UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
January 3, 2005
Date of report (date of earliest event reported)
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DIGITAL FUSION, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware 0-24073 13-3817344
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
4940-A Corporate Drive, Huntsville, AL 35805
(Address of Principal Executive Offices)
(256) 837-2620
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former address, if Changed Since Last Report)
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Check the appropriate box below if the Form 8-K filing in intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14D-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
On January 6, 2005, the Company announced that one of the it's operating
divisions, Summit Research Corporation ("Summit/DFI"), was recently awarded a
$3.2 million contract by the U.S. Army Space and Missile Defense Command
(USASMDC) to provide advanced weapons, sensors, and airborne sensor technologies
research and development. The estimated potential value of the award is $24.4
million if all options are exercised. The contract award consists of a Basic
Effort award valued at approximately $400,000 and award options Option I, Option
II and Option III valued at approximately $6 million, $9 million and $9 million
respectively. The Basic Effort and approximately $2.8 million of Option I have
been exercised and funded.
On September 13, 2004 the Company entered into an employment agreement (the
"Agreement") with Edward Rawlinson (the "Executive") pursuant to which the
Company has retained the Executive to serve as Vice President - Engineering
Services Division of the Company. The following summary is qualified in its
entirety by reference to the text of the Agreement.
The Agreement provides for the employment of the Executive for a period of two
years commencing on September 13, 2004, unless terminated earlier pursuant to
the terms of the Agreement. Under the terms of the Employment Agreement, the
Executive will receive annual compensation of no less than $175,000 and
participate in the Company's Executive Incentive Plan. The Company granted to
the Executive the option to purchase 245,000 shares of the Company's common
stock exercisable at $0.885 a share of which 82,000 shares are currently vested
and the remainder are subject to vesting performance structure set by the Board
of Directors. The Company will provide for the Executive's participation in the
medical, dental, vision, life and disability insurance programs maintained by
the Company for its employees. In addition, the Company shall pay the Executive
a $125 a month allowance for telephone expenses.
The Agreement also provides for the payment by the Company to the Executive
severance payments equal to six months of the Executive's current base salary
plus any accrued incentive bonus upon a voluntary termination of employment for
"good reason," an involuntary termination of employment without "good cause," or
a voluntary termination of employment following a reduction in the Executive's
duties or title occurring within 12 months after a "change in control" of the
Company. Following such a termination of employment, the Executive will receive
(i) all benefits that have vested under the terms of the Agreement, and (ii)
health care coverage continuation rights under COBRA.
In the event the Executive terminates his employment for other than "good
reason," or the Company terminates the Executive's employment for "cause," the
Executive shall not be entitled to receive any salary or other compensation or
other benefits for any period after such termination. However, following such a
termination of employment, the Executive will receive (i) all benefits that have
vested under the terms of the Agreement, and (ii) health care coverage
continuation rights under COBRA. The Agreement and all benefits provided under
the Agreement will terminate immediately upon the death of the Executive,
provided that the Executive's heirs and estate will receive all benefits that
have vested under any written term of plan, and the Executive's dependents will
receive health care coverage continuation rights under COBRA.
The Agreement contains restrictive covenants which prohibit the Executive from
(i) associating with a business that is competitive with any line of business of
the Company for which the Executive provided services during the term of the
Executive's employment, without the Company's consent and (ii) soliciting the
Company's agents and employees during the term of the Executive's employment and
for a period of one year following any termination of employment.
On January 3, 2005 the Company entered into an employment agreement (the
"Agreement") with Joseph Summers (the "Executive") pursuant to which the Company
has retained the Executive to serve as Vice President - Strategic Planning of
the Company. The following summary is qualified in its entirety by reference to
the text of the Agreement.
The Agreement provides for the employment of the Executive for a period of two
years commencing on January 3, 2005, unless terminated earlier pursuant to the
terms of the Agreement. Under the terms of the Employment Agreement, the
Executive will receive annual compensation of no less than $150,000 and
participate in the Company's Executive Incentive Plan. The Company granted to
the Executive the option to purchase 145,000 shares of the Company's common
stock exercisable at $2.625 a share of which 50,000 shares are currently vested
and the remainder are subject to vesting performance structure set by the Board
of Directors. The Company will provide for the Executive's participation in the
medical, dental, vision, life and disability insurance programs maintained by
the Company for its employees. In addition, the Company shall pay the Executive
a $125 a month allowance for telephone expenses.
The Agreement also provides for the payment by the Company to the Executive
severance payments equal to six months of the Executive's current base salary
plus any accrued incentive bonus upon a voluntary termination of employment for
"good reason," an involuntary termination of employment without "good cause," or
a voluntary termination of employment following a reduction in the Executive's
duties or title occurring within 12 months after a "change in control" of the
Company. Following such a termination of employment, the Executive will receive
(i) all benefits that have vested under the terms of the Agreement, and (ii)
health care coverage continuation rights under COBRA.
In the event the Executive terminates his employment for other than "good
reason," or the Company terminates the Executive's employment for "cause," the
Executive shall not be entitled to receive any salary or other compensation or
other benefits for any period after such termination. However, following such a
termination of employment, the Executive will receive (i) all benefits that have
vested under the terms of the Agreement, and (ii) health care coverage
continuation rights under COBRA. The Agreement and all benefits provided under
the Agreement will terminate immediately upon the death of the Executive,
provided that the Executive's heirs and estate will receive all benefits that
have vested under any written term of plan, and the Executive's dependents will
receive health care coverage continuation rights under COBRA.
The Agreement contains restrictive covenants which prohibit the Executive from
(i) associating with a business that is competitive with any line of business of
the Company for which the Executive provided services during the term of the
Executive's employment, without the Company's consent and (ii) soliciting the
Company's agents and employees during the term of the Executive's employment and
for a period of one year following any termination of employment.
On January 3, 2005 the Company entered into an employment agreement (the
"Agreement") with Michael W. Wicks (the "Executive") pursuant to which the
Company has retained the Executive to serve as President - Summit Research, a
division of the Company. The following summary is qualified in its entirety by
reference to the text of the Agreement.
The Agreement provides for the employment of the Executive for a period of two
years commencing on January 3, 2005, or until the Note referenced in Item 2.01
is repaid or converted. unless terminated earlier pursuant to the terms of the
Agreement. Under the terms of the Employment Agreement, the Executive will
receive annual compensation of no less than $160,000 and participate in the
Company's Executive Incentive Plan. The Company will provide for the Executive's
participation in the medical, dental, vision, life and disability insurance
programs maintained by the Company for its employees. In addition, the Company
shall pay the Executive a $125 a month allowance for telephone expenses.
The Agreement also provides for the payment by the Company to the Executive
severance payments equal to six months of the Executive's current base salary
plus any accrued incentive bonus upon a voluntary termination of employment for
"good reason," an involuntary termination of employment without "good cause," or
a voluntary termination of employment following a reduction in the Executive's
duties or title occurring within 12 months after a "change in control" of the
Company. Following such a termination of employment, the Executive will receive
(i) all benefits that have vested under the terms of the Agreement, and (ii)
health care coverage continuation rights under COBRA.
In the event the Executive terminates his employment for other than "good
reason," or the Company terminates the Executive's employment for "cause," the
Executive shall not be entitled to receive any salary or other compensation or
other benefits for any period after such termination. However, following such a
termination of employment, the Executive will receive (i) all benefits that have
vested under the terms of the Agreement, and (ii) health care coverage
continuation rights under COBRA. The Agreement and all benefits provided under
the Agreement will terminate immediately upon the death of the Executive,
provided that the Executive's heirs and estate will receive all benefits that
have vested under any written term of plan, and the Executive's dependents will
receive health care coverage continuation rights under COBRA.
The Agreement contains restrictive covenants which prohibit the Executive from
(i) associating with a business that is competitive with any line of business of
the Company for which the Executive provided services during the term of the
Executive's employment, without the Company's consent and (ii) soliciting the
Company's agents and employees during the term of the Executive's employment and
for a period of one year following any termination of employment.
Section 2 - Financial Information
Item 2.01 Completion of Acquisition or Disposition of Assets.
On January 3, 2005, pursuant to a Stock Purchase Agreement dated October
28, 2004 by and between Digital Fusion, Inc. ("Digital Fusion") and Michael W.
Wicks ("Wicks"), Digital Fusion acquired all of Wicks' outstanding capital stock
of Summit Research Corporation ("Summit").
Under the terms of the Agreement, the Company paid to Wicks (a) $1,600,000
in cash, (b) 575,000 shares of the Company's common stock and (c) a convertible
promissory note (the "Note") in the cumulative amount of $2,700,000. On the six
month anniversary of the Closing, Wicks shall receive $600,000 cash plus an
additional amount equal to the excess of Summit's tangible net worth as of the
Closing in excess of $900,000 (the "Second Payment"). The tangible net worth of
Summit as of the Closing shall be determined by Summit's independent certified
public accountants (subject to review by the Company's independent certified
public accountants). To the extent that Summit's tangible net worth as of the
Closing is less than $900,000, the Note shall be reduced by that same amount.
The principal portion of the Note may be converted at any time by Wicks
into a number of shares determined by dividing the converted principal amount of
the Note by the Conversion Price of $2.25 per share. In the event the entire
Note is converted, Wicks will receive a total of 1,200,000 shares of the
Company's common stock. No interest shall accrue on the Note during any calendar
month in which the Company's common stock is publicly traded and the average
closing price of the Company's common stock is greater than $2.80 per share.
Section 3 - Securities and Trading Markets
Item 3.02 Unregistered Sales of Equity Securities.
On January 3, 2005, the Company issued 575,000 shares of its common stock
to Wicks as part of the purchase price of all of Wick's outstanding capital
stock of Summit. These shares were issued in reliance on an exemption from
registration under Section 4(2) of the Securities Act of 1933 ("Act") and
Regulation D promulgated under the Act.
In addition, if the full original principal amount of the Note were
converted, this would result in the issuance of an aggregate of 1,200,000 shares
of the Company's common stock
Section 7 - Regulation FD
Item 7.01 Regulation FD Disclosure.
The Company issued a press release announcing the award of a $3.2 Million
USASMDC Contract to Summit Research which is attached as Exhibit 99.1.
Section 9 - Financial Statements Exhibits
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The financial statements required by Item 9.01(a) of Form 8-K will be filed by
amendment within 71 calendar days after the date this report on Form 8-K must be
filed.
(b) Pro Forma Financial Information
The pro forma financial statements required by Item 9.01(b) will be filed by
amendment within 71 calendar days after the date this report on Form 8-K must be
filed.
(c) Exhibits
Exhibit No. Description
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99.1* Press release dated January 4, 2005, issued by Digital Fusion,
Inc.
99.2* Press release dated January 6, 2005, issued by Digital Fusion,
Inc.
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 7, 2005
DIGITAL FUSION, INC.
By: /s/ Roy E. Crippen, III
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Roy E. Crippen, III, Chief Executive Officer,
and Director
EXHIBIT INDEX
Exhibit No. Description
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99.1* Press release dated January 4, 2005, issued by Digital Fusion, Inc.
99.2* Press release dated January 6, 2005, issued by Digital Fusion, Inc.
*Filed herewith.