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 MARCH 6, 2000
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 March 6, 2000 at 3:00 p.m., PST, at
the Company's corporate offices, 2335 Alaska Avenue, El Segundo, California, for
the following purposes:
(1) To elect a Board of Directors of seven members;
(2) To consider and act upon a proposal to approve an amendment to
the Company's Certificate of Incorporation increasing the
number of authorized shares of Common Stock from 200,000,000
to 500,000,000;
(3) To consider and act upon a proposal to approve an amendment to
the Company's Certificate of Incorporation to authorize
10,000,000 shares of Preferred Stock;
(4) To consider and act upon a proposal to authorize the adoption
of the Company's 2000 Stock Option Plan;
(5) To consider and act upon a proposal to effect a reverse split
of the Company's Common Stock; and
(6) To transact any other business which may properly come before
the meeting.
Stockholders of record at the close of business on January 14, 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
January 14, 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
February 22, 2000
Please mark, date, and sign the enclosed Proxy and return it at an early date in
the enclosed postage-prepaid 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
February 22, 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 March 6, 2000 at
3:00 p.m., PST, at the Company's corporate offices, 2335 Alaska Avenue, El
Segundo, 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, (ii) "FOR" the proposed amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock from 200,000,000 to 500,000,000, (iii) "FOR" the proposed amendment
to the Company's Certificate of Incorporation to authorize 10,000,000 shares of
Preferred Stock, (iv) "FOR" a proposal to authorize the adoption of the
Company's 2000 Stock Option Plan, (v) "FOR" a proposal to effect a reverse split
of the Company's Common Stock, and (vi) 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 January 14,
2000, are entitled to receive notice of and to vote at the meeting. On that
date, Aura had outstanding 177,249,203 shares of Common 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. The
Company has retained the proxy solicitation firm of Georgeson Shareholder
Communications, Inc. to assist the Company in the solicitation of Proxies and
will be paid a fee of $6,500.00, plus its reasonable out-of-pocket expenses.
This Proxy Statement and the accompanying Notice of Annual Meeting and form of
Proxy are being mailed or delivered to Stockholders on or about February 22,
2000.
<PAGE>
PROPOSAL NO. 1
ELECTION OF SEVEN NOMINEES FOR DIRECTORS
The Board of Directors of the Company recommends that the Stockholders vote
"FOR" the election of the seven nominees for director.
Nominees and Voting
The Bylaws of the Company provide for a board of seven directors.
Consequently, at the Annual Meeting, seven 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 seven persons. The Company has
nominated for election as directors the seven persons named below. Each of these
nominees has indicated that they are able and willing to serve as directors.
Under the terms of its proposed 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 seven nominees for director.
Director
Name Age Since Title
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Zvi Kurtzman 52 1987 Chief Executive Officer, Chairman,
Board of Directors
Harvey Cohen 66 1993 Director, member of Audit Committee
Salvador Diaz-Verson, Jr. 47 1997 Director, member of Audit and
Compensation Committees
Stephen A. Talesnick 50 1999 Director
Norman Reitman 76 Nominee
David F. Hadley 35 Nominee
Sanford R. Edlein 56 Nominee
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 to 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.
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.
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 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.
David F. Hadley David F. Hadley is the founder and president of D.F. Hadley
& Co., Inc. ("DFH&Co"). DFH&Co is a boutique financial services firm that
provides consulting and advisory services to emerging growth companies located
in the western United States. The principals of DFH&Co also seek to invest as
principals in the equity securities of DFH&Co clients. Prior to founding DFH&Co
in August 1999, Mr. Hadley was a managing director in the global investment
banking group of BT Alex. Brown Inc., focusing on the media and communications
sector. Mr. Hadley was employed by subsidiaries of Bankers Trust Corporation
from 1986 to June 1999. He received his MSc. In Economic History (with
distinction) from the London School of Economics and his A.B. from Dartmouth
College (summa cum laude).
Sanford R. Edlein, a Certified Public Accountant, 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. Previously, from
1996 to 1998 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.
Mr. Edlein has a AAS degree from Bronx Community College and a BBA degree from
City of New York.
MANAGEMENT
Listed below are Executive Officers of the Company who are not
directors or nominees, their ages, titles and background information. All the
officers listed below hold their offices at the pleasure of the Board of
Directors.
Name Age Title
Gerald S. Papazian 44 President, Chief Operating Officer
Arthur J. Schwartz, Ph.D. 52 Executive Vice President
Cipora Kurtzman Lavut 43 Senior Vice President
Neal B. Kaufman 54 Senior Vice President
Steven C. Veen 44 Senior Vice President, Chief
Financial Officer
Michael Froch 38 Senior Vice President, General
Counsel and Secretary
Keith O. Stuart 43 Senior Vice President Sales and Marketing
Ronald J. Goldstein 58 Senior Vice President Sales and Marketing
Jacob Mail 49 Senior Vice President, Operations
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 the
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. Mr. Papazian has been a
director of the Company since 1997 and will continue in such capacity until the
Annual Meeting..
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. Dr. Schwartz has been a director of the Company since
1987 and will continue in such capacity until the Annual Meeting.
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 and Contracts for the
Company since 1988. She graduated in 1984 from California State University at
Northridge with a B.S. degree in Business Administration. Ms. Lavut has been a
director of the Company since 1989 and will continue in such capacity until the
Annual Meeting.
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. Mr. Kaufman has
been a director of the Company since 1989 and will continue in such capacity
until the Annual Meeting
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. Mr. Veen has been a director of the
Company since 1997 and will continue in such capacity until the Annual Meeting.
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 Research Center, 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 the capacity since November, 1999. He is responsible for the
marketing and sales of AuraGen for worldwide government agencies, military and
OEMs, 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 has been responsible for all marketing and business
development activities for the Company and has served since 1995 as President of
Aura Automotive. 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, 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.
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 January 24, 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 nominees
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> <C>
Gardner Lewis Asset Management 20,517,936 11.58%
Zvi (Harry) Kurtzman 2,444,468 (1)(2) 1.2%
Arthur J. Schwartz 1,928,487 (1)(3)(4) 1.1%
Cipora Kurtzman Lavut 1,655,468 (5) *
Neal B. Kaufman 1,732,657 (1)(7) *
Harvey Cohen 306,250 (6) *
Yoshikazu Masayoshi 283,455 (8) *
Salvador Diaz-Verson, Jr. 44,000 *
Stephen A. Talesnick 2,437,596 (9) 1.4%
Gerald S. Papazian 314,992 (10) *
Steven C. Veen 378,585 (11) *
Michael I. Froch 217,997 (12) *
Keith O. Stuart 322,366 (13) *
Ronald Goldstein 180,188 (14) *
Jacob Mail 214,763 (15) *
Norman Reitman 587,142 (16) *
Sanford R. Edlein 0 *
All executive officers and directors 13,048,414 7.0%
as a group (15 persons)
</TABLE>
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* 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 and
convertible securities exercisable within 60 days of January 24, 2000.
(3) Includes 515,000 shares which may be purchased pursuant to options and
convertible securities exercisable within 60 days of January 24, 2000.
(4) Includes 32,000 shares held by Dr. Schwartz as custodian for his
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 January 24, 2000.
(6) Includes 31,250 shares beneficially owned, and 265,000 shares which
may be purchased pursuant to options within 60 days of January 24, 2000 of
which 100,000 are beneficially owned.
(7) Includes 470,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000.
(8) Includes 283,455 shares which were received as part of the MYS
acquisition purchase consideration.
(9) Includes 196,364 shares which may be purchased pursuant to warrants
exercisable within 60 days of January 24, 2000. Mr. Talesnick joined the Board
of Directors in September 1999.
(10) Includes 166,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000.
(11) Includes 215,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000.
(12) Includes 130,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000.
(13) Includes 300,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000. In Fiscal 2000 these options
were divided equally pursuant to a court order as part of a marital dissolution
proceeding.
(14) Includes 140,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000.
(15) Includes 150,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000.
(16) Includes 345,000 shares which may be purchased pursuant to options
exercisable within 60 days of January 24, 2000 and 12,500 shares owned by Mr.
Reitman's wife, as to which 12,500 shares he disclaims any beneficial ownership.
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 six meetings during the year ended
February 28, 1999. Each director whose term is expected to continue attended
more than 75% of the Board meetings during Fiscal 1999. During the last fiscal
year the Company did not maintain a nominating committee. Since August 1993, the
Company has maintained a Compensation Committee which in Fiscal 1999 consisted
of Messrs. Diaz-Verson, Jr., and Brigadier Ashok Dewan. The Compensation
Committee met two times during Fiscal 1999. Since January 1989, the Company has
maintained an Audit Committee which in Fiscal 1999 consisted of Salvador
Diaz-Verson, Jr., Harvey Cohen and Brigadier Ashok Dewan. 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 28,
1999.
Effective December 1992, the Company elected to begin to compensate
non-officer directors at the rate of $5,000 per year. Effective September 1997,
each non-employee director is entitled to receive $30,000 per year for serving
as a director, and $5,000 per year for each director who serves on the audit
committee.
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 28, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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) 1999 $384,290 1,000,000 $1,966
Chief Executive Officer 1998 245,018 0
1997 212,549 0
Arthur J. Schwartz (1) 1999 $204,895 500,000 $1,872
Executive 1998 172,115 0
Vice President 1997 163,971 0
Gerald Papazian (1) 1999 $203,025 100,000 $1,846
President and Chief Operating 1998 154,737 0
Officer 1997 143,122 0
Steven Veen(1) 1999 $196,412 100,000 $1,811
Senior Vice President and 1998 150,127 0
Chief Financial Officer 1997 151,817 0
Yoshikazu Masayoshi 1999 $290,500 0 $ 0
President, MYS Corporation 1998 273,242 0
1997 270,000 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 1999, 1998 and 1997, respectively, were as
follows: Zvi Kurtzman - $385,000, $200,000, $200,000; Arthur J. Schwartz,-
$205,000, $160,000, $160,000; Gerald S. Papazian - $210,000, $140,000, $140,000,
Steven C. Veen - $200,000, $150,000, $150,000.
(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 year ended February 28, 1999.
No cash bonuses or restricted stock awards were granted to the above
individuals during the fiscal years ended February 28, 1999, February 28, 1998
and February 28, 1997.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information at February 28,
1999, and for the year then ended, with respect to stock options granted to the
individuals named in the Summary Compensation Table above. No options have been
granted at an option price below the fair market value of the Common Stock on
the date of grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized
Number of % of Total Value at Assumed
Securities Options/SARS Annual Rates of
Underlying Granted to Stock Price
Options/SARS Employees In Exercise Price Expiration Appreciation for
Name Granted Fiscal Year Per Share Date Option Term
---- ------- ----------- --------- ---- -----------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
-- ---
Zvi (Harry) Kurtzman 1,000,000 35.7% 3.31 3/5/08 0 0
Arthur J. Schwartz 500,000 17.9% 3.31 3/5/08 0 0
Gerald Papazian 100,000 3.6% 3.31 3/5/08 0 0
Steven C. Veen 100,000 3.6% 3.31 3/5/08 0 0
Yoshikazu Masayoshi -- -- -- -- -- --
</TABLE>
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.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
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
Arthur Schwartz 515,000 300,000 $ 0 $ 0
Gerald Papazian 166,000 60,000 $ 0 $ 0
Steven Veen 215,000 210,000 $ 0 $ 0
Yoshikazu Masayoshi 0 0 $ 0 $ 0
*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 28, 1999.
</TABLE>
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 and Kaufman 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.
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.
In March 1998, the Committee reviewed and unanimously approved stock
option awards under the Company's stock option plan after consulting with a
nationally recognized employee benefits firm. The Committee granted Mr. Kurtzman
an option to purchase 1,000,000 shares of Common Stock, which vest 20% per year
over five years. The options are exercisable at $3.31 per share which was 105%
of the market price of the Company's Common Stock on the date of grant. Senior
executives in the Company participate in the stock option plan and the
Compensation Committee granted such executives options to purchase Common Stock
during Fiscal 1998. In determining the number of shares to award to Mr. Kurtzman
and other executives, the Compensation Committee considered several factors,
including primarily Mr. Kurtzman's and other executives' actual and potential
contributions to the Company's long term success, and the size of awards
provided to other executives in comparable companies holding similar positions.
In July 1997 the Compensation Committee unanimously recommended the
re-pricing of stock options granted to key employees, including Mr. Kurtzman and
the Named Executive Officers. The Compensation Committee's re-pricing of options
for key employees was made to those persons who have made significant
contributions to the Company's business, for the purpose of maintaining
corporate morale and creating an incentive for continued employment.
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 1999 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 Member
Salvador Diaz-Verson, Jr.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee in Fiscal 1999 was comprised of Brigadier
Ashok Dewan and Salvador Diaz-Verson, Jr. Decisions regarding compensation of
executive officers for the Fiscal year ended February 28, 1999 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 28, 1999 were made unanimously by the outside, disinterested, directors
of the Board of Directors, after reviewing recommendations of the Compensation
Committee.
Certain Relationships and Related Party Transactions
None.
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 28, 1999, all filing
requirements applicable to its officers, directors, and ten percent beneficial
owners were satisfied.
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.
<PAGE>
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 2/28/95 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING FEBRUARY 28
Cumulative Total Return
Feb-95 Feb-96 Feb-97 Feb-98 Feb-99
----- ------ ------ ------ ------
AURA SYSTEMS, INC> 100 161 80 93 15
NASDAQ STOCK MARKET INDEX (US) 100 139 165 223 288
S & P TECHNOLOGY SECTOR 100 149 194 280 414
<PAGE>
PROPOSAL NO. 2
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
The Board of Directors recommends that the Stockholders vote "For" the proposed
amendment to the Company's Certificate of Incorporation to increase the number
of shares of Common Stock authorized for issuance.
On January 14, 2000, the Board of Directors adopted resolutions
approving an amendment to the Company's Certificate of Incorporation to increase
the number of shares of Common Stock, $.005 par value per share, authorized for
issuance from 200,000,000 to 500,000,000 (the "Common Stock Amendment"), and
directing that the Amendment be presented to the Stockholders for approval at
the Company's Annual Meeting.
As of October 1, 1999, approximately 106,133,392 shares of the
Company's Common Stock were outstanding. As of January 14, 2000, the Company had
increased the number of outstanding shares of Common Stock to 177,249,203. The
issuance of approximately 71,115,811 shares since October 1, 1999, resulted in
the elimination of more than $30 million of indebtedness for borrowed money and
an equity infusion of approximately $7.0 million in a private placement of
Common Stock consummated in November 1999.
Accordingly, only 22,750,797 shares of Common Stock were available for
issuance as of January 14, 2000. In addition, on such date the Company had
reserved for issuance approximately 60 million shares of Common Stock for future
issuance upon the possible future reduction of indebtedness, conversion or
exercise of outstanding warrants and options of the Company. Additional shares
of Common Stock beyond the amount currently authorized will be required by the
Company in the near future for the following reasons:
o The Company will be impeded in its ability to raise needed capital
to sustain and expand its operations if it does not have
additional authorized shares of Common Stock available for
issuance.
o The availability of proceeds from future sales of Common Stock
will allow the Company the flexibility to reduce existing debt.
o The terms of the Company's proposed loan agreement with one of its
lenders, the Infinity Group, requires that the Company increase
the number of its authorized shares of Common Stock, as this
lender has the right to convert its debt into Common Stock at a
fixed conversion price, generally $.60, under certain
circumstances if the Company defaults on its obligations to the
Infinity Group.
o An increase in the number of authorized shares of Common Stock is
required under the terms of the Company's proposed loan agreement
with the Infinity Group.
o The Company has committed to issue at least 2,000,000 shares of
Common Stock to implement the settlement of a class action
lawsuit.
o Additional authorized shares of Common Stock will be required to
implement the 2000 Stock Option Plan proposed for adoption, which
the Company believes will be necessary to attract, retain and
motivate qualified personnel.
For these reasons, Management believes it is both necessary and
appropriate to increase the number of its authorized shares of Common Stock from
200,000,000 to 500,000,000. If the proposal to effect a Reverse Stock Split
(Proposal No. 5) is adopted and implemented by the Company, the number of
authorized shares will be reduced proportionately. For example, if the Common
Stock Amendment is implemented and a 1:10 Reverse Split is implemented, the
number of authorized shares of Common Stock would then be 50,000,000.
Need for Additional Working Capital
Historically, the Company's cash flow from operations has not been
sufficient to maintain its business. In the past the Company has financed its
growth from external sources of financing. These sources have included,
principally, the sale of its Common Stock and private indebtedness convertible
into Common Stock. Access to conventional bank financing has been limited.
In the fiscal year ended February 28, 1999, significant steps were
taken to downsize and refocus the Company's business on the Company's AuraGen
mobile generator. Management believes that despite these actions, current and
projected cash flow for at least the next six months will not be sufficient to
maintain and expand these operations. Thereafter, the Company anticipates that
additional capital will be required to meet the anticipated increased demand for
the AuraGen products. Absent an increase in the number of authorized shares of
its Common Stock, the Company will be limited in its ability to implement its
planned future growth and expansion.
Ability to Reduce Existing Debt
Following the Company's debt restructuring in Fiscal 2000, the Company
still has significant indebtedness. It may be in the Company's interest in the
future to raise additional funds from the sale of its Common Stock to reduce a
portion of this outstanding indebtedness. For example, under the proposed terms
of the restructured indebtedness with Infinity Group the Company is entitled to
a substantial discount of principal in the event of early prepayment of the
debt, initially 20% of the principal amount prepaid, which percentage declines
ratably over the term of the debt. In addition, certain creditors of the Company
have expressed an interest in forgiving a portion of outstanding debt in
exchange for early payment. Therefore, depending upon a number of factors,
including the future price of the Company's Common Stock, it may be desirable to
utilize proceeds from the future sale of Common Stock to prepay debt.
Compliance With Infinity Group Loan Agreement
Under a proposed agreement between the Company and the Infinity Group
as part of the restructuring, the remaining $12.5 million of debt is convertible
into Aura Common Stock at a fixed price, generally $.60 per share, in the event
of an uncured default. Therefore, Aura is required to maintain a sufficient
number of authorized shares of Common Stock to provide for this event. If the
Stockholders do not approve an increase of the number of authorized shares of
Common Stock, the Company will be in default under the proposed loan agreement
with the Infinity Group, entitling the lender to accelerate the maturity of the
$12.5 million of debt.
Implementation of 2000 Stock Option Plan
The Company has proposed the adoption of its 2000 Stock Option Plan,
which the Company believes is essential to attract, retain and motivate key
personnel (Proposal No. 4). Absent an increase in the number of authorized
shares of Common Stock, the Company will be unable to implement the Option Plan.
Therefore, Management believes it is essential that the Stockholders
vote in favor of the proposal to increase the number of authorized shares of
Common Stock from 200,000,000 to 500,000,000. Although the Company has no plans
to utilize all of the increased authorized shares which would be available if
the Common Stock Amendment is approved, Management believes that it is important
that the Company have the flexibility to issue additional shares without further
authorization from the Stockholders. If the Common Stock Amendment is approved
by the Stockholders, the Company will not seek further authorization from the
Stockholders prior to any issuances of Common Stock, except as may be required
by law or securities exchanges.
The authorized number of shares of Common Stock and the subsequent
issuance of such shares could have the effect of delaying or preventing a change
in control of the Company without further action by the Stockholders. Shares of
authorized and unissued preferred stock could (within the limits imposed by
applicable law) be issued in one or more transactions which would make a change
in control of the Company more difficult and, therefore, less likely. Any such
issuance of additional stock could have the effect of diluting the earnings per
share and book value per share of outstanding shares of the Company's Common
Stock, and such additional shares could be used to dilute the stock ownership or
voting rights of persons seeking to obtain control of the Company.
The holders of Common Stock have equal rights to dividends when, as and
if declared by the Board of Directors and are entitled to share ratably in all
of the assets of the Company available for distribution to holders of Common
Stock upon the liquidation, dissolution or winding up of the affairs of the
Company, subject to the rights of the holders of any outstanding preferred
stock. Holders of Common Stock do not have preemptive rights. Holders of Common
Stock are entitled to one vote per share on all matters which Stockholders are
entitled to vote upon at all meetings of Stockholders.
Stockholder Vote
The affirmative vote of the holders of shares representing a majority
of the outstanding shares on the record date is required to authorize the Common
Stock Amendment.
The Board of Directors recommends that the Stockholders vote "For" the
proposed amendment to the Company's Certificate of Incorporation to increase the
number of shares of Common Stock authorized for issuance.
<PAGE>
PROPOSAL NO. 3
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO AUTHORIZE 10,000,000 SHARES OF PREFERRED STOCK
The Board of Directors recommends that the Stockholders vote "FOR" the proposed
amendment to the Company's Certificate of Incorporation to authorize 10,000,000
shares of preferred stock.
The Company's Certificate of Incorporation does not presently authorize
the Company to issue preferred stock. In January 2000, the Company's Board of
Directors approved, subject to stockholder approval, an amendment to the
Company's Certificate of Incorporation to authorize 10,000,000 shares of
preferred stock, $.005 par value (the "Preferred Stock Amendment"). The rights,
preferences and privileges of the preferred stock, if approved, will be in the
sole discretion of the Company's Board of Directors (within the limits of
applicable law).
The principal purpose of this proposed amendment is to authorize shares
of preferred stock which will be available in the event the Board of Directors
determines that it is necessary or appropriate to raise additional capital
through the sale of securities, to acquire another company or its business or
assets, to seek to establish a strategic relationship with a corporate partner
or to permit a future stock dividend or stock split. The Board of Directors has
no present agreement or arrangement to issue any such shares. If the Preferred
Stock Amendment is approved by the Stockholders, the Board of Directors does not
intend to solicit further Stockholder approval prior to the issuance of any
additional shares of preferred stock, except as may be required by applicable
law.
The authorized number of shares of preferred stock and the subsequent
issuance of such shares could have the effect of delaying or preventing a change
in control of the Company without further action by the Stockholders. Shares of
authorized and unissued preferred stock could (within the limits imposed by
applicable law) be issued in one or more transactions which would make a change
in control of the Company more difficult and, therefore, less likely. Any such
issuance of additional stock could have the effect of diluting the earnings per
share and book value per share of outstanding shares of the Company's capital
stock, and such additional shares could be used to dilute the stock ownership or
voting rights of persons seeking to obtain control of the Company.
Under the terms of the proposed loan agreement with the Infinity Group,
there will be restrictions on the ability of the Company to issue Preferred
Stock without the consent of the lender.
Stockholder Vote
The affirmative vote of the holders of shares representing a majority
of the outstanding shares on the record date is required to authorize the
Preferred Stock Amendment.
The Company recommends that you vote "For" the amendment to the
Certificate of Incorporation to authorize 10,000,000 shares of preferred stock.
<PAGE>
PROPOSAL NO. 4
PROPOSAL TO ADOPT THE COMPANY'S
2000 STOCK OPTION PLAN
The Board of Directors recommends that the Stockholders vote "FOR" the proposal
to adopt the 2000 Stock Option Plan.
Introduction
In 1989 the Company adopted the 1989 Stock Option Plan, which provided
for grants of options to employees of up to 8% of the outstanding Common Stock
from time to time. As of January 31, 2000, options for 6,525,300 shares were
outstanding under the 1989 Plan and options for 504,400 shares had been
exercised. The 1989 Plan expired in 1999. Therefore, no further option grants
may be made under the 1989 Plan.
Therefore, on January 14, 2000 the Board of Directors adopted the 2000
Stock Option Plan (the "New Plan"), subject to Stockholder approval. The New
Plan allows the Company to grant options to purchase the Company's Common Stock
to designated employees, executive officers, directors, consultants, advisors
and other corporate and divisional officers of the Company and its subsidiaries
("Participants"). The Board adopted the New Plan to provide employee and
non-employee Participants with additional incentives to make significant and
extraordinary contributions to the long-term performance and growth of the
Company and to attract and retain employees, directors, consultants and advisors
of exceptional ability.
The Board of Directors recommends that Stockholders vote "FOR" the
adoption of the New Plan in order to assure that the Company will have a vehicle
for attracting and retaining employees, directors, consultants and advisors of
exceptional ability.
The text of the New Plan is set forth as Appendix "A" to this Proxy
Statement. The following is a summary of the principal features of the New Plan
and does not purport to be complete. Stockholders are urged to read the New Plan
in its entirety. This summary is subject to and qualified in its entirety by
reference to Appendix "A." Any capitalized terms which are used in this summary
description but not defined here or elsewhere in this Proxy Statement have the
meanings assigned to them in the New Plan.
Principal Features of the New Plan
The New Plan authorizes the Committee to grant stock options
exercisable for up to an aggregate of 10% of the Company's outstanding shares of
Common Stock, based upon the number of shares outstanding from time to time of
the Company's Common Stock. As of January 14, 2000, there were 177,249,203
outstanding shares of Common Stock. Therefore, as of such date 17,724,920 option
shares were available for grant under the New Plan. No stock options may be
granted under the New Plan after February 1, 2010. If a stock option expires,
terminates or is cancelled for any reason without having been exercised in full,
the shares of Common Stock not purchased thereunder are available for future
grants.
Stock options under the New Plan are intended to qualify as incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986 (the "Code"), if so designated on the date of grant. Stock options that are
not designated or do not qualify as incentive stock options are non-statutory
stock options and are not eligible for the tax benefits applicable to incentive
stock options.
The New Plan will be administered by a Committee of three or more
persons established by the Board of Directors from time to time. The current
Committee members are the full Board of Directors. The Committee has complete
authority, subject to the express provisions of the New Plan, to approve the
persons nominated by the management of Aura to be granted stock options, to
determine the number of stock options to be granted to Participants, to set the
terms and conditions of stock options, to remove or adjust any restrictions and
conditions upon stock options and to adopt such rules and regulations, and to
make all other determinations, deemed necessary or desirable for the
administration of the New Plan.
In selecting optionees, consideration is given to factors such as
employment position, duties and responsibilities, ability, productivity, length
of service, morale, interest in the Company and recommendations of supervisors.
Awards may be granted to the same Participant on more than one occasion. Each
stock option is evidenced by a written option agreement in a form approved by
the Committee.
The purchase price (exercise price) of option shares must be at least
equal to the fair market value of such shares on the date the stock option is
granted or such later date as the Committee specifies. The stock option term is
for a period of ten years from the date of grant or such shorter period as is
determined by the Committee. Each stock option may provide that it is
exercisable in full or in cumulative or non-cumulative installments, and each
stock option is exercisable from the date of grant or any later date specified
therein, all as determined by the Committee. The Committee's authority to take
certain actions under the New Plan includes authority to accelerate vesting
schedules and to otherwise waive or adjust restrictions applicable to the
exercise of stock options.
Each stock option may be exercised in whole or in part (but not as to
fractional shares) by delivering a notice of exercise to the Company together
with payment of the exercise price. The exercise price may be paid in cash, by
cashier's or certified check.
Except as otherwise provided below or unless otherwise provided by the
Committee, an optionee may not exercise a stock option unless from the date of
grant to the date of exercise the optionee remains continuously in the employ of
the Company. If the employment of the optionee terminates for any reason other
than death, disability or retirement at or after the age of 65, the stock
options then currently exercisable remain exercisable for a period of 90 days
after such termination of employment (except that the 90 day period is extended
to 12 months if the optionee dies during such 90 day period), subject to earlier
expiration at the end of their fixed term. If the employment of the optionee
terminates because of death, disability or retirement at or after the age of 65,
the stock options then currently exercisable remain in full force and effect and
may be exercised at any time during the option term pursuant to the provisions
of the New Plan; unless otherwise provided by the Committee, all stock options
to the extent then not presently exercisable shall terminate as of the date of
termination of employment.
An employee may receive incentive stock options covering option shares
of any value, provided that the value of all option shares subject to one or
more of such incentive stock options which are first exercisable in any one
calendar year may not exceed the maximum amount permitted under Section 422 of
the Code (currently $100,000).
Each stock option granted under the New Plan is exercisable during an
optionee's lifetime only by such optionee. Stock options are transferable only
by Will or the laws of intestate succession unless otherwise determined by the
Committee.
The Board of Directors may at any time suspend, amend or terminate the
New Plan. Shareholder approval is required, however, to materially increase the
benefits accruing to optionees, materially increase the number of securities
which may be issued (except for adjustments under anti-dilution clauses) or
materially modify the requirements as to eligibility for participation. The New
Plan authorizes the Committee to include in stock options provisions which
permit the acceleration of vesting in the event of a change in control of the
Company resulting from certain occurrences. The Company intends to maintain a
current registration statement under the Securities Act of 1933 with respect to
the shares of Common Stock issuable upon the exercise of stock options granted
under the New Plan.
Option Grants Under the New Plan
There are currently 82 employees (including 10 executive officers) and
3 non-employee directors eligible to participate in the New Plan. The New Plan
also allows grants of stock options to consultants and advisors. As of January
31, 2000, no options had been granted under the New Plan. Future grants under
the New Plan will be made at the discretion of the Committee and are not yet
determinable.
Summary of Federal Income Tax Consequences
The following discussion of the federal income tax consequences of the
New Plan is intended to be a summary of applicable U.S. federal law. State,
local and foreign tax consequences may differ. Because the federal income tax
rules governing options and related payments are complex and subject to frequent
change and because the tax treatment may be governed by laws of non-U.S.
jurisdictions, optionees are advised to consult their tax advisors prior to
exercise of options or dispositions of stock acquired pursuant to an option
exercise.
Tax Consequences to Optionees
Incentive Stock Options. An optionee recognizes no taxable income upon
the grant of an incentive stock option. In addition, there will be no taxable
income recognized by the optionee at the time of exercise of an incentive stock
option provided the optionee has been in the employ of Aura at all times during
the period beginning on the date of grant and ending on the date three months
before the date of exercise.
Gain recognized upon a disposition of the option shares generally will
be taxable as long-term capital gain if the shares are not disposed of within
(i) two years from the date of grant of the incentive stock option and (ii) one
year from the exercise date. If both of these conditions are not satisfied, the
disposition is a "disqualifying disposition". In that event, gain equal to the
excess of the fair market value of the option shares at the exercise date over
the exercise price generally will be taxed as ordinary income and any further
gain will be taxed as long-term capital gain if the shares were held more than
12 months. Shares acquired upon the exercise of an incentive stock option will
have a basis equal to the exercise price of the stock option.
Upon the exercise of an incentive stock option, an amount equal to the
excess of the fair market value of the option shares at the exercise date over
the exercise price is treated as alternative minimum taxable income for purposes
of the alternative minimum tax.
Incentive stock options exercised by an optionee who has not satisfied
the applicable requirements as to continuous employment do not qualify for the
tax treatment discussed above. Instead, the exercise of such options will be
subject to the rules which apply to the exercise of non-statutory stock options.
Non-statutory Stock Options. An optionee recognizes no taxable income
upon the grant of a non-statutory stock option. In general, upon the exercise of
a non-statutory stock option, the optionee will recognize ordinary income in an
amount equal to the excess of the fair market value of the option shares on the
exercise date over the exercise price.
Shares acquired upon the exercise of a non-statutory stock option by
the payment of cash will have a basis equal to their fair market value on the
exercise date and have a holding period beginning on the exercise date. Gain or
loss recognized on a disposition of the option shares generally will qualify as
long-term capital gain or loss if the shares have a holding period of more than
12 months.
Aura generally must collect and pay withholding taxes upon the exercise
of a non-statutory stock option.
Tax Consequences to Aura
Aura generally is allowed an income tax deduction for amounts that are
taxable to optionees as ordinary income under the foregoing rules, if it
satisfies all Federal income tax withholding requirements. Amounts deemed to be
compensation to executive officers as a result of the exercise of stock options
or the sale of option shares will not be taken into account in determining
whether the compensation paid to the executive exceeds the limits on
deductibility imposed under Section 162(m) of the Code.
Required Approval
The affirmative vote of the holders of a majority of shares of Common
Stock represented and voting at a duly held meeting at which a quorum is present
is required to approve the adoption of the New Plan. Unless marked to the
contrary, proxies received will be voted "FOR" approval of the New Plan.
The Board of Directors recommends that the Stockholders vote "FOR" the
proposal to adopt the 2000 Stock Option Plan.
<PAGE>
PROPOSAL NO. 5
TO CONSIDER AND ACT UPON A PROPOSAL TO EFFECT A POSSIBLE
REVERSE SPLIT OF THE COMPANY'S COMMON STOCK
The Board of Directors recommends that Stockholders vote "FOR" the proposal to
effect the Reverse Split.
The Reverse Stock Split Proposal
On January 14, 2000, the Board of Directors adopted resolutions
directing that the Stockholders consider and vote upon a possible Reverse Stock
Split of the Company's Common Stock. The Board believes that the Reverse Split
is beneficial to the Company and the Stockholders. The principal reasons for the
Reverse Split are to aid the Company in meeting listing requirements for the
Nasdaq Stock Market, to attempt to enhance investor interest in the Common Stock
and to attempt to help the investment community realize the underlying value of
the Common Stock.
Under the terms of the Reverse Stock Split Proposal being submitted to
the Stockholders, the Board of Directors would be authorized to file an
amendment to the Company's Certificate of Incorporation to effect a Reverse
Stock Split of the Company's outstanding Common Stock in an amount not greater
than one share of Common Stock for each 10 shares of outstanding Common Stock at
any time prior to the Company's next Annual Meeting of Stockholders later this
year. Assuming Stockholder approval of the Reverse Stock Split Proposal, the
Board of Directors would retain the discretion to implement a Reverse Stock
Split of not greater than 1:10, or to abandon the Reverse Stock Split Proposal.
In determining when or if the Board will implement the Reverse Stock
Split Proposal, the Board of Directors may consider a variety of factors in
determining whether to proceed with the Reverse Split, including, but not
limited to, overall trends in the stock market, recent changes and anticipated
trends in the per share market price of the Company's Common Stock, business
developments and the Company's actual and projected financial performance.
Presently, the Board of Directors does not intend to implement the
Reverse Stock Split Proposal unless the market price of the Company's Common
Stock trades at or near $1.00 per share. However, following Stockholder approval
of the Reverse Stock Split Proposal, the Board of Directors will retain the
absolute discretion to implement the Reverse Stock Split Proposal in an amount
not greater than 1:10 at any time prior to the Company's next Annual Meeting of
Stockholders or to abandon implementation of the Reverse Split. On February 10,
2000, the closing price of the Company's Common Stock was $0.33 per share.
If the Stockholders approve the Reverse Stock Split Proposal and the
Board of Directors thereafter elects to implement the Reverse Split, the Company
intends to issue a press release announcing the terms and effective date of the
Reverse Split not less than 10 days prior to the effective date of the Reverse
Split.
Reasons for the Reverse Stock Split Proposal
From 1988 until July 1999 the Company's Common Stock was listed on The
Nasdaq Stock Market ("Nasdaq"). In July 1999 the Company's Common Stock was
delisted from The Nasdaq Stock Market as a result of the Company's inabililty to
timely file its Annual Report on Form 10-K with the Securities and Exchange
Commission because of the delay in completing the audit of its annual financial
statements. The audit was completed in February 2000 and the Company regained
compliance with its SEC reporting obligations.
The Common Stock is currently quoted on the over the counter market.
The Company believes the Reverse Split is necessary to achieve compliance with
the quantitative listing maintenance criteria established by Nasdaq regarding
the minimum bid price of listed securities. For initial inclusion on the Nasdaq
National Market, the minimum bid price per share is required to be at least
$5.00. The Company believes that, other than the minimum bid price, it will meet
all of the listing requirements required for listing on Nasdaq.
The Company expects that, as a result of the Reverse Split, the market
price of the Common Stock would increase significantly, thereby enabling the
Company to comply with the Nasdaq $5.00 minimum bid price requirement.
Because the Common Stock is not listed Nasdaq, trading of the Common is
conducted in the over-the-counter market. Because of the absence of a Nasdaq
listing, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Common Stock. In addition,
because the Common Stock is not listed on Nasdaq and presently trades at less
than $5.00 per share, trading in the Common Stock is also be subject to the
requirements of certain rules promulgated under the Exchange Act, which require
additional disclosure by brokers or dealers in connection with any trades
involving a stock defined as a "penny stock" (generally, any non-Nasdaq equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions). Because the Company's Common Stock is presently classified
as a "penny stock," prior to effectuating any trade in the Common Stock, a
broker or dealer is required under such Exchange Act rules to make a suitability
determination as to such proposed purchaser of the Common Stock and to receive a
written agreement, meeting certain requirements, prior to effectuating any
transaction in the Common Stock. The additional burdens imposed upon brokers or
dealers by such requirements could discourage brokers or dealers from effecting
transactions in the Common Stock, which could severely limit the market
liquidity of the Common Stock and the ability of investors to trade the Common
Stock.
The Board also believes that the current low per share price of the
Common Stock may have a negative effect on the price and marketability of
existing shares, the amount and percentage (relative to share price) of
transaction costs paid by individual Stockholders and the potential ability of
the Company to raise capital by issuing additional shares of Common Stock or
other securities convertible into Common Stock or to undertake merger or
acquisition transactions. Reasons for these effects include internal policies
and practices of certain institutional investors which prevent or tend to
discourage the purchase of low-priced stocks, the fact that many brokerage
houses do not permit low-priced stocks to be used as collateral for margin
accounts or to be purchased on margin and a variety of brokerage house policies
and practices which tend to discourage individual brokers within those firms
from dealing in low-priced stocks.
In addition, since broker's commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on higher
priced stocks, the current share price of the Common Stock can result in
individual Stockholders paying transaction costs which are a higher percentage
of the share price than would be the case if the share price were substantially
higher. The Board believes that the Reverse Split, and the expected resulting
increased price level, may enhance investor interest in the Common Stock and may
help the investment community realize the underlying value of the Common Stock.
There is however, no assurance that any of the foregoing effects will occur.
While the Board of Directors believes that the shares of Common Stock
will trade at higher prices than those which have prevailed in recent months,
there is no assurance that such increase in the trading price will occur or, if
it does occur, that it will equal or exceed the direct arithmetical result of
the Reverse Split since there are numerous factors and contingencies which could
affect such price. There is no assurance that the Company will meet the listing
requirements for Nasdaq following the Reverse Split.
Implementation of the Reverse Split
The Reverse Split, if implemented, will be formally implemented by
filing an amendment to the Company's Certificate of Incorporation with the
Secretary of State of the State of Delaware amending the Company's Certificate
of Incorporation to reflect the Reverse Stock Split, effective as of 5:00 p.m.,
Eastern time, on the date of the filing of such amendment with the Delaware
Secretary of State (the "Effective Time"). At the Effective Time all outstanding
shares of Common Stock held by each holder of record on such date would be
automatically combined into such lesser number of shares as is determined by the
Board of Directors, without any further action on the part of the Stockholders.
No fractional shares will be issued. All fractional shares for one-half share or
more will be increased to the next higher whole number of shares and all
fractional shares less than one-half share will be decreased to the next lower
whole number of shares, respectively.
Effects of the Reverse Stock Split
The effect of the Reverse Split upon holders of Common Stock will be
that the total number of shares of the Company's Common Stock (each, an "Old
Share") held by each Stockholder will be automatically converted into the number
of whole shares of Common Stock equal to the number of shares of Common Stock
owned immediately prior to the Reverse Split divided by the number determined by
the Board of Directors, not to exceed 10, adjusted, as described below, for any
fractional shares (each, a "New Share").
Assuming the Reverse Split is approved by the Company's Stockholders at
the Annual Meeting and implemented by the Company, each Stockholder's percentage
ownership interest in the Company and proportional voting power will remain
unchanged, except for minor differences resulting from adjustments for
fractional shares. The rights and privileges of the holders of shares of Common
Stock will be substantially unaffected by the Reverse Split.
All issued and outstanding options, warrants, and convertible
securities would be appropriately adjusted for the Reverse Split automatically
on the effective date of the Reverse Split. The Reverse Split would not affect
any Stockholder's proportionate equity interest in the Company except for those
Stockholders who would receive an additional share of Common Stock in lieu of
fractional shares.
The Reverse Split may result in some Stockholders owning "odd-lots" of
less than 100 shares of Common Stock. Brokerage commissions and other costs of
transactions in odd-lots are generally somewhat higher than the costs of
transactions in "round-lots" of even multiples of 100 shares.
Certain Rights of Common Stock Holders
The holders of Common Stock have equal rights to dividends when, as and
if declared by the Board of Directors and are entitled to share ratably in all
of the assets of the Company available for distribution to holders of Common
Stock upon the liquidation, dissolution or winding up of the affairs of the
Company, subject to any rights, preferences or privileges of holders of any
outstanding preferred stock. Holders of Common Stock do not have preemptive
rights. Holders of Common Stock are entitled to one vote per share on all
matters which Stockholders are entitled to vote upon at all meetings of
Stockholders.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act, and, as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Reverse Split will not affect
the registration of the Common Stock under the Exchange Act.
Pursuant to Delaware law the Company's Stockholders are not entitled to
dissenters' rights of appraisal with respect to the Reverse Stock Split
Proposal.
Exchange of Stock Certificates
Assuming the Reverse Split is approved by the Stockholders and
implemented by the Company, Stockholders will be required to exchange their
stock certificates for new certificates representing the shares of new Common
Stock. Stockholders will be furnished with the necessary materials and
instructions for the surrender and exchange of stock certificates at the
appropriate time by the Company's transfer agent following the effectiveness of
the Reverse Split. Stockholders will not be required to pay a transfer or other
fee in connection with the exchange of certificates. Stockholders should not
submit any certificates until requested to do so.
Federal Income Tax Consequences
The following description of Federal income tax consequences is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this Proxy
Statement.
The Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Split. The Company, however, believes that because
the Reverse Split is not part of a plan to periodically increase a Stockholder's
proportionate interest in the assets or earnings and profits of the Company, the
Reverse Split will have the following federal income tax effects.
1. The Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E)(5) of the Code.
2. A Stockholder will not recognize gain or loss on the exchange.
In the aggregate, the stockholder's basis in the New Shares
will equal such Stockholder's basis in the Old Shares.
3. A Stockholder's holding period for the New Shares will be the
same as the holding period of the Old Shares exchanged
therefor.
The Company will not recognize any gain or loss on the exchange by
reason of Section 1032 of the Code.
The Federal income tax discussion with respect to the Reverse Split set
forth above is included for general information only. All Stockholders are
advised to consult their own tax advisors as to federal, state and local or
foreign tax consequences applicable to them which could result from the Reverse
Split.
Stockholder Vote
The affirmative vote of the holders of shares representing a majority
of the outstanding shares on the record date is required to adopt the Reverse
Stock Split Proposal.
The Board of Directors recommends that Stockholders vote "FOR" the
proposal to effect the Reverse Split.
<PAGE>
MISCELLANEOUS
Independent Auditors
Pannell Kerr Forster has been selected to serve as the Company's
independent auditors for the fiscal year ending February 29, 2000.
Representatives of Pannell Kerr Forster are expected to be present at the
meeting and will have the opportunity to make a statement if they so desire, and
will be available to respond to appropriate questions. Pannell Kerr Forster has
served as the Company's independent auditors since 1992.
Stockholder Proposals for the 2000 Annual Meeting
Stockholder proposals complying with the applicable rules under the
Exchange Act intended to be presented at the 2000 Annual Meeting of Stockholders
must be received at the offices of the Company by April 15, 2000 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 1999 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
February 22, 2000
<PAGE>
Appendix "A"
Aura Systems, Inc.
2000 Stock Option Plan
1. Purpose.
This Stock Option Plan (the "Plan") is intended to allow designated
employees, executive officers, directors, consultants, advisors and other
corporate and divisional officers (all of whom are sometimes collectively
referred to herein as "Employees") of Aura Systems, Inc., a Delaware corporation
("Aura"), and its subsidiaries which it may have from time to time (Aura and
such subsidiaries being together referred to herein as the "Company") to receive
certain options ("Stock Options") to purchase Aura's common stock, $.005 par
value ("Common Stock"), as herein provided. The purpose of the Plan is to
provide Employees with additional incentives to make significant and
extraordinary contributions to the long-term performance and growth of the
Company and to attract and retain Employees of exceptional ability.
2. Administration.
(a) The Plan shall be administered by a Committee of three or more
persons ("Committee") established by the Board of Directors of Aura (the
"Board") from time to time, which may consist of the Compensation Committee, the
full Board of Directors or such persons as the Board shall designate. A majority
of its members shall constitute a quorum. The Committee shall be governed by the
provisions of Aura's By-Laws and of Delaware law applicable to the Board, except
as otherwise provided herein or determined by the Board.
(b) The Committee shall have full and complete authority, in its
discretion, but subject to the express provisions of the Plan: to approve the
Employees nominated by the management of the Company to be granted Stock
Options; to determine the number of Stock Options to be granted to an Employee;
to determine the time or times at which Stock Options shall be granted; to
establish the terms and conditions upon which Stock Options may be exercised; to
remove or adjust any restrictions and conditions upon Stock Options; to specify,
at the time of grant, provisions relating to the exercisability of Stock Options
and to accelerate or otherwise modify the exercisability of any Stock Options;
and to adopt such rules and regulations and to make all other determinations
deemed necessary or desirable for the administration of the Plan. All
interpretations and constructions of the Plan by the Committee, and all of its
actions hereunder, shall be binding and conclusive on all persons for all
purposes.
(c) The Company hereby agrees to indemnify and hold harmless each
Committee member and each employee of the Company, and the estate and heirs of
such Committee member or employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees, which such
Committee member or employee or his or her estate or heirs may suffer as a
result of his or her responsibilities, obligations or duties in connection with
the Plan, to the extent that insurance, if any, does not cover the payment of
such items.
3. Eligibility and Participation.
Employees eligible under the Plan shall be approved by the Committee
from those Employees who, in the opinion of the management of the Company, are
in positions which enable them to make significant and extraordinary
contributions to the long-term performance and growth of the Company. In
selecting Employees to whom Stock Options may be granted, consideration shall be
given to factors such as employment position, duties and responsibilities,
ability, productivity, length of service, morale, interest in the Company and
recommendations of supervisors.
4. Grants.
The Committee may grant Stock Options in such amounts, at such times,
and to such Employees nominated by the management of the Company as the
Committee, in its discretion, may determine. Stock Options granted under the
Plan shall constitute "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986 ("the Code"), if so designated by the
Committee on the date of grant. The Committee shall also have the discretion to
grant Stock Options which do not constitute incentive stock options and any such
Stock Options shall be designated non-statutory stock options by the Committee
on the date of grant. The aggregate fair market value (determined as of the time
an incentive stock option is granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Employee
during any one calendar year (under all plans of the Company and any parent or
subsidiary of the Company) may not exceed the maximum amount permitted under
Section 422 of the Code (currently $100,000.00). Non-statutory stock options
shall not be subject to the limitations relating to incentive stock options
contained in the preceding sentence. Subject to the provisions of paragraph 11
hereof, the number of shares of Common Stock issued and issuable pursuant to the
exercise of Stock Options granted hereunder shall not exceed 10% of the Common
Stock of Aura from time to time outstanding. Each Stock Option shall be
evidenced by a written agreement (the "Option Agreement") in a form approved by
the Committee, which shall be executed on behalf of the Company and by the
Employee to whom the Stock Option is granted. If a Stock Option expires,
terminates or is cancelled for any reason without having been exercised in full,
the shares of Common Stock not purchased thereunder shall again be available for
purposes of the Plan.
5. Purchase Price.
The purchase price (the "Exercise Price") of shares of Common Stock
subject to each Stock Option ("Option Shares") shall equal the fair market value
("Fair Market Value") of such shares on the date of grant of such Stock Option.
Notwithstanding the foregoing, the Exercise Price of Option Shares subject to an
incentive stock option granted to an Employee who at the time of grant owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of any parent or Subsidiary shall be at least equal
to 110% of the Fair Market Value of such shares on the date of grant of such
Stock Option. The Fair Market Value of a share of Common Stock on any date shall
be equal to the closing price of the Common Stock for the last preceding day on
which Aura's shares were traded, and the method for determining the closing
price shall be determined by the Committee.
6. Option Period.
The Stock Option period (the "Term") shall commence on the date of
grant of the Stock Option and shall be ten (10) years or such shorter period as
is determined by the Committee. Notwithstanding the foregoing, but subject to
the provisions of paragraphs 2(b) and 11(c), Stock Options granted to Employees
who are subject to the reporting requirements of Section 16(a) of the U.S.
Securities Exchange Act of 1934 ("Section 16 Reporting Persons") shall not be
exercisable until at least six months and one day from the date the Stock Option
is granted, or, if later, from the date of stockholder approval of the Plan. If
an Employee shall not in any period purchase all of the Option Shares which the
Employee is entitled to purchase in such period, the Employee may purchase all
or any part of such Option Shares at any time prior to the expiration of the
Stock Option.
7. Exercise of Options.
(a) Each Stock Option may be exercised in whole or in part (but not as
to fractional shares) by delivering it for surrender or endorsement to the
Company, attention of the Corporate Secretary, at the principal office of the
Company, together with payment of the Exercise Price and an executed Notice and
Agreement of Exercise in the form prescribed by paragraph 7(b). Payment may be
made in cash, by cashier's or certified check.
(b) The exercise of each Stock Option is conditioned upon the agreement
of the Employee to the terms and conditions of this Plan and of such Stock
Option as evidenced by the Employee's execution and delivery of a Notice and
Agreement of Exercise in a form to be determined by the Committee in its
discretion. Such Notice and Agreement of Exercise shall set forth the agreement
of the Employee that: (a) no Option Shares will be sold or otherwise distributed
in violation of the Securities Act of 1933 (the "Securities Act") or any other
applicable federal or state securities laws, (b) each Option Share certificate
may be imprinted with legends reflecting any applicable federal and state
securities law restrictions and conditions, (c) the Company may comply with said
securities law restrictions and issue "stop transfer" instructions to its
Transfer Agent and Registrar without liability, (d) if the Employee is a Section
16 Reporting Person, the Employee will furnish to the Company a copy of each
Form 4 or Form 5 filed by said Employee and will timely file all reports
required under federal securities laws, and (e) the Employee will report all
sales of Option Shares to the Company in writing on a form prescribed by the
Company.
(c) No Stock Option shall be exercisable unless and until any
applicable registration or qualification requirements of federal and state
securities laws, and all other legal requirements, have been fully complied with
The Company will use reasonable efforts to maintain the effectiveness of a
Registration Statement under the Securities Act for the issuance of Stock
Options and shares acquired thereunder, but there may be times when no such
Registration Statement will be currently effective. The exercise of Stock
Options may be temporarily suspended without liability to the Company during
times when no such Registration Statement is currently effective, or during
times when, in the reasonable opinion of the Committee, such suspension is
necessary to preclude violation of any requirements of applicable law or
regulatory bodies having jurisdiction over the Company. If any Stock Option
would expire for any reason, then if the exercise of such Stock Option is duly
tendered before its expiration, such Stock Option shall be exercisable and
exercised (unless the attempted exercise is withdrawn) as of the first day after
the end of such suspension. The Company shall have no obligation to file any
Registration Statement covering resales of Option Shares.
8. Continuous Employment.
Except as provided in paragraph 10 below or unless otherwise provided
by the Committee, an Employee may not exercise a Stock Option unless from the
date of grant to the date of exercise such Employee remains continuously in the
employ of the Company. For purposes of this paragraph 8, the period of
continuous employment of an Employee with the Company shall be deemed to include
(without extending the term of the Stock Option) any period during which such
Employee is on leave of absence with the consent of the Company, provided that
such leave of absence shall not exceed three (3) months and that such Employee
returns to the employ of the Company at the expiration of such leave of absence.
If such Employee fails to return to the employ of the Company at the expiration
of such leave of absence, such Employee's employment with the Company shall be
deemed terminated as of the date such leave of absence commenced. The continuous
employment of an Employee with the Company shall also be deemed to include any
period during which such Employee is a member of the military, provided that
such Employee returns to the employ of the Company within ninety (90) days (or
such longer period as may be prescribed by law) from the date such Employee
first becomes entitled to discharge. If an Employee does not return to the
employ of the Company within ninety (90) days (or such longer period as may be
prescribed by law) from the date such Employee first becomes entitled to
discharge, such Employee's employment with the Company shall be deemed to have
terminated as of the date such Employee's military service ended.
9. Restrictions on Transfer.
Options granted under this Plan shall be transferable only by will or
the laws of descent and distribution unless otherwise determined by the
Committee at any time at or after the date of grant of the Option, provided such
transfer does not conflict with applicable securities laws or render the Company
ineligible to use Form S-8 or any successor form to register the Options. No
interest of any Employee under the Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy or any other legal
or equitable process. Each Stock Option granted under this Plan shall be
exercisable during an Employee's lifetime (or in the event of the death of
Employee, by his or her legal representative) only by such Employee or such
Employee's permitted transferees or legal representative.
10. Termination of Employment.
(a) Upon an Employee's Retirement, Disability or death: (a) all Stock
Options to the extent then presently exercisable shall remain in full force and
effect and may be exercised pursuant to the provisions thereof, including
expiration at the end of the fixed term thereof, and (b) unless otherwise
provided by the Committee, all Stock Options to the extent not then presently
exercisable by such Employee shall terminate as of the date of such termination
of employment and shall not be exercisable thereafter.
(b) Upon the termination of the employment of an Employee with the
Company for any reason other than the reasons set forth in paragraph 10(a)
hereof, unless otherwise provided by the Committee, (a) all Stock Options to the
extent then presently exercisable by such Employee shall remain exercisable only
for a period of ninety (90) days after the date of such termination of
employment (except that the ninety (90) day period shall be extended to twelve
(12) months if the Employee shall die during such ninety (90) day period), and
may be exercised pursuant to the provisions thereof, including expiration at the
end of the fixed term thereof, and (b) all Stock Options to the extent not then
presently exercisable by such Employee shall terminate as of the date of such
termination of employment and shall not be exercisable thereafter.
(c) For purposes of this Plan:
(i) "Retirement" shall mean an Employee's retirement from the
employ of the Company on or after the date on which such Employee attains the
age of sixty-five (65) years; and
(ii) "Disability" shall mean total and permanent incapacity of an
Employee, due to physical impairment or legally established mental incompetence,
to perform the usual duties of such Employee's employment with the Company,
which disability shall be determined on medical evidence by a licensed physician
designated by the Committee.
11. Adjustments Upon Change in Capitalization.
(a) The number and class of shares subject to each outstanding Stock
Option, the Exercise Price thereof (but not the total price) and the maximum
number of Stock Options that may be granted under the Plan shall be
proportionately adjusted in the event of any increase or decrease in the number
of the issued shares of Common Stock which results from a split-up or
consolidation of shares, payment of a stock dividend or dividends exceeding a
total of two and one-half percent (2.5%) for which the record dates occur in any
one fiscal year, a recapitalization (other than the conversion of convertible
securities according to their terms), a combination of shares or other like
capital adjustment, so that upon exercise of the Stock Option, the Employee
shall receive the number and class of shares such Employee would have received
had such Employee been the holder of the number of shares of Common Stock for
which the Stock Option is being exercised upon the date of such change or
increase or decrease in the number of issued shares of the Company.
(b) Upon a reorganization, merger or consolidation of the Company with
one or more corporations as a result of which Aura is not the surviving
corporation or in which Aura survives as a wholly-owned subsidiary of another
corporation, or upon a sale of all or substantially all of the property of the
Company to another corporation, or any dividend or distribution to shareholders
of more than ten percent (10%) of the Company's assets, adequate adjustment or
other provisions shall be made by the Company or other party to such transaction
so that there shall remain and/or be substituted for the Option Shares provided
for herein, the shares, securities or assets which would have been issuable or
payable in respect of or in exchange for such Option Shares then remaining, as
if the Employee had been the owner of such Option Shares as of the applicable
date. Any securities so substituted shall be subject to similar successive
adjustments.
(c) In the sole discretion of the Committee, Stock Options may include
provisions, on terms authorized by the Committee in its sole discretion, that
accelerate the Employees' rights to exercise Stock Options upon a sale of
substantially all of the Company's assets, the dissolution of Aura or upon a
change in the controlling shareholder interest in Aura resulting from a tender
offer, reorganization, merger or consolidation or from any other transaction or
occurrence, whether or not similar to the foregoing (each, a "Change in
Control").
12. Withholding Taxes.
The Company shall have the right at the time of exercise of any Stock
Option to make adequate provision for any federal, state, local or foreign taxes
which it believes are or may be required by law to be withheld with respect to
such exercise ("Tax Liability"), to ensure the payment of any such Tax
Liability. The Company may provide for the payment of any Tax Liability by any
of the following means or a combination of such means, as determined by the
Committee in its sole and absolute discretion in the particular case: (i) by
requiring the Employee to tender a cash payment to the Company, (ii) by
withholding from the Employee's salary, (iii) by withholding from the Option
Shares which would otherwise be issuable upon exercise of the Stock Option that
number of Option Shares having an aggregate Fair Market Value as of the date the
withholding tax obligation arises that is equal to the Employee's Tax Liability
or (iv) by any other method deemed appropriate by the Committee. Satisfaction of
the Tax Liability of a Section 16 Reporting Person may be made by the method of
payment specified in clause (iii) above upon satisfaction of such additional
conditions as the Committee shall deem in its sole and absolute discretion as
appropriate in order for such withholding of Option Shares to qualify for the
exemption provided for in Section 16b-3 of the Exchange Act.
13. Relationship to Other Employee Benefit Plans.
Stock Options granted hereunder shall not be deemed to be salary or
other compensation to any Employee for purposes of any pension, thrift,
profit-sharing, stock purchase or any other employee benefit plan now maintained
or hereafter adopted by the Company.
14. Amendments and Termination.
The Board of Directors may at any time suspend, amend or terminate this
Plan. No amendment or modification of this Plan may be adopted, except subject
to shareholder approval, which would: (a) materially increase the benefits
accruing to Employees under this Plan, (b) materially increase the number of
securities which may be issued under this Plan or (c) materially modify the
requirements as to eligibility for participation in the Plan.
15. Successors in Interest.
The provisions of this Plan and the actions of the Committee shall be
binding upon all heirs, successors and assigns of the Company and of Employees.
16. Other Documents.
All documents prepared, executed or delivered in connection with this
Plan shall be, in substance and form, as established and modified by the
Committee or by persons under its direction and supervision; provided, however,
that all such documents shall be subject in every respect to the provisions of
this Plan, and in the event of any conflict between the terms of any such
document and this Plan, the provisions of this Plan shall prevail. All Stock
Options granted under the Plan shall be evidenced by written agreements executed
by the Company and the Employees to whom the Stock Options have been granted.
17. No Obligation to Continue Employment.
This Plan and grants hereunder shall not impose any obligation on the
Company to continue to employ any Employee. Moreover, no provision of this Plan
or any document executed or delivered pursuant to this Plan shall be deemed
modified in any way by any employment contract between an Employee (or other
employee) and the Company.
18. Term of Plan.
This Plan was adopted by the Board effective January 14, 2000. No Stock
Options may be granted under this Plan after January 14, 2010.
19. Governing Law.
This Plan shall be construed in accordance with, and governed by, the
laws of the State of Delaware.
20. Stockholder Approval.
No Stock Option shall be exercisable unless and until the stockholders
of the Company have approved this Plan and all other legal requirements have
been fully complied with.
21. Privileges of Stock Ownership.
The holder of a Stock Option shall not be entitled to the privileges of
stock ownership as to any shares of the Company common stock not actually issued
to such holder.
IN WITNESS WHEREOF, this Plan has been executed effective as of the
14th day of January, 2000.
AURA SYSTEMS, INC.
By_________________
President
<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 January 14, 2000, at the Annual Meeting of
Stockholders to be held on March 6, 2000, 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 February 22, 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 David F. Hadley
Sanford R. Edlein
2. Approval of Amendment to the Company's Certificate of Incorporation to
Increase the number of shares of common stock authorized for issuance.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval to amend the Company's Certificate of Incorporation to Authorize
10,000,000 shares of preferred stock.
[_] FOR [_] AGAINST [_] ABSTAIN
4. Approval to adopt the Company's 2000 Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
5. Approval to consider and act upon a proposal to effect a possible reverse
split of the Company's common stock.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
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 PROPOSALS 1-5.
Dated: ______________________, 2000
<PAGE>
Please sign exactly as the name
appears below. When shares are held
by joint tenants, both should sign.
When signing as attorney, as
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by President
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
-----------------------------------
Signature
-----------------------------------
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.
