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.

1. 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").

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.
   
    

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