AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON JULY 20, 2000
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the
Securities Exchange Act of 1934.
Filed by the Registrant [__]
Filed by a Party other than the Registrant [X]
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 Under Rule 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) (1) 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:
================================================================================
<PAGE>
COMVERSE TECHNOLOGY, INC.
170 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 2000
------------------
NOTICE IS HEREBY GIVEN that the 2000 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,
September 15, 2000, commencing at 10:00 A.M. (local time) for the following
purposes:
1. To elect eight 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.
2. To consider and act upon a proposal to amend the Certificate of
Incorporation of the Company to increase from 300,000,000 to 600,000,000 the
aggregate number of authorized shares of the Company's Common Stock, par value
$.10 per share ("Common Stock").
3. To consider and vote upon a proposal to adopt the Company's 2000
Stock Incentive Compensation Plan, under which up to 9,000,000 shares of the
Company's Common Stock, par value $.10 per share ("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 the Company's
Employee Stock Purchase Plan to increase from 1,500,000 to 2,000,000 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, 2001.
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
1, 2000 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, 2000 accompanies this Notice of Meeting.
By Order of the Board of Directors,
William F. Sorin,
Secretary
August 3, 2000
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.
<PAGE>
COMVERSE TECHNOLOGY, INC.
170 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
------------------
PROXY STATEMENT
-----------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 2000
------------------
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
SEPTEMBER 15, 2000 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, electronic mail, 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 1,
2000 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 [158,798,616 as of
July 17, 2000)] 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 first
being mailed on or about August 3, 2000 to shareholders of record on the Record
Date.
2
<PAGE>
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table identifies and sets forth certain information
concerning the beneficial ownership of Common Stock 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>
FMR Corporation
82 Devonshire Street
Boston, MA 02109 Shareholder 18,650,178 (3) 11.7%
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 Shareholder 17,347,064 (3) 10.9%
AIM Management Group, Inc.
1315 Peachtree Street, N.E.
Atlanta, GA 30309 Shareholder 10,993,252 (3) 6.9%
Kobi Alexander(a)(b) President, Chairman of the Board,
Chief Executive Officer and Director 2,694,996 1.7%
Francis E. Girard Chief Executive Officer - Comverse
Network Systems Division and Director 484,768 *
Itsik Danziger President and Chief Operating Officer -
Comverse Network Systems Division
and Director 41,464 *
Dan Bodner President and Chief Executive Officer -
Comverse Infosys Division 74,722 *
David Kreinberg Vice President of Finance and
Chief Financial Officer 26,870 *
Zvi Alexander Director 32,000 *
John H. Friedman(b)(c)(d) Director 37,000 *
Sam Oolie(a)(b)(c)(d) Director 21,000 *
William F. Sorin(a)(d) Secretary and Director 7,501 *
Shaula A. Yemini, Ph.D.(c) Director 34,200 *
All directors and executive
officers as a group (10 persons) 3,454,521 2.1%
</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.
3
<PAGE>
(1) Includes outstanding shares and shares issuable upon the exercise of stock
options that are exercisable at or within 60 days after July 17, 2000.
Does not include shares issuable upon the exercise of stock options that
are not exercisable until more than 60 days after July 17, 2000. The
shares subject to stock options held by the individuals identified above
as of July 17, 2000 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 17, 2000 July 17, 2000
----------------------- ----------------------
<S> <C> <C>
Kobi Alexander 2,682,366 2,055,000
Francis E. Girard 380,500 341,996
Itsik Danziger 41,250 497,500
Dan Bodner 52,502 50,000
David Kreinberg 13,332 153,750
Zvi Alexander 23,000 27,000
John H. Friedman 37,000 27,000
Sam Oolie 21,000 27,000
William F. Sorin 7,501 166,877
Shaula A. Yemini, Ph.D. 25,200 27,000
All directors and executive
officers as a group 3,283,651 3,373,123
</TABLE>
(2) Based on 158,798,616 shares of Common Stock issued and outstanding on July
17, 2000, 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 1999.
BACKGROUND OF NOMINEES AND EXECUTIVE OFFICERS
Kobi Alexander. Mr. Alexander, age 48, 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. Mr. Alexander is also a director of
Ulticom, Inc.
Francis E. Girard. Mr. Girard, age 61, has served as Chief Executive
Officer of the 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
4
<PAGE>
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 51, 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.
Dan Bodner. Mr. Bodner, age 41, has served as Chief Executive Officer
of the Comverse Infosys Division ("Comverse Infosys") since December 1999. Mr.
Bodner has been employed by the Company since 1987 in a variety of executive and
managerial capacities, including President of Comverse Infosys and of various
subsidiaries in the Infosys Division. From 1986 to 1987, Mr. Bodner was employed
as Director of Real-Time Software Development for Contahal Ltd., a subsidiary of
Tadiran Ltd. From 1981 through 1985, Mr. Bodner served in the Israeli military.
Mr. Bodner received a B.Sc., cum laude, in Electrical Engineering from the
Technion, Israel Institute of Technology, in 1981 and an M.Sc., cum laude, in
Electrical Engineering from Tel Aviv University in 1987.
David Kreinberg. Mr. Kreinberg, age 35, 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. Mr. Kreinberg is also a director of Ulticom, Inc.
Zvi Alexander. Mr. Alexander, age 78, has been a director of the
Company since August 1989. Mr. Alexander has been actively engaged in the energy
industry for more than 35 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 47, has been a director of the
Company since June 1994. He is the Managing Director of Easton Capital Corp., 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
5
<PAGE>
Yale Law School. He is a director of Clipserver.com PLC, a media monitoring
company.
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 NCT Group, formerly 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 51, 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. Mr. Sorin is also a director of Ulticom, Inc.
Shaula A. Yemini, Ph.D. Dr. Yemini, age 52, 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 (the "Remuneration 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, 2000, there were six meetings of
the Board of Directors of the Company, one meeting (and one written action in
lieu of meeting) of the Remuneration Committee, and one meeting of the Audit
6
<PAGE>
Committee. Each member of the Board of Directors attended at least 75% of the
meetings of the Board of Directors and of each Committee of which he was a
member during the year.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table presents summary information regarding the
compensation paid or accrued by the Company for services rendered during the
fiscal year ended December 31, 1997, the one month transition period ended
January 31, 1998, and the fiscal years ended January 31, 1999 and 2000 by
certain of its executive officers:
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(3)(4)
------------------------------- ------ -------- ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
Kobi Alexander Jan. 2000 $ 642,000 $ 4,682,178 630,000 $ 1,120,867
President, Chief Executive Jan. 1999 $ 350,300 $ 3,446,393 750,000 $ 431,128
Officer and Chairman of Jan. 1998 $ 29,192 - 1,500,000 $ 15,771
the Board of Directors Dec. 1997 $ 370,458 $ 1,344,150 450,000 $ 249,661
Carmel Vernia(5) Jan. 2000 $ 159,043 - - $ 37,116
Chief Operating Officer; Jan. 1999 $ 158,248 $ 170,000 - $ 37,699
Chief Executive Officer, Jan. 1998 $ 12,356 - 187,500 $ 2,985
Comverse Infosys Dec. 1997 $ 150,162 $ 150,000 105,000 $ 36,048
Francis E. Girard(6) Jan. 2000 $ 385,008 $ 125,000 - $ 26,000
Chief Executive Officer, Jan. 1999 $ 385,008 $ 286,233 - $ 26,000
Comverse Network Systems Jan. 1998 $ 32,083 - 450,000 $ 2,000
Dec.1997(7) $ 330,007 $ 291,250 - $ 24,000
Itsik Danziger Jan. 2000 $ 166,237 $ 379,500 160,000 $ 38,872
Chief Operating Officer, Jan. 1999 $ 151,101 $ 286,233 150,000 $ 36,147
Comverse Network Systems Jan. 1998 $ 10,919 - 375,000 $ 2,181
Dec. 1997 $ 132,701 $ 167,928 150,000 $ 32,082
David Kreinberg Jan. 2000 $ 160,000 $ 100,000 75,000 $ 10,080
Vice President of Finance
and Chief Financial Officer(8)
Igal Nissim Jan. 1999 $ 105,976 $ 36,775 - $ 25,237
Chief Financial Officer(9) Jan. 1998 $ 8,333 - 75,000 $ 1,972
Dec. 1997 $ 101,272 $ 27,800 15,000 $ 24,277
</TABLE>
-------------------
/footnotes on next page /
8
<PAGE>
/footnotes from previous 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."
(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, $277,779, $250,441, $7,773 and $211,750 accrued
in the years ended January 31, 2000 and 1999, the month of January 1998
and the year ended December 31, 1997, respectively, for payments due on
termination of employment pursuant to the terms of his employment
agreements with the Company and $825,000 and $125,000 paid in the years
ended January 31, 2000 and 1999, respectively, 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 policies.
(5) Mr. Vernia served as Chief Operating Officer of the Company during the
periods indicated and as Chief Executive Officer of Comverse Infosys, Inc.
through December 1999. Mr. Vernia resigned from the Company effective
April 2000 upon his appointment to the position of Chief Scientist of the
State of Israel.
(6) Mr. Girard began serving as Chief Executive Officer of Comverse Network
Systems, effective January 1998. Previously, from May 1996, Mr. Girard
served as President and Chief Executive Officer of Boston.
(7) Boston had a January 31 fiscal year. Accordingly, the information
presented for Mr. Girard is for the 11 months ended December 31, 1997.
(8) Mr. Kreinberg was promoted to Chief Financial Officer of the Company
effective May 1999.
(9) Mr. Nissim served as Chief Financial Officer of the Company until May
1999. He currently serves as Chief Financial Officer of Comverse Infosys,
Inc.
9
<PAGE>
The following table sets forth information concerning options granted
during the year ended January 31, 2000 to the executive officers of the Company
identified above 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 630,000 7.3% $46.50 October 18, 2009 $ 18,423,468 $ 46,688,685
Carmel Vernia - - - - - -
Francis E. Girard - - - - - -
Itsik Danziger 160,000 1.8% $46.50 October 18, 2009 $ 4,678,976 $ 11,857,444
David Kreinberg 75,000 0.9% $46.50 October 18, 2009 $ 2,193,270 $ 5,558,177
------------------
</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.
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, 2000, value realized, number of unexercised options held at
January 31, 2000, 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.
10
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATE OPTION EXERCISES IN THE YEAR ENDED JANUARY 31, 2000 AND
VALUE OF UNEXERCISED OPTIONS AT JANUARY 31, 2000
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS HELD IN-THE-MONEY OPTIONS
ON VALUE AT JANUARY 31, 2000 HELD AT JANUARY 31, 2000
------------------- ------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C>
Kobi Alexander 445,380 $ 16,346,799 2,844,866 2,242,500 $ 184,353,886 $ 114,114,191
Carmel Vernia 582,500 $ 32,333,123 235,000 311,250 $ 14,034,267 $ 18,662,415
Francis E. Girard 231,826 $ 7,720,995 400,500 439,496 $ 24,172,880 $ 26,995,855
Itsik Danziger 183,750 $ 8,021,619 146,250 538,750 $ 8,911,481 $ 26,967,572
David Kreinberg 53,880 $ 1,891,776 26,952 170,832 $ 1,653,126 $ 7,770,972
</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 extending through January
31, 2004 at a current base annual salary of $630,000. Pursuant to the agreement,
Mr. Alexander received bonus compensation of $4,682,178 for services rendered
during the year ended January 31, 2000 and is entitled to receive bonus
compensation in succeeding years 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,
determined without regard to the bonus and any acquisition-related expenses and
charges. 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.
Following termination or expiration of the term of employment, Mr.
Alexander is entitled to receive a severance payment equal to $112,736 times the
number of years from the beginning of his employment with the Company, the
amount of which payment increases at the rate of 10% per annum compounded for
each year of employment following December 31, 2000, plus continued fringe
benefits for three years and insurance coverage for up to 10 years. If Mr.
Alexander's employment is terminated by the Company without "cause", or by Mr.
Alexander for "good reason" (as those terms are defined in the agreement), he is
entitled to additional payments attributable to the salary, bonus and the
monetary equivalence of other benefits which he otherwise would have expected to
receive for a period of three years or the balance of the agreement term,
whichever is longer. If such termination occurs following a change in control of
the Company, the required additional payment is three times Mr. Alexander's
annual salary and bonus, and he is additionally entitled to the accelerated
vesting of all retirement benefits and stock options, and payments sufficient to
reimburse any associated excise tax liability and income tax resulting from such
reimbursement. The agreements also provide for Mr. Alexander to receive options
entitling him to purchase 7-1/2% of the equity of Comverse's subsidiaries, other
than Comverse Network Systems, Inc., at prices equal to the higher of the book
value of the underlying shares at the date of option grant or the fair market
value of such shares at that date determined on the basis of an arms'-length
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<PAGE>
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, as well
as any options granted Mr. Alexander under the Company's stock option or stock
incentive plans, become fully vested, exercisable and nonforfeitable in the
event of a change in control of the Company, the termination of Mr. Alexander's
employment by the Company without cause or by Mr. Alexander for good reason, or
Mr. Alexander's death or disability.
Mr. Alexander serves as Chairman of the Board of CNSL at a current
basic compensation 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. 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 compensation 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. 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 61,000 Israeli shekels, subject to Israeli statutory cost
of living adjustment (resulting in a current annual salary equal to
approximately $179,000) 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.
Mr. Kreinberg is employed as Vice President of Finance and Chief
Financial Officer of the Company under an agreement providing for an annual
salary of $180,000 and an annual bonus which is based on goals for Mr.
Kreinberg. Mr. Kreinberg 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
12
<PAGE>
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 27,000 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 5,400 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.
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,
Dr. Shaula A. Yemini, President and Chief Executive Officer of SMARTS and Mr.
Alexander's sister, is a director of the Company and a member of the
Remuneration Committee.
OPTIONS TO PURCHASE SUBSIDIARY SHARES
The President and Chief Executive Officer of the Company holds
options to purchase shares of certain subsidiaries of the Company as set forth
under "Employment Agreements," above. In addition, other employees, including
certain executive officers of the Company, have been granted options to acquire
shares of certain subsidiaries and affiliates of the Company, other than
Comverse Network Systems. Such option awards are not tied to the performance of
the respective subsidiaries or affiliates, but are intended to incentivize
employees in the units in which they are employed and for which they have direct
responsibility. The amount of shares issuable upon exercise of such options
varies among the subsidiaries and affiliates affected, not exceeding in any
instance 20% of the shares outstanding assuming exercise in full. These options
have terms ranging up to 15 years and become exercisable and vest over various
periods ranging up to seven years from the date of initial grant. The exercise
price of each option is equal to the higher of the book value of the underlying
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<PAGE>
shares at the date of grant or the fair market value of such shares at that date
determined by the Board of Directors of the applicable subsidiary or by a
committee of the Board of Directors of the Company. During the year ended
January 31, 2000, options to purchase 1,227,263 and 32,727 shares of the
Company's Ulticom, Inc. subsidiary were exercised by Messrs. Alexander and
Kreinberg, respectively, at an exercise price of $0.622 per share.
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 and affiliates 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 $316,294 for legal services rendered
to the Company during the year ended January 31, 2000.
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<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 increments over a number of 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 and affiliates, as a means of providing
incentives directly tied to the performance of those business units with which
the recipients are directly involved. (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 and affiliates 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 the year ended January 31, 2000, the Company
granted option to purchase an aggregate of 8,463,306 shares of Common Stock,
including options to purchase an aggregate of 865,000 shares awarded to
executive officers of the Company.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), places a limit of $1,000,000 on the amount of compensation that may be
deducted by the Company in any year with respect to each of the Company's five
most highly paid executive officers. Certain performance-based compensation that
has been approved by stockholders is not subject to the deduction limit. To
maintain flexibility in compensating executive officers in a manner designed to
promote varying corporate goals, the Compensation Committee has not adopted a
policy that all compensation must be deductible.
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<PAGE>
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 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 1995 through the
year ended January 31, 2000:
Compounded Annual Rate of Growth
December 1995 Through January 31, 2000
--------------------------------------
Revenues 37%
Net Income 187%
Earnings Per Share (Diluted) 162%
Stockholders' Equity 41%
Assets 44%
The Company's achievements under Mr. Alexander`s leadership were acknowledged
during the past year in the Company's rankings at number 6 of the "Barron's 500"
list, number 11 of the "Business Week 50" and number 16 of the "Infotech 100" in
the 1999 Information Technology Annual Report of Business Week, and its addition
to the "NASDAQ 100" company index. Mr. Alexander was ranked at number 12 by
Chief Executive magazine among chief executive officers of the 1,000 largest
United States corporations based on its criteria for creation of wealth for
shareholders.
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,
1995 and the reinvestment of any dividends.
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Total Return To Shareholder's
(Dividends reinvested monthly)
ANNUAL RETURN PERCENTAGE
Years Ending
Company / Index Jan96 Jan97 Jan98 Jan99 Jan00
----------------------------------------------------------------------------
COMVERSE TECHNOLOGY INC 56.56 132.27 -25.14 149.35 156.03
S&P 500 COMP-LTD 38.67 26.34 26.91 32.49 10.35
TECHNOLOGY-500 48.11 54.85 20.85 87.08 38.79
INDEXED RETURNS
Base Years Ending
Period
Company / Index Jan95 Jan96 Jan97 Jan98 Jan99 Jan00
------------------------------------------------------------------------------
COMVERSE TECHNOLOGY INC 100 156.56 363.64 272.22 678.79 1737.89
S&P 500 COMP-LTD 100 138.67 175.19 222.33 294.57 325.05
TECHNOLOGY-500 100 148.11 229.34 277.15 518.50 719.63
17
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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.
<TABLE>
<S> <C> <C> <C>
Kobi Alexander Zvi Alexander Itsik Danziger John H. Friedman
Francis E. Girard Sam Oolie William F. Sorin Shaula A. Yemini Ph.D.
</TABLE>
The election of directors will be made by plurality of votes cast at
the Annual Meeting, with the eight nominees receiving the greatest number of
votes being elected. THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION AT THE
ANNUAL MEETING OF THE EIGHT 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 300,000,000 to 600,000,000
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 six hundred two million, five hundred thousand
(602,500,000) shares, of which six hundred million (600,000,000)
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."
The Board of Directors believes that it is in the best interest of
the Company and its shareholders to have available 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
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<PAGE>
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 two-for-one stock split (in the form of a 100% stock
dividend) in April 2000, 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 would increase the
ability of the Company to effect future stock dividends in meaningful amounts.
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 2000 STOCK INCENTIVE COMPENSATION PLAN
INTRODUCTION
The Board of Directors has approved the 2000 Stock Incentive
Compensation Plan (the "Incentive Plan") and has recommended that the Incentive
Plan be submitted to the shareholders for adoption at the Annual Meeting. 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 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 June 30, 2000, only 213,834 shares of
Common Stock are available for the grant of options under the Company's existing
stock option plans.
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
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<PAGE>
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 may issue an aggregate of not more than 9,000,000 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 any of its subsidiaries or affiliates 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, 2000, the Company estimates that there
were approximately 5,100 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 27,000 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
("Nonqualified Options", and, together with ISOs, "Options"), stock appreciation
rights (which may or may not 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.
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
20
<PAGE>
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 17, 2000, the closing price of
Common Stock as reported on the NASDAQ National Market System was $100.125 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. In certain instances, the Remuneration Committee may
provide for a lower exercise price of Nonqualified Options or appreciation base
of SARs. For Awards covering up to five percent of the total shares reserved for
issuance under the Incentive Plan ("Unrestricted Awards"), the Remuneration
Committee may establish such exercise price or appreciation base in its
discretion. For other awards, the exercise price or appreciation base may be set
at a discount of up to 15% from Fair Market Value at the date of grant if the
discount is expressly granted in lieu of a reasonable amount of salary or cash
bonus. 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. With the exception of Unrestricted Awards, the
applicable deferral period or term of restrictions shall be at least three years
(or one year if the Award is performance based), with acceleration permitted in
limited circumstances.
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<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 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
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Committee may authorize current or deferred payments (payable in cash or Common
Stock or a combination thereof) or appropriate adjustments to the outstanding
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 in 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 -
Employment 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 Awards 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 that it changes the class of eligible employees, modifies the Individual
Limit or the categories of Section 162(m) performance goals described herein, or
otherwise constitutes a material amendment of the plan, and provided that no
amendment shall impair any rights under any Award then outstanding without the
Plan Participant's consent. The exercise prices of outstanding Options granted
under the Incentive Plan may be reduced by action of the Remuneration Committee
with prior approval by the shareholders of the Company, and repricing may be
authorized by the committee without the requirement of such approval for
Unrestricted Awards and in occasional circumstances (i) to fulfill a legitimate
corporate purpose, such as retention of a key employee, (ii) to maintain option
value in the face of extreme circumstances beyond management's control and (iii)
if the repricing is limited to no more than 5% of the shares authorized for
grant under the Incentive Plan. 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 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
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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 generally be
entitled to a deduction at the same time and in the same amount as the Plan
Participant recognizes ordinary income in connection with the exercise of a
Nonqualified Option (subject to the satisfaction of Section 162(m) of the Code,
in the case of Options subject thereto, and Section 280G of the Code). 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 shares on the
exercise date or generally, 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). Section 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 with an exercise
price of not less than Fair Market Value on the grant date 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 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.
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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 with an exercise price or appreciation base, as the case may be, of not
less than Fair Market Value on the grant date 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).
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 Internal Revenue 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 generally 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 and to Section 280G of the Code). 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 (a
"Section 83(b) Election") 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 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 1,500,000 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
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the number of Shares of Common Stock reserved for purchase thereunder to a total
of 2,000,000 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.
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. Any employee who, after purchasing Common Stock under the Stock Purchase
Plan, would own 5% or more of the total combined voting power or value of all
classes of Common Stock of the Company or any Subsidiary is not eligible to
participate. Ownership of stock is determined in accordance with the provisions
of Section 424(d) of the Code. In addition, an employee is not permitted in any
calendar year to purchase Common Stock under the Stock Purchase Plan with a fair
market value of more than $25,000.
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 2,000,000 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 30,2000, 2000, an aggregate of 702,852 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, 2000,
approximately 5,100 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.
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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.
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 purchase price of
the shares. 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
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compensation paid to specified officers in any one year 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, 2001. 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.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The Company currently expects to hold its next Annual Meeting of
Shareholders on or about September 15, 2001. Any shareholder who wishes to make
a proposal for consideration at that meeting and wishes to have that proposal
included in the proxy statement for the meeting must submit the proposal to the
Secretary of the Company no later than April 5, 2001. Such a proposal will be
included in next year's proxy statement to the extent required by the
regulations of the Securities and Exchange Commission. A shareholder who wishes
to make a proposal at the 2001 Annual Meeting, but does not wish to have the
proposal included in the proxy statement for that meeting, must give notice of
the proposal to the Secretary of the Company no later than June 19, 2001 in
order for the notice to be considered timely under Rule 14a-4(c) of the
Securities and Exchange Commission.
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
August 3, 2000
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Annex I
2000 Stock Incentive Compensation Plan
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COMVERSE TECHNOLOGY, INC.
2000 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 (in 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 shareholders, 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.
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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.
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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. 2000 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.
2.29 "Unrestricted Award" means an Award or series of Awards representing
in the aggregate up to 5% of the total number of shares of Common
Stock available for Awards under the Plan and so designated by the
Committee.
3. Eligibility
3.1 Any Employee is eligible to receive an Award.
3.2 Subject to adjustment as provided in Section 10, each Director shall
receive in each fiscal year of the Company, commencing with the year
ending January 31, 2001, Options to purchase 27,000 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. Subject to adjustment as provided
in Section 10,such Options shall vest and become non-forfeitable
incrementally, to the extent of 5,400 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, options granted thereunder to
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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. An Award that is subject
to the achievement of a Performance Goal shall, for the purposes of
the Plan, be referred to as a "Performance Based Award." 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
9,000,000 shares.
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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
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 shareholder 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.
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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. With the exception of
Unrestricted Awards, the Deferral Period shall be at least one year
for a Performance Based Deferred Stock Award and at least three years
for all other Deferred Stock Awards. 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, other than a Performance Based Award, only in
limited circumstances, such as death, disability or retirement of the
Holder or a corporate disposition, or where the Deferred Stock Award
is made expressly in lieu of salary or cash bonus payments to which
the Holder would otherwise be entitled.
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. With the exception of
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Unrestricted Awards, the Restriction Period shall be at least one
year for a Performance Based Restricted Stock Award and at least
three years for all other Restricted Stock Awards. 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, other than a Performance Based Restricted Stock
Award, only in limited circumstances, such as death, disability or
retirement of the Holder or a corporate disposition, or where the
Restricted Stock Award is made expressly in lieu of salary or cash
bonus payments to which the Holder would otherwise be entitled.
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, provided that, with the
exception of Unrestricted Awards, the option price may be set at a
discount from the Fair Market Value of a share of Common Stock on the
date of grant only if the discount is expressly granted in lieu of a
reasonable amount of salary or bonus and the discount shall not
exceed 15% of such Fair Market Value.
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.
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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.
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),
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 or disability, 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
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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
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 shareholders 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.
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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
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 September 15, 2000. 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 shareholder 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 which constitutes a material amendment of the
Plan or 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
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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 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.
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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 Except as hereinafter provided, the Committee may amend any
outstanding Awards, other than Performance Based 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. The option prices of outstanding Options may be
reduced by action of the Committee with prior approval by the
shareholders of the Company, and repricing may be authorized by the
Committee without the requirement of such approval for Unrestricted
Awards and in occasional circumstances (i) to fulfill a legitimate
corporate purpose, such as retention of a key employee, (ii) to
maintain option value in the face of extreme circumstances beyond
management's control and (iii) if the repricing is limited to no more
than 5% of the shares authorized for grant under the Plan.
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Annex II
1997 Employee Stock Purchase Plan
(As Amended)
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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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(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 2,000,000 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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(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.
(d) A participant's Authorization shall immediately terminate in the
event that the participant's employer shall no longer qualify as a Subsidiary
Corporation within the meaning of Paragraph 2(f) of the Plan. Any payroll
deductions credited to a participant's account after such change in the
participant's employer's status shall be refunded to the participant with
interest.
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:
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(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
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
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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
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.
(e) Upon termination of a participant's employment due to the
participant's employer failing to meet the definition of Subsidiary Corporation,
as set forth in Paragraph 2(f) of the Plan, the Committee shall, with respect to
participant's affected by the change in their employer's status as a Subsidiary
Corporation, provide for any of the following:
(i) refund to the participant the payroll deductions
credited to his or her account, with interest, as determined by the
Committee; or,
(ii) if such change in the participant's employer's status
as a Subsidiary Corporation occurs within ninety (90) days of an
Offering Termination Date, the Committee may permit the participant
to exercise his or her Option on the Offering Termination Date; or,
(iii) if such change in the participant's employer's status
as a Subsidiary Corporation does not occur within ninety (90) days of
the Offering Termination Date, the Committee may provide for an
earlier Offering Termination Date with respect to participants
affected by such change in their employer's status.
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.
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12. Stock.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 2,000,000 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 2,000,000, 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.
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
48
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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).
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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 shall thereafter be applicable, as nearly as reasonably
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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.
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[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, September 15, 2000, 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 PROPOSALS 2, 3, 4 AND 5
AND FOR THE ELECTION OF EACH OF THE NOMINEES IDENTIFIED IN PROPOSAL 1.
PROPOSAL NO. 1 - 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 Shaula A. Yemini
PROPOSAL NO. 2 - AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL NO. 3 - ADOPTION OF 2000 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 EIGHT NOMINEES IDENTIFIED
ABOVE AND "FOR" PROPOSALS 2, 3, 4 AND 5.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, 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: _________________, 2000
----------------------------
Signature
----------------------------
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
2
