UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COMVERSE TECHNOLOGY, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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)(4) 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):__________
(4) Proposed maximum aggregate value of transaction: ______________
(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: _______________
NY2:\784424\02\GT9K02!.DOC\37994.0003
<PAGE>
COMVERSE TECHNOLOGY, INC.
170 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 8, 1999
------------------
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders of
COMVERSE TECHNOLOGY, INC. (the "Company") will be held at the Huntington Hilton,
598 Broadhollow Road (Route 110), Melville, New York, on Friday, October 8,
1999, commencing at 10:00 A.M. (local time) for the following purposes:
1. To consider and act upon a proposal to amend the Certificate of
Incorporation of the Company to increase from 100,000,000 to 300,000,000 the
aggregate number of authorized shares of the Company's Common Stock, par value
$.10 per share ("Common Stock").
2. To elect nine directors who will serve as the Board of Directors of
the Company until the next annual meeting of shareholders and the election of
their qualified successors.
3. To consider and vote upon a proposal to adopt the Company's 1999
Stock Incentive Compensation Plan, under which up to 3,500,000 shares of Common
Stock may be issued as equity-based compensation to employees and directors of
the Company.
4. To consider and vote upon a proposal to amend to the Company's
Employee Stock Purchase Plan, to increase from 375,000 to 750,000 the total
number of shares of Common Stock available for purchase by participating
employees thereunder.
5. To consider and act upon a proposal to ratify the engagement of
Deloitte & Touche LLP as independent auditors of the Company for the year ending
January 31, 2000.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only those shareholders of record at the close of business on August
16, 1999 are entitled to receive notice of and to vote at the Annual Meeting or
any adjournment thereof.
A copy of the Company's Annual Report to Shareholders for the year
ended January 31, 1999 accompanies this Notice of Meeting.
By Order of the Board of Directors,
William F. Sorin,
Secretary
_____________, 1999
ATTENDANCE AT THE ANNUAL MEETING BY HOLDERS OF AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK, APPEARING IN PERSON OR REPRESENTED BY PROXY,
IS NECESSARY TO CONSTITUTE A QUORUM. YOUR ATTENDANCE IS IMPORTANT AND
APPRECIATED. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN AND RETURN THE ACCOMPANYING PROXY CARD. YOUR PROXY MAY BE REVOKED IN YOUR
DISCRETION AT ANY TIME BEFORE THE SHARES ARE VOTED.
#784808
<PAGE>
COMVERSE TECHNOLOGY, INC.
170 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
------------------
PROXY STATEMENT
-----------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 8, 1999
------------------
This Proxy Statement and the accompanying form of proxy are being
furnished in connection with the solicitation of proxies by the Board of
Directors of Comverse Technology, Inc., a New York corporation (the "Company"),
for use at the Annual Meeting of the Shareholders of the Company to be held on
October 8, 1999 or any adjournment thereof (the "Annual Meeting").
A proxy in the accompanying form, which is properly executed, duly
returned to the Company and not revoked, will be voted in accordance with the
instructions contained in the proxy. If no instructions are given with respect
to any matter specified in the Notice of Annual Meeting to be acted upon at the
Annual Meeting, the proxy will be voted in favor of such matter. As to any other
matters properly brought before the Annual Meeting, the persons named in the
proxy will vote in accordance with their best judgment. Any shareholder who
desires to revoke a proxy may do so at any time prior to the vote of the
associated shares by tendering written notice of revocation addressed to the
Secretary of the Company, by attending the Annual Meeting in person and
requesting the return of the proxy or by delivering to the Secretary of the
Company another form of proxy bearing a later date of execution.
The cost of the solicitation of proxies will be paid by the Company. In
addition to the solicitation of proxies by the use of the mails, regularly
engaged employees of the Company may, without additional compensation, solicit
proxies by personal interviews, telephone and telefacsimile. The Company will,
upon request, reimburse brokers and others who are only record holders of the
Company's Common Stock, par value $.10 per share (the "Common Stock"), for their
reasonable expenses in forwarding proxy material to beneficial owners of such
stock and obtaining voting instructions from such owners.
D. F. King & Co., Inc. ("D. F. King") has been engaged by the Company
to assist in the solicitation of proxies and for such services will receive a
fee of $7,500, reimbursement of certain out-of-pocket expenses and
indemnification by the Company against certain losses resulting from its
engagement.
The Board of Directors has fixed the close of business on August 16,
1999 as the record date for determining the shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). At the Record Date, there
were issued, outstanding and entitled to vote an aggregate of 70,658,194[based
on shares outstanding at July 23, 1999] shares of Common Stock. Attendance at
the Annual Meeting, in person or represented by proxy, by the holders of a
majority of all shares of Common Stock issued, outstanding and entitled to vote
constitutes a quorum. Each share of Common Stock entitles the holder thereof to
one vote on each matter presented for action at the meeting.
This Proxy Statement and the accompanying form of proxy are being
mailed on or about ______________, 1999 to shareholders of record on the Record
Date.
<PAGE>
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table identifies and sets forth certain information
concerning the beneficial ownership of Common Stock at July 19, 1999 by the
executive officers of the Company, by each incumbent director of the Company
standing for reelection at the Annual Meeting and by each person known by the
Company to beneficially own more than five percent of the issued and outstanding
Common Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES OF TOTAL
BENEFICIALLY OUTSTANDING
NAME RELATIONSHIP WITH THE COMPANY OWNED(1) SHARES(2)
- ---- ----------------------------- -------- ---------
<S> <C> <C> <C>
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 Shareholder 8,163,987(3) 11.6%
AIM Management Group, Inc.
1315 Peachtree Street, N.E.
Atlanta, GA 30309 Shareholder 7,057,906(3) 10.0%
Brinson Partners, Inc.
209 South LaSalle
Chicago, IL 60604 Shareholder 3,841,332(3) 5.4%
Kobi Alexander(a)(b) President, Chairman of the Board,
Chief Executive Officer and Director 1,500,469 2.1%
Carmel Vernia Chief Executive Officer - Comverse
Infosys Division and Director 291,875 *
Francis E. Girard Chief Executive Officer - Comverse
Network Systems Division and Director 238,445 *
Itsik Danziger President and Chief Operating Officer -
Comverse Network Systems Division
and Director 62,553 *
David Kreinberg Vice President of Finance and
Chief Financial Officer 15,577 *
Zvi Alexander Director 21,250 *
John H. Friedman(b)(c)(d) Director 13,000 *
Sam Oolie(a)(b)(c)(d) Director 6,000 *
William F. Sorin(a)(d) Secretary and Director 3,750 *
Shaula A. Yemini, Ph.D.(c) Director 19,350 *
All directors and executive
officers as a group (10 persons) 2,172,269 3.0%
</TABLE>
- -----------------
* Less than 1%.
(a) Member of Executive Committee of the Board of Directors.
(b) Member of Audit Committee of the Board of Directors.
(c) Member of Remuneration and Stock Option Committee of the Board of
Directors.
(d) Member of Corporate Planning and Structure Committee of the Board of
Directors.
- 2 -
<PAGE>
(1) Includes outstanding shares and shares issuable upon the exercise of
stock options that are exercisable at or within 60 days after July 19,
1999. Does not include shares issuable upon the exercise of stock
options that are not exercisable until more than 60 days after July 19,
1999. The shares subject to stock options held by the individuals
identified above as of July 19, 1999 consist of the following:
<TABLE>
<CAPTION>
Number of Shares of Common Stock Subject to Options
Exercisable at or Within Not Exercisable Until More
60 days after Than 60 Days After
July 19, 1999 July 19, 1999
----------------------- ----------------------
<S> <C> <C>
Kobi Alexander 1,147,498 1,087,500
Carmel Vernia 291,875 202,500
Francis E. Girard 156,563 305,248
Itsik Danziger 62,250 255,000
David Kreinberg 10,416 64,791
Zvi Alexander 13,000 9,000
John H. Friedman 13,000 9,000
Sam Oolie 6,000 9,000
William F. Sorin 3,750 86,251
Shaula A. Yemini, Ph.D. 14,100 9,000
All directors and executive
officers as a group 1,718,452 2,037,290
</TABLE>
(2) Based on 70,647,317 shares of Common Stock issued and outstanding on
July 19, 1999, excluding, except as otherwise noted, shares of Common
Stock issuable upon the exercise of outstanding stock options.
(3) Based on Schedule 13G filings with the Securities and Exchange
Commission reflecting data as of December 1998.
BACKGROUND OF NOMINEES AND EXECUTIVE OFFICERS
Kobi Alexander. Mr. Alexander, age 47, is a founder of the Company and
has served as Chairman of the Board of Directors of the Company since September
1986, as President and Chief Executive Officer since April 1987 and as a
director of the Company since its formation in October 1984. Mr. Alexander also
served as Co-Managing Director of the Company's wholly-owned Israeli subsidiary,
Comverse Network Systems Ltd. ("CNSL"), from its formation in 1982 until October
1986. From October 1984 to September 1986, Mr. Alexander served as Co-Chairman
and Co-Chief Executive Officer of the Company. Prior to the formation of CNSL,
in 1980 and 1981, Mr. Alexander served as an independent financial and business
consultant to a number of multinational corporations. Between 1978 and 1980, Mr.
Alexander worked in the Corporate Finance Department of Shearson Loeb Rhoades
(currently Salomon Smith Barney, Inc.). Mr. Alexander received a B.A., magna cum
laude, in Economics from the Hebrew University of Jerusalem in 1977, and an
M.B.A. in Finance from New York University in 1980. He has served as the
Chairman of the High-Tech Research and Development Section of the Israeli
Association of Industrialists.
Carmel Vernia. Mr. Vernia, age 46, has served as a director since
August 1997, and is Chief Executive Officer of the Company's Infosys Division
("Infosys"). Since 1984 he as been employed in the Company and its subsidiaries
in various capacities, including Chief Operating Officer, Vice President,
Manager of the Government Systems Division and Manager of research and
development. Prior to joining the Company, he was employed by Elco Ltd. in
Israel, where he headed the development of advanced perimeter intrusion
detection systems. Between 1980 and 1982, Mr. Vernia was employed by Intel
- 3 -
<PAGE>
Company in Santa Clara, California, where he served as applications engineer for
digital signal processing, digital telephony and data communications products.
He received a B.Sc. in Electrical Engineering from the Technion, Israel
Institute of Technology, in 1974 and a M.Sc. in Electrical and Computer
Engineering from the University of California at Davis in 1980.
Francis E. Girard. Mr. Girard, age 60, has served as Chief Executive
Officer of Comverse Network Systems Division ("Comverse Network Systems") and a
director of the Company since January 1998. From May 1996 to January 1998, he
served as President, Chief Executive Officer and a director of Boston
Technology, Inc. ("Boston"), a company that was merged into the Company in
January 1998. Prior to that, he served as Boston's Executive Vice President of
World Sales. He joined Boston in January 1989 as Senior Vice President of Sales
and assumed the position of Senior Vice President and General Manager of North
American Markets in January 1994. Previously, he was Vice President of Sales,
Marketing and Support of NEC Information Systems, Inc., a U.S. distributor of
NEC computers and peripherals, from 1985 to 1989. Mr. Girard served as Director
of Marketing for the National Independent Sales Organization and Reseller
Marketing Programs at Wang Laboratories, Inc. from 1983 to 1985, in addition to
several other sales and marketing management positions. Mr. Girard holds a B.S.
degree in Business from Merrimack College.
Itsik Danziger. Mr. Danziger, age 50, has served as Chief Operating
Officer of Comverse Network Systems since January 1998 and additionally as
President since May 1999, and as a director of the Company since November 1998.
From 1984, Mr. Danziger served in various management positions with the Company,
including Vice President, Manager of the Network Systems Division and Manager of
research and development. Prior to joining the Company, he was employed for 10
years by Tadiran Ltd. in a variety of technical and managerial capacities. Mr.
Danziger received a B.Sc. and M.Sc., cum laude, in Electrical Engineering from
the Technion, Israel Institute of Technology, in 1974 and 1984, respectively.
David Kreinberg. Mr. Kreinberg, age 34, has served as Vice President of
Finance and Chief Financial Officer of the Company since May 1999. Previously,
Mr. Kreinberg served as Vice President of Finance and Treasurer from April 1996
and as Vice President of Financial Planning from April 1994. Mr. Kreinberg is a
Certified Public Accountant, and prior to joining the Company he served as a
senior manager at Deloitte & Touche LLP. Mr. Kreinberg received a B.S., summa
cum laude, in Accounting from Yeshiva University and an M.B.A. in Finance and
International Business from Columbia Business School in 1986 and 1990,
respectively.
Zvi Alexander. Mr. Alexander, age 77, has been a director of the
Company since August 1989. Mr. Alexander has been actively engage in the energy
industry for more than 30 years. He served as Chief Executive Officer of the
Israeli National Oil Company and its successor from 1966 through 1976, and has
subsequently engaged in activities in the energy industry as a consultant and
independent entrepreneur. Mr. Alexander is currently Chairman of A&T Exploration
Company Ltd. Zvi Alexander is the father of Kobi Alexander and Shaula A. Yemini.
John H. Friedman. Mr. Friedman, age 46, has been a director of the
Company since June 1994. He is the Managing Director of Easton Capital Company,
a private investment firm founded by Mr. Friedman in 1991. From 1989 to 1991,
Mr. Friedman was a Managing Director of Security Pacific Capital Investors.
Prior to joining that firm, he was a Managing Director of E. M. Warburg, Pincus
& Co., Inc., where he was employed from 1981 to 1989. From 1978 to 1980, Mr.
Friedman practiced law with the firm of Sullivan & Cromwell in New York City.
Mr. Friedman received a B.A., magna cum laude, from Yale University and a J.D.
from Yale Law School. He is a director of M/A/R/C Inc., a research and database
management company.
- 4 -
<PAGE>
Sam Oolie. Mr. Oolie, age 63, has been a director of the Company since
May 1986. He has been Chairman and Chief Executive Officer of NoFire
Technologies, Inc., a manufacturer of high performance fire retardant products,
since August 1995. He has also been Chairman of Oolie Enterprises, an investment
company, since July 1985 and a director of CFC Associates, a venture capital
firm, since January 1984. He was Chairman of The Nostalgia Network, a cable
television network, from April 1987 to January 1990 and was Vice Chairman and
director of American Mobile Communications, Inc., a cellular telephone company,
from February 1987 to July 1989. From February 1962 to July 1985, Mr. Oolie was
Chairman, Chief Executive Officer and a director of Food Concepts, Inc., a
provider of food services to institutions and hospitals. Mr. Oolie also serves
as a director of Avesis, Inc. and Noise Cancellation Technologies, Inc. Mr.
Oolie received a B.S. from Massachusetts Institute of Technology in 1958 and an
M.B.A. from Harvard Business School in 1961.
William F. Sorin. Mr. Sorin, age 50, has served as a director and the
Corporate Secretary of the Company since its formation in October 1984. He is an
attorney engaged in private practice and is general counsel to the Company. Mr.
Sorin received a B.A. from Trinity College in 1970 and a J.D., cum laude, from
Harvard Law School in 1973.
Shaula A. Yemini, Ph.D. Dr. Yemini, age 51, has served as a director of
the Company since August 1997. She is President and Chief Executive Officer of
Systems Management Arts Incorporated ("SMARTS"), a developer of automated
network problem diagnosis software. Prior to the formation of SMARTS in 1993,
Dr. Yemini held various research and managerial positions at International
Business Machines Company ("IBM") since June 1982, most recently serving as
Senior Manager at IBM's T. J. Watson Center, where she built and managed the
Distributed Systems Software Technology Department. Prior to that, she taught
computer science at the Courant Institute of New York University. Dr. Yemini
received a B.Sc. in Mathematics and Physics in 1972 and an M.Sc. in Applied
Mathematics, cum laude, in 1974, both from the Hebrew University in Jerusalem,
and a Ph.D. in Computer Science from the University of California at Los Angeles
in 1980. Dr. Yemini is the sister of Kobi Alexander and the daughter of Zvi
Alexander.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has four standing committees. The Executive
Committee is empowered to exercise the full authority of the Board of Directors
in circumstances when convening the full board is not practicable. The Audit
Committee is responsible for reviewing audit procedures and supervising the
relationship between the Company and its independent auditors. The Remuneration
and Stock Option Committee is responsible for approving compensation
arrangements for senior management of the Company and administering the
Company's stock option plans. The Corporate Planning and Structure Committee
reviews and makes recommendations to the board concerning issues of corporate
structure and planning, including the formation and capitalization of
subsidiaries of the Company, the structure of acquisition transactions, the
terms of any stock options and other compensation arrangements in respect of
subsidiaries of the Company, situations that might involve conflicts of interest
relative to the Company and its subsidiaries and the terms of significant
transactions between the Company and its subsidiaries.
During the year ended January 31, 1999 ("Fiscal 1998"), there were four
meetings of the Board of Directors of the Company, one meeting (and two written
actions in lieu of meetings) of the Remuneration and Stock Option Committee, two
meetings of the Audit Committee and one meeting of the Corporate Planning and
Structure Committee. Each member of the Board of Directors attended all the
meetings of the Board of Directors and of each Committee of which he was a
member during the year.
- 5 -
<PAGE>
EXECUTIVE COMPENSATION
The following table presents summary information regarding the
compensation paid or accrued by the Company for services rendered during the
fiscal years ended December 31, 1996 and 1997, the one month transition period
ended January 31, 1998, and Fiscal 1998 by those of its executive officers whose
salary and bonus compensation during Fiscal 1998 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION STOCK
NAME AND PERIOD OPTION ALL OTHER
PRINCIPAL POSITION ENDED SALARY(1) BONUS(2) GRANTS(3) COMPENSATION(4)
- ------------------ ----- --------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Kobi Alexander Jan. 1999 $ 350,300 $ 3,446,393 375,000 $ 431,128
President, Chief Executive Jan. 1998 $ 29,192 - 750,000 $ 15,771
Officer and Chairman of Dec. 1997 $ 370,458 $ 1,344,150 225,000 $ 249,661
the Board of Directors Dec. 1996 $ 379,944 $ 864,829 150,000 $ 235,906
Carmel Vernia Jan. 1999 $ 158,248 $ 170,000 - $ 37,699
Chief Operating Officer and Jan. 1998 $ 12,356 - 187,500 $ 2,985
Chief Executive Officer, Dec. 1997 $ 150,162 $ 150,000 105,000 $ 36,048
Comverse Infosys Dec. 1996 $ 129,889 $ 150,000 37,500 $ 31,763
Francis E. Girard(5) Jan. 1999 $ 385,008 $ 286,233 - $ 26,000
Chief Executive Officer, Jan. 1998 $ 32,083 - 225,000 $ 2,000
Comverse Network Systems Dec.1997(6) $ 330,007 $ 291,250 - $ 24,000
Dec.1996(6) $ 312,000 $ 157,500 341,250 $ 24,500
Itsik Danziger Jan. 1999 $ 151,101 $ 286,233 75,000 $ 36,147
Chief Operating Officer, Jan. 1998 $ 10,919 - 187,500 $ 2,181
Comverse Network Systems Dec.1997 $ 132,701 $ 167,928 75,000 $ 32,082
Dec.1996 $ 123,619 $ 134,400 7,500 $ 29,863
Igal Nissim Jan. 1999 $ 105,976 $ 36,775 - $ 25,237
Chief Financial Officer(7) Jan. 1998 $ 8,333 - 37,500 $ 1,972
Dec. 1997 $ 101,272 $ 27,800 7,500 $ 24,277
Dec. 1996 $ 115,342 $ 23,070 7,500 $ 19,699
- -------------------
</TABLE>
(1) Includes salary and payments in lieu of earned vacation.
(2) Includes bonuses accrued for services performed in the year indicated,
regardless of the year of payment.
(3) See also "Options to Purchase Subsidiary Shares."
/footnotes continued on following page/
- 6 -
<PAGE>
/continuation of footnotes/
(4) Consists of miscellaneous items not exceeding $50,000 in the aggregate
for any individual, including premium payments and contributions under
executive insurance and training plans, 401(k) matching payments and,
in the case of Mr. Alexander, $250,441, $7,773, $211,750, and $184,800
accrued in Fiscal 1998, the month of January 1998 and the years ended
December 31, 1997 and 1996, respectively, for payments due on
termination of employment pursuant to the terms of his employment
agreements with the Company and $125,000 paid in Fiscal 1998 in
premiums for "split dollar" life insurance for the benefit of Mr.
Alexander, which premiums are required to be refunded to the Company
out of benefit payments or cash surrender value under the associated
policy.
(5) Mr. Girard began serving as Chief Executive Officer of Comverse Network
Systems effective January 14, 1998. Previously, from May 31, 1996, Mr.
Girard served as President and Chief Executive Officer of Boston. Prior
to that, Mr. Girard served as Executive Vice President of World Sales
of Boston.
(6) Boston had a January 31 fiscal year. Accordingly, the information
presented for Mr. Girard is for the 11 months ended December 31, 1997
and the 12 months ended January 31, 1997.
(7) Mr. Nissim served as Chief Financial Officer of the Company during the
periods indicated. He currently serves as Chief Financial Officer of
Infosys.
The following table sets forth information concerning options granted
during Fiscal 1998 to the executive officers of the Company under its employee
stock option plans:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM*
- ------------------------------------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE
SHARES EMPLOYEES PRICE
SUBJECT TO IN FISCAL PER EXPIRATION
NAME OPTION YEAR SHARE DATE 5% 10%
- -------------------- ------ -------- -------- ----------------------- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Kobi Alexander 375,000 27.9% $20.00 October 9, 2008 $ 4,716,710 $ 11,953,068
Carmel Vernia - - - - - -
Francis E. Girard - - - - - -
Itsik Danziger 75,000 5.6% $20.00 October 9, 2008 $ 943,342 $ 2,390,614
Igal Nissim - - - - - -
- ------------------------
</TABLE>
* Represents the gain that would be realized if the options were held for
their entire ten-year term and the value of the underlying shares
increased at compounded annual rates of 5% and 10% from the fair market
value at the dates of option grant.
- 7 -
<PAGE>
The options have a term of ten years and become exercisable and vest in
equal annual increments over the period of four years from the date of grant.
The exercise price of the options is equal to the fair market value of the
underlying shares at the date of grant.
The following table sets forth, as to each executive officer identified
above, the shares acquired on exercise of options during Fiscal 1998, value
realized, number of unexercised options held at January 31, 1999, currently
exercisable and subject to future vesting, and the value of such options based
on the closing price of the underlying shares on the NASDAQ National Market
System National Market System at that date, net of the associated exercise
price.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATE OPTION EXERCISES IN FISCAL 1998 AND
VALUE OF UNEXERCISED OPTIONS AT JANUARY 31, 1999
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS HELD IN-THE-MONEY OPTIONS
ON VALUE AT JANUARY 31, 1999 HELD AT JANUARY 31, 1999
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kobi Alexander 427,500 $ 9,654,218 1,213,874 1,237,499 $ 57,712,024 $ 42,256,226
Carmel Vernia 75,000 $ 2,273,750 300,000 264,375 $ 13,942,968 $ 8,480,938
Francis E. Girard 57,150 $ 1,331,235 181,913 353,998 $ 6,559,591 $ 12,626,114
Itsik Danziger 28,125 $ 793,594 50,625 303,750 $ 1,799,063 $ 10,224,063
Igal Nissim 7,500 $ 197,855 31,875 43,125 $ 1,396,563 $ 1,514,688
</TABLE>
See "Options to Purchase Subsidiary Shares" for information regarding
the grant to certain executive officers of options to purchase shares of
subsidiaries of the Company.
EMPLOYMENT AGREEMENTS
Mr. Alexander serves as Chairman of the Board, President and Chief
Executive Officer of the Company under an agreement effective as of February 1,
1999 and extending through January 31, 2004 at a current base annual salary of
$600,000. Pursuant to the agreement, Mr. Alexander is entitled to receive bonus
compensation in an amount to be negotiated annually, but not less than 2.75% of
the Company's consolidated after tax net income in each year. Mr. Alexander also
receives various supplemental medical, insurance and other personal benefits
from the Company, including the use of an automobile leased by the Company.
Upon the termination of his employment with the Company for any reason,
Mr. Alexander is entitled to receive a deferred compensation payment in an
amount equal to $102,500 times the number of years (plus any partial years) of
his employment by the Company commencing with 1983, increased by 10% per annum.
In the event that Mr. Alexander's employment is terminated by the Company
without cause, or by Mr. Alexander as a result of a material breach by the
Company of its obligations under the agreement or other specified circumstances,
Mr. Alexander is entitled to payment of salary and pro-rated bonus through the
date of termination and an additional lump sum payment equal to the product of
(a) the greater of three or the number of years remaining in the unexpired term
of the agreement multiplied by (b) the sum of his then current base salary plus
the highest annual bonus earned by Mr. Alexander during the three years
preceding the date of termination plus the monetary equivalence of the fair
value of his annual non-monetary compensation and benefits. In addition, Mr.
- 8 -
<PAGE>
Alexander will continue to receive employment-related benefits for the period of
36 months following termination, Company-funded life insurance benefits for the
period of five years following termination and comprehensive family medical
benefits for a period of 10 years following termination, regardless of cause.
In the event of the termination of Mr. Alexander's employment following
a change in control of the Company, including termination by the Company without
cause or termination by Mr. Alexander under specified circumstances, he is
entitled to receive (a) payment of salary and pro-rated bonus through the date
of termination (computed at the rates then in effect or, if higher, during
specified periods prior to the date of change in control), (b) an additional
payment equal to three times the sum of his annual salary and bonus (as so
computed), (c) the accelerated vesting of all stock options and retirement
benefits and (d) a payment in an amount necessary to discharge without cost to
Mr. Alexander any excise tax imposed in respect of all payments due under the
agreement.
The agreement also requires the Company to grant to Mr. Alexander an
option to purchase up to 7.5% of the shares of each subsidiary of the Company,
other than Comverse Network Systems, Inc. ("CNSI"), for a price equal to the
greater of the fair market value or the book value of such shares at the date of
option grant.
Mr. Alexander serves as Chairman of the Board of CNSL at a current
basic annual salary (the "Basic Salary") of $100,000. CNSL has also agreed to
reimburse Mr. Alexander for certain business-related expenses, to provide him
with various employment-related and personal benefits , the value of which is
estimated at approximately 25% of the Basic Salary, and to pay certain amounts
for his account into defined contribution insurance and training funds in
Israel. CNSL is also required to pay any taxes incurred by Mr. Alexander in
respect of benefits provided to him under the agreement and certain professional
fees incurred for the benefit of Mr. Alexander. In the event that CNSL
unilaterally terminates or fundamentally breaches the agreement, it must pay, as
liquidated damages, an amount equal to the Basic Salary due for the remainder of
the term of the agreement plus an amount equal to the present value of all
non-monetary benefits under the agreement.
Mr. Vernia is employed as Chief Executive Officer of Infosys under an
agreement providing for a base monthly salary at a current rate of 55,000
Israeli shekels, subject to Israeli statutory cost of living adjustment
(resulting in a current annual salary equal to approximately $162,000) and an
annual bonus in an amount to be determined each year. The agreement may be
terminated by either party only with prior notice of at least one year. Mr.
Vernia is entitled under the agreement to receive various insurance and
supplemental benefits and the use of an automobile owned or leased by the
Company.
Mr. Girard is employed by the Company pursuant to an employment
agreement providing for his services in the capacity of Chief Executive Officer
of Comverse Network Systems for a three year term commencing January 14, 1998.
The agreement provides Mr. Girard an annual base salary of $385,000 (subject to
periodic review), a bonus which is to be based on goals for Mr. Girard and
Comverse Network Systems (not to exceed Mr. Girard's annual base salary), and an
expense stipend and generally available fringe benefits. Mr. Girard is entitled
to a payment equal to one year of his base salary (plus accrued bonuses) in the
event that his employment is terminated without cause.
Mr. Danziger is employed as President and Chief Operating officer of
Comverse Network Systems under an agreement providing for a base monthly salary
at a current rate of 57,000 Israeli shekels, subject to Israeli statutory cost
of living adjustment (resulting in a current annual salary equal to
approximately $168,000) and an annual bonus which is based on goals for Mr.
Danziger and Comverse Network Systems. Mr. Danziger is entitled to receive
- 9 -
<PAGE>
various insurance and supplemental benefits and the use of an automobile owned
or leased by the Company.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company or otherwise
compensated by the Company for services rendered in another capacity, and whose
position on the Board of Directors is not attributable to any contract between
the Company and such director or any other entity with which such director is
affiliated, receives compensation in the amount of $2,750 for each meeting of
the Board of Directors and of certain committees of the Board of Directors
attended by him during the year. Under the Company's existing stock option
plans, each of such eligible directors is also entitled to receive an annual
stock option grant entitling him to purchase 9,000 shares of Common Stock at a
price per share equal to the fair market value of the Common Stock as reported
on the NASDAQ National Market System on the date two business days after the
publication of the audited year-end financial statements of the Company, such
options being subject to forfeiture to the extent of 1,800 shares per meeting in
the event that the option holder, during the year of grant, fails to attend at
least five meetings of the Board of Directors and any of its committees of which
the option holder is a member. Under the Company's 1999 Stock Incentive
Compensation Plan, subject to adoption at the Annual Meeting, each such eligible
director will be entitled to an annual option grant to purchase up to 13,500
shares. Each director who resides outside of the United States and is not an
officer or employee of the Company is entitled to reimbursement of expenses
incurred for attendance at meetings of the Board, up to the amount of $2,000 for
each meeting attended.
SEVERANCE BENEFITS FOLLOWING A CHANGE IN CONTROL
The Company has instituted severance benefits arrangements for eligible
employees, other than the President and Chief Executive Officer (whose benefits
are described above), due in the event of the termination of employment, within
two years following a change in control of the Company, either by the Company
without cause or by an employee under specified circumstances. Key executives,
as designated from time to time by the Remuneration Committee, are generally
entitled to receive (a) payment of salary and pro-rated bonus through the date
of termination (computed at the rates then in effect or, if higher, during
specified periods prior to the date of change in control), (b) an additional
payment equal to the sum of annual salary and bonus (as so computed), (c) the
accelerated vesting of all stock options and retirement benefits, (d)
continuation for one additional year of certain employment-related benefits and
(e) in the discretion of the Remuneration Committee, a payment in an amount
necessary to discharge without cost to the employee any excise tax imposed in
respect of the payments due under the severance arrangement. Other employees are
generally entitled to receive, in the event of the involuntary termination of
their employment, (a) payment of their then current salary through the date of
termination, (b) an additional payment equal to one month of salary for each
year of employment with the Company, up to twelve, prior to termination, (c) the
accelerated vesting of stock options and retirement benefits and (d)
continuation of certain employment-related benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Kobi Alexander, President, Chairman of the Board and Chief Executive
Officer of the Company, serves as a member of the Board of Directors of SMARTS,
of which his sister, Dr. Shaula A. Yemini, is President and Chief Executive
Officer. Dr. Yemini is a member of the Remuneration Committee.
- 10 -
<PAGE>
OPTIONS TO PURCHASE SUBSIDIARY SHARES
The Company has granted to certain key executives and other employees
options to acquire shares of certain subsidiaries, other than CNSI, as a means
of providing incentives directly tied to the performance of those subsidiaries
for which different grantees typically have direct responsibility. Such options
are provided to the President and Chief Executive Officer of the Company as set
forth under "Employment Agreements," above. Options have been granted to other
employees which, upon exercise, in the aggregate do not exceed 20% of the
outstanding shares of the relevant subsidiaries. In general, these options have
terms of up to ten years, become exercisable and vest over periods up to seven
years from the first anniversary of the date of initial grant, and have exercise
prices equal to the higher of the book value of the underlying shares at the
date of grant or the fair market value of such shares at that date determined on
the basis of an arms'-length transaction with a third party or, if no such
transactions have occurred, on a reasonable basis as determined by the Board of
Directors.
These options (and any shares received by the holders upon exercise)
provide the option holders with a potentially larger equity interest in the
respective subsidiaries than in the Company, which, under certain circumstances,
could cause the option holders' interests to conflict with those of the
Company's shareholders generally.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid or accrued legal fees to William F. Sorin, a director
of the Company, in the amount of $533,100 for legal services rendered to the
Company during Fiscal 1998.
- 11 -
<PAGE>
REPORT OF THE REMUNERATION AND STOCK OPTION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION
The principal components of the Company's executive compensation
arrangements are base salary, cash bonus awards and stock options. Compensation
arrangements for senior management personnel in certain instances include a
performance-based component as well as discretionary bonus awards.
Salary levels throughout the organization are reviewed annually, and
are adjusted periodically when the Company believes that adjustment is required,
taking into account competitive factors in the industries and locations of the
Company's activities. In establishing compensation levels throughout the
organization, the Company relies to a significant extent on its direct
experience in the recruitment of personnel as well as reported compensation
levels of senior management of other, similarly situated companies. Supplemental
cash bonus awards are made periodically to reflect superior performance by
individual employees, in accordance with recommendations by senior management,
and in certain instances in accordance with formulas based on the profitability
of the Company or its individual business units.
Historically, employees of the Company have benefited from the
Company's practice of awarding stock options to personnel throughout the
organization, and the resulting value associated with the increase in the market
price of the Company's shares. The Board of Directors believes that equity-based
incentive arrangements, such as employee stock options and employee stock
purchase plans, are among the most effective means available to the Company of
aligning the interests of employees with the objectives of shareholders
generally, and of building their long term commitment to the organization. The
Company emphasizes stock option awards as an essential element of the
remuneration package available to its executives and employees. Stock options
typically vest in annual increments over periods of up to four years to
encourage long-term commitment to the Company by the grantees.
The Company has also adopted the practice of awarding to key executives
and other employees options entitling them to acquire shares of certain of the
Company's subsidiaries, as a means of providing incentives directly tied to the
performance of those business units for which different recipients generally
have direct responsibility. (See "Options to Purchase Subsidiary Shares"). These
options (and any shares received by the holders upon exercise) provide the
option holders with a potentially larger equity interest in the respective
subsidiaries than in the Company, which, under certain circumstances, could
cause the option holders' interests to conflict with those of the Company's
shareholders generally.
The Company considers both available competitive data and subjective
performance evaluations in determining the number of options to grant to its
officers and key employees. During Fiscal 1998, grants of options to purchase an
aggregate of 1,345,291 shares of Common Stock were made to all employees,
including options to purchase an aggregate of 450,000 shares awarded to
executive officers of the Company. The options granted to executive officers
vest in increments over periods of four years from the date of grant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Alexander has served as President and Chief Executive Officer of
the Company since 1987 under agreements providing for fixed annual salary, bonus
compensation and employment-related benefits. The terms of Mr. Alexander's
employment agreements, as currently in effect, are described above.
The terms of Mr. Alexander's employment have been established by direct
negotiation between Mr. Alexander and the Remuneration Committee. In approving
such terms, the Remuneration Committee has taken into account compensation
- 12 -
<PAGE>
levels of chief executive officers of other publicly-held companies and the
success achieved by the Company throughout the period that Mr. Alexander has
served as Chief Executive Officer, as reflected by the significant growth in the
Company's annual revenues, net income, earnings per share, assets and
stockholder's equity over the period extending from December 1994 through the
end of Fiscal 1998:
<TABLE>
<CAPTION>
Compounded Annual Rate of Growth
December 1994 Through January 31, 1999
--------------------------------------
<S> <C>
Revenues 36%
Net Income 44%
Earnings Per Share (Diluted) 37%
Stockholders' Equity 24%
Assets 38%
</TABLE>
The Company's achievements under Mr. Alexander`s leadership are reflected in its
54.1% average compounded annual total stockholders' return over the 10 years
ended December 31, 1998, reported by The Wall Street Journal as the 9th highest
rate of total return of 1,000 major U.S. companies during the period, its
ranking as number 16 of the "Infotech 100" companies in the 1999 Information
Technology Annual Report of Business Week and its recent addition to the "NASDAQ
100" company index.
THE REMUNERATION AND STOCK OPTION COMMITTEE
John H. Friedman, Chairman
Sam Oolie
Shaula A. Yemini Ph.D.
STOCK PERFORMANCE GRAPH
The following table compares the five year cumulative return on a
hypothetical investment in Comverse Technology, Inc. (CMVT), the S&P 500 Index
and the S&P Technology 500 Index, assuming an investment of $100 on January 31,
1994 and the reinvestment of any dividends.
<TABLE>
<CAPTION>
INDEXED RETURNS
BASE YEARS ENDING
PERIOD
COMPANY / INDEX JAN94 JAN95 JAN96 JAN97 JAN98 JAN99
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMVERSE TECHNOLOGY INC 100 86.09 134.79 313.05 234.35 584.37
S&P 500 INDEX 100 100.53 139.40 176.12 223.51 296.13
TECHNOLOGY-500 100 111.50 165.14 255.72 309.03 578.15
</TABLE>
- 13 -
<PAGE>
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
ELECTION OF DIRECTORS
It is the intention of the Board of Directors to nominate at the Annual
Meeting each of the individuals named below for election as the Board of
Directors of the Company until the next Annual Meeting of Shareholders and the
election of their qualified successors, or their earlier resignation or removal.
In the event that any of such nominees should become unwilling or unable to
stand for election at the Annual Meeting for any reason, at present unknown, it
is intended that votes will be cast pursuant to the accompanying proxy for such
substitute nominee or nominees as the Board of Directors may designate.
Kobi Alexander Zvi Alexander Itsik Danziger
John H. Friedman Frances E. Girard Sam Oolie
William F. Sorin Carmel Vernia Shaula A. Yemini Ph.D.
The election of directors will be made by plurality of votes cast at
the Annual Meeting, with the nine nominees receiving the greatest number of
votes being elected. THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION AT THE
ANNUAL MEETING OF THE NINE INDIVIDUALS NAMED ABOVE.
AMENDMENT OF CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has approved, and recommends to the shareholders
for approval at the Annual Meeting, an amendment of the Certificate of
Incorporation of the Company to increase from to 100,000,000 to 300,000,000 the
aggregate number of authorized shares of the Company's Common Stock.
The proposed amendment would revise Article FOURTH of the Certificate
of Incorporation to read in its entirety as follows:
"The total number of shares of stock which the Company is authorized to
issue is three hundred two million, five hundred thousand (302,500,000)
shares, of which three hundred million (300,000,000) shares shall be
denominated Common Stock, having a par value of ten cents ($0.10) per
share, and two million, five hundred thousand (2,500,000) shares shall
be denominated Preferred Stock, having a par value of one cent ($0.01)
per share. Preferred Stock may be issued in one or more series with
such designations, relative rights, preferences and limitations as may
be fixed from time to time by the Board of Directors of the Company.
Except as may be specifically provided in the resolution or resolutions
authorizing issuance of Preferred Stock, no holders of capital shares
of the Company, by reason of the ownership thereof, shall have any
preemptive rights to subscribe for, purchase or otherwise acquire any
securities of the Company."
As of April 30, 1999, an aggregate of 69,758,855 shares of Common Stock
were issued and outstanding, 12,271,728 shares were reserved for issuance under
the Company's stock option plans and outustanding stock purchase warrants,
157,062 shares were reserved for issuance under the Company's Employee Stock
Purchase Plan and 10,747,236 shares were reserved for issuance upon the
conversion of the Company's 5-3/4% Convertible Subordinated Debentures Due 2006
and 4-1/2% Convertible Subordinated Debentures Due 2005. Accordingly, only
7,065,119 shares of Common Stock were available for issuance in connection with
other corporate purposes.
- 14 -
<PAGE>
The Board of Directors believes that it is in the best interest of the
Company and its shareholders to have available an adequate number of additional
shares of Common Stock for general corporate purposes, including such purposes
as potential corporate acquisitions, raising of additional capital, stock
dividends and equity-based compensation for employees. The Company believes that
there exist attractive opportunities to expand its business in a cost-effective
manner through acquisitions, and the Company regularly evaluates acquisition
opportunities and engages in discussions with possible acquisition candidates.
The Company believes that its ability to issue Common Stock in connection with
potential corporate acquisitions, both in consideration for acquired businesses
and to have available for issuance under equity incentive plans of any acquired
companies, increases its ability to structure and negotiate transactions that
may benefit the shareholders of the Company and to effectuate such transactions
in the most cost-effective manner. In particular, the Company would be required
to issue Common Stock in order to effectuate acquisitions to be accounted for on
a pooling of interests basis or to be structured as tax-free reorganizations.
The Company effected a three-for-two stock split (in the form of a 50% stock
dividend) in April 1999, and believes that similar capital adjustments may be
beneficial in the future depending on the trading price of the Common Stock and
general market conditions. Additional authorized shares will be required for the
Company to effect any future stock dividends in meaningful amounts. In addition,
additional authorized shares will be necessary for the Company to implement the
Stock Incentive Plan being proposed for adoption at the Annual Meeting (see
""Adoption of the 1999 Stock Incentive Compensation Plan").
The authorization of additional Common Stock will not, by itself, have
any effect on the rights of holders of the currently outstanding Common Stock.
However, any issuance of additional Common Stock could, depending on the
circumstances, affect the existing holders of Common Stock by diluting per share
earnings and voting power of the outstanding Common Stock. The availability of
additional Common Stock could also enable the Company to dilute the interests of
others that might seek to acquire the Company, thereby rendering such an
acquisition less likely and impairing the ability of shareholders of the Company
to realize any premium over the market value of their shares that might
otherwise be offered in an acquisition transaction.
Adoption of this proposed amendment requires the affirmative vote of
the holders of a majority of all outstanding shares of Common Stock entitled to
vote at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ADOPTION OF THE PROPOSAL.
ADOPTION OF THE 1999 STOCK INCENTIVE COMPENSATION PLAN
INTRODUCTION
The Board of Directors approved the 1999 Stock Incentive Compensation
Plan (the "Incentive Plan") on May 13, 1999, 1999 and recommended that the
Incentive Plan be submitted to the shareholders for adoption at the Annual
Meeting, subject to the approval at the Annual Meeting of the foregoing
amendment of the Company's Certificate of Incorporation. The purposes of the
Incentive Plan are to attract, retain and motivate directors and key employees,
to align their respective interests with shareholders' interests through
equity-based compensation and to permit the granting of awards that will
constitute performance-based compensation for certain executive officers under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Shareholder approval is required in order for the Incentive Plan to meet the
requirements of Section 162(m) of the Code, for ISOs (as hereinafter defined) to
meet the requirements of Code Section 422 and for Common Stock issued under the
Incentive Plan to be approved for trading on the NASDAQ National Market System.
As of April 30, 1999, only 38,513 shares of Common Stock are available for the
grant of options under the Company's existing stock option plans.
- 15 -
<PAGE>
Adoption of this proposal requires the affirmative vote of the holders
of a majority of the shares of Common Stock present or represented by proxy, and
entitled to vote, at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE ADOPTION OF THE PROPOSAL.
SUMMARY OF THE INCENTIVE PLAN
The following summary of the Incentive Plan is qualified in its
entirety by reference to the Incentive Plan, a copy of which is attached as
Annex I to this Proxy Statement. Capitalized terms not otherwise defined in this
summary have the meanings given to them in the text of the Incentive Plan.
Administration. The Incentive Plan shall be administered by the
Remuneration Committee, which will consist of at least three directors who are
intended to be "non- employee directors" as defined in Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and "outside directors" within the meaning of Section 162(m) of
the Code. The Remuneration Committee has the authority to determine the Award
(as defined below) recipients, the timing of Awards and the type, size and terms
of each Award. It also has the authority to construe, interpret and implement
the Incentive Plan, including prescribing rules thereunder.
Shares Available Under the Incentive Plan. Under the Incentive Plan,
the Company will issue an aggregate of not more than 3,500,000 shares of Common
Stock. In addition, shares of Common Stock covered by Awards that have expired,
terminated or been canceled or forfeited, other than by exercise or vesting, may
be reissued under the Incentive Plan.
Eligibility. Awards under the Incentive Plan may be made to any
employee of the Company or its subsidiaries whom the Remuneration Committee
selects (each, a "Plan Participant"). For this reason, it is not possible to
determine the benefits or amounts that will be received by any particular
employee or group of employees in the future. However, the maximum number of
shares of Common Stock subject to an Award that may be granted to any eligible
employee shall not exceed 1,000,000 during any calendar year (the "Individual
Limit"). As of June 30, 1999, the Company estimates that there were
approximately 3,700 employees of the Company eligible to receive Awards under
the Incentive Plan.
In addition, in each fiscal year, each member of the Board of Directors
who is not an employee of the Company or its subsidiaries, who does not receive
compensation from the Company or its subsidiaries in any capacity other than as
a director and whose membership on the Board of Directors is not attributable to
any contract between the Company and such director or any other entity with
which such director is affiliated (an "Eligible Director") shall receive a
Nonqualified Option (as described herein) to purchase 13,500 shares of Common
Stock at an exercise price per share equal to the Fair Market Value of a share
of Common Stock as of the date two business days after the publication of the
audited year-end financial results of the Company for the immediately preceding
year.
Awards Under the Incentive Plan. The Incentive Plan provides, in
general, for grants of incentive stock options described in Code Section 422
("ISOs"), options to acquire Common Stock not described in Code Section 422 (the
"Nonqualified Options", and, together with ISOs, "Options"), stock appreciation
rights which may be connected to Options ("SARs"), restricted stock ("Restricted
Stock") and deferred stock ("Deferred Stock") (each of the foregoing grants, an
"Award"). Awards may be granted alone or in tandem, and on such terms and
conditions as the Remuneration Committee determines, subject to certain
limitations contained in the Incentive Plan.
- 16 -
<PAGE>
Options and SARs. Unless the applicable Award provides otherwise, no
Option may be transferred, pledged or otherwise conveyed by a Plan Participant.
An Option shall be exercisable during such period as the Remuneration Committee
determines. Options may contain restrictions on the transferability of and
impose forfeiture conditions on the Common Stock acquired by the Plan
Participant upon exercise.
To exercise an Option or SAR, the Plan Participant must notify the
Company on such form and in such manner as the Remuneration Committee may
prescribe. Unless the applicable Award certificate otherwise provides or the
Remuneration Committee otherwise determines, any notice of exercise of an Option
must be accompanied by payment in full of the purchase price for the shares
being purchased. Payment of an Option's exercise price may be made in any
combination of the following: (i) cash or personal check; (ii) if and to the
extent authorized by the Remuneration Committee, in shares of Common Stock owned
by the Plan Participant; (iii) if and to the extent authorized by the
Remuneration Committee, in shares of Restricted Stock, in which case the Common
Stock to which the Option relates shall be subject to the same restrictions
originally imposed on the Restricted Stock exchanged therefor; and (iv) any
other method authorized by the Remuneration Committee.
Unless the applicable Award certificate provides otherwise, an SAR
connected to an Option shall be exercisable at any time that the related Option
may be exercised. Unrelated SARs shall become and remain exercisable under such
terms as the Remuneration Committee determines. Upon exercise of an SAR, a Plan
Participant will receive an amount equal to the excess of the Fair Market Value
of a share of Common Stock on the exercise date over the Option exercise price
(in the case of a Related SAR) or appreciation base (in the case of an Unrelated
SAR), multiplied by the number of shares of Common Stock in respect of which the
SAR is exercised. Payment to a Plan Participant upon exercise of an SAR shall be
made in cash, Restricted Stock or Deferred Stock (Restricted Stock or Deferred
Stock to be valued at Fair Market Value (as defined below) as of the exercise
date), as the Remuneration Committee determines. The exercise of SARs connected
to an Option results in the reduction of the number of shares subject to the
connected Options to the extent of such exercise.
The exercise price of Incentive Stock Options must not be less than the
price of a share of Common Stock on the NASDAQ National Market System ("Fair
Market Value") on the grant date. As of July 19, 1999, the closing price of
Common Stock as reported on the NASDAQ National Market System was $77-5/8 per
share. The exercise price of an ISO granted to an employee who owns, directly or
indirectly, stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or a subsidiary ("Ten-Percent Shareholder")
shall be no less than 110% of the Fair Market Value of a share of Common Stock
on the date of grant. The Remuneration Committee may provide for a lower
exercise price of Nonqualified Options or appreciation base of SARs. No Option
or SAR shall remain exercisable for more than 10 years after the grant date;
provided that an ISO granted to a Ten-Percent Shareholder shall remain
exercisable for no more than five years after the grant date.
Deferred Stock and Restricted Stock. Deferred Stock Awards are general
unsecured obligations of the Company to deliver a specified number of shares of
Common Stock at the end of a specified deferral period. Restricted Stock Awards
are grants of shares of Common Stock that are subject to forfeiture upon the
happening of specified events.
The Remuneration Committee shall determine the number of shares of
Common Stock subject to a Deferred Stock Award, the number of shares of
Restricted Stock to be delivered to Plan Participants and the applicable
restrictions and the conditions under which the deferral period ends and the
applicable restrictions lapse.
- 17 -
<PAGE>
The delivery of Deferred Stock and the vesting of Restricted Stock may
be conditioned upon the completion of a period of employment with the Company,
the attainment of performance goals or such other conditions as the Remuneration
Committee determines. Unless an Award otherwise provides, a Plan Participant may
vote and receive dividends on Restricted Stock and will be credited with
dividend equivalents on Deferred Stock. Dividends credited to Plan Participants
on Deferred Stock Awards will be subject to the same conditions as applicable to
the Awards themselves.
Section 162(m) Awards. In the Remuneration Committee's discretion, any
Award may be designated a Section 162(m) Award. A Section 162(m) Award is an
Award under which all payments are intended to constitute qualified performance-
based compensation which, if received by an employee (a "Section 162(m) Covered
Employee") covered by Section 162(m) of the Code ("Section 162(m)") (generally,
the Company's Chief Executive Officer and four other highest paid executive
officers), would be excluded from the Section 162(m) limit on deductibility.
Section 162(m) Awards will be earned upon the attainment of one or more
objective performance goals established by the Remuneration Committee, generally
not later than 90 days after the start of the period of service to which the
goals relate, based upon one or more of the following business criteria
applicable to the Plan Participant, a business segment or the Company as a
whole: earnings per share; Common Stock price per share; return on average
equity, assets or investments; pre-tax income; net revenue; net income; book
value per share; earnings available to the Company stockholders; market share;
operating income; cash flow; and costs. Section 162(m) Awards may also consist
of Options and SARs granted with an exercise price or appreciation base, as the
case may be, not less than the Fair Market Value of a share of Common Stock, on
the grant date. The Remuneration Committee will not grant a Section 162(m) Award
prior to shareholder approval of the Incentive Plan. The failure, however, of
any Section 162(m) Award to meet the requirements of Section 162(m) shall not
invalidate such Award provided such Award meets the otherwise applicable
provisions of the Incentive Plan.
When establishing the thresholds and targets that constitute the
performance goals and the amounts (which may be denominated in shares of Common
Stock or cash) payable to a Plan Participant on attainment of the goals, the
Remuneration Committee may specify that the Section 162(m) Award will be earned
if the applicable target is achieved for one goal, one of a number of goals or
more than one goal. The Remuneration Committee may also specify that a Section
162(m) Award will be earned in full only upon the attainment of a specified
performance goal or goals, or will vary based upon different levels of
achievement of a goal or goals.
After the end of each measuring period, the Remuneration Committee
shall certify whether the applicable performance targets have been met for each
Section 162(m) Award (other than an Option or SAR) and determine the amount
available to vest, become exercisable or be delivered or paid under each such
award. In its discretion, the Remuneration Committee may reduce such amount
based on factors it determines appropriate, such as the pay practices of
competitors or individual, the Company or business segment performance.
In any calendar year, the maximum number of shares of Common Stock a
Plan Participant may be awarded under an Award shall not exceed the Individual
Limit.
General. Whether an Award is denominated in whole or in part by
reference to shares of Common Stock, the Remuneration Committee may provide that
it may be paid at the election of the Remuneration Committee with the Plan
Participant's consent in whole or in part in Common Stock, Restricted Stock or
Deferred Stock. With respect to any dividend or distribution on shares of Common
Stock corresponding to an Award other than an Option or SAR, the Remuneration
Committee may authorize current or deferred payments (payable in cash or Common
Stock or a combination thereof) or appropriate adjustments to the outstanding
- 18 -
<PAGE>
Award to reflect such dividend or distribution, including the reinvestment of
dividends into additional shares of Common Stock or Stock Units. The
Remuneration Committee may cancel any Award and issue a new Award in
substitution therefor upon such terms as the Remuneration Committee determines.
Change of Control. Upon the occurrence of any "change in control" of
the Company (as defined in the Incentive Plan) that is not approved by the Board
of Directors, all outstanding Options and SARs shall vest and become
exercisable, all Deferred Stock shall be vested and deliverable and all
Restricted Stock shall vest and be nonforfeitable. In the event of any "change
in control" of the Company that is approved by the Board of Directors, the
Remuneration Committee shall have the discretion to accelerate the vesting of
outstanding Awards, to cash out the value of outstanding Options or to require
the acquiror to assume outstanding Options. See also "Executive Compensation -
Emplyment Agreements" and "- Severance Benefits Following a Change in Control."
No Stockholder Rights. Except as an Award otherwise provides, no Plan
Participant shall have any rights as a Company stockholder with respect to any
Common Stock subject to the Award until the issuance of a stock certificate
therefor to the Plan Participant. Nothing in the Incentive Plan or in any Award
shall confer upon any person the right to continue in the employment or other
service of the Company.
Adjustments. The Remuneration Committee may make equitable adjustment
to the following for any change in the issued number of shares of Common Stock
resulting from the subdivision or combination thereof or other capital
adjustments, or the payment of a stock dividend, or other change in the Common
Stock effected without receipt of consideration by the Company: (i) the number
of shares of Common Stock subject to Awards and/or that may be issued pursuant
to Awards; (ii) the maximum number of Options and unrelated SARs that may be
granted to any one person in any period; (iii) the maximum number of shares of
Common Stock that may be paid pursuant to a Section 162(m) Award; and (iv) the
exercise price of Options and the appreciation base price of SARs.
Amendment; Termination. The Board of Directors may from time to time in
its discretion amend or terminate the Incentive Plan; provided that no such
amendment or termination shall be made without stockholders' approval to the
extent such approval changes the class of eligible employees, modifies the
Individual Limit or the categories of Section 162(m) performance goals described
herein, and provided that no amendment shall impair any rights under any Award
then outstanding without the Plan Participant's consent. The Incentive Plan
shall remain in full force and effect until the earlier of 10 years from the
date of its adoption by the Board of Directors or the date it is terminated by
the Board of Directors.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a general summary of certain of the principal
Federal income tax consequences to Plan Participants and the Company of certain
Awards under the Incentive Plan. The following discussion is general in nature
and is not intended to be a complete analysis of all potential tax consequences
to Plan Participants or the Company of such Awards. This discussion is based on
the Code as currently in effect.
Options. The grant of a Nonqualified Option will not result in the
recognition of taxable income by the Plan Participant or a deduction to the
Company. Ordinary income generally will be recognized by Plan Participants at
the time the Nonqualified Option is exercised. The amount of such income
generally will be equal to the excess of the fair market value of the shares on
the exercise date over the exercise price. The Company will be entitled to a
deduction at the same time and in the same amount as the Plan Participant
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<PAGE>
recognizes ordinary income in connection with the exercise of a Nonqualified
Option (subject to the satisfaction of Section 162(m) in the case of Options
subject thereto). Gain or loss upon a subsequent sale of any Common Stock
received upon the exercise of a Nonqualified Option generally would be taxed as
capital gain or loss (long-term or short-term, depending upon the holding period
of the Common Stock sold).
ISOs are intended to be incentive stock options under the Code. Upon
the grant or exercise of an incentive stock option complying with the Code, the
Plan Participant does not realize income and the Company is not entitled to any
deduction. However, the excess of the fair market value of the Common Stock as
of the exercise date over the exercise price will constitute an adjustment to
the Plan Participant's taxable income for purposes of the alternative minimum
tax. If the shares of Common Stock are not disposed of within the one-year
period beginning on the Option exercise date, or within the two-year period
beginning on the Option grant date, any profit realized by the Plan Participant
upon such disposition will be taxed as capital gain and the Company will receive
no deduction. If the shares of Common Stock are disposed of within the one-year
period from the date of Option exercise or within the two-year period from the
Option grant date, the excess of the fair market value of the share on the
exercise date or, if less, the fair market value on the disposition date, over
the exercise price will be taxable as ordinary income of the Plan Participant at
the disposition date, and the Company will be entitled to a corresponding
deduction.
If a Section 162(m) Covered Employee's taxable compensation from the
Company in any year (including compensation related to Options) exceeds
$1,000,000, such compensation in excess of $1,000,000 may not be tax- deductible
by the Company under Section 162(m). 162(m) Covered Employees are determined at
the end of the Company's taxable year. Excluded from the calculation of taxable
compensation for this purpose is compensation that is "performance-based" within
the meaning of Section 162(m). Compensation realized upon the exercise of an
Option granted under the Incentive Plan is intended to qualify as
"performance-based" under Section 162(m) so that such compensation may be
deductible without regard to the limits of Section 162(m).
If an Option is exercised through the use of Common Stock previously
owned by the employee, such exercise generally will not be considered a taxable
disposition of the previously owned shares and, thus, no gain or loss will be
recognized with respect to such shares upon such exercise. However, if the
previously owned shares were acquired by the exercise of an ISO or other
tax-qualified stock option and the holding period requirement for those shares
was not satisfied at the time they were used to exercise an ISO, such use would
constitute a disqualifying disposition of such previously owned shares which may
result in the recognition of ordinary income (but, under proposed Treasury
Regulations, not any additional capital gain) in the amount described above. If
an otherwise qualifying ISO first becomes exercisable in any one year for shares
having a value in excess of $100,000 (grant date value), the portion of the
option in respect of such excess shares will be treated as a Nonqualified
Option.
Stock Appreciation Rights. No income will be recognized by a Plan
Participant who is awarded an SAR until cash, Restricted Stock or Deferred Stock
representing the amount of the appreciation are transferred to the Plan
Participant pursuant to exercise of the SAR. If the settlement vesting of Common
Stock transferred upon exercise is deferred following the date of exercise,
income recognition will generally be deferred until the date of vesting. The
amount of income will equal the amount of cash or fair market value of Common
Stock delivered to the Plan Participant and will be ordinary income. The Company
will be entitled to a deduction at the same time and in the same amount.
Compensation realized upon the exercise of an SAR granted under the Incentive
Plan is intended to qualify as "performance based" under Section 162(m) so that
compensation may be deductible without regard to the limits of Section 162(m).
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Restricted Stock and Deferred Stock. A Plan Participant who is awarded
Restricted Stock or Deferred Stock will not be taxed at the time of grant
unless, in the case of Restricted Stock, the Plan Participant makes a special
election with the Service pursuant to Code Section 83(b), as discussed below.
Upon lapse of the restrictions on transferability applicable to the Restricted
Stock or upon the expiration of the deferral period applicable to Deferred
Stock, the Plan Participant will recognize ordinary income on the then fair
market value of the Restricted Stock or Deferred Stock and a corresponding
deduction will be allowable to the Company (subject to the satisfaction of an
exclusion from Section 162(m) limit in the case of Restricted Stock or Deferred
Stock held by Section 162(m) Covered Employees). In such case, the Plan
Participant's basis in the Common Stock will be equal to the ordinary income so
recognized. Upon subsequent disposition of such Common Stock, the Plan
Participant will realize long-term or short-term capital gain or loss.
Pursuant to Code Section 83(b), the Plan Participant may elect within
30 days of the grant of Restricted Stock to recognize ordinary income in an
amount equal to the fair market value of the Restricted Stock at the time of
grant (determined without regard to any restrictions which may lapse). In that
case, the Plan Participant will acquire a tax basis in such Common Stock equal
to the ordinary income recognized by the Plan Participant on the grant date. No
tax will be payable upon lapse or release of the restrictions or at the time the
Restricted Stock first becomes transferable, and any gain or loss upon
subsequent disposition will be a capital gain or loss. In the event of a
forfeiture of Restricted Stock with respect to which a Plan Participant
previously made a Code Section 83(b) election, the Plan Participant will not be
entitled to a loss deduction.
Change in Control Payments. If any payments under the Incentive Plan
are contingent on a change in control within the meaning of Code Section 280G
(which could include, for example, the accelerated vesting of Options upon a
change in control), then the Company may be denied an income tax deduction and
the Plan Participant may be subject to a 20 percent excise tax in addition to
income taxes which may otherwise be imposed on such payments. (See "Executive
Compensation - Severance Benefits Following a Change in Control".)
AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN
Introduction
The Company's Employee Stock Purchase Plan (the "Stock Purchase Plan")
was adopted by the shareholders at the Company's 1998 Annual Meeting and
provides for the purchase of up to 375,000 shares of Common Stock by
participating eligible employees of the Company and its subsidiaries. The Board
of Directors has approved the amendment of the Stock Purchase Plan to increase
the number of Shares of Common Stock reserved for purchase thereunder to a total
of 750,000 shares, subject to approval of such amendment and of the foregoing
amendment of the Company's Certificate of Incorporation by the shareholders at
the Annual Meeting. The purpose of the Stock Purchase Plan is to encourage stock
ownership by eligible employees of the Company and certain designated
subsidiaries, thereby increasing eligible employees' personal interest in the
Company's continued success and progress. The Stock Purchase Plan is intended to
facilitate and encourage regular investment in Common Stock and to motivate
eligible employees to contribute to the success of the Company.
Adoption of this proposal requires the affirmative vote of the holders
of a majority of the shares of Common Stock present or represented by proxy, and
entitled to vote, at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE ADOPTION OF THE PROPOSAL.
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<PAGE>
Summary of the Stock Purchase Plan
The following is a summary of the principal features of the Stock
Purchase Plan, but such summary is qualified in its entirety by reference to the
complete text of the Stock Purchase Plan, as amended, attached to this Proxy
Statement as Annex II.
The Stock Purchase Plan is an employee stock purchase plan which is
intended to comply with the provisions of Section 423 of the Code. The Stock
Purchase Plan allows eligible employees who elect to participate in the Stock
Purchase Plan ("Participants") to make purchases of Common Stock through payroll
deductions at a price of 85% of the fair market value of Common Stock on the
first day or last day of each Offering Period (as defined below), whichever is
lower. Participants are limited by the Code to a maximum of $21,250 deducted
from their compensation under the Stock Purchase Plan during any calendar year.
Administration. The Stock Purchase Plan is administered by the
Remuneration Committee, which is authorized to decide questions of eligibility
and to make rules and regulations for the administration and interpretation of
the Stock Purchase Plan, subject to final authority of the Board of Directors.
All determinations of the Remuneration Committee with respect to the Stock
Purchase Plan are binding. The expenses of administering the Stock Purchase Plan
are borne by the Company.
Shares Available Under the Stock Purchase Plan. Under the Stock
Purchase Plan, as proposed to be amended, the Company will issue an aggregate of
not more than 750,000 shares of Common Stock. The maximum number of shares
issuable under the Stock Purchase Plan will be subject to adjustment for any
dividend, stock split or other relevant change in the Company's capitalization.
Through June 30, 1999, an aggregate of 217,938 shares of Common Stock had been
issued under the plan.
Eligibility. With certain exceptions, all full-time employees,
including officers and directors who are Company employees, who have been
employed by the Company or an eligible subsidiary for at least three months, are
eligible to participate in the Stock Purchase Plan. As of June 30, 1999,
approximately 3,700 employees of the Company were eligible to participate. The
purchase of shares under the Stock Purchase Plan is voluntary, and the Company
cannot now determine the number of shares to be purchased under the Stock
Purchase Plan in the future by any person or group.
Operation of the Stock Purchase Plan. Common Stock is purchased under
the Stock Purchase Plan through semi-annual offering periods ("Offering
Periods"). During each Offering Period, the maximum number of shares which may
be purchased by a Participant (a "purchase option") is determined on the first
day of the Offering Period under a formula whereby 85% of the market value of a
share of Common Stock on the first day of the Offering Period is divided into an
amount equal to 6% of that Participant's annualized base pay (as defined in the
Stock Purchase Plan). A Participant may elect to have up to 10% of his or her
base pay withheld from his or her pay for this purpose. The price at which the
Participant may purchase shares is the lower of (i) 85% of the last sale price
of the Common Stock on the NASDAQ National Market System on the first day of the
Offering Period or (ii) 85% of such price on the last day of the Offering
Period.
Amendment. The Board of Directors may at any time, and from time to
time, modify, terminate or amend the Stock Purchase Plan in any respect, except
that if at any time the approval of the shareholders of the Company is required
as to such modification or amendment under (i) Section 423 of the Code, (ii)
Rule 16b-3 of the Exchange Act or any successor provisions ("Rule 16b-3") or
(iii) under any applicable listing requirement of the NASDAQ National Market
System, the Board of Directors may not effect such modification or amendment
without shareholder approval.
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<PAGE>
The termination, modification or amendment of the Stock Purchase Plan
shall not, without the consent of a Participant, affect his or her rights under
a purchase option previously selected by the Participant. With the consent of
the Participant affected, the Board of Directors may amend outstanding purchase
options in a manner not inconsistent with the terms of the Stock Purchase Plan.
The Board of Directors shall also have the right to amend or modify the terms
and provisions of the Stock Purchase Plan and of any purchase options previously
granted under the Stock Purchase Plan to the extent necessary to ensure the
continued qualification of the Stock Purchase Plan under Section 423 of the Code
and Rule 16b-3. The Stock Purchase Plan also contains provisions relating to the
disposition of purchase options in the event of certain mergers or other
significant transactions involving the Company.
Certain Federal Income Tax Consequences
The Stock Purchase Plan, and the rights of Participants to make
purchases thereunder, is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. No income (other than dividends) will be
taxable to a Participant until disposition of the shares purchased under the
Stock Purchase Plan. Upon the disposition of the shares of Common Stock, the
Participant will generally be subject to tax and the amount of the tax will
depend upon the holding period.
If the shares are disposed of more than two years from the first day of
the Offering Period, or if the Participant dies (at any time, regardless of the
holding period), the Participant will recognize ordinary income for the taxable
year of the disposition or death measured as the lesser of (a) the excess of the
fair market value of the shares at the time of such disposition over the
purchase price or (b) an amount equal to 15% of the fair market value of the
shares as of the beginning of the Offering Period. The Company will not be
entitled to a corresponding deduction.
If the shares are disposed of within two years of the first day of the
Offering Period (a "Disqualifying Disposition"), the Participant will recognize
ordinary income for the taxable year of the disposition generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Subject to the limitation described in the
next sentence, the Company will be entitled to a tax deduction equal to the
amount of ordinary income recognized as described in this paragraph. Under
Section 162(m), the Company's tax deduction for all compensation paid to
specified officers in any one year after 1993 is limited to $1,000,000 unless
the compensation qualifies for an exemption from this limitation. Amounts
recognized as ordinary income on a Disqualifying Disposition will not be exempt.
The Participant's tax basis in the shares will initially be his or her
purchase price for those particular shares, and that tax basis will be increased
at the time of disposition of the shares by the foregoing taxable amount. In the
case of a taxable disposition of the shares, the difference between such
adjusted tax basis and the amount realized will be capital gain or loss, either
long-term or short-term, depending upon how long the shares have been held on
the date of disposition.
RATIFICATION OF ENGAGEMENT OF INDEPENDENT AUDITORS
Shareholders will be requested at the Annual Meeting to ratify the
engagement of Deloitte & Touche LLP to serve as independent auditors of the
Company for the year ending January 31, 2000. Deloitte & Touche LLP has served
as the Company's auditors since 1988. A representative of the firm is expected
to be present at the Annual Meeting, will have the opportunity to make a
statement and will be available to respond to appropriate questions. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE PROPOSAL.
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<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any shareholder proposal intended to be presented at the next Annual
Meeting of Shareholders of the Company must be received by the Company by
_________, 1999 to be considered for inclusion in the Company's proxy
solicitation materials for such meeting.
OTHER BUSINESS
The Board of Directors does not know of any matter to be brought before
the Annual Meeting other than the matters specified in the Notice of Annual
Meeting accompanying this Proxy Statement. The persons named in the form of
proxy solicited by the Board of Directors will vote all proxies that have been
properly executed. If any matters not set forth in the Notice of Annual Meeting
are properly brought before the Annual Meeting, such persons will vote thereon
in accordance with their best judgment.
By Order of the Board of Directors,
William F. Sorin
Secretary
Woodbury, New York
_____________, 1999
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<PAGE>
Annex I
1999 Stock Incentive Compensation Plan
<PAGE>
COMVERSE TECHNOLOGY, INC.
1999 STOCK INCENTIVE COMPENSATION PLAN
1. Purpose of the Plan
The purpose of the Plan is to assist the Company, its Subsidiaries and
Affiliates in attracting and retaining valued directors and employees by
offering them a greater stake in the Company's success and a closer identity
with it, and to encourage ownership of the Company's stock by such employees.
2. Definitions
2.1 "Affiliate" means any entity other than the Subsidiaries in which the
Company has a substantial direct or indirect equity interest, as
determined by the Board.
2.2 "Award" means an award of Deferred Stock, Restricted Stock, Options or
SARs under the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Change in Control" means (i) the Board (or, if approval of the Board
is not required as a matter of law, the shareholders of the Company)
shall approve (a) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant
to which shares of Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (b) any sale, lease,
exchange or other transfer (on one transaction or a series of related
transactions) of all, or substantially all, the assets of the Company
or (c) the adoption of any plan or proposal for the liquidation or
dissolution of the Company; (ii) any person (as such term is defined in
Section 13(d) of the 1934 Act), corporation or other entity other than
the Company shall make a tender offer or exchange offer to acquire any
Common Stock (or securities convertible into Common Stock) for cash,
securities or any other consideration, provided that (a) at least a
portion of such securities sought pursuant to the offer in question is
acquired and (b) after consummation of such offer, the person,
corporation or other entity in question is the "beneficial owner" (as
such term is defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of 20% or more of the outstanding shares of Common Stock
(calculated as provided in paragraph (d) of such Rule 13d-3 in the case
of rights to acquire Common Stock); (iii) during any period of two
consecutive years, individuals who at the beginning of such period
constituted the entire Board ceased for any reason to constitute a
majority thereof unless the election, or the nomination for election by
the Company's stockholders, of each new director was approved by a vote
of at least two-thirds of the directors then still in office who were
directors at the beginning of the period; or (iv) the occurrence of any
other event the Committee determines shall constitute a "Change in
Control" hereunder.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
2.6 "Common Stock" means the common stock of the Company, par value $.10
per share, or such other class or kind of shares or other securities
resulting from the application of Section 10.
2.7 "Company" means Comverse Technology, Inc, a New York corporation or any
successor corporation.
2.8 "Committee" means the committee designated by the Board to administer
the Plan under Section 4. The Committee shall have at least three
members, each of whom shall be a member of the Board, a Non-Employee
Director and an Outside Director.
2.9 "Deferred Stock" means an Award made under Section 6 of the Plan to
receive Common Stock at the end of a specified Deferral Period.
2.10 "Deferral Period" means the period during which the receipt of a
Deferred Stock Award under Section 6 of the Plan will be deferred.
2.11 "Director" means each member of the Board who is not an Employee, who
does not receive compensation from the Company or any Subsidiary in any
capacity other than as a Director and whose membership on the Board is
not attributable to any contract between the Company and such Director
or any other entity with which such Director is affiliated.
2.12 "Employee" means an officer or other key employee of the Company, a
Subsidiary or an Affiliate including a director who is such an
employee.
2.13 "Fair Market Value" on any given date means the closing price of shares
of Common Stock on the principal national securities exchange on which
the Common Stock is listed on such date or, if Common Stock was not
traded on such date, on the last preceding day on which the Common
Stock was traded, or as otherwise deternined by the Committee.
2.14 "Holder" means an individual to whom an Award is made.
2.15 "Hostile Change in Control" means any Change in Control described in
Section 2.4(ii) that is not approved or recommended by the Board.
2.16 "Incentive Stock Option" means an Option intended to meet the
requirements of an incentive stock option as defined in Section 422 of
the Code and designated as an Incentive Stock Option.
2.17 "1934 Act" means the Securities Exchange Act of 1934, as amended.
2.18 "Non-Employee Director" means a person defined in Rule 16b-3(b)(3)
promulgated by the Securities and Exchange Commission under the 1934
Act, or any successor definition adopted by the Securities and Exchange
Commission.
2.19 "Non-Qualified Option" means an Option not intended to be an Incentive
Stock Option, and designated as a Non-Qualified Option.
<PAGE>
2.20 "Option" means any stock option granted from time to time under Section
8 of the Plan.
2.21 "Outside Director" means a member of the Board who is an "outside
director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.22 "Plan" means the Comverse Technology, Inc. 1999 Stock Incentive
Compensation Plan herein set forth, as amended from time to time.
2.23 "Restricted Stock" means Common Stock awarded by the Committee under
Section 7 of the Plan.
2.24 "Restriction Period" means the period during which Restricted Stock
awarded under Section 7 of the Plan is subject to forfeiture.
2.25 "Retirement" means retirement from the active employment of the
Company, a Subsidiary or an Affiliate pursuant to the relevant
provisions of the applicable pension plan of such entity or as
otherwise determined by the Committee.
2.26 "SAR" means a stock appreciation right awarded by the Committee under
Section 9 of the Plan.
2.27 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company (or any
subsequent parent of the Company) if each of the corporations other
than the last corporation in the unbroken chain owns stock possession
50% or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
2.28 "Ten Percent Shareholder" means a person who on any given date owns,
either directly or indirectly (taking into account the attribution
rules contained in Section 424(d) of the Code), stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Company or a Subsidiary.
3. Eligibility
3.1 Any Employee is eligible to receive an Award.
3.2 Each Director shall receive in each fiscal year of the Company,
commencing with the year ending January 31, 2001, Options to purchase
13,500 shares of Common Stock having an exercise price per share equal
to the Fair Market Value as of the date two business days after the
publication of the audited year-end financial statements of the Company
for the immediately preceding fiscal year. For the year ending January
31, 2000, each Director shall receive Options to purchase 4,500 shares
of Common Stock having an exercise price per share equal to the Fair
Market Value as of the date of the adoption of this Plan by the
shareholders of the Company. Such Options shall vest and become
non-forfeitable incrementally, to the extent of 2,700 shares per
meeting of the Board, and any committees of the Board of which such
Director is a member, attended by the recipient during the year of
grant; provided, however, that during the continuation of any of the
Company's previously-adopted Stock Option Plans, with the exception of
option grants during the fiscal year ending January 31, 2000, options
<PAGE>
granted thereunder to Directors shall be deemed to be granted under the
Plan for the purposes of this Section 3.2.
4. Administration and Implementation of Plan
4.1 The Plan shall be administered by the Committee, which shall have full
power to interpret and administer the Plan and full authority to act in
selecting the Employees to whom Awards will be granted, in determining
the type and amount of Awards to be granted to each such Employee, the
terms and conditions of Awards granted under the Plan and the terms of
agreements which will be entered into with Holders.
4.2 The Committee's powers shall include, but not be limited to, the power
to determine whether, to what extent and under what circumstances an
Option may be exchanged for cash, Common Stock, Restricted Stock,
Deferred Stock or some combination thereof; to determine whether, to
what extent and under what circumstances an Award is made and operates
in tandem with other Awards made hereunder; to determine whether, to
what extent and under what circumstances Common Stock or cash payable
with respect to an Award shall be deferred, either automatically or at
the election of the Holder (including the power to add deemed earnings
to any such deferral); and to grant Awards (other than Incentive Stock
Options) that are transferable by the Holder.
4.3 The Committee shall have the power to adopt regulations for carrying
out the Plan and to make changes in such regulations as it shall, from
time to time, deem advisable. Any interpretation by the Committee of
the terms and provisions of the Plan and the administration thereof,
and all action taken by the Committee, shall be final and binding on
Holders.
4.4 The Committee may condition the grant of any Award or the lapse of any
Deferral or Restriction Period (or any combination thereof) upon the
Holder's achievement of a Performance Goal that is established by the
Committee before the grant of the Award. For this purpose, a
"Performance Goal" shall mean a goal that must be met by the end of a
period specified by the Committee (but that is substantially uncertain
to be met before the grant of the Award) based upon: (i) the price of
Common Stock, (ii) the market share of the Company, its Subsidiaries or
Affiliates (or any business unit thereof), (iii) sales by the Company,
its Subsidiaries or Affiliates (or any business unit thereof), (iv)
earnings per share of Common Stock, (v) return on shareholder equity of
the Company, (vi) costs of the Company, its Subsidiaries or Affiliates
(or any business unit thereof) or (vii) any other performance goal that
would satisfy the applicable requirements of Section 162(m) of the
Code. The Committee shall have discretion to determine the specific
targets with respect to each of these categories of Performance Goals.
Before granting an Award or permitting the lapse of any Deferral or
Restriction Period subject to this Section, the Committee shall certify
that an individual has satisfied the applicable Performance Goal.
5. Shares of Stock Subject to the Plan
5.1 Subject to adjustment as provided in Section 10, the total number of
shares of Common Stock available for Awards under the Plan shall be
3,500,000 shares.
5.2 The maximum number of shares of Common Stock subject to an Award that
may be awarded to any Employee shall not exceed 1,000,000 during any
calendar year (the "Individual Limit"). Subject to Section 5.3 and
<PAGE>
Section 10, any shares of Common Stock subject to an Award that is
canceled or repriced by the Committee shall count against the
Individual Limit. Notwithstanding the foregoing, the Individual Limit
may be adjusted to reflect the effect on shares of Common Stock of any
transaction or event described in Section 10.
5.3 Any shares issued by the Company through the assumption or substitution
of outstanding grants from an acquired company shall not (i) reduce the
shares available for Awards under the Plan, or (ii) be counted against
the Individual Limit. Any shares issued hereunder may consist, in whole
or in part, of authorized and unissued shares or treasury shares. If
any shares subject to any Award granted hereunder are forfeited or such
Award otherwise terminates without the issuance of such shares or the
payment of other consideration in lieu of such shares, the shares
subject to such Award, to the extent of any such forfeiture or
termination, shall again be available for Awards under the Plan.
6. Deferred Stock
An Award of Deferred Stock is an agreement by the Company to deliver to
the recipient a specified number of shares of Common Stock at the end of a
specified deferral period or periods. Such an Award shall be subject to the
following terms and conditions.
6.1 Deferred Stock Awards shall be evidenced by Deferred Stock agreements.
Such agreements shall conform to the requirements of the Plan and may
contain such other provisions as the Committee shall deem advisable.
6.2 Upon determination of the number of shares of Deferred Stock to be
awarded to a Holder, the Committee shall direct that the same be
credited to the Holder's account on the books of the Company but that
issuance and delivery of the same shall be deferred until the date or
dates provided in Section 6.5 hereof. Prior to issuance and delivery
hereunder the Holder shall have no rights as a stockholder with respect
to any shares of Deferred Stock credited to the Holder's account.
6.3 Amounts equal to any dividends declared during the Deferral Period with
respect to the number of shares covered by a Deferred Stock Award will
be paid to the Holder currently, or deferred and deemed to be
reinvested in additional Deferred Stock, or otherwise reinvested on
such terms as are determined at the time of the Award by the Committee,
in its sole discretion, and specified in the Deferred Stock agreement.
6.4 The Committee may condition the grant of an Award of Deferred Stock or
the expiration of the Deferral Period upon the Employee's achievement
of one or more Performance Goal(s) specified in the Deferred Stock
agreement. If the Employee fails to achieve the specified Performance
Goal(s), either the Committee shall not grant the Deferred Stock Award
to the Employee or the Holder shall forfeit the Award and no Common
Stock shall be transferred to him pursuant to the Deferred Stock Award.
Unless otherwise determined by the Committee at the time of an Award,
dividends paid during the Deferral Period on Deferred Stock subject to
a Performance Goal shall be reinvested in additional Deferred Stock and
the lapse of the Deferral Period for such Deferred Stock shall be
subject to the Performance Goal(s) previously established by the
Committee.
<PAGE>
6.5 The Deferred Stock agreement shall specify the duration of the Deferral
Period taking into account termination of employment on account of
death, disability, Retirement or other cause. The Deferral Period may
consist of one or more installments. At the end of the Deferral Period
or any installment thereof the shares of Deferred Stock applicable to
such installment credited to the account of a Holder shall be issued
and delivered to the Holder (or, where appropriate, the Holder's legal
representative) in accordance with the terms of the Deferred Stock
agreement. The Committee may, in its sole discretion, accelerate the
delivery of all or any part of a Deferred Stock Award or waive the
deferral limitations for all or any part of a Deferred Stock Award.
7. Restricted Stock
An Award of Restricted Stock is a grant by the Company of a specified
number of shares of Common Stock to the Employee, which shares are subject to
forfeiture upon the happening of specified events. Such an Award shall be
subject to the following terms and conditions:
7.1 Restricted Stock shall be evidenced by Restricted Stock agreements.
Such agreements shall conform to the requirements of the Plan and may
contain such other provisions as the Committee shall deem advisable.
7.2 Upon determination of the number of shares of Restricted Stock to be
granted to the Holder, the Committee shall direct that a certificate or
certificates representing the number of shares of Common Stock be
issued to the Holder with the Holder designated as the registered
owner. The certificate(s) representing such shares shall be legended as
to sale, transfer, assignment, pledge or other encumbrances during the
Restriction Period and deposited by the Holder, together with a stock
power endorsed in blank, with the Company, to be held in escrow during
the Restriction Period.
7.3 Unless otherwise determined by the Committee at the time of an Award,
during the Restriction Period the Holder shall have the right to
receive dividends from and to vote the shares of Restricted Stock.
7.4 The Committee may condition the grant of an Award of Restricted Stock
or the expiration of the Restriction Period upon the Employee's
achievement of one or more Performance Goal(s) specified in the
Restricted Stock Agreement. If the Employee fails to achieve the
specified Performance Goal(s), either the Committee shall not grant the
Restricted Stock to the Employee or the Holder shall forfeit the Award
of Restricted Stock and the Common Stock shall be forfeited to the
Company.
7.5 The Restricted Stock agreement shall specify the duration of the
Restriction Period and the performance, employment or other conditions
(including termination of employment on account of death, disability,
Retirement or other cause) under which the Restricted Stock may be
forfeited to the Company. At the end of the Restriction Period the
restrictions imposed hereunder shall lapse with respect to the number
of shares of Restricted Stock as determined by the Committee, and the
legend shall be removed and such number of shares delivered to the
Holder (or, where appropriate, the Holder's legal representative). The
Committee may, in its sole discretion, modify or accelerate the vesting
and delivery of shares of Restricted Stock.
<PAGE>
8. Options
Options give an Employee or Director the right to purchase a specified
number of shares of Common Stock, Deferred Stock or Restricted Stock (as
selected by the Committee) from the Company for a specified time period at a
fixed price. Options granted to Employees may be either Incentive Stock Options
or Non-Qualified Stock Options. Option granted to Directors pursuant to Section
3.2 shall be Non-Qualified Stock Options. The grant of Options shall be subject
to the following terms and conditions:
8.1 Options shall be evidenced by Option agreements. Such agreements shall
conform to the requirements of the Plan, and may contain such other
provisions as the Committee shall deem advisable.
8.2 Subject to Section 3.2, the price per share at which Common Stock may
be purchased upon exercise of an Option shall be determined by the
Committee, but, in the case of grants of Incentive Stock Options, shall
be not less than the Fair Market Value of a share of Common Stock on
the date of grant. In the case of any Incentive Stock Option granted to
a Ten Percent Shareholder, the option price per share shall not be less
than 110% of the Fair Market Value of a share of Common Stock on the
date of grant. The option price per share for Non-Qualified Options may
be less than the Fair Market Value of a share of Common Stock on the
date of grant.
8.3 The Option agreements shall specify when an Option may be exercised and
the terms and conditions applicable thereto. The term of an Option
shall in no event be greater than ten years (five years in the case of
an Incentive Stock Option granted to a Ten Percent Shareholder).
8.4 Each provision of the Plan and each Option agreement relating to an
Incentive Stock Option shall be construed so that each Incentive Stock
Option shall be an incentive stock option as defined in Section 422 of
the Code, and any provisions of the Option agreement thereof that
cannot be so construed shall be disregarded. Incentive Stock Options
may not be granted to employees of Affiliates.
8.5 No Incentive Stock Option shall be transferable otherwise than by will
or the laws of descent and distribution and, during the lifetime of the
Holder, shall be exercisable only by the Holder. Upon the death of a
Holder, the person to whom the rights have passed by will or by the
laws of descent and distribution may exercise an Incentive Stock Option
only in accordance with this Section 8.
8.6 Except as provided in an Option Agreement, the option price of the
shares of Common Stock upon the exercise of an Option shall be paid in
full at the time of the exercise in cash, in Shares of Common Stock
valued at Fair Market Value on the date of exercise or a combination of
cash and such shares of Common Stock. With the consent of the
Committee, payment upon the exercise of a Non-Qualified Option may be
made in whole or in part by Restricted Stock (based on the fair market
value of the Restricted Stock on the date the Option is exercised, as
determined by the Committee). In such case the Common Stock to which
the Option relates shall be subject to the same forfeiture restrictions
originally imposed on the Restricted Stock exchanged therefor. The
Committee may provide in the applicable Option agreement for other
methods for exercising options including by delivery of a note by the
Holder in the amount of the exercise price.
<PAGE>
8.7 With the Holder's consent, the Committee may amend any outstanding
Option to deliver shares of Deferred Stock or Restricted Stock instead
of Common Stock.
8.8 If a Holder's employment by the Company, a Subsidiary or Affiliate
terminates by reason of death, any Option granted to such Holder may
thereafter be exercised (to the extent such Option was exercisable at
the time of death or on such accelerated basis as the Committee may
determine at or after grant) by, where appropriate, the Holder's
transferee or by the Holder's legal representative, until the earlier
of the date specified in the applicable Option Agreement or one year
after the Holder's death.
8.9 If a Holder's employment by the Company, a Subsidiary or Affiliate
terminates by reason of disability (as determined by the Committee) or
Retirement, any unexercised Option granted to the Holder shall become
immediately exercisable and may thereafter be exercised by the Holder
(or, where appropriate, the Holder's transferee or legal
representative) until the earlier of the date specified in the
applicable Option Agreement or 90 days after such termination of
employment.
8.10 If a Holder's employment by the Company, Subsidiary or Affiliate
terminates for any reason other than death, disability or Retirement,
all unexercised Options awarded to the Holder shall terminate on the
earlier of the date specified in the applicable Option Agreement or 90
days after such termination of employment.
8.11 The Committee or the Board may in their discretion extend the period
during which an Option held by an Employee may be exercised to such
period, not to exceed three years following the termination of an
Employee's employment or service with the Company or any of the
Subsidiaries, as the committee or the Board may determine to be
appropriate in any particular instance.
9. Stock Appreciation Rights
SARs are rights to receive a payment in cash, Common Stock, Restricted
Stock or Deferred Stock (as selected by the Committee) equal to the increase in
the Fair Market Value of a specified number of shares of Common Stock from the
date of grant of the SAR to the date of exercise. The grant of SARs shall be
subject to the following terms and conditions:
9.1 SARs shall be evidenced by SAR agreements. Such agreements shall
conform to the requirements of the Plan and may contain such other
provisions as the committee shall deem advisable. A SAR may be granted
in tandem with all or a portion of a related Option under the Plan
("Tandem SAR"), or may be granted separately ("Freestanding SAR"). A
Tandem SAR may be granted either at the time of the grant of the Option
or at any time thereafter during the term of the Option and shall be
exercisable only to the extent that the related Option is exercisable.
In no event shall any SAR be exercisable within the first six months of
its grant.
9.2 The base price of a Tandem SAR shall be the option price under the
related Option. The base price of a Freestanding SAR shall be not less
than 100% of the Fair Market Value of the Common Stock, as determined
by the Committee, on the date of grant of the Freestanding SAR.
9.3 A SAR shall entitle the recipient to receive a payment equal to the
excess of the Fair Market Value of the shares of Common Stock covered
by the SAR on the date of exercise over the base price of the SAR. Such
payment may be in cash, in shares of Common Stock, in shares of
<PAGE>
Deferred Stock, in shares of Restricted Stock or any combination, as
the Committee shall determine. Upon exercise of a Tandem SAR as to some
or all of the shares of Common Stock covered by the grant, the related
Option shall be canceled automatically to the extent of the number of
shares of Common Stock covered by such exercise, and such shares shall
no longer be available for purchase under the Option pursuant to
Section 8. Conversely, if the related Option is exercised as to some or
all of the shares of Common Stock covered by the Award, the related
Tandem SAR, if any, shall be canceled automatically to the extent of
the number of shares of Common Stock covered by the Option exercise.
9.4 SARs shall be subject to the same terms and conditions applicable to
Options as stated in Sections 8.3, 8.5, 8.7, 8.8, 8.9 and 8.10.
10. Adjustments Upon Changes in Capitalization
In the event of a reorganization, recapitalization, stock split,
spin-off, split-off, split-up, stock dividend, issuance of stock rights,
combination of shares, merger, consolidation or any other change in the
corporate structure of the Company affecting Common Stock, or any distribution
to stockholders other than a cash dividend, the Board shall make appropriate
adjustment in the number and kind of shares authorized by the Plan and any
adjustments to outstanding Awards as it determines appropriate. No fractional
shares of Common Stock shall be issued pursuant to such an adjustment. The
Committee may determine to pay the Fair Market Value of any fractional shares
resulting from adjustments pursuant to this Section in cash to the Holder.
11. Adjustments Upon a Change in Control
Except as otherwise provided in an applicable agreement, upon the
occurrence of a Change in Control (other than a Hostile Change of Control), the
Committee may elect to provide that all outstanding Options and Stock
Appreciation Rights shall immediately vest and become exercisable, each Deferral
Period and Restriction Period shall immediately lapse or all shares of Deferred
Stock subject to outstanding Awards shall be issued and delivered to the Holder.
In the event of a Hostile Change in Control, each of the foregoing actions shall
occur automatically upon the occurrence of such Hostile Change in Control. At
any time before a Change in Control, the Committee may, without the consent of
any Holder of an Option, (i) require the entity effecting the Change in Control
or a parent or subsidiary of such entity to assume each outstanding Option or
substitute an equivalent option therefor or (ii) terminate and cancel all
outstanding Options upon the Change in Control and pay the Holder of each such
Option cash equal to the product of (x) the difference between the Fair Market
Value of Common Stock on the date of the Change in Control and the exercise
price of such Option and (y) the number of shares of Common Stock subject to
such Option. For the purposes of this Section, an Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each share of Common Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
parent, the Committee may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each share of Common Stock subject to the Option, to be solely common stock
<PAGE>
of the successor corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger.
12. Effective Date, Termination and Amendment
The Plan shall become effective on May 13, 1999, subject to shareholder
approval. The Plan shall remain in full force and effect until the earlier of 10
years from the date of its adoption by the Board, or the date it is terminated
by the Board. The Board shall have the power to amend, suspend or terminate the
Plan at any time, provided that no such amendment shall be made without
stockholder approval which shall:
12.1 Increase (except as provided in Section 10) the total number of shares
available for issuance pursuant to the Plan;
12.2 Change the class of individuals eligible to be Holders;
12.3 Modify the Individual Limit (except as provided Section 10) or the
categories of Performance Goals previously disclosed to shareholders;
12.4 Change the provisions of this Section 12; or
12.5 Make any other change for which shareholder approval is required under
Section 16(b) or any successor provision of the 1934 Act.
Termination of the Plan pursuant to this Section 12 shall not affect Awards
outstanding under the Plan at the time of termination.
13. Transferability
Except as provided below, Awards may not be pledged, assigned or
transferred for any reason during the Holder's lifetime, and any attempt to do
so shall be void and the relevant Award shall be forfeited. The Committee may
grant Awards (except Incentive Stock Options) that are transferable by the
Holder during his lifetime, but such Awards shall be transferable only to the
extent specifically provided in the agreement entered into with the Holder. The
transferee of the Holder shall, in all cases, be subject to the provisions of
the agreement between the Company and the Holder.
14. General Provisions
14.1 Nothing contained in the Plan, or any Award granted pursuant to the
Plan, shall confer upon any Employee any right with respect to
continued employment by the Company, a Subsidiary or Affiliate, nor
interfere in any way with the right of the Company, a Subsidiary or
Affiliate to terminate the employment of any Employee at any time.
14.2 For purposes of this Plan, transfer of employment between the Company
and its Subsidiaries and Affiliates shall not be deemed termination of
employment.
14.3 In connection with the transfer of shares of Common Stock as a result
of the exercise or vesting of an Award or upon any other event that
would subject the Holder to taxation, the Company shall have the right
to require the Holder to pay an amount in cash or to retain or sell
without notice, or to demand surrender of, shares of Common Stock in
<PAGE>
value sufficient to cover any tax, including any Federal, state or
local income tax, required by any governmental entity to be withheld or
otherwise deducted and paid with respect to such transfer ("Withholding
Tax"), and to make payment (or to reimburse itself for payment made) to
the appropriate taxing authority of an amount in cash equal to the
amount of such Withholding Tax, remitting any balance to the employee.
For purposes of this Section 14.3, the value of shares of Common Stock
so retained or surrendered shall be the Fair Market Value on the date
that the amount of the Withholding Tax is to be determined (the "Tax
Date"), and the value of shares of Common Stock so sold shall be the
actual net sale price per share (after deduction of commissions)
received by the Company. Notwithstanding the foregoing, the Holder
shall be entitled to satisfy the obligation to pay any Withholding Tax,
in whole or in part, by providing the Company with funds sufficient to
enable the Company to pay such Withholding Tax or by requiring the
Company to retain or to accept upon delivery thereof shares of Common
Stock (other than unvested Restricted Stock) sufficient in value
(determined in accordance with the last sentence of the preceding
paragraph) to cover the amount of such Withholding Tax. Each election
by a Holder to have shares retained or to deliver shares for this
purpose shall be subject to the following restrictions: (i) the
election must be in writing and made on or prior to the Tax Date; and
(ii) the election shall be subject to the disapproval of the Committee.
14.4 With respect to Holders subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails
to so comply, it shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Committee.
14.5 Without amending the Plan, Awards may be granted to Employees who are
foreign nationals or employed outside the United States or both, on
such terms and conditions different from those specified in the Plan as
may, in the judgment of the Committee, be necessary or desirable to
further the purpose of the Plan.
14.6 To the extent that Federal laws (such as the 1934 Act, the Code or the
Employee Retirement Income Security Act of 1974) do not otherwise
control, the Plan and all determinations made and actions taken
pursuant hereto shall be governed by the law of New York and construed
accordingly.
14.7 The Committee may amend any outstanding Awards to the extent it deems
appropriate. Such amendment may be made by the Committee without the
consent of the Holder, except in the case of amendments adverse to the
Holder, in which case the Holder's consent is required for any such
amendment. Notwithstanding the foregoing, the Committee may exercise
its authority under Section 11 without the consent of Holders.
<PAGE>
Annex II
1997 Employee Stock Purchase Plan
(As Amended)
<PAGE>
Draft: July 21, 1999
COMVERSE TECHNOLOGY, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
(As Amended)
1. Purposes.
The 1997 Employee Stock Purchase Plan of Comverse Technology, Inc. (the
"Plan") is intended to provide a method whereby employees of Comverse
Technology, Inc. and its subsidiary and predecessor corporations, if any
(hereinafter collectively referred to, unless the context otherwise requires,
the "Company"), will have an opportunity to acquire a proprietary interest in
the Company through the purchase of shares of Common Stock of the Company. It is
the intention of the Company to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of Section 423 of the Code.
2. Definitions.
(a) "Base Pay" means regular straight-time earnings (as the same may be
adjusted from time to time) but excluding payments for overtime, shift
differentials, incentive compensation, sales commissions, bonuses and other
special payments.
(b) "Common Stock" means the common stock of the Company, par value
$.10 per share, or such other class or kind of shares or other securities
resulting from the application of Section .
(c) "Employee" means any person who is customarily employed for 20 or
more hours per week and more than five months in a calendar year by the Company
or by a Subsidiary Corporation.
(d) "Offering Commencement Date" means the applicable date on which an
Offering under the Plan commences pursuant to Paragraph 4.
(e) "Offering Termination Date" means the applicable date on which an
Offering under the Plan terminates pursuant to Paragraph 4.
(f) "Subsidiary Corporation" means any present or future corporation
which (i) is a "subsidiary corporation" as that term is defined in Section
424(f) of the Code and (ii) is designated as a participant in the Plan by the
Board of Directors or Committee described in Paragraph 13.
3. Eligibility.
(a) Any Employee who shall have completed three months of employment
and shall be employed by the Company on the applicable Offering Commencement
Date shall be eligible to participate in the Plan.
(b) Any provision of the Plan to the contrary notwithstanding, no
Employee shall be granted an option to participate in the Plan:
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<PAGE>
(i) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5%
or more of the total combined voting power or value of all classes of
stock of the Company or of any Subsidiary Corporation (for purposes of
this Paragraph the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any employee); or
(ii) which permits his or her rights to purchase stock under
all employee stock purchase plans maintained by the Company and its
subsidiaries to accrue at a rate which exceeds $25,000 of the fair
market value of the stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at
any time.
4. Offering Dates.
The Plan will be implemented by semiannual offerings (referred to
herein collectively as "Offerings" and individually as an "Offering") of a
maximum aggregate of 750,000 shares (subject to adjustment as provided in
Paragraph 12(a) and 17) of Common Stock, subject to Paragraph 12, 17 and 22
below, as follows:
(i) Offering I shall commence on each March 1 and terminate on
each August 31.
(ii) Offering II shall commence on each September 1 and terminate
on each final day of February.
Participation in any one Offering under the Plan shall neither limit,
nor require, participation in any other Offering.
5. Participation.
All Employees will become participants in an Offering on the applicable
Offering Commencement Date. Payroll deductions, if any, for a participant shall
commence on the applicable Offering Commencement Date of the Offering and shall
end on the Offering Termination Date of such Offering, unless sooner terminated
pursuant to Paragraph 10.
6. Payroll Deductions.
(a) Participants may elect to have amounts withheld from their base pay
by completing an authorization for a payroll deduction ("Authorization") on the
form provided by the Company and filing it with the Company's Payroll
department. At the time a participant files his or her Authorization for a
payroll deduction, the participant shall elect to have deductions made from his
or her pay on each payday during the time he or she is a participant in an
Offering at the rate of 0, 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his or her
annualized base pay. If a participant has not filed an Authorization for a
previous Offering or for the applicable Offering at least seven (7) days prior
to the applicable Offering Commencement Date, he or she shall be deemed to have
filed an Authorization electing to withhold 0% of his or her annualized base
pay.
(b) All payroll deductions made for the participant shall be credited
to his or her account maintained by the Company under the Plan. A participant
may not make any separate cash payment into such account.
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<PAGE>
(c) Except as provided in Paragraph 8(b) or 10, a participant may only
make changes to the rate of deduction from his or her annualized base pay, on
not more than one occasion during an Offering, by completing a new Authorization
on the form provided by the Company and filing it with the Company's Director of
Treasury Operations as provided herein. Such new Authorization shall be
effective upon the commencement of the first pay period subsequent to its
filing. A participant may change his or her Authorization only once during any
Offering.
7. Granting of Option.
(a) For each of the Offerings, a participating Employee shall be deemed
to have been granted an option (the "Option"), on the applicable Offering
Commencement Date, to purchase a maximum number of shares of Common Stock equal
to an amount determined as follows: 85% of the market value of a share of the
Company's Common Stock on the applicable Offering Commencement Date shall be
divided into an amount equal to 6% of the Employee's annualized Base Pay as of
such Offering Commencement Date. For all purposes of the Plan, the market value
of the Company's Common Stock shall be determined as provided in subparagraph
(b) below. An Employee's "annualized Base Pay" for any Offering shall be
determined as follows: (i) for any Employee who was employed by the Company for
an entire twelve-month period ending on the day prior to the Offering
Commencement Date, the Employee's total Base Pay for such twelve-month period;
(ii) for any Employee not employed for the entire twelve-month period, the sum
of the Base Pay earned in each of the full calendar months prior to the Offering
Commencement Date during which the Employee was employed by the Company, divided
by the number of full calendar months for which the Employee was employed,
multiplied by twelve.
(b) The purchase price of a share of Common Stock purchased with
payroll deductions made during each Offering (the "Option Exercise Price") shall
be the lower of:
(i) 85% of the last sale price of the Common Stock on the
Nasdaq Stock Market (or on such other national securities exchange on
which the Common Stock is then traded) as reported in The Wall Street
Journal, on the applicable Offering Commencement Date (or on the next
regular business date on which shares of Common Stock shall be traded
if no shares of Common Stock shall have been traded on such Offering
Commencement Date); or
(ii) 85% of the last sale price of Common Stock on the Nasdaq
Stock Market (or on such other national securities exchange on which
the Common Stock is then traded) as reported in The Wall Street
Journal, on the applicable Offering Termination Date (or on the next
regular business date on which shares of Common Stock shall be traded
if no shares of Common Stock shall have been traded on such Offering
Termination Date).
8. Exercise of Options.
With respect to each Offering during the term of the Plan:
(a) Unless a participant gives written notice of withdrawal to the
Company as provided in Paragraphs 8(b) and 10, his or her Option will be deemed
to have been exercised automatically on the Offering Termination Date applicable
to such Offering, for the purchase of the number of full shares of Common Stock
which the accumulated payroll deductions (without interest) in his or her
account maintained by the Company under the Plan at that time will purchase at
- 3 -
<PAGE>
the applicable Option Exercise Price (but not in excess of the number of shares
for which Options have been granted to the Employee pursuant to Paragraph 7(a)),
and any excess in his or her account at that time will be returned to him or
her, with interest as determined by the Committee prior to each Offering
Commencement Date, based on the assumption that such excess comprises funds most
recently deducted from the participant's pay; provided that any excess returned
on account of fractional shares will not be credited with any interest.
(b) By written notice to the Director of Treasury Operations of the
Company at any time prior to the Offering Termination Date applicable to any
such Offering, a participant may elect to withdraw all, but not less than all,
of the accumulated payroll deductions in his or her account at such time, with
interest as determined by the Committee prior to each Offering Commencement
Date.
(c) Fractional shares will not be issued under the Plan and any
accumulated payroll deductions which would have been used to purchase fractional
shares shall be returned to an employee without interest promptly following the
termination of an Offering.
9. Delivery.
As promptly as practicable after the Offering Termination Date of each
Offering, the Company will deliver to each participant, as appropriate, the
certificate or certificates representing the shares of Common Stock purchased
upon the exercise of such participant's Option.
10. Withdrawal.
(a) As indicated in Paragraph 8(b), a participant may withdraw payroll
deductions credited to his or her account with the Company under any Offering at
any time prior to the applicable Offering Termination Date by giving written
notice of withdrawal to the Director of Treasury Operations. All of the
participant's payroll deductions credited to his or her account will be paid to
the participant promptly after receipt of such notice of withdrawal and no
further payroll deductions will be made from his or her pay during such
Offering. The Company may, at its option, treat any attempt by an employee to
borrow on the security of accumulated payroll deductions as an election, under
Paragraph 8(b), to withdraw such deductions.
(b) A participant's withdrawal from any Offering will not have any
effect upon his or her eligibility to participate in any succeeding Offering or
in any similar Plan which may hereafter be adopted by the Company.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death or disability, while in the employ of
the Company, the payroll deductions credited to his or her account will be
returned to the participant, with interest as determined by the Committee prior
to each Offering Commencement Date, or, in the case of his or her death
subsequent to the termination of employment, to the person or persons entitled
thereto under Paragraph 14.
(d) Upon termination of the participant's employment because of
disability or death, the participant or his or her beneficiary (as defined in
Paragraph 14) shall have the right to elect, by written notice given to the
Company's Director of Treasury Operations prior to the expiration of the period
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<PAGE>
of 30 days commencing with the date of the disability or death of the
participant, either
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or
(ii) to exercise the participant's Option on the Offering
Termination Date next following the date of the participant's
disability or death for the purchase of the number of full shares of
Common Stock which the accumulated payroll deductions in the
participant's account at the date of the participant's disability or
death will purchase at the applicable Option Exercise Price, and any
excess in such account will be returned to the participant or said
beneficiary.
If no such written notice of election is received by the Director of
Treasury Operations, the participant or beneficiary shall automatically be
deemed to have elected to withdraw the payroll deductions credited to the
participant's account at the date of the participant's disability or death and
the same will be paid promptly to the participant or said beneficiary with
interest as determined by the Committee prior to each Offering Commencement
Date.
11. Interest.
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participant employee except under withdrawal as
provided under Paragraphs 8(b) and 10 or upon the return of payroll deductions
as provided under Paragraphs 8(a) and 12(a). In the event of the return of
excess payroll deductions under Paragraphs 8(a) and 12(a), interest thereon, if
any, shall be computed assuming that such excess comprises funds most recently
deducted from the participant's pay.
12. Stock.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 750,000 shares, subject to adjustment
upon changes in capitalization of the Company as provided in Paragraph 17. If
the total number of shares for which Options are exercised in accordance with
Paragraph 8 exceeds 750,000, the Company shall make a pro rata allocation of the
shares available for delivery and distribution in as nearly a uniform manner as
shall be practicable and as it shall determine to be equitable, and the balance
of payroll deductions credited to the account of each participant under the Plan
shall be returned to him or her as promptly as possible, with interest on such
balance at the rate determined by the Committee prior to each Offering
Commencement Date, based on the assumption that such excess comprises funds most
recently deducted from the participant's pay.
(b) The participant will have no interest in Common Stock covered by
his or her Option until such Option has been exercised.
(c) Common Stock to be delivered to a participant under the Plan will
be issued in the name of the participant, or, if the participant so directs, by
written notice to the Company prior to the Offering Termination Date applicable
thereto, in the names of the participant and one such other person may be
designated by the participant, as joint tenants with rights of survivorship, to
the extent permitted by applicable law.
- 5 -
<PAGE>
13. Administration.
The Plan shall be administered by the committee appointed by the Board
of Directors of the Company to administer the Plan (the committee so designated
by the Board of Directors shall hereinafter be referred to as the "Committee").
The officer of the Company charged with day-to-day administration of the Plan
shall, for matters involving the Plan, be an ex- officio member of the
Committee. The interpretation and construction of any provision of the Plan and
the adoption of rules and regulations for administering the Plan shall be made
by the Committee, subject, however, at all times to the final approval of the
Board of Directors of the Company. Such rules may include, without limitation,
restrictions on the frequency of changes in withholding rates. Determinations
made by the Committee and approved by the Board of Directors of the Company with
respect to any matter or provision contained in the Plan shall be final,
conclusive and binding upon the Company and upon all participants, their heirs
or legal representatives. Any rule or regulation adopted by the Committee shall
remain in full force and effect unless and until altered, amended or repealed by
the Committee or the Board of Directors of the Company.
14. Designation of Beneficiary.
A participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and/or cash in the event of the death of the
participant prior to the delivery of such shares or cash to the participant.
Such designation of beneficiary may be changed by the participant at any time by
written notice to the Company's payroll department. Within 30 days after the
participant's death, the beneficiary may, as provided in Paragraph 10(d), elect
to exercise the participant's Option when it becomes exercisable on the Offering
Termination Date of the then current Offering. Upon the death of a participant
and upon receipt by the Company of proof of identity and existence at the
participant's death, (of a beneficiary validly designated by the participant
under the Plan) and upon and notice of election of the validly designated
beneficiary to exercise the participant's Option, the Company shall deliver such
stock and/or cash to such beneficiary. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such stock and/or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company) the Company, in its discretion, may deliver such
stock and/or cash to the spouse or to any one or more dependents of the
participant as the Company may determine. No beneficiary shall prior to the
death of the participant by whom he or she has been designated acquire any
interest in the stock or cash credited to the participant's account maintained
by the Company under the Plan.
15. Transferability.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive stock under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
by the participant otherwise than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Paragraph 8(b).
- 6 -
<PAGE>
16. Use of Funds.
All payroll deductions received or held by the Company under this Plan
may be used by the Company for any corporate purpose and the Company shall not
be obligated to segregate such payroll deductions.
17. Effects of Changes of Common Stock.
In the event of any changes of outstanding shares of the Common Stock
by reason of stock dividends, subdivisions, combinations and exchanges of
shares, recapitalizations, mergers in which the Company is the surviving
corporation, consolidations, and the like, the aggregate number of and class of
shares available under the Plan and Option Exercise Price per share shall be
appropriately adjusted by the Board of Directors of the Company, whose
determination shall be conclusive. Any such adjustments may provide for the
elimination of any fractional shares which would otherwise become subject to any
Options.
18. Amendment or Termination.
(a) The Board of Directors of the Company may at any time, and from
time to time, modify, terminate or amend the Plan in any respect, except that if
at any time the approval of the stockholders of the Company is required as to
such modification or amendment under (i) Section 423 of the Code, or (ii) under
Rule 16b-3 of the Securities Exchange Act of 1934, as amended, or any successor
provisions ("Rule 16b-3"), or (iii) under any applicable listing requirements,
the Board of Directors may not effect such modification or amendment without
such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of a participant, affect his or her rights under an
Option previously granted to him or her. With the consent of the participant
affected, the Board of Directors may amend outstanding Options in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify the terms and provisions of the Plan and of any Options previously
granted under the Plan to the extent necessary to ensure the continued
qualification of the Plan under Section 423 of the Code and Rule 16b-3.
19. Notices.
All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received by the Company's Director of Treasury Operations.
20. Merger or Consolidation.
If the Company shall at any time merge into or consolidate with another
corporation and the Company is the surviving entity, the holder of each Option
then outstanding will thereafter be entitled to receive at the next Offering
Termination Date upon the automatic exercise of such Option under Paragraph 8(a)
(unless previously withdrawn pursuant to Paragraph 10) for each share as to
which such Option shall be exercised the securities or property which a holder
of one share of the Common Stock was entitled to upon and at the time of such
merger or consolidation, and the Board of Directors of the Company shall take
such steps in connection with such merger or consolidation as the Board of
Directors shall deem necessary to assure that the provisions of Paragraph 17
- 7 -
<PAGE>
shall thereafter be applicable, as nearly as reasonably practicable, to such
securities or property. In the event of a merger or consolidation in which the
Company is not the surviving entity, or of a sale of all or substantially all of
the assets of the Company, the Plan shall terminate, and all payroll deductions
credited to participants' accounts shall be returned to them, with interest as
determined by the Committee prior to each Offering Commencement Date; provided,
however, that the Board of Directors may, in the event of such merger,
consolidation or sale, accelerate the Offering Termination Date of the Offering
then in effect and permit participants to purchase shares under the Plan at such
accelerated Offering Termination Date.
21. Approval of Stockholders.
The Plan has been adopted by the Board of Directors of the Company, but
all grants of Options shall be conditional upon the ratification and approval of
the Plan by the stockholders of the Company within twelve months after the
adoption of the Plan by the Board of Directors.
22. Registration and Qualification of the Plan Under Applicable Securities Laws.
Notwithstanding anything to the contrary herein, no Option shall be
granted under the Plan until such time as the Company has qualified or
registered the shares which are subject to the Options under all applicable
state and federal securities laws to the extent required by such laws. In the
event the shares shall not have been so qualified and registered prior to the
date an Offering is scheduled to commence, the Offering Commencement Date shall
be the date upon which the registration of the shares and other qualification
shall have become effective.
- 8 -
<PAGE>
[FORM OF PROXY - SIDE ONE]
PROXY
COMVERSE TECHNOLOGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of COMVERSE TECHNOLOGY, INC., a New York corporation
(the "Corporation"), hereby appoints Kobi Alexander, David Kreinberg and William
F. Sorin, and each of them voting singly in the absence of the others, attorneys
and proxies, each with full power of substitution and revocation, to vote all
shares of Common Stock of the Corporation which the undersigned is entitled to
vote at the Annual Meeting of Shareholders of the Corporation to be held on
Friday, October 8, 1999, at 10:00 A.M. (local time), or at any adjournment
thereof, in accordance with the following instructions:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, FOR
AND PROPOSALS 3, 4 AND 5 AND FOR THE ELECTION OF EACH OF
THE NOMINEES IDENTIFIED IN PROPOSAL 2.
PROPOSAL NO. 1 - AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL NO. 2 - ELECTION OF DIRECTORS:
[ ] FOR all nominees listed (except [ ] WITHHOLD AUTHORITY to vote
as marked to the contrary below) for all nominees listed
below.
(Instruction: To withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
Nominees:
Kobi Alexander Zvi Alexander Itsik Danziger John H. Friedman
Francis E. Girard Sam Oolie William F. Sorin Carmel Vernia
Shaula A. Yemini
PROPOSAL NO. 3 - ADOPTION OF 1999 STOCK INCENTIVE COMPENSATION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL NO. 4 - AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL NO. 5 - RATIFICATION OF ENGAGEMENT OF DELOITTE & TOUCHE LLP AS
AUDITORS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(To be completed and signed on the reverse side)
<PAGE>
[FORM OF PROXY - SIDE TWO]
(Continued from other side)
The named proxies are authorized to vote in their discretion on such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
"FOR" THE ELECTION TO THE BOARD OF DIRECTORS OF THE NINE NOMINEES IDENTIFIED
ABOVE AND "FOR" PROPOSALS 1, 3, 4 AND 5.
PLEASE MARK, SIGN, DATE AND Please sign exactly as name appears hereon.
RETURN THE PROXY CARD When shares are held by joint tenants, both
PROMPTLY USING THE ENCLOSED should sign. When signing as attorney,
ENVELOPE. executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by an authorized officer. If a
partnership, please sign in partnership name
by an authorized person.
Dated: _________________, 1999
-------------------------------------------
Signature
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Signature, if held jointly
