SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 31, 2002
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DSET CORPORATION
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(Exact Name of Registrant as Specified in Charter)
New Jersey 0-23611 22-300022
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(State or Other Jurisdiction (Commission File Number) (IRS Employer Identification No.)
of Incorporation)
1160 US Highway 22 East
Bridgewater, New Jersey 08807
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (908) 526-7500
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On January 31, 2002, DSET Corporation, a New Jersey corporation
("DSET"), completed its acquisition of ISPSoft Inc., a New Jersey corporation
("ISPSoft"). ISPSoft was a privately-held provider of software to assist
telecommunications service providers and other enterprises manage their Internet
protocol networks and services, a line of business that DSET currently intends
to continue. In the acquisition, DSET Merger Corporation, a New Jersey
corporation and wholly-owned subsidiary of DSET (the "Subsidiary"), merged with
and into ISPSoft, followed immediately by the merger of ISPSoft with and into
DSET (collectively, the "Merger") pursuant to the terms and conditions of an
Agreement and Plan of Merger (the "Merger Agreement"), dated June 26, 2001, as
amended, by and among DSET, the Subsidiary and ISPSoft. The Merger is intended
to qualify as reorganization under Section 368(a) of the Internal Revenue Code
of 1986, as amended. The description contained in this Item 2 of the
transactions consummated pursuant to the Merger Agreement is qualified in its
entirety by reference to the full text of the Merger Agreement, which is
incorporated by reference herein.
Upon the consummation of the Merger, DSET received all of the
outstanding capital stock of ISPSoft and retired or assumed certain debts for
the following consideration: (a) the former shareholders of ISPSoft received an
aggregate of 2,281,143 newly-issued shares of DSET Common Stock, no par value;
(b) certain of such shareholders may be entitled to receive up to an additional
aggregate of $500,000 in cash or registered shares of DSET Common Stock
subject to certain limitations and the satisfaction of certain net revenue
milestones, all as set forth in the Merger Agreement; (c) certain shareholders
or note holders of ISPSoft received an aggregate cash payment of $1,525,000
(such cash payments were made from DSET's existing working capital cash
balances); and (d) certain note holders of ISPSoft received notes from DSET
in an aggregate amount of $800,000.
As further consideration, DSET assumed each issued and outstanding
option for the purchase of Common Stock of ISPSoft and converted each such
option into options to acquire shares of DSET Common Stock. The aggregate amount
of shares of DSET's Common Stock to be issued upon exercise of such options is
241,483 shares, with a weighted average exercise price of $1.97 per share.
The principles followed in determining the amount of consideration paid
in the Merger were based upon negotiations between unaffiliated parties and
consideration was given to, among other factors: (i) the financial and operating
performance and prospects of DSET and ISPSoft; (ii) draft pro forma financial
statements of DSET which reflect the financial position and prospects of DSET
after giving effect to the Merger; (iii) the report of DSET's independent
financial advisor with respect to the Merger; and (iv) proposed tax treatment to
be accorded the Merger. Prior to the Merger, there were no material
relationships between ISPSoft or its shareholders and DSET or any of DSET's
affiliates, any director or officer of DSET, or any associate of such director
or officer other than that in anticipation of the Merger, DSET loaned ISPSoft up
to an aggregate of $4,400,000 through January 31, 2002. Certain directors and
officers of ISPSoft prior to the Merger continued as directors and/or officers
of DSET subsequent to the Merger, all as set forth in the Merger Agreement.
Pursuant to an Escrow Agreement, dated as of January 31, 2002, by and
among DSET, certain shareholders of ISPSoft and American Stock Transfer & Trust
Company, approximately ten percent (10%), of the shares issued in the Merger are
being held in escrow for a twelve (12) month period in the event of any breach
of representations or warranties and to secure certain indemnification rights
that DSET has under the Merger Agreement. The escrow amount shall be DSET's sole
and exclusive remedy for any breach of representations, warranties or covenants
of ISPSoft or its shareholders, absent actual fraud or intentional wrongdoing.
The Escrow Agreement is incorporated by reference herein.
The shares of DSET Common Stock issued or to be issued to the prior
shareholders of ISPSoft in connection with the Merger are registered on a
Registration Statement on Form S-4 (File No. 333-65898). The Registration
Statement on Form S-4 was declared effective on December 20, 2001. Shares of
DSET Common Stock underlying options assumed in the Merger will also be
registered with the Securities and Exchange Commission.
A copy of the press release announcing the consummation of the Merger
is incorporated herein by reference and attached hereto as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired.
The audited balance sheets of ISPSoft Inc. (a Development Stage
Company) as of December 31, 2000, and 1999, and the related statements of
operations, stockholders' equity (deficiency) and cash flows, for the year ended
December 31, 2000 and for the period March 30, 1999 (date of inception) to
December 31, 1999 and for the period from March 30, 1999 (date of inception) to
December 31, 2000, and the notes related thereto, and the Independent Auditors'
Report thereon, as well as the unaudited balance sheets of ISPSoft Inc. (a
Development Stage Company) as of September 30, 2001 and 2000, and the related
statements of operations, stockholders' equity (deficiency) and cash flows, for
the nine months ended September 30, 2001 and 2000 are set forth at pages F-1
through F-32 of the joint proxy statement/prospectus contained in DSET's
Registration Statement on Form S-4 (File No. 333-65898). Such balance sheets,
statements of operations, stockholders' equity (deficiency) and cash flows and
notes set forth at such pages are incorporated herein by reference and are
attached hereto as Exhibit 99.2.
(b) Pro Forma Financial Information.
The unaudited pro forma balance sheet as of September 30, 2001, the
unaudited pro forma statement of operations for the nine months ended September
30, 2001, the unaudited pro forma statement of operations for the year ended
December 31, 2000 for DSET Corporation and Subsidiaries and the notes related
thereto are set forth at pages 132 through 137 of the joint proxy
statement/prospectus contained in DSET's Registration Statement on Form S-4
(File No. 333-65898). Such balance sheet, statements of operation and notes
related thereto are attached hereto as Exhibit 99.3.
(c) Exhibits.
+2.1 Agreement and Plan of Merger, dated June 26, 2001, as
amended, by and among DSET Corporation, DSET Merger
Corporation and ISPSoft Inc.*
23.1 Consent of Amper, Politziner Mattia P.A. (relating to the
financial statements for ISPSoft Inc.).
99.1 Press Release dated January 31, 2002, regarding the
consummation of the acquisition.
99.2 Financial Statements of ISPSoft, Inc.
99.3 The unaudited pro forma balance sheet as of September 30,
2001, the unaudited pro forma statement of operations for the
nine months ended September 30, 2001, the unaudited pro forma
statement of operations for the year ended December 31, 2000
for DSET Corporation and Subsidiaries and the notes related
thereto.
+ This Exhibit is incorporated by reference bearing the same number
filed with DSET's Registration Statement on Form S-4 (File No. 333-65898), which
the Securities and Exchange Commission declared effective on December 20, 2001.
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and
exhibits to this document are not being filed herewith because DSET believes
that the information contained therein is not material. DSET agrees to furnish
supplementally a copy of any schedule or exhibit to the Securities and Exchange
Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DSET Corporation.
By: /s/ Bruce M. Crowell
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Name: Bruce M. Crowell
Title: Chief Financial Officer
February 7, 2002
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