Fill and Sign the Dpw Holdings Announces One for Forty Reverse Stock Split Form

PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATIONTO EFFECTUATE A ONE-FOR-TEN REVERSE STOCK SPLIT Introduction The Company's Board of Directors has adopted a resolution to effectuate a one-for-ten reverse stock split (the "Reverse Split") of the Company's Common Stock effective as of October 14, 1994. The effect of the Reverse Split upon holders of Common Stock will be that the total number of shares of the Company's Common Stock held by each stockholder will be automatically converted into the number of whole shares of Common Stock equal to the number of shares of Common Stock owned immediately prior to the Reverse Split divided by ten, adjusted, as described below, for any fractional shares. Assuming the Reverse Split is approved by the Company's stockholders at the special Meeting, each stockholder's percentage ownership interest in the Company and proportional voting power will remain unchanged, except for minor differences resulting from adjustments for fractional shares. The rights and privileges of the holders of shares of Common Stock will be substantially unaffected by the Reverse Split. No certificates or scrip representing fractional shares of the Company's Common Stock wil l be issued to stockholders because of the Reverse Split. All fractional shares of one-half share or more wil l be increased to the next higher whole number of shares, and all fractional shares of less than one-half share will be decreased to the next lower whole number of shares, respectively. Reasons for the Reverse split The Company's shares of Common Stock have been listed, and have traded, on the National Association of Securities Dealers Automated Quotation ("NASDAQ") system since August 1991, when the Company complete d its initial public offering. For continued listing on the NASDAQ system, it is necessary that, am ong other things, the minimum bid price of the Company's shares of Common Stock exceed $1.00 per share. The $1.00 per share minimum bid price need not be maintained if the market value of the public floa t of the Company's shares of Common Stock exceeds $1,000,000 and the Company's capital and surplus exceed $2,000,000. Over the past several months, the bid price of the Company's shares of Common Stock has fluctuated widely. On numerous occasions, and for protracted periods, the bid price of the Company's shares of Common Stock has fallen below $1.00. While the public float of the Company's shares of Common Stock has exceeded $1,000,000 at all times since the Company's initial public offering, at _________________________________, the Company's capital and surplus was $______________________________. As a result, the Company's shares of Common Stock are in danger of being delisted from the NASDAQ system. Management believes that if the Reverse Split is approved by the stockholders at the Special Meeting, and the Reverse Split is effectuated, then the Company's shares of Common Stock will have a minimum bid price in excess of $1.00 per share and, therefore, continue to be listed and traded on the NASDAQ system. If the Reverse Split is not approved by the stockholders at the Special Meeting, then it is highly likely that the Company's shares of Common Stock will cease to be listed and traded on the NASDAQ syst em. In such event, the shares of Common Stock will likely be quoted in the "pink sheets" maintained by the National Quotation Bureau, Inc., the spread between the bid and ask price of the shares of Common Stock is l ikely to be greater than at present and stockholders may experience a greater degree of difficulty in engaging in trade s of shares of Common Stock. Implementation of the Reverse Split The Reverse Split will be formally implemented by amending the present Article IV of the Company's Certificate of Incorporation, as amended, to add the following Section 4.8: “4.8 Effective as of: ___________ __.m., _________________ time, on ___________________, all outstanding shares of Common Stock held by each holder of record on such date shall be automatically combined at the rate of one-for-ten without any further action on the part of the holders thereof or this Corporation. No fractional shares shall be issued. All fractional shares for one-half share or more shall be increased to the next higher whole number of shares and all fractional shares of less than one-half share shall be decreased to the next lower whole number of shares, respectively." Assuming the Reverse Split is approved by the stockholders at the Special Meeting, an appropriate amendment to the Company’s Certificate of Incorporation, as amended, will be filed with the Secretary of State of the State of _________________________. Principal Effects of the Reverse Split Stockholder’s have no right under _____________________ law or under the Company’s Certificate of Incorporation or Bylaws to dissent from the Reverse Split or to dissent from the rounding to the nearest whole share of any fractional share resulting from the Reverse Split in lieu of issuing fractional shares. The Company had an authorized capital of 2,000,000 shares of Preferred Stock, par value $.001 per share, and 100,000,000 shares of Common Stock, par value $.001 per share, as of _______________________. The authorized capital stock of the Company will not be reduced or other affected by the Reverse Split. The number of issued and outstanding shares of Common Stock of the Company on that date was ______________. Based upon the Company’s best estimate, the aggregate number of shares of Common Stock that will be issued and outstanding on ____________________________ after giving effect to the Reverse Split is ____________. _____________________________. The Reverse Split may result in some stockholders owning “odd-lots” of less than 100 shares of Common Stock. Brokerage commissions and other costs of transactions in odd-lots are generally somewhat higher than costs of transactions in “round-lots” of even multiples of 100 shares. Dilution The Company has suffered recurring losses from operations. The Company intends to issue additional shares of its Common Stock on an ongoing basis in order to satisfy all or a portion of its need for cash. If and to the extent that the Company issues additional shares of its Common Stock, either prior or subsequent to the implementation of the Reverse Split, each stockholder’s percentage ownership interest in the Company and proportional voting power will be proportionately reduced. The Company has previously issued, and has outstanding, various options, warrants and rights to purchase _________________________ shares of its Common Stock. If the Reverse Split is approved by the stockholders at the Special Meeting, in general, both the exercise price and the number of shares subject to each such option, warrant and right will be affected by the Reverse Split. In many instances, the exercise price of an option, wa rrant or right will increase by 1,000%, and the number of shares subject to such option, warrant or right will be reduced by 90%. As a result, if the Reverse Split is implemented, it is possible that the holders of all or a substantial number of the outstanding options, warrant and rights to purchase shares of the Company’s Common Stock will determine that it is not in their best interests to exercise such options, warrants or rights. If and to the extent that such is the case, each stockholder's percentage ownership interest in the Company and proportional voting power will not be proportionately reduced as the result of the exercise of such outstanding options, warrants and rights. Exchange of Stock Certificates Assuming the Reverse Split is approved by the stockholders, stockholders will be required to exchange their stock certificates for new certificates representing the shares of new C ommon Stock. stockholders will be furnished with the necessary materials and instructions for the surrender and exchange of stock certificates at the appropriate time by the Company's transfer agent. Stockholders will not be required to pay a transfer or other fee in connection with the exchange of certificates. Stockholders should not submit any certifi cates until requested to do so. Federal Income Tax Consequences The following description of Federal income tax consequences is based upon the Internal Revenue Code of 1986, as amended, the applicable Treasury Regulations promulgated thereunder, judicial a uthority and current administrative rulings and practices as in effect on the date of this Proxy Statem ent. This discussion is for general information only and does not discuss consequences which may apply to special classes of taxpayers (e.g., non- resident aliens, broker-dealers or insurance companies). Stockholders are urged to consult their own tax advisors to determine the particular consequences-to them. The exchange of shares of Common Stock for shares of new Common Stock will not result in recognit ion of gain or loss. The holding period of the shares of new Common Stock will include the stoc kholder's holding period for the shares of Common Stock exchanged therefor, provided that the shares of Common Stock were held as a capital asset. The adjusted basis of the shares of new Common Stock will be t he same as the adjusted basis of the shares of Common Stock exchanged therefor. Vote and Recommendation The affirmative vote of the holders of a majority of all of the outstanding shares of Com mon Stock of the Company is required to approve the Reverse Split. THE BOARD OF DIRECTORS RECOMMENDS A VOT E “FOR” THE PROPOSAL TO APPROVE THE REVERSE SPLIT.