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:

[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only as permitted by
Rule 14a-6(e)(2))

[ ] 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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(4) Date Filed:

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AURA SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 7, 2003

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 February 7, 2003 at 10:00 a.m.,
PST, at the Company's headquarter facilities at 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 500,000,000 to 1,000,000,000;

(3) To consider and act upon a proposal to effect a possible reverse split
of the Company's Common Stock;

(4) To consider and act upon a proposal to approve an amendment to the
Company's 2000 Stock Option Plan;

(5) To consider and act upon a proposal to ratify the election of Singer
Lewak Greenbaum & Goldstein LLP as the Company's independent auditors
for Fiscal 2003; and

(6) To transact any other business which may properly come before the
meeting.

Stockholders of record at the close of business on December 11, 2002 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
December 11, 2002 may attend. Any beneficial owner of shares with a letter of
authorization from his record holder may attend the meeting.

By Order of the Board of Directors

/s/ Michael I. Froch

Michael I. Froch
Secretary

El Segundo, California
January____, 2003

Please mark, date, and sign the enclosed Proxy and return it at an early date in
the enclosed return envelope so that, if you are unable to attend the Annual
Meeting, your shares may be voted.

AURA SYSTEMS, INC.
2335 Alaska Avenue
El Segundo, CA 90245
(310) 643-5300

PROXY STATEMENT

January ___, 2003

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 February 7, 2003
at 10:00 a.m. PST, at the at the Company's headquarter facilities at 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 amendments to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock from 500,000,000 to 1,000,000,000, (iii) "FOR" the proposal to
effect a possible reverse split of the Company's Common Stock, (iv) "FOR" the
proposal to approve an amendment to the Company's 2000 Stock Option Plan, and
(v) 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 December 11, 2002
are entitled to receive notice of and to vote at the meeting. On that date, Aura
had outstanding 432,272,275 shares of Common Stock and no Preferred Stock. The
shares of Common Stock vote as a single class. Holders of shares of Common Stock
on the record date are entitled to one vote for each share held. The presence at
the Annual Meeting, either in person or by proxy, of the holders of a majority
of the shares of Common Stock issued, outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business.

In accordance with Delaware law, abstentions and "broker non-votes" (i.e.
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote shares
as to a matter with respect to which brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the matter as to which the non-vote is indicated. Therefore, a broker
non-vote will have no legal effect on any matter requiring the affirmative vote
of a plurality of the votes cast, and will have the same legal effect as a vote
"against" any other matters presented at the meeting which require approval by a
majority of the shares represented in person or by proxy at the meeting.

In the event that sufficient votes in favor of any of the proposals are not
received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitations of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
by proxy at the Annual Meeting. The persons named as proxies will vote in favor
of such adjournment or adjournments.

The cost of preparing, assembling, printing and mailing the materials, the
Notice and the enclosed form of Proxy, as well as the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company will
request banks, brokers, dealers, and voting trustees or other nominees to
forward solicitation materials to their customers who are beneficial owners of
shares, and will reimburse them for the reasonable out-of-pocket expenses of
such solicitations. The original solicitation of proxies by mail may be
supplemented by telephone, telegram, personal solicitation or other means by
officers and other regular employees or agents of the Company, but no additional
compensation will be paid to such individuals on account of such activities.
This Proxy Statement and the accompanying Notice of Annual Meeting and form of
Proxy are being mailed or delivered to Stockholders on or about January ___,
2003.

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 By-Laws 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.

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.

Name Age Title

Neal Meehan......................... 61 Chairman of the Board and Chief Executive Officer
Carl Albert......................... 60 Director, Board of Directors
Harvey Cohen........................ 69 Director, Member of Audit Committee
Lawrence Diamant.................... 61 Director, Member of Compensation Committee
Salvador Diaz-Verson, Jr............ 51 Director, Member of Compensation Committee
John Pincavage...................... 58 Director, Member of Audit Committee
Norman Reitman...................... 79 Director, Member of Audit Committee

NEAL MEEHAN is Chairman of the Board of Directors and Chief Executive
Officer effective July 2002, following appointment by resolution of the Board of
Directors pursuant to the By-Laws of the Corporation. He has been a Director of
the Company and has served in this capacity since October 2000. Mr. Meehan's
business career spans the transportation and telecommunications sectors. Since
July 2002, Mr. Meehan has served as the Chairman of the Board and Chief
Executive Officer of the Company. Mr. Meehan serves in such capacities under the
terms of a Consulting Agreement between the Company and air2ground, LLC. He is
currently Managing Partner of air2ground, LLC and is involved in business
development and strategic planning for start-up and mature companies. He has
served as President and Chief Executive Officer of a number of airlines
including New York Air, Midway Airlines, Chicago Air and Continental Express. He
has also served in various marketing and operations capacities for American
Airlines and Continental Airlines. In addition, he has served in various senior
capacities for a number of telecommunications firms including In-Flight Phone
Corp., Iridium LLC and Hush Communications USA, Inc., a firm specializing in
data encryption. After a tour as an officer in the United States Marine Corps,
Mr. Meehan received his MBA from St. Johns University. Mr. Meehan is also the
recipient of an honorary Doctorate of Commercial Science from St. Johns
University.

CARL ALBERT is a Director of Company and has served in this capacity since
July 2001. From March 2002 until July 2002, Mr. Albert served as Chairman of the
Board of Directors. Mr. Albert was, until February 2002, a member of the Board
of Directors of Fairchild Dornier Corporation, a privately held company in the
business of manufacturing aircraft. Mr. Albert held a significant interest in
Fairchild Dornier Corporation from 1990, when he provided the venture capital
necessary for acquiring ownership control of the company's predecessor
corporation, Fairchild Aircraft, until April 2000 when the majority interest in
the company was sold. From 1996 through April 2000, following Fairchild
Aircraft's purchase of Daimler-Benz's 80% interest in Dornier, he was the
Chairman of the Board of Directors of Fairchild Dornier Corporation, its Chief
Executive Officer and the majority stockholder. Mr. Albert was the Chairman of
the Board of Directors of Fairchild Aircraft, its Chief Executive Officer and
the majority stockholder from 1990 through 1996. From 1986 through 1989, he
provided venture capital and served as the CEO or President of a California
based regional airline, West Wings Airlines, which operated as an American Eagle
franchisee until acquired by the parent of American Airlines in 1988. Mr.
Albert's business experience includes 18 years as an attorney, specializing in
business and corporate law in Los Angeles, California. He also serves and has
served as a Member of the Board of Directors of a number of privately and
publicly held corporations, including Dr. Pepper Bottling Company of California,
K & K Properties, Ozark Airlines and Tulip Corporation. Mr. Albert holds a B.A.
from UCLA in political science and an L.L.B. from the UCLA School of Law.

HARVEY COHEN is a Director of the Company and has served in this capacity
since August 1993. Mr. Cohen is President of Margate Advisory Group, Inc., an
investment advisor registered with the Securities and Exchange Commission, and a
management consultant since August 1981. Mr. Cohen has consulted with the
Company on various operating and growth strategies since June 1989 and assisted
in the sale of certain of the Company's securities. From December 1979 through
July 1981, he was President and Chief Operating Officer of Silicon Systems,
Inc., a custom integrated circuit manufacturer which made its initial public
offering in February 1981 after having raised $4 million in venture capital in
1980. From 1975 until 1979, Mr. Cohen served as President and Chief Executive
Officer of International Communication Sciences, Inc., a communications computer
manufacturing start-up company for which he raised over $7.5 million in venture
capital. From 1966 through 1975, Mr. Cohen was employed by Scientific Data
Systems, Inc. ("S.D.S."), a computer manufacturing and service company, which
became Xerox Data Systems, Inc. ("X.D.S.") after its acquisition by Xerox in
1969. 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 from Harvard University in
1957.

LAWRENCE DIAMANT is a Director of the Company and has served in this
capacity since April 2002. He is a senior partner of the Los Angeles based law
firm Robinson, Diamant & Wolkowitz, a professional corporation. Mr. Diamant is a
member of the State Bar of California and of the American Bar Association
Business Law Section Committees on Banking Law, Commercial Financial Services
and Business Bankruptcy. He has served as a reporter for its Ethics Task Force
sub-section and currently serves as a sub-committee vice chair on Courts,
Jurisdiction, Venue and Administration. Mr. Diamant has also served as Chairman
of the Los Angeles County Bar Association Executive Committee on Commercial Law
and Bankruptcy and is a member of the Financial Lawyers Conference. Mr. Diamant
is a graduate from UCLA School of Law.

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 is currently the Chairman of United Americas
Bankshares. Mr. Diaz-Verson has served as President and Member of the Board of
Directors of American Family Corporation ("AFLCAC Inc."), a publicly held
insurance holding company, from 1979 until 1991. Mr. Diaz-Verson also served as
Executive Vice President and Chief Investment Officer of American Family Life
Assurance Company, subsidiary of AFLCAC Inc., from 1976 through 1991. Mr.
Diaz-Verson is a graduate of Florida State University. He is currently a
Director of the Board of Miramar Securities, Clemente Capital Inc., Regions Bank
of Georgia and The Philippine Strategic Investment Holding Limited. Since 1992,
Mr. Diaz-Verson has also been a member of the Board of Trustees of the
Christopher Columbus Fellowship Foundation, appointed by President George Bush
in 1992, and re-appointed by President Clinton in early 2000.

JOHN PINCAVAGE is a Director of the Company and has served in this capacity
since March 2002. Mr. Pincavage is a Chartered Financial Analyst with many years
of experience on Wall Street. Since 2001, he has been employed as a Registered
Representative by C. L. Glazer & Co., a NASD-member firm in Greenwich,
Connecticut. Since 1999, he has been the President and founder of Pincavage &
Associates, LLC, a consulting and financial advisory firm for the aviation
industry. From 1995 to 1999, he was an Executive Director in equity research at
Warburg Dillon Read, LLC, a Partner and Director at the Transportation Group,
LLC heading research efforts from 1989 to 1995, Executive Vice President -
Research at Paine Webber Incorporated from 1975 to 1989, and Vice President -
Research at Blyth Eastman Dillon from 1971 to 1975. Mr. Pincavage is a member of
the New York Society of Securities Analysts and has served on numerous boards
including the Board of Directors of the Virginia Engineering Foundation. He
holds a Bachelor of Aerospace Engineering and an MBA, both from University of
Virginia.

NORMAN REITMAN is a Director of the Company and has served in this capacity
since March 2000. He previously served as a Director of the Company from January
1989 to September 1998. Mr. Reitman obtained his B.B.A. degree in business
administration from St. Johns University in 1946 and became licensed as a public
accountant in New York in 1955. Mr. Reitman is the retired Chairman of the Board
and President of Norman Reitman Co., Inc., insurance auditors, where he served
from 1979 until June 1990. Mr. Reitman was a senior partner in Norman Reitman
Co., a public accounting firm, where he served from 1952 through 1979. Mr.
Reitman served on the Board of Directors and was a Vice President of American
Family Life Assurance Co., a publicly held insurance company, from 1966 until
April 1991.

MANAGEMENT

Information concerning the executive officers of the Company during
Fiscal 2002 is included in the Company's annual report on Form 10-K for the
fiscal year ended February 28, 2002. Listed below are the current executive
officers of the Company who are not Directors or nominees, their ages, titles
and background information. Executive officers serve at the discretion of the
Board.

Name Age Position

Neal Meehan......................... 61 Chairman of the Board of Directors and Chief Executive Officer
Michael Froch....................... 41 Sr. Vice President, General Counsel and Secretary,
Government and International Affairs
Craig Lipus......................... 47 Vice President - Sales and Marketing
Jacob Mail.......................... 51 Sr. Vice President - AuraGen(R)Operations
David Rescino....................... 44 Sr. Vice President - Finance and Chief Financial Officer

MICHAEL 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. Since August 2002, in addition to his role as General Counsel
and Secretary, he has served as the Company's Senior Vice President, Government
and International Affairs. He is also in charge of company administrative
affairs and leads a newly formed Strategic Business Alliance Task Force
reporting to the senior management team and the Chairman. 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
Congressional Intern and Staff Assistant to the Honorable Tom Lantos, Member of
Congress, presently the Ranking Member of the Committee on International
Relations of the United States House of Representatives.

CRAIG LIPUS is Vice President - Sales and Marketing and has served in this
capacity since June 2002. From 1993 through 2001, Mr. Lipus was the Business
Unit Manager and Director of Sales for Interlink Electronics, a publicly traded
corporation in the wireless communication and technologies business located in
Camarillo, California. At Interlink, Mr. Lipus was responsible for both branded
and OEM products, and executing the sales and marketing strategy. Prior to 1993,
from 1983 through 1993, he held various positions at Polaroid Corporation,
including Western Regional Sales Manager, Electronic Imaging, District Sales
Manager, and Marketing Representative, Professional Products Group. Throughout
his career to date, Mr. Lipus has managed various sales organizations that
marketed a full line of product solutions through diverse channels. He holds a
B.A. in Marketing from California State University, Fullerton, California.

JACOB MAIL is Senior Vice President - AuraGen(R) Operations and has served
in this capacity since 1995. While at Aura, Mr. Mail has identified, negotiated
and contracted all the supply chain arrangements for the AuraGen(R). In
addition, Mr. Mail implemented programs to monitor and project needs for
production schedules and provide full traceability of all components. Mr. Mail
is responsible for the implementation of the "Call Home" programs, which
provides the Company with a user database for every AuraGen(R) installed in a
vehicle. In addition to the manufacturing and infrastructure implementations,
Mr. Mail is also responsible for all engineering and vehicle integration, as
well as customer service and training. Prior to joing the Company, Mr. Mail
served over 20 years at Israel Aircraft Industries. He holds a B.S. degree in
Mechanical Engineering from the Technion and a Master degree from the University
of Tel Aviv.

DAVID RESCINO is Senior Vice President - Finance and Chief Financial
Officer of the Company and has served in this capacity since November 2002. From
2001 to 2002, Mr. Rescino was the Vice President - Finance and Chief Financial
Officer of Vanguard Airlines, Inc. ("Vanguard"). Mr. Rescino has some continuing
responsibilities with Vanguard, including his November 2002 appointment to
Vanguard's Board of Directors. From 1999 to 2001, Mr. Rescino was an aviation
consultant in Dallas, Texas. From 1995 to 1999, Mr. Rescino was Chief Financial
Officer of Aspen Mountain Air/Lone Star Airlines. In addition to prior financial
management positions in the transportation sector, Mr. Rescino has several
years' experience in public accounting. He holds a B.S. degree in Accountancy
from the University of Illinois - Urbana.

Change in Management

In December 2001, the Company and six former members of the Company's
senior management, including Zvi Kurtzman, the former Chief Executive Officer,
Gerald Papazian, the former President and Steven Veen, the former Chief
Financial Officer, entered into agreements providing for the termination of
their employment with the Company effective February 28, 2002.

Effective March 2002, the Company retained Joshua Hauser as the Company's
President and Chief Executive Officer and Steven Burdick as the Company's Chief
Financial Officer. Craig Lipus, the Company's Vice President - Sales and
Marketing, joined the Company in June 2002, filling a vacancy created in
December 2001. In July 2002, Carl Albert stepped down as Chairman, remaining on
the Board, and Neal Meehan was appointed Chairman to fill the vacancy pursuant
to the Company's By-Laws. Thereafter, Mr. Hauser's employment relationship with
the Company ended and Mr. Meehan was appointed Chief Executive Officer. In
October 2002, Mr. Burdick's employment relationship with the Company ceased,
with David Rescino becoming the Chief Financial Officer, effective November
2002.

Family Relationships

None.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the Company's
Common Stock owned as of November 30, 2002 (i) by each person who is known by
Aura to be the beneficial owner of more than five percent (5%) of its
outstanding Common Stock, (ii) by each of the Company's Directors and those
executive officers named in the Summary Compensation Table, and (iii) by all
Directors and executive officers as a group:

Number of Shares of Percent of Common
Beneficial Owner Common Stock Stock
---------------- ------------ -----

Gardner Lewis Asset Management L.P. (1) 23,212,336 5.37%
ICM Asset Management Inc. (2) 23,499,933 5.44%
James M. Simmons (3) 24,980,042 5.78%
Harvey Cohen (4) 958,287 *
Lawrence A. Diamant (5) 1,019,727 *
Salvador Diaz-Verson, Jr. (6) 2,595,128 *
Norman Reitman (7) 867,142 *
Neal Meehan (8) 3,610,625 *
Carl Albert (9) 4,970,893 1.04%
John Pincavage (10) 250,000 *
Zvi Kurtzman (11)(16) 10,404,592 2.19%
Cipora Kurtzman Lavut (12)(16) 4,351,009 *
Gerald Papazian (13)(16) 2,315,262 *
Arthur Schwartz (14)(16) 5,122,228 1.08%
Steven Veen (15)(16) 2,593,947 *
All current executive officers and Directors as a group 18,350,468 3.84%
(14 persons)

* Less than 1% of outstanding shares.

(1) Based upon information contained in Schedule 13G/A dated February 14, 2002,
as filed with the SEC by Gardner Lewis Asset Management Inc. Of the
23,212,336 shares beneficially owned by this person, it has sole
dispositive power with respect to all of these shares, sole voting power
with respect to 22,345,736 shares, and shared voting power with respect to
338,700 shares.

(2) Based upon information contained in Schedule 13G dated February 14, 2002,
as filed with the SEC by ICM Asset Management, Inc. ICM Asset Management,
Inc. is a registered investment advisor whose clients have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the stock. Such person has neither sole voting
nor sole dispositive power with respect to any of the 23,499,933 shares
reported as being beneficially owned. Of the 23,499,933 shares beneficially
owned by ICM Asset Management, Inc. it has shared dispositive power with
respect to all of these shares, and shared voting power with respect to
22,562,390 shares. James M. Simmons is the President of ICM Asset
Management, Inc, and is also the beneficial owner of these shares in such
capacity. Accordingly, these shares are also included in the shares
reflected as being beneficially owned by James M. Simmons.

(3) Based upon information contained in Schedule 13G dated February 14, 2002,
as filed with the SEC by James M. Simmons. Included in the shares
beneficially owned by Mr. Simmons are 23,499,933 shares shown as being
beneficially owned by ICM Asset Management, Inc., a registered investment
advisor whose clients have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the stock.
James M. Simmons is the President of ICM Asset Management, Inc, and is
therefore also the beneficial owner of these shares in such capacity. Mr.
Simmons has neither sole voting nor sole dispositive power with respect to
any of the 24,980,042 shares reported as being beneficially owned by him.
Of the 24,980,042 shares beneficially owned by Mr. Simmons, he has shared
dispositive power with respect to all of these shares, and shared voting
power with respect to 24,042,499 shares.

(4) Includes 31,250 shares beneficially owned, and 755,000 shares which may be
purchased pursuant to options within 60 days of November 30, 2002.

(5) Includes 340,989 shares which are held by the firm Robinson, Diamant &
Wolkowitz where Mr. Diamant is a senior partner. Mr. Diamant disclaims
beneficial ownership of these shares. Includes 250,000 shares which may be
purchased pursuant to options within 60 days of November 30, 2002.

(6) Includes 680,000 shares which may be purchased pursuant to options
exercisable within 60 days of November 30, 2002.

(7) Includes 625,000 shares which may be purchased pursuant to options
exercisable within 60 days of November 30, 2002 and 12,500 shares owned by
Mr. Reitman's wife, as to which 12,500 shares he disclaims any beneficial
ownership.

(8) Includes 3,466,875 shares which may be purchased pursuant to options and
warrants exercisable within 60 days of November 30, 2002.

(9) Includes 3,250,000 shares which may be purchased pursuant to options and
warrants exercisable within 60 days of November 30, 2002.

(10) Includes 250,000 shares which may be purchased pursuant to options and
warrants exercisable within 60 days of November 30, 2002.

(11) Includes 175,000 shares beneficially owned which are held of record by
Advanced Integrated Systems, Inc., and 7,567,917 shares which may be
purchased pursuant to options within 60 days of November 30, 2002.

(12) Includes 2,872,083 shares which may be purchased pursuant to options
exercisable within 60 days of November 30, 2002.

(13) Includes 1,870,583 shares which may be purchased pursuant to options
exercisable within 60 days of November 30, 2002.

(14) Includes 175,000 shares beneficially owned which are held of record by
Advanced Integrated Systems, Inc., 74,000 shares owned by Mr. Schwartz's
children, to which Mr. Schwartz disclaims beneficial ownership, and
2,934,583 shares which may be purchased pursuant to options within 60 days
of November 30, 2002.

(15) Includes 20,000 shares owned by Mr. Veen's children, to which Mr. Veen
disclaims beneficial ownership, and 2,038,333 shares which may be purchased
pursuant to options within 60 days of November 30, 2002.

(16) These individuals are no longer officers or employees of the Company.

The mailing address for Gardner Lewis Asset Management, L.P. is 285 Wilmington
West Chester Pike, Chadds Ford, PA 19317.

The mailing address for ICM Asset Management, Inc. and James M. Simmons is W.
601 Main Avenue, Suite 600, Spokane, WA 99201.

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 nine meetings during the year ended February
28, 2002. Each Director whose term is expected to continue, attended more than
75% of the Board meetings during Fiscal 2002. During the last fiscal year, the
Company did not maintain a nominating committee. Since August 1993, the Company
has maintained a Compensation Committee which presently consists of Salvador
Diaz-Verson, Jr. and Lawrence Diamant. The Compensation Committee met not less
than four times during Fiscal 2002. Since January 1989, the Company has
maintained an Audit Committee which presently consists of Harvey Cohen, Norman
Reitman and John Pincavage. 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 not less than four times
during the fiscal year ended February 28, 2002.

Effective Fiscal 2002, each non-employee Director is entitled to receive
100,000 stock options per year for serving as a Director, and an additional
25,000 stock options per year for each Director who serves on the Audit
Committee. Effective Fiscal 2002, new Directors are entitled to receive an
initial membership grant of 250,000 stock options. The above options vest six
months plus one day from the date of grant and the exercise price is set at or
above market as of the date of grant.

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, 2002. Each of the
individuals named in the table ceased to be executive officers as of February
28, 2002.

SUMMARY COMPENSATION TABLE

Annual Long-term All Other

Name and Principal Position Year Compensation(1) Compensation Awards Compensation(2)
--------------------------- ---- --------------- ------------------- ---------------

Salary Options/SARs

Zvi (Harry) Kurtzman (1) 2002 $385,000 7,718,750 $0
Chief Executive Officer 2001 385,000 4,500,000 0
2000 386,232 0 0

Gerald S. Papazian (1) 2002 $210,000 2,268,750 $0
President and Chief Operating 2001 210,000 1,000,000 2,029
Officer 2000 217,777 0 0

Arthur J. Schwartz (1) 2002 $205,000 4,143,750 $0
Executive Vice President 2001 205,000 1,000,000 0
2000 210,192 0 0

Steven C. Veen (1) 2002 $200,000 2,175,000 $0
Senior Vice President and 2001 200,000 1,000,000 2,100
Chief Financial Officer 2000 205,469 0 0

Cipora Kurtzman Lavut (1) 2002 $195,000 3,956,250 $0
Senior Vice President 2001 195,000 1,000,000 0
2000 203,942 0 0

(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 always represent the actual salary accrued for each individual
during the period. The actual salary rate for these individuals which was
accrued during the fiscal year ended February 2002, 2001 and 2000, respectively,
were as follows: Zvi (Harry) Kurtzman - $385,000, $385,000, $385,000; Gerald S.
Papazian - $210,000, $210,000, $210,000; Arthur J. Schwartz - $205,000,
$205,000, $205,000; Steven C. Veen - $200,000, $200,000, $200,000; Cipora
Kurtzman Lavut - $195,000, $195,000, $195,000. Of the compensation paid in
fiscal 2001, $100,427, $53,140, $50,254, $35,301, $38,027 was paid in the form
of 315,361, 166,869, 157,807, 110,851, 119,414 shares, respectively, of
restricted Common Stock of the Company to Mr. Kurtzman, Mr. Papazian, Mr.
Schwartz, Mr. Veen and Ms. Kurtzman Lavut, respectively. Of the compensation
paid in fiscal 2000, $144,561, $34,781, $78,201, $44,918 and $58,520 was paid in
the form of 535,413, 128,818, 289,632, 166,363, and 216,742 shares,
respectively, of restricted Common Stock of the Company, valued as of the date
of issuance, to Mr. Kurtzman, Mr. Papazian, Mr. Schwartz, Mr. Veen and Ms.
Kurtzman Lavut, respectively.

(2) Such compensation consisted of total Company contributions made to the
plan account of each individual pursuant to the Company's Employee Retirement
Savings Plan during the fiscal year ended February 28, 2002.

No cash bonuses or restricted stock awards were granted to the above
individuals during the fiscal years ended February 28, 2002, February 28, 2001,
and February 29, 2000. Effective Fiscal 2002, each non-employee Director is
entitled to receive 100,000 stock options per year for serving as a Director,
and an additional 25,000 stock options per year for each Director who serves on
the Audit Committee. Effective Fiscal 2002, new Directors are entitled to
receive an initial membership grant of 250,000 stock options. The above options
vest six months plus one day from the date of grant and the exercise price is
set at or above market as of the date of grant.

Option Grants in the Last Fiscal Year

The following table summarizes certain information regarding option grants
to purchase Common Stock of the Company to the Chief Executive Officer and those
other executive officers named in the Summary Compensation Table (the "Named
Executive Officers").

OPTIONS / SAR GRANTS IN LAST FISCAL YEAR

Individual Grants
----------------------------- ------------------------------------------- ------------- -------------------------

Number of % of Potential
Securities Total Realizable Value at
Under- Options/ Assumed Annual
lying SARs Rates of Stock Price
Options/ Granted to Exercise Appreciation
SARs Employees Or Base For Option Term*
Granted In fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
----------------------------- -------------- -------------- ------------- ------------- ----------- -------------

Zvi (Harry) Kurtzman 7,718,750 36.8% 0.55 12/21/11 385,938 3,164,687
Gerald Papazian 2,268,750 10.8% 0.55 12/21/11 113,438 1,043,625
Arthur J. Schwartz 4,143,750 19.8% 0.55 12/21/11 207,188 1,698,938
Steven C. Veen 2,175,000 10.4% 0.55 12/21/11 108,750 891,750
Cipora Kurtzman Lavut 3,956,250 18.9% 0.55 12/21/11 197,813 1,622,063

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 / SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION / SAR VALUES

Number of Unexercised Value of Unexercised
Options/SARs at Fiscal In-the-Money Options/
Name Year End SARs at Fiscal Year End*
---- ---------------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------

Zvi (Harry) Kurtzman 6,734,583 6,804,167 $ 180,000 $ 90,000
Gerald S. Papazian 1,653,917 1,840,833 $ 40,000 $ 20,000
Arthur J. Schwartz 2,717,917 3,170,833 $ 40,000 $ 20,000
Steven C. Veen 1,821,670 1,778,333 $ 40,000 $ 20,000
Cipora Kurtzman Lavut 2,655,417 3,045,833 $ 40,000 $ 20,000

* 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, 2002.

No options were exercised by the above individuals during the fiscal year
ended February 28, 2002.

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.

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.

Termination of Certain 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 agreements and
severance agreements with Messrs. Kurtzman, Schwartz, Papazian, Veen, Froch,
Kaufman, and Ms. Kurtzman Lavut and entered into severance agreements with
Messrs. Goldstein, Mail, and Stuart. The Committee reviewed and approved such
agreements unanimously after consulting with a nationally recognized employee
benefits firm and determining that such agreements were necessary in order to
retain highly qualified executives whose abilities are critical to the long-term
success and competitiveness of the Company.

The employment agreements with Mr. Kurtzman and the Named Executive
Officers had an initial term of three years. The term would be automatically
extended for one year on each anniversary of the effective date of the
employment agreement unless either party gave prior notice of termination of the
agreement. Upon the death or disability of these executives, their employment
agreements provided for a lump sum payment equal to one year's salary and the
immediate vesting of stock based compensation awards. In the event of the
executive's termination for cause, the terminated executive was entitled only to
compensation accrued through the date of termination. If the executive was
terminated by the Company other than by reason of death, disability or cause,
the terminated executive would be entitled to continued payment of the base
salary through the end of the stated term together with an annual bonus for each
of the remaining years under the employment agreement equal to the highest
annual bonus amount received by the terminated executive in the three years
preceding termination and the immediate vesting of stock based compensation
awards.

Pursuant to severance agreements entered into effective March 1998 between
the Company and key executives of the Company, including Mr. Kurtzman and the
Named Executive Officers, these individuals were entitled to certain additional
benefits, which would become effective at such time as there was a "change in
control" of the Company, as defined in the severance agreements. If such
executive's employment was terminated following a change in control other than
by reason of death, disability or by the executive without "good reason", or if
following a change in control the executive elected to terminate his employment
on the one year anniversary following a change in control, the terminating
executive would be entitled to specified severance payments in lieu of salary,
bonus and other compensation which would otherwise accrue to the executive upon
termination of the employment agreement. Specifically, the severance agreements
provided that, for Messrs. Kurtzman and Schwartz and Ms. Kurtzman Lavut, a lump
sum severance payment would be due upon termination in the amount of three times
the sum of the terminated executive's base salary then in effect plus the
highest annual bonus earned in the three years preceding the date of
termination; and in the case of Messrs. Veen and Papazian, 1.5 times such base
salary and bonus. The severance agreements also provided for the accelerated
vesting of stock based awards and the continuation of life and health insurance
benefits following the date of termination for 36 months.

In March 2000, Mr. Kurtzman proposed to the Board of Directors that
consideration be given to restructuring employment and severance agreements to
allow the Company the flexibility to implement an orderly management transition,
if and when deemed advisable by the Board. Certain members of the Company's
senior management believed that at some time in the future, as market acceptance
of the AuraGen(R) accelerated and manufacturing operations expanded, it might be
desirable to replace all or part of the senior members of the management team
with individuals having focused experience in large scale manufacturing and
sales operation.

Subsequently, the Company's Board of Directors entered into discussions
with certain members of senior management with a view towards restructuring the
employment and severance agreements. The Board of Directors, through its
Compensation Committee, retained independent outside consultants to formulate a
proposal whereby the existing employment and severance agreements with senior
management would be modified to allow for the possibility of an orderly
management transition in the future if and when deemed advisable by the Board.

In December 2001, following deliberations by the Compensation Committee and
the Board of Directors in consultation with independent consultants and after
concluding discussions with the affected members of the management team the
Company entered into separation agreements with Messrs. Kurtzman, Papazian,
Schwartz, Kaufman and Veen and Ms. Kurtzman Lavut, terminating their existing
employment contracts and restructuring their severance benefits. Pursuant to
these separation agreements, these individuals terminated their employment
relationship with the Company effective February 28, 2002. Under the terms of
the separation agreements, the departing officers relinquished their right to
any multi-year cash severance benefits in exchange for a one time grant of stock
options and warrants exercisable at a price of $.55 per share, which vest over a
period of 18 months from the termination of employment. The aggregate number of
shares underlying the options and warrants issued under these separation
agreements is 22,218,750. The number of stock options for each person was
determined based on the underlying total compensation due to the employee upon
termination under each person's existing employment agreement, multiplied by two
and divided by $0.32 per share. Each of the officers has agreed to continue as a
consultant to the Company for a period of one year at 85% of their former
compensation. In addition, each executive is entitled to receive continued
medical benefits for three years following termination of employment.

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.

To date, no executive officer has received compensation in excess of $1
million in any year. The Company has recently learned, however, that its 2000
Stock Option Plan does not contain the provisions necessary to allow for options
to qualify for exemption. The proposed Amended and Restated 2000 Stock Option
Plan does contain such provisions.

Committee Members

Salvador Diaz-Verson, Jr. and Lawrence A. Diamant

Compensation Committee Interlocks and Insider Participation

The Compensation Committee for the fiscal year ended February 28, 2002
comprised Salvador Diaz-Verson, Jr., Stephen A. Talesnick, and Harry Haisfield.
Decisions regarding compensation of executive officers for the fiscal year ended
February 28, 2002 were made unanimously by the outside, disinterested Directors
of the Board of Directors, after reviewing recommendations of the Compensation
Committee.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions

In the third quarter of Fiscal 2002, the Company entered into a short-term
loan agreement with Carl Albert, a member of the Board of Directors, for
$250,000, bearing interest at a rate of 10%. The note, including accrued
interest of $2,500, was repaid within the third quarter. In the fourth quarter
of Fiscal 2002, the Company entered into a short-term loan agreement with Carl
Albert for another $250,000, bearing interest at a rate of 10%. The note, which
is included in current notes payable at February 28, 2002, and accrued interest
of $4,400, was repaid in March 2002. The Company incurred approximately $15,000
in legal fees to Mr. Albert's counsel pursuant to the loan agreements.

In May 2002, Mr. Albert acquired 500,000 shares of Common Stock from the
Company for $100,000 in connection with a private placement by the Company to a
number of third party investors.

During Fiscal 2002, the law firm of Robinson, Diamant and Wolkowitz
received $50,000 and 483,846 shares of Aura Common Stock valued at approximately
$159,000 in consideration of legal services rendered by the firm to Aura.
Lawrence Diamant, a Director of the Company, is a member of this law firm. In
July 2002, Mr. Diamant acquired 50,000 shares of Common Stock from the Company
for $10,000 in connection with a private placement by the Company to a number of
third party investors.

As more fully described in the Company's 8-K filed on December 13, 2002,
the Company consummated the initial closing under an Agreement for Sale and
Leaseback on December 1, 2002 with a group of individuals, (the "Purchasers")
pursuant to which the Company agreed to sell its Aura Realty, Inc. ("Aura
Realty") subsidiary to Purchasers and enter into a new 10-year lease of the
properties owned by Aura Realty. Aura Realty was a wholly-owned subsidiary of
the Company whose sole assets consist of certain real properties currently
occupied by the Company as its headquarter facilities in El Segundo, California.
Of the sixteen Purchasers, five are current consultants to the Company and
members of the Company's former management who separated from the Company at the
end of February 2002 (the "Consultants"). A fee of $50,000 was paid by the
Company to the Consultants in connection with the Agreement. The Company also
paid to the Consultants approximately $135,000 from the funds it received at
closing representing a portion of unpaid consulting fees contractually due to
the Consultants at December 1, 2002.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities 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, or written
representations that no reports were required, the Company believes that for the
fiscal year ended February 28, 2002, all filing requirements applicable to its
officers, directors, and ten percent beneficial owners were satisfied except
that Messrs. Cohen and Mr. Diaz-Verson did not timely file a single Form 5 with
two transaction acquisitions reported.

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 Industrial Index+. The Comparisons in the graph are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Company's Common Stock.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG AURA SYSTEMS,
INCORPORATED, THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE S & P INDUSTRIAL
INDEX

*$100 INVESTED ON 2/28/97 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING FEBRUARY 28

Cumulative Total Return

1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----

Aura Systems, Inc. Return % 16.30 -84.00 -31.58 36.36 -17.78
Cum $ $100.00 $116.30 $18.61 $12.73 $17.36 $14.27

S&P INDUSTRIALS Return % 34.56 23.21 17.39 -15.99 -8.95
Cum $ $100.00 $134.56 $165.79 $194.62 $163.50 $148.88

NASDAQ US Return % 36.64 30.24 104.32 -54.45 -18.85
Cum $ $100.00 $136.64 $177.96 $363.60 $165.62 $134.40

+ In 2001, the S&P Technology Index was divided into individual technology
sectors which do not match the Company's business area. As a result, on a
going forward basis comparisons will be made versus the Industrial Index
which is more indicative of the Company's business.

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 December 10, 2002, 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 500,000,000 to 1,000,000,000 (the "Common Stock Amendment"), and
directing that the Amendment be presented to the Stockholders for approval at
the Company's Annual Meeting.

As of December 10, 2002, approximately 432,272,225 shares of the Company's
Common Stock were outstanding. Accordingly, after including shares, including
options and warrants, reserved for future issuance, no shares of Common Stock
are available for issuance. 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 Company will be impeded in its ability to attract and build
strategic relationships.

o The availability of proceeds from future sales of Common Stock will
allow the Company the flexibility to reduce existing debt.

o Additional authorized shares of Common Stock will be required to make
full use of the 2000 Stock Option Plan, 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 500,000,000
to 1,000,000,000.

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, 2002, significant steps were taken to
downsize and refocus the Company's business on the Company's AuraGen(R) 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 2002, 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. 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.

Continuation of the 2000 Stock Option Plan

The Company must continue to use its 2000 Stock Option Plan, which the
Company believes is essential to attract, retain and motivate key personnel.
Absent an increase in the number of authorized shares of Common Stock, the
Company will be unable to continue utilizing 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 500,000,000 to 1,000,000,000. 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.

Amendment to Articles of Incorporation

If approved, Article "FOURTH" of the Articles of Incorporation would be
amended and restated as follows:

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.

PROPOSAL NO. 3

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 a possible reverse split.

The Reverse Stock Split Proposal

On December 10, 2002, 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. 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 December 10,
2002, the closing price of the Company's Common Stock was $0.07 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 inability 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 on Nasdaq, trading of the Common
Stock 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, 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 therefore.

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.

Amendment to Articles of Incorporation if Proposal 2 is Approved

If Proposal 2 of this Proxy Statement is approved thereby increasing the
number of authorized shares of Common Stock to 1,000,000,000, and if Proposal 3
of this Proxy statement is approved thereby authorizing the Board to effect a
possible reverse stock split, and if the Board elects to file an amendment to
effect the Reverse Stock Split, then Article "FOURTH" of the Articles of
Incorporation would be amended and restated as follows:

"FOURTH". The total number of shares of stock which this corporation is
authorized to issue is: One Billion Ten Million (1,010,000,000) shares of
the par value of $.005 each, amounting to Five million Fifty Thousand
Dollars ($5,050,000.00), of which One Billion (1,000,000,000) shares shall
be Common Stock and Ten Million (10,000,000) Shares shall be Preferred
Stock. The Preferred Stock shall have such designations, powers,
preferences, rights, qualifications, limitations and restrictions permitted
under the General Corporation Law of the State of Delaware, which the Board
of Directors of the Corporation may fix by resolution. Upon the effective
date of this Amendment (the "Effective Date"), each 10 shares of Common
Stock outstanding immediately prior to the Effective Date shall be
automatically converted into and reclassified as one share of Common Stock.
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 number of shares, respectively.

Amendment to Articles of Incorporation if Proposal 2 is Not Approved

If Proposal 2 of this Proxy Statement is not approved, and the total number
of authorized shares of Common Stock remains at 500,000,000, and if Proposal 3
of this Proxy statement is approved thereby authorizing the Board to effect a
possible reverse stock split, and if the Board elects to file an amendment to
effect the Reverse Stock Split, then Article "FOURTH" of the Articles of
Incorporation would be amended and restated as follows:

"FOURTH". The total number of shares of stock which this corporation is
authorized to issue is: Five Hundred Ten Million (510,000,000) shares of
the par value of $.005 each, amounting to Two Million Five Hundred Fifty
Thousand Dollars ($2,500,000.00), of which Five Hundred Million
(500,000,000) shares shall be Common Stock and Ten Million (10,000,000)
Shares shall be Preferred Stock. The Preferred Stock shall have such
designations, powers, preferences, rights, qualifications, limitations and
restrictions permitted under the General Corporation Law of the State of
Delaware, which the Board of Directors of the Corporation may fix by
resolution. Upon the effective date of this Amendment (the "Effective
Date"), each 10 shares of Common Stock outstanding immediately prior to the
Effective Date shall be automatically converted into and reclassified as
one share of Common Stock. 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 number of shares, respectively.

The Board of Directors recommends that Stockholders vote "FOR" the proposal
to effect a possible reverse split.

PROPOSAL NO. 4

TO CONSIDER AND ACT UPON A PROPOSAL TO APPROVE
AN AMENDMENT TO THE COMPANY'S 2000 STOCK OPTION PLAN

The Board of Directors recommends that Stockholders vote "FOR" the proposal to
adopt the Amended and Restated Aura Systems, Inc. 2000 Stock Option Plan.

The Company's 2000 Stock Option Plan was adopted on March 6, 2000. In order
to support the Company's long-term incentive compensation program and enable it
to continue to attract and retain employees, directors and consultants, the
Board of Directors has determined that it is necessary to amend the plan to
increase the number of shares available for awards and to make certain changes
in the terms of the Plan. Material changes to the plan include, but are not
limited to: (1) providing that the shares of Common Stock shall be 100,000,000;
(2) the addition of Incentive Stock Options; (3) the addition of other forms of
equity compensation; and (4) the substitution of new Stock Options for
previously granted Stock Options, or for the options granted under other plans
or agreements, in each case including previously granted options having higher
option prices. The changes to the Plan are intended to provide greater
flexibility as to the types of awards that may be granted and the manner in
which they are administered.

The following is a description of the material terms of the Plan as amended
subject to shareholder approval, and as such is qualified by the actual terms of
the Plan, the full text of which is set forth in Exhibit A to this Proxy
Statement.

DESCRIPTION OF THE PLAN

Stock Subject to Plan

The total number of shares of Common Stock which may be issued Shares
awarded under the Plan shall be 100,000,000. Such shares may be authorized but
unissued shares or shares that have been issued and reacquired by the Company.
The payment of any award in cash shall not count against the Plan's share limit.
To the extent a stock option is surrendered for cash or terminates without
having been exercised, or an award terminates without the holder having received
payment of the award, or shares awarded are forfeited, the shares subject to
such award will be available for future awards under the Plan. In addition,
shares surrendered to the Company in payment of the option price or withheld by
the Company to satisfy the award holder's tax liability with respect to an award
will not count against the share limit and will become available for issuance
under the Plan.

Administration

The Plan shall be administered by a committee designated by the Board, or
if no committee is designated, then the plan shall be administered by the entire
Board. (The Board of Directors or committee so acting is referred to in this
description as the "Administrator"). The Administrator is authorized to, among
other things, grant and amend (provided however that no amendment shall impair
the rights of the award holder without his or her written consent) awards to
eligible persons under the Plan; to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it shall deem advisable;
to interpret the terms and provisions of the Plan and any award granted under
the Plan; and to make all factual and other determinations necessary or
advisable for the administration of the Plan.

Eligibility

Awards under the Plan may be made by the Administrator, in its discretion,
to all Employees, officers, directors, consultants, advisors and suppliers of
the Company or of any Subsidiary of the Company. In addition, awards under such
Sections may be granted to prospective employees, officers, directors,
consultants, advisors and suppliers but such awards shall not become effective
until the recipient's commencement of employment or service with the Company or
a Subsidiary. Incentive Options may be granted only to employees and prospective
employees. Award recipients under the Plan shall be selected from time to time
by the Administrator, in its sole discretion, from among those eligible. The
maximum number of Stock Options and/or Stock Appreciation Rights that can be
granted in any fiscal year is 25,000,000.

Types of Awards

A summary of the types of awards available under the Plan is set forth
below. In general, the Administrator has the authority to grant awards on such
terms and conditions as it may determine in its sole discretion, except where
such discretion is limited by an express provision of the Plan.

1. STOCK OPTIONS. Incentive stock options ("ISOs") and non-qualified stock
options may be granted for such number of shares of Common Stock as the
Administrator determines. A stock option will be exercisable at such times, over
such term and subject to such terms and conditions as the Administrator
determines, at an exercise price determined by the Administrator. (ISOs are
subject to restrictions as to exercise period and price as required by the
Internal Revenue Code and may be granted only to employees.) Payment of the
exercise price may be made in such manner as the Administrator may provide,
including one or more of cash, delivery of shares of Common Stock already owned
or subject to award under the Plan, broker-assisted "cashless exercise," or any
other manner determined by the Administrator. The Administrator may provide that
the stock options will be transferable. Upon an optionee's termination of
service, the option will be exercisable to the extent determined by the
Administrator, either in the initial grant or an amendment thereto. The
Administrator may provide that an option that is outstanding on the date of an
optionee's death will remain outstanding for an additional period after the date
of such death, notwithstanding that such option would otherwise have expired
earlier.

If the Company acquires another business, by merger or otherwise, the
Administrator may grant stock options in substitution for any options or other
stock awards or stock-based awards granted by such other business or an
affiliate thereof. Such substitute stock options may be granted on such terms as
the Administrator deems appropriate in the circumstances, notwithstanding any
limitations on stock options contained in the Plan.

2. RESTRICTED STOCK. Restricted stock is stock that has been issued,
subject to forfeiture. In making an award of restricted stock, the Administrator
will determine the periods, if any, during which the stock is subject to
forfeiture, and the purchase price, if any, for the stock. The vesting of
restricted stock (i.e., the point at which it becomes non-forfeitable) may be
conditioned upon the completion of a specified period of service with the
Company or a related company, the attainment of specific performance goals, or
such other criteria as the Administrator may determine. During the restricted
period, the award holder may not sell, transfer, pledge or assign the restricted
stock, except as may be permitted by the Administrator. The certificate
evidencing the restricted stock will be registered in the holder's name,
although the Administrator may direct that it remain in the possession of the
Company until the restrictions have lapsed. Except as may otherwise be provided
by the Administrator, upon the termination of the award holder's service for any
reason during the period before the restricted stock has vested, or in the event
the conditions to vesting are not satisfied, all restricted stock that has not
vested will be subject to forfeiture and the Administrator may provide that any
purchase price paid by the holder, or an amount equal to the restricted stock's
fair market value on the date of forfeiture, if lower, shall be paid to the
holder. During the restricted period, the holder will have the right to vote the
restricted stock and to receive any cash dividends, if so provided by the
Administrator. Stock dividends will be treated as additional shares of
restricted stock and will be subject to the same terms and conditions as the
initial grant, unless otherwise provided by the Administrator.

3. DEFERRED STOCK. A deferred stock award represents the Company's
agreement to deliver shares of Common Stock (or their cash equivalent) at a
specified future time. Such delivery may be conditioned upon the completion of a
specified period of service, the attainment of specific performance goals, or
such other criteria as the Administrator may determine, or may provide for the
unconditional delivery of shares (or their cash equivalent) on the specified
date. In making an award of deferred stock the Administrator will determine the
period during which receipt of the Common Stock will be deferred, and the
period, if any, during which the award is subject to forfeiture, and may provide
for the issuance of stock pursuant to the award without payment therefore. At
the end of the deferral period, and assuming the satisfaction of any
condition(s) to vesting of the award, the award will be settled in shares of
Common Stock, cash equal to the fair market value of such stock, or a
combination thereof, as provided by the Administrator. During the deferral
period set by the Administrator, the award holder may not sell, transfer, pledge
or assign the deferred stock award. In the event of termination of service
before the deferred stock award has vested, the award will be forfeited, except
as may be provided by the Administrator. Deferred stock will carry no voting
rights until such time as shares of Common Stock are actually issued. The
Administrator has the right to determine whether and when dividend equivalents
will be paid with respect to a deferred stock award.

4. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right shall entitle the
holder thereof to receive, for each share as to which the award is granted,
payment of an amount, in cash, shares of Common Stock, or a combination thereof,
as determined by the Committee, equal in value to the excess of the Fair Market
Value of a share of Common Stock on the date of exercise over an amount
specified by the Committee. Any such award shall be in such form and shall have
such terms and conditions as the Committee may determine. The grant shall
specify the number of shares of Common Stock as to which the Stock Appreciation
Right is granted. The Committee may provide that a Stock Appreciation Right may
be exercised only within the 60-day period following occurrence of a Change in
Control. The Committee may also provide that in the event of a Change in Control
the amount to be paid upon exercise of a Stock Appreciation Right shall be based
on the Change in Control Price.

5. BONUS STOCK AWARDS. The Committee may award Bonus Stock to any eligible
award recipient subject to such terms and conditions as the Committee shall
determine. The grant of Bonus Stock may, but need not, be conditioned upon the
attainment of specified performance objectives or upon such other criteria as
the Committee may determine. The Committee may waive such conditions in whole or
in part (except that the Committee may not waive conditions or restrictions with
respect to awards intended to qualify under Section 162(m) of the Code unless
such waiver would not cause the award to fail to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code). Unless
otherwise specified by the Committee, no money shall be paid by the recipient
for the Bonus Stock. Alternatively, the Committee may, after considering any
accounting impact to the Company, offer eligible employees the opportunity to
purchase Bonus Stock at a discount from its Fair Market Value. The Bonus Stock
award shall be satisfied by the delivery of the designated number of shares of
Common Stock which are not subject to restriction.

Deferrals of Awards

The Administrator may permit an award recipient to elect to defer receipt
of any award for a specified period or until a specified event, upon such terms
as are determined by the Administrator.

Change of Control Provisions

The Plan authorizes the Administrator to grant awards that contain special
vesting provisions if there is a Change of Control. If and to the extent
provided in the award, upon a Change of Control stock options will become fully
exercisable, the restrictions and vesting conditions applicable to restricted
stock and deferred stock will lapse and such shares and awards will be deemed
fully vested, and the Administrator, in its sole discretion, may accelerate the
payment date of all vested restricted stock and deferred stock. A "Change of
Control" means generally (1) the acquisition of a majority of the voting power
of the Company's stock by a person, entity, or group (with certain exceptions)
that owned less than 5% of such voting power immediately prior to the Company's
initial public offering; (2) the date on which a majority of the members of the
Board of Directors are not "Current Directors" (which term is defined to mean
the Company's current Directors and Directors whose nomination or election was
approved by a majority of the Directors who at the time were "Current
Directors"); (3) a merger or consolidation with another entity where the
Company's Stockholders immediately prior to the merger or consolidation would no
longer comprise a majority of the voting shares of the surviving Corporation in
substantially the same proportions as their prior ownership, or where the
directors of the Company would not constitute a majority of the Board of
Directors of the surviving Corporation; (4) a sale of substantially all of the
assets of the Company; or (5) approval by the Stockholders of a plan of complete
liquidation of the Company.

Amendment

The Plan is of unlimited duration. The Plan may be discontinued or amended
by the Board of Directors, except that no amendment or discontinuation may
adversely affect any outstanding award without the holder's written consent.
Amendments may be made without Stockholder approval except as required to
satisfy stock exchange or regulatory requirements.

Adjustment

In the case of certain changes in the Company's structure affecting the
Common Stock, appropriate adjustments may be made by the Board of Directors, in
its sole discretion, in order to prevent dilution or enlargement of benefits, in
the number of shares reserved under the Plan, the number of shares as to which
awards can be granted to any individual in any fiscal year, in the number and
kind of shares or other property subject to awards then outstanding under the
Plan and, where applicable, the amount to be paid by the award holders or the
Company pursuant to awards under the Plan. In addition, upon certain corporate
transactions the Board may, in its discretion, (1) accelerate the vesting and/or
payment date of awards, (2) cash-out outstanding awards, (3) provide for the
assumption of outstanding awards by a surviving or transferee company, (4)
provide that in lieu of shares of Common Stock of the Company, the award
recipient will be entitled to receive the consideration he would have received
for such shares in the transaction (or the value of such consideration in cash),
and/or (5) require stock options to be either exercised prior to the transaction
or forfeited.

Awards Under the Plan

The following table sets forth the number of stock options granted to the
persons set forth below since the adoption of the Plan, including options that
have been exercised, and options that are outstanding.

NAME AND PRINCIPAL POSITION OPTIONS RECEIVED (OR RECEIVED SUBJECT TO
AVAILABILITY OF SHARES)

Zvi (Harry) Kurtzman 9,934,823
Former Chief Executive Officer
Gerald C. Papazian 2,645,861
Former Chief Operating Officer
Steven C. Veen 2,581,722
Former Chief Financial Officer
Cipora Kurtzman Lavut 3,799,456
Former Senior Vice President
Arthur J. Schwartz 3,927,633
Former Senior Vice President
All current executive officers as a group 7,145,000
All current Directors who are not executive officers as a group 5,480,000

Neal Meehan 3,420,000
Nominee for election as a Director
Carl Albert 3,000,000
Nominee for election as a Director
Harvey Cohen 700,000
Nominee for election as a Director
Lawrence Diamant 250,000
Nominee for election as a Director
Salvador Diaz-Verson, Jr. 680,000
Nominee for election as a Director
John Pincavage 250,000
Nominee for election as a Director
Norman Reitman 600,000
Nominee for election as a Director
All former and current employees, including all current officers 29,896,951
who are not executive officers, as a group
Each other person who received or is to receive 0
5 percent of such options, warrants or rights
Each associate of any Director, executive officer, or nominee 0

Certain Federal Income Tax Consequences

The following is a summary of certain Federal Income Tax aspects of stock
options that may be awarded under the Plan based upon the laws in effect on the
date hereof.

Non-Qualified Stock Options

No income is recognized by the optionee at the time a non-qualified option
is granted. Upon exercise of the option, the optionee recognizes ordinary income
in an amount equal to the excess of the fair market value of the shares on the
date of exercise over the option price. At disposition of the shares, any
appreciation after the date of exercise is treated as capital gain.

Incentive Stock Options

An optionee generally will not recognize income upon the exercise of an
Incentive Stock Option during the period of his/her employment with the Company
or one of its subsidiaries or within three months after termination of
employment. (The optionee also will not recognize income upon the exercise of an
Incentive Stock Option within 12 months after the optionee's termination of
employment by reason of permanent and total disability, or within the remaining
term of the option following the optionee's death). However, the "spread"
between the fair market value of the shares at the time of exercise and the
exercise price is includible in the calculation of alternative minimum taxable
income for purposes of the alternative minimum tax. The exercise of an Incentive
Stock Option after the expiration of the specified time periods results in such
exercise being treated in the same manner as the exercise of a non-qualified
stock option.

If the optionee holds the shares received throughout the "ISO holding
period", which is both the two-year period after the ISO was granted and the
one-year period after the exercise of the ISO, the optionee will recognize
capital gain or loss when he/she disposes of the shares. Such gain or loss will
be measured by the difference between the exercise price and the amount received
for the shares at the time of disposition. If the shares acquired upon exercise
of an ISO are disposed of before the end of the ISO holding period, the
disposition is a "disqualifying disposition," which causes the optionee to
recognize ordinary income in an amount generally equal to the lesser of (i) the
excess of the value of the shares on the option exercise date over the exercise
price or (ii) the excess of the amount received upon disposition of the shares
over the exercise price. Any excess of the amount received upon disposition of
the shares over the value of the shares on the exercise date will be taxed to
the optionee as capital gain.

Company Deductions

As a general rule, the Company or one of its subsidiaries will be entitled
to a deduction for Federal Income Tax purposes at the same time and in the same
amount that an employee or Director recognizes ordinary income from awards under
the Plan, to the extent such income is considered reasonable compensation under
the Internal Revenue Code. The Company will not, however, be entitled to a
deduction with respect to payments that are contingent upon a change of control
if such payments are deemed to constitute "excess parachute payments" pursuant
to Section 280G of the Code and do not qualify as reasonable compensation
pursuant to that Section; such payments will subject the recipients to a 20%
excise tax. In addition, the Company will not be entitled to a deduction to the
extent compensation in excess of $1 million is paid to an executive officer
named in the proxy statement who was employed by the Company at year-end, unless
the compensation qualifies as "performance based" under Section 162(m) of the
Code. The Plan authorizes the Administrator to grant awards that qualify as
"performance based", as well as awards that do not qualify.

Miscellaneous

On December 10, 2002, the price of the Company's stock was $0.07 per
share.

The Board of Directors recommends that Stockholders vote "FOR" the proposal
to adopt the Amended and Restated Aura Systems, Inc. 2000 Stock Option Plan.

PROPOSAL NO. 5

INDEPENDENT AUDITORS

The Board of Directors recommends that Stockholders vote "FOR" the proposed
ratification of Singer Lewak Greenbaum & Goldstein LLP as the Company's
independent auditors.

The Board of Directors, upon recommendation of the Audit Committee, has
selected Singer Lewak Greenbaum & Goldstein LLP as independent auditors to
examine the Company's accounts for the fiscal year ending February 28, 2003, and
has further directed that Management submit the selection of independent
auditors for ratification by the Stockholders at the Annual Meeting of
Shareholders. Representatives of Singer Lewak Greenbaum & Goldstein LLP are
expected to be present at the Shareholder Meeting, will have the opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions. If the Stockholders do not ratify the selection of Singer
Lewak Greenbaum & Goldstein LLP, the Board of Directors will reconsider the
selection of independent auditors.

FEES PAID TO SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

The Audit Committee retained Singer Lewak Greenbaum & Goldstein LLP as the
Company's independent auditors to audit the Company's financial statements for
Fiscal 2002. The aggregate fees billed by Singer Lewak Greenbaum & Goldstein LLP
include fees for the following services rendered during Fiscal 2002:

Audit Fees - totaling $74,588.

Financial Information Systems Design and Implementation Fees - Singer did
not render professional services relating to financial information systems
design and implementation for the fiscal year ended February 28, 2002.

All Other Fees - totaling $44,813.

The Audit Committee has concluded that the provisions of the non-audit
services listed above as "All Other Fees" and "Financial Information Systems
Design and Implementation Fees" are compatible with maintaining the independence
of Singer Lewak Greenbaum & Goldstein LLP.

The Board of Directors recommends that Stockholders vote "FOR" the proposed
ratification of Singer Lewak Greenbaum & Goldstein LLP as the Company's
independent auditors.

Audit Committee Report

The Company maintains an Audit Committee (the "Committee"), consisting
entirely of outside, disinterested Directors who are not employees or former
employees of the Company. The primary purpose of the Audit Committee is to
assist the Board of Directors in its general oversight of the Company's
financial reporting process. The Committee annually reviews the NASD standard of
independence for audit committees and at its most recent review determined that
the Committee meets that standard.

Management is responsible for the preparation, presentation, and integrity
of the Company's financial statements, accounting and financial reporting
principles, internal controls, and procedures designed to ensure compliance with
accounting standards, applicable laws, and regulations. The Company's
independent auditors, Singer Lewak Greenbaum & Goldstein LLP, are responsible
for performing an independent audit of the consolidated financial statements and
expressing an opinion on the conformity of those financial statements with
generally accepted accounting principles.

The Committee has reviewed and discussed the audited financial statements
of the Company for the fiscal year ended February 28, 2002 with the Company's
management and has discussed with Singer Lewak Greenbaum & Goldstein LLP the
matters required to be discussed by Statement on Auditing Standards Board
Standard No. 61, as amended, "Communication with Audit Committees". In addition,
Singer Lewak Greenbaum & Goldstein LLP has provided the Audit Committee with the
written disclosures and the letter required by the Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees", and the Audit
Committee has discussed with Singer Lewak Greenbaum & Goldstein LLP their
independence.

In August 1998, a lawsuit captioned Collins v. Kurtzman et al. was filed in
U.S. District Court in the Central District of California, which purported to be
a derivative Shareholder suit on behalf of Aura against members of the Board of
Directors of the Company. Aura believes that the action was without merit. In
April 1999, a final settlement was entered into by the parties which called for
a dismissal of the action and no payments by any of the defendants. In
consideration of the plaintiff dismissing its lawsuit, Aura agreed to adopt and
implement a fraud detection program (the "Program") under the auspices of the
Audit Committee, after consulting with the Company's outside legal counsel and
independent auditors. The purpose of the Program is to detect and prevent fraud,
maintain accurate books and records for financial transactions, establish
procedures to ensure the recording of transactions to be in accordance with
generally accepted accounting principles, and to ensure that the Company's SEC
filings comply with SEC rules and regulations. The Audit Committee is
responsible for monitoring the Program on an ongoing basis with the assistance
of the Company's outside legal counsel and its independent auditors.

Committee Members

John Pincavage, Harvey Cohen, and Norman Reitman

MISCELLANEOUS

Stockholder Proposals for the Fiscal 2003 Annual Meeting

Stockholder proposals complying with the applicable rules under the
Exchange Act intended to be presented at the Fiscal 2003 Annual Meeting of
Stockholders must be received at the offices of the Company by September 15,
2003 (1) 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 proposal, (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 2002 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

(1) SEC requirement is for proposals to be received at a reasonable time before
the Company begins to print and mail its proxy materials. Accordingly, the date
inserted must be reasonable in terms of next year's mailing schedule. (See Reg.
14a-8(e)).

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 Neal F. Meehan 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 December 11, 2002, at the Annual Meeting of Stockholders to be
held on February 7, 2003 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 January ___, 2003,
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.)

Neal F. Meehan Harvey Cohen Salvador Diaz-Verson, Jr.
Carl A. Albert Norman Reitman John Pincavage
Lawrence A. Diamant

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 500,000,000 to 1,000,000,000.

[_] FOR [_] AGAINST [_] ABSTAIN

3. To consider and act upon a proposal to effect a possible reverse split of
the Company's Common Stock.

[_] FOR [_] AGAINST [_] ABSTAIN

4. To consider and act upon a proposal to approve an amendment to the
Company's 2000 Stock Option Plan.

[_] FOR [_] AGAINST [_] ABSTAIN

5. To consider and act upon a proposal to ratify the selection of Singer Lewak
Greenbaum & Goldstein LLP as the Company's independent auditors for Fiscal
2003.

[_] FOR [_] AGAINST [_] ABSTAIN

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: ______________________, 2003

Please sign exactly as the name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, 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.

__________________________ ____________________________

Name Signature

___________________________ _____________________________
Number of Shares Signature if held jointly

If you also expect to attend the Annual Meeting of Stockholders, the Board of
Directors requests you to check the box below:

[_] I/we plan to attend the Annual Meeting of Stockholders.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

Exhibit A
AMENDED AND RESTATED AURA SYSTEMS, INC.
2000 STOCK OPTION PLAN

WHEREAS, Aura Systems, Inc. (the "Company") adopted a 2000 Stock Option on
March 6, 2000 (such plan, as in effect to the date hereof, the "2000 Plan"); and

WHEREAS, the Company desires to amend and restate the 2000 Plan in order to
improve the Company's ability to attract and retain highly qualified personnel
by providing greater flexibility in making equity-based awards and increasing
the number of shares of Common Stock subject to such awards.

NOW, THEREFORE, the 2000 Plan is amended and restated to read in its
entirety as follows:

SECTION 1. Purpose and Types of Awards

1.1 The purposes of the Amended and Restated Aura Systems, Inc. 2000 Stock
Option Plan (the "Plan") are to attract, retain and reward its employees,
officers, directors, consultants, advisors and suppliers and strengthen the
mutuality of interests between such persons and the Company's Shareholders by
offering such persons an equity interest in the Company and thereby enabling
them to participate in the long-term success and growth of the Company.

1.2 Awards under the Plan may be in the form of (i) Stock Options; (ii)
Stock Appreciation Rights; (iii) Restricted Stock; (iv) Deferred Stock; and/or
(v) Bonus Stock. Awards may be free-standing or granted in tandem. If two awards
are granted in tandem, the award holder may exercise (or otherwise receive the
benefit of) one award only to the extent he or she relinquishes the tandem
award.

SECTION 2. Definitions

"Board" shall mean the Board of Directors of the Company.

"Bonus Stock" shall mean an award described in Section 10 of the Plan.

"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

"Committee" shall mean the committee of the Board designated by the Board
to administer the Plan, or if no committee is designated, and in any case with
respect to awards to Non-Employee Directors, the entire Board.

"Common Stock" shall mean the Common Stock of the Company, par value $0.01
per share.

"Company" shall mean Aura Systems, Inc. and its successors.

"Deferred Stock" shall mean an award described in Section 9 of the Plan.

"Director Option" shall mean a Stock Option granted under Section 12 of the
Plan.

"Employee" shall mean an employee of the Company or of any Subsidiary of
the Company.

"Fair Market Value" of the Common Stock on any date shall mean the value
determined in good faith by the Committee, by formula or otherwise; provided,
however, that unless the Committee determines to use a different measure, the
fair market value of the Common Stock shall be the closing sales price of the
Common Stock (on such exchange or market as is determined by the Board to be the
primary market for the Common Stock) on the date in question (or if shares of
Common Stock were not traded on such date, then on the next preceding trading
day on which a sale of Common Stock occurred).

"Incentive Option" shall mean a Stock Option granted under the Plan which
both is designated as an Incentive Option and qualifies as an incentive stock
option within the meaning of Section 422 of the Code.

"Non-Employee Director" shall mean a Director of the Company who is not
employed by the Company or any of its Subsidiaries.

"Non-Qualified Option" shall mean a Stock Option granted under the Plan
which either is designated as a Non-Qualified Option or does not qualify as an
incentive stock option within the meaning of Section 422 of the Code.

"Optionee" shall mean any person who has been granted a Stock Option under
the Plan or who is otherwise entitled to exercise a Stock Option.

"Option Period" shall mean, with respect to any portion of a Stock Option,
the period after such portion has become exercisable and before it has expired
or terminated.

"Plan" shall mean the Amended and Restated Aura Systems, Inc. 2000 Stock
Option Plan.

"Relationship" shall mean the status of employee, officer, or Director of
the Company or any Subsidiary of the Company.

"Restricted Stock" shall mean an award described in Section 8 of the Plan.

"Stock Appreciation Right" shall mean an award described in Section 7 of
the Plan.

"Stock Option" shall mean an Incentive Option or a Non-Qualified Option,
and, unless the context requires otherwise, shall include Director Options.

"Subsidiary" shall mean any corporation, partnership, joint venture or
other entity in which the Company owns, directly or indirectly, more than 50% of
the ownership interests.

SECTION 3. Administration

3.1 The Plan shall be administered by the Committee. Notwithstanding
anything to the contrary contained herein, only the Board shall have authority
to grant awards to Non-Employee Directors and to amend and interpret such
awards.

3.2 The Committee shall have the following authority and discretion with
respect to awards under the Plan: to grant and amend (provided however that no
amendment shall impair the rights of the award holder without his or her written
consent) awards to eligible persons under the Plan; to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall deem advisable; to interpret the terms and provisions of the Plan and any
award granted under the Plan; and to make all factual and other determinations
necessary or advisable for the administration of the Plan. In particular, and
without limiting its authority and powers, the Committee shall have the
authority and discretion:

(a) to select the persons to whom awards will be granted from among
those eligible;

(b) to determine the number of shares of Common Stock to be covered by
each award granted hereunder subject to the limitations contained herein;

(c) to determine the terms and conditions of any award granted
hereunder, including, but not limited to, any vesting or other restrictions
based on such continued employment, performance objectives and such other
factors as the Committee may establish, and to determine whether the terms
and conditions of the award have been satisfied;

(d) to determine the treatment of awards upon an Employee's
retirement, disability, death, termination for cause or other termination
of employment, or during a leave of absence or upon a Non-Employee
Director's termination of Relationship;

(e) to determine that the award holder has no rights with respect to
any dividends declared with respect to any shares covered by an award or
that amounts equal to the amount of any dividends declared with respect to
the number of shares covered by an award (i) will be paid to the award
holder currently or (ii) will be deferred and deemed to be reinvested or
(iii) will otherwise be credited to the award holder;

(f) to determine whether, to what extent, and under what circumstances
Common Stock and other amounts payable with respect to an award will be
deferred either automatically or at the election of an award holder,
including providing for and determining the amount (if any) of deemed
earnings on any deferred amount during any deferral period;

(g) to amend the terms of any award, prospectively or retroactively;
provided, however, that no amendment shall impair the rights of the award
holder without his or her written consent;

(h) to determine, pursuant to a formula or otherwise, the Fair Market
Value of the Common Stock on a given date;

(i) after considering any accounting impact to the Company, to provide
that the shares of Common Stock received as a result of an award shall be
subject to a right of repurchase by the Company and/or a right of first
refusal, in each case subject to such terms and conditions as the Committee
may specify;

(j) to adopt one or more sub-plans, consistent with the Plan,
containing such provisions as may be necessary or desirable to enable
awards under the Plan to comply with the laws of other jurisdictions and/or
qualify for preferred tax treatment under such laws;

(k) to delegate such administrative duties as it may deem advisable to
one or more of its members or to one or more Employees or agents; and

(l) after considering any accounting impact to the Company, to
substitute new Stock Options for previously granted Stock Options, or for
options granted under other plans or agreements, in each case including
previously granted options having higher option prices.

3.3 The Committee shall have the right to designate awards as "Performance
Awards." The grant or vesting of a Performance Award shall be subject to the
achievement of performance objectives established by the Committee based on one
or more of the following criteria, in each case applied to the Company on a
consolidated basis and/or to a business unit and which the Committee may use as
an absolute measure, as a measure of improvement relative to prior performance,
or as a measure of comparable performance relative to a peer group of companies:
sales, operating profits, operating profits before taxes, operating profits
before interest expense and taxes, net earnings, earnings per share, return on
equity, return on assets, return on invested capital, total shareholder return,
cash flow, debt to equity ratio, market share, stock price, economic value
added, and market value added.

3.4 All determinations and interpretations made by the Committee pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Company and award holders. Determinations by the Committee under
the Plan relating to the form, amount, and terms and conditions of awards need
not be uniform, and may be made selectively among persons who receive or are
eligible to receive awards under the Plan, whether or not such persons are
similarly situated.

3.5 The Committee shall act by a majority of its members at a meeting
(present in person or by conference telephone) or by unanimous written consent.

3.6 No member of the Board or the Committee, nor any officer or Employee of
the Company or its Subsidiaries acting on behalf of the Board or the Committee,
shall be personally liable for any action, determination or interpretation taken
or made with respect to the Plan or any award hereunder. The Company shall
indemnify all members of the Board and the Committee and all such officers and
Employees acting on their behalf, to the extent permitted by law, from and
against any and all liabilities, costs and expenses incurred by such persons as
a result of any act, or omission to act, in connection with the performance of
such persons' duties, responsibilities and obligations under the Plan.

SECTION 4. Stock Subject to Plan

4.1 The total number of shares of Common Stock which may be issued under
the Plan shall be 100,000,000, including 43,021,951 shares previously issued in
the 2000 Stock Option Plan as of December 11, 2002, subject to adjustment as
provided in Section 4.4. Such shares may consist of authorized but unissued
shares or shares that have been issued and reacquired by the Company. The
exercise of a Stock Appreciation Right for cash or the payment of any award in
cash shall not count against this share limit.

4.2 To the extent a Stock Option is surrendered for cash or terminates
without having been exercised, or an award terminates without the holder having
received payment of the award, or shares awarded are forfeited, the shares
subject to such award shall again be available for distribution in connection
with future awards under the Plan. Shares of Common Stock equal in number to the
shares surrendered in payment of the option price, and shares of Common Stock
which are withheld in order to satisfy federal, state or local tax liability,
shall not count against the above limit, and shall again be available for awards
under the Plan.

4.3 No Employee shall be granted Stock Options and/or Stock Appreciation
Rights with respect to more than 25,000,000 shares of Common Stock in any fiscal
year, and no Employee shall be granted Restricted Stock, Deferred Stock and/or
Bonus Stock awards with respect to more than 25,000,000 shares of Common Stock
in any fiscal year, subject to adjustment as provided in Section 4.4.

4.4 In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, stock dividend, stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Common Stock such that an adjustment is
determined by the Board in its discretion to be appropriate, after considering
any accounting impact to the Company, in order to prevent dilution or
enlargement of benefits under the Plan, then the Board shall, in such a manner
as it may in its discretion deem equitable, adjust any or all of (i) the
aggregate number and kind of shares reserved for issuance under the Plan, (ii)
the number and kind of shares as to which awards may be granted to any
individual in any fiscal year, (iii) the number and kind of shares or other
property subject to outstanding awards, and (iv) the exercise price of
outstanding Stock Options and any other amounts to be paid by award holders or
the Company, as the case may be, with respect to outstanding awards.

In addition, upon the dissolution or liquidation of the Company or upon any
reorganization, merger, or consolidation as a result of which the Company is not
the surviving corporation (or survives as a wholly-owned subsidiary of another
corporation), or upon a sale of substantially all the assets of the Company, the
Board may, after considering any accounting impact to the Company, take such
action as it in its discretion deems appropriate to (i) accelerate the time when
awards vest and/or may be exercised and/or may be paid, (ii) cash out
outstanding Stock Options and/or other awards at or immediately prior to the
date of such event, (iii) provide for the assumption of outstanding Stock
Options or other awards by surviving, successor or transferee corporations, (iv)
provide that in lieu of shares of Common Stock of Company, the award recipient
shall be entitled to receive the consideration he would have received in such
transaction in exchange for such shares of Common Stock (or the Fair Market
Value thereof in cash), and/or (v) provide that Stock Options shall be
exercisable for a period of at least 10 business days from the date of receipt
of a notice from the Company of such proposed event, following the expiration of
which period any unexercised Stock Options shall terminate.

The Board's determination as to which adjustments shall be made under this
Section 4.4 and the extent thereof shall be final, binding and conclusive.

4.5 No fractional shares shall be issued or delivered under the Plan. The
Committee shall determine whether the value of fractional shares shall be paid
in cash or other property, or whether such fractional shares and any rights
thereto shall be cancelled without payment.

SECTION 5. Eligibility

5.1 The persons who are eligible for awards hereunder are employees,
officers, Directors, consultants, advisors and suppliers of the Company or of
any Subsidiary of the Company. In addition, awards under such Sections may be
granted to prospective employees, officers, Directors, consultants, advisors and
suppliers but such awards shall not become effective until the recipient's
commencement of employment or service with the Company or a Subsidiary.
Incentive Options may be granted only to Employees and prospective Employees.
Award recipients under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible.

5.2 Non-Employee Directors shall be granted awards under Section 12 in
addition to any awards which may be granted to them under other Sections of the
Plan.

SECTION 6. Stock Options

6.1 The Stock Options awarded to Employees under the Plan may be of two
types: (i) Incentive Options and (ii) Non-Qualified Options. To the extent that
any Stock Option granted to an Employee does not qualify as an Incentive Option,
it shall constitute a Non-Qualified Option. All Stock Options awarded to persons
who are not Employees shall be Non-Qualified Options.

6.2 Subject to the following provisions, Stock Options awarded under
Section 6 of the Plan shall be in such form and shall have such terms and
conditions as the Committee may determine.

(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee,
after considering any accounting impact to the Company; provided, however,
that the exercise price of any Incentive Option or Non-Qualified Option
shall not be less than the Fair Market Value of the Common Stock on the
date of the award thereof.

(b) Option Term. The term of each Stock Option shall be fixed by the
Committee.

(c) Exercisability. Stock Options shall be exercisable and shall vest
at such time or times and subject to such terms and conditions as shall be
determined by the Committee. The Committee may impose different schedules
for exercisability and vesting. After considering any accounting impact to
the Company, the Committee may waive any exercise or vesting provisions or
accelerate the exercisability or vesting of the Stock Option at any time in
whole or in part.

(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the Option Period by giving the Company notice of
exercise in the form approved by the Committee (which may be written or
electronic) specifying the number of whole shares to be purchased,
accompanied by payment of the aggregate option price for such shares.
Payment of the option price shall be made in such manner as the Committee
may provide in the award, which may include (i) cash (including cash
equivalents), (ii) delivery (either by actual delivery of the shares or by
providing an affidavit affirming ownership of the shares) of shares of
Common Stock already owned by the Optionee for at least six months, (iii)
to the extent permitted by law, broker-assisted "cashless exercise" in
which the Optionee delivers a notice of exercise together with irrevocable
instructions to a broker acceptable to the Company to sell shares of Common
Stock (or a sufficient portion of such shares) acquired upon exercise of
the Stock Option and remit to the Company a sufficient portion of the sale
proceeds to pay the total option price and any withholding tax obligation
resulting from such exercise, (iv) any other manner permitted by law, or
(v) any combination of the foregoing.

(e) No Shareholder Rights. An Optionee shall have no rights to
dividends or other rights of a shareholder with respect to shares subject
to a Stock Option until the Optionee has duly exercised the Stock Option
and a certificate for such shares has been duly issued (or the Optionee has
otherwise been duly recorded as the owner of the shares on the books of the
Company).

(f) Termination of Employment or Relationship. Following the
termination of an Optionee's employment or other Relationship with the
Company or its Subsidiaries, the Stock Option shall be exercisable to the
extent determined by the Committee. The Committee may provide different
post-termination exercise provisions which may vary based on the nature of
and reason for the termination. The Committee may provide that,
notwithstanding the option term fixed pursuant to Section 6.2(b), a
Non-Qualified Option which is outstanding on the date of an Optionee's
death shall remain outstanding for an additional period after the date of
such death. The Committee shall have absolute discretion to determine the
date and circumstances of any termination of employment or other
Relationship.

(g) Non-transferability. Unless otherwise provided by the Committee,
(i) Stock Options shall not be transferable by the Optionee other than by
will or by the laws of descent and distribution, and (ii) during the
Optionee's lifetime, all Stock Options shall be exercisable only by such
Optionee. The Committee, in its sole discretion, may permit Stock Options
to be transferred to such other transferees and on such terms and
conditions as may be determined by the Committee.

(h) Surrender Rights. The Committee may, after considering any
accounting impact to the Company, provide that Stock Options may be
surrendered for cash upon any terms and conditions set by the Committee.

6.3 Notwithstanding the provisions of Section 6.2, Incentive Options shall
be subject to the following additional restrictions:

(a) Option Price. No Incentive Option shall have an option price which
is less than the Fair Market Value of the Common Stock on the date of the
award of the Incentive Option (or, with respect to awards to prospective
Employees, on the first day of employment).

(b) Option Term. No Incentive Option shall be exercisable more than
ten years after the date such Incentive Stock Option is awarded.

(c) Additional Limitations for 10% Shareholders. No Incentive Option
granted to an Employee who owns more than 10% of the total combined voting
power of all classes of stock of the Company or any of its parent or
subsidiary corporations, as defined in Section 424 of the Code, shall (i)
have an option price which is less than 110% of the Fair Market Value of
the Common Stock on the date of award of the Incentive Option or (ii) be
exercisable more than five years after the date such Incentive Option is
awarded.

(d) Exercisability. The aggregate Fair Market Value (determined as of
the time the Incentive Option is granted) of the shares with respect to
which Incentive Options (granted under the Plan and any other plans of the
Company, its parent corporation or subsidiary corporations, as defined in
Section 424 of the Code) are exercisable for the first time by an Optionee
in any calendar year shall not exceed $100,000.

(e) Notice of Disqualifying Disposition. An Optionee's right to
exercise an Incentive Option shall be subject to the Optionee's agreement
to notify the Company of any "disqualifying disposition" (for purposes of
Section 422 of the Code) of the shares acquired upon such exercise.

(f) Non-transferability. Incentive Options shall not be transferable
by the Optionee, other than by will or by the laws of descent and
distribution. During the Optionee's lifetime, all Incentive Options shall
be exercisable only by such Optionee.

(g) Last Grant Date. No Incentive Option shall be granted more than
ten years after the earlier of the date of adoption of the Plan by the
Board or approval of the Plan by the Company's Shareholders.

The Committee may, with the consent of the Optionee, amend an Incentive
Option in a manner that would cause loss of Incentive Option status, provided
the Stock Option as so amended satisfies the requirements of Section 6.2.

6.4 Substitute Options. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Committee may grant Stock Options in substitution for any
options or other stock awards or stock-based awards granted by such entity or an
affiliate thereof. Such substitute Stock Options may be granted on such terms as
the Committee deems appropriate in the circumstances, notwithstanding any
limitations on Stock Options contained in other provisions of this Section 6.

SECTION 7. Stock Appreciation Rights

7.1 A Stock Appreciation Right shall entitle the holder thereof to receive,
for each share as to which the award is granted, payment of an amount, in cash,
shares of Common Stock, or a combination thereof, as determined by the
Committee, equal in value to the excess of the Fair Market Value of a share of
Common Stock on the date of exercise over an amount specified by the Committee.
Any such award shall be in such form and shall have such terms and conditions as
the Committee may determine. The grant shall specify the number of shares of
Common Stock as to which the Stock Appreciation Right is granted.

7.2 The Committee may provide that a Stock Appreciation Right may be
exercised only within the 60-day period following occurrence of a Change in
Control (as defined in Section 14.2) (such Stock Appreciation Right being
referred to herein as a "Limited Stock Appreciation Right"). The Committee may
also provide that in the event of a Change in Control the amount to be paid upon
exercise of a Stock Appreciation Right shall be based on the Change in Control
Price (as defined in Section 14.3).

SECTION 8. Restricted Stock

Subject to the following provisions, all awards of Restricted Stock shall
be in such form and shall have such terms and conditions as the Committee may
determine:

(a) The Restricted Stock award shall specify the number of shares of
Restricted Stock to be awarded, the price, if any, to be paid by the
recipient of the Restricted Stock and the date or dates on which, or the
conditions upon the satisfaction of which, the Restricted Stock will vest.
The grant and/or the vesting of Restricted Stock may be conditioned upon
the completion of a specified period of service with the Company and/or its
Subsidiaries, upon the attainment of specified performance objectives, or
upon such other criteria as the Committee may determine.

(b) Stock certificates representing the Restricted Stock awarded under
the Plan shall be registered in the award holder's name, but the Committee
may direct that such certificates be held by the Company on behalf of the
award holder. Except as may be permitted by the Committee, no share of
Restricted Stock may be sold, transferred, assigned, pledged or otherwise
encumbered by the award holder until such share has vested in accordance
with the terms of the Restricted Stock award. At the time Restricted Stock
vests, a certificate for such vested shares shall be delivered to the award
holder (or his or her designated beneficiary in the event of death), free
of all restrictions.

(c) The Committee may provide that the award holder shall have the
right to vote and/or receive dividends on Restricted Stock. Unless the
Committee provides otherwise, Common Stock received as a dividend on, or in
connection with a stock split of, Restricted Stock shall be subject to the
same restrictions as the Restricted Stock.

(d) Except as may be provided by the Committee, in the event of an
award holder's termination of employment or other Relationship before all
of his or her Restricted Stock has vested, or in the event any conditions
to the vesting of Restricted Stock have not been satisfied prior to any
deadline for the satisfaction of such conditions set forth in the award,
the shares of Restricted Stock which have not vested shall be forfeited,
and the Committee may provide that (i) any purchase price paid by the award
holder shall be returned to the award holder or (ii) a cash payment equal
to the Restricted Stock's Fair Market Value on the date of forfeiture, if
lower, shall be paid to the award holder.

(e) The Committee may waive, in whole or in part, any or all of the
conditions to receipt of, or restrictions with respect to, any or all of
the award holder's Restricted Stock (except that the Committee may not
waive conditions or restrictions with respect to awards intended to qualify
under Section 162(m) of the Code unless such waiver would not cause the
award to fail to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code).

SECTION 9. Deferred Stock Awards

Subject to the following provisions, all awards of Deferred Stock shall be
in such form and shall have such terms and conditions as the Committee may
determine:

(a) The Deferred Stock award shall specify the number of shares of
Deferred Stock to be awarded and the duration of the period (the "Deferral
Period") during which, and the conditions under which, receipt of the
Common Stock will be deferred. The Committee may condition the grant or
vesting of Deferred Stock, or receipt of Common Stock or cash at the end of
the Deferral Period, upon the completion of a specified period of service
with the Company and/or its Subsidiaries, upon the attainment of specified
performance objectives, or upon such other criteria as the Committee may
determine.

(b) Except as may be provided by the Committee, Deferred Stock awards
may not be sold, assigned, transferred, pledged or otherwise encumbered
during the Deferral Period.

(c) At the expiration of the Deferral Period, the award holder (or his
or her designated beneficiary in the event of death) shall receive (i)
certificates for the number of shares of Common Stock equal to the number
of shares covered by the Deferred Stock award, (ii) cash equal to the Fair
Market Value of such Common Stock, or (iii) a combination of shares and
cash, as the Committee may determine.

(d) Except as may be provided by the Committee, in the event of an
award holder's termination of employment or other Relationship before the
Deferred Stock has vested, his or her Deferred Stock award shall be
forfeited.

(e) The Committee may waive, in whole or in part, any or all of the
conditions to receipt of, or restrictions with respect to, Common Stock or
cash under a Deferred Stock award (except that the Committee may not waive
conditions or restrictions with respect to awards intended to qualify under
Section 162(m) of the Code unless such waiver would not cause the award to
fail to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code).

SECTION 10. Bonus Stock Awards

The Committee may award Bonus Stock to any eligible award recipient subject
to such terms and conditions as the Committee shall determine. The grant of
Bonus Stock may, but need not, be conditioned upon the attainment of specified
performance objectives or upon such other criteria as the Committee may
determine. The Committee may waive such conditions in whole or in part (except
that the Committee may not waive conditions or restrictions with respect to
awards intended to qualify under Section 162(m) of the Code unless such waiver
would not cause the award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code). Unless otherwise specified by
the Committee, no money shall be paid by the recipient for the Bonus Stock.
Alternatively, the Committee may, after considering any accounting impact to the
Company, offer eligible employees the opportunity to purchase Bonus Stock at a
discount from its Fair Market Value. The Bonus Stock award shall be satisfied by
the delivery of the designated number of shares of Common Stock which are not
subject to restriction.

SECTION 11. Election to Defer Awards

The Committee may permit an award recipient to elect to defer payment of an
award for a specified period or until a specified event, upon such terms as are
determined by the Committee.

SECTION 12. Non-Employee Director Options

12.1 Director Options shall be Non-Qualified Options and shall have the
following terms and conditions:

(a) Option Price. The option price per share of Common Stock
purchasable under a Director Option shall be the Fair Market Value of the
Common Stock on the date of grant.

(b) Option Term. The term of a Director Option shall be ten years
unless the Committee determines that a shorter term will be applicable.

(d) Method of Exercise. The Director Option may be exercised in whole
or in part at any time during the Option Period by giving the Company
notice of exercise in the form approved by the Committee (which may be
written or electronic) specifying the number of whole shares to be
purchased, accompanied by payment of the aggregate option price for such
shares. Payment of the option price may, at the election of the Optionee,
be made in any one or more of the following: (i) cash (including cash
equivalents), (ii) by delivery (either by actual delivery of the shares or
by providing an affidavit affirming ownership of the shares) of whole
shares of Common Stock already owned by the Optionee for at least six
months (which shares shall be valued at their Fair Market Value on the date
of exercise), or (iii) to the extent permitted by law, by broker-assisted
"cashless exercise" in which the Optionee delivers a notice of exercise
together with irrevocable instructions to a broker acceptable to the
Company to sell shares of Common Stock (or a sufficient portion of such
shares) acquired upon exercise of the Director Option and remit to the
Company a sufficient portion of the sales proceeds to pay the total option
price for such exercise.

(e) Termination of Service. If the Optionee's service on the Company's
Board is terminated by reason of death, such Optionee's Director Options
shall become immediately exercisable, and may be exercised until the end of
their term. If the Optionee's service on the Company's Board is terminated
for any other reason, such Optionee's Director Options which are
exercisable on the date of such termination of Relationship shall continue
to be exercisable until the end of their term, and any other Director
Options held by such Optionee shall terminate immediately.

(f) Transferability. A Non-Employee Director may transfer a Director
Option to (i) a revocable trust or other "grantor trust" under Sections
671-677 of the Code for the benefit of the Non-Employee Director during his
lifetime, or (ii) one or more of his children, grandchildren and spouse
("family members") or to one or more trusts for the benefit of such family
members, or to one or more partnerships in which such family members and
the Non-Employee Director are the only partners, or (iii) such other
persons or entities as may be permitted by the Board. All transfers of
Director Options shall be subject to prior approval by the Board and any
terms and conditions as may be imposed by the Board. Except for options
transferred as provided in this Section 12.2(f), no Director Option shall
be transferable by the Optionee other than by will or by the laws of
descent and distribution, and during the Optionee's lifetime, all Director
Options shall be exercisable only by the Optionee.

(g) No Shareholder Rights. An Optionee shall have neither rights to
dividends nor other rights of a shareholder with respect to shares subject
to a Director Option until the Optionee has duly exercised the Director
Option and a certificate for such shares has been duly issued (or the
Optionee has otherwise been duly recorded as the owner of the shares on the
books of the Company).

(h) Surrender Rights. The Committee may, after considering any
accounting impact to the Company, provide that Director Options may be
surrendered for cash upon any terms and conditions set by the Committee.

SECTION 13. Tax Withholding

13.1 Each award holder shall, no later than the date as of which an amount
with respect to an award first becomes includible in such person's gross income
for applicable tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, local or
other taxes of any kind required by law to be withheld with respect to the
award.

The obligations of the Company under the Plan shall be conditional on such
payment or arrangements. The Company (and, where applicable, its Subsidiaries),
shall, to the extent permitted by law, have the right to deduct the minimum
amount of any required tax withholdings from any such taxes from any payment of
any kind otherwise due to the award holder.

13.2 To the extent permitted by the Committee, and subject to such terms
and conditions as the Committee may provide, an Employee may elect to have the
minimum amount of any required tax withholdings with respect to any awards
hereunder, satisfied by (i) having the Company withhold shares of Common Stock
otherwise deliverable to such person with respect to the award or (ii)
delivering to the Company shares of unrestricted Common Stock already owned by
the Employee for at least six months. Alternatively, the Committee may require
that a portion of the shares of Common Stock otherwise deliverable be applied to
satisfy the withholding tax obligations with respect to the award.

SECTION 14. Change in Control

14.1 In the event of a Change in Control, unless otherwise determined by
the Committee at the time of grant or by amendment (with the award holder's
consent) of such grant:

(a) all outstanding Stock Options (including Director Options) and all
outstanding Stock Appreciation Rights (including Limited Stock Appreciation
Rights) awarded under the Plan shall become fully exercisable and vested;

(b) the restrictions and vesting conditions applicable to any
outstanding Restricted Stock and Deferred Stock awards under the Plan shall
lapse and such shares and awards shall be deemed fully vested;

(c) the Committee may, in its sole discretion, accelerate the payment
date of all Restricted Stock and Deferred Stock awards; and

(d) to the extent the cash payment of any award is based on the Fair
Market Value of Common Stock, such Fair Market Value shall be the Change in
Control Price.

14.2 A "Change of Control" shall be deemed to occur on:

(a) the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, other than the
Company and its Subsidiaries as determined immediately prior to that date
or an employee benefit plan of the Company or its Subsidiaries, has become
the beneficial owner, directly or indirectly (with beneficial ownership
determined as provided in Rule 13d-3, or any successor rule, under the
Securities Exchange Act of 1934) of securities of the Company representing
25% or more of the total combined voting power of all classes of stock of
the Company having the right under ordinary circumstances to vote at an
election of the Board, unless such person has acquired 80% or more of such
securities directly from the Company;

(b) the date on which one-third or more of the members of the Board
shall consist of persons other than Current Directors (for these purposes a
"Current Director" shall mean any member of the Board on the effective date
specified in Section 17 hereof and any member of the Board whose nomination
or election has been approved by a majority of the Current Directors then
on the Board);

(c) the date of approval by the Stockholders of the Company of an
agreement providing for the merger or consolidation of the Company with
another corporation where (i) the Stockholders of the Company, immediately
prior to the merger or consolidation, would not beneficially own,
immediately after the merger or consolidation, shares entitling such
Stockholders to 50% or more of all votes (without consideration of the
rights of any class of stock to elect Directors by a separate class vote)
to which all Stockholders of the corporation issuing cash or securities in
the merger or consolidation would be entitled in the election of Directors,
or (ii) where the members of the Board, immediately prior to the merger or
consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation issuing
cash or securities in the merger or consolidation; or

(d) the date of approval by the Stockholders of the Company of the
liquidation of the Company or the sale or other disposition of all or
substantially all of the assets of the Company.

14.3 "Change in Control Price" means the highest price per share of Common
Stock paid in any transaction reported on any national market or securities
exchange where the Common Stock is traded, or paid or offered in any transaction
related to a Change in Control at any time during the 90-day period ending with
the Change in Control. Notwithstanding the foregoing sentence, in the case of
Stock Appreciation Rights granted in tandem with Incentive Options, the Change
in Control Price shall be the highest price paid on the date on which the Stock
Appreciation Right is exercised.

SECTION 15. General Provisions

15.1 Each award under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine that (i) the listing, registration or
qualification of the Common Stock subject or related thereto upon any securities
exchange or market or under any state or federal law, or (ii) the consent or
approval of any government regulatory body or (iii) an agreement by the
recipient of an award with respect to the disposition of Common Stock, is
necessary or desirable in order to satisfy any legal requirements, or (iv) the
issuance, sale or delivery of any shares of Common Stock is or may in the
circumstances be unlawful under the laws or regulations of any applicable
jurisdiction, the right to exercise such Stock Option shall be suspended, such
award shall not be granted and such shares will not be issued, sold or
delivered, in whole or in part, unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee, and the
Committee determines that the issuance, sale or delivery of the shares is
lawful.

The application of this Section shall not extend the term of any Stock
Option or other award. The Company shall have no obligation to effect any
registration or qualification of the Common Stock under federal or state laws or
to compensate the award holder for any loss caused by the implementation of this
Section 15.1.

15.2 The Committee may provide, at the time of grant or by amendment with
the award holder's consent, that an award and/or Common Stock acquired under the
Plan shall be forfeited, including after exercise or vesting, if within a
specified period of time the award holder engages in any of the conduct
described below ("Disqualifying Conduct"). Disqualifying Conduct shall mean (i)
the award holder's performance of service for a competitor of the Company and/or
its Subsidiaries, including service as an employee, director, or consultant, or
the establishing by the award holder of a business which competes with the
Company and/or its Subsidiaries, (ii) the award holder's solicitation of
employees or customers of the Company and/or its Subsidiaries (iii) the award
holder's improper use or disclosure of confidential information of the Company
and/or its Subsidiaries or (iv) material misconduct by the award holder in the
performance of such award holder's duties for the Company and/or its
Subsidiaries, as determined by the Committee.

15.3 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements.

15.4 Nothing in the Plan nor in any award hereunder shall confer upon any
award holder any right to continuation of his or her employment by or other
Relationship with the Company or its Subsidiaries, or interfere in any way with
the rights of any such company to terminate such employment or other
Relationship.

15.5 Neither the Plan nor any award shall create or be construed to create
a trust or separate fund of any kind or a fiduciary relationship between the
Company or Subsidiary and an award recipient, and no award recipient will, by
participation in the Plan, acquire any right in any specific Company property,
including any property the Company may set aside in connection with the Plan. To
the extent that any award recipient acquires a right to receive payments from
the Company or any Subsidiary pursuant to an award, such right shall not be
greater than the right of an unsecured general creditor of the Company or its
Subsidiaries.

15.6 The Plan and all awards hereunder shall be governed by the laws of the
State of Delaware without giving effect to conflict of laws principles.

SECTION 16. Amendments and Termination

16.1 The Plan shall be of unlimited duration. The Board may discontinue the
Plan at any time and may amend it from time to time. No amendment or
discontinuation of the Plan shall adversely affect any award previously granted
without the award holder's written consent. Amendments may be made without
shareholder approval except as required to satisfy applicable laws or
regulations or the requirements of any stock exchange or market on which the
Common Stock is listed or traded.

16.2 The Committee may amend the terms of any award prospectively or
retroactively; provided, however, that no amendment shall impair the rights of
the award holder without his or her written consent.

SECTION 17. Effective Date of Plan

17.1 The Plan shall be effective on February 7, 2003, subject to approval
by the Company's Shareholders within 12 months of such date.