<PAGE>
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 o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to o Rule 240.14a-11(c)
or o 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 Reg
istrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required
o 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:
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:
<PAGAE>
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 two
purposes:
1. To seek shareholder approval for an increase in the
number of common shares the Company is authorized to
issue from 5,000,000 shares to 10,000,000 shares;
2. 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 the 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 Tuesday, 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 common shares to 10,000,000 common shares.
2. To consider and act upon a proposal to ratify and
approve the Company's 1996 Employee Stock Purchase
Savings Plan which provides for the issuance of up to
100,000 common shares pursuant to the terms of the
Plan.
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
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 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.
<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 shareholder abstains. Consequently,
an abstention will have the same effect as a negative vote. If a
<PAGE>
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.
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 10,000,000 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.
The Company has no present plans, understandings or
agreements for the issuance or use of the proposed additional
common shares except to continue its regular practice of granting
options to 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 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 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
<PAGE>
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 Section 1.
Authorized Shares under Article Three - Capital
Stock 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 Eleven Million (11,000,000) shares divided
into Ten Million (10,000,000) common shares
and One Million (1,000,000) Preferred
Shares."
Recommendation of Board of Directors
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED COMMON SHARES.
2. PROPOSAL TO ADOPT THE 1996 EMPLOYEE STOCK PURCHASE SAVINGS P
LAN
General Information
On February 13, 1996, the Board of Directors approved the
Ault Incorporated 1996 Employee Stock Purchase Savings Plan (the
"Purchase Plan"). The Board of Directors adopted the Purchase
Plan to encourage stock ownership by all employees of the Company
and 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.
<PAGE>
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.
A maximum of 100,000 common shares may be issued under the
Purchase Plan. The Purchase Plan will be administered by a
Committee consisting of not less than two 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.
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 is
customarily employed or is expected to be customarily employed
twenty (20) hours or more per week by the Company is eligible to
participate in the Purchase Plan.
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 phase 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 conform to the
provisions of Section 423 of the 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.
<PAGE>
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.
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
EXHIBIT A
AULT INCORPORATED
1996 Employee Stock Purchase Savings Plan
Article I
Purpose
<PAGE>
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 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.
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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 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:
<PAGE>
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 her option 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.
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.
<PAGE>
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 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.
<PAGE>
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 determina
tion, 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 theretofore 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
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
<PAGE>
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 liquida
tion 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, such adjustments 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 hereinbefore 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 to such relatives of the
Participant as would be entitled to such cash under the laws of
intestacy 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
<PAGE>
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.
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.
