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                                                                  EXHIBIT 10.3.1

May 18, 1995

Mr. Robert G. Allison
31401 Via Las Palmas
San Juan Capistrano, CA  92675

Dear Bobby:

      I am writing to confirm our recent discussions regarding the compensation
package for your work as the Chief Operating Officer of Aurora Electronics, Inc.
Attached is a copy of the Fiscal 1995 - 1996 Executive Compensation Plan -
Update (the "Plan"). Your compensation will be paid pursuant to the terms and
conditions described in this letter as further explained in the Plan, and also
subject to normal company policies as they apply now and change from time to
time. Details include:

BASE SALARY:       $225,000 per year. Payments will be made on the normal
                   payroll schedule.

DEBT REDUCTION     For debt reduction from Corporate Transactions, as described 
  BONUS #1:        in the Plan, your bonus percentage shall be 0.20%            

DEBT REDUCTION     For debt reduction from Operations, as described in the Plan,
  BONUS #2:        your bonus percentage shall be 0.65%                         
                   
EVA BONUS:         For EVA bonus payments, as described in the Plan, your EVA
                   factor shall be 0.026

STOCK OPTIONS:     As described in the Plan, you were granted options to
                   purchase an additional 50,000 shares of Aurora common stock
                   by the Options Committee of the Board, with an exercise price
                   of $3.375 per share on May 15, 1995.

SEVERANCE:         The Company recognizes the difficulties that this period
                   places on its executives. As a result, it wishes to modify
                   the severance terms of your employment as well. This
                   paragraph replaces entirely all of Aurora's prior severance
                   agreements with you.

                   This letter and your response do not constitute a contract of
                   employment for a stated term. As always since you joined
                   Aurora, you have the right to terminate your employment at
                   any time, and Aurora retains a similar right to terminate
                   your employment at will. Termination by the Company may be
                   for (1) cause, or (2) other. In the event that you are
                   terminated for cause (e.g. insubordination, moral turpitude,
                   theft, violation of the law, breach of fiduciary duties,
                   abuse of employees, willful misrepresentation, etc.), or you
                   voluntarily resign, your compensation will cease after 30
                   days, and the vesting of your options will cease immediately.
                   If you are terminated for any other reason, your compensation
                   and option vesting will continue for 12 months.
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CHANGE OF          In the event of a change of control of the Company, the
  CONTROL:         following will occur:                                  
                   

                   -  All of your stock options will be deemed to have vested
                      immediately prior to such change;

                   -  If within 90 days you are not offered employment from the
                      surviving company under terms and conditions acceptable to
                      you, or you are terminated by the surviving company within
                      those 90 days, you may resign unconditionally and you will
                      continue to receive your base salary, insurance and
                      automobile benefits for a period of two years. You will
                      also receive a full and immediate payout of all earned but
                      unpaid bonuses and deferred compensation (vested and
                      unvested).

                   A change of control shall be defined as a (a) an event that
                   results in a change in ownership of over 40% of the common
                   stock of the corporation or the change in over 50% of the
                   membership of the Board of Directors, or (b) the sale of a
                   majority of the assets of the Company.



      The remainder of your terms of employment remain unchanged.

Best personal regards,


/s/ Jim C. Cowart
-----------------
Jim C. Cowart


Accepted and agreed:  /s/ Robert G. Allison
                      -----------------------------------------
                                   Robert G. Allison

                                       05/24/95
                      -----------------------------------------
                                        (Date)


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                            AURORA ELECTRONICS, INC.

              FISCAL 1995 - 96 EXECUTIVE COMPENSATION PLAN - UPDATE

                          DISCUSSION OF SPECIFIC TERMS

1.  Bonus formulas are designed to target two goals: (a) reduction of debt, and
    (b) generation of net income (EVA). Debt reduction bonus payments will be
    calculated according to the following table:

<TABLE>
<CAPTION>
                               DEBT REDUCTION VIA      DEBT REDUCTION FROM
                             CORPORATE TRANSACTIONS        OPERATIONS
                             ----------------------        ----------
<S>                         <C>                        <C>
        Jim C. Cowart
        Bobby Allison       See attached letter
        Dave Lahar
        John Grazer
</TABLE>

    At the end of each of the six quarters ending 9/30/96, the cumulative net
    reduction of total debt since 3/31/95 will be calculated, and the indicated
    executive will earn a bonus (subject to the Payment Terms discussed below)
    equal to that debt reduction multiplied by the percentage in the table for
    the source of funds for that debt reduction. Corporate Transaction debt
    reduction will include proceeds from external financing, litigation, sale of
    businesses, negotiated restructurings, etc. All other debt reductions
    (including income from affiliates after the establishment of their
    affiliation) will be considered from Operations.

2.  EVA bonus payments will be calculated according to the following table:

<TABLE>
<CAPTION>
                                           EVA FACTOR
                                           ----------

<S>                                <C>       
                 Jim C. Cowart

                 Bobby Allison     See attached letter
                 Dave Lahar
                 John Grazer
</TABLE>

    EVA bonus payments will be calculated for the five quarters ending 9/30/96,
    and the indicated executive will earn a bonus (subject to the Payment Terms
    discussed below) equal to the factor indicated in the table multiplied by
    the amount, if any, by which earnings of the company exceeds a 17.5% return
    on shareholders' average equity. Average equity shall be calculated as one
    half the sum of the beginning and ending equity amounts. Net earnings of the
    company shall be calculated using actual taxes paid.

3.  Each executive shall be granted 50,000 options exercisable at market on the
    day of the grant. The specific targets for option vesting are as shown in
    the following table:

<TABLE>
<CAPTION>
             QUARTER ENDING        EBITA MARGIN         PRE TAX INCOME
             --------------        ------------         --------------

<S>                                <C>                  <C>      
          9/30/95                       7.60%             $  900,000
          12/31/95                      8.60%              1,500,000
          3/31/96                      10.50%              2,500,000
          6/30/96                       9.90%              2,300,000
          9/30/96                       9.90%              2,300,000
</TABLE>

    Each quarter that the target is met, 5,000 of the options shall vest. Once a
    target is missed, the options shall revert to the option pool.




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4.  Payment Terms. There are six quarters for the Debt Reduction Bonus plan, and
    five quarters for the EVA Bonus plan. It is desirable to (a) maintain an
    incentive for continuing performance in every quarter, (b) protect the
    Company against payments that become too large as a result of declines in
    performance, and (c) distribute cash to executives as soon as it is earned.
    At the end of each quarter, the total bonus payable under that plan from its
    inception to that date will be calculated, and a payment shall be made to
    the eligible executive such that the total payments under that plan to the
    end of the quarter shall be as shown in the following table:

<TABLE>
<CAPTION>
            QUARTER ENDING        DEBT REDUCTION PLAN         EVA PLAN
            --------------        -------------------         --------

<S>                                      <C>                   <C> 
         6/30/95                         1/21                   n/a
         9/30/95                         3/21                  1/15
         12/31/95                        6/21                  3/15
         3/31/96                         10/21                 6/15
         6/30/96                         15/21                 10/15
         9/30/96                         100%                  100%
</TABLE>

    Payment dates shall be the date of the filing of the 10-Q or 10-K covering
    the relevant quarter. Bonuses will be payable to an executive only if he was
    employed by the company on the first and last day of the quarter.

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