10-K405/A 1 0001.txt ================================================================================ 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: [ ] ================================================================================ -i- 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- 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. NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- 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 --------------- (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- 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- 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- 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- 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:

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) --------------------------- ------ -------- ------ ------ ------------ 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 -------------------

/footnotes on next page / -5- /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- 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 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% -------------------- -------- ------------- -------- ----------------- ----- ------ 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 ------------------

*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. -7- 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

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 ---- -------- -------- ----------- ------------- ----------- ------------- 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

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- 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. -9- 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. -10- 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.

NUMBER OF PERCENT SHARES OF TOTAL BENEFICIALLY OUTSTANDING BENEFICIAL OWNER RELATIONSHIP WITH THE COMPANY OWNED SHARES(1) ---------------- ----------------------------- --------- ------ 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%

----------------- * Less than 1%. /footnotes on next page/ -11- /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. -12- 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. -13- 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 -14-