EXHIBIT 10.2


 


STOCK OPTION AGREEMENT


 


This
Stock Option Agreement, is dated as of December 16, 2005, and entered into
by and among SL Industries, Inc., a New Jersey corporation (“Purchaser”),
Lakers Acquisition Corp., a Minnesota corporation and a wholly-owned subsidiary
of Purchaser (“Merger Sub”), and Ault Incorporated, a Minnesota corporation
(the “Company”).


 


WHEREAS,
the Company, Purchaser and Merger Sub are entering into an Agreement and Plan
of Merger (the “Merger Agreement”) of even date herewith providing for (a) a
cash tender offer to purchase any and all outstanding shares of common stock,
no par value, of the Company (the “Common Stock”) (such shares together with
any associated preferred stock or other rights issued pursuant to the Rights
Agreement, dated as of February 13, 1996, between the Company and Norwest
Bank Minnesota, N.A. as the same has been amended through the date hereof, the “Shares”)
at a price of $2.90 per Share, net to the seller in cash without interest
thereon, upon the terms and subject to the conditions set forth in the Merger
Agreement (the “Offer”); and (b) the merger (the “Merger”) of Merger Sub
with and into the Company; and


 


WHEREAS,
as a condition to the willingness of Purchaser and Merger Sub to enter into the
Merger Agreement and commence the Offer, Purchaser and Merger Sub have
requested, and the Company has agreed to grant to Merger Sub, the option to
purchase, as described herein, authorized but unissued shares of Common Stock.


 


NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein, and for other good and valuable consideration the
sufficiency of which is hereby acknowledged, the parties agree as follows:


 


1.  Grant of Option.  On the terms and subject to the conditions of
this Agreement, the Company hereby grants to Merger Sub an irrevocable option
(the “Option”) to purchase for the Offer Price, as defined in the Merger
Agreement (the “Purchase Price”), shares of Common Stock, in such amounts as
shall be determined by Merger Sub in its discretion, up to such number of
shares which, upon exercise, would result in Merger Sub, Purchaser and
Purchaser Affiliates (as defined in the Merger Agreement) owning in excess of
ninety percent (90%) of the then-outstanding shares of Common Stock
(collectively, the “Optioned Shares”).


 


2.  Exercise of Option.  Subject to the condition in the immediately
succeeding sentence being satisfied, the Option may be exercised by Merger Sub
at any time in whole, but not in part, after Merger Sub has purchased Shares
pursuant to the Offer which, together with Shares otherwise held or acquired by
Merger Sub, Purchaser and Purchaser Affiliates, results in Merger Sub,
Purchaser and Purchaser Affiliates owning in the aggregate at least seventy-five
percent (75%) of the then-outstanding shares of Common Stock and until the
earlier of (a) the Closing Date (as defined in the Merger Agreement) and (b) the
termination of the Merger Agreement in accordance with its terms.  The exercise of the Option is conditioned
upon Merger Sub, Purchaser and Purchaser Affiliates owning in the aggregate,
immediately following such exercise, at least ninety percent (90%) of the
outstanding shares of Common Stock.  In
the event Merger Sub wishes to exercise the Option, Merger Sub shall give a
written notice (the “Notice”)


 





















 


to the Company of its intention to exercise
the Option, specifying the number of Optioned Shares to be purchased and
providing the representation described in the second sentence of Section 4
hereof.  Such notice shall be delivered
to the Company in accordance with the requirements of Section 8(d), and
shall specify a date (which may be the date of such notice) not more than ten (10) business
days after the date such Notice is given for the purchase of the Optioned
Shares.  The closing (the “Closing”) of
the purchase of the Optioned Shares shall take place at the offices of Olshan
Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65 East 55th Street, New York, New York 10022, or at such
other location as Merger Sub shall elect. 
If any decree, injunction, order, law or regulation shall not permit the
purchase of the Optioned Shares to be consummated on the date specified in such
Notice, the date for the Closing shall be as soon as practicable following the
cessation of such restriction on consummation, but in any event within two (2) business
days thereof.


 


3.  Payment and Delivery of Certificate(s).  At any Closing hereunder, (a) Merger Sub
shall deliver to the Company a Promissory Note substantially in the form
attached hereto as Exhibit A (the “Note”) for the aggregate price for the
Optioned Shares so purchased; and (b) the Company shall deliver to Merger
Sub a certificate or certificates representing the number of Optioned Shares so
purchased registered in the name of Merger Sub. 
Certificates for Optioned Shares delivered at the Closing may be
endorsed with a restrictive legend that shall read substantially as follows:


 


“THE
SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.”


 


It
is understood and agreed that the reference to the resale restrictions of the
Securities Act of 1933, as amended (the “Act”), in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if
Purchaser shall have delivered to the Company a copy of a letter from the staff
of the Securities and Exchange Commission, or an opinion of counsel or other
evidence reasonably satisfactory to the Company, to the effect that
registration of the future resale of the Optioned Shares is not required and
that such legend is not required for purposes of the Act.


 


4.  Covenant Regarding the Merger.  Purchaser covenants and agrees that promptly
following exercise of the Option it shall cause Purchaser, Merger Sub and the
Company to consummate the Merger in accordance with Minnesota Statutes, Section 302A.621.  In addition, Purchaser shall reaffirm this
covenant as a representation in its Notice hereunder and at the Closing
hereunder.


 


5.  Representations and Warranties of the
Company.  The Company hereby
represents and warrants (such representations and warranties being deemed
repeated at and as of any Closing hereunder) to Purchaser and Merger Sub as
follows:


 


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(a) 
Due Incorporation.  The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota and has the requisite corporate power and
authority to enter into and perform this Agreement.


 


(b) 
Due Authorization, etc.  This Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company.  This Agreement has been duly executed and
delivered by a duly authorized officer of the Company and constitutes the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.


 


(c) 
Company’s Capital Stock.  The Company has
taken all necessary corporate action to authorize and reserve for issuance upon
exercise of the Option the Optioned Shares, and at all times from the date
hereof through the date of termination of this Agreement will keep reserved for
issuance upon exercise of the Option that number of shares of Common Stock that
Merger Sub is then entitled to purchase pursuant to the Option.  The shares of Common Stock to be issued upon
due exercise, in whole or in part, of the Option shall, when issued, be validly
issued, fully paid and non-assessable, and shall be delivered free and clear of
all claims, liens, encumbrances and security interests, including any preemptive
right of any of the stockholders of the Company.  Upon closing of the Option, the Optioned
Shares will be deemed to be owned by Merger Sub for purposes of Section 302A.621
of the Minnesota Business Corporation Act.


 


6.  Representations and Warranties of Merger
Sub and Purchaser.  Purchaser and
Merger Sub hereby jointly and severally represent and warrant (such
representations and warranties being deemed repeated at and as of any Closing
hereunder) to the Company as follows:


 


(a) 
Due Incorporation.  Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey, and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, and each has the requisite corporate power and authority to enter
into and perform this Agreement.


 


(b) 
Due Authorization, etc.  This Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Merger Sub and
Purchaser.  This Agreement has been duly
executed and delivered by a duly authorized officer of Merger Sub and of
Purchaser, and constitutes the valid and binding obligation of Merger Sub and
of Purchaser, enforceable against each in accordance with its terms.


 


(c) 
Distribution.  Merger Sub acknowledges
and agrees that the Optioned Shares have not been registered, and that the
Company is under no obligation to register the Optioned Shares, under the Act
or any state securities laws.  Merger Sub
is acquiring the Option and will acquire the Optioned Shares to be purchased
upon exercise of the Option for its own account and not with a view to the
distribution thereof within the meaning of the Act.  The foregoing representation and warranty
shall be made by any assignee under Section 8(a) and shall be binding
upon such assignee.


 


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7.  Adjustment Upon Changes in Capitalization.  In the event of any change in the shares of
the Company’s capital stock by reason of any stock dividend, stock split,
merger, recapitalization, combination, conversion, exchange of shares, issuance
of shares (or agreements or commitments to issue shares) or the like, the
number of Optioned Shares subject to the Option and the purchase price per
Optioned Share shall be appropriately and equitably adjusted.


 


8.  Miscellaneous.


 


(a) 
Assignment.  This Agreement shall
not be assigned by Merger Sub, except to Purchaser or a wholly-owned subsidiary
of Purchaser, without the prior written consent of the Company.


 


(b) 
Amendments.  This Agreement may
not be modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.


 


(c) 
Survival of Representations, etc. 
All representations, warranties and agreements in this Agreement shall
survive the Closing.


 


(d) 
Notices.  All notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile, receipt confirmed, or on the
next business day when sent by overnight courier or on the second succeeding
business day when sent by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified by like notice):


 


If to the Company:


 


Ault
Incorporated

7105 Northland Terrace

Minneapolis, MN  55428-1028

Attention: Frederick Green

Facsimile: 763-592-1911


 


With a copy (which shall not
constitute notice) to:


 


Lindquist & Vennum
P.L.L.P.

4200 IDS Center

80 South Eight Street

Minneapolis, MN 55402-2205

Attention: Richard Primuth

Facsimile: (612) 371-3207


 


If to Purchaser or Merger Sub,
to:


 


SL Industries, Inc.

520 Fellowship Road

Suite A114

Mount Laurel, New Jersey  08054

Attention: James Taylor

Facsimile: 856-727-1683


 


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With a copy (which shall not
constitute notice) to:


 


Olshan Grundman Frome
Rosenzweig & Wolosky LLP

Park Avenue Tower

65 East 55th Street

New York, New York  10022

Attention: Steven Wolosky, Esq.

Facsimile: (212) 451-2222


 


(e) 
Governing Law.  This Agreement
shall be governed by and construed in accordance with the substantive law of
the State of Minnesota without giving effect to any conflict of laws principles
thereof that might require the application of the law of another jurisdiction.


 


(f) 
Counterparts.  This Agreement may
be executed in several counterparts, each of which shall be an original, but
all of which together shall constitute one and the same agreement.


 


(g) 
Effect on Headings.  The Section headings
herein are for convenience only and shall not effect the construction hereof.


 


(h) 
Entire Agreement.  This Agreement
constitutes the entire agreement among the parties with respect to the matters
referred to herein and supersedes all prior agreements or understandings, both
written or oral, among the parties, or any of them, with respect to the subject
matter hereof.


 


(i) 
Specific Performance.  Merger Sub,
Purchaser and the Company each acknowledge and agree that the other would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed by it in accordance with the specific terms or were otherwise
breached.  The Company agrees that if for
any reason the Company shall have failed to issue Optioned Shares or to perform
any of its other obligations under this Agreement, then Merger Sub and
Purchaser shall be entitled to specific performance and injunctive and other equitable
relief and the Company agrees to waive any requirement for the securing or
posting of a bond in connection with the obtaining of any such injunctive or
other equitable relief.  This provision
is without prejudice to any other rights Merger Sub and Purchaser may have
against the Company for any failure to perform its obligations under this
Agreement. Purchaser and Merger Sub agree that if for any reason Purchaser
shall have failed to fulfill the covenant specified in Section 4 above or
failed to perform any of their other obligations under this Agreement, then the
Company shall be entitled to specific performance and injunctive and other
equitable relief and Merger Sub and Purchaser agree to waive any requirement
for the securing or posting of a bond in connection with the obtaining of any
such injunctive or other equitable relief. 
This provision is without prejudice to any other rights the Company may
have against Merger Sub and Purchaser for any failure to perform their
obligations under this Agreement.


 


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IN
WITNESS WHEREOF, Purchaser, Merger Sub and the Company have caused this Stock
Option Agreement to be duly executed on the day and year first above written.


 


	
   

  	
  SL INDUSTRIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James C. Taylor

  	
   

  
	
   

  	
  Name:

  	
  James C. Taylor

  
	
   

  	
  Title:

  	
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LAKERS ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James C. Taylor

  	
   

  
	
   

  	
  Name:

  	
  James C. Taylor

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AULT INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frederick M. Green

  	
   

  
	
   

  	
  Name:

  	
  Frederick M. Green

  
	
   

  	
  Title:

  	
  President and Chief Executive
  Officer

  



 


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EXHIBIT A


 


NON-TRANSFERABLE PROMISSORY NOTE


 


FOR
VALUE RECEIVED, Lakers Acquisition Corp., a Minnesota corporation (“Maker”),
hereby promises to pay to Ault Incorporated, a Minnesota corporation, the
principal amount of
[               ]
($                    )],
with no interest, on                               
[six months after the date of exercise] by wire transfer of immediately available
funds to an account designated by the payee. 
The amount due hereunder shall be payable in money of the United States
of America lawful at such time for the payment of public and private debts.


 


Maker
hereby waives presentment, diligence, protest and demand, notice of protest,
demand, dishonor and nonpayment of this Note, and all other notices of any kind
in connection with the delivery, acceptance, performance, default or
enforcement of this Note.


 


This
Note shall be governed by and construed in accordance with the laws of the
State of Minnesota without giving effect to conflict of law principles thereof
that might require the application of the law of any other jurisdiction.


 


IN
WITNESS WHEREOF, the Maker has caused this Note to be executed as of the         day
of            200  .


 


	
   

  	
  LAKERS ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


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