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Exhibit 10.8  

            , 2001  

PROXY AGREEMENT  

 WITH RESPECT TO CAPITAL STOCK  

 OF  

 COMVERSE INFOSYS TECHNOLOGY, INC.  

  
 

    Table of Contents
  PROXY AGREEMENT
  WITH RESPECT TO CAPITAL STOCK
  OF
  COMVERSE INFOSYS TECHNOLOGY, INC.    
  

	Topic
 
	 	Page

	RECITALS	 	1
	
ORGANIZATION	
 	

2
	 	

ARTICLE I	
 	

Establishment of Proxy Agreement	
 	

2
	 	ARTICLE II	 	Appointment of Proxy Holders	 	2
	 	ARTICLE III	 	Acknowledgment of Obligations	 	3
	 	ARTICLE IV	 	Indemnification and Compensation of Proxy Holders	 	5
	 	ARTICLE V	 	Restrictions Binding on Subsidiaries of the Cleared Corporation	 	5
	
OPERATIONS	
 	

6
	 	ARTICLE VI	 	Actions by the Proxy Holders	 	6
	 	ARTICLE VII	 	Voting Discretion	 	6
	 	ARTICLE VIII	 	Government Security Committee (GSC)	 	8
	 	ARTICLE IX	 	Annual Review and Certification	 	9
	 	ARTICLE X	 	Duty to Report Violations of the Agreement	 	10
	
CONTACTS AND VISITS	
 	

10
	 	

ARTICLE XI	
 	

Regulated Meetings, Visits and Communications	
 	

10
	 	ARTICLE XII	 	DoD Remedies	 	11
	
ADMINISTRATION	
 	

12
	 	ARTICLE XIII	 	Grant of Proxy, Restrictive Legend and Sale of Stock	 	12
	 	ARTICLE XIV	 	Dividends	 	13
	 	ARTICLE XV	 	Notices	 	13
	 	ARTICLE XVI	 	Inconsistencies with Other Documents	 	14
	 	ARTICLE XVII	 	Governing Law; Construction	 	14
	
TERMINATION	
 	

14
	 	ARTICLE XVIII	 	Termination, Amendment and Interpretations of the Agreement	 	14
	 	ARTICLE XIX	 	Actions Upon Termination of the Agreement	 	15
	 	ARTICLE XX	 	Place of Filing	 	15
	
EXECUTION	
 	

16
	 	ARTICLE XXI	 	Execution	 	16

PROXY AGREEMENT

WITH RESPECT TO CAPITAL STOCK

OF

COMVERSE INFOSYS TECHNOLOGY, INC.  

This
Proxy Agreement ("Agreement") is made this            day
of                        20    by and between Comverse Technology Inc., a New York corporation ("CTI");
Comverse
Infosys Inc., a Delaware corporation (the "Shareholder"); Comverse Infosys Technology, Inc., a Delaware corporation (the "Cleared Corporation"); Robert T. Marsh, Robert W. Bazley, and
John J. Welch, Jr. and their successors appointed as provided in the Agreement (each individually a "Proxy Holder" and collectively the "Proxy Holders"), and the United States Department of Defense
("DoD"), all of the above collectively the "Parties." 

RECITALS:  

        WHEREAS, the Cleared Corporation is duly organized and validly existing under the laws of the State of Delaware,
and has an authorized capital of 1,500 shares, all of which are common voting shares, par value $0.01 per share, and of which 100 such shares are issued and outstanding (the "Shares"); and 

        WHEREAS, CTI owns more than a majority of the Shareholder; and 

        WHEREAS, the Shareholder owns all the Shares of the Cleared Corporation; and 

        WHEREAS, the Cleared Corporation's business consists of the development, marketing, and distribution of defense and defense-related items
for various User Agencies1 of the United States Government, including, without limitation, the DoD; and 

	1
	The
Office of Secretary of Defense (OSD), (including all boards, councils, staffs, and commands), DoD agencies, and the Departments of Army, Navy, and Air Force (including
all of their activities); the Departments of State, Commerce, Treasury, Transportation, Interior, Agriculture, Labor, and Justice; National Aeronautics and Space Administration (NASA); General
Services Administration (GSA), Small Business Administration (SBA), National Science Foundation (NSF); Environmental Protection Agency (EPA); International Trade Commission (ITC), and United States
Trade (UST). 

        WHEREAS, the offices and facilities of the Cleared Corporation require facility security clearances2 issued under the
National Industrial Security Program ("NISP") to conduct its business and the NISP requires that a corporation maintaining a facility security clearance be effectively insulated from foreign
ownership, control or influence ("FOCI"); and 

        WHEREAS, the Assistant Secretary of Defense for Command, Control, Communications and Intelligence ("C3I") has determined that the
provisions of this Agreement are necessary to enable the United States to protect itself against the unauthorized disclosure of information relating to the National Security; and 

        WHEREAS, the DoD has agreed to grant or continue the Cleared Corporation's facility security clearance from and after the effective date
of this Agreement in consideration for inter alia, the Parties' execution and compliance with the provisions of this Agreement, the purpose of which is reasonably and
effectively to exclude CTI and the Shareholder; and all entities that the aforementioned companies control, all of the above collectively the "Affiliates," from unauthorized access to
classified3 and controlled unclassified4 information and influence over the Cleared Corporation's business or management; and 

	2
	An
administrative determination that a facility is eligible for access to classified information of a certain category.

	3
	"Classified
information" is any information that has been determined pursuant to Executive Order 12356 or any predecessor order to require protection against unauthorized
disclosure and is so designated. The classifications TOP SECRET, SECRET and CONFIDENTIAL are used to designate such information.

	4
	"Unclassified
Information", the export of which is controlled by the International Traffic in Arms Regulation ("ITAR") and/or the Export Administration Regulations
("EAR"). The export of technical data which is inherently military in nature is controlled by the ITAR. The export of technical data which has both military and commercial uses is controlled by EAR. 

 

        WHEREAS, the Defense Security Service ("DSS") has oversight responsibilities of the NISP on behalf of the DoD; and the NISP requires that
a corporation maintaining such a facility clearance be effectively insulated from FOCI, this Agreement is entered into between the Parties in order to negate such FOCI, and to be submitted to the DSS
for approval as required by applicable DoD regulation and policy; and 

        WHEREAS, in order to comply fully with the NISP, the Parties have agreed that the voting control of the shares should be vested in
citizens of the United States: 

        NOW THEREFORE, in consideration of the premises and of the mutual undertakings of the Parties hereinafter set forth, a Proxy Agreement in
respect of the shares is hereby created and established, subject to the following terms and conditions, to which all and every one of the Parties expressly assents and agrees: 

ORGANIZATION  

ARTICLE I—Establishment of Proxy Agreement 

        1.01.  The
establishment of this Agreement involves the selection of no less than three Proxy Holders with the qualifications set forth in Section 2.01.
The Proxy shall be granted by the Shareholder to the Proxy Holders pursuant to Article XIII. DoD shall determine that all requirements of this Agreement have been satisfied including the
necessary independence and separation of operation, lack of interdependence between the Affiliates on the one hand and the Cleared Corporation and/or its subsidiaries, and the financial
self-reliance and business viability of the Cleared Corporation. 

ARTICLE II—Appointment of Proxy Holders 

        2.01.  Initial
Proxy Holder nominees will be chosen by the Shareholder. The initial and successor Proxy Holders shall: be resident citizens of the United
States; have had no prior contractual, financial, or employment relationships with the Affiliates, Shareholder or the Cleared Corporation; certify their willingness to accept their security
responsibilities; and be eligible for the requisite personnel security clearance.5 The appointment of initial and successor Proxy Holders shall not become effective until approved by
DSS. 

	5
	Eligibility
for the requisite personnel security clearance is an administrative determination that an individual is eligible for access to classified information of a
certain category. 

        2.02.  Except
as authorized by Section 2.03 below, the Shareholder may not remove a Proxy Holder except for acts of gross negligence or willful
misconduct while in office. The Shareholder may remove a Proxy Holder for such acts by an instrument signed by or on behalf of the Shareholder and filed with the Cleared Corporation at its principal
office in Reston, Virginia. The Shareholder must notify DSS 20 days prior to filing such instrument, and notice must be given pursuant to Section 15.01 of this Agreement. However, if
such removal would result in only one remaining Proxy Holder, then such an instrument of removal shall not be effective until a successor Proxy Holder who is qualified to serve hereunder has accepted
appointment. 

        2.03.  With
the approval of DoD, the Shareholder may also remove a Proxy Holder for acts in violation of the Agreement, including the inability to protect the
legitimate economic interest of the Shareholder pursuant to Section 6.05. The Shareholder must petition DoD for permission to remove a Proxy Holder for acts in violation of the Agreement.
However, DoD has the right to determine, in its sole discretion, whether such petition should be granted. 

        2.04.  Any
Proxy Holder may at any time resign by submitting to the Cleared Corporation at its principal office in Reston, Virginia, a resignation in writing,
with notice to the Shareholder and DSS pursuant to Section 15.01. Such resignation shall be effective on the date of resignation stated by the Proxy Holder. No formal acceptance of resignation
by the Cleared Corporation is necessary to make 

2

 

the resignation effective. Upon resignation, a Proxy Holder's obligations and responsibilities under the Agreement are completed. However, if such resignation would result in only one remaining Proxy
Holder, then the resignation shall not be effective until a successor Proxy Holder who is qualified to serve hereunder has accepted appointment. 

        2.05.  Nomination
and appointment of successor Proxy Holders shall be accomplished as follows: 

        a.    In
the event of the death, resignation, removal or inability to act of any Proxy Holder, the Cleared Corporation shall give prompt written notice to DSS and the
Shareholder. The remaining Proxy Holders shall nominate a successor Proxy Holder and notify the Shareholder and DDS of the nominee. In the event that a nominee is vetoed by the Shareholder pursuant to
Section 2.05(b) below, the remaining Proxy Holders shall diligently nominate an alternate successor Proxy Holder. 

        b.    The
Shareholder shall not have the right to nominate or suggest any person for the position of a successor Proxy Holder. The Shareholder shall have the right to veto
without cause a nominee for the position of successor Proxy Holder. Absent a veto by the Shareholder of a nominee, and upon approval by DSS, the nominee may be appointed by the remaining Proxy
Holders. The Shareholder shall notify the remaining Proxy Holders and DSS of acceptance or veto within 20 days of receipt of the nomination of a successor Proxy Holder. Failure by the
Shareholder to notify the Proxy Holders within 20 days of notification of nomination shall be deemed to constitute acceptance. 

        c.    If
the Shareholder has vetoed three successive nominees proposed by the remaining Proxy Holders, the third nominee, upon approval by DSS, shall be accepted absent an
appeal submitted by the Shareholder to DSS for reasonable cause. 

        d.    Any
nomination and appointment of a successor Proxy Holder shall be made by an instrument in writing signed by the remaining Proxy Holders. Counterparts of such
instrument shall be delivered to the Cleared Corporation, DSS and the Shareholder as provided in Section 15.01. 

        2.06.  Acceptance
of appointment for all initial or successor Proxy Holders as provided above may only be accomplished by their agreement to be bound by the
terms of this Agreement, as signified by their signature on the counterpart of this Agreement on file at the Cleared Corporation's principal office in Reston, Virginia, with copies to the other Proxy
Holders, the Shareholder, and DSS. Upon acceptance of such appointment by the nominee and approval by DSS, the initial or successor Proxy Holder shall be vested with all the rights, powers, authority
and immunities herein conferred upon the Proxy Holders by this Agreement. 

        2.07.  On
the death, resignation, removal or disability of a Proxy Holder, the remaining Proxy Holders may exercise all of the rights, powers and privileges of
the Proxy Holders as set forth in this Agreement until a successor accepts appointment. If no Proxy Holders remain, the Chairman or Acting Chairman of the Board of Directors of the Cleared Corporation
shall, upon written notice to DSS, be automatically vested with all rights, powers, authorities and immunities of the Proxy Holders for an interim period not to exceed 30 days, except that the
Shareholder shall, under such circumstances, have the right to appoint two new Proxy Holders pursuant to Section 2.01. The two new Proxy Holders shall nominate the third Proxy Holder pursuant
to Section 2.05. 

ARTICLE III—Acknowledgment of Obligations 

        3.01.  All
Proxy Holders shall become Directors of the Cleared Corporation. Proxy Holders may appoint or remove other Directors in their sole discretion. The
Board of Directors shall elect a Chairman, who may be one of the Proxy Holders. 

        3.02.  The
terms of compensation, including any and all benefits for the Proxy Holders, shall be negotiated between the Proxy Holders and Shareholder, paid by
the Cleared Corporation, shall not be 

3

 

changed during the Proxy Holders' tenure as Proxy Holders, except upon mutual agreement between the Proxy Holders and the Shareholder with approval of DDS, and shall be provided to DSS. 

        3.03.  Each
Proxy Holder agrees that, in order to be qualified under the Agreement, he must have had no prior or existing contractual, financial or employment
relationship with either the Cleared Corporation or the Affiliates prior to their appointment. Each Proxy Holder further agrees, in order to maintain his qualification as a Proxy Holder:
(i) not to establish any relationships of any kind with the Shareholder, the Affiliates or the Cleared Corporation except as may be required or permitted by the Agreement; and (ii) to be
processed for and remain eligible for a United States Government personnel security clearance and reside within the United States during the term of the Agreement as a Proxy Holder; 

        3.04.  Each
of the Proxy Holders, in recognition of his obligations under the Agreement, agrees: 

        a.    that
the Shares are being placed in a Proxy Agreement as a security measure designed to insulate the Cleared Corporation from any foreign control or influence that may
arise from the Shareholder's ownership of the Shares; 

        b.    that
the United States Government is placing its reliance upon each Proxy Holder as United States citizen to exercise independently all prerogatives of ownership of the
Cleared Corporation; 

        c.    that
one year from the effective date of the Agreement or at the annual meeting required under Section 9.01, the Proxy Holders shall assure that a report is
submitted to DSS in accordance with Section 9.02; 

        d.    that
each Proxy Holder, upon acceptance of appointment, shall be briefed by a representative of DSS on his responsibilities under the NISP and the Agreement; 

        e.    that
one year from the effective date of the Agreement or at the annual meeting required under Section 9.01, the Proxy Holders shall meet with representatives of
DSS in accordance with Section 9.01; 

        f.      that
each Proxy Holder, upon acceptance of appointment and annually thereafter, shall execute, for delivery to DSS, a certificate affirming his Agreement to be bound by,
and accept his responsibilities under the Agreement; 

        g.    not
to accept direction from the Shareholder on any matter before the Proxy Holders or the Board of Directors of the Cleared Corporation and not to permit the Shareholder
to exercise any control or influence over the business or management of the Cleared Corporation except as provided in the Agreement; 

        h.    to
ensure that the management appointed by the Proxy Holders fully understands his responsibility to exercise all prerogatives of management with complete independence
from any foreign influence or control; 

        i.      that
each principal officer of the Cleared Corporation shall be furnished a policy statement on FOCI, stating that management has complete independence from the
Shareholder, that they are barred from taking any action that would countermand the Agreement, and that any suspected violation of this Agreement shall be reported immediately to the Chairman of the
GSC; 

        j.      nothing
in this Agreement is intended to prohibit the Shareholder, as the owner of the Cleared Corporation, from offering to the Proxy Holders advice or administrative
services of the type customarily provided to subsidiary corporations, nor to prohibit the Proxy Holders and the Cleared Corporation from accepting such assistance, when the assistance is
(i) not inconsistent with the Cleared Corporation's obligations under the National Industrial Security Program Operation Manual ("NISPOM"), and (ii) of benefit to the Cleared Corporation
as determined by 

4

 

the Proxy Holders in their sole discretion. It shall be a condition of the Proxy Holders' acceptance of any administrative services pursuant to this subparagraph j that DSS shall have approved an
amendment or addendum to this Agreement authorizing such acceptance; 

        k.    to
maintain records, journals and minutes of meetings and copies of all communications sent or received by them in the execution of their duties. Such data and copies of
all information furnished to the Shareholder by the Cleared Corporation or the Proxy Holders shall be made available upon request for inspection by DSS at the office of the Proxy Holders or the office
of the Cleared Corporation. 

        3.05.  The
Proxy Holders shall appoint an independent financial auditor to conduct an annual audit of the Cleared Corporation's books and records. The Proxy
Holders shall advise DSS and the Shareholder of their action. Upon completion of the audit and review by the Proxy Holders, and subject to the removal of any information not releasable under the
Agreement, the audit report shall be forwarded to the Shareholder. 

        3.06.  The
Cleared Corporation, the Shareholder, or a majority of the Proxy Holders then in office may from time to time request meetings with DSS Headquarters
regarding the implementation of this Agreement. At such meetings, matters may be discussed including, but not limited to, the following: assistance related to the problems or impediments associated
with the practical application of this Agreement, performance of the Proxy Holders, or other matters affecting this Agreement. 

ARTICLE IV—Indemnification and Compensation of Proxy Holders 

        4.01.  In
voting the stock with respect to which they hold proxies, the Proxy Holders shall vote and act on all matters in accordance with their best judgment,
but they assume no responsibility with respect to any action taken by them or taken in pursuance of their vote as cast; and no Proxy Holder shall incur any responsibility by reason of any error in
law, mistake of judgment or any matter or thing done or suffered or omitted to be done under this Agreement, except for his or her own individual gross negligence or willful misconduct. 

        4.02.  The
Proxy Holders shall not be answerable for the default or misconduct of, or for actions taken in reliance on advice received from, any agent or
attorney appointed by them in pursuance of this Agreement if such agent or attorney was selected with reasonable care. 

        4.03.  The
Cleared Corporation and the Shareholder jointly and severally shall indemnify and hold each Proxy Holder harmless from any and all claims arising
from or in any way connected to his performance as a Proxy Holder or director of the Cleared Corporation under the Agreement to the fullest extent permitted by the bylaws of the Cleared Corporation or
applicable law. The Cleared Corporation and the shareholder shall advance fees and costs as incurred in connection with the defense of any such claim. The Shareholder and/or the Cleared Corporation
may purchase insurance to cover this indemnification. 

        4.04.  The
compensation, reasonable and necessary travel expenses and other expenses paid or incurred by the Proxy Holders in the administration of their Proxy
Holder duties shall be borne and promptly paid by the Cleared Corporation upon submission to it of reasonably detailed documentation as appropriate. The Cleared Corporation hereby agrees to promptly
pay such compensation, travel expenses and other expenses. 

ARTICLE V—Restrictions Binding on Subsidiaries of the Cleared Corporation 

        5.01.  The
Parties hereto agree that the provisions of the Agreement shall apply to; and shall be made to be binding upon; all present and future subsidiaries
of the Cleared Corporation. The Cleared Corporation hereby agrees to undertake any and all measures, and provide such authorizations, as may 

5

 

be necessary to effectuate this requirement. The sale of, or termination of the Cleared Corporation's control over any such subsidiary shall terminate the applicability to it of the Agreement. 

        5.02.  If
the Cleared Corporation proposes to form a subsidiary, or to acquire ownership or control of another company, it shall give notice of such
proposed action to DSS and shall advise DSS again immediately upon consummation of such formation or acquisition. 

OPERATIONS  

ARTICLE VI—Actions by the Proxy Holders 

        6.01.  The
Proxy Holders shall adopt written standard operating procedures which shall be followed by the Proxy Holders in discharging their responsibilities
under this Agreement. The operating procedures shall be maintained by the Proxy Holders for inspection by DSS. The Shareholder may review the operating procedures only with the advanced written
approval of DoD. Shareholder appeals of any provision of the operating procedures shall be forwarded to DSS. DoD has the right to determine, in its sole discretion, whether such appeal should be
favorably considered. 

        6.02.  Proxy
Holders shall hold regularly scheduled meetings. These meetings may be held at such time and at such place within the United States as shall be
decided, from time to time, by a majority of the Proxy Holders. At least four meetings shall be held each year. Minutes of such meetings shall be prepared and retained by the Proxy Holders for
inspection by DSS. 

        6.03.  For
the purpose of conducting the Cleared Corporation's business, a majority of the Proxy Holders present at an official meeting, either in person or by
written proxy, shall have the right to cast either in person or by written proxy one vote on each question. In lieu of a meeting, action may also be taken on the business of the Cleared Corporation by
a writing signed by all the Proxy Holders. Each Proxy Holder agrees to attend, except for good cause shown, not less than 50% of all official meetings held in one year's time at which his attendance
is formally requested pursuant to the Proxy Holders' procedures. 

        6.04.  No
proxy to vote the Shares may be given to, or voted by, any person other than one of the Proxy Holders. 

        6.05.  Subject
at all times to the responsibility to ensure compliance by the Cleared Corporation with NISP requirements and the Agreement, the Proxy Holders
shall act in good faith as reasonably prudent persons to protect the legitimate economic interests of the Shareholder in the Cleared Corporation as an ongoing business concern. 

        6.06.  The
Government Security Committee (see Section 8.01 below) shall establish written policies and procedures and maintain oversight to provide
reasonable assurance to itself and DSS that electronic communications between the Cleared Corporation and its subsidiaries and the Affiliates do not disclose classified or export controlled
information without proper authorization. (Note: as used in this Agreement, the term "electronic communications" means the transfer of information via, including but not limited to, telephone
conversations, facsimiles, teleconferences, video conferences or electronic mail.) Policies and procedures will also provide reasonable assurance that electronic communications are not used by the
Parent(s) and/or any of its Affiliates to exert influence or control over the Cleared Corporation's business or management in a manner which could adversely affect the performance of classified
contracts. 

ARTICLE VII—Voting Discretion 

        7.01.  Except
as otherwise provided in this Agreement, the Proxy Holders shall possess and shall be entitled to exercise in their sole and absolute discretion,
with respect to any and all of the Shares at any time covered by the Agreement, the right to vote the same or to consent to any and every act of 

6

 

the Cleared Corporation in the same manner and to the same extent as if they were the absolute owners of such Shares in their own right. All decisions and actions by the Proxy Holders pursuant to
this Agreement shall be based on their independent judgment. All decisions and actions by the Proxy Holders shall be free of any control or influence from the Shareholder in any manner whatsoever
except as specifically permitted in the Agreement. Communication of any nature and by any means from the Shareholder deemed by the Proxy Holders to be an attempt to assert any influence or control
precluded by the Agreement, shall be reported immediately by the Proxy Holders to DSS. 

        7.02.  In
addition to the general authorities conferred by Section 7.01 above, the Proxy Holders are specifically authorized in the exercise of their
sole and absolute discretion with respect to any and all of the Shares to vote for or consent to: 

        a.    the
election of directors of the Cleared Corporation; 

        b.    any
increase, reduction or reclassification of the capital stock of the Cleared Corporation; 

        c.    any
changes or amendments to the Articles of Incorporation or Bylaws of the Cleared Corporation6 involving matters other than those necessary pursuant to
Section 7.04 below; 

	6
	The
Bylaws and Articles of Incorporation of the Cleared Corporation shall be reviewed by DDS at the time of establishment of this Agreement and at least annually
thereafter. 

        d.    the
sale or disposal of the property, assets or business of the Cleared Corporation other than that prohibited in Section 7.03 below; 

        e.    the
pledging, mortgaging or encumbering of any assets of the Cleared Corporation, except as described in Section 7.03 below, which any Shareholder might lawfully
exercise. 

        f.      any
action with respect to the foregoing, or any other matter affecting the Cleared Corporation and not specifically described in Section 7.03 which any
Shareholder might lawfully exercise. 

        7.03.  The
Proxy Holders are not authorized to take any of the following actions without the express written approval of the Shareholder: 

        a.    the
sale or disposal, in any manner, of capital assets or business of the Cleared Corporation where an individual sale or disposition exceeds 25% of the assets of the
Cleared Corporation or where sales or dispositions in the aggregate exceeds 45% of the assets of the Cleared Corporation; 

        b.    the
pledging, mortgaging or encumbering of the assets of the Cleared Corporation for purposes other than obtaining working capital or funds for capital improvements; 

        c.    any
merger, consolidation, reorganization or dissolution of the Cleared Corporation; or 

        d.    the
filing or making of any petition under the federal bankruptcy laws or any similar law or statute of any state or any foreign country. 

        7.04.  The
Proxy Holders agree that they shall, upon written request by the Shareholder, take such action or actions as are necessary to recommend, authorize or
approve the actions specified in Section 7.03. The Proxy Holders shall consult with the Shareholder concerning such action so that the Shareholder may have sufficient information to ensure that
all such actions will be taken in accordance with applicable United States laws and regulations. Any action of the Proxy Holders with respect to the matters specified in Section 7.03 which is
taken without the approval of the Shareholder shall be void and shall have no effect. 

        7.05.  Anything
in this Agreement to the contrary notwithstanding, the Proxy Holders may, upon the petition of the Shareholder, authorize the sale of all or
substantially all of the assets of the Cleared 

7

 

Corporation or any division thereof to a person(s) who is (are) a citizen(s) of the United States or a non-foreign owned or controlled entity. 

ARTICLE VIII—Government Security Committee (GSC) 

        8.01.  There
shall be established a permanent committee of the Cleared Corporation's Board of Directors, to be known as the Government Security Committee
("GSC"), consisting of all Proxy Holders Directors and those officers of the Cleared Corporation who are also directors and who hold
personnel security clearances at the level of the Cleared Corporation's facility security clearance. The members of the GSC shall exercise all reasonable efforts to ensure that the Cleared Corporation
maintains policies and procedures to safeguard classified information in the possession of the Cleared Corporation and to ensure that the Cleared Corporation complies with the Agreement, the ITAR,
EAR, and the DoD Industrial Security Manual. 

        8.02.  The
GSC shall designate one of the Proxy Holder members to serve as Chairman of the GSC. 

        8.03.  The
Chairman of the GSC shall designate a member of the GSC to be Secretary of the GSC. The Secretary's responsibility shall include ensuring that all
records, journals, and minutes of GSC meetings and other documents sent to or received by the GSC are prepared and retained for inspection by DSS. 

        8.04.  A
Facility Security Officer ("FSO") shall be appointed by the Cleared Corporation and shall be the principal advisor to the GSC concerning the
safeguarding of classified information. The FSO's responsibility includes the operational oversight of the Cleared Corporation's compliance with the requirements of the NISP. 

        8.05.  The
members of the GSC shall exercise all reasonable efforts to ensure that the Cleared Corporation develops and implements a Technology Control Plan
("TCP"), which shall be subject to inspection by DSS. The GSC shall have authority to establish the policy for the Cleared Corporation's TCP. The TCP shall prescribe measures to prevent unauthorized
disclosure or export of controlled unclassified information consistent with applicable United States laws and regulations. 

        8.06.  A
Technology Control Officer ("TCO") shall be appointed by the Cleared Corporation and shall be the principal advisor to the GSC concerning the
protection of controlled unclassified information and other proprietary technology and data subject to regulatory or contractual control by the U. S. Government. The TCO's responsibilities shall
include the establishment and administration of all intracompany procedures, including employee training programs to prevent the unauthorized disclosure or export of controlled unclassified
information and to ensure that the Cleared Corporation otherwise complies with the requirements of the ITAR and EAR. 

        8.07.  Discussions
of classified and controlled unclassified information by the GSC shall be held in closed sessions and accurate minutes of such meetings shall
be kept and shall be made available only to such authorized individuals as are so designated by the GSC. 

        8.08.  Upon
taking office, the GSC members, the FSO and the TCO shall be briefed by a DSS representative on their responsibilities under the NISP and the
Agreement. 

        8.09.  Each
member of the GSC shall exercise all reasonable efforts to ensure that all provisions of the Agreement are carried out; that the Cleared
Corporation's directors, officers, and employees comply with the provisions of the Agreement; and that DSS is advised of any known violation of, or known attempt to violate, any provision of the
Agreement, appropriate contract provisions regarding security, United States Government export control laws and regulations, and the NISPOM. 

        8.10.  Each
member of the GSC shall execute, for delivery to DSS upon accepting his appointment and thereafter at each annual meeting of the Cleared Corporation
with DSS as established by this 

8

 

Agreement, a certificate acknowledging the protective security measures taken by the Cleared Corporation to implement this Agreement; and further acknowledging his agreement to be bound by and
acceptance of his responsibilities under this Agreement and acknowledging that the United States Government ("USG") has placed its reliance on him as United States ("US") citizen and as the holder of
a personnel security clearance to exercise all reasonable efforts to ensure those matters set forth herein. 

ARTICLE IX—Annual Review and Certification 

        9.01.  Representative(s)
of DSS, the Proxy Holders, other members of GSC, the FSO, the Cleared Corporation's Chief Executive Officer ("CEO"), the Cleared
Corporation's Chief Financial Officer ("CFO") and the Shareholder shall meet annually to review the purpose and effectiveness of this Agreement and to establish a common understanding of the operating
requirements and how they will be implemented. These meetings shall include a discussion of the following: 

        a.    whether
this Agreement is working in a satisfactory manner; 

        b.    compliance
or acts of noncompliance with the Agreement, NISPOM, or other applicable laws and regulations; 

        c.    necessary
guidance or assistance regarding problems or impediments associated with the practical application or utility of the Agreement; and 

        d.    whether
security controls, practices or procedures warrant adjustment. 

        9.02.  The
CEO and the Chairman of the GSC shall jointly submit to DSS one year from the effective date of the Agreement or at the annual meeting provided for
in Section 9.01., an implementation and compliance report. Such reports shall include the following information: 

        a.    a
detailed description of the manner in which the Cleared Corporation is carrying out its obligation under the Agreement; 

        b.    changes
to security procedures, implemented or proposed, and the reasons for those changes; 

        c.    a
detailed description of any acts of noncompliance, whether inadvertent or intentional, with a discussion of what steps were taken to prevent such acts from occurring in
the future; 

        d.    any
changes or impending changes, to any of the Cleared Corporation's management including reasons for such changes; 

        e.    a
statement, as appropriate, that a review of the records concerning all visits and communications between representatives of the Cleared Corporation and the Affiliates
have been accomplished and the records are in order; 

        f.      a
detailed chronological summary of all transfers of classified and/or controlled unclassified information, if any, from the Cleared Corporation to the Affiliates,
complete with an explanation of the USG authorization relied upon to effect such transfers. Copies of approved export licenses covering the reporting period shall be appended to the report; and 

        g.    a
list of current classified contracts of which the Cleared Corporation (to include its cleared divisions and cleared subsidiaries) is a party, including the percentage
of income derived from each classified contract; and, 

        h.    any
other issues that could have a bearing on the effectiveness or implementation of this Agreement. 

9

 

ARTICLE X—Duty to Report Violations of the Agreement 

        10.01.The
Parties to the Agreement, agree to report promptly to DSS all instances in which the term and obligations of the Agreement may have been violated. 

CONTACTS AND VISITS  

ARTICLE XI—Regulated Meetings, Visits and Communications 

        11.01.  The
Parties to the Agreement hereby agree to abide by the following procedures regarding meetings, visits, and communications between the Cleared
Corporation and it's subsidiaries and divisions and the Affiliates. 

        a.    The
Proxy Holders shall schedule a meeting once each year with the Shareholder. Meetings with the Shareholder may be held more frequently than once each year if a
majority of the Proxy Holders agree. Representatives of the Cleared Corporation may attend these meetings if requested by the Proxy Holders. Classified and controlled unclassified information shall
not be disclosed to the Shareholder except as specifically authorized by applicable law or regulation. Suggestions or requests of the Shareholder representatives present at these meetings shall not be
binding on the Proxy Holders or the Cleared Corporation. Minutes of meetings in which Shareholder representatives are in attendance shall be prepared and retained by the GSC for inspection by DSS. 

        b.    All
proposed non-routine visits to the Cleared Corporation and its subsidiaries by any person who represents the Affiliates (including all of the directors,
officers, employees, representatives, and agents of each) and all proposed non-routine visits to the Affiliates by any person who represents the Cleared Corporation or its subsidiaries
(including all directors, officers, employees, representatives, and agents of each) as well as visits between such persons at other locations, must be approved in advance by the Proxy Holder
designated to act on such requests. All requests for such approval shall be submitted in writing to the Cleared Corporation's FSO for routing to the designated Proxy Holder. Although strictly social
contacts at other locations between the Cleared Corporation's personnel and any individual representing the Affiliates are not prohibited, written reports of such visits must be submitted after the
fact to the FSO for filing with, and review by, the designated Proxy Holder. 

        c.    A
written request for approval of a visit must be submitted to the FSO not less than seven (7) calendar days prior to the date of the proposed visit. If any
unforeseen exigency precludes compliance with this requirement, such request may be communicated via telephone or other electronic means to the FSO and promptly confirmed in writing. The exact purpose
and justification for the visit must be set forth in detail sufficient to make a reasonable and prudent evaluation of the proposed visit. Each proposed visit must be individually justified and a
separate approval request must be submitted for each. Representatives of DoD shall have the right to be present and to monitor all visits described in Section 11.01(b) above, no matter where
they occur. 

        d.    Upon
receipt of a written request for approval of a visit, the FSO will promptly relay the information to the designated Proxy Holder, who, as soon as possible after
being so advised, will indicate approval or disapproval of the request telephonically or by other expeditious means to the visiting parties. Such approval or disapproval will be promptly confirmed in
writing. The GSC shall review periodically the records of any proposed and consummated visits that have occurred since the last review to ensure proper adherence to approved procedures and to verify
that sufficient and proper justification was furnished. 

        e.    Consistent
with the security reliance the USG has placed on the Cleared Corporation and the individual Proxy Holders under this Agreement, certain routine visits inherent
to an 

10

 

independent and viable business operation ("Routine Business Visits") shall require advance approval only from the FSO or his or her designee. 

        f.      Visits
regarded to be Routine Business Visits, and therefore, requiring advance approval only from the FSO or his or her designee, are, in general, those which are made
in connection with regular day-to-day business operation that pertain strictly to the purely commercial aspects of the Cleared Corporation's business and do not involve the
transfer or receipt of classified information or export-controlled technical data. Unless notice to the contrary is given to the FSO by the Proxy Holders, the following visits by employees below the
management level shall be assumed to be Routine Business Visits: 

        i.      Solicitation,
quotation, procurement, or other utilization of the products and services of the parties referenced herein as commercial suppliers (including the supply of
such products or services to the USG) to the same extent as other commercial suppliers would be dealt with. 

        ii.    Fiscal,
fiduciary, and financial matters necessitated by compliance with the requirements of federal, state, and local authorities. Reports of visits in this category
will state a rationale as to why the visit is required. 

        iii.    Marketing
and technical activities involving the export of products where the parties are required to comply with the existing procedures of the U.S. Departments of
Defense, Commerce, State, Treasury,
and other government agencies. Visits in the category will clearly identify the products, devices, components, or technical activity involved. The identification numbers of Department of State and/or
Department of Commerce export licenses will be cited where applicable. 

        11.02.  Visits
and other communications between the Cleared Corporation and its subsidiaries and the Affiliates on such commercial matters as proposed
contracts, subcontracts, joint ventures, partnerships, and teaming arrangements shall be approved in advance by a majority of the Proxy Holders. 

        11.03.  Nothing
in this Agreement shall be construed to prevent the Cleared Corporation from supplying to the Shareholder financial data relating to the
financial condition and financial operations of the Cleared Corporation. The Cleared Corporation shall also respond in writing through the Proxy Holders to written questions that the Shareholder may
have concerning information contained in such reports. The Proxy Holders and the Shareholder shall engage in discussions to determine the format of such reporting. The format must be acceptable to
DSS. 

        11.04.  The
Proxy Holders shall provide the Shareholder with regular quarterly reports of the financial condition and operations of the Cleared Corporation in a
form acceptable to DSS and shall make available appropriate financial personnel to provide any necessary assistance to aid the Shareholder's personnel to understand the financial presentation and
applicable accounting principles. 

        11.05.  A
chronological file of all documentation associated with meetings, visitations and communications, together with appropriate approvals or disapprovals
and reports, required pursuant to this Article XI, shall be maintained by the FSO for inspection by DSS. 

ARTICLE XII—DoD Remedies 

        12.01.  DoD
reserves the right to impose any security safeguard not expressly contained in the Agreement that it believes is necessary to ensure that
unauthorized access by the Affiliates to classified and controlled unclassified information is effectively precluded. 

11

 

        12.02.  Nothing
contained in the Agreement shall limit or affect the authority of the head of the USG agency7 to deny or revoke the Cleared
Corporation's access to classified and controlled unclassified
information under its jurisdiction if it is determined by the User Agency that the national security so requires. 

	7
	The
term "agency" has the meaning provided at 5 United States Code ' 552(f). 

        12.03.  The
Parties hereby assent and agree that the USG has the right, obligation and authority to require any or all of the following remedies in the event of
a material breach of the Agreement: 

        a.    The
novation of the Cleared Corporation's classified contracts to a company not under FOCI. The costs of the novation to a qualified
successor-in-interest will be borne by the Cleared Corporation; 

        b.    The
termination of the Cleared Corporation's classified contracts and the denial of new classified contracts for the Cleared Corporation; 

        c.    The
revocation of the Cleared Corporation's facility security clearance; and 

        d.    The
suspension and/or debarment of the Cleared Corporation from participation in all Federal Government contracts, in accordance with the provisions of the Federal
Acquisition Regulations. 

        12.04.  Nothing
in the Agreement limits the right of the USG to pursue criminal sanctions against the Cleared Corporation, the Shareholder, any Affiliates, or
any director, officer, employee, representative, or agent of any of these companies, for violations of the criminal laws of the United States in connection with their performance of any of the
obligations imposed by this Agreement, including but not limited to any violations of the False Statements Act 18.U. S. C. 287, or of federal criminal statutes pertaining to the unauthorized
disclosure of classified information. 

ADMINISTRATION  

ARTICLE XIII—Grant of Proxy, Restrictive Legend and Sale of Stock 

        13.01.  The
Shareholder hereby appoints the Proxy Holders as its proxies, to have all rights, powers and authority to exercise all voting rights with respect to
the Shares, subject to the terms and conditions set forth in the Agreement. 

        13.02.  It
is the essence of the Agreement that none of the rights, powers and authority which the agreement confers on the Proxy Holders may be terminated at
any time or in any manner other than as provided in the Agreement. 

        13.03.  Concurrently
with the execution and delivery of the Agreement, the Shareholder shall annotate all certificates representing the Shares with the legend
set out below to reflect that the Shares are subject to a proxy which is terminable only at such time or times, and in such manners, as are provided in the Agreement. 

The
shares represented by this certificate are subject to a Proxy Agreement dated                        , under which the owner of
these Shares has granted to the Proxy Holders named therein, and to their
successors, those voting rights with respect to the shares represented hereby that are set forth in said agreement, which rights are terminable only at such time or times, and in such manner as are
provided in said agreement. The purpose of said agreement is to meet the requirements of the Department of Defense so that the facility security clearances of the Cleared Corporation will be
continued. 

12

 

        13.04.  All
certificates representing the Shares shall be deposited with the Proxy Holders at their office in trust for the Shareholder and available for
inspection by DSS and the Shareholder. Receipts for such certificates shall be provided to the Shareholder. 

        13.05.  If
additional Shares of the Cleared Corporation are issued to the Shareholder, it shall be a condition of such issuance that the Shareholder execute a
supplemental Proxy Agreement, containing the same terms and conditions set forth in the Agreement, appointing the Proxy Holders as its proxies to exercise all voting rights with respect to such
shares; and the certificates for such shares shall be annotated in the same manner as provided in Section 13.03 above. 

        13.06.  Nothing
in the Agreement shall restrict the right of the Shareholder or any successor owner of the Shares from selling, transferring, pledging or
otherwise encumbering, all or a portion thereof,
subject to the terms and conditions of the Agreement, as appropriate, and the aforementioned restrictive legend shall not purport nor be construed to limit any owner's ability to effect any such sale,
transfer or encumbrance. However, DSS shall be advised in writing of any proposed sale of the Shares or assets of the Cleared Corporation prior to the execution of any sales agreement. Conversely, the
Proxy Holders shall not have the power to sell or otherwise transfer or pledge or otherwise encumber the Shares. 

ARTICLE XIV—Dividends 

        14.01.  During
the term of the Agreement, the Shareholder, or any successor Shareholder, shall be entitled from time to time to receive from the Proxy Holders
payments equal to cash dividends, if any, collected by or for the account of the Proxy Holders upon the Shares. 

        14.02.  In
the event the Proxy Holders receive any shares as a dividend upon the Shares, the Proxy Holders shall accept such shares. 

ARTICLE XV—Notices 

        15.01.  All
notices required or permitted to be given to the Parties to the Agreement shall be given by mailing the same in a sealed postage paid envelope, via
registered or certified mail, or sending the 

13

 

same by courier or facsimile, to the addresses shown below, or to such other addresses as the Parties may designate from time to time pursuant to this section: 

	For the Cleared Corporation:	 	Comverse Infosys Technology, Inc.

14900 Conference Center Drive, Suite # 100

Chantilly, VA 20151

Attn: David Worthley, President & CEO
	

For the Shareholder:	
 	

Comverse Infosys Inc.

234 Crossways Park Drive

Woodbury, NY 11797

Attn: Dan Bodner, President & CEO
	

For the Proxy Holders:	
 	

c/o Jill Inbar, Esq.

Shea & Gardner

1800 Massachusetts Ave, N.W.

Washington, D.C. 20036
	

For CTI:	
 	

Comverse Technology, Inc.

170 Crossways Park Drive

Woodbury, NY 11797

Attn: David Kreinberg
	

For DSS:	
 	

Defense Security Service

1340 Braddock Place

Alexandria, VA 22314-1651

Attn: Otelia Rice, FOCI Branch Chief

ARTICLE XVI—Inconsistencies with Other Documents 

        16.01.  In
the event that any resolution, regulation or bylaw of any of the Parties to the Agreement is found to be inconsistent with any provisions hereof, the
terms of the Agreement shall control. 

ARTICLE XVII—Governing Law; Construction 

        17.01.  The
Agreement shall be construed so as to comply with all applicable United States laws, regulations, and Executive Orders except that, to the extent
not inconsistent with the right of the United States hereunder, the laws of the State of Delaware shall apply to questions concerning the rights, powers, and duties of the Cleared Corporation, the
Shareholder, and CTI under, or by virtue of, the Agreement. 

        17.02.  In
all instances consistent with the context, nouns and pronouns of any gender shall be construed to include the other gender. 

TERMINATION  

ARTICLE XVIII—Termination, Amendment and Interpretations of the Agreement. 

        18.01.  The
Agreement may only be terminated by DSS as follows: 

        a.    in
the event of a sale of the business or all of the Shares of the Cleared Corporation to a company or person not under FOCI; 

        b.    when
the existence of the Agreement is no longer necessary to maintain a facility security clearance for the Cleared Corporation. 

14

 

        c.    when
the continuation of a facility security clearance for the Cleared Corporation is no longer necessary; 

        d.    when
there has been a breach of the Agreement that requires it to be terminated; or when DoD otherwise determines that termination is in the national interest; 

        e.    when
the Shareholder and the Cleared Corporation for any reason and at any time, petition DSS to terminate this Agreement; however, DSS has the right to receive full
disclosure of the reason or reasons therefor, and has the right to determine, in its sole discretion, whether such petition should be granted. 

        18.02.  If
DoD determines that this Agreement should be terminated for any reason, DSS shall provide the Cleared Corporation and the Shareholder with thirty
(30) days written advance notice of its intent and the reasons therefor. 

        18.03.  DoD
may only refuse to terminate this Agreement when continuance is necessary in the interest of the national security of the United States. 

        18.04.  The
Agreement may be amended by an agreement in writing executed by all parties. 

        18.05.  The
Proxy Holders are authorized to consult with the Shareholder concerning any proposed amendments to, or termination of this Agreement. Documentation
concerning such consultations shall be prepared and retained by the Proxy Holders for inspection by DSS. 

        18.06.  The
Parties to the Agreement agree that any questions concerning interpretations of the Agreement, or whether a proposed activity is permitted under the
Agreement, shall be referred to DoD for resolution. 

        18.07.  This
Agreement may also be terminated at any time by the Cleared Corporation or Shareholder by delivering written notice of termination to DSS and the
other parties hereto (i) if its continued existence is no longer necessary to maintain the Cleared Corporation's facility security clearance; or (ii) if the continuation of the facility
security clearance of the Cleared Corporation is no longer necessary for the conduct of the Cleared Corporation's business, provided thirty (30) days written notice is given to DSS and DSS
approves. 

        18.08.  Unless
extended in accordance with the law applicable hereto, this Agreement shall terminate without action of or notice by the Proxy Holders, the
Cleared Corporation, or Shareholder ten (10) years from the date hereof. 

ARTICLE XIX—Actions Upon Termination of the Agreement 

        19.01.  Upon
termination of the Agreement in any manner as above provided, the restrictive legend affixed to the certificates representing the Shares will be
removed. 

        19.02.  The
DSS shall furnish the Cleared Corporation and the Shareholder with written notice of the termination of this Agreement. 

        19.03.  Upon
termination of the Agreement, all further obligations or duties of the Proxy Holders under the Agreement shall cease. 

ARTICLE XX—Place of Filing 

        20.01.Upon
execution and until the termination of the Agreement, one original counterpart shall be filed at the principal office of the Cleared Corporation, located in
Reston, Virginia. 

15

 

EXECUTION  

ARTICLE XXI—Execution 

        21.01.  The
Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of such counterparts shall together
constitute but one and the same instrument. All Parties to this Agreement are entitled to retain an executed counterpart of this Agreement. 

        IN
WITNESS WHEREOF, the Parties hereto have duly executed the Agreement which shall not become effective until duly executed by the DoD. 

	

[Witnessed]
 Signature of Witness/Date	
 	

By	
 	

/s/  DAVID WORTHLEY      
 David Worthley

President & Chief Executive Officer	
 	

Date	
 	

3/29/01
	

 	
 	

FOR COMVERSE INFOSYS TECHNOLOGY, INC.
	

[Witnessed]
 Signature of Witness/Date	
 	

By	
 	

/s/  DAN BODNER      
 Dan Bodner

President & Chief Executive Officer	
 	

Date	
 	

5/04/01
	

 	
 	

FOR COMVERSE INFOSYS INC.
	

[Witnessed]
 Signature of Witness/Date	
 	

/s/  GENERAL ROBERT T. MARSH (RET.)      
 General Robert T. Marsh (ret.)	
 	

Date	
 	

3/30/01
	

 	
 	

PROXY HOLDER
	

[Witnessed]
 Signature of Witness/Date	
 	

/s/  GENERAL ROBERT W. BAZLEY (RET.)      
 General Robert W. Bazley (ret.)	
 	

Date	
 	

3/29/01
	

 	
 	

PROXY HOLDER
	

[Witnessed]
 Signature of Witness/Date	
 	

/s/  JOHN J. WELCH, JR.      
 John J. Welch, Jr.	
 	

Date	
 	

3/29/01
	

 	
 	

PROXY HOLDER
	

[Witnessed]
 Signature of Witness/Date	
 	

/s/  DAVID KREINBERG      
 David Kreinberg	
 	

Date	
 	

5/3/01
	

 	
 	

FOR COMVERSE TECHNOLOGY, INC.
	

[Witnessed]
 Signature of Witness/Date	
 	

By	
 	

/s/  VALERIE L. HEIL      
 Valerie L. Heil

Deputy Director for Policy, Defense Security Service	
 	

Date	
 	

5/21/01
	

 	
 	

FOR THE DEPARTMENT OF DEFENSE
	Effective Date 5/21/01

(Date of DSS signature)	 	 	 	 	 	 

16

 
PROXY HOLDER CERTIFICATE  

        Pursuant to the provisions of the National Industrial Security Program Operating Manual and the proposed Proxy Agreement among Comverse Technology, Inc.,
Comverse Infosys Inc. and the proxy holders for the stock of Comverse Infosys Technology, Inc., under which I will be one of the proxy holders, the following assurances are provided: 

	10
	I
am a United States citizen currently residing within the United States, capable of assuming full responsibility for voting the stock of Comverse Infosys Technology, Inc., and
exercising the management prerogative relating thereto in such a way as to insure that Comverse Infosys Inc., and any of its parent companies will be effectively insulated from Comverse Infosys
Technology, Inc., the cleared facility.

	20
	I
agree to be processed for a personnel security clearance to the same level as the Comverse Infosys Technology, Inc., facility clearance. I understand that my personnel
clearance must be maintained while serving as a proxy holder for Comverse Infosys Inc.

	30
	I
am a completely disinterested individual with no prior involvement with either Comverse Infosys Technology, Inc. or any of its affiliates or the Comverse Infosys Inc.
or any of its affiliates, other than any prior involvement as a Proxy Holder.

	40
	I
fully understand the functions and the responsibilities of a proxy holder under the proposed proxy agreement and I am willing to accept those responsibilities. 

	 	 	Signed:	 	/s/  ROBERT T. MARSH      

	 	 	Dated:	 	3/30/01

	Witness: [Witnessed]

17

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Exhibit 10.9  

 
 

VERINT SYSTEMS INC. STOCK INCENTIVE COMPENSATION PLAN
  
    Amended as
of                        , 2002
  
    (formerly Comverse Infosys, Inc. Stock Option Plan)    

        1.    Purpose.    

        The
purpose of this Stock Incentive Compensation Plan (the "Plan") is to induce key personnel, including employees, directors, independent contractors, and other persons rendering valued
services, to remain in the employ or service of Verint Systems Inc. (the "Company"), and its present and future subsidiary corporations, sister and parent corporations, and other affiliated
companies (each of which is hereinafter referred to as an "Affiliate"), to attract new personnel and to encourage such personnel to secure or increase on reasonable terms their stock ownership in the
Company. The Board of Directors of the Company (the "Board") believes that the granting of options (the "Options"), stock appreciation rights (the "SARs"), restricted stock and deferred stock awards
(collectively, the Options, the SARs, restricted stock and deferred stock are referred to as "Awards") under the Plan will promote continuity of management and increased incentive and personal
interest in the welfare of the Company by those who are or may become primarily responsible for shaping and carrying out the long range plans of the Company and securing its continued growth and
financial success. Options granted hereunder are intended to be either (a) "incentive stock options" (which term, when used herein, shall have the meaning ascribed thereto by the provisions of
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code")) or (b) options which are not incentive stock options or (c) a combination thereof, as determined by
the Committee (the "Committee") (referred to in Section 5 hereof) at the time of the grant thereof. 

        2.    Effective Date of the Plan.    

        The
Plan became effective on September 10, 1996, by resolution of the Board, subject to ratification of the Plan by the vote of the holders of a majority of the outstanding shares
of the common stock of the Company present in person or by proxy at the 1996 Annual Meeting of Shareholders of the Company. The Plan was amended on May 5, 1999, February 1, 2001, and by
this amendment on                        , 2002. 

        3.    Stock Subject to Plan.    

        Twenty-five
million (25,000,000) of the authorized but unissued shares of the Company's common stock, par value $.001 per share (the "Common Stock") are hereby reserved for
issuance pursuant to Awards granted hereunder; provided, however, that the number of shares so reserved may from time to time be reduced to the extent that a corresponding number of issued and
outstanding shares of the Common Stock are purchased by the Company and set aside for issuance pursuant to Awards. If any Awards expire or terminate for any reason without having been exercised in
full, the outstanding shares subject thereto shall again be available for the purposes of the Plan. 

 

        4.    Administration.    

        The
Plan shall be administered by the Committee referred to in Section 5 hereof. If a Committee shall not be so established, the Board shall perform the duties and functions
ascribed herein to the Committee. Subject to the express provisions of the Plan, the Committee shall have complete authority, in its discretion, to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of the respective Award agreements (which need not be identical), to determine the individuals (the "Participants") to whom
and the times and the prices at which Awards shall be granted, to establish the option periods, the number of shares of the Common Stock to be subject to each Award, whether each Award shall be
exercisable or otherwise vest immediately or in installments and, if in installments, the time and size thereof, whether each Option shall be an incentive stock option or an Option which is not an
incentive stock option, and to make all other determinations necessary or advisable for the administration of the Plan. In making such determinations, the Committee may take into account the nature of
the services rendered by the respective Participants, their present and potential contributions to the success of the Company and the Subsidiaries and such other factors as the Committee, in its
discretion, shall deem relevant. The Committee's determination on all of the matters referred to in this Section 4 shall be conclusive. 

        5.    Committee.    

        The
Committee shall consist of at least three individuals who may, but need not, be members of the Board and all of whom shall be "disinterested persons" within the meaning of
Rule 16b-3(c)(2)(i) promulgated under the Securities Exchange Act of 1934, as amended (the "34 Act"). The Committee shall be appointed by the Board, which may at any time and
from time to time remove any member of the Committee, with or without cause, appoint additional members of the Committee and fill vacancies, however caused, in the Committee. A majority of the members
of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination of the Committee reduced to writing and signed
by all of the members of the Committee shall be fully as effective as if it had been made at a meeting duly called and held. If at any time no Committee has been appointed, the Board shall act as the
Committee. 

        6.    Eligibility.    

        A.
An Option that is an incentive stock option may be granted only to key employees of the Company or an Affiliate. 

        B.
An Option that is not an incentive stock option and other Awards may be granted to key employees of the Company or an Affiliate, non-employee directors and to independent
contractors rendering services to the Company or an Affiliate. 

2

 

        7.    Options.    Options give a Participant the right to purchase a specified number of shares of Common Stock,
Deferred Stock or Restricted Stock (as selected by the Committee) from the Company for a specified time period at a fixed price. Options granted to Participants who are Employees may be either
incentive stock options or Options not intended to qualify as incentive stock options. Option granted to Participants who are not employees shall be Options not intended to qualify as incentive stock
options. The grant of Options shall be subject to the following terms and conditions: 

        A.
The initial per share option price of any Option which is an incentive stock option shall not be less than the Fair Market Value, defined below, of a share of the Common Stock on the
date of grant; provided, however, that, in the case of a Participant who owns more than 10% of the total combined voting power of the Common Stock at the time an incentive stock option is granted to
him, the initial per share option price shall not be less than 110% of the fair market value of the Common Stock. 

        B.
The initial per share option price of any Option which is not an incentive stock option shall not be less than $0.001. 

        C.
Participants shall be granted Options for such term as the Committee shall determine, not in excess of ten (10) years from the date of the granting thereof; provided, however,
that in the case of a Participant who owns more than 10% of the total combined voting power of the Common Stock at the time an Option which is an incentive stock option is granted to him, the term
with respect to such Option shall not be in excess of five (5) years from the date of the granting thereof. 

        D.
The aggregate fair market value (determined at the date of grant) of the shares of the Common Stock for which any Participant may be granted incentive stock options which are
exercisable for the first time in any calendar year (whether under the terms of the Plan or any other stock option plan of the Company) shall not exceed $100,000. To the extent that any Option which
is intended to be an incentive stock option fails to satisfy the requirements of this Section, the Option shall be treated as an Option which is not an incentive stock option. This Section shall be
applied by taking Options into account in the order in which they are granted. 

        E.
For the purposes hereof, the "Fair Market Value" of a share of the Common Stock on any date shall be equal to (i) in the case of Options granted effective upon completion of an
initial public offering of the Common Stock, the initial public offering price of such Common Stock, and (ii) in all other cases, the closing sale price of a share of the Common Stock as
published by a national securities exchange on which the shares of the Common Stock are traded on such date or, if there is no sale of the Common Stock on such date, the average of the bid and asked
prices on such exchange at the close of trading on such date or, if the shares of the Common Stock are not listed on a national securities exchange on such date, the closing price in the over the
counter market, or if the Common Stock is not traded on a national securities exchange or the over the counter market, the fair market value of a share of the Common Stock on such date as shall be 

3

 

determined
in good faith by the Committee in compliance with Section 422(b)(4) of the Code and the applicable regulations promulgated thereunder. 

        F.
Options granted to employees of and consultants to the Company or any Affiliate shall become exercisable at such times and in such installments as the Committee shall determine at the
time of the grant thereof. 

        G.
Except as hereinbefore otherwise set forth, or as set forth in the applicable Award agreement, an Option may be exercised either in whole or in part at any time or from time to time. 

        H.
An Option may be exercised only by a written notice of intent to exercise such Option with respect to a specified number of shares of the Common Stock and payment to the Company of
the amount of the option price for the number of shares of the Common Stock so specified; provided, however, that, if the Committee shall in its sole discretion so determine at the time of the grant
of any Option, all or any portion of such payment may be made in kind by the delivery of shares of the Common Stock having a Fair Market Value (as determined in the manner set forth in
paragraph E of Section 7 hereof) on the date of delivery equal to the portion of the option price so paid; provided, however, that any such determination shall not result in other than
"fixed" accounting for purposes of the Company's financial accounting. 

        I.
No Option intended to qualify as an incentive stock option shall be transferable otherwise than by will or the laws of descent and distribution and, during the lifetime of the
Participant, shall be exercisable only by the Participant. Upon the death of a Participant, the person to whom the rights have passed by will or by the laws of descent and distribution may exercise an
Option intended to qualify as an incentive stock option only in accordance with this Section 7. 

        8.    Deferred Stock.    

        An
Award of Deferred Stock is an agreement by the Company to deliver to the recipient a specified number of shares of Common Stock at the end of a specified deferral period or periods.
Such an Award shall be subject to the following terms and conditions: 

        A.
Deferred Stock Awards shall be evidenced by Deferred Stock agreements. Such agreements shall conform to the requirements of the Plan and may contain such other provisions as the
Committee shall deem advisable. 

        B.
Upon determination of the number of shares of Deferred Stock to be awarded to a Participant, the Committee shall direct that the same be credited to the Participant's account on the
books of the Company but that issuance and delivery of the same shall be deferred until the date or dates provided in Section 8(E) hereof. Prior to issuance and delivery hereunder the
Participant shall have no rights as a stockholder with respect to any shares of Deferred Stock credited to the Participant's account. 

4

 

        C.
Amounts equal to any dividends declared during the Deferral Period with respect to the number of shares covered by a Deferred Stock Award will be paid to the Participant currently, or
deferred and deemed to be reinvested in additional Deferred Stock, or otherwise reinvested on such terms as are determined at the time of the Award by the Committee, in its sole discretion, and
specified in the Deferred Stock agreement. 

        D.
The Committee may condition the grant of an Award of Deferred Stock or the expiration of the Deferral Period upon the Participant's achievement of one or more performance goal(s)
specified in the Deferred Stock agreement. If the Participant fails to achieve the specified performance goal(s), either the Committee shall not grant the Deferred Stock Award to the Participant or
the Participant shall forfeit the Award and no Common Stock shall be transferred to him pursuant to the Deferred Stock Award. Unless otherwise determined by the Committee at the time of an Award,
dividends paid during the Deferral Period on Deferred Stock subject to a performance goal shall be reinvested in additional Deferred Stock and the lapse of the Deferral Period for such Deferred Stock
shall be subject to the performance goal(s) previously established by the Committee. 

        E.
The Deferred Stock agreement shall specify the duration of the Deferral Period taking into account termination of employment on account of death, disability, retirement or other
cause. The Deferral Period may consist of one or more installments. At the end of the Deferral Period or any installment thereof the shares of Deferred Stock applicable to such installment credited to
the account of a Participant shall be issued and delivered to the Participant (or, where appropriate, the Participant's legal representative) in accordance with the terms of the Deferred Stock
agreement. The Committee may, in its sole discretion, accelerate the delivery of all or any part of a Deferred Stock Award or waive the deferral limitations for all or any part of a Deferred Stock
Award. 

        9.    Restricted Stock.    

        An
Award of Restricted Stock is a grant by the Company of a specified number of shares of Common Stock to the Participant, which shares are subject to forfeiture upon the happening of
specified events. Such an Award shall be subject to the following terms and conditions: 

        A.
Restricted Stock shall be evidenced by Restricted Stock agreements. Such agreements shall conform to the requirements of the Plan and may contain such other provisions as the
Committee shall deem advisable. 

        B.
Upon determination of the number of shares of Restricted Stock to be granted to the Participant, the Committee shall direct that a certificate or certificates representing the number
of shares of Common Stock be issued to the Participant with the Participant designated as the registered owner. The certificate(s) representing such shares shall be legended as to sale, transfer,
assignment, pledge or other encumbrances during the restriction period and deposited by the Participant, together with a stock power endorsed in blank, with the Company, to be held in escrow during
the restriction period. 

5

 

        C.
Unless otherwise determined by the Committee at the time of an Award, during the restriction period the Participant shall have the right to receive dividends from and to vote the
shares of Restricted Stock. 

        D.
The Committee may condition the grant of an Award of Restricted Stock or the expiration of the restriction period upon the Participant's achievement of one or more performance goal(s)
specified in the Restricted Stock Agreement. If the Employee fails to achieve the specified performance goal(s), either the Committee shall not grant the Restricted Stock to the Participant or the
Participant shall forfeit the Award of Restricted Stock and the Common Stock shall be forfeited to the Company. 

        E.
The Restricted Stock agreement shall specify the duration of the restriction period and the performance, employment or other conditions (including termination of employment on account
of death, disability, retirement or other cause) under which the Restricted Stock may be forfeited to the Company. At the end of the restriction period the restrictions imposed hereunder shall lapse
with respect to the number of shares of Restricted Stock as determined by the Committee, and the legend shall be removed and such number of shares delivered to the Participant (or, where appropriate,
the Participant's legal representative). The Committee may, in its sole discretion, modify or accelerate the vesting and delivery of shares of Restricted Stock. 

        10.    Stock Appreciation Rights.    

        SARs
are rights to receive a payment in cash, Common Stock, Restricted Stock or Deferred Stock (as selected by the Committee) equal to the increase in the Fair Market Value of a
specified number of shares of Common Stock from the date of grant of the SAR to the date of exercise. The grant of SARs shall be subject to the following terms and conditions: 

        A.
SARs shall be evidenced by SAR agreements. Such agreements shall conform to the requirements of the Plan and may contain such other provisions as the committee shall deem advisable. A
SAR may be granted in tandem with all or a portion of a related Option under the Plan ("Tandem SAR"), or may be granted separately ("Freestanding SAR"). A Tandem SAR may be granted either at the time
of the grant of the Option or at any time thereafter during the term of the Option and shall be exercisable only to the extent that the related Option is exercisable. In no event shall any SAR be
exercisable within the first six (6) months of its grant. 

        B.
The base price of a Tandem SAR shall be the option price under the related Option. The base price of a Freestanding SAR shall be not less than 100% of the Fair Market Value of the
Common Stock, as determined by the Committee, on the date of grant of the Freestanding SAR. 

        C.
A SAR shall entitle the recipient to receive a payment equal to the excess of the Fair Market Value of the shares of Common Stock covered by the SAR on the date of exercise over the
base price of the SAR. Such payment may be in cash, shares of 

6

 

Common
Stock, shares of Deferred Stock, shares of Restricted Stock or any combination, as the Committee shall determine. Upon exercise of a Tandem SAR as to some or all of the shares of Common Stock
covered by the grant, the related Option shall be canceled automatically to the extent of the number of shares of Common Stock covered by such exercise, and such shares shall no longer be available
for purchase under the Option pursuant to Section 7. Conversely, if the related Option is exercised as to some or all of the shares of Common Stock covered by the Award, the related Tandem SAR,
if any, shall be canceled automatically to the extent of the number of shares of Common Stock covered by the Option exercise. 

        D.
SARs shall be subject to the same terms and conditions applicable to Options as stated in Section 7 above. 

        11.    Transferability of Awards.    

        Except
as provided above, Awards may not be pledged, assigned or transferred for any reason during the Participant's lifetime, and any attempt to do so shall be void and the relevant
Award shall be forfeited. The Committee may grant Awards (except Incentive Stock Options) that are transferable by the Participant during his or her lifetime, but such Awards shall be transferable
only to the extent specifically provided in the agreement entered into with the Participant. The transferee of the Participant shall, in all cases, be subject to the provisions of the agreement
between the Company and the Participant. 

        12.    Termination of Employment.    

        
A. Except as otherwise determined by the Committee, in the event a Participant leaves the employ or service of the Company or any Affiliate for any reason other than death, retirement or disability
(as such term is defined in Section 22(e) of the Code), whether voluntarily or otherwise, each Award theretofore granted to him which shall not have expired or otherwise been canceled shall, to
the extent it is exercisable on the date of such termination of employment or service and to the extent it shall not have theretofore been exercised or become unexercisable, terminate upon the earlier
to occur of (i) the expiration of a period of ninety (90) days after such termination of employment or service or (ii) the date specified in said Award. 

        B.
In the event a Participant's employment or service with the Company or any Affiliate terminates by reason of his death, each Award theretofore granted to him which shall not have
expired or otherwise been canceled shall, to the extent it is exercisable on the date of such Participant's death and to the extent it shall not have theretofore been exercised or become
unexercisable, terminate upon the earlier to occur of (i) the expiration of a period of one year after such Participant's death or (ii) the date specified in said Award. 

        C.
In the event a Participant's employment or service with the Company or any Affiliate terminates by reason of his retirement, whether voluntarily or as may be 

7

 

required
by any pension plan, or by reason of his disability (as such term is defined in Section 22(e) of the Code), each Award theretofore granted to him which shall not have expired or
otherwise been canceled shall become immediately exercisable in full and shall, to the extent it shall not have theretofore been exercised or become unexercisable, terminate upon the earlier to occur
of (i) the expiration of ninety (90) days after the date of such Participant's retirement or disability or (ii) the date specified in said Award. 

        D.
The Committee or the Board may in its discretion extend the period during which an Option held by any employee of or consultant to the Company or any Affiliate may be exercised to
such period, not to exceed three years following the termination of a Participant's employment or service with the Company or any Affiliate, as the Committee or the Board may determine to be
appropriate in any particular instance. 

        13.    Adjustments Upon a Change in Control    

        A.
Except as otherwise provided in an applicable agreement, upon the occurrence of a Change in Control (other than a Hostile Change of Control), the Committee may elect to provide that
all
outstanding Options and Stock Appreciation Rights shall immediately vest and become exercisable, each Deferral Period and restriction period shall immediately lapse or all shares of Deferred Stock
subject to outstanding Awards shall be issued and delivered to the Participant. In the event of a Hostile Change in Control, each of the foregoing actions shall occur automatically upon the occurrence
of such Hostile Change in Control. At any time before a Change in Control, the Committee may, without the consent of any Participant, (i) require the entity effecting the Change in Control or a
parent or subsidiary of such entity to assume each outstanding Award or substitute an equivalent option therefor or (ii) terminate and cancel all outstanding Awards upon the Change in Control
and pay the Participant cash equal to the product of (x) the difference between the Fair Market Value of Common Stock on the date of the Change in Control and the exercise price of such Option
and (y) the number of shares of Common Stock subject to such Award. For the purposes of this Section, an Award shall be considered assumed if, following the merger, the award confers the right
to purchase, for each share of Common Stock subject to the Award immediately prior to the merger, the consideration (whether stock, cash, or other securities or property) received in the merger by
holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such consideration received in the merger was not solely common stock of the successor corporation or its parent, the Committee may,
with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each share of Common Stock subject to the Award, to be solely common
stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger. 

        B.
"Change in Control" means (i) the Board (or, if approval of the Board is not required as a matter of law, the shareholders of the Company) shall approve (a) any
consolidation or merger of the Company in which the Company is not the continuing or 

8

 

surviving
corporation or pursuant to which shares of Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of Common Stock
immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (b) any sale, lease, exchange or other
transfer (on one transaction or a series of related transactions) of all, or substantially all, the assets of the Company or (c) the adoption of any plan or proposal for the liquidation or
dissolution of the Company; (ii) any person (as such term is defined in Section 13(d) of the 1934 Act), corporation or other entity other than the Company shall make a tender offer or
exchange offer to acquire any Common Stock (or securities convertible into Common Stock) for cash, securities or any other consideration, provided that (a) at least a portion of such securities
sought pursuant to the offer in question is acquired and (b) after consummation of such offer, the person, corporation or other entity in question is the "beneficial owner" (as such term is
defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 20% or more of the outstanding shares of Common Stock (calculated as provided in paragraph (d) of such
Rule 13d-3 in the case of rights to acquire Common Stock); (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the
entire Board ceased for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at
least two-thirds of the
directors then still in office who were directors at the beginning of the period; or (iv) the occurrence of any other event the Committee determines shall constitute a "Change in Control"
hereunder. 

        C.
"Hostile Change in Control" means any Change in Control described in Section 13(B) above that is not approved or recommended by the Board. 

        14.    Adjustment of Number of Shares.    

        A.
In the event that a dividend shall be declared upon the Common Stock payable in shares of the Common Stock, the number of shares of the Common Stock then subject to any Award and the
number of shares of the Common Stock reserved for issuance in accordance with the provisions of the Plan but not yet covered by an Award shall be adjusted by adding to each share the number of shares
which would be distributable thereon if such share had been outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend. In the event that the outstanding
shares of the Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of shares, sale of assets, merger or consolidation, then, there shall be substituted for each share of the Common Stock then
subject to any Award and for each share of the Common Stock reserved for issuance in accordance with the provisions of the Plan but not yet covered by an Award, the number and kind of shares of stock
or other securities into which each outstanding share of the Common Stock shall be so changed or for which each such share shall be exchanged; provided, however, that, in the event of a merger or
consolidation in which the Company is not the surviving corporation or of a sale by the Company of all or substantially all of its assets to a corporation not controlled by the Company (within the 

9

 

meaning
of Section 1563(a)(1) of the Code) immediately prior to such transaction, the Board determines, in its discretion, that such change or exchange cannot be effected or would be
inappropriate, then, each Option theretofore granted to a Participant which shall not have expired or otherwise been canceled shall become immediately exercisable in full and shall terminate upon the
later to occur of (i) the expiration of thirty (30) days following notice to the Participant by the Company of such merger, consolidation or sale, or (ii) the date of such merger,
consolidation or sale. 

        B.
In the event that there shall be any change, other than as specified in this Section 14, in the number or kind of outstanding shares of the Common Stock, or of any stock or
other securities into which the Common Stock shall have been changed, or for which it shall have been exchanged, then, if the Committee shall, in its sole discretion, determine that such change
equitably requires an adjustment in the number or kind of shares then subject to any Award and the number or kind of shares reserved for
issuance in accordance with the provisions of the Plan but not yet covered by an Award, such adjustment shall be made by the Committee and shall be effective and binding for all purposes of the Plan
and of each Award agreement entered into in accordance with the provisions of the Plan. 

        C.
In the case of any substitution or adjustment in accordance with the provisions of this Section 14, the option price in each stock option agreement for each share covered
thereby prior to such substitution or adjustment shall be the option price for all shares of stock or other securities which shall have been substituted for such share or to which such share shall
have been adjusted in accordance with the provisions of this Section 14. No adjustment or substitution provided for in this Section 14 shall require the Company to sell a fractional
share under any stock option agreement. 

        15.    Purchase for Investment and Waivers.    

        Unless
the shares to be issued upon the exercise of an Option or other Award by a Participant shall be registered prior to the issuance thereof under the Securities Act of 1933, as
amended, such Participant shall, as a condition of the Company's obligation to issue such shares, be required to give a representation in writing that he is acquiring such shares for his own account
as an investment and not with a view to, or for sale in connection with, the distribution of any thereof. 

        16.    Amendment of Plan.    

        The
Board may at any time make such modifications of the Plan as it shall deem advisable; provided, however, that (i) the provisions hereof relating to the receipt of Options by
directors of the Company who are not employees of the Company or any Affiliate, the exercise price and terms and conditions of the exercise thereof may not be amended more than once in any period of
six (6) months, except as may be required to comply with changes in the Code or other applicable law, and (ii) the Board may not without further approval of shareholders representing a
majority of the voting power present in person or by proxy at any special or annual meeting of shareholders increase 

10

 

the
number of shares of the Common Stock as to which Options may be granted under the Plan (as adjusted in accordance with the provisions of Section 14 hereof), or change the class of persons
eligible to participate in the Plan or change the manner of determining the option prices which would result in a decrease in the price of Options or other Awards, or extend the period during which
Awards may be granted or exercised. Except as otherwise provided in Section 17 hereof, no termination or amendment
of the Plan may, without the consent of the Participant to whom any Option shall theretofore have been granted, adversely affect the rights of such Participant under such Option. 

        17.    Expiration and Termination of the Plan.    

        The
Plan shall terminate on March 10, 2012 or at such earlier time as the Board may determine. Awards may be granted under the Plan at any time and from time to time prior to its
termination. Any Awards outstanding under the Plan at the time of the termination of the Plan shall remain in effect until such Awards shall have been exercised or shall have expired in accordance
with its terms. 

        18.    Awards Granted in Connection with Acquisitions.    

        In
the event that the Committee determines that, in connection with the acquisition by the Company of another corporation which shall become an Affiliate of the Company (such corporation
being hereinafter referred to as an "Acquired Affiliate"), Awards may be granted hereunder to key employees of an Acquired Affiliate in exchange for then outstanding options to purchase securities of
the Acquired Affiliate, such Awards may be granted at such option prices, may be exercisable immediately or at any time or times either in whole or in part, may be granted without the requirement that
the Participant enter into an agreement with the Company that he will remain in the employ or service of the Company or an Affiliate for any required period of time and may contain such other
provisions not inconsistent with the Plan, or the requirement set forth in Section 16 hereof that certain amendments to the Plan must be approved by the shareholders of the Company, as the
Committee, in its discretion, shall deem appropriate at the time of the granting of such Awards. 

        19.    Withholding.    

        A.
In connection with the transfer of shares of Common Stock as a result of the exercise or vesting of an Award or upon any other event that would subject the Participant to taxation,
the Company shall have the right to require the Participant to pay an amount in cash or to retain or sell without notice, or to demand surrender of, shares of Common Stock in value sufficient to cover
any tax, including any Federal, state or local income tax, required by any governmental entity to be withheld or otherwise deducted and paid with respect to such transfer ("Withholding Tax"), and to
make payment (or to reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the employee. For
purposes of this Section 19, the value of shares of Common Stock so retained or surrendered shall be the Fair Market Value on the date that the amount of the 

11

 

Withholding
Tax is to be determined (the "Tax Date"), and the value of shares of Common Stock so sold shall be the actual net sale price per share (after deduction of commissions) received by the
Company. 

        B.
Notwithstanding the foregoing, the Participant shall be entitled to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Company with funds
sufficient to enable the Company to pay such Withholding Tax or by requiring the Company to retain or to accept upon delivery thereof shares of Common Stock (other than unvested Restricted Stock)
sufficient in value (determined in accordance with the last sentence of the preceding paragraph) to cover the amount of such Withholding Tax. Each election by a Participant to have shares retained or
to deliver shares for this purpose shall be subject to the following restrictions: (i) the election must be in writing and made on or prior to the Tax Date; and (ii) the election shall
be subject to the disapproval of the Committee. 

        C.
In the event of the death of a Participant, an additional condition of exercising any Option or other Award shall be the delivery to the Company of such tax waivers and other
documents as the Committee shall determine. 

        20.    General.    

        A.
For purposes of this Plan, transfer of employment between the Company and its Affiliates shall not be deemed termination of employment. 

        B.
With respect to Holders subject to Section 16 of the 1934 Act, transactions under the Plan are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee. 

        C.
Without amending the Plan, Awards may be granted to Participants who are foreign nationals or employed outside the United States or both, on such terms and conditions different from
those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to further the purpose of the Plan. 

        D.
To the extent that Federal laws (such as the 1934 Act, or the Code) do not otherwise control, the Plan and all determinations made and actions taken pursuant hereto shall be governed
by the corporate law of the State of Delaware and construed accordingly. The Plan is not intended to be an "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). 

12

QuickLinks

VERINT SYSTEMS INC. STOCK INCENTIVE COMPENSATION PLAN Amended as of , 2002 (formerly Comverse Infosys, Inc. Stock Option Plan)

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