SCHEDULE 14(a) INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] solicitng Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AURA SYSTEMS, INC>
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Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of filing Fee (Check the appropriate box).
[X] No fee required.
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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
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(2) Form, Schedule or Registration Statement No.
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(3) Filing Party
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(4) Date Filed:
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<PAGE>
AURA SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 9, 2001
To the Stockholders of Aura Systems, Inc.:
The Annual Meeting of Stockholders of Aura Systems, Inc., a Delaware
corporation (the "Company"), will be held on January 9, 2001 at 3:00 p.m., PST,
at the Manhattan Beach Marriott, 1400 Parkview Avenue, Manhattan Beach,
California, for the following purposes:
(1) To elect a Board of Directors of nine members; and
(2) To transact any other business which may properly come before
the meeting.
Stockholders of record at the close of business on November 10, 2000,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof.
All Stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The giving of
your proxy will not affect your right to vote in person should you later decide
to attend the meeting.
Any stockholder of record of the Company at the close of business on
November 10, 2000, may attend. Any beneficial owner of shares with a letter of
authorization from his recordholder may attend the meeting.
By Order of the Board of Directors
/s/ Michael I. Froch
Michael I. Froch
Secretary
El Segundo, California
December 11, 2000
Please mark, date, and sign the enclosed Proxy and return it at an early date in
the enclosed return envelope so that, if you are unable to attend the Annual
Meeting, your shares may be voted.
<PAGE>
AURA SYSTEMS, INC.
2335 Alaska Avenue
El Segundo, CA 90245
(310) 643-5300
PROXY STATEMENT
December 11, 2000
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Aura Systems, Inc. ("Aura" or the
"Company") for the Annual Meeting of Stockholders to be held on January 9, 2001
at 3:00 p.m., PST, at the Manhattan Beach Marriott, 1400 Parkview Avenue,
Manhattan Beach, California, (the "Annual Meeting") and any postponements or
adjournments thereof. Any Stockholder giving a proxy may revoke it before or at
the meeting by providing a proxy bearing a later date or by attending the
meeting and expressing a desire to vote in person. If the enclosed proxy is
properly signed and returned, the shares represented thereby will be voted at
the Annual Meeting as directed by the Stockholder on the proxy card; and, if no
choice is specified, they will be voted (i) "FOR" the directors nominated by the
Board of Directors and (ii) in the discretion of the persons acting as proxies,
for any other matters. Your cooperation in promptly returning the enclosed proxy
will reduce Aura's expenses and enable its management and employees to continue
their normal duties for your benefit with minimum interruption for follow-up
proxy solicitation.
Only Stockholders of record at the close of business on November 10,
2000, are entitled to receive notice of and to vote at the meeting. On that
date, Aura had outstanding 281,376,809 shares of Common Stock and no Preferred
Stock. The shares of Common Stock vote as a single class. Holders of shares of
Common Stock on the record date are entitled to one vote for each share held.
The presence at the Annual Meeting, either in person or by proxy, of the holders
of a majority of the shares of Common Stock issued, outstanding and entitled to
vote is necessary to constitute a quorum for the transaction of business.
In accordance with Delaware law, abstentions and "broker non-votes"
(i.e. proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares as to a matter with respect to which brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the matter as to which the non-vote is indicated. Therefore, a broker
non-vote will have no legal effect on any matter requiring the affirmative vote
of a plurality of the votes cast, and will have the same legal effect as a vote
"against" any other matters presented at the meeting which require approval by a
majority of the shares represented in person or by proxy at the meeting.
In the event that sufficient votes in favor of any of the proposals are
not received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitations of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
by proxy at the Annual Meeting. The persons named as proxies will vote in favor
of such adjournment or adjournments.
The cost of preparing, assembling, printing and mailing the materials,
the Notice and the enclosed form of Proxy, as well as the cost of soliciting
proxies relating to the Annual Meeting, will be borne by the Company. The
Company will request banks, brokers, dealers, and voting trustees or other
nominees to forward solicitation materials to their customers who are beneficial
owners of shares, and will reimburse them for the reasonable out-of-pocket
expenses of such solicitations. The original solicitation of proxies by mail may
be supplemented by telephone, telegram, personal solicitation or other means by
officers and other regular employees or agents of the Company, but no additional
compensation will be paid to such individuals on account of such activities.
This Proxy Statement and the accompanying Notice of Annual Meeting and form of
Proxy are being mailed or delivered to Stockholders on or about December 11,
2000.
<PAGE>
PROPOSAL NO. 1
ELECTION OF NINE NOMINEES FOR DIRECTORS
The Board of Directors of the Company recommends that the Stockholders vote
"FOR" the election of the nine nominees for director.
Nominees and Voting
The Bylaws of the Company provide for a board of nine directors.
Consequently, at the Annual Meeting, nine directors will be elected to serve
until the next Annual Meeting and until their successors are elected and
qualified. Proxies may not be voted for more than nine persons. The Company has
nominated for election as directors the nine persons named below. Each of these
nominees has indicated that they are able and willing to serve as directors.
Under the terms of its Loan Agreement with its principal lender, the
Company's Board of Directors is required to be comprised of persons the majority
of whom are "independent directors," as defined in such agreement, so long as
any indebtedness is outstanding to the lender. A person is deemed to be an
"independent director" if such person is not an employee or former employee or
otherwise having a significant business relationship with the Company during the
past three years. Accordingly, a majority of the Company's nominees are
"independent directors" under the Loan Agreement.
Unless otherwise instructed, the Company's proxy holders intend to vote
the shares of Common Stock represented by the proxies in favor of the election
of these nominees. If for any reason any of these nominees will be unable or
unwilling to serve, the shares represented by the enclosed proxy will be voted
for the election of the balance of those named and such other person or persons
as the Board of Directors may recommend. The Board of Directors has no reason to
believe that any such nominee will be unable or unwilling to serve. Directors
are elected by a plurality of the votes cast.
The Company's nominees and directors are listed below, together with
their ages, principal occupations, offices with the Company and year in which
each became a director of the Company.
The Board of Directors of the Company recommends that the Stockholders
vote "FOR" the election of the nine nominees for director.
<TABLE>
<CAPTION>
Director
Name Age Since Title
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Zvi Kurtzman 53 1987 Chief Executive Officer, Chairman, Board of Directors
Harvey Cohen 67 1993 Director, member of Audit Committee
Salvador Diaz-Verson, Jr. 48 1997 Director, member of Compensation Committees
Stephen A. Talesnick 51 1999 Director, member of Compensation Committee
Norman Reitman 77 2000 Director, member of Audit Committee
Sanford R. Edlein 56 2000 Director, member of Audit Committee
Harry Haisfield 59 2000 Director
Neal Meehan 59 2000 Director
William Richbourg 57 Nominee
</TABLE>
Business Experience of Directors and Nominees During the Past Five Years
Zvi Kurtzman is the CEO and Chairman of the Board of Directors of the
Company and has served in this capacity since 1987. Mr. Kurtzman also served as
the Company's President from 1987 to 1997. Mr. Kurtzman obtained his B.S. and
M.S. degrees in physics from California State University, Northridge in 1970 and
1971, respectively, and completed all course requirements for a Ph.D. in
theoretical physics at the University of California, Riverside. He was employed
as a senior scientist with the Science Applications International Corp. a
scientific research company in San Diego, from 1984 to 1985 and with Hughes
Aircraft Company, a scientific and aerospace company, from 1983 to 1984. Prior
thereto, Mr. Kurtzman was a consultant to major defense subcontractors in the
areas of computers, automation and engineering.
In October, 1996, the Securities and Exchange Commission ("Commission")
issued an order (Securities Act Release No. 7352) instituting an administrative
proceeding against Aura Systems, Zvi Kurtzman, and an Aura former officer. The
proceeding was settled on consent of all the parties, without admitting or
denying any of the Commission's findings. In its order, the Commission found
that Aura and the others violated the reporting, recordkeeping and anti-fraud
provisions of the securities laws in 1993 and 1994 in connection with its
reporting on two transactions in reports previously filed with the Commission.
The Commission's order directs that each party cease and desist from committing
or causing any future violation of these provisions. The Commission did not
require Aura to restate any of the previously issued financial statements or
otherwise amend any of its prior reports filed with the Commission. Neither Mr.
Kurtzman nor anyone else personally benefited in any way from these events.
Also, the Commission did not seek any monetary penalties from Aura, Mr. Kurtzman
or anyone else. For a more complete description of the Commission's Order, see
the Commission's release referred to above.
Harvey Cohen is a director of the Company and has served in this
capacity since August 1993. Mr. Cohen is President of Margate Advisory Group,
Inc., an investment advisor registered with the Securities and Exchange
Commission, and a management consultant since August 1981. Mr. Cohen has
consulted with the Company on various operating and growth strategies since June
1989 and assisted in the sale of certain of the Company's securities. From
December 1979 through July 1981, he was President and Chief Operating Officer of
Silicon Systems, Inc., a custom integrated circuit manufacturer which made its
initial public offering in February 1981 after having raised $4 million in
venture capital in 1980. From 1975 until 1979, Mr. Cohen served as President and
Chief Executive Officer of International Communication Sciences, Inc., a
communications computer manufacturing start-up company for which he raised over
$7.5 million in venture capital. From 1966 through 1975, Mr. Cohen was employed
by Scientific Data Systems, Inc. ("S.D.S."), a computer manufacturing and
service company, which became Xerox Data Systems, Inc. ("X.D.S.") after its
acquisition by Xerox in 1979. During that time, he held several senior
management positions, including Vice President-Systems Division of S.D.S. and
Senior Vice President-Advanced Systems Operating of the Business Planning Group.
Mr. Cohen received his B.S.(Honors) in Electrical Engineering in 1955 and an
MBA in 1957 from Harvard University.
Hon. Salvador Diaz-Verson, Jr. is a director of the Company and has served
in this capacity since September 1997. Mr. Diaz-Verson is the founder, and since
1991 has been the Chairman and President of Diaz-Verson Capital Investments,
Inc., an Investment Adviser registered with the Securities and Exchange
Commission. Mr. Diaz-Verson served as president and member of the Board of
Directors of American Family Corporation (AFLCAC Inc.) a publicly held insurance
holding company, from 1979 until 1991. Mr. Diaz-Verson also served as Executive
Vice President and Chief Investment Officer of American Family Life Assurance
Company, subsidiary of AFLCAC Inc. from 1976 through 1991. Mr. Diaz-Verson is a
graduate of Florida State University. He is currently a director of the board of
Miramar Securities, Clemente Capital Inc., Regions Bank of Georgia and The
Philippine Strategic Investment Holding Limited. Since 1992, Mr. Diaz-Verson has
also been a member of the Board of Trustees of the Christopher Columbus
Fellowship Foundation, presidentally appointed by President George Bush in 1992,
and re-appointed by President Clinton in early 2000.
Stephen A. Talesnick is a director of the Company and has served in
this capacity since September 1999, following appointment by resolution of the
Board of Directors to fill a vacancy pursuant to the Bylaws of the corporation.
Mr. Talesnick has owned and maintained a private law practice since 1977, which
is presently located in Beverly Hills. Mr. Talesnick specializes in business and
financial transactions in addition to entertainment industry related matters. He
originally practiced as an associate in the New York law firm of White & Case.
In 1992, Mr. Talesnick became a financial advisor in the financial services
industry and is registered with the Securities and Exchange Commission. Mr.
Talesnick is a graduate of The Wharton School of Finance and Commerce at the
University Of Pennsylvania and received his Juris Doctor degree from Columbia
University School of Law.
Norman Reitman is a director of the Company and has served in this
capacity since March 6, 2000. He previously served as a director of the Company
from January 1989 to September 1998. Mr. Reitman obtained his B.B.A. degree in
business administration from St. Johns University in 1946 and became licensed as
a public accountant in New York in 1955. Mr. Reitman is the retired Chairman of
the Board and President of Norman Reitman Co., Inc., insurance auditors, where
he served from 1979 until June 1990. Mr. Reitman was a senior partner in Norman
Reitman Co., a public accounting firm, where he served from 1952 through 1979.
Mr. Reitman served on the Board of Directors and was a Vice President of
American Family Life Assurance Co., a publicly held insurance company, from 1966
until April 1991.
Sanford R. Edlein, is a director of the Company and has served in this
capacity since March 6,2000. He is a Certified Public Accountant, Certified
Turnaround Professional, and has served as a consultant and senior executive for
privately held and public companies for more than thirty years and has assisted
in financial and operating matters, corporate governance, crisis management and
mergers and acquisitions. He has served on the boards of public companies
including Sport Supply Group, Inc., BSN Corporation, Tennis Lady, Escalade
Corporation and American Equity Financial Corporation. Since 1998 he has been
employed with Glass & Associates, Inc. a firm that specializes in turnaround and
crisis management. From 1996 to 1998 he was president of Edlein & Associates,
LLC. a consulting firm. From 1994 to 1996 he was CEO, COO and a member of the
board of directors of Sport Supply Group, Inc. From 1965 through 1980 and 1989
through 1994, respectively, Mr. Edlein served as a partner and then managing
partner of Grant Thornton LLP (Boston office). Mr. Edlein has a AAS degree from
Bronx Community College and a BBA degree from City University of New York.
Harry B. Haisfield is a director of the Company and has served in this
capacity since October 2000 following appointment by resolution of the Board of
Directors, pursuant to the Bylaws of the corporation. Since 1982, Mr. Haisfield,
a private investor, has been involved with start-up companies and has served on
the board of directors of several corporations. He is currently the Chairman and
CEO of Raydak Corporation, which develops non-destructive testing technology. He
has served on the Board of Directors of Achieve.Com, Radiance Communications and
as a director of First Pacific Networks, a publicly-held company. Upon
completing college, Mr. Haisfield entered the U.S. Naval flight training program
in Pensacola, Florida, finishing in the top of his class. He served more than
five years as an officer and pilot in the U.S. Marines until his release in 1966
at the rank of Captain. At that time he left the military to join Pan American
Airlines where he served as an active pilot until 1991.
Neal Meehan is a director of the Company and has served in this
capacity since October 2000 following appointment by resolution of the Board of
Directors, pursuant to the Bylaws of the corporation. Mr. Meehan's business
career spans the transportation and telecommunications sectors, and he is
currently involved in market development and strategic planning for start-up and
mature companies. He has served as president and chief executive officer of a
number of airlines including New York Air, Midway Airlines, Chicago Air and
Continental Express. He has also served in various marketing and operations
capacities for American Airlines and Continental Airlines. In addition, he has
served in various senior capacities for a number of telecommunications firms
including In-Flight Phone Corp., Iridium LLC and Hush Communications USA, Inc.,
a firm specializing in data encryption. After a successful career in the United
States Marine Corps, Mr. Meehan received his MBA from St. Johns University. Mr.
Meehan is also the recipient of an honorary doctorate from St. Johns University
in Commercial Science.
William B. Richbourg is a director nominee of the Company. Mr.
Richbourg, a trial lawyer, has been engaged in the private practice of law,
since 1968. He has a JD from the University of Florida Law School. Mr. Richbourg
is active in the environmental field where he has served as President and
Director of Environmental Systems, Inc., a privately-held company involved in
the electro-magnetic treatment of water and as President and Director of ECO-21,
a privately-held company specializing in the marketing and sales of an
after-market emissions reducing system for gasoline and diesel engines. As an
outstanding football player at the University of Florida, he was the recipient
of numerous academic and athletic awards.
MANAGEMENT
Listed below are Executive Officers of the Company who are not
directors or nominees, their ages, titles and background information.
Name Age Title
Gerald S. Papazian 45 President, Chief Operating Officer
Arthur J. Schwartz, Ph.D. 53 Executive Vice President
Cipora Kurtzman-Lavut 44 Senior Vice President, Corporate Communications
Neal B. Kaufman 55 Senior Vice President,
Management Information Systems
Steven C. Veen 45 Senior Vice President, Chief Financial Officer
Michael I. Froch 39 Senior Vice President,
General Counsel and Secretary
Keith O. Stuart 45 Senior Vice President Sales and Marketing
Ronald J. Goldstein 59 Senior Vice President Sales and Marketing
Jacob Mail 50 Senior Vice President, AuraGen Operations
Richard E. Van Allen 54 Senior Vice President,
Industrial and Special Programs
Gerald S. Papazian has been the Company's President and Chief Operating
Officer since July 1997. He joined the Company in August 1988 from Bear, Stearns
& Co., an investment-banking firm, where he served from 1986 as Vice President,
Corporate Finance. His responsibilities there included valuation of companies
for potential financing, merger or acquisition. Prior to joining Bear Stearns,
Mr. Papazian was an Associate in the New York law firm of Stroock & Stroock &
Lavan, where he specialized in general corporate and securities law with
extensive experience in public offerings. He received a BA, Economics (magna cum
laude) from the University of Southern California in 1977 and a JD and MBA from
the University of California, Los Angeles in 1981. He served as a trustee of the
University of Southern California from 1994 to 1999.
Arthur J. Schwartz, Ph.D. has been the Executive Vice President of the
Company since February 1987. Dr. Schwartz obtained his M.S. degree in physics
from the University of Chicago in 1971 and a Ph.D. in physics from the
University of Pittsburgh in 1978. Dr. Schwartz was employed as a Technical
Director with Science Applications International Corp., a scientific research
company in San Diego, California from 1983 to 1984 and was a senior physicist
with Hughes Aircraft Company, a scientific and aerospace company, from 1980 to
1984. While at Hughes, he was responsible for advanced studies and development
where he headed a research and development effort for new technologies to
process optical signals detected by space sensors. While at Aura, he served for
3 years on a Joint Tri Services Committee reporting to the U.S. Government on
certain technology issues.
Cipora Kurtzman-Lavut is Senior Vice President, Corporate
Communications, and has served in this capacity since December 1991. She
previously served as Vice President in charge of Marketing for the Company since
1988. She graduated in 1984 from California State University at Northridge with
a B.S. degree in Business Administration.
Neal B. Kaufman is Senior Vice President, Management Information
Systems, and has served in this capacity since 1988. Mr. Kaufman graduated from
the University of California, Los Angeles, in 1967 where he obtained a B.S. in
engineering. He was employed as a software project manager with Abacus
Programming Corp., a software development firm, from 1975 to 1985. He headed a
team of software specialists on the Gas Centrifuge Nuclear Fuel enrichment
program for the United States Department of Energy and developed software
related to the Viking and Mariner projects for the California Institute of
Technology Jet Propulsion Laboratory in Pasadena, California.
Steven C. Veen, a Certified Public Accountant, is Senior Vice
President, Chief Financial Officer, and has served in this capacity since March
1994. He joined the Company as its Controller in December 1992. Before that, he
had over 12 years experience in varying capacities in the public accounting
profession. Mr. Veen served from 1983 to December 1992 with Muller, King, Black,
Mathys & Acker, Certified Public Accountants. He received a B.A. in accounting
from Michigan State University in 1981.
Michael I. Froch is Senior Vice President, General Counsel and
Secretary of the Company and has served as General Counsel since March 1997 and
as Secretary since July 1997. He joined the Company in 1994 as its corporate
counsel. From 1991 through 1994, Mr. Froch was engaged in private law practice
in California. Mr. Froch is admitted to the California and District of Columbia
bars. He received his Juris Doctor degree from Santa Clara University School of
Law in 1989, during which time he served as judicial extern to the Honorable
Spencer M. Williams, United States District Judge for the Northern District of
California. He received his A.B. degree from the University of California at
Berkeley in 1984, serving from 1982 through 1983 as Staff Assistant to the
Honorable Tom Lantos, Member of Congress.
Keith O. Stuart is Senior Vice President, Sales and Marketing and has
served in this capacity since November, 1999. Previously he served as President
of the Company's Tech Center division, from 1995 to 1999 and has been in charge
of hardware development for Aura since 1988. Mr. Stuart obtained his B.S. and
M.S. degrees in electrical engineering from the University of California Los
Angeles in 1978 and 1980, respectively. Mr. Stuart worked for Cyphermaster, Inc.
during 1986 and was employed by Hughes Aircraft Company, a scientific and
aerospace company, prior thereto. Mr. Stuart has designed and fabricated
digitally controlled, magnetically supported gimbals that isolate the seeker
portion of a United States Space Defense Initiative and has also developed a
multi-computer automated test station for the evaluation of sophisticated
electro-optical devices.
Ronald J. Goldstein is Senior Vice President, Sales and Marketing,
serving in this capacity since November, 1999. He is responsible for the
marketing and sales of AuraGen to worldwide government agencies and the military
and has served in various capacities at Aura since 1989. He holds two M.S.
degrees in Computing Technology and the Management of R & D from George
Washington University and has completed coursework for a Ph.D. in Nuclear
Engineering from North Carolina State University. Mr. Goldstein has over 25
years of experience in high technology both in government and industry. Since
1989 Mr. Goldstein was responsible for all marketing and business development
activities for the Company and served since 1995 as President of the
Automotive/Industrial division of the Company. Prior to joining Aura, Mr.
Goldstein was Manager of Space Initiatives at Hughes Aircraft Company, a
scientific and research company, where he was responsible for the design,
production and marketing of a wide variety of aerospace systems and hardware.
Prior to joining Hughes in 1982, Mr. Goldstein was the Special Assistant for
National Programs in the Office of the Secretary of Defense, and before that
held high level program management positions with the Defense Department and
Central Intelligence Agency.
Jacob Mail is Senior Vice President, AuraGen Operations, serving in
this capacity since November 1999. Previously he has served as Vice President of
Operations from 1995 to 1999. Mr. Mail served over 20 years at Israeli Aircraft
Industries, starting as a Lead Engineer and progressing to Program Manager. He
was responsible for the development and production of hydraulic actuation,
steering control systems, rotor brake systems and other systems and subsystems
involved in both commercial and military aircraft. Systems designed by Mr. Mail
are being used today all over the western world. In addition, Mr. Mail has
extensive experience in the preparation of technical specifications planning and
organizing production in accordance with customer specifications at full quality
assurance.
Dr. Richard E. Van Allen is Senior Vice President, Industrial and
Special Programs, serving in this capacity since June 1999. He is currently the
Program Manager for the military version of the commercial AuraGen generator. In
addition, Dr. Van Allen manages ongoing electromagnetic actuator projects. He
joined the company in 1990 and previously was Manager and Vice President of the
AuraSound Division, and before that was Division manager of the Magnetics
Division. In these positions, Dr. Van Allen has been involved in the development
and manufacture of virtually every electromagnetic system produced by Aura
Systems. Prior to joining Aura, he was a Laboratory Manager in Advanced
Government Programs at the Hughes Aircraft Company Space and Communications
Group. Before joining Hughes, Dr. Van Allen served as the Navigation Team Leader
for the Voyager outer planets exploration program at the Jet Propulsion
Laboratory. He received his B.S. degree in Aeronautical and Astronautical
Engineering, along with an M.S. and Ph.D. in Aerospace Engineering, from Purdue
University.
Family Relationships
Cipora Kurtzman Lavut, a Senior Vice President, is the sister of Zvi
Kurtzman, who is the Chief Executive Officer and a director of the Company.
Jacob Mail, Vice President, Operational Planning is a first cousin of Cipora
Kurtzman Lavut and Zvi Kurtzman.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
Company's Common Stock owned as of October 31, 2000 (i) by each person who is
known by Aura to be the beneficial owner of more than five percent (5%) of its
outstanding Common Stock, (ii) by each of the Company's directors and those
executive officers named in the Summary Compensation Table, and (iii) by all
directors and executive officers as a group:
<TABLE>
<CAPTION>
Shares of Percent of
Common Stock Common Stock
Name Beneficially Owned Beneficially Owned
<S> <C> <C>
Gardner Lewis Asset Management 19,980,436 7.1%
Arthur Liu 27,474,074 (13) 9.8%
Zvi (Harry) Kurtzman 3,706,675 (1)(2) 1.3%
Arthur J. Schwartz 2,702,645 (1)(3)(4) 1.0%
Cipora Kurtzman Lavut 1,993,926 (5) *
Harvey Cohen 918,287 (6) *
Salvador Diaz-Verson, Jr. 1,456,037 (10) *
Stephen A. Talesnick 3,087,698 (14) 1.1%
Gerald S. Papazian 610,679 (7) *
Steven C. Veen 820,614 (8) *
Norman Reitman 1,037,142 (9) *
Sanford R. Edlein 250,000 (15) *
Harry Haisfield 1,306,700 (11) *
Neal Meehan 190,625 (12) *
William Richbourg 210,000 *
All executive officers and directors 21,110,214 7.5%
as a group (19 persons)
</TABLE>
--------------------
* Less than 1% of outstanding shares.
(1) Includes 175,000 shares held of record by Advanced Integrated Systems, Inc.
(2) Includes 870,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000.
(3) Includes 515,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000.
(4) Includes 32,000 shares held by Dr. Schwartz as custodian for his children,
and 74,000 owned by Dr. Schwartz' children, to which Dr. Schwartz disclaims
any beneficial ownership.
(5) Includes 515,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000.
(6) Includes 31,250 shares beneficially owned, and 715,000 shares which may be
purchased pursuant to options within 60 days of October 31, 2000 of which
100,000 are beneficially owned.
(7) Includes 166,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000.
(8) Includes 265,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000, and 20,000 shares held by
Mr. Veen as custodian for his children, to which Mr. Veen disclaims any
beneficial ownership.
(9) Includes 795,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000 and 12,500 shares owned by
Mr. Reitman's wife, as to which 12,500 shares he disclaims any beneficial
ownership.
(10) Includes 450,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000.
(11) Includes 274,000 shares which may be purchased pursuant to warrants
exercisable within 60 days of October 31, 2000.
(12) Includes 46,875 shares which may be purchased pursuant to warrants
exercisable within 60 days of October 31, 2000, and 50,000 shares held by
Mr. Meehan as custodian for his son, to which Mr. Meehan disclaims
beneficial ownership.
(13) Includes 13,974,074 shares held by Alaris, Inc., which may be deemed to be
beneficially owned, and 4,500,000 shares which may be purchased pursuant to
warrants exercisable within 60 days of October 31, 2000.
(14) Includes 300,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000.
(15) Includes 250,000 shares which may be purchased pursuant to options
exercisable within 60 days of October 31, 2000.
The mailing address for Gardner Lewis Asset Management, L.P. is 285
Wilmington - West Chester Pike, Chadds Ford, Pa. 19317.
The mailing address for the others is c/o Aura Systems, Inc., 2335 Alaska
Avenue, El Segundo, CA 90245.
Board of Directors Meetings and Committees
Aura's Board of Directors held four meetings during the year ended
February 29, 2000. Each director whose term is expected to continue attended
more than 75% of the Board meetings during Fiscal 2000. During the last fiscal
year the Company did not maintain a nominating committee. Since August 1993, the
Company has maintained a Compensation Committee which presently consists of
Salvador Diaz-Verson, Jr., Stephen A. Talesnick and David F. Hadley. The
Compensation Committee met two times during Fiscal 2000. Since January 1989, the
Company has maintained an Audit Committee which presently consists of Sanford
Edein, Harvey Cohen and Norman Reitman. The Audit Committee approves the
selection and engagement of independent accountants and reviews with them the
plan and scope of their audit for each year, the results of the audit when
completed, and their fees for services performed. The Audit Committee met four
times during the fiscal year ended February 29, 2000.
Effective March 2000, each non-employee director is entitled to receive
$20,000 per year for serving as a director.
EXECUTIVE COMPENSATION
Cash Compensation For Executives
The following table summarizes all compensation paid to the Company's
Chief Executive Officer, and to the four most highly compensated executive
officers of the Company other than the Chief Executive Officer whose total
compensation exceeded $100,000 during the fiscal year ended February 29, 2000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Long Term All Other
Compensation(1)Compensation Awards Compensation(2)
Name and
Principal Position Year Salary Options/SARs
<S> <C> <C> <C> <C>
Zvi (Harry) Kurtzman (1) 2000 $386,232 0 $ 0
Chief Executive Officer 1999 384,290 1,000,000
1998 245,018 0
Gerald S. Papazian (1) 2000 $217,777 0 $2,392
President and Chief Operating 1999 203,025 100,000
Officer 1998 154,737 0
Arthur J. Schwartz (1) 2000 $210,192 0 $ 0
Executive Vice President 1999 204,895 500,000
1998 172,115 0
Steven C. Veen(1) 2000 $205,469 0 $2,257
Senior Vice President and 1999 196,412 100,000
Chief Financial Officer 1998 150,127 0
Cipora Kurtzman-Lavut(1) 2000 $203,942 0 $ 0
Senior Vice President 1999 199,221 500,000
1998 162,225 0
</TABLE>
(1) The amounts shown are the amounts actually paid to the named officers during
the respective fiscal years. Because of the timing of the payments, these
amounts do not represent the actual salary accrued by each individual during the
period. The actual salary rate for these individuals which was accrued during
the fiscal year ended February 2000, 1999 and 1998, respectively, were as
follows: Zvi Kurtzman - $385,000, $385,000, $200,000; Gerald S. Papazian -
$210,000, $210,000, $140,000; Arthur J. Schwartz - $205,000, $205,000, $160,000;
Steven C. Veen - $200,000, $200,000, $150,000; Cipora Kurtzman-Lavut - $195,000,
$195,000, $150,000.
Of the compensation paid in Fiscal 2000, $144,561, $34,781, $78,201,
$44,918 and $58,520 was paid in the form of restricted common stock of the
Company to Mr. Kurtzman, Mr. Papazian, Mr. Schwartz, Mr. Veen and Ms.
Kurtzman-Lavut, respectively.
(2) Such compensation consisted of total Company contributions made to the plan
account of each individual pursuant to the Company's Employees Stock Ownership
Plan during the fiscal years ended February 29, 2000.
No cash bonuses or restricted stock awards were granted to the above
individuals during the fiscal years ended February 29, 2000, February 28, 1999
and February 28, 1998.
The following table summarizes certain information regarding the number
and value of all options to purchase Common Stock of the Company held by the
Chief Executive Officer and those other executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-Money Options/
Name Year End SARs at Fiscal Year End*
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Zvi Kurtzman 870,000 600,000 $ 0 $ 0
Gerald S. Papazian 166,000 60,000 $ 0 $ 0
Arthur J. Schwartz 515,000 300,000 $ 0 $ 0
Steven C. Veen 265,000 160,000 $ 0 $ 0
Cipora Kurtzman-Lavut 515,000 300,000 $ 0 $ 0
</TABLE>
*Based on the average high and low reported prices of the Company's Common Stock
on the last day of the fiscal year ended February 29, 2000.
Subsequent to year end, the above named officers were awarded the
following option grants: Zvi Kurtzman - 4,500,000 shares, Gerald S. Papazian -
1,000,000 shares, Arthur J. Schwartz - 1,000,000 shares, Steven C. Veen -
1,000,000 shares, Cipora Kurtzman-Lavut - 1,000,000 shares.
No options were exercised by the above individuals during the fiscal
year ended February 29, 2000.
Employment Agreements
Effective as of March 5, 1998 the Company, following unanimous approval
of all five outside, disinterested, directors of the Board of Directors, entered
into employment agreements with each of Messrs. Kurtzman, Schwartz, Kaufman and
Ms. Kurtzman Lavut. The employment agreements provide for a term of three years,
in each case with provision for automatic one year extensions until either the
executive or the Company notifies the other that such party does not wish to
extend the agreement. Messrs. Kurtzman, Schwartz, Kaufman and Ms. Kurtzman Lavut
are paid base salaries of $385,000, $205,000, $195,000, $195,000 per year
pursuant to their respective employment agreements. In addition, such agreements
provide for discretionary annual bonuses as determined by the Board of Directors
and target bonuses of up to 50% of the executive's base salary based on the
attainment of certain criteria determined by the Compensation Committee. The
employment agreements also provide for standard employee benefits, including
participation in the Company's stock incentive plan. In addition, the Company is
required to maintain, during the executive's term of employment, a life
insurance policy with a face value of two times the executive's base salary,
provided such premiums do not exceed $10,000 per year.
Each of the employment agreements provides that if the Company
terminates the executive's employment without "cause" (as defined in the
employment agreements), then such executive is entitled to receive the base
salary at the rate then in effect for the remainder of the term (or for a period
of six months if greater), a bonus equal to the highest annual discretionary
bonus in the preceding three year period prior to such termination for each
fiscal year during the Severance Period, continuation of all life insurance
premium payments and all outstanding equity awards would vest. Pursuant to the
terms of the employment agreements Messrs. Kurtzman, Schwartz, Kaufman and Ms.
Kurtzman Lavut also received a one time option grant to purchase, respectively,
1,000,000, 500,000, 500,000 and 500,000 shares of Common Stock under the
Company's Option Plan, which options vest over five years. The per share
exercise price of such grant is $3.31, which is 5% above the fair market value
of the options on the date such options were granted.
The employment agreements provide that during the term of employment,
each executive will be subject to certain confidentiality and non-solicitation
restrictions.
Severance Agreements
Effective as of March 5, 1998, the Company, following unanimous
approval of all five outside, disinterested, directors of the Board of
Directors, entered into severance agreements with each of Messrs. Kurtzman,
Schwartz, Kaufman and Ms. Kurtzman Lavut. The severance agreements provide for a
term of three years, with a provision for automatic one-year extensions until
either the executive or the Company notifies the other that such party does not
wish to extend the agreement. If a Change in Control (as defined in the
agreement) occurs, the agreements will continue for at least 24 months following
the date of such Change in Control. The agreements provide that if, following a
Change in Control, the executive's employment is terminated without Cause (as
defined in the agreement) or with Good Reason (as defined in the agreement) or
the executive terminates his or her employment for any reason during the one
month period commencing on the first anniversary of the Change in Control, the
executive would be entitled to receive (i) three times the sum of the base
salary plus the highest annual bonus earned by the executive in the three year
period immediately preceding such termination; (ii) continued employee benefits
for three years, reduced to the extent benefits of the same type are received by
or made available to the executive during the 36 month period following
termination; and (iii) accelerated vesting of stock options. To the extent the
executive becomes subject to the "golden parachute" excise tax imposed under
Section 4999 of the Internal Revenue Code of 1986, the executive would receive
an additional cash payment in an amount sufficient to offset the effects of such
excise tax.
Compensation Committee Report
The Company maintains a Compensation Committee (the "Committee"),
consisting entirely of outside, disinterested, directors who are not employees
or former employees of the Company. The Committee recommends salary practices
for executive officers of the Company, with all compensation determinations
ultimately made by a majority of the outside, disinterested, directors. Prior to
Fiscal 1998, compensation of executive officers, other than the Chief Executive
Officer, was determined by the Chief Executive Officer after review and
consultation with the Committee.
Compensation Philosophy
The Company's policy in compensating executive officers is to establish
methods and levels of compensation that will provide strong incentives to
promote the profitability and growth of the Company and reward superior
performance. Compensation of executive officers includes salary as well as
stock-based programs. The Board believes that compensation of the Company's key
executives should be sufficient to attract and retain highly qualified personnel
and also provide meaningful incentives for measurably superior performance. The
Company places special emphasis on equity-based compensation, particularly in
the form of options. This approach also serves to match the interests of the
executive officers with the interest of the stockholders. The Company seeks to
reward achievement of long and short-term performance goals which are measured
by a number of factors, including improvements in revenue and achieving
profitability.
Included in the factors considered by the Committee in setting the
compensation of the Company's Chief Executive Officer are the growth in the
Company's commercial sales, the development of commercial applications for the
Company's technology, and the effective allocation of capital resources.
Employment Contracts
The Company offers employment contracts to key executives only when it
is in the best interest of the Company and its stockholders to attract and
retain such key executives and to ensure continuity and stability of management.
Effective as of March 1998, the Company entered into employment and severance
agreements with Mr. Kurtzman, the Company's Chief Executive Officer, and Messrs.
Schwartz, Papazian, Veen and Ms. Kurtzman Lavut (the "Named Executive Officers")
and other key executives of the Company. The Committee reviewed and approved
such agreements unanimously after consulting with a nationally recognized
employee benefits firm and determining that such agreements were necessary in
order to retain highly qualified executives whose abilities are critical to the
long-term success and competitiveness of the Company.
The Company's senior management believes that at some time in the
future, as market acceptance of the AuraGen accelerates and manufacturing
operations expand, it may be desirable to replace all or part of the senior
members of the management team with individuals having focused experience in
large scale manufacturing and sales operation. Accordingly, in March 2000 Zvi
Kurtzman, the Company's Chairman and Chief Executive Officer, proposed to the
Board of Directors that consideration be given to restructuring the employment
agreements of some or all of senior management (Zvi Kurtzman, Arthur J.
Schwartz, Steven Veen, Cipora Kurtzman, Gerald Papazian and Neal Kaufman,
referred to as "Senior Management") to allow the Company the flexibility to
implement an orderly management transition, if and when deemed advisable by the
Board.
Subsequently, the Company's Board of Directors entered into discussions
with certain members of Senior Management with a view towards restructuring
their employment and severance agreements. The Board of Directors, through its
Compensation Committee, retained independent outside consultants to formulate a
proposal whereby the employment relationship with Senior Management would be
modified to allow for the possibility of an orderly management transition in the
future if and when deemed advisable by the Board.
Following discussions between the Compensation Committee of the Board
of Directors and Senior Management, in consultation with independent
consultants, the Compensation Committee proposed to Senior Management that
agreements be entered into between Senior Management and the Company whereby the
existing employment agreements would be restructured. Under the current proposal
being discussed the Company would have the right to terminate the employment of
any of the members of Senior Management for any reason as employees at will and
Senior Management would relinquish its rights to further compensation and
severance payments under the existing employment agreements. In exchange for
relinquishing such rights, the participating members of Senior Management would
receive a one time payment in Aura Common Stock (valued at $0.32 per share)
approximately equal to the value of the remaining term of the existing
employment agreements. If and when any of the Senior Management members' are
terminated in the Board's discretion, such Senior Management members would
thereafter remain as consultants to the Company for a period of one year at 85%
of their current base salaries, subject to extension by mutual agreement. Senior
Management has agreed in principal to these basic terms. However, there are
material terms which remain to be considered and agreed to by the Board of
Directors and Senior Management. There are no assurances that final agreements
will be achieved between the Company and Senior Management or when such
agreements will be implemented.
Compensation of Chief Executive Officer and Other Executives
The Compensation Committee increased Mr. Kurtzman's salary in March
1998 to $385,000, effective as of December 1997, after consulting with a
nationally recognized employee benefits firm. The increase reflected the
Compensation Committee's assessment of his performance and Mr. Kurtzman's
service to the Company. Salary increases for other senior executives effected
during 1998 were based on similar considerations including individual
performance, position, tenure, experience and compensation surveys of comparable
companies.
Effective in Fiscal 1999 Mr. Kurtzman and the Named Executive Officers
are, pursuant to their employment agreements with the Company, entitled to a
discretionary annual bonus as determined by the Compensation Committee and a
majority of the outside, disinterested, directors of the Board of Directors. In
determining the amounts of such bonuses, the Compensation Committee considers
the individual performance of each executive and the performance of the Company.
Based upon the Company's financial performance during Fiscal 2000 the
Compensation Committee determined not to award bonuses to Mr. Kurtzman or the
Named Executive Officers.
Section 162(m) Policy
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally provides that publicly held companies may not deduct compensation paid
to certain of its top executive officers to the extent such compensation exceeds
$1 million per officer in any year. However, pursuant to regulations issued by
the Treasury Department, certain limited exemptions to Section 162(m) apply with
respect to "qualified performance-based compensation" and to compensation paid
in certain circumstances by companies in the first few years following their
initial public offering of stock. The Company has taken steps to provide that
these exemptions will apply to compensation paid to its executive officers, and
the Company will continue to monitor the applicability of Section 162(m) to its
ongoing compensation arrangements. Accordingly, the Company does not expect that
amounts of compensation paid to its executive officers will fail to be
deductible by reason of Section 162(m).
Committee Members
Salvador Diaz-Verson, Jr., Stephen A. Talesnick and David F. Hadley
Compensation Committee Interlocks and Insider Participation
The Compensation Committee in Fiscal 2000 was comprised of Salvador
Diaz-Verson, Jr. Decisions regarding compensation of executive officers for the
Fiscal year ended February 29, 2000 were made unanimously by the outside,
disinterested, directors of the Board of Directors, after reviewing
recommendations of the Compensation Committee. Decisions regarding option grants
under the 1989 Option Plan for the Fiscal year ended February 29, 2000 were made
unanimously by the outside, disinterested, directors of the Board of Directors,
after reviewing recommendations of the Compensation Committee.
Audit Committee Report
The Company maintains an Audit Committee (the "Committee"), consisting
entirely of outside, disinterested directors who are not employees or former
employees of the Company. The Committee has, in the course of its duties,
reviewed and discussed with management the audited financial statements, and has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61. The Committee has also received the
appropriate auditors disclosures regarding the auditors' independence as
required by Independence Standards Board Standard No. 1. The Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K as filed with the
Commission for Fiscal 2000. The Board of Directors has adopted a written charter
for the Committee which is included in Appendix 1.
Changes in Accountants
In August 2000 the Company received a notice of resignation from its
independent auditors, Pannell Kerr Forster, Certified Public Accountants, A
Professional Corporation ("PKF"). Having served as the independent auditors of
the Company since 1992, PKF has never had nor does it currently have any
disagreements with the Company on any matter of accounting principles or
practices, financial statement disclosure, auditing scope or procedure or any
reportable events. The auditors reports on the financial statements for the past
eight years during its entire engagement period have not contained any adverse
opinion or disclaimer of opinion and have not been qualified or modified as to
uncertainty, audit scope or accounting principles except for fiscal years 1999
and 2000 when the audit reports were modified with a going concern uncertainty.
The Company has been informed that PKF's decision was due to business reasons.
PKF is fully cooperating with the auditor selection and transition
process, which the audit committee expects to complete as soon as possible. The
Company as part of its restructuring strategy and focus on the AuraGen, will now
seek to reduce its costs associated with its audits. The Company's next audited
financial report for the year ending February 28, 2001 is due to be filed on May
31, 2001.
Unrelated to its decision and pursuant to SEC rules, under Item
304(a)(1)(v)(C)(1)(i) of Regulation S-K, PKF advised that information had come
to its attention which, if further investigated, may materially impact the
fairness or reliability of previously issued audit reports or the underlying
financial statements of Aura Systems Inc. and Subsidiaries. The information was
contained in court filings of the SEC in regards to the Staff's response to
motions to quash subpoenas. These motions were filed in connection with a
pending SEC investigation, reported publicly by the Company in a press release
dated January 20, 1999.
The Staff of the SEC has advised the Company that the investigation is
confidential and should not be construed as an indication that any violation of
law has occurred or as a reflection upon any person, entity or security. The
Company is cooperating fully with the inquiry. The Company does not believe that
the matters referred to in the SEC Staff's requests will have a material effect
on the Company's future financial condition or results of operations.
Representatives of Pannell Kerr Forster are not expected to be in
attendance at the Annual Meeting.
Certain Relationships and Related Party Transactions
Related Transactions
December 1998 Private Placement
In December 1998 the Company completed a private placement of Units,
each Unit consisting of 10 shares of Common Stock and Warrants to purchase four
shares of Common Stock at an exercise price of $1.00 per share for five years.
The original subscription price was $10.00 per Unit. Of the total gross offering
proceeds of approximately $1.8 million, $100,000 was invested by the mother of
Zvi Kurtzman, and $400,000 was invested by Stephen Talesnick, who subsequently
became a member of the Board of Directors in 1999. The terms of the offering
called for, among other things, the prompt registration of the purchased
securities with the SEC. As a result principally of delays in completing the
Company's audit for the fiscal year ended February 1999, the Company was unable
to timely file the required registration. Consequently in amendments to the
offering terms which culminated in March 2000, the Company agreed to increase
the number of shares received by each investor based upon an agreed price of
$.33 per share and the investors agreed to surrender the Warrants and their
right to receive interest from the Company.
Convertible Note Exchange
As part of the Company's financial restructuring in Fiscal 1999 the
Company offered to exchange convertible notes issued to investors in 1993 for
Common Stock. As a result of the restructuring the Company converted the notes
at a price of $.27 per share. These investors among others included Zvi Kurtzman
and Arthur J. Schwartz, whose notes entitled them to receive from the Company
$100,000 and $80,000, respectively, plus accrued and unpaid interest. Both
Messrs. Kurtzman and Schwartz exchanged their notes for Common Stock in March
2000.
Transactions with Algo Technologies, Inc. and Affiliates
In October 1999 the Company entered into an agreement with RGC
International Investors, LDC, an institutional investor ("RGC") and Algo
Technologies, Inc. ("Algo") whereby RGC (i) sold to Algo and a group of
unrelated investors (the "Algo Investors") the Company's three Convertible
Unsecured Debentures (the "RGC Debentures"), in the aggregate principal amount
of $17,365,000, (ii) exchanged with the Registrant its $3 million Secured
Convertible Note for a new non-convertible Secured Note (the "New RGC Note") in
the original principal amount of $3 million, and (iii) cancelled Warrants to
purchase 9,000,770 shares of the Registrant's Common Stock in exchange for new
Warrants to purchase 1,000,000 shares of common stock exercisable at $0.375 per
share. The New RGC Note bears interest at the rate of 8% per annum, with
principal and interest payable no less frequently than quarterly. The New RGC
Note continues to be secured by a lien on certain assets of the Company,
including inventory and accounts receivable.
Under the agreement between the Company and the Algo Investors, the RGC
Debentures were convertible into a maximum of 46,500,000 shares of the
Registrant's Common Stock unless the Registrant failed to complete the
restructuring with a group of three investors, including Infinity Investors
Limited ("Infinity"). The Algo Investors converted a portion of the RGC
Debentures into 46,500,000 shares of Common Stock and canceled the remaining
outstanding principal and interest owed under the RGC Debentures upon the
consummation of the restructuring with another investor group of approximately
$17.4 million of outstanding Debentures described below.
In February 2000 the Company consummated a restructuring agreement with
Infinity whereby the Algo Investors acquired $4 million of Debentures from
Infinity in exchange for $3 million from the Algo Investors and 1,111,111 shares
of Common Stock owned by Algo, and Aura exchanged with the Investor Group the
remaining outstanding Debentures evidencing more than $13 million of
indebtedness for 100,000 Warrants exercisable at $0.375 per share, and new
Secured Notes in the aggregate principal amount of $12.5 million. The Debentures
acquired by the Algo Investors were converted into 18,534,445 shares of Aura
Common Stock in full satisfaction of such Debentures as part of the
restructuring.
In October 1999 Algo acquired 10 million shares of Aura Common Stock
from Aura at $0.25 in a private placement. In May 2000 Arthur Liu, who may be
deemed to be an affiliate of Algo, participated in a private placement whereby
Mr. Liu received Units consisting of 9 million shares of Aura Common Stock and
Warrants to purchase 5 million shares of Common Stock at $0.48 per share. Algo
may be deemed to be the beneficial owner of more than 5% of Aura's outstanding
Common Stock. Mr. Liu is the beneficial owner of a majority of the capital stock
of Algo. See "Security Ownership of Certain Beneficial Owners and Management"
elsewhere herein.
In June 1999 Alaris, Inc., an affiliate of Algo, acquired or licensed
the principal assets and technology of Aura's AuraSound division. The sale was
finalized in December 1999 with total consideration received of approximately
$2.4 million.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's officers and directors, and
beneficial owners of more than ten percent of the Common Stock, to file with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. reports of ownership and changes in ownership of the Common Stock.
Copies of such reports are required to be furnished to the Company. Based solely
on its review of the copies of such reports furnished to the Company, the
Company believes that during its Fiscal year ended February 29, 2000, all filing
requirements applicable to its officers, directors, and ten percent beneficial
owners were satisfied.
<PAGE>
Performance Graph
The following graph compares the cumulative total stockholder return of
the Company with the cumulative total return on the NASDAQ Stock Market Index
(U.S.) and the S&P Tech Composite Index. The comparisons in the graph are
required by the Securities and Exchange Commission and are not intended to
forecast or be indicative of possible future performance of the Company's common
stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG AURA SYSTEMS,
INCORPORATED, THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE S & P TECHNOLOGY
SECTOR INDEX
*$100 INVESTED ON 2/28/96 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING FEBRUARY 28
Cumulative Total Return
Feb-96 Feb-97 Feb-98 Feb-99 Feb-00
------ ------ ------ ------ ------
AURA SYSTEMS, INC. 100 49 57 9 6
NASDAQ STOCK MARKET INDEX (US) 100 118 160 207 414
S & P TECHNOLOGY SECTOR 100 130 188 294 508
<PAGE>
MISCELLANEOUS
Stockholder Proposals for the 2001 Annual Meeting
Stockholder proposals complying with the applicable rules under the
Exchange Act intended to be presented at the 2001 Annual Meeting of Stockholders
must be received at the offices of the Company by April 15, 2001 to be
considered by Aura for inclusion in Aura's proxy statement and form of proxy
relating to that meeting. Such proposals should be directed to the attention of
the Secretary, Aura Systems, Inc., 2335 Alaska Avenue, El Segundo, CA 90245.
The Stockholder's written notice relating to proposals other than for
director nominees must contain (i) the name and address of the Stockholder
making the proposals, (ii) any material interest of the stockholder in the
proposal, and (iii) such information concerning the person making the proposal
and the proposal itself as would be required by SEC rules to be included in a
proxy statement soliciting proxies for such proposal. Presentation of any
Stockholder proposal at the Annual Meeting is also subject to procedures
established by the Chairman of the Meeting consistent with Delaware corporate
law.
Other Matters
Neither Aura nor any of the persons named as proxies knows of matters
other than those above stated to be voted on at the Annual Meeting. However, if
any other matters are properly presented at the meeting, it is the intention of
the persons named as proxies to vote in accordance with their judgment on such
matters, subject to direction by the Board of Directors.
Under the Company's By-laws, nominations for director of the Company
and other Stockholder proposals, other than those made by the Board of
Directors, may only be made by Stockholders of record on the record date who
have delivered a written notice to the Secretary of the Company no later than 10
days following the Notice of Annual Meeting.
Available Information
The 2000 Annual Report to Stockholders accompanies this Proxy
Statement, but is not to be deemed a part of the proxy soliciting material.
While you have the matter in mind, please complete, sign and return the
enclosed proxy card promptly.
By Order of the Board of Directors
/s/ Michael I. Froch
Michael I. Froch
Secretary
El Segundo, California
-----------------
<PAGE>
APPENDIX 1
CHARTER OF THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS OF
AURA SYSTEMS, INC.
Organization
The Audit Committee shall consist of four members of the Board of Directors, all
of whom shall be independent directors, in accordance with the listing
requirements of the Nasdaq Stock Market.
Statement of Policy
The Audit Committee shall make recommendations to the Board of Directors in
fulfilling its responsibility to the stockholders relating to corporate
accountability and the reporting practices of the Corporation. In so doing, it
is the responsibility of the Audit Committee to maintain free and open means of
communication between the directors, the independent auditors, the internal
auditors and the financial management of the Corporation.
Responsibilities
The Audit Committee shall:
i. Review the external auditor's compensation, the proposed terms of its
engagement and its independence;
ii. Serve as an additional channel of communication between the external
auditor and the Board of Directors and between the senior internal auditing
executive, if any, and the Board of Directors;
iii. Review the results of each external audit, including any qualifications in
the external auditor's opinion, any related letter of reportable
conditions, management's responses to recommendations made by the external
auditor in connection with the audit, reports submitted to the Audit
Committee by the internal auditing department that are material to the
Corporation as a whole, and management's responses to those reports;
iv. Review the Corporation's annual financial statements and any significant
disputes between management and the external auditor that arose in
connection with the preparation of those financial statements;
v. Consider, in consultation with the external auditor and the senior internal
auditing executive, if any, the adequacy of the Corporation's internal
financial controls; it being understood that, among other things, such
controls must be designed to provide reasonable assurance that the
Corporation's publicly reported financial statements are presented fairly
in conformity with generally accepted accounting principles;
vi. Consider major changes and other major questions of choice regarding the
appropriate auditing and accounting principles and practices to be followed
when preparing the Corporation's financial statements;
vii. Meet (a) quarterly with the Chief Executive Officer and separately with the
Chief Financial Officer to review the financial affairs of the Corporation,
and (b) at its discretion with the external auditor for the Corporation;
viii.Review related party transactions for potential conflicts of interest in
accordance with the listing requirements of the Nasdaq Stock Market and
other government regulatory agencies; and
ix. Perform oversight functions as requested by the Board of Directors.
<PAGE>
PROXY
AURA SYSTEMS, INC.
2335 ALASKA AVENUE
EL SEGUNDO, CA 90245
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Zvi (Harry) Kurtzman and Michael I.
Froch as Proxies, each with the power to appoint their substitutes and with full
power to act alone, and hereby authorizes them to represent and to vote as
designated below, all shares of Common Stock of Aura Systems, Inc. held of
record by the undersigned on November 10, 2000, at the Annual Meeting of
Stockholders to be held on January 9, 2001, including any adjournments or
continuances thereof.
The Proxies appointed hereby are instructed to vote as indicated herein
on the following proposals as more fully described in the Company's Notice of
Meeting of Stockholders and Proxy Statement, each dated December 11, 2000,
receipt of which is hereby acknowledged, and in their discretion on any other
business which may properly come before the meeting or adjournment thereof.
1. Election of Directors
[_] FOR all nominees listed below (except [_] WITHHOLD AUTHORITY to vote
as marked to the contrary below) for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name below.)
Zvi (Harry) Kurtzman Harvey Cohen Salvador Diaz-Verson, Jr.
Stephen A. Talesnick Norman Reitman Sanford R. Edlein
Harry Haisfield Neal Meehan William Richbourg
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR PROPOSAL 1.
Dated: ______________________, 200_
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-----------------------------------
Signature
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Signature if held jointly
If you also expect to attend the
stockholders' meeting, the Board of
Directors requests you check the box
below:
[_] I/we plan to attend the
stockholders meeting
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
Dear Shareholders:
Fiscal 2000 was not a very good year. The Company got into major problems
with its NewCom investment in the early part of calendar 1999. These problems
propagated into the new year causing severe shortages in cash flow, which in
return generated extensive pressure from creditors. Most of the year was spent
negotiating with creditors, selling non AuraGen related operations, downsizing
the Company and trying to raise new capital under very distressful conditions.
Revenues declined to approximately $5.8 million from approximately $53.6 million
during the previous year as operations were discontinued. However the losses for
the year declined to approximately $9.5 million from approximately $150 million
in the previous year as the Company was downsized.
Financial Restructure
In October 1999, the Company successfully negotiated an agreement with one
of its key convertible bondholders. This resulted in the elimination of
approximately $23 million in convertible debt, and its replacement with a new
$3.0 million non-convertible note payable quarterly over 36 months at 8%
interest. In February 2000 just before the end of the fiscal year the Company
successfully reached an agreement with the second large convertible bondholder
that resulted in the exchange of approximately $18 million of convertible debt
into a new $12.5 million non convertible note due in 36 months with 8% interest
and quarterly payments of interest only. The Company also reached an agreement
with two other smaller bondholders where their combined debts of approximately
$4.5 million were converted into equity. An amicable agreement was reached with
the trade creditors for a 36-month pay out with 8% interest. We also negotiated
a payment plan with the bank to extend the approximately $3.0 million in line of
credit which the Company drew on during the previous year. A settlement was
negotiated with two of NewCom's creditors where Aura served as an expressed
written guarantor. That resulted in a workout of approximately $6.5 million into
approximately $3.0 million payable over 36 month note at 8% interest and an
additional $1.0 million payable over the following 24 months. Finally we
negotiated with our real estate mortgage holder a plan to eliminate the
arrearages on the mortgage and avoid a foreclosure. There were still a number of
creditors with unresolved issues, but the majority of debt had been
restructured.
Operational Restructure
Management realized that in order to reestablish the viability of the
company drastic changes had to be taken. The changes required not only to the
financial debt restructure, but also to the operational restructure. The logical
long-term strategy for the Company was to focus all of its activities and
efforts on the AuraGen. The Company sold its sound operations to three groups.
The Japanese operation was sold back to the original owners MYS in Japan for
approximately $4.5 million. All the equipment and assets of Electrotec, our
sound touring and leasing company were leased out for $1.5 million for two years
with an option at the end of the lease to purchase all the assets for an
additional $.5 million payment. The main speaker operation was sold for
approximately $5.0 million including assumption of debt. The Company closed its
clean room and discontinued all activities related to electrooptical and the
AMA. The Company retained its license agreement with Daewoo Electronics for the
AMA. All electromagnetic activities not related to the AuraGen were put on hold
and the Company was looking for a buyer for its ceramic operations in New Hope
Minnesota. Staff was reduced from over 500 to approximately 85 during this
period. Facilities were reduced and the Company retained approximately 75,000
square feet of facilities in El Segundo plus the Ceramic facility in Minnesota.
Aura became an AuraGen Company.
While all the financial crises were on going we continued our activities on
the AuraGen. During this period numerous brackets and mounting kits were
developed for many different types of engines. On a small level we continued
sales activities, field service and development for higher power AuraGens.
Throughout this period we diligently continued our activities with the US Army
and General Motors. At the SEMA show in Las Vegas in October 1999, General
Motors displayed the Sierra Professional concept vehicle with the AuraGen. In
January GM introduced the Terradyne truck with the AuraGen and for the next 10
months GM has shown the AuraGen in numerous trade shows across the country.
During this same period the US Army was engaged in numerous tests for the
AuraGen that we supported, both in manpower and numerous changes and adjustments
that the Army required. The Company also shipped small quantities of AuraGen
every month increasing the penetration and awareness to numerous industrial
users of mobile power.
Subsequent Events
Many events transpired since the end of fiscal year 2000. Since March
2000,the AuraGen was shown by GM on the GMC Sierra Professional in many trade
shows across the nation, generating a lot of interest in our product. In surveys
conducted by GM the AuraGen was the number one choice of options by potential
users of the vehicle. General Motors made the AuraGen a required component in
its Goodwrench mobile service program and has installed a fleet of approximately
100 units with the AuraGen. In addition GM plans to add hundreds of additional
units during the next 12 months. At the SEMA show in Las Vegas in the first week
of November 2000, GM displayed the AuraGen on four vehicles, the Chevrolet
Silverado, the Chevrolet Suburban RT, the GMC Savannah Professional and the GMC
Yukon XL. In all these vehicles the AuraGen was totally integrated into the
vehicle with the AuraGen on-off control box built into the dash of the Silverado
and Suburban. Late in 2000, the Company will install its first AuraGen for Ford.
Ford will use this unit for evaluation as a possibility on their heavy-duty
trucks.
The US Army has completed the air drop certification for the AuraGen and
the Company started shipping units to the 82nd Airborne in Fort Bragg. General
Motors Military showed the AuraGen at the Army show in Washington DC and is now
offering the AuraGen as the auxiliary power source on selected versions of its
military vehicles. The Company is involved in numerous other activities with the
US Army. The U.S. Air Force as well as the Air National Guard are now in the
process of evaluating the AuraGen for their use. The Company has delivered 10KW
units to the Army and is in the final stages to offer 10KW units commercially.
The Korean Army has completed its evaluation and has recommended the AuraGens
for its use. The Company is currently demonstrating the AuraGen to a number of
other armies around the world.
Numerous industrial, states, municipalities and other organizations are now
using the AuraGen in their daily work. There are over 2500 AuraGen units in the
field, and the Company is now negotiating many different contracts for fleets
across the nation in numerous industries.
The Company sold its Ceramic operation in Minnesota.
Outlook for the future
The outlook for the future is very positive. We now have a company that is
totally focused on one technology and its application to the AuraGen. Recently
we developed an AuraGen configuration that supports both AC and DC power at
different levels. This allows the AuraGen to act both as a generator and
inverter as well as a battery charger. The implications are that our system can
now provide power with the engine off in the inverter mode and when the
batteries are low the generator mode kicks in to charge the batteries. Our plans
are to increase the family of AuraGen products by developing different power
levels such as 8KW, 10KW, 12KW and 25KW.
We started to increase our sales staff and activities. We have a new VP of
sales and marketing with 35 years experience in the energy field. Our sales
organization and efforts are now focused on a three-pronged approach, Automotive
OEMs, Government and Industrial.
We strongly believe that in calendar year 2001 we may have substantial
penetration in sales across many industries and users of mobile power. We still
have some challenges ahead. We need to rebuild confidence in the investment
community, confidence among our suppliers, confidence among our creditors and
most important confidence among you our shareholders.I would like to take this
opportunity and thank all of you our shareholders for your patience and support
through a difficult year. I would also like to thank our staff, suppliers and
creditors who stuck it out under very trying circumstances. We shall overcome.
/s/ Zvi Kurtzman
Zvi Harry Kurtzman
CEO
This letter contains forward looking statements and future results may
differ materially from those anticipated in such forward statements, as
discussed in the Company's Report which follows.
