<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by Registrant X
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
AURORA ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BOARD OF DIRECTORS OF AURORA ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid: $125.00
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No:
- --------------------------------------------------------------------------------
(3) Filing Party: Aurora Electronics, Inc.
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(4) Date Filed: February 25, 1997
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____________________________________
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
AURORA ELECTRONICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 25, 1997
As a stockholder of Aurora Electronics, Inc. (the "Company"), you are
hereby given notice of and invited to attend in person or by proxy the Annual
Meeting of Stockholders of the Company to be held at Aurora Electronics, Inc.,
9477 Waples Street, Suite 150, San Diego, California 92121, on Tuesday,
March 25, 1997, at 1:00 p.m. local time, for the following purposes:
1. To elect seven directors for a one-year term, and
2. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on February 21,
1997 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at such meeting and any
adjournment(s) thereof. Only stockholders of record at the close of business on
the Record Date are entitled to notice of and to vote at such meeting. The
transfer books of the Company will not be closed.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, MANAGEMENT DESIRES TO HAVE THE MAXIMUM
REPRESENTATION AT THE MEETING AND RESPECTFULLY REQUESTS THAT YOU DATE, EXECUTE
AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED STAMPED ENVELOPE FOR WHICH
NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. A proxy may be
revoked by a stockholder any time prior to its use as specified in the enclosed
proxy statement.
By Order of the Board of Directors
DEBORAH A. NICHOLLS,
Secretary
Irvine, California
February 25, 1997
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED HEREIN.
<PAGE> 3
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 4
AURORA ELECTRONICS, INC.
2030 Main Street, Suite 1120
Irvine, California 92614-7241
-------------
PROXY STATEMENT
-------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 25, 1997
-------------
TO OUR STOCKHOLDERS:
This Proxy Statement is furnished to stockholders of Aurora Electronics,
Inc. (the "Company"), for use at the Annual Meeting of Stockholders to be held
Aurora Electronics, Inc., 9477 Waples Street, Suite 150, San Diego, California
92121, on Tuesday, March 25, 1997, at 1:00 p.m. local time, or at any
adjournment or adjournments thereof (the "Annual Meeting"). The enclosed proxy
is being solicited by the Board of Directors of the Company and is subject to
revocation at any time prior to the voting of the proxy. Unless a different
choice is indicated, all duly executed proxies received by the Company will be
voted in accordance with the instructions set forth on the back side of the
proxy card. The record of stockholders entitled to vote at the Annual Meeting
was taken at the close of business on February 21, 1997 (the "Record Date").
This Proxy Statement and the enclosed proxy card are being sent or given to
stockholders on or about February 26, 1997.
VOTING PROCEDURES AND REVOCABILITY OF PROXIES
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on February 21, 1997 to vote in the election of
directors and on any other proposal properly raised at the Annual Meeting. The
proxy card provides space for a stockholder to (a) vote in favor of or to
withhold voting for the nominees for the Board of Directors, (b) vote for or
against any proposal to be considered at the Annual Meeting or (c) abstain from
voting on any proposal other than election of directors if the stockholder
chooses to do so. The election of directors will be decided by a plurality of
the votes entitled to be cast at the Annual Meeting by the holders of the Common
Stock and the Convertible Preferred Stock. In all other matters, the affirmative
vote of a majority of the votes present or represented by proxy and entitled to
be cast at the Annual Meeting by the holders of the Common Stock and Convertible
Preferred Stock is required to take stockholder action.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the votes entitled to be cast by the Common Stock and the
Convertible Preferred Stock will constitute a quorum for the transaction of
business at the Annual Meeting. If a quorum is not present, in person or by
proxy, the Annual Meeting may be adjourned from time to time until a quorum is
obtained. Welsh, Carson, Anderson and Stowe VII, L.P.'s ("WCAS VII") presence at
the Annual Meeting, in person or by proxy, is sufficient to constitute a quorum.
Shares as to which authority to vote has been withheld with respect to any
matter brought to a vote before the stockholders will not be counted as a vote
in favor of such matter. Abstentions and broker nonvotes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. With respect to all matters other than the election of directors,
an abstention will have the same effect as a vote against any specified
proposal. A broker
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<PAGE> 5
nonvote will have no effect on the outcome of any vote of the stockholders.
Stockholders are urged to sign the accompanying proxy card and return it
promptly.
When a signed proxy card is returned with choices specified with respect
to voting matters, the shares represented will be voted by the proxies
designated on the proxy card in accordance with the stockholder's instructions.
The proxies for the stockholders are Jim C. Cowart and John P. Grazer. A
stockholder wishing to name another person as his or her proxy may do so by
crossing out the names of the designated proxies and inserting the name(s) of
such other person(s) to act as his or her proxy(ies). In that case, it will be
necessary for the stockholder to sign the proxy card and deliver it to the
person named as his or her proxy and for the person so named to be present and
vote at the Annual Meeting. Proxy cards so marked should not be mailed to the
Company.
If a signed proxy card is returned and the stockholder has made no
specifications with respect to voting matters, the shares will be voted for the
election of the seven nominees for director and, at the discretion of the
proxies, on any other matter that may properly come before the Annual Meeting or
any adjournment(s) of the Annual Meeting. Valid proxies will be voted at the
Annual Meeting and at any adjournment(s) of the Annual Meeting in the manner
specified.
Any stockholder giving a proxy has the unconditional right to revoke it
at any time before it is voted by any act inconsistent with the proxy, including
notifying the Secretary of the Company in writing, executing a subsequent proxy
or personally appearing at the Annual Meeting and casting a contrary vote.
However, no revocation will be effective unless notice of such revocation has
been received by the Company at or prior to the Annual Meeting.
The total issued and outstanding capital stock of the Company as of
January 31, 1997 consisted of 5,742,523 shares of Common Stock and 400,000
shares of Convertible Preferred Stock.
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
Seven directors are proposed to be elected at the Annual Meeting. If
elected, each director will hold office until the next annual meeting of
stockholders or until his successor shall be duly elected and qualified. The
election of directors will be decided by a plurality of the votes entitled to be
cast at the meeting by the holders of the Common Stock and the Convertible
Preferred Stock. All nominees named below are members of the present Board of
Directors of the Company. All nominees have consented to serve if elected, but,
if any nominee becomes unable to serve, the persons named as proxies may
exercise their discretion to vote for a substitute nominee. Management has no
reason to believe that any of the nominees named below will be unable to serve.
In connection with the recapitalization of the Company in March 1996,
WCAS VII was granted the right to designate up to four nominees for election to
the Board of Directors. Except for the WCAS VII nominees, other nominations for
election to the Board of Directors may be made by the Board of Directors, a
nominating committee appointed by the Board of Directors or by any stockholder
entitled to vote for the election of directors. Nominations made by stockholders
must be made by written notice, certified mail, return-receipt requested and
received by the Secretary of the Company by December 1 of any calendar year. If,
however, less than thirty days' notice of a stockholders' meeting called for the
election of directors is given to stockholders, nominations by stockholders must
be so made and received by the Secretary of the Company not later than the close
of business on the tenth day following the day on which the notice was mailed.
Such notice shall set forth as to each proposed nominee who is not an
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<PAGE> 6
incumbent director: (a) the name, age, business address and, if known, residence
address of each nominee proposed in such notice; (b) the principal occupation or
employment of each such nominee; (c) the number of shares of Common Stock of the
Company that are beneficially owned by each such nominee and the nominating
stockholder; and (d) any other information concerning the nominee that must be
disclosed of nominees in proxy solicitations pursuant to Rule 14(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The individuals named below were nominated for election to the Board of
Directors of the Company by the current Board of Directors and by WCAS VII. The
name, age, business experience and public directorships of each nominee for
director are as follows [verify age]:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE OR EMPLOYMENT SINCE
- -------------------------------- --- ----------------------------------------------------- --------
<S> <C> <C> <C>
Harvey B. Cash 58 General Partner, InterWest Partners III and IV 1993
(Venture Capital Firms) (1)
Jim C. Cowart 45 Chairman of the Board and Chief Executive Officer, 1992
Aurora Electronics, Inc. (2)
Amin J. Khoury 57 Chairman of the Board, B/E Aerospace, Inc. (3) 1993
David A. Lahar 39 President, EOS Capital, Inc. (4) 1992
Thomas E. McInerney 55 General Partner, Welsh, Carson, Anderson & Stowe (5) 1996
Richard H. Stowe 53 General Partner, Welsh, Carson, Anderson & Stowe (6) 1996
William H. Watkins, Jr. 55 Partner, Watkins, Watkins & Keenan (7) 1983
</TABLE>
________________________________
(1) Mr. 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; Convex Computer Corporation ("CNX" - NYSE), a manufacturer and
distributor of super-mini mainframe computers; 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.
(2) Mr. 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.
(3) Mr. 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.
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<PAGE> 7
(4) Mr. 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.
(5) Mr. 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.
(6) Mr. 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.
(7) Mr. Watkins, 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.
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE "FOR"
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE
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<PAGE> 8
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>
CLASS OF AMOUNT AND
OUTSTANDING NATURE OF BENEFICIAL PERCENT OF
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 (13 persons)
</TABLE>
____________________________________
* Director
** Named Executive Officer
*** Less than one percent
(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
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<PAGE> 9
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., 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
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<PAGE> 10
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.
MANAGEMENT
MEETING ATTENDANCE AND COMMITTEES OF THE BOARD
The business of the Company is managed under the direction of the Board
of Directors. The Board meets during the Company's fiscal year to review
significant developments affecting the Company and to act on matters requiring
Board approval. The Board of Directors held five (5) formal meetings and acted
by unanimous written consent three (3) times during the fiscal year ended
September 30, 1996. During the fiscal year, each member of the Board
participated in at least 75% of all Board and committee meetings held during the
period that he served as a director and/or committee member.
The Board of Directors has established an Audit Committee and a
Compensation and Stock Option Committee to devote attention to specific subjects
and to assist the Board in the discharge of its responsibilities. The functions
of these committees and their current members are described below.
Audit Committee. During the fiscal year, the Audit Committee was
comprised of Amin J. Khoury, Richard H. Stowe (Chairman) and William H. Watkins,
Jr. The Audit Committee is empowered to recommend to the Board of Directors a
firm of certified public accountants to conduct audits of the accounts and
affairs of the Company, review accounting objectives and procedures of the
Company and the findings and reports of the independent certified public
accountants, and make such reports and recommendations to the Board of Directors
as it deems appropriate. The Audit Committee did not hold any formal meetings
during the past fiscal year. The last formal Audit Committee meeting was held
on December 17, 1996.
Compensation and Stock Option Committee. During the fiscal year, the
Compensation and Stock Option Committee was comprised of Harvey B. Cash, Thomas
E. McInerney (Chairman) and Richard H. Stowe (all of whom are Disinterested
Directors of the Company). The Compensation and Stock Option Committee is
empowered to establish and revise the compensation paid to all executive
officers of the Company and has complete authority to (a) construe, interpret,
and administer the provisions of the 1993 Stock Option Plan and the 1996 Stock
Option Plan, and the provisions of the option agreements granted thereunder; (b)
select the key employees, consultants and directors to whom awards are granted,
the number of options, the number of shares of Common Stock with respect to each
option, the exercise price or prices of each option, the vesting and exercise
period of each option, whether an option may be exercised as to less than all of
the Common Stock subject to the option and such other terms and conditions of
each option, if any, that are not inconsistent with the provisions of the
Company's Stock Option Plans; (c) prescribe, amend and rescind rules and
regulations pertaining to the Company's Stock Option Plans; and (d) make all
other determinations necessary or advisable for their implementation and
administration. The Compensation and Stock Option Committee held various
telephonic meetings during the past fiscal year, and acted by unanimous written
consent two (2) times during the past fiscal year.
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<PAGE> 11
The Board of Directors does not have a standing nominating committee or
any other committee performing a similar function. The function customarily
attributable to a nominating committee is performed by the Board of Directors as
a whole.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
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>
_____________________________
(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.
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<PAGE> 12
(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.
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
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<PAGE> 13
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.
David A. Lahar. On July 31, 1996, Mr. Lahar resigned as President of the
Company. On August 1, 1996, Mr. Lahar and the Company agreed on a separation
package, pursuant to which Mr. Lahar received his annual base salary through
December 31, 1996 and will receive one half of his annual base salary through
June 30, 1997. Mr. Lahar is not eligible for any performance or discretionary
bonuses. Mr. Lahar continues to serve as a director of the Company.
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.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee has responsibility for
determining compensation for the Company's executive officers, setting overall
compensation policy for the Company, and administering the Company's Stock
Option Plans, including authority regarding the selection of award recipients
and the size and terms of all option grants under the Option Plans. The Chief
Executive Officer and the President of the Company make annual compensation
recommendations for the Company's executive officers to the Compensation and
Stock Option Committee.
The Compensation and Stock Option Committee believes that the Company
must attract and retain superior executives in order to succeed. In fiscal 1996,
the Company focused on assembling and retaining a highly qualified senior
management team and in aligning the interests of its officers with the success
of the Company. Reaching this goal was the objective of the Compensation and
Stock Option Committee in determining the type and amount of executive officer
compensation for fiscal 1996, using base salary, short term incentives in the
form of a bonus, long term incentives in the form of stock options and various
benefits generally available to employees of the Company (such as health
insurance).
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<PAGE> 14
The cash compensation levels for the Company's executive officers for
fiscal 1996 were determined by the Compensation and Stock Option Committee based
on a variety of subjective elements, including each executive officer's
compensation history, experience in rendering services to the Company and
individual talents. In addition to considering these elements, the Compensation
and Stock Option Committee evaluated industry-specific executive compensation
survey reports with respect to the executive officers of the Company. The
Compensation and Stock Option Committee based its decisions regarding the split
between base salary and target bonus payments on the Company's objective of
aligning officers' interests with the success of the Company by placing a
percentage of each executive officer's pay at risk through a short-term
incentive target bonus dependent upon Company performance and individual
performance. This is consistent with the philosophy extended to the Company's
management employee population in general. With respect to each executive
officer other than the Chief Executive Officer and President, the Compensation
and Stock Option Committee reviewed base salary in place for the prior fiscal
year and target bonus levels for which each executive officer was previously
eligible and made adjustments to each executive officer's cash compensation
based on the foregoing elements, considered in light of the cash compensation
paid to similarly situated executives as indicated by the survey reports,
although the Committee did not assign weights to any one element or to the
survey reports.
Pursuant to letter agreements entered into between the Company and
Messrs. Cowart and Grazer in 1995 and 1996, respectively, Messrs. Cowart and
Grazer each receive an annual base salary of $200,000 and $175,000,
respectively. In setting this figure, the Compensation and Stock Option
Committee considered an independent study of executive compensation in addition
to the foregoing variety of elements considered with respect to all executive
officers. The study compared compensation data from (a) nine comparable
organizations, weighting the organizations comparable to the Company in terms of
annual sales and the positions comparable to those of Messrs. Cowart and Grazer
in terms of perceived levels of accountability, and (b) published survey reports
of executive compensation paid in similar industry groups as a function of
annual sales, weighting the groups comparable to the Company in terms of
similarity to the Company's business and the positions comparable to those of
Messrs. Cowart and Grazer in terms of similarity of duties. The group of
comparable organizations covered in the independent study is not the same as the
peer group established to compare shareholder returns in the Performance Graph
included in this Proxy Statement, but the Committee noted that some overlap
existed between the two groups.
The Compensation and Stock Option Committee did not assign weights to any
one of the variety of elements or to the independent study of executive
compensation in making the determination concerning base salary and target bonus
levels for Messrs. Cowart and Grazer. Rather, the Compensation and Stock Option
Committee followed the general philosophy that Messrs. Cowart and Grazer have
the opportunity to receive total cash compensation in the mid-range of the
lowest and highest combinations of base salary and target bonus levels
established by the comparison data and considered the elements within this
framework. The study recommended a base salary for Messrs. Cowart and Grazer of
$200,000 and $175,000, respectively, which fell within the mid-range of the
lowest and highest base salaries established from the comparison data. The
Committee ultimately decided that the base annual salary level for each of
Messrs. Cowart and Grazer would be $200,000 and $175,000, respectively.
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<PAGE> 15
This report is submitted by the Compensation and Stock Option Committee
and the Stock Option Committee:
Compensation and Stock Option Committee
Harvey B. Cash
Thomas E. McInerney
Richard H. Stowe
This Report will not be deemed to be incorporated by reference in any
filing by the Company under the Securities Act of 1933 (the "Securities Act") or
the Exchange Act, except to the extent that the Company specifically
incorporates this Report by reference.
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<PAGE> 16
PERFORMANCE GRAPH
Prior to September 30, 1992, the Company was involved in the
manufacturing, distribution and marketing of sporting goods. On September 30,
1992, the Company positioned itself in the electronics industry through the
acquisition of Micro-C. The Company believes that a comparison of stockholder
returns achieved subsequent to fiscal 1993 to stockholder returns achieved
during periods prior to fiscal 1993 would not be meaningful because of (a) the
different nature of the Company's current and former principal operations, (b)
the changes in the Company's management after September 30, 1992, and (c) the
different peer groups associated with the Company's current and former
operations. Accordingly, the following graph shows a comparison of cumulative
total returns for the Company, the S&P 500 Composite Index and an index of peer
companies selected by the Company for the period since September 30, 1992.
Companies in the peer group are as follows: Bell Microproducts, Benchmark
Electronics, Inc., The Cerplex Group, Inc., Genicom Corp., IEC Electronics
Corp., Intelogic Trace, Jabil Circuits, Inc., Jaco Electronics, Inc., Milgray
Electronics, Inc., Nu Horizons Electronics Corp., PC Service Source, Inc.,
Plexus Corp., Richardson Electronics, Ltd., Sterling Electronics and Western
Micro Technology, Inc. The comparison assumes $100 was invested on September 30,
1992 in the Company's Common Stock and in each of the two indices and assumes
reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AURORA ELECTRONICS, INC. PEER GROUP S&P 500
- ------------------ ------------------------ ---------- -------
<S> <C> <C> <C>
9/30/92 $100 $100 $100
9/30/93 $121.51 $112.94 $101.32
9/30/94 $91.63 $117.14 $88.44
9/30/95 $50.80 $147.95 $111.24
9/30/96 $31.87 $136.23 $130.83
</TABLE>
The stock price performance depicted in the above graph is not
necessarily indicative of future price performance. This Performance Graph will
not be deemed to be incorporated by reference in any filing by the Company under
the Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates the graph by reference.
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<PAGE> 17
STOCKHOLDER PROPOSALS
A proper proposal submitted by a stockholder in accordance with
applicable rules and regulations for presentation at the Company's next annual
meeting that is received at the Company's principal executive office by January
1, 1998 will be included in the Company's proxy statement and form of proxy for
that meeting.
PERSONS MAKING THE SOLICITATION
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company. The cost of soliciting proxies in the accompanying form will be
paid by the Company. Officers of the Company may solicit proxies by mail,
telephone or telegraph. Upon request, the Company will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses incurred
by them in forwarding proxy material to beneficial owners of shares of the
Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent certified public accountants, has been
selected by the Board of Directors as the Company's independent auditor for the
current year. A representative of Arthur Andersen LLP is expected to be present
at the Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so and is expected to be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth herein. Should any other
matter requiring a vote of stockholders arise, the proxies in the enclosed form
confer upon the person or persons entitled to vote the shares represented by
such proxies discretionary authority to vote the same in accordance with their
best judgment in the interest of the Company.
FINANCIAL STATEMENTS
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM A COPY
OF THIS PROXY STATEMENT IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON AND BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS
DAY OF RECEIPT OF SUCH REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K. REQUESTS SHOULD BE DIRECTED TO DEBORAH A. NICHOLLS, SECRETARY, AURORA
ELECTRONICS, INC., 2030 MAIN STREET, SUITE 1120, IRVINE, CALIFORNIA 92614-7241;
TELEPHONE NUMBER: (714) 660-1232, FAX NUMBER: (714) 851-8414. AFTER APRIL 1,
1997, REQUESTS SHOULD BE DIRECTED TO DEBORAH A. NICHOLLS, SECRETARY, AURORA
ELECTRONICS, INC., 9477 WAPLES STREET, SUITE 150, SAN DIEGO, CALIFORNIA 92121;
TELEPHONE NUMBER: (619) 552-1213, FAX NUMBER: (619) 552-1402.
By Order of the Board of Directors,
DEBORAH A. NICHOLLS,
Secretary
February 25, 1997
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<PAGE> 18
AURORA ELECTRONICS, INC.
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS AT
1:00 P.M., TUESDAY, MARCH 25, 1997
AURORA ELECTRONICS, INC., 9477 WAPLES STREET, SUITE 150,
SAN DIEGO, CALIFORNIA 92121
The undersigned stockholder of Aurora Electronics, Inc. (the "Company")
hereby appoints Jim C. Cowart and John P. Grazer, or either of them, as
proxies, each with full powers of substitution, to vote the shares of the
undersigned at the above-stated Annual Meeting and at any adjournment(s)
thereof:
(Please sign on the reverse side)
<PAGE> 19
A [X] Please mark your
votes as in this
example.
(1) Election of Directors:
FOR all nominees listed at right
(except as provided to the contrary below) [ ]
WITHHOLD AUTHORITY to vote for
all nominees listed at right [ ]
Nominees: Harvey B. Cash
Jim C. Cowart
Amin J. Khoury
David A. Laher
Thomas E. McInerney
Richard H. Stowe
William H. Watkins, Jr.
(2) On any other business that may properly come before the meeting; hereby
revoking any proxy or proxies heretofore given by the undersigned.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
IN ACCORDANCE WITH THE SPECIFICATIONS MADE ABOVE. IF A CHOICE IS NOT INDICATED
WITH RESPECT TO ITEM (1), THIS PROXY WILL BE VOTED "FOR" EACH DIRECTOR. THE
PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTER REFERRED TO IN
ITEM (2). THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
Receipt herewith of the Company's Annual Report and Notice of Meeting and
Proxy Statement, dated February 25, 1997, is hereby acknowledged.
PLEASE SIGN, DATE AND MAIL TODAY.
SIGNATURE DATE
----------------------------- --------------------------
SIGNATURE DATE
----------------------------- --------------------------
IF HELD JOINTLY
NOTE: (Joint owners must EACH sign. Please sign EXACTLY as your name(s)
appear(s) on this card. When signing as attorney, trustee, executor,
administrator, guardian or corporate officer, please give your
FULL title.)
