DATA SYSTEMS & SOFTWARE INC
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>c22253_ex10-3.txt
<TEXT>


                                                                    EXHIBIT 10.3

                                OPTION AGREEMENT


       THIS OPTION AGREEMENT (this "AGREEMENT"),  dated as of September 1, 2001,
is made by and between COMVERGE TECHNOLOGIES,  INC., a Delaware corporation (the
"COMPANY"), and ROBERT M. CHISTE ("CHISTE").

                                 R E C I T A L S

       WHEREAS, Chiste and the Company have entered into an employment agreement
made as of the date  hereof  (the  "EMPLOYMENT  AGREEMENT"),  pursuant  to which
Chiste has agreed to be employed by the Company as its Chief  Executive  Officer
and Vice Chairman of the Board of Directors; and

       WHEREAS,  pursuant to Paragraph 2(b)(iii) of to the Employment Agreement,
the Company has agreed to grant an option to Chiste for the  purchase of 349,325
shares of the Company's Common Stock, par value $.01 per share ("COMMON STOCK"),
subject  to the terms and  conditions  set forth  herein  and in the  Employment
Agreement,  representing an ownership of 6% of the outstanding  capital stock of
the Company as of the date hereof  (including  shares of Common Stock  currently
reserved for issuance  upon the exercise of employee  stock  options  granted to
date by the Company).

AGREEMENT

       NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties hereto agree as follows:

              1.     GRANT OF OPTION. (a) Subject to the terms and conditions of
this Agreement and the Employment Agreement, the Company hereby grants to Chiste
an option (this  "OPTION")  for the  purchase  from the Company of up to 349,325
shares  of  Common  Stock  (the  "OPTION  SHARES")  at a price  per  share to be
determined  in accordance  with the  provisions  of paragraph  2(b) hereof.  The
number of Option Shares to which this Option pertains and the per share price at
which  this  Option may be  exercised  (the  "EXERCISE  PRICE")  are  subject to
adjustment in accordance with the provisions of Paragraph 3 of this Agreement.

              (b)    The Company and Chiste agree that the Exercise  Price shall
be equal to the fair  market  value  of a share of  Common  Stock as  determined
pursuant  to the  following  methodology.  No later than  October  15,  2001 the
Company,  at its sole  cost and  expense,  shall  engage an  independent  expert
appraiser  (the  "INDEPENDENT  APPRAISER") to determine the fair market value of
the  Company as of July 31, 2001 (or, if the  Independent  Appraiser  determines
that a valuation as of such date cannot practicably be performed, then as of the
most recent  practicable date as determined by the Independent  Appraiser).  The
valuation  shall  be  conducted  by any of the "Big 5"  accounting  firms or any
national  accounting  firm,  investment bank or other firm regularly  engaged in
conducting such valuations reasonably acceptable to both the Company and Chiste.
The  Exercise  Price  shall be equal to the  total  valuation  for  Comverge  as

<PAGE>


determined  by the  Independent  Appraiser,  DIVIDED by the number of issued and
outstanding  Common Stock,  i.e.  4,936,713 as of July 31, 2001. The Independent
Appraiser  shall be engaged to complete its  valuation on or before  November 1,
2001. The determination of the Exercise Price by the Independent Appraiser shall
be binding and conclusive on Chiste and the Company.

              2.     MANNER OF  EXERCISE.  This Option may be  exercised  by the
delivery  to the  Company  of a written  notice  signed by Chiste in the form of
EXHIBIT A hereto,  together with full payment of the purchase  price therefor in
cash or by certified check payable to the order of the Company. The Company may,
in its  sole  discretion,  require  Chiste  to remit to the  Company  an  amount
sufficient to satisfy any federal,  state or local  withholding tax requirements
prior to delivering to Chiste any Option Shares  purchased upon exercise of this
Option.  This Option may not be exercised with respect to a fractional share. In
lieu of such fractional  share, the Company shall make a cash payment  therefore
upon the basis of the Exercise Price then in effect.

              3.     ADJUSTMENTS.

              (a)    STOCK SPLITS,  STOCK DIVIDENDS,  ETC. If the Company at any
time (x) subdivides (by any stock split,  stock  dividend,  recapitalization  or
otherwise)  the  shares of Common  Stock  outstanding  into a greater  number of
shares,  the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced and the number of Option Shares remaining purchasable
pursuant  to this  Option  shall be  proportionately  increased,  and (y) if the
Company at any time combines (by reverse stock split or otherwise) the shares of
Common Stock outstanding into a smaller number of shares,  the Exercise Price in
effect immediately prior to such combination will be  proportionately  increased
and the number of Option Shares  remaining  purchasable  pursuant to this Option
shall be  proportionately  decreased.  Upon each adjustment of this Option,  the
Company shall compute such  adjustment and furnish Chiste with a summary setting
forth such adjustment and the facts upon which such adjustment is based.

              (b)    RECLASSIFICATIONS,   EXCHANGE,   SUBSTITUTION.   Upon   any
reclassification,  exchange,  substitution,  or other  event  that  results in a
change of the number  and/or class of  securities  issuable upon the exercise of
this  Option,  Chiste  shall be entitled to receive an option or other  security
exercisable  or  convertible  for the number and kind of securities and property
that Chiste would have  received  for the Option  Shares if this Option had been
exercised immediately before such reclassification,  exchange,  substitution, or
other  event  (including  an event that may be deemed a Change of Control of the
Company).  The Company or its  successor  shall  promptly  issue to Chiste a new
option or other security  exercisable or convertible  for such new securities or
other property, which new option or other security (as the case may be) shall be
subject to the terms of this Agreement (including, without limitation, Paragraph
4(b)).

              (c)    DILUTION.  The Company  represents  and  warrants  that the
Option  Shares  represent  not less  than six  percent  (6%) of the  outstanding
capital stock of the Company as of the date hereof  (including  shares of Common
Stock  currently  reserved  for  issuance  upon the  exercise of employee  stock
options  granted to date by the Company).  Chiste  acknowledges  that subsequent
issuances  of Common Stock will dilute his  percentage  interest in the Company.
The Company agrees that in the event that Chiste's  percentage interest would be
reduced  below six percent (6%) solely due to the  issuance of capital  stock by
the Company other than  issuances of capital stock or options or other rights to
purchase   capital  stock  issued  by  the  Company  as  compensation   and  the
paid-in-capital  of the  Company  is less  than $15  million,  then  the  number

                                       2
<PAGE>


of Option Shares for which this Option is exercisable  shall be increased by the
number  of  additional  shares  of  Common  Stock  so  as to  maintain  Chiste's
percentage  interest  in the  Company at no less than six  percent  (6%) and the
Exercise Price shall be proportionately  reduced.  Chiste  acknowledges that the
provisions  of this  paragraph  3(c)  will  terminate  on the date on which  the
paid-in-capital of the Company is equal to or greater than $15 million.

              4.     TIME  OF  EXERCISE  OF  OPTION.  (a)  This  Option  may  be
exercised  as to not more than  116,442  shares at any time after  December  31,
2001, as to not more than 232,884 shares at any time after December 31, 2002 and
as to the total of 349,325  shares at any time after  December 31, 2003,  unless
this Option has been  terminated in accordance  with the provisions of Paragraph
5.

              (b)    TERMINATION  OF THE  EMPLOYMENT  AGREEMENT  WITHOUT  CAUSE.
Anything in this Paragraph 4 and in Paragraph 5 to the contrary notwithstanding,
at any time after an IPO this  Option may be  exercised  as to all of the Option
Shares  (less the  number of Option  Shares as to which it has  previously  been
exercised, surrendered or forfeited) during the period commencing on the date on
which the  Company  terminates  the  Employment  Agreement  without  "Cause" (as
defined therein) and ending on December 31, 2006.

              5.     TERMINATION  OF  OPTION.   This  Option  shall  immediately
terminate  after  December  31,  2006,  or upon the earlier  termination  of the
Employment  Agreement,  except  that if the  date of such  termination  is after
December 31, 2001,  Chiste's right to exercise the  unexercised  portion of this
Option shall continue to be  exercisable  but only as to the number of shares as
to which it would  otherwise have been  exercisable  for (x) 12 months after the
date of such  termination (but in no event later than December 31, 2006) if such
termination  was due to Chiste's  death or  disability  (as defined in paragraph
7(a)(ii)(C) of the Employment Agreement),  or (y) three months after the date of
any termination of the Employment  Agreement by Chiste or any termination by the
Company  without Cause prior to an IPO. In all cases under this  paragraph 5 and
paragraph  4(b)  hereof,  Chiste's  right to exercise any portion of this Option
after  termination  of  the  Employment   Agreement  shall  be  subject  to  the
satisfaction  of the conditions  precedent that Chiste not breach or threaten to
breach any of the  provisions  that survive the  termination  of the  Employment
Agreement, including, without limitation, any of the provisions of paragraphs 3,
4, 5 and 6 thereof.

              6.     RESTRICTION ON TRANSFER. This Option may not be assigned or
transferred  except by will or the law of descent  and  distribution  and during
Chiste's lifetime may be exercised only by Chiste to the extent provided in this
Agreement.

              7.     OPTION SHARES FULLY PAID;  RESERVATION OF COMMON STOCK. All
of the Option  Shares  issuable  upon the  exercise  of this Option  will,  upon
issuance  and  receipt  of the  Exercise  Price  therefor,  be  fully  paid  and
non-assessable,  and free from all taxes,  liens and charges with respect to the
issue  thereof.  During the period in which this  Option may be  exercised,  the
Company shall have  authorized  and reserved for issuance  sufficient  shares of
Common Stock to provide for the exercise of this Option by Chiste.

              8.     REPRESENTATIONS AND WARRANTIES OF CHISTE.  Chiste makes the
following  representations and warranties to the Company,  each and all of which
shall survive the execution and delivery of this  Agreement and the  termination
thereof:

                                       3
<PAGE>


              (a)    Chiste is  acquiring  this  Option and,  upon the  exercise
thereof,  the Option  Shares for  investment  for his own account and not with a
view to, or for resale in connection with, the distribution or other disposition
thereof.  Chiste  agrees  that he  will  not,  directly  or  indirectly,  offer,
transfer,  sell,  assign,  pledge,  hypothecate or otherwise  dispose of (each a
"TRANSFER")  any of the Option Shares unless such Transfer (A) is pursuant to an
effective  registration  statement under the Securities Act of 1933, as amended,
and the rules and regulations in effect  thereunder (the "SECURITIES  ACT"), (B)
is made in accordance with Rule 144 under the Securities Act, or (C) counsel for
Chiste shall have furnished the Company with an opinion,  reasonably  acceptable
to  the  Company,   that  no  such  registration  is  required  because  of  the
availability of an exemption under the Securities Act.

              (b)    Chiste is an "Accredited Investor" (as that term is defined
in Rule 501 of  Regulation  D under  the  Securities  Act) and by  reason of his
business and financial experience, Chiste has such knowledge, sophistication and
experience in business and financial  matters as to be capable of evaluating the
merits and risks of the  prospective  investment  in this  Option and the Option
Shares and making an informed investment  decision with respect thereto.  Chiste
is able to bear the  economic  risk of his  investment  in this  Option  and the
Option Shares and is able to afford a complete loss of such  investment;  and he
has made (and in  connection  with each  exercise of this Option,  will make) an
independent investigation of the Company and relied upon (and in connection with
each exercise of this Option,  will rely upon) his own due diligence,  valuation
analysis and other analyses in determining to purchase the Option Shares.

              (c)    Chiste  acknowledges  that  this  Option  and  the  Options
Shares: have not been registered under the Securities Act or the securities laws
of any state or other jurisdiction and may not be so registered;  be Transferred
unless this Option and the Option Shares are  subsequently  registered under the
Securities  Act  and  any  applicable  state  laws  or an  exemption  from  such
registration is available.  Chiste also  acknowledges  and agrees that he has no
registration rights with respect to this Option and the Option Shares.

       9.     COMPLETE  AGREEMENT.  This Agreement  supersedes any and all other
agreements,  either oral or in writing,  between Company and Chiste with respect
to this Option and the Option Shares.  This Agreement may not be modified except
in writing signed by the Company and Chiste and no term of this Agreement may be
waived except in writing signed by the party waiving such term.

       10.    NO  WAIVER.  No waiver by the  parties  hereto of any  default  or
breach of any term,  condition or covenant of this Agreement  shall be deemed to
be a waiver of any  subsequent  default or breach of the same or any other term,
condition or covenant contained herein.

       11.    NOTICE.  Whenever  any notice is required  hereunder,  it shall be
given in writing addressed as follows:

                     To the Company          Comverge Technologies, Inc.
                                             23 Vreeland Road
                                             Florham Park, New Jersey 07932
                                             Attn:  Chairman of the Board

                                       4
<PAGE>


                     To Chiste               Robert M. Chiste
                                             15834 Hidden Cove
                                             Houston, Texas  77079

Notice  shall be deemed  delivered  (i) three (3) days after the  deposit in the
U.S. mail of a writing addressed as above and sent first class mail,  certified,
return receipt requested,  (ii) upon hand delivery, (iii) one business day after
deposit with Federal Express or other recognized  over-night courier service, or
(iv) when actually  received.  Either party may change the address for notice by
notifying the other party of such change in accordance with this paragraph 11.

       12.    HEADINGS. The paragraph headings herein are for reference purposes
only and are not intended in any way to describe, interpret, define or limit the
extent or intent of this Agreement or of any part hereof.

       13.    GOVERNING LAW; JURISDICTION.  This Agreement shall in all respects
be governed,  enforced and construed according to the internal laws of the State
of New Jersey  without regard to the principles of the conflict of laws thereof.
Each party  hereby  irrevocably  consents and agrees that any legal or equitable
action or proceeding  based upon,  arising  under or relating to this  Agreement
shall be brought  exclusively  in any Federal or state court in the State of New
Jersey. Each party hereby irrevocably  consents to the personal  jurisdiction of
any such court.

       14.    NO RIGHTS AS STOCKHOLDER. Chiste shall not have any rights
as a  stockholder  of the Company with respect to the Option Shares until Chiste
becomes the holder of such Option Shares upon the exercise of this Option.

       15.    COUNTERPARTS.  This  Agreement  may be  executed  in any number of
counterparts  and any party  hereto may  execute any such  counterpart,  each of
which when executed and  delivered  shall be deemed to be an original and all of
which  counterparts  taken  together  shall  constitute  but one  and  the  same
instrument.


                        [SIGNATURES APPEAR ON NEXT PAGE]

                                       5
<PAGE>


              IN  WITNESS  WHEREOF,   the  parties  hereto  have  executed  this
Agreement as of the date and year first above written.

                                          COMVERGE TECHNOLOGIES, INC.


                                          By     /s/ George Morgenstern
                                             -----------------------------------
                                                 Name:  George Morgenstern
                                                 Title: Chairman




   /s/ Robert M. Chiste
-----------------------------
 Robert M. Chiste

                                       6
<PAGE>


                          EXHIBIT A TO OPTION AGREEMENT

                              OPTION EXERCISE FORM

COMVERGE TECHNOLOGIES, INC.
23 VREELAND ROAD
FLORHAM PARK, NJ  07932

Gentlemen:

              I hereby  exercise  the  following  portion of the option that has
heretofore been granted to me as follows:

              Date of grant        September 1, 2001
                           -----------------------------------------------------
              Exercise  price per share   $
                                       -----------------------------------------
              Number of shares underlying option grant
                                                      --------------------------
              Number of shares underlying option held
                                                     ---------------------------
              Number of shares for which option being exercised hereby
                                                                      ----------
              In connection with this exercise, I enclose my check in the amount
              of  $_____________________ in payment of the exercise price of the
              shares being acquired hereby and any applicable withholding taxes.

              I hereby agree to execute  whatever other  documents are necessary
in order to comply with the Option Agreement,  dated as of September 1, 2001, by
and between Comverge  Technologies,  Inc. and Robert M. Chiste (the "AGREEMENT")
and any applicable  legal  requirements  in connection  with the issuance of the
stock to me pursuant to the Agreement.


------------------------------              ------------------------------
Chiste (Signature)                          Social Security Number

------------------------------              ------------------------------
Please print name

------------------------------              ------------------------------
Date                                        Address

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