SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box: [ ]
Preliminary Proxy Statement [ ]
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Digital Products Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): [x] $125 per Exchange Act
Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth in the amount on which the filing
fee is calculated and state how it was determined)
- - --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0- 11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Pary
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4) Date Filed:
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<PAGE>
DIGITAL PRODUCTS CORPORATION
800 N.W. 33RD STREET
POMPANO BEACH, FLORIDA 33064
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
MARCH 26, 1996
To the Shareholders of Digital Products Corporation:
NOTICE IS HEREBY GIVEN that an Annual Meeting (the "Annual
Meeting") of Shareholders of Digital Products Corporation, a Florida corporation
(the "Company"), will be held at 10:00 a.m. local time, on March 26, 1996, at
the Company's headquarters, 800 N.W. 33rd Street, Pompano Beach, Florida, for
the following purposes:
(a) To elect a four member Board of Directors to serve until the
next Annual Meeting of Shareholders of the Company and until their
successors are duly elected and qualified;
(b) To consider and vote upon the ratification of the selection
of Richard A. Eisner & Company as the firm of independent Certified
Public Accountants to audit the books and accounts of the Company for
its fiscal year ending March 31, 1996; and
(c) To transact such other business as may properly come before
the Annual Meeting and any adjournments thereof.
In accordance with the provisions of the Company's By-laws, the
Board of Directors has fixed the close of business on January 25, 1996
as the date for determining the shareholders of record entitled to
receive notice of, and to vote at, the Annual Meeting and any
adjournments thereof.
SHAREHOLDERS ARE URGED TO FILL IN, DATE, SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING PREPAID ENVELOPE
It is desirable that as many shareholders as possible be
represented, in person or by proxy, at the Annual Meeting.
Consequently, whether or not you now expect to be present, please
execute and return the enclosed Proxy. You have the power to revoke
your Proxy at any time before it is voted, and the giving of a Proxy
will not affect your right to vote in person if you attend the Annual
Meeting.
By Order of the Board of Directors,
/s/ Col. Clinton L. Pagano /s/ Richard A. Angulo
Col. Clinton L. Pagano Richard A. Angulo
Chairman of the Board President and Chief Executive Officer
February 23, 1996
<PAGE>
DIGITAL PRODUCTS CORPORATION
800 N.W. 33RD STREET
POMPANO BEACH, FLORIDA 33064
305-783-9600
PROXY STATEMENT
February 23, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Digital Products Corporation (the
"Company") for use at the Company's Annual Meeting of Shareholders to be held on
March 26, 1996, and at any adjournment thereof (the "Annual Meeting"). Further,
solicitation of proxies may be made personally, or by telephone or telegraph, by
regularly employed officers and other employees of the Company, who will receive
no additional compensation for such. The cost of soliciting proxies will be
borne by the Company which may enlist the assistance of, and reimburse the
reasonable expenses of, banks and brokerage houses in the additional
solicitation of proxies and proxy authorizations, particularly from their
customers whose stock is not registered in the owner's name, but in the name of
such banks or brokerage houses.
All shares represented at the Annual Meeting by proxies will be voted
provided that such proxies are properly signed and dated. In cases where a
choice is indicated, the shares represented will be voted in accordance with the
specifications so made. In cases where no specifications are made, the shares
represented will be voted FOR the election of the nominees listed below to the
Company's Board of Directors, and FOR the ratification of the selection of
Richard A. Eisner & Company as the Company's independent auditors for its fiscal
year ending March 31, 1996.
Any shareholder executing and returning a proxy has the power to revoke
such proxy at any time prior to the voting thereof by: (a) written notice to the
Secretary of the Company at the Company's headquarters delivered prior to the
commencement of the Annual Meeting, (b) providing a signed proxy bearing a later
date, or (c) appearing in person and voting at the Annual Meeting.
A copy of the Annual Report of the Company for the fiscal year ended
March 31, 1995 (the "1995 Fiscal Year"), including financial statements, is
being mailed concurrently herewith (on or about February 23, 1996) to all
shareholders of record at the close of business on January 25, 1996. The Annual
Report does not constitute a part of the proxy solicitation material for the
Annual Meeting.
1
<PAGE>
VOTING SECURITIES
Only shareholders of record at the close of business on January 25, 1996
are entitled to vote at the Annual Meeting. The total number of shares of common
stock, par value $.025 per share, of the Company (the "Common Stock"), issued,
outstanding and entitled to be voted on the record date was 11,589,267 shares
(exclusive of treasury shares not entitled to be voted). The Company's sole
issued and outstanding class of stock is its Common Stock. Each of such shares
is entitled to one vote upon all matters to be acted upon at the Annual Meeting.
The holders of a majority of the outstanding shares of Common Stock shall
constitute a quorum, which is necessary for the transaction of business at the
Annual Meeting. In determining the presence of a quorum at the Annual Meeting,
abstentions are counted and broker non-votes are not counted. In accordance with
the Company's Articles of Incorporation and By-laws, and applicable law, the
election of directors shall be by a plurality of the votes cast; and a majority
of votes cast is required for the ratification of the retention of the auditors.
As to all matters to be voted on by shareholders at the Annual Meeting,
abstentions and broker non-votes have no legal effect on whether a matter is
approved.
SHARES HELD BY DIRECTORS AND NAMED EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL
OWNERS
Set forth in the table below is information concerning the ownership, as
of the close of business on January 25, 1996, of the Common Stock by (i) each
person who was known by the Company to be a beneficial owner of more than 5% of
the Common Stock; (ii) by all directors; (iii) by each of the Named Executive
Officers (as that term is defined in Item 402(a)(3) of Regulation S-K
promulgated by the Securities and Exchange Commission), and (iv) by all
directors and executive officers of the Company as a group.
Amount and Nature of Percent of
Name Beneficial Ownership Class(1)
- - -------------------------------------------------------------------------------
Richard A. Angulo 1,336,140(2) 11.06%
David J. Dell |^| 100,000(3) *
John E. Dell | 887,027(4) 7.40%
Henry E. Hudson 0 0
Michael F. Marino 170,250(5) 1.45%
Col. Clinton L. Pagano 282,340(6) 2.41%
All Directors and Executive
Officers As A Group (4 persons)+ 1,888,730(7) 15.20%
- - ---------------
* Less than 1%.
2
<PAGE>
|^| Vice President of Technology & Organizational Development until November
1995. Mr. D. Dell is not seeking re- election to the Board of Directors but
will remain a director of the Company until the Annual Meeting and until
his successor is duly elected and qualified.
| While no longer a director of the Company, John E. Dell is a beneficial
owner of greater than 5% of the Common Stock. The address for Mr. J. Dell
is c/o Digital Products Corporation, 800 N.W. 33rd Street, Pompano Beach,
Florida 33064.
+ Includes the Company's directors and executive officers on January 25,
1996.
(1) Percentages do not take into account the Company's 40,061 treasury shares.
(2) Includes 486,140 shares which Mr. Angulo has the option to acquire within
the next 60 days. Does not include 13,860 shares underlying options held by
Mr. Angulo which are not exercisable within the next 60 days. Also includes
600,000 shares of Common Stock which Mr. Angulo acquired from John E. Dell,
pursuant to a Stock Purchase Agreement, dated as of December 31, 1994 (the
"Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, Mr.
Angulo executed and delivered to Mr. J. Dell a personal promissory note
(the "Note"), dated December 31, 1994, payable to Mr. J. Dell, in the
amount of $180,000, bearing interest at the rate of twelve percent (12%)
per annum (payable monthly commencing on February 1, 1995) and payable as
follows: $80,000 on or before January 31, 1995, with the remaining
principal amount and all outstanding interest on December 31, 1996. The
600,000 shares of Common Stock acquired by Mr. Angulo from Mr. Dell are
collateral to secure his payment under the Note and are the subject of a
Stock Escrow Agreement, dated as of December 31, 1994 (the "Escrow
Agreement"), among Mr. Angulo, Mr. J. Dell, the Company and Mason, Briody,
Gallagher & Taylor. Mr. Angulo has voting power over such 600,000 shares
until such time as an Event of Default under the Note and Escrow Agreement
shall occur.
(3) Includes 100,000 shares which Mr. D. Dell has the option to acquire within
the next 60 days.
(4) Includes 396,500 shares which Mr. J. Dell has the option to acquire within
the next 60 days.
(5) Includes 120,250 shares which Mr. Marino has the option to acquire within
the next 60 days.
(6) Includes 132,340 shares which Col. Pagano has the option to acquire within
the next 60 days.
(7) Includes the 838,730 shares underlying the options set forth in notes (2),
(3), (5) and (6) above, all of which are exercisable within the next 60
days. Does not include the 13,860 shares underlying the options set forth
in note (2) above.
PROPOSAL 1
ELECTION OF DIRECTORS
The individuals listed below have been nominated for election to the Board
of Directors to hold office until the next succeeding Annual Meeting of
Shareholders and until his successor is duly elected and qualified.
Nominees Principal Occupation Director Since
- - -------- -------------------- --------------
Col. Clinton L. Pagano Executive Vice President of Compliance 1992
of Capital Gaming International, Inc.
Richard A. Angulo President and Chief Executive Officer 1993
of the Company
Henry E. Hudson Attorney 1996
Michael F. Marino Attorney 1992
3
<PAGE>
Biographical information concerning the nominees is set forth under the
caption "Directors and Executive Officers". Management of the Company is not
aware of any reason why any of the nominees will not be able to serve. If a
nominee should subsequently become unavailable for election, the persons voting
the accompanying proxy may, in their sole discretion, vote FOR such substitute
nominee the present Board of Directors may recommend.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with regard to the
directors and executive officers of the Company:
Name Age Principal Positions with the Company
- - ---- --- ------------------------------------
Col. Clinton L. Pagano 67 Chairman of the Board
Richard A. Angulo 42 Director, President and Chief Executive
Officer
Henry E. Hudson 48 Director
Michael F. Marino 48 Director
COLONEL CLINTON L. PAGANO (retired), was appointed a director of the
Company in 1992 and he became Chairman of the Board of Directors in February
1996. Col. Pagano was the Superintendent of the New Jersey State Police from
1975 to 1990, during the tenures of two New Jersey Governors. During 1990 and
1991, Col. Pagano was Director of the New Jersey Division of Motor Vehicles, a
position he was appointed to by a third New Jersey Governor. During the terms of
three Governors, Col. Pagano served on the Governor's Commission on Prison
Overcrowding. Col. Pagano has over 40 years of law enforcement experience,
including the implementation in New Jersey of a coordinated State and Federal
organized crime control program. During his tenure as Superintendent of the New
Jersey State Police, Col. Pagano was the State Director of Emergency Management,
a federally mandated crisis management position responsible for the control of
natural and manmade disasters and the coordination of State action during a
national emergency. Col. Pagano was also responsible for developing and
implementing the public safety and security programs for the New Jersey Sports
and Exposition Authority. Col. Pagano has served as a director and Executive
Vice-President of Compliance of Capital Gaming International, Inc. (a
publicly-traded multi-jurisdictional gaming company with interests in various
gaming projects, including Indian gaming management in several states) since
November 1992.
RICHARD A. ANGULO was named a director and the President and Chief
Executive Officer of the Company in September 1993. Mr. Angulo first joined the
Company in 1983 and was, since 1989, its National Director of Sales and
Marketing. In the Company's fiscal year ended March 31, 1989, Mr. Angulo served
as General Manager of the Company and made significant reductions in the
Company's expenses. During his employment with the Company, Mr. Angulo was the
leading force in the development of the Company's line of products and services
directed to the house arrest industry, and has assisted hundreds of government
agencies in implementing electronic monitoring programs.
4
<PAGE>
HENRY E. HUDSON, ESQUIRE was appointed a director of the Company in
February 1996. Mr. Hudson has been Of Counsel at the McLean, Virginia office of
the national law firm of Reed Smith Shaw & McClay from July 1991 to February
1992 and from January 1996 to present. Mr. Hudson has over 22 years of general
litigation experience and has been admitted to practice before various federal
and state courts, including the Supreme Court of the United States and the
Supreme Court of Virginia. From November 1993 to December 1995, Mr. Hudson had
been Of Counsel at the law firm of Mays & Valentine located in Alexandria,
Virginia. From February 1992 to October 1993, Mr. Hudson served as Director of
the United States Marshals Service. From 1986 to 1991, Mr. Hudson served as
United States Attorney for the Eastern District of Virginia. From 1980 to 1986,
Mr. Hudson served Arlington County, Virginia as the Commonwealth's Attorney. Mr.
Hudson has an extensive record of local, state and national community service
with an emphasis on the criminal justice/law enforcement area, including his
current position as the Chairman of the Virginia Criminal Justice Services
Board.
MICHAEL F. MARINO, ESQUIRE has served as a director of the Company since
1992. Mr. Marino is Deputy Head of the Labor Group of Reed, Smith, Shaw and
McClay, one of the nation's largest law firms. He also serves as Managing
Partner of the McLean, Virginia office of the firm. Mr. Marino has practiced law
and tried cases in federal and state courts throughout the United States for
over 20 years. He is a member of the New York, District of Columbia, and
Virginia bars. He has authored several books on labor and employment law and is
recognized in the Best Lawyers in America. Mr. Marino served as a Captain in the
United States Marine Corps, and as Special Counsel to the Secretary of the Navy.
He received his B.S. degree from Cornell University, J.D. from Syracuse
University, and L.L.M. from Georgetown University.
BOARD COMMITTEES AND ATTENDANCE RECORDS
The Board of Directors of the Company has formed the following Committees:
(a) an Audit Committee, presently consisting of Mr. Marino and Col. Pagano,
which is responsible for reviewing and evaluating the Company's financial
controls and financial reporting obligations, (b) an Executive Compensation
Committee, presently consisting of Mr. Marino, which is responsible for
reviewing and evaluating the duties and performance of the Company's officers
and key employees and making recommendations concerning the compensation
packages to be tendered to such individuals in the future, and (c) three stock
option plan committees, each presently consisting of Mr. Marino and Col. Pagano,
which committees are responsible for administering the Company's 1988 Incentive
Stock Option Plan, 1990 Nonstatutory Stock Option Plan and 1991 Incentive Stock
Option Plan.
5
<PAGE>
During the 1995 Fiscal Year, there were three formal meetings of the
Board of Directors of the Company, two meetings of the Audit Committee, one
meeting of the Executive Compensation Committee, and one meeting of the
1991 Incentive Stock Option Plan Committee. None of the directors attended
fewer than 75% of the Board meetings held during the 1995 Fiscal Year while
they were serving as directors, and each director attended all meetings of
any committees of which they were members during the fiscal year.
Additional Board and committee actions were conducted by unanimous written
consent.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
ABOVE LISTED SLATE OF DIRECTOR-NOMINEES
PROPOSAL 2
APPOINTMENT OF AUDITORS
The Board of Directors has selected Richard A. Eisner & Company to
audit the accounts of the Company for its fiscal year ending March 31, 1996
and to perform such accounting services as may be appropriate. Unless
otherwise indicated, proxies in the accompanying form will be voted FOR the
ratification of the appointment of Richard A. Eisner & Company as auditors
for the Company for its fiscal year ending March 31, 1996. Richard A.
Eisner & Company has acted as auditors for the Company for all periods
commencing with the fiscal year ended March 31, 1990.
It is not anticipated that a representative of Richard A. Eisner &
Company will be present at the Annual Meeting for issuance of statements or
the answering of shareholders' questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF RICHARD A. EISNER & COMPANY
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matter which is to be presented for action at the Annual
Meeting. If any matter other than those described above (i.e., election of
directors and ratification of auditors) does properly come before the
Annual Meeting, the individuals named in the enclosed proxy will, unless
indicated otherwise, vote the shares represented thereby in accordance with
their best judgment.
6
<PAGE>
MANAGEMENT'S REMUNERATION
BOARD REPORT ON EXECUTIVE COMPENSATION
Pursuant to regulations adopted by the Securities and Exchange
Commission regarding disclosure of companies' executive compensation
policies, the Board of Directors has prepared the following report
pertaining to the Company's executive compensation policies for the 1995
Fiscal Year.
Like other public corporations, the Company compensates its senior
executives and other employees with remuneration packages consisting of
base salary, stock options and bonuses. The remuneration packages are
designed to give the individuals sufficient funds for their immediate needs
and to encourage an increased interest in and greater concern for the
short- and long-term welfare of the Company, as well as to obtain and
retain the services of persons responsible for the continued growth of the
Company. In determining the specific level of executive compensation, the
Board considers overall corporate performance; the individual officer's job
functions, duties and responsibilities; actual results within the
executive's areas of responsibility; prior compensation to the individual
executive and those persons previously performing such function; the
competitiveness of the compensation package with those offered by other
corporations seeking the same executives and other employees as the
Company; the recommendation of the Chief Executive Officer; the Company's
financial position; and such other factors as the Board may deem relevant
to its determinations. Despite considering all of the above-mentioned
factors, the Board has not found it practical to, and has not attempted to,
assign relative weights to the specific factors considered in determining
any executive officers' (including the Chief Executive Officer's)
compensation.
Richard A. Angulo has been the Company's President and Chief Executive
Officer since September 1993. Prior to that Mr. Angulo served the Company
for over ten years in various capacities such as National Director of Sales
and General Manager. In determining Mr. Angulo's compensation during the
1995 Fiscal Year, the Board considered the general factors discussed above,
and placed particular emphasis on the following factors: the necessity to
compensate him in cash at a level similar to his total salary and bonus
compensation received prior to his appointment as the President and Chief
Executive Officer; the Company's need to reduce overall employee related
expenses; and, the Company's need to provide him with sufficient incentive
to improve the Company's financial position and operational results. Such
goals were achieved by paying Mr. Angulo a base salary of $112,500 which is
commensurate with his compensation prior to becoming the Chief Executive
Officer, yet permits the Company to achieve its goal of reducing overall
employee related expenses. In addition, in August 1994 the Board repriced
all of Mr. Angulo's stock options to ensure he had proper incentive to
carry out the Company's financial and operating objectives. The options
were repriced above the current market price so that Mr. Angulo would only
receive additional compensation if he was able to improve shareholder
wealth by increasing the market price of the Common Stock. The salary and
stock options also present a competitive compensation package that serves
to retain Mr. Angulo.
Richard A. Angulo Michael F. Marino
David J. Dell Col. Clinton L. Pagano
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
paid by the Company during the three years ended on March 31, 1995, to (i)
the Chief Executive Officer of the Company, and (ii) all other executive
officers of the Company, or any of its subsidiaries, who were serving in
such capacity on March 31, 1995 and received total annual salary and bonus
in excess of $100,000 during the 1995 Fiscal Year (collectively, "Named
Executive Officers").
Annual Compensation Long-Term
------------------- ---------
Compensation
------------
<TABLE>
<CAPTION>
Name and Year Ended Other Annual Stock All Other
Principal Position March 31 Salary Bonus Compensation Options Compensation
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Angulo, 1995 $112,500 -0- $15,958(2) 500,000(3) -0-
President and Chief 1994 $80,385 $45,153(4) $15,958(2) 500,000(5) -0-
Executive Officer(1) 1993 n/a n/a n/a n/a n/a
David J. Dell, 1995 $120,000 -0- -0- 200,000(7) -0-
Vice President 1994 n/a n/a n/a n/a n/a
of Technology and 1993 n/a n/a n/a n/a n/a
Organizational
Development(6)
</TABLE>
- - ------------------------------
(1) Mr. Angulo was appointed as the Company's President and Chief Executive
Officer on September 30, 1993.
(2) Consists of car expenses and payment of medical insurance premium for
immediate family members not afforded other employees.
(3) In August 1994, options to purchase an aggregate 500,000 shares of
Common Stock, all with a per share exercise price of $4.00, were
repriced with options to purchase an aggregate 500,000 shares of
Common Stock all with a per share exercise price of $1.50.
(4) Consists of sales commissions earned while serving as the Company's
National Director of Sales and Marketing.
(5) In September 1993, options to purchase an aggregate 282,000 shares of
Common Stock (including options to purchase 200,000 shares granted in June
1993), at a weighted average per share exercise price of $8.661, were
repriced with options to purchase an aggregate 130,284 shares of Common
Stock, all with a per share exercise price of $4.00. These repriced options
are included in the options to purchase 500,000 shares so listed in the
Summary Compensation Table.
(6) Mr. Dell was the Company's Vice President of Technology and Organizational
Development from October 1994 to November 1995.
(7) In August 1994, Mr. Dell (i) was granted options to purchase an aggregate
50,000 shares of Common Stock with a per share exercise price of $1.50 and
(ii) had existing options to purchase an aggregate 50,000 shares of Common
Stock, with a per share exercise price of $4.00, repriced with options to
purchase an aggregate 50,000 shares of Common Stock with a per share
exercise price of $1.50. In December 1994, these same options to purchase
an aggregate 100,000 shares of Common Stock, all with a per share exercise
price of $1.50, were repriced with options to purchase an aggregate 100,000
shares of Common Stock all with a per share exercise price of $1.00.
8
<PAGE>
OPTION GRANTS IN THE 1995 FISCAL YEAR
The following table sets forth information with respect to options
granted to each of the Named Executive Officers during the 1995 Fiscal Year
(including options repriced during the 1995 Fiscal Year).
<TABLE>
<CAPTION>
Number of Percentage of
Shares Total Options Potential Realized Value At
Underlying Granted to Assumed Rates of Stock Price
Options Employees In Exercise Expiration Appreciation for Option Term(1)
-------------------------------
Name Granted Fiscal Year Price Date 5% 10%
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Angulo 4,620(2) .25% $1.50 3/1/97 - 0 - - 0 -
924(2) .05% $1.50 3/1/01 - 0 - - 0 -
9,240(2) .51% $1.50 10/15/01 - 0 - - 0 -
92,400(2) 5.10% $1.50 6/3/97 - 0 - - 0 -
23,100(2) 1.28% $1.50 6/8/99 - 0 - - 0 -
369,716(2) 20.42% $1.50 9/29/98 - 0 - - 0 -
David J. Dell 50,000(3) 2.76% $1.50 8/18/99 - 0 - - 0 -
50,000(3) 2.76% $1.50 9/29/98 - 0 - - 0 -
100,000(3) 5.52% - $1.00 12/12/99
</TABLE>
- - -------------------
(1) Calculated as the product of (a) the difference between (i) the product
of the per-share market price at the time of grant and the sum of 1
plus the adjusted stock price appreciation rate (the assumed rate of
appreciation compounded annually over the term of the option) and (ii)
the per-share price of the option, and (b) the number of securities
underlying the grant at fiscal year-end.
(2) The options indicated were repriced on August 19, 1994 from an exercise
price of $4.00 per share to an exercise price of $1.50 per share. On
August 19, 1994, the per share market price (i.e. closing sale price)
was $.5625.
(3) On August 19, 1994, Mr. Dell (i) was granted options to purchase an
aggregate 50,000 shares of common stock with a per share exercise price
of $1.50, and (ii) had existing options to purchase an aggregate 50,000
shares of Common Stock, all with a per share exercise price of $4.00,
repriced with options to purchase an aggregate 50,000 shares of Common
Stock with a per share exercise price of $1.50. On August 19, 1994, the
per share market price (i.e. closing sale price) was $.5625. On
December 13, 1994, these same options to purchase an aggregate 100,000
shares of Common Stock, all with a per share exercise price of $1.50,
were repriced with options to purchase an aggregate 100,000 shares of
Common Stock all with a per share exercise price of $1.00. On December
13, 1994, the per share market price (i.e. closing sale price) was
$.40625.
OPTIONS EXERCISED AND REMAINING OUTSTANDING
The following table sets forth information with respect to options
exercised by each of the Named Executive Officers during the 1995 Fiscal Year
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money
Options at March 31, 1995 at March 31, 1995
------------------------- -----------------
Shares Acquired
Name On Exercise Value Realized Exercisable Unexercisable Exercisable Unexerciseable
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Angulo - 0 - - 0 - 481,520 18,480 - 0 - - 0 -
David J. Dell - 0 - - 0 - 100,000 - 0 - - 0 - - 0 -
</TABLE>
9
<PAGE>
DIRECTORS' REMUNERATION
Each director not otherwise a full-time employee of the Company,
receives $500.00 for each meeting of the Board of Directors, or
committee thereof, which they attend, along with the reimbursement of
their reasonable expenses incurred on the Company's behalf.
EMPLOYMENT CONTRACTS
As of July 3, 1995, Richard A. Angulo, President and Chief
Executive Officer of the Company, entered into a five year employment
agreement with the Company providing for an annual salary of $150,000.
Mr. Angulo is eligible to receive an annual bonus, payable quarterly
in cash or shares of Common Stock of the Company, based on the net
profit of the Company. Under the terms of the agreement, Mr. Angulo
was entitled to and received 200,000 shares of Common Stock of the
Company. Pursuant to the terms of the agreement, Mr. Angulo is
required to obtain a $1 million key man life insurance policy payable
to the Company as a beneficiary and Mr. Angulo is permitted to obtain
a separate life insurance policy payable to his designated
beneficiaries. The Company is obligated to pay the premium expenses
for both life insurance policies. Mr. Angulo's employment agreement
provides that it may only be terminated for cause as defined in the
agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the 1995 Fiscal Year, the Company's Executive Compensation Committee
(the "Compensation Committee") consisted of Michael F. Marino and John E. Dell.
Following Mr. Dell's resignation from the Compensation Committee in July 1995,
the Compensation Committee currently consists of Michael Marino, with two seats
on the Compensation Committee currently vacant. Neither Messrs. Marino or J.
Dell are officers or employees of the Company, nor have they served in such
capacities in the past.
Set forth below is a description of transactions or relationships involving
the Company and the Compensation Committee members or entities in which the
Compensation Committee members or their respective family members were officers,
directors or beneficial holders of 5% or more of such entities' voting
securities from April 1, 1994 to March 31, 1995:
(a) On August 19, 1994, the Board of Directors approved a replacement of
stock options held by certain executive officers and directors of the Company
having a per share exercise price of $4.00 per share, which were in excess of
the market value of the Company's Common Stock at that time, and replaced such
options with new options having an exercise price of $1.50. The vesting
provisions and expiration dates of the replacement options remained the same as
the original options. The closing sale price for a share of common stock on
August 19, 1994 was $.5625. Set forth below is information with respect to the
options held by Messrs. John Dell and Michael Marino which were repriced.
10
<PAGE>
Number of Shares Expiration Date of
Name of Optionee Underlying Option Repriced Option at Time of Repricing
- - ---------------- -------------------------- ---------------------------
Michael F. Marino 20,250 6/03/97
50,000 9/29/98
John E. Dell 138,600 8/01/95
(former director) 346,500 6/03/97
50,000 9/29/98
(b) On August 19, 1994, options to purchase 50,000 shares of Common Stock
were granted to Michael F. Marino. All such options were granted at the exercise
price of $1.50 per share, exercisable during the period from August 19, 1995
through August 18, 1999. On August 19, 1994, the closing sale price of a share
of Common Stock was $.5625.
(c) On December 13, 1994, the Board of Directors approved a further
repricing of certain stock options held by certain executive officers and
directors of the Company having an exercise price of $1.50 per share, which were
in excess of the market value of the Company's Common Stock at that time, and
replaced such options with new options having an exercise price of $1.00. The
vesting provisions of the replacement options remained the same as the original
options and the expiration dates were amended to five years from the replacement
date. The closing sale price for a share of Common Stock on December 13, 1994
was $.40625. Set forth below is information with respect to the options held by
Michael F. Marino which were repriced.
Number of Shares Expiration Date of
Underlying Option Option at Time of
Name of Optionee Repriced Repricing New Expiration Date
- - ---------------- -------- --------- -------------------
Michael F. Marino 20,250 6/3/97 12/12/99
50,000 9/29/98 12/12/99
50,000 8/18/99 12/12/99
11
<PAGE>
REPRICING OF STOCK OPTIONS
TEN YEAR TABLE OF OPTION REPRICINGS
The following table sets forth information concerning the repricing of
options held by the executive officers of the Company.
<TABLE>
<CAPTION>
Length of
Original
Option Term
Remaining
Exercise at Date of
Name Number of Market Price of Price at Number of Replacement Repricing or
and Date of Options Stock at Time of Time of Replacement Option Amendment
Position Repricing Repriced Repricing Repricing Options Exercise Price (months)
- - ----------------- ------------- ------------- ------------------ ------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard A. 8/19/94 4,620 $.5625 $4.00 4,620 $1.50 31
Angulo(1) 924 $.5625 $4.00 924 $1.50 79
9,240 $.5625 $4.00 9,240 $1.50 86
92,400 $.5625 $4.00 92,400 $1.50 34
23,100 $.5625 $4.00 23,100 $1.50 58
369,716 $.5625 $4.00 369,716 $1.50 49
9/30/93 10,000 $1.625 $5.625 4,620 $4.00 41
2,000 $1.625 $5.625 924 $4.00 89
20,000 $1.625 $7.50 9,240 $4.00 96
200,000 $1.625 $9.875 92,400 $4.00 44
50,000 $1.625 $5.00 23,100 $4.00 68
David J. Dell(2) 12/13/94 50,000 $.40625 $1.50 50,000 $1.00 46
12/13/94 50,000 $.40625 $1.50 50,000 $1.00 56
8/19/94 50,000 $.5625 $4.00 50,000 $1.50 49
Theodore M. 2/28/91 800,000* $5.156 * 1,000,000 $5.625 56
Sabarese(3)
Albert J. Brees(4) 2/28/91 10,000 $5.156 $10.00 10,000 $5.525 63
Keith S. Braun(5) 9/30/93 50,000 $1.625 $9.875 20,250 $4.00 44
James 9/30/93 25,000 $1.625 $9.25 13,425 $4.00 55
Matthews, III(6) 9/30/93 50,000 $1.625 $5.00 26,850 $4.00 68
9/30/93 60,000 $1.625 $8.75 32,220 $4.00 97
</TABLE>
- - --------
1 President and Chief Executive Officer
2 Former Vice President of Technology and Organizational Development
3 Former President and Chief Executive Officer
4 Former Controller, Secretary and Chief Financial Officer
5 Former Secretary
6 Former Financial Officer
12
<PAGE>
* The repricing of Mr. Sabarese's options was in connection with the
entering into of a new employment agreement, extending the term of his
employment with the Company. The replaced options all were to expire on August
1, 1995 and had per share exercise prices and vesting dates as follows: 200,000
options at $9.375 having previously vested; 200,000 options at $9.375 vesting on
August 1, 1991; 200,000 options at $15.00 vesting on August 1, 1993; and 200,000
options at $15.00 vesting on August 1, 1993. The replacement options also were
to expire on August 1, 1995 and vested as follows: immediately, with respect to
200,000 options; 200,000 options on July 31, 1992; and 400,000 options on July
31, 1993.
BOARD REPORT ON OPTION REPRICINGS
On August 19, 1994, the Board of Directors approved a replacement of stock
options held by certain officers and directors of the Company having a per share
exercise price of $4.00 per share, which were substantially in excess of the
market value of the Company's Common Stock at that time, and replaced such
options with new options having an exercise price of $1.50 per share. The
vesting provisions and expiration dates of the replacement options remained the
same as the original options. The closing sale price for a share of Common Stock
on August 19, 1994 was $.5625 per share.
On December 13, 1994, the Board of Directors approved a further repricing
of stock options held by certain officers and directors of the Company having an
exercise price of $1.50 per share, which were in excess of the market value of
the Company's Common Stock at that time, and replaced such options with new
options having an exercise price of $1.00 per share. The vesting provisions of
the replacement options remained the same as the original options and the
expiration dates were amended to expire five years from the replacement date.
The closing sale price for a share of Common Stock on December 13, 1994 was
$.40625 per share.
The Board of Directors believes that equity ownership provides a major
incentive to directors and officers in building stockholder value, and serves to
retain outstanding directors and officers and to align their interest with
stockholders. The Board of Directors determined that the decrease in price of
the Company's Common Stock was severely limiting the motivational and retention
value of the options held by its directors and officers. The Board of Directors
was of the view that stock options with exercise prices well above the market
value of the Company's Common Stock do not serve any incentive function.
Accordingly, the Board of Directors repriced the stock options described above
in this report.
Richard A. Angulo Michael F. Marino
David E. Dell Col. Clinton L. Pagano
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description of certain transactions since April 1,
1994 between the Company and its directors, executive officers and beneficial
owners of five percent or more of the outstanding Common Stock, as well as
certain business relationships between the Company and its directors.
(a) On August 19, 1994, the Board of Directors approved a replacement of
stock options held by certain executive officers and directors of the Company
having a per share exercise price of $4.00 per share, which were in excess of
the market value of the Company's Common Stock at that time, and replaced such
options with new options having an exercise price of $1.50. The vesting
provisions and expiration dates of the replacement options remained the same as
the original options. The closing sale price for a share of common stock on
August 19, 1994 was $.5625. Set forth below is information with respect to the
directors and executive officers whose options were so repriced.
Number of Shares Expiration Date of
Name of Optionee Underlying Option Repriced Option at Time of Repricing
- - ---------------- -------------------------- ---------------------------
Richard A. Angulo 4,620 3/1/97
924 3/1/01
9,240 10/15/01
92,400 6/3/97
23,100 6/8/99
369,716 9/29/98
David J. Dell 50,000 9/29/98
John E. Dell 138,600 8/1/95
(former director) 346,500 6/3/97
50,000 9/29/98
Michael F. Marino 20,250 6/3/97
50,000 9/29/98
Col. Clinton L. Pagano 9,240 2/3/02
23,100 6/3/97
50,000 9/29/98
(b) On August 19, 1994, options to purchase shares of Common Stock were
granted to the directors listed below, in the amounts set forth opposite their
respective names. All such options were granted at the exercise price of $1.50
per share, exercisable during the period from August 19, 1995 through August 19,
1999. On August 19, 1994, the closing sale price of a share of Common Stock was
$.5625.
14
<PAGE>
Number of Shares
Name of Optionee Underlying Option
- - ---------------- -----------------
David J. Dell 50,000
Michael F. Marino 50,000
Col. Clinton L. Pagano 50,000
(c) On December 13, 1994, the Board of Directors approved a further
repricing of certain stock options held by certain executive officers and
directors of the Company having an exercise price of $1.50 per share, which were
in excess of the market value of the Company's Common Stock at that time, and
replaced such options with new options having an exercise price of $1.00. The
vesting provisions of the replacement options remained the same as the original
options and the expiration dates were amended to five years from the replacement
date. The closing sale price for a share of Common Stock on December 13, 1994
was $.40625. Set forth below is information with respect to the directors and
executive officers whose options were so repriced.
Number of Shares Expiration Date of
Underlying Option Option New Expiration
Name of Optionee Repriced at Time of Repricing Date
- - ---------------- ----------------- -------------------- --------------
David J. Dell 50,000 9/29/98 12/12/99
50,000 8/18/99 12/12/99
Michael F. Marino 20,250 6/3/97 12/12/99
50,000 9/29/98 12/12/99
50,000 8/18/99 12/12/99
Col. Clinton L. Pagano 9,240 2/3/02 2/3/02
23,100 6/3/97 12/12/99
50,000 9/29/98 12/12/99
50,000 8/18/99 12/12/99
(d) Pursuant to a Consulting Agreement, effective as of August 1, 1995,
between the Company and Col. Clinton L. Pagano, the Company is required to pay
Col. Pagano $65,000 per year to perform consulting services related to the
marketing of the Company's electronic home surveillance products. This
Consulting Agreement has a one year term, subject to automatic renewal for
successive one year periods unless either of the parties notifies the other
party of their intention not to renew the Consulting Agreement.
The Company believes that the transactions described above were fair to the
Company and were as favorable to the Company as those which it might have
obtained from non-affiliated third parties, given the circumstances under which
such transactions were proposed and effectuated.
15
<PAGE>
COMPANY'S PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change,
assuming a One Hundred ($100) Dollar investment on March 31, 1990, in the
cumulative total shareholder return on shares of Common Stock (as measured by
dividing (a) the sum of: (i) the cumulative amount of dividends for the
measurement period, assuming dividend reinvestment, plus (ii) the difference
between the share price at the end and beginning of the measurement period; by
(b) the share price at the beginning of the measurement period) with the
cumulative total return (similarly measured) of the Center for Research in
Securities Prices of the University of Chicago Graduate School of Business
("CRSP") Index of the Nasdaq Stock Market (US Companies) and the cumulative
total return of the CRSP Index for Nasdaq Non-Financial Stocks.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH APPEARS HERE
Measurement Period
------------------
3/30/90 3/28/91 3/31/92 3/31/93 3/31/94 3/31/95
------- ------- ------- ------- ------- -------
Digital Products
Corporation 100.0 65.5 124.1 49.7 15.9 3.1
Nasdaq Stock Market
(US Companies) 100.0 114.2 145.6 167.4 180.7 200.9
Nasdaq Non-Financial
Stocks 100.0 118.2 147.1 158.7 174.2 189.7
16
<PAGE>
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
Upon the written request of any shareholder of the Company, as record or
beneficial owner, the Company will provide to such shareholder a copy of the
Company's Annual Report on Form 10-K for its fiscal year ended March 31, 1995,
including the financial statements and the schedules thereto, filed with the
Securities and Exchange Commission. Any request should be directed to Richard A.
Angulo, President and Chief Executive Officer, at the Company's place of
business listed above. There will be no charge for the Form 10-K, unless one or
more exhibits thereto are requested, in which event the Company's reasonable
expenses of furnishing such exhibits may be charged.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT
Based solely on a review of Forms 3 and 4, and any amendments thereto,
furnished to the Company pursuant to Rule 16a-3(e) promulgated under the
Securities Exchange Act of 1934, as amended, and written representations from
certain reporting persons that they were not required to file a Form 5 for
specified fiscal years, the Company believes that, with respect to the 1995
Fiscal Year, all Section 16(a) filing requirements applicable to its executive
officers and directors and those beneficial owners of more than ten percent of
the Company's Common Stock were timely complied with.
FUTURE STOCKHOLDER PROPOSALS
From time to time, shareholders present proposals which may be a proper
subject for inclusion in the Company's Proxy Statement and for consideration at
its Annual Meetings of Shareholders. To be considered, proposals must be
submitted on a timely basis. Proposals for the next Annual Meeting of
Shareholders of the Company must be received by the Company no later than
October 23, 1996 for inclusion, if proper, in next year's proxy solicitation
materials.
GENERAL
The Company will pay all of the costs of preparing, assembling and mailing
the form of proxy, Proxy Statement and other materials which may be sent to the
shareholders in connection with this solicitation, as well as any costs of
soliciting proxies in the accompanying form. Solicitation will be made by mail,
and officers and regular employees of the Company may also solicit proxies by
telephone, telegraph or personal interview for which they will receive no
additional remuneration. The Company expects to request brokers and nominees who
hold stock in their names to furnish this proxy material to their customers and
to solicit proxies from them. The Company will reimburse such brokers and
nominees for their out-of-pocket and reasonable clerical expenses in connection
therewith.
17
<PAGE>
WHILE YOU HAVE THE MATTER IN MIND, PLEASE COMPLETE, SIGN
AND RETURN THE ENCLOSED PROXY CARD
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Col. Clinton L. Pagano
Col. Clinton L. Pagano
Chairman of the Board
/s/ Richard A. Angulo
Richard A. Angulo
President and Chief
Executive Officer
B:\PROXY
<PAGE> 18
<TABLE><CAPTION>
[X] Please mark your [ [
votes as in this
example.
<S> <C> <C> <C> <C> <C> <C>
WITHHOLDING
AUTHORITY TO VOTE
for all nominees Nominees: Col. Clinton L. Pagano,
listed at right Richard A. Angulo, FOR AGAINST ABSTAIN
FOR Henry E. Hudson, 2. Ratification of the [ ] [ ] [ ]
1. Election of [ ] [ ] Michael F. Marino selection of Richard
Directors. A. Eisner & Company as
the Company's independent
(Instructions: To withhold authority auditors through the fiscal
to vote for any individual nominee, year endng March 31, 1996.
write that nominee's name on the line
provided below.) 3. In his discretion either
Proxy is authorized to vote
such other business as may
- - ------------------------------------- property come before the
meeting.
The Board of Directors recommends a vote FOR all
of the foregoing. This proxy when properly executed
will be voted in the manner directed herein by the
undersigned stockholder. If no direction is made,
this proxy will be voted FOR the election of the
above directors and FOR Proposal 2.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY. Receipt of the Notice of Annual Meeting
of Shareholders and accompanying Proxy Statement of
the Board of Directors is acknowledged.
</TABLE>
SIGNATURE _____________ DATE ______ SIGNATURE ______________ DATE _______
NOTE: If stock is held in the name of more than one person, all holders
should sign. Sign exactly as the name or names appear hereon, persons signing
in fiduciary capacity should include their name as well.
DIGITAL PRODUCTS CORPORATION
REVOCABLE PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
The undersigned hereby appoints Richard A. Angulo and Col. Clinton L.
R Pagano, and each of them, as Proxy, each with the power to appoint his
substitute, and hereby authorizes Mr. Angulo and Col. Pagano to represent
O and to vote, as designated below, all of the shares of common stock of
Digital Products Corporation (the "Company") held of record by the
X undersigned on January 25, 1996, at the Company's Annual Meeting of
Shareholders to be held at the Company's headquarters, 800 N.W. 33rd
Y Street, Pompano Beach, Florida, on March 26, 1996 at 10:00 a.m., local
time, or any adjournment thereof.
|
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(Continued and to be signed on reverse side.)
