<PAGE>
 
                                                                   EXHIBIT 10.13

                                   AGREEMENT


     This Agreement is made by and between K & K Enterprises, with principal
offices in Noida, India ("Majority Owner") and Aura Systems, Inc. ("Aura"), a
Delaware corporation, with principal offices in El Segundo, California, USA, for
the formation of a joint venture between them.


                                   WITNESSETH


     WHEREAS, Aura has developed, and is the owner of patented and proprietary
technology relating to the development, design and manufacture of speaker
motors, speakers and speaker systems;

     WHEREAS, Aura has identified product applications incorporating the Aura
patented and proprietary technology;

     WHEREAS, Aura does not possess the resources with which to pursue the
manufacture of such product applications;

     WHEREAS, Majority Owner is interested in funding the further manufacture of
products for such applications incorporating the Aura proprietary technology in
exchange for certain rights;

     WHEREAS, to accomplish the above, the parties are desirous of entering into
a joint venture to further the development, design, manufacture and marketing of
such product applications.

     NOW, THEREFORE, the parties hereby acknowledge this Agreement to be the
understanding reached by and between the parties hereto as of the date set forth
hereinbelow:


1.   OBJECT

     (a)  The object of this Agreement is to form an Indian company to be called
          Dewan Aurasound (hereinafter referred to as "NEWCO") with principal
          offices in or about Noida, India under the joint ownership of Majority
          Owner and Aura for the manufacture of products (within the scope of a
          certain license agreement more particularly set forth hereinbelow)
          incorporating Aura patented and proprietary technology.  NEWCO will
          conduct business as an independent entity separate and apart from its
          shareholders.

     (b)  Majority Owner acknowledge that time is of the essence of making and
          performance of this Agreement.
<PAGE>
 
2.   STRUCTURE

     (a)  The ownership of NEWCO will be 49% held by Aura and 51% held by
          Majority Owner.  Upon incorporation of NEWCO as a privately held
          company, NEWCO shall issue shares (in an amount to be determined)
          equal to such percentages.

     (b)  The NEWCO Board of Directors shall be comprised of five board members,
          two of which shall be appointed by Aura and three of which shall be
          appointed by Majority Owner.  Majority Owner shall serve as Chairman
          of the Board.  Each party shall have the sole power to appoint its
          respective board members and each party shall have the sole power to
          remove and replace or substitute its respective board members.  Except
          as expressly set forth in Paragraphs 2(b) and 2(c) hereinbelow, all
          resolutions and other matters to be determined by a vote of the NEWCO
          Board of Directors shall be decided by a simple majority of the total
          Board.

     (c)  Aura and Majority Owner agree that the Articles of Incorporation of
          NEWCO, and/or its By-Laws, shall provide and establish the structure
          of the Board of Directors as set forth in Section 2(b), including the
          number of its members and the representations on the NEWCO Board of
          Directors by the parties hereto, and further agree that such provision
          in the Articles of Incorporation and/or the By-Laws of NEWCO shall not
          be amended or modified unless such amendments or modifications are
          consented to by a three-quarters vote of the NEWCO shareholders.

     (d)  Aura and Majority Owner agree that the Articles of Incorporation of
          NEWCO, and/or its By-Laws, shall provide and establish that NEWCO
          shall not be liquidated unless such liquidation is approved by a
          three-quarters vote of NEWCO shareholders, and further agree that such
          provision in the Articles of Incorporation and/or the By-Laws of NEWCO
          shall not be amended or modified unless such amendments or
          modifications are consented to by a three-quarters vote of the NEWCO
          shareholders.

     (e)  Majority Owner shall jointly manage the administration of NEWCO.  Aura
          shall have primary responsibility over development and design of the
          products.  Majority Owner shall have primary responsibility over
          manufacturing of the products and financing of NEWCO.

     (f)  NEWCO shall be incorporated as soon as practicable after execution of
          this Agreement.

     (g)  NEWCO, upon receiving its initial capitalization, shall establish a
          factory in Noida, India.

                                      -2-
<PAGE>
 
3.   CONTRIBUTION AND COMMITMENTS

     (a)  Aura shall contribute and has contributed to NEWCO a working prototype
          of an exemplary product of the type to be manufactured by NEWCO.

     (b)  Majority owner shall purchase from Aura the license described in
          Article 4.  Majority Owner shall contribute the rights under the
          license to NEWCO but not the obligation to pay the license fee.

     (c)  The parties shall contribute working capital in the amount of
          $500,000.00 to NEWCO in proportion to their ownership interest.
          Additional capital shall be contributed as needed in proportion or by
          either, as required, in the form of a loan at prevailing commercial
          bank loan interest rates.  Such loans shall be approved by a three-
          quarters majority of the Board.  Additional financing by third parties
          shall dilute each party in equal shares of their ownership proportion.

     (d)  Majority Owner shall make arrangements  to facilitate and coordinate
          all engagements and necessary licenses with local governments and
          regulatory authorities.

     (e)  Each of the parties shall further contribute, without compensation for
          consultancy or otherwise, their respective expertise and know how
          regarding the Board and management functions assumed under Article 2
          of this Agreement.  Nothing contained in this paragraph 3(d) shall
          limit or restrict Aura's rights to receive payment from NEWCO for
          engineering services ordered by NEWCO.  Any such order for engineering
          services shall, however, be at Aura's standard labor rates burdened
          with overhead and G & A, as defined by generally accepted accounting
          principals, plus 10%.

     (f)  Aura shall provide training to NEWCO personnel at Aura's facility to
          establish the assembly procedure for manufacturing the Product.  Any
          additional expenses not related to the technology transfer under the
          license, including but not limited to travel, per diem fees and
          special materials, which may be required of Aura at NEWCO's facility,
          shall be reimbursed by NEWCO to Aura at Aura's regular billing rates,
          and shall be initiated at NEWCO's sole discretion.

     (g)  Aura shall purchase from NEWCO 20,000,000 units of the licensed
          product (as such term is defined in Paragraph 4(a)) within the first
          seven years of this Agreement at such times and in such quantities,
          sizes, and types as Aura shall in its sole discretion determine.
          During the first two years under this agreement, the sales price of
          licensed product shall be NEWCO's costs + 20% (but in 

                                      -3-
<PAGE>
 
          any event competitive with prevailing wholesale prices for similar
          products) and thereafter at competitive wholesale prices as shall be
          agreed by and between the parties.

          Aura's obligations on this Paragraph 3(g) shall be suspended in the
          event of Force Majeure.  For the purposes of Aura's purchase
          obligations, the term "force majeure" shall mean an act of god,
          strike, lockout, act of public enemy, war, blockade, public riot,
          fire, storm, flood or other act of nature, explosion, governmental
          action, governmental delay, restraint or inaction, unavailability of
          equipment, and any other cause, whether of the kind specifically
          enumerated above or otherwise, which is not reasonably within the
          control of the party claiming suspension.  Aura shall use all
          reasonable diligence to remove the force majeure as quickly as
          practicable.  In the event Aura claims an event of force majeure, the
          payments outlined in Paragraph 4(b) of this Agreement shall be
          suspended for a like period or periods of time.

4.   LICENSE

     (a)  AURA will grant, by separate written instrument, to Majority Owner an
          exclusive, life of patents, non-transferable, non-assignable and non-
          divisible right, license, without further right of sub-license, and
          privilege to use only in the context of Paragraph 3(b) above the Aura
          patented and proprietary technology, including patents, patent
          applications and trade secrets (hereinafter referred to as the
          "Licensed Technology") in the field of speaker motors, speakers and
          speaker systems (hereinafter referred to as the "License Field") for
          the manufacture of products in the License Field incorporating the
          Licensed Technology (hereinafter referred to as the "Licensed
          Products") and for the sale of Licensed Products in Indian
          subcontinent (India, Pakistan, Nepal, Sri Lanka and Bangladesh),
          Middle East countries (Saudi Arabia, Kuwait, UAE, Jordan and Israel),
          Taiwan, and Western Europe (except Volkswagen, Mercedes and Fiat, for
          which territory such license shall be non-exclusive) (the
          "Territory").  Nothing contained herein shall prohibit or restrict the
          secondary vertical sale of Licensed Products outside the Territory.

     (b)  In consideration of the license granted by Aura to Majority Owner,
          Majority Owner agrees to pay to Aura a one-time, non-creditable, lump
          sum, non-refundable license fee of $1,000,000 within twenty four
          months of the date of this agreement according to India law and the
          schedule as attached hereto as Exhibit "A".

                                      -4-
<PAGE>
 
          Except for such subsequent events as specified in this Paragraph
          3(b), no contingency shall exist to Aura's receipt of the License Fee
          when due.  Majority Owners's obligations to pay the License Fee when
          due shall be suspended in the event of Aura's suspension of payments
          under Paragraph 3(g) due to Force Majeure.  The parties agree to
          execute such license, on usual and customary terms not inconsistent
          with this Agreement, within 5 calendar days of the signing of this
          Agreement.

     (c)  Majority Owner further agrees not to compete in the License Field with
          either Aura or NEWCO, nor invest in or fund others in competition with
          Aura or NEWCO in the License Field.  The covenant of this paragraph
          4(b) shall survive termination of this Agreement for a period of seven
          (7) years.  Nothing contained herein shall prohibit ownership of
          shares in any company in competition with Aura or NEWCO provided that
          such ownership does not exceed 4.9% of the outstanding shares of such
          company.

     (d)  In the event an assignment of any or all of the Aura proprietary
          technology is made for the benefit of creditors under an India analog
          either Chapter 7 or Chapter 11 of the U.S. Bankruptcy Law, then this
          license shall not revert and the assignee-creditor takes title to such
          transferred technology subject to the terms of this Agreement.

     (e)  In the event an assignment of any or all of the assets of NEWCO is
          made for the benefit of creditors under an Indian analog to Chapter 7
          of the U.S. Bankruptcy law, then the license granted to Majority Owner
          shall terminate and all rights under the sub-license revert to Aura.

     (f)  Any and all improvements to the Licensed Technology made by Aura
          subsequent to the date of this Agreement shall be licensed to NEWCO
          under the same terms and conditions as set forth in Section 4(a)
          without further payment of license fee or royalty to Aura.

     (g)  Any and all improvements to the Licensed Technology made by NEWCO
          (without funding or other assistance by Aura) shall belong to NEWCO
          subject to a grant of a fully paid, royalty free license to Aura for
          such improvements.

                                      -5-
<PAGE>
 
5.   BOOKS AND RECORDS

     (a)  NEWCO shall establish and maintain at its principal place of business,
          or at such other place as the parties may consent to in writing, full,
          true and accurate books of account, records and other data, kept in
          accordance with generally accepted accounting principles, containing
          all particulars necessary for a precise auditing of the complete
          financial statements of NEWCO.  The parties and its agents, including
          their accountants and attorneys, shall, during the term of this
          Agreement, have the right, during normal business hours, and upon
          reasonable prior notice, to inspect and make extracts from such books
          of account, records and other data relating to the financial condition
          of NEWCO provided, however, that such examinations shall be conducted
          no more often than once for each fiscal year period.

     (b)  All financial reporting and accounting of NEWCO shall be performed by
          a qualified, independent international auditor.


6.   REPRESENTATIONS AND WARRANTIES

     (a)  AURA represents and warrants to Majority Owner that, as of the date of
          this Agreement: (i) AURA has the corporate power and authority to
          enter into and to carry out the terms and provisions of this
          Agreement; (ii) AURA has not entered into any agreement or
          understanding regarding the manufacture of the Licensed Products in
          the License Field which is in conflict with or inconsistent with any
          of the terms or conditions of this Agreement; (iii) AURA has no actual
          knowledge after diligent inquiry that its Licensed Technology or
          Licensed Products conflict with, violate or infringe any rights of any
          third party, and (iv) there are no actions or proceedings pending, or
          to Aura's knowledge, threatened, which would prevent or make unlawful
          the consummation of the transactions contemplated by this Agreement.

          Aura will indemnify NEWCO and Majority Owner from and against any
          cost, expense, lawsuit, legal proceeding, judgment or liability
          arising out of or associated with any claim brought by any third party
          claiming a violation or infringement by the Licensed Technology or
          Licensed Products of such third party's patent rights wheresoever
          situated.

          NEWCO and Majority Owner shall have the right to engage independent
          counsel to defend any claims of such third parties for
          violations/infringement of any patent or intellectual property rights,
          the cost of which shall be 

                                      -6-
<PAGE>
 
          borne solely by Aura.

          Aura has applied for and received a patent from the United States
          Patent Office relating to the License Technology and has not granted
          any rights to any third party which are inconsistent with the rights
          to be granted NEWCO under the License Agreement.

     (b)  Majority Owner represents and warrants to AURA that, as of the date of
          this Agreement: (i) Majority Owner has the power and authority to
          enter into and to carry out the terms and provisions of this
          Agreement, (ii) the execution, delivery and performance of this
          Agreement by Majority Owner will not conflict with or violate any
          agreements or understandings to which Majority Owner is a party or by
          which it may be bound, (iii) Majority Owner has the financial
          resources, liquidity, equity, credit and net worth to make the
          contribution and arrange for the credit to be extended to NEWCO as
          required under Section 3(b), and (iv) there are no actions or
          proceedings pending, or to either's knowledge, threatened, which would
          prevent or make unlawful the consummation of the transactions
          contemplated by this Agreement.

     (c)  The parties represent and warrant to each other that neither of them
          shall liquidate its ownership of NEWCO without first offering to the
          other of them the right to obtain the liquidating party's ownership
          upon the same or better term's to the liquidating party as offered by
          a third party.

     (d)  The parties agree that NEWCO shall warrant the Licensed Products to be
          free from defects in material and workmanship upon such terms as shall
          be agreed to in writing between NEWCO and its customers.  NEWCO shall
          indemnify and hold Aura and Majority Owner harmless from all loss
          resulting from the manufacture, use or sale of licensed products.


7.   INSURANCE

     (a)  NEWCO shall at all times during the term of this Agreement and
          thereafter carry Director and Officer insurance and product, hazard
          (including, but not limited to fire, earthquake, flood, theft and
          burglary) and general liability insurance, and any other insurance
          required under law, covering acts, omissions or occurrences during the
          term of this Agreement, in the amount which shall be commercially
          reasonable.  Such policies shall name AURA and Majority Owner as
          additional insureds and beneficiaries in the same percentages of their
          respective stock ownership in 

                                      -7-
<PAGE>
 
          NEWCO. NEWCO shall use its best efforts to obtain a policy which
          provides that it shall not be cancellable except upon thirty (30) days
          prior written notice to AURA and Majority Owner NEWCO agrees to
          provide Aura and Majority Owner with one or more certificates
          evidencing the insurance coverage hereunder and the insurance policies
          promptly upon the request of Aura and/or Majority Owner Aura, Majority
          Owner and NEWCO acknowledge that insurance markets are rapidly
          changing and that insurance in the form and amounts described in this
          paragraph may not be available in the future. In such event, NEWCO
          shall nevertheless maintain insurance coverage which is customary and
          commercially reasonable.


8.   DEFAULT

     (a)  Each of the following shall constitute an event of default hereunder
          ("Event of Default"):  (i) Either Party fails to perform any material
          covenant or agreement contained in this Agreement and Either Party
          fails to perform such covenant following thirty (30) days' written
          notice from the other party and opportunity to cure, provided,
          however, if the default is of such a nature that it cannot reasonably
          be cured within such thirty (30)-day period, then the defaulting party
          shall not be deemed to be in default so long as the defaulting party
          promptly commences to cure such default and diligently pursues such
          cure to completion;  (ii) Any representation or warranty of either
          party herein shall prove to be incorrect in any material respect;
          (iii) Majority Owner shall at any time challenge or otherwise assert
          the invalidity of any of AURA's rights to Licensed Technology licensed
          hereunder; or (iv) Majority Owner or AURA makes a general assignment
          or general arrangement for the benefit of creditors without the prior
          written consent of the other party, a petition for adjudication of
          bankruptcy or for reorganization or rearrangement is filed by or
          against either party and is not dismissed within thirty (30) days, a
          trustee or receiver is appointed to take possession of all or a
          substantial portion of either party's properties and possession
          thereof is not restored to such party within sixty (60) days, or all
          or a substantial portion of either party's assets shall be subjected
          to attachment, execution or other judicial seizure which is not
          discharged, stayed or bonded within sixty (60) days.

     (b)  If a Default shall occur hereunder, either party shall have the right,
          to be exercised by it in its sole discretion (after reasonable
          opportunity to cure the default has been given), to terminate this
          Agreement upon written notice to the defaulting party.  The right 

                                      -8-
<PAGE>
 
          of either party to terminate this Agreement for Default shall be in
          addition to any other rights or remedies to which either party shall
          be entitled at law. Termination of this Agreement shall be without
          prejudice to any rights or remedies which either party may have, under
          this Agreement

     (c)  In the event this Agreement is terminated by Aura by reason of default
          of Majority Owner, then the license granted to NEWCO under Section
          4(a) shall terminate and revert to Aura.


9.   SECRECY

     (a)  AURA has taken reasonable security measures to protect the secrecy of
          its proprietary technology in speakers, speaker manufacturing
          processes and tooling for the manufacture of speakers.  The parties
          agree that this proprietary technology is valuable only so long as it
          remains secret. Accordingly, each party agrees to take all steps
          reasonably necessary to protect Confidential Information (as
          hereinafter defined) from entering the public domain or falling into
          the hands of unauthorized third parties.  All information which in any
          way embodies, evidences or relates to the proprietary technology is
          referred to herein as "Confidential Information".  Confidential
          Information excludes any information which is or becomes in the public
          domain by public use, publication, general knowledge or similar means
          other than by breach of this Agreement.

     (b)  Each party agrees to take reasonable steps to maintain the secrecy of
          Confidential Information.


10.  BUSINESS PLAN

     (a)  The parties hereto shall, as soon as practicable after execution of
          this Agreement, develop a business plan for NEWCO.


11.  SUCCESSORS

     (a)  Except as otherwise provided herein, this Agreement shall be binding
          upon and inure to the benefit of the parties hereto and their
          permitted successors and assigns.

                                      -9-
<PAGE>
 
12.  SEVERABILITY

     (a)  The provisions of this Agreement are severable, and if any one or more
          provisions are determined to be judicially unenforceable, in whole or
          in part, the remaining provisions, and any partially unenforceable
          provisions to the extent enforceable, shall nevertheless be binding
          and enforceable. In the event that any act, regulation, directive, or
          law of a government having jurisdiction and respect of this Agreement,
          including its departments, agencies or courts, should make it
          impossible or prohibit, restrain, modify or eliminate any act or
          obligation of Majority Owner under this Agreement, Aura shall have the
          right, at its option, to suspend this Agreement or to make such
          modifications therein as may be necessary.


13.  NOTICES

     (a)  All notices and other communications permitted or required by the
          provisions of this Agreement shall be in writing and shall be
          personally delivered or deposited in the United States Mail, bearing
          adequate first class postage and addressed as hereinafter provided.
          Notices delivered in person shall be effective upon the date of
          delivery. Notices by mail shall be effective upon the receipt thereof
          by the addressee or upon the tenth (10th) calendar day after being
          deposited in the  U.S. mail, as the case may be, whichever is earlier.
          Any party hereto shall have the right from time to time and at any
          time while this Agreement is in effect to change the respective
          addressees thereof and each shall have the right to specify as the
          address thereof any other address. Any notice herein required or
          permitted to be given may be given, in addition to the manner set
          forth above, by courier, telex, TWX, cable or facsimile transmission,
          provided that the party giving such notice obtains acknowledgment by
          courier proof of delivery, telex, TWX, cable or facsimile transmission
          that such notice has been received by the party to be notified. Notice
          given in this manner shall be effective upon transmission of
          acknowledgment of receipt of same by the parties to be notified.


14.  DISPUTES

     (a)  All disputes between the parties arising under or out of this
          Agreement shall be settled by arbitration conducted in Los Angeles,
          California. Either side to the dispute may institute arbitration by
          giving written notice to the other party of its intention to
          arbitrate.

                                      -10-
<PAGE>
 
     (b)  Unless otherwise expressly provided herein or agreed upon by the
          parties in writing, the arbitration shall be conducted in accordance
          with the commercial rules then obtaining of the American Arbitration
          Association.

     (c)  Any award made pursuant to arbitration may be entered as a judgment by
          any court of competent jurisdiction upon the application of any party
          to said arbitration. Such award shall include an award of costs and
          reasonable attorney's fees incurred by the prevailing party.

     (d)  Notwithstanding the foregoing provisions of this Paragraph 11, either
          party shall have the right to petition a court of appropriate
          jurisdiction seeking injunctive or other similar relief pending the
          conclusion of any arbitration proceedings.


15.  LITIGATION

     (a)  In the event of any litigation or proceeding in arbitration between
          the parties arising in any manner out of this Agreement or the
          asserted breach thereof, the prevailing party shall recover court
          costs or costs of arbitration, as appropriate, and actual attorneys'
          fees.


16.  WAIVER

     (a)  The waiver or excuse by either party hereto as to any breach, default
          or deficiency and the performance by the other party of any duty or
          obligation by the other party to be performed hereunder shall not
          constitute or be deemed a continuing waiver or excuse of the same or
          any other duty or obligation owed by the other.


17.  REMEDIES NOT EXCLUSIVE

     (a)  No remedy conferred by any of the specific provisions of this
          Agreement is intended to be exclusive of any other remedy and each and
          every remedy shall be cumulative and shall be in addition to every
          other remedy given hereunder or now or hereafter existing at law or in
          equity or by statute or otherwise. The election of any one or more
          remedies by any of the parties shall not constitute a waiver of the
          right to pursue other remedies.

                                      -11-
<PAGE>
 
18.  CAPTIONS

     (a)  Captions and paragraph headings used herein are for convenience only
          and are not a part of this Agreement and shall not be used in
          construing it.

19.  ENTIRE AGREEMENT

     (a)  This Agreement contains the entire understanding between the parties
          concerning the subject matter of this Agreement and supersedes all
          prior understandings and agreements, whether oral or written, between
          them respecting the subject matter hereof. There are no
          representations, agreements, arrangements or understandings, oral or
          written, between the parties hereto relating to the subject matter of
          this Agreement which are not fully expressed herein. This Agreement
          may be modified only by an agreement in writing signed by all of the
          parties hereto.

20.  COUNTERPARTS

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

21.  GENDER; NUMBER

     (a)  Terms used herein in any number or gender include other numbers or
          genders, as the context may require.

22.  GOVERNING LAW

     This Agreement is made and entered into in the State of California, United
     States of America.  It is the intention of the parties hereto that this
     Agreement shall be subject to and shall be enforced and construed under
     tenets of international law.

                                      -12-
<PAGE>
 
     WHEREFORE, the parties agree that this Agreement constitutes and
memorializes the understanding reached by and between the parties on the date
set forth hereinbelow, and intend to be legally bound by the mutual covenants,
terms and conditions herein.  The parties shall use their best efforts to enter
into a definitive agreement setting forth the entire relationship between the
parties hereto.



AURA SYSTEMS, INC.                  K & K ENTERPRISES



By: /s/ Harry Zvi Kurtzman          By: /s/ Kenny A. Dewan
    ----------------------              ------------------
    Harry Zvi Kurtzman                  Kenny A. Dewan
    Chief Executive Officer             Vice President

Date:  July 19, 1995                Date:  July 19, 1995

                                      -13-
<PAGE>
 
                                   EXHIBIT A
                                   ---------



 .    $50,000 no later than August 31, 1995.

 .    $100,000 no later than November 30, 1995.

 .    $250,000 no later than February 29, 1996.

 .    $40,000 per month thereafter until paid in full.



                                   EXHIBIT A