SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant x
Filed by a party other than the registrant
Check the appropriate box:
o Preliminary proxy statement o Confidential, for Use
of the
x Definitive proxy statement Commission Only (as
permitted
o Definitive additional materials by Rule 14a-6(e)(2))
o Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12
Ault Incorporated
(Name of Registrant as Specified in Its Charter)
Ault Incorporated
(Name of Person(s) Filing Proxy Statement, if other than the Reg
istrant)
Payment of Filing Fee (Check the appropriate box):
x $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2) or Items 22(a)(2) of Schedule A.
o $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
o Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
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:
o Fee paid previously with preliminary materials.
o 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:
AULT INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 1, 1996
To the Shareholders of Ault Incorporated:
Notice is hereby given that the Annual Meeting of Shareholders
of Ault Incorporated will be held October 1, 1996 at the
Minneapolis Club, 615 Second Avenue South, Minneapolis, Minnesota
55402. The meeting will convene at 3:00 p.m., Minneapolis time,
for the following purposes:
1. To elect seven directors to hold office until the next
Annual Meeting of Shareholders or until their successors
are elected.
2. To consider and act upon a proposal to ratify and approve
an amendment to the Company's 1986 Stock Option Plan to
increase the total number of shares authorized to be
issued under such Plan by 100,000.
3. 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
August 16, 1996 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
August 30, 1996
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND
RETURN 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.
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 the
Annual Meeting of Shareholders to be held on October 1, 1996, 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 Annual 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
commenced on or about August 30, 1996. The Company's corporate
offices are located at 7300 Boone Avenue North, Minneapolis,
Minnesota 55428 and its telephone number is (612) 493-1900.
Only shareholders of record at the close of business on August
16, 1996 will be entitled to vote at the Annual Meeting. The
Company has outstanding only one class of stock, no par value
Common Stock, of which 2,128,776 shares were issued and outstanding
and entitled to vote as of August 16, 1996. Each share is entitled
to one vote. The presence in person or by proxy of the holders of
a majority of the shares of Common Stock entitled to vote at the
Annual 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 Annual 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 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.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table provides information as of August 1, 1996
concerning the beneficial ownership of the Company's Common Stock
by (i) all persons who are known by the Company to own five percent
or more of the Common Stock of the Company, (ii) each of the
directors of the Company, (iii) each executive officer named in the
table on page 4, and (iv) all directors and officers of the Company
as a group. All shares represent sole voting and investment power.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Beneficial Owner Owned of Class
<S> <C> <C>
Frederick M. Green
7300 Boone Avenue North
Minneapolis, MN 55428 87,500 3.8%
Delbert W. Johnson 5,300 *
John G. Kassakian 8,100 *
Edward C. Lund 6,500 *
Eric G. Mitchell, Jr. 5,400 *
Matthew A. Sutton 15,000 *
James M. Duddleston 10,500 *
Gregory L. Harris 40,000 1.7%
Hokung Choi 47,900 2.1%
Carlos S. Montague 72,075 3.1%
All Directors and Officers as
a Group (11 persons) 298,275 13.0%
<FN>
* Less than 1%.
(1) Includes the following numbers of shares of Common Stock
which may be purchased pursuant to stock options which
are exercisable within 60 days of the date hereof: Mr.
Green, 37,500 shares; Mr. Johnson, 4,500 shares; Mr.
Kassakian, 4,500 shares; Mr. Lund, 4,500 shares; Mr.
Mitchell, 4,500 shares; Mr. Sutton, 4,500 shares, Mr.
Duddleston, 4,500 shares; Mr. Harris, 40,000 shares; Mr.
Choi, 31,500 shares; Mr. Montague, 26,500 shares; and all
directors and officers as a group, 162,500 shares.
</TABLE>
1. ELECTION OF DIRECTORS
Seven directors will be elected at the Annual Meeting of
Shareholders, each to serve until the next Annual Meeting of
Shareholders or until a successor is elected. The Board of
Directors has nominated for election the seven persons named
below and each has consented to being named as a nominee. All
of the nominees are currently directors of the Company. It is
intended that proxies solicited will be voted for the nominees
named below. The Company believes that each nominee named
below will be able to serve; but in the event any nominee is
unable to serve as a director, the persons named as proxies
have advised that they will vote for the election of such
substitute nominee as the Board of Directors may propose.
The names of the nominees, their principal occupations
for at least the past five years, and other information is set
forth below.
<TABLE>
<CAPTION>
Principal Occupation and Director
Name Other Directorships Since
<S> <C> <C>
James M. Self employed consultant 1988
Dudleston (74) and retired executive
Frederick M. President and Chief 1979
Green (53) Executive Officer of the
Company
Delbert W. President, Pioneer Metal 1983
Johnson (57) Finishing Co.,a subsidiary
of Safeguard Scientifics,
Inc. (fabricated metal
products); Director of
Safeguard Scientifics,
Inc., Tennant Company,
First Bank System Inc.,
Coherent Communications
Systems Corp. and Compucom
Systems Inc.
John G. Kassakian Professor of Electrical 1984
(53) Engineering and Director,
Laboratory for
Electromagnetic and
Electronic Systems,
Massachusetts Institute of
Technology; Director of
Sheldahl, Inc.
Edward C. Lund Retired Executive 1974
(78)
Eric G. Mitchell President, The Pricing 1992
(50) Advisor, Inc. (business
consulting)
Matthew A. Sutton Independent Management 1987
(73) Consultant; former
Consultant, Honeywell
Consultants, Ltd.; former
Executive Vice President
of Defense and Marine
Systems and Group Vice
President of
Aerospace/Avionics of
Honeywell Inc. (computers
and defense systems);
Director of Lexington
Standard Corporation
</TABLE>
The Board of Directors met seven times during fiscal 1996.
Each director attended more than 75% of the meetings of the Board
of Directors and any committee on which he served, except for Mr.
Kassakian who attended 71% of such meetings.
Members of the Board who are not otherwise employed by the
Company were paid an annual fee of $4,000 plus $500 for each Board
meeting or Board committee meeting attended. Each non-employee
member of the Board of Directors also receives at the time of
election or reelection of the Board by the shareholders an option
to purchase 1,000 shares of the Company's common stock at a
purchase price equal to the fair market value of the Company's
common stock on the date of such election or reelection. On
September 26, 1995, the date of the 1995 Annual Meeting of
Shareholders each non-employee member of the Board of Directors on
that date (all current directors) received an option to purchase
1,000 shares at a price of $3.688 per share. Mr. Kassakian
received a $600 monthly fee from the Company during fiscal 1996 in
exchange for certain consulting services provided to the Company.
The Company has an Audit Committee which met once during
fiscal 1996 and consisted of Messrs. Johnson, Duddleston and
Mitchell. The Audit Committee, among other responsibilities,
recommends to the full Board of Directors the selection of auditors
and reviews and evaluates the activities and reports of the
auditors, as well as the internal accounting controls of the
Company.
The Company also has a Compensation Committee which met twice
during fiscal 1996 and consisted of Messrs. Lund, Mitchell and
Sutton. The Compensation Committee, among other responsibilities,
recommends to the full Board of Directors compensation for
executive officers and key personnel and reviews the Company's
compensation policies and practices.
The Company does not have a nominating committee.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ending June 2,
1996, May 28, 1995 and May 29, 1994, the cash compensation paid by
the Company, as well as certain other compensation paid or accrued
for these years, to Frederick M. Green, the Company's President and
Chief Executive Officer, and to each of the other executive
officers of the Company (together with Mr. Green, the "Named
Executives") whose total cash compensation exceeded $100,000 during
fiscal 1996 in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Securities
Compensation Underlying All Other
Name and Fiscal Salary Bonus Options Compensation
Position Year ($) ($) (1) (#) (2) ($)
<S> <C> <C> <C> <C> <C> <C>
Frederick M. Green 1996 $196,207 $7,546 20,000 $3,859 (3)
President and Chief 1995 183,500 3,528 15,000 3,753 (3)
Executive Officer 1994 178,526 -0- -0- 3,495 (3)
Gregory L. Harris 1996 115,880 4,457 10,000 1,412 (4)
Vice President 1995 108,311 2,082 8,000 1,575 (4)
of Sales & Mktg. 1994 105,644 -0- -0- 2,084 (4)
Carlos S. Montague 1996 100,243 3,856 10,000 2,846 (5)
Vice President, Chief 1995 93,668 1,801 8,000 2,641 (5)
Financial Officer 1994 88,885 -0- -0- 2,420 (5)
and Ass't. Secretary
Hokung Choi 1996 102,262 3,933 10,000 2,921 (6)
Vice President 1995 97,091 1,867 8,000 2,313 (6)
Far East Operations 1994 93,496 -0- -0- 2,199 (6)
<FN>
(1) Represents bonuses earned in the fiscal year shown but which
were paid in the following fiscal year.
(2) Reflects the number of shares purchasable under option grants.
(3) Reflects 401(k) matching contributions of $2,419, $2,313 and
$2,811 under the Company's Profit Sharing and Retirement Plan
in 1996, 1995 and 1994, respectively, and the payment of
$1,440, $1,440 and $684 for life insurance premiums in 1996,
1995 and 1994, respectively.
(4) Reflects 401(k) matching contributions of $1,281, $1,456 and
$1,980 under the Company's Profit Sharing and Retirement Plan
in 1996, 1995 and 1994, respectively, and the payment of $131,
$119 and $104 for life insurance premiums in 1996, 1995 and
1994, respectively.
(5) Reflects 401(k) matching contributions of $1,530, $1,433 and
$1,357 under the Company's Profit Sharing and Retirement Plan
in 1996, 1995 and 1994, respectively, and the payment of
$1,316, $1,208 and $1,063 for life insurance premiums in 1996,
1995 and 1994, respectively.
(6) Reflects 401(k) matching contributions of $1,562, $1,484 and
$1,430 under the Company's Profit Sharing and Retirement Plan
in 1996, 1995 and 1994, respectively, and the payment of
$1,359, $829 and $769 for life insurance premiums in 1996,
1995 and 1994, respectively.
</TABLE>
Stock Option Grants
The following table contains information concerning grants of
stock options to the Named Executives during the fiscal year ending
June 2, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number Percent
of of Total
Securi- Options Potential Realizable
Under- Granted Value at Assumed
lying to Annual Rate of Stock
Options Employees Exercise Expira- Price Appreciation
Granted in Fiscal Price tion for Option Term
Name (#)(1) Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Frederick M.
Green 20,000 20% $2.313 7-17-05 $29,093 $73,727
Gregory L.
Harris 10,000 10% 2.313 7-17-05 14,546 36,863
Carlos S.
Montague 10,000 10% 2.313 7-17-05 14,546 36,863
Hokung Choi 10,000 10% 2.313 7-17-05 14,546 36,863
<FN>
(1) Each option becomes exercisable in equal installments over a
period of four years, commencing January 18, 1996.
</TABLE>
Option Exercises and Holdings
The following table sets forth information with respect to the
Named Executives concerning the exercise of options during the
fiscal year ending June 2, 1996 and unexercised options held as of
June 2, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Under- Unexercised
lying Unexercised in-the-Money
Shares Options at Options at
Acquired Value FY-End (#) FY-End (#)
on Rea-
Exercise lized Exer- Unexer- Exer- Unexer-
(#) ($) cisable cisable cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Frederick M.
Green 0 0 37,500 22,500 $541,425 $324,855
Gregory L.
Harris 11,500 $48,320 44,000 11,500 635,272 166,037
Carlos S.
Montague 0 0 21,500 11,500 310,417 166,037
Hokung Choi 0 0 31,500 11,500 454,797 166,037
<FN>
(1) Based on closing price of $14.438 per share of the Company's
Common Stock on June 2, 1996.
</TABLE>
Compensation Committee Report
The Compensation Committee (the "Committee") consists of three
non-employee members of the Company's Board of Directors (the
"Board"): Messrs. Edward C. Lund, Eric G. Mitchell, Jr., and
Matthew A. Sutton. The Committee determines compensation for the
Chief Executive Officer and other executive officers, based on
qualitative and quantitative measures of performance, and makes
recommendations to the Board for approval. Actions by the
Committee relating to awards under the Company's Stock Option Plan
are, however, final in accordance with Rule 16b-3 under the
Securities Exchange Act of 1934.
Executive Officer Compensation Policy. The Committee's
executive compensation policy is designed to provide compensation
that is externally competitive at the various professional levels.
Application of the policy utilizes retrospective quantitative
issues such as performance to objectives and strategies, as
measured by results of operations and individual initiatives and
achievements. The policy also encourages and recognizes strategic
actions that position the Company to better compete in its markets
for enhanced operational results in the longer term. The objective
of the policy is to encourage initiative and to attract and retain
qualified executives. As a result of these factors, the actual
change in compensation for any particular executive officer for a
particular year may be higher than those of competitive sources and
may not necessarily reflect operational results of the preceding
year. The Company utilizes independently conducted market surveys
to ascertain comparative compensation data.
Compensation Elements. Compensation currently paid to the
Company's Executive Officer principally consists of three elements:
base salary, bonus and periodic stock option awards.
Salary. The base salary of the Company's executive officers
are generally established by reference to base salaries paid to
executives in similar positions with similar responsibilities based
on publicly available compensation surveys. Base salaries are
reviewed annually. The base salaries of the Company's executive
officers as a group increased in fiscal 1996 by 6.6. By way of
comparison, the Company's revenues increased by 24.8% in fiscal
1996 and the Company achieved net income of approximately $883,000
versus net income of approximately $333,000 in fiscal 1995.
Bonus. From 1987 through fiscal 1994 the Company had a policy
of granting incentive bonuses to its key employees, including
executive officers, under an Incentive Plan. Payments under the
Incentive Plan were based on the attainment of designated levels of
minimum and maximum pre-tax earnings that are established by the
Committee at the beginning of the fiscal year. No payments were
paid under this plan in fiscal 1995 and fiscal 1996. However, in
fiscal years 1995 and 1996, each of the Company's Executive
Officers earned a bonus equal to one weeks' and two weeks'
compensation, respectively, along with all of the Company's U.S.
employees. These bonus were earned as a result of the Company
reaching certain operational targets established at the beginning
of each of these fiscal years. The bonuses earned in fiscal 1995
were paid in fiscal 1996 and the bonuses earned in fiscal 1996 were
paid in fiscal 1997.
Options/Stock Based Compensation. Stock options are awarded
under the Company's 1986 Employee Stock Option Plan. Options are
granted at an exercise price that is equal to the fair market value
of a common share on the date of the grant. The Committee believes
that stock ownership by management derived from granting of stock
options is beneficial because it aligns the interests of executive
management with that of shareholders. It serves to further
encourage superior management performance and specifically
motivates executives to remain focused on factors which enhance the
market value of the Company's common stock. During fiscal 1996, the
Committee granted stock options to purchase 100,000 shares of
commons stock to officers and key employees, and the executive
officers were granted 50% of the total options granted to all
officers and key employees.
Chief Executive Officer Compensation. Mr. Frederick M. Green
is evaluated by the same factors applicable to the evaluation of
other Executive Officers, as described above and participates in
the same executive compensation plans provided by the other senior
executives. Mr. Green's base salary for fiscal 1996 increased
approximately 6.9% from the prior year, virtually the same increase
awarded to all Executive Officers. Mr. Green did not receive a
bonus under the Company's incentive plan in fiscal 1996, but earned
an additional two week salary under the special bonus plan
described above which was applicable to all employees of the
Company. Mr. Green also was awarded stock options to acquire
20,000 shares in fiscal 1996. The Committee regards Mr. Green's
cash compensation and stock option awards in fiscal 1996 as
reasonable in relation to published information on compensation of
executives with similar responsibilities, as well as when measured
against the 24.8% increase in revenues and the 65% increase in net
income in fiscal 1996.
Submitted by the Compensation Committee of the Company's Board
of Directors:
<TABLE>
<S> <C> <C>
Edward C. Lund Eric G. Mitchell, Jr. Matthew A. Sutton
</TABLE>
Stock Performance
The table below sets forth a comparison of the cumulative
shareholder return of the Company's Common Stock over the last five
fiscal years with the cumulative total return over the same periods
for the Nasdaq Market Index and the Electronic Components, N.E.C.
(SIC Code 3679, which includes 67 companies). The table below
compares the cumulative total return of the Company's Common Stock
over the last five fiscal years assuming a $100 investment on June
2, 1991 and assuming reinvestment of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
Jun 2, May 31, May 30, May 29, May 28, Jun 2,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Ault
Incorporated $100.00 $166.67 $93.33 $80.00 $126.67 $753.33
Electronic
Components
Index $100.00 103.68 106.63 114.60 150.40 213.07
Nasdaq Market
Index $100.00 106.46 127.40 139.71 152.91 215.84
</TABLE>
2. PROPOSAL TO AMEND THE COMPANY'S
1986 EMPLOYEE STOCK OPTION PLAN
Introduction
The shareholders of the Company approved the Ault Incorporated
1986 Employee Stock Option Plan (the "Stock Option Plan") on
October 29, 1987 and approved amendments to the Stock Option Plan
on September 28, 1989 and August 21, 1992. The purpose of the
Stock Option Plan is to provide a continuing long-term incentive to
selected officers, key employees and outside directors of the
Company and of any subsidiary of the Company, to provide a means of
rewarding outstanding performance and to enable the Company to
maintain a competitive position to attract and retain key personnel
necessary for the Company's continued growth and profitability. On
August 26, 1996, the last reported sale price of the Company's
Common Stock in the NASDAQ Small Cap Issues Market was $9 1/8.
Amendment to Stock Option Plan to Increase Authorized Shares
The Stock Option Plan originally authorized the issuance of
200,000 shares of Common Stock pursuant to options granted
thereunder. At the 1989 and 1992 Annual Meeting of Shareholders,
amendments to increase the number of shares available under the
Stock Option Plan by 100,000 shares and 200,000, respectively, were
ratified. The Board of Directors has again amended the Stock
Option Plan, subject to ratification and approval of the
shareholders, to increase the total number of shares available
under the Stock Option Plan by 100,000 shares to a total of 600,000
shares. There were outstanding on August 1, 1996 options to
purchase 461,250 shares under the Stock Option Plan (including
options to purchase 100,000 shares granted by the Compensation
Committee in July 1996 that are contingent on the approval by the
shareholders of the proposed Amendment to the Stock Option Plan)
and, at such date, shares had been purchased through exercise of
options granted under the Stock Option Plan. Therefore, absent
stockholder approval of this amendment to the Stock Option Plan,
the July 1996 contingent grants would be rescinded or reduced and
further options to purchase only 46,950 shares in the aggregate
would be permitted. The Board of Directors has deemed it prudent
to increase the shares available for grant under the Plan by
100,000 shares to enable option exercises under the contingent
grants. (Under applicable law options may not be granted under the
Stock Option Plan after November 1996 and accordingly, the Company
intends to seek shareholder approval for a new stock option plan in
1997). Such an increase will have the effect of increasing the
total number of shares available for issuance under the Stock
Option Plan to 146,950 shares.
Summary of Terms of Stock Option Plan
The following provides a summary of certain provisions of the
Stock Option Plan:
Eligibility
Key salaried employees of the Company or a subsidiary and non-
employee directors of the Company are eligible to receive options.
Administration and Amendment
The Stock Option Plan is administered by the Committee and may
be amended by the Board of Directors. Any interpretation,
determination or other action made or taken by the Committee shall
be final.
Terms and Conditions
The Stock Option Plan provides for the issuance of incentive
stock options under Section 422 of the Internal Revenue Code of
Stock Option ("ISO's") and options which do not qualify as
incentive stock options ("NQO's"). For employees who do not own
stock possessing more than 10% of the total combined voting power
of the Company or of any subsidiary, the exercise price under each
option intended to be an ISO shall not be less than 100% of the
fair market value of the Common Stock of the Company on the date
the option is granted. For employees who own stock possessing more
than 10% of the total combined voting power of the Company or of
any subsidiary, the exercise price under each option intended to be
an ISO shall not be less than 110% of the fair market value of the
Common Stock of the Company on the date the option is granted. For
all employees, the NQO exercise price per share shall not be less
than 100% of the fair market value of the Common Stock of the
Company on the date the option is granted.
If the Common Stock of the Company is listed for trading on
one or more national securities exchanges (including the NASDAQ
National Market System), the fair market value shall be the
reported last sale price on the principal such exchange on the date
in question, or if the Common Stock shall not have been traded on
such principal exchange on the first day prior thereto on which the
Common Stock was so traded. If the Common Stock is not listed for
trading on a national securities exchange (including the NASDAQ
National Market System) but is traded in the over-the-counter
market, the fair market value shall be the mean of the highest and
lowest bid prices for such Common Stock of the Company in question.
If the Common Stock of the Company is not listed for trading on a
national securities exchange (including the NASDAQ National Market
System) nor traded in the over-the-counter market, the Board of
Directors shall determine the fair market value of the Common Stock
which shall be final and binding on all parties. Generally
speaking, the purchase price of an option is to be paid in cash, or
if authorized by the Board of Directors, in shares of Common Stock
of the Company, a combination of cash and such Common Stock or by a
promissory note of the employee.
The term of each option granted to employees is determined by
the Compensation Committee; however, the term of each option
granted to non-employee directors shall be ten (10) years. The
term of each option granted to employees will vary according to
type of option, provided that no option will be exercisable later
than ten years from the date of grant of the option. Subject to
the above, options granted to employees will be exercisable in such
number of shares and at such time or times, including in periodic
installments, as may be determined by the Board of Directors at the
time of grant.
In the event that an employee dies while employed by the
Company or a subsidiary of the Company, or within not more than
three months after termination of his or her employment, options
held by the employee may be exercised by the person designated in
the employee's will or his or her proper legal representative, for
a period of three months following his or her death. Generally
speaking, if the employment of an employee terminates for a reason
other than death, options held by the employee must be exercised no
later than three months following the employee's termination.
Notwithstanding the foregoing, in no event is an option exercisable
after the termination date specified in the option grant.
The number, kind and price of the shares subject to each
outstanding option will be adjusted in the event of stock splits,
stock dividends, or other changes in the Company's outstanding
securities. In addition, the Stock Option Plan grants broad
discretion to the Board of Directors to take such action as it may
deem necessary or advisable and fair and equitable to employees in
the event of a change in control of the Company, a tender or
exchange offer for all or part of the Common Stock of the Company,
a merger or consolidation of the Company or a sale of all or
substantially all of the Company's assets, including authority to
provide for earlier, later, extended or additional terms for the
exercise of the whole or any installments of outstanding options,
alternate forms of payment or other modification.
There is no express limitation upon the duration of the Stock
Option Plan. However, any incentive stock options to be granted
under the Stock Option Plan must be granted within ten (10) years
from the date the Stock Option Plan was adopted by the Board of
Directors. The Board of Directors may terminate or amend the Stock
Option Plan provided that no amendment without shareholder approval
shall increase the number of shares as to which options may be
granted, change the class of eligible participants, reduce the
minimum option price for incentive stock options to less than 100%
of fair market value at the time of grant, or permit non-employee
directors to receive options other than pursuant to the Stock
Option Plan.
Income Tax Consequences
An optionee will not realize taxable compensation income upon
the grant of an ISO. In addition, an optionee will not realize
taxable compensation income upon the exercise of an ISO if he or
she exercises it as an employee or within one month after
terminating his or her employment (or within six months after
termination of the optionee's employment if such termination
results from death or a permanent and total disability). The
amount by which the fair market value of the shares purchased
exceeds the aggregate option at the time of exercise is includible
in computing alternative minimum taxable income for purposes of the
alternative minimum tax.
If stock acquired pursuant to an ISO is not disposed of prior
to the date two years from the option grant date and one year from
the option exercise date, 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 income 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 balance of any gain
will be characterized as capital gain. Under current law, net
capital gains are taxed at ordinary income rates up to a maximum of
28%.
An optionee will not realize taxable compensation income upon
the grant of an NQO. When an optionee exercises his or her NQO, 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.
Upon the exercise of a NQO, the Stock Option Plan requires the
optionee to pay to the Company any amount necessary to satisfy
applicable federal, state or local withholding tax requirements.
Registration with SEC
The Company intends to file a Registration Statement covering
the issuance of the additional shares issuable under the Stock
Option Plan as amended with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended.
Shareholder Approval
The affirmative vote of a majority of the outstanding shares
of the Company's Common Stock voting at the meeting in person or by
proxy is required for the approval of the proposed amendment to the
Company's Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THIS AMENDMENT OF THE 1986 EMPLOYEE STOCK OPTION PLAN.
THE COMPANY'S AUDITORS
McGladrey & Pullen, LLP, independent public accountants, have
served as the auditors of the Company since 1974. A representative
of McGladrey & Pullen, LLP is expected to be present at the Annual
Meeting of Shareholders, will have an opportunity to make a
statement if he or she desires to do so and will be available to
respond to appropriate questions.
SHAREHOLDER 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
prepared in accordance with the proxy rules must be received by the
Company on or before May 30, 1997.
GENERAL
Compliance with Section 16(a) of the Securities Exchange Act of
1934.
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers, and persons who own
more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company. These
insiders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a)
forms they file, including Forms 3, 4 and 5.
To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, the Company's
insiders complied with all Section 16(a) finding requirements
applicable to them during the fiscal year ended June 2, 1996.
Other Matters
Management knows of no other matters that will be presented at
the Annual Meeting of Shareholders. However, the enclosed proxy
gives discretionary authority in the event that any additional
matters should be presented.
The Annual Report of the Company for the past fiscal year is
enclosed herewith and contains the Company's financial statements
for the fiscal year ended June 2, 1996. Shareholders may receive
without charge a copy of the Company's Annual Report on Form 10-K,
including financial statements and schedules thereto, as filed with
the Securities and Exchange Commission, by writing to: Vice
President and Chief Financial Officer, Ault Incorporated, 7300
Boone Avenue North, Minneapolis, Minnesota 55428.
By Order of the Board of Directors,
Richard A. Primuth, Secretary
AULT INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For October 1, 1996 Annual Meeting of Shareholders
The undersigned hereby appoints Frederick M. Green and Delbert
W. Johnson, 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
August 16, 1996 at the Annual Meeting of Shareholders to be held in
Minneapolis, Minnesota on October 1, 1996, or at any adjournment or
adjournments, hereby revoking all former proxies.
1. ELECTION OF DIRECTORS:
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY
(except as marked to the contrary). to vote for all nominees
listed below
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in
the list below.)
James M. Duddleston, Frederick M. Green,
Delbert W. Johnson, John G. Kassakian, Edward C. Lund
Eric G. Mitchell, Jr., Matthew A. Sutton
2. PROPOSAL TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE
ISSUED UNDER THE COMPANY'S 1986 STOCK OPTION PLAN BY 100,000
SHARES.
___ FOR ___ AGAINST ___ ABSTAIN
3. 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) AND (2) IN ACCORDANCE WITH THE SPECIFICATIONS MADE
AND "FOR" SUCH PROPOSALS IF THERE IS NO SPECIFICATION.
Dated: __________________, 1996
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.
