SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
DATA SYSTEMS & SOFTWARE INC.
--------------------------------------------------------------------------------
(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:
DATA SYSTEMS & SOFTWARE INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 8, 2003
The Annual Meeting of Stockholders of Data Systems & Software Inc. (the
"Company") will be held at the DoubleTree Hotel, 180 Route 17 South, Mahwah, New
Jersey, on Monday, December 8, 2003, at 9:30 a.m., for the following purposes:
(1) To elect four directors to hold office until the next
annual meeting of stockholders and until their successors have been
duly elected and qualified; and
(2) To consider and act upon such other and further matters as
may properly come before the meeting or any postponements or
adjournments thereof.
Only stockholders of record at the close of business on November 7,
2003, are entitled to notice of and to vote at the meeting or any postponements
or adjournments thereof.
Regardless of how many shares you own, your vote is very important.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE. No additional postage is required.
BY ORDER OF THE BOARD OF DIRECTORS,
SHELDON KRAUSE
Secretary
November 14, 2003
Mahwah, New Jersey
DATA SYSTEMS & SOFTWARE INC.
200 Route 17
Mahwah, New Jersey 07430
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Data Systems & Software Inc.,
a Delaware corporation (the "Company" or "DSSI"), to be voted at the Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held at the
DoubleTree Hotel, 180 Route 17 South, Mahwah, New Jersey, on Monday, December 8,
2003, at 9:30 a.m., and any postponements or adjournments thereof. This Proxy
Statement and the accompanying materials are being mailed on or about November
14, 2003, to holders of record of the Common Stock, par value $.01 per share, of
the Company (the "Common Stock") as of the record date.
The record date (the "Record Date") for determining stockholders
entitled to notice of, and to vote at, the Annual Meeting has been established
as the close of business on November 7, 2003. On that date, 7,902,025 shares of
Common Stock of the Company were outstanding and entitled to vote. Holders of
record of Common Stock on the Record Date will be entitled to one vote for each
share held on all matters properly brought before the Annual Meeting.
The presence at the Annual Meeting, in person or represented by proxy,
of a majority of the outstanding shares of Common Stock entitled to vote thereat
will constitute a quorum for the transaction of business. If a share is deemed
present at the Annual Meeting for any one matter, it will be deemed present for
purposes of determining the presence of a quorum for all other matters presented
to the meeting. Votes withheld from any nominee for election as a director,
abstentions, and shares held by a nominee for a beneficial owner that are voted
on any matter which may come before the meeting will be deemed present for
purposes of determining the presence of a quorum.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. With respect to the election of directors, stockholders may
vote in favor of all nominees, withhold their votes as to all nominees or
withhold their votes as to specific nominees. Stockholders should specify their
choices on the accompanying proxy card. If no specific instructions are given,
the shares represented by a signed proxy will be voted FOR the election of all
management nominees for election as directors, except as otherwise required by
law. Directors will be elected at the Annual Meeting by a plurality of the votes
cast. Any stockholder of record returning the accompanying proxy card may revoke
such proxy at any time prior to its exercise by (i) giving written notice to the
Company of such revocation, (ii) voting in person at the Annual Meeting or (iii)
executing and delivering to the Company a later-dated proxy. Written revocations
and later-dated proxies should be sent to Data Systems & Software Inc., 200
Route 17, Mahwah, New Jersey 07430, Attention: Secretary.
A beneficial owner of Common Stock who hold his shares through a broker
or other nominee in "street name" who wishes to vote his shares at the Annual
Meeting must contact his broker or nominee and obtain a legal proxy to vote such
shares at the Annual Meeting. This legal proxy must be presented to the
Inspector of Voting at the Annual Meeting. A beneficial owner who does not hold
a legal proxy will not be permitted to vote his shares at the Annual Meeting.
Commencing ten days before the date of the Annual Meeting, an
alphabetical list of the names and addresses of the stockholders of record of
the Company as of the Record Date will be available at the principal executive
offices of the Company, 200 Route 17, Mahwah, New Jersey 07430, for inspection
by any stockholder during normal business hours for any purpose germane to the
Annual Meeting.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the notes thereto set forth information, as of
October 31, 2003 (except as otherwise set forth herein), concerning beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of Common Stock by (i) each director of the Company and each nominee for
director, (ii) each of the executive officers of the Company named in the
Summary Compensation Table under "Executive and Director Compensation," (iii)
all executive officers and directors of the Company as a group, and (iv) each
holder of 5% or more of the Company's outstanding shares of Common Stock.
Name and Address Number of Shares of Percentage of
of Common Stock Common Stock
Beneficial Owner(1)(2) Beneficially Owned(2) Outstanding(2)
---------------------- --------------------- --------------
George Morgenstern 781,304(3) 9.3%
Howard Gutzmer 676,291(4) 8.6%
5550 Oberlin Drive
San Diego, CA 92121
Dimensional Fund Advisors Inc. 492,100(5) 6.2%
1299 Ocean Avenue
Santa Monica, CA 90401
Avi Kerbs 7,500(6) *
Elihu Levine 45,970(7) *
Shane Yurman - -
Shlomie Morgenstern 71,000(8) *
Yacov Kaufman 205,000(9) 2.5%
Robert M. Chiste 175,000(10) 2.2%
Jacob Neuwirth 60,870 *
All executive officers and directors of the
Company as a group (8 people) 1,201,470 13.8%
------------
* Less than 1%
(1) Unless otherwise indicated, business address is in care of the Company.
(2) Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares indicated. For purposes of this table, a person
or group of persons is deemed to have "beneficial ownership" of any shares
as of a given date which such person has the right to acquire within 60 days
after such date. Percentage information is based on the number of Shares
outstanding as of November 7, 2003.
(3) Consists of (i) 261,854 shares held by Mr. Morgenstern, including 20,000
shares received by Mr. Morgenstern pursuant to a restricted stock grant
which are not yet fully vested, (ii) 497,250 options exercisable within 60
days of October 31, 2003 held by Mr. Morgenstern and (iii) 22,200 shares
owned by Mr. Morgenstern's wife.
(4) Based on information in Amendment No. 2 to Schedule 13G filed on January 27,
2003. Consists of (i) 60,340 shares owned by Mr. Gutzmer (including shares
held in his IRA), (ii) 508,125 shares owned by the Gutzmer Family Trust, of
which Mr. Gutzmer is a co-trustee, (iii) 64,950 shares held in an IRA of Mr.
Gutzmer's wife; (iv) 37,576 shares owned by a corporation of which Mr.
Gutzmer is an executive officer, director and principal shareholder and (v)
5,300 shares owned by a limited partnership, the corporate general partner
of which Mr. Gutzmer is the sole director.
(5) Based on information in Amendment No. 2 to Schedule 13G filed on February
11, 2003.Consists of options exercisable within 60 days of October 31, 2003.
(7) Consists of (i) 40,000 shares owned by Mr. Levine and his wife in a joint
account, (ii) 1,180 shares held in an IRA of Mr. Levine, (iii) 3,000 shares
owned by Mr. Levine's wife and (iv) 1,790 shares held in an IRA of Mr.
Levine's wife.
(8) Consists of 1,000 shares and 70,000 options exercisable within 60 days of
October 31, 2003 held by Mr. Shlomie Morgenstern.
-2-
(9) Consists of options exercisable within 60 days of October 31, 2003 held by
Mr. Kaufman.
(10)Consists of 100,000 shares and 75,000 options exercisable within 60 days of
October 31, 2003 held by Mr. Chiste.
PROPOSAL 1
ELECTION OF DIRECTORS
The whole Board of Directors of the Company is currently comprised of
five seats, one of which is vacant. The vacancy initially resulted from the
death of one of our directors in June 2002. The Board of Directors has nominated
the four current directors, George Morgenstern, Avi Kerbs, Elihu Levine and
Shane Yurman, for election as directors at the Annual Meeting. All nominees have
consented to be named and serve if elected.
With respect to the election of directors, stockholders may vote in
favor of all nominees, withhold their votes as to all nominees or withhold their
votes as to specific nominees. Stockholders cannot vote for more than the four
nominees named in this proxy statement. Stockholders should specify their
choices on the accompanying proxy card. If no specific instructions are given,
the shares represented by a signed proxy will be voted FOR the election of all
four management nominees. If any nominee becomes unavailable for any reason to
serve as a director at the time of the Annual Meeting (which event is not
anticipated), proxies will be voted in the discretion of the persons acting
pursuant to the proxy for any nominee who shall be designated by the current
Board of Directors as a substitute nominee. Only persons nominated in accordance
with the notice requirements of the Company's By-laws are eligible for election
as directors of the Company. All nominations for director that are not timely
delivered to the Company or that fail to comply with the requirements set forth
in the Company's By-laws will be excluded from the Annual Meeting, as provided
in the By-laws. A copy of the Company's By-laws can be obtained from the
Secretary of the Company, 200 Route 17, Mahwah, New Jersey 07430. Directors will
be elected at the Annual Meeting by a plurality of the votes cast (i.e., the
four nominees receiving the greatest number of votes will be elected as
directors).
-3-
Certain Information Regarding Directors and Officers
Set forth below is certain information concerning the nominees for
director and certain officers of the Company:
Name Age Position
---- --- --------
George Morgenstern 70 Director, Chairman of the Board, President and Chief Executive
Officer; Chairman of the Board of our dsIT Technologies Ltd.
subsidiary (formerly Decision Systems Israel Ltd.) ("dsIT"); and
director of our Comverge, Inc. subsidiary (formerly Comverge
Technologies, Inc.) ("Comverge")
Avi Kerbs 56 Director
Elihu Levine 71 Director
Shane Yurman 55 Director
Shlomie Morgenstern 41 Vice President-Operations
Jacob Neuwirth 56 Chief Executive Officer and President of dsIT
Yacov Kaufman 46 Vice President and Chief Financial Officer; and Vice President
and Chief Financial Officer of dsIT
Robert M. Chiste 56 Chief Executive Officer and director of Comverge
GEORGE MORGENSTERN has been our Chairman of the Board since June 1993,
and has been our President and Chief Executive Officer since our incorporation
in 1986. Mr. Morgenstern also serves as Chairman of the Board of dsIT, and as
director of Comverge. Mr. Morgenstern was the Chairman of the Board of Comverge
from October 1997 to April 2003.
AVI KERBS has served as one of our directors since December 2002. Since
1991, Mr. Kerbs has been the Chief Executive Officer and President of Teuza
Management and Development 1991 Ltd., a company that manages a family of Israeli
venture capital funds. Mr. Kerbs is a director of Nova Measuring Instruments
Ltd.
ELIHU LEVINE has been one of our directors since April 29, 2003. From
1992 to his retirement in January 1997, Mr. Levine was an officer and employed
in various executive capacities by International Data Operations, Inc., one of
our subsidiaries. Mr. Levine also served as a director of Tower Semiconductor
Ltd. from March 1997 to January 2000.
SHANE YURMAN has been one of our directors since April 30, 2003. Mr.
Yurman, who is a certified public accountant, has been engaged in public
accounting since 1971. Mr. Yurman is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified Public
Accountants where he previously served as a member of the Auditing Standards and
Procedures Committee.
SHLOMIE MORGENSTERN has been our Vice President-Operations since
February 2000 and was one of our directors from November 2001 until December
2002. Mr. Morgenstern also serves as President of our Databit subsidiary. Since
1996, Mr. Morgenstern has been employed by us in various administrative
capacities. Mr. Morgenstern is the son of George Morgenstern, our Chairman of
the Board, President and Chief Executive Officer.
-4-
JACOB NEUWIRTH has been Chief Executive Officer and President of dsIT
since December 2001. From 1994 to 2001, he was the founder and President of
Endan IT Solutions Ltd., an Israeli IT solutions provider specializing in
billing and healthcare IT solutions, which was acquired by dsIT in December
2001.
YACOV KAUFMAN has been our Executive Vice President since December 2001
and our Chief Financial Officer since February 1996. Mr. Kaufman has also served
as a Vice President of dsIT from 1992 to 2001 and as Chief Financial Officer of
dsIT since 1990, having served as Controller of dsIT since 1986.
ROBERT M. CHISTE was appointed Chief Executive Officer and elected
director of Comverge in September 2001. Mr. Chiste served as Vice Chairman of
Comverge from September 2001 to April 2003. From 1999 to 2001, Mr. Chiste served
as Chairman and Chief Executive officer of FuelONE, Inc., a technology oriented
fuel and lubricant wholesale distribution company that he co-founded, and as
Chairman of FuelQuest Inc., a related e-commerce enterprise. In 1998 Mr. Chiste
co-founded Tri-Active Inc., a network and systems management company. From 1997
to 1998, Mr. Chiste served as Executive Vice President at Philip Services Corp.
and as President of their Industrial Services/Utilities Management Division. Mr.
Chiste is also a director of Pentacon, Inc.
On January 21, 2003, Dr. Robert L. Kuhn resigned from our Board of
Directors. Dr. Kuhn had served as a director since 1986 and as Vice Chairman of
the Board of Directors since 1994. On April 28, 2003, Dr. Allen I. Schiff
resigned from our Board of Directors. Dr. Schiff had served as a director since
1992 and was chairman of our Audit and Compensation Committees. On April 29,
2003, Dr. Susan M. Malley resigned from our Board of Directors. Dr. Malley had
served as a director since 1998 and was a member of our Audit and Compensation
Committees.
We have an Audit Committee that was established by our Board of
Directors for the purpose of overseeing our accounting and financial reporting
processes and audits of our financial statements of the issuer. The members of
the Audit Committee are Messrs. Yurman (Chairman), Kerbs and Levine. Each of the
members of the Audit Committee meets the independence and experience
requirements of Marketplace Rule 4350(d)(2) of the NASDAQ Stock Market, Inc.
MEETINGS OF THE BOARD OF DIRECTORS
During 2002, the Board of Directors of the Company met ten times. Each
incumbent director who served as a director in 2002 attended at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors held
(during the 2002 period for which the director served)and (ii) the total number
of meetings held during 2002 by each committee of the Board of Directors on
which such director served (during the period for which such director served).
INFORMATION CONCERNING CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has a standing Audit Committee
comprised of Mr. Yurman, who serves as Chairman, Mr. Kerbs and Mr. Levine.
During 2002, the Audit Committee met four times.
In accordance with Nasdaq rules, the Company has adopted a formal
written audit committee charter setting forth the responsibilities of the Audit
Committee. The Audit Committee is charged with assisting the directors in
fulfilling their responsibilities to stockholders and others relating to the
corporate accounting and reporting practices of the Company and the quality and
integrity of the financial reports of the Company. The Audit Committee is
responsible for selecting, evaluating and replacing the independent auditors and
with overseeing the independence of the auditors. The Audit Committee reviews
with the Company's independent auditors the Company's accounting practices and
policies; reviews the report of the Company's independent auditors on the
Company's year-end financial statements; examines from time to time, in
consultation with the Company's financial officers and its
-5-
independent auditors, the Company's overall accounting and financial controls;
and is available to the Company's independent auditors for consultation. The
Audit Committee must have at least three members, all of whom must be
independent and must be financially literate. At least one member of the Audit
Committee must have a background in finance or accounting. All the members of
the Audit Committee have the requisite independence and financial literacy and
at least one member has the requisite accounting or finance background.
The Board of Directors has also established a Compensation and Stock
Option Committee (the "Compensation Committee") which administered the Company's
stock-based compensation plans and approved awards of stock options and other
stock-based compensation, and reviewed and approved the employment terms and
compensation of executive officers of the Company. During 2002, the Compensation
Committee was inactive and the activities previously assumed by it were
performed by the full Board of Directors. The Compensation Committee did not
meet during 2002, and is currently inactive.
The Board of Directors does not have a nominating committee.
EXECUTIVE AND DIRECTOR COMPENSATION
COMPENSATION OF DIRECTORS
Each of our directors is generally paid $1,000 for each Board or
committee meeting, which he or she attends (except if a committee meeting is
held on the same day as a Board meeting) and is reimbursed for associated
out-of-pocket expenses. Dr. Schiff was paid $24,000 per annum for his service as
Chairman of both the Audit Committee and the Compensation Committee, and was
paid a total of $27,000 in 2002 in connection with his service on the Board of
Directors and Board committees. Dr. Kuhn was paid $39,580 in 2002 in connection
with his service on the Board and as our Vice Chairman. Dr. Malley was paid a
total of $17,000 in 2002 in connection with her service on the Board of
Directors and Board committees. Mr. Kerbs and Mr. Levine are each paid $6,000
per annum plus meeting fees in connection with their service on the Board and
Audit Committee. Mr. Yurman is paid $20,000 per annum plus meeting fees for his
service on the Board and as Chairman of the Audit Committee.
In addition to the directors' fees described above, at the last Annual
Meeting of Stockholders each member of the Board of Directors who was not one of
our employees and who met certain other eligibility criteria (Mr. Kerbs, Dr.
Malley and Dr. Schiff) was granted options to purchase 7,500 shares of our
common stock at an exercise price of $1.77 per share (the fair market value of
our common stock on such date). These options were granted pursuant to our 1994
Stock Option Plan for Outside Directors described below.
Our 1994 Stock Option Plan for Outside Directors provides for awards of
non-qualified options to our directors who are not employed by us or any of our
affiliates and who meet certain other eligibility criteria. Pursuant to the
plan, (i) upon first election or appointment to the Board of Directors, each
newly elected or appointed eligible director is granted an option to purchase
7,500 shares of our common stock and (ii) immediately following each of our
Annual Meeting of Stockholders, each eligible director will generally be granted
an option to purchase 7,500 shares of our common stock. Options granted under
the plan have an exercise price per share equal to the fair market value of our
common stock on the date of issuance and are exercisable beginning on the first
anniversary of the date of the grant until the earliest of (i) ten years from
the date of grant, (ii) one year from the date on which an optionee ceases to be
an eligible director and (iii) 90 days after the date on which the optionee
ceases to be a director. The maximum number of shares of our common stock in
respect of which awards may be granted under the plan is 400,000, of which
22,500 non-expired options have been granted to date.
-6-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All matters related to the compensation of executive officers,
including the Chief Executive Officer, are acted upon by the full Board of
Directors. The mandate of our Compensation Committee of the Board of Directors,
which has been inactive since 2002, encompasses all matters related to
compensation, including determination of stock option and other stock-based
compensation and review of employment terms and compensation of executive
officers.
The following persons served both as members of our Board of Directors
and as our officers or employees in 2002: George Morgenstern (Chairman of the
Board, President and Chief Executive Officer), Mr. Sheldon Krause (Secretary)
and Mr. Shlomie Morgenstern (Vice President-Operations). Both Mr. Krause and Mr.
Shlomie Morgenstern served as directors until our annual meeting on December 3,
2002. Dr. Kuhn, who resigned as director on January 21, 2003, also served as our
Vice Chairman of the Board. During 2002, no member of the Board of Directors who
was also one of our officers participated in any deliberations of the Board of
Directors or any committee thereof relating to his own compensation or to the
compensation of any person to whom he is related. Except as described above,
each member of the Board of Directors participated in 2002 in deliberations of
the Board of Directors concerning executive officer compensation. During 2002,
Mr. George Morgenstern, Dr. Malley and Mr. Krause engaged in transactions with
us in which they were deemed to have an interest. For further information, see
"Certain Related Party Transactions" below.
EMPLOYMENT ARRANGEMENTS
George Morgenstern serves as our Chairman of the Board, President and
Chief Executive Officer pursuant to an employment agreement that commenced on
January 1, 1997 and was amended in March 2002 to extend through December 31,
2003 (the "Employment Agreement"). The Employment Agreement provides for a base
salary of $420,000 per annum (currently $470,000 due to cost of living
adjustments), subject to annual review by the Board and an annual cost of living
adjustment, plus contributions to a nonqualified retirement fund equal to 25% of
his base salary. Mr. Morgenstern's compensation pursuant to the Employment
Agreement also includes the use of two company automobiles, premium payments on
a life insurance policy owned by Mr. Morgenstern and other fringe benefits.
Pursuant to the Employment Agreement, Mr. Morgenstern may at any time
prior to December 31, 2003, elect to terminate his employment with us and
thereafter to continue to serve us as a consultant for a period (the "Consulting
Period") ending on December 31 of the seventh year following the year in which
he first commences to serve as a consultant. During the Consulting Period, Mr.
Morgenstern would be entitled to receive an annual consulting fee plus
contributions to a nonqualified retirement fund and fringe benefits on the same
basis as during the term of his employment as described above. Mr. Morgenstern's
annual consulting fee during the Consulting Period would be equal to 50% of his
annual salary in effect immediately prior to the Consulting Period through the
end of the fourth full calendar year of the Consulting Period, and 25% of such
annual salary for the remainder of the Consulting Period (subject in all cases
to an annual cost of living adjustment). However, if Mr. Morgenstern elects to
become a consultant following a breach by the Company of its obligations under
the Employment Agreement or following a change in control of the Company (as
defined in the Employment Agreement), Mr. Morgenstern would be entitled to
receive his full annual salary until December 31, 2003, and thereafter to
receive an annual consulting fee as described above for the balance of the
Consulting Period. We are obligated under the Employment Agreement to fund at
the beginning of the Consulting Period all amounts to become payable to Mr.
Morgenstern for consulting services and to fund upon his death all amounts
payable to his estate. During the term of the Employment Agreement (including
any Consulting Period), Mr. Morgenstern may not engage in a business that is in
substantial and direct competition with our business or any of our subsidiaries.
-7-
In addition to the compensation provided for under the Employment
Agreement, in January 2000 the Board approved a bonus of $150,000 if Mr.
Morgenstern remained employed full-time as President and Chief Executive Officer
of the Company through December 31, 2001, which bonus was paid in 2001, and a
$150,000 bonus if an equity financing of Comverge of at least $10 million was
completed by December 31, 2000, which bonus was not paid as no qualifying equity
financing was completed by the end of 2000.
Yacov Kaufman serves as Vice President and Chief Financial Officer of
the Company and as Executive Vice President and Chief Financial Officer of dsIT
pursuant to an employment agreement entered into with the Company on January 1,
1999, and amended in June 2002. The amendment to Mr. Kaufman's employment
agreement provides for an increase in Mr. Kaufman's salary to $200,000
retroactive to January 1, 2002.
We make certain payments to fund in part our future severance
obligations to Mr. Kaufman. If Mr. Kaufman's employment is voluntarily
terminated or is terminated by us for reasons other than for cause, we must pay
him an amount equal to 150% of his last month's salary multiplied by the number
of years (including partial years) that Mr. Kaufman worked for us. This
severance obligation, which is customary for executives of Israeli companies,
would be reduced by the amount contributed by us to certain Israeli pension and
severance funds pursuant to Mr. Kaufman's employment agreement. As of December
31, 2002, the unfunded portion of our severance obligation was $71,000. In
addition, the agreement with Mr. Kaufman provides for an additional payment
equal to six times his last month's total compensation, payable at the end of
his employment with us, unless he is terminated by us for cause.
In addition to the compensation provided for by Mr. Kaufman's
employment agreement, in November 2001, the Board approved a $50,000 bonus and
the grant of options to purchase 15,000 shares of our common stock to Mr.
Kaufman in connection with his efforts with respect to the acquisition by our
Israeli subsidiary, dsIT, of Endan IT Solutions Ltd. The payment of the bonus
and the grant of the options were both contingent upon the closing of the Endan
acquisition, which occurred in December 2001.
Robert Chiste serves as Chief Executive Officer of Comverge pursuant to
an employment agreement that commenced on September 1, 2001. Under a voting
agreement entered into by us and other investors in Comverge, Mr. Chiste serves
as a director of Comverge. Mr. Chiste's employment agreement provides for a base
salary of $250,000 per annum, plus an annual bonus of up to 75% of his base
salary contingent upon achieving performance objectives established each year by
the Board of Directors of Comverge.
In connection with the signing of his employment agreement, Mr. Chiste
also received an option to purchase shares of Comverge common stock,
representing 6% of the outstanding Comverge shares (on a fully diluted basis),
at an exercise price of $1.20 per share. The exercise price was determined based
upon a valuation of Comverge as of July 31, 2001, performed by an independent
appraiser. Mr. Chiste's Comverge option will be adjusted to protect against
dilution from issuances of common stock until Comverge's paid in capital is at
least $15 million. Under the agreement, Mr. Chiste also received a grant under
our 1994 Stock Incentive Plan of a stock option to purchase 75,000 shares of our
common stock at an exercise price of $5.95. In addition to the options, pursuant
to his employment agreement, Mr. Chiste entered into an agreement with us for
the purchase of 50,000 shares of our common stock at a price of $5.95 per share.
Mr. Chiste paid for the common stock by assigning and endorsing to us a 6%
subordinated note of a publicly traded company, due April 2010, in the principal
amount of $297,500. The subordinated note, which is assignable, is due April
2010; pays interest semi-annually (in cash or by an additional promissory note);
and is subject to repayment in four annual payments beginning in April 2006. The
issuer of the note subsequently declared bankruptcy and the Company has written
off the recorded value of the note.
-8-
Mr. Chiste will receive retirement payments from Comverge if, after his
60th birthday, his employment agreement is terminated without cause or because
of Mr. Chiste's death or disability. Mr. Chiste will not receive any retirement
payment if his employment is terminated prior to his 60th birthday. Mr. Chiste's
retirement payments will be made over seven years commencing on the date of
termination. During the first four years, Mr. Chiste's retirement payments will
be equal to 50% of his base salary in effect at the time of his termination, and
during the last three years the retirement payments will be equal to 25% of the
base salary.
Mr. Chiste may in certain circumstances receive severance payments from
Comverge. Under his employment agreement, if Mr. Chiste's employment is
terminated without cause, Comverge would have to pay Mr. Chiste one year of base
salary, or if there has been an IPO for Comverge, three years of base salary
plus up to 15% of any excess parachute payment, plus, if such termination is
before December 31, 2002, his base salary through December 31. Mr. Chiste will
not be entitled to any severance payments under his employment agreement if he
voluntarily terminates his employment agreement.
The stock option agreements with our executive officers generally
provide for accelerated vesting in the event we have a change in control.
Jacob Neuwirth serves as President and Chief Executive Officer of dsIT
pursuant to an employment agreement that commenced on December 16, 2001. Mr.
Neuwirth's employment agreement provides for a base salary which is denominated
in linked NIS equivalent to $165,000 per annum, linked to the Israeli Consumer
Price Index, plus an annual bonus of 10%, should dsIT's annual net profit exceed
the NIS equivalent of $317,000 and a 20% bonus should it exceed the NIS
equivalent of $633,000. In addition, the agreement with Mr. Neuwirth provides
for six months advance notice of termination of employment by either side, and
an additional payment equal to six times his last month's total compensation,
payable upon any termination of his employment.
Under his employment agreement, Mr. Neuwirth is entitled to a loan of
up to $100,000 from dsIT. As of December 31, 2002 the loan, which is denominated
in linked NIS, bears interest at 4% and has no fixed maturity date, had an
outstanding balance of $48,000. No amounts have been drawn upon under this loan
during the last two fiscal years, and variations in the outstanding principal
amount between periods have solely been due to currency exchange rate
fluctuations.
-9-
EXECUTIVE COMPENSATION
The following table sets forth for the periods indicated information
concerning the compensation of our Chief Executive Officer and the four other of
our officers who received in excess of $100,000 in salary and bonus during 2002.
SUMMARY COMPENSATION TABLE
Long Term All Other
Annual Compensation Compensation Awards Compensation ($)
------------------- ----------------
Securities
Name and Restricted Stock Underlying
Principal Position Year Salary ($) Bonus ($) Awards ($) Options (#)
------------------ ---- ---------- --------- ---------- -----------
George Morgenstern 2000 446,600 550,000 - - 193,900
Chief Executive 2001 446,351 150,000 - - 187,721
Officer 2002 465,700(1) - - - 182,860(2)
Yacov Kaufman 2000 150,000 32,000 - - 27,400
Chief Financial Officer 2001 158,403 50,000 - - 48,400
2002 170,294 - - - 37,899(3)
Shlomie Morgenstern 2000 160,000 100,000 - - -
Vice President 2001 193,500 - - (4) -
2002 204,345 15,000 - - 7,440(5)
Jacob Neuwirth 2000 - - - - -
Chief Executive Officer 2001 - - - - -
and President of dsIT 2002 174,512 - - - 39,788(3)
Robert M. Chiste 2000 - - - - -
Chief Executive Officer 2001 (6) - - - -
of 2002 250,000 - - - $32,359(7)
Comverge, Inc.
-------------
(1) Includes a catch up of contractual cost of living adjustments for prior
years that had not been taken in the amount of $21,200.
(2) Consists of (i) $120,800 in contributions to a non-qualified retirement
fund, (ii) $28,000 in life insurance premiums, (iii) $22,600 paid for
accrued vacation, (iv) $3,000 in director's fees and (v) $8,460 imputed
value of automobile fringe benefits.
(3) Represents primarily contributions to severance and pension funds and
automobile fringe benefits. Contributions to severance and pension funds are
made on substantially the same basis as those made on behalf of all Israeli
executives.
(4) In 2001, Mr. Shlomie Morgenstern was awarded options to purchase shares of
Comverge representing 0.5% of the outstanding stock of Comverge, at an
aggregate exercise price of $35,340. Mr. Shlomie Morgenstern served as a
director of Comverge from June 1999 until April 2003.
(5) Consists of $3,000 in director's fees and $4,400 imputed value of automobile
fringe benefits.
(6) Mr. Chiste joined Comverge in September 2001.
(7) Consists of rental and travel allowances.
-10-
The following tables summarize (i) the options granted in 2002 to the
executive officers named in the Summary Compensation Table above, (ii) the
potential value of these options at the end of the option term assuming certain
levels of appreciation of our common stock, (iii) the number of shares acquired
by such named executive officers upon the exercise of options in 2002 and the
value realized thereon, and (iv) the number and value of all options held by
such executive officers at the end of 2002.
OPTION/SAR GRANTS IN 2002
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants(1) for Option Terms(2)
----------------------------------------------------------- -----------------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (#) Year (%) ($/Share) Date 5% ($) 10% ($)
---- ----------- -------- --------- ---------- ------ -------
Yacov Kaufman(3) 25,000 100% $5.25 7/31/07 41,846 94,221
-------------
(1) We did not grant any stock appreciation rights (SARs) in 2002.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% compounded annual appreciation rates prescribed by the SEC and,
therefore, are not intended to forecast possible future price appreciation,
if any, of our common stock.
(3) Represents extension of expiring options at their original exercise price.
AGGREGATED OPTION EXERCISES IN 2002
AND FISCAL YEAR END STOCK OPTION VALUES
Number of
Shares
Acquired Value Number of Securities
Upon Realized Underlying Unexercised Value of Unexercised
Name Exercise (#) ($) Options at Year End (#) In-the-Money Options ($) (1)
---- ------------ -------- ---------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
- - 380,583 116,667 - -
Yacov Kaufman - - 185,666 19,334 - -
Robert Chiste - - 50,000 25,000 - -
Shlomie Morgenstern - - 60,833 9,167 - -
-------------
(1) Based on the closing price for our common stock on December 31, 2002 of
$0.85 per share.
-11-
CERTAIN RELATED PARTY TRANSACTIONS
During 2002, we paid approximately $630,000 for legal services rendered
and reimbursement of out-of-pocket expenses to Ehrenreich Eilenberg & Krause
LLP, a law firm in which Sheldon Krause, a former director and our Secretary, is
a member. Such fees related to services rendered by Mr. Krause and other members
and employees of his firm, as well as certain special and local counsel retained
and supervised by his firm who performed services on our behalf. Mr. Krause is
the son-in-law of George Morgenstern, our Chairman, President and Chief
Executive Officer.
As reported on the Summary Compensation Table above, Shlomie
Morgenstern, the son of George Morgenstern, our Chairman, President and Chief
Executive Officer, received compensation during 2002 in connection with his
position as Vice President-Operations.
In March 2001, we retained Malley Associates Capital Management, an
asset management firm that is controlled by Susan L. Malley, then one of our
directors, to provide discretionary asset management services to us with respect
to $2 million of our funds. The agreement provided for a management fee of 1%
per annum of the amount under management. In September 2002, the arrangement was
terminated. Malley Associates no longer provides any asset management or other
services to us. The aggregate fees paid to Malley Associates from March 2001
through September 2002 were $25,407. Dr. Malley resigned as a director on April
29, 2003.
In July 2001, we entered in an arrangement with a corporation
wholly-owned by George Morgenstern, our Chairman, President and Chief Executive
Officer, for use by such corporation of approximately 400 of the approximately
4,650 square feet leased by us in New York City. Based on our lease for our New
York City premises, the pro rata full rental cost (including electricity) of the
portion of the premises utilized by the corporation was approximately $1,450 per
month. In October 2002, we entered into a written agreement for the
corporation's use of its portion of the premises. The agreement provided for the
payment to us of $2,000 per month and was terminable by either party on 60 days
written notice to the other. As of February 2002, the corporation gave us notice
of its intent to vacate the space in April 2002. During 2002 we received $35,000
of rent from this corporation.
In January 2000, our Comverge subsidiary extended loans of $9,925 each
evidenced by a promissory note to both our Chief Executive Officer and Chief
Financial Officer to finance the purchase of Comverge common stock. The loans
had an initial maturity date of January 3, 2002 and were extended at that time
to mature on January 3, 2004. The loans bear interest at 4.25% per annum,
payable at maturity.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Company's compensation package for its executive officers consists
of three components: (i) base salary; (ii) cash bonus; and (iii) options and/or
stock grants. Under guidelines previously adopted by the Compensation Committee,
the compensation decisions with respect to the Company's executive officers are
generally to be made at the first regularly scheduled Board or Committee meeting
(which ever is earlier) in each fiscal year. Prior to that Board meeting, the
chief executive officer of the Company is to submit to the Board or Committee
recommendations for the compensation package of executive officers. The chief
executive officer's recommendations are to include bonus recommendations for the
preceding fiscal year. The independent directors evaluate the chief executive
officer's recommendations, considering the following factors: (i) stock price
performance over the previous 12 months; (ii) corporate performance as measured
primarily by cash flow from operations; and (iii) the extent to which the
executive officer has achieved performance goals established for that year
(whether established by an employment agreement or by the Board). The Committee
has established a target cap on the annual grant
-12-
of options and/or restricted stock grants to executive officers of 2% of the
then outstanding Common Stock. During 2002, the role of the Committee was
performed by the full Board of Directors.
In July 2002 the Board extended to July 31, 2007 the expiration date of
options to purchase 25,000 shares of Common Stock that had previously been
granted to Mr. Kaufman in July 1997 pursuant to the Company's 1994 Stock
Incentive Plan. All other terms of the option, including the original exercise
price of $5.25 per share, remained the same. The extension was made in
recognition of Mr. Kaufman's dedication and efforts on behalf of the Company.
Mr. Kaufman's base salary continued at the prior year's level of $160,000.
In 2002, the Company raised Mr. Shlomie Morgenstern's base salary from
$195,000 to $205,000, in recognition of his services and as an incentive for
continued employment. In April 2003 the Company granted a $50,000 bonus to Mr.
Morgenstern to recognize Mr. Morgenstern's management of the Company's Databit
subsidiary and the performance of his duties at Comverge during 2002 and to that
date in 2003, and as an incentive for his continued employment with the Company.
In September 2001, the Company's Comverge subsidiary entered into an
employment agreement with Robert Chiste. Mr. Chiste's employment agreement
provides for a base salary of $250,000, an annual bonus of up to 75% of his base
salary based upon achieving performance goals set each year by the Comverge
Board, severance payments upon certain termination events, and reimbursement
through March 1, 2003, of up to $3,500 per month for auto, living and personal
travel expenses. The employment agreement was entered into after an extensive
search for a CEO for Comverge to build Comverge's business, benefiting the
Company and its stockholders. In December 2002, the Company authorized a grant
of 50,000 shares of Common Stock to Mr. Chiste, to reward him for his efforts on
behalf of Comverge, particularly its fundraising activities, and to align his
interests with those of the Company's shareholders. No bonus was awarded to Mr.
Chiste for 2002.
BASIS FOR CHIEF EXECUTIVE OFFICER'S COMPENSATION
During 2002, George Morgenstern, Chairman, President and Chief
Executive Officer of the Company, had no increase in salary, receiving $465,700
pursuant to an employment agreement previously entered into with the Company,
which was extended by the Board in May 2001 and again in March 2002 and now runs
through December 31, 2003. Effective August 2002, Mr. Morgenstern, along with
other senior management, voluntarily reduced his base salary by 10% as part of
cost-cutting measures. His compensation for 2002 also included payments totaling
$21,200 for prior year cost of living adjustments that he had not taken. Mr.
Morgenstern received no bonus for 2002.
BOARD OF DIRECTORS*
George Morgenstern
Avi Kerbs
-------------
* Includes only names of current directors who served during the period in which
matters covered by this Report were discussed. Mr. Kerbs' service as a
director began in December 2002.
-13-
AUDIT COMMITTEE REPORT
The Audit Committee is composed of three directors, each of whom
qualifies as an "independent director" as such term is defined in Rule
4200(a)(14) of the National Association of Securities Dealers. The Audit
Committee operates under a written charter adopted by the Board.
Management is responsible for the Company's internal controls and
financial reporting process. The external auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Audit Committee's responsibility is to monitor and oversee
these processes.
In this context, the Audit Committee has met and held discussions with
management and KPMG LLP ("KPMG"), the external auditors for the year ended
December 31, 2002. Management represented to the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, and
the Audit Committee reviewed and discussed the consolidated financial statements
with management and KPMG prior to their issuance. The Audit Committee discussed
with KPMG matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
KPMG also provided to the Audit Committee the disclosures required by
Independent Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Audit Committee discussed with KPMG that firm's
independence.
Based on the Audit Committee's discussion with management and KPMG and
the Audit Committee's review of the representation of management and KPMG to the
Audit Committee, the Audit Committee recommended to the Board, and the Board
approved, the inclusion of the audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002. In
October 2003, KPMG resigned as the Company's auditors and, as of November 12,
2003, the Company had not retained new auditors for the year ending December 31,
2003.
AUDIT COMMITTEE
Avi Kerbs*
-------------
* Mr. Kerbs is the only current director who served on the Audit Committee
during the period in which matters covered by this Report were discussed.
-14-
STOCK PRICE PERFORMANCE GRAPH
The following stock price performance graph compares the cumulative
total return of the Company's Common Stock, during the period December 31, 1997
to December 31, 2002, to the cumulative total return during such period of (i)
the Nasdaq Stock Market Index (United States and Foreign) and (ii) the Nasdaq
Computer & Data Processing Stock Index.
COMPARISION OF CUMULATIVE TOTAL RETURNS
[LINE GRAPH APPEARS HERE]
12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/29/2001 12/31/2002
DSSI 100 61.77 79.41 98.54 114.09 20
Nasdaq Computer & Data 100 178.39 392.44 180.62 145.45 100.03
Processing Stock Index
Nasdaq Stock Market Index 100 138.48 258.17 155 123.09 84.7
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires our executive officers and directors, and persons who own more
than 10% of a registered class of our equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). These persons are also required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file. Based solely on its review of such
forms received by us or written representations from certain reporting persons,
except as described below we believe that during 2002 all applicable filing
requirements were complied with by its executive officers and directors.
In 2002, Mr. Morgenstern failed to timely file four Form 4s covering
ten purchases totaling 10,200 shares of Common Stock by his wife during October
of that year.
-15-
INDEPENDENT PUBLIC ACCOUNTANTS AND AUDITORS
CHANGE IN ACCOUNTANT
On October 9, 2003, KPMG LLP ("KPMG") notified us that as of that date
it had resigned as our independent accountant.
KPMG audited the Company's financial statements for the years ended
December 31, 2000, December 31, 2001 and December 31, 2002, and provided reviews
relating to the Company's quarterly reports on Form 10-Q for the first two
quarters of 2003. The audit reports of KPMG on the Company's consolidated
financial statements for the past two fiscal years did not contain an adverse
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles, except the reports of KPMG
refer to the Company's adoption of Statements of Financial Accounting Standards
No. 141, "Business Combinations", for purchase method business combinations
completed after June 30, 2001, No. 142, "Goodwill and Other Intangible Assets",
effective January 1, 2002, and No. 145, "Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections," in 2002.
During the two most recent fiscal years and through October 9, 2003,
there were no disagreements between the Company and KPMG as to any matter of
accounting principles or practices, financial statement disclosure, or audit
scope or procedure, which disagreement, if not resolved to the satisfaction of
KPMG, would have caused it to make reference to the subject matter of the
disagreement in its reports on the financial statements for such periods within
the meaning of Item 304(a)(1)(iv) of Regulation S-K.
As a result of its resignation, we do not anticipate that a KPMG
representative will attend the meeting. Should the Company engage independent
accountants for the current fiscal year prior to the date of the Annual Meeting,
the new accountants will be invited to attend the Annual Meeting.
AUDIT FEES
The aggregate fees billed by KPMG for professional services rendered
for the audit of the Company's annual financial statements for the years ended
December 31, 2001 and 2002 and the reviews of the Company's quarterly financial
statements for those fiscal years, as well as for any other services normally
provided by the principal accountant in connection with statutory or regulatory
filings or engagements for those years (primarily relating to fees in connection
with SEC filings), totaled $228,900 and $207,900, respectively.
AUDIT-RELATED FEES
No fees were billed in 2001 or 2002 for assurance and related services
by KPMG that were reasonably related to the performance of its audit or review
of the Company's financial statements.
TAX FEES
No fees were billed in 2001 for professional services rendered by KPMG
for tax compliance, tax advice, and tax planning. In 2002, fees totaling $5,000
were billed by KPMG for such services.
-16-
ALL OTHER FEES
For the years ended December 31, 2001 and December 31, 2002, no fees
were billed by KPMG for services other than those referred to above.
STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING
Stockholders may present proposals for inclusion in the Company's 2004
proxy statement provided that (in addition to other applicable requirements)
such proposals are received by the Company in writing at its principal executive
offices no later than July 17, 2004.
Pursuant to the By-laws of the Company, stockholders who wish to
nominate any person for election to the Board of Directors or bring any other
business before the 2004 Annual Meeting must generally give notice thereof to
the Company at its principal executive offices not less than 60 days nor more
than 90 days before the date of the meeting. All nominations for director or
other business sought to be transacted that are not timely delivered to the
Company or that fail to comply with the requirements set forth in the Company's
By-laws will be excluded from the Annual Meeting, as provided in the By-laws. A
copy of the By-laws of the Company is available upon request from the Secretary
of the Company, 200 Route 17, Mahwah, New Jersey 07430.
OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters to be presented for action at the Annual Meeting other than those listed
in the accompanying Notice of Annual Meeting and described herein. If any other
matters not described herein should properly come before the meeting for
stockholder action, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in respect thereof in accordance with the Board
of Directors' recommendations.
ANNUAL REPORT
A copy of the Company's Annual Report, covering the fiscal year ended
December 31, 2002, including audited financial statements, is enclosed with this
Proxy Statement. Such report is not incorporated in this Proxy Statement and is
not a part of the proxy soliciting material.
SOLICITATION OF PROXIES
The cost of soliciting proxies for the Annual Meeting will be borne by
the Company. In addition to use of the mails, proxies may be solicited by
personal interview, telephone, telex or facsimile. The Company will, upon
request and in accordance with applicable regulation, reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation material to
the beneficial owners of stock.
BY ORDER OF THE BOARD OF DIRECTORS,
SHELDON KRAUSE
Secretary
November 14, 2003
Mahwah, New Jersey
-17-
--------------------------------------------------------------------------------
DATA SYSTEMS & SOFTWARE INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George Morgenstern, Shane Yurman and Sheldon
Krause, and each of them, with full power of substitution, as proxies, to vote
at the Annual Meeting of Stockholders of Data Systems & Software Inc. to be held
at The Double Tree Hotel, 180 Route 17 South, Mahwah, New Jersey, on Monday,
December 8, 2003, at 9:30 a.m., and any adjournments and postponements thereof,
hereby revoking all proxies heretofore given, to vote all shares of Common Stock
of the Company held or owned by the undersigned as directed on the reverse, and,
in their discretion, upon such other matters as may properly be brought before
the meeting. This proxy revokes all prior proxies given by the undersigned.
(Continued and to be signed on the reverse side)
--------------------------------------------------------------------------------
18
ANNUAL MEETING OF STOCKHOLDERS
DATA SYSTEMS & SOFTWARE INC.
December 8, 2003
Please date, sign and mail your
proxy card in the envelope provided as soon as possible.
/ Please detach along perforated line and mail in the envelope provided. /
--------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE[X]
--------------------------------------------------------------------------------
1. Election of 2. Act upon such other matters as may come
Directors Nominees: George Morgenstern before the meeting
Avi Kerbs
/ / FOR ALL NOMINEES Elihu Levine This proxy, when properly executed, will be voted
Shane Yurman as directed herein by the undersigned stockholder.
/ / WITHHOLD AUTHORITY If no direction is indicated, the proxy will be
FOR ALL NOMINEES voted for the election of the directors indicated
and for approval of the proposals presented.
/ / FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL EXCEPT" and fill in the circle next to each
nominee you wish to withhold, as shown here:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate you new address in the address space above. Please note that / /
changes to the registered name(s) on the account may not be submitted via
this method.
SIGNATURE OF STOCKHOLDER_________________DATE ____________ SIGNATURE OF STOCKHOLDER________________DATE_____________
Note: Please sign exactly as name or names appear on this proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
CORPORATE INFORMATION
-----------------------------------------------------------------------------------------------------------------------------------
HEADQUARTERS SUBSIDIARIES Frank A. Magnotti
President, Global Sales and Marketing
Data Systems & Software Inc. dsIT Technologies Ltd.
200 Route 17 11 Ben Gurion Avenue Joseph D. Esteves
Mahwah, New Jersey 07430 Givat Shmuel 54017 Israel Executive Vice President
www.dssiinc.com www.dsit.co.il
Wayne Wren
Jacob Neuwirth (Noy) Executive Vice President and Chief Financial
DIRECTORS & OFFICERS President and Chief Executive Officer Officer
George Morgenstern Yacov Kaufman Itzchak Almog
Chairman of the Board, President and Chief Executive Vice President and Chief Executive Vice President, Engineering
Executive Officer Financial Officer
Avi Kerbs Benny Sela LEGAL COUNSEL
Director and Member of Audit Committee Executive Vice President
Ehrenreich Eilenberg & Krause LLP
Elihu Levine Yoel Olansky 11 East 44th Street
Director and Member of Audit Vice President--IT Division New York, New York 10017
Committee www.eeklaw.com
Gilad Landau
Shane Yurman Vice President--Health Care
Director and Chairman of Audit Committee REGISTRAR AND
Databit Inc./Databit Solutions TRANSFER AGENT
Shlomie Morgenstern 200 Route 17
Vice President--Operations Mahwah, New Jersey 07430 American Stock Transfer &
databit-nj.com Trust Co.
Yacov Kaufman 59 Maiden Lane
Vice President and Chief Financial Officer Shlomie Morgenstern New York, New York 10005
President www.amstock.com
Sheldon Krause
Secretary
AFFILIATE ADDITIONAL INFORMATION
Comverge, Inc. For additional information regarding DSSI,
23 Vreeland Road, Suite 160 please write to:
Florham Park, New Jersey 07932
www.comverge.com Investor Relations
Data Systems & Software Inc.
Robert M. Chiste 200 Route 17
Chairman of the Board and Chief Mahwah, New Jersey 07430
Executive Officer ir@dssiinc.com