-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MgUk55uQE7FflIz2Wo2JQcii0lu+o43SPhZeqaCmvZUMT5izE3Ce5UfAHc6G9C/A 04aw/Bw5MW7z2ZZca7ZEWQ== 0000909518-99-000360.txt : 19990624 0000909518-99-000360.hdr.sgml : 19990624 ACCESSION NUMBER: 0000909518-99-000360 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990528 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMVERSE TECHNOLOGY INC/NY/ CENTRAL INDEX KEY: 0000803014 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 133238402 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-15502 FILM NUMBER: 99636862 BUSINESS ADDRESS: STREET 1: 170 CROSSWAYS PARK DR CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5166777200 MAIL ADDRESS: STREET 1: 170 CROSSWAYS PARK DRIVE STREET 2: 170 CROSSWAYS PARK DRIVE CITY: WOODBURY STATE: NY ZIP: 11797 10-K405/A 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 TO Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year ended January 31, 1999 Commission File Number 0-15502 COMVERSE TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) NEW YORK 13-3238402 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 170 CROSSWAYS PARK DRIVE WOODBURY, NY 11797 (Address of principal executive offices) Registrant's telephone number, including area code: 516-677-7200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Not applicable Not applicable Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.10 PAR VALUE PER SHARE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: [X] No: [ ] ================================================================================ 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 24, 1999 was approximately $4,476,186,000. The closing price of the registrant's common stock on the NASDAQ National Market System on May 24, 1999 was $64.50 per share. There were 69,852,047 shares of the registrant's common stock outstanding on May 24, 1999. DOCUMENTS INCORPORATED BY REFERENCE None. ---------------------------- TRILOGUE and Access NP are registered trademarks and TRILOGUE INfinity, AUDIODISK, ULTRA, and SignalWare are trademarks of the Company. ii 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) 47 President, Chairman of the Board of Directors, Chief Executive Officer and Director Carmel Vernia 46 Chief Operating Officer, Chief Executive Officer of Comverse Infosys Division and Director Francis E. Girard 60 Chief Executive Officer of Comverse Network Systems Division and Director Itsik Danziger 50 President and Chief Operating Officer of Comverse Network Systems Division and Director David Kreinberg 34 Vice President of Finance and Chief Financial Officer Zvi Alexander 77 Director John H. Friedman(2)(3)(4) 46 Director Sam Oolie(1)(2)(3)(4) 62 Director William F. Sorin(1)(4) 50 Secretary and Director Shaula A. Yemini, Ph.D.(3) 51 Director
--------------- (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. Carmel Vernia. Mr. Vernia has served as Chief Operating Officer of the Company since January 1994 and as a director since August 1997. He is also Chief Executive Officer of Comverse Infosys Division ("Infosys"). Since 1984 he as been employed in the Company's Israeli subsidiaries in various capacities, including Vice President, Manager of the Government Systems Division and Manager of research and development. Prior to joining the Company, he was employed by Elco Ltd. in Israel, where he headed the development of advanced perimeter intrusion detection systems. Between 1980 and 1982, Mr. Vernia was employed by Intel Corporation in Santa Clara, California, where he served as applications engineer for digital signal processing, digital telephony and data communications products. He received a B.Sc. in Electrical Engineering from the Technion, Israel Institute of Technology, in 1974 and a M.Sc. in Electrical and Computer Engineering from the University of California at Davis in 1980. Francis E. Girard. Mr. Girard has served as Chief Executive Officer of Comverse Network Systems Division ("Comverse Network Systems") and a director of the Company since January 1998. From May 1996 to January 1998, he served as President, Chief Executive Officer and a director of Boston Technology, Inc. ("Boston"), a company that was merged into the Company in January 1998. Prior to that, he served as Boston's Executive Vice President of World Sales. He joined Boston in January 1989 as Senior Vice President of Sales and assumed the position of Senior Vice President and General Manager of North American Markets in January 1994. Previously, he was Vice President of Sales, Marketing and Support of NEC Information Systems, Inc., a U.S. distributor of NEC computers and peripherals, from 1985 to 1989. Mr. Girard has also served as Director of Marketing for the National Independent Sales Organization and Reseller Marketing Programs at Wang Laboratories, Inc. from 1983 to 1985, in addition to several other sales and marketing management positions. Mr. Girard holds a B.S. degree in Business from Merrimack College. -2- Itsik Danziger. Mr. Danziger has served as Chief Operating Officer of Comverse Network Systems since January 1998 and additionally as President since May 1999 and as a director of the Company since November 1998. From 1984, Mr. Danziger served in various management positions with the Company, including Vice President, Manager of the Network Systems Division and Manager of research and development. Prior to joining the Company, he was employed for 10 years by Tadiran Ltd. in a variety of technical and managerial capacities. Mr. Danziger received a B.Sc. and M.Sc., cum laude, in Electrical Engineering from the Technion, Israel Institute of Technology, in 1974 and 1984, respectively. David Kreinberg. Mr. Kreinberg has served as Vice President of Finance and Chief Financial Officer of the Company since May 1999. Previously, Mr. Kreinberg served as Vice President of Finance and Treasurer from April 1996 and as Vice President of Financial Planning from April 1994. Mr. Kreinberg is a Certified Public Accountant, and prior to joining the Company he served as a senior manager at Deloitte & Touche LLP. Mr. Kreinberg received a B.S., summa cum laude, in Accounting from Yeshiva University and an M.B.A. in Finance and International Business from Columbia Business School in 1986 and 1990, respectively. Zvi Alexander. Mr. Alexander has been a director of the Company since August 1989. Mr. Alexander has been actively engaged in the energy industry for more than 30 years. He served as Chief Executive Officer of the Israeli National Oil Company and its successor from 1966 through 1976, and subsequently engaged in activities in the energy industry as a consultant and independent entrepreneur. Mr. Alexander is currently Chairman of A&T Exploration Company Ltd. Zvi Alexander is the father of Kobi Alexander and Shaula A. Yemini. John H. Friedman. Mr. Friedman has been a director of the Company since June 1994. He is the Managing Director of Easton Capital Corporation, a private investment firm founded by Mr. Friedman in 1991. From 1989 to 1991, Mr. Friedman was a Managing Director of Security Pacific Capital Investors. Prior to joining that firm, he was a Managing Director of E. M. Warburg, Pincus & Co., Inc., where he was employed from 1981 to 1989. From 1978 to 1980, Mr. Friedman practiced law with the firm of Sullivan & Cromwell in New York City. Mr. Friedman received a B.A., magna cum laude, from Yale University and a J.D. from Yale Law School. He is a director of M/A/R/C Inc., a research and database management company. Sam Oolie. Mr. Oolie has been a director of the Company since May 1986. He has been Chairman and Chief Executive Officer of NoFire Technologies, Inc., a manufacturer of high performance fire retardant products, since August 1995. He has also been Chairman of Oolie Enterprises, an investment company, since July 1985. He also has served as a director of CFC Associates, a venture capital firm, since January 1984. He was Chairman of The Nostalgia Network, a cable television network, from April 1987 to January 1990 and was Vice Chairman and director of American Mobile Communications, Inc., a cellular telephone company, from February 1987 to July 1989. From February 1962 to July 1985, Mr. Oolie was Chairman, Chief Executive Officer and a director of Food Concepts, Inc., a provider of food services to institutions and hospitals. Mr. Oolie also serves as a director of Avesis, Inc. and Noise Cancellation Technologies, Inc. Mr. Oolie received a B.S. from Massachusetts Institute of Technology in 1958 and an M.B.A. from Harvard Business School in 1961. -3- William F. Sorin. Mr. Sorin has served as a director and the Corporate Secretary of the Company since its formation in October 1984. He is an attorney engaged in private practice and is general counsel to the Company. Mr. Sorin received a B.A. from Trinity College in 1970 and a J.D., cum laude, from Harvard Law School in 1973. Shaula A. Yemini, Ph.D. Dr. Yemini has served as a director of the Company since August 1997. She is President and Chief Executive Officer of Systems Management Arts Incorporated ("SMARTS"), a developer of automated network problem diagnosis software. Prior to the formation of SMARTS in 1993, Dr. Yemini held various research and managerial positions at International Business Machines Corporation ("IBM") since June 1982, most recently serving as Senior Manager at IBM's T. J. Watson Center, where she built and managed the Distributed Systems Software Technology Department. Prior to that, she taught computer science at the Courant Institute of New York University. Dr. Yemini received a B.Sc. in Mathematics and Physics in 1972 and an M.Sc. in Applied Mathematics, cum laude, in 1974, both from the Hebrew University in Jerusalem, and a Ph.D. in Computer Science from the University of California at Los Angeles in 1980. Dr. Yemini is the sister of Kobi Alexander and the daughter of Zvi Alexander. COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors has four standing committees. The Executive Committee is empowered to exercise the full authority of the Board of Directors in circumstances when convening the full board is not practicable. The Audit Committee is responsible for reviewing audit procedures and supervising the relationship between the Company and its independent auditors. The Remuneration and Stock Option Committee is responsible for approving compensation arrangements for senior management of the Company and administering the Company's stock option plans. The Corporate Planning and Structure Committee reviews and makes recommendations to the board concerning issues of corporate structure and planning, including the formation and capitalization of subsidiaries of the Company, the structure of acquisition transactions, the terms of any stock options and other compensation arrangements in respect of subsidiaries of the Company, situations that might involve conflicts of interest relative to the Company and its subsidiaries and the terms of significant transactions between the Company and its subsidiaries. -4- ITEM 11. EXECUTIVE COMPENSATION. The following table presents summary information regarding the compensation paid or accrued by the Company for services rendered during the fiscal years ended December 31, 1996 and 1997, the one month transition period ended January 31, 1998, and the fiscal year ended January 31, 1999 by those of its executive officers whose salary and bonus compensation during the year ended January 31, 1999 exceeded $100,000: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION STOCK NAME AND PERIOD OPTION ALL OTHER PRINCIPAL POSITION ENDING SALARY(1) BONUS(2) GRANTS(3) COMPENSATION(4) - ------------------ ------ --------- -------- --------- --------------- Kobi Alexander Jan. 1999 $ 350,300 $ 3,446,393 375,000 $ 306,128 President, Chief Executive Jan. 1998 $ 29,192 - 750,000 $ 15,771 Officer and Chairman of Dec. 1997 $ 370,458 $ 1,344,150 225,000 $ 249,661 the Board of Directors Dec. 1996 $ 379,944 $ 864,829 150,000 $ 235,906 Carmel Vernia Jan. 1999 $ 158,248 $ 170,000 - $ 37,699 Chief Operating Officer Jan. 1998 $ 12,356 - 187,500 $ 2,985 Chief Executive Officer, Dec. 1997 $ 150,162 $ 150,000 105,000 $ 36,048 Comverse Infosys Dec. 1996 $ 129,889 $ 150,000 37,500 $ 31,763 Francis E. Girard(5) Jan. 1999 $ 385,008 $ 286,233 - $ 26,000 Chief Executive Officer, Jan. 1998 $ 32,083 - 225,000 $ 2,000 Comverse Network Systems Dec.1997(6) $ 330,007 $ 291,250 - $ 24,000 Dec.1996(6) $ 312,000 $ 157,500 341,250 $ 24,500 Itsik Danziger Jan. 1999 $ 151,101 $ 286,233 75,000 $ 36,147 Chief Operating Officer, Jan. 1998 $ 10,919 - 187,500 $ 2,181 Comverse Network Systems Dec.1997 $ 132,701 $ 167,928 75,000 $ 32,082 Dec.1996 $ 123,619 $ 134,400 7,500 $ 29,863 Igal Nissim Jan. 1999 $ 105,976 $ 36,775 - $ 25,237 Chief Financial Officer(7) Jan. 1998 $ 8,333 - 37,500 $ 1,972 Dec. 1997 $ 101,272 $ 27,800 7,500 $ 24,277 Dec. 1996 $ 115,342 $ 23,070 7,500 $ 19,699 - -------------------
(1) Includes salary and payments in lieu of earned vacation. (2) Includes bonuses accrued for services performed in the year indicated, regardless of the year of payment. (3) See also "Security Ownership of Certain Beneficial Owners and Management - Options to Purchase Subsidiary Shares." /footnotes continued on following page/ -5- /continuation of footnotes/ (4) Consists of miscellaneous items not exceeding $50,000 in the aggregate for any individual, including premium payments and contributions under executive insurance and training plans, 401(k) matching payments and, in the case of Mr. Alexander, $250,441, $7,773, $211,750, and $184,800 accrued in the year ended January 31, 1999, the month of January 1998 and the years ended December 31, 1997 and 1996, respectively, for payments due on termination of employment pursuant to the terms of his employment agreements with the Company. (5) Mr. Girard began serving as Chief Executive Officer of Comverse Network Systems, effective January 14, 1998. Previously, from May 31, 1996, Mr. Girard served as President and Chief Executive Officer of Boston. Prior to that, Mr. Girard served as Executive Vice President of World Sales of Boston. (6) Boston had a January 31 fiscal year. Accordingly, the information presented for Mr. Girard is for the 11 months ended December 31, 1997 and the 12 months ended January 31, 1997. (7) Mr. Nissim served as Chief Financial Officer of the Company during the periods indicated. He currently serves as Chief Financial Officer of Infosys. The following table sets forth information concerning options granted during the year ended January 31, 1999 to the executive officers of the Company under its employee stock option plans: STOCK OPTION GRANTS IN LAST FISCAL YEAR
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 375,000 27.9% $20.00 October 9, 2008 $ 4,716,710 $ 11,953,068 Carmel Vernia - - - - - - Francis E. Girard - - - - - - Itsik Danziger 75,000 5.6% $20.00 October 9, 2008 $ 943,342 $ 2,390,614 Igal Nissim - - - - - - - ------------------------
*Represents the gain that would be realized if the options were held for their entire ten-year term and the value of the underlying shares increased at compounded annual rates of 5% and 10% from the fair market value at the date of option grants. -6- The options have a term of ten years and become exercisable and vest in equal annual increments over the period of four years from the year of grant. The exercise price of the options is equal to the fair market value of the underlying shares at the date of grant. The following table sets forth, as to each executive officer identified above, the shares acquired on exercise of options during the year ended January 31, 1999, value realized, number of unexercised options held at January 31, 1999, currently exercisable and subject to future vesting, and the value of such options based on the closing price of the underlying shares on the NASDAQ National Market System at that date, net of the associated exercise price. OPTION EXERCISES AND YEAR-END VALUE TABLE AGGREGATE OPTION EXERCISES IN THE YEAR ENDED JANUARY 31, 1999 AND VALUE OF UNEXERCISED OPTIONS AT JANUARY 31, 1999
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED ACQUIRED OPTIONS HELD IN-THE-MONEY OPTIONS ON VALUE AT JANUARY 31, 1999 HELD AT JANUARY 31, 1999 NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- -------- -------- ----------- ------------- ----------- ------------- Kobi Alexander 427,500 $ 9,654,218 1,213,874 1,237,499 $ 57,712,024 $ 42,256,226 Carmel Vernia 75,000 $ 2,273,750 300,000 264,375 $ 13,942,968 $ 8,480,938 Francis E. Girard 57,150 $ 1,331,235 181,913 353,998 $ 6,559,591 $ 12,626,114 Itsik Danziger 28,125 $ 793,594 50,625 303,750 $ 1,799,063 $ 10,224,063 Igal Nissim 7,500 $ 197,855 31,875 43,125 $ 1,396,563 $ 1,514,688
See "Security Ownership of Certain Beneficial Owners and Management - - Options to Purchase Subsidiary Shares" for information regarding the grant to certain executive officers of options to purchase shares of subsidiaries of the Company. EMPLOYMENT AGREEMENTS Mr. Alexander serves as Chairman of the Board, President and Chief Executive Officer of the Company under an agreement extending through June 30, 2000 at a current base annual salary of $308,300. Pursuant to the agreement, Mr. Alexander received bonus compensation of $3,446,393 for services rendered during the year ended January 31, 1999 and is entitled to receive bonus compensation in succeeding years in an amount to be negotiated annually, but not less than 3% of the Company's consolidated after tax net income in each year. Mr. Alexander also receives various supplemental medical, insurance and other personal benefits from the Company under the terms of his employment, including the use of an automobile leased by the Company. -7- Upon the termination of his employment with the Company for any reason, Mr. Alexander is entitled to receive a severance payment in an amount equal to $102,487 times the number of years (plus any partial years) of his employment by the Company commencing with 1983, increased by 10% per annum, plus continued employment-related benefits for the period of 36 months following termination. In the event that Mr. Alexander's employment is terminated by the Company without cause, by Mr. Alexander as a result of a material breach by the Company of its obligations under the agreement or by his resignation within the period of six months following a change in control of the Company, Mr. Alexander is entitled to an additional severance payment equal to 299% of the average annual cash compensation (including salary and any bonus payments) received by him from the Company during the most recent three fiscal years plus an amount equal to the income tax liability to Mr. Alexander resulting from such payment. The agreement also requires the Company to grant to Mr. Alexander an option to purchase up to 7.5% of the shares of each subsidiary of the Company, other than Comverse Network Systems, Inc., for a price equal to the greater of the fair market value or the book value of such shares at the date of option grant. Mr. Alexander serves as Chairman of the Board of CNSL at a current basic salary (the "Basic Salary") of $3,500 per month. CNSL has also agreed to reimburse Mr. Alexander for certain business-related expenses, to provide him with the use of an automobile owned or leased by CNSL, and to pay certain amounts for his account into defined contribution insurance and training funds in Israel. In addition, if Mr. Alexander conducts business activities abroad, including in the United States, CNSL is required to bear his reasonable lodging and living expenses, which shall in any event be not less than the per diem allowance customarily provided to senior executive managers of Israeli companies, and if the period of his stay abroad is in excess of eight weeks, his Basic Salary during such period shall be increased to an amount which will support a standard of living comparable to that provided in Israel by the Basic Salary and other benefits afforded under the agreement. CNSL is also required to pay any taxes incurred by Mr. Alexander in respect of benefits provided to him under the agreement and certain professional fees incurred for the benefit of Mr. Alexander. In the event that CNSL unilaterally terminates or fundamentally breaches the agreement, it must pay, as liquidated damages, an amount equal to the Basic Salary due for the remainder of the term of the agreement plus an amount equal to the present value of all non-monetary benefits under the agreement. The present value of the non-monetary benefits under the agreement is not readily determinable but is estimated at approximately 25% of such salary. Mr. Vernia is employed as Chief Operating Officer of the Company and Chief Executive Officer of Infosys under an agreement providing for a base monthly salary at a current rate of 55,000 Israeli shekels, subject to Israeli statutory cost of living adjustment (resulting in a current annual salary equal to approximately $160,000) and an annual bonus in an amount to be determined each year. The agreement may be terminated by either party only with prior notice of at least one year. Mr. Vernia is entitled under the agreement to receive various insurance and supplemental benefits and the use of an automobile owned or leased by the Company. Mr. Girard is employed by the Company pursuant to an employment agreement providing for his services in the capacity of Chief Executive Officer of Comverse Network Systems for a three year term commencing January 14, 1998. -8- The agreement provides Mr. Girard an annual base salary of $385,000 (subject to periodic review), a bonus which is to be based on goals for Mr. Girard and Comverse Network Systems (not to exceed Mr. Girard's annual base salary), and an expense stipend and generally available fringe benefits. Mr. Girard is entitled to a payment equal to one year of his base salary (plus accrued bonuses) in the event that his employment is terminated without cause. Mr. Danziger is employed as President and Chief Operating officer of Comverse Network Systems under an agreement providing for a base monthly salary at a current rate of 57,000 Israeli shekels, subject to Israeli statutory cost of living adjustment (resulting in a current annual salary equal to approximately $166,000) and an annual bonus which is based on goals for Mr. Danziger and Comverse Network Systems. Mr. Danziger is entitled to receive various insurance and supplemental benefits and the use of an automobile owned or leased by the Company. COMPENSATION OF DIRECTORS Each director who is not an employee of the Company or otherwise compensated by the Company for services rendered in another capacity, and whose position on the Board of Directors is not attributable to any contract between the Company and such director or any other entity with which such director is affiliated, receives compensation in the amount of $2,750 for each meeting of the Board of Directors and of certain committees of the Board of Directors attended by him during the year. Each of such eligible directors is also entitled to receive an annual stock option grant under the Company's Stock Option Plans entitling him to purchase 9,000 shares of common stock at a price per share equal to the fair market value of the common stock as reported on the NASDAQ System on the date two business days after the publication of the audited year-end financial statements of the Company. Such options are subject to forfeiture to the extent of 1,800 shares per meeting in the event that the option holder, during the year of grant, fails to attend at least five meetings of the Board of Directors and any of its committees of which the option holder is a member. Each director who resides outside of the United States and is not an officer or employee of the Company is entitled to reimbursement of expenses incurred for attendance at meetings of the Board, up to the amount of $2,000 for each meeting attended. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Kobi Alexander, President, Chairman of the Board and Chief Executive Officer of the Company, serves as a member of the Board of Directors of System Management ARTS, Incorporated ("SMARTS"), a developer of automated network problem diagnosis software. Dr. Shaula A. Yemini, President and Chief Executive Officer of SMARTS and Mr. Alexander's sister, is a member of the Remuneration and Stock Option Committee of the Board of Directors of the Company. -9- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information concerning the beneficial ownership of shares of common stock on the part of the executive officers and directors of the Company and all persons known by the Company to be beneficial owners of more than five percent of the outstanding common stock as at May 24, 1999.
NUMBER OF PERCENT SHARES OF TOTAL BENEFICIALLY OUTSTANDING BENEFICIAL OWNER RELATIONSHIP WITH THE COMPANY OWNED SHARES(1) - ---------------- ----------------------------- ----- --------- Putnam Investments, Inc. One Post Office Square Boston, MA 02109 Shareholder 8,163,987(2) 11.7% AIM Management Group, Inc. 1315 Peachtree Street, N.E. Atlanta, GA 30309 Shareholder 7,057,906(2) 10.1% Brinson Partners, Inc. 209 South LaSalle Chicago, IL 60604 Shareholder 3,841,332(2) 5.5% Kobi Alexander President, Chairman of the Board, Chief Executive Officer and Director 1,716,844(3) 2.4% Carmel Vernia Chief Operating Officer and Director 361,875(4)(5) * Francis E. Girard Chief Executive Officer, Comverse Network Systems and Director 312,545(6) * Itsik Danziger Chief Operating Officer, Comverse Network Systems and Director 99,678 (7) * David Kreinberg Vice President of Finance and Chief Financial Officer 22,577(8) * Zvi Alexander Director 26,250(9)(10) * John H. Friedman Director 18,000(4)(10) * Sam Oolie Director 15,000(4)(10) * William F. Sorin Secretary and Director 44,997(4)(11) * Shaula A. Yemini, Ph.D. Director 23,850(10)(12) * All directors and executive officers as a group (10 persons) 2,641,616(13) 3.7%
- ----------------- * Less than 1%. (1) Based on 69,852,047 shares of common stock issued and outstanding on May 24, 1999, excluding, except as otherwise noted, shares of common stock issuable upon the exercise of outstanding stock options. /footnotes continued on following page/ -10- /continuation of footnotes/ (2) Based on Schedule 13G filings with the Securities and Exchange Commission reflecting data as of December 1998. (3) Includes 1,363,873 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. Does not include 1,087,500 shares issuable upon the exercise of options that were not exercisable at or within 60 days after May 24, 1999. (4) Consists solely of shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. (5) Does not include 202,500 shares issuable upon the exercise of options that were not exercisable at or within 60 days after May 24, 1999. (6) Includes 230,663 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. Does not include 305,248 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after May 24, 1999. (7) Includes 99,375 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. Does not include 255,000 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after May 24, 1999. (8) Includes 17,416 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. Does not include 64,791 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after May 24, 1999. (9) Includes 18,000 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. (10) Does not include 9,000 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after May 24, 1999. (11) Does not include 86,251 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after May 24, 1999. (12) Includes 18,600 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. (13) Includes 2,187,799 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after May 24, 1999. Does not include 2,037,290 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after May 24, 1999. OPTIONS TO PURCHASE SUBSIDIARY SHARES The Company has granted to certain key executives and other employees options to acquire shares of certain subsidiaries, other than Comverse Network Systems, as a means of providing incentives directly tied to the performance of those subsidiaries for which different grantees have direct responsibility. Such options are provided to the President and Chief Executive Officer of the Company as set forth under "Employment Agreements," above. Options have been granted to other employees which, upon exercise, in the aggregate do not exceed 20% of the outstanding shares of the relevant subsidiaries. In general, these options have terms of up to ten years, become exercisable and vest over periods up to seven years from the first anniversary of the date of initial grant, and have exercise prices equal to the higher of the book value of the underlying shares at the date of grant or the fair market -11- value of such shares at that date determined on the basis of an arms'-length transaction with a third party or, if no such transactions have occurred, on a reasonable basis as determined by the Board of Directors. These options (and any shares received by the holders upon exercise) provide the option holders with a potentially larger equity interest in the respective subsidiaries than in the Company, which, under certain circumstances, could cause the option holders' interests to conflict with those of the Company's shareholders generally. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Company paid or accrued legal fees to William F. Sorin, a director of the Company, in the amount of $533,100 for legal services rendered to the Company during the year ended January 31, 1999. -12- 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 -13- -----END PRIVACY-ENHANCED MESSAGE-----