UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 28, 2006
VERINT SYSTEMS INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-49790 11-3200514
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
330 SOUTH SERVICE ROAD, MELVILLE, NEW YORK 11747
(Address of Principal Executive Offices) (Zip Code)
(631) 962-9600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Office of the Chief Scientist of the Israeli Ministry of Industry and Trade
Since Verint Systems Inc. (including its subsidiaries, the "Company" or
"Verint")'s inception, it has participated in a royalty-bearing program
sponsored by the Office of the Chief Scientist (the "OCS") of the Israeli
Ministry of Industry and Trade for the support of research and development
("R&D"). Under the program, the Company has received grants from the OCS for R&D
and is obligated to repay those grants plus interest over time in the form of
royalty payments based on the sales of products successfully developed by the
Company under this program. The Company has received approximately $60 million
in cumulative grants from the OCS and has recorded $33 million in cumulative
royalties and interest to the OCS.
Historically, the amount the Company has received in reimbursement for
R&D from the OCS has exceeded the amount of royalties the Company has paid to
the OCS in a given fiscal year. However, in recent years, the Company's sales of
products subject to royalties grew and the Government of Israel has increased
the rate of royalty due. Further, the Government of Israel has reduced the
grants available under these programs to the Company in recent years.
Consequently, the Company has been recording more in royalties to the OCS than
the Company receives in reimbursement from the OCS for R&D expenses.
Under the OCS program, once a participating company achieves certain
thresholds, it may request to exit the program by paying a lump sum at a level
discounted relative to the amount actually due to the OCS under this program
that would have otherwise been repaid over time through royalties. In that
regard, on July 31, 2006, the Company finalized an arrangement with the OCS
pursuant to which the OCS agreed to accept from the Company approximately $36
million (the "OCS Payment") to settle its obligations to the OCS under this
program and the Company substantially completed payment of all amounts due to
the OCS on that date, and has fully completed payment as of this date.
Prior to this arrangement the Company has made cumulative payments of
$21 million and, with the OCS Payment, total payments by the Company to the OCS
since the beginning of the program equal approximately $57 million. If the
Company had not exited the program, the Company believes that the aggregate
potential obligation to the OCS throughout the Company's participation in this
program would have been approximately $66 million, which is the amount that the
Company received from the OCS plus accumulated interest. This arrangement
results in the Company taking a pre-tax charge in its second quarter results of
approximately $24 million.
The Company believes that if it had continued in the program and had
received grants similar to recent levels, the Company would have recorded more
royalties than grants received in its 2006 fiscal year ("Fiscal 2006 OCS Net
Effect"). The Company believes that the lost interest income from the cash used
for the OCS Payment will be less than the Fiscal 2006 OCS Net Effect.
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Independent Director Compensation
On July 28, 2006, the Board of Directors of the Company approved certain changes
to the compensation of independent directors. The changes affecting cash
compensation of independent directors are effective as of August 1, 2006. The
changes affecting equity-based compensation of independent directors shall
become effective as described below.
The principal changes were as follows:
o Annual Cash Retainer. The annual cash retainer for each independent
director was increased from $15,000 to $30,000, payable in arrears
at the end of each fiscal quarter.
o Board Meeting Fees. The fee paid to each independent director for
attendance at board meetings was raised from $1,000 per meeting to
$1,500 per meeting.
o Committee Meeting Fees. The fee paid to each independent director
for attendance at board committee meetings was raised from $500 per
meeting to $750 per meeting.
o Restricted Stock Grants. In lieu of granting stock options to
independent directors, the Company will grant 5,000 shares of
restricted stock of the Company to each independent director on the
anniversary of each such director's service on the Board, which will
vest in equal quarterly increments of 1,250 shares during the year
after the grant. However, the Company is currently not granting any
equity awards to directors, officers or employees and, therefore,
such shares of restricted stock, when granted, shall be treated for
vesting purposes as if granted on the anniversary of such directors
service on the Board. Accordingly, the grant date for vesting
purposes of the shares of restricted stock to be granted to each of
Messrs. Victor A. DeMarines, Kenneth A. Minihan and Howard Safir
will be May 16, 2006 and, with respect to the shares of restricted
stock to be granted to Mr. Myers, August 12, 2006.
Certain statements in this Report concerning Verint's future revenues, earnings
per share, results or prospects are "forward-looking statements" under the
Private Securities Litigation Reform Act of 1995. There can be no assurances
that forward-looking statements will be achieved, and actual results could
differ materially from forecasts and estimates. Important risks, uncertainties
and other important factors that could cause actual results to differ materially
include, among others: potential impact on Verint's financial results as a
result of Comverse Technology, Inc.'s creation of a special committee of the
Board of Directors of Comverse to review matters relating to grants of Comverse
stock options, including but not limited to, the accuracy of the stated dates of
Comverse option grants and whether Comverse followed all of its proper corporate
procedures and the results of the Comverse special committee's review; the
effect of Verint's failure to timely file all required reports under the
Securities Exchange Act of 1934, and the resultant potential delisting of
Verint's common stock on Nasdaq; the impact of governmental inquiries arising
out of or related to option grants; introducing quality products on a timely
basis that satisfy customer requirements and achieve market acceptance; lengthy
and variable sales cycles create difficulty in forecasting the timing of
revenue; integrating the business and personnel of Mercom and CM Insight; risks
associated with significant foreign operations, including fluctuations in
foreign currency exchange rates; aggressive competition in all of Verint's
markets, which creates pricing pressure; integrating the business and personnel
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of MultiVision, including implementation of adequate internal controls; managing
our expansion in the Asia Pacific region; risks that Verint's intellectual
property rights may not be adequate to protect its business or that others may
claim that Verint infringes upon their intellectual property rights; risks
associated with integrating the business and employees of Opus and RP
Sicherheissysteme GMBH; risks associated with Verint's ability to retain
existing personnel and recruit and retain qualified personnel in all geographies
in which Verint operates; decline in information technology spending; changes in
the demand for Verint's products; challenges in increasing gross margins; risks
associated with changes in the competitive or regulatory environment in which
Verint operates; dependence on government contracts; expected increase in
Verint's effective tax rate; perception that Verint improperly handles sensitive
or confidential information; inability to maintain relationships with value
added resellers and systems integrators; difficulty of improving Verint's
infrastructure in order to be able to continue to grow; risks associated with
Comverse Technology, Inc. controlling Verint's business and affairs; and other
risks described in filings with the Securities and Exchange Commission. All
documents are available through the SEC's Electronic Data Gathering Analysis and
Retrieval system (EDGAR) at www.sec.gov or from Verint's website at
www.verint.com. Verint makes no commitment to revise or update any
forward-looking statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VERINT SYSTEMS INC.
Dated: August 1, 2006 By: /s/ Igal Nissim
--------------------------------
Name: Igal Nissim
Title: Chief Financial Officer
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