<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------
FORM 10-K/A
AMENDMENT #1
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ____
-----------------------------
COMMISSION FILE NUMBER 0-9725
AURORA ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1539534
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2030 MAIN STREET, SUITE 1120, IRVINE, CALIFORNIA 92614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 660-1232
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
- ------------------------------- ------------------------------------------
Common Stock, $.03 Par Value American Stock Exchange
7 3/4% Convertible Subordinated American Stock Exchange
Debentures, Due 2001
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of the voting stock held by non-affiliates
of the registrant on December 20, 1996, 1996 based on the closing price of the
Common Stock on the American Stock Exchange was approximately $8,927,692.
Indicated below is the number of shares outstanding of each class of
the registrant's Common Stock, as of December 20, 1996.
<TABLE>
<CAPTION>
Title of Each Class of Common Stock Number of Outstanding
----------------------------------- ---------------------
<S> <C>
Common Stock, $.03 par value 5,742,523
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of the Form 10-K
----------------------------------- ---------------------
Proxy Statement for the 1997 Annual Part III
Meeting of Stockholders
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company as of December 20,
1996 were as follows:
<TABLE>
<CAPTION>
OFFICER
DIRECTOR/EXECUTIVE NAME AGE PRESENT POSITION SINCE
----------------------- --- ---------------- -----
<S> <C> <C> <C>
Jim C. Cowart 45 Chairman of the Board and Chief Executive 1992
Officer
Harvey B. Cash 58 Director 1993
Amin J. Khoury 57 Director 1993
David A. Lahar 39 Director 1992
Thomas E. McInerney 55 Director 1996
Richard H. Stowe 53 Director 1996
William H. Watkins, Jr. 55 Director 1983
John P. Grazer 42 President and Chief Financial Officer 1993
Richard A. Kain 58 Senior Vice President - North American 1995
Operations
George M. Korchinsky 55 Managing Director - European Operations and 1996
Senior Vice President
Amir Asadi 38 Vice President - Information Systems 1996
Jonathan Shultz 36 Vice President - Finance and Administration 1996
Stephen F. Weber 45 Vice President - Marketing 1996
</TABLE>
- -------------------------------------------
JIM C. COWART, since December 31, 1992, has served as the Chairman of the Board
and Chief Executive Officer of the Company and formerly served as Vice
President of Strategic Development of the Company. Since February 1992, Mr.
Cowart has served as Chairman of EOS Capital, Inc., a private capital firm
which has been, from time to time, retained by the Company. Mr. Cowart is
also a director of B/E Aerospace, Inc. ("BEAV" - NASD), a leading manufacturer
of aircraft cabin interior products. Mr. Cowart has been a director of the
Company since October 1992. Mr. Cowart and Mr. Cash are first cousins.
HARVEY B. CASH, from June 1985 to present, has been a general partner of
InterWest Partners III, and from June 1989 to present, Mr. Cash has been a
general partner of InterWest Partners IV, both of which are venture capital
firms. Mr. Cash, since December 1983, has also been a general partner of Berry
Cash Southwest Partnership, a venture capital firm. Mr. Cash is a director of
Cirrus Logic, Inc. ("CRUS" - NASD), a semiconductor company; Cyrix Corporation
("CYRX" - NASD), a manufacturer and distributor of math co-processors; and
ProNet, Inc., ("PNET" - NASD), a distributor of medical pagers and electronic
tracking systems. Mr. Cash has served as a director of the Company since
September 1993. Mr. Cash and Mr. Cowart are first cousins.
AMIN J. KHOURY, since July 1987, has served as Chairman of the Board of B/E
Aerospace, Inc. ("BEAV" - NASD), a leading manufacturer of aircraft cabin
interior products. From July 1987 until March 1996, Mr. Khoury also served as
Chief Executive Officer of B/E Aerospace, Inc. Mr. Khoury is Chairman of the
Board of Directors of Applied Extrusion Technologies, Inc. ("AETC" - NASD), a
manufacturer of packaging films, polymer nets and other specialty products.
Since July 1994, Mr. Khoury has also served as director of Brooks Automation,
Inc., a supplier of wafer handling systems on modules for the electronics
industry. Mr. Khoury has been a director of the Company since January 1993,
with the exception of the period from approximately July 1, 1993 to November
23, 1993.
2
<PAGE> 3
DAVID A. LAHAR, since February 1992 has served as President of EOS Capital,
Inc., a private capital firm which has been, from time to time, retained by the
Company. From December 31, 1992 until July 1996, Mr. Lahar also served as the
President of the Company and formerly served as the Chief Financial Officer of
the Company. Mr. Lahar has been a director of the Company since October 1992.
THOMAS E. MCINERNEY, since 1987, has been a general partner of Welsh, Carson,
Anderson & Stowe and has been a general partner of the respective sole general
partners of its associated limited partnerships. Mr. McInerney, since 1988,
has served as a Director of DecisionOne Holdings Corp. ("DOCI" - NASD), and
from 1994 to 1995, served as its Chairman. Mr. McInerney is also a director of
Bisys Group, Inc. ("BSYS" - NASD). Mr. McInerney has been a director of the
Company since March 1996.
RICHARD H. STOWE, since 1979, has been a general partner of Welsh, Carson,
Anderson & Stowe and has been a general partner of the respective sole general
partners of its associated limited partnerships. Mr. Stowe is a director of
EmCare Holdings Inc. ("EMCR" - NASD), a provider of physician services
management in hospital emergency departments; Medaphis Corporation ("MEDA" -
NASD), a provider of accounts receivable management services to
hospital-affiliated physicians and hospitals; Health Management Systems,
Inc.("HMSY" - NASD), a provider of revenue enhancement services for health care
providers and payors, and several private companies. Mr. Stowe has been a
director of the Company since March 1996.
WILLIAM H. WATKINS, JR., since December 1971, has been a partner and certified
public accountant with Watkins, Watkins & Keenan, a certified public accounting
firm. Mr. Watkins is a director of Sport Supply Group, Inc. ("GYM" - NYSE), a
leading direct marketer of sporting goods and athletic equipment. Mr. Watkins
has been a director of the Company since 1983.
JOHN P. GRAZER, since October 1996, has served as President and Chief Financial
Officer. From May 1993 to October 1996 Mr. Grazer served as Senior Vice
President, Finance and Administration of the Company. From 1992 to April 1993,
Mr. Grazer served as Vice President of Finance and Administration of Home
Fashions Inc. From 1990 to 1992, Mr. Grazer served as Vice President of
Finance and Chief Financial Officer of RB Industries, Inc. From 1985 to 1990,
Mr. Grazer served as Vice President, Finance of Amplica, Inc. a COMSAT company.
RICHARD A. KAIN, since October 1996, has served as Senior Vice President -
North American Operations. Mr. Kain joined Aurora in May, 1995 as Vice
President Operations and General Manager. From 1985 to 1995, Mr. Kain served
as Vice President Operations for Symbol Technologies, Inc. From 1984 to 1985,
Mr. Kain served as Vice President - Operations for Pancretec, Inc. From 1978
to 1984, Mr. Kain served as Manager - Manufacturing Scientific Instruments
Division for Beckman Instruments, Inc.
GEORGE M. KORCHINSKY is Managing Director - European Operations and Senior Vice
President. Mr. Korchinsky joined Aurora in November 1996. From May 1991 to
October 1996, Mr. Korchinsky served as Vice President & Managing Director -
Europe, Middle East, Africa for Symantec. From January 1989 to May 1991, Mr.
Korchinsky served as General Manager Northern & Central Europe from Cognos Ltd.
From January 1987 to January 1989, Mr. Korchinsky served as Managing Director
Data Communications Equipment for Paradyne Ltd. and from 1984 to 1987 held
various sales, marketing and technical management positions with Paradyne Ltd.
AMIR ASADI joined Aurora in April 1996 as Vice President - Information Systems.
From June 1990 to April 1996, Mr. Asadi served as Vice President, Information
Systems for Home Fashions Inc. From October 1987 to June 1990, Mr. Asadi
served as Director, Systems Development of Beech Street of California. From
May 1986 to October 1987, Mr. Asadi served as Information Systems Consultant,
Project Manager for Fremont Indemnity.
3
<PAGE> 4
JONATHAN SHULTZ, since October 1996, has served as Vice President Finance and
Administration. Since joining Aurora in October 1992, Mr. Shultz has held the
following positions: From May 1995 to October 1996, Mr. Shultz served as Vice
President Finance and Administration, ARS Division. From June 1994 to May
1995, Mr. Shultz served as Vice President Controller/Treasurer. From September
1993 to June 1994, Mr. Shultz served as Corporate Controller, and from October
1992 to September 1993, he served as Controller, Micro-C Division. From
January 1986 to October 1992, Mr. Shultz served as Audit Manager/Technology
Coordinator for Ernst & Young.
STEPHEN F. WEBER, since May 1996, has served as Vice President Marketing. From
January 1995 to May 1996, Mr. Weber was a co-founder of MindShare Associates,
LLC. From July 1993 to January 1995, Mr. Weber served as Director, Storage
Marketing for Avnet EMG. From March 1992 to July 1993, Mr. Weber served as
Corporate Marketing Manager for Avnet EMG. From 1984 to 1992, Mr. Weber was a
sales representative for Anthem Electronics.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation paid by the Company to the Named Executive Officers during fiscal
1996, 1995 and 1994:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION (1)
--------------------------- ------ ------ ----- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Jim C. Cowart, 1996 $ 190,961 $ 10,534 1,334,954 (3) $ 1,928
Chairman of the Board 1995 168,080 112,742 (2) 66,000 (4) 4,126
and Chief Executive 1994 124,519 60,000 20,000 4,324
Officer
David A. Lahar, (5) 1996 $ 186,793 $ 10,534 671,546 (6) $ 1,915
President 1995 166,238 114,742 (2) 66,000 (4) 3,775
1994 124,519 60,000 20,000 2,794
John P. Grazer, 1996 $ 170,936 $ 10,514 899,668 (7) $ 3,963
President and Chief 1995 143,322 106,425 (2) 66,000 (4) 4,893
Financial Officer 1994 133,384 50,000 20,000 3,406
Harold Haagsma, (8) 1996 $ 149,808 $ 50,083 67,027 (9) $ 3,404
President, Asset Recovery 1995 145,000 58,875 16,000 (4) 5,387
Services, a division of AEG 1994 123,616 32,639 20,000 3,916
Richard A. Kain 1996 $ 144,616 $ 36,000 100,000 (10) 4,726
Senior Vice President, 1995 45,000 3,125 20,000 (4) --
North American Operations 1994 -- -- -- --
William H. McMahon, Jr., (11) 1996 $ 206,093 $67,347 19,805 (12) $ 5,985
President, Century Division 1995 167,231 71,139 40,000 (4) $ 5,020
a division of AEG 1994 61,385 15,250 35,000 --
</TABLE>
- -------------------------------------------
4
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(1) The amounts disclosed in this column consist only of Company
contributions under the Company's 401(k) plan.
(2) In connection with the completion of the recapitalization of the
Company on March 29, 1996, Messrs. Cowart, Lahar and Grazer received
bonuses in the amounts of $112,000, $114,000 and $105,000, respectively,
in respect of 1995 performance that became payable in the event that a
satisfactory recapitalization of the Company was obtained.
(3) During May 1996, Mr. Cowart surrendered for cancellation all of
his outstanding options to purchase shares of Common Stock, and he was
issued replacement options under the Company's 1996 Stock Option Plan
(the "1996 Plan") to purchase an aggregate of 1,334,954 shares of
Company Common Stock consisting of 288,387 Tranche A Options, 288,387
Tranche A1 Options, 379,090 Tranche B Options and 379,090 Tranche C
Options.
(4) During May 1995, the Compensation and Stock Option Committee of
the Board of Directors offered each optionee the opportunity to
surrender for cancellation his or her outstanding options and replace
such outstanding options with non-qualified stock options to acquire
eighty percent (80%) of the number of shares of the Company's Common
Stock as canceled, at a price per share equal to twenty-five cents
($0.25) over the closing price of the Company's Common Stock on May 15,
1995.
(5) Mr. Lahar resigned from the Company effective August 1, 1996.
(6) During May 1996, Mr. Lahar surrendered for cancellation all of
his outstanding options to purchase shares of Common Stock, and he was
issued replacement options under the 1996 Plan to purchase an aggregate
of 671,546 shares of Company Common Stock, consisting of 288,387 Tranche
A Options, 288,387 Tranche A1 Options, 94,772 Tranche B Options. Mr.
Lahar's options expire, unless earlier exercised, on July 31, 2001.
(7) During May 1996, Mr. Grazer surrendered for cancellation all of
his outstanding options to purchase shares of Common Stock, and he was
issued replacement options under the 1996 Plan to purchase an aggregate
of 899,668 shares of Company Common Stock, consisting of 154,987 Tranche
A Options, 154,987 Tranche A1 Options, 294,847 Tranche B Options and
294,847 Tranche C Options.
(8) Mr. Haagsma resigned from the Company effective November 1, 1996.
(9) During May 1996, Mr. Haagsma surrendered for cancellation all of
his outstanding options to purchase shares of Common Stock, and he was
issued replacement options under the 1996 Plan to purchase an aggregate
of 67,027 shares of Company Common Stock, consisting of 58,000 Tranche A
Options, 9,027 Tranche B Options. Mr. Haagsma's options expire, unless
earlier exercised, on July 30, 1997.
(10) During May 1996, Mr. Kain surrendered for cancellation all of
his outstanding options to purchase shares of Common Stock, and he was
issued replacement options under the 1996 Plan to purchase an aggregate
of 100,000 shares of Company Common Stock, consisting of 3,000 Tranche A
Options, 20,973 Tranche B Options and 76,027 Tranche C Options.
(11) Mr. McMahon resigned from the Company effective June 28, 1996.
(12) During May 1996, Mr. McMahon surrendered for cancellation all of
his outstanding options to purchase shares of Common Stock, and he was
issued replacement options under the 1996 Plan to purchase an aggregate
of 19,805 shares of Company Common Stock, consisting of 14,800 Tranche A
Options, 5,005 Tranche B Options. Mr. McMahon's options expire, unless
earlier exercised, on March 31, 1997.
5
<PAGE> 6
COMPENSATION OF DIRECTORS
Each non-employee director receives $2,500 for each quarter that such
person serves as a director of the Company. Officers of the Company do not
receive any fees for serving on the Board of Directors. Non-employee directors
are automatically granted nonqualified stock options to purchase 25,000 shares
of Common Stock upon election to the Board of Directors and options to purchase
5,000 shares of Common Stock on the date of each annual meeting of the
Company's stockholders when such non-employee director has served on the Board
of Directors for the immediately preceding 181 consecutive days, has agreed to
serve as a director upon such re-election and is re-elected to the Board of
Directors. All directors are entitled to reimbursement for expenses incurred
for attendance at each meeting.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Jim C. Cowart. Mr. Cowart and the Company entered into an employment
letter effective as of May 18, 1995, pursuant to which he currently serves as
Chairman of the Board and Chief Executive Officer of the Company. Under the
employment letter, Mr. Cowart receives an annual base salary and an incentive
bonus based upon certain financial performance targets of the Company. If the
Company terminates Mr. Cowart's employment without cause (as defined in the
letter), Mr. Cowart's compensation and option vesting will continue for twelve
(12) months. In the event of a change of control of the Company, Mr. Cowart's
stock options vest immediately, and his compensation will continue for a period
of two years.
John P. Grazer. Mr. Grazer and the Company entered into an employment
letter effective as of October 22, 1996, pursuant to which he currently serves
as President and Chief Financial Officer of the Company. Under the employment
letter, Mr. Grazer receives an annual base salary and an incentive bonus based
upon certain financial performance targets of the Company. If the Company
terminates Mr. Grazer's employment without cause (as defined in the letter),
Mr. Grazer's compensation will continue for fifteen (15) months. In the event
of a change of control of the Company that leads to Mr. Grazer's termination,
Mr. Grazer's compensation will continue for a period of fifteen (15) months,
and his stock options will vest immediately (unless otherwise determined by the
Compensation Committee).
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
General. Harvey B. Cash, Thomas E. McInerney (Chairman) and Richard H.
Stowe served on the Compensation and Stock Option Committee of the Board of
Directors during the last fiscal year. Neither Mr. Cash, Mr. McInerney nor Mr.
Stowe are current or former officers or employees of the Company.
During fiscal 1996, Jim C. Cowart (Chairman of the Board and Chief
Executive Officer of the Company) served as a director and member of the
compensation committee of the Board of Directors of B/E Aerospace, Inc. Amin
J. Khoury, a director of the Company, is Chairman of the Board of B/E
Aerospace, Inc.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table and notes thereto set forth certain information
with respect to the beneficial ownership of the Company's Common Stock as of
January 31, 1997 by (i) each of the "Named Executive Officers" (as defined in
Regulation S-K to the 1933 Securities Act, as amended), (ii) each director of
the Company, (iii) each beneficial owner of more than 5% of the Company's
Common Stock and (iv) all executive officers and directors of the Company as a
group.
Except as otherwise indicated, each of the stockholders named below
has sole voting and investment power with respect to the shares of Common Stock
beneficially owned:
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
CLASS OF NATURE OF BENEFICIAL OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK OWNERSHIP (1) SHARES
----------------------------------------- ------------ -------------------- -----------
<S> <C> <C> <C>
Harvey B. Cash* Common Stock 150,368 (2) ***
Jim C. Cowart*/** Common Stock 537,022 (3) 2.19%
John P. Grazer** Common Stock 238,586 (4) ***
Harold Haagsma** Common Stock 67,027 (5) ***
Richard A. Kain** Common Stock 14,143 (6) ***
Amin J. Khoury* Common Stock 41,250 (7) ***
David A. Lahar* Common Stock 692,833 (8) 2.82%
Thomas E. McInerney* Common Stock 18,192,284 (9) 74.07%
William H. McMahon, Jr.** Common Stock 23,898(10) ***
Richard H. Stowe* Common Stock 18,180,519(11) 74.02%
William H. Watkins, Jr.* Common Stock 38,250(12) ***
WCAS Capital Partners II, L.P. Common Stock 738,295(13) 2.99%
320 Park Avenue, Suite 2500
New York, NY 10022-6815
Welsh, Carson, Anderson & Stowe VII, L.P. Common Stock 20,985,513(13)(14) 74.19%
320 Park Avenue, Suite 2500
New York, NY 10022-6815
WCAS Information Partners, L.P. Common Stock 235,294(13)(14) ***
320 Park Avenue, Suite 2500
New York, NY 10022-6815
Directors and Executive Officers Common Stock 23,836,995(15) 79.62%
as a group (9 persons)
- -------------------------------------------
</TABLE>
* Director
** Named Executive Officer
*** Less than one percent
7
<PAGE> 8
(1) Sole voting and investment power unless otherwise indicated,
subject to community property laws where applicable. Shares of Common
Stock that can be acquired through the conversion of Convertible
Preferred Stock are deemed outstanding for the purpose of computing the
percentage of beneficial ownership. Shares of Common Stock that were not
outstanding but that could be acquired through the exercise of stock
options or the conversion of convertible debentures within 60 days of
January 31, 1997 are deemed outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by a particular
person. However, such shares are not deemed outstanding for the purpose
of computing the percentage of outstanding shares beneficially owned by
any other person.
(2) Includes (i) currently exercisable stock options to purchase
36,250 shares of the Company's Common Stock, (ii) 2,000 shares of the
Company's Convertible Preferred Stock directly owned by Mr. Cash, which
if converted, represents 94,118 shares of Common Stock and (iii) 20,000
shares of Common Stock owned by Mr. Cash.
(3) Includes (i) currently exercisable stock options to purchase
395,175 shares of the Company's Common Stock, (ii) 2,000 shares of the
Company's Convertible Preferred Stock directly owned by Mr. Cowart,
which if converted, represents 94,118 shares of Common Stock and (iii)
47,729 shares of Common Stock owned by Mr. Cowart.
(4) Includes (i) currently exercisable stock options to purchase
235,155 shares of the Company's Common Stock and (ii) 3,431 shares of
Common Stock owned by Mr. Grazer.
(5) Includes currently exercisable stock options to purchase 67,027
shares of the Company's Common Stock.
(6) Includes (i) currently exercisable stock options to purchase
10,943 shares of the Company's Common Stock and (ii) 3,200 shares of
Common Stock owned by Mr. Kain.
(7) Includes (i) currently exercisable stock options to purchase
36,250 shares of the Company's Common Stock and (ii) 5,000 shares of
Common Stock owned by Mr. Khoury.
(8) Includes (i) currently exercisable stock options to purchase
671,546 shares of the Company's Common Stock and (ii) 21,287 shares of
Common Stock owned by Mr. Lahar.
(9) Includes (i) currently exercisable stock options to purchase
6,250 shares of the Company's Common Stock, (ii) 1,750 shares of the
Company's Convertible Preferred Stock owned directly by Mr. McInerney,
which if converted, represents 82,353 shares of Common Stock, (iii)
607,211 shares of the Company's Common Stock beneficially owned by WCAS
Capital Partners, II L.P., of which Mr. McInerney is a general partner
of its sole general partner, (iv) 366,800 shares of the Company's
Convertible Preferred Stock, which if converted, represents 17,261,176
shares of Common Stock beneficially owned by Welsh, Carson, Anderson &
Stowe VII, L.P. of which Mr. McInerney is a general partner of its sole
general partner and (v) 5,000 shares of the Company's Convertible
Preferred Stock, which if converted, represents 235,294 shares of Common
Stock beneficially owned by WCAS Information Partners, L.P. of which Mr.
McInerney is a general partner of its sole general partner.
(10) Includes (i) currently exercisable stock options to purchase
19,805 shares of the Company's Common Stock and (ii) 4,093 shares of
Common Stock owned by Mr. McMahon.
(11) Includes (i) currently exercisable stock options to purchase 6,250
shares of the Company's Common Stock, (ii) 1,500 shares of the Company's
Convertible Preferred Stock owned directly by Mr. Stowe, which if
converted, represents 70,588 shares of Common Stock, (iii) 607,211
shares of the Company's Common Stock beneficially owned by WCAS Capital
Partners, II L.P.,
8
<PAGE> 9
of which Mr. Stowe is a general partner of its sole general partner,
(iv) 366,800 shares of the Company's Convertible Preferred Stock,
which if converted, represents 17,261,176 shares of Common Stock
beneficially owned by Welsh, Carson, Anderson & Stowe VII, L.P., of
which Mr. Stowe is a general partner of its sole general partner and
(v) 5,000 shares of the Company's Convertible Preferred Stock, which
if converted, represents 235,294 shares of Common Stock beneficially
owned by WCAS Information Partners, L.P., of which Mr. Stowe is a
general partner of its sole general partner.
(12) Includes (i) currently exercisable stock options to purchase 36,250
shares of the Company's Common Stock and (ii) 2,000 shares of Common
Stock owned by Mr. Watkins.
(13) Messrs. McInerney and Stowe are general partners of the
respective sole general partners of WCAS Capital Partners II, L.P.,
Welsh, Carson, Anderson & Stowe VII, L.P. and WCAS Information
Partners, L.P., and may be deemed to beneficially own the shares of
Common Stock and Convertible Preferred stock owned by such
partnerships.
(14) Reflects ownership of Convertible Preferred Stock, which if
converted, represents shares of Common Stock beneficially owned.
(15) Includes (i) 5,999,348 shares of Common Stock issuable upon
exercise of stock options, warrants and convertible debentures and
(ii) 379,050 shares of Convertible Preferred Stock, which if
converted, represents 17,837,647 shares of Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AURORA ELECTRONICS, INC.
February 12, 1997 By: /s/ John P. Grazer
-------------------------------
John P. Grazer,
President and Chief Financial Officer
(Principal Financial Officer)
10
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------------------------------------------------
<S> <C>
3.1 The Restated Certificate of Incorporation of the Company, as
amended (incorporated by reference from Exhibit 3.1 to the
Company's Transition Report on Form 10-K for the transition
period from December 31, 1991 to September 30, 1992).
3.2 Bylaws of the Company, as amended (incorporated by reference
from Exhibit 4.2 to the Company's Registration Statement on Form
S-8 (Registration No. 33-79426)).
4.1 Indenture between the Company and MBank Dallas, National
Association relating to the Company's 7-3/4% Convertible
Subordinated Debentures due 2001, including form of
Debenture (incorporated by reference from Exhibit 4.1 to
the Company's Registration Statement on Form S-2
(Registration No. 33-4276)).
4.2 First Supplemental Indenture relating to the Company's 7-3/4%
Convertible Subordinated Debentures, dated December 1, 1987,
between the Company and MTrust Corp., National Association,
appointing MTrust Corp. as successor trustee to MBank Dallas
(incorporated by reference from Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended September
30, 1993).
4.3 Tripartite Agreement relating to the Company's 7-3/4% Convertible
Subordinated Debentures, dated as of January 7, 1990, by and
among MTrust Corp., National Association, Ameritrust Texas N.A.,
and the Company (incorporated by reference from Exhibit 4.3 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989).
4.4 Second Supplemental Indenture relating to the Company's 7-3/4%
Convertible Subordinated Debentures, dated to be effective
as of November 30, 1992, between the Company and Society National
Bank (incorporated by reference from Exhibit 4.4 to the Company's
Post-Effective Amendment No. 1 to Registration Statement on Form
S-3 (No. 33-32377)).
4.5 Certificate of Designations, Preferences and Rights of
Convertible [__] Preferred Stock dated March 1996 relating to
400,000 shares of Preferred Stock.
4.6 Common Stock Purchase Warrant (Paribas), Form of Warrant to
Purchase 94,903 Shares of Common Stock of Aurora Electronics,
Inc., dated May 12, 1994, issued to each of Banque Paribas and
Banque Indosuez (incorporated by reference from Exhibit 4.2 to
the Company's Report on Form 8-K dated May 26, 1994).
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------------------------------------------------
<S> <C>
4.7 Common Stock Warrant (Lender) Banque Indosuez, Form of
Warrant to Purchase Shares of Common Stock of Aurora
Electronics, Inc., dated May 12, 1994, issued to each of Banque
Paribas, Banque Indosuez and Union Bank (incorporated by
reference from Exhibit 4.3 to the Company's Report on
Form 8-K dated May 26, 1994).
4.8 Aurora Electronics, Inc. Common Stock Purchase Warrant, dated
September 30, 1996, issued to Welsh, Carson, Anderson & Stowe
VII, L.P.
4.9 Aurora Electronics, Inc. Common Stock Purchase Warrant, dated
September 30, 1996, issued to WCAS Capital Partners II, L.P.
4.10 Form of Aurora Electronics, Inc. Common Stock Purchase Warrant,
issued to Welsh, Carson, Anderson & Stowe VII, L.P.
4.11 Form of Aurora Electronics, Inc. Common Stock Purchase Warrant,
issued to WCAS Capital Partners II, L.P.
10.1 Aurora Electronics, Inc. 1993 Stock Option Plan, as amended by
Amendment No. 1 dated to be effective as of March 1, 1994 and by
Amendment No. 2 dated to be effective as of March 1, 1994
(incorporated by reference from Exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Registration No. 33-79426)).
10.2 Aurora Electronics, Inc. 1996 Stock Option Plan (incorporated by
reference from Exhibit 10.19 to the Company's Form 10-Q for the
quarter ended June 30, 1996).
10.3 Form of Indemnification Agreement entered into between the
Company and each of the directors of the Company (incorporated
by reference from Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991).
*10.4.2 Letter Agreement, dated October 22, 1996, between the Company
and John P. Grazer relating to employment.
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------------------------------------------------
<S> <C>
10.5 Letter Agreement, dated March 1, 1994, between the Company and
Jim C. Cowart relating to employment (incorporated by reference
from Exhibit 10.5 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994).
10.5.1 Letter Agreement, dated May 18, 1995, between the Company and
Jim C. Cowart relating to employment (incorporated by reference
from Exhibit 10.5.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1995)
10.8 Standard Multi-Tenant Net Lease, dated November 3, 1992, by and
between Sorrento Mesa Properties, Inc. and Micro-C Corporation
(now Aurora Electronics Group, Inc.) (incorporated by reference
from Exhibit 10.7 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993).
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------------------------------------------------
<S> <C>
10.9 Standard Industrial Lease - Net, dated March 27, 1984, by and
between Northgate Investment Company (now David Pick) and
Repair Services, Inc. (now Aurora Electronics Group, Inc.)
(incorporated by reference from Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the fiscal year ended September
30, 1993).
10.10 Standard Industrial / Commercial Single Tenant Lease - Net dated
November 30, 1994, by and between The Equitable Life Assurance
Society of the United States and Aurora Electronics Group, Inc.
(incorporated by reference from Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994).
10.11 Standard Lease Agreement dated October 27, 1992, by and between
Crow-Brindell-Mitchell and Aurora Electronics Group, Inc. as
Assignee of CCB Computer Brokers, Inc. d/b/a Century Computer
Services, Inc. (incorporated by reference from Exhibit 10.10 to
the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994).
10.12 Lease Agreement Shelby Distribution Center dated November 11,
1994 by and between J. Shea Leatherman, William A. Leatherman,
Jr., Irwin L. Zanone and Aurora Electronics Group, Inc.
(incorporated by reference from Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended September
30, 1994).
10.13 Lease dated July 14, 1988, by and between American National Bank
and Trust Company of Chicago and BSN Corp. (now Aurora
Electronics, Inc.) (incorporated by reference from Exhibit 10.12
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994).
10.14 Form of Tax Indemnity Agreement by and between the Company
and SSG (incorporated by reference from Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991).
10.15 Stock Purchase Agreement, dated as of September 30, 1992, by and
among the Company, Robert E. Morris and Norma J. Morris, Trustees
of the Robert and Norma Morris Family Trust and The Robert and
Norma Morris Charitable Remainder Unitrust (incorporated by
reference from Exhibit 2.1 to Form 8-K filed on October 19,
1992).
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------------------------------------------------
<S> <C>
10.16 Merger Agreement and Plan of Reorganization, dated September 12,
1993, by and between the Company and FRS, Inc. (incorporated by
reference from Exhibit 2.1 to the Company's Current Report on
Form 8-K, dated October 15, 1993).
10.17 Asset Purchase Agreement, dated March 15, 1994 to be effective as
of March 1, 1994, as amended, by and among the Company, Aurora
Electronics Group, Inc. and CCB Computer Brokers, Inc. and CCM
Computers International, Ltd. (incorporated by reference from
Exhibit (b)(1) to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994).
10.18 Aurora Electronics, Inc. 401-K Plan (incorporated by reference
from Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993).
10.19 Securities Purchase Agreement among Aurora Electronics, Inc.,
Welsh, Carson, Anderson & Stowe VII, L.P., WCAS Capital Partners
II, L.P. and the Several Purchasers Named Therein, dated February
21, 1996, incorporated by reference from Exhibit (b)(2) of the
Company's Issuer Tender Offer Statement on Schedule 13E-4, which
was filed with the Securities and Exchange Commission on February
23, 1996.
10.20 Aurora Electronics Inc. Offer to Purchase for Cash up to
6,500,000 Shares of Its Common Stock at $2.875 Per Share, dated
February 23, 1996, incorporated by reference from Exhibit (a)(1)
of the Company's Issuer Tender Offer Statement on Schedule 13E-4,
which was filed with the Securities and Exchange Commission on
February 23, 1996.
10.21 Credit Agreement among Aurora Electronics Group, Inc., as
Borrower, the Guarantors Named Therein, the Lenders Named therein
and Chemical Bank, N.A., as Agent, dated March 29, 1996
(incorporated by reference from Exhibit 10.21 to the Company's
Report on Form 8-K dated March 29, 1996).
10.22 $15,000,000 Tranche A Note between Aurora Electronics Group,
Inc., as Maker, and Chemical Bank, N.A., as Lender, dated March
29, 1996 (incorporated by reference from Exhibit 10.22 to the
Company's Report on Form 8-K dated March 29, 1996).
10.23 $20,000,000 Tranche B Note between Aurora Electronics Group,
Inc., as Maker, and Chemical Bank, N.A., as Lender, dated March
29, 1996 (incorporated by reference from Exhibit 10.23 to the
Company's Report on Form 8-K dated March 29, 1996).
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------------------------------------------------
<S> <C>
10.24 Pledge Agreement among Aurora Electronics Group, Inc.,
Aurora Electronics, Inc. and Chemical Bank, N.A., dated March
29, 1996 (incorporated by reference from Exhibit 10.24
to the Company's Report on Form 8-K dated March 29,
1996).
10.25 Security Agreement among Aurora Electronics Group, Inc.,
Aurora Electronics, Inc. and Chemical Bank, N.A., dated March
29, 1996 (incorporated by reference from Exhibit 10.25
to the Company's Report on Form 8-K dated March 29,
1996).
10.26 Security Agreement and Mortgage -- Patents and Trademarks
among Aurora Electronics Group, Inc., Aurora Electronics, Inc.
and Chemical Bank, N.A., dated March 29, 1996
(incorporated by reference from Exhibit 10.26 to the
Company's Report on Form 8-K dated March 29, 1996).
10.27 Assignment for Security (Patents) among Aurora Electronics
Group, Inc., as Assignor, and Chemical Bank, as Assignee,
dated March 29, 1996 (incorporated by reference from
Exhibit 10.27 to the Company's Report on Form 8-K dated
March 29, 1996).
10.28 Assignment for Security (Patents) among Aurora Electronics,
Inc., as Assignor, and Chemical Bank, as Assignee, dated March
29, 1996 (incorporated by reference from Exhibit 10.28
to the Company's Report on Form 8-K dated March 29,
1996).
10.29 Assignment for Security (Trademarks) among Aurora
Electronics Group, Inc., as Assignor, and Chemical Bank, as
Assignee, dated March 29, 1996 (incorporated by reference from
Exhibit 10.29 to the Company's Report on Form 8-K dated
March 29, 1996).
10.30 Assignment for Security (Trademarks) among Aurora
Electronics, Inc., as Assignor, and Chemical Bank, as Assignee,
dated March 29, 1996 (incorporated by reference from
Exhibit 10.30 to the Company's Report on Form 8-K dated
March 29, 1996).
10.31 Registration Rights Agreement, among Aurora Electronics, Inc.,
Welsh, Carson, Anderson & Stowe VII, L.P., and WCAS Capital
Partners II, L.P., dated March 29, 1996.
10.32 Aurora Electronics, Inc. 10% Senior Subordinated Note due
September 30, 2001, by Aurora Electronics, Inc. as payor to WCAS
Capital Partners II, L.P., as payee, dated March 29, 1996.
10.33 Financial Support Agreement, among Aurora Electronics, Inc.,
Aurora Electronics Group, Inc., Welsh, Carson, Anderson & Stowe
VII, L.P., and WCAS Capital Partners II, L.P., dated as of
September 30, 1996.
10.34 Limited (Overadvance) Guarantee, made by Welsh, Carson, Anderson
& Stowe, VII, L.P. and WCAS Capital Partners II, L.P., each a
Guarantor, and collectively, the Guarantors, in favor of The
Chase Manhattan Bank (formerly known as Chemical Bank), as Agent
for the Lenders, dated as of September 30, 1996.
10.35 Limited (Acquisition) Guarantee, made by Welsh, Carson, Anderson
& Stowe, VII, L.P. and WCAS Capital Partners II, L.P., each a
Guarantor, and collectively, the Guarantors, in favor of The
Chase Manhattan Bank (formerly known as Chemical Bank), as Agent
for the Lenders, dated as of September 30, 1996.
10.36 Form of Note, Aurora Electronics Group, Inc. 10% Senior
Subordinated Note due September 30, 2001, by Aurora Electronics
Group, Inc. as payor.
10.37 Amendment No. 1 to Registration Rights Agreement, among Aurora
Electronics, Inc. and the parties listed on Schedule I thereto,
dated as of September 30, 1996.
11 Computation of Earnings Per Share
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------------------------------------------------
<S> <C>
21.1 Subsidiaries of the Company:
JURISDICTION
NAME OF INCORPORATION
---------------------------- ----------------
Aurora Electronics Group, Inc. California
Aurora Electronics Limited United Kingdom
Micro-C (Barbados) Ltd. Barbados
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule
</TABLE>
- --------------------
*Filed herewith.
17
<PAGE> 1
EXHIBIT 10.4.2
October 22,1996
Mr. John P. Grazer
22646 Sacedon
Mission Viejo, CA 92691
Dear John:
This letter covers your position as the President, and Chief Financial Officer
of Aurora Electronics, Inc. and Aurora Electronics Group, Inc.
This letter is effective immediately upon signing. You will report to the Chief
Executive Officer and the Board of Directors of Aurora. Your duties will be,
among other things, to have primary responsibility for the financial and
administrative functions in the Company, including without limitation, (a)
primary responsibility for the operations of the Company; (b) execution of the
Company's strategy and growth of the Company's business; and (c) financial
reporting to the SEC, shareholders, lenders, etc. These duties may be expanded
or modified from time to time by the CEO and/or Board, and you will carry them
out either directly or through other members of the management team as
appropriate. You will be expected to devote your full business time and best
efforts to the performance of your duties and responsibilities for the Company,
and as a corporate officer you will assume the associated fiduciary duties to
shareholders.
The terms of your employment include:
BASE SALARY: $175,000 (annualized rate) subject to adjustment
from time to time.
PROMOTION BONUS: $150,000 one-time bonus upon accepting the position.
PERFORMANCE AND
DISCRETIONARY
BONUSES: You will be eligible for a performance and a
discretionary bonus, initially targeted at 50% of
base salary (annualized rate) to be determined from
time to time by the Compensation Committee of the
Board of Directors. The Performance Measure for each
period of time is determined during the Company's
annual planning cycle, and is approved by the
Compensation Committee of the Board of Directors. To
receive a performance based bonus for a period, you
must be employed by the Company at the end of the
period for which the bonus is payable and on the date
the bonus is payable (provided that your performance
bonus for each period shall be paid on or before the
date the Company files its 10-Q for the quarter or
10-K for the year). The FY97 Incentive Plan is
currently being finalized.
STOCK OPTIONS: The recapitalization completed on March 29, 1996
includes a substantial change in the stock options
for senior executives. As discussed in that plan, you
have been awarded 899,669 options to purchase Aurora
common stock, including 154,987 Tranche A options,
154,987 Tranche A1 options, 294,847 Tranche B options
and 294,847 Tranche C options. Your Tranche A
<PAGE> 2
options were fully be vested upon issuance. Your
Tranche A1 options are vesting ratably on the first
day of each month for the 24 months beginning July
1997. One-eighth of your Tranche B options vested on
September 30, 1996, and will continue vesting each
March 31 and September 30 through March 31, 2000, and
your Tranche C options will vest either with
performance (over years 1-4) or with time (over later
years). All Tranche A options and all vested Tranche
A1 options that you own on leaving the Company will
remain exercisable for 90 days, provided that if your
employment is terminated as a result of death,
disability or termination by the Company which is not
for cause, your Tranche A and vested Tranche A1
Options will remain exercisable for 12 months or the
remaining term of the option (whichever is less). All
vested Tranche B and Tranche C Options that you own
on leaving the Company will remain exercisable for 90
days, provided that if your employment is terminated
as a result of death or disability, your Tranche B
and C Options will remain exercisable for 12 months
or the remaining term of the option (whichever is
less).
PUT ON OPTIONS: On December 31, 1999, you have a right to sell to the
Company for $2.00 per share all stock options
assuming employment as of that date. To exercise this
put, you will need to make an irrevocable notice to
the Company of you intent to do so between November 1
and 15, 1999.
In the event of termination not for cause prior to
December 31, 1999, a one-time right to sell to the
Company for $2.00 per share all stock options vested
to the date of termination or at the end of the
severance period described below, whichever period is
longer.
SEVERANCE: This letter and your response do not constitute a
contract of employment for a stated term. As always
since you joined Aurora, you have the right to
terminate your employment at any time, and Aurora
retains a similar right to terminate your employment
at will. Termination by the Company may be for (1)
cause, or (2) other than for cause. In the event that
you are terminated for cause or you terminate
voluntarily, your compensation will end on the date
of termination. For these purposes, "cause" means
termination by the Company of your relationship as
employee of the Company: (a) for committing an act of
fraud or willful misconduct against the Company; (b)
for conviction of, or entry of a plea by the Optionee
of nolo contendere to, a felony; (c) for breach of
your fiduciary duties to the Company or its
Stockholders; or (d) for committing a material act of
personal dishonesty or willful misconduct. (For
purposes of this agreement, "compensation" includes
salary, bonus, insurance and other employee benefits
and auto-related benefits.) If you are terminated for
any other reason (other than death or disability),
your compensation will continue (as salary and
benefit continuation, and not as a lump-sum payment))
for 15 months. The Company further agrees that if
your duties and compensation are reduced below the
levels of those discussed above, you will have a 30
day period during which you may notify the Company
that such reduction is a constructive termination
which will entitle you to the benefits of this
severance paragraph.
CHANGE OF
CONTROL: A "Change in Control" shall be defined as (i) the
sale, lease or transfer, whether direct or indirect,
of all or substantially all of the assets of the
Company and its subsidiaries, taken as a whole, in
one transaction or a series of related transactions,
to any "person" or "group" (other than the WCAS Group
as defined below), (ii) the liquidation or
dissolution of the Company or the adoption of a plan
of liquidation or dissolution of the Company, (iii)
the acquisition of "beneficial ownership" by any
<PAGE> 3
"person" or "group" (other than the WCAS Group) of
voting stock of the Company representing more than
50% of the voting power of all outstanding shares of
such voting stock, whether by way of merger or
consolidation or otherwise, or (iv) during any period
of two consecutive years, the failure of those
individuals who at the beginning of such period
constituted the Company's Board of Directors
(together with any new directors whose election or
appointment by such Board or whose nomination for
election or appointment by the shareholders of the
Company was approved by a vote of a majority of the
directors then still in office who were either
directors at the beginning of such period or whose
election or nomination for election was previously so
approved) to constitute a majority of the Company's
Board of Directors then in office.
For purposes of this definition, (i) the terms
"person" and "group" shall have the meaning set forth
in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not
applicable, (ii) the term "beneficial owner" shall
have the meaning set forth in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable,
except that a person shall be deemed to have
"beneficial ownership" of all shares that any such
person has the right to acquire, whether such right
is exercisable immediately or only after the passage
of time or upon the occurrence of certain events,
(iii) any "person" or "group" will be deemed to
beneficially own any voting stock of the Company so
long as such person or group beneficially owns,
directly or indirectly, in the aggregate a majority
of the voting stock of a registered holder of the
voting stock of the Company, and (iv) the term "WCAS
Group" shall mean Welsh, Carson, Anderson & Stowe
VII, L.P., WCAS Capital Partners II, L.P. and any
general partners thereof.
In the event of a Change in Control of the Company,
the following will occur:
Stock Options
If the WCAS Group has Compensation Committee Control
(defined below) before the Change in Control, all
options held by you shall vest immediately with the
approval of the Compensation Committee unless it is
the judgment of the Compensation Committee members
who are appointees of the WCAS Group that the
investment by the WCAS Group in the Company through
the date of such Change in Control has been less than
successful. "Compensation Committee Control" exists
if (i) the WCAS Group has the ability to elect at
least one-half of the members of the board of
directors of the Company, (ii) at least one-half of
the Compensation Committee members are WCAS Group
representatives to the board of directors, or (iii)
the WCAS Group owns at least one-half of the voting
stock of the Company.
If the WCAS Group does not have Compensation
Committee Control before the Change in Control of the
Company, all of your outstanding unvested options
shall vest.
Failure to Offer Employment
If within 90 days following a Change of Control you
are not offered employment from the surviving company
under terms and conditions acceptable to you, or you
are terminated by the surviving company within those
90 days, you may elect to terminate your employment
and shall be entitled, following such termination,
(i) to receive the severance benefits described in
the last sentence of the "Severance" clause above and
(ii) to receive a full payout of all earned but
unpaid bonuses and deferred compensation accrued
through the date of each such termination. For
<PAGE> 4
purposes of determining your earned but unpaid
bonuses and deferred compensation, all vested
benefits shall be included. Any unvested benefits
shall be treated as vested on a pro rata basis. For
example, if you are severed on July 1, xxx9, and you
have a bonus plan based on one year's performance
beginning January 1, xxx9 and ending January 1, xx10,
and the performance measure for the period has been
achieved for 102%, one-half of the amount that would
have been payable for a full year's performance of
102% will be payable.
NON-COMPETITION
AND CONFIDENTIALITY: During the course of your employment by the Company,
you will represent the Company and its subsidiaries
and develop contacts and relationships on their
behalf, including customers, suppliers, potential
customers and suppliers, and other employees. To
protect the Company's and its subsidiaries' interests
in these contacts and relationships, you agree that
if you are terminated for cause or you voluntarily
resign, for a period of two years after such
termination or resignation, without the Company's
prior written approval, you will not, in connection
with any business that provides spare parts
distribution or electronics recycling services to
major personal computer manufacturers and field
service organizations, as an employee, consultant,
principal or otherwise, (1) conduct or assist others
in conducting a business that competes with the
Company's or its subsidiaries' businesses of
providing the same services for such customers in the
United States, Canada, the United Kingdom or the
Netherlands, or (2) recruit, hire or assist others in
recruiting or hiring any person who is or within the
preceding 12 months was an employee of the Company or
its subsidiaries.
You agree that the scope of the foregoing agreement
is reasonable as to time, area and persons and is
necessary to protect the legitimate business
interests of the Company and its subsidiaries. You
further agree that such agreement will be regarded as
divisible and will be operative as to time, area and
persons to the extent that it may be so operative,
and if any part of such agreement is declared
invalid, unenforceable, or void as to time, area or
persons, the validity and enforceability of the
remainder will not be affected.
You also agree that the trade secrets, plans,
strategies, and technology and processes of the
Company and its subsidiaries, and information
concerning the products, services, production,
reconditioning, development, technology, and all
technical information, procurement and sales
activities and procedures, customer, supplier, or
distributor lists, promotion and pricing techniques
and credit and financial data concerning customers,
suppliers, and distributors of the Company and its
subsidiaries are valuable, special, and unique assets
of the Company and its subsidiaries (collectively,
the "Confidential Information"). In light of the
competitive nature of the industry in which the
business of the Company and its subsidiaries is
conducted, you agree that all your knowledge and
information about the Confidential Information will
be considered Confidential Information. In
recognition of this, you agree that except as
specifically authorized in writing by the Company,
you will not, in whole or in part, (1) disclose any
Confidential Information to any person, other than
the Company or its subsidiaries, or (2) make use of
any Confidential Information for your own purposes or
for the benefit of any other person, other than the
Company or its subsidiaries.
You also acknowledge and agree that all manuals,
drawings, blueprints, letters, notes, notebooks,
reports, books, procedures, forms, documents,
records, or paper or copies thereof pertaining to the
operations or business of the Company and its
subsidiaries that you have made or received or are
known to you in any
<PAGE> 5
way in connection with your employment and any other
Confidential Information are and will be the
exclusive property of the Company or the relevant
subsidiary. You acknowledge that all such papers and
records will at all times be subject to the control
of the Company or the relevant subsidiary, and you
agree to surrender the same upon request of the
Company, and will surrender such no later than any
termination of your employment with the Company or
the relevant subsidiary, whether voluntary or
involuntary. The Company and each subsidiary may
notify anyone employing you at any time of the
provisions of this Agreement.
HEALTH AND LIFE
INSURANCE: The Company will pay for its standard health and
dental coverage policy for you and your family. You
will also receive the same life and disability
insurance and employee benefits as the other senior
executives of Aurora.
VACATION: You will initially be entitled to approximately 3
weeks vacation per year.
OTHER BENEFITS
AND EXPENSES: You will be compensated for expenses incurred in the
performance of your duties (e.g. travel and
entertainment, car phone, etc.), including an
automobile allowance of $600 per month, and you
will be eligible for all of the benefits for which
other senior executives are eligible.
Payment of all of the above compensation and benefits will, of course, be
subject to (1) normal Company policies, and (2) the various laws and regulations
applicable to the Company and your employment both at present and as they are
changed from time to time. Any post-employment compensation (severance, stock
option ownership, etc.) will be payable to your estate in the event of your
death. In signing this letter, you represent that you have not relied on any
agreements or representations that are not set forth herein, and that any and
all disputes that arise between the parties hereto will be resolved through
binding arbitration rather than litigation.
Best personal regards, Accepted and agreed:
/s/ Jim C. Cowart
Jim C. Cowart /s/ John P. Grazer
Chairman and CEO _______________________
John P. Grazer
_______________________
Date
