r It • I Cy, 20 1 ' Jeffrey S. Abraham (JA-2946) Jabraham@afflaw .com Lawrence D . Levit (LL-9507) [email protected] ABRAHAM FRUCHTER & TWERSKY LLP One Penn Plaza, Suite 2805 New York, NY 10119 4Nt!:.CFiKSQ F1C Tel: (212) 279-5050 Fax: (212) 279-3655
Attorneys for Plaintiff KLYP OFFICE
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ~ a
BRUCE BRAVERMAN, derivatively on behalf of Comverse Technology, Inc., . AZpA 6% Plaintiff, CK Ja V . Civ. No .
KOBI ALEXANDER, ZEEV BREGMAN, DAVID JURY TRIAL DEMANDED KREINBERG, RAZ ALON, ITSIK DANZIGER, JOHN H. FRIEDMAN, RON HIRANI, SAM ❑GLIE and WILLIAM F. SORIN,
Defendants,
-and-
COMVERSE TECHNOLOGY, INC ., a New York Corporation,
Nominal Defendant.
VERIFIED SHAREHOLDER'S DERIVATIVE COMPLAINT
Plaintiff Bruce Braverman, alleges upon personal knowledge as to himself and his own acts , and as to all other matters upon information and belief based upon, inter alia, the investigation mad e by and through his attorneys, which investigation included, among other things, a review of th e
public documents, Securities and Exchange Commission ("SEC ) filings, analyst reports, news
1 0 0 releases and media reports of Comverse Technology, Inc. ("Comverse" or the "Company"), as follows:
INTRODUCTION AND OVERVIEW
Plaintiff is now, and at relevant times was, a holder of the common stock o f
Comverse. This action is being brought derivatively for the benefit of the Company against certai n of the Company's senior executives and directors and seeks to remedy the damages caused to th e
Company by their wrongful conduct .
2. As set forth in greater detail below, the senior executives and directors of the
Company named in this action as defendants breached their fiduciary duties to the Company by
allowing stock options to be granted that were improperly backdated to allow for lower exercise
prices. As a result of these actions, the exercise dates for these stock options were set at times that
allowed the holders to reap extraordinary and improperly obtained profits .
3. During March 2006, the Company admitted that investigations into the backdating of
its stock options had begun. Indeed, an analysis by The Wall Street Journal revealed that the odds
that the recipients of the stock options could have been granted the low exercise prices they were
granted by chance were approximately 1 in six billion. The Company also announced that it would
likely have to restate earnings downward for the years 2001 through 2005 . The Company further
stated that it would be unable to file its Form I Q-K for the year ended January 31, 2006 in a timely
manner and that it received notification that its shares maybe delisted from the Nasdaq stock
market.
4. These actions have exposed the Company to substantial risk . The Company has also been damaged by selling shares to the defendants who exercised their improperly priced stock options by receiving less in the way of payments for its stock than it should have received if the
options had been properly priced . In addition, the Company has been damaged by paying excessive
compensation at least for the years 2001 through 2005 to its executives who received such stock
2 0 0 options. Under the provisions of the Sarbanes-Oxley Act of 2002, the current and former Chie f
Executive Officers and Chief Financial Officers of the Company are to reimburse the Company for any incentive-based or equity-based compensation they received for the time period listed below.
5. As a result, in part, of these disclosures, the Company's stock price plummeted on
March 14, 2006, decreasing by $4.30 per share to a closing price of $24.85 per share.
The Company's losses in its stock price inflicted substantial damage to members o f the investing public, and these defrauded investors soon named Comverse as a defendant in
securities fraud actions pending in this Court (the "Pending Securities Fraud Actions") . As a result,
Comverse is subject to great expense and the prospect of even more substantial liability . Moreover,
the Company's standing with the investment community and the public has been adversely affected .
JURISDICTION AND VENU E
7. The claims alleged herein arise under Sectionl4(a) of the Securities Exchange Act o f
1934 (the "Exchange Act"), 15 U.S.C. § 78n(a), and Rule 14a-9, 17 C.F.R. § 240.14a-9 promulgated thereunder as well as under the Sarbanes -Oxley Act of 2002 and the common law. The jurisdiction of this Court is based on Section 27 of the Exchange Act, 15 U.S.C. §78aa and 28 U.S.C. §1331 (federal question jurisdiction). In addition, this Court has jurisdiction over this action pursuant to 28 U.S.C. § 1367 because the claims asserted herein arise from the same factual circumstance and are related to claims in certain securities fraud actions currently pending before this Court.
9. Venue is proper in this judicial district pursuant to Section 27 of the Exchange Act . Many of the acts and transactions giving rise to the violations of law complained of herein,
including the preparation and dissemination to the investing public of materially false and
misleading information, occurred in this judicial district . Comverse maintains its executive office s
in Woodbury, New York, and the Pending Securities Fraud Actions are pending in this District . 9 0
10. In connection with the acts, transactions and conduct alleged herein, defendants used the means and instrumentalities of interstate commerce, including the United States mails, interstat e telephone communications and the facilities of a national securities exchange and market .
THE PARTIES
11 . PlaintiffBruce Braverman is a resident of the State of New Jersey, is currently a shareholder of the Company and was a shareholder of the Company at the time . of the wrongdoings which are the subject of this complaint .
12. Nominal Defendant Comverse is a New York corporation, which has its principal place of business located at 170 Crossways Park Drive, Woodbury, New York . The Company describes itself on its Web site as "the world's leading provider of software and systems enabling network-based multimedia enhanced communications services . More than 400 wireless and wireline telecommunications network operators in more than 100 countries, have selected Comverse's enhanced services systems and software, which enable the provision of revenue-generating value-added services including call answering with one-touch call return, short messaging services, EP-based unified messaging (voice, fax, and email in a singlemailbox), 2 .5G13 G multimedia messaging (MMS), wireless instant messaging, wireless data and Internet-based services, voice-controlled dialing, messaging and browsing, prepaid wireless services, and additional personal communication services ." Comverse common stock trades on the NASDAQ National Market under the symbol "CMVT" . The Company is named as a nominal defendant solely in a derivative capacity and this action is brought in order to obtain a recovery and other appropriate relief on its behalf.
13. Defendant Kobi Alexander ("Alexander") is a founder of the Company and has serve d as Chairman ofthe Board ofDirectors since September 1986 and as Chief Executive Officer since April
1987 . Alexander has served as a director of the Company since its formation in October 1984 .
Alexander served as President of the Company from its formation in October 1984 until 3anuary 2001 .
Alexander is also Chairman of the Board and a director of Ulticom, Inc . 4'Ulticom") and Verint
4 Systems Inc. ("Verint"}, two subsidiaries of Comverse . He is also a director of Systems Management
Arts Inc. ("SMARTS"), a developer of automated network problem diagnosis software . His sister, Dr.
Shaula A. Yemini, is the President and Chief Executive Officer of SMARTS. Yemini was a director
of Comverse for many years and was a member of the Remuneration and Stock Option Committee (the predecessor of the Compensation Committee) from August 1997 until June 2001 .
14. Defendant Itsik Danziger ("Danziger"} has served as a director of the Company since
November 1998 . He is an employee of the Company and the Chairman of the Board of Starhome BV
("Starhome"}, a subsidiary of the Company. Danziger served as President of Comverse from January
2001 to March 2003 and ChiefOperating Officer of Comverse from January 1998, and also as President from May 1999, until January 2001 .
15. Defendant William F . Sorin ("Soria") has served as a director and Corporate Secretary
of Comverse since its formation in October 1984.
16. Defendant John H. Friedman ("Friedman') has served as a director of Comverse since June 1994. He is a member of the Compensation Committee and the Audit Committee of the board . 17. Defendant Ron Hiram ("Hiram") has served as a director of Comverse since June 2001 .
Hiram was the co-head of TeleSoft Partners' investment activities in Israel from 2401 to 2002 . TeleSoft
Partners was a venture capital fund that focused on companies developing telecommunications-related
technologies. Prior to that, from 1994 to 2000, Hiram served as a Managing Director and Partner of
Soros Fund Management LLC (the "Soros Fund"), an international hedge fund. Comverse, through a
joint venture formed in partnership with an investment company managed by the Soros Fund, invests
in venture capital in high technology firms. Each participant committed a total of $37.5 million to be
used to make investments. Hiram is also a director of Ulticom, and a director of SMARTS, and
replaced Yemini as a member of the Remuneration and Stock Option Committee when he replaced her
as a member of the Comverse board . He is currently a member of the Compensation Committee and
the Audit Committee of the Comverse board.
5 18. Sam Oolie ("Oolie") has served as a director of Comverse since May 1986 . He is a member of the Compensation Committee and the Audit Committee of the board .
19 . Raz Alon ("Alan") has served as a director of Comverse since December 2003 .
20. Defendants Alexander, Danziger, Sarin, Friedman, Hiram, Oolie and Alon are collectively referred to herein as the "Director Defendants ."
21 . Defendant Zeev Bregman ("Bregman") has served as Chief Executive Of ficer of Comverse, Inc. since January 2001 . From 1987, Bregman served in various management and marketing positions within the Company, including Vice President, EMEA Division of Comverse and Vice
President, Messaging Division of Comverse.
22. Defendant David Kreinberg ("Kreinberg"} has served as Executive Vice President an d
Chief Financial Officer of the Company since September 2002 . Previously, 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 ofFinancial Planning from April 1994 .
Kreinberg is a Certified Public Accountant, and prior to joining the Company he served as a senior
manager at Deloitte & Touche LLP . He is also a director of Ulticom and Verint .
23 . Defendants Alexander, Danziger, Bregman and Kreinberg are collectively referred t o
herein as the "Executive Defendants ." The Executive Defendants and the Director Defendants ar e collectively referred to herein as the "Individual Defendants ." 24. At all relevant times, the Director Defendants operated as a collective entity throug h
periodic meetings held either in person or telephonically where they discussed matters affecting the
Company's business and reached collective and consensu al decisions regarding actions taken. The
Director Defendants also received similar, if not identical, information in the form of written or oral
reports fromCompany employees and management relating to its business,including internal,periodic
financial statements and official data and reports in advance of, at and subsequent to meetings of the
Board of Directors and senior executives . Thus, because the Director Defendants acted as a unit ,
6 conducted the Company's business pursuant to consensual agreements and formal resolutions and received collectively and/or disseminated the same information about the Company's business at or about the same time, it is appropriate to treat the Director Defendants as a collective entity for the purposes of this complaint .
25. The Director Defendants, by virtue of serving as officers and/or directors of the Company, owed fundamental fiduciary duties of due care, loyalty, candor and good faith to the Company and its stockholders in connection with the operations, management and supervision of the Company and each breached those duties as set forth in further detail below.
DERIVATIVE ALLEGATIONS
26. Plaintiffbrings this action derivativelyin the right of and for the benefit of the Company
to redress injuries suffered and to be suffered by the Company as a direct result of defendants'
wrongdoings.
27 . Plaintiff will adequately and fairly represent the interests of the Company and its
stockholders in enforcing and prosecuting their rights.
28. This action is brought to remedy violations of applicable law .
29. Plaintiffhas not made any demand on the present Board to institute this action because
such demand would be a futile and useless act for the following reasons :
(a) A majority of the Company's directors participated in, acquiesced in, and/or
approved the acts or omissions or recklessly disregarded the wrongs alleged herein, and did so in
affirmative violation of their duties to the Company and its stockholders and have permitted the wrongs
alleged and/or have remained inactive although they had knowledge or notice of those wrongs . Thus,
the Company's Board could not exercise independent objective judgment in deciding whether to bring
this action nor vigorously prosecute this action. The members ofthe Company's Board had ready access
to documents and information that should have caused them to disallow thebackdating of stock options,
yet the directors allowed that to occur and to continue;
7 0 0
(b) Asa result of the gross negligence ,mismanagement, and/or reckless or intentional misconduct of the directors, the Company has been exposed to potential damages amounting to ten o f millions of dollars in connection with the Pending Securities Fraud Actions alleging violations of the federal securities laws;
(c) Because oftheir participation in the mismanagement of the Company, the Director
Defendants are in no position to prosecute this action . Each of them is in a position of irreconcilable conflict of interest in terms of the prosecution of this action . For example, Alexander would be required to defend the Pending Securities Fraud Actions against the Company (which arises out of the conduct of its officers and directors), while, at the same time, be obligated to gather ammunition that might eventually be of use in pressing the claims of this complaint against himself and other members of the
Board. Thus, neither the Director Defendants, nor their attorneys could be expected to carry out such a task in an impartial manner;
(d) The Director Defendants cannot defend their actions by any alleged "independent " business judgnent since each of them acted in bad faith, grossly and recklessly abused their discretion, acted in breach of their fiduciary duties to the Company and its stockholders and failed to act and abdicated their functions and duties as directors ;
(e) A majority of the Company's directors are not independent either because the y were involved in setting up or approving (or acquiescing in the approval) of the backdating of stock options either by their management positions or Compensation Committee or Audit Committee memberships, or allowed the backdating to occur and/or to continue without taking any actions to stop or to prevent it from occurring;
(f) The directors are accused of breaches of their fiduciary duties and of bein g implicated in and liable for failing to put into place adequate internal controls and adequate means o f
supervision to prevent the wrongful conduct referred to herein ;
8 (g} Requiring demand on the board of directors to institute a claim for violations o f the rules prohibiting proxy fraud as contained in Section 14(a) of the Exchange Act and the rule s promulgated thereunder by the SEC wouldbe inconsistent with the existence ofan implied private righ t of action designed to remedy such wrongs ;
(h) Requiring a demand on the board of directors following their failure to take step s to recover funds for the Company's benefit arising from the violation of Section 3 04 of Sarbanes-Oxle y Act of 2002 would be inconsistent with the broad remedial purpose of that legislation ; and (i) The directors have a variety of overlapping business and personal relationships with other directors which impedes their ability to act in a disinterested fashion with respect to an y potential litigation which could be brought for the benefit of Cornverse .
30. This action is not a collusive one to confer jurisdiction on a court of the United State s which it would not otherwise have.
SUBSTANTIVE ALLEGATION S
31 . As part of the compensation that Comverse provided to its executives and directors, it proposed the adoption of a stock option plan. In December 1996, Comverse shareholders voted to adopt the 1996 Stock Option Plan, replacing the prior plan . Under its provisions, the 1996 Stock Option Plan required, inter alga, that the options granted must be at an exercise price that was not less than 100% of the fair market value of the Company's stock on the date of grant. This Plan was attached as an exhibit to the Company's Schedule 14A filed with the SEC on November 15, 1996 .
32. Stock options provide recipients with the right to buy company stock at a set price , called the exercise price or strike price . That right-usually does not vest for one year or more, but then once it vests, continues for several years. The exercise price is typically the stock's price at 4 p .m. on the date of the grant, an average of that day's high and low prices or the price at 4 p .m. the day prior to the grant. The lower the exercise price, the more profit the recipient can potentially realize when the
options are exercised . Stock options are granted as part of employee compensation packages, and
9 provide an incentive to improve performance and the company's stock price . If the company's stock price does not increase from the date ofthe options grant, then the options will not be profitable . When the options are exercised, the recipient purchases stock from the company, paying the strike price no matter what the price of the company's stock at the time of exercise .
33 . Thus, the day the options are priced is significant and can make an enormous differenc e as to whether the options will be profitable to the recipient and the amount of the profitability . Granting options at a price below the current market value could result in false information being provided to shareholders because options are granted pursuant to shareholder-approved plans, which typicallyprice the options on either the day of the award or the prior day . Backdating of options in order to provide a lower exercise price may be in violation of the applicable plan, would be contrary to the goal of providing the recipients with an incentive to increase the company's stock price and would provide the recipient with a paper profit from the date of the grant.
34. Comverse engaged in the practice of backdating stock options . Such practice not only improperly benefitted the Executive Defendants, but also resulted in the overstatement of Converse's profits between 2001 and the first three quarters of 2006 because options priced below the stock fair market value when they were awarded brought the recipients an instant paper gain . Under accounting rules, such action is the equivalent of additional compensation and thus must be treated as a cost to the company. Converse did not properly account for the options granted. As a result of the Company manipulating the actual dates ofineasurement for stock options, Converse will likelybe forced to record additional non-cash charges for stock-based compensation expenses in prior periods . The Company expects that such non-cash charges will be material and that the Companywill be restating its historical financial statements for each of the fiscal years ended January 31,2005,2004,2003,2002 and 2001 and for the first three quarters of the fiscal year ended January 31, 2006 .
35. The Company has had in place an incentive compensation plan for a number of years,
whereby the Compensation Committee of the board awards, inter aiia, stock options to certain of th e
10 Company's executives. While the incentive compensation plan has been revised over the years, the determination of the price per share at which the Company's common stock may be purchased upon the exercise of an option remained the same for Incentive Stock Options in that the price per share was not to be less than the Fair Market Value (as defined in the Plan) of a share of common stock on the date of the grant. For certain larger holders, the option price per share was not be less than 110% of the fair market value of a share of common stock on the date of the grant. The Fair Market Value was essentially defined in the Plan to be the closing price of the stock on the date of the grant .
36. The Company's 2005 Stock Incentive Compensation Plan (the "2005 Plan"), which wa s part of the proxy statement distributed by the Director Defendants to the Company's shareholders o n or about May 9, 2005 (the "2005 Proxy Statement"}, provided, in part:
4.1 The Plan shall be administered by the Compensation Committee, which shall have full power to interpret and administer the Plan and full authority to act in selecting the Directors, Employees and Consultants to whom Awards will be granted, in determining the type and amount of Awards to be granted to each such Director, Employee or Consultant, the terms and conditions of Awards granted under the Plan and the terms of agreements which will be entered into with Holders .
8.2 The price per share at which Common Stock may be purchased upon exercise of an Option shall be determined by the Committee, but, in the case of grants of Incentive Stock Options, shall be not less than the Fair Market Value of a share of Common Stock on the date of grant. In the case of any Incentive Stock Option granted to a Ten percent Shareholder, the option price per share shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date of grant.
37, Pursuant to the provisions of the 2005 Plan, the Compensation Committee had full authority over the granting of options and the terms of such grant, however, the exercise price was se t by the terms of the 2005 Plan, and determined by the date of the grant of the options . Such price could not be reduced without shareholder approval. (Section 12.2 of the 2005 Plan.)
38. Prior versions of the Company's 2005 Plan contained substantially similar (if no t identical) language to the language quoted above, and provided similar authority to the Compensatio n
11 Committee (and its predecessor committee) and similar restraints regarding the setting of the exercis e price for options.
39. For the year ended January 31, 2001, the following executive officers of the Compan y were granted options to purchase the Company's stock pursuant to the then existing incentive plan :
Name Number of Shares Subject to Option
Kobi Alexander 600,000 Itsik Danziger 200,000 Zeev Bregman 250,000 David Kreinberg 100,000 40. For the year ended January 31, 2001, the following Comverse executive officer s exercised options to acquire the number of shares indicated and the value realized by such exercise :
Name Shares A uired on Exercise Value Realize d
Kobi Alexander 932,630 $93,129,386 Itsik Danziger 255,000 20,300,690 Francis E. Girard 202,500 18,100,881 Zeev Bregman 172,500 3,626,420 David Kreinberg 61,934 4,868,85 1
41 . For the year ended January 31, 2002, the following executive officers of the Compan y
were granted options to purchase the Company's stock pursuant to the then existing incentive plan : Name Number of Shares Subject to Optio n
Kobi Alexander 600,000 Itsik Danziger 200,000 Zeev Bregman 300,000 David Kreinberg 125,000
42. For the year ended January 31, 2002, the following Comverse executive officers
exercised options to acquire the number of shares indicated and the value realized by such exercise : Name Shares Acquired on Exercise Value Realized Itsik Danziger 60,000 $5,982,962 David Kreinberg 14,290 1,454,81 3
12 43 . On or about January 16, 2002, the Director Defendants (except for Alon) had distributed to the Company's shareholders a proxy statement that sought approval of a plan to re-price certain stock options that hadbeen granted (the "2002 Proxy Statement). The 2002 Proxy Statement provided, inter alia, that the exercise price for the re-priced options would be the fair market value on the grant date .
On February 25, 2002, the Company's shareholders approved the stock option exchange program that provided employees and officers with the opportunity to cancel unexercised stock options previously granted in exchange for replacement options to be granted in the future at a ratio of 0 .85 new options
for each existing option cancelled (the "Exchange") . The option exchange program commenced on
May 22, 2002 and expired on June 20, 2002 .
44. Pursuant to the stock option exchange program, the following executive officers of th e Company were granted options to purchase the Company's stock in exchange for their then existin g
options:
Name Number of Shares Subject to tion
Kobi Alexander 535,50 1 510,000 509,999 382,499
Itsik Danziger 170,000 170,000 110,500 31,875
Zeev Bregman 255,000 212,500 76,500 25,500
David Kreinberg 106,252 85,000 54,91 1 3,188
45 . Other than the above listed exchanges of options, no options were granted to thes e
Comverse executive officers for the year ended January 31, 2003.
13 46. For the year ended January 31, 2004, the following executive officers of the Company were granted options to purchase the Company's stock pursuant to the then existing incentive plan: Name Number of Shares Subiect to Optio n Kobi Alexander 461,000 Itsik Danziger 45,000 Zeev Bregman 211,300 David Kreinberg 134,500
47. For the year ended January 31, 2004, the following Comverse executive officers
exercised options to acquire the number of shares indicated and the value realized by such exercise :
Name Shares A uired on Exercise Value Realized
Kobi Alexander 824,740 $10,679,689 Itsik Danziger 352,500 2,550,013 Zeev Bregman 250,000 1,894,167 David Kreinberg 142,000 1,014,207
48. For the year ended January 31, 2005, the following executive officers of the Compan y
were granted options to purchase the Company's stock pursuant to the then existing incentive plan : Name Number of Shares Subject to Qption
Kobi Alexander 182,100 Zeev Bregman 120,000 David Kreinberg 100,000
49. For the year ended January 31, 2005, the following Comverse executive officer s
exercised options to acquire the number of shares indicated and the value realized by such exercise :
Name Shares A uired on Exercise Value Realized
Zeev Bregrnan 80,000 $1 ,117,672 David Kreinberg 47,143 667,92 5
50. On April 30, 2001, Comverse filed with the SEC its Form 10-K for the year ende d January 31, 2001 . The Form 10-K included the Company's financial statements, which were stated to
have beenprepared in accordance with generally accepted accountingprinciples ("GAAP"). The Form
14 10-K, signed bydefendants Alexander andKreinberg, also stated regarding stock options awarded, inter alia, to the Executive Defendants:
The Company applies Accounting Principles Board Opinion No . 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its option plans. Accordingly, as all options have been granted at exercise prices equal to fair market valu e on the date of grant, no compensation expense has been recognized by the Company in connection with its stock-based compensation plans .
51 . On April 30, 2002, Comverse filed with the SEC its Form 10-K for the year ended January 31, 2002. The Form 10-K included the Company's financial statements, which were stated t o have been prepared in accordance with GAAP . The Form 10-K, signed by defendants Alexander and
Kreinberg, also stated regarding stock options awarded, inter alia, to the Executive Defendants:
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its option plans. Accordingly, as all options have been granted at exercise prices equal to fair market valu e on the date of grant, no compensation expense has been recognized by the Company in connection with its stock based compensation plans .
52. On April 30, 2003, Comverse filed with the SEC its Annual Report on Form 10-K fo r the period ended January 31, 2003 . The Form 10-K, signed by defendants Alexander and Kreinberg, included the Company's financial statements, which were stated to have been prepared in accordance with GA.AP. In connection with the Form 10-K, the Company submitted to the SEC the certifications of the principal executive officer and the principal financial officer ofthe Company as required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 .
53 . On April 14, 2004, Comverse filed with the SEC its Form 10-K for the period ended January 31, 2004. The Form 10-K, signed by defendants Alexander and Kreisberg, included the
Company's financial statements, which were stated to have been prepared in accordance with GAAP . In connectionwith the Form 10-K, the Company submitted to the SEC the certifications ofthe principal executive officer and the principal financial officer of the Company as required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 .
15 54. On April 4, 2005, Comverse filed with the SEC its Form 10-K for the period ended
January 31, 2005. The Form 10-K, signed by defendants Alexander and Kreinberg, included the
Company's financial statements, which were stated to have been prepared in accordance with GAAP .
In connection with the Form 10-K, the Company submitted to the SEC the certifications of the principal executive officer and the principal financial officer of the Company as required pursuant to Sections 302 and 905 of the Sarbanes-Oxley Act of 2002 .
55 . On March 14, 2006, Comverse announced the creation of a special committee of its
Board of Directors to review matters relating to the Company's stock option grants, including, but not limited to, the accuracy of the stated dates of option grants and whether all proper corporate procedures were followed. The press release stated:
Although it has not been determined whether the review will result in any restatement of the company's historical financial statements and, if so, the years affected and the amounts involved, management believes that certain restatements will likely be required. Any such restatements will not have an impact on historical revenues or operating results excluding stock option related expenses .
In the fourth quarter ended January 31, 2006, the company achieved sales of $337,726,000, its thirteenth consecutive quarter of sequential sales growth, generated $153,614,000 in operating cash flow, and ended the quarter with a record orders backlog of $798,175,000.
The company ended the quarter with cash and cash equivalents, bank time deposits and short-term investments of $2,105,625,000, accounts receivable of $315,451,000, inventories of $135,601,000, prepaid expenses and other current assets of $98,553,000, property and equipment, net, of $137,722,000, othe r assets of $471,217,000, total assets of $3,264,169,000, advance payments from customers of $208,519,000, and convertible debt of $419,759,000.
The company will seek to release its full results for the fourth quarter and year ended January 31, 2006 as soon as practicable after the completion of the special committee's review and the determination of whether any restatement of the company's historical financial statements is required. The company cautions that investors should not make assumptions about the cost of sales, gross margin, operating expenses, income from operations, net income, earnings per share or other financial statement items that may be affected by stock option related expenses .
56. On this news, Converse's stock price dropped from $29.15 to $24.85 per share.
16 57. On April 17, 2006, Comverse announced that, as a result of the ongoing review relatin g to the Company's stock option grants, it will be filing a Form 12b-25 with the SEC indicating that its
Annual Report on Form 10-K for the fiscal year ended January 31, 2006 will not be filed on its due date of April 17, 2006. The Company stated that it would not seek a 15-day filing extension because it did not believe it could file the Annual Report by the end of the extension period. The press release stated :
As previously announced on March 14, 2006, the Company's Board of Directors created a special committee (the "Special Committee") composed of outside directors to review matters relating to the Company's stock option grants, including the accuracy of the stated dates of option grants and whether all proper corporate procedures were followed . The Special Committee is being assisted by independent outside legal counsel and accounting experts . At this time, the Special Committee has not completed its work or reached final conclusions and is continuing its review. The Special Committee has, however, reache d a preliminary conclusion that the actual dates of measurement for certai n past stock option grants for accounting purposes differed from the recorded grant dates for such awards . As a result of changes in measurement dates, the Company expects to record additional non-cash charges for stock-based compensation expenses in prior periods. Based on the Special Committee' s preliminary conclusion, the Company expects that (1) such non-cash charges will be material and (i ) the Company will need to restate its historical financial statements for each of the fiscal years ended January 31, 2005, 2004, 2003, 2002 and 2001 and for the first three quarters of the fiscal year ended January 31, 2006 . Such charges could also affect prior periods. On April 14, 2006, the Audit Committee of the Company's Board of Directors concluded that such financial statements and any related reports of its independent registered public accounting firm should no longer be relied upon .
Any such stock-based compensation charges would have the effect of decreasing the income from operations, net income and retained earnings figures contained in the Company's historical financial statements . The Company does not expect that the anticipated restatements would have a material impact on its historical revenues, cash position or non-stock option related operating expenses .
The Company notified The NASDAQ Stock Market that it expects not t o be in compliance with the NASDAQ requirements for continued listing under NASDAQ Marketplace Rule .43 10(c)(14) that requires the Company to make on a timely basis all required filings with the SEC. The Company expects that it will receive a Staff Determination letter from The NASDAQ Stock Market indicating that, due to its noncompliance with NASDAQ Marketplace Rule 4310(c)(14) , its common stock would be delisted unless the Company requests a hearin g in accordance with the NASDAQ Marketplace Rules . If the Company receives such a Staff Determination Letter, the Company intends to request a hearing before the NASDAQ Listing Qualifications Panel to review the Staff Determination . Under NASDAQ Marketplace Rules, a request for a hearing stays the delistin g
17 action pending the issuance of a wri tten determination by the NASDAQ Listing Qualification Panel.
The Company intends to issue results for its fourth quarter and the fiscal year ended January 31, 2006, file its Annual Report on Form . I 0-K for the fiscal year ended January 31, 2006 and file any financial statements required to be restated as soon as practicable after the completion of the Special Committee's review. (Emphasis added)
58 . Defendants directly participated in an accounting fraud whichmaterially overstated th e
Company's financial results in violation of GAAP . Defendants materially overstated Converse's financial results by improperlybackdating the actual dates ofineasurement for past stock options grants .
As a result ofthe Companymanipulating the actual dates of measurement for stock options, Comverse will be forced to record additional non-cash charges for stock-based compensation expenses in prior periods. The Company expects that (1) such non-cash charges will be material and (ii) the Companywill need to restate its historical financial statements for each of the fiscal years ended January 31, 2005,
2004, 2003, 2002 and 2001 and for the first three quarters of the fiscal year ended January 31, 2006.
In response to this announcement, Converse's stock price continued its decline and closed at $23 .10 per share on April 18, 2006 on unusually large trading volumes .
59. On or about July 20, 2000, the Director Defendants (except Alon and Hiram) ha d distributed to the Company's shareholders a Proxy Statement, which contained the Company's 2000
Stock Incentive Compensation Plan (the "2000 Proxy Statement") that contained the procedures for the setting of the exercise prices of stock options granted to the Executive Defendants . Those procedures were similar to the procedures described above for the 2005 Plan. Comverse shareholders voted to approve the 2000 Incentive Plan on or about September 15, 2000 .
60. On or about May 15, 2001, the Director Defendants (except Alon and Hiram) had distributed to the Company's shareholders a Proxy Statement, which contained the Company's 2001 Stock Incentive Compensation Plan (the "2001 Proxy Statement") that contained the procedures for the setting of the exercise prices of stock options granted to the Executive Defendants . Those
18 procedures were similar to the procedures described above for the 2005 Plan. Comverse shareholders voted to approve the 2001 Incentive Plan on or about June 15, 2001 .
61 . On or about May 3, 2004, the Director Defendants had distributed to the Company's shareholders a Proxy Statement, which contained the Company's 2004 Stock Incentive Compensation
Plan (the "2004 Proxy Statement") that contained the procedures for the setting of the exercise prices of stock options granted to the Executive Defendants . Those procedures were similar to the procedures described above for the 2005 Plan . Comverse shareholders voted to approve the 2004 Incentive Plan on or about June 15, 2004.
COUNT I
62 . Plaintiff realleges and incorporates by reference each and every allegation containe d above.
63 . This Claim is brought derivatively by plaintiff on-behalf of the Company against the
Director Defendants for violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated
thereunder by the SEC.
64. The Director Defendants caused Comverse to file Proxy Statements with the SEC, which were circulated to Converse's shareholders, that sought shareholder approval for the Company's
stock incentive plans or for the Exchange (collectively, the "Plans") . These Plans provided, interalia,
that Comverse's executives couldbe granted certain stock options ifthe shareholders voted for approval
of the applicable plan. Among other things, the Plans set out how the exercise prices would beset for
the options that were awarded.
65. For the 2001 Proxy Statement, the 2002 Proxy Statement, the 2004 Proxy Statement and the 2005 Proxy Statement (collectively, the "Proxy Statements"), it was stated, in substantially similar
language, that the exercise price for the stock options granted pursuant to the Plans would be no less
than the fair market value of the stock on the date of the granting of the option . Based on this
disclosure, the Plans contained in the Proxy Statements were approved by Comverse's shareholders ,
19 66 . Despite the requirement contained in the Plans, the exercise prices were not set on th e date of the grant of the options, but were improperly backdated .
67. The Director Defendants knowingly, recklessly or negligently allowed the granting date for the stock options to be backdated and ignored the provisions of the Plans as to bow the exercise price was to be set.
68. The Director Defendants caused Comverse to file the Proxy Statements with the SE C containing the provisions of the Plans, which were false and/or misleading because the exercise price s for the options granted to the Executive Defendants were not set in accordance with those Plans .
69. The misstatements and omissions alleged above were material. Had the truth been disclosed, Comverse's shareholders may well have not voted their approval of the Plans. The Director
Defendants knew or recklessly disregarded the misstatements or omissions in the Proxy Statements as alleged above, or they should have known that the Proxy Statements contained misstatements or omissions as alleged above.
70. Converse has been injured by the material misstatements in and omissions from the
Proxy Statements . Comverse has no adequate remedy at law and is therefore entitled to equitable relief including, without limitation, an order setting aside the Plans, which were approved pursuant to the
Proxy Statements. Further, Comverse is entitled to recover damages to compensate the Company for all damages resulting from the Director Defendants' acts and omissions in violation of Rule 14a 9 .
7 1 . This action was timely commenced within five years ofthe date ofthe Proxy Statement s and within one year from the time that plaintiffs discovered or reasonably could have discovered th e facts upon which this Complaint is based.
COUNT II
72. Plaintiff realleges and incorporates by reference each and every allegation contained above.
20 73. This claim is brought byplaintiff derivatively on behalf ofnominal defendant Comvers e pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 ["Sarbanes -Oxley"} against defendants
Alexander and Kreinberg.
74. Defendants Alexander was Chief Executive Officer of Comverse and Kreinberg wa s
Chief Financial Officer of Comverse during periods of time when the Company filed financial statements as part of periodic reports with the SEC that will be required to be restated .
75. Comverse has stated that it likely will be restating its financial statements for it s Fiscal Years ended January 31, 2001, 2002, 2003, 2004 and 2005 as well as for the first three quarter s of the fiscal year ended January 31, 2006 as a result of the material non-cash charges for stock base d compensation expenses .
76. Comverse's restatement will be due to misconduct as the dates for the exercising of stock options granted to the Executive Defendants were improperly backdated .
77 . Defendants Alexander and Kreinberg are required to reimburse Comverse for any bonus or incentive-based equity compensation they received and any profits they realized from the sale o f Comverse securities, including the exercising of options, during the period of times when they serve d as either the Chief Executive Officer or Chief Financial Officer of the Company.
COUNT III
78. Plaintiff realleges and incorporates by reference each and every allegation containe d above.
79. This claim is brought by plaintiff derivatively on behalf of the Company against th e
Individual Defendants . The Individual Defendants are fiduciaries of the Company and of all of its
public stockholders and . owe to them the duty to conduct the business of the Company loyally,
faithfully, carefully, diligently and prudently . These claims are asserted based upon the Individual
Defendants' acts in violation of applicable state law and common law, which acts constitute gross and
reckless breaches of fiduciary duties .
21 80. The Individual Defendants, in their roles as executives and directors of th e
Company, participated in the acts of mismanagement alleged herein, or acted in reckless disregard of the facts known to them, and failed to exercise due care to prevent the backdating of options . The
Individual Defendants became aware, or should have become aware through reasonable inquiry, of the facts alleged herein, but did nothing to correct them and thereby breached their duty of care, loyalty, accountability and disclosure to the stockholders of the Companyby failing to act as an ordinary prudent person would have acted in a like position.
81 . As a result of the Individual Defendants' breach of their fiduciary duties to th e Company, Comverse has suffered at least the following damages :
(a) Comverse senior executives were over-compensated because the exercis e
prices of their awards of stock options were lower thanthe procedures mandate d
they be;
(b) Comverse, as the seller of shares to the Company's Executive Defendant s who exercised options, received less payments for those shares than i t was entitled to receive ;
(c) Comverse shareholders were deprived of accurate information
concerning the Company's operations causing them to approve of
the Company's Plans on false or misleading information, which they otherwise would not have approved ;
(d) Comverse has been exposed to hundreds of millions of dollars in
potential liability from securities fraud class actions filed against th e Company and currently pending before this-Court; and (e) Comverse's stock maybe delisted by NASDAQ.
82. As a result of the Individual Defendants' wrongful conduct and actions, includin g
22 . t 1 0 0
the failure to maintain a system of internal controls adequate to ensure the Company's compliance with the federal securities laws, the Company has suffered considerable damage to, and drastic diminutio n
in, the value of its assets. 83 . All the Individual Defendants, singly and in concert, engaged in the aforesaid conduc t in grossly negligent and/or reckless disregard of their fiduciary duties to the Company.
84. By .reason of the foregoing, the Individual Defendants have breached their fiduciary
obligations to the Company and its stockholders. 85. The Company and its stockholders have been injured by reason of the Individua l
Defendants' grossly negligent breach and/or reckless disregard oftheir fiduciary duties to the Company .
The Individual Defendants engaged in the aforesaid conduct without exercising the reasonable and
ordinary care which they as directors and senior executives owed to the Company and have thereby
wrongfully breached and/or aided and abetted breaches of fiduciary duties to the Company. The
plaintiff, as a stockholder and derivativerepresentative ofthe Company, seeks damages and otherrelief
for the Company as hereinafter set forth.
COUNT IV
86. Plaintiff realleges and incorporates by reference each and every allegation containe d
above.
87. This claim is brought derivatively by plaintiff on behalf of the Company against the Individual Defendants for breach of contract.
88 . The Company has sustained damages as a result of defendants' conduct because i t
overcompensated certain of its senior executives including the Executive Defendants . The granting of
awards of stock options to the Executive Defendants were improperly backdated in violation of th e Company's compensation plans .
89. The Plans were approved by the Company's shareholders and included a provision a s
to how the exercise price was Lobe determined. Rather than follow theprocedures provided in the Plans
23 contained in the 2000 Proxy Statement and the other Proxy Statements, the Individual Defendant s caused the granting of those options to be backdated to allow for an improper exercise price in explicit violation of the terms of the Plans .
90. The awards of stock options set forth above based on the Company's improper backdating of the exercise price are based on mistakes of fact and are therefore voidable as a matter o f contract law. COUNT V 91 . Plaintiff realleges and incorporates by reference each and every allegation containe d
above.
92. This Claim is brought derivatively by plaintiff on behalf of the Company agains t
the Executive Defendants for unjust enrichment.
93 . Comversehas sustained damages as a result of defendants' conduct because Comvers e has received less payments when the Executive Defendants exercised stock options than it was entitle d
to receive if the options had not been improperly backdated .
94. The backdating of stock options, as set forth above, constitutes unjust enrichment to th e
Executive Defendants because they were not entitled to the pecuniary and financial benefits conferre d upon them thereby. The Executive Defendants improperly and unjustly benefitted from their receipt of these improperly backdated options to the Company's detriment. 95. Such unjust enrichment occurred at the Company' s cost and expense. The Company
has therefore been injured thereby to the amount and to the extent that the Executive Defendants
benefitted from the backdating of the options as described above . Plaintiff, as a stockholder and
derivative representative of the Company, seeks damages and other relief for the Company in the
amount of the unjust enrichment by which the Executive Defendants improperly benefitted.
24 COUNT VI
96. Plaintiff realleges and incorporates by reference each and every allegation contained above.
97. This Claim is brought derivatively by plaintiff on behalf of the Company against the Individual Defendants for contribution and indemnification .
98. Comverse is alleged to be liable to Plaintiff and the putative class in the securities fraud
actions for misleading the public about the Company's operations and results . In the event the
Company is found liable to those persons for violating the federal securities laws, the Company's
liability will arise, in whole or in part, from the intentional, knowing, or reckless acts or omissions of
the Director Defendants and the Executive Defendants as alleged herein, and the Company will be
entitled to receive contribution from the Individual Defendants in connection with the securities fraud
actions against the Company currently-pending in this District. In the event the Companyis found liable
to those persons for violatingprinciples of state and/or common law, the Company's liability will result
in whole or in part from the intentional, knowing, reckless, or grossly negligent acts or omissions of the
Individual Defendants as alleged herein, and the Company will be entitled to receive contribution or
indemnification from these defendants to the extent such claims are or will be brought against the
Company.
COUNT VII
99. Plaintiff realleges and incorporates by reference each and every allegation containe d above.
100. This Claim is brought derivatively by plaintiff on behalf of the Company against th e
Executive Defendants for insider trading.
101 . The Executive Defendants occupied positions within the Companythatmade themprivy to confidential, proprietary information concerning Comverse's financial condition, including th e
accounting for the stock options awarded to the Executive Defendants. This information constituted
25 I I, X 0 9
a proprietary asset belonging to the Company . The Executive Defendants used this information to their
own benefit. Because the improperbackdating of stock options did not begin to be revealed until March
14, 2006, Comverse's stock was artificially inflated; and the Executive Defendants exercised options
for millions of shares of Comverse stock during the past few years, receiving proceeds of tens of
millions of dollars. In so doing, these Executive Defendants misappropriated information that they
possessed regarding the true status of Comverse's finances and used it for their personal financial
benefit, or disregarded such information that was available to them or should have been discovered by
them.
101 At the time of their insider stock transactions, the Executive Defendants should have
knownthat the Company's financial statements were incorrect and that the exercise prices for the stock
options they were granted had been improperly backdated. The Executive Defendants' transactions in
Comverse stock while in possession of this material, non-public information constituted breaches of
their fiduciary duties of loyalty and/or due care to the nominal defendant.
103 . The adverse, non-public material information regarding the Company's financial
statements was proprietary information belonging to Comverse . In using their knowledge of the
Company's undisclosed information to exercise their personal holding of Comverse stock options and
receive higherprices for the stock theyreceived than they would otherwise have obtained, the Executive
Defendants used the Company's proprietary information for personal gain, in breach of their fiduciary
duties to the nominal defendant. Thus, the Company is entitled to recover any profits the Executive
Defendants received from their insider trading, beyond what they would have received if they had
disclosed the adverse non-public information before their transactions in Converse stock .
104. By reason of the foregoing, the Executive Defendants have caused the nomina l defendant to suffer substantial harm, including harm for which it has no adequate remedy at law . DEMAND FOR JURY TRIAL, Plaintiff demands a trial by jury on all issues.
26 T Ic 1 0 0
WHEREFORE, plaintiff demands judgment as follows : A. Declaring that Defendants have violated the federal securities laws and breache d
and participated in the breach of their fiduciary duties to the Company ;
B. Ordering defendants Alexander and Kreinberg to reimburse the Company for al l bonuses, options, and incentive compensation they received or profits they realized from trading i n Comverse common stock while they served as the Chief Executive Officer or Chief Financial Officer of Comverse;
C. Ordering the Executive Defendants to return any options to
acquire shares of Comverse common stock pursuant to the incentive stock option plans approved in th e
Proxy Statements;
D. Ordering that the Company's incentive stock option plan be set aside; E. Entering judgment against Defendants and in favor of the Company for th e amount of damages sustained by the Company or which will be sustained as a result of Defendants '
violations of law alleged herein ;
F. Ordering any and all appropriate equitable and/or injunctive relief against the
Defendants to the extent that the Company is unable to obtain from such Defendants an adequat e remedy at law;
G. Awarding the Company compensatory damages including pre judgment an d
post-judgment interest;
H. Awarding plaintiffin this action his reasonable attorneys' fees, experts' fees and other reasonable costs and expenses; and
27 Granting such other and further relief as this Court may deem just and proper . Dated: May 1, 2006
ABRAHAM FRUCHTER & TWERSKY LL P
Bpy~- Jeffrey S. Abraham Lawrence D. Levit (LL-9507) One Penn Plaza, Suite 2805 New York, N .Y. 10119 Telephone: (212) 279-5050 Fax: (212) 279-365 5
Attorneys for Plaintiff
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• 4. %JS 44 (Rev. 11104) CIVIL COVER SH The JS 44 civil cover sheet and the information contained herein neitherep e nor supplement the ice 1 rother a ' yIau exceptas rovided . This form, approved by the Judicial Conferencer f the Unitedg blocal rules of court rates in Sept is of t e erk of Dort for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM .) . -
1. (a) PLAINTIFFS DEFENDANTS- Stow ALEKANDEB . T.EEV EREOMAN, NBRRt3 . R4Z ALOM.ICSI K DANZIGSR, JOHN H. DAVIDFRiEDMAN KBE[. BRUCE BRAVERMAN, derivatively on behalf of Comverse ROTE li1RAM. SAM OOUF.a end WFLL!AM F. SORJN, AND Technology, Inc . COMVERSE T£CHNOLOGY .iNC ., aNM York Catporailon
(b) County of Residence of First Listed Plaintiff Camden County, N.J . Countyof Residence of First Listed Defendant (EXCEPT IN U.S . PLAINTIFF CASES) (IN U .S . PLAINTIFF' CASES ONLY ) NOTE : IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE LAND INVOLVED.
(c) Attorney ' s (Firm Name, Address, and Telephone Number) Attorneys (ifYnown) Abraham Fruchter & Twersky, LLP One Penn Plaze Suite 2805 ii Ag FI 9 Jn New York, NY 101 t 9 (212) 279-5050 II. BASIS OF JURISDICTION (Place an'x" in one Box o nly) III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an "X" in one Box for Plaintiff (For Diversity Cases Only) and One Box for Defendant) Q 1 U .S. Government CJ 3 Federal Question PTF DEF PTF DE F Plaintiff (U.S. Govermnent Not a Party) Citizen of This State ❑ 1 Cl 1 Incorporated or Principal Place Q 4 CI 4 of Bu t
02 U.S . Government Cl 4 Diversity Citizenof Anottter State 0 2 Q 2 Ince J35 Cl 5 Defendant of Business In Another Stat e (Indicate Citizenship of Parties in Item III) Citizen or Subject of a 03 Q 3 Foreign Nation C] 6 Q 6 Foreign Country T1 7 NA TiH 17 fl7+ 4Z!TP1' NTR ACT TORTS_: :; ::; FORIFEITURE7PENALTYi : ! `BANICIiiJPTCY.i OTUERSTATIJTE S 0 130Ins rance PERSONAL INJURY PERSONAL INJURY 0 610 Agriculture 0 422 Appeal 28 USC 158 Q 400 State Reapportiomncnt [1 120 Marine 0 310 Airplane Cl 362 Personal Injury - Cl 620 Other Food & Drug Q 423 Withdrawal El 410 Antitrus t 0 130 M1]Ier Act Q 315 Airplane Product Med. Malpractice Q 625 Drug Related Seizure 28 USC 157 Q 430 Banks dad Bankiltg Q 140 Negotiable Instrument Liability 0 365 Personal Injury - of Property 21 USC 881 0 450 Commerce 17 350 Recovery of Overpayment El 320 Assault, Libel & Product Liability Q 630 Liquor Laws 'i'PR PERTY-RIGH S Q 460 Deportatio n & Enforcement of Judgment Slander Q 368 Asbestos Personal CI 640 R .R. & Truck Cl 820 Copyrights Cl 470 Racketeer Influenced and ❑ 151 Medicare Act Q 330 Federal Employers' Injury Product 0 650 Airline Regs. 0 834 Patent Corrupt Organization s Cl 152 Recovery of Defaulted Liability Liability C l 660 Occupational 0 846 Trademark Cl 410 Consumer Credit Student Loans El 340 Marine PERSONAL PROPERTY Safety/Health 0 490 Cable/Sat TV (Excl . Veterans) Cl 345 Marine Product Cl 370 Othar Fraud Q 690 Other Cl 810 Selective Service Cl 153 Recovery of Overpayment Liability 0 371 Truth in Lending : : ::' . -LABOR=.:_ :- :": : :' : ---SOCIAL S&URITrY • : - Q 850 Securities/Con1ffloditiesl of Veteran's Benefits 0 350 Motor Vehicle Cl 380 Other Personal 0 710 Fair Labor Standards Q 861 HIA (1395ft) Exchange 0 160 Stockholders' Suits 0 355 Motor Vehicle Property Damage Act Q 862 Black Lung (923) CI 875 Customer Challenge Q 190 Other Contract Product Liability C] 385 PropertyDamage o 720 LaborfMgmt. Relations Q 863 DIWCII]IW W (405(g)) 12 USC 341 0 0 195 Contract Product Liability 0 360 Other Pemonal Product Liability Q 730 LabotlMgmt.Reporiing 0 864 SSID Title XVI Cl 890 Other Statutory Action s ❑ 196 Franchise Injury & Disclosure Act d 865 RSI (405(g)) C] 891 Agricultural Act s -REAL PROPERTY : CIVIL RIGHTS -PRISONER PETITIONS 0 740 Railway Labor Act FEDERAL TAX SUITS 0 892 Economic Stabilization Act O 210 Land Condemnation Q 441 Voting Q 510 Motions to Vacate Cl 790 Other Labor Litigation Cl 870 Taxes (U .S . Plaintiff Q 893 Environmental Matter s ❑ O 220 Forcclosure Cl 442 Employment Sentence Q 791 Empt. Ret. Inc . or Defendant) 894 Energy Allocation Act Cl 230 Rent Lease & Ejectment El 443 Housing/ Habeas Corpus : SecurityAct 0 871 IRS-Third Party Cl 895 Freedom of Information El 240 Torts to Land Accommodations CD 530 General 26 USC 7609 Act Cl 245 Tort Product Liability C] 444 Welfare C7 535 Death Penalty Q 900Appeal of Fee Determination Q 290 All Other Real Property ❑ 445 Amer. w/Disabilities - ❑ 540 Mandamus & Other Under Equal Access . Employment Cl 550 Civil Rights to Justic e ❑ 446 Amer. w/Disabilities - C3 555 Prison Condition Cl 950 Constitutionality of Other State Statutes ❑ 440 Other Civil Rights
V. ORIGIN (Place an'x" in One Box Only) Appeal to District 191 0 2 L7 3 C3 4 173 5 Transferred from I~ 6 0 7 Judge fro m Original Removed from Remanded from Reinstated or another district Multidistrict Magistrat e
e the U S. Civil tatote under wbi h ou ar qg oo O CLIi 111GS any txc rl ange lC OF ~04, U . a . . 71 CAUSE d-W ACTION Brief description of cause : Violations of proxy rules and breach of fiduciary duty relating to back dating stock options W. REQUESTED IN CHECK IF TIES IS A CLASS ACTION DEMANDS CHECK YES only if demanded in complaint : COMPLAINT : UNDER F.R .C.P. 23 JURY DEMAND: [ [ Yes CD No VIII. RELATED CASE(S ) Y (See instructions) . IF AN JUDGE Nicholas G . Garautis DOCKET NUMBER CV 06 1825
DATE s~ OF 11 Old Or xr c oxn
RECEIPT p AMOUNT APPLYING IFP JUD GE MAO . JUDGE ARBITRATION CERTIFICATION
1, Lawrence D. Levit , counsel for Bruce Braverma n do hereby certify pursuant to the Local Arbitration Rule 83 .10 that to the best of my knowledge and belief the damages recoverable in the above captioned civil action exceed the sum of $150,000 exclusive of interest and costs . Relief other than monetary damages is sought .
DISCLOSURE STATEMENT - FEDERAL RULES CIVIL PROCEDURE 7 .1
Identify any parent corporation and any publicly held corporation or more or its stocks:
Did the cause arise in Nassau or Suffolk County? 5/1/
If answered yes, please indicate which county . dt ~s Gl ~! JAS 511f
County ofresidence of plaintiff(s) (I) (2) (3)
County ofresidence of defendant(s) (1) (2) (3)
I am currently admitted in the Eastern District of New York and currently a member in good standing of the bar of this court .
Yes I/ No
Are you currently the subject of any disciplinary action(s) in this or any other state or federal court?
Yes (Ifyes, please explain) No V/
Please provide your E-MAIL Address and bar code below . Your bar code consists of the initials of your first and last name and the last four digits of your social security number or any other four digit number registered by the attorney with the Clerk of Court. (This information must be provided pursuant to local rule 11 .1(b) of the civil rules). ATTORNEY BAR CODE: LL 9507
E-MAIL Address: LLevit@aftlaw .com
I consent to the use of electronic filing procedures adopted by the Court in Administrative Order Na. 97-12, "In re electronic Filing Proc ures(EFP)", and consent to the electronic se rvice of all papers.
Signature: ~''~ .