). For purposes of this Agreement as well as re-affirming the representations and warranties contained in the Prior Transaction Documents, the term "Transaction Documents" as used herein and therein shall mean the Prior Transaction Documents together with this Agreement. All of such representations and warranties shall survive the closing of the transactions contemplated by the Prior Transaction Documents and this Agreement.

Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the other Transaction Documents shall remain unchanged and in full force and effect.

Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the other Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by such agreements, the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Optional Advance Notes. Notwithstanding that the Company is paying such costs and expenses, the Company acknowledges an d agrees that such legal counsel is representing only the Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title: _____________________________________

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By: ______________________________________

Name: ______________________________________

Title: ______________________________________

I:\Spodocs\28601\00016\agree\00137349.DOC

EX-12 14 exhm.htm THIRD AMENDMENT AGREEMENT Third Amendment Agreement (00139688.DOC;1) THIRD AMENDMENT AGREEMENT

THIS THIRD AMENDMENT AGREEMENT (this "Agreement") is entered into as of September 30, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P. each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, in connection with loans to the Company by the Lenders, the Company and the Lenders entered into an Agreement dated as of July 24, 2003 (the "Agreement"), the Company executed in favor of the Lenders four Convertible Promissory Notes dated July 24, 2003 (collectively, the "Notes"), and the Company executed in favor of Koyah Leverage Partners, L.P. (as collateral agent for the Lenders) a Security Agreement dated as of July 24, 2003 (the "Security Agreement");

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003 (the "Amendment");

WHEREAS, in connection with the Additional Advance Agreement, the Lenders have made certain further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into an Amendment Agreement dated as of August 21, 2003 (the "Amendment Agreement");

WHEREAS, in connection with the Amendment Agreement, the Lenders have made further additional optional advances to Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Second Amendment Agreement dated as of September 18, 2003 (the "Second Amendment Agreement");

WHEREAS, in connection with the Second Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS , the Company has requested that the Lenders make still further additional optional advances under the Optional Advance Notes on or around the date hereof in the aggregate principal amount of approximately Two Hundred Thousand Dollars ($200,000), in the form of direct payment by the Lenders of certain costs and expenses of the Lenders payable by the Company and/or direct advances to the Company;

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

Amendment of Maximum Principal Amount of Optional Advance Notes. The maximum principal amount of the Optional Advance Note in favor of Koyah Leverage hereby is amended to be One Million Six Hundred Forty Thousand Dollars ($1,640,000 ) and the maximum principal amount of the Optional Advance Note in favor of Koyah hereby is amended to be Four Hundred Ten Thousand Dollars ($410,000 ).

Company Acknowledgements. The Company confirms, acknowledges and agrees that (i) the Security Agreement and the Stock Pledge Agreement secure all of the Company's obligations under the Transaction Documents (as defined below) and (ii) any future additional advances to the Company by the Lenders under the Optional Advance Notes, or any other future financing of the Company by the Lenders, are at the option of the Lenders, in their sole discretion.

Further Assurances. If requested by the Lenders, the Company shall promptly execute and deliver amended and restated documents to replace the Optional Advance Notes or any other Transaction Documents and appropriately reflect the amendments of the Optional Advance Notes or any other Transaction Documents which are contained in this Agreement or any other Transaction Documents, as further evidence of the Company's obligations thereunder.

Reaffirmation and Survival of Representations. The Company hereby re-affirms and re-makes all of the representations and warranties contained in the Agreement, the Notes, the Security Agreement, the Amendment, the Additional Advance Agreement, the Amendment Agreement, the Stock Pledge Agreement and the Second Amendment Agreement (collectively, the "Prior Transaction Documents") as of the date hereof (as modified by the amendments and waivers set forth in certain of the Transaction Documents). For purposes of this Agreement as well as re-affirming the representations and warranties contained in the Prior Transaction Documents, the term "Transaction Documents" as used herein and therein shall mean the Prior Transaction Documents together with this Agreement. All of such representations and warranties shall survive the closing of the transactions contemplated by the Prior Transaction Documents and this Agreement.

Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the other Transaction Documents shall remain unchanged and in full force and effect.

Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

Lenders' Attorney Fees and Expenses in Connection with this Agreement. The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the other Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by such agreements, the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Optional Advance Notes. Notwithstanding t hat the Company is paying such costs and expenses, the Company acknowledges and agrees that such legal counsel is representing only the Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title: _____________________________________

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By: ______________________________________

Name: ______________________________________

Title: ______________________________________

I:\Spodocs\28601\00016\agree\00139688.DOC

EX-13 15 exhn.htm FOURTH AMENDMENT AGREEMENT Fourth Amendment Agreement - Clean Final (00143014.DOC;1) FOURTH AMENDMENT AGREEMENT

THIS FOURTH AMENDMENT AGREEMENT (this "Agreement") is entered into as of October 16, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P. each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, in connection with loans to the Company by the Lenders, the Company and the Lenders entered into an Agreement dated as of July 24, 2003 (the "Agreement"), the Company executed in favor of the Lenders four Convertible Promissory Notes dated July 24, 2003 (collectively, the "Notes"), and the Company executed in favor of Koyah Leverage Partners, L.P. (as collateral agent for the Lenders) a Security Agreement dated as of July 24, 2003 (the "Security Agreement");

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003 (the "Amendment");

WHEREAS, in connection with the Additional Advance Agreement, the Lenders have made certain further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into an Amendment Agreement dated as of August 21, 2003 (the "Amendment Agreement");

WHEREAS, in connection with the Amendment Agreement, the Lenders have made further additional optional advances to Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Second Amendment Agreement dated as of September 18, 2003 (the "Second Amendment Agreement");

WHEREAS, in connection with the Second Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Third Amendment Agreement dated as of September 30, 2003 (the "Third Amendment Agreement");

WHEREAS, in connection with the Third Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS , the Company has requested that the Lenders make still further additional optional advances under the Optional Advance Notes on or around the date hereof in the aggregate principal amount of approximately Three Hundred Fifty Thousand Dollars ($350,000), in the form of direct payment by the Lenders of certain costs and expenses of the Lenders payable by the Company and/or direct advances to the Company;

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

Amendment of Maximum Principal Amount of Optional Advance Notes. The maximum principal amount of the Optional Advance Note in favor of Koyah Leverage hereby is amended to be One Million Nine Hundred Twenty Thousand Dollars ($1,920,000 ) and the maximum principal amount of the Optional Advance Note in favor of Koyah hereby is amended to be Four Hundred Eighty Thousand Dollars ($480,000 ).

Company Acknowledgements. The Company confirms, acknowledges and agrees that (i) the Security Agreement and the Stock Pledge Agreement secure all of the Company's obligations under the Transaction Documents (as defined below) and (ii) any future additional advances to the Company by the Lenders under the Optional Advance Notes, or any other future financing of the Company by the Lenders, are at the option of the Lenders, in their sole discretion.

Further Assurances. If requested by the Lenders, the Company shall promptly execute and deliver amended and restated documents to replace the Optional Advance Notes or any other Transaction Documents and appropriately reflect the amendments of the Optional Advance Notes or any other Transaction Documents which are contained in this Agreement or any other Transaction Documents, as further evidence of the Company's obligations thereunder.

Reaffirmation and Survival of Representations. The Company hereby re-affirms and re-makes all of the representations and warranties contained in the Agreement, the Notes, the Security Agreement, the Amendment, the Additional Advance Agreement, the Amendment Agreement, the Stock Pledge Agreement, the Second Amendment Agreement and the Third Amendment Agreement (collectively, the "Prior Transaction Documents") as of the date hereof (as modified by the amendments and waivers set forth in certain of the Transaction Documents). For purposes of this Agreement as well as re-affirming the representations and warranties contained in the Prior Transaction Documents, the term "Transaction Documents" as used herein and therein shall mean the Prior Transaction Documents together with this Agreement. All of such representations and warranties shall survive the closing of the transactions contemplated by the Prior Transactio n Documents and this Agreement.

Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the other Transaction Documents shall remain unchanged and in full force and effect.

Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

Lenders' Attorney Fees and Expenses in Connection with this Agreement. The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the other Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by such agreements, the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Optional Advance Notes. Notwithstanding t hat the Company is paying such costs and expenses, the Company acknowledges and agrees that such legal counsel is representing only the Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title: _____________________________________

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By: ______________________________________

Name: ______________________________________

Title: ______________________________________

I:\Spodocs\28601\00016\agree\00143014.DOC

EX-14 16 exho.htm FIFTH AMENDMENT AGREEMENT Fifth Amendment Agreement - Clean (00145012.DOC;1) FOURTH FIFTH AMENDMENT AGREEMENT

THIS FOURTH FIFTH AMENDMENT AGREEMENT (this "Agreement") is entered into as of October 1627, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P., each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, in connection with loans to the Company by the Lenders, the Company and the Lenders entered into an Agreement dated as of July 24, 2003 (the "Agreement"), the Company executed in favor of the Lenders four Convertible Promissory Notes dated July 24, 2003 (collectively, the "Notes"), and the Company executed in favor of Koyah Leverage Partners, L.P. (as collateral agent for the Lenders) a Security Agreement dated as of July 24, 2003 (the "Security Agreement");

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003 (the "Amendment");

WHEREAS, in connection with the Additional Advance Agreement, the Lenders have made certain further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into an Amendment Agreement dated as of August 21, 2003 (the "Amendment Agreement");

WHEREAS, in connection with the Amendment Agreement, the Lenders have made further additional optional advances to Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Second Amendment Agreement dated as of September 18, 2003 (the "Second Amendment Agreement");

WHEREAS, in connection with the Second Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Third Amendment Agreement dated as of September 30, 2003 (the "Third Amendment Agreement");

WHEREAS, in connection with the Third Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Fourth Amendment Agreement dated as of October 16, 2003 (the "Fourth Amendment Agreement");

WHEREAS, in connection with the Fourth Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS , the Company has requested that the Lenders make still further additional optional advances under the Optional Advance Notes on or around the date hereof in the aggregate principal amount of approximately Three Hundred Fifty Thousand Dollars ($3500,000), in the form of direct payment by the Lenders of certain costs and expenses of the Lenders payable by the Company and/or direct advances to the Company;

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

Amendment of Maximum Principal Amount of Optional Advance Notes. The maximum principal amount of the Optional Advance Note in favor of Koyah Leverage hereby is amended to be One Two Million Nine Hundred Twenty One Hundred Ssixty Thousand Dollars ($1,9202,160,000 ) and the maximum principal amount of the Optional Advance Note in favor of Koyah hereby is amended to be Four Five Hundred Eighty Forty Thousand Dollars ($480,000 540,000).

Company Acknowledgements. The Company confirms, acknowledges and agrees that (i) the Security Agreement and the Stock Pledge Agreement secure all of the Company's obligations under the Transaction Documents (as defined below) and (ii) any future additional advances to the Company by the Lenders under the Optional Advance Notes, or any other future financing of the Company by the Lenders, are at the option of the Lenders, in their sole discretion.

Further Assurances. If requested by the Lenders, the Company shall promptly execute and deliver amended and restated documents to replace the Optional Advance Notes or any other Transaction Documents and appropriately reflect the amendments of the Optional Advance Notes or any other Transaction Documents which are contained in this Agreement or any other Transaction Documents, as further evidence of the Company's obligations thereunder.

Reaffirmation and Survival of Representations. The Company hereby re-affirms and re-makes all of the representations and warranties contained in the Agreement, the Notes, the Security Agreement, the Amendment, the Additional Advance Agreement, the Amendment Agreement, the Stock Pledge Agreement, the Second Amendment Agreement, and the Third Amendment Agreement, and the Fourth Amendment Agreement (collectively, the "Prior Transaction Documents") as of the date hereof (as modified by the amendments and waivers set forth in certain of the Transaction Documents). For purposes of this Agreement as well as re-affirming the representations and warranties contained in the Prior Transaction Documents, the term "Transaction Documents" as used herein and therein shall mean the Prior Transaction Documents together with this Agreement. All of such representations and warranties shall survive the closing of the transactions contemplated by the Prior Transaction Documents and this Agreement.

Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the other Transaction Documents shall remain unchanged and in full force and effect.

Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

Lenders' Attorney Fees and Expenses in Connection with this Agreement. The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the other Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by such agreements, the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Optional Advance Notes. Notwithstanding t hat the Company is paying such costs and expenses, the Company acknowledges and agrees that such legal counsel is representing only the Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title: _____________________________________

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By: ______________________________________

Name: ______________________________________

Title: ______________________________________

I:\Spodocs\28601\00016\agree\00143014.DOC

I:\Spodocs\28601\00016\agree\00145012.DOC

EX-15 17 exhp.htm SIXTH AMENDMENT AGREEMENT Sixth Amendment Agreement (00147538.DOC;1) SIXTH AMENDMENT AGREEMENT

THIS SIXTH AMENDMENT AGREEMENT (this "Agreement") is entered into as of November 11, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P., each a Delaware limited partnership (collectively the "Lenders").

WHEREAS, in connection with loans to the Company by the Lenders, the Company and the Lenders entered into an Agreement dated as of July 24, 2003 (the "Agreement"), the Company executed in favor of the Lenders four Convertible Promissory Notes dated July 24, 2003 (collectively, the "Notes"), and the Company executed in favor of Koyah Leverage Partners, L.P. (as collateral agent for the Lenders) a Security Agreement dated as of July 24, 2003 (the "Security Agreement");

WHEREAS, the Company and the Lenders also entered into an Amendment and Waiver Agreement dated as of August 6, 2003 (the "Amendment");

WHEREAS, in connection with the Additional Advance Agreement, the Lenders have made certain further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into an Amendment Agreement dated as of August 21, 2003 (the "Amendment Agreement");

WHEREAS, in connection with the Amendment Agreement, the Lenders have made further additional optional advances to Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Second Amendment Agreement dated as of September 18, 2003 (the "Second Amendment Agreement");

WHEREAS, in connection with the Second Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Third Amendment Agreement dated as of September 30, 2003 (the "Third Amendment Agreement");

WHEREAS, in connection with the Third Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Fourth Amendment Agreement dated as of October 16, 2003 (the "Fourth Amendment Agreement");

WHEREAS, in connection with the Fourth Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS, the Company and Lenders also entered into a Fifth Amendment Agreement dated as of October 27, 2003 (the "Fifth Amendment Agreement");

WHEREAS, in connection with the Fifth Amendment Agreement, the Lenders have made further additional optional advances to the Company under the Optional Advance Notes;

WHEREAS , the Company has requested that the Lenders make still further additional optional advances under the Optional Advance Notes on or around the date hereof in the aggregate principal amount of approximately Three Hundred Fifty Thousand Dollars ($350,000.00), in the form of direct payment by the Lenders of certain costs and expenses of the Lenders payable by the Company and/or direct advances to the Company;

NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows:

Amendment of Maximum Principal Amount of Optional Advance Notes. The maximum principal amount of the Optional Advance Note in favor of Koyah Leverage hereby is amended to be Two Million Four Hundred Forty Thousand Dollars ($2,440,000.00) and the maximum principal amount of the Optional Advance Note in favor of Koyah hereby is amended to be Six Hundred Ten Thousand Dollars ($610,000.00).

Company Acknowledgements. The Company confirms, acknowledges and agrees that (i) the Security Agreement and the Stock Pledge Agreement secure all of the Company's obligations under the Transaction Documents (as defined below) and (ii) any future additional advances to the Company by the Lenders under the Optional Advance Notes, or any other future financing of the Company by the Lenders, are at the option of the Lenders, in their sole discretion.

Further Assurances. If requested by the Lenders, the Company shall promptly execute and deliver amended and restated documents to replace the Optional Advance Notes or any other Transaction Documents and appropriately reflect the amendments of the Optional Advance Notes or any other Transaction Documents which are contained in this Agreement or any other Transaction Documents, as further evidence of the Company's obligations thereunder.

Reaffirmation and Survival of Representations. The Company hereby re-affirms and re-makes all of the representations and warranties contained in the Agreement, the Notes, the Security Agreement, the Amendment, the Additional Advance Agreement, the Amendment Agreement, the Stock Pledge Agreement, the Second Amendment Agreement, the Third Amendment Agreement, the Fourth Amendment Agreement, and the Fifth Amendment Agreement (collectively, the "Prior Transaction Documents") as of the date hereof (as modified by the amendments and waivers set forth in certain of the Transaction Documents). For purposes of this Agreement as well as re-affirming the representations and warranties contained in the Prior Transaction Documents, the term "Transaction Documents" as used herein and therein shall mean the Prior Transaction Documents together with this Agreement. All of such representations and warranties shall survive the closing of the transactions contemplated by the Prior Transaction Documents and this Agreement.

Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lenders in the case of an amendment and only with the written consent of the waiving party in the case of a waiver.

Entire Agreement. This Agreement, together with the other Transaction Documents, constitute the entire agreement of the parties concerning the subject matter hereof and thereof, all prior discussions, proposals, negotiations and understandings having been merged herein and therein. Except as specifically modified by this Agreement, the other Transaction Documents shall remain unchanged and in full force and effect.

Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and the Lenders. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

Severability. If any part of this Agreement is determined to be illegal or unenforceable, all other parts shall remain in full force and effect.

Attorneys' Fees. The Company shall pay the reasonable attorneys' fees, costs and disbursements of the Lenders in enforcing any terms of this Agreement, whether or not any action at law or in equity is brought.

Governing Law. The Agreement shall be governed by and construed and interpreted in accordance with the law of the State of Washington, 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 Spokane, Washington, 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.

Miscellaneous. Any notice under this Agreement shall be given in writing and shall be addressed to the party to be notified at the address indicated below, or at such other address as such party may designate by written notice to the other party.

Aura Systems, Inc.
2335 Alaska Avenue
El Segundo, CA 90245
Attn: Neal Meehan

Fax: 310-643-8719

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

Lenders' Attorney Fees and Expenses in Connection with this Agreement. The Company shall pay the costs and expenses of legal counsel to the Lenders in connection with the negotiation, execution and delivery of this Agreement, the other Transaction Documents, and any other related agreements with the Lenders as well as the consummation of the transactions contemplated by such agreements, the administration of such agreements and any amendments or waivers of such agreements. The Company shall pay such costs and expenses immediately upon submittal, and the Lenders may apply any retainer held by them or their legal counsel against such costs and expenses. Alternatively, the Lenders may deduct some or all of such costs and expenses from the proceeds of the loans from the Lenders when disbursing such loans and/or pay such costs and expenses directly and then the amounts so paid shall constitute advances made under the Optional Advance Notes. Notwithstanding t hat the Company is paying such costs and expenses, the Company acknowledges and agrees that such legal counsel is representing only the Lenders, and not the Company.

[Remainder of Page Intentionally Left Blank]

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first set forth above.

AURA SYSTEMS, INC.

By:

Name:

Title:

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By:

Name:
Title: _____________________________________

KOYAH PARTNERS, L.P.

By: Koyah Ventures LLC, its general partner

By: ______________________________________

Name: ______________________________________

Title: ______________________________________

I:\Spodocs\28601\00016\agree\00147538.DOC

EX-16 18 exhq.htm SEVENTH AMENDMENT AGREEMENT Seventh Amendment Agreement - Clean 11/25/03 (00150130.DOC;1) SEVENTH AMENDMENT AGREEMENT

THIS SEVENTH AMENDMENT AGREEMENT (this "Agreement") is entered into as of November 25, 2003 between AURA SYSTEMS, INC., a Delaware corporation (the "Company"), and KOYAH LEVERAGE PARTNERS, L.P. and KOYAH PARTNERS, L.P., each a Delaware limited partnership (collectively the "Lenders").