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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Fiscal Year ended January 31, 1999
Commission File Number 0-15502
COMVERSE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3238402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
170 CROSSWAYS PARK DRIVE
WOODBURY, NY 11797
(Address of principal executive offices)
Registrant's telephone number, including area code: 516-677-7200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Not applicable Not applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: [X] No: [ ]
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i
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant on May 24, 1999 was approximately $4,476,186,000. The closing
price of the registrant's common stock on the NASDAQ National Market System on
May 24, 1999 was $64.50 per share.
There were 69,852,047 shares of the registrant's common stock
outstanding on May 24, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
None.
----------------------------
TRILOGUE and Access NP are registered trademarks and TRILOGUE
INfinity, AUDIODISK, ULTRA, and SignalWare are trademarks of the Company.
ii
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the
directors and executive officers of the Company. Each director has been elected
to serve until the next annual meeting of shareholders and each executive
officer serves at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Kobi Alexander(1)(2) 47 President, Chairman of the Board of
Directors, Chief Executive Officer and Director
Carmel Vernia 46 Chief Operating Officer, Chief Executive
Officer of Comverse Infosys Division and
Director
Francis E. Girard 60 Chief Executive Officer of Comverse
Network Systems Division and Director
Itsik Danziger 50 President and Chief Operating Officer of
Comverse Network Systems Division and
Director
David Kreinberg 34 Vice President of Finance and
Chief Financial Officer
Zvi Alexander 77 Director
John H. Friedman(2)(3)(4) 46 Director
Sam Oolie(1)(2)(3)(4) 62 Director
William F. Sorin(1)(4) 50 Secretary and Director
Shaula A. Yemini, Ph.D.(3) 51 Director
</TABLE>
---------------
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit Committee of the Board of Directors.
(3) Member of Remuneration and Stock Option Committee of the Board of
Directors.
(4) Member of Corporate Planning and Structure Committee of the Board of
Directors.
-1-
<PAGE>
BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS
Kobi Alexander. Mr. Alexander, a founder of the Company, 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 has served as Chief Operating Officer of
the Company since January 1994 and as a director since August 1997. He is also
Chief Executive Officer of Comverse Infosys Division ("Infosys"). Since 1984 he
as been employed in the Company's Israeli subsidiaries in various capacities,
including 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 Corporation 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 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 has also 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.
-2-
<PAGE>
Itsik Danziger. Mr. Danziger 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 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 has been a director of the Company
since August 1989. Mr. Alexander has been actively engaged 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
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 has been a director of the Company
since June 1994. He is the Managing Director of Easton Capital Corporation, 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.
Sam Oolie. Mr. Oolie 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. He also has served as 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.
-3-
<PAGE>
William F. Sorin. Mr. Sorin 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 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 Corporation ("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.
-4-
<PAGE>
ITEM 11. 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 the fiscal year ended January 31, 1999 by those of
its executive officers whose salary and bonus compensation during the year ended
January 31, 1999 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION STOCK
NAME AND PERIOD OPTION ALL OTHER
PRINCIPAL POSITION ENDING 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 $ 306,128
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 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 "Security Ownership of Certain Beneficial Owners and Management -
Options to Purchase Subsidiary Shares."
/footnotes continued on following page/
-5-
<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 the year ended January 31, 1999, 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.
(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 the year ended January 31, 1999 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
NUMBER OF OPTIONS EXERCISE
SHARES GRANTED TO PRICE
SUBJECT TO EMPLOYEES PER EXPIRATION
NAME OPTION IN PERIOD 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 date of option grants.
-6-
<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 year 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 the year ended January
31, 1999, 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 at that date, net of the associated exercise price.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATE OPTION EXERCISES IN THE YEAR ENDED JANUARY 31, 1999 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 "Security Ownership of Certain Beneficial Owners and Management
- - 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 extending through June 30,
2000 at a current base annual salary of $308,300. Pursuant to the agreement, Mr.
Alexander received bonus compensation of $3,446,393 for services rendered during
the year ended January 31, 1999 and is entitled to receive bonus compensation in
succeeding years in an amount to be negotiated annually, but not less than 3% 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 under the terms of his employment, including the use of an
automobile leased by the Company.
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<PAGE>
Upon the termination of his employment with the Company for any
reason, Mr. Alexander is entitled to receive a severance payment in an amount
equal to $102,487 times the number of years (plus any partial years) of his
employment by the Company commencing with 1983, increased by 10% per annum, plus
continued employment-related benefits for the period of 36 months following
termination. In the event that Mr. Alexander's employment is terminated by the
Company without cause, by Mr. Alexander as a result of a material breach by the
Company of its obligations under the agreement or by his resignation within the
period of six months following a change in control of the Company, Mr. Alexander
is entitled to an additional severance payment equal to 299% of the average
annual cash compensation (including salary and any bonus payments) received by
him from the Company during the most recent three fiscal years plus an amount
equal to the income tax liability to Mr. Alexander resulting from such payment.
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., 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 salary (the "Basic Salary") of $3,500 per month. CNSL has also agreed to
reimburse Mr. Alexander for certain business-related expenses, to provide him
with the use of an automobile owned or leased by CNSL, and to pay certain
amounts for his account into defined contribution insurance and training funds
in Israel. In addition, if Mr. Alexander conducts business activities abroad,
including in the United States, CNSL is required to bear his reasonable lodging
and living expenses, which shall in any event be not less than the per diem
allowance customarily provided to senior executive managers of Israeli
companies, and if the period of his stay abroad is in excess of eight weeks, his
Basic Salary during such period shall be increased to an amount which will
support a standard of living comparable to that provided in Israel by the Basic
Salary and other benefits afforded under the agreement. 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. The present value of the non-monetary benefits under the agreement is
not readily determinable but is estimated at approximately 25% of such salary.
Mr. Vernia is employed as Chief Operating Officer of the Company
and 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 $160,000) 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.
-8-
<PAGE>
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 $166,000) and an annual bonus which is based on goals for Mr.
Danziger and Comverse Network Systems. Mr. Danziger is entitled to receive
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. Each of such eligible directors is also
entitled to receive an annual stock option grant under the Company's Stock
Option Plans 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 System on the date two business days after the publication of the audited
year-end financial statements of the Company. Such options are 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. 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.
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 System Management ARTS, Incorporated ("SMARTS"), a developer of automated
network problem diagnosis software. Dr. Shaula A. Yemini, President and Chief
Executive Officer of SMARTS and Mr. Alexander's sister, is a member of the
Remuneration and Stock Option Committee of the Board of Directors of the
Company.
-9-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information concerning the
beneficial ownership of shares of common stock on the part of the executive
officers and directors of the Company and all persons known by the Company to be
beneficial owners of more than five percent of the outstanding common stock as
at May 24, 1999.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES OF TOTAL
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER RELATIONSHIP WITH THE COMPANY OWNED SHARES(1)
- ---------------- ----------------------------- ----- ---------
<S> <C> <C> <C>
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 Shareholder 8,163,987(2) 11.7%
AIM Management Group, Inc.
1315 Peachtree Street, N.E.
Atlanta, GA 30309 Shareholder 7,057,906(2) 10.1%
Brinson Partners, Inc.
209 South LaSalle
Chicago, IL 60604 Shareholder 3,841,332(2) 5.5%
Kobi Alexander President, Chairman of the Board,
Chief Executive Officer and Director 1,716,844(3) 2.4%
Carmel Vernia Chief Operating Officer and Director 361,875(4)(5) *
Francis E. Girard Chief Executive Officer,
Comverse Network Systems and Director 312,545(6) *
Itsik Danziger Chief Operating Officer, Comverse
Network Systems and Director 99,678 (7) *
David Kreinberg Vice President of Finance and
Chief Financial Officer 22,577(8) *
Zvi Alexander Director 26,250(9)(10) *
John H. Friedman Director 18,000(4)(10) *
Sam Oolie Director 15,000(4)(10) *
William F. Sorin Secretary and Director 44,997(4)(11) *
Shaula A. Yemini, Ph.D. Director 23,850(10)(12) *
All directors and executive
officers as a group (10 persons) 2,641,616(13) 3.7%
</TABLE>
- -----------------
* Less than 1%.
(1) Based on 69,852,047 shares of common stock issued and outstanding on May
24, 1999, excluding, except as otherwise noted, shares of common stock
issuable upon the exercise of outstanding stock options.
/footnotes continued on following page/
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<PAGE>
/continuation of footnotes/
(2) Based on Schedule 13G filings with the Securities and Exchange Commission
reflecting data as of December 1998.
(3) Includes 1,363,873 shares issuable upon the exercise of stock options
that were exercisable at or within 60 days after May 24, 1999. Does not
include 1,087,500 shares issuable upon the exercise of options that were
not exercisable at or within 60 days after May 24, 1999.
(4) Consists solely of shares issuable upon the exercise of stock options
that were exercisable at or within 60 days after May 24, 1999.
(5) Does not include 202,500 shares issuable upon the exercise of options
that were not exercisable at or within 60 days after May 24, 1999.
(6) Includes 230,663 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 24, 1999. Does not
include 305,248 shares issuable upon the exercise of stock options that
were not exercisable at or within 60 days after May 24, 1999.
(7) Includes 99,375 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 24, 1999. Does not
include 255,000 shares issuable upon the exercise of stock options that
were not exercisable at or within 60 days after May 24, 1999.
(8) Includes 17,416 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 24, 1999. Does not
include 64,791 shares issuable upon the exercise of stock options that
were not exercisable at or within 60 days after May 24, 1999.
(9) Includes 18,000 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 24, 1999.
(10) Does not include 9,000 shares issuable upon the exercise of stock options
that were not exercisable at or within 60 days after May 24, 1999.
(11) Does not include 86,251 shares issuable upon the exercise of stock
options that were not exercisable at or within 60 days after May 24,
1999.
(12) Includes 18,600 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 24, 1999.
(13) Includes 2,187,799 shares issuable upon the exercise of stock options
that were exercisable at or within 60 days after May 24, 1999. Does not
include 2,037,290 shares issuable upon the exercise of stock options that
were not exercisable at or within 60 days after May 24, 1999.
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 Comverse
Network Systems, as a means of providing incentives directly tied to the
performance of those subsidiaries for which different grantees 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
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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.
ITEM 13. 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 the year ended January 31, 1999.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMVERSE TECHNOLOGY, INC.
(Registrant)
By: /s/ Kobi Alexander
-------------------------------------
Kobi Alexander
President, Chairman of the Board
and Chief Executive Officer
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