Exhibit 99.1
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, dated this 6th day of February, 1998
("Agreement"), by and among Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx,
Xxxxxx/Xxxxxx Capital Advisors, Inc., Cummer/Xxxxxx Capital Partners,
Inc., Cummer/Xxxxxx Holdings, Inc. Profit Sharing Plan, Cummer/Xxxxxx
Holdings, Inc., Cummer/Xxxxxx Securities, Inc., XXX for Xxxxxx X. Xxxxxx
and The Committee to Enhance Data Systems & Software Inc. Stockholder
Value (the foregoing individuals and entities being collectively referred
to herein as the "Cummer/Xxxxxx Group"); and Data Systems & Software
Inc., a Delaware corporation (the "Company").
WHEREAS, the Cummer/Xxxxxx Group has publicly stated that it
intends to seek consents from stockholders of the Company for the
purposes of attempting to remove the incumbent Board of Directors (the
"Board"), electing nominees of their choosing and amending certain of the
Company's By-laws (the "Consent Solicitation"), and has taken certain
actions in furtherance thereof;
WHEREAS, the Company commenced an action entitled Data
Systems & Software Inc. x. Xxxxxx, et al. against the members of the
Cummer/Xxxxxx Group in the United States District Court for the District
of New Jersey (the "Pending Litigation"); and
WHEREAS, the Company and the members of the Cummer/Xxxxxx
Group have determined that the interests of the Company and its
stockholders, and the interests of the members of the Cummer/Xxxxxx
Group, would best be served by (i) avoiding the substantial expense and
disruption that could be expected to result from the Consent Solicitation
and the Pending Litigation, (ii) terminating the Pending Litigation
against the members of the Cummer/Xxxxxx Group as provided herein, and
(iii) the receipt of other agreements, covenants, rights and benefits as
provided herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements and representations set forth herein, intending to be
legally bound hereby, the parties hereby agree as follows:
1. Settlement of Pending Litigation; Board
Composition; Related Matters.
(a) As promptly as practicable after the execution of
this Agreement, the Company shall take all steps
necessary to dismiss the Pending Litigation
without prejudice and without costs or expenses.
The Company agrees that (i) it will not, prior to
the Termination Date (as such term is defined in
paragraph 2(a) hereof), reinstitute against any
members of the Cummer/Xxxxxx Group or against any
of the persons nominated by the Cummer/Xxxxxx
Group to stand for election to the Board in the
Consent Solicitation, any of the claims made in
the Pending Lawsuit and (ii) following the
Termination Date the Pending Lawsuit will be
dismissed with prejudice.
(b) The XXX for Xxxxxx X. Xxxxxx, a member of the
Cummer/Xxxxxx Group, hereby revokes the Written
Consent of Stockholder to Action Without a
Meeting dated January 7, 1998 submitted to the
Company by CEDE & Co. on its behalf, and the
Cummer/Xxxxxx Group hereby terminates the Consent
Solicitation.
(c) The Company and the members of the Cummer/Xxxxxx
Group hereby agree that the Company may nominate
such persons as it deems appropriate to stand for
election to the Board at the Company's 1998
Annual Meeting (the "1998 Annual Meeting"). The
Company has informed the Cummer/Xxxxxx Group that
it has been seeking, and will continue to seek,
one or more persons who are not currently serving
on the Board, with appropriate qualifications, to
serve on the Board as independent outside
directors, and that if such person or persons are
selected prior to the time the Company selects
its nominees to stand for election to the Board
at the 1998 Annual Meeting, such person or
persons will also be nominees. The persons
nominated by the Company to stand for election to
the Board in accordance with this paragraph 1(c)
are referred to herein as the "1998 Nominees."
The 1998 Nominees shall serve on the Board for a
term expiring at the Company's 1999 Annual
Meeting of Stockholders and until their
respective successors shall have been duly
elected and qualified.
(d) The members of the Cummer/Xxxxxx Group and their
Affiliates and Associates (as such terms are
hereinafter defined), and the Company shall
support and recommend that the Company's
stockholders vote for the election of each of the
1998 Nominees at the 1998 Annual Meeting, and the
members of the Cummer/Xxxxxx Group shall vote,
and shall cause their respective Affiliates and
Associates to vote, all shares of the Company's
Common Stock (the "Common Stock") which they are
entitled to vote at the 1998 Annual Meeting in
favor of the election of each of the 1998
Nominees.
(e) At the first meeting of the Board following the
certification of the vote of the election of
directors at the 1998 Annual Meeting, the Board
shall create a Compensation Committee of the
Board, consisting of three directors, at least
two of whom shall be directors who are not
employees of the Company.
2. Certain Covenants.
(a) The covenants and agreements contained in this
paragraph 2 shall terminate on the fifth
anniversary of the date hereof (the "Termination
Date").
(b) Each member of the Cummer/Xxxxxx Group jointly
and severally agrees that during the period
commencing on the date hereof and ending on the
Termination Date, without the prior written
consent of the Board specifically expressed in a
resolution adopted by a majority vote of the full
membership of the Board, they will not, and will
cause each of their Affiliates and Associates not
to, directly or indirectly:
(i) acquire, offer or propose to
acquire, or agree to acquire (except
by way of stock dividends or other
distributions or offerings made
available to holders of Voting
Securities (as such term is
hereinafter defined) generally,
provided that any such securities so
received shall be subject to the
provisions hereof), directly or
indirectly, whether by purchase,
tender or exchange offer, through the
acquisition of control of another
Person (as hereinafter defined), by
joining a partnership, limited
partnership, syndicate or other
"group" (within the meaning of Section
13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Exchange
Act")) or otherwise, any Voting
Securities;
(ii) engage, or in any way participate,
directly or indirectly, in any
"solicitation" (as such term is used
in the proxy rules of the Securities
and Exchange Commission (the "SEC"))
of proxies or consents (whether or not
relating to the election or removal of
directors), seek to advise, encourage
or influence any Person with respect
to the voting of any Voting
Securities, initiate, propose or
otherwise "solicit" (as such term is
used in the proxy rules of the SEC)
stockholders of the Company for the
approval of stockholder proposals
whether made pursuant to Rule 14a-8
under the Exchange Act or otherwise,
induce or attempt to induce any other
Person to initiate any such
stockholder proposal, or otherwise
communicate with the Company's
stockholders or others pursuant to
Rule 14a-1(l)(2)(iv) under the
Exchange Act;
(iii)seek, propose or make any public
statements with respect to, any
merger, consolidation, business
combination, tender or exchange offer,
sale or purchase of assets, sale or
purchase of securities, dissolution,
liquidation, restructuring,
recapitalization or similar
transactions involving the Company or
any of its Affiliates;
(iv) form, join or in any way participate
in any "group" (within the meaning of
Section 13(d)(3) of the Exchange Act)
with respect to any Voting Securities,
other than the "group" identified in a
Schedule 13D filed with the SEC on
December 18, 1997, as amended as of
the date hereof, by members of the
Cummer/Xxxxxx Group;
(v) deposit any Voting Securities in
any voting trust or subject any Voting
Securities to any arrangement or
agreement with respect to the voting
of any Voting Securities, except as
specifically set forth in paragraph
1(d) hereof;
(vi) otherwise act, alone or in concert
with others, to control or seek to
control or influence or seek to
influence the management, the Board or
policies of the Company;
(vii)seek, alone or in concert with
others, (a) to call a meeting of
stockholders, (b) representation on
the Board, or (c) the removal of any
member of the Board;
(viii) make any publicly disclosed proposal
or enter into any discussion regarding
any of the foregoing, or make any
proposal, statement or inquiry, or
disclose any intention, plan or
arrangement (whether written or oral)
inconsistent with the foregoing, or
make or disclose any request to waive
or terminate any provision of this
Agreement; or
(ix) take or cause or induce others to take
any action inconsistent with any of
the foregoing.
3. Representations and Warranties of the Cummer/Xxxxxx
Group. The members of the Cummer/Xxxxxx Group jointly
and severally represent and warrant as follows:
(a) Each member of the Cummer/Xxxxxx Group has the
power and authority to execute, deliver and carry
out the provisions of this Agreement and to
consummate the transactions contemplated hereby.
(b) This Agreement has been duly and validly
authorized, executed, and delivered by each
member of the Cummer/Xxxxxx Group, constitutes a
valid and binding obligation of each such member,
and is enforceable in accordance with its terms.
(c) The members of the Cummer/Xxxxxx Group, together
with their Affiliates and Associates,
beneficially own, directly or indirectly, an
aggregate of 425,400 shares of Common Stock of
the Company as set forth by beneficial owner and
amount on Schedule A hereto and such shares of
Common Stock constitute all of the Voting
Securities of the Company beneficially owned by
the members of the Cummer/Xxxxxx Group and their
Affiliates and Associates.
4. Representations and Warranties of the Company. The
Company hereby represents and warrants as follows:
(a) The Company has the corporate power and authority
to execute, deliver and carry out the terms and
provisions of this Agreement and to consummate
the transactions contemplated hereby.
(b) This Agreement has been duly and validly
authorized, executed and delivered by the Company
and constitutes a valid and binding agreement of
the Company, enforceable in accordance with its
terms.
5. Specific Performance. Each of the members of the
Cummer/Xxxxxx Group and the Company, acknowledges and
agrees that irreparable injury to the other parties
hereto would occur in the event any of the provisions
of this Agreement were not performed in accordance with
their specific terms or were otherwise breached and
that such injury would not be compensable in damages.
It is accordingly agreed that each party hereto (the
"Moving Party") shall be entitled to specific
enforcement of the terms hereof and the other parties
hereto will not take action, directly or indirectly, in
opposition to the Moving Party seeking such relief on
the grounds that any other remedy or relief is
available at law or in equity.
6. Retraction of Certain Statements. The members of
the Cummer/Xxxxxx Group hereby retract any statements
contained in their public filings or otherwise which in
any way may be construed as alleging improper or
unlawful conduct on the part of any officers,
directors, employees or agents of the Company.
7. Expenses. Concurrently with the execution of this
Agreement, the Cummer/Xxxxxx Group is reimbursing the
Company for a portion of the Company's out-of-pocket
expenses incurred in connection with the Consent
Solicitation, the Pending Litigation and the
negotiation and execution of this Agreement, in the
amount of $20,000.
8. No Waiver. Any waiver by any party hereto of a breach
of any provision of this Agreement shall not operate as
or be construed to be a waiver of any other breach of
such provision or of any breach of any other provision
of this Agreement. The failure of any party hereto to
insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term
or any other term of this Agreement.
9. Certain Definitions. As used in this Agreement,
(a) the term "Person" shall mean any individual,
partnership, corporation, group, syndicate, trust,
government or agency thereof, or any other association
or entity; (b) the terms "Affiliates" and "Associates"
shall have the meanings set forth in Rule 12b-2 under
the Exchange Act and shall include persons who become
Affiliates or Associates of any Person subsequent to
the date hereof; and (c) the term "Voting Securities"
shall mean the shares of Common Stock and any other
securities of the Company entitled to vote in the
election of directors, or securities convertible into,
or exercisable or exchangeable for, such Common Stock
or other securities, whether or not subject to the
passage of time or other contingencies.
10. Successors and Assigns. All the terms and provisions of
this Agreement shall inure to the benefit of and shall
be enforceable by the successor and assigns of the
parties hereto.
11. Survival of Representations. All representations,
warranties and agreements made by the parties in this
Agreement or pursuant hereto shall survive the date
hereof.
12. Entire Agreement; Amendments. This Agreement
contains the entire understanding of the parties hereto
with respect to its subject matter. There are no
restrictions, agreements, promises, representations,
warranties, covenants or undertakings other than those
expressly set forth herein, except as may otherwise be
agreed to in writing among the parties. This Agreement
may be amended only by a written instrument duly
executed by the parties hereto or their respective
successors or assigns.
13. Headings. The section headings contained in this
Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
14. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been
duly given if so given) by hand delivery, cable,
telecopy or telex, or by mail (registered or certified,
postage prepaid, return receipt requested) to the
respective parties hereto as follows:
If to the Company:
Data Systems & Software Inc.
000 Xxxxx 00
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxxx, Chairman
President and Chief Executive Officer
Telecopy: 201/529-8330
with copies to:
Xxxxxxxxxx Xxxxxxxxx Xxxxxx & Xxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Telecopy: 212/986-2399
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: 212/735-2000
If to the Cummer/Xxxxxx Group:
Cummer/Xxxxxx Holdings, Inc.
0000 Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx and
Xxxxxx X. Xxxxxx
Telecopy: 817/763-5559
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telecopy: 817/332-3140
or to such other address as the person to whom notice
is given may have previously furnished to the others in
writing in the manner set forth above.
15. Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the
laws of the State of New Jersey without reference to
the conflict of laws principles thereof.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but
each of which together shall constitute one and the
same Agreement.
17. Cummer/Xxxxxx Group Representative. Each member of the
Cummer/Xxxxxx Group hereby irrevocably appoints Xxxxxx
X. Xxxxxx as such member's attorney-in-fact and
representative (the "Representative"), in such member's
place and stead, to do any and all things and to
execute any and all documents and give and receive any
and all notices or instructions in connection with this
Agreement and the transactions contemplated hereby. The
Company shall be entitled to rely, as being binding on
each member of the Cummer/Xxxxxx Group, upon any action
taken by the Representative or upon any document,
notice, instruction or other writing given or executed
by the Representative.
18. No Admission. Nothing contained herein shall
constitute an admission by any party hereto of
liability or wrongdoing.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
each of the undesigned parties has executed or caused this Agreement to
be executed on the date first above written.
DATA SYSTEMS & SOFTWARE INC.
By: /s/ Xxxxxx Xxxxxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: Chairman, President and
Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
XXXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
XXXXXX X. XXXXXX
CUMMER/XXXXXX CAPITAL ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
CUMMER/XXXXXX CAPITAL PARTNERS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
CUMMER/XXXXXX HOLDINGS, INC. PROFIT
SHARING PLAN
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
CUMMER/XXXXXX HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
CUMMER/XXXXXX SECURITIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
XXX FOR XXXXXX X. XXXXXX
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title:
THE COMMITTEE TO ENHANCE DATA
SYSTEMS & SOFTWARE INC. STOCKHOLDER
VALUE
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Representative Member
SCHEDULE A
Summary of Beneficial Ownership of Shares of Common Stock of
Data Systems & Software Inc.
----------------------------------------------------------------------------
Amount
Beneficially Percent
Beneficial Owner Owned of Class(1)
----------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 413,800(2) 5.62%
Xxxxxx X. Xxxxxx 423,600(3) 5.75%
Cummer/Xxxxxx Capital Advisors, Inc. 192,000(4) 2.61%
Cummer/Xxxxxx Capital Partners, Inc. 210,000(5) 2.85%
Cummer/Xxxxxx Holdings, Inc. Profit Sharing 10,000(6) 0.14%
Plan
Cummer/Xxxxxx Holdings, Inc. 0 0
Cummer/Xxxxxx Securities, Inc. 0 0
XXX for Xxxxxx X. Xxxxxx 11,600(7) 0.16%
The Committee to Enhance Data Systems & 0 0
Software Inc. Stockholder Value
------------------------
1 Based on 7,369,178 shares of common stock of Data Systems &
Software Inc. outstanding as of October 31, 1997.
2 Includes 1,800 shares owned of record over which Xx. Xxxxxx has
sole voting and dispositive powers; 192,000 shares held in
discretionary accounts of clients of Cummer/Xxxxxx Securities, Inc.
("Securities") regarding which Cummer/Xxxxxx Capital Advisors, Inc.
("Advisors") has shared dispositive powers and regarding which Xx.
Xxxxxx has shared dispositive powers as a director and officer of
Advisors; 210,000 shares owned by Investors Strategic Partners I,
Ltd. (the "Partnership") regarding which Xx. Xxxxxx has shared
voting and dispositive powers as a director and officer of
Cummer/Xxxxxx Capital Partners, Inc. ("Partners"), the corporate
General Partner of the Partnership, and as an individual General
Partner of the Partnership; and 10,000 shares held by the
Cummer/Xxxxxx Holdings, Inc. Profit Sharing Plan (the "Plan")
regarding which Xx. Xxxxxx has shared voting and dispositive powers
as a trustee of the Plan.
3 Includes 11,600 shares owned by the XXX for Xxxxxx X. Xxxxxx
regarding which Xx. Xxxxxx has sole voting and dispositive powers;
192,000 shares held in discretionary accounts of clients of
Securities regarding which Advisors has shared dispositive powers
and regarding which Xx. Xxxxxx has shared dispositive powers as a
director and officer of Advisors; 210,000 shares owned by the
Partnership regarding which Xx. Xxxxxx has shared voting and
dispositive powers as a director and officer of Partners, the
corporate General Partner of the Partnership, and as an individual
General Partner of the Partnership; and 10,000 shares held by the
Plan regarding which Xx. Xxxxxx has shared voting and dispositive
powers as a trustee of the Plan.
4 Represents 192,000 shares held in discretionary accounts of clients
of Securities, regarding which Advisors has shared dispositive
powers. Voting control over these shares has been retained by the
discretionary account holders who have contracted with Advisors for
investment advisory services.
5 Represents 210,000 shares owned by the Partnership, over which
Partners, Cummer and Xxxxxx have sole voting and dispositive powers
as the General Partners of the partnership.
6 Represents 10,000 shares owned by employees of Cummer/Xxxxxx
Holdings, Inc. and its subsidiaries over which the Plan has sole
voting and dispositive powers.
7 Xxxxxx X. Xxxxxx has sole voting and dispositive powers regarding
the shares owned by the XXX for Xxxxxx X. Xxxxxx.
