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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Fiscal Year ended January 31, 2000
Commission File Number 0-15502
COMVERSE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3238402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
170 CROSSWAYS PARK DRIVE
WOODBURY, NY 11797
(Address of principal executive offices)
Registrant's telephone number, including area code: 516-677-7200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Not applicable Not applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: [X] No: [ ]
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-i-
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant on May 16, 2000 was approximately $12,568,000,000 The closing
price of the registrant's common stock on the NASDAQ National Market System on
May 16, 2000 was $81.00 per share.
There were 155,574,242 shares of the registrant's common stock
outstanding on May 16, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TRILOGUE, Access NP and Signalware are registered trademarks, and
TRILOGUE INfinity, AUDIODISK, Ultra, Ulticom, Nexworx, Ultimate Call Control,
Programmable Network and Softservice are trademarks, of the Company.
-ii-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the
directors and executive officers of the Company. Each director has been elected
to serve until the next annual meeting of shareholders and each executive
officer serves at the discretion of the Board of Directors.
<TABLE>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Kobi Alexander(1)(2) 48 President, Chairman of the Board of
Directors, Chief Executive Officer
and Director
Francis E. Girard 61 Chief Executive Officer of Comverse
Network Systems Division and Director
Itsik Danziger 51 President and Chief Operating Officer of
Comverse Network Systems Division and Director
David Kreinberg 35 Vice President of Finance and Chief Financial
Officer
Dan Bodner 41 President and Chief Executive Officer
of Comverse Infosys, Inc.
Zvi Alexander 78 Director
John H. Friedman(2)(3)(4) 47 Director
Sam Oolie(1)(2)(3)(4) 63 Director
William F. Sorin(1)(4) 51 Secretary and Director
Shaula A. Yemini, Ph.D.(3) 52 Director
</TABLE>
---------------
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit Committee of the Board of Directors.
(3) Member of Remuneration and Stock Option Committee of the Board of
Directors.
(4) Member of Corporate Planning and Structure Committee of the Board of
Directors.
-1-
<PAGE>
BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS
Kobi Alexander. Mr. Alexander, a founder of the Company, has served as
Chairman of the Board of Directors of the Company since September 1986, as
President and Chief Executive Officer since April 1987 and as a director of the
Company since its formation in October 1984. Mr. Alexander also served as
Co-Managing Director of the Company's wholly-owned Israeli subsidiary, Comverse
Network Systems Ltd. ("CNSL") from its formation in 1982 until October 1986.
From October 1984 to September 1986, Mr. Alexander served as Co-Chairman and
Co-Chief Executive Officer of the Company. Prior to the formation of CNSL, in
1980 and 1981, Mr. Alexander served as an independent financial and business
consultant to a number of multinational corporations. Between 1978 and 1980, Mr.
Alexander worked in the Corporate Finance Department of Shearson Loeb Rhoades
(currently Salomon Smith Barney, Inc.). Mr. Alexander received a B.A., magna cum
laude, in Economics from the Hebrew University of Jerusalem in 1977, and an
M.B.A. in Finance from New York University in 1980. He has served as the
Chairman of the High-Tech Research and Development Section of the Israeli
Association of Industrialists.
Francis E. Girard. Mr. Girard has served as Chief Executive Officer of
Comverse Network Systems Division ("Comverse Network Systems") and a director of
the Company since January 1998. From May 1996 to January 1998, he served as
President, Chief Executive Officer and a director of Boston Technology, Inc.
("Boston"), a company that was merged into the Company in January 1998. Prior to
that, he served as Boston's Executive Vice President of World Sales. He joined
Boston in January 1989 as Senior Vice President of Sales and assumed the
position of Senior Vice President and General Manager of North American Markets
in January 1994. Previously, he was Vice President of Sales, Marketing and
Support of NEC Information Systems, Inc., a U.S. distributor of NEC computers
and peripherals, from 1985 to 1989. Mr. Girard has also served as Director of
Marketing for the National Independent Sales Organization and Reseller Marketing
Programs at Wang Laboratories, Inc. from 1983 to 1985, in addition to several
other sales and marketing management positions. Mr. Girard holds a B.S. degree
in Business from Merrimack College.
Itsik Danziger. Mr. Danziger has served as Chief Operating Officer of
Comverse Network Systems since January 1998 and additionally as President since
May 1999 and as a director of the Company since November 1998. From 1984, Mr.
Danziger served in various management positions with the Company, including Vice
President, Manager of the Network Systems Division and Manager of research and
development. Prior to joining the Company, he was employed for 10 years by
Tadiran Ltd. in a variety of technical and managerial capacities. Mr. Danziger
received a B.Sc. and M.Sc., cum laude, in Electrical Engineering from the
Technion, Israel Institute of Technology, in 1974 and 1984, respectively.
David Kreinberg. Mr. Kreinberg has served as Vice President of Finance
and Chief Financial Officer of the Company since May 1999. Previously, Mr.
Kreinberg served as Vice President of Finance and Treasurer from April 1996 and
as Vice President of Financial Planning from April 1994. Mr. Kreinberg is a
Certified Public Accountant, and prior to joining the Company he served as a
senior manager at Deloitte & Touche LLP. Mr. Kreinberg received a B.S., summa
cum laude, in Accounting from Yeshiva University and an M.B.A. in Finance and
International Business from Columbia Business School in 1986 and 1990,
respectively.
-2-
<PAGE>
Dan Bodner. Mr. Bodner has been employed by the Company in various
capacities since 1987 and currently serves as President and CEO of Comverse
Infosys, Inc., a subsidiary of the Company. 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.
Zvi Alexander. Mr. Alexander has been a director of the Company since
August 1989. Mr. Alexander has been actively engaged in the energy industry for
more than 35 years. He served as Chief Executive Officer of the Israeli National
Oil Company and its successor from 1966 through 1976, and subsequently engaged
in activities in the energy industry as a consultant and independent
entrepreneur. Mr. Alexander is currently Chairman of A&T Exploration Company
Ltd. Zvi Alexander is the father of Kobi Alexander and Shaula A. Yemini.
John H. Friedman. Mr. Friedman has been a director of the Company
since June 1994. He is Managing Director of Easton Capital Corporation, a
private investment firm founded by Mr. Friedman in 1991, and of Easton Hunt
Capital Partners, LP, a venture capital fund he helped found in 1999. From 1989
to 1991, Mr. Friedman was a Managing Director of Security Pacific Capital
Investors. Prior to joining that firm, he was a Managing Director of E. M.
Warburg, Pincus & Co., Inc., where he was employed from 1981 to 1989. From 1978
to 1980, Mr. Friedman practiced law with the firm of Sullivan & Cromwell in New
York City. Mr. Friedman received a B.A., magna cum laude, from Yale University
and a J.D. from Yale Law School. He is a director of Clipserver.com PLC, a media
monitoring company.
Sam Oolie. Mr. Oolie has been a director of the Company since May
1986. He has been Chairman and Chief Executive Officer of NoFire Technologies,
Inc., a manufacturer of high performance fire retardant products, since August
1995. He has also been Chairman of Oolie Enterprises, an investment company,
since July 1985. He also has served as a director of CFC Associates, a venture
capital firm, since January 1984. He was Chairman of The Nostalgia Network, a
cable television network, from April 1987 to January 1990 and was Vice Chairman
and director of American Mobile Communications, Inc., a cellular telephone
company, from February 1987 to July 1989. From February 1962 to July 1985, Mr.
Oolie was Chairman, Chief Executive Officer and a director of Food Concepts,
Inc., a provider of food services to institutions and hospitals. Mr. Oolie also
serves as a director of 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 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.
-3-
<PAGE>
Shaula A. Yemini, Ph.D. Dr. Yemini has served as a director of the
Company since August 1997. She is President and Chief Executive Officer of
Systems Management Arts Incorporated ("SMARTS"), a developer of automated
network problem diagnosis software. Prior to the formation of SMARTS in 1993,
Dr. Yemini held various research and managerial positions at International
Business Machines Corporation ("IBM") since June 1982, most recently serving as
Senior Manager at IBM's T. J. Watson Center, where she built and managed the
Distributed Systems Software Technology Department. Prior to that, she taught
computer science at the Courant Institute of New York University. Dr. Yemini
received a B.Sc. in Mathematics and Physics in 1972 and an M.Sc. in Applied
Mathematics, cum laude, in 1974, both from the Hebrew University in Jerusalem,
and a Ph.D. in Computer Science from the University of California at Los Angeles
in 1980. Dr. Yemini is the sister of Kobi Alexander and the daughter of Zvi
Alexander.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has four standing committees. The Executive
Committee is empowered to exercise the full authority of the Board of Directors
in circumstances when convening the full board is not practicable. The Audit
Committee is responsible for reviewing audit procedures and supervising the
relationship between the Company and its independent auditors. The Remuneration
and Stock Option Committee is responsible for approving compensation
arrangements for senior management of the Company and administering the
Company's stock option plans. The Corporate Planning and Structure Committee
reviews and makes recommendations to the board concerning issues of corporate
structure and planning, including the formation and capitalization of
subsidiaries of the Company, the structure of acquisition transactions, the
terms of any stock options and other compensation arrangements in respect of
subsidiaries of the Company, situations that might involve conflicts of interest
relative to the Company and its subsidiaries and the terms of significant
transactions between the Company and its subsidiaries.
-4-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The following table presents summary information regarding the
compensation paid or accrued by the Company for services rendered during the
fiscal 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:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ STOCK
NAME AND PERIOD OPTION ALL OTHER
PRINCIPAL POSITION ENDING SALARY(1) BONUS(2) GRANTS(3) COMPENSATION(4)
--------------------------- ------ -------- ------ ------ ------------
<S> <C> <C> <C> <C> <C>
Kobi Alexander Jan. 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 $ 288,431 160,000 $ 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 /
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<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 "Security Ownership of Certain Beneficial Owners and Management -
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.
-6-
<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:
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
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.
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<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>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD IN-THE-MONEY OPTIONS
ACQUIRED AT JANUARY 31, 2000 HELD AT JANUARY 31, 2000
ON VALUE ------------------- ------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <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 "Security Ownership of Certain Beneficial Owners and Management -
Options to Purchase Subsidiary Shares" for information regarding the grant to
certain executive officers of options to purchase shares of subsidiaries of the
Company.
EMPLOYMENT AGREEMENTS
Mr. Alexander serves as Chairman of the Board, President and Chief
Executive Officer of the Company under an agreement extending through 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
-8-
<PAGE>
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
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 $176,000) 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.
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<PAGE>
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company or otherwise
compensated by the Company for services rendered in another capacity, and whose
position on the Board of Directors is not attributable to any contract between
the Company and such director or any other entity with which such director is
affiliated, receives compensation in the amount of $2,750 for each meeting of
the Board of Directors and of certain committees of the Board of Directors
attended by him during the year. Each of such eligible directors is also
entitled to receive an annual stock option grant under the Company's Stock
Option Plans entitling him to purchase 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.
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 member of the Remuneration and Stock Option Committee
of the Board of Directors of the Company.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information concerning the
beneficial ownership of shares of common stock on the part of the executive
officers and directors of the Company and all persons known by the Company to be
beneficial owners of more than five percent of the outstanding common stock as
at May 16, 2000.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES OF TOTAL
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER RELATIONSHIP WITH THE COMPANY OWNED SHARES(1)
---------------- ----------------------------- --------- ------
<S> <C> <C> <C>
FMR Corporation
82 Devonshire Street
Boston, MA 02109 Shareholder 18,650,178 (2) 12.0%
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 Shareholder 17,347,064 (2) 11.2%
AIM Management Group, Inc.
1315 Peachtree Street, N.E.
Atlanta, GA 30309 Shareholder 10,993,252 (2) 7.1%
Morgan Stanley Dean
Witter & Co.
1585 Broadway
New York, NY 10036 Shareholder 7,808,984 (2) 5.0%
Kobi Alexander President, Chairman of the Board,
Chief Executive Officer and Director 3,166,938 (3) 2.0%
Francis E. Girard Chief Executive Officer, Comverse
Network Systems and Director 686,328 (4) *
Itsik Danziger Chief Operating Officer, Comverse
Network Systems and Director 107,714 (5) *
David Kreinberg Vice President of Finance and
Chief Financial Officer 41,510 (6) *
Zvi Alexander Director 42,000 (7)(8) *
John H. Friedman Director 43,000 (8)(9) *
Sam Oolie Director 27,000 (8)(9) *
William F. Sorin Secretary and Director 22,501 (9)(10) *
Shaula A. Yemini, Ph.D. Director 45,700 (8)(11) *
All directors and executive
officers as a group (9 persons) 4,182,691 (12) 2.6%
</TABLE>
-----------------
* Less than 1%.
/footnotes on next page/
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<PAGE>
/footnotes from previous table/
(1) Based on 155,574,242 shares of common stock issued and outstanding on May
16, 2000, excluding, except as otherwise noted, shares of common stock
issuable upon the exercise of outstanding stock options.
(2) Based on Schedule 13G filings with the Securities and Exchange Commission
reflecting data as of December 1999.
(3) Includes 2,982,366 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May16, 2000. Does not include
2,055,000 shares issuable upon the exercise of options that were not
exercisable at or within 60 days after May 16, 2000.
(4) Includes 498,000 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 16, 2000. Does not include
341,996 shares issuable upon the exercise of stock options that were not
exercisable at or within 60 days after May 16, 2000.
(5) Includes 107,500 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 16, 2000. Does not include
497,500 shares issuable upon the exercise of stock options that were not
exercisable at or within 60 days after May 16, 2000.
(6) Includes 27,332 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 16, 2000. Does not include
153,750 shares issuable upon the exercise of stock options that were not
exercisable at or within 60 days after May 16, 2000.
(7) Includes 33,000 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 16, 2000.
(8) Does not include 27,000 shares issuable upon the exercise of stock options
that were not exercisable at or within 60 days after May 16, 2000
(9) Consists solely of shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 16, 2000.
(10) Does not include 166,877 shares issuable upon the exercise of stock options
that were not exercisable at or within 60 days after May 16, 2000.
(11) Includes 35,200 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 16, 2000.
(12) Includes 3,775,899 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after May 16, 2000. Does not include
3,323,123 shares issuable upon the exercise of stock options that were not
exercisable at or within 60 days after May 16, 2000.
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<PAGE>
OPTIONS TO PURCHASE SUBSIDIARY SHARES
The Company has granted to certain key executives and other employees
options to acquire shares of certain subsidiaries, other than Comverse Network
Systems. Such options are provided to the President and Chief Executive Officer
of the Company, as set forth under "Employment Agreements" above. In addition,
the Company has granted to certain other employees of the Company options to
acquire shares of certain subsidiaries. Such option issuances are not tied to
the performance of the subsidiaries, but are intended to incentivize employees
in the units for which they have direct responsibility. The portion of the
shares of the subsidiaries upon which such options have been granted varies
among the subsidiaries affected, not exceeding in any instance 20% of the shares
outstanding assuming exercise in full. The options have terms of 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 shares at the date of grant or
the fair market value of such shares at that date determined on the basis of an
arms'-length transaction with a third party or, if no such transactions have
occurred, on a reasonable basis as determined by a committee of the Board of
Directors.
These options (and any shares received by the holders upon exercise)
provide the option holders with a potentially larger equity interest in the
respective subsidiaries than in the Company, which, under certain circumstances,
could cause the option holders' interests to conflict with those of the
Company's shareholders generally.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company paid or accrued legal fees to William F. Sorin, a director
of the Company, in the amount of $316,294 for legal services rendered to the
Company during the year ended January 31, 2000.
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<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMVERSE TECHNOLOGY, INC.
(Registrant)
By: /s/ Kobi Alexander
----------------------------------
Kobi Alexander
President, Chairman of the Board
and Chief Executive Officer
Dated: May 30, 2000
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