The Need for a Policy Statement
The purchase or sale of securities while possessing material nonpublic (“insider”) information or the selective disclosure of such information to others who may trade is prohibited by United States As an essential part of your work, many of you have access to material nonpublic information about Digital Power Corporation and its subsidiary (collectively the "Company") or about the Company’s business (including information about other companies with which the Company does or may do business). federal and state laws.
The Company has adopted this Policy Statement to avoid even the appearance of improper conduct on the part of any Company employee (not just so-called insiders). All Company employees have worked hard over the years to establish a reputation for integrity and ethical conduct. This Policy Statement is designed to further the reputation of the Company and each employee for integrity and good corporate citizenship.
No director, officer, employee or relative of such person who has material nonpublic information relating to the Company, may buy or sell securities of the Company, directly or indirectly, or engage in any other action to take personal advantage of that information, or pass on such information to others. This policy also applies to information relating to any other company, including customers or suppliers, obtained in the course of employment.
Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are no exception. Even the appearance of an improper transaction must be avoided to preserve the Company's reputation for adhering to the highest standards of conduct.
Liability of Supervisory Persons
The Company, as well as a director, officer or other Company manager, is subject to liability under the federal securities laws if the Company or such person knew or recklessly disregarded the fact that a person directly or indirectly under the Company’s or such person’s control was likely to engage in insider trading and failed to take appropriate steps to prevent such an act before it occurred. The penalties for such inaction can be significant.
If material nonpublic information is inadvertently disclosed, no matter what the circumstances, by any Company director, officer, employee, or their relatives, the person making or discovering that disclosure should immediately report the facts to the President of the Company or the Audit Committee of the Board of Directors.
Definition of Material Nonpublic Information
“Material” information is any information that a reasonable investor would likely consider important in a decision to buy, hold, or sell stock. In short, any information which could reasonably affect the price of the stock.
“Nonpublic” information is any information which has not been disclosed generally to the marketplace. Information about the Company that is not yet in general circulation should be considered nonpublic. Similarly, information received about another company in circumstances indicating that it is not yet in general circulation should be considered nonpublic. All information that you learn about the Company or its business plans in connection with your employment is potentially “insider” information until publicly disclosed or made available by the Company. You should treat all such information as confidential and proprietary to the Company. You may not disclose it to others, such as family, relatives, business or social acquaintances, who do not need to know it for legitimate business reasons. If this nonpublic information is also “material” you are required by law and this Company policy to refrain from trading and from passing the information on to others who may trade.
Common examples of information that will frequently be regarded as material, assuming the same has not been publicly disclosed by the Company, are projections of future earnings or losses, or financial liquidity problems; major marketing changes; news of a pending or proposed joint venture, merger, acquisition or tender offer; news of a significant sale of assets or the disposition of a subsidiary; changes in dividend policies or the declaration of a stock split or the offering of additional securities; changes in management; major personnel changes; significant new products or discoveries; significant litigation or government investigations; or the gain or loss of a substantial customer or supplier.
Remember, if your securities transactions become the subject of scrutiny, they will be viewed after-the-fact with the benefit of hindsight. As a result, before engaging in any transaction you should carefully consider how regulators and others might view your transaction in hindsight.
Transactions by Family Members
The very same restrictions apply to your family members and others living in your household. Employees are expected to be responsible for the compliance of their immediate family and personal households.
Tipping Information to Others
Whether the information is proprietary information about the Company or information that could have an impact on the price of the Company’s securities, you must not pass the information on to others, including family members and others living in your household or friends and casual acquaintances. Employees are expected to be responsible for the compliance of their immediate family and others living in the households. The above penalties apply whether or not you derive any benefit from another’s actions.
Accordingly, employees should not respond to inquiries from outsiders and should refer all such inquiries to the corporate officer designated in writing to respond to such inquiries.
It would be improper for an employee to enter a trade immediately after the Company has made a public announcement of material information, including earnings releases. Because the Company's shareholders and the investing public should be afforded the time to receive the information and act upon it, as a general rule, you should not engage in any transactions until at least on full business day after material information has been released.
Trading During Window Periods
Investment by Company employees in the Company's securities is encouraged. The most appropriate periods to buy or sell the Company's securities is the period beginning on the third business day and ending on the twelfth business day following the release of quarterly or annual financial results (so-called “window periods”). In general, this is the period when there should be the least amount of inside information about the Company that is unavailable to the investing public. It is permissible to trade at other times. However, you may not buy or sell the Company's securities even during window periods if you are in possession of material nonpublic information.
Any person who has any questions about specific transactions may obtain additional guidance from Bartel Eng & Schroder, counsel for the Company. Remember, however, the ultimate responsibility for adhering to the Policy Statement and avoiding improper transactions rests with you. It is imperative that you use your best judgment.
Pre-Clearance of Trades by Directors, Officers, and Certain Other Personnel
To provide assistance in preventing inadvertent violations to insure compliance with timely reporting, and to avoid even the appearance of an improper transaction (which could result, for example, where an officer engages in a trade while unaware of a pending major development), the procedure set forth below must be followed by the directors, officers, all persons reporting directly to the officers, and by other employees who may have access to material nonpublic information.
All transactions in securities of the Company (acquisitions, dispositions, transfers, etc.) by any member of the above-mentioned groups must be pre-cleared by the Company's Chief Financial Officer or President.
If you contemplate a transaction, you should contact Uzi Sasson, Chief Financial Officer in advance. This requirement does not apply to stock option exercises or other periodic or regular savings plan or deferred compensation plan purchases. However, it would cover market sales of option stock following the exercise of the options ("cashless exercise" or "same day sales").
The reasons for this requirement are several. In addition to better prevent trading on material non-public information, pre-clearance of all trades by reporting individuals (i.e. directors, executive officers, and 10% beneficial owners) will help to assure timely filing by such individuals of Form 4's under Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act"). Under Section 16(b), a Form 4 must be filed before the end of the second business day following the day on which the transaction was executed, for each non-exempt acquisition or disposition of the Company's equity securities by a reporting person. Because of the relatively short filing period, failure to timely file can occur and then the delinquent filing must be reported by the Company (naming the individual) in its annual report and proxy statement filed with the Securities and Exchange Commission.
Pre-clearance of all trades will also better enable the Company's officers, directors, and 10% stockholders to avoid violations of the short-swing profit provisions of Section 16(b) of the Exchange Act. Under this rule, insiders can be required to disgorge any profits realized from the purchase and sale (or sale and purchase) of any non-exempt equity security of the Company within a six month period. Section 16(b) imposes strict liability; there is no requirement of intent to violate the section, nor are unintentional or inadvertent violations excused. Further, violation of Section 16(b) does not depend on the use or possession of inside information. Advising counsel in advance of any proposed transaction in the Company's equity securities will allow for a review of previously filed Form 4's so as to avoid any potential Section 16(b) liability.
If you believe that you may be in possession of material nonpublic information, do not disclose that information without first discussing the same with the Company's President.
10b5- 1 Plans
The Company recognizes the potential need of employees and allows employees to enter into 10b5-1 plan arrangements with brokerage and investment firms to facilitate the trading of Company securities. These arrangements should be pre-cleared by Uzi Sasson, Chief Financial Officer and the President prior to execution to insure full compliance with Rule 10b5-1.
Employees will be required to certify their understanding of and intent to comply with this Policy Statement. Officers and directors and other key employees may be required to certify compliance on an annual basis.