<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant
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
- -+ Soliciting Material Pursuant to Rule 240.14a-11(c) or
Rule 240.14a-12
______________________________________________________________________
______________
(Name of Registrant as Specified in Its Charter)
Ault Incorporated
______________________________________________________________________
______________
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transactions
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth the
amount on which the filing fee is calculated and state how
it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
PRELIMINARY PROXY MATERIALS
December 30, 1996
January 10, 1997
Dear Shareholder:
The Board of Directors of Ault Incorporated has scheduled a
special meeting of shareholders to be held on Tuesday, February 11,
1997 at the offices of the Company at 7300 Boone Avenue North,
Brooklyn Park, Minnesota. The formal Notice of the meeting and Proxy
Statement appear on the following pages. The Board is holding this
Special Shareholders Meeting for three purposes:
1. To seek shareholder approval for an increase in the number
of common shares the Company is uthorized to issue from 5,000,000
shares to 15,000,000 shares;
2. To seek shareholder ratification and approval of the
Company's 1996 Stock Option Plan; and
3. To seek shareholder ratification and approval for the
Company's 1996 Employee Stock Purchase Savings Plan.
Detailed information regarding each of these proposals is set
forth in this Proxy Statement. The Board believes it is in the best
interest of the Company to seek shareholder approval of these matters
at this time rather then to delay action until the next annual meeting
of shareholders which will not occur until approximately October 1,
1997.
If you are unable to attend this meeting, you can be assured that
your shares will be represented at the meeting if you complete and
return the enclosed proxy card in the envelope provided as soon as
possible.
Cordially,
Frederick M. Green
Chairman of the Board and Chief
Executive Officer
<PAGE>
AULT INCORPORATED
___________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
February 11, 1997
__________________
To the Shareholders of Ault Incorporated:
Notice is hereby given that a Special Meeting of the Shareholders
of Ault Incorporated will be held February 11, 1997 at the offices of
the Company, 7300 Boone Avenue North, Brooklyn Park, Minnesota 55428.
The meeting will convene at 3:00 p.m., Central Standard Time, for the
following purposes:
1. To consider and vote upon a proposal to amend the Company's
Restated Articles of Incorporation to increase the
authorized number of common shares from 5,000,000 to
15,000,000.
2. To consider and act upon a proposal to ratify and approve
the Company's 1996 Stock Plan.
3. To consider and act upon a proposal to ratify and approve
the Company's 1996 Employee Stock Purchase Savings Plan.
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on January
3, 1997 as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
Richard A. Primuth, Secretary
Minneapolis, Minnesota
January 10, 1997
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN,
DATE ANDRETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER
OR NOT YOU EXPECT TO ATTEND IN PERSON. SHAREHOLDERS WHO
ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN
PERSON IF THEY SO DESIRE.
<PAGE>
AULT INCORPORATED
_____________________
PROXY STATEMENT
_____________________
This Proxy Statement is furnished to the shareholders of Ault
Incorporated (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at a
Special Meeting of Shareholders to be held on February 11, 1997, or
any adjournment or adjournments thereof. The cost of this
solicitation will be borne by the Company. In addition to
solicitation by mail, officers, directors and employees of the Company
may solicit proxies by telephone, telegraph or in person. The Company
may also request banks and brokers to solicit their customers who have
a beneficial interest in the Company's Common Stock registered in the
names of nominees and will reimburse such banks and brokers for their
reasonable out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by
written notice to the Secretary, by receipt of a proxy properly signed
and dated subsequent to an earlier proxy, or by revocation of a
written proxy by request in person at the Special Meeting; but if not
revoked, the shares represented by such proxy will be voted. The
mailing of this Proxy Statement to shareholders of the Company will
commence on or about January 10, 1997. The Company's corporate
offices are located at 7300 Boone Avenue North, Brooklyn Park,
Minnesota 55428 and its telephone number is (612) 493-1900.
Only shareholders of record at the close of business on January
3, 1997 will be entitled to vote at the Special Meeting. The Company
has outstanding only one class of stock, no par value Common Shares,
of which 3,985,776 shares were issued and outstanding and entitled to
vote as of January 3, 1997. Each share is entitled to one vote. The
presence in person or by proxy of the holders of a majority of the
common shares entitled to vote at the Special Meeting of Shareholders
constitutes a quorum for the transaction of business. The shares
represented by the enclosed proxy will be voted if the proxy is
properly signed and received prior to the meeting.
Under Minnesota law, each item of business properly presented at
a meeting of shareholders generally must be approved by the
affirmative vote of the holders of a majority of the voting power of
the shares present, in person or by proxy, and entitled to vote on
that item of business. However, if the shares present and entitled to
vote on that item of business would not constitute a quorum for the
transaction of business at the meeting, then the item must be approved
by a majority of the voting power of the minimum number of shares that
would constitute such a quorum. Votes cast by proxy or in person at
the Special Meeting of Shareholders will be tabulated to determine
whether or not a quorum is present. Abstentions will be treated as
shares that are present and entitled to vote for purposes of
determining the presence of a quorum and in tabulating votes cast on
proposals presented to shareholders for a vote, but as unvoted for
purposes of determining the approval of the matter from which the
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shareholder abstains. Consequently, an abstention will have the same
effect as a negative vote. If a broker indicates on the proxy that it
does not have discretionary authority as to certain shares to vote on
a particular matter, those shares will not be considered as present
and entitled to vote with respect to that matter.
<PAGE>
1. PROPOSAL TO INCREASE THE COMPANY'S AUTHORIZED
NUMBER OF COMMON SHARES
The Board of Directors has approved an amendment to the Company's
Restated Articles of Incorporation which would increase the number of
common shares the Company is authorized to issue from 5,000,000 common
shares to 15,000,000 common shares. The Board believes adoption of
this amendment is in the best interests of the shareholders and
recommends that shareholders vote in favor of this proposal.
The Board of Directors is proposing an increase in the Company's
authorized shares because substantially all of the 5,000,000 currently
authorized common shares are either outstanding or reserved for
issuance pursuant to options or warrants. At January 3, 1997,
3,985,776 common shares were issued and outstanding. In addition,
444,250 common shares were reserved for future issuance under the
Company's 1986 Stock Option Plan and 112,000 shares are reserved for
issuance under warrants issued to underwriters in connection with the
Company's recent public offering. Finally, at the February 11, 1996
special shareholders meeting the Board of Directors is also seeking
approval for a new employee stock option plan and for an employee
stock purchase savings plan. These plans are described in Proposals 2
and 3 below of this Proxy Statement. If the shareholders approve the
adoption of the stock option plan and the stock purchase plan as
recommended by the Board of Directors, without an increase in the
Company's authorized common shares, these plans could not be
implemented.
The Company has no present plans, understandings or agreements
for the issuance or use of the proposed additional common shares
except to continue its practice of regularly granting stock options to
its key employees under stock option plans. However, the Board of
Directors believes the Company needs additional authorized shares to
provide the Company with the flexibility, as the need arises, to use
common shares, or securities convertible into common shares, in the
event of any future public offerings, significant acquisitions, stock
dividends, stock option plans and for other purposes. Such activities
would require more common shares than are available currently.
The newly authorized common shares would be identical to the
existing authorized common shares in all respects. Holders of common
shares are entitled to one vote per share. Cumulative voting in the
election of directors is not permitted. Holders of common shares have
no conversion rights and or preemptive or other rights to subscribe
for additional securities. Upon liquidation of the Company, the
holders of common shares will be entitled to share ratably in all
assets available for distribution after the payment or provision for
payment of all debts and liabilities and subject to the rights of the
holders of preferred stock, if any, which may be outstanding. Each
common share is entitled to such dividends as may from time to time be
declared by the Board of Directors out of funds legally available
therefor.
In addition to the common shares, the Company's Restated Articles
of Incorporation currently authorize the issuance of 1,000,000
<PAGE>
preferred shares, par value $1.00 per share Although none of the
preferred shares are currently outstanding, approximately 40,000
preferred shares are reserved for issuance under the Company's
shareholders rights plan adopted on February 13, 1996. Pursuant to
the shareholder rights plan, each share of common stock has one
preferred stock purchase right attached (the "Right") which entitles
the holder to buy one hundredth of one share of the Company Series A
Junior Participating Preferred stock at an initial exercise price of
$36.00 (subject to adjustment). The Rights will become exercisable
only if, with certain exceptions, a person becomes a "acquiring
person" by acquiring 15% or more of the outstanding common stock or
announcing a tender offer with respect to 15% or more of the Company's
common stock. If the Rights become exercisable, a holder generally
will be entitled to purchase for the exercise price of $36.00 that
number of shares of Common Stock having then current market value of
$72.00. If the Company is acquired in a merger or other business
combination transaction, each Right will entitle its holder to
purchase, at the Right's exercise price, the number of shares of the
acquiring company's common stock having a then current market value of
twice the Right's exercise price. The existence of the rights plan,
accordingly, has the effect of discouraging tender offers or other
acquisition proposals not approved by the Company's Board of
Directors. Apart from the rights plan, although the Board of
Directors has no present plan to do so, authorized and unissued common
shares and preferred stock could be issued in one or more transactions
with terms, provisions and rights which would make it more difficult,
and less likely, to take over the Company. Any such issuance of
additional shares could have the effect of diluting the earnings per
share and book value per share of existing shares of common shares,
and such additional shares could be used to dilute the share ownership
of persons seeking to obtain control of the Company.
The resolution to be considered and acted upon by the
shareholders at the Special Meeting is as follows:
RESOLVED, that the first sentence of Article Three - Capital
Stock, Section 1. Authorized Shares of the Restated
Articles of Incorporation of the Company be amended to read
as follows:
"1. Authorized Shares. The aggregate number of shares of
stock which this corporation shall have the authority to issue is
Sixteen Million (16,000,000) shares divided into Fifteen Million
(15,000,000) common shares and One Million (1,000,000) Preferred
Shares."
Vote Required
Shareholder approval of the Purchase Plan requires the
affirmative vote of the holders of a majority of the Company's issued
and outstanding common shares.
Recommendation of Board of Directors
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ADOPTION OF THE PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED COMMON
SHARES.
<PAGE>
2. PROPOSAL FOR APPROVAL OF THE 1996 STOCK PLAN
General Information
On December 12, 1996, the Company's Board of Directors adopted
the Ault Incorporated 1996 Stock Plan (the "1996 Plan"), subject to
ratification and approval by the Company's shareholders. The 1996
Plan is a successor to the Company's 1986 Stock Option Plan (the "1986
Plan") which expired in November, 1996. Consistent with the purposes
of the 1986 Plan, the purpose of the 1996 Plan is to enable the
Company and its subsidiaries to retain and attract key employees,
consultants and non-employee directors who contribute to the Company's
success by their ability, ingenuity and industry, and to enable such
key employees, consultants and non-employee directors to participate
in the long-term success and growth of the Company by giving them a
proprietary interest in the Company. The 1996 Plan authorizes the
granting of awards in any of the following forms: (i) stock options,
(ii) stock appreciation rights, (iii) restricted stock, and (iv)
deferred stock.
The 1996 Plan provides for a total share authorization of 500,000
shares in order to provide an adequate reserve for the grant of
options to key employees in the future and to provide for ongoing
automatic grants of stock options to non-employee directors. The 1986
Plan was originally adopted with an authorization of 200,000 shares
which was increased pursuant to several amendments approved by the
shareholders to authorize options to acquire a total of 600,000
shares. As of January 3, 1997 a total of 151,800 shares have been
purchased through the exercise of options; in addition, options to
purchase 444,250 shares were outstanding under the 1986 Plan.
Accordingly, substantially all of the shares authorized for issuance
under the 1986 Plan have been issued or are reserved for issuance.
When the Board of Directors approved the 1996 Plan, it considered
a variety of factors, including the increase in the size and scope of
the Company's operations during the last several years; the importance
of attracting and retaining technical and management employees in an
increasingly competitive market; and, the importance of attracting and
retaining qualified non-employee directors.
The principal features of the 1996 Plan are summarized below.
Shares Available Under 1996 Plan. The maximum number of common
shares reserved and availableunder the 1996 Plan for awards is 500,000
(subject to possible adjustment in the event of stock splits or other
similar changes in outstanding common shares). Common shares covered
by expired or terminated stock options and forfeited shares of
restricted stock or deferred stock may be used for subsequent awards
under the 1996 Plan.
Eligibility and Administration. Officers and other key employees
of the Company and its subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the
business of the Company and its subsidiaries, as well as consultants
and non-employee directors, are eligible to be granted awards under
the 1996 Plan. The 1996 Plan will be administered by the Board or, in
its discretion, by a committee of not less than two non-employee
directors who are "outside directors" as defined in the 1996 Plan (the
"Committee")appointed by the Board of Directors. The term "Board" as
used in this section refers to the Board of Directors or, if the Board
has delegated its authority, the Committee. The Board will have the
power to make awards (other than awards to non-employee Directors),
determine the number of shares covered by each award and other terms
and conditions of such awards, interpret the 1996 Plan, and adopt
rules, regulations and procedures with respect to the administration
<PAGE>
of the 1996 Plan. The Board may delegate its authority to officers of
the Company for the purpose of selecting key employees who are not
officers of the Company to be participants in the 1996 Plan.
Awards Under 1996 Plan
Stock Options. The Board may grant stock options that either
qualify as "incentive stock options" under the Internal Revenue Code
of 1986, as amended ("Code") or are "non-qualified stock options" in
such form and upon such terms as the Board may approve from time to
time. Stock options granted under the 1996 Plan may be exercised
during their respective terms as determined by the Board. The
purchase price may be paid by tendering cash or, in the Board's
discretion, by tendering promissory notes or common stock. The
optionee may elect to pay all or part of the option exercise price by
having the Company withhold upon exercise of the option a number of
shares with a fair market value equal to the aggregate option exercise
price for the shares with respect to which such election is made. No
stock option shall be transferable by the optionee or exercised by
anyone else during the optionee's lifetime.
Stock options may be exercised during varying periods of time
after a participant's termination of employment, dependent upon the
reason for the termination. Following a participant's death, the
participant's stock options may be exercised to the extent they were
exercisable at the time of death by the legal representative of the
estate or the optionee's legatee for a period of one year or until the
expiration of the stated term of the option, whichever is less. The
same time periods apply if the participant is terminated by reason of
disability. If the participant retires, the participant's stock
options may be exercised to the extent they were exercisable at the
time of retirement or for a period of three months (or such longer
period as determined by the Board at the time of retirement) from the
date of retirement or until the expiration of the stated term of the
option, whichever is less. If the participant is involuntarily
terminated without cause, the participant's options may be exercised
to the extent they were exercisable at the time of termination for the
lesser of three months or the balance of the stated term of the
option. If the participant's employment is terminated for cause, the
participant's stock options immediately terminate. These exercise
periods may be reduced by the Board for particular options. The Board
may, in its discretion, accelerate the exercisability of stock options
which would not otherwise be exercisable upon death, disability or
retirement.
No incentive stock options shall be granted under the 1996 Plan
after December 11, 2006. The term of an incentive stock option may
not exceed 10 years (or 5 years if issued to a participant who owns or
is deemed to own more than 10% of the combined voting power of all
classes of stock of the Company, any subsidiary or affiliate). The
aggregate fair market value of the common stock with respect to which
an incentive stock option is exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. The
exercise price under an incentive stock option may not be less than
the fair market value of the common stock on the date the option is
granted (or, in the event the participant owns more than 10% of the
combined voting power of all classes of stock of the Company, the
option price shall be not less than 110% of the fair market value of
the stock on the date the option is granted). The exercise price for
non-qualified options granted under the 1996 Plan may be less than
100% of the fair market value of the common stock on the date of
grant.
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Pursuant to a limitation in the 1996 Plan, no eligible person may
be granted any stock options for more than 100,000 shares of common
stock in the aggregate during any fiscal year. This limitation is
included pursuant to Section 162(m) of the Internal Revenue Code,
which provides a $1 million limitation on the compensation of certain
executive officers that is deductible by the Company for federal
income tax purposes. The limitation on stock options granted to an
individual during any fiscal year is intended to preserve the
Company's federal tax deduction for compensation expense related to
stock options that may be granted to executive officers under the 1996
Plan.
The 1996 Plan provides for the automatic granting of options to
non-employee directors. Such options are granted to each person who
(i) is not an employee of the Company, any parent corporation or
subsidiary and (ii) is elected or re-elected as a director by vote of
the Board or the shareholders subsequent to December 31, 1996. Each
such person automatically receives, as of the date of each such
election or re-election, a non-qualified option to purchase 2,000
shares of common stock with an option price equal to the fair market
value of the Company's common stock on the date the option is granted.
The Board in appropriate circumstances may adjust the option to be
granted under this provision to any such person who has received a
stock option from the Company in the three preceding years. The
options have ten-year terms and are exercisable, as to one-third of
the shares subject to the option, beginning one year after the date of
option grant; as to the second third, beginning two years after the
date of option grant; and as to the last third, beginning three years
after the date of option grant. Any vested portion of these options
will not expire upon termination of service as a director. Non-
employee directors are also eligible to receive additional grants of
non-qualified stock options under the 1996 Plan.
The automatic grant program under the 1996 Plan replaces a
similar formula grant program under the 1986 Plan, with each option
granted under the 1986 Plan covering 1,000 shares, vesting over a
three-year period.
Stock Appreciation Rights. The Board may grant stock
appreciation rights ("SARs") in connection with all or part of any
stock option (with the exception of options granted to non-employee
directors), either at the time of the stock option grant, or, in the
case of non-qualified options, later during the term of the stock
option. SARs entitle the participant to receive from the Company the
same economic value that would have been derived from the exercise of
an underlying stock option and the immediate sale of the shares of
common stock. Such value is paid by the Company in cash, shares of
common stock or a combination of both, in the discretion of the Board.
SARs are exercisable or transferable only at such times and to the
extent stock options to which they relate are exercisable or
transferable. If an SAR is exercised, the underlying stock option is
terminated as to the number of shares covered by the SAR exercise.
Restricted Stock. The Board may grant restricted stock awards
that result in shares of common stock being issued to a participant
subject to restrictions against disposition during a restricted period
established by the Board. The Board may condition the grant of
restricted stock upon the attainment of specified performance goals or
service requirements. The provisions of restricted stock awards need
not be the same with respect to each recipient. The restricted stock
will be held in custody by the Company until the restrictions thereon
have lapsed. During the period of the restrictions, a participant has
the right to vote the shares of restricted stock and to receive
<PAGE>
dividends and distributions unless the Board requires such dividends
and distributions to be held by the Company subject to the same
restrictions as the restricted stock. Notwithstanding the foregoing,
all restrictions with respect to restricted stock lapse 60 days (or
less as determined by the Board) prior to the occurrence of a merger
or other significant corporate change, as provided in the 1996 Plan.
If a participant terminates employment during the period of the
restrictions, all shares still subject to restrictions will be
forfeited and returned to the Company, subject to the right of the
Board to waive such restrictions in the event of a participant's
death, total disability, retirement or under special circumstances
approved by the Board.
Deferred Stock. The Board may grant deferred stock awards that
result in shares of common stock being issued to a participant or
group of participants upon the expiration of a deferral period. The
Board may condition the grant of deferred stock upon the attainment of
specified performance goals. The provisions of deferred stock awards
need not be the same with respect to each recipient.
Upon termination of employment for any reason during the deferral
period for a given award, the deferred stock in question shall be
forfeited by the participant, subject to the Board's ability to waive
any remaining deferral limitations with respect to a participant's
deferred stock. During the deferral period, deferred stock awards may
not be sold, assigned, transferred, pledged or otherwise encumbered
and any dividends declared with respect to the number of shares
covered by a deferred stock award will either be immediately paid to
the participant or deferred and deemed to be reinvested in additional
deferred stock, as determined by the Board. The Board may allow a
participant to elect to further defer receipt of a deferred stock
award for a specified period or until a specified event.
Federal Income Tax Consequences
Stock Options. An optionee will not realize taxable compensation
income upon the grant of an incentive stock option. In addition, an
optionee generally will not realize taxable compensation income upon
the exercise of an incentive stock option if he or she exercises it as
an employee or within three months after termination of employment (or
within one year after termination if the termination results from a
permanent and total disability). The amount by which the fair market
value of the shares purchased exceeds the aggregate option price at
the time of exercise will be alternative minimum taxable income for
purposes of applying the alternative minimum tax. If stock acquired
pursuant to an incentive stock option is not disposed of prior to the
date two years from the option grant date or prior to one year from
the option exercise date (the "Applicable Holding Periods"), any gain
or loss realized upon the sale of such shares will be characterized as
capital gain or loss. If the Applicable Holding Periods are not
satisfied, then any gain realized in connection with the disposition
of such stock will generally be taxable as ordinary compensation
income in the year in which the disposition occurred, to the extent of
the difference between the fair market value of such stock on the date
of exercise and the option exercise price. The Company is entitled to
a tax deduction to the extent, and at the time, the participant
realizes compensation income. The balance of any gain will be
characterized as a capital gain. Under current law, net capital gains
are taxed at a maximum federal rate of 28% while compensation income
may be taxed at higher federal rates.
<PAGE>
An optionee generally will not realize taxable compensation
income upon the grant of a non-qualified stock option. As a general
matter, when an optionee exercises a non-qualified stock option, he or
she will realize taxable compensation income at that time equal to the
difference between the aggregate option price and the fair market
value of the stock on the date of exercise. The Company is entitled
to a tax deduction to the extent, and at the time, the participant
realizes compensation income.
SARs. The grant of an SAR would not result in income for the
participant or in a deduction for the Company. Upon receipt of shares
or cash from exercise of an SAR, the participant would generally
recognize compensation income, measured by the fair market value of
the shares plus any cash received, and the Company would be entitled
to a corresponding deduction.
Restricted Stock and Deferred Stock. The grant of restricted
stock and deferred stock should not result in immediate income for the
participant or in a deduction for the Company for federal income tax
purposes, assuming the shares are nontransferable and subject to
restrictions or to a deferral period which would result in a
"substantial risk of forfeiture" as intended by the Company and as
defined in applicable Treasury regulations. If the shares are
transferable or there are no such restrictions or significant deferral
periods, the participant will realize compensation income upon receipt
of the award. Otherwise, a participant generally will realize taxable
compensation when any such restrictions or deferral period lapses.
The amount of such income will be the value of the common stock on
that date less any amount paid for the shares. Dividends paid on the
common stock and received by the participant during the restricted
period or deferral period also will be taxable compensation income to
the participant. In any event, the Company will be entitled to a tax
deduction to the extent, and at the time, the participant realizes
compensation income. A participant may elect, under Section 83(b) of
the Code, to be taxed on the value of the stock at the time of award.
If the election is made, the fair market value of the stock at the
time of the award is taxable to the participant as compensation income
and the Company is entitled to a corresponding deduction.
Withholding. The 1996 Plan requires each participant, no later
than the date as of which any part of the value of an award first
becomes includible as compensation in the gross income of the
participant, to pay to the Company any federal, state or local taxes
required by law to be withheld with respect to the award. The Company
shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. With
respect to any award under the 1996 Plan, if the terms of the award so
permit, a participant may elect to satisfy part or all of the
withholding tax requirements associated with the award by (i)
authorizing the Company to retain from the number of shares of Company
common stock which would otherwise be deliverable to the participant,
or (ii) delivering to the Company from shares of Company common stock
already owned by the participant that number of shares having an
aggregate fair market value equal to part or all of the tax payable by
the participant. In that case, the Company would pay the tax
liability from its own funds.
Registration With the SEC
Upon approval of the 1996 Plan by the shareholders, the Company
intends to file a registration statement covering the offering of the
shares of common stock issuable under the 1996 Plan with the
<PAGE>
Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended.
Vote Required
Shareholder approval of the 1996 Plan requires the affirmative
vote of the holders of a majority of the shares of common stock
represented at the meeting and entitled to vote.
Recommendation of Board of Directors
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE 1996 STOCK PLAN.
3. PROPOSAL TO ADOPT THE 1996 EMPLOYEE STOCK PURCHASE PLAN
General Information
On February 13, 1996, the Board of Directors adopted the Ault
Incorporated 1996 Employee Stock
Purchase Plan (the "Purchase Plan"). The Board of Directors has
adopted the Purchase Plan to encourage stock ownership by all
employees of the Company, provide an incentive to employees to remain
in employment, improve operations, increase profits, and contribute
more significantly to the Company's success. The Purchase Plan
authorizes the purchase of shares of the Company's common stock
pursuant to a systematic payroll deduction program more fully
described below.
Summary of Purchase Plan
The following is a brief summary of the provisions of the
Purchase Plan and reference is made to the complete text of the
Purchase Plan, which is set forth in Exhibit A hereto.
The Purchase Plan will be administered by a Committee consisting
of not less than three members who are appointed by the Board of
Directors. Each member of such Committee will be either a director,
officer or an employee of the Company.
There are 100,000 common shares, no par value, reserved for
issuance under the Purchase Plan, and eligible employees will not pay
any consideration to the Company in order to receive the options.
The Purchase Plan commenced on March 10, 1996 and will be carried
out in successive phases of up to one year each. Eligible employees
do not pay any consideration to the Company in order to receive the
options. Based upon participation initiated in March 1996, options to
acquire approximately 12,000 shares are outstanding under the first
phase of the plan.
Any employee, including an officer of the Company, who as of the
first day of the month immediately preceding the Commencement Date of
a phase of the Purchase Plan can be reasonably expected to work a
total of 750 hours or more during the following 12-month period shall
be eligible to participate in the Purchase Plan.
<PAGE>
Eligible employees elect to participate in the Purchase Plan by
completing payroll deduction authorization forms prior to the
Commencement Date of any phase of the Purchase Plan. Payroll
deductions are limited to 10% of a Participant's base pay for the term
of the phase of the Purchase Plan.
As of the Commencement Date of any phase of the Purchase Plan, an
eligible employee who elects to participate in the Purchase Plan is
granted an option for as many full shares as he or she will be able to
purchase pursuant to the payroll deduction procedure. The option
price for employees who participate on the Commencement Date of any
phase of the Purchase Plan is the lower of: (1) 85% of the fair market
value of the share on the Commencement Date of that purchase of the
Purchase Plan, or (ii) 85% of the fair market value of the shares of
the Termination Date of that phase of the Purchase Plan.
Exercise of the option occurs automatically on the Termination
Date of the phase of the Purchase Plan, unless a Participant gives
written notice prior to such date as to an election not to exercise.
A Participant may, at any time during the term of the Purchase Plan,
give notice that he or she does not wish to continue to participate,
and all amounts withheld will be refunded with interest.
The Company considers the Purchase Plan to be a "qualified" stock
purchase plan under Section 423, Internal Revenue Code. Under the
Internal Revenue Code, as amended to date, no income will result to a
grantee of an option upon the granting or exercise of an option, and
no deduction will be allowed to the Company. The gain, if any,
resulting from a disposition of the shares received by a Participant,
will be reported according to the provisions of Section 423, Internal
Revenue Code of 1954, as amended, and will be taxed in part as
ordinary income and in part as capital gain.
The Board of Directors may at any time amend the Purchase Plan,
except that no amendment may make changes in option already granted
which would adversely affect the rights of any Participant.
Registration With the SEC
The Company has filed with the Securities and Exchange
Commission, pursuant to the Securities Act of 1933, as amended, a
registration statement covering the offering of the 100,000 shares of
common stock under the Purchase Plan.
Vote Required
Shareholder approval of the Purchase Plan requires the
affirmative vote of the holders of a majority of the shares of common
stock represented at the meeting and entitled to vote.
Recommendation of Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
EMPLOYEE STOCK PURCHASE SAVINGS PLAN.
<PAGE>
SHAREHOLDERS PROPOSALS
The proxy rules of the Securities and Exchange Commission permit
shareholders of a Company, after timely notice to the Company, to
present proposals for shareholder action in the Company's proxy
statements where such proposals are consistent with applicable law,
pertain to matters appropriate for shareholder action and are not
properly omitted by Company action in accordance with the proxy rules.
The Ault Incorporated 1997 Annual Meeting of Shareholders is expected
to be held on or about September 30, 1997 and proxy materials in
connection with that meeting are expected to be mailed on or about
August 25, 1997. Shareholder proposals related to the 1997 Annual
Meeting prepared in accordance with the proxy rules must be received
by the Company on or before May 30, 1997.
OTHER MATTERS
The management knows of no other matters which will be presented
at the Special Meeting. If any other matters arise at the meeting it
is intended that the shares represented by the proxies in the
accompanying form will be voted in accordance with the judgment of the
persons named in the proxy.
By Order of the Board of Directors,
Richard A. Primuth, Corporate Secretary
<PAGE>
Exhibit A
AULT INCORPORATED.
1996 STOCK PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the AULT INCORPORATED 1996 Stock Plan
(the "Plan"). The purpose of the Plan is to enable AULT INCORPORATED
(the "Company") to retain and attract executives and other key
employees, non-employee directors and consultants who contribute to
the Company's success by their ability, ingenuity and industry, and to
enable such individuals to participate in the long-term success and
growth of the Company by giving them a proprietary interest in the
Company.
For purposes of the Plan, the following terms shall be defined as
set forth below:
a. "Board" means the Board of Directors of the Company as it
may be comprised from time to time.
b. "Cause" means a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony, willful
misconduct, dishonesty or intentional violation of a statute, rule or
regulation, any of which, in the judgment of the Company, is harmful
to the business or reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
d. "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then the
functions of the Committee specified in the Plan shall be exercised by
the Board, unless the Plan specifically states otherwise.
e. "Consultant" means any person, including an advisor, engaged
by the Company or a Parent of the Subsidiary of the Company to render
services and who is compensated for such services and who is not an
employee of the Company or any Parent Corporation or Subsidiary of the
Company. A Non-Employee Director may serve as a Consultant.
f. "Company" means Ault Incorporated, a corporation organized
under the laws of the State of Minnesota (or any successor
corporation).
g. "Deferred Stock" means an award made pursuant to Section 8
below of the right to receive stock at the end of a specified deferral
period.
h. "Disability" means permanent and total disability as
determined by the Committee.
i. "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active employment with the
Company and any Subsidiary or Parent Corporation of the Company.
<PAGE>
j. "Fair Market Value" of Stock on any given date shall be
determined by the Committee as follows: (a) if the Stock is listed for
trading on one of more national securities exchanges, or is traded on
the NASDAQ Stock Market, the last reported sales price on the
principal such exchange or the NASDAQ Stock Market on the date in
question, or if such Stock shall not have been traded on such
principal exchange on such date, the last reported sales price on such
principal exchange or the NASDAQ Stock Market on the first day prior
thereto on which such Stock was so traded; or (b) if the Stock is not
listed for trading on a national securities exchange or the NASDAQ
Stock Market, but is traded in the over-the-counter market, including
the NASDAQ Small Cap Market, the closing bid price for such Stock on
the date in question, or if there is no such bid price for such Stock
on such date, the closing bid price on the first day prior thereto on
which such price existed; or (c) if neither (a) or (b) is applicable,
by any means fair and reasonable by the Committee, which determination
shall be final and binding on all parties.
k. "Incentive Stock Option" means any Stock Option intended to
be and designated as an "Incentive Stock Option" within the meaning of
Section 422 of the Code.
l. "Non-Employee Director" means a "Non-Employee Director"
within the meaning of Rule 16b-3(b)(3) under the Securities Exchange
Act of 1934.
m. "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, and is intended to be and is designated
as a "Non-Qualified Stock Option."
n. "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Parent Corporation of the
Company on or after age 65.
o. "Outside Director" means a Director who: (a) is not a
current employee of the Company or any member of an affiliated group
which includes the Company; (b) is not a former employee of the
Company who receives compensation for prior services (other than
benefits under a tax-qualified retirement plan) during the taxable
year; (c) has not been an officer of the Company; (d) does not receive
remuneration from the Company, either directly or indirectly, in any
capacity other than as a director, except as otherwise permitted under
Code Section 162(m) and regulations thereunder. For this purpose,
remuneration includes any payment in exchange for good or services.
This definition shall be further governed by the provisions of Code
Section 162(m) and regulations promulgated thereunder.
p. "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company
if each of the corporations (other than the Company) owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
q. "Restricted Stock" means an award of shares of Stock that
are subject to restrictions under Section 7 below.
r. "Retirement" means Normal Retirement or Early Retirement.
s. "Stock" means the Common Shares, no par value, of the
Company.
<PAGE>
t. "Stock Appreciation Right" means the right pursuant to an
award granted under Section 6 below to surrender to the Company all or
a portion of a Stock Option in exchange for an amount equal to the
difference between (i) Fair Market Value, as of the date such Stock
Option or such portion thereof is surrendered, of the shares of Stock
covered by such Stock Option or such portion thereof, and (ii) the
aggregate exercise price of such Stock Option or such portion thereof.
u. "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 below.
v. "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if
each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board of Directors of the Company
consisting of at least two Directors, all of whom shall be Outside
Directors and Non-Employee Directors, who shall serve at the pleasure
of the Board. If the Board has established a Compensation Committee,
the Compensation Committee shall serve as the Committee for purposes
of this Plan.
The Committee shall have the power and authority to grant to
eligible employees or Consultants, pursuant to the terms of the Plan:
(i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, or (iv) Deferred Stock awards.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the
Company and its Subsidiaries and other eligible persons to whom Stock
Options, Stock Appreciation Rights, Restricted Stock and Deferred
Stock awards may from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock and Deferred Stock awards, or a combination of the
foregoing, are to be granted hereunder;
(iii) to determine the number of shares to be covered by
each such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to, any restriction on any Stock Option or other award
and/or the shares of Stock relating thereto), which authority shall be
exclusively vested in the Committee (and not the Board) for purposes
of establishing performance criteria used with Restricted Stock and
Deferred Stock awards; provided, however, that in the event of a
merger or asset sale, the applicable provisions of Sections 5(c) and
7(c) of the Plan shall govern the acceleration of the vesting of any
Stock Option or awards;
<PAGE>
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the
election of the participant.
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan
as it shall, from time to time, deem advisable; to interpret the terms
and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to
otherwise supervise the administration of the Plan. The Committee may
delegate to executive officers of the Company the authority to
exercise the powers specified in (i), (ii), (iii), (iv) and (v) above
with respect to persons who are not either the chief executive officer
of the Company or the four highest paid officers of the Company other
than the chief executive officer.
All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the
Company and Plan participants.
<PAGE>
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 500,000. Such shares may
consist, in whole or in part, of authorized and unissued shares.
Subject to paragraph (b)(iv) of Section 6 below, if any shares
that have been optioned cease to be subject to Stock Options, or if
any shares subject to any Restricted Stock or Deferred Stock award
granted hereunder are forfeited or such award otherwise terminates
without a payment being made to the participant, such shares shall
again be available for distribution in connection with future awards
under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure
affecting the Stock, or spin-off or other distribution of assets to
shareholders, such substitution or adjustment shall be made in the
aggregate number of shares reserved for issuance under the Plan, in
the number and option price of shares subject to outstanding options
granted under the Plan, and in the number of shares subject to
Restricted Stock or Deferred Stock awards granted under the Plan as
may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also
be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Option.
SECTION 4. Eligibility.
Officers, other key employees of the Company and Subsidiaries,
members of the Board of Directors, and Consultants who are responsible
for or contribute to the management, growth and profitability of the
business of the Company and its Subsidiaries are eligible to be
granted Stock Options, Stock Appreciation Rights, Restricted Stock or
Deferred Stock awards under the Plan. The optionees and participants
under the Plan shall be selected from time to time by the Committee,
in its sole discretion, from among those eligible, and the Committee
shall determine, in its sole discretion, the number of shares covered
by each award.
Notwithstanding the foregoing, no person shall receive grants of
Stock Options and Stock Appreciation Rights under this Plan which
exceed 100,000 shares during any fiscal year of the Company.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock Options. No
Incentive Stock Options shall be granted under the Plan after December
11, 2006.
The Committee shall have the authority to grant any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of
options (in each case with or without Stock Appreciation Rights). To
the extent that any option does not qualify as an Incentive Stock
<PAGE>
Option, it shall constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of
this Plan relating to Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify either the Plan or
any Incentive Stock Option under Section 422 of the Code. The
preceding sentence shall not preclude any modification or amendment to
an outstanding Incentive Stock Option, whether or not such
modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in
writing to the modification or amendment.
Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable.
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee
at the time of grant. In no event shall the option price per share of
Stock purchasable under an Incentive Stock Option be less than 100% of
Fair Market Value on the date the option is granted. If an employee
owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price shall be no less than 110%
of the Fair Market Value of the Stock on the date the option is
granted.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable
more than ten years after the date the option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than 10% of the combined voting
power of all classes of stock of the Company or any Parent Corporation
or Subsidiary and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years
from the date of grant.
(c) Exercisability. Stock Options shall be exercisable at such
time or times as determined by the Committee at or after grant,
subject to the restrictions stated in Section 5(b) above. If the
Committee provides, in its discretion, that any option is exercisable
only in installments, the Committee may waive such installment
exercise provisions at any time. Notwithstanding anything contained
in the Plan to the contrary, the Committee may, in its discretion,
extend or vary the term of any Stock Option or any installment
thereof, whether or not the optionee is then employed by the Company,
if such action is deemed to be in the best interests of the Company;
provided, however, that in the event of a merger or sale of assets,
the provisions of this Section 5(c) shall govern vesting acceleration.
Notwithstanding the foregoing, unless the Stock Option provides
otherwise, any Stock Option granted under this Plan shall be
exercisable in full, without regard to any installment exercise
provisions, for a period specified by the Committee, but not to exceed
sixty (60) days, prior to the occurrence of any of the following
events: (i) dissolution or liquidation of the Company other than in
conjunction with a bankruptcy of the Company or any similar
occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be
the surviving entity or (iii) the transfer of substantially all of the
assets of the Company or 75% or more of the outstanding Stock of the
Company.
<PAGE>
The grant of an option pursuant to the Plan shall not limit in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business
or assets.
(d) Method of Exercise. Stock Options may be exercised in whole
or in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares to
be purchased. Such notice shall be accompanied by payment in full of
the purchase price, either by check, or by any other form of legal
consideration deemed sufficient by the Committee and consistent with
the Plan's purpose and applicable law, including promissory notes or a
properly executed exercise notice together with irrevocable
instructions to a broker acceptable to the Company to promptly deliver
to the Company the amount of sale or loan proceeds to pay the exercise
price. As determined by the Committee at the time of grant or
exercise, in its sole discretion, payment in full or in part may also
be made in the form of Stock already owned by the optionee (which in
the case of Stock acquired upon exercise of an option have been owned
for more than six months on the date of surrender) or, in the case of
the exercise of a Non-Qualified Stock Option, Restricted Stock or
Deferred Stock subject to an award hereunder (based, in each case, on
the Fair Market Value of the Stock on the date the option is
exercised, as determined by the Committee), provided, however, that,
in the case of an Incentive Stock Option, the right to make a payment
in the form of already owned shares may be authorized only at the time
the option is granted, and provided further that in the event payment
is made in the form of shares of Restricted Stock or a Deferred Stock
award, the optionee will receive a portion of the option shares in the
form of, and in an amount equal to, the Restricted Stock or Deferred
Stock award tendered as payment by the optionee. If the terms of an
option so permit, an optionee may elect to pay all or part of the
option exercise price by having the Company withhold from the shares
of Stock that would otherwise be issued upon exercise that number of
shares of Stock having a Fair Market Value equal to the aggregate
option exercise price for the shares with respect to which such
election is made. No shares of Stock shall be issued until full
payment therefor has been made. An optionee shall generally have the
rights to dividends and other rights of a shareholder with respect to
shares subject to the option when the optionee has given written
notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in paragraph (a) of
Section 12.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the
Company and any Subsidiary or Parent Corporation terminates by reason
of death, any Incentive Stock Option may thereafter be immediately
exercised, to the extent then exercisable, by the legal representative
of the estate or by the legatee of the optionee under the will of the
optionee, for a period of twelve months from the date of such death or
until the expiration of the stated term of the option, whichever
period is shorter. In the event of termination of employment by
reason of death, if any Stock Option is exercised after the expiration
of the exercise periods that apply for purposes of Section 422 of the
Code, the option will thereafter be treated as a Non-Qualified Stock
Option.
<PAGE>
(g) Termination by Reason of Disability. If an optionee's
employment by the Company and any Subsidiary or Parent Corporation
terminates by reason of Disability, any Incentive Stock Option held by
such optionee may thereafter be exercised, to the extent it was
exercisable at the time of termination due to Disability, but may not
be exercised after twelve months from the date of such termination of
employment or the expiration of the stated term of the option,
whichever period is the shorter. In the event of termination of
employment by reason of Disability, if any Stock Option is exercised
after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's
employment by the Company and any Subsidiary or Parent Corporation
terminates by reason of Retirement and the terms of the Stock Option
so provide, any Incentive Stock Option held by such optionee may
thereafter be exercised to the extent it was exercisable at the time
of such Retirement, but may not be exercised after twelve months from
the date of such termination of employment or the expiration of the
stated term of the option, whichever period is the shorter. In the
event of termination of employment by reason of Retirement, if any
Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, the option will
thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination. If an optionee's continuous status as
an employee or Consultant terminates (other than upon the optionee's
death, Disability or Retirement), any Incentive Stock Option held by
such optionee may thereafter be exercised to the extent it was
exercisable at the time of such termination, but may not be exercised
after 90 days after such termination, or the expiration of the stated
term of the option, whichever period is the shorter. In the event of
termination of employment by reason other than death, Disability or
Retirement and if pursuant to its terms any Stock Option is exercised
after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option. In the event an Optionee's employment with
the Company is terminated for Cause, all unexercised Options granted
to such Optionee shall immediately terminate.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair
Market Value (determined as of the time the Stock Option is granted)
of the Common Stock with respect to which an Incentive Stock Option
under this Plan or any other plan of the Company and any Subsidiary or
Parent Corporation is exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
(k) Directors Who Are Not Employees. Each person who (i) is not
an employee of the Company, any Parent Corporation or any Subsidiary
and (ii) is elected or re-elected as a Director by the Board or the
shareholders subsequent to December 31, 1996, shall automatically be
granted an Option to purchase 2,000 shares of Stock as of the date of
such election or re-election, at an option price per share equal to
100% of the Fair Market Value of a share of Stock on the date of such
election or re-election. The Board in appropriate circumstances may
adjust the Option to be granted under this Section 5(k) to any such
person who has received a stock option from the Company in the three
preceding years. All such Options shall be designated as Non-
Qualified Stock Options and shall be subject to the same terms and
provisions as are then in effect with respect to the grant of Non-
Qualified Stock Options to officers and key employees of the Company,
except that (1) the term of each such Option shall be equal to ten
<PAGE>
years, which term shall not expire upon the termination of service as
a Director and (2) the Option shall become exercisable as to one-third
of the shares subject to the Option beginning one year after the date
the Option is granted, the second third beginning two years after the
date the Option is granted and the last third beginning three years
after the date the Option is granted. Upon termination of such
Director's service as a Director of the Company, the unvested portion
of an Option held by such Director shall not be exercisable. Subject
to the foregoing, all provisions of this Plan not inconsistent with
the foregoing shall apply to Options granted pursuant to this Section
5(k).
SECTION 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option granted
under the Plan. In the case of a Non-Qualified Stock Option, such
rights may be granted either at or after the time of the grant of such
Option. In the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock
Option, except that a Stock Appreciation Right granted with respect to
less than the full number of shares covered by a related Stock Option
shall not be reduced until the exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Stock
Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (b) of this Section 6, by surrendering the
applicable portion of the related Stock Option. Upon such exercise
and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in paragraph (b) of this Section
6. Stock Options which have been so surrendered, in whole or in part,
shall no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the
provisions of the Plan, as shall be determined from time to time by
the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which
they relate shall be exercisable in accordance with the provisions of
Section 5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an
amount in cash or shares of Stock equal in value to the excess of the
Fair Market Value of one share of Stock over the option price per
share specified in the related option multiplied by the number of
shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the
form of payment.
(iii) Stock Appreciation Rights shall be transferable
only when and to the extent that the underlying Stock Option would be
transferable under Section 5 of the Plan.
<PAGE>
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the
limitation set forth in Sections 3 and 4 of the Plan on the total
number of shares of Stock to be issued under the Plan and the maximum
number of shares to be awarded to any one person in a fiscal year, but
only to the extent of the number of shares issued or issuable under
the Stock appreciation Right at the time of exercise based on the
value of the Stock Appreciation Right at such time.
(v) A Stock Appreciation Right granted in connection with
an Incentive Stock Option may be exercised only if and when the market
price of the Stock subject to the Incentive Stock Option exceeds the
exercise price of such Option.
SECTION 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued
either alone or in addition to otherawards granted under the Plan.
The Committee shall determine the officers, key employees and
Consultants of the Company and Subsidiaries to whom, and the time or
times at which, grants of Restricted Stock will be made, the number of
shares to be awarded, the time or times within which such awards may
be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the
attainment of specified performance goals. The provisions of
Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates. The prospective recipient of an
award of shares of Restricted Stock shall not have any rights with
respect to such award, unless and until such recipient has executed an
agreement evidencing the award and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then
applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan.
Such certificate shall be registered in the name of the
participant, and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such award,
substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Ault Incorporated
1996 Stock Plan and an Agreement entered into between the
registered owner and Ault Incorporated. Copies of such Plan
and Agreement are on file in the offices of Ault
Incorporated."
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until
the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award, the participant shall
have delivered a stock power, endorsed in blank, relating to the
Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to the Plan shall be subject to the following
restrictions and conditions:
<PAGE>
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the
Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section
7, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares and the right to receive any
cash dividends. The Committee, in its sole discretion, may permit or
require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of Restricted
Stock (to the extent shares are available under Section 3 and subject
to paragraph (f) of Section 12). Certificates for shares of
unrestricted Stock shall be delivered to the grantee promptly after,
and only after, the period of forfeiture shall have expired without
forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement
and paragraph (c)(iv) of this Section 7, upon termination of
employment for any reason during the Restriction Period, all shares
still subject to restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in
part any or all remaining restrictions with respect to such
participant's shares of Restricted Stock.
(v) Notwithstanding the foregoing, all restrictions with
respect to any participant's shares of Restricted Stock shall lapse,
on the date determined by the Committee, prior to, but in no event
more than sixty (60) days prior to, the occurrence of any of the
following events: (i) dissolution or liquidation of the Company,
other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition,
separation, reorganization, or similar occurrence, where the Company
will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 75% or more of the
outstanding Stock of the Company.
SECTION 8. Deferred Stock Awards.
(a) Administration. Deferred Stock may be awarded either alone
or in addition to other awards granted under the Plan. The Committee
shall determine the officers, key employees and Consultants of the
Company and Subsidiaries to whom and the time or times at which
Deferred Stock shall be awarded, the number of Shares of Deferred
Stock to be awarded to any participant or group of participants, the
duration of the period (the "Deferral Period") during which, and the
conditions under which, receipt of the Stock will be deferred, and the
terms and conditions of the award in addition to those contained in
paragraph (b) of this Section 8. The Committee may also condition the
grant of Deferred Stock upon the attainment of specified performance
goals. The provisions of Deferred Stock awards need not be the same
with respect to each recipient.
<PAGE>
(b) Terms and Conditions.
(i) Subject to the provisions of this Plan and the award
agreement, Deferred Stock awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or Elective
Deferral Period, where applicable), share certificates shall be
delivered to the participant, or his legal representative, in a number
equal to the shares covered by the Deferred Stock award.
(ii) Amounts equal to any dividends declared during the
Deferral Period with respect to the number of shares covered by a
Deferred Stock award will be paid to the participant currently or
deferred and deemed to be reinvested in additional Deferred Stock or
otherwise reinvested, all as determined at the time of the award by
the Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement
and paragraph (b)(iv) of this Section 8, upon termination of
employment for any reason during the Deferral Period for a given
award, the Deferred Stock in question shall be forfeited by the
participant.
(iv) In the event of special hardship circumstances of
a participant whose employment is terminated (other than for Cause)
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in
part any or all of the remaining deferral limitations imposed
hereunder with respect to any or all of the participant's Deferred
Stock.
(v) A participant may elect to further defer receipt of the
award for a specified period or until a specified event (the "Elective
Deferral Period"), subject in each case to the Committee's approval
and to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such
election must generally be made prior to completion of one half of the
Deferral Period for a Deferred Stock award (or for an installment of
such an award).
(vi) Each award shall be confirmed by, and subject to the
terms of, a Deferred Stock agreement executed by the Company and the
participant.
SECTION 9. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be
deemed a termination of employment:
(a) a transfer of an employee from the Company to a Parent
Corporation or Subsidiary, or from a Parent Corporation or Subsidiary
to the Company, or from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee,
for military service or sickness, or for any other purpose approved by
the Company if the period of such leave does not exceed ninety (90)
days (or such longer period as the Committee may approve, in its sole
discretion); and
<PAGE>
(c) a leave of absence in excess of ninety (90) days, approved
in writing by the Committee, but only if the employee's right to
reemployment is guaranteed either by a statute or by contract, and
provided that, in the case of any leave of absence, the employee
returns to work within 30 days after the end of such leave.
SECTION 10. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made (i) which
would impair the rights of an optionee or participant under a Stock
Option, Restricted Stock or other Stock-based award theretofore
granted, without the optionee's or participant's consent, or (ii)
which without the approval of the stockholders of the Company would
cause the Plan to no longer comply with Rule 16b-3 under the
Securities Exchange Act of 1934, Section 422 of the Code or any other
regulatory requirements.
The Committee may amend the terms of any award or option
theretofore granted, prospectively or retroactively to the extent such
amendment is consistent with the terms of this Plan, but no such
amendment shall impair the rights of any holder without his or her
consent except to the extent authorized under the Plan. The Committee
may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.
SECTION 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not
yet made to a participant or optionee by the Company, nothing
contained herein shall give any such participant or optionee any
rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with
respect to awards hereunder, provided, however, that the existence of
such trusts or other arrangements is consistent with the unfunded
status of the Plan.
SECTION 12. General Provisions.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option under the Plan to represent to and agree
with the Company in writing that the optionee is acquiring the shares
without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan
pursuant to any Restricted Stock, Deferred Stock or other Stock-based
awards shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed,
and any applicable Federal or state securities laws, and the Committee
may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted
Stock, Deferred Stock and other Stock-based awards under the Plan
(other than Stock Options) are not required to make any payment or
<PAGE>
provide consideration other than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in
specific cases. The adoption of the Plan shall not confer upon any
employee of the Company or any Subsidiary any right to continued
employment with the Company or a Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any
time.
(d) Each participant shall, no later than the date as of which
any part of the value of an award first becomes includible as
compensation in the gross income of the participant for Federal income
tax purposes, pay to the Company, or make arrangements satisfactory to
the Committee regarding payment of, any Federal, state, or local 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 and the Company and Subsidiaries shall,
to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the participant.
With respect to any award under the Plan, if the terms of such award
so permit, a participant may elect by written notice to the Company to
satisfy part or all of the withholding tax requirements associated
with the award by (i) authorizing the Company to retain from the
number of shares of Stock that would otherwise be deliverable to the
participant, or (ii) delivering to the Company from shares of Stock
already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by
the participant under this Section 12(d). Any such election shall be
in accordance with, and subject to, applicable tax and securities
laws, regulations and rulings.
(e) At the time of grant, the Committee may provide in
connection with any grant made under this Plan that the shares of
Stock received as a result of such grant shall be subject to a
repurchase right in favor of the Company, pursuant to which the
participant shall be required to offer to the Company upon termination
of employment for any reason any shares that the participant acquired
under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to
the cash consideration paid for the Stock, subject to such other terms
and conditions as the Committee may specify at the time of grant. The
Committee may, at the time of the grant of an award under the Plan,
provide the Company with the right to repurchase, or require the
forfeiture of, shares of Stock acquired pursuant to the Plan by any
participant who, at any time within two years after termination of
employment with the Company, directly or indirectly competes with, or
is employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock
(or in Deferred Stock or other types of Plan awards) at the time of
any dividend payment shall only be permissible if the Committee (or
the Company's chief financial officer) certifies in writing that under
Section 3 sufficient shares are available for such reinvestment
(taking into account then outstanding Stock Options and other Plan
awards).
(g) The Plan is expressly made subject to the approval by
shareholders of the Company. If the Plan is not so approved by the
shareholders on or before one year after this Plan's adoption by the
Board of Directors, this Plan shall not come into effect. The
<PAGE>
offering of the shares hereunder shall be also subject to the
effecting by the Company of any registration or qualification of the
shares under any federal or state law or the obtaining of the consent
or approval of any governmental regulatory body which the Company
shall determine, in its sole discretion, is necessary or desirable as
a condition to or in connection with, the offering or the issue or
purchase of the shares covered thereby. The Company shall make every
reasonable effort to effect such registration or qualification or to
obtain such consent or approval.
<PAGE>
EXHIBIT B
AULT INCORPORATED
1996 Employee Stock Purchase Savings Plan
Article I
Purpose
The purpose of the 1996 Employee Stock Purchase Savings Plan is
to provide a greater community of interest between Ault Incorporated
shareholders and its employees, and to encourage and facilitate
purchases of shares of common stock in the Company by its employees.
It is believed the Plan will encourage employees to remain in the
employ of the Company and will provide them with further incentive to
improve operations, increase profits and contribute more significantly
to the Company's success and will also permit the Company to compete
with other corporations offering similar plans in obtaining and
retaining the services of competent employees. It is intended that
options issued pursuant to this Plan shall constitute options issued
pursuant to an "Employee Stock Purchase Plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended.
Article II
Definitions
A. "Plan" means the 1996 Ault Incorporated Employee Stock
Purchase Savings Plan.
B. "Board of Directors" means the Board of Directors of Ault
Incorporated.
C. "Code" means the Internal Revenue Code of 1986, as amended.
D. "Company" means Ault Incorporated, and any of its
subsidiaries (as that term is defined by Section 424(f) of the Code)
to which Ault Incorporated and such respective subsidiaries, by
action of their boards of directors, shall make this Plan applicable.
E. "Employee" means any person, including an officer, who is
customarily employed or is expected to be customarily employed twenty
(20) hours or more per week by the Company.
F. "Eligible Employee" means an Employee of the Company who is
eligible for participation in the Plan in accordance with Article IV.
G. "Participant" means an Eligible Employee who has elected to
participate in the Plan in accordance with Article V.
H. "Committee" means the committee provided for in Article XI.
I. The "Effective Date" of the Plan means March 10, 1996 or a
date established by the Committee not to exceed fourteen days
<PAGE>
following registration of the options and shares reserved pursuant to
the Plan with the United States Securities and Exchange Commission.
J. The "Commencement Date" of a Phase (as defined herein) shall
be determined and defined as
provided in Article III, Section B herein.
K. "Base Pay" means regular straight time earnings annualized
as of the date of Commencement Date of a Phase, excluding payments, if
any, for overtime, incentive compensation, commissions, disability
payments, bonuses and any other similar, special remuneration.
L. "Termination Date" shall mean a date set by the Committee
which is at least 358 days after but no more than 365 days after the
Commencement Date of a particular Phase of the Plan provided that the
Committee may elect to accelerate the termination Date of any Phase
effective on the date specified by the Committee in the event of (i)
any consolidation or merger in which Ault Incorporated is not the
surviving corporation or pursuant to which shares of Ault Incorporated
would be converted into cash, securities or other property; (ii) any
sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the
assets of the Company; (iii) any plan of liquidation or dissolution of
Ault Incorporated; (iv) any event or transaction which would cause
Ault Incorporated shares to cease to be quoted on the NASDAQ Automated
Quotation System.
M. "Shares" shall mean common shares of Ault Incorporated of no
par value, subject to adjustments which may be made in accordance with
Articles XVI and XVII.
Article III
Term and Phases of the Plan
A. The Plan will commence on the Effective Date and will
terminate ten (10) years and six months thereafter, except that any
Phase (as hereinafter defined) commenced prior to such termination
shall, if necessary, be allowed to continue beyond such termination
until completion. Notwithstanding the foregoing, this Plan shall be
considered of no force or effect and any options granted shall be null
and void unless the holders of a majority of shares of the common
stock of the Company, represented at a meeting in person or by proxy,
approve the Plan within twelve (12) months before or after the date of
its adoption by the Board of Directors.
B. The Plan shall be carried out in one or more phases (each
herein a "Phase"), each Phase being for a period of one year. No
Phase shall run concurrently with any other phase, but a Phase may
commence immediately after the termination of the preceding Phase.
The commencement of each Phase (the "Commencement Date") shall be
determined by the Committee, provided that the Commencement Date of
the first Phase shall be within twelve (12) months before or after the
date of approval of the Plan by the shareholders of the Company. In
the event all of the stock reserved for grant of options hereunder is
issued pursuant to the terms hereof prior to the Commencement Date of
one or more Phases scheduled by the Committee or the number of shares
remaining is so small, in the opinion of the Committee, as to render
administration of any succeeding Phase impracticable, such Phase or
Phases shall be canceled. Phases shall be numbered successively as
Phase 1, Phase 2, Phase 3, etc.
<PAGE>
Article IV
Eligibility
A. Any Employee of the Company who has completed at least one
month of continuous service on or prior to the Commencement Date of a
Phase of the Plan shall be eligible to participate in the Plan,
subject to the limitations imposed by Section 423 of the Code.
B. Any Employee who is a member of the Board of Directors of
the Company shall be eligible to participate in the Plan.
C. Notwithstanding any provision of the Plan to the contrary,
no Employee shall be granted an option:
1. if such Employee, immediately after the option is
granted, owns shares possessing five percent (5%) or more of the
total combined voting power or value of all classes of shares of
the Company or a parent or a subsidiary of the Company. For
purposes of determining share ownership, the rules of Section
424(d) of the Code shall apply, and shares which the Employee may
purchase under outstanding options shall be treated as shares
owned by the Employee;
2. which permits the Employee to purchase shares under
such plans of the Company or a subsidiary of the Company to
accrue at a rate which exceeds $25,000 of the fair market value
of such shares (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any
time. The term "accrue" shall be interpreted as in Section
423(b)(8) of the Code;
3. which can be exercised after the expiration of twenty-
seven months from the date the option is granted.
Article V
Participation
A. An Eligible Employee may elect to enroll as, and become a
Participant in, any Phase of the Plan by completing a payroll
deduction authorization on the form provided by the Company and filing
it the personnel office prior to or on the date the phase commences.
B. Payroll deductions for a Participant shall commence on the
first payday after the Commencement Date of the Phase for which the
Eligible Employee has enrolled and shall end on the last payday
immediately prior to or coinciding with the Termination Date of the
particular Phase, unless sooner terminated by the Participant as
provided in Article IX or as otherwise provided herein.
C. A Participant who ceases to be an Eligible Employee,
although still employed by the Company, thereupon shall be deemed to
discontinue his or her participation in the Plan, and he or she shall
have the rights provided in Article IX.
<PAGE>
D. Participation in the Plan shall be voluntary.
Article VI
Payroll Deductions
A. Upon enrollment, a Participant shall elect to make
contributions to the Plan by payroll deductions (in full dollar
amounts calculated to be as uniform as practicable throughout the
period of the Phase), in the aggregate amount not in excess of the sum
of 10% of such Participant's Base Pay for the term of the Phase, as
determined on the basis of his or her annual or annualized Base Pay at
the Commencement Date of the Phase. The minimum authorized payroll
deduction must aggregate to not less than $10 per month.
B. All payroll deductions made for Participants shall be
credited to their accounts under the Plan. The Participant may not
make any separate cash payments into such account.
C. A Participant may discontinue his or her participation in
the Phase and terminate his or her payroll deduction authorized at any
time as provided in Article IX.
D. A Participant may reduce the amount of his or her payroll
deduction by completing an amended payroll deduction authorization on
the form provided and filing it with his or her personnel office, but
no change can be made during a Phase of the Plan which would either
change the time or increase the rate of his or her payroll deductions.
E. In the event that the Participant's compensation for any pay
period is terminated or reduced from the compensation rate for such a
period as of the Commencement Date of the Phase for any reason so that
the amount actually withheld on behalf of the Participant as of the
termination date of the Phase is less than the amount anticipated to
be withheld over the Phase year as determined on the Commencement Date
of the Phase, then the extent to which the Participant may exercise
his option shall be based on the amount actually withheld on his
behalf. In the event of a change in the pay period of any
Participant, such as from bi-weekly to monthly, an appropriate
adjustment shall be made to the deduction in each new pay period so as
to ensure the deduction of the proper amount authorized by the
Participant.
Article VII
Terms and Conditions of Options
A. Stock options granted pursuant to the Plan may be evidenced
by agreements in such form as the Committee shall approve, provided
that all Employees shall have the same rights and privileges and
provided further that such options shall comply with and be subject to
the following terms and conditions. The Committee may conclude that
agreements are not necessary.
B. As of the Commencement Date of a Phase when a Participant's
payroll deduction authorization becomes effective, the Participant
shall be granted an option for as many full shares as he or she will
be able to purchase with the payroll deductions credited to his or her
account during his or her participation in the Phase, subject to the
<PAGE>
limitations of Article X. The maximum number of shares subject to
purchase by a Participant shall equal the total amount credited to the
Participant's account under Section VI hereof divided by the option
price set forth in Section VII, Paragraph C.1 hereof.
C. The option price of shares purchased with payroll deductions
for an Employee who becomes a Participant as of the Commencement Date
of a Phase shall be the lower of:
1. 85% of the fair market value of the shares on the date
the Phase commences; or,
2. 85% of the fair market value of the shares on the
Termination Date of the Phase.
D. The fair market value of the shares shall be determined by
the Committee for each valuation date in a manner consistent with
Section 423 of the Code.
Article VIII
Exercise of Option
A. Unless a Participant gives written notice to the Company as
provided in Article IX, his or heroption for the purchase of shares
will be exercised automatically for him or her as of the Termination
Date of the Phase for the purchase of the number of full shares which
the accumulated payroll deductions in his or her account at that time
will purchase at the applicable option price; but in no event shall
the number of full shares be greater than the number of full shares to
which the Participant would have been eligible to receive when he or
she first became a Participant under the Phase if he or she had
elected a payroll deduction rate of 10% of his or her then annual or
annualized Base Pay and as if the option price were solely based under
Paragraph C.1 of Article VII.
B. By written notice to the Company within the period
commencing three (3) months prior to and ending on the business day
immediately preceding the Termination Date of the Phase and after
delivery to the Participant of a prospectus covering the shares to be
issued under the Plan, a Participant may elect, effective as of the
Termination Date, to:
1. withdraw all the accumulated payroll deductions in his
or her account at the time, with interest; or, after receipt of a
prospectus as set forth above,
2. exercise his or her option for a specified number of
full shares less than the number of full shares which the
accumulated payroll deductions in his or her account will
purchase at the applicable option price and withdraw the balance
in his or her account without interest; but in no event shall the
number of full shares be greater than the number of full shares
to which a Participant would have been eligible to receive when
he or she first became a Participant under the Phase if he or she
had elected a payroll deduction rate of 10% of his or her then
annual or annualized Base Pay and as if the option price were
solely based under Paragraph C.1 of Article VII.
<PAGE>
C. Notwithstanding the provisions of Paragraphs A and B above,
if a Participant files reports pursuant to Section 16 of the
Securities Exchange Act of 1934 (at the Commencement Date of a Phase
or becomes obligated to file such reports during a Phase) then such a
Participant shall not have the right to withdraw all or a portion of
the accumulated payroll deductions except in accordance with Article
IX, Paragraphs A and B.
Article IX
Death, Withdrawal or Termination
A. In the event of death of a Participant, the person or
persons specified in Article XVIII may give
notice to the Company within sixty (60) days of the death of the
Participant electing to purchase the number of full shares which the
accumulated payroll deductions in the account of such deceased
Participant will purchase under the option at the applicable option
price specified in Paragraph C of Article VII and have the balance in
the account distributed in cash without interest. If no such notice
is received by the Company within said sixty (60) days, the
accumulated payroll deductions will be distributed in cash plus
interest.
B. Upon termination of the Participant's employment for any
reason other than the death of the Participant, the payroll deductions
credited to his or her account, plus interest, shall be returned to
him or her.
C. Except for a Participant governed by Paragraph C of Article
VIII, a Participant may withdraw payroll deductions credited to his or
her account under the Plan at any time by giving written notice to the
Company. All of the Participant's payroll deductions credited to his
or her account, plus interest, shall be paid to him or her promptly
after receipt of his or her notice of withdrawal and no further
payroll deductions shall be made from his or her compensation.
Article X
Shares Under Option
A. The shares to be sold to a Participant under the Plan may,
at the election of the Company, be either treasury shares or shares
originally issued for such purpose. The maximum number of shares
which shall be made available for purchase under the Plan shall be
100,000 shares, subject to adjustment upon changes in capitalization
of the Company as provided in Articles XVI and XVII. Shares subject
to the unexercised portion of any lapsed or expired option may again
be subject to option under the plan. If the total number of shares
for which options are to be granted on any date in accordance with
Article VII exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised
or are then outstanding), the Committee shall make a pro rata
allocation of the shares remaining available in as nearly a uniform
manner as shall be practicable and as it shall determine to be
equitable. In such event, payroll deductions to be made shall be
reduced accordingly and the Committee shall give written notice of
such reduction to each Participant affected thereby.
B. As promptly as practicable after the Termination Date of a
Phase, the Company shall deliver to each Participant the full shares
purchased under exercise of his or her option, together with a cash
<PAGE>
payment equal to the balance (without interest) of any payroll
deductions credited to his or her account which were not used for the
purchase of shares.
C. The Participant will have no interest in shares covered by
his or her option until such option has been exercised.
Article XI
Administration
A. The Plan shall be administered by a Committee consisting of
not less than two (2) members who shall be appointed by the Board of
Directors of the Company. If the Board of Directors has established a
Compensation Committee, such Compensation Committee shall be the
"Committee" hereunder. Each member of such Committee shall be either
a director, an officer or an employee of the Company.
B. The Committee shall be vested with full authority to make,
administer, and interpret such rules and regulations as it deems
necessary to administer the Plan, and any such determination, decision
or action of such Committee with respect to any action in connection
with the construction, interpretation, administration or application
of the Plan shall be final, conclusive and binding on the Company and
on all Participants and any and all other persons claiming under or
through any Participant, unless otherwise determined by the Board of
Directors. All determinations of the Committee shall be made by a
majority of its members. Any decision which is made in writing and
signed by a majority of the members of the Committee shall be
effective as fully as though made by a majority vote at a meeting duly
called and held.
C. The determinations of the Committee shall be made in
accordance with its judgment as to the best interests of the Company,
its employees and its shareholders and in accordance with the purposes
of the Plan; provided, however, that the provisions of the Plan shall
at all times be construed in a manner consistent with the requirements
of Section 423 of the Internal Revenue Code, as amended.
D. The Company shall pay all expenses of administering the
Plan. No member of the Board of Directors or the Committee shall be
personally liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
Article XII
Amendment of the Plan
The Board of Directors of the Company may at any time amend the
Plan, except that no amendment may make any change in any option
therefore granted which would adversely affect the rights of any
Participant, and no amendment shall be made without prior approval of
the shareholders of the Company if such amendment would require sale
of more shares than are authorized under Article X of the Plan.
Article XIII
Non-transferability
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Neither payroll deductions credited to a Participant's account
nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way by the Participant and any such
attempted assignment, transfer, pledge or other disposition shall be
null and void and without effect, but the Company may treat such act
as an election to withdraw funds in accordance with Article IX.
Article XIV
Use of Funds
All payroll deductions received or held by the Company under this
Plan may be used by the Company for any corporate purposes and the
Company shall not be obligated to segregate such payroll deductions.
Article XV
Interest
In any situation where the Plan provides for the payment of
interest on a Participant's payroll deductions, such interest shall be
determined by averaging the balance in the Participant's account for
the period of his or her participation and computing interest thereon
at the rate of 5% per annum (simple interest). The Committee may
change the rate of interest for a particular Phase, provided such
change is made prior to the Commencement Date of the Phase.
Article XVI
Changes in Capitalization, Merger, etc.
A. Subject to any required action by the shareholders, the
number of shares covered by each outstanding option, the price per
share thereof in each such option, and the maximum number of shares
available for purchase pursuant to options issued under the Plan shall
be deemed proportionately adjusted for any increase or decrease in the
number of issued shares of the Company resulting from a subdivision or
consolidation of shares or the payment of a share dividend (but only
on the shares) or any other increase or decrease in the number of such
shares effected without receipt of consideration by the Company.
B. If the Company shall be involved in any merger or
consolidation, whether or not it is the surviving corporation, each
outstanding option shall pertain to and apply to the securities to
which a holder of the number of shares subject to the option would
have been entitled. A dissolution or liquidation of the Company shall
cause each outstanding option to terminate, provided in such event
that, immediately prior to such dissolution or liquidation, each
Participant shall be repaid the payroll deductions credited to his or
her account, plus interest.
C. In the event of a change in the shares of the Company as
presently constituted, which is limited to a change of all its
authorized shares with no par value into the same number of shares
with a stated par value, the shares resulting from any such change
shall be deemed to be the shares within the meaning of this Plan.
<PAGE>
Article XVII
Adjustments to Shares
A. To the extent that the foregoing adjustments relate to
shares or securities of the Company, suchadjustments shall be made by
the Committee, and its determination in that respect shall be final,
binding and conclusive, provided that each option granted pursuant to
this Plan shall not be adjusted in a manner that causes the option to
fail to continue to qualify as an option issued pursuant to an
"employee stock purchase plan" within the meaning of Section 423 of
the Code.
B. Except as herein before expressly provided in Articles XVI
and XVII, the optionee shall have no right by reason of any
subdivision or consolidation of shares of any class or the payment of
any stock dividend or any other increase or decrease in the number of
shares of any class or by reason of any dissolution, liquidation,
merger, or consolidation or spin-off of assets or stock of another
corporation, and any issue by the Company of shares of any class, or
securities convertible into shares of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to the option.
C. The grant of an option pursuant to this Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
Article XVIII
Beneficiary Designation
A Participant may file a written designation of a beneficiary who
may elect to purchase shares or receive cash to the Participant's
credit under the Plan in the event of such Participant's death prior
to delivery to him or her of such shares and cash. Such designation
of beneficiary may be changed by the Participant at any time by
written notice. Upon the death of a Participant and upon receipt by
the Company of proof deemed adequate by it of the identity and
existence at the Participant's death of a beneficiary validly
designated by him or her under the Plan, the Company shall deliver
such shares and cash to such beneficiary in accordance with Section A
of Article IX. If, upon the death of a Participant, there is no
surviving beneficiary duly designated as above provided, the Company
shall deliver accumulated payroll deductions to the executor or
administrator of the estate of the Participant or, if no such executor
or administrator has been appointed (to the knowledge of the Company)
within sixty (60) days following the Participant's death, the Company
shall deliver such accumulated payroll deductions to the surviving
spouse (or if no surviving spouse, to a surviving child or surviving
children), if any, as though named as the designated beneficiary
hereunder or, if there is no such surviving spouse or child, then in
the deceased Participant's domicile as though named as the designated
beneficiary hereunder. The Company shall not be liable for any
distribution made of shares or cash pursuant to any will or other
testamentary disposition made by such Participant, or because of the
provisions of law concerning intestacy, or otherwise. No designated
beneficiary shall, prior to the death of the Participant by whom he or
she has been designated, acquire any interest in the shares or cash
credited to the Participant under the Plan.
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Article XIX
Registration and Qualification of Shares
The offering of the shares hereunder shall be subject to the
effecting by the Company of any registration or qualification of the
shares under any federal or state law or the obtaining of the consent
or approval of any governmental regulatory body which the Company
shall determine, in its sole discretion, is necessary or desirable as
a condition to or in connection with the offering or the issue or
purchase of the shares covered thereby. The Company shall make every
reasonable effort to effect such registration or qualification or to
obtain such consent or approval.
Article XX
Plan Preconditions
The Plan is expressly made subject to approval of shareholders of
the Company. If the Plan is not so approved by the shareholders on or
before one year after adoption by the Board of Directors, this Plan
shall not come into effect. In such case, the accumulated payroll
deductions credited to the account of each Participant shall forthwith
be repaid to him or her with interest.
<PAGE>
AULT INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For February 11, 1997 Special Meeting of Shareholders
The undersigned hereby appoints Frederick M. Green, Delbert W.
Johnson and Edward C. Lund, or either of them, as proxies, with full
power of substitution to vote all shares of stock of Ault Incorporated
of record in the name of the undersigned at the close of business on
January 3, 1997 at a Special Meeting of Shareholders to be held in
Brooklyn Park, Minnesota on February 11, 1997, or at any adjournment
or adjournments thereof.
1. PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION TO
INCREASE THE TOTAL NUMBER OF AUTHORIZED COMMON SHARES TO A TOTAL
OF
15,000,000 COMMON SHARES:
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY AND APPROVE THE COMPANY'S 1996 STOCK PLAN:
FOR AGAINST ABSTAIN
3. PROPOSAL TO RATIFY AND APPROVE THE COMPANY'S 1996 EMPLOYEE STOCK
PURCHASE SAVINGS PLAN:
FOR AGAINST ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY
OTHER
MATTERS COMING BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON
PROPOSALS (1), (2) AND (3) IN ACCORDANCE WITH THE
SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF THERE IS NO
SPECIFICATION.
Dated: __________________, 1997
Signed:
(Signature)
(Signature)
Please sign name(s) exactly as shown at left.
When signing as executor, administrator,
trustee, guardian, etc., give full title as
such; when shares have been issued in the
names of two or more persons, all should
sign.
