Digital Power CEO will get extra options if sales fall only by half this year - http://blogs.mercurynews.com - Jack Davis

Digital Power CEO will get extra options if sales fall only by half this year

http://blogs.mercurynews.com/docudrama/2008/07/11/digital-power-ceo-will-get-extra-options-if-sales-fall-only-by-half-this-year/

Posted by Jack Davis on July 11th, 2008 at 7:46 am | Categorized as Uncategorized | Tagged as u

While
the awarding of performance-based compensation is common place, the
revelation of what the performance measures actually are is rare.

You can’t get much clearer than the terms spelled out in an employment agreement between
Digital Power and its new chief executive, Amos Kohn, who has served on
the company’s board since 2003 and been its interim CEO since February.

But the term “performance” may be a misnomer, unless by performance you include stanching the bleeding.

In addition to his relatively paltry $175,000 salary and an option
grant covering 50,000 shares, Kohn will receive an additional grant for
100,000 shares if the company “collects at least $5,800,000 in revenue
and earns net profit of at least $100,000 during 2008,” and if he is
still CEO as of June 30, 2009.

The maker of power supplies (its production cycle is pictured) had
sales in 2007 of $12.2 million and net income of $120,000. That means
that the extra options will be his if sales this year are roughly half
what they were last year, and if net income drops no more than $20,000,
or about 17 percent.

So how hard will it be to hit this mark? The company is already half
way toward the sales goal have reported $3.2 million in revenue for its
first quarter of 2008. Hitting the profit target may be trickier. The
company lost $162,000 in net income during the first quarter, so Kohn
is already in the hole on that one.

Goals for 2009 and 2010 were also spelled out in the agreement. Should the company have sales

of $6,375,000 in 2009 and a net profit of at least $337,450, the
company will pay Kohn an additional bonus equal to a fraction of his
salary where the fraction is made up from the company’s gross profit
divided by its gross sales that year.

Same deal in 2010 when the sales target for Kohn rises to $7,650,000 and the net profit target rises to $473,450.

Digital Power shares fell below $1 in March after the release of
results for the first quarter, and have shed more than 40 percent of
their value so far this year.