DATA SYSTEMS & SOFTWARE INC, PREC14A, 1998-01-15

DATA SYSTEMS & SOFTWARE INC
PREC14A, 1998-01-15
SEMICONDUCTORS & RELATED DEVICES

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SCHEDULE 14A INFORMATION

Revocation 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:
{X} Preliminary Proxy Statement (Revocation of Consent Statement)
{_} Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
{_} Definitive Proxy Statement (Revocation of Consent Statement)
{_} Definitive Additional Materials
{_} 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 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:
(4) Proposed maximum aggregate value of transactions:
(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:

PRELIMINARY COPY -- SUBJECT TO COMPLETION.
DATED JANUARY 15, 1998

[DSSI Letterhead]

January __, 1998

Dear Fellow Stockholder:

We are writing to alert you that two dissident
stockholders, Dwayne A. Moyers and Jeffrey A. Cummer, and certain
entities they control, are attempting to take complete control of your
Company. In an effort to do this, the Moyers/Cummer group is contacting
stockholders of Data Systems & Software, Inc. and asking them to sign
consent forms to remove, without cause, your entire Board of Directors
and replace your directors with the Moyers/Cummer group's own hand-picked
nominees.

WE URGE YOU NOT TO SIGN ANY BLUE CONSENT CARD OR
OTHER FORMS WHICH MAY BE FURNISHED TO YOU BY
MESSRS. MOYERS OR CUMMER, OR THEIR SELF-STYLED
"COMMITTEE."

Mr. Moyers, age 29, and Mr. Cummer, age 40, are Texas-based
investment managers and securities brokers, who have disclosed no
experience in operating or managing a sophisticated software business
such as the Company's. The five people they would install as directors of
your Company include themselves, their lawyer (who would receive a
$50,000 bonus if they were to succeed in taking control of your Company)
and a "private investor" who has not invested in a single share of your
Company's stock. We believe you will agree that you cannot afford to put
the future of your investment in the hands of these people.

You can act today to protect your investment in the Company.
Whether or not you have previously signed the Moyers/Cummer group's BLUE
consent card, please sign and date the enclosed WHITE Consent Revocation
Card and return it in the enclosed postage-paid envelope. The
Moyers/Cummer group is trying to stampede you and your fellow
stockholders into acting by February 20, 1998, so it is important that
you send in the WHITE Consent Revocation Card today!

We thank you for your continued trust and support.

Sincerely,

[George Morgenstern]

Chairman of the Board,
President and Chief Executive Officer

PRELIMINARY COPY--SUBJECT TO COMPLETION, DATED JANUARY 15, 1998

DATA SYSTEMS & SOFTWARE INC.
200 ROUTE 17
MAHWAH, NEW JERSEY 07430
------------

CONSENT REVOCATION STATEMENT FURNISHED BY THE
BOARD OF DIRECTORS OF DATA SYSTEMS & SOFTWARE INC.
IN OPPOSITION TO THE SOLICITATION OF CONSENTS BY THE COMMITTEE
TO ENHANCE DATA SYSTEMS & SOFTWARE INC. STOCKHOLDER VALUE
(THE "MOYERS/CUMMER GROUP")
------------

JANUARY __, 1998

This Revocation of Consent Statement and the accompanying
WHITE Consent Revocation Card are being furnished by the Board of
Directors (the "Board") of Data Systems & Software Inc., a Delaware
corporation ("DSSI" or the "Company"), to the holders of
outstanding shares of DSSI's common stock, par value $.01 per share
(the "Common Stock"), in opposition to the solicitation (the
"Moyers/Cummer Solicitation") by the Moyers/Cummer Group of written
consents from the stockholders of DSSI. The Moyers/Cummer Group
consists of two dissident DSSI stockholders who are business partners,
Dwayne A. Moyers and Jeffrey A. Cummer, and certain entities they
control. The Moyers/Cummer Group, in what we believe is an effort to make
it appear that they speak for other stockholders, is calling itself a
"Committee" of stockholders.

The Moyers/Cummer Group is attempting to take complete
control of DSSI. The purpose of the Moyers/Cummer solicitation is to
attempt to remove, without cause, the Company's entire Board of
Directors, and replace them with five new directors selected by the
Moyers/Cummer Group. The Moyers/Cummer Group also is soliciting consents
in support of four proposed amendments to the Company's By-laws (the
"By-laws") and one other proposal, all as described in more detail below.

DSSI'S BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE
MOYERS/CUMMER SOLICITATION AND URGES YOU NOT TO SIGN THE BLUE CONSENT
CARD OR ANY OTHER FORMS WHICH MAY BE SENT TO YOU BY THE MOYERS/CUMMER
GROUP.

EVEN IF YOU PREVIOUSLY SIGNED AND RETURNED THE MOYERS/CUMMER
GROUP'S BLUE CONSENT CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE. WE
URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED WHITE CONSENT
REVOCATION CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOUR PROMPT
ACTION IS IMPORTANT. PLEASE RETURN THE WHITE CONSENT REVOCATION CARD
TODAY. CAUTION: MARKING THE "ABSTAIN" BOX ON THE WHITE CONSENT REVOCATION
CARD MAY NOT HAVE THE EFFECT OF REVOKING A PRIOR CONSENT. IN ORDER TO BE
SURE THAT YOU ARE REVOKING A PRIOR CONSENT, YOU MUST EITHER MARK THE
"REVOKE CONSENT" BOX ON THE WHITE CONSENT REVOCATION CARD, OR SIGN THE
WHITE CONSENT REVOCATION CARD WITHOUT MARKING ANY BOXES.

IF YOUR SHARES ARE HELD IN "STREET NAME," ONLY YOUR BROKER OR
BANKER CAN VOTE YOUR SHARES. PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT HIM OR HER TO VOTE A WHITE CONSENT REVOCATION CARD
ON YOUR BEHALF TODAY.

This Consent Revocation Statement and the enclosed WHITE
Consent Revocation Card are first being mailed to stockholders on
or about January __, 1998.

If you have any questions about giving your revocation of
consent or require assistance, please call Innisfree M&A Incorporated
("Innisfree"), the firm assisting DSSI in this solicitation, at the phone
numbers shown below:

INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10022
CALL TOLL FREE: (888) 750-5834
BANKS & BROKERS CALL COLLECT: (212) 750-5833

------------

REASONS FOR OPPOSING THE MOYERS/CUMMER SOLICITATION

DSSI'S BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE MOYERS/CUMMER
SOLICITATION AND URGES YOU NOT TO SIGN THE BLUE CONSENT CARD OR ANY OTHER
FORMS WHICH MAY BE SENT TO YOU BY THE MOYERS/CUMMER GROUP. The
Moyers/Cummer Group is soliciting written consents to take the following
actions without a stockholders meeting (collectively, the "Moyers/Cummer
Proposals"). The text of each of the seven proposed resolutions
constituting the Moyers/Cummer Proposals is set forth below:

MOYERS/CUMMER PROPOSAL 1

Remove, without cause, the Company's entire Board of Directors:

"RESOLVED, that each member of the Board of Directors of
the Company, such members being, at the present time, George Morgenstern,
Sheldon Krause, Harvey Eisenberger, Robert Kuhn, Samuel Fogel, Maxwell
Raab and Allen Schiff, and any person or persons (other than the persons
elected pursuant to this consent) elected or appointed to the Board of
Directors of the Company prior to the effective date of this resolution
in addition to or in lieu of any of the afore named individuals to fill
any newly created directorships or vacancy on the Board of Directors of
the Company, or otherwise, is hereby removed and the office of each
member of the Board of Directors is hereby declared vacant."

MOYERS/CUMMER PROPOSAL 2

Elect five persons selected by the Moyers/Cummer Group to
constitute the Board of Directors:

"RESOLVED, that the following persons are hereby elected
as directors of the Company to fill vacant directorships on the Board of
Directors, and to serve until their respective successors are duly
elected and qualified: Dwayne A. Moyers; Jeffrey A. Cummer; William
Nelson II; Kyle G. Kennedy; and Alan M. Steinmetz."

MOYERS/CUMMER PROPOSAL 3

Amend Article XII of the By-laws to prohibit the Board of
Directors from amending certain provisions of the By-laws without the
written consent of a majority of the stockholders:

"RESOLVED, that Article XII of the By-laws be amended
by appending to the end of said Article XII the following:

; provided, however, that the Board of Directors
shall have no right or authority and shall not be permitted to alter, amend
or repeal any By-law which affects or which would affect, in any way,
certain stockholder rights relating to (a) the nomination, removal and
election of directors, or (b) the calling of special meetings by the
stockholders without the prior written consent of holders of no less than
a majority of the outstanding shares."

MOYERS/CUMMER PROPOSAL 4

Repeal any changes made to the By-laws subsequent to January
7, 1998, the Record Date of the Moyers/Cummer Solicitation:

"RESOLVED, that any changes made after the Record Date
to the By-laws by the current Board of Directors be rendered null and
void and of no further force and effect."

MOYERS/CUMMER PROPOSAL 5

Amend Article II, Section 2 of the By-laws by deleting it in
its entirety and substituting therefor the following:

"RESOLVED, that Article II, Section 2 of the By-laws of
the Company be deleted in its entirety and the following be inserted
therein in its lieu and stead as Section 2 of Article II:

"Special Meetings. Special meetings of the
stockholders may be called at any time by the Board of Directors or
the President of the Corporation or by written consent of a stockholder
or stockholders holding of record at least twenty-five percent (25%)
of the shares of Common Stock of the Corporation issued and outstanding,
such special meeting to be held at such place (within or without the
State of Delaware), date and hour as shall be designated in the notice
or waiver of notice thereof."

A copy of current text of Article II, Section 2 of the
By-laws is set forth on Appendix A.

MOYERS/CUMMER PROPOSAL 6

Repeal Sections 6 and 7 of Article II of the By-laws and
delete said two sections from the By-laws:

"RESOLVED, that Sections 6 and 7 of Article II of the
By-laws of the Company be rendered null and void and of no further force
and effect and that said Sections 6 and 7 be repealed and deleted from
the By-laws of the Company."

Sections 6 and 7 of Article II of the By-laws set forth
procedures to be followed by stockholders intending to make nominations
for directors or present other business at an annual meeting. In essence,
such sections require that the Company be notified of any such intentions
at least 60 days in advance of the date of the annual meeting so as to
provide the Board of Directors with an opportunity to evaluate any such
nominations or other proposals and make an appropriate recommendation to
stockholders. A copy of such sections is set forth on Appendix A.

MOYERS/CUMMER PROPOSAL 7

Terminate or amend the Company's Stockholder Rights Plan as
set forth in the Rights Agreement (the "Rights Agreement") dated March
19, 1996, between the Company and American Stock Transfer & Trust Co., as
Rights Agent:

"RESOLVED, that the Board of Directors shall
immediately undertake to terminate that certain Rights Agreement so that
the Rights Agreement shall be rendered null and void, but only to the
extent that the termination of such Rights Agreement would not result in
the exercisability by any rights holder under the Rights Agreement of any
rights held thereunder and/or would not have a negative economic effect
on the Company, which determination shall be made by the Board of
Directors in their sole reasonable discretion, or, in the alternative,
upon the Board's reasonable discretion, provide for an amendment to said
Rights Agreement to provide for a threshold for the triggering of the
rights set forth in said Rights Agreement to be changed from 15% to 25%."

* * *

In furtherance of their goal of seeking to take complete
control of the Company without offering stockholders any value at all for
their shares, and without presenting any specific plan for increasing
stockholder value, the Moyers/Cummer Group is seeking written consents of
the Company's stockholders to remove, without cause, the entire Board of
Directors and to replace the directors with five persons selected by the
Moyers/Cummer Group. The Moyers/Cummer Group also is seeking consents in
support of the other five Moyers/Cummer Proposals. In response to the
Moyers/Cummer Solicitation, the Board of Directors is asking the
Company's stockholders not to provide their consent and is soliciting
from the Company's stockholders revocations of any consents that may have
been given.

THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY BELIEVES
THAT THE MOYERS/CUMMER PROPOSALS ARE NOT IN THE BEST INTERESTS OF THE
COMPANY'S STOCKHOLDERS AND URGES STOCKHOLDERS TO REJECT SUCH PROPOSALS.
YOUR BOARD OF DIRECTORS THEREFORE REQUESTS THAT YOU SIGN, DATE AND RETURN
THE ENCLOSED WHITE REVOCATION OF CONSENT CARD, WHETHER OR NOT YOU HAVE
PREVIOUSLY SIGNED AND RETURNED THE BLUE CONSENT CARD SOLICITED BY THE
MOYERS/CUMMER GROUP.

The Board of Directors strongly believes that the arguments
set forth by the Moyers/Cummer Group are seriously flawed and
simplistic, and that the Moyers/Cummer Group is simply trying to take
control of the Company for its own benefit and advantage. The persons
whom the Moyers/Cummer Group have nominated to serve as directors of the
Company have indicated in the Moyers/Cummer Group's public filings no
experience in managing a business like DSSI. Their proposal is simply
that they intend to use the Company's resources over a period of two to
three years to bring in outside advisors and consultants to help them
come up with a plan to break up your Company. The Company's Board of
Directors believes that the Moyers/Cummer Group does not understand the
current industry conditions or the adverse tax consequences which such a
proposal would entail and, in the Board's judgment, there is no basis to
believe that the Moyers/Cummer Group will in any way enhance stockholder
value.

Your Board of Directors is, and has always been, committed to
increasing value for all stockholders. Over the last two years, the
Company has been working to develop new products and markets so as to be
in a position to realize future value for stockholders. In this regard,
the Company regularly consults, as and when appropriate, with investment
bankers and other consultants so as to evaluate the alternatives for
financing the various start-up operations and maximizing their
potential.

Furthermore, the Moyers/Cummer Group's attempt to take
complete control of the Company would, the Board believes, deprive DSSI
stockholders of the opportunity to fully benefit from the progress now
underway at DSSI. This progress has been accomplished by an experienced
and dedicated management team working under the direction of the Board of
Directors.

Your Board of Directors believes that the Moyers/Cummer
Proposals relating to the By-laws and the Rights Agreement are designed
to limit the Board's flexibility in protecting the interests of all
stockholders and effectively opposing the efforts of the Moyers/Cummer
Group to take complete control of the Company.

In 1994, your Board of Directors adopted certain amendments
to the By-laws which are designed to ensure that stockholders have
informed and meaningful input, while minimizing any unnecessary
disruptions to the operations of the Company's on-going business. For
example, by adopting advance notice By-laws (Sections 6 and 7 of Article
II of the By-laws), the Board has not denied the right of stockholders to
participate in the annual meeting of stockholders. The advance notice
provisions simply ensure that stockholders would not be surprised and
would be entitled to receive information from both the proponent and the
Company before being required to cast their votes. Similarly, the
provision of the By-laws requiring that special meetings be called by the
Board of Directors is intended to limit the disruptive impact that a
special meeting may have, in recognition of the fact that a meeting, at
which all directors are subject to election, would be held on an annual
basis and that stockholders always had the opportunity at any time to
effect changes in the Board of Directors through the use of the
stockholder consent procedures.

Lastly, the Moyers/Cummer Group has stated in public filings
that they may purchase an as yet unspecified number of additional shares,
while at the same time it is asking stockholders to vote for a
termination of the Rights Agreement or, in the alternative, an increase
in the triggering threshold from fifteen to twenty-five percent. The
Rights Agreement is not intended to prevent all offers to acquire the
Company, but rather to deter efforts to acquire control of the Company,
such as through the acquisition of additional shares in the open market,
which do not offer fair value for all shares. The Board of Directors
believes that consideration of termination or modification of the Rights
Agreement at this time would benefit only the Moyers/Cummer Group (which
is seeking complete control of the Company without offering stockholders
anything for their shares), and would not be in the best interest of the
Company's other stockholders.

THE BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE MOYERS/CUMMER
SOLICITATION AND URGES YOU NOT TO SIGN THE BLUE CONSENT CARD OR ANY OTHER
FORMS WHICH MAY BE SENT TO YOU BY MOYERS/CUMMER GROUP.

EVEN IF YOU PREVIOUSLY SIGNED AND RETURNED MOYERS/CUMMER
GROUP'S BLUE CONSENT CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE. WE
URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED WHITE CONSENT
REVOCATION CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. CAUTION:
MARKING THE "ABSTAIN" BOX ON THE WHITE CONSENT REVOCATION CARD MAY NOT
HAVE THE EFFECT OF REVOKING A PRIOR CONSENT. IN ORDER TO BE SURE THAT YOU
ARE REVOKING A PRIOR CONSENT, YOU MUST EITHER MARK THE "REVOKE CONSENT"
BOX ON THE WHITE CONSENT REVOCATION CARD OR SIGN THE WHITE CONSENT
REVOCATION CARD WITHOUT MARKING ANY BOXES.

IF YOU HAVE ANY QUESTIONS, PLEASE CALL INNISFREE, THE FIRM
ASSISTING THE COMPANY IN THIS SOLICITATION, TOLL-FREE AT (888) 750-5834.
BANKS AND BROKERS SHOULD CALL COLLECT AT (212) 750-5833.

THE CONSENT PROCEDURE

Under Section 228 of the General Corporation Law of the State
of Delaware (the "DGCL"), unless otherwise provided in the certificate of
incorporation, any action which may be taken at an annual or special
meeting of stockholders of a corporation may be taken without a meeting
if consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were
present and voted, and such consents are duly delivered to the
corporation.

Thus, the unrevoked consent of the holders of not less than a
majority of the shares of Common Stock outstanding and entitled to
vote on the Record Date (as defined below) must be obtained within the
time limits specified herein to adopt each of the Moyers/Cummer
Proposals. Each share of Common Stock is entitled to one vote per
share. Since consents are required from the holders of record of a
majority of the outstanding shares of Common Stock in order for
each of the Moyers/Cummer Proposals to be adopted, an abstention
from voting on the Moyers/Cummer Group's BLUE Consent Card or a broker
non- vote will have the practical effect of a vote against such
proposals.

Under Section 228 of the DGCL, in order to be effective,
consents with respect to the Moyers/Cummer Proposals must be
delivered within 60 days of the earliest dated consent with respect
to the Moyers/Cummer Proposals delivered to DSSI. On January 7, 1998,
a consent with respect to 11,600 shares of Common Stock executed on
behalf of an IRA for Dwayne A. Moyers, was delivered to the Company.
Accordingly, the record date (the "Record Date") for stockholders
entitled to consent is January 7, 1998 and the consents will not be
effective unless the requisite number of unrevoked consents are obtained
on or before March 8, 1998. As of the Record Date, there were 7,369,178
shares of Common Stock issued and outstanding.

A stockholder may revoke any previously signed consent by
signing, dating and returning a WHITE Consent Revocation Card in the
postage-paid envelope provided, and either marking the "Revoke Consent"
box or not marking any boxes. A consent may also be revoked by delivery
of a written consent revocation to the Moyers/Cummer Group. STOCKHOLDERS
ARE URGED, HOWEVER, TO DELIVER ALL CONSENT REVOCATIONS TO
INNISFREE, THE FIRM ASSISTING DSSI IN THIS SOLICITATION, AT INNISFREE M&A
INCORPORATED, 501 MADISON AVENUE, 20TH FLOOR, NEW YORK, NEW YORK 10022.
DSSI requests that if a consent revocation is instead delivered
to the Moyers/Cummer Group, a photostatic copy of the revocation
also be delivered to DSSI c/o Innisfree at the address set forth above,
so that DSSI will be aware of all revocations. Any consent
revocation may itself be revoked at any time by signing, dating and
returning to the Moyers/Cummer Group a subsequently dated BLUE
consent card, or by delivery of a written revocation of such consent
revocation to DSSI or the Moyers/Cummer Group.

According to the preliminary Consent Solicitation Statement
(the "Moyers/Cummer Statement") filed on January 7, 1998 by the
Moyers/Cummer Group with the Securities and Exchange Commission, the
Moyers/Cummer Group "intends to deliver consents to the Company in the
manner required by Section 228 of the DGCL once the [Moyers/Cummer Group]
has determined that valid and unrevoked consents representing a majority
of the issued and outstanding shares of the Common Stock as of the Record
Date have been obtained." In addition, the Moyers/Cummer Group is trying
to pressure stockholders to act by February 20, 1998. Accordingly, it is
important that any stockholder who has executed a consent and desires to
revoke such consent sign, date and mail the WHITE Consent Revocation Card
as soon as possible.

If any shares of Common Stock that you owned on the Record Date
were held for you in an account with a stock brokerage firm, bank nominee or
other similar "street name" holder, you are not entitled to vote such
shares directly, but rather must give instructions to the stock brokerage
firm, bank nominee or other "street name" holder to grant or revoke
consent for the shares of Common Stock held in your name. Accordingly,
you should contact the person responsible for your account and direct him
or her to execute the enclosed WHITE Consent Revocation Card on your
behalf. You are urged to confirm in writing your instructions to the
person responsible for your account and provide a copy of those
instructions to DSSI in care of Innisfree at the address set forth above
so that DSSI will be aware of your instructions and can attempt to ensure
such instructions are followed.

YOU HAVE THE RIGHT TO REVOKE ANY CONSENT YOU MAY HAVE
PREVIOUSLY GIVEN TO THE MOYERS/CUMMER GROUP. TO DO SO, YOU NEED ONLY
SIGN, DATE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE THE WHITE
CONSENT REVOCATION CARD WHICH ACCOMPANIES THIS REVOCATION STATEMENT.
IF YOU DO NOT INDICATE A SPECIFIC VOTE ON THE WHITE CONSENT REVOCATION
CARD WITH RESPECT TO ANY MOYERS/CUMMER PROPOSAL, THE CARD WILL BE USED IN
ACCORDANCE WITH THE DSSI BOARD'S RECOMMENDATION TO REVOKE ANY CONSENT
WITH RESPECT TO SUCH PROPOSAL.

IF YOU ARE AGAINST THE MOYERS/CUMMER PROPOSALS AND HAVE NOT
SIGNED A MOYERS/CUMMER GROUP CONSENT, YOU MAY SHOW YOUR OPPOSITION TO THE
MOYERS/CUMMER PROPOSALS BY SIGNING, DATING AND RETURNING THE ENCLOSED
WHITE CONSENT REVOCATION CARD. THIS WILL BETTER ENABLE DSSI TO KEEP
TRACK OF HOW MANY STOCKHOLDERS OPPOSE THE MOYERS/CUMMER PROPOSALS.

DSSI has retained Innisfree to assist in communicating
with stockholders in connection with the Moyers/Cummer Solicitation
and to assist in our efforts to obtain consent revocations. If you
have any questions about how to complete or submit your WHITE Consent
Revocation Card or any other questions, Innisfree will be pleased to
assist you. You may call Innisfree toll-free at (888) 750-5834.

CERTAIN INFORMATION REGARDING THE COMPANY'S DIRECTORS AND OFFICERS

Set forth below is certain information concerning the Board
of Directors and the executive officers of the Company:

NAME AGE POSITIONS
- -------------- ------ -----------------
George Morgenstern 64 Director; Chairman of the Board, President and
Chief Executive Officer of DSSI; Chairman of the
Board of the Company's Decisions Systems Israel
Ltd. subsidiary ("DSI Israel"); Chairman of the
Board of the Company's Tower Semiconductor Ltd.
subsidiary ("Tower")

Robert L. Kuhn 53 Director; Vice Chairman of the Board of DSSI

Samuel Fogel 52 Director; Executive Vice President of DSSI;
President and General Manager of DSI Israel

Yacov Kaufman 40 Vice President and Chief Financial Officer of
DSSI; Vice President and Chief Financial Officer
of DSI Israel

David Weldler 40 Vice President

Harvey Eisenberger 53 Director

Sheldon Krause 42 Director and Secretary

Maxwell M. Rabb 87 Director

Allen I. Schiff 51 Director

- -------------------------

GEORGE MORGENSTERN has been Chairman of the Board since June
1993, and has been President and Chief Executive Officer of DSSI since
its incorporation in 1986. Mr. Morgenstern also serves as Chairman of the
Board of DSI Israel and as Chairman of the Board of Tower.

ROBERT L. KUHN has been a director of DSSI since 1986 and Vice
Chairman of the Board of DSSI since 1994. Since 1991, Dr. Kuhn has been
President of Geneva Financial Corporation, a company specializing in
mergers and acquisitions. Dr. Kuhn has been active in establishing joint
ventures and cross-border transactions with Japan and China, and has been
an advisor for the governments of the People's Republic of China, Israel
and Germany on commercializing science and technology.

SAMUEL FOGEL has been a director and Executive Vice President
of DSSI since March 1997, Vice President of DSSI since June 1993,
President of DSI Israel since October 1991, and General Manager of DSI
Israel since June 1990.

YACOV KAUFMAN has been Vice President and Chief Financial
Officer of DSSI since February 1996. Mr. Kaufman has been a Vice
President of DSI Israel since 1992 and Chief Financial Officer of DSI
Israel since 1990.

DAVID WELDLER has been Vice President of DSSI since February
1996. From February 1995 to February 1996, Mr. Weldler served in various
capacities at DSSI. From 1991 to 1995 Mr. Weldler was president of an
international marketing firm.

HARVEY EISENBERGER has been a director of the Company since
1994. Since March 1997, Mr. Eisenberger has been employed by the
Company's PHD division in an administrative capacity. From 1986 to March
1997, Mr. Eisenberger was an account executive with a New York investment
firm.

SHELDON KRAUSE has served as Secretary of the Company since
1986 and as a director since 1994. Since 1987, Mr. Krause has been
engaged in the private practice of law in New York City and is currently
a member of the firm of Ehrenreich Eilenberg Krause & Zivian LLP (which
prior to January 1998 was known as Ehrenreich & Krause). From 1981 to
1986, Mr. Krause was associated with the New York law firm of Cravath,
Swaine & Moore. Mr. Krause is the son-in-law of George Morgenstern,
Chairman of the Board, President and Chief Executive Officer of the
Company.

HON. MAXWELL M. RABB has been a director of the Company since
1992. Ambassador Rabb has been Of Counsel to the law firm of Kramer, Levin,
Naftalis & Frankel since 1991 and was Of Counsel to the law firm of
Stroock & Stroock & Lavan from 1989 to 1991. From 1981 to 1988,
Ambassador Rabb was United States Ambassador to Italy.

ALLEN I. SCHIFF has been a director of the Company since
1992. Since 1978 he has been a Professor of Accounting at Fordham
University Graduate School of Business Administration, serving as
Chairman of the Accounting Department from 1981 to 1983 and from 1985 to
1990.

MEETINGS OF THE BOARD OF DIRECTORS

During 1997, the Board of Directors of the Company met four
times. Each person that served as a director in 1997 (except (i)
Ambassador Rabb, who attended two Board meetings in 1997 and (ii) Mr.
Fogel, who was appointed to the Board during 1997 and did not attend any
meetings) attended in excess of 75% of the aggregate of: (i) the total
number of meetings of the Board of Directors held during 1997 and (ii)
the total number of meetings held during 1997 by each committee of the
Board of Directors on which the 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 Dr. Schiff, who serves as Chairman, and Mr. Krause.
During 1997, the Audit Committee met four times.

The Audit Committee is charged with assisting the directors
with the fulfillment of 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 reviews with the Company's independent
certified public accountants 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 independent
certified public accountants, the Company's overall accounting and
financial controls; and is available to the Company's independent
auditors for consultation. In addition, the Audit Committee makes
recommendations to the Board of Directors regarding the engagement or
discharge of the Company's auditors.

The Board of Directors has also established a Stock Option
Committee which administers the Company's stock-based compensation plans
and which approves awards of stock options and other stock-based
compensation. Dr. Schiff and Mr. Krause currently serve on the Committee,
with Dr. Schiff acting as Chairman. Ambassador Rabb serves on the
Committee as an alternate member.

The Board of Directors does not have a nominating committee
or a compensation committee.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

BY DIRECTORS AND EXECUTIVE OFFICERS

The following table and the notes thereto set forth
information, as of January 14, 1998, 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, (ii) each of the
executive officers of the Company named in the Summary Compensation Table
under "Executive and Director Compensation," and (iii) all executive
officers and directors of the Company as a group (9 persons).
PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OF COMMON SHARES COMMON STOCK
BENEFICIAL OWNER (1) BENEFICIALLY OWNED (2) OUTSTANDING
- --------------------- ----------------------- -------------

George Morgenstern.................. 506,489(3) 6.2%
Robert L. Kuhn...................... 442,489(4) 5.4%
Samuel Fogel........................ 297,403(5) 3.7%
Yacov Kaufman....................... 41,667(6) *
David Weldler....................... 13,333(6) *
Harvey Eisenberger.................. 15,000(6) *
Sheldon Krause...................... 20,000(6) *
Hon. Maxwell M. Rabb................ 20,000(6) *
Allen I. Schiff..................... 20,000(6) *
All executive officers and directors
of the Company as a group (9 people) 1,334,714 14.8%
- ----------------------------------------------------------------------------

* Less than 1%

(1) 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. For
purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, any
security which such person or persons has the right to acquire
within 60 days after such date is deemed to be outstanding for the
purpose of computing the percentage ownership of such person or
persons, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.

(3) Consists of (i) 179,239 shares held by Mr. Morgenstern, including
100,000 shares received by Mr. Morgenstern in March 1996 as a
restricted stock award which will vest over a three year period,
and (ii) 327,250 currently exercisable options held by Mr.
Morgenstern.

(4) Consists of 192,656 shares and 249,833 currently exercisable options
held by Dr. Kuhn.

(5) Consists of 90,737 shares and 206,666 currently exercisable options
held by Mr. Fogel.

(6) Consists of currently exercisable options.

BY OTHERS

Set forth below is information about stockholders or
groups of stockholders known to DSSI to be the beneficial owners of more
than 5% of DSSI's equity securities, other than those stockholders listed
above. This information has been obtained from reports filed pursuant to
Regulation 13D-G under the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF COMMON STOCK COMMON STOCK
- ------------------------------------ ----------------------- ------------

Group comprised of the following
affiliates of the Moyers/Cummer Group:
Cummer/Moyers Capital Advisors, Inc.,
Cummer/Moyers Capital Partners, Inc.,
Jeffrey A. Cummer, Dwayne A. Moyers
and Cummer/Moyers Holdings, Inc.
Profit Sharing Plan, 3417 Hulen
Street, Fort Worth Texas. . . . . . . . 425,400(1) 5.77%
- --------------------

(1) Based on information provided in Amendment No. 1 to a Schedule 13D,
dated January 13, 1998 and filed by the group. In the Schedule 13D,
Cummer/Moyers Capital Advisors, Inc. reports beneficial ownership
of 192,000 shares of which it has shared dispositive power and no
voting power; Cummer/Moyers Capital Partners, Inc., as general partner
of an investment partnership, reports beneficial ownership of 210,000
shares of which it has sole dispositive and voting power; Cummer/Moyers
Holdings, Inc. Profit Sharing Plan reports beneficial ownership of
10,000 shares of which it has sole dispositive and voting power;
Jeffrey A. Cummer reports beneficial ownership of 413,800 shares,
including 1,800 shares held directly by him; and Dwayne A. Moyers
reports beneficial ownership of 423,600 shares, including 11,600 shares
held by an IRA. The aggregate number of shares reported in the Schedule
13D as being owned by the group is 425,400 shares.

EXECUTIVE AND DIRECTOR COMPENSATION

COMPENSATION OF DIRECTORS

Each director of the Company is paid $1,000 for each meeting which
such director attends and is reimbursed for associated out-of-pocket
expenses. Dr. Schiff is paid an additional amount of $20,000 per annum
for his service as Chairman of the Audit Committee and Stock Option
Committee plus additional amounts in the event of special committee
assignments. Dr. Schiff was paid a total of $24,000 in 1997 in connection
with his service on the Board of Directors and Board committees. Mr.
Eisenberger was paid an additional $6,000 in 1997 in connection with his
service on the Board and the Audit Committee. Dr. Kuhn was paid an
additional $50,000 in 1997 in connection with his service as Vice
Chairman of the Company.

In addition to the director's fees described above, each
member of the Board of Directors who is not an employee of the Company
(Mr. Krause, Ambassador Rabb and Dr. Schiff) was granted options in 1997
to purchase 7,500 shares of Common Stock at an exercise price of $6.50
per share (the fair market value of the Common Stock on the date of the
Company's 1997 annual meeting of stockholders). These options were
granted pursuant to the Company's 1994 Stock Option Plan for Outside
Directors described below.

The Company's 1994 Stock Option Plan for Outside Directors
provides for awards of non-qualified options to directors of the Company
who are not employees of the Company or its 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
eligible director will be granted an option to purchase 7,500 shares of
Common Stock and (ii) immediately following each annual meeting of
stockholders of the Company, each eligible director will generally be
granted an option to purchase 7,500 shares of Common Stock. Options
granted under the plan are exercisable beginning on the first anniversary
of the date of the grant until the earliest of (i) 10 years from the date
of grant, (ii) one year from the date of which an optionee ceases to be
an eligible director and (iii) the date an optionee ceases to be a
director (90 days thereafter if due to the death or disability). Options
granted under the plan are required to provide for an exercise price per
share equal to 100% of the fair market value per share of Common Stock on
the date the option is granted. The maximum number of shares of Common
Stock in respect of which awards may be granted under the plan is
200,000.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has not established a compensation
committee. All matters related to compensation, except for matters
related to stock option and other stock-based compensation, are
determined by the Board of Directors. Matters related to stock options
and other stock-based compensation are determined by the Stock Option
Committee.

The following persons served both as members of the Board of
Directors and officers of the Company in 1997: Mr. Morgenstern (Chairman
of the Board, President and Chief Executive Officer), Dr. Kuhn (Vice
Chairman of the Board) and Mr. Krause (Secretary). During 1997, no member
of the Board of Directors who was also an officer of the Company
participated in any deliberations of the Board of Directors or any
committee thereof relating to his own compensation. In addition, Mr.
Krause did not participate in any such deliberations relating to Mr.
Morgenstern's compensation. Subject to the foregoing limitations, each
member of the Board of Directors participated in 1997 in deliberations of
the Board of Directors concerning executive officer compensation. For
information concerning transactions with the Company in which directors
or officers may be deemed to have an interest, see the section entitled
"Certain Related Party Transactions."

EMPLOYMENT ARRANGEMENTS

George Morgenstern serves as Chairman of the Board, President
and Chief Executive Officer of the Company pursuant to an employment
agreement which commenced on January 1, 1994 and was modified in January
1997 (the "Employment Agreement"). The Employment Agreement provides for
a salary of $420,000 per annum (subject to annual review by the Board and
an annual cost of living adjustment commencing in 1998) 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.

The Employment Agreement extends through December 31, 2001.
Mr. Morgenstern may at any time prior to the end of the term, subject to
certain notice requirements, elect to terminate his employment with the
Company and to thereafter continue to serve the Company 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 (but in no event prior to December 31, 2005 if the Consulting
Period commences following a Change in Control of the Company (as defined
in the Employment Agreement) or a breach by the Company of the Employment
Agreement). During the Consulting Period, Mr. Morgenstern would be
entitled to receive an annual consulting fee at the rate specified in the
following sentence plus the same contributions to a nonqualified
retirement fund and the same fringe benefits that he is entitled to
receive during the term of his employment as described above. Mr.
Morgenstern's annual consulting fee during the Consulting Period will
generally be equal to 50% of his annual salary in effect immediately
prior to the Consulting Period, reducing to 25% following the end of the
fourth full calendar year 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,
Mr. Morgenstern would be entitled to receive his full annual salary until
December 31, 2001, and thereafter to receive an annual consulting fee as
described in the preceding sentence for the balance of the Consulting
Period. The Company is obligated under the Employment Agreement to fund
at the beginning of any 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
the business of the Company or any of its subsidiaries.

Samuel Fogel serves as President and General Manager of DSI
Israel, pursuant to an employment agreement with the Company. The term of
the agreement is automatically extended for an additional one-year period
on August 31 of each year unless terminated for any reason by either
party upon three months' prior written notice or by the Company for cause
(as defined). In addition to his cash compensation, Mr. Fogel also has
use of a company automobile and receives other benefits customarily
conferred in Israel upon persons in similar corporate positions.

The stock option agreements with the Company's executive
officers generally provide for accelerated vesting in the event of a
"Change in Control of the Company" (as defined in such agreements). The
removal of the Company's existing Board of Directors and their
replacement with the persons selected by the Moyers/Cummer Group would
constitute a Change in Control of the Company for purposes of the
Employment Agreement and the stock option agreements.

EXECUTIVE COMPENSATION

The following table sets forth for the periods indicated
information concerning the compensation of the Chief Executive Officer
and the three other officers of the Company who received in excess of
$100,000 in compensation during 1997. Mr. Weldler was not an officer of
the Company prior to 1996.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------------
NAME AND RESTRICTED SECURITIES
PRINCIPAL ------------------- STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) AWARD ($) OPTIONS (#) COMPENSATION($)
- ------------------ ---- ------- ------ --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>

George Morgenstern 1995 300,000 -- -- 97,500 82,800
Chief Executive 1996 300,000 -- 600,000(1) 100,000 85,000
Officer 1997 420,000 - - 126,000(2)

Samuel Fogel 1995 132,000 -- -- 40,000 17,600
Executive Vice 1996 132,000 -- -- -- 17,600
President 1997 132,000 -- -- -- 17,600(3)

Yacov Kaufman 1995 99,600 26,200 -- 20,000 15,000
Vice President 1996 108,000 5,900 -- -- 17,000
1997 108,000 10,000 -- -- 17,000(3)

David Weldler 1996 200,000 -- -- 10,000 --
Vice President 1997 200,000 - - - --
</TABLE>

-------------------------
(1) Represents the fair market value of 100,000 shares of Common Stock
awarded in a restricted stock award pursuant to the Company's 1994
Stock Incentive Plan, valued at the market price for the Common
Stock on the date of the award. The shares vest over a three-year
period, with one-third of the shares vesting in March of each year
commencing March 1997. Dividends, if and when declared by the
Company, would be payable on vested shares; unvested shares are not
eligible to receive dividends. No restricted stock awards have been
previously made to Mr. Morgenstern.

(2) Consists of (i) $105,000 in contributions to a non-qualified
retirement fund,(ii) approximately $17,000 paid in lieu of vacation
not taken in 1996, (iii) approximately $5,000 in life insurance
premiums and (iv) director's fees of $4,000.

(3) Represents contributions to severance and pension funds. These
contributions are made on substantially the same basis as those
made on behalf of all Israeli employees.

The following tables summarize (i) the options granted in
1997 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 the Company's Common
Stock, (iii) the number of shares acquired by such named executive
officers upon the exercise of options in 1997 and the value realized
thereon, and (iv) the number and value of all options held by such
executive officers at the end of 1997.

OPTION/SAR GRANTS IN 1997

POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(2)
------------------------------------------ -------------------
% OF
NUMBER TOTAL
OF OPTIONS
SECURITIES GRANTED
UNDERLYING TO EXERCISE OR
OPTIONS EMPLOYEES BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR (%) ($/SHARE) DATE 5% ($) 10% ($)
- ------------- ---------- --------- --------- ---------- ------ -------

Yacov Kaufman 25,000 80.6 5.25 7/31/02 36,262 80,129

- -------------------------

(1) The Company did not grant any stock appreciation rights (SARs) in 1997.

(2) The dollar amounts under these columns are the result of calculations
at the 5% and 10% compounded annual appreciation rates prescribed by
the Securities and Exchange Commission and, therefore, are not intended
to forecast possible future price appreciation, if any, of the Common
Stock.

(3) These options become exercisable as to one-third in July of each year
commencing July 1998.

AGGREGATED OPTION EXERCISES IN 1997
AND FISCAL YEAR END STOCK OPTION VALUES

NUMBER
OF NUMBER OF SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT YEAR END(#) OPTIONS($)(2)
UPON VALUE ---------------------- ------------------------
NAME EXERCISE(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>

George Morgenstern... -- -- 327,250 120,000 -- --
Samuel Fogel......... -- -- 206,666 33,334 -- --
Yacov Kaufman........ -- -- 41,667 -- -- --
David Weldler........ -- 13,333 6,667 -- --

</TABLE>

- --------------------------

(1) No options were exercised by any of the named persons in 1997.
(2) Based on the closing price for the Common Stock on December 31, 1997,
of $4-3/4.

CERTAIN RELATED PARTY TRANSACTIONS

In December 1994, the Company made a non-interest bearing
loan of approximately $277,000 to Samuel Fogel, a director and Executive
Vice President of the Company and President of DSI Israel. The loan
remains outstanding and is repayable out of the proceeds of the sale of
shares of Common Stock previously issued to Mr. Fogel.

During 1996 and 1997, the Company made a loan to George
Morgenstern, its Chairman, President and Chief Executive Officer, to
facilitate Mr. Morgenstern's purchase of an apartment in Israel for his
use while in Israel on DSSI business. As of December 31, 1997, the
balance of this loan, which bears interest at an annual rate of 7%, was
approximately $650,000. Such loan is repayable in monthly installments
over a period of five years.

During 1997, the Company paid approximately $385,000 for
legal services rendered and reimbursement of out-of-pocket expenses to
Ehrenreich & Krause, a law firm in which Sheldon Krause, a director and
Secretary of the Company, was a member. Effective January 1998, such law
firm is known as Ehrenreich Eilenberg Krause & Zivian LLP. In addition,
Tower paid approximately $153,000 for legal services rendered and
reimbursement of out-of-pocket expenses to such firm in 1997. Prior to
1997, Tower's financial results were included in the Company's
consolidated financial statements, and payments by both companies to
Ehrenreich & Krause were reported on a combined basis.

During 1997, Shlomie Morgenstern, Director of Operations for
the Company's Databit and International Data Operations subsidiaries,
received compensation of approximately $98,000. Shlomie Morgenstern is a
son of George Morgenstern, Chairman, President and Chief Executive
Officer of the Company.

COMPENSATION REPORT OF THE BOARD OF DIRECTORS FOR 1996

The goals of the Company's compensation policy are to (i)
attract, retain and reward executives who contribute to the overall
success of the Company by offering compensation that is competitive, (ii)
motivate executives to achieve the Company's business objectives and
(iii) align the interests of executives with the long-term interests of
stockholders. In 1996, the Company primarily used salary, stock options
and restricted stock to meet these goals. The Board of Directors believes
that there is necessarily an element of subjectivity in establishing
compensation levels for the Company's executives and does not follow
specific objective performance criteria when establishing such compensation
levels.

The salary paid to Mr. Morgenstern, the chief executive
officer of the Company, in 1996 was paid pursuant to an employment
agreement entered into by the Company with Mr. Morgenstern at the
beginning of 1994 (described under "Executive and Director
Compensation--Employment Arrangements"). Because Mr. Morgenstern's cash
compensation during 1996 was made solely pursuant to his employment
agreement, the Board of Directors took no action regarding Mr.
Morgenstern's cash compensation during 1996. In addition to being paid
salary, Mr. Morgenstern was granted stock options and restricted stock
during 1996. The decisions with respect to such grants were based upon
the subjective evaluation of the Stock Option Committee of various
factors, including the executive's ability to influence the Company's
long-term growth and profitability and the advisability of using
long-term compensation awards as a means of retaining the services of the
executive over the long term and further aligning the interests of the
executive with those of the stockholders.

BOARD OF DIRECTORS

George Morgenstern
Robert L. Kuhn
Samuel Fogel
Harvey Eisenberger
Sheldon Krause
Maxwell M. Rabb
Allen I. Schiff

STOCK PRICE PERFORMANCE GRAPH

The following stock price performance graph compares the
cumulative total return of the Company's Common Stock, during the period
February 10, 1992 (date of the Company's initial public offering) to
December 31, 1996, 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. The comparison in the
graph assumes the investment of $100 in the Company's Common Stock and in
each such index on February 10, 1992, and the reinvestment of all
divide nds.
<TABLE>
<CAPTION>

COMPARISON OF CUMULATIVE TOTAL RETURN

02/10/92 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>

DSSI........................ 100 185.33 421.667 158.333 233.333 189.333
Nasdaq Computer & Data
Processing Stock Index.... 100 100.066 105.905 128.611 195.868 241.754
Nasdaq Stock Market Index... 100 108.547 125.652 121.874 171.157 209.540
</TABLE>

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 the Company's executive officers and directors,
and persons who own more than 10% of a registered class of the Company's
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 the Company with copies of all
Section 16(a) forms that they file. Based solely on the Company's review
of such forms received by it, or written representations from certain
reporting persons, the Company believes that during 1997 all filing
requirements applicable to its executive officers and directors were
complied with.

CERTAIN LITIGATION

On January 15, 1998, DSSI commenced an action in the United
States District Court for the District of New Jersey (the "Court")
against Dwayne A. Moyers, Cummer/Moyers Capital Advisors, Inc.,
Cummer/Moyers Capital Partners, Inc., Jeffrey A. Cummer, Cummer/Moyers
Holdings, Inc. Profit Sharing Plan, Cummer/Moyers Holdings, Inc. and
The Committee to Enhance Data Systems & Software Inc. Stockholder
Value (the "Defendants"). The Complaint seeks, among other relief, an
order enjoining what the complaint alleges are Defendants' continuing
violations of Sections 13(d) and 14(a) of the Exchange Act, the rules
and regulations promulgated thereunder by the SEC and the common law.
The Complaint alleges, among other things, that unless these violations
are enjoined, DSSI and its shareholders will be irreparably harmed in
that DSSI's shareholders will be forced to make voting decisions
respecting the Defendants' consent solicitation based upon materially
inaccurate and incomplete information. DSSI has moved the Court for
an order setting an expedited discovery, briefing and hearing schedule
on DSSI's motion for a preliminary injunction.

PARTICIPANTS IN THE SOLICITATION

Under applicable regulations of the SEC, each member of the
Board, the executive officers of DSSI and certain other members of
management of DSSI may be deemed to be a "participant" in DSSI's
solicitation of revocations of consent. Information about the
principal occupations of directors and executive officers is set forth
under the section entitled "Certain Information Regarding the Company's
Directors and Officers." Information about the present ownership of
DSSI's securities by directors and executive officers of DSSI is
provided in "Stock Ownership of Certain Beneficial Owners and
Management -- By Directors and Executive Officers". In addition to DSSI's
directors and executive officers, Ms. Laurie Smith, Investor Relations
Coordinator, may be deemed to be a participant. Ms. Smith beneficially
owns options to acquire a total of 2,000 shares of the Company's Common
Stock. The business address for each participant is c/o Data Systems &
Software Inc., 200 Route 17, Mahwah, New Jersey 07430. Information
about the transactions in the Company's securities within the past two
years by each of the participants is provided in Appendix B.

SOLICITATION OF REVOCATIONS

The cost of the solicitation of revocations of consent
will be borne by DSSI. DSSI estimates that the total expenditures
in connection with such solicitation (including the fees and
expenses of DSSI's attorneys, public relations advisers and solicitors,
advertising, printing, mailing, travel and other costs, but
excluding salaries and wages of officers and employees), will be
approximately $_______, of which $__________ has been spent to
date. In addition to the Board's solicitation by mail,
directors, officers and other DSSI employees may, without
additional compensation, solicit revocations by mail, in
person, by telecommunication or by other electronic means.

DSSI has retained Innisfree, at an estimated fee of
$50,000, plus reasonable out-of-pocket expenses, to assist in the
solicitation of revocations, as well as to assist DSSI with its
communications with its stockholders with respect to, and to
provide other services to DSSI in connection with, DSSI's opposition
to the Moyers/Cummer Solicitation. Approximately fifteen
persons will be utilized by Innisfree in its efforts. DSSI will
reimburse brokerage houses, banks, custodians and other
nominees and fiduciaries for out-of-pocket expenses incurred in
forwarding DSSI's consent revocation materials to, and obtaining
instructions relating to such materials from, beneficial owners
of Common Stock. DSSI has agreed to indemnify Innisfree against
certain liabilities and expenses in connection
with its engagement, including certain liabilities under the
federal securities laws.

INDEPENDENT PUBLIC ACCOUNTANTS AND AUDITORS

Deloitte & Touche LLP served as the Company's independent
certified public accountants and auditors for the year ended December 31,
1997 and is expected to serve in that capacity for fiscal year 1998.

STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING

Stockholders may present proposals for inclusion in the
Company's 1998 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 March 27, 1998.

Sheldon Krause,
January __, 1998 Secretary

IMPORTANT

1. If your shares are registered in your own names, please sign, date and
mail the enclosed WHITE Consent Revocation Card to Innisfree in the
postage-paid envelope provided.

2. If you have previously signed and returned a BLUE consent card to
the Moyers/Cummer Group, you have every right to change your vote. Only
your latest dated card will count. You may revoke any BLUE consent
card already sent to the Moyers/Cummer Group by signing, dating and
mailing the enclosed WHITE Consent Revocation Card in the postage-paid
envelope provided.

3. If your shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can sign a WHITE Consent Revocation Card
with respect to your shares and only after receiving your specific
instructions. To ensure that your shares are voted, you should also
contact the person responsible for your account and give instructions for
a WHITE Consent Revocation Card to be issued representing your shares.

4. After signing the enclosed WHITE Consent Revocation Card, do not
sign or return the BLUE consent card. Do not even use the Moyers/Cummer
Group's BLUE consent card or any other forms sent to you by the
Moyers/Cummer Group to indicate your opposition to the Moyers/Cummer
Proposals.

If you have any questions about giving your revocation of
consent or require assistance, please call:

INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20th FLOOR
NEW YORK, NEW YORK 10022
CALL TOLL FREE: (888) 750-5834
BANKS & BROKERS CALL COLLECT: (212) 750-5833

APPENDIX A

PROPOSED BY-LAW AMENDMENTS

The following paragraph sets forth Article II, Section 2 of
the Company's By-laws.

Section 2. Special Meetings. Special meetings of the
stockholders may be called at any time by the Board or the President of
the Corporation, and may not be called by any other person or persons.
Any such special meeting shall be held at such place (within or without
the State of Delaware), date and hour as shall be designated in the
notice or waiver of notice thereof.

The following paragraph sets forth Article II, Section 2 as
proposed by the Moyers/Cummer Group under Moyers/Cummer Proposal 5.

Section 2. Special Meetings. Special meetings of the
stockholders may be called at any time by the Board of Directors or the
President of the Corporation or by written consent of a stockholder or
stockholders holding of record at least twenty-five percent (25%) of the
shares of Common Stock of the Corporation issued and outstanding, such
special meeting to be held at such place (within or without the State of
Delaware), date and hour as shall be designated in the notice or waiver
of notice thereof.

* * *

The following paragraphs set forth the current Article II,
Sections 6 and 7 of the Company's By-laws.

Section 6. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible
for election as directors; provided, however, that the following
procedures shall not apply to the nomination of persons for election as
directors by vote of any class or series of preferred stock of the
Corporation. Nominations of persons for election to the Board of
Directors of the Corporation at the annual meeting may be made at such
meeting by or at the direction of the Board of Directors, by any
committee or persons appointed by the Board of Directors or by any common
stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set
forth in this Section 6. Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the
event that less than 75 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders and the meeting is
held on a day which is not within five calendar days of the date on which
the prior year's meeting was held, notice by the stockholder to be timely
must be so received not later than the close of business on the fifteenth
day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made, whichever first occurs. Such
stockholder's notice to the Secretary shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class, series and number of shares of
capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of
directors pursuant to the Rules and Regulations of the Securities and
Exchange Commission under Section 14 of the Securities Exchange Act of
1934, as amended; and (b) as to the stockholder giving notice (i) the
name and record address of the stockholder and (ii) the class, series and
number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder. Such notice shall be accompanied
by the executed consent of each nominee to serve as a director if so
elected. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a director
of the Corporation. No person shall be eligible for election as a
director of the Corporation by the holders of the Common Stock of the
Corporation unless nominated in accordance with the procedures set forth
herein. The officer of the Corporation presiding at an annual meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the foregoing procedure, and
if he should so determine, he shall so declare to the meeting, and the
defective nomination shall be disregarded.

Section 7. Advance Notification of Business to be Transacted
at Stockholder Meetings. To be properly brought before the annual or any
special stockholders' meeting, business must be either (a) specified in
the notice of meeting (or any supplement or amendment thereto) given by
or at the direction of the Board of Directors, (b) otherwise properly
brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual or any special
stockholders' meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the secretary of the Corporation. To
be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not less
than 60 days nor more than 90 days prior to the meeting; provided,
however, that in the event that less than 75 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders
and the meeting is held on a day which is not within five calendar days
of the date on which the prior year's meeting was held, notice by the
stockholder to be timely must be so received not later than the close of
business on the fifteenth day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made,
whichever first occurs; provided, further, however, that this Section 7
shall not apply to any special meeting of stockholders where only the
holders of one or more classes or series of preferred stock of the
Corporation are entitled to vote. Such stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to
bring before the meeting (i) a brief description of the business desired
to be brought before the meeting and the reasons for conducting such
business at the meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class, series and number
of shares of capital stock of the Corporation which are beneficially
owned by the stockholder and (iv) any material interest of the
stockholder in such business.

Except as otherwise provided in this Section 7, no business
shall be conducted at the annual or any special meeting except in
accordance with the procedures set forth in this Section 7, provided,
however, that nothing in this Section 7 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the
meeting. The officer of the Corporation presiding at the meeting shall,
if the facts warrant, determine and declare to the meeting that business
was not properly brought before the meeting in accordance with the
provisions of this Section 7, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before
the meeting shall not be transacted.

APPENDIX B

INFORMATION CONCERNING CERTAIN TRANSACTIONS IN DSSI'S SECURITIES
WITHIN THE PAST TWO YEARS

The following table sets forth all purchases and sales of DSSI's
securities by the participants referred to above during the last two
years:

Number of Date of
Shares Purchased Purchase
Name (or Sold) or Sale
- ---- ---------------- --------

David Weldler 10,000(1) 5/28/96
(10,000)(1) 5/28/96

Maxwell Rabb (5,000) 9/27/96
(5,000) 11/27/96
(5,000) 12/5/96
(5,000) 12/6/96

(1) The 10,000 shares were purchased upon exercise of stock options and
sold on the same day.

PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED JANUARY 15, 1998

[FORM OF CONSENT REVOCATION CARD -- WHITE]

DATA SYSTEMS & SOFTWARE INC.

THIS REVOCATION OF CONSENT IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
DATA SYSTEMS & SOFTWARE INC.
IN OPPOSITION TO THE SOLICITATION BY THE MOYERS/CUMMER GROUP (OPERATING
UNDER THE NAME "THE COMMITTEE TO ENHANCE DATA SYSTEMS & SOFTWARE INC.
STOCKHOLDER VALUE")

The undersigned, a holder of shares of Common Stock, par value $.01
per share (the "Common Stock"), of Data Systems & Software Inc. ("DSSI"),
acting with respect to all of the shares of Common Stock held by the
undersigned, hereby revokes any and all consents that the undersigned
may have given with respect to each of the following proposals:

THE BOARD OF DIRECTORS OF DATA SYSTEMS & SOFTWARE INC. UNANIMOUSLY RECOMMENDS
THAT YOU "REVOKE CONSENT". PLEASE SIGN, DATE AND MAIL THIS CONSENT REVOCATION
CARD TODAY.

IMPORTANT: MARKING THE "ABSTAIN" BOX WITH RESPECT TO ANY PROPOSAL MAY NOT
HAVE THE EFFECT OF REVOKING A PRIOR CONSENT. IN ORDER TO BE SURE THAT YOU
ARE REVOKING A PRIOR CONSENT, YOU MUST EITHER MARK THE "REVOKE CONSENT"
BOX OR SIGN THIS CONSENT REVOCATION CARD WITHOUT MARKING ANY BOXES.

MOYERS/CUMMER PROPOSAL 1: Remove, without cause, the entire existing Board
of Directors, consisting of the following persons: George Morgenstern,
Sheldon Krause, Harvey Eisenberger, Robert Kuhn, Samuel Fogel, Maxwell
Raab and Allen Schiff.

[__] REVOKE CONSENT [__] DO NOT REVOKE CONSENT [ ] ABSTAIN

MOYERS/CUMMER PROPOSAL 2: Elect the following five persons selected by the
Moyers/Cummer Group to constitute the Board of Directors: Dwayne A. Moyers;
Jeffrey A. Cummer; William Nelson II; Kyle G. Kennedy; and Alan M. Steinmetz.

[__] REVOKE CONSENT [__] DO NOT REVOKE CONSENT

INSTRUCTIONS: IF YOU WANT TO REVOKE YOUR CONSENT FOR FEWER THAN ALL OF THE
CANDIDATES, CHECK THE "REVOKE CONSENT" BOX BUT WRITE THE NAMES OF THE PERSONS
AS TO WHICH CONSENT IS NOT REVOKED IN THE FOLLOWING SPACE:

MOYERS/CUMMER PROPOSAL 3: Amend Article XII of the By-laws in the manner
described in the Revocation of Consent Statement.