
20.	SUBSEQUENT EVENTS

Equity-Based Compensation Awards

In connection with the Share Distribution, CTI's equity-based compensation awards were treated as follows:

Stock Option Awards

CTI options were adjusted as described below based on (1) the optionholder's employer following the Share Distribution and (2) whether the CTI options had an exercise price that is (A) less than $10.52 per share (referred to as the Group A options) or (B) equal to or greater than $10.52 per share (referred to as the Group B options).

As of the Share Distribution date, CTI options (Group A and Group B) held by Comverse's officers and employees were replaced with options for shares of Comverse common stock. As of the Share Distribution date, CTI options (Group A and Group B) held by CTI employees and by Verint employees remained CTI options.

As of the Share Distribution date, there were outstanding Group A options to purchase 374,800 CTI common shares, all of which were held by Comverse's officers and employees. The exercise price of the Group A options were adjusted such that the exercise price is equal to one hundred percent (100%) of the published closing trading price of a share of Comverse's common stock on the NASDAQ Stock Exchange on November 1, 2012. The number of shares of Comverse common stock subject to the Group A options were adjusted such that for each award, the aggregate Black-Scholes value of the Group A options immediately after the Share Distribution date was equal to the aggregate Black-Scholes value of the Group A options immediately before the Share Distribution date. The adjusted Group A options have a new term of ten years beginning on November 1, 2012. Any fractional shares resulting from the adjustment were rounded down to the nearest whole share. All other terms of the Group A options remained the same, including continued vesting pursuant to the current terms of the awards.

As of the distribution date, there were outstanding Group B options to purchase 1,863,577 CTI common shares. Comverse's officers and employees held Group B options to purchase 1,716,978 CTI common shares and CTI officers and employees and Verint officers and employees held options to purchase 146,599 CTI common shares. The exercise price of the Group B options held by Comverse's officers and employees was adjusted such that the exercise price is two hundred percent (200%) of the published closing trading price of a share of Comverse common stock on the NASDAQ Stock Exchange on November 1, 2012. The number of shares of Comverse common stock subject to the Group B options were adjusted such that for each award the aggregate Black-Scholes value of the Group B Options immediately after the Share Distribution date is equal to the aggregate Black-Scholes value of the Group B options immediately before the Share Distribution date. The adjusted Group B options have a remaining term that is the same as the existing option term. Any fractional shares resulting from the adjustment were rounded down to the nearest whole share. All other terms of the Group B options remained the same, including continued vesting pursuant to the current terms of the awards.

The exercise price and the number of shares underlying CTI options held by CTI officers and employees and Verint officers and employees were adjusted as described above for the Group B options (as all such options have an exercise price that is equal to or greater than $10.52 per share) except that these optionholders retained options to purchase CTI common shares which were adjusted such that the exercise price is equal two hundred percent (200%) of the published closing trading price of a CTI common share on the NASDAQ Stock Exchange (traded the “regular way”) on November 1, 2012. Any fractional shares resulting from the adjustment were rounded down to the nearest whole share. All other terms of the options remained the same, including continued vesting pursuant to the current terms of the awards.

As of the Share Distribution date, there were 1,533,699 CTI options that were in the money. CTI options that were “in the money,” (i.e., where the exercise price is less than the trading price of the CTI stock) were adjusted or replaced in a manner that preserved the aggregate in-the-money value and the ratio of exercise price to fair-market value of such options. The term of these awards was not changed. All other terms of the options remained the same, including continued vesting pursuant to the current terms of the awards.

Unvested Restricted Stock Units (RSUs) and Unvested Deferred Stock Units (DSUs)

As of November 1, 2012, unvested CTI RSUs and unvested CTI DSUs held by Comverse's officers and employees were replaced with Comverse DSUs and RSUs. Following the Share Distribution date, the number of shares of Comverse common stock underlying the replaced RSUs and DSUs were equal to (1) the number of CTI common shares underlying the CTI RSUs and CTI DSUs held as of the Share Distribution date multiplied by (2) a ratio, the numerator of which is equal to the published closing trading price of a CTI common share on the NASDAQ Stock Exchange (traded the “regular way”) on the day prior to November 1, 2012 and the denominator of which is equal to the published closing trading price of a share of Comverse common stock on the NASDAQ Stock Exchange on November 1, 2012. In lieu of issuing fractional RSUs or DSUs, a cash payment equal to the value of the fractional share was made to the holder, which payment was nominal. All other terms and conditions of the RSUs and DSUs remained the same, including continued vesting pursuant to the current terms of the awards.

As of the Share Distribution date, unvested CTI RSUs and unvested CTI DSUs held by CTI directors, officers and employees remained CTI RSUs or CTI DSUs. Following the distribution date, the number of CTI common shares underlying the CTI RSUs and CTI DSUs were equal to (1) the number of CTI shares of common stock underlying the CTI RSUs and CTI DSUs held as of the distribution date multiplied by (2) a ratio, the numerator of which is equal to the published closing trading price of a CTI common share on the NASDAQ Stock Exchange (traded the “regular way”) on the day prior to November 1, 2012 and, the denominator of which is equal to the published closing trading price of a CTI common share on the NASDAQ Stock Exchange (traded “ex-dividend”) on November 1, 2012. In lieu of issuing fractional RSUs or DSUs, a cash payment equal to the value of the a fractional share, was made to the holder, which payment was nominal. All other terms of the CTI RSUs and CTI DSUs remained the same, including vesting pursuant to the current terms of the awards.

The following table presents the combined activity of all the CTI stock incentive plans in connection with the Share Distribution:



	Stock options
	Group A	Group B	In the money	Total	RSUs /DSUs
Outstanding as of the Share Distribution date	374,800	1,863,577	1,533,699	3,772,076	4,428,943
Less: Held by Comverse's officers, employees and consultants replaced with Comverse's options, RSU /DSU.	374,800	1,716,978	1,533,699	3,625,477	3,785,006
Held by CTI and Verint officers and employees as of the Share Distribution	—	146,599	—	146,599	643,937
Modified options / RSUs and DSUs held by CTI and Verint officers and employees post Share Distribution	—	64,369	—	64,369	1,248,089

The change in terms of CTI's equity-based awards held by CTI employees was considered a modification of an award. As a result, the Company compared the fair value of the awards immediately prior to the Share Distribution to the fair value of the awards immediately after the Share Distribution to measure incremental compensation cost. The modification resulted in an increase in the fair value of the awards. The amount of non-cash compensation expense was negligible.