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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, 2003
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 pursuantto Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Not applicable Not applicable
Securities registered pursuantto 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-
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.
[ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the closing price as of the last
business day of the registrant's most recently completed second fiscal quarter,
July 31, 2002, was approximately $1,486,963,000.
There were 188,192,862 shares of the registrant's common stock
outstanding on May 6, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Comverse, Comverse Technology and Comverse's logos are trademarks of the
Company. LORONIX(R) is a registered trademark, and Intelligent Recording,
OpenStorage Portal, RELIANT, STAR-GATE, ULTRA, Universal Database and Verint
Systems are trademarks of Verint Systems Inc., a subsidiary of the Company.
Signalware(R) and Ulticom(R) are registered trademarks of Ulticom, Inc., a
subsidiary 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) 51 Chairman of the Board of Directors, Chief Executive
Officer and Director
Zeev Bregman 41 Chief Executive Officer of Comverse, Inc.
Dan Bodner 44 President and Chief Executive Officer of Verint Systems
Inc.
David Kreinberg 38 Executive Vice President and Chief Financial Officer
Itsik Danziger(6) 54 Director
John H. Friedman(2)(3)(4)(5) 50 Director
Francis E. Girard 64 Director
Ron Hiram(2)(3)(5) 50 Director
Sam Oolie(1)(2)(3)(4)(5) 66 Director
William F. Sorin(1)(4) 54 Secretary and Director
---------------
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit Committee of the Board of Directors.
(3) Member of Compensation Committee of the Board of Directors.
(4) Member of Corporate Planning and Structure Committee of the Board of
Directors.
(5) Member of Corporate Governance and Nominating Committee of the Board of
Directors.
(6) Mr. Danziger resigned as President of the Company in March 2003.
-1-
BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS
Kobi Alexander. Mr. Alexander is a founder of the Company and has
served as Chairman of the Board of Directors since September 1986 and as Chief
Executive Officer since April 1987. Mr. Alexander has served as a director of
the Company since its formation in October 1984. Mr. Alexander served as
President of the Company from its formation in October 1984 until January 2001.
Mr. Alexander also served as Co-Managing Director of the Company's wholly-owned
Israeli subsidiary, Comverse Ltd., 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
Comverse Ltd., 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 a division of Citigroup Inc.). Mr. Alexander
received a B.A., magna cum laude, in Economics from the Hebrew University of
Jerusalem in 1977, and an M.B.A. in Finance from New York University in 1980. He
has served as the Chairman of the High-Tech Research and Development Section of
the Israeli Association of Industrialists. Mr. Alexander is also Chairman of the
Board and a director of Ulticom, Inc. ("Ulticom") and Verint Systems Inc.
("Verint").
Zeev Bregman. Mr. Bregman has served as Chief Executive Officer of
Comverse, Inc. ("Comverse") since January 2001. From 1987, Mr. Bregman served in
various management and marketing positions within the Company, including Vice
President, EMEA Division of Comverse and Vice President, Trilogue Division of
Comverse. Prior to joining the Company he was employed by Clarity Ltd. Mr.
Bregman received a B.Sc., with high honors, in Mathematics and Computer Science
and a M.Sc., with high honors, in Computer Science from Tel Aviv University. He
also earned a Kellogg-Recanati International Executive MBA, a joint degree from
the Faculty of Management of Tel-Aviv University and Northwestern University.
Dan Bodner. Mr. Bodner has served as President and/or Chief Executive
Officer of Verint since February 1994. From 1991 to 1998, Mr. Bodner also served
as President and Chief Executive Officer of Comverse Government Systems Corp., a
former affiliate of Verint. From 1987 to 1991, Mr. Bodner held various
management positions with the Company. Prior to joining the Company, Mr. Bodner
was employed for two years as Director of Software Development for Contahal Ltd.
Mr. Bodner received a B.Sc., cum laude, in Electrical Engineering from the
Technion, Israel Institute of Technology, in 1981 and a M.Sc., cum laude, in
Telecommunications and Computer Science from Tel Aviv University in 1987. Mr.
Bodner also serves as a director of Verint.
David Kreinberg. Mr. Kreinberg has served as Executive Vice President
and Chief Financial Officer of the Company since September 2002. Previously, Mr.
Kreinberg served as the Company's Vice President of Finance and Chief Financial
Officer from May 1999, as Vice President of Finance and Treasurer from April
1996 and as Vice President of Financial Planning from April 1994. Mr. Kreinberg
is a Certified Public Accountant, and prior to joining the Company he served as
a senior manager at Deloitte & Touche LLP. Mr. Kreinberg received a B.S., summa
cum laude, in Accounting from Yeshiva University and an M.B.A. in Finance and
International Business from Columbia Business School in 1986 and 1990,
respectively. Mr. Kreinberg is also a director of Ulticom and Verint.
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Itsik Danziger. Mr. Danziger has served as a director of the Company
since November 1998. Mr. Danziger served as President of the Company from
January 2001 until March 2003, as Chief Operating Officer of Comverse from
January 1998 and additionally as its President from May 1999 until January 2001.
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.
John H. Friedman. Mr. Friedman has served as a director of the
Company since June 1994. Mr. Friedman is Managing Director of Easton Capital
Corp., a private investment firm founded by Mr. Friedman in 1991. From 1989 to
1991, Mr. Friedman was a Managing Director of Security Pacific Capital
Investors. Prior to joining that firm, he was a Managing Director of E. M.
Warburg, Pincus & Co., Inc., where he was employed from 1981 to 1989. From 1978
to 1980, Mr. Friedman practiced law with the firm of Sullivan & Cromwell in New
York City. Mr. Friedman received a B.A., magna cum laude, from Yale University
and a J.D. from Yale Law School.
Francis E. Girard. Mr. Girard has served as a director of the Company
since January 1998 and as a consultant since September 2002. From January 2001
until January 2002, Mr. Girard also served as Vice Chairman of Comverse, and
from January 1998 until January 2001, he served as Chief Executive Officer of
Comverse. 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. From 1985 to
1989, he was Vice President of Sales, Marketing and Support of NEC Information
Systems, Inc. From 1983 to 1985, Mr. Girard also served as Director of Marketing
for the National Independent Sales Organization and Reseller Marketing Programs
at Wang Laboratories, Inc. Mr. Girard also serves as a member of the board of
directors of Artisoft, Inc. Mr. Girard holds a B.S. degree in Business from
Merrimack College.
Ron Hiram. Mr. Hiram has served as a director of the Company since
June 2001. Mr. Hiram is a Managing Partner of Eurofund 2000 L.P., a venture
capital fund focused on Israeli related companies in the telecommunications,
information technology and microelectronic spheres. Previously, Mr. Hiram
co-headed TeleSoft Partners' investment activities in Israel from 2001 to 2002.
TeleSoft Partners is a Silicon Valley venture capital fund focusing on companies
developing telecommunication-related technologies. From 1994 to 2000, Mr. Hiram
served as a Managing Director and Partner of Soros Fund Management LLC
("Soros"), an international hedge fund, devoting the bulk of his time to private
equity investments. Prior to joining Soros, Mr. Hiram worked at Lehman Brothers
for thirteen years, most recently serving as Managing Director of a workout and
restructuring group. Mr. Hiram also serves as a member of the board of directors
of Ulticom. Mr. Hiram was previously a director of the Company in 1986 and 1987.
Mr. Hiram received an M.B.A. from Columbia University in 1981.
Sam Oolie. Mr. Oolie has served as a director of the Company since
May 1986. Since August 1995, Mr. Oolie has been Chairman of NoFire Technologies,
Inc., a manufacturer of high performance fire retardant products. He has been
Chairman of Oolie Enterprises, an investment company, since July 1985. He also
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served as a director of CFC Associates, a venture capital firm, from January
1984 to December 1999. 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 Corporate
Secretary of the Company since its formation in October 1984. Mr. Sorin is an
attorney engaged in private practice and is senior general counsel to the
Company. Mr. Sorin received a B.A., Phi Beta Kappa, from Trinity College in 1970
and a J.D., cum laude, from Harvard Law School in 1973. Mr. Sorin is also a
director of Ulticom and Verint.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has five 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 Compensation
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. The Corporate Governance and Nominating Committee is
responsible for reviewing and ensuring compliance with the Company's corporate
governance principles and for identifying and nominating individuals to be
considered for the Company's Board of Directors.
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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 January 31, 2001, 2002 and 2003 by certain of its executive
officers:
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------- STOCK
NAME AND YEAR OPTION ALL OTHER
PRINCIPAL POSITION ENDING SALARY BONUS(2) GRANTS(3) COMPENSATION(3)(5)
- ------------------ ------ ------ -------- --------- ------------------
Kobi Alexander Jan. 2003 $672,000 $ - 1,937,999 (4) $ 653,720
Chief Executive Officer Jan. 2002 $403,000 (1) $ - (1) 600,000 $ 1,316,039
and Chairman of the Jan. 2001 $672,000 $ 7,458,915 600,000 $ 1,270,327
Board of Directors
Itsik Danziger Jan. 2003 $151,930 $ - 482,375 (4) $ 43,574
President(6) Jan. 2002 $168,287 $ - 200,000 $ 44,088
Jan. 2001 $179,340 $ 420,000 200,000 $ 45,914
Zeev Bregman Jan. 2003 $155,120 $ - 569,500 (4) $ 43,511
Chief Executive Officer, Jan. 2002 $156,617 $ - 300,000 $ 42,829
Comverse(7) Jan. 2001 $151,939 $ 420,000 250,000 $ 38,327
Dan Bodner Jan. 2003 $200,000 $ 200,000 57,377 (4) $ 4,261
President and Chief Jan. 2002 $200,000 $ 50,000 30,000 $ 2,000
Executive Officer,Verint
David Kreinberg Jan. 2003 $200,000 $ 170,000 249,351 (4) $ 118,006
Executive Vice President Jan. 2002 $187,303 $ - 125,000 $ 211,067
and Chief Financial Officer Jan. 2001 $180,000 $ 170,000 100,000 $ 129,800
Francis E. Girard
Chief Executive Officer,
Comverse(8) Jan. 2001 $385,008 $ - - $ 26,000
- -----------------------------
/footnotes on next page/
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/footnotes from previous table/
(1) Includes $217,402 of salary and $185,598 of payments in lieu of earned
vacation. During the year ended January 31, 2002, Mr. Alexander was
entitled under his employment agreements to receive $672,000 in salary and
a bonus of approximately $1,500,000. Mr. Alexander voluntarily waived his
right to approximately $1,955,000, which is 90% of his salary and bonus,
in support of cost-reduction steps taken by the Company.
(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 solely of options granted under the Company's stock option
exchange program as described below.
(5) 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, the amount includes $410,363, $360,665 and
$316,602 accrued in the years ended January 31, 2003, 2002 and 2001,
respectively, for payments due on termination of employment pursuant to
the terms of his employment agreements with the Company and $191,313,
$903,197 and $905,679 paid in the years ended January 31, 2003, 2002 and
2001, respectively, in premiums for life insurance, of which $125,000,
$825,000 and $825,000, respectively, was provided under arrangements
whereby the Company is entitled to reimbursement of premiums paid under
the arrangements from the benefit payments or cash surrender value. In the
case of Mr. Kreinberg, the amount includes $2,160, $115,160 and $115,335
paid in the years ended January 31, 2003, 2002 and 2001, respectively, in
premiums for life insurance, of which $113,000 for each of the years ended
January 31, 2002 and 2001 was provided under arrangements whereby the
Company is entitled to reimbursement of the premiums paid under the
arrangements from the benefit payments or cash surrender value. In the
case of Mr. Kreinberg, the amount also includes $100,000 and $80,000
accrued in the years ended January 31, 2003 and 2002, respectively, for
payments due on the termination of his employment with the Company.
(6) Mr. Danziger served as President of the Company from January 2001 until
March 2003. Mr. Danziger currently serves as an employee and a director of
the Company.
(7) Mr. Bregman was promoted to Chief Executive Officer of Comverse in January
2001.
(8) Mr. Girard served as Vice Chairman of Comverse from January 2001 until
January 2002 and served as Chief Executive Officer of Comverse from
January 1998 until January 2001. Mr. Girard currently serves as a
consultant to and director of the Company.
-6-
The following table sets forth information concerning options granted
during the year ended January 31, 2003 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 (1) IN PERIOD SHARE DATE 5% 10%
- ---- ---------- --------- ----- ---- -- ---
Kobi Alexander 535,501 3.4% $ 10.52 October 18, 2009 $ 2,230,728 $ 5,177,903
510,000 3.2% $ 10.52 November 30, 2010 $ 2,529,937 $ 6,048,804
509,999 3.2% $ 10.52 October 22, 2011 $ 2,892,188 $ 7,093,584
382,499 2.4% $ 10.52 May 28, 2007 $ 968,907 $ 2,113,158
Itsik Danziger 170,000 1.1% $ 10.52 November 30, 2010 $ 843,312 $ 2,016,268
170,000 1.1% $ 10.52 October 22, 2011 $ 964,064 $ 2,364,533
110,500 0.7% $ 10.52 October 18, 2009 $ 460,308 $ 1,068,454
31,875 0.2% $ 10.52 May 28, 2007 $ 80,742 $ 176,097
Zeev Bregman 255,000 1.6% $ 10.52 November 30, 2010 $ 1,264,968 $ 3,024,402
212,500 1.3% $ 10.52 October 22, 2011 $ 1,205,081 $ 2,955,666
76,500 0.5% $ 10.52 October 18, 2009 $ 318,675 $ 739,699
25,500 0.2% $ 10.52 May 28, 2007 $ 64,594 $ 140,878
Dan Bodner(2) 31,876 0.2% $ 10.52 October 18, 2009 $ 132,785 $ 308,218
25,501 0.2% $ 10.52 October 22, 2011 $ 144,615 $ 354,694
David Kreinberg(3) 106,252 0.7% $ 10.52 October 22, 2011 $ 602,552 $ 1,477,861
85,000 0.5% $ 10.52 November 30, 2010 $ 421,656 $ 1,008,134
54,911 0.3% $ 10.52 October 18, 2009 $ 228,742 $ 530,949
3,188 0.0% $ 10.52 May 28, 2007 $ 8,076 $ 17,612
- ------------------
* Represents the gain that would be realized if the options were held
for their entire 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.
(1) All options were granted under the Company's stock option exchange
program as described below.
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(2) Mr. Bodner also was granted options to purchase 66,537 shares of
Verint at an exercise price of $16.00 per share with an expiration
date of May 21, 2012. Assuming 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%, the potential
realizable value would be $669,516 and $1,696,685, respectively.
(3) Mr. Kreinberg also was granted options to purchase 4,893 shares of
Verint at an exercise price of $16.00 per share. Assuming 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%, the potential realizable value would be $49,235 and $124,771,
respectively.
The options in the above table vest in increments over the period of
up to three 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.
In May 2002, the Company commenced a Stock Option Exchange Program
("SOEP") for its eligible employees, including the executive officers. Under the
SOEP, participating employees were given the opportunity to have unexercised
stock options previously granted to them cancelled, in exchange for replacement
options that were granted on December 23, 2002 (the "Regrant Date"). The
replacement options were granted at a ratio of 0.85 new options for each
existing option cancelled, at the fair market value of the Company's stock on
the Regrant Date. The following table sets forth information concerning option
repricings held by executive officers during the ten year period ended January
31, 2003.
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TEN-YEAR OPTION REPRICINGS
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET ORIGINAL
PRICE OF EXERCISE DATE
NUMBER OF STOCK AT PRICE OF NEW ORIGINAL
REPRICING OPTIONS TIME OF REPRICED EXERCISE OPTION
NAME DATE REPRICED REPRICING OPTION PRICE EXPIRED
- --------------------- ------------------ ---------- --------- ---------- ------- ------------------
Kobi Alexander December 23, 2002 535,501 $10.52 $46.50 $10.52 October 18, 2009
December 23, 2002 510,000 $10.52 $85.00 $10.52 November 30, 2010
December 23, 2002 509,999 $10.52 $16.05 $10.52 October 22, 2011
December 23, 2002 382,499 $10.52 $14.75 $10.52 May 28, 2007
Itsik Danziger December 23, 2002 170,000 $10.52 $85.00 $10.52 November 30, 2010
December 23, 2002 170,000 $10.52 $16.05 $10.52 October 22, 2011
December 23, 2002 110,500 $10.52 $46.50 $10.52 October 18, 2009
December 23, 2002 31,875 $10.52 $14.75 $10.52 May 28, 2007
Zeev Bregman December 23, 2002 255,000 $10.52 $85.00 $10.52 November 30, 2010
December 23, 2002 212,500 $10.52 $16.05 $10.52 October 22, 2011
December 23, 2002 76,500 $10.52 $46.50 $10.52 October 18, 2009
December 23, 2002 25,500 $10.52 $14.75 $10.52 May 28, 2007
Dan Bodner December 23, 2002 31,876 $10.52 $46.50 $10.52 October 18, 2009
December 23, 2002 25,501 $10.52 $16.05 $10.52 October 22, 2011
David Kreinberg December 23, 2002 106,252 $10.52 $16.05 $10.52 October 22, 2011
December 23, 2002 85,000 $10.52 $85.00 $10.52 November 30, 2010
December 23, 2002 54,911 $10.52 $46.50 $10.52 October 18, 2009
December 23, 2002 3,188 $10.52 $14.75 $10.52 May 28, 2007
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, 2003, value realized, number of unexercised options held at
January 31, 2003, 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 of $9.52 on January 31, 2003, net of the
associated exercise price.
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OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATE OPTION EXERCISES IN THE YEAR ENDED JANUARY 31, 2003 AND
VALUE OF UNEXERCISED OPTIONS AT JANUARY 31, 2003
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD IN-THE-MONEY OPTIONS
ACQUIRED AT JANUARY 31, 2003 HELD AT JANUARY 31, 2003
ON VALUE ------------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
Kobi Alexander(1) - $ - 3,074,738 1,937,999 $3,843,176 $ -
Itsik Danziger(2) - $ - 202,500 482,375 $ - $ -
Zeev Bregman(3) - $ - 112,500 569,500 $ - $ -
Dan Bodner(4) - $ - - 57,377 $ - $ -
David Kreinberg(5) - $ - 53,210 249,351 $ - $ -
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.
(1) As of January 31, 2003, Mr. Alexander also owns options to purchase (i)
359,574 shares of common stock of Verint valued at $5,196,463, all of
which were exercisable and none of which were exercised during the year
ended January 31, 2003, (ii) 8.1 shares of common stock of Startel
Corporation, all of which were exercisable and none of which were
exercised during the year ended January 31, 2003, and (iii) 162 shares of
common stock of CTI Capital Corporation, all of which were exercisable and
none of which were exercised during the year ended January 31, 2003.
(2) As of January 31, 2003, Mr. Danziger also owns options to purchase (i)
11,742 shares of common stock of Verint valued at $116,633, of which
options to purchase 2,936 shares, valued at $29,163 were exercisable and
none of which were exercised during the year ended January 31, 2003, (ii)
43,818 shares of common stock of Ulticom, valued at $175,885, of which
options to purchase 19,273 shares, valued at $77,362 were exercisable and
none of which were exercised during the year ended January 31, 2003, and
(iii) 22,400 Class B shares of Starhome BV, all of which were
unexercisable.
(3) As of January 31, 2003, Mr. Bregman owns options to purchase (i) 11,742
shares of common stock of Verint valued at $116,633, of which options to
purchase 2,936 shares, valued at $29,163 were exercisable and none of
which were exercised during the year ended January 31, 2003, (ii) 36,818
shares of common stock of Ulticom, valued at $147,787, of which options to
purchase 12,273 shares, valued at $49,264 were exercisable and none of
which were exercised during the year ended January 31, 2003, and (iii)
22,400 Class B shares of Starhome BV, all of which were unexercisable.
(4) As of January 31, 2003, Mr. Bodner also owns options to purchase 262,233
shares of common stock of Verint valued at $2,500,677, of which options to
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purchase 144,327 shares, valued at $1,789,852, were exercisable and none
of which were exercised during the year ended January 31, 2003.
(5) Mr. Kreinberg realized $73,878 on the exercise of options to purchase
4,893 shares of Verint common stock during the year ended January 31,
2003. As of January 31, 2003, Mr. Kreinberg also owns options to purchase
(i) 11,741 shares of common stock of Verint, all of which were
unexercisable and valued at $81,527, (ii) 73,636 shares of common stock of
Ulticom, valued at $295,575, of which options to purchase 24,545 shares,
valued at $98,524 were exercisable and none of which were exercised during
the year ended January 31, 2003, and (iii) 9,000 Class B shares of
Starhome BV, all of which were unexercisable.
EMPLOYMENT AGREEMENTS
Mr. Alexander serves as Chairman of the Board and Chief Executive
Officer of the Company under an agreement extending through January 31, 2004 at
a current base annual salary of $630,000. 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.
Mr. Alexander serves as Chairman of the Board of Comverse Ltd. at a
current basic compensation of $3,500 per month. Comverse Ltd. has also agreed to
pay certain amounts for his account into defined contribution insurance and
training funds in Israel. Comverse Ltd. 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 Comverse Ltd. 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.
Following termination or expiration of the term of employment, Mr.
Alexander is entitled to receive a severance payment equal to $136,411 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, 2002, plus continued fringe
benefits for three years and insurance coverage for up to 10 years. If Mr.
Alexander's employment is terminated by the Company without "cause", or by Mr.
Alexander for "good reason" (as those terms are defined in the agreement), he is
entitled to additional payments attributable to the salary, bonus and the
monetary equivalence of other benefits which he otherwise would have expected to
receive for a period of three years or the balance of the agreement term,
whichever is longer. If such termination occurs following a change in control of
the Company, the required additional payment is three times Mr. Alexander's
annual salary and bonus, and he is additionally entitled to the accelerated
vesting of all retirement benefits and stock options, and payments sufficient to
reimburse any associated excise tax liability and income tax resulting from such
reimbursement. Mr. Alexander's options 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. Insurance
benefits include life insurance providing cumulative death benefits of
approximately $40,000,000 including amounts provided under arrangements through
which the Company is to be reimbursed premiums from the benefit payments or cash
surrender value.
-11-
Mr. Bregman is employed as Chief Executive Officer of Comverse under
an agreement providing for a base monthly salary at a current rate of
approximately 60,000 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 which is based on the performance of Mr. Bregman
and Comverse. Mr. Bregman is entitled to receive various insurance and
supplemental benefits and the use of an automobile owned or leased by the
Company.
Mr. Bodner is employed as President and Chief Executive Officer of
Verint under an agreement providing for an annual salary of $200,000 and an
annual bonus which is based on the performance of Mr. Bodner and Verint. Mr.
Bodner is entitled to receive the use of an automobile owned or leased by the
Company.
Mr. Kreinberg is employed as Executive Vice President and Chief
Financial Officer of the Company under an agreement providing for an annual
salary of $200,000 and an annual bonus which is based on the performance of Mr.
Kreinberg and the Company. Mr. Kreinberg is entitled to receive various
insurance and supplemental benefits and the use of an automobile owned or leased
by the Company. In addition, following termination of Mr. Kreinberg's
employment, other than for cause, Mr. Kreinberg is entitled to receive a payment
equal to $20,000 times the number of years from the first year of his employment
with the Company, the amount of which payment increases at the rate of 10% per
annum compounded for each completed year of employment following January 31,
2003.
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 such director 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 such director 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.
-12-
SEVERANCE BENEFITS FOLLOWING A CHANGE IN CONTROL
The Company has instituted severance benefits arrangements for
eligible employees, other than the Chief Executive Officer (whose benefits are
described above), due in the event of the termination of employment, within two
years following a change in control of the Company, either by the Company
without cause or by an employee under specified circumstances. Key executives,
as designated from time to time by the Compensation Committee, are generally
entitled in the event of such termination following a change in control to
receive (a) payment of salary and pro-rated bonus through the date of
termination (computed at the rates then in effect or, if higher, during
specified periods prior to the date of change in control), (b) an additional
payment equal to the sum of annual salary and bonus (as so computed), (c) the
accelerated vesting of all stock options and retirement benefits, (d)
continuation for one additional year of certain employment-related benefits and
(e) in the discretion of the Compensation Committee, a payment in an amount
necessary to discharge without cost to the employee any excise tax imposed in
respect of the payments due under the severance arrangement. Other employees are
generally entitled to receive, in the event of the involuntary termination of
their employment following a change in control, (a) payment of their then
current salary through the date of termination, (b) an additional payment equal
to one month of salary for each year of employment with the Company, up to
twelve, prior to termination, (c) the accelerated vesting of stock options and
retirement benefits and (d) continuation of certain employment-related benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
-13-
ITEM 12. PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT.
The following table identifies and sets forth certain information
concerning the beneficial ownership of Common Stock by the executive officers of
the Company, by each director of the Company and by each person known by the
Company to beneficially own more than five percent of the issued and outstanding
Common Stock. Except as otherwise noted, information is given as of May 6, 2003.
NUMBER OF PERCENT
SHARES OF TOTAL
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER RELATIONSHIP WITH THE COMPANY OWNED(1) SHARES(2)
- ---------------- ----------------------------- -------- ---------
FMR Corporation Shareholder 28,153,723 (3) 15.0%
82 Devonshire Street
Boston, MA 02109
Citigroup Inc. Shareholder 19,793,367 (3) 10.5%
399 Park Avenue
New York, NY 10043
Kobi Alexander Chairman of the Board, 4,394,122 (4) 2.3%
Chief Executive Officer and Director
Zeev Bregman Chief Executive Officer of 417,874 (5) *
Comverse
Dan Bodner President and Chief Executive 66,587 (6) *
Officer of Verint
David Kreinberg Executive Vice President and 206,070 (7) *
Chief Financial Officer
Itsik Danziger Director 481,551 (8) *
John H. Friedman Director 113,000 *
Francis E. Girard Director 689,851 (9) *
Ron Hiram Director 54,000 (10) *
Sam Oolie Director 92,000 (11) *
William F. Sorin Secretary and Director 116,857 (12) *
All directors and executive
officers as a group (10 persons) 6,631,912 3.4%
- -----------------
* Less than 1%.
/footnotes on next page/
-14-
/footnotes from previous table/
(1) Includes outstanding shares and shares issuable upon the exercise of stock
options that are exercisable at or within 60 days after May 6, 2003. Does
not include shares issuable upon the exercise of stock options that are
not exercisable until more than 60 days after May 6, 2003. The shares
subject to stock options held by the individuals identified above as of
May 6, 2003 consist of the following:
NUMBER OF SHARES OF COMMON STOCK
SUBJECT TO OPTIONS
---------------------------------------------------------------------
EXERCISABLE AT OR WITHIN NOT EXERCISABLE AT OR WITHIN
60 DAYS AFTER MAY 6, 2003 60 DAYS AFTER MAY 6, 2003
------------------------- -------------------------
Kobi Alexander 4,368,862 643,875
Zeev Bregman 417,438 264,562
Dan Bodner 30,813 26,564
David Kreinberg 188,342 114,219
Itsik Danziger 480,875 204,000
John H. Friedman 113,000 27,000
Francis E. Girard 610,896 -
Ron Hiram 54,000 27,000
Sam Oolie 92,000 27,000
William F. Sorin 116,857 39,846
All directors and executive officers as a group
(10 persons) 6,473,083 1,374,066
(2) Based on 188,192,862 shares of common stock issued and outstanding on May
6, 2003, excluding, except as otherwise noted, shares of common stock
issuable upon the exercise of outstanding stock options.
(3) Based on Schedule 13G filings with the Securities and Exchange Commission
reflecting data as of December 2002.
(4) Mr. Alexander is also the beneficial owner of 997,263 shares of common
stock of Ulticom and 2,700,000 class C shares of Starhome BV, a subsidiary
of the Company. In addition, Mr. Alexander is the beneficial owner of
475,931 shares of common stock of Verint, which includes 359,574 shares
issuable upon the exercise of stock options exercisable at or within 60
days after May 6, 2003. Additionally, Mr. Alexander is the beneficial
owner of 8.1 shares of common stock of Startel Corporation and 162 shares
of common stock of CTI Capital Corporation, each of which is a subsidiary
of the Company, which shares are issuable upon the exercise of stock
options exercisable at or within 60 days after May 6, 2003.
(5) Mr. Bregman is also the beneficial owner of 24,546 shares of common stock
of Ulticom, and 5,872 shares of common stock of Verint, which are issuable
upon the exercise of stock options exercisable at or within 60 days after
May 6, 2003.
(6) Mr. Bodner is also the beneficial owner of 180,530 shares of common stock
of Verint, which are issuable upon the exercise of stock options
exercisable at or within 60 days after May 6, 2003.
(7) Mr. Kreinberg is also the beneficial owner of 59,091 shares of common
stock of Ulticom, which includes 49,091 shares issuable upon the exercise
of stock options exercisable at or within 60 days after May 6, 2003, and
3,670 shares of common stock of Verint, which are issuable upon the
-15-
exercise of stock options exercisable at or within 60 days after May 6,
2003.
(8) Mr. Danziger is also the beneficial owner of 31,546 shares of common stock
of Ulticom, and 5,872 shares of common stock of Verint, which are issuable
upon the exercise of stock options exercisable at or within 60 days after
May 6, 2003.
(9) Mr. Girard is also the beneficial owner of 3,000 shares of common stock of
Ulticom.
(10) Mr. Hiram is also the beneficial owner of 21,000 shares of common stock of
Ulticom, which includes 20,000 shares issuable upon the exercise of stock
options exercisable at or within 60 days after May 6, 2003.
(11) Mr. Oolie is also the beneficial owner of 1,000 shares of common stock of
Ulticom.
(12) Mr. Sorin is also the beneficial owner of 16,364 shares of common stock of
Ulticom, and 3,669 shares of common stock of Verint, which are issuable
upon the exercise of stock options exercisable at or within 60 days after
May 6, 2003.
EQUITY COMPENSATION PLAN INFORMATION
As of January 31, 2003
---------------------------------------------------------------------------
Number of shares
Number of shares to be Weighted-average remaining available
issued upon exercise exercise price of for future issuance
of outstanding options, outstanding options, under equity
warrants and rights warrants and rights compensation plans
------------------- ------------------- ------------------
Equity compensation plans
approved by stockholders 24,876,809 (1) $12.78 11,156,662 (2)
Equity compensation plans
not approved by stockholders(3) 0 N.A. 0
---------- ------ ----------
Total 24,876,809 $12.78 11,156,662
(1) Includes 1,682,079 options with an average exercise price of $17.35 under
plans assumed in connection with our acquisition of Boston Technology, Inc.
(2) Includes 1,921,579 shares remaining under the Company's employee stock
purchase plans.
(3) This table excludes compensation plans from which the Company is no longer
issuing shares other than shares to be issued upon exercise of options that are
outstanding. As of January 31, 2003, there were options to acquire 203,018
shares with a weighted-average exercise price of $6.22 outstanding under such
plans. The Company assumed these options in connection with acquisitions of
various entities.
-16-
OPTIONS TO PURCHASE SUBSIDIARY SHARES
The Chief Executive Officer of the Company, as well as other
employees, including certain executive officers of the Company, have been
granted options to acquire shares of certain subsidiaries and affiliates of the
Company, other than Comverse. Such option awards are not tied to the performance
of the respective subsidiaries or affiliates, but are generally intended to
incentivize employees in the units in which they are employed and for which they
have direct responsibility. The amount of shares issuable upon exercise of such
options varies among the subsidiaries and affiliates affected, not exceeding in
any instance 20% of the shares outstanding assuming exercise in full. These
options have terms ranging up to 15 years and become exercisable and vest over
various periods ranging up to seven years from the date of initial grant. The
exercise price of each option is equal to the higher of the book value of the
underlying shares at the date of grant or the fair market value of such shares
at that date determined by the Board of Directors of the applicable subsidiary
or by a committee of the Board of Directors of the Company.
These options (and any shares received by the holders upon exercise)
provide the option holders with a potentially larger equity interest in the
respective subsidiaries and affiliates than in the Company, which, under certain
circumstances, could cause the option holders' interests to conflict with those
of the Company's shareholders generally.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the SEC initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during the fiscal year ended January 31, 2003, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with, except as set forth below. On the
last Form 4 filed by Mr. Girard in December 2001, he incorrectly reported
ownership of 101,963 shares. Due to prior gifts and/or distributions made to
family members and organizations, the correct number of shares reported should
have been 78,955. Mr. Girard filed a Form 5 on May 22, 2003 correcting his
ownership amounts. No changes were made to his ownership since that filing.
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 $136,500 for legal services rendered
to the Company during the year ended January 31, 2003.
-17-
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/ David Kreinberg
-----------------------------------
David Kreinberg
Executive Vice President and
Chief Financial Officer
Dated: May 30, 2003
-18-
CERTIFICATIONS
I, Kobi Alexander, Chairman of the Board of Directors and Chief Executive
Officer, certify that:
1. I have reviewed this amendment to the annual report on Form 10-K/A of
Comverse Technology, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this amended annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this amended annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
amended annual report.
Date: May 30, 2003 /s/ Kobi Alexander
------------------------------------------
Name: Kobi Alexander
Title: Chairman of the Board of Directors
and Chief Executive Officer
I, David Kreinberg, the Executive Vice President and Chief Financial Officer of
Comverse Technology, Inc., certify that:
1. I have reviewed this amendment to the annual report on Form 10-K/A of
Comverse Technology, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this amended annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this amended annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
amended annual report.
Date: May 30, 2003 /s/ David Kreinberg
------------------------------------------
Name: David Kreinberg
Title: Executive Vice President and
Chief Financial Officer
-19-
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
*These exhibits are being "furnished" with this periodic report and are
not deemed "filed" with the Securities and Exchange Commission and are not
incorporated by reference in any filing of Comverse Technology, Inc. under
the Securities Act of 1933 or the Securities Exchange Act of 1934, whether
made before or after the date hereof and irrespective of any general
incorporation by reference language in any such filings.
-20-