Related Party Transactions	9 Months Ended
Oct. 31, 2012
Related Party Transactions [Abstract]
Related Party Transactions	RELATED PARTY TRANSACTIONS Settlement Agreement with Cadian Capital On May 30, 2012, CTI's Board of Directors entered into a letter agreement with Cadian Capital Management, LLC (“Cadian Capital”), Cadian Fund LP, Cadian Master Fund LP and Cadian GP LLC (Cadian Capital, together with the aforementioned entities other than CTI and Verint being referred to collectively as the “Cadian Group”) with respect to the solicitation for the election of CTI director nominees at the election of directors at the Annual Meeting of Shareholders of CTI that was held on June 28, 2012 (the “CTI AGM”) by the Cadian Group pursuant to the proxy statement filed with SEC on March 28, 2012, as subsequently amended. Such letter agreement is referred to herein as the “Letter Agreement.” Pursuant to the terms and conditions of the Letter Agreement, the Cadian Group immediately abandoned its solicitation for the election of its or any other person's nominees as directors of CTI other than those nominees proposed by CTI in connection with the CTI AGM and agreed to vote all securities of CTI over which it has beneficial ownership in favor of the slate of directors named in CTI's proxy statement filed in connection with the CTI AGM the parties also agreed to take various actions with respect to the composition of the Board of Directors of Verint Systems (the “Verint Board”), the Board of Directors of Comverse, Inc. (the “Comverse Board”) and the CTI Board. With respect to the Verint Board, the parties to the Letter Agreement agreed, among other things, that three nominees designated by Cadian Capital (the “CTI-Cadian Verint Nominees”) and acceptable to the CTI Board and the Verint Board under the "Applicable Standard" (as defined below) to replace Augustus Oliver, Theodore Schell and Mark Terrell, three members of the CTI Board who also currently serve as members of the Verint Board. With respect to the Comverse Board, CTI agreed that, immediately prior to the Share Distribution, it would cause the Comverse Board to be comprised of seven directors, one of whom shall be the chief executive officer of Comverse, three of whom shall be designated by the CTI Board (initially Susan Bowick and Mark Terrell and a director to be named in the near term), and three of whom shall be designated by Cadian Capital (which three shall be James Budge, Stephen Andrews and Doron Inbar), each of whom are acceptable to the CTI Board to serve as directors of the Comverse Board. Accordingly, on October 30, 2012, the CTI Board, in CTI's capacity as the sole stockholder of Comverse, resolved to increase the size of the Comverse Board, immediately prior to the Share Distribution to seven directors and to appoint James Budge, Steven Andrews and Doron Inbar to fill three of the resulting four vacancies in accordance with the Letter Agreement. The CTI Board also resolved on October 30, 2012, in CTI's capacity as the sole stockholder of Comverse, to appoint Henry R. Nothhaft to fill the remaining vacancy on the Comverse Board and the other members of the Comverse Board appointed him to serve as Chairman. The “Applicable Standard” means, with respect to any decision of a board of directors or any individual director with regard to whether to approve or find acceptable any nominee or designee for election or appointment as a director, such board of directors or director acting reasonably and in good faith but in no event constrained from exercising its, his or her fiduciary duties. In addition, each member of the Cadian Group agreed that (a) it would vote all securities of CTI over which it has beneficial ownership in favor of the Share Distribution and publicly announce its intention to vote in favor of the Share Distribution (provided, that the terms and conditions of the Share Distribution are, in the reasonable business judgment of Cadian Capital, fair and reasonable to, and in the best interests of, CTI shareholders) and (b) if a merger between CTI and Verint is proposed on terms and conditions that, in the reasonable business judgment of Cadian Capital acting in good faith, are fair and reasonable to, and in the best interests of, both CTI shareholders and Verint stockholders, it will vote all securities of CTI and Verint over which it has beneficial ownership in favor of such merger and publicly announce its intention to vote in favor of such merger. In consideration of the foregoing, CTI agreed to reimburse up to $300,000 and CTI did reimburse approximately $263,000 of the reasonable, out-of-pocket documented expenses of the Cadian Group. The rights and obligations of the Cadian Group and CTI under the Letter Agreement (a) with respect to the CTI Board will terminate and be of no further force or effect in the event that the Cadian Group at any time ceases to own, in the aggregate, at least 1,000,000 shares of CTI common stock, (b) with respect to the Verint Board will terminate and be of no further force and effect (i) in the event that the Cadian Group ceases to own, in the aggregate, at least 1,000,000 shares of Verint common stock or (ii) in the event that CTI ceases to be the beneficial owner of a majority of the outstanding voting securities of Verint. In addition, the Letter Agreement will terminate and be of no further force or effect (x) from and after June 28, 2013 or (y) earlier, in the event that any member of the Cadian Group breaches in any material respect certain of its obligations under the Letter Agreement and such breach remains uncured after receipt of notice. Merger of CTI and Verint Merger Agreement On August 12, 2012, CTI and Verint entered into an Agreement and Plan of Merger (the “Verint Merger Agreement”) providing for the merger, upon the terms and subject to the conditions set forth in the Verint Merger Agreement, of CTI with and into a wholly-owned subsidiary of Verint (the “Verint Merger”). At the completion of the Verint Merger, each share of CTI common stock outstanding immediately prior to the effective time of the Verint Merger will be converted into the right to receive new shares of Verint common stock (“Verint Common Stock”) at an exchange ratio specified in the Verint Merger Agreement and described below. The Verint Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and it is a condition to the completion of the Verint Merger that each of CTI and Verint receive tax opinions from their respective counsel stating that the Verint Merger should be treated as a reorganization qualifying under Section 368(a) of the Internal Revenue Code. Verint has informed us that prior to completion of the Verint Merger, it may seek a private letter ruling from the Internal Revenue Service (the “IRS”) to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code; however, there can be no assurance that it will seek to obtain a ruling from the IRS or that the IRS will grant such a ruling. If the IRS were to determine, prior to completion of the Verint Merger, that the Verint Merger does not qualify as a reorganization under Section 368(a) of the Code, or there is substantial doubt that a favorable ruling would eventually be obtained, it is unlikely that CTI's and Verint's respective counsel would deliver the required opinions and the completion of the Verint Merger might not occur. As of October 31, 2012, CTI held approximately 40.6% of the total number of shares of Verint Common Stock outstanding and also all of Verint's outstanding Series A Convertible Perpetual Preferred Stock (“Verint Preferred Stock”) which, if converted, would result in CTI holding in the aggregate approximately 53.5% of the total number of shares of Verint Common Stock outstanding. The share exchange provision of the Verint Merger Agreement provides that each holder of CTI common shares will receive new shares of Verint Common Stock representing such holder's pro rata portion of an aggregate number of shares of Verint Common Stock equal to the sum of (1) the number of shares of Verint Common Stock held by CTI immediately prior to the completion of the Verint Merger (including the shares of Verint Common Stock issuable upon conversion of the Verint Preferred Stock held by CTI at a conversion price of $32.66) plus (2) additional shares of Verint Common Stock the number of which is equal to the dollar value described below (the “Target Amount”) divided by the average of the daily volume weighted averages of the trading prices of Verint Common Stock on the NASDAQ Global Market during the 20 consecutive trading days ending on the second trading day immediately prior to the closing date of the Verint Merger (the “Average Closing Price”), plus (3) an additional number of shares of Verint Common Stock based on the positive net worth of CTI (as determined in accordance with the Verint Merger Agreement) immediately prior to the completion of the Verint Merger, up to a maximum of dollar value of $10.0 million. The Target Amount is $25.0 million, however it will be reduced to $0, if prior to the completion of the Verint Merger, CTI beneficially owns less than 50% of the outstanding shares of Verint Common Stock (on an as-exercised and fully diluted basis), unless CTI owns less than 50% of the Verint Common Stock because Verint issued new shares of voting securities after the date of the Verint Merger Agreement. The number of shares of Verint Common Stock into which one share of CTI common stock will convert as a result of the Verint Merger is referred to herein as the “Exchange Ratio.” Each outstanding share of Verint Common Stock and Verint Preferred Stock held by CTI upon the completion of the Verint Merger will be cancelled. Any outstanding shares of Verint Preferred Stock held by stockholders other than CTI will be cancelled and converted into shares of Verint Common Stock in accordance with the terms of the certificate of designation of the Verint Preferred Stock, which will be amended prior to completion of the Verint Merger to provide for such cancellation and conversion. Holders of shares of Verint Common Stock immediately prior to the completion of the Verint Merger, other than CTI, will continue to own their existing shares, which will not be affected by the Verint Merger. The completion of the Verint Merger is subject to several conditions that the parties believe are customary for transactions of this type, including, among others, (1) the approval of the Verint Merger Agreement by Verint's stockholders and CTI's shareholders, as well as, in the case of Verint, by the affirmative vote of holders representing a majority of shares of Verint Common Stock that are not held by CTI or its subsidiaries, (2) the absence of a material adverse effect with respect to Verint, CTI or Comverse, (3) effectiveness of the Form S-4 registration statement registering the issuance of the Verint Common Stock in the Verint Merger and the absence of any stop order (or proceedings seeking a stop order) in respect thereof, (4) authorization for listing on the NASDAQ Stock Market of the Verint Common Stock to be issued in the Verint Merger and (5) receipt of tax opinions from Verint's and CTI's respective counsel stating that the Verint Merger should be treated as a reorganization qualifying under Section 368(a) of the Internal Revenue Code. In addition, completion of the Verint Merger by Verint is subject to other conditions, including (1) receipt of confirmation of the positive net worth of CTI (as determined in accordance with the Verint Merger Agreement), (2) receipt of copies of the opinions with respect to the capital adequacy of CTI and Comverse delivered to the CTI Board of Directors from a nationally recognized provider of such opinions, and (3) determination by Verint's board of directors (in good faith after consultation with counsel) that there are no pending or threatened actions (other than shareholder actions arising out of the Verint Merger or the Share Distribution) that create a liability to Verint in excess of $10.0 million or a material adverse effect on CTI, taking into account certain indemnification obligations. The Verint Merger Agreement restricts CTI from amending or modifying the terms of the agreements relating to the Share Distribution from the forms attached to the Verint Merger Agreement without Verint's consent if those amendments or modifications would adversely affect the rights of Verint or CTI under those agreements in any material respect, including without limitation the right of CTI to be indemnified for certain losses related to Comverse. The Verint Merger Agreement provides certain termination rights to both Verint and CTI, and further provides that in connection with the termination of the Verint Merger Agreement under specified circumstances, Verint may be required to pay CTI, or CTI may be required to pay Verint, a fee of $10.0 million and/or such party's out-of-pocket expenses. Furthermore, upon termination of the Verint Merger Agreement under certain circumstances, CTI and Verint would be entitled to certain rights and subject to certain obligations set forth in the Governance and Repurchase Rights Agreement, that is described below. The terms of the Verint Merger Agreement were negotiated between CTI and a special committee of the board of directors of Verint consisting solely of independent directors not affiliated with CTI. The Verint Merger Agreement was approved by the board of directors of Verint based on the recommendation of the special committee and by CTI's Board of Directors. During the three and nine months ended October 31, 2012, CTI and Verint incurred expenses of $10.4 million and $14.2 million, respectively, consisting primarily of legal and other professional fees, associated with this matter, which have been expensed as incurred and are reflected within selling, general and administrative expenses. The Company expects to continue to incur such expenses through, and possibility beyond, the completion of the Verint Merger, including certain professional fees which were contingent upon execution of the Verint Merger Agreement. Voting Agreement In connection with entering into the Verint Merger Agreement, CTI entered into a Voting Agreement (the “Voting Agreement”) with Verint pursuant to which CTI agreed, among other things, to vote the shares of Verint Common Stock and Verint Preferred Stock beneficially owned by CTI in favor of the adoption of the Verint Merger Agreement. CTI also agreed to comply with certain restrictions on the disposition of such shares as set forth in the Voting Agreement, including requiring any transferee of CTI's voting securities to be bound by the terms of the Voting Agreement. Pursuant to its terms, the Voting Agreement will terminate upon the earlier to occur of (1) the completion of the Verint Merger and (2) the termination of the Verint Merger Agreement in accordance with its terms. Governance and Repurchase Rights Agreement In connection with the Verint Merger, Verint and CTI entered into a Governance and Repurchase Rights Agreement (the “Governance and Repurchase Rights Agreement”). Pursuant to the Governance and Repurchase Rights Agreement, in the event the Verint Merger Agreement is terminated either because (i) the Share Distribution or a Comverse disposition had failed to occur by April 30, 2013 (but only if CTI shareholder approval was obtained) or (ii) a knowing or deliberate breach by CTI of its obligations under the Verint Merger Agreement was not cured within 30 days of notice (“Trigger Events”), then during the 18 months following such termination, unless the Governance and Repurchase Rights Agreement is terminated earlier in accordance with its terms (the “Option Period”), Verint will use commercially reasonable efforts to cause its board of directors to be comprised of (1) nine directors for so long as the Letter Agreement dated May 30, 2012 among CTI, Cadian Capital Management, LLC (“Cadian Capital”), Cadian Fund LP, Cadian Master Fund LP and Cadian GP LLC (the “Cadian Agreement”) remains in effect and (2) seven directors in the event the Cadian Agreement is no longer in effect. Each party has agreed to use commercially reasonable efforts to ensure that any slate of nominees recommended for election to the Verint board of directors during the Term (as defined below) will include the following individuals: (a) for so long as CTI beneficially owns 50% or more of Verint's outstanding voting securities (on an as-exercised and fully diluted basis) and the Cadian Agreement remains in effect, up to two nominees designated by CTI and up to three nominees designated by Cadian Capital, (b) for so long as either CTI beneficially owns more than 30% but less than 50% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis) and the Cadian Agreement remains in effect or CTI owns more than 50% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis) and the Cadian Agreement is no longer in effect, up to two nominees designated by CTI, and (c) for so long as CTI beneficially owns more than 15% but less than 30% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis), one nominee designated by CTI. During the Term (as defined below) and for so long as the Cadian Agreement remains in effect, CTI is not permitted to amend any of the terms or conditions of the Cadian Agreement relating to Verint or its board of directors, including the requirement contained in the Cadian Agreement that all Verint directors designated by Cadian Capital qualify as “independent” pursuant to the NASDAQ listing standards, without Verint's prior written consent. In addition, following a Trigger Event, until the earlier of the expiration of the applicable Option Period and the forfeiture of the Verint Call Option (as defined below), neither CTI nor its affiliates will, directly or indirectly, acquire or propose to acquire beneficial ownership of any of Verint's outstanding voting securities other than shares of Verint Common Stock acquired pursuant to the conversion of the Verint Preferred Stock beneficially owned by CTI (the “Standstill”). CTI also agreed that for so long as the Verint board of directors is not comprised of a majority of directors that qualify as “independent” pursuant to the NASDAQ listing standards, CTI will, following a Trigger Event until the expiration of the Term, vote the Verint voting securities that it beneficially owns (1) in proportion to the votes cast with respect to Verint voting securities not beneficially owned by CTI, unless the matter being voted upon (a) would materially and adversely affect the rights of the Verint Preferred Stock disproportionately relative to the rights of the Verint Common Stock, (b) solely relates to holders of Verint Preferred Stock or (c) would disproportionately have a material and adverse impact on holders of Verint Common Stock that own more than 9% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis), and (2) as instructed by CTI's public shareholders in the event of a proposal with respect to (a) the sale or disposition of all or substantially all of the assets of Verint or of Verint's significant subsidiaries to a third party, (b) the consummation of certain transactions by which any person or group is or becomes the beneficial owner, directly or indirectly, of 50% or more of Verint's voting securities or (c) specified other consolidations, mergers or business combinations involving Verint. Under the Governance and Repurchase Rights Agreement, CTI granted Verint the right (which right may only be exercised once) following a Trigger Event and during the Option Period to purchase such number of shares (the “Option Shares”) of Verint Preferred Stock owned by CTI (or Verint Common Stock into which such Verint Preferred Stock has been converted) that would result in CTI having beneficial ownership of less than 50% but not less than 49.5% (on an as-exercised and fully diluted basis) (the “Verint Call Option”). The purchase price of the Option Shares would be equal to the sum of (1) the aggregate liquidation preference of the Verint Preferred Stock to be purchased, plus (2) the aggregate market value (determined in accordance with the Governance and Repurchase Rights Agreement) of any Verint Common Stock to be purchased, plus (3) a pro rata portion of $5.0 million based on the number of Option Shares purchased (determined in accordance with the Governance and Repurchase Rights Agreement) relative to the total number of outstanding shares of the Verint Preferred Stock. The Verint Call Option will automatically terminate in the event that CTI beneficially owns less than 50% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis), with several exceptions, as defined in the Governance and Repurchase Rights Agreements. The Governance and Repurchase Rights Agreement will terminate upon the earlier of the expiration of the Option Period and the date on which CTI consummates a transaction involving CTI pursuant to which the CTI shareholders immediately preceding such transaction would hold securities representing less than 50% of the total outstanding voting power of the surviving or resulting entity of such transaction, unless the Verint Call Option had been exercised at that time, in which case the termination date will be extended until the consummation of the Verint Call Option (such period, the “Term”). Merger Accounting For financial reporting purposes, the Merger, if completed, will be accounted for as the acquisition of CTI by Verint, with Verint as the continuing reporting entity, in a combination of entities under common control. Common control transactions are transfers and exchanges between entities that are under the control of the same parent, or are transactions in which all of the combining entities are controlled by the same party or parties before and after the transaction and that control is not transitory. When accounting for a transfer of assets or exchange of shares between entities under common control, the entity receiving the net assets or the equity interests recognizes the assets and liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of the transfer. In the Merger, CTI's shareholders would exchange their CTI shares for new shares of Verint's common stock and CTI's equity interests in Verint would be canceled. Upon the issuance of new shares of Verint's common stock to CTI's shareholders and the corresponding cancellation of CTI's holdings of shares of Verint's common stock and Preferred Stock upon completion of the Merger, Verint's total consolidated stockholders' equity would be adjusted to reflect the carrying value of our Preferred Stock, and the carrying values of CTI's net assets, other than its equity interests in Verint, as increases to Verint's additional paid-in capital. Following the October 31, 2012 Share Distribution, the net assets of CTI consist primarily of its controlling equity interests in Verint, as well as certain residual cash and cash equivalents and other sundry net assets. In addition, CTI has NOL carryforwards for income tax reporting purposes. At the completion of the Merger, the deferred tax assets attributable to CTI's NOL carryforwards are expected to be fully offset by unrecognized tax benefits and valuation allowances. No CTI employees, operations or business processes would move to the combined company in the Merger. As a result, Verint's existing net assets and operations would represent the vast majority of the net assets and all of the operations of the combined company. Agreements Related to the Share Distribution CTI entered into a distribution agreement (the “Distribution Agreement”), transition services agreement, tax disaffiliation agreement and employee matters agreement (collectively, the “Share Distribution Agreements”) with Comverse in connection with the Share Distribution. Under the Distribution Agreement, among other things, Comverse has agreed to indemnify CTI and its affiliates (including Verint following the Verint Merger) against certain losses that may arise as a result of the Verint Merger and Share Distribution (see Note 12, Discontinued Operations). Verint Series A Convertible Perpetual Preferred Stock On May 25, 2007, in connection with Verint’s acquisition of Witness, CTI entered into a Securities Purchase Agreement with Verint (the “Securities Purchase Agreement”), whereby CTI purchased, for cash, an aggregate of 293,000 shares of Verint’s Series A Convertible Perpetual Preferred Stock (the “preferred stock”), which represents all of Verint’s outstanding preferred stock, for an aggregate purchase price of $293.0 million. Proceeds from the issuance of the preferred stock were used to partially finance the acquisition. The preferred stock is eliminated in consolidation. Through October 31, 2012 and January 31, 2012, cumulative, undeclared dividends on the preferred stock were $69.4 million and $59.0 million, respectively. As of October 31, 2012 and January 31, 2012, the liquidation preference of the preferred stock was $362.4 million and $352.0 million, respectively. Each share of preferred stock is entitled to a number of votes equal to the number of shares of common stock into which such share of preferred stock is convertible using the conversion rate that was in effect upon the issuance of the preferred stock in May 2007, on all matters voted upon by Verint Systems’ common stockholders. The conversion rate was set at 30.6185 shares of common stock for each share of preferred stock. As of October 31, 2012 and January 31, 2012, the preferred stock could be converted into approximately 11.1 million and 10.8 million shares of Verint Systems’ common stock, respectively. Under the terms of the Verint Merger Agreement, each holder of CTI common shares at the effective time of the Verint Merger would receive, among other consideration, the right to receive its pro rata portion of new shares of Verint Systems' common stock issuable upon conversion of the Preferred Stock held by CTI at the effective time of the Verint Merger at a conversion price of $32.66. Each outstanding share of the Preferred Stock held by CTI will be canceled at the completion of the Verint Merger, and each outstanding share of preferred stock not held by CTI will be converted into shares of Verint's common stock. Under the Verint Merger Agreement, the parties have agreed that the Verint Merger and the other transactions contemplated by the Verint Merger Agreement will not constitute fundamental change events under the terms of the Preferred Stock.

RELATED PARTY TRANSACTIONS

Settlement Agreement with Cadian Capital

On May 30, 2012, CTI's Board of Directors entered into a letter agreement with Cadian Capital Management, LLC (“Cadian Capital”), Cadian Fund LP, Cadian Master Fund LP and Cadian GP LLC (Cadian Capital, together with the aforementioned entities other than CTI and Verint being referred to collectively as the “Cadian Group”) with respect to the solicitation for the election of CTI director nominees at the election of directors at the Annual Meeting of Shareholders of CTI that was held on June 28, 2012 (the “CTI AGM”) by the Cadian Group pursuant to the proxy statement filed with SEC on March 28, 2012, as subsequently amended. Such letter agreement is referred to herein as the “Letter Agreement.”

Pursuant to the terms and conditions of the Letter Agreement, the Cadian Group immediately abandoned its solicitation for the election of its or any other person's nominees as directors of CTI other than those nominees proposed by CTI in connection with the CTI AGM and agreed to vote all securities of CTI over which it has beneficial ownership in favor of the slate of directors named in CTI's proxy statement filed in connection with the CTI AGM the parties also agreed to take various actions with respect to the composition of the Board of Directors of Verint Systems (the “Verint Board”), the Board of Directors of Comverse, Inc. (the “Comverse Board”) and the CTI Board.

With respect to the Verint Board, the parties to the Letter Agreement agreed, among other things, that three nominees designated by Cadian Capital (the “CTI-Cadian Verint Nominees”) and acceptable to the CTI Board and the Verint Board under the "Applicable Standard" (as defined below) to replace Augustus Oliver, Theodore Schell and Mark Terrell, three members of the CTI Board who also currently serve as members of the Verint Board.

With respect to the Comverse Board, CTI agreed that, immediately prior to the Share Distribution, it would cause the Comverse Board to be comprised of seven directors, one of whom shall be the chief executive officer of Comverse, three of whom shall be designated by the CTI Board (initially Susan Bowick and Mark Terrell and a director to be named in the near term), and three of whom shall be designated by Cadian Capital (which three shall be James Budge, Stephen Andrews and Doron Inbar), each of whom are acceptable to the CTI Board to serve as directors of the Comverse Board. Accordingly, on October 30, 2012, the CTI Board, in CTI's capacity as the sole stockholder of Comverse, resolved to increase the size of the Comverse Board, immediately prior to the Share Distribution to seven directors and to appoint James Budge, Steven Andrews and Doron Inbar to fill three of the resulting four vacancies in accordance with the Letter Agreement. The CTI Board also resolved on October 30, 2012, in CTI's capacity as the sole stockholder of Comverse, to appoint Henry R. Nothhaft to fill the remaining vacancy on the Comverse Board and the other members of the Comverse Board appointed him to serve as Chairman.

The “Applicable Standard” means, with respect to any decision of a board of directors or any individual director with regard to whether to approve or find acceptable any nominee or designee for election or appointment as a director, such board of directors or director acting reasonably and in good faith but in no event constrained from exercising its, his or her fiduciary duties.

In addition, each member of the Cadian Group agreed that (a) it would vote all securities of CTI over which it has beneficial ownership in favor of the Share Distribution and publicly announce its intention to vote in favor of the Share Distribution (provided, that the terms and conditions of the Share Distribution are, in the reasonable business judgment of Cadian Capital, fair and reasonable to, and in the best interests of, CTI shareholders) and (b) if a merger between CTI and Verint is proposed on terms and conditions that, in the reasonable business judgment of Cadian Capital acting in good faith, are fair and reasonable to, and in the best interests of, both CTI shareholders and Verint stockholders, it will vote all securities of CTI and Verint over which it has beneficial ownership in favor of such merger and publicly announce its intention to vote in favor of such merger.

In consideration of the foregoing, CTI agreed to reimburse up to $300,000 and CTI did reimburse approximately $263,000 of the reasonable, out-of-pocket documented expenses of the Cadian Group.

The rights and obligations of the Cadian Group and CTI under the Letter Agreement (a) with respect to the CTI Board will terminate and be of no further force or effect in the event that the Cadian Group at any time ceases to own, in the aggregate, at least 1,000,000 shares of CTI common stock, (b) with respect to the Verint Board will terminate and be of no further force and effect (i) in the event that the Cadian Group ceases to own, in the aggregate, at least 1,000,000 shares of Verint common stock or (ii) in the event that CTI ceases to be the beneficial owner of a majority of the outstanding voting securities of Verint. In addition, the Letter Agreement will terminate and be of no further force or effect (x) from and after June 28, 2013 or (y) earlier, in the event that any member of the Cadian Group breaches in any material respect certain of its obligations under the Letter Agreement and such breach remains uncured after receipt of notice.

Merger of CTI and Verint

Merger Agreement

On August 12, 2012, CTI and Verint entered into an Agreement and Plan of Merger (the “Verint Merger Agreement”) providing for the merger, upon the terms and subject to the conditions set forth in the Verint Merger Agreement, of CTI with and into a wholly-owned subsidiary of Verint (the “Verint Merger”). At the completion of the Verint Merger, each share of CTI common stock outstanding immediately prior to the effective time of the Verint Merger will be converted into the right to receive new shares of Verint common stock (“Verint Common Stock”) at an exchange ratio specified in the Verint Merger Agreement and described below.

The Verint Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and it is a condition to the completion of the Verint Merger that each of CTI and Verint receive tax opinions from their respective counsel stating that the Verint Merger should be treated as a reorganization qualifying under Section 368(a) of the Internal Revenue Code. Verint has informed us that prior to completion of the Verint Merger, it may seek a private letter ruling from the Internal Revenue Service (the “IRS”) to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code; however, there can be no assurance that it will seek to obtain a ruling from the IRS or that the IRS will grant such a ruling. If the IRS were to determine, prior to completion of the Verint Merger, that the Verint Merger does not qualify as a reorganization under Section 368(a) of the Code, or there is substantial doubt that a favorable ruling would eventually be obtained, it is unlikely that CTI's and Verint's respective counsel would deliver the required opinions and the completion of the Verint Merger might not occur.

As of October 31, 2012, CTI held approximately 40.6% of the total number of shares of Verint Common Stock outstanding and also all of Verint's outstanding Series A Convertible Perpetual Preferred Stock (“Verint Preferred Stock”) which, if converted, would result in CTI holding in the aggregate approximately 53.5% of the total number of shares of Verint Common Stock outstanding.

The share exchange provision of the Verint Merger Agreement provides that each holder of CTI common shares will receive new shares of Verint Common Stock representing such holder's pro rata portion of an aggregate number of shares of Verint Common Stock equal to the sum of (1) the number of shares of Verint Common Stock held by CTI immediately prior to the completion of the Verint Merger (including the shares of Verint Common Stock issuable upon conversion of the Verint Preferred Stock held by CTI at a conversion price of $32.66) plus (2) additional shares of Verint Common Stock the number of which is equal to the dollar value described below (the “Target Amount”) divided by the average of the daily volume weighted averages of the trading prices of Verint Common Stock on the NASDAQ Global Market during the 20 consecutive trading days ending on the second trading day immediately prior to the closing date of the Verint Merger (the “Average Closing Price”), plus (3) an additional number of shares of Verint Common Stock based on the positive net worth of CTI (as determined in accordance with the Verint Merger Agreement) immediately prior to the completion of the Verint Merger, up to a maximum of dollar value of $10.0 million. The Target Amount is $25.0 million, however it will be reduced to $0, if prior to the completion of the Verint Merger, CTI beneficially owns less than 50% of the outstanding shares of Verint Common Stock (on an as-exercised and fully diluted basis), unless CTI owns less than 50% of the Verint Common Stock because Verint issued new shares of voting securities after the date of the Verint Merger Agreement. The number of shares of Verint Common Stock into which one share of CTI common stock will convert as a result of the Verint Merger is referred to herein as the “Exchange Ratio.”

Each outstanding share of Verint Common Stock and Verint Preferred Stock held by CTI upon the completion of the Verint Merger will be cancelled. Any outstanding shares of Verint Preferred Stock held by stockholders other than CTI will be cancelled and converted into shares of Verint Common Stock in accordance with the terms of the certificate of designation of the Verint Preferred Stock, which will be amended prior to completion of the Verint Merger to provide for such cancellation and conversion. Holders of shares of Verint Common Stock immediately prior to the completion of the Verint Merger, other than CTI, will continue to own their existing shares, which will not be affected by the Verint Merger.

The completion of the Verint Merger is subject to several conditions that the parties believe are customary for transactions of this type, including, among others, (1) the approval of the Verint Merger Agreement by Verint's stockholders and CTI's shareholders, as well as, in the case of Verint, by the affirmative vote of holders representing a majority of shares of Verint Common Stock that are not held by CTI or its subsidiaries, (2) the absence of a material adverse effect with respect to Verint, CTI or Comverse, (3) effectiveness of the Form S-4 registration statement registering the issuance of the Verint Common Stock in the Verint Merger and the absence of any stop order (or proceedings seeking a stop order) in respect thereof, (4) authorization for listing on the NASDAQ Stock Market of the Verint Common Stock to be issued in the Verint Merger and (5) receipt of tax opinions from Verint's and CTI's respective counsel stating that the Verint Merger should be treated as a reorganization qualifying under Section 368(a) of the Internal Revenue Code.

In addition, completion of the Verint Merger by Verint is subject to other conditions, including (1) receipt of confirmation of the positive net worth of CTI (as determined in accordance with the Verint Merger Agreement), (2) receipt of copies of the opinions with respect to the capital adequacy of CTI and Comverse delivered to the CTI Board of Directors from a nationally recognized provider of such opinions, and (3) determination by Verint's board of directors (in good faith after consultation with counsel) that there are no pending or threatened actions (other than shareholder actions arising out of the Verint Merger or the Share Distribution) that create a liability to Verint in excess of $10.0 million or a material adverse effect on CTI, taking into account certain indemnification obligations.

The Verint Merger Agreement restricts CTI from amending or modifying the terms of the agreements relating to the Share Distribution from the forms attached to the Verint Merger Agreement without Verint's consent if those amendments or modifications would adversely affect the rights of Verint or CTI under those agreements in any material respect, including without limitation the right of CTI to be indemnified for certain losses related to Comverse.

The Verint Merger Agreement provides certain termination rights to both Verint and CTI, and further provides that in connection with the termination of the Verint Merger Agreement under specified circumstances, Verint may be required to pay CTI, or CTI may be required to pay Verint, a fee of $10.0 million and/or such party's out-of-pocket expenses. Furthermore, upon termination of the Verint Merger Agreement under certain circumstances, CTI and Verint would be entitled to certain rights and subject to certain obligations set forth in the Governance and Repurchase Rights Agreement, that is described below.

The terms of the Verint Merger Agreement were negotiated between CTI and a special committee of the board of directors of Verint consisting solely of independent directors not affiliated with CTI. The Verint Merger Agreement was approved by the board of directors of Verint based on the recommendation of the special committee and by CTI's Board of Directors.

During the three and nine months ended October 31, 2012, CTI and Verint incurred expenses of $10.4 million and $14.2 million, respectively, consisting primarily of legal and other professional fees, associated with this matter, which have been expensed as incurred and are reflected within selling, general and administrative expenses. The Company expects to continue to incur such expenses through, and possibility beyond, the completion of the Verint Merger, including certain professional fees which were contingent upon execution of the Verint Merger Agreement.

Voting Agreement

In connection with entering into the Verint Merger Agreement, CTI entered into a Voting Agreement (the “Voting Agreement”) with Verint pursuant to which CTI agreed, among other things, to vote the shares of Verint Common Stock and Verint Preferred Stock beneficially owned by CTI in favor of the adoption of the Verint Merger Agreement. CTI also agreed to comply with certain restrictions on the disposition of such shares as set forth in the Voting Agreement, including requiring any transferee of CTI's voting securities to be bound by the terms of the Voting Agreement. Pursuant to its terms, the Voting Agreement will terminate upon the earlier to occur of (1) the completion of the Verint Merger and (2) the termination of the Verint Merger Agreement in accordance with its terms.

Governance and Repurchase Rights Agreement

In connection with the Verint Merger, Verint and CTI entered into a Governance and Repurchase Rights Agreement (the “Governance and Repurchase Rights Agreement”).

Pursuant to the Governance and Repurchase Rights Agreement, in the event the Verint Merger Agreement is terminated either because (i) the Share Distribution or a Comverse disposition had failed to occur by April 30, 2013 (but only if CTI shareholder approval was obtained) or (ii) a knowing or deliberate breach by CTI of its obligations under the Verint Merger Agreement was not cured within 30 days of notice (“Trigger Events”), then during the 18 months following such termination, unless the Governance and Repurchase Rights Agreement is terminated earlier in accordance with its terms (the “Option Period”), Verint will use commercially reasonable efforts to cause its board of directors to be comprised of (1) nine directors for so long as the Letter Agreement dated May 30, 2012 among CTI, Cadian Capital Management, LLC (“Cadian Capital”), Cadian Fund LP, Cadian Master Fund LP and Cadian GP LLC (the “Cadian Agreement”) remains in effect and (2) seven directors in the event the Cadian Agreement is no longer in effect. Each party has agreed to use commercially reasonable efforts to ensure that any slate of nominees recommended for election to the Verint board of directors during the Term (as defined below) will include the following individuals: (a) for so long as CTI beneficially owns 50% or more of Verint's outstanding voting securities (on an as-exercised and fully diluted basis) and the Cadian Agreement remains in effect, up to two nominees designated by CTI and up to three nominees designated by Cadian Capital, (b) for so long as either CTI beneficially owns more than 30% but less than 50% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis) and the Cadian Agreement remains in effect or CTI owns more than 50% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis) and the Cadian Agreement is no longer in effect, up to two nominees designated by CTI, and (c) for so long as CTI beneficially owns more than 15% but less than 30% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis), one nominee designated by CTI. During the Term (as defined below) and for so long as the Cadian Agreement remains in effect, CTI is not permitted to amend any of the terms or conditions of the Cadian Agreement relating to Verint or its board of directors, including the requirement contained in the Cadian Agreement that all Verint directors designated by Cadian Capital qualify as “independent” pursuant to the NASDAQ listing standards, without Verint's prior written consent.

In addition, following a Trigger Event, until the earlier of the expiration of the applicable Option Period and the forfeiture of the Verint Call Option (as defined below), neither CTI nor its affiliates will, directly or indirectly, acquire or propose to acquire beneficial ownership of any of Verint's outstanding voting securities other than shares of Verint Common Stock acquired pursuant to the conversion of the Verint Preferred Stock beneficially owned by CTI (the “Standstill”).

CTI also agreed that for so long as the Verint board of directors is not comprised of a majority of directors that qualify as “independent” pursuant to the NASDAQ listing standards, CTI will, following a Trigger Event until the expiration of the Term, vote the Verint voting securities that it beneficially owns (1) in proportion to the votes cast with respect to Verint voting securities not beneficially owned by CTI, unless the matter being voted upon (a) would materially and adversely affect the rights of the Verint Preferred Stock disproportionately relative to the rights of the Verint Common Stock, (b) solely relates to holders of Verint Preferred Stock or (c) would disproportionately have a material and adverse impact on holders of Verint Common Stock that own more than 9% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis), and (2) as instructed by CTI's public shareholders in the event of a proposal with respect to (a) the sale or disposition of all or substantially all of the assets of Verint or of Verint's significant subsidiaries to a third party, (b) the consummation of certain transactions by which any person or group is or becomes the beneficial owner, directly or indirectly, of 50% or more of Verint's voting securities or (c) specified other consolidations, mergers or business combinations involving Verint.

Under the Governance and Repurchase Rights Agreement, CTI granted Verint the right (which right may only be exercised once) following a Trigger Event and during the Option Period to purchase such number of shares (the “Option Shares”) of Verint Preferred Stock owned by CTI (or Verint Common Stock into which such Verint Preferred Stock has been converted) that would result in CTI having beneficial ownership of less than 50% but not less than 49.5% (on an as-exercised and fully diluted basis) (the “Verint Call Option”). The purchase price of the Option Shares would be equal to the sum of (1) the aggregate liquidation preference of the Verint Preferred Stock to be purchased, plus (2) the aggregate market value (determined in accordance with the Governance and Repurchase Rights Agreement) of any Verint Common Stock to be purchased, plus (3) a pro rata portion of $5.0 million based on the number of Option Shares purchased (determined in accordance with the Governance and Repurchase Rights Agreement) relative to the total number of outstanding shares of the Verint Preferred Stock.

The Verint Call Option will automatically terminate in the event that CTI beneficially owns less than 50% of Verint's outstanding voting securities (on an as-exercised and fully diluted basis), with several exceptions, as defined in the Governance and Repurchase Rights Agreements.

The Governance and Repurchase Rights Agreement will terminate upon the earlier of the expiration of the Option Period and the date on which CTI consummates a transaction involving CTI pursuant to which the CTI shareholders immediately preceding such transaction would hold securities representing less than 50% of the total outstanding voting power of the surviving or resulting entity of such transaction, unless the Verint Call Option had been exercised at that time, in which case the termination date will be extended until the consummation of the Verint Call Option (such period, the “Term”).

Merger Accounting

For financial reporting purposes, the Merger, if completed, will be accounted for as the acquisition of CTI by Verint, with Verint as the continuing reporting entity, in a combination of entities under common control. Common control transactions are transfers and exchanges between entities that are under the control of the same parent, or are transactions in which all of the combining entities are controlled by the same party or parties before and after the transaction and that control is not transitory. When accounting for a transfer of assets or exchange of shares between entities under common control, the entity receiving the net assets or the equity interests recognizes the assets and liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of the transfer.

In the Merger, CTI's shareholders would exchange their CTI shares for new shares of Verint's common stock and CTI's equity interests in Verint would be canceled. Upon the issuance of new shares of Verint's common stock to CTI's shareholders and the corresponding cancellation of CTI's holdings of shares of Verint's common stock and Preferred Stock upon completion of the Merger, Verint's total consolidated stockholders' equity would be adjusted to reflect the carrying value of our Preferred Stock, and the carrying values of CTI's net assets, other than its equity interests in Verint, as increases to Verint's additional paid-in capital.

Following the October 31, 2012 Share Distribution, the net assets of CTI consist primarily of its controlling equity interests in Verint, as well as certain residual cash and cash equivalents and other sundry net assets. In addition, CTI has NOL carryforwards for income tax reporting purposes. At the completion of the Merger, the deferred tax assets attributable to CTI's NOL carryforwards are expected to be fully offset by unrecognized tax benefits and valuation allowances. No CTI employees, operations or business processes would move to the combined company in the Merger. As a result, Verint's existing net assets and operations would represent the vast majority of the net assets and all of the operations of the combined company.

Agreements Related to the Share Distribution

CTI entered into a distribution agreement (the “Distribution Agreement”), transition services agreement, tax disaffiliation agreement and employee matters agreement (collectively, the “Share Distribution Agreements”) with Comverse in connection with the Share Distribution. Under the Distribution Agreement, among other things, Comverse has agreed to indemnify CTI and its affiliates (including Verint following the Verint Merger) against certain losses that may arise as a result of the Verint Merger and Share Distribution (see Note 12, Discontinued Operations).

Verint Series A Convertible Perpetual Preferred Stock

On May 25, 2007, in connection with Verint’s acquisition of Witness, CTI entered into a Securities Purchase Agreement with Verint (the “Securities Purchase Agreement”), whereby CTI purchased, for cash, an aggregate of 293,000 shares of Verint’s Series A Convertible Perpetual Preferred Stock (the “preferred stock”), which represents all of Verint’s outstanding preferred stock, for an aggregate purchase price of $293.0 million. Proceeds from the issuance of the preferred stock were used to partially finance the acquisition. The preferred stock is eliminated in consolidation. Through October 31, 2012 and January 31, 2012, cumulative, undeclared dividends on the preferred stock were $69.4 million and $59.0 million, respectively. As of October 31, 2012 and January 31, 2012, the liquidation preference of the preferred stock was $362.4 million and $352.0 million, respectively.

Each share of preferred stock is entitled to a number of votes equal to the number of shares of common stock into which such share of preferred stock is convertible using the conversion rate that was in effect upon the issuance of the preferred stock in May 2007, on all matters voted upon by Verint Systems’ common stockholders. The conversion rate was set at 30.6185 shares of common stock for each share of preferred stock. As of October 31, 2012 and January 31, 2012, the preferred stock could be converted into approximately 11.1 million and 10.8 million shares of Verint Systems’ common stock, respectively.

Under the terms of the Verint Merger Agreement, each holder of CTI common shares at the effective time of the Verint Merger would receive, among other consideration, the right to receive its pro rata portion of new shares of Verint Systems' common stock issuable upon conversion of the Preferred Stock held by CTI at the effective time of the Verint Merger at a conversion price of $32.66. Each outstanding share of the Preferred Stock held by CTI will be canceled at the completion of the Verint Merger, and each outstanding share of preferred stock not held by CTI will be converted into shares of Verint's common stock.

Under the Verint Merger Agreement, the parties have agreed that the Verint Merger and the other transactions contemplated by the Verint Merger Agreement will not constitute fundamental change events under the terms of the Preferred Stock.