SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
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 POWER 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| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>ii
DIGITAL POWER CORPORATION
41920 Christy Street
Fremont, CA 94538
(510) 657-2635
To the Shareholders of Digital Power Corporation:
You are cordially invited to attend the Annual Meeting (the "Meeting")
of the Shareholders of Digital Power Corporation ("Digital") which will be held
on Wednesday, May 24, 2000, at 10:00 a.m. (Pacific Time), at the Newark-Fremont
Hilton Hotel, located at 39900 Balentine Drive, Newark, California 94560.
The accompanying Notice of the Annual Meeting of the Shareholders and
Proxy Statement contain the matters to be considered and acted upon, and you
should read such material carefully.
The Proxy Statement contains important information concerning the
election of the Board of Directors of Digital. I urge you to give this matter
your close attention, as it is of great significance to Digital and its
shareholders. In addition, shareholders may transact such other business as may
properly come before the Meeting or any adjournment thereof. The Board of
Directors strongly recommends your approval of the nominees to the Board.
We hope you will be able to attend the Meeting, but, if you cannot do
so, it is important that your shares be represented. Accordingly, we urge you to
mark, sign, date and return the enclosed proxy promptly. You may, of course,
revoke your proxy if you attend the Meeting and choose to vote in person.
Sincerely,
/s/ ROBERT O. SMITH
---------------------
Robert O. Smith
President
April 24, 2000
<PAGE>ii
DIGITAL POWER CORPORATION
41920 Christy Street
Fremont, California 94538
(510) 657-2635
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On Wednesday, May 24, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Digital Power Corporation, a California corporation ("Digital" or the
"Company"), will be held on Wednesday, May 24, 2000, at 10:00 a.m. (Pacific
Time), at the Newark-Fremont Hotel, located at 39900 Balentine Drive, Newark,
California 94560, for the following purposes, all of which are more completely
discussed in the accompanying Proxy Statement:
1. The election of five directors to hold office until the next
Annual Meeting of Shareholders or until their successors are
elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
All of the above matters are more fully described in the accompanying
Proxy Statement. Only shareholders of record at the close of business on April
21, 2000, are entitled to notice of and to vote at the Annual Meeting of the
Shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
PHILIP G. SWANY, Secretary
Fremont, California
April 24, 2000
YOU ARE CORDIALLY INVITED TO ATTEND DIGITAL'S ANNUAL MEETING OF SHAREHOLDERS. IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN.
EVEN IF YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF
YOU ATTEND THE MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY
GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE
EXERCISE THEREOF.
<PAGE>1
PROXY STATEMENT OF
DIGITAL POWER CORPORATION
41920 Christy Street
Fremont, CA 94538
(510) 657-2635
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished to the shareholders of Digital Power
Corporation ("Digital" or the "Company") in connection with the solicitation of
proxies on behalf of Digital's Board of Directors for use at Digital's Annual
Meeting of the Shareholders (the "Meeting") to be held on Wednesday, May 24,
2000, at 10:00 a.m. (Pacific Time), at the Newark-Fremont Hilton Hotel, located
at 39900 Balentine Drive, Newark, California 94560, and at any and all
adjournments thereof. Only shareholders of record on April 21, 2000, will be
entitled to notice of and to vote at the Meeting.
The proxy solicited hereby, if properly signed and returned to Digital
and not revoked prior to its use, will be voted at the Meeting in accordance
with the instructions contained therein. If no contrary instructions are given,
each proxy received will be voted "FOR" the five nominees for the Board of
Directors, and at the proxyholders' discretion, on such other matters, if any,
which may come before the Meeting (including any proposal to adjourn the
Meeting). Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by: (i) filing with Digital written notice of its
revocation addressed to Philip G. Swany, Corporate Secretary, Digital Power
Corporation, 41920 Christy Street, Fremont, California 94538; (ii) submitting a
duly executed proxy bearing a later date; or (iii) appearing at the Meeting and
giving the Corporate Secretary notice of his or her intention to vote in person.
This solicitation of proxies is being made by Digital's Board of
Directors. Digital will bear the entire cost of preparing, assembling, printing,
and mailing proxy materials furnished by the Board of Directors to shareholders.
In addition to the solicitation of proxies by use of the mail, some of the
officers, directors, employees, and agents of Digital may, without additional
compensation, solicit proxies by telephone or personal interview, the cost of
which Digital will also bear. Digital will reimburse banks, brokerage houses,
and other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding these proxy materials to shareholders whose stock in Digital is held
of record by such entities. In addition, Digital may use the services of
individuals or companies it does not regularly employ in connection with this
solicitation of proxies if management determines it to be advisable.
A copy of Digital's Annual Report on Form 10-KSB for the year ended
December 31, 1999, accompanies this Proxy Statement.
This Proxy Statement and form of proxy were first mailed to shareholders
on or about April 24, 2000.
<PAGE>2
RECORD DATE AND VOTING RIGHTS
Digital is authorized to issue up to 10,000,000 shares of Common Stock,
no par value. As of April 21, 2000, 2,804,435 shares of Common Stock were issued
and outstanding. No shares of Preferred Stock are outstanding. Each share of
Common Stock shall be entitled to one vote on all matters submitted for
shareholder approval. The record date for determination of shareholders entitled
to notice of and to vote at the Meeting is April 21, 2000.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Meeting in accordance with the directions
given. A majority of the outstanding shares of Common Stock must be represented
at the Meeting to constitute a quorum for the transaction of business. For the
election of directors, shareholders may vote in favor of all nominees, or
withhold their votes as to all nominees, or withhold their votes as to specific
nominees, by following the instructions on the enclosed proxy card. If no
specific instructions are given with respect to any matter to be voted on, the
shares represented by a signed proxy will be voted FOR the election of the
Board's nominees. Directors will be elected from nominees receiving the highest
number of affirmative votes cast by the holders of Digital's Common Stock,
voting in person or by proxy at the Meeting. The abstentions, because they will
be counted in determining whether a quorum is present for the vote on all
matters, will have no effect on the election of directors. Broker non-votes are
also counted towards a quorum but are not counted for any purpose in determining
whether a matter has been approved, and will have the same effect as an
abstention.
In connection with the election of directors, shares may be voted
cumulatively, but only for persons whose names have been placed in nomination
prior to the voting for election of directors and only if the shareholder
holding such shares has given notice at the Meeting, prior to such voting, of
his or her intention to vote cumulatively. (Notice of intention to vote
cumulatively may not be given by simply marking and returning a proxy.) If any
Company shareholder gives such notice, then all shareholders eligible to vote
will be entitled to cumulate their votes in voting for election of directors.
Cumulative voting allows a shareholder to cast a number of votes equal to the
number of shares held in his or her name as of the record date, multiplied by
the number of directors to be elected. All of these votes may be cast for any
one nominee, or they may be distributed among as many nominees as the
shareholder sees fit. The nominees receiving the highest number of affirmative
votes, up to the number of directors to be elected, shall be elected.
If one of Digital's shareholders gives notice of intention to vote
cumulatively, the persons holding the proxies solicited by the Board of
Directors will exercise their cumulative voting rights, at their discretion, to
vote the shares they hold in such a way as to ensure the election of as many of
the Board's nominees as they deem possible. This discretion and authority of the
proxy holders may be withheld by checking the box on the proxy card marked
"withhold authority." Such an instruction, however, will also deny the
proxyholders the authority to vote for any or all of the nominees of the Board
of Directors, even if cumulative voting is not called for at the Meeting,
although it will not prevent the proxyholders from voting, at their discretion,
for any other person whose name may be properly placed in nomination at the
Meeting.
A shareholder may choose to withhold from the proxyholders the authority
to vote for any of the individual candidates for the Board of Directors by
marking the appropriate box on the proxy card and striking out the names of the
disfavored candidates as they appear on the proxy card. In that event, the
proxyholders will not cast any of the shareholder's votes for candidates whose
names have been crossed out, whether or not cumulative voting is called for at
the Meeting, but they will retain the authority to vote for the candidates
nominated by the Board of Directors whose names have not been struck out, and
for any other candidates who may be properly nominated at the Meeting. If a
<PAGE>3
shareholder wishes to specify the manner in which his or her votes are allocated
in the event of cumulative voting, he or she must appear and vote in person at
the Meeting. Ballots will be available at the Meeting for persons desiring to
vote in person.
ELECTION OF DIRECTORS
At the Meeting, shareholders will be asked to elect Messrs. Robert O.
Smith, Chris Schofield, Thomas W. O'Neil, Jr., Scott C. McDonald and Robert J.
Boschert, all current directors, to serve until the next Meeting and until their
successor shall be elected and qualified. None of the nominees for director was
selected pursuant to any arrangement or understanding. There are no family
relationships between any of the directors and executive officers of Digital.
Nominees for Director
The nominees for director have consented to being named as nominees in this
Proxy Statement and have agreed to serve as director, if elected at the Meeting.
In the event that any nominee is unable to serve, the person named in the proxy
has discretion to vote for other persons if such other persons are designated by
the Board of Directors. The Board of Directors has no reason to believe that any
of the nominees will be unavailable for election.
The following sets forth the persons nominated by the Board of Directors
for election as a director and certain information with respect to that person.
Nominee Age
---------------------- ------
Robert O. Smith 55
Chris Schofield 43
Thomas W. O'Neil, Jr. 70
Scott C. McDonald 46
Robert J. Boschert 63
Background of Nominees
Robert O. Smith is currently the President, Chief Executive Officer and
Chairman of the Board. Mr Smith had been the Chairman of the Board since May
1999 and Chief Executive Officer, President and Director since 1989. From 1980
to 1989, he variously served as Vice President/Group Controller of Power
Conversion Group, General Manager of Compower Division, and President of a
Boschert subsidiary, Computer Products, Inc., a manufacturer of power conversion
products and industrial automation systems. Mr. Smith received a B.S. in
Business Administration from Ohio University and completed course work in the
M.B.A. program at Kent State University.
Chris Schofield is currently the Managing Director of Digital Power Limited
and has held the position since January 1998. Mr. Schofield has been a Director
since 1998. Mr. Schofield served as Director and General Manager of Gresham
Power Group and Director of United Kingdom Operations of the Oxford Instruments
Group, from 1995 to 1998.
<PAGE>4
Thomas W. O'Neil, Jr. is currently a Director and has held that position
since 1991. Mr. O'Neil is a Certified Public Accountant and Partner since 1991
of Schultze, Wallace & O'Neil, CPAs. He retired as a Partner of KPMG Peat
Marwick, where he was employed from 1955 to 1991. Mr. O'Neil has served as a
Director of California Exposition and State Fair, Director of Regional Credit
Association and Director of Alternative Technology Resources, Inc. Mr. O'Neil is
a graduate of St. Mary's College and is a member of the St. Mary's College Board
of Regents.
Scott C. McDonald is currently a Director, appointed in May 1998. Mr.
McDonald is also the Chief Financial Officer and Administrative Officer of
Conxion Corporation since December 1999, and a Director of Castelle Incorporated
and Octant Technologies, Inc. since April 1999 and April 1998, respectively.
From November 1996 to May 1998, Mr. McDonald served as Director of CIDCO
Incorporated, a communications and information delivery company. From October
1993 to January 1997, he served as Executive Vice President, Chief Operating and
Financial Officer of CIDCO. From March 1993 to September 1993, he served as
President, Chief Operating and Financial Officer of PSI Integration, Inc. From
February 1989 to February 1993, he served as Chief Financial Officer and Vice
President, Finance Administration of Integrated System, Inc. Mr. McDonald
received a B.S. in Accounting from the University of Akron and an M.B.A. from
Golden Gate University.
Robert J. Boschert is currently a Director and a Business consultant for
small high-growth technology companies. Mr. Boschert is a Director of Hytek
Microsystems, Inc., a position he has held since 1990. From June 1986 until June
1998, he served as consultant to Union Technology. Mr. Boschert is a founder of
Boschert, Inc., and retired as a member of the Board of Directors in 1984. Mr.
Boschert received a B.S. in Electrical Engineering from the University of
Missouri.
Committees of the Board; Meetings and Attendance
The Board's Audit Committee currently consists of Messrs. McDonald, O'Neil
and Boschert. The primary functions of the Audit Committee are to review the
scope and results of audits by the Company's independent auditors, the Company's
internal accounting controls, the non-audit services performed by the
independent accountants, and the cost of accounting services.
The Board's Compensation Committee consists of Messrs. Boschert and
McDonald. The Compensation Committee administers the Company's 1996 Stock Option
Plan, the Company's 1998 Stock Option Plan, and the Company's 2000 Non-Qualified
Stock Option Plan and approves compensation, remuneration, and incentive
arrangements for officers and employees of the Company.
The Board does not have a Nominating Committee.
The Board met three times during 1999, and the Audit Committee and the
Compensation Committee each met one time during 1999. Each director attended at
least 75% of the meetings of the Board and of the committees upon which he
served except for Mr. Boschert who attended 66-2/3% of the meetings and Mr.
Schofield who attended 33-1/3% of the meetings.
Compensation of Directors
Non-employee directors receive $10,000 per annum paid quarterly and options
to purchase 10,000 shares of Common Stock.
<PAGE>5
Vote Required for the Election of Directors
Directors will be elected from the nominees receiving the highest number
of affirmative votes of the shares of Common Stock present and voting at the
Meeting. Each share of Common Stock which is represented, in person or by proxy,
at the Meeting will be accorded one vote on each nominee for director, unless
one or more shareholders express an intention to exercise the right of
cumulative voting, in which case all shares will be accorded the cumulative
voting rights described under the caption "Record Date and Voting Rights,"
above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" ALL OF THE FIVE ABOVE-LISTED NOMINEES.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Digital's directors, executive officers, and persons who own more than
10% of Digital's outstanding Common Stock to file reports of ownership on Form 3
and changes in ownership on Form 4 or 5 with the Securities and Exchange
Commission (the "SEC"). Such directors, executive officers, and 10% shareholders
are also required by the SEC rules to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
Digital, or written representations that such filings were not required, Digital
believes that, during the year ended December 31, 1999, its executive officers,
directors and 10% shareholders complied with all applicable Section 16(a) filing
requirements.
Executive Officers
The name, age and description of the executive officers of Digital and
its subsidiaries are listed below.
<TABLE>
<S> <C> <C> <C>
Name Position Age Period
- ----------------- ------------------------- ------- -----------------------------------------
Robert O. Smith Chairman of the Board, 55 Chairman of the Board: 1998 - Present
President and Chief Chief Executive Officer: 1989 - Present
Executive Officer President: 1996 - Present
Chris Schofield Managing Director, 43 1998 - Present
Digital Power Limited
Philip G. Swany Chief Financial Officer 50 1996 - Present
</TABLE>
Background of Present Executive Officers
Robert O. Smith (See Background of Nominees above for description)
Chris Schofield (See Background of Nominees above for description)
<PAGE>7
Philip G. Swany is the Chief Financial Officer. Mr. Swany joined the
Company as its Controller in 1981. In February 1992, he left the Company to
serve as the Controller for Crystal Graphics, Inc., a 3-D graphics software
development company. In September 1995, Mr. Swany returned to the Company where
he was made Vice President-Finance. In May 1996, he was named Chief Financial
Officer and Secretary of the Company. Mr. Swany received a B.S. in Business
Administration - Accounting from Menlo College, and attended graduate courses in
Business Administration at the University of Colorado.
Executive Compensation
Executive officers are appointed by, and serve at the discretion of, the
Board of Directors. Except for Robert O. Smith, the Company's President and
Chief Executive Officer, the Company has no employment agreements with any of
its executive officers. The following table sets forth the compensation of the
Company's President and Chief Executive Officer for 1999 and during the past two
years. No other officer received annual compensation in excess of $100,000
during the 1999 fiscal year.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
----------------------------------- ------------------------------- --------------
Restricted Securities LTIP
Name and Pricipal Other Annual Stock Underlying Payouts All Other
Position Year Salary Compensation ($) Award(s) ($) Options (#) ($) Compensation
- -------------------------------------------------------------- ------------------------------- ----------------------------
Robert O. Smith 1999 $134,038(1) $0 $0 100,000(2) $0 $0
President and 1998 $141,912(1) $0 $0 100,000(3) $0 $0
CEO 1997 $150,000 $0 $0 100,000(4) $0 $0
</TABLE>
(1) Pursuant to Mr. Smith's employment contract, during 1999, Mr. Smith
was entitled to receive $200,000 per annum and during 1998, was
entitled to receive $175,000 per annum. Due to the financial condition
of the Company, Mr. Smith only received $134,038 and $141,912 during
1999 and 1998, respectively.
(2) Represents options to acquire 100,000 shares of common stock at $1.875
per share.
(3) Pursuant to his employment contract, in January 1998, Mr. Smith
received options to acquire 100,000 shares of Common Stock at $6.69
per share. These options expire in January 2008. On November 5, 1998,
these options were repriced to an exercise price of $2.31 per share.
(4) Pursuant to his employment contract, in January 1997, Mr. Smith
received options to acquire 100,000 shares of Common Stock at $5.4375
per share. These options expire in January 2007. On November 5, 1998,
these options were repriced to an exercise price of $2.31 per share.
On March 1, 2000, the Company and Mr. Smith entered into an employment
contract effective January 1, 2000. The term of the employment agreement is for
one year subject to annual renewal. Under the terms of Mr. Smith's employment
contract, Mr. Smith shall serve as President and Chief Executive Officer of the
Company and his salary shall be $200,000 per annum and be entitled to bonuses as
determined by the Board. In addition, he shall have the right to receive on the
first business day of each January during the term of his contract options to
acquire 100,000 shares of Common Stock at the lower of market value as of such
date or the average closing price for the first six months of each year of his
<PAGE>8
contract. Pursuant to Mr. Smith's employment contract, in the event there is a
change in control of the Company, Mr. Smith shall be entitled to receive in one
payment, the sum of six (6) times his annual base salary. If Mr. Smith's
employment agreement is not renewed or he is terminated without cause, Mr. Smith
will be entitled to three times his annual base salary.
The following table sets forth the options granted to Mr. Smith during
the past fiscal year.
<TABLE>
<S> <C> <C> <C> <C>
OPTION/ SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
---------------------------------------------------------------------------------------
Number of Securities % of Total Options Exercise or Expiration
Underlying Options Granted to Employees Base Price Date
Name Granted (#) in Fiscal Year ($/Shareholder)
- ------------------ -------------------------- ---------------------- ----------------- ----------------
Robert O. Smith 100,000 54.98% $1.875 January 2009
</TABLE>
The following table sets forth Mr. Smith's fiscal year end option
values. No options were exercised by Mr. Smith during 1999.
<TABLE>
<S> <C> <C> <C> <C>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of
Unexercised In-the-
Number of Unexercised Money Options
Shares Options at FY-End (#) at FY-End ($)(1)
Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ------------------ ------------- --------------------- --------------------- ----------------------
Robert O. Smith None None 386,400 / 0 $81,496 / $0
</TABLE>
(1) Market price at December 31, 1999, for a share of common stock was
$1.4375.
Stock Plans
Employee Stock Purchase Plan. The Company has adopted an Employee Stock
Ownership Plan ("ESOP") in conformity with ERISA requirements. As of December
31, 1999, the ESOP owns, in the aggregate, 167,504 shares of the Company's
Common Stock. In June 1996, the ESOP entered into a $500,000 loan with San Jose
National bank to finance the purchase of shares. The Company guaranteed the
repayment of the loan, and Company contributions to the ESOP were used to pay
off the loan by the end of 1999. All employees of the Company participate in the
ESOP on the basis of level of compensation and length of service. Participation
in the ESOP is subject to vesting over a six-year period. The shares of the
Company's Common Stock owned by the ESOP are voted by the ESOP trustees. Mr.
Smith, President and Chief Executive Officer of the Company, is one of two
trustees of the ESOP.
1998 and 1996 Stock Option Plans. The Company has established the 1998
and 1996 Stock Option Plans (the "Plans"). The purposes of the Plans are to
encourage stock ownership by employees, officers, and directors of the Company
<PAGE>9
to give them a greater personal interest in the success of the business and to
provide an added incentive to continue to advance in their employment by or
service to the Company. A total of 753,000 options are authorized to be issued
under the Plans, of which 647,980 options have been issued. The Plans provide
for the grant of either incentive or non-statutory stock options. The exercise
price of any incentive stock option granted under the Plans may not be less than
100% of the fair market value of the Common Stock of the Company on the date of
grant. The fair market value for which an optionee may be granted incentive
stock options in any calendar year may not exceed $100,000. Shares subject to
options under the Plans may be purchased for cash. Unless otherwise provided by
the Board, an option granted under the Plans is exercisable for ten years. The
Plans are administered by the Compensation Committee which has discretion to
determine optionees, the number of shares to be covered by each option, the
exercise schedule, and other terms of the options. The Plans may be amended,
suspended, or terminated by the Board but no such action may impair rights under
a previously granted option. Each incentive stock option is exercisable, during
the lifetime of the optionee, only so long as the optionee remains employed by
the Company. No option is transferrable by the optionee other than by will or
the laws of descent and distribution.
2000 Non-Qualified Stock Option Plan. The Company has established the
2000 Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), of which
500,000 shares of the Company's Common Stock has been reserved for issuance
under the Non-Qualified Plan. As of April 21, 2000, the Company has not issued
any options under the 2000 Non-Qualified Plan.
Other Stock Options
The Company, as of December 31, 1999, has outstanding options to acquire
92,000 shares of Common Stock at $1.80 per share and options to acquire 86,900
shares of Common Stock at $.50 per share. These options were granted to
employees in May 1993 and are now fully vested.
401(k) Plan
The Company has adopted a tax-qualified employee savings and retirement
plan (the "401(k) Plan"), which generally covers all of the Company's full-time
employees. Pursuant to the 401(k) Plan, employees may make voluntary
contributions to the 401(k) Plan up to a maximum of six percent of eligible
compensation. These deferred amounts are contributed to the 401(k) Plan. The
401(k) Plan permits, but does not require, additional matching and Company
contributions on behalf of Plan participants. The Company matches contributions
at the rate of $.25 for each $1.00 contributed. The Company can also make
discretionary contributions. The 401(k) Plan is intended to qualify under
Sections 401(k) and 401(a) of the Internal Revenue Code of 1986, as amended.
Contributions to such a qualified plan are deductible to the Company when made
and neither the contributions nor the income earned on those contributions is
taxable to Plan participants until withdrawn. All 401(k) Plan contributions are
credited to separate accounts maintained in trust.
<PAGE>10
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 21, 2000, certain
information with respect to the beneficial ownership of shares of Digital Common
Stock by all shareholders known by Digital to be the beneficial owners of more
than five percent (5%) of the outstanding shares of such Common Stock, all
directors and executive officers of Digital individually, and all directors and
all executive officers of Digital as a group. As of April 21, 2000, there were
2,804,435 shares of Common Stock outstanding.
<TABLE>
<S> <C> <C>
No. of Shares
Name Common Stock(1) Percent
- --------------------------------------------- ------------------ ----------
Rhodora Finance Corporation Limited 180,000 6.42%
80 Broad Street
Monrovia, Liberia
Digital Power - ESOP 167,504 5.97%
41920 Christy Street
Fremont, CA 94538
Thomas W. O'Neil, Jr., 75,600(2) 2.65%
Director
Robert O. Smith, 765,904(3) 22.51%
Director and Chief Executive Officer
Chris Schofield, 9,000 *
Managing Director, Digital Power Limited
Philip G. Swany, 49,250(4) 1.73%
Chief Financial Officer
Scott C. McDonald, 10,000(5) *
Director
Robert J. Boschert, 10,000(5) *
Director
All directors and executive officers as a group 919,754(6) 24.7%
(6 persons)
</TABLE>
* Less than one percent (1%).
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
(2) Includes 50,000 shares subject to options and warrants exercisable within
60 days.
(3) Includes 598,400 shares subject to options and warrants exercisable within
60 days. Also includes 167,504 owned by the Digital Power ESOP of which Mr.
Smith is a trustee.
(4) Represents 49,250 shares subject to options exercisable within 60 days.
(5) Includes 10,000 shares subject to options and warrants exercisable within
60 days.
<PAGE>11
(6) Includes 717,650 shares subject to options and warrants and exercisable
within 60 days. Also includes 167,504 shares owned by the Digital Power
ESOP, of which Mr. Smith is a trustee and may be deemed a beneficial owner.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors retained the firm of Hein + Associates, LLP as
independent auditor for Digital and its subsidiaries for the year 2000. A
representative of Hein + Associates, LLP will be at the Meeting to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors of Digital knows of no other matters that may or
are likely to be presented at the Meeting. However, in such event, the persons
named in the enclosed form of proxy will vote such proxy in accordance with
their best judgment in such matters pursuant to discretionary authority granted
in the proxy.
ADDITIONAL INFORMATION
Copies of the exhibits to Digital's Annual Report on Form 10-KSB will be
provided to any requesting shareholder, provided that such shareholder agrees to
reimburse the Company for reasonable fees related to providing such exhibits.
Shareholders should direct their request to: Corporate Secretary, Digital Power
Corporation, 41920 Christy Street, Fremont, California 94538.
SHAREHOLDER PROPOSALS
Shareholder proposals to be included in Digital's Proxy Statement and
Proxy for its 2001 annual meeting must meet the requirements of Rule 14a-8
promulgated by the SEC and must be received by Digital no later than Friday,
December 1, 2000.
ALL SHAREHOLDERS ARE URGED TO EXECUTE THE ACCOMPANYING PROXY AND TO RETURN
IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. SHAREHOLDERS MAY REVOKE THE PROXY
IF THEY DESIRE AT ANY TIME BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ PHILIP G. SWANY
----------------------
Philip G. Swany,
Corporate Secretary
April 24, 2000
<PAGE>
DIGITAL POWER CORPORATION
41920 Christy Street, Fremont, CA 94538
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert O. Smith and Philip G. Swany, and
each of them, as proxies with the power to appoint his or their successor, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of DIGITAL POWER CORPORATION ("Digital"), held of record
by the undersigned on April 21, 2000, at the Annual Meeting of Shareholders to
be held on May 24, 2000 at 10:00 a.m. (Pacific Time), at the Newark-Fremont
Hilton Hotel, located at 39900 Balentine Drive, Newark, California 94560, and at
any and all adjournments thereof.
1. Election of Directors.
FOR all nominees listed below _____ WITHHOLD AUTHORITY ______
(except as marked to the contrary below) (to withhold vote for all
Nominees below)
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Robert O. Smith Chris Schofield Thomas W. O'Neil, Jr.
Scott C. McDonald Robert J. Boschert
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted "FOR" the five above-listed director nominees.
<PAGE>
Please sign exactly as name appears on the share certificates. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated: ______ ____________________________ ______________________________
Name (Print) Name (Print) (if held jointly)
____________________________ ______________________________
Signature Signature (if held jointly)
____________________________ ______________________________
(Address) (Address)
I will ___ will not ___ attend the Meeting. Number of persons to attend: _____.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
