**Exhibit 10.6**

 

**AULT INCORPORATED**

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**SENIOR MANAGEMENT**

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**CHANGE IN CONTROL SEVERANCE PAY PLAN**

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**ARTICLE 1**

**Introduction**

 

1.1                                 Plan Name.  Thename of the Plan is the “Ault Incorporated Senior Management Change in ControlSeverance Pay Plan.”

 

1.2                                 Plan Type.  The Planis unfunded and is maintained by the Company primarily for the purpose ofproviding benefits for a select group of executive officers and other seniormanagement employees.  As such, the Planis intended to be exempt from the provisions of Parts 2 through 4 of Subtitle Bof Title I and from Title IV of ERISA by operation of sections 201(2),302(a)(3),401(a)(1) and 4021(b)(6) thereof, respectively.

 

1.3                                 Plan Purposes. The Board considers the attraction and retention of a strong seniormanagement team, including executive officers, to be essential to protectingand enhancing the best interests of the Company and its stockholders.  In this connection, the Board recognizes thatabsent adequate assurances and protections, the possibility of a Change in Controlmay inhibit the Company’s fulfillment of this essential objective.  To this end, the Company has established thisPlan to:

 

(a)                                  Permit the Company to effectively recruitand retain executive officers and other senior management personnel who, in theabsence of adequate assurances and protections, may be deterred by thepossibility of a Change in Control from accepting or continuing employment withthe Company;

 

(b)                                 Enable executive officers and othersenior management to evaluate objectively whether a potential change in controlis in the best interests of the Company and its shareholders;

 

(c)                                  Assure the Company and its shareholdersof continuity of executive officers and other senior management in the event ofan actual or threatened change in control; and,

 

(d)                                 Ease the transition to new employment forexecutive officers and other senior management personnel terminated as a resultof a Change in Control.

 

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**ARTICLE 2**

**Definitions, Construction and Interpretations**

 

The definitions and rules of constructionand interpretation set forth in this Article 2 apply in construing thePlan unless the context otherwise indicates.

 

2.1                                 Affiliate.  An **“Affiliate”**is:

 

(a)                                  any corporation at least a majority ofwhose securities have ordinary voting power for the election of directors owneddirectly or indirectly by the Company; or

 

(b)                                 any other form of business entity inwhich the Company, by virtue of a direct or indirect ownership interest, hasthe right to elect a majority of the members of such entity’s governing body.

 

2.2                                 Annual Base Salary. A Participant’s **“Annual Base Salary”**is his or her annual base cash salary from the Company attributable to servicesrendered as an employee of the Company at the rate in effect either (a) immediatelyprior to the Change in Control or (b) at the time Notice ofTermination is given, whichever is greater, but, in either case, disregardingany decrease which constitutes Good Reason for the Participant’s termination ofemployment and determined before any reduction for employee contributions ordeferrals, whether voluntary or involuntary, pursuant to any Benefit Plan.

 

2.3                                 Benefit Plan. A **“Benefit Plan”** is anycompensation plan (such as stock option, stock purchase, restricted stock orother equity-based plan), any employee benefit plan (such as a thrift, savings,profit sharing, pension, medical, dental, disability, accident, life insurance,relocation, salary continuation, expense reimbursement, vacation, fringebenefit, office and support staff plan or policy) or any other plan, program,policy, practice, perquisite or agreement of the Company intended to benefitemployees generally, or executive officers and other members of seniormanagement employees as a group.

 

2.4                                 Board.  The **“Board”** is the board of directors of theCompany duly qualified and acting at the time in question.

 

2.5                                 Cause.  (A) Subjectto Subsection (B), **“Cause”**with respect to a particular Participant is any of the following:

 

(1)                                  the Participant’s gross misconduct whichis materially and demonstrably injurious to the Company;

 

(2)                                  the Participant’s willful and continuedfailure to perform substantially his or her duties with the Company (other thana failure resulting from the Participant’s incapacity due to bodily injury orphysical or mental illness) after a demand for substantial performance isdelivered to the Participant by the Board which specifically identifies themanner in which the Board believes that the Participant has not substantiallyperformed his or her duties and provides for a reasonable period of time withinwhich the Participant may take corrective measures; or

 

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(3)                                  the Participant’s conviction (including aplea of nolo contendere) of willfully engaging in illegal conduct constitutinga felony or gross misdemeanor under federal or state law which is materiallyand demonstrably injurious to the Company or which impairs the Participant’sability to perform substantially his or her duties with the Company.

 

An act or failure to act will be considered “gross”or “willful” for this purpose only if done, or omitted to be done, by theParticipant in bad faith and without reasonable belief that it was in, or notopposed to, the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to aresolution duly adopted by the board of directors or governing body of anyCompany (or any committee thereof) or based upon the advice of counsel for theCompany will be conclusively presumed to be done, or omitted to be done, by theParticipant in good faith and in the best interests of the Company.  A Participant’s attention to matters notdirectly related to the business of the Company will not provide a basis fortermination for Cause so long as the Board did not expressly disapprove inwriting of his or her engagement in such activities either before or within areasonable period of time after the Board knew or could reasonably have knownthat the Participant engaged in those activities.

 

(B)                                Notwithstanding Subsection (A), aParticipant will not be deemed to have been terminated for Cause unless anduntil there has been delivered to such Participant a copy of a resolution dulyadopted by the affirmative vote of not less than a majority of the entiremembership of the Board at a duly constituted meeting of the Board (as to whichreasonable notice to such Participant and an opportunity for such Participant,together with his or her counsel, to be heard before the Board is given), findingthat in good faith opinion of the Board such Participant was guilty of theconduct set forth in clause (1), (2) or (3) of Subsection (A) andspecifying the particulars thereof in detail.

 

2.6                                 Change in Control.  (A)**“Changein Control”** is any of the following:

 

(1)                                  the sale, lease, exchange or othertransfer, directly or indirectly, of all or substantially all of the assets ofthe Company, in one transaction or in a series of related transactions, to anyPerson;

 

(2)                                  the approval by the stockholders of theCompany of any plan or proposal for the liquidation or dissolution of theCompany;

 

(3)                                  any Person is or becomes the “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly orindirectly, of (a) 20 percent or more, but not more than 50 percent, ofthe combined voting power of the Company’s outstanding securities ordinarilyhaving the right to vote at an election of directors, unless the transactionresulting in such ownership has been approved in advance by the “continuitydirectors,” as defined at Subsection (B) or (b) more than 50percent of the combined voting power of the Company’s outstanding securitiesordinarily having the right to vote at elections of directors (regardless ofany approval by the continuity directors);

 

(4)                                  a merger or consolidation to which theCompany is a party if the stockholders of the Company immediately prior to theeffective date of such merger or consolidation have

 

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“beneficial ownership”(as defined in Rule 13d-3 under the Exchange Act) immediately followingthe effective date of such merger or consolidation of securities of thesurviving company representing (a) 50 percent or more, but not more than80 percent, of the combined voting power of the surviving corporation’ s thenoutstanding securities ordinarily having the right to vote at elections ofdirectors, unless such merger or consolidation has been approved in advance bythe continuity directors, or (b) less than 50 percent of the combined votingpower of the surviving corporation’ s then outstanding securities ordinarilyhaving the right to vote at elections of directors (regardless of any approvalby the continuity directors);

 

(5)                                  the continuity directors cease for anyreason to constitute at least a majority the Board; or

 

(6)                                  a change in control of a nature that isdetermined by outside legal counsel to the Company to be required to bereported (assuming such event has not been “previously reported”) pursuant to section 13or 15(d) of the Exchange Act, whether or not the Company is then subjectto such reporting requirement.

 

(B)                                For purposes of this section, the term “continuitydirectors” refers to the individuals who are members of the Board on August 25,1998, and any individual who subsequently becomes a member of the Board whoseelection or nomination for election by the Company’s stockholders was approvedby a vote of at least a majority of the directors who are continuity directors(either by a specific vote or by approval of the proxy statement of the Companyin which such individual is named as a nominee for director without objectionto such nomination).

 

2.7                                 Code.  The **“Code”** is the Internal Revenue Code of1986, as amended.  Any reference to aspecific provision of the Code includes a reference to such provision as it maybe amended from time to time and to any successor provision.

 

2.8                                 Company.  The **“Company”** is Ault Incorporated, anyAffiliate and any Successor.

 

2.9                                 Date of Termination. The **“Date of Termination”**with respect to a Participant means:

 

(a)                                  if the Participant’s employment is to beterminated by the Participant for Good Reason, the date specified in the Noticeof Termination which in no event may be a date more than 60 days after the dateon which Notice of Termination is given unless the Company agrees in writing toa later date;

 

(b)                                 if the Participant’s employment is to beterminated by the Company for Cause, the date specified in the Notice ofTermination;

 

(c)                                  if the Participant’s employment isterminated by reason of death, the date of death; or

 

(d)                                 if the Participant’s employment is to beterminated by the Company for any reason other than Cause or death, the datespecified in the Notice of Termination, which in no event may be a date earlierthan 60 days after the date on which a Notice of

 

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Termination is given,unless the Participant expressly agrees in writing to an earlier date.

 

In the case of termination by the Company of aParticipant’s employment for Cause, if the Participant has not previouslyexpressly agreed in writing to the termination, then within the 30-day periodafter the Participant’s receipt of the Notice of Termination, the Participantmay notify the Company that a dispute exists concerning the termination, inwhich event the Date of Termination will be the date set either by mutualwritten agreement of the parties or by the arbitrators or a court in proceedingas provided in Section 5.4.

 

2.10                           Eligible Participant. An **“Eligible Participant”** isa Participant who has become eligible to receive benefits pursuant to Section 3.3.

 

2.11                           ERISA.  **“ERISA”** is the Employee Retirement IncomeSecurity Act of 1974, as amended.  Anyreference to a specific provision of ERISA includes a reference to such provisionas it may be amended from time to time and to any successor provision.

 

2.12                           Exchange Act. The **“Exchange Act”** is theSecurities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act or to any rule orregulation thereunder includes a reference to such provision as it may beamended from time to time and to any successor provision.

 

2.13                           Good Reason.  (A) Subjectto Subsection (B), **“Good Reason”**with respect to a Participant is any of the following:

 

(1)                                  an adverse change in the Participant’sstatus or position as an Executive Officer or Senior Management employee of theCompany as in effect immediately prior to the Change in Control, including,without limitation, any adverse change in the Participant’s status or positionas a result of a material diminution in his or her duties or responsibilities(other than, if applicable, any such change directly attributable to the factthat the Company is no longer publicly owned) or the assignment to theParticipant of any duties or responsibilities which, in such Participant’sreasonable judgment, are inconsistent with such status or position, or anyremoval of the Participant from or any failure to reappoint or reelect theparticipant to such position (except in connection with the termination of hisor her employment for Cause or as a result of his or her death or by aParticipant other than for Good Reason); however, Good Reason does not includean adverse change in a Participant’s status or position caused by an insubstantialand inadvertent action that is remedied by the Company promptly after receiptof notice of such change is given by the Participant;

 

(2)                                  a reduction by the Company in theParticipant’s Annual Base Salary, or an adverse change in the form or timing ofthe payment thereof, as in effect immediately prior to the Change in Control oras thereafter increased;

 

(3)                                  the failure by the Company to continue ineffect any material Benefit Plan in which the Participant is participating atany time during the 90-day period immediately preceding the Change in Controlother than as a result of the normal expiration of any such Benefit Plan inaccordance with its terms as in effect immediately prior to the

 

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90-day periodimmediately preceding the Change in Control without either (i) providingto Participant a Benefit Plan or Plans which provide to the Participantbenefits which are reasonably equivalent to the economic value of thediscontinued Benefit Plan to the Participant or (ii) increasingParticipant’s base compensation by an amount which is reasonably equivalent tothe economic value of the discontinued Benefit Plan); or the taking of anyaction, or the failure to act, by the Company which would adversely affect aParticipant’s continued participation in any of such Benefit Plans on at leastas favorable a basis to such Participant as is the case immediately prior tothe Change in Control or which would materially reduce a Participant’ sbenefits in the future, under any of such Benefit Plans or deprive aParticipant of any material benefit enjoyed by such Participant immediatelyprior to the Change in Control;

 

(4)                                  the Company’s requiring a Participant tobe based more than 25 miles from where his or her office is located immediatelyprior to the Change in Control, except for required travel on the Company’sbusiness, and then only to the extent substantially consistent with thebusinesses travel obligations which the Participant undertook on behalf of theCompany during the 90-day period immediately preceding the Change in Control(without regard to travel related to or in anticipation of the Change inControl);

 

(5)                                  the failure of the Company to obtain fromany Successor the assent to this Plan contemplated by Section 6.1; or,

 

(6)                                  any purported termination by the Companyof a Participant’s employment which is not properly effected pursuant to aNotice of Termination and pursuant to any other requirements of this Plan, andfor purposes of this Plan, no such purported termination will be effective.

 

(B)                                A Participant’s continuation of his orher employment does not constitute consent to, or waiver of any rights arisingin connection with, any circumstance constituting Good Reason.

 

2.14                           Governing Law. To the extent that state law is not preempted by provisions of ERISA orany other laws of the United States, this Plan will be administered, construed,and enforced according to the internal, substantive laws of the State ofMinnesota, without regard to its conflict of laws rules.

 

2.15                           Headings.  Theheadings of articles and sections are included solely for convenience.  If there is a conflict between the headingsand the text of the Plan, the text will control.

 

2.16                           Notice of Termination. A **“Notice of Termination”**is a written notice which indicates the specific termination provision in thisPlan pursuant to which the notice is given. Any purported termination by the Company or by a Participant following aChange in Control (or prior to a Change in Control if a Participant’stermination was either a condition of the Change in Control or was at therequest or insistence of any Person related to the Change in Control) must becommunicated by written Notice of Termination to be effective; provided, thatthe Participant’s failure to provide Notice of Termination will not limit anyof his or her rights under the Plan except to the extent the Company candemonstrate that it suffered material actual damages by reason of such failure.

 

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2.17                           Number and Gender. Wherever appropriate, the singular number may be read as the plural, theplural number may be read as the singular and a reference to one gender may beread as a reference to the other.

 

2.18                           Participant. A **“Participant”** is aQualified Employee who is participating in the Plan pursuant to Article 3.

 

2.19                           Plan.  The **“Plan”** is that set forth in this instrumentas it may be amended from time to time.

 

2.20                           Person.  A **“Person”** includes any individual,corporation, partnership, group, association or other “person,” as such term isused in section 14(d) of the Exchange Act, other than the Company,any Affiliate of the Company or any Benefit Plan sponsored by the Company or anAffiliate.

 

2.21                           Qualified Employee. A **“Qualified Employee”** isan individual designated by the Board as an executive officer or seniormanagement employee eligible to participate in this Plan.  If an individual is a Qualified Employeeimmediately prior to a Change in Control, he or she will continue to be aQualified Employee until his or her Date of Termination.

 

2.22                           Successor.  A **“Successor”** is any Person that succeeds to,or has the practical ability to control (either immediately or with the passageof time), the Company’s business directly, by merger, consolidation or otherform of business combination, or indirectly, by purchase of the Company’soutstanding securities ordinarily having the right to vote at the election ofdirectors, all or substantially all of its assets or otherwise.

 

**ARTICLE 3**

**Participation and Eligibility for Benefits**

 

3.1                                 Commencement of Participation. Each Qualified Employee will commence participation in the Plan on thefirst day on which he or she perform services for the Company as a QualifiedEmployee.

 

3.2                                 Ceasing to be a Qualified Employee.  (A) AParticipant who ceases for any reason to be a Qualified Employee will, exceptwith respect to any current or future benefit to which he or she is thenentitled, thereupon immediately cease his or her participation in the Plan.

 

(B)                                Notwithstanding any other provision ofthe Plan to the contrary, a Participant will cease to be a Qualified Employeeif, prior to a Change in Control: (1) an Affiliate is sold, merged,transferred or in any other manner or for any other reason ceases to be anAffiliate and no Change in Control occurs in connection therewith; (2) theParticipant’s primary employment duties are with the Affiliate at the time ofthe occurrence of such event; and (3) such Participant does not, inconjunction therewith, transfer employment directly to the Company.

 

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3.3                                 Eligibility for Benefits. A Participant will become eligible for the benefits provided in Article 4if:

 

(a) (i) his or her employmentwith the Company is terminated for any reason other than his or her death orCause or (ii) the Participant terminates employment with the Company forGood Reason, and

 

(b) such termination occurs either (i) withinthe period beginning on the date of a Change in Control and ending on the lastday of the eighteen (18) month that begins after the month in which the Changein Control occurs or (ii) prior to a Change in Control if such terminationwas either a condition of the Change in Control or was at the request orinsistence of a Person related to the Change in Control.

 

**ARTICLE 4**

**Benefits**

 

4.1                                 Compensation and Benefits Before Date ofTermination.  During the period beginning on the date anEligible Participant or the Company, as the case may be, receives Notice ofTermination and ending on the date of Termination, the Company will continue topay the Eligible Participant his or her Annual Base Salary and cause his or hercontinued participation in all Benefit Plans in accordance with the terms ofsuch Benefit Plans.

 

4.2                                 Cash Payment.  (A) TheCompany will make a lump-sum cash payment to an Eligible Participant in anamount equal to one (1) times the sum of (1) the Participant’s AnnualBase Salary plus (2) the maximum incentive bonus that could be payable tothe Participant for the annual performance period that includes the date onwhich Notice of Termination is given or, if greater, the Eligible Participant’sactual incentive bonus for the immediately preceding annual performance period;provided that if the Eligible Participant has been designated as anExecutive Officer of the Company by the Board, the lump-sum cash paymentpayable to such Eligible Participant shall be equal to two (2) times thesum of clause (1) and clause (2) of this Subsection (A).

 

(B)                                The payment provided for in Subsection (A) willbe made no later than the thirtieth day following the Eligible Participant’sDate of Termination; provided, however, that if the amount of such paymentcannot be finally determined on or before such day, the Company will pay to theEligible Participant on such day an estimate, as determined in good faith bythe Company, of the amount of such payment and will pay the remainder (togetherwith interest from the date of such estimated payment at the rate provided inCode section 1274(b)(2)(B)) as soon as the amount thereof can bedetermined but in no event later than 60 days after the Date ofTermination.  If the amount of theestimated payment exceeds the amount subsequently determined to have been due,such excess will constitute a loan by the Company to the Eligible Participantpayable no later than 30 days after demand by the Company (together withinterest from the date of such estimated payment at the rate provided in Code section 1274(b)(2)(B)).

 

4.3                                 Continuation of Welfare Benefits.  (A) Withrespect to welfare Benefit Plans (including, without limitation, medical,vision, dental, life, disability and accidental death and dismemberment plans)which by their terms cover each Eligible Participant (and his or her familymembers and dependents who were eligible to be covered at any time during the 90-dayperiod immediately prior

 

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to a Change in Control under the correspondingplan) Company will either (i) maintain such Benefit Plans during under theperiod described in Subsection (B) under terms and at a cost to theEligible Participant and his or her family members and dependents that is atleast as favorable as the most favorable terms and cost in effect at any timeduring the 90-day period immediately preceding the Change in Control (in whichcase the continuation period under federal and state continuation laws, to theextent applicable, will begin to run from the date on which coverage pursuantto this Section 4.3 ends) or (ii) make an additional cash paymentequal to 15% of the cash payment specified in Section 4.2(A).

 

(B)                                For purposes of Subsection (A)(i),the continuation period with respect to any particular type of benefit is theperiod beginning on an Eligible Participant’s Date of Termination and ending onthe earlier of (1) the last day of the twelfth month following the monthin which the Date of Termination occurs or (2) the date on which theEligible Participant becomes covered under a plan of another employer providingsuch benefit to the Eligible Participant and his or her eligible family membersand dependents without any pre-existing condition limitation or exclusion.

 

(C)                                To the extent an Eligible Participantincurs a tax liability (including federal, state and local taxes and anyinterest and penalties with respect thereto) in connection with a benefitprovided pursuant to Subsection (A) which he or she would not haveincurred had he or she been an active employee of the Company participating ina generally applicable Benefit Plan, the Company will make a payment to theEligible Participant in an amount equal to such tax liability plus anadditional amount sufficient to permit the Eligible Participant to retain a netamount after all taxes (including penalties and interest) equal to the initialtax liability in connection with the benefit. For purposes of applying the foregoing, an Eligible Participant’s taxrate will be deemed to be the highest statutory marginal state and federal taxrate (on a combined basis) then in effect. The payment pursuant to this subsection will be made within 30 daysafter the Eligible Participant’s remittal of a written request thereforeaccompanied by a statement indicating the basis for and amount of theliability.

 

4.4                                 Out Placement Counseling Services. The Company will pay up to 30 percent of an Eligible Employee’s AnnualBase Salary for individual out placement counseling to the EligibleParticipant.  Such payments will be madeeither directly to the counselor or to the Eligible Participant uponpresentation of an invoice for services rendered or to be rendered.

 

4.5                                 Gross-Up Payments. The Company will cause its independent auditors promptly to review, atthe Company’s sole expense, the applicability of Code section 4999 topayments pursuant to the Plan.  If suchauditors determine that any payment or distribution of any type by the Companyto or for the benefit of an Eligible Participant, whether paid or payable ordistributed or distributable pursuant to the terms of the Plan, any Benefit Planor otherwise (the “Total Payments”), would be subject to the excise tax imposedby Code section 4999 or any comparable state or local law, or any interestor penalties with respect to such excise tax (such excise tax, together withany such interest and penalties, are collectively referred to as the “ExciseTax”), the Company will make an additional cash payment (a “Gross-Up Payment”)to the Eligible Participant within 30 days after such determination equal to anamount such that after payment by the Eligible Participant of all taxes(including any interest or penalties imposed with respect to such taxes),including any Excise Tax, imposed upon the Gross-Up Payment, the EligibleParticipant would retain an amount of the Gross-Up Payment equal to the ExciseTax imposed upon the Total Payments.  Forpurposes of the foregoing determination, an Eligible Participant’s tax ratewill be deemed to be the highest statutory marginal state and federal tax rate(on a combined basis) then in effect.  Ifno determination by the

 

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Company’s auditors is made prior to the time atax return reflecting the Total Payments is required to be filed by theEligible Participant, he or she will be entitled to receive from the Company aGross-Up Payment calculated on the basis of the Total Payments he or shereported in such tax return, within 30 days of the filing of such taxreturn.  In all events, if any taxauthority determines that a greater Excise Tax should be imposed upon the TotalPayments than is determined by the Company’s independent auditors or reflectedin the Eligible Participants’ tax return pursuant to this Section 4.6, theEligible Participant is entitled to receive from the Company the full Gross-UpPayment calculated on the basis of the amount of Excise Tax determined to bepayable by such tax authority within 30 days after such determination.

 

4.6                                 Indemnification. The Company will indemnify and advance expenses to an EligibleParticipant to the full extent permitted by law for damages, costs and expenses(including, without limitation, judgments, fines, penalties, settlements andreasonable fees and expenses of the Participant’s counsel) incurred inconnection with all matters, events and transactions relating to such EligibleParticipant’s service to or status with the Company or any other corporation,employee benefit plan or other entity with whom the Eligible Participant servedat the request of the Company.

 

**ARTICLE 5**

**Administration and Enforcement of Rights**

 

5.1                                 Plan Administration. The Board has the power and authority to construed, interpret andadminister the Plan.  Prior to a Changein Control, the Board may delegate such power and authority to any committee orindividual but such delegation will automatically cease to be effective at thetime of the Change in Control and thereafter the Board’s duties are notdelegable.  Prior to (but not after) aChange in Control, the power and authority of the Board and any individual orcommittee to whom such power and authority is in whole or in part delegated isdiscretionary as to all matters.

 

5.2                                 Duration and Amendment.  (A) ThisPlan is effective as of August 25, 1998 and will remain in effect until December 31,1999.  Beginning on January 1, 1999and on each subsequent January 1, the term of this Plan will automaticallybe extended for an additional calendar year (for example, on January 1,1999 the expiration date would automatically become December 31,2000)  unless the Board gives writtennotice to all Participants not less than 90 days prior to any such date ofautomatic extension that the term of the Plan will not be so extended.  In any event, the term of the Plan cannot andwill not expire within the period beginning on the date of a Change in Controland ending on the last day of the eighteenth month that begins after the monthin which the Change in Control occurs.

 

(B)                                The Board may amend the Plan from time totime in such respects as the Board may deem advisable; provided, first, that noamendment that reduces, either directly or indirectly a benefit or right to abenefit provided or that may be provided under the Plan to any QualifiedEmployee will be effective with respect to that Qualified Employee if a Changein Control occurs within the 24-month period immediately following the later ofthe date on which the amendment is adopted or the date on which the amendmentis effective; and, second, that on and after the date of a Change in Control,the Plan may be amended only if each Participant and Eligible Participant isprovided with written notice of the amendment (which must include a completeand accurate description of the amendment and its intended and potentialaffects on Participants and Eligible Participants and a copy of the proposedamendment) at least 90 days before the adoption of the amendment and the

 

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amendment is approved by the affirmative vote ofnot less than 80 percent of all Participants and Eligible Participants.

 

5.3                                 Benefit Claims. A person whose employment relationship with the Company has terminatedand who has not been awarded benefits under the Plan or who objects to theamount of the benefits so awarded may, within 60 days after his or heremployment has terminated, file a written request for benefits with theBoard.  The Board will review suchrequest and will notify the claimant of its decision within 10 days after suchrequest is filed.  If the Board deniesthe claim for benefits, the notice of the denial will contain

 

(a)                                  the specific reason for the denial;

 

(b)                                 a specific reference to the provision ofthe Plan on which denial is based;

 

(c)                                  a description of any additionalinformation or material necessary for the person to perfect his or her claim(and an explanation of why such information is material or necessary), and

 

(d)                                 an explanation of the Plan’s claim reviewprocedure.

 

If the Board determines that a claimant is noteligible for benefits, or if the claimant believes that he or she is entitledto greater or different benefits, the claimant may file a petition for reviewwith the Board within 60 days after the claimant receives the notice issued bythe Board.  Within 10 days after theBoard receives the petition, the Boar will give the claimant (and his or hercounsel, if any) an opportunity to present his or her position to the Boardorally or in writing, and the claimant (or his or her counsel) will have theright to review the pertinent documents. Within 10 days after the hearing (or the date of receipt of the petitionif the claimant presents his or her position in writing) the Board will notifythe claimant of its decision in writing, stating the decision and the specificprovisions of the Plan on which the decision is based.

 

5.4                                 Disputes.  (A) Ifa Participant so elects, any dispute or controversy arising under or inconnection with this Plan will be settled exclusively by arbitration inaccordance with the rules of the American Arbitration Association then ineffect.  Judgment may be entered on thearbitrator’s award in any court having jurisdiction; provided, that aParticipant may seek specific performance of his or her right to receivecompensation or benefits until the Date of Termination during the pendency ofany dispute or controversy arising under or in connection with the Plan.  If any dispute, controversy or claim fordamages arising under or in connection with this Plan is settled byarbitration, all expenses incurred and related to such arbitration will be paidby the Company.

 

(B)                                If a Participant does not electarbitration, he or she may pursue all available legal remedies.  The Company will pay or reimburse eachParticipant for all reasonable legal fees, court costs, experts’ fees andrelated costs and expenses incurred by such Participant in connection with anyactual, threatened or contemplated litigation relating to this Plan to whichthe Participant is or reasonably expects to become a party, whether or notinitiated by the Participant, if the Participant is successful in recoveringany benefit under this Plan as a result of such action.  Such costs include (1) all such fees andexpenses, if any, incurred in contesting or disputing any termination oremployment or (2) any effort by the Participant to obtain or enforce anyright or benefit provided by this Plan.

 

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(C)                                The Company will not assert in anydispute or controversy with any Participant arising under or in connection withthis Plan the Participant’s failure to exhaust administrative remedies.

 

5.5                                 Funding and Payment. Benefits payable to an Eligible Participant under this Plan will be paidonly from the general assets of the Company. No person has any right to or interest in any specific assets of theCompany by reason of this Plan.  To theextent benefits under this Plan are not paid when due to an EligibleParticipant, he or she is a general unsecured creditor of the Company withrespect to any amounts due under the Plan.

 

**ARTICLE 6**

**Miscellaneous**

 

6.1                                 Successors.  TheCompany will require any Successor to expressly assume and agree to perform theobligations of this Plan in the same manner and to the same extent that theCompany would be required to perform if no such succession had takenplace.  Failure of the Company to obtainsuch assumption and agreement at least three business days prior to the time aPerson becomes a Successor(or where the Company does not have at least threebusiness days’ advance notice that a Person may become a Successor, within onebusiness day after having notice that such Person may become or has become aSuccessor) will constitute Good Reason for termination of a Participant’semployment.  The date on which any suchsuccession becomes effective will be deemed the Date of Termination and Noticeof Termination will be deemed to have been given on such date.

 

6.2                                 Binding Plan. This Plan is for the benefit of, and is enforceable by, eachParticipant, each Participant’s personal and legal representatives, executors,administrators, successors, heirs, distributees, devisees and legatees, buteach Participant may not otherwise assign any or his or her rights or delegateany of his or her obligations under this Plan. If a Participant dies after becoming entitled to, but before receiving,any amounts payable under this Plan, all such amounts, unless otherwiseprovided in this Plan, will be paid in accordance with the terms of this Planto such Participant’s devisee, legatee or other designee or, if there be nosuch designee, to such Participant’s estate.

 

6.3                                 Validity.  Theinvalidity or unenforceability of any provision of the Plan does not affect thevalidity or enforceability of any other provision of the Plan, which willremain in full force and effect.

 

6.4                                 No Mitigation. No Eligible Participant will be required to mitigate the amount of anybenefits the Company becomes obligated to provide in connection with this Planby seeking other employment or otherwise and the benefits to be provided inconnection with this Plan may not be reduced, offset or subject to recovery bythe Company by any benefits an Eligible Participant may receive from othersources.

 

6.5                                 No Set-Off.  TheCompany has no right to set-off benefits owed under this Plan against amountsowed or claimed to be owed by an Eligible Participant to the Company under thisPlan or otherwise.

 

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6.6                                 Taxes.  Allpayments to be made to each Eligible Participant in connection with this Planwill be subject to required withholding of federal, state and local income,excise and employment-related taxes.

 

6.7                                 Notices.  For thepurposes of this Plan, notices and all other communications provided for in, orrequired under, this Plan must be in writing and will be deemed to have beenduly given when personally delivered or when mailed by United States registeredor certified mail, return receipt requested, postage prepaid and addressed toeach Participant’s or the Company’s (as the case may be) respective address(provided that all notices to the Company must be directed to the attention ofthe chair of the Board).  For purposes ofany such notice requirement, the Company will use the Participant’s mostcurrent address on file in the Company’s personnel records.  Any notice of a Participant’s change ofaddress will be effective only upon receipt by the Company.

 

6.8                                 Effect of Plan Benefits on OtherSeverance Plans.  A Participant who receives any payment underthe terms of this Plan will not be eligible to receive benefits under any otherseverance pay plan sponsored or maintained by the Company.

 

6.9                                 Related Plans. To the extent that any provision of any other Benefit Plan or agreementbetween the Company and a Participant limits, qualifies or is inconsistent withany provision of this Plan, then for purposes of this Plan, while such otherBenefit Plan or agreement remains in force, the provision of this Plan willcontrol and such provision of such other Benefit Plan or agreement will bedeemed to have been superseded, and to be of no force or effect, as if suchother agreement had been formally amended to the extent necessary to accomplishsuch purpose.  Nothing in this Planprevents or limits a Participant’s continuing or future participation in anyBenefit Plan provided by the Company, and nothing in this Plan limits orotherwise affects the rights Participants may have under any Benefit Plans orother agreements with the Company. Amounts which are vested benefits or which Participants are otherwiseentitled to receive under any Benefit Plan or another agreement with theCompany at or subsequent to the Date of Termination will be payable inaccordance with such Benefit Plan or other agreement.

 

6.10                           No Employment or Service Contract. Nothing in this Plan is intended to provide any Participant with anyright to continue in the employ of the Company for any period of specificduration or interfere with or otherwise restrict in any way Participants’  rights or the rights of the Company, whichrights are hereby expressly reserved, to terminate a Participant’s employmentat any time for any reason or no reason whatsoever, with or without cause.

 

6.11                           Survival.  Therespective obligations of, and benefits afforded to, the Company and theParticipants which by their express terms or clear intent survive terminationof a Participant’s employment with the Company or termination of this Plan, asthe case may be, will remain in full force and effect according to their termsnotwithstanding the termination of a Participant’s employment with the Companyor termination of this Plan, as the case may be.

 

6.12                           Effect on Other Plans. Unless otherwise expressly provided therein, benefits paid or payableunder the Plan will not be deemed to be salary or compensation for purposes ofdetermining the benefits to which a Participant may be entitled under any otherBenefit Plan sponsored, maintained or contributed to by the Company.

 

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6.13                           Prohibition of Alienation. No Participant will have the right to alienate, assign, encumber,hypothecate or pledge his or her interest in any benefit provided under thePlan, voluntarily or involuntarily, and any attempt to so dispose of anyinterest will be void.

 

 

Adopted by the Ault Board of Directors on August 25,1998.

 

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