<PAGE>
 
                                                                   Exhibit 10.14

                               LICENSE AGREEMENT
                               -----------------

     This LICENSE AGREEMENT (the "Agreement") is made and entered into as of
July 19, 1995, by and between AURA SYSTEMS, INC., a Delaware corporation
("Licensor"), and K & K Enterprises, with its principal offices in Noida, India,
("Licensee").

                                    Recitals
                                    --------

     A.  Licensor is the owner of all right, title and interest in and to
certain inventions relating to the Licensed Products as disclosed and/or claimed
in patent applications identified in Schedule "A" hereto, and has developed
Proprietary Rights which may be utilized in the Licensed Products.

     B.  Licensor has been heretofore disclosed to Licensee in confidence the
Licensed Technology.

     C.  Licensee is engaged in the business of manufacturing and selling
speakers and speaker systems throughout the world and proposes to commercialize,
manufacture and sell Licensed Products in the License Field utilizing the
Licensed Technology.

     D.  Licensor is willing to grant to Licensee a license to utilize the
Licensed Technology for Licensed Products in the License Field on the terms and
subject to the conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein the parties hereby agree as follows:

     1.  DEFINITIONS.
         ------------

     "LICENSED TECHNOLOGY" shall mean the Patent Rights and the Proprietary
     ---------------------                                                 
Rights and any modifications, enhancements or improvements to the technology
embodied in the Patent Rights and Proprietary Rights which are necessary, used
or useful to develop, manufacture or sell the Licensed Products or Derived
Products.

     "PATENT RIGHTS" shall mean the issued patents in all countries where
     ---------------                                                     
issued, applications for patents together with the right to obtain the issuance
of letters patent in the United States and in foreign countries based upon said
applications and any continuation, continuation in part, division and re-issues
thereof, as presently itemized in the appended Schedule "A" to this Agreement
and as the same shall be supplemented 

                                      -1-
<PAGE>
 
from time to time on the filing of such additional applications based thereon or
based upon improvements added thereto pursuant to Paragraph 7.1 of this
Agreement.

     "PROPRIETARY RIGHTS" shall mean data, inventions, information, processes,
     --------------------                                                     
know-how, trade secrets, sketches, prototypes, notebooks, papers, drawings,
formulae (including copies or extracts thereof) and similar intellectual
property rights which Licensor has or may hereafter develop and which are
necessary or useful for the development, manufacture or sale of the Licensed
Products.

     "JOINT VENTURE AGREEMENT" shall mean the Joint Venture Agreement entered
     -------------------------                                               
into between Aura Systems, Inc. and K & K Enterprises on July 19, 1992.

     "LICENSE FIELD" shall mean speaker motors, speakers and speaker systems.
     ---------------                                                         

     "LICENSED PRODUCTS" shall mean products in the License Field that
     -------------------                                              
incorporate the Licensed Technology.

     "AFFILIATE" shall mean, as to any party, a person or entity controlling,
     -----------                                                             
controlled by or under common control with such party.

     "TERRITORY" shall mean the Exclusive Territory and the Non-Exclusive
     -----------                                                         
Territory

     "EXCLUSIVE TERRITORY" shall mean India, Pakistan, Nepal, Sri Lanka,
     ---------------------                                              
Bangladesh, Saudi Arabia, Kuwait, UAE, Jordan, Israel, Taiwan, and Western
Europe.

     "NON-EXCLUSIVE TERRITORY" shall mean Volkswagen, Mercedes and Fiat in
     -------------------------                                            
Western Europe.

     2.  GRANT OF LICENSE.
         ---------------- 

          2.1 SCOPE. Licensor hereby grants to Licensee an exclusive field of
              -----                                                          
use, non-transferable, non-assignable and non-divisible right, license and
privilege to use the Licensed Technology throughout the world for the
manufacture and sale of Licensed Products in the License Field. Licensor hereby
retains the unfettered right to use, and to sub-license to others to use, the
Licensed Technology for any other purpose, including, without limitation, the
use or other exploitation of the Licensed Technology for or in connection with
the development, manufacture or sale of products, processes, designs or
inventions having application, actual or potential, other than for Licensed
Products.

          Licensor hereby grants to Licensee an exclusive, life of patents, non-
transferable, non-assignable and non-divisible right license, without further
right of sub-license, and privilege to use the 

                                      -2-
<PAGE>
 
Licensed Technology in the License Field for the manufacture of Licensed
Products and for the sale of Licensed Products in the Exclusive Territory.

          Licensor hereby grants to Licensee a non-exclusive life of patents,
non-transferable, non-assignable and non-divisible, right license, without
further right of sub-license, and privilege to use the Licensed Technology in
the License Field for the manufacture of Licensed Products and for the sale of
Licensed Products in the Non-Exclusive Territory.

          2.2  TERM. Subject to earlier termination as provided herein, the
               ----                                                        
license granted by Licensor to Licensee pursuant to this Paragraph 2 to
manufacture and sell Licensed Products shall terminate on the later of (i)
seventeen (17) years from the date hereof, or (ii) the first to expire of any
U.S. patent issuing within the Patent Rights.

     3. ROYALTIES.
        --------- 

          3.1  AMOUNT OF ROYALTIES. As Licensor's sole compensation for the
               -------------------                                         
rights and licenses granted by it to Licensee pursuant to Paragraph 2 and
technical assistance to be provided by Licensor hereunder, Licensee shall pay to
Licensor the following fees and royalties:

          (a) a one time, non-refundable, non-creditable disclosure fee of One
Million Dollars ($1,000,000.00) (the "Disclosure Fee") payable by Licensee to
Licensor in immediately available funds within twenty-four (24) months of the
date of this Agreement, according to Indian law and the schedule attached hereto
as Exhibit B, in consideration solely for Licensor's disclosure of the Licensed
Technology existing on the date of this Agreement;

          3.2  INTEREST ON LATE PAYMENTS. Time shall be of the essence in
               -------------------------                                 
respect of the payment of the Royalty Fee under this Agreement. Royalties which
are not paid when due hereunder shall bear interest from and after the due date
at the rate of the lessor of 18% per annum or the maximum lawful rate.

          3.3  CURRENCY. Payments shown by each calendar quarter report shall be
               --------                                                         
paid in United States dollars and shall be paid to Licensor in full, without
set-off or counterclaim, and in such amount as may be necessary in order that
all Royalty Fees (after deduction for withholding for or on account of any
present or future taxes, levies, imposts, duties or other charges imposed by any
political subdivision or taxing authority on such Royalty Fees ("Taxes")) shall
not be less than the amounts otherwise required to be 

                                      -3-
<PAGE>
 
paid under this Agreement. Any and all Taxes required to be so withheld or
deducted shall be paid by Licensee to the proper taxing authorities, and proof
of payment shall be secured and sent to Licensor as evidence of such payment.
The rate of exchange to be used in computing the amount of the United States
dollars due to Licensor in satisfaction of payment obligations with respect to
sales in foreign countries shall be calculated at the exchange rate set by
Citibank, N.A., New York, New York, for the purchase of United States dollars
with the currency of the country of origin of such payment on the last business
day of the calendar quarter for which payment is being made.

          3.4  FOREIGN PAYMENTS. If governmental regulations prevent remittance
               ----------------                                                
from any foreign country of any amounts due under this Paragraph 3 in respect of
sales in that country, Licensee shall so notify Licensor in writing and, subject
to the remainder of this Paragraph 3.7, the obligation under this Agreement to
make payments respect of sales in that country shall be suspended (but the
amounts due but not paid shall continue to accrue) until such remittances are
possible; provided, however, that notwithstanding the foregoing, (i) to the
          --------  -------                                                
extent that Licensee invests its own blocked funds in passive investments in
such country or liquidates its own blocked funds, Licensee shall do the same
with Licensor's funds, and (ii) Licensor shall have the right, at any time and
from time to time, upon written notice to Licensee, to direct Licensee either to
pay such funds in any such country in the local currency or to liquidate such
currency at available rates and pay the liquidated amounts to Licensor. Any such
payment by Licensee shall be deemed to be payment in full of the amount so paid
or liquidated, and Licensee shall have no liability to Licensor for any actions
taken in accordance with this Paragraph 3.7.

          3.5  BOOKS AND RECORDS. Licensee shall establish and maintain at its
               -----------------                                              
principal place of business, or at such other place as Licensor 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 determination of the royalties payable under
this Agreement. Licensor and its agents, including its accountants and
attorneys, shall, during the term of this Agreement, and for a period of three
years thereafter, 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 Licensed Products and the
Royalty Fees. If any examination by Licensor of Licensee's 

                                      -4-
<PAGE>
 
books and records discloses an underpayment to Licensor which, for the
accounting periods under examination, exceed in the aggregate five percent (5%)
of the royalties reported to Licensor by Licensee with respect to such periods,
Licensee shall pay such excess upon demand together with Licensor's costs and
expenses reasonably incurred in connection with any such examination.

     4.  COMMERCIALIZATION OF LICENSED PRODUCTS.
         -------------------------------------- 

     In consideration of the grant by Licensor under Paragraph 2 of this
Agreement, Licensee agrees to use its best efforts, at Licensee's expense, to
commercialize Licensed Products utilizing the Licensed Technology in the License
Field and to market and sell such Licensed Products. Such activity shall be in a
manner consistent with sound business judgment and in accordance with Licensee's
normal business practices, giving due regard to the state of the development of
the Licensed Technology, the cost effectiveness of the Licensed Technology and
market opportunities for Licensed Products in the License Field, all as the same
shall exist from time to time. Licensee shall be under no obligation to commit
any specific dollars worth of effort. Licensee shall apprise Licensor on a
regular, periodic and timely basis of all activities of Licensee, including its
affiliates, relating to the development, marketing, manufacture or sale of any
of the Licensed Products or in respect of the development of the Licensed
Technology.

     5.  TECHNICAL ASSISTANCE.
         -------------------- 

          5.1  DISCLOSURE OF LICENSED TECHNOLOGY. Licensor has heretofore
               ---------------------------------                         
provided to Licensee in confidence, and will continue to provide Licensee in
confidence, all proprietary information relating to the Licensed Technology
being licensed hereunder. All such information has been and will be received and
retained in confidence in accordance with the terms of this Agreement, including
Paragraph 16. Licensor and Licensee shall each select an employee who shall act
as its technical correspondent in transmitting technical information and in
arranging for other assistance necessary to fully exploit the Licensed
Technology for Licensed Products in the License Field. Each party shall indicate
promptly to the other in writing the name of its technical correspondent. The
technical correspondent shall cooperatively work out a practicable plan to keep
each party informed about the other's current and planned activities relating to
the use, practice, development, manufacture, marketing and sale of the Licensed
Products and the Licensed Technology.

                                      -5-
<PAGE>
 
          5.2  EXCHANGE OF INFORMATION. Licensor's technical correspondent shall
               -----------------------                                          
be responsible for answering all reasonable technical inquiries received from
Licensee's technical correspondent relating to Licensed Products and the
Licensed Technology and shall provide, to the extent requested, copies of
pertinent technical information of Licensor, including, to the extent
applicable, test reports and other technical reports, operation and maintenance
manuals, assembly and detailed drawings, and other pertinent information in
Licensor's possession. Licensor shall, subject to any restrictions that may be
imposed by the United States Government, on written notice, give to duly
accredited representatives of Licensee access to its facilities, at reasonable
times and under reasonable conditions, for the purpose of acquiring in
confidence technical information about Licensor's methods of practicing the
Licensed Technology in the License Field. Licensee shall use maximum precautions
in instructing representatives who visit facilities of Licensor to assure that
any in confidence technical information received by them shall be kept
confidential.

          5.3  CONSULTANTS. At the request of Licensee, Licensor will provide
               -----------                                                   
the services of up to three technical consultants on a full-time basis, to
assist Licensee in practicing the Licensed Technology for the purpose of
developing and manufacturing Licensed Products. These consultants will be fully
knowledgeable about all technical aspects of the Licensed Technology. Licensee
agrees to reimburse Licensor for the reasonable living and travel expenses of
such consultants. In addition, effective for services provided on or after July
19, 1996 [first anniversary of effective date], Licensee shall pay Licensor for
such consulting services at Licensor's regular hourly or per diem consulting
rate.

     6.  IMPROVEMENTS.
         ------------ 

          6.1  IMPROVEMENTS BY LICENSOR. It is contemplated that Licensor may,
               ------------------------                                       
but (except as expressly provided herein) is not required to, continue from time
to time to engage in research and development in areas relevant to the Licensed
Technology, both within and outside of the License Field. Such research and
development may result in improvements to the Licensed Technology which will
have commercial utilization for Licensed Products in the License Field.
Accordingly, Licensor (including its affiliates) agrees to disclose to Licensee
in confidence such improvements to the Licensed Technology its deems appropriate
for commercial utilization of the Licensed Technology in the License Field at
such times and with such frequency as Licensor deems appropriate, but in no
event later than ninety (90) days after 

                                      -6-
<PAGE>
 
Licensor has concluded that the subject matter of the improvement may be
appropriate for commercial utilization of the Licensed Technology in the License
Field. Any and all patents, know-how, ideas, processes, inventions and
discoveries, whether patentable or not, conceived by Licensor or its employees
and relating to such improvements shall be and remain the sole and exclusive
property of Licensor. Any such improvements to the Licensed Technology shall
become part of the Licensed Technology and the patent applications therefor
shall be added to Schedule "A").

          6.2  IMPROVEMENTS BY LICENSEE. Licensee (including its affiliates)
               ------------------------                                     
shall make timely disclosures to Licensor both in writing and supplemented
orally as required by Licensor of any and all patentable and non-patentable
proprietary information made or conceived by Licensee which is within the scope
of any claim, as written, of any present or future application for or issued
United States patents, owned by Licensor or any affiliate or Licensor, or in the
nature of improvements, modifications or developments of the Licensed
Technology. Such disclosure shall be made as often and at such times as seems
both timely and appropriate to the nature of the improvement/modification/
development, but in all events not later than the first to occur of (i) one
hundred eighty (l80) days after first use of the improvement/modification/
developments; (ii) one year after the development of the improvement/
modification/development; (iii) forty-five (45) days after the submission 
to the management or counsel of Licensee, by one or more of its employees,
of an invention disclosure submitted or considered in contemplation of possible 
applications for patent thereon; (iv) if the improvement/modification/
development is potentially patentable, not less than one hundred eighty 
(180) days prior to the deadline for filing any application for patent
thereon, domestic or foreign, whichever occurs first.

          6.3  RIGHTS TO CERTAIN IMPROVEMENTS. All improvements/
               -------------------------------                  
modifications/developments to the Licensed Technology which are (i) conceived by
Licensee during the term of this Agreement or thereafter, (ii) made
independently of Licensor, (iii) paid for solely by Licensee; and (iv) not
derived from know-how, patents or other proprietary information furnished by
Licensor to Licensee, shall be owned by Licensee, subject to a perpetual,
royalty-free worldwide non-exclusive license in favor of Licensor to make, use
and sell, including the right to sub-license, such improvement/
modification/development, which right shall survive the termination of this
Agreement.

                                      -7-
<PAGE>
 
     7.  FILING AND PROSECUTION OF PATENTS.
         --------------------------------- 

          7.1  PENDING PATENT APPLICATIONS. Licensor has filed the Patent
               ---------------------------                               
Applications in the United States and will cause to be prosecuted such Patent
Applications (Licensor having made no representation that any patents will issue
thereon). In addition, Licensor has filed or will use its best efforts to timely
file Patent Applications and to prosecute such filings in France, West Germany,
Italy, Spain, United Kingdom, Sweden, Japan, Korea, Canada and Australia
("Foreign Territories"). The preparation, filing and prosecution of such Patent
Applications shall be controlled by, and the cost and expenses shall be borne
by, Licensor.

          7.2  ADDITIONAL PATENTS. From and after the date of this Agreement
               ------------------                                           
Licensor agrees to utilize its best efforts to timely file and prosecute, at
Licensor's expense and at the request of Licensee, patent applications in
respect of Licensed Technology which has potential application to the Licensed
Products in the License Field. Such patent applications shall be filed and
prosecuted in the United States and in the Foreign Territories. However, if
Licensor shall determine in its reasonable and good faith discretion, after
consultation with Licensee, that the benefits of filing and prosecuting any such
patents, either within the United States or in any of the Foreign Territories,
are outweighed by the costs thereof, after giving due consideration to the
anticipated costs of prosecution, its potential commercial utility, the
likelihood of successful prosecution, the anticipated protection afforded by the
patent issuing thereon, or any other relevant factors, Licensor shall not be
obligated to file or prosecute such patents and shall promptly notify Licensee
of Licensor's intentions. In such event, Licensee shall have the right, at its
expense, to file and/or prosecute patent applications in Licensor's name in such
countries as it deems appropriate. Subject to the other provisions of this
Agreement, each party agrees to cooperate with the other party and to keep such
other party informed in respect of patent applications and patents comprising
the Licensed Technology.

     8.  INFRINGEMENT.
         ------------ 

     Licensor and Licensee shall promptly report to the other any information
which comes to its attention concerning any use by a third party of Licensed
Technology which might amount to an infringement thereof. If the infringement
constitutes a substantial and actionable infringement of any of the 

                                      -8-
<PAGE>
 
Licensed Technology, Licensee shall, at its expense, within ninety (90) days
initiate action through competent legal counsel reasonably satisfactory to
Licensor to terminate or abate such activity unless Licensee shall reasonably
determine that the anticipated costs of prosecuting such action outweigh the
anticipated economic benefits to Licensor and Licensee. If Licensee shall for
any reason fail or refuse to prosecute or continue prosecution of such action,
it shall promptly notify Licensor, who may elect to institute or continue such
action at Licensee's expense (unless such refusal or failure was wrongful, in
which case such costs and expenses shall be for the account of Licensor). Each
party shall cooperate with the other and the prosecuting party shall keep the
other party apprised of the status of the proceeding and shall allow such other
party to participate in such proceedings at such person's expense, including, in
the case of Licensor, Licensor's right to participate as a party. In no event
shall the party prosecuting the action settle any such action without the
consent of the other party hereto, which consent will not be unreasonably
withheld or delayed. If such action shall have been both commenced and
prosecuted by Licensee, any judgment, award or settlement obtained as a result
of such proceeding shall be allocated as follows: (i) first, to costs and
                                                      -----
attorneys' fees incurred by Licensee in connection with the prosecution of such
limitation; (ii) second, ninety-six percent (96%) of the remainder to Licensee 
                 ------ 
and four percent (4%) of the remainder to Licensor; Provided, however, if a
                                                    --------  -------
portion of the judgment, settlement or award is reasonably identifiable or
identified as representing lost revenues of Licensee, the proceeds of such
judgment, settlement or award (after deducting attorneys' fees and costs) shall
be allocated (y) first, ninety-six percent (96%) to Licensee, and four percent 
                 ----- 
(4%) to Licensor to the extent such proceeds represent lost revenues, and (z)
second, the balance being divided equally between Licensee and Licensor. 
------                   
Licensee shall utilize reasonable efforts to obtain an allocation of lost
revenues in any proceeding or settlement thereof. In the event that Licensee
shall fail or refuse for any reason to prosecute any action under this Paragraph
9, in addition to any right or remedy to which Licensor may be entitled, one
hundred percent (100%) of the proceeds of any judgment, settlement or award
shall be retained by Licensor.

     9.  INDEMNIFICATION.
         --------------- 

          9.1  BY LICENSEE. Licensee agrees to indemnify, defend and hold
               -----------                                               
Licensor, including its employees, agents, and affiliates, harmless from and
against any and all payments, damages, demands, 

                                      -9-
<PAGE>
 
claims, losses, expenses, costs, obligations and liabilities (including
reasonable attorney's fees and costs), which arise out of, result from or are
related to the breach by Licensee of any representation, warranty or covenant
contained in this Agreement.

          9.2  BY LICENSOR. Licensor hereby agrees to indemnify, defend and hold
               -----------                                                      
Licensee, including its employees, agents and affiliates, harmless from and
against any and all payments, damages, demands, claims, losses, expenses, costs,
obligations and liabilities (including reasonable attorneys' fees and costs)
which arise out of, result from or are related to  (i) infringement or alleged
infringement of the Licensed Technology or Licensed Products on a third party's
patent rights, or  (ii) any breach by Licensor of any of its representations,
warranties or covenants contained in this Agreement.

          9.3  INDEMNIFICATION PROCEDURE. The party indemnified hereunder (the
               -------------------------                                      
"Indemnitee") shall promptly notify the indemnifying party (the "Indemnitor") of
the existence of any claim, demand or other matter involving liabilities to
third parties to which the Indemnitor's indemnification obligations would apply
and shall give the Indemnitor a reasonable opportunity to defend the same at its
own expense and with counsel of its own selection (who shall be approved by the
Indemnitee, which approval shall not be unreasonably withheld); provided,
                                                                -------- 
however, that the Indemnitee at all times also shall have the right to fully
-------                                                                     
participate in the defense at its own expense. If the Indemnitor shall fail to
defend within a reasonable time after such notice, the Indemnitee shall have the
right, but not the obligation, to undertake the defense of, and to compromise or
settle (exercising reasonable business judgment) the claim or other matter on
behalf, for the account and at the risk and expense of the Indemnitor. Except as
provided in the preceding sentence, no party shall compromise or settle the
claim or matter without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed in each instance. If the
claim is one that cannot by its nature be defended solely by the Indemnitor, the
Indemnitee shall make available all information and assistance that the
Indemnitor reasonably may request.

     10.  INSURANCE.
          --------- 

     Licensee shall at all times during the term of this Agreement and
thereafter carry product and general liability insurance, covering acts,
omissions or occurrences during the term of this Agreement, in

                                      -10-
<PAGE>
 
the amount of at least Ten Million Dollars ($l0,000,000) per occurrence. Such
policy shall name Licensor as an additional insured, and shall be maintained
with companies holding a "General Policy Rating" of A-12 or better, as set forth
in the most current issue of "Best Key Rating Guide". Licensee 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 Licensor. Licensee agrees
to provide Licensor with one or more certificates evidencing the insurance
coverage hereunder and the insurance policies promptly upon the request of
Licensor. Licensor and Licensee 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, Licensee shall nevertheless
maintain insurance coverage which is customary and commercially reasonable.

     11.  SUB-LICENSE.
          ----------- 

     Licensee shall not have the right to sub-license Licensee's rights to
manufacture and sell Licensed Products except through separate written agreement
to which Licensor has also been made a party.

     12.  REPRESENTATIONS AND WARRANTIES.
          ------------------------------ 

          12.1  REPRESENTATIONS AND WARRANTIES OF LICENSOR. Licensor represents
                ------------------------------------------                     
and warrants to Licensee that, as of the date of this Agreement:

          (a) INCORPORATION.  Licensor represents and warrants that Aura
              -------------                                             
Systems, Inc. is a corporation in good standing and is incorporated in the State
of Delaware.

          (b) POWER AND AUTHORITY. Licensor has the corporate power and
              -------------------                                      
authority to enter into and to carry out the terms and provisions of this
Agreement; and this Agreement is the legal, valid and binding obligation of
Licensor and is enforceable against Licensor in accordance with its terms.

          (c) NO CONFLICTING AGREEMENTS. Licensor has not granted to any person
              -------------------------                                        
other than the Licensee any right, title or interest in or to the Licensed
Technology or entered into any agreement or understanding regarding the Licensed
Technology, in either case which is in conflict with or inconsistent with any of
the terms or conditions of this Agreement.

          (d) INFRINGEMENT. Licensor has no actual knowledge, after diligent
              ------------                                                  
inquiry, that the Licensed Technology conflicts with, violates or infringes any
rights of any third party.

                                      -11-
<PAGE>
 
          (e) LITIGATION. There are no actions or proceedings pending, or to
              ----------                                                    
Licensor's knowledge, threatened, which would prevent or make unlawful the
consummation of the transactions contemplated by this Agreement.

          (f) THIRD-PARTY CLAIMS. Licensee shall have the right to engage
              ------------------                                         
independent counsel to defend any claims of third parties for
violation/infringement of any patent or intellectual property rights, the cost
of which shall be borne solely by Licensor.

          (g) PATENT. Licensor has applied for and received a patent from the
              ------                                                         
United States Patent Office relating to the Licensed Technology and has not
granted any rights to any third party which are inconsistent with the rights
granted to Licensee under this Agreement.

          (h) ACCURACY OF REPRESENTATIONS. Licensor represents and warrants that
              ---------------------------                                       
the representations and warrants herein are accurate and true to the best of
Licensor's knowledge, after diligent inquiry.

          12.2  REPRESENTATIONS AND WARRANTIES OF LICENSEE. Licensee represents
                ------------------------------------------                     
and warrants to Licensor that, as of the date of this Agreement:

          (a) INCORPORATION.  Licensee represents and warrants that K & K
              -------------                                              
Enterprises is a corporation in good standing and is incorporated in Noida,
India.

          (b) POWER AND AUTHORITY. Licensee has the corporate power and
              -------------------                                      
authority to enter into and to carry out the terms and provisions of this
Agreement; and this Agreement is the legal, valid and binding obligation of
Licensee, enforceable against Licensee in accordance with its terms.

          (c) NO CONFLICTING AGREEMENTS. The execution, delivery and performance
              -------------------------                                         
of this Agreement by Licensee will not conflict with or violate any agreements
or understandings to which Licensee is a party or by which it may be bound.

          (d) LITIGATION. There are no actions or proceedings pending, or to
              ----------                                                    
Licensee's knowledge, threatened, which would prevent or make unlawful the
consummation of the transactions contemplated by this Agreement.

                                      -12-
<PAGE>
 
          (e) ACCURACY OF REPRESENTATIONS. Licensee represents and warrants that
              ---------------------------                                       
the representations and warrants herein are accurate and true to the best of
Licensee's knowledge, after diligent inquiry.

          12.3.  DISCLAIMER.
                 ---------- 

EXCEPT AS EXPRESSLY PROVIDED IN PARAGRAPH 12.1, LICENS0R DISCLAIMS ANY EXPRESS
OR IMPLIED WARRANTY (i) THAT THE LICENSED TECHNOLOGY OR THE USE THEREOF, OR ANY
LICENSED PRODUCTS INCORPORATING THE LICENSED TECHNOLOGY OR MANUFACTURED BY THE
USE THEREOF WILL BE FREE FROM CLAIMS OF PATENT INFRINGEMENT, INTERFERENCE, OR
UNLAWFUL USE OF PROPRIETARY INFORMATION OF ANY THIRD PARTY, OR (ii) OF THE
ACCURACY, RELIABILITY, TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS OR
MARKETABILITY OF THE LICENSED TECHNOLOGY OR ITS SUITABILITY OR FITNESS FOR ANY
PURPOSE WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE DESIGN, DEVELOPMENT,
MANUFACTURE, USE OR SALE OF LICENSED PRODUCTS. LICENSOR DISCLAIMS ALL OTHER
WARRANTIES OF WHATEVER NATURE, EXPRESS OR IMPLIED.

     13.  DEFAULT.
          ------- 

          13.1  Each of the following shall constitute an event of default
hereunder ("Event of Default"):

          (a) Licensee fails to perform any material covenant or agreement
contained in this Agreement or the Joint Venture Agreement, and Licensee fails
to perform such covenant following thirty (30) days' written notice from
Licensor 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 Licensee shall not be deemed to be in default so long as Licensee promptly
commences to cure such default and diligently pursues such cure to completion;

          (b) Any representation or warranty of Licensee herein shall prove to
be incorrect in any material respect;

          (c) Licensee shall at any time challenge or otherwise assert the
invalidity of any of Licensor's rights to Licensed Technology licensed
hereunder;

          (d) Licensee makes a general assignment or general arrangement for the
benefit of creditors; a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Licensee and is not
dismissed within thirty (30) days; a trustee or receiver is appointed to take
possession of all or a substantial portion of Licensee's properties and
possession thereof is not restored to Licensee within sixty (60) days; or all or
a substantial portion of Licensee's assets shall be subjected to

                                      -13-
<PAGE>
 
attachment, execution or other judicial seizure which is not discharged, stayed
or bonded within sixty (60) days;

          (e) Licensor fails to perform any material covenant or agreement in
this Agreement or the Joint Venture Agreement and Licensor fails to perform such
covenant following thirty (30) days written notice from Licensee and opportunity
to cure, provided, however, that if the default is of such a nature that it
         --------  -------                                                 
cannot reasonably be cured within such thirty (30) day period, then Licensor
shall not be deemed to be in default so long as Licensor promptly commences to
cure such default and diligently pursues such cure to completion;

          (f) Any representation or warranty of Licensor herein shall prove to
be incorrect in any material respect;

          (g) Any final determination that all the patents and patent
applications relating to the Licensed Products are determined to be invalid or
unenforceable in the jurisdiction or jurisdictions of the Territory; or

          (h) Licensor makes a general assignment or general arrangement for the
benefit of creditors; a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Licensor and is not
dismissed within thirty (30) days; a trustee or receiver is appointed to take
possession of all or a substantial portion of Licensor's properties and
possession thereof is not restored to Licensor within sixty (60) days; or all or
a substantial portion of Licensor's assets shall be subjected to attachment
execution or other judicial seizure which is not discharged, stayed or bonded
within sixty (60) days.

          13.2  If an Event of Default shall occur hereunder, Licensor shall
have the right, to be exercised by it in its sole discretion, to terminate this
Agreement upon written notice to Licensee, and this Agreement and the rights
granted to Licensee shall thereupon terminate. The right of Licensor to
terminate this Agreement shall be in addition to any other rights or remedies to
which Licensor shall be entitled at law.

                                      -14-
<PAGE>
 
     14. EFFECT OF TERMINATION.
         --------------------- 

          14.1  On and after termination of this Agreement, whether pursuant to
the provisions of Paragraph 2.2, 3.3(b) or otherwise:

          (a) All rights granted to Licensee hereunder, including any interest
in and to the Licensed Technology which Licensee may acquire, shall forthwith
and without further act or instrument, be assigned and revert to Licensor. In
addition, Licensee will execute any instruments requested by Licensor which are
necessary to accomplish or confirm the foregoing. Any such assignment, transfer
or conveyance shall be without consideration other than the mutual agreements
contained herein:

          (b) Licensee will refrain from further use of the Licensed Technology;
and

          (c) Licensee shall refrain from manufacturing the Licensed Products.

          14.2  Termination of this Agreement in any manner shall be without
prejudice to any rights or remedies which either party may have, under this
Agreement or otherwise, and shall not prejudice Licensor's right to recover any
royalty or other sum accrued to Licensor hereunder and unpaid at the time of
termination. Nor shall termination prejudice any cause of action or claim of
Licensor or Licensee then accrued or to accrue on account of any breach or
default of Licensee or Licensor, as the case may be. Without limiting the
foregoing, the provisions of Paragraphs 3.8, 9 and 16 are intended to survive
termination of this Agreement. After the termination in any manner of this
Agreement, Licensee may fill any orders for Licensed Products received before
the date of termination, subject to the provisions of Paragraph 3.

     15.  PATENT MARKING: TRADEMARK.
          ------------------------- 

          15.1  Licensee shall do everything reasonably required of it by
Licensor in connection with patent marking or the giving of such other notices
as provided for under United States or applicable foreign patent laws.

          15.2  All Licensed Products shall bear Licensor's trademark "AURA
SOUND" (the "Trademark").

          15.3  Licensee acknowledges and agrees that Licensor is the sole and
exclusive owner of the Trademark. As such, Licensee's use of the Trademark shall
at all times be pursuant to this Agreement as 

                                      -15-
<PAGE>
 
a non-exclusive licensee, and Licensee shall not at any time acquire any rights
in the Trademark by virtue of its use thereof.

          15.4  Licensee agrees to take such actions as Licensor may reasonably
require for the protection of Licensor's proprietary interest in the Trademark.
Licensee shall cooperate fully and in good faith at Licensee's own expense with
Licensor for the purpose of preserving Licensor's rights in and to the
Trademark. Nothing contained in this Agreement shall be construed as an
assignment or grant to Licensee of any right, title or interest in or to the
Trademark, or any of Licensor's other trademarks, it being understood that all
rights relating thereto are reserved by Licensor, except for the license
hereunder to Licensee of the right to use and utilize the Trademark as expressly
provided herein. Licensee agrees that it will not at any time question the
validity of the Trademark or register or attempt to register the Trademark in
its own name or that of any other firm, person or corporation.

          15.5  Licensee, at its own expense, shall assist Licensor to the full
extent requested by Licensor in the protection of or the procurement of any
protection of Licensor's rights to the Trademark. Licensee shall promptly notify
Licensor in writing of any uses which may be infringements of the Trademark
which come to Licensee's attention. Licensor shall have the sole right to
determine whether or not any action shall be taken on account of any such
infringements.

          15.6  Licensee agrees that, in order to protect the prestige and
goodwill associated with the Trademark, all Licensed Products shall be of high
quality materials and workmanship and shall be otherwise manufactured in
accordance with the usual standards of Licensee.

     16.  SECRECY.
          ------- 

          16.1  Licensor has taken reasonable security measures to protect the
secrecy of the Licensed Technology. All employees of Licensor and any other
persons who have invented, discovered, designed, or developed the Licensed
Technology or who otherwise have knowledge of or access to the Licensed
Technology have been adequately notified that the Licensed Technology is
proprietary to Licensor, and is not to be divulged. The parties agree that the
Licensed Technology is valuable only so long as it remains secret. Accordingly,
each party agrees to take all steps necessary to protect Confidential
Information (as hereinafter defined) from entering the public domain or falling
into the hands of 

                                      -16-
<PAGE>
 
unauthorized third parties. All information which in any way embodies, evidences
or relates to the Licensed Technology which has been or will be tendered to the
other, including, without limitation, all prototypes, documents, books,
notebooks, papers, drawings, sketches, formulae or copies or extracts thereof,
and other data of any kind and description pertaining to the Licensed
Technology, as well as written instructions or comments given by employees of
either party to the other pertaining to the Licensed Technology is referred to
herein as "Confidential Information".

          16.2  Each party agrees to take reasonable steps to maintain the
secrecy of Confidential Information, including but not limited to, the
following:

          (a) Segregation by each party of the areas of its factory, laboratory
or other facility where it develops the Licensed Technology or the Licensed
Products to prevent unauthorized personnel from acquiring information about the
Licensed Technology or the Licensed Products;

          (b) Restriction of access to these areas to technical personnel
pledged to secrecy, who are required to know the methods for the practice or
manufacture of the Licensed Products or the Licensed Technology in order to
utilize them for the purposes of this Agreement, and to those supervisory,
executive or other personnel pledged to secrecy who are required to have access
to these areas in the performance of their duties; and

          (c) Numbering all originals and copies of all photographs and writings
evidencing the Licensed Technology, and maintaining a record of the persons
entrusted with the custody of these originals and copies and, to the extent
practicable, maintaining all copies in safes or other locked containers when not
in actual use.

          16.3  All Confidential Information will be received by each party and
maintained in confidence and not be copied or communicated to any third party
except as specifically authorized herein, and all employees of each party will
be made aware of the terms and conditions of this Paragraph. Each party shall
obtain, from its respective employees, agents and other persons who have access
to the Licensed Technology, such non-disclosure agreements satisfactory in form
and content to the other party as are necessary or appropriate to implement the
provisions of this Paragraph.

                                      -17-
<PAGE>
 
          16.4  Subject to the provisions of Paragraph 16.6, the obligations of
each party imposed by this Paragraph 16 shall survive the termination of this
Agreement.

          16.5  All Licensed Technology in documentary or other tangible form,
and all copies of it, must be returned promptly to Licensor upon termination of
this Agreement or, as applicable, upon earlier expiration of Licensee's rights
thereto in accordance with Paragraph 3, and Licensee shall thereupon cease the
use thereof.

          16.6  No party shall be liable to the other for disclosure of any
Confidential Information if the same: (l) was well known in written form in the
public domain at the time it was disclosed; (2) was known to the party receiving
it at the time of disclosure, as shown by documentation in existence at or prior
to the date such Confidential Information was received by such party sufficient
to clearly establish such knowledge; or (3) is disclosed with the prior written
approval of the other party.

     17.  ARBITRATION.
          ----------- 

          17.1  SELECTION OF ARBITRATORS.
                ------------------------ 

     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, which notice shall contain the name
of the arbitrator selected by the party instituting arbitration, the nature of
the controversy, the amount involved, if any, the remedies sought, and any other
pertinent matter. Within fifteen (15) days after the giving of such notice, the
other party may submit to the initiating party the name of an arbitrator whom it
has appointed; thereafter the two arbitrators so appointed shall in good faith
select a neutral third arbitrator; the three arbitrators so selected shall
resolve the controversy. If the two arbitrators are unable to agree upon a
neutral third arbitrator within the fifteen day period, the third arbitrator
shall be appointed by the American Arbitration Association in accordance with
its then existing rules. If the other party shall refuse or neglect to appoint
an arbitrator within the requisite fifteen day period, the arbitrator appointed
by the initiating party shall be empowered to proceed to arbitrate and determine
the fact or matter in controversy as the sole arbitrator, and his award in
writing shall be final, conclusive and binding upon the parties. The

                                      -18-
<PAGE>
 
arbitrators nominated or appointed hereunder shall not be parties hereto or
associated with or employed by or have the status of a supplier of goods and
services to any party hereto.

          17.2  PROCEDURE. The arbitrator or arbitrators, if they desire, shall
                ---------                                                      
have access to all books and records of Licensor and Licensee, as well as any
and all other documents and things of the parties pertinent to the matter in
arbitration which shall enable them to make the required decision. Prior to
rendering their decision, the arbitrators shall afford each of the parties an
opportunity, both orally and in writing, to present any relevant evidence and to
present that party's factual contentions and arguments in connection with the
matter in arbitration; provided, however, that the formal rules of evidence
applicable to judicial proceedings shall not apply; and provided, further, that
any party submitting written materials shall be required to deliver a copy of
the same to the other party concurrently with the delivery thereof to the
arbitrators and such other party shall have the opportunity to submit a written
reply, a copy of which will also be delivered to the other party concurrently
with the delivery thereof to the arbitrators. Oral argument shall take place
only at a hearing before all of the arbitrators at which all parties are
afforded a reasonable opportunity to be present and be heard. The parties may
engage their own experts for purposes of presenting evidence to the arbitrators.
In all other respects and 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. In addition, the provisions of California Code of Civil Procedure
Section 1283.05, or any successor section thereto, relating to the taking of
depositions in an arbitration proceeding, shall be applicable to the
arbitration.

          17.3  ARBITRATION AWARD. Unless the time is extended by a majority of
                -----------------                                              
the arbitrators, they shall submit their determination in writing within sixty
(60) days after the third arbitrator is selected, or if only one arbitrator is
acting, within sixty (60) days after his appointment.  If there are three
arbitrators selected, as above provided, an award in writing signed by any two
of them shall be final, conclusive and binding upon the parties hereto.  Any
award made pursuant to arbitration Any 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.

                                      -19-
<PAGE>
 
          17.4  INTERIM INJUNCTIVE RELIEF. Notwithstanding the foregoing
                -------------------------                               
provisions of this Paragraph 17, 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.

     18.  MISCELLANEOUS.
          ------------- 

          18.1  NOTICES. 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 fifth (5th)
calendar day after being deposited in the U.S. mail, 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 telex, TWX, cable or facsimile transmission, provided
that the party giving such notice obtains acknowledgment by 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. Notices shall
be addressed, until notice of change is aforesaid, as follows:


          (a)  IF TO LICENSOR:
               -------------- 

               Aura Systems, Inc.
               2335 Alaska Ave.
               El Segundo, California 90245

               Attention: Anthony T. Cascio,
                          VP, General Counsel


          (b)  IF TO LICENSEE:
               -------------- 

               K & K Enterprises
               128 Sector 37
               Noida 201303, INDIA

               Attention: Mr. Kenny A. Dewan,
                          Managing Director

                                      -20-
<PAGE>
 
          18.2  NO JOINT VENTURE. Nothing contained herein shall be construed to
                ----------------                                                
deem the parties in the relationship of partners or joint venturers, and no
party hereto shall have any power to obligate any other party hereto in any
manner whatsoever, except as expressly provided for herein.

          18.3  WAIVER. 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.

          18.4  REMEDIES NOT EXCLUSIVE. 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.

          18.5  NO ASSIGNMENT. Subject to the provisions of Paragraph 11,
                -------------                                            
Licensee may not assign or encumber, in whole or in part, its rights under this
Agreement or grant any sub-licenses without the prior written consent of
Licensor. Licensor shall have the right to assign its rights and duties
hereunder without the consent of Licensee provided that Licensor gives Licensee
prior written notice of any such assignment. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.

          18.6  SUCCESSORS. 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.

          18.7  LITIGATION. 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.

          18.8  CAPTIONS. 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.

                                      -21-
<PAGE>
 
          18.9  ENTIRE AGREEMENT. Except for such Joint Venture Agreement dated
                ----------------                                               
July 19, 1995 by and between the parties herein, 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.

          18.10  SEVERABILITY. 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 Licensee under this
Agreement, Licensor shall have the right, at its option, to suspend this
Agreement or to make such modifications therein as may be necessary.

          18.11  COUNTERPARTS. 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.

          18.12  GENDER; NUMBER. Terms used herein in any number or gender
                 --------------                                           
include other numbers or genders, as the context may require.

          18.13  GOVERNING LAW. This Agreement is made and entered into in the
                 -------------                                                
State of California. It is the intention of the parties hereto that this
Agreement shall be subject to and shall be enforced and construed pursuant to
the internal laws of the State of California without reference to California's
choice of law rules.

                                      -22-
<PAGE>
 
     IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date and year first above written.


LICENSOR:                           LICENSEE:

AURA SYSTEMS, INC.,                 K & K ENTERPRISES
A DELAWARE CORPORATION              A NOIDA, INDIA CORPORATION



By /s/ Anthony T. Cascio            By /s/ K.A. Dewan
   ----------------------------        ------------------------------
   Anthony T. Cascio                       K.A. Dewan
   VP Secretary                        Its Vice President
                                           --------------------------

                                      -23-