-----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, Ga7o6iG+hgGU8zKyJOw6JDgj7rxxBH4p03u6xgMi2VYP3TnA0zBpzlCO4q2G+hUc zSOsd3zei43cJQGskWwm1w== 0001144204-04-015945.txt : 20041008 0001144204-04-015945.hdr.sgml : 20041008 20041008141311 ACCESSION NUMBER: 0001144204-04-015945 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20041008 DATE AS OF CHANGE: 20041008 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Lavut Cipora CENTRAL INDEX KEY: 0001304133 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: BUSINESS PHONE: 310 820 4123 MAIL ADDRESS: STREET 1: 12100 WILSHIRE BOULEVARD CITY: LOS ANGELES STATE: CA ZIP: 90025 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: 041071926 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 SC 13D 1 v07362_sc13dlavut.txt ================================================================================ SEC POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION 1746 CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM (11-02) DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER. ================================================================================ ========================== OMB APPROVAL ========================== OMB Number: 3235-0145 ========================== Expires: December 31, 2005 ========================== Estimated average burden hours per response. . .11 ========================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ________)* AURA SYSTEMS, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 051526 10 1 - -------------------------------------------------------------------------------- (CUSIP Number) Melinda Mason, Secretary Aura Systems, Inc. 2335 Alaska Avenue El Segundo, CA 90245 310-643-5300 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 14, 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 ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(G), check the following box. [_] Page 1 of 6 CUSIP No. 051526101 - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Lavut, Cipora - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) (b) [X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) OO, PF - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States of America - -------------------------------------------------------------------------------- Number of 7. Sole Voting Power 49,125,054 Shares ------------------------------------------------------------------------- Beneficially 8. Shared Voting Power 0 Owned by ----------------------------------------------------------------------- Each 9. Sole Dispositive Power 49,125,054 Reporting ---------------------------------------------------------------------- Person 10. Shared Dispositive Power 0 With -------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 49,125,054 - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 9.84 - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- Page 2 of 6 ITEM 1. SECURITY AND ISSUER The securities to which this Schedule 13D relates are the common stock (the "Common Stock") of Aura Systems, Inc., a Delaware corporation (the "Company"). The address of the Company's principal executive office is 2335 Alaska Avenue, El Segundo, CA 90245. ITEM 2. IDENTITY AND BACKGROUND This Schedule 13D is being filed by Cipora Lavut (the "Reporting Person") whose address is 12100 Wilshire Boulevard, Los Angeles, CA 90025. The Reporting Person is self employed as a consultant to Aries Group Ltd. During the past five years, the Reporting Person has not (1) been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors), or (2) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he 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. The Reporting Person is a citizen of the United States. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Private Placement - The Reporting Person purchased $590,000 of securities in a private placement. $180,000 of this investment was previously advanced to the Company and was from Reporting Person's personal funds. The balance of $410,000 was paid in a promissory note which is secured by the portion of the securities purchased which remained unpaid. The securities are being held in escrow and will be released proportionately as payments are made under the promissory note. The note bears interest at 8% per annum. The Reporting Person intends to use personal funds to repay the note. Litigation Settlement - The Reporting Person received additional securities as part of a global litigation settlement. No cash was paid for Series B Preferred, warrants and Common Stock of the Company issued thereunder. ITEM 4. PURPOSE OF TRANSACTION The Reporting Person acquired the Stock for investment purposes. In pursuing such investment purposes, the Reporting Person 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 Company's operations, business strategy or prospects, or from sale or merger of the Company. The Reporting Person reserves the right to formulate other plans and/or make other proposals, and take such actions with respect to her investment in the Company, 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 her, in public market or privately negotiated transactions. The Reporting Person may at any time reconsider and change her plans or proposals relating to the foregoing. Page 3 of 6 The Reporting Person holds, among other securities of the Company, shares of the Company's Series B Preferred Stock (the "Series B Preferred Shares"). The Company's Certificate of Incorporation entitles the holders of the Series B Shares to elect four of the Company's directors for as long as the Series B Shares are outstanding. Under that certain Shareholder Agreement effective as of September 14, 2004, among the holders of the Series B Shares (the "Series B Shareholders"), the Series B Shareholders agreed, among other things, to use their best efforts to cause the size of the Company's board of directors to remain set at seven directors at all times and that each of four named Shareholders has the right to elect one of the four directors that the Series B Shareholders are entitled to elect. Ms. Lavut has the right to designate a director and has designated Raymond Yu. The Shareholder Agreement is an exhibit to this Schedule 13D. See Item 7. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) The Company had an aggregate of 452,865,398 shares of Common Stock outstanding as of September 14, 2004. (b) The Reporting Person has sole power to vote securities convertible into 49,125,054 common shares. (c) The Reporting Person participated in the following transactions in the Common Stock in the past sixty (60) days (transactions 1 - 2 were contingent upon one another): (1) On September 14, 2004, in settlement of litigation, the Reporting Person received 11,048 shares of Series B preferred which had a value of $55,239 (which convert to 2,762,000 shares of Common Stock), a Warrant to purchase 5,800,000 shares of Common Stock, and 972,371 shares of Common Stock. (2) On September 14, 2004, the Reporting Person invested $590,000 in the Company's private placement and received 118,000 shares of Series B preferred (which convert to 29,500,000 shares of Common Stock) and 7,375,000 Warrants to purchase Common Stock. The Reporting Person paid $180,000 in cash and issued a promissory note in the amount of $410,000. The note is payable over a nine month period. Securities which have not been paid for are being held in escrow and released pro-rata as payment is made. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The Reporting Person has no contract, arrangement, understanding or relationship (whether or not legally enforceable) with any person with respect to any shares or other securities of any class of the Company, except as described in Item 4 herein. Page 4 of 6 ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 99.1 Ownership Table Exhibit 99.2 Shareholders Agreement effective as of 9/14/04 Exhibit 99.3 Promissory Note effective 9/14/04 in the amount of $410,000 Page 5 of 6 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: October 6, 2004 /s/ Cipora Lavut - -------------------------------------------------------------------------------- Signature Cipora Lavut - -------------------------------------------------------------------------------- Name/Title - -------------------------------------------------------------------------------- Signature - -------------------------------------------------------------------------------- Name/Title The original statement shall be signed by each person on whose behalf the statement is filed or his authorized representative. If the statement is signed on behalf of a person by his authorized representative (other than an executive officer or general partner of the filing person), evidence of the representative's authority to sign on behalf of such person shall be filed with the statement: provided, however, that a power of attorney for this purpose which is already on file with the Commission may be incorporated by reference. The name and any title of each person who signs the statement shall be typed or printed beneath his signature. ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001) Page 6 of 6 EX-99.1 2 v07362_ex99-1.txt Exhibit 99.1 OWNERSHIP TABLE CIPORA LAVUT (the "Reporting Person") The Reporting Person has sole voting and dispositive power with respect to the shares described herein unless otherwise indicated. NUMBER OF SHARES BENEFICIALLY OWNED - ------------------------------------------------------------------------------- Aggregate Number of Shares Aggregate Number Beneficially Owned of Shares as Converted to Beneficially Owned Common Stock ---------------------------------------- Series A Convertible Redeemable Preferred Stock 4,378 547,250 - ------------------------------------------------------------------------------- Series B Cumulative Convertible Preferred Stock (1) (3) 129,942 32,485,500 - ------------------------------------------------------------------------------- Warrants and Options to Purchase Common Stock (1) (2) (3) 13,175,000 13,175,000 - ------------------------------------------------------------------------------- Common Stock 2,917,304 2,917,304 - ------------------------------------------------------------------------------- TOTAL COMMON STOCK N/A 49,125,054 =============================================================================== Common Stock of Aura Systems, Inc. Outstanding as of September 14, 2004 (4) 452,865,398 - ---------------------------------------------------------- Percentage of Shares of Common Stock Beneficially Owned on a Fully Converted Basis 9.84% - ---------------------------------------------------------- Note 1 - Excludes convertible preferred stock and warrants covering an aggregate of 279,375 shares of common. These securities are potentially issuable pursuant to a real estate contract which has been signed but not closed. Note 2 - Excludes options and warrants to purchase 7,773,500 shares of common stock because of restrictions on exercise imposed by the Settlement Agreement. These securities may not be exercised until (i) registration of the common stock into which the Series B Preferred Stock may be converted has been declared effective by the SEC or (ii) Aura shareholders have authorized an increase in the number of its common shares sufficient in number to allow for such exercise. Note 3 - Excludes convertible preferred stock and warrants covering an aggregate of 584,063 shares of common potentially issuable to Allan Lavut, the husband of the Reporting Person. The Reporting Person disclaims beneficial ownership of these securties. These securities are potentially issuable pursuant to a real estate contract which has been signed but not closed Note 4 - Includes 21,942,248 shares referenced as "committed" in the latest Aura financial statements which include the following: (i) 1,943,276 penalty shares in connection with the purchase of real estate, (ii) 8,151324 shares penalty shares to Aura Realty minority shareholders for failure to have an effective registration statement (iii) 5,639,600 shares issuable upon Aura's forced conversion of a convertible note and (iv) 6,208,048 shares issued upon settlement of litigation with the Aries Group. EX-99.2 3 v07362_ex99-2.txt SHAREHOLDER AGREEMENT This SHAREHOLDER AGREEMENT (this "Agreement") is made as of August 19, 2004 by and among the parties listed on the signature page hereto (individually, a "Shareholder" and collectively, the "Shareholders"). PREAMBLE A. Certain of the Shareholders are parties to that certain Securities Purchase Agreement of even date herewith (the "Securities Purchase Agreement") for the purchase of Series B Convertible Preferred Stock, par value $.005, (the "Series B Preferred Stock") of Aura Systems, Inc., a Delaware corporation (the "Company"), which is convertible into shares of common stock, par value $.005 (the "Common Stock") of the Company. B. Certain of the Shareholders are parties to that certain Amendment and Conversion Agreement of even date herewith (the "Amendment and Conversion Agreement") for the conversion of indebtedness of the Company into Series B Preferred Stock. C. Certain of the Shareholders are parties to that certain Settlement Agreement dated as of August __, 2004 whereby certain shares of Series B Preferred Stock are being issued in settlement of litigation (the "Settlement"). D.. In connection with the Securities Purchase Agreement, Cipora Lavut, Maimon and Ben Moshe each have executed a Promissory Note dated the date hereof (the "Lavut Note", the "Maimon Note" and the "Ben Moshe Note", respectively) (individually, a "Note" and collectively, the "Notes"). E. To induce each other to enter into the Securities Purchase Agreement, the Amendment and Conversion Agreement and the Settlement the Shareholders have agreed to enter into this Agreement. F. Capitalized terms which are not defined in this Agreement shall have the respective meanings ascribed thereto in the Securities Purchase Agreement or the Amendment and Conversion Agreement and , the Settlement NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto hereby agree as follows: SECTION 1. BOARD OF DIRECTORS; VOTING OF SHARES. 1.1. BOARD SIZE. The Company's Certificate of Incorporation is silent on the size of the Board of Directors. The Company's Bylaws, after giving effect to a recent amendment effective on the Closing Date, provide that the Board of Directors shall be seven in number. The Shareholders shall use their best efforts to take all necessary action to cause the size of the Board of Directors of the Company at all times to remain set at seven directors. 1.2. DIRECTOR DESIGNATION RIGHTS. The Company's Certificate of Incorporation entitles the holders of the Series B Preferred Stock to elect four directors so long as any Series B Preferred Stock is outstanding. Following the Closing Date the Shareholders agree to vote for directors for such four director positions, designated as follows: (i) Leverage shall have the right to designate one director; (ii) Cipora Lavut shall have the right to designate one director; (iii) Maimon shall have the right to designate one director; and (iv) Ben Moshe shall have the right to designate one director. Such designees may be either the persons nominated by the Company's Board of Directors to serve as directors or such other persons as the Shareholder(s) may designate in accordance with the provisions of this Agreement. Upon the occurrence of (x) a Default (as defined in the Lavut Note), the director designation right of Lavut under this Agreement shall terminate, (y) a Default (as defined in the Maimon Note), the director designation right of Maimon under this Agreement shall terminate and (z) a Default (as defined in the Ben Moshe Note), the director designation right of Ben Moshe under this Agreement shall terminate. In addition, if any Shareholder with designation rights under this Agreement ceases to hold any Series B Preferred Stock, the director designation right of such party shall terminate. Any director designated by any Shareholder as an "Initial Director Designee" (as hereinafter defined) pursuant to this Section shall take and hold office only so long as the Shareholder designating such director is not in Default under its respective Note and, upon taking office shall submit a conditional resignation, effective automatically upon termination of such designating Shareholder's director designation rights. If any Shareholder's director designation rights under this Agreement terminate, then any successor director shall be selected by the Board of Directors. As a condition to the Closing under the Securities Purchase Agreement, Carl Albert, James S. Harrington and Lawrence Diamant will submit their resignations as members of the Company's Board of Directors, effective as of the Closing Date. The initial director designees (the "Initial Director Designee") of such Shareholders on the Closing Date are as follows: Leverage: Neal Meehan (Existing director) Lavut: Raymond Yu (New director) Maimon: Dr. Fred Balister (New director) Ben Moshe: Izar Fernbach (New director) Each Shareholder with director designation rights represents and warrants (i) that any director now or hereafter designated by such Shareholder under this Agreement is not (and will not be at the time of designation) a person of the type described in 17 CFR 230.262(b), the text of which is attached hereto as Exhibit A, and (ii) that the director designation rights held by such Shareholder, the exercise thereof, and the voting for the election of such director do not (and will not) violate any applicable law, statute, rule or regulation or any applicable order or decree, including without limitation any federal or state securities law, statute, rule or regulation or any order or decree of the Securities Exchange Commission or state securities agency. -2- For purposes of this Agreement, (i) rights and obligations under this Agreement with respect to voting as shareholders shall also include any shareholder action by written consent pursuant to Delaware law, and (ii) director designation rights under this Agreement shall include the right to designate an initial designee for election as director, as well as the right to change such designation by designating a replacement designee. Each Shareholder further acknowledges that, in the event of any subsequent vacancy on the Board of Directors (whether by resignation, removal or death of any such directors) or upon the expiration of a director's term of office, in addition to the right of the Shareholders to designate amongst themselves a successor director to fill such vacancy in accordance with the terms of this Agreement, the Board of Directors of the Company retains the unfettered discretion and right to appoint a director to fill any vacancy in accordance with the Bylaws and to nominate directors for the stockholders to approve at a stockholder meeting (including any action by written consent of the stockholders). 1.3. BOARD COMPOSITION. Each Shareholder shall use their best efforts to cause the four directors who are elected by the Shareholders to be comprised at all times of the persons designated from time to time in accordance with the director designation rights. 1.4. VOTING AND OTHER ACTIONS TO EFFECTUATE. Without limiting the generality of the foregoing: (i) each Shareholder shall vote all shares of stock of the Company currently owned or hereafter acquired by such Shareholder which are entitled to vote in any election or removal of such directors by the stockholders of the Company (whether at a stockholder meeting or by written consent) in accordance with the exercise of director designation rights; (ii) each Shareholder shall not vote any such stock or take any other action in any manner which is inconsistent with the terms of this Agreement, including without limitation amending or causing the amendment of the Certificate of Incorporation or Bylaws in any manner inconsistent with the terms of this Agreement; (iii) each Shareholder shall take or cause to be taken all other action necessary to effectuate or implement the director designation rights; (iv) each Shareholder shall also cause their affiliates to do the same. SECTION 2. INCREASE IN AUTHORIZED SHARES; VOTING OF SHARES. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Preferred Stock and exercise of all warrants issued in connection therewith, each Shareholder shall vote all shares of stock of the Company currently owned or hereafter acquired by such Shareholder which are entitled to vote on any increase of the authorized shares of Common Stock (whether at a stockholder meeting or by written consent) in favor of an increase to at least such number of shares as shall be sufficient for such purpose, including, but not limited to, voting in favor of any necessary amendment to the Company's Certificate of Incorporation. Each Shareholder shall also cause their affiliates to do the same. SECTION 3. INTENTIONALLY OMITTED -3- SECTION 4. LEGENDS ON STOCK CERTIFICATE. In order to effectuate the terms of this Agreement, each certificate of stock issued to the Shareholders evidencing ownership of shares of Series B Stock of the Company currently owned or hereafter acquired by such Shareholder shall bear the following legend upon its face or legends of similar effect: "THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING AGREEMENTS CONTAINED IN A SHAREHOLDER AGREEMENT DATED AS OF AUGUST 19, 2004, AS IT MAY BE AMENDED FROM TIME TO TIME." SECTION 5. PROTECTIVE PROVISIONS. So long as any shares of Series B Preferred Stock held by the Shareholders shall be outstanding, this Agreement may not be amended or otherwise modified without the written consent of the four Shareholders having director designation rights under this Agreement which have not terminated. Any amendment or modification effected in accordance with this Section shall be binding on all Shareholders. SECTION 6. FURTHER ASSURANCES. Each Shareholder covenants and agrees (i) to vote, and otherwise use its best efforts to cause the Company to provide, the full rights and benefits contemplated by this Agreement and to fully comply with and perform each of its obligations contained in this Agreement and shall take any and all action as a stockholder of the Company as may be necessary to cause the Company to provide such rights and benefits and to comply with such obligations and (ii) to execute such further documents and take such further actions as may be necessary or appropriate to effectuate the purposes of this Agreement, including without limitation the granting of irrevocable proxies. SECTION 7. TERMINATION. This Agreement shall terminate on the occurrence of any of the following events: (a) As to any single Shareholder, when such Shareholder no longer own any shares of Series B Preferred Stock; or (b) As to all Shareholders, upon the execution of a written agreement by the four Shareholders having director designation rights under this Agreement which have not been terminated. -4- SECTION 8. MISCELLANEOUS. 8.1. NOTICE. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered upon transmittal by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. Notice to a Shareholder shall be sent to its facsimile number or at the address set forth below or at such other address as may be furnished in writing to the notifying party: American Friends of Karen Chava Bnai Levi Aries Group attn: Z. Kurtzman 12100 Wilshire Blvd., Suite 705 Los Angeles, CA 90025 Fax: (310) 820-4118 Edgar Appleby Peacock Point Locust Valley, NY 11560 Fax: 516-674-3748 Yair Ben Moshe 7250 Beverly Blvd., Suite 101 Los Angeles, CA 90036 Fax: 323-954-8848 Shmuel Ben Moshe 7250 Beverly Blvd., Suite 101 Los Angeles, CA 90036 Fax: 323-954-8848 Anton d'Espous 22 Rue d'Bearn 9200 St. Cloud, France 92210 Fax: ____________________ Izar Fernbach 7250 Beverly Blvd., Suite 101 Los Angeles, CA 90036 Fax: 323-954-8848 Yaska Ginsberg P.O. Box 1406 Studio City, CA 91614 Fax: 323-330-1390 Patrick Glen 3003 Windmill Rd. Torrance, CA 90505 Fax: ____________________ Neal Kaufman Aries Group 12100 Wilshire Blvd., Suite 705 Los Angeles, CA 90025 -5- Koyah Leverage Partners, L.P. c/o ICM Asset Management, Inc. 601 West Main Avenue, Suite 600 Spokane WA 99201 Attn: Robert Law Fax: 509-444-4500 Koyah Partners, L.P. c/o ICM Asset Management, Inc. 601 West Main Avenue, Suite 600 Spokane WA 99201 Attn: Robert Law Fax: 509-444-4500 Koyah Ventures LLC c/o ICM Asset Management, Inc. 601 W. Main Avenue, Suite 600 Spokane, WA 99201 Attn: Robert Law Fax: 509-444-4500 Zvi Kurtzman 109 N. Kilkea Dr. Los Angeles, CA 90048 Fax: 310-820-4118 Cipora Lavut Aries Group attn: Cipora Lavut 12100 Wilshire Blvd., Suite 705 Los Angeles, CA 90025 Fax: (310) 820-4118 David Maimon P.O. Box 1406 Studio City, CA 91614 Fax: 323-330-1390 Prudent Bear Fund, Inc. 8140 Walnut Hill Lane, Suite 300 Dallas, TX 75206 Attn: Gregg Jahnke Fax: 214-696-5556 Raven Partners, L.P. c/o ICM Asset Management, Inc. 601 W. Main Avenue, Suite 600 Spokane, WA 99201 Attn: Robert Law Fax: 509-444-4500 -6- Arthur Schwartz Aries Group 12100 Wilshire Blvd., Suite 705 Los Angeles, CA 90025 Fax: (310) 820-4118 James Simmons c/o ICM Asset Management, Inc. 601 W. Main Avenue, Suite 600 Spokane, WA 99201 Fax: 509-444-4500 TripleNet, LLC 80 W. Wieuca Road Suite 150 Atlanta, GA 30342 Fax: (404) 250-1612 Steven Veen 7936 E. 6th Street Downey, CA 90241 Fax: ____________________ 8.2. ADDITIONAL SHAREHOLDERS. Any additional persons or entities acquiring Series B Preferred Stock after the date hereof shall become additional parties to this Agreement with all of the rights and obligations of a Shareholder hereunder by executing and delivering an agreement joining in this Agreement in the form of the Joinder Agreement attached hereto as Exhibit B (a "Joinder Agreement"). In the event of any sale or other transfer of Series B Preferred Stock other than in an open market transaction, the transfer shall be on the condition that the transferee is bound by and subject to the terms of this Agreement, and the transferring Shareholder shall cause the transferee to confirm being bound by and subject to this Agreement by executing and delivering a Joinder Agreement unless such transferee is already a party to this Agreement. 8.3. NO WAIVER. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. 8.4. GOVERNING LAW; JURISDICTION. THE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THAT STATE'S CONFLICT OF LAWS PRINCIPLES. ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN LOS ANGELES, CALIFORNIA, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN. ALL PARTIES HERETO WAIVE ANY OBJECTIONS TO THE LOCATION OF THE ABOVE REFERENCED COURTS, INCLUDING BUT NOT LIMITED TO ANY OBJECTION BASED ON LACK OF JURISDICTION, IMPROPER VENUE OR FORUM NON-CONVENIENS. NOTWITHSTANDING THE FOREGOING, ANY PARTY OBTAINING ANY ORDER OR JUDGMENT IN ANY OF THE ABOVE REFERENCED COURTS MAY BRING AN ACTION IN A COURT IN ANOTHER JURISDICTION IN ORDER TO ENFORCE SUCH ORDER OR JUDGMENT. -7- 8.5. SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. 8.6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. 8.7. NO LIABILITY. No Shareholder with director designation, rights makes any representation or warranty as to the fitness or competence of such Shareholders designee or shall incur any liability for the actions of such designee; it being understood, however, that this Section is not intended to reduce the representation and warranty made by each Shareholder with director designation rights contained in Section 1.2. 8.8. SPECIFIC PERFORMANCE. Each Shareholder acknowledges that money damages for breach of this Agreement are impossible to measure and would not adequately compensate the other Shareholders for damages resulting from such breach, and that the other Shareholders would suffer irreparable harm from such breach. Accordingly, each Shareholder agrees that the other Shareholders shall be entitled to specific enforcement of this Agreement (including a temporary injunction or restraining order) and, in any action to specifically enforce this Agreement, waives any claim or defense that an adequate remedy exists at law and any requirement to post a bond. 8.9. ATTORNEYS FEES. In any action to enforce this Agreement, the prevailing party shall be entitled to recover its reasonable costs and expenses, including without limitation attorneys fees. 8.10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. 8.11. HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 8.12. COUNTERPARTS. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. -8- 8.13. CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party. 8.14. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and their respective successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity. [SIGNATURES ON NEXT PAGE] -9- IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written. SHAREHOLDERS: AMERICAN FRIENDS OF KAREN CHAVA BNAI LEVI By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ ------------------------------------------------ EDGAR APPLEBY ------------------------------------------------ YAIR BEN MOSHE ------------------------------------------------ SHMUEL BEN MOSHE ------------------------------------------------ ANTON D'ESPOUS ------------------------------------------------ IZAR FERNBACH ------------------------------------------------ YASKA GINSBERG ------------------------------------------------ PATRICK GLEN ------------------------------------------------ NEAL KAUFMAN -10- KOYAH LEVERAGE PARTNERS, L.P. By: Koyah Ventures LLC, its general partner By: --------------------------------------------- Name: Robert J. Law Title: Vice President KOYAH PARTNERS, L.P. By: Koyah Ventures LLC, its general partner By: --------------------------------------------- Name: Robert J. Law Title: Vice President KOYAH VENTURES LLC By: --------------------------------------------- Name: Robert J. Law Title: Vice President ------------------------------------------------ ZVI KURTZMAN ------------------------------------------------ CIPORA LAVUT ------------------------------------------------ DAVID MAIMON PRUDENT BEAR FUND, INC. By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ -11- RAVEN PARTNERS, L.P. By: Koyah Ventures LLC, its general partner By: --------------------------------------------- Name: Robert J. Law Title: Vice President ------------------------------------------------ ARTHUR SCHWARTZ ------------------------------------------------ JAMES SIMMONS TRIPLENET, LLC By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ ------------------------------------------------ STEVEN VEEN ACKNOWLEDGMENT AND AGREEMENT The Company hereby acknowledges the existence of the foregoing Agreement, but is not a party to this Agreement and shall not have any obligations under this Agreement except as follows: To effectuate the provisions of Section 8.2 of this Agreement, the Company hereby agrees that: (1) in the event of the issuance of any additional shares of Series B Preferred Stock after the date hereof, the Company shall require, as a condition of the issuance of certificates evidencing such shares, that the person or entity acquiring such shares execute and deliver to each of the other Shareholders a duly executed counterpart of this Joinder Agreement unless such person or entity is already a party to this Agreement, and (2) all such certificates shall be legended as set forth in Section 4 of the foregoing Agreement. AURA SYSTEMS, INC. By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ -12- EXHIBIT A 17 CFR 230.262 SS. 230.262 DISQUALIFICATION PROVISIONS. Unless, upon a showing of good cause and without prejudice to any other action by the Commission, the Commission determines that it is not necessary under the circumstances that the exemption provided by this Regulation A be denied, the exemption shall not be available for the offer or sale of securities, if: (a) The issuer, any of its predecessors or any affiliated issuer: (1) Has filed a registration statement which is the subject of any pending proceeding or examination under section 8 of the Act, or has been the subject of any refusal order or stop order thereunder within 5 years prior to the filing of the offering statement required by ss.230.252; (2) Is subject to any pending proceeding under ss.230.258 or any similar section adopted under section 3(b) of the Securities Act, or to an order entered thereunder within 5 years prior to the filing of such offering statement; (3) Has been convicted within 5 years prior to the filing of such offering statement of any felony or misdemeanor in connection with the purchase or sale of any security or involving the making of any false filing with the Commission; (4) Is subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to any order, judgment or decree of any court of competent jurisdiction, entered within 5 years prior to the filing of such offering statement, permanently restraining or enjoining, such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with the Commission; or (5) Is subject to a United States Postal Service false representation order entered under 39 U.S.C. ss.3005 within 5 years prior to the filing of the offering statement, or is subject to a temporary restraining order or preliminary injunction entered under 39 U.S.C. ss.3007 with respect to conduct alleged to have violated 39 U.S.C. ss.3005. The entry of an order, judgment or decree against any affiliated entity before the affiliation with the issuer arose, if the affiliated entity is not in control of the issuer and if the affiliated entity and the issuer are not under the common control of a third party who was in control of the affiliated entity at the time of such entry does not come within the purview of this paragraph (a) of this section. (b) Any director, officer or general partner of the issuer, beneficial owner of 10 percent or more of any class of its equity securities, any promoter of the issuer presently connected with it in any capacity, any underwriter of the securities to be offered, or any partner, director or officer of any such underwriter: -13- (1) Has been convicted within 10 years prior to the filing of the offering statement required by ss.230.252 of any felony or misdemeanor in connection with the purchase or sale of any security, involving the making of a false filing with the Commission, or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser; (2) Is subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily enjoining or restraining, or is subject to any order, judgment, or decree of any court of competent jurisdiction, entered within 5 years prior to the filing of such offering statement, permanently enjoining or restraining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security, involving the making of a false filing with the Commission, or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser; (3) Is subject to an order of the Commission entered pursuant to section 15(b), 15B(a), or 15B(c) of the Exchange Act, or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.); (4) Is suspended or expelled from membership in, or suspended or barred from association with a member of, a national securities exchange registered under section 6 of the Exchange Act or a national securities association registered under section 15A of the Exchange Act for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade; or (5) Is subject to a United States Postal Service false representation order entered under 39 U.S.C. ss.3005 within 5 years prior to the filing of the offering statement required by ss.230.252, or is subject to a restraining order or preliminary injunction entered under 39 U.S.C. ss.3007 with respect to conduct alleged to have violated 39 U.S.C. ss.3005. (c) Any underwriter of such securities was an underwriter or was named as an underwriter of any securities: (1) Covered by any registration statement which is the subject of any pending proceeding or examination under section 8 of the Act, or is the subject of any refusal order or stop order entered thereunder within 5 years prior to the filing of the offering statement required by ss.230.252; or (2) Covered by any filing which is subject to any pending proceeding under ss.230.258 or any similar rule adopted under section 3(b) of the Securities Act, or to an order entered thereunder within 5 years prior to the filing of such offering statement. -14- EXHIBIT B JOINDER AGREEMENT The undersigned, hereby agrees to become a party to the Shareholders Agreement dated as of August 19, 2004, relating to Aura Systems, Inc. as it may be amended from time to time, with all of the rights and obligations of a "Shareholder" thereunder, which obligations include without limitation the obligation to vote for directors as designated by certain parties to the Shareholders Agreement. This Joinder Agreement shall take effect and shall become a part of such Shareholders Agreement immediately upon execution. Executed as of the date set forth below. Dated: [Name of Joining Party] -------------------------- By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Address: ------------------------------------ ------------------------------------ -15- EX-99.3 4 v07362_ex99-3.txt PROMISSORY NOTE Principal Amount: $410,000 El Segundo, California Interest Rate: 8% August 19, 2004 FOR VALUE RECEIVED, the undersigned, Cipora Lavut ("Borrower"), hereby promises to pay to the order of AURA SYSTEMS, INC., a Delaware corporation ("Lender"), the principal sum of Four Hundred and Ten Thousand Dollars ($410,000) together with interest thereon at the rate of 8% per annum, from the date hereof, payable in according with the schedule attached hereto, with the entire remaining unpaid principal balance, together with accrued interest, due and payable in full on May 5, 2005. This Note is being delivered by Borrower to Lender pursuant to a Securities Purchase Agreement ("Purchase Agreement") dated as of August 19, 2004, by and between Lender, Borrower and the other purchasers signatories thereto, and is subject to the terms of an Escrow Agreement ("Escrow Agreement") dated as of August 19, 2004, by and between Lender, Borrower and the other purchasers signatories thereto. All capitalized terms not defined herein shall have the meanings set forth in the Purchase Agreement. 1. Interest Rate and Payment. The outstanding principal balance of this Note shall accrue interest at the rate of eight percent (8%) per annum. All payments shall be made to the address of Lender stated in this Note, or to any other address as Lender may specify. 2. Prepayment. This note may be prepaid, in whole or in part, at any time, without penalty. 3. 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. 4. Late Charge. If any payment of principal or interest under this Note shall not be made within seven (7) business days after the due date, this Note shall bear interest (after as well as before judgment) at a rate of three percent (3%) 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. 5. Default. The following shall constitute a default under this Note (a "Default"): Failure by Borrower to make any payment due under this Note, within seven (7) business days following the due date, or (ii) failure by Borrower to comply with its obligations under Paragraph 7(b) of this Note. 6. Acceleration. If a Default shall continue for more than sixty (60) days after written notice by Lender to Borrower (an "Acceleration 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. 7. Certain Default Consequences. Upon the occurrence of a Default, in addition to any other rights and remedies that may exist as a result of such Default, the following provisions shall apply: (a) Purchase Price Adjustment. In addition to principal, interest or other amounts otherwise due and payable, there shall become due and payable under this Note as additional principal, without notice or demand, a sum equal to Ten Percent (10%) of the amount of the past due payment ("Purchase Price Adjustment"), which amount shall constitute additional consideration for the Units purchased by Borrower under the Purchase Agreement. Upon acceleration of this Note after the occurrence of an Acceleration Default, there shall become due and payable under this Note, as additional principal, without notice or demand, a sum equal to Ten Percent (10%) of the accelerated amount. (b) Reduction of Warrant Shares. Series B Warrants equal to 1,281,250 shall automatically be cancelled and Borrower shall forthwith surrender or cause to be surrendered for cancellation Series B Warrants in such amount. Such cancellation shall only occur one time regardless of whether there are multiple Defaults. The Series B Warrants to be surrendered by Borrower shall be surrendered by Borrower in the following order: First, Series B Warrants which are not on deposit under either (i) the Escrow Agreement or (ii) the Security and Pledge Agreement with Korah Partners dated as of August 10, 2004 (the "Security Agreement"). Second, to the extent the surrendered Warrants do not equal the number of Series B Warrants required to be cancelled, Series B Warrants on deposit under the Escrow Agreement. The Series B Warrants on deposit under the Security Agreement shall not be cancelled pursuant to this paragraph 7(b). (c) Conversion of Series B Shares Upon Default. At the option of Lender, exercisable at any time, Lender shall have the right, upon notice to Borrower ("Conversion Notice"), to cause the conversion of all Series B Shares acquired by Borrower under the Purchase Agreement into Common Stock ("Conversion Shares") without any action by Borrower, but on the other conversion terms set forth in Section 6(c) through 6(j) of the Certificate of Designations. Notwithstanding the foregoing, Lender cannot cause conversion of any Series B Shares on deposit under the Security Agreement pursuant to this paragraph 7(c).If, at the time of the Conversion Notice, the resale of the Conversion Shares is not covered by an effective registration statement under the Securities Act of 1933, then such Conversion Notice shall not become effective until such time as the resale of the Conversion Shares are either covered by an effective registration or can be sold by Borrower in any three-month period without volume limitation and without registration in compliance with Rule 144 under the Securities Act of 1933. 2 (d) Suspension of Voting Rights During Default. So long as any Default shall be continuing, then without notice or demand, Borrower shall cease to be entitled to vote any Series B Shares, Conversion Shares or Warrant Shares held by the Escrow Agent for the account of Borrower. (e) Termination of Director Nominating Rights. The director nomination rights of Borrower under the Shareholder Agreement shall terminate. (f) Cancellation of Unpaid Securities. Series B Shares and Series B Warrants which have not been paid for shall, at Lender's option, be cancelled. In the event that the Lender elects to cancel any Series B Shares and Warrants under this Paragraph 7(f) as a result of a Default, Borrower's obligation to pay for the cancelled Series B Shares and Warrants shall terminate. 8. No Exclusive Remedy. 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. 9. Governing Law. This Note shall be governed by and construed and interpreted in accordance with the law of the State of California, without regard to that state's conflict of laws principles. All disputes between the parties hereto, whether sounding in contract, tort, equity or otherwise, shall be resolved only by state and federal courts located in Los Angeles County, California, and the courts to which an appeal therefrom may be taken. All parties hereto waive any objections to the location of the above referenced courts, including but not limited to any objection based on lack of jurisdiction, improper venue or forum non-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. 10. Severability. If any part of this Note is determined to be illegal or unenforceable, all other parts shall remain in full force and effect. 11. 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. If to Lender: Aura Systems, Inc. 2335 Alaska Avenue El Segundo, CA 90245 Attention: President Fax: (310)-643-8719 If to Borrower: At the address set forth in the Purchase Agreement. 3 12. Miscellaneous. (a) 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. (b) 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. (c) 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. Prepayments applied to principal shall be applied in inverse order of maturity. (d) 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) 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. 4 IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its name on and as of the day and year first above written. "Borrower" - ---------------------- Cipora Lavut 5 -----END PRIVACY-ENHANCED MESSAGE-----