UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 10, 2006
DATA SYSTEMS & SOFTWARE INC.
(Exact name of Registrants as Specified in their Charters)
Delaware 0-19771 22-2786081
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(States or Other Jurisdiction (Commission file Numbers) (IRS Employer
of Incorporation) Identification Nos.)
200 Route 17, Mahwah, New Jersey 07430
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(Address of Principal Executive Offices) (Zip Code)
Registrants' telephone number, including area code (201) 529-2026
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-2 under the Exchange Act (17 CFR
240.14a-2)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into Material Definitive Agreement.
Item 1.02. Termination of a Material Definitive Agreement
Item 2.01. Completion of Acquisition or Disposition of Assets
Item 5.02. Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
1. Sale of Databit Subsidiary; Related Transactions. On March 10, 2006 the
Registrant entered into a Stock Purchase Agreement dated as of March 9, 2006
(the "Stock Purchase Agreement"), for the sale of all the outstanding capital
stock of its Databit Inc. subsidiary ("Databit") to Shlomie Morgenstern,
President of Databit and a Vice President of the Registrant. The transactions
contempalted under the SPA, and the related transactions to which the Regstrant,
Shlomie Morgenstern and George Morgenstern were party and which are described in
this Report (collectively, the "Transactions"), were consummated on March 10,
2006.
The closing of the Transactions was conditioned, among other things, on
the following:
(a) Termination of the Employment Agreement dated August 19, 2004
among Shlomie Morgenstern, Databit and the Registrant and the release of the
Registrant from any and all liability thereunder (other than under the related
stock option and restricted stock agreements which would be modified as
described below) including the waiver by Shlomie Morgenstern of any and all
severance or change of control payments to which he would have been entitled to
thereunder.
(b) Amendment of the option and restricted stock agreements between
the Registrant and Sholmie Morgenstern to provide for acceleration of any
unvested grants on the closing of the Transactions and for all options to be
exercisable through 18 months from the closing.
(c) The assignment to and assumption by Databit of the obligations
of Registrant to George Morgenstern under the Employment Agreement between the
Registrant and George Morgenstern dated January 1, 1997, as amended (the "GM
Employment Agreement") upon the following terms:
(i) Reduction of the amounts owed to George Morgenstern under
the GM Employment Agreement by the lump sum payment described below and the
modifications to options and restricted stock agreements described below.
(ii) A release by George Morgenstern releasing Registrant from
any and all liability and obligations to him under the GM Employment Agreement,
subject to a lump sum payment of $600,000.
(d) The assumption by Databit of the Registrant's obligations under
the Registrant's leases for the premises in New York City and Mahwah, New Jersey
premises, which provide for aggregate rents of approximately $450,000 over the
next three years.
(e) The delivery by John A. Moore and the other reporting persons on
the Schedule 13D dated June 30, 2005 (filed July 11, 2005) of consent agreements
manifesting approval of the Transactions and their fairness, and agreeing not to
institute any claim against the parties to the Transactions arising from the
Transactions, subject to the fulfillment of certain conditions specified in such
consents.
(f) The amendment of the option agreement with George Morgenstern
dated December 30, 2004 to provide for the acceleration of the 60,000 options
that are not currently vested and the extension of the exercise period for all
options held by George Morgenstern to the later of (i) September 2009 and (ii)
18 months after the cessation of service under the new consulting agreement
described below.
(g) The amendment of the Restricted Stock Agreement dated August 31,
1998 between George Morgenstern and the Registrant to provide for the removal of
any vesting conditions from the 20,000 shares still subject to such
conditions.
(h) Execution and delivery by George Morgenstern and the Registrant
of a new consulting agreement for a period of two years, pursuant to which
George Morgenstern would serve as a consultant to the Registrant, primarily to
assist in the management of the Registrant's dsIT subsidiary, which agreement
will provide for compensation of $1.00 per year plus a non-accountable expense
allowance of $65,000 per year to cover expected costs of travel and other
expenses.
In connection with its approval of the Transactions, the Board of
Directors of the Registrant also approved the following: (i) the call of the
2006 annual meeting of the stockholders for as soon as practicable; (ii) the
appointment of John A. Moore as the Registrant's representative on the Board of
Directors of Comverge Inc.; and (iii) the creation of a Nominations Committee to
select the slate of nominees to appear on the management proxy for the 2006
annual shareholder meeting and the appointment of John A. Moore and George
Morgenstern to such committee.
The Transactions were approved by a special committee comprised only of
independent directors of the Board acting with the advice of a financial advisor
and special counsel engaged by the committee.
The foregoing description is qualified in its entirety by reference to the
agreements filed as exhibits herewith, which are incorporated herein by
reference.
2. Changes of Executive Officers; Board of Directors. Effective the
consummation of the Transactions, (i) George Morgenstern ceased to serve as a
President and CEO of the Registrant but will continue to serve as a member of
the Board of Directros and as Chairman of the Board, (ii) Shlomie Morgentern
ceased to serve as Vice President--Operations of the Registrant will no longer
act as an officer or director of any of its subsidiaries, and (iii) John A.
Moore was appointed President and Chief Executive Officer and as a director of
the Registrant.
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3. Biographical Information for John A. Moore. Mr. Moore is the President
and founder of Wilmington Scientific and of Edson Moore Healthcare Ventures. Mr.
Moore has led a diverse career in investment banking, private venture capital
and business management. He is an active investor in emerging growth companies.
He is currently President of Edson Moore Healthcare Ventures which he founded to
acquire $150 million of drug delivery assets from Elan Pharmaceuticals in 2002.
He was Chairman and EVP of ImaRx Therapeutics from February 2004 to February
2006. He was Chairman of Elite Pharmaceuticals (AMEX-ELI) from February 2003 to
October 2004. He is currently Chairman of Optimer, Inc. a consumer products
company and a Director of ImaRx Therapeutics, AGI Dermatics, Voltaix, Inc. and
Medihut (MHUT.PK). Mr. Moore has a B.A. in History of Economics from Rutgers
University.
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Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(b) Pro forma financial information
The required pro forma financial information will be provided by amendment
as soon as practicable after release of the Registrant's financial
statements for the year ended December 31, 2005.
(d) Exhibits
10.1 Stock Purchase Agreement dated as of March 9, 2006 by and between
Shlomie Morgenstern, Databit Inc., and Data Systems & Software Inc.
10.2 Termination and Release Agreement dated as of March 9, 2006 by and
between Shlomie Morgenstern and Data Systems & Software Inc.
(included as Exhibit A to the Stock Purchase Agreement).
10.3 Amendment Agreement to GM Employment Agreement dated as of March 9,
2006 by and between George Morgenstern and Data Systems & Software
Inc. (included as Exhibit B to the Stock Purchase Agreement).
10.4 Amendment Agreement to Purchaser Option Agreements and Restricted
Stock Award Agreement dated as of March 9, 2006 by and between
Shlomie Morgenstern and Data Systems & Software Inc. (included as
Exhibit C to the Stock Purchase Agreement).
10.5 Amendment Agreement to GM Option Agreements and Restricted Stock
Agreement date March 9, 2006 by and between George Morgenstern and
Data Systems & Software Inc. (included as Exhibit D to the Stock
Purchase Agreement).
10.6 Consulting Agreement dated March 9, 2006 by and between George
Morgenstern and Data Systems & Software Inc. (included as Exhibit E
to the Stock Purchase Agreement).
10.7 Form of Consent Agreement (included as Exhibit F to the Stock
Purchase Agreement).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on this 16th day of March 2006.
DATA SYSTEMS & SOFTWARE INC.
By: /s/ Michael Barth
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Name: Michael Barth
Title: Chief Financial Officer
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