-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GEmeZ4+muJh4bMGuCWCgJzrnbQy0tVDIfoHytCj6zxqxr8egOwYQFg9f4fYGAB7C vTPeuHAWecD2j6P41Z3zyQ== 0000950130-97-001937.txt : 19970429 0000950130-97-001937.hdr.sgml : 19970429 ACCESSION NUMBER: 0000950130-97-001937 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970428 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMVERSE TECHNOLOGY INC/NY/ CENTRAL INDEX KEY: 0000803014 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 133238402 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-15502 FILM NUMBER: 97588375 BUSINESS ADDRESS: STREET 1: 170 CROSSWAYS PARK DR CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5166777200 MAIL ADDRESS: STREET 1: 170 CROSSWAYS PARK DRIVE STREET 2: 170 CROSSWAYS PARK DRIVE CITY: WOODBURY STATE: NY ZIP: 11797 10-K405/A 1 FORM 10-K405 AMENDMENT NO. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 TO Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year ended December 31, 1996 Commission File Number 0-15502 COMVERSE TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) NEW YORK 13-3238402 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 170 CROSSWAYS PARK DRIVE WOODBURY, NY 11797 (Address of principal executive offices) Registrant's telephone number, including area code: 516-677-7200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Not applicable Not applicable Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.10 PAR VALUE PER SHARE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: [X] No: [ ] ================================================================================ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant on April 1, 1997 was approximately $962,157,462.50. The closing price of the registrant's common stock on the NASDAQ National Market System on April 1, 1997 was $38.75 per share. There were 24,829,870 shares of the registrant's common stock outstanding on April 1, 1997. DOCUMENTS INCORPORATED BY REFERENCE None. ____________________________ TRILOGUE is a registered trademark and AUDIODISK, FaxNet, GenLogue, Mentor, SafeNet, Trade Shield, TRILOGUE INfinity, ULTRA, UltraNet, and Verify are trademarks of the Company. ii PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth certain information regarding the directors and executive officers of the Company. Each director has been elected to serve until the next annual meeting of shareholders and each executive officer serves at the discretion of the Board of Directors.
NAME AGE POSITION WITH THE COMPANY - ---- --- ------------------------- Kobi Alexander/(1)(2)/ 44 President, Chairman of the Board of Directors, Chief Executive Officer and Director Carmel Vernia 44 Chief Operating Officer; Managing Director of Efrat Future Technology Ltd. Igal Nissim 41 Chief Financial Officer Zvi Alexander 74 Director John H. Friedman/(2)(3)(4)/ 43 Director Sam Oolie/(1)(2)(3)(4)/ 60 Director William F. Sorin/(1)(4)/ 48 Secretary and Director Yechiam Yemini/(1)(3)/ 49 Director
- ---------- (1) Member of Executive Committee of the Board of Directors. (2) Member of Audit Committee of the Board of Directors. (3) Member of Remuneration and Stock Option Committee of the Board of Directors. (4) Member of Corporate Planning and Structure Committee of the Board of Directors. BACKGROUND OF DIRECTORS AND EXECUTIVE OFFICERS Kobi Alexander. Mr. Alexander has served as Chairman of the Board of -------------- Directors of the Corporation since September 1986, as President and Chief Executive Officer since April 1987 and as a director of the Corporation since its formation. Mr. Alexander also served as Co-Managing Director of the Corporation's wholly-owned Israeli subsidiary, Efrat Future Technology Ltd. ("Efrat") from its formation in 1982 until October 1986, and currently serves as Chairman of the Board of Directors of Efrat. From October 1984 to September 1986, Mr. Alexander served as Co-Chairman and Co-Chief Executive Officer of the Corporation. Prior to the formation of Efrat, 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 Smith Barney, Inc.). Mr. Alexander received a B.A., magna cum laude, in Economics from the Hebrew University of Jerusalem in 1977, and an M.B.A. in Finance from New York University in 1980. He has served as the Chairman of the High-Tech Research and Development Section of the Israeli Association of Industrialists. Carmel Vernia. Mr. Vernia serves as Chief Operating Officer of the ------------- Corporation and as Managing Director of Efrat, where he has been employed since 1984 in various capacities, including Vice President, Manager of the Government Systems Division and Manager of the Research and Development Division. Prior to joining Efrat, he was employed by Elco Ltd. in Israel, where he headed the development of advanced perimeter intrusion detection systems. Between 1980 and 1982, Mr. Vernia was employed by Intel Corporation in Santa Clara, California, where he served as applications engineer for digital signal processing, digital telephony and data communications products. He received a B.Sc. in Electrical Engineering from the Technion, Israel Institute of Technology, in 1974 and a M.Sc. in Electrical and Computer Engineering from the University of California at Davis in 1980. Igal Nissim. Mr. Nissim has been employed by the Corporation since May ----------- 1986 and has served as Chief Financial Officer of the Corporation since January 1993. He previously served as Chief Financial Officer of Efrat. Prior to joining the Corporation, he was employed by Gadot Industrial Enterprises Ltd. for a period of two years as deputy controller, responsible for financial and cost accounting. Mr. Nissim is a Certified Public Accountant in Israel and was employed for four years with Kesselman & Kesselman, one of the largest accounting firms in Israel. He received a B.A. in Economics and Accounting from Tel Aviv University in 1981. Zvi Alexander. Mr. Alexander has been a director of the Corporation since ------------- August 1989. Mr. Alexander has been actively engaged in the energy industry for more than 30 years. He served as Chief Executive Officer of the Israeli National Oil Company and its successor from 1966 through 1976, and subsequently engaged in activities in the energy industry as a consultant and independent entrepreneur. He is currently Chairman of A&T Exploration Company Ltd. Zvi Alexander is the father of Kobi Alexander and the father-in-law of Yechiam Yemini. John H. Friedman. Mr. Friedman has been a director of the Corporation ---------------- since June 1994. He is the Managing Director of Easton Capital Corporation, a private investment firm founded by Mr. Friedman in 1991. From 1989 to 1991, Mr. Friedman was a Managing Director of Security Pacific Capital Investors. Prior to joining that firm, he was a Managing Director of E. M. Warburg, Pincus & Co., Inc., where he was employed from 1981 to 1989. From 1978 to 1980, Mr. Friedman practiced law with the firm of Sullivan & Cromwell in New York City. Mr. Friedman received a B.A., magna cum laude, from Yale University and a J.D. from Yale Law School. Sam Oolie. Mr. Oolie has been a director of the Corporation since May --------- 1986. He has been Chairman and Chief Executive Officer of NoFire Technologies, Inc. since August 1996. He has also been Chairman of Oolie Enterprises, an investment company, since July 1985. He also has served as a director of CFC Associates, a venture capital firm, since January 1984. He was Chairman of The Nostalgia Network, a cable television network, from April 1987 to January 1990 and was Vice Chairman and director of American Mobile Communications, Inc., a cellular telephone company, from February 1987 to July 1989. From February 1962 to July 1985, Mr. Oolie was Chairman, Chief Executive Officer and a director of Food Concepts, Inc., a provider of food services to institutions and hospitals. Mr. Oolie also serves as a director of Avesis, Inc. and Noise Cancellation Technologies, Inc. Mr. Oolie received a B.S. from Massachusetts Institute of Technology in 1958 and an M.B.A. from Harvard Business School in 1961. William F. Sorin. Mr. Sorin, who has served as a director and the ---------------- Corporate Secretary of the Corporation since its formation, is an attorney engaged in private practice and is general counsel to the Corporation. Mr. Sorin received a B.A. from Trinity College in 1970 and a J.D., cum laude, from Harvard Law School in 1973. Yechiam Yemini. Professor Yemini, a director of the Corporation from -------------- October 1984 to May 1986 and since May 1987, has been Chief Scientific Advisor to the Corporation since its formation. He has been a professor in the computer science department of Columbia University since 1980, where he is leading research projects in the areas of distributed computing and communications and network management systems. Professor Yemini received a Ph.D. in Computer Science from UCLA in 1978 in the area of computer networking. Professor Yemini is the brother-in-law of Kobi Alexander and the son-in-law of Zvi Alexander. -2- COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors has four standing committees. The Executive Committee is empowered to exercise the full authority of the Board of Directors in circumstances when convening the full board is not practicable. The Audit Committee is responsible for reviewing audit procedures and supervising the relationship between the Company and its independent auditors. The Remuneration and Stock Option Committee is responsible for approving compensation arrangements for senior management of the Company and administering the Company's stock option plans. The Corporate Planning and Structure Committee reviews and makes recommendations to the board concerning issues of corporate structure and planning, including the formation and capitalization of subsidiaries of the Company, the structure of acquisition transactions, the terms of any stock options and other compensation arrangements in respect of subsidiaries of the Company, situations that might involve conflicts of interest relative to the Company and its subsidiaries and the terms of significant transactions between the Company and its subsidiaries. ITEM 11. EXECUTIVE COMPENSATION. The following table presents summary information regarding the compensation paid or accrued by the Company for services rendered during the years 1994, 1995 and 1996 by those of its executive officers whose salary and bonus compensation during 1996 exceeded $100,000: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION STOCK NAME AND ------------------------------ OPTION ALL OTHER PRINCIPAL POSITION YEAR SALARY/(1)/ BONUS/(2)/ GRANTS/(3)/ COMPENSATION/(4)/ - ------------------ ---- ------ ----- ------ ------------ Kobi Alexander 1996 $379,944 $864,829 100,000 $235,906 President, Chief Executive 1995 $342,950 $526,845 - $324,454 Officer and Chairman of 1994 $348,643 $364,020 500,000 $102,877 the Board of Directors Carmel Vernia 1996 $129,889 $150,000 25,000 $ 31,763 Chief Operating Officer 1995 $130,394 $100,000 - $ 29,921 Managing Director, Efrat 1994 $121,436 $100,000 200,000 $ 30,973 Igal Nissim 1996 $115,342 $ 23,070 5,000 $ 19,699 Chief Financial Officer 1995 $ 98,988 $ 15,000 10,000 - 1994 $101,480 $ 17,500 10,000 -
- ------------------- (1) Includes salary and payments in lieu of earned vacation. (2) Includes bonuses accrued for services performed in the year indicated, regardless of the year of payment. (3) See also "Security Ownership of Certain Beneficial Owners and Management - Options to Purchase Subsidiary Shares." (4) Consists of miscellaneous items not exceeding $25,000 in the aggregate for any individual, including premium payments and contributions under executive insurance and training plans and, in the case of Mr. Alexander, $184,800, $281,000 and $60,000 accrued in 1996, 1995 and 1994, respectively, for payments due on termination of employment pursuant to the terms of his employment agreements with the Company. -3- The following table sets forth information concerning options granted during 1996 to the executive officers of the Company under its employee stock option plans: STOCK OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION INDIVIDUAL GRANTS FOR OPTION TERM* - --------------------------------------------------------------------- -------------------------- PERCENT OF TOTAL OPTIONS NUMBER OF GRANTED TO EXERCISE SHARES EMPLOYEES PRICE SUBJECT TO IN FISCAL PER EXPIRATION NAME OPTION YEAR SHARE DATE 5% 10% - ---------------- ------ ---------- -------- ---------------- -------- ------- Kobi Alexander 100,000 9.2% $23.75 July 15, 2006 $ 1,493,625 $3,785,138 Carmel Vernia 25,000 2.3% $23.75 July 15, 2006 $ 373,406 $ 946,285 Igal Nissim 5,000 0.5% $23.75 July 15, 2006 $ 74,681 $ 189,257
________________________ * Represents the gain that would be realized if the options were held for their entire ten-year term and the value of the underlying shares increased at compounded annual rates of 5% and 10% from the fair market value at the date of option grants. The options have a term of ten years and become exercisable and vest in annual increments over the period of four years from the year of grant. The exercise price of the options is equal to the fair market value of the underlying shares at the date of grant. The following table sets forth certain information concerning options granted during the past three fiscal years to the executive officers of the Company under its employee stock option plans: -4- STOCK OPTION GRANTS IN LAST THREE FISCAL YEARS
PERCENT OF TOTAL OPTIONS NUMBER OF GRANTED TO EXERCISE SHARES EMPLOYEES PRICE YEAR OF SUBJECT TO IN FISCAL PER EXPIRATION GRANT NAME OPTION YEAR SHARE DATE - ----------------- -------------- --------- -------- ---------- ------------------ 1996: Kobi Alexander 100,000 9.2% $23.75 July 15, 2006 Carmel Vernia 25,000 2.3% $23.75 July 15, 2006 Igal Nissim 5,000 0.5% $23.75 July 15, 2006 1995: Kobi Alexander - - - - Carmel Vernia - - - - Igal Nissim 10,000 1.5% $13.50 May 25, 2005 1994: Kobi Alexander 500,000 42.5% $10.00 September 22, 2004 Carmel Vernia 200,000 17.0% $10.00 September 22, 2004 Igal Nissim 10,000 0.9% $10.00 September 22, 2004
The following table sets forth, as to each executive officer identified above, the shares acquired on exercise of options, value realized, number of unexercised options held at December 31, 1996, currently exercisable and subject to future vesting, and the value of such options based on the closing price of the underlying shares on the NASDAQ National Market System at that date, net of the associated exercise price. OPTION EXERCISES AND YEAR-END VALUE TABLE AGGREGATE OPTION EXERCISES IN 1996 AND VALUE OF UNEXERCISED OPTIONS AT DECEMBER 31, 1996
VALUE OF UNEXERCISED SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS ACQUIRED OPTIONS HELD HELD AT DECEMBER 31, 1996 ON VALUE AT DECEMBER 31, 1996 ------------------------- NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------- -------- -------- ----------- ------------- ----------- ------------- Kobi Alexander - - 769,250 350,000 $25,314,326 $ 8,359,375 Carmel Vernia 40,000 $859,400 218,750 31,250 $ 6,020,710 $ 504,297 Igal Nissim 2,000 $ 45,620 12,500 22,500 $ 322,344 $ 513,594
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. -5- EMPLOYMENT AGREEMENTS Mr. Alexander serves as Chairman of the Board, President and Chief Executive Officer of the Company under an agreement extending through June 30, 2000 at a current base annual salary of $308,300. Pursuant to the agreement, Mr. Alexander received bonus compensation of $864,829 for services rendered during 1996 and is entitled to receive bonus compensation in 1997 and succeeding years in an amount to be negotiated annually, but not less than 3% of the Company's consolidated after tax net income in each year. Mr. Alexander also receives various supplemental medical, insurance and other personal benefits from the Company under the terms of his employment, including the use of an automobile leased by the Company. Upon the termination of his employment with the Company for any reason, Mr. Alexander is entitled to receive a severance payment in an amount equal to $84,700 times the number of years (plus any partial years) of his employment by the Company commencing with 1983, increased by 10% per annum starting in December 1997, plus continued employment-related benefits for the period of 36 months following termination. In the event that Mr. Alexander's employment is terminated by the Company without cause, by Mr. Alexander as a result of a material breach by the Company of its obligations under the agreement or by his resignation within the period of six months following a change in control of the Company, Mr. Alexander is entitled to an additional severance payment equal to 299% of the average annual cash compensation (including salary and any bonus payments) received by him from the Company during the most recent three fiscal years plus an amount equal to the income tax liability to Mr. Alexander resulting from such payment. The agreement also requires the Company to grant to Mr. Alexander an option to purchase up to 7.5% of the shares of each subsidiary of the Company, other than Efrat, for a price equal to the greater of the fair market value or the book value of such shares at the date of option grant. Mr. Alexander serves as Chairman of the Board of Efrat under an agreement that extends through July 31, 1997 at a current basic salary (the "Basic Salary") of $3,500 per month. Efrat has also agreed to reimburse Mr. Alexander for certain business-related expenses, to provide him with the use of a company- owned automobile and to pay certain amounts for his account into defined contribution insurance and training funds in Israel. In addition, if Mr. Alexander conducts business activities abroad, including in the United States, Efrat is required to bear his reasonable lodging and living expenses, which shall in any event be not less than the per diem allowance customarily provided to senior executive managers of Israeli companies, and if the period of his stay abroad is in excess of eight weeks, his Basic Salary during such period shall be increased to an amount which will support a standard of living comparable to that provided in Israel by the Basic Salary and other benefits afforded under the agreement. Efrat 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 Efrat unilaterally terminates or fundamentally breaches the agreement, it must pay, as liquidated damages, an amount equal to the Basic Salary due for the remainder of the term of the agreement plus an amount equal to the present value of all non-monetary benefits under the agreement. The present value of the non- monetary benefits under the agreement is not readily determinable but is estimated at approximately 25% of such salary. Mr. Vernia is employed as Managing Director of Efrat and Chief Operating Officer of the Company under an agreement providing for a base monthly salary at a current rate of 43,258 Israeli shekels, subject to Israeli statutory cost of living adjustment (resulting in a current annual salary equal to approximately $153,000) and an annual bonus in an amount to be determined. The agreement may be terminated by either party only with prior notice of at least one year. Mr. Vernia is entitled under the agreement to receive various insurance and supplemental benefits and the use of an automobile owned or leased by Efrat. Mr. Vernia has also been granted options to purchase between 2.5% and 3.5% of the shares of certain subsidiaries of the Company for a price equal to the greater of the fair market value or the book value of such shares at the date of option grant. Mr. Nissim receives a base monthly salary from the Company of 29,174 Israeli shekels, subject to Israeli statutory cost of living adjustment (resulting in a current annual salary equal to approximately $103,000) and various insurance and supplemental benefits, including the use of an automobile owned or leased by the Company. -6- 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 $2,250 for each meeting of the Board of Directors and of certain committees of the Board of Directors attended by him during the year. Each of such eligible directors is also entitled to receive an annual stock option grant under the Company's Stock Option Plans entitling him to purchase 6,000 shares of common stock at a price per share equal to the fair market value of the common stock as reported on the NASDAQ System on the date two business days after the publication of the audited year-end financial statements of the Company. Such options are subject to forfeiture to the extent of 1,200 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. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information concerning the beneficial ownership of shares of common stock on the part of the executive officers and directors of the Company and all persons known by the Company to be beneficial owners of more than five percent of the outstanding common stock as at April 1, 1997.
NUMBER OF PERCENT SHARES OF TOTAL BENEFICIALLY OUTSTANDING BENEFICIAL OWNER RELATIONSHIP WITH THE COMPANY OWNED SHARES/(1)/ - ---------------- ----------------------------- --------- ------ Pilgrim Baxter & Associates Ltd. Shareholder 2,309,300/(2)/ 9.3% 1255 Drummers Lane Wayne, PA 19087 American Century Companies, Inc. Shareholder 1,791,600/(2)/ 7.2% 4500 Main Street Kansas City, MO 64141 Kobi Alexander President, Chairman of the Board, Chief Executive Officer and Director 863,750/(3)/ 3.4% Carmel Vernia Chief Operating Officer 218,750/(4)(5)/ * Igal Nissim Chief Financial Officer 17,500/(4)(6)/ * Zvi Alexander Director 31,000/(7)(8)/ * John H. Friedman Director 7,000/(4)(8)/ * Sam Oolie Director 11,000/(4)(8)/ * William F. Sorin Secretary and Director 25,000/(4)(9)/ * Yechiam Yemini Director 30,000/(7)(8)/ * All directors and executive officers as a group (8 persons) 1,204,000/(10)/ 4.6%
_________________ * Less than 1%. /footnotes on following page/ -7- (1) Based on 24,829,870 shares of common stock issued and outstanding on April 1, 1997, excluding, except as otherwise noted, shares of common stock issuable upon the exercise of outstanding stock options. (2) Based on Schedule 13G filings with the Securities and Exchange Commission reflecting data as of December 1996. (3) Includes 769,250 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after April 1, 1997. Does not include 350,000 shares issuable upon the exercise of options that were not exercisable at or within 60 days after April 1, 1997. (4) Consists solely of shares issuable upon the exercise of stock options that were exercisable at or within 60 days after April 1, 1997. (5) Does not include 31,250 shares issuable upon the exercise of options that were not exercisable at or within 60 days after April 1, 1997. (6) Does not include 17,500 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after April 1, 1997. (7) Includes 23,000 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after April 1, 1997. (8) Does not include 6,000 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after April 1, 1997. (9) Does not include 10,000 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after April 1, 1997. (10) Includes 1,094,500 shares issuable upon the exercise of stock options that were exercisable at or within 60 days after April 1, 1997. Does not include 432,750 shares issuable upon the exercise of stock options that were not exercisable at or within 60 days after April 1, 1997. OPTIONS TO PURCHASE SUBSIDIARY SHARES The Company has granted to certain key executives options to acquire shares of certain subsidiaries, other than Efrat, as a means of providing incentives directly tied to the performance of those subsidiaries for which different executives have direct responsibility. Such options have been granted to executive officers of the Company as set forth under "Employment Agreements". Options have been granted to other key employees which, upon exercise, would represent in the aggregate between approximately 2.4% and approximately 23.6% of the outstanding shares of the relevant subsidiaries. In general, these options have terms of up to ten years, become exercisable and vest in equal ratable annual increments over periods ranging from three to five years from the first anniversary of the date of initial grant, and have exercise prices equal to the higher of the book value of the underlying shares at the date of grant or the fair market value of such shares at that date determined on the basis of an arms'-length transaction with a third party or, if no such transactions have occurred, on a reasonable basis as determined by the Board of Directors. Upon the exercise, in whole or in part, of any option, Comverse will receive an irrevocable proxy to vote the underlying shares and a right of first refusal to purchase the shares upon any proposed sale, transfer or other disposition, until such time as the shares shall have been sold in a bona fide open market transaction. These options (and any shares received by the holders upon exercise) provide the option holders with a potentially larger equity interest in the respective subsidiaries than in the Company, which, under certain circumstances, could cause the option holders' interests to conflict with those of the Company's shareholders generally. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Company paid William F. Sorin, a director of the Company, an aggregate of approximately $254,000 for legal services rendered to the Company during the year ended December 31, 1996. -8- SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMVERSE TECHNOLOGY, INC. (Registrant) By: S/ Kobi Alexander ---------------------------------------- Kobi Alexander President, Chairman of the Board and Chief Executive Officer -9- -----END PRIVACY-ENHANCED MESSAGE-----