COMVERSE TECHNOLOGY INC/NY/
DEF 14A, 1995-10-18
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<PAGE>
 
 
                           SCHEDULE 14A INFORMATION

          Proxy Statement Pursuant to Section 14(a) of the Securities
                    Exchange Act of 1934 (Amendment No.  )
        
Filed by the Registrant [X]

Filed by a Party other than the Registrant [_] 

Check the appropriate box:

[_]  Preliminary Proxy Statement        [_]  Confidential, for Use of the 
                                             Commission Only (as permitted by
[X]  Definitive Proxy Statement              Rule 14a-6(e)(2))
                                    
[_]  Definitive Additional Materials

[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

                           Comverse Technology, Inc.
- - - --------------------------------------------------------------------------------
               (Name of Registrant as Specified In Its Charter)


- - - --------------------------------------------------------------------------------
   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

   
Payment of Filing Fee (Check the appropriate box):

[X]  $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
     or Item 22(a)(2) of Schedule 14A.

[_]  $500 per each party to the controversy pursuant to Exchange Act Rule
     14a-6(i)(3).

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

   
     (1) Title of each class of securities to which transaction applies:

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     (2) Aggregate number of securities to which transaction applies:

     -------------------------------------------------------------------------


     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
         the filing fee is calculated and state how it was determined):

     -------------------------------------------------------------------------
      

     (4) Proposed maximum aggregate value of transaction:

     -------------------------------------------------------------------------


     (5) Total fee paid:

     -------------------------------------------------------------------------

[_]  Fee paid previously with preliminary materials.
     
[_]  Check box if any part of the fee is offset as provided by Exchange
     Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
     number, or the Form or Schedule and the date of its filing.
     
     (1) Amount Previously Paid:
 
     -------------------------------------------------------------------------


     (2) Form, Schedule or Registration Statement No.:

     -------------------------------------------------------------------------


     (3) Filing Party:
      
     -------------------------------------------------------------------------


     (4) Date Filed:

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Notes:

<PAGE>
 
                           COMVERSE TECHNOLOGY, INC.
                            170 CROSSWAYS PARK DRIVE
                            WOODBURY, NEW YORK 11797

                               __________________

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                        TO BE HELD ON NOVEMBER 17, 1995

                               __________________

     NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Shareholders of
COMVERSE TECHNOLOGY, INC. (the "Corporation") will be held at The Garden City
Hotel, 45 Seventh Street, Garden City, New York, on Friday, November 17, 1995,
commencing at 10:00 A.M. (local time) for the following purposes:

          1.  To elect the members of the Board of Directors of the Corporation
     to serve until the next Annual Meeting of Shareholders.

          2.  To consider and act upon a proposal to approve the adoption of the
     Corporation's 1995 Stock Option Plan and to reserve an aggregate of
     1,000,000 shares of Common Stock for future issuance thereunder.

          3.  To consider and act upon a proposal to ratify the selection of
     Deloitte & Touche as independent auditors of the Corporation for the year
     ending December 31, 1995.

          4.  To transact such other business as may properly come before the
     meeting or any adjournment thereof.


     Only those shareholders of record at the close of business on October 16,
1995 are entitled to receive notice of and to vote at the Annual Meeting or any
adjournment thereof.

     A copy of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1994 accompanies this Notice of Meeting.

                              By Order of the Board of Directors,


                              William F. Sorin,
                              Secretary
October 17, 1995



ATTENDANCE AT THE ANNUAL MEETING BY HOLDERS OF AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK, APPEARING IN PERSON OR REPRESENTED BY PROXY,
IS NECESSARY TO CONSTITUTE A QUORUM.  YOUR ATTENDANCE IS IMPORTANT AND
APPRECIATED.  WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN AND RETURN THE ACCOMPANYING PROXY CARD.  YOUR PROXY MAY BE REVOKED IN YOUR
DISCRETION AT ANY TIME BEFORE THE SHARES ARE VOTED.
<PAGE>
 
                           COMVERSE TECHNOLOGY, INC.
                            170 CROSSWAYS PARK DRIVE
                            WOODBURY, NEW YORK 11797

                               __________________

                                PROXY STATEMENT

                               _________________

                         ANNUAL MEETING OF SHAREHOLDERS
                        TO BE HELD ON NOVEMBER 17, 1995

                               __________________

          This Proxy Statement and the accompanying form of proxy are being
furnished in connection with the solicitation of proxies by the Board of
Directors of Comverse Technology, Inc., a New York corporation ("Comverse" or
the "Corporation"), for use at the Annual Meeting of the Shareholders of the
Corporation to be held on November 17, 1995 or any adjournment thereof (the
"Annual Meeting").

          A proxy in the accompanying form, which is properly executed, duly
returned to the Corporation and not revoked, will be voted in accordance with
the instructions contained in the proxy.  If no instructions are given with
respect to any matter specified in the Notice of Annual Meeting to be acted upon
at the Annual Meeting, the proxy will be voted in favor of such matter.  As to
any other matters properly brought before the Annual Meeting, the persons named
in the proxy will vote in accordance with their best judgment.  Any shareholder
who desires to revoke a proxy may do so at any time prior to the vote of the
shares by tendering written notice of revocation addressed to the Secretary of
the Corporation, by attending the Annual Meeting in person and requesting the
return of the proxy or by delivering to the Secretary of the Corporation another
form of proxy bearing a later date of execution.

          The cost of the solicitation of proxies will be paid by the
Corporation.  In addition to the solicitation of proxies by the use of the
mails, regularly engaged employees of the Corporation may, without additional
compensation, solicit proxies by personal interviews, telephone and
telefacsimile.  The Corporation will, upon request, reimburse brokers and others
who are only record holders of the Corporation's Common Stock, par value $.10
per share (the "Common Stock"), for their reasonable expenses in forwarding
proxy material to beneficial owners of such stock and obtaining voting
instructions from such owners.

          The Board of Directors has fixed the close of business on October 16,
1995 as the record date for determining the shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date").  At the Record Date,
there were issued, outstanding and entitled to vote an aggregate of
21,228,214 shares of Common Stock.  Attendance at the Annual Meeting, in
person or represented by proxy, by the holders of a majority of all shares of
Common Stock issued, outstanding and entitled to vote constitutes a quorum.
Each share of Common Stock entitles the holder thereof to one vote on each
matter presented for action at the meeting.

          This Proxy Statement and the accompanying form of proxy are being
mailed on or about October 17, 1995 to shareholders of record on the Record
Date.
<PAGE>
 
MANAGEMENT AND PRINCIPAL SHAREHOLDERS

   The following table identifies and sets forth certain information concerning
the beneficial ownership of Common Stock at October 1, 1995 by the executive
officers of the Corporation, by each incumbent director of the Corporation
standing for reelection at the Annual Meeting and by each person known by the
Corporation to beneficially own more than five percent of the issued and
outstanding Common Stock.

<TABLE>
<CAPTION>
                                                                                         NUMBER OF        PERCENT
                                                                                           SHARES         OF TOTAL
                                                                                        BENEFICIALLY    OUTSTANDING
NAME                                      AGE     RELATIONSHIP WITH THE CORPORATION        OWNED         SHARES(1)
- - - ----                                      ---     ---------------------------------    --------------   ------------
<S>                                       <C>     <C>                                  <C>              <C>
Kobi Alexander(a)(b)                       43     President, Chairman of the
                                                  Board, Chief Executive Officer
                                                  and Director                           1,044,613(2)           4.8%
Carmel Vernia                              43     Chief Operating Officer                  211,248(3)             *
Igal Nissim                                40     Vice President-Finance and
                                                  Chief Financial Officer                    7,000(4)(5)          *
Zvi Alexander                              73     Director                                  14,000(4)             *
John H. Friedman(b)(c)(d)                  42                              Director          2,000(4)             *
Sam Oolie(a)(b)(c)(d)                      59     Director                                  11,000(4)             *
William F. Sorin(a)(d)                     46     Secretary and Director                    25,000(4)             *
Yechiam Yemini(a)(c)                       47     Director                                  23,000(6)             *
All directors and executive
 officers as a group (8 persons)                                                         1,337,861(7)           6.0%
</TABLE>

- - - -----------------
  * Less than 1%.

(a) Member of Executive Committee of the Board of Directors.
(b) Member of Audit Committee of the Board of Directors.
(c) Member of Remuneration and Stock Option Committee of the Board of Directors.
(d) Member of Corporate Planning and Structure Committee of the Board of
    Directors.

(1) Based on 21,183,070 shares of Common Stock issued and outstanding on
    October 1, 1995, excluding, except as otherwise noted, shares of Common
    Stock issuable upon the exercise of outstanding stock options. (2) Includes
    50,000 shares held directly by Mr. Alexander, 563,750 shares issuable upon
    the exercise of stock options that were exercisable at or within 60 days
    after October 1, 1995 and 430,863 shares held by other persons, which Mr.
    Alexander has the sole right to vote pursuant to a proxy. Does not include
    500,000 shares issuable upon the exercise of options that were not
    exercisable at or within 60 days after October 1, 1995.
(3) Includes 202,500 shares issuable upon the exercise of stock options that
    were exercisable at or within 60 days after October 1, 1995. Does not
    include 62,500 shares issuable upon the exercise of options that were not
    exercisable at or within 60 days after October 1, 1995.
(4) Consists solely of shares issuable upon the exercise of stock options
    that were exercisable at or within 60 days after October 1, 1995.
(5) Does not include 25,000 shares issuable upon the exercise of stock
    options that were not exercisable at or within 60 days after October 1,
    1995.
(6) Includes 16,000 shares issuable upon the exercise of stock options that
    were exercisable at or within 60 days after October 1, 1995.
(7) Includes 841,250 shares issuable upon the exercise of stock options that
    were exercisable at or within 60 days after October 1, 1995.  Does not
    include 587,500 shares issuable upon the exercise of options that were
    not exercisable at or within 60 days after October 1, 1995.

                                     - 2 -
<PAGE>
 
BACKGROUND OF NOMINEES AND EXECUTIVE OFFICERS

        Kobi Alexander.  Mr. Alexander has served as Chairman of the Board of
        --------------                                                       
   Directors of the Corporation since September 1986, as President and Chief
   Executive Officer since April 1987 and as a director of the Corporation since
   its formation.  Mr. Alexander also served as Co-Managing Director of the
   Corporation's wholly-owned Israeli subsidiary, Efrat Future Technology Ltd.
   ("Efrat") from its formation in 1982 until October 1986, and currently serves
   as Chairman of the Board of Directors of Efrat.  From October 1984 to
   September 1986, Mr. Alexander served as Co-Chairman and Co-Chief Executive
   Officer of the Corporation.  Prior to the formation of Efrat, in 1980 and
   1981, Mr. Alexander served as an independent financial and business
   consultant to a number of multinational corporations. Between 1978 and 1980,
   Mr. Alexander worked in the Corporate Finance Department of Shearson Loeb
   Rhoades (currently Smith Barney Shearson).  Mr. Alexander received a B.A.,
   magna cum laude, in Economics from the Hebrew University of Jerusalem in
   1977, and an M.B.A. in Finance from New York University in 1980.  He has
   served as the Chairman of the High-Tech Research and Development Section of
   the Israeli Association of Industrialists.

        Carmel Vernia.  Mr. Vernia serves as Chief Operating Officer of the
        -------------                                                      
   Corporation and as Managing Director of Efrat, where he has been employed
   since 1984 in various capacities, including Vice President, Manager of the
   Government Systems Division and Manager of the Research and Development
   Division.  Prior to joining Efrat, he was employed by Elco Ltd. in Israel,
   where he headed the development of advanced perimeter intrusion detection
   systems.  Between 1980 and 1982, Mr. Vernia was employed by Intel Corporation
   in Santa Clara, California, where he served as applications engineer for
   digital signal processing, digital telephony and data communications
   products.  He received a B.Sc. in Electrical Engineering from the Technion,
   Israel Institute of Technology, in 1974 and a M.Sc. in Electrical and
   Computer Engineering from the University of California at Davis in 1980.

        Igal Nissim.  Mr. Nissim has been employed by the Corporation since May
        -----------                                                            
   1986 and has served as Vice President-Finance and Chief Financial Officer of
   the Corporation since January 1993.  He previously served as Chief Financial
   Officer of Efrat.  Prior to joining the Corporation, he was employed by Gadot
   Industrial Enterprises Ltd. for a period of two years as deputy controller,
   responsible for financial and cost accounting.  Mr. Nissim is a Certified
   Public Accountant in Israel and was employed for four years with Kesselman &
   Kesselman, one of the largest accounting firms in Israel.  He received a B.A.
   in Economics and Accounting from Tel Aviv University in 1981.

        Zvi Alexander.  Mr. Alexander has been a director of the Corporation
        -------------                                                       
   since August 1989.  Mr. Alexander has been actively engaged in the energy
   industry for more than 30 years.  He served as Chief Executive Officer of the
   Israeli National Oil Company and its successor from 1966 through 1976, and
   subsequently engaged in activities in the energy industry as a consultant and
   independent entrepreneur.  He is currently Chairman of A&T Exploration
   Company Ltd.  Zvi Alexander is the father of Kobi Alexander and the father-
   in-law of Yechiam Yemini.

        John H. Friedman.  Mr. Friedman has been a director of the Corporation
        ----------------                                                      
   since June  1994.  He is the Managing Director of Easton Capital Corporation,
   a private investment firm founded by Mr. Friedman in 1991.  From 1989 to
   1991, Mr. Friedman was a Managing Director of Security Pacific Capital
   Investors.  Prior to joining that firm, he was a Managing Director of E. M.
   Warburg, Pincus & Co., Inc., where he was employed from 1981 to 1989.  From
   1978 to 1980, Mr. Friedman practiced law with the firm of Sullivan & Cromwell
   in New York City.  Mr. Friedman is also a director of Alliance Entertainment
   Corporation.  Mr. Friedman received a B.A., magna cum laude, from Yale
   University and a J.D. from Yale Law School.

        Sam Oolie.  Mr. Oolie has been a director of the Corporation since May
        ---------                                                             
   1986.  He has been Chairman and Chief Executive Officer of NoFire
   Technologies, Inc., a manufacturer of high performance fire retardant
   products which offer protection against heat and fire for many applications
   in the automotive, 

                                     - 3 -
<PAGE>
 
   construction, telecommunications, utility, marine, military and other
   markets, since August 1995. He has also been Chairman of Oolie Enterprises,
   an investment company, since July 1985. He also has served as a director of
   CFC Associates, a venture capital firm, since January 1984 and as Chairman of
   New Thermal Corp., an extruder of plastic profiles for the window industry,
   since January 1991. He was Chairman of The Nostalgia Network, a cable
   television network, from April 1987 to January 1990 and was Vice Chairman and
   director of American Mobile Communications, Inc., a cellular telephone
   company, from February 1987 to July 1989. From February 1962 to July 1985,
   Mr. Oolie was Chairman, Chief Executive Officer and a director of Food
   Concepts, Inc., a provider of food services to institutions and hospitals.
   Mr. Oolie also serves as a director of Avesis, Inc., NoFire Technologies,
   Inc., Wayfinder, Inc. and Noise Cancellation Technologies, Inc. Mr. Oolie
   received a B.S. from Massachusetts Institute of Technology in 1958 and an
   M.B.A. from Harvard Business School in 1961.

        William F. Sorin.  Mr. Sorin, who has served as a director and the
        ----------------                                                  
   Corporate Secretary of the Corporation since its formation, is an attorney
   engaged in private practice and is general counsel to the Corporation.  Mr.
   Sorin received a B.A. from Trinity College in 1970 and a J.D., cum laude,
   from Harvard Law School in 1973.

        Yechiam Yemini.  Professor Yemini, a director of the Corporation from
        --------------                                                       
   October 1984 to May 1986 and since May 1987, has been Chief Scientific
   Advisor to the Corporation since its formation.  He has been a professor in
   the computer science department of Columbia University since 1980, where he
   is leading research projects in the areas of distributed computing and
   communications and network management systems.  Professor Yemini received a
   Ph.D. in Computer Science from UCLA in 1978 in the area of computer
   networking.  Professor Yemini is the brother-in-law of Kobi Alexander and the
   son-in-law of Zvi Alexander.

   COMMITTEES OF THE BOARD OF DIRECTORS

        The Board of Directors has four standing committees.  The Executive
   Committee is empowered to exercise the full authority of the Board of
   Directors in circumstances when convening the full board is not practicable.
   The Audit Committee is responsible for reviewing audit procedures and
   supervising the relationship between the Corporation and its independent
   auditors. The Remuneration and Stock Option Committee is responsible for
   approving compensation arrangements for senior management of the Corporation
   and administering the Corporation's stock option plans.  The Corporate
   Planning and Structure Committee reviews and makes recommendations to the
   board concerning issues of corporate structure and planning, including the
   formation and capitalization of subsidiaries of the Corporation, the
   structure of acquisition transactions, the terms of any stock options and
   other compensation arrangements in respect of subsidiaries of the
   Corporation, situations that might involve conflicts of interest relative to
   the Corporation and its subsidiaries and the terms of significant
   transactions between the Corporation and its subsidiaries.

        During 1994, there were five meetings of the Board of Directors of the
   Corporation, one meeting (and one written action in lieu of meetings) of the
   Remuneration and Stock Option Committee, two meetings of the Audit Committee
   and one meeting of the Corporate Planning and Structure Committee.  Each
   member of the Board of Directors attended all the meetings of the Board of
   Directors and of each Committee of which he was a member during the year.

                                     - 4 -
<PAGE>
 
   EXECUTIVE COMPENSATION

        The following table presents summary information regarding the
   compensation paid or accrued by the Corporation for services rendered during
   the years 1992, 1993 and 1994 by those of its executive officers whose salary
   and bonus compensation during 1994 exceeded $100,000:


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
 
                                                              
                                                                 LONG-TERM  
                                                                COMPENSATION 
                                   ANNUAL COMPENSATION             STOCK     
     NAME AND                 -----------------------------       OPTION        ALL OTHER 
PRINCIPAL POSITION            YEAR   SALARY(1)     BONUS(2)    GRANTS(3)(4)   COMPENSATION(5)
- - - ----------------------------  ----  ----------    ---------    ------------   ---------------
<S>                           <C>   <C>           <C>          <C>            <C>
 
Kobi Alexander                1994   $348,643     $364,020          500,000       $102,877
President, Chief Executive    1993   $339,683     $425,000                -       $238,247
Officer and Chairman of       1992   $258,701     $420,475                -       $195,775
the Board of Directors
Carmel Vernia                 1994   $121,436     $100,000          200,000       $ 30,973
Chief Operating Officer(6)    1993   $100,513     $ 40,000           25,000       $ 23,065
Managing Director, Efrat      1992   $ 87,132     $ 30,000                -       $ 19,859
 
Igal Nissim                   1994   $101,480     $ 17,500           10,000              -
Chief Financial Officer(7)    1993   $ 90,000     $ 15,000           10,000              -
                              1992   $ 69,111            -                -       $ 11,129
- - - -------------------
</TABLE>
(1) Includes salary and payments in lieu of earned vacation.
(2) Includes bonuses accrued for services performed in the year indicated,
    regardless of the year of payment.
(3) Number of shares subject to options has been adjusted to reflect the one-
    for-ten combination, or "reverse split", of the Corporation's shares on
    February 26, 1993.
(4) See also "Security Ownership of Certain Beneficial Owners and Management -
    Options to Purchase Subsidiary Shares."
(5) Consists of miscellaneous items not exceeding $10,000 in the aggregate for
    any individual, premium payments and contributions under executive insurance
    and training plans and, in the case of Mr. Alexander, $60,000, $211,000 and
    $181,000 accrued in 1994, 1993 and 1992, respectively, for payments due on
    termination of employment pursuant to the terms of his employment agreements
    with the Corporation.
(6) Mr. Vernia was appointed Chief Operating Officer of the Corporation
    effective January 1, 1994.
(7) Mr. Nissim was appointed Chief Financial Officer of the Corporation
    effective January 1, 1993.

     The following table sets forth information concerning options granted
during 1994 to the executive officers of the Corporation under its employee
stock option plans:

                                     - 5 -
<PAGE>
 
                    STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                                                            POTENTIAL REALIZABLE VALUE
                                                                                             ASSUMED ANNUAL RATES OF
                                                                                            STOCK PRICE APPRECIATION
                                                                  INDIVIDUAL GRANTS             FOR OPTION TERM*
                                                                  ------------------        --------------------------
                                           PERCENT OF
                                             TOTAL
                                            OPTIONS
                              NUMBER OF    GRANTED TO   EXERCISE
                                SHARES     EMPLOYEES     PRICE
                              SUBJECT TO   IN FISCAL      PER        EXPIRATION
NAME                          OPTION         YEAR        SHARE          DATE                   5%              10%
- - - ----                          ----------   ----------   --------  ------------------       ----------       ----------
<S>                           <C>          <C>          <C>       <C>                      <C>              <C>
                                                                                                       
Kobi Alexander                   500,000     42.5%       $10.000  September 22, 2004       $3,144,473       $7,968,712
Carmel Vernia                    200,000     17.0%       $10.000  September 22, 2004       $1,257,789       $3,187,485
Igal Nissim                       10,000      0.9%       $10.000  September 22, 2004       $   62,889       $  159,374
- - - ------------------------
</TABLE>
*    Represents the gain that would be realized if the option were held for its
     entire ten-year term and the value of the underlying shares increased at
     compounded annual rates of 5% and 10% from the fair market value at the
     date of option grant.

     Each of these options has a term of ten years and becomes exercisable and
vests in annual increments over periods of up to four years from the year of
grant.  The exercise price of each option is equal to the fair market value of
the underlying shares at the date of grant.

     The following table sets forth certain information concerning options
granted during the past three fiscal years to the above-named executive officers
of the Corporation under its employee stock option plans:

                 STOCK OPTION GRANTS IN LAST THREE FISCAL YEARS
<TABLE>
<CAPTION>
 
                           PERCENT OF
                             TOTAL
                            OPTIONS
             NUMBER OF     GRANTED TO   EXERCISE
               SHARES      EMPLOYEES     PRICE
YEAR OF                    SUBJECT TO  IN FISCAL     PER        EXPIRATION
GRANT           NAME         OPTION       YEAR      SHARE          DATE
- - - ---------  --------------  ----------  ----------  -------  ------------------
<S>        <C>             <C>         <C>         <C>      <C>
 
1994:
           Kobi Alexander     500,000    42.5%     $10.000  September 22, 2004
           Carmel Vernia      200,000    17.0%     $10.000  September 22, 2004
           Igal Nissim         10,000     0.9%     $10.000  September 22, 2004
1993:                                            
           Kobi Alexander           -       -            -                   -
           Carmel Vernia       25,000     6.1%     $13.375  September 15, 2003
           Igal Nissim         10,000     2.4%     $13.375  September 15, 2003
1992:                                            
           Kobi Alexander           -       -            -                   -
           Carmel Vernia            -       -            -                   -
           Igal Nissim              -       -            -                   -
</TABLE>

                                     - 6 -
<PAGE>
 
     The following table sets forth, as to each executive officer identified
above, the number of unexercised options held at December 31, 1994, exercisable
at that date or subject to future vesting, and the value of such options based
on the closing price of the underlying shares on the NASDAQ National Market
System at that date, net of the associated exercise price.  No options were
exercised by the executive officers of the Corporation during 1994.


                   OPTION EXERCISES AND YEAR-END VALUE TABLE

                     AGGREGATE OPTION EXERCISES IN 1994 AND
               VALUE OF UNEXERCISED OPTIONS AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
                                         NUMBER OF UNEXERCISED         VALUE OF UNEXERCISED
                   SHARES                     OPTIONS HELD             IN-THE-MONEY OPTIONS
                  ACQUIRED                AT DECEMBER 31, 1994       HELD AT DECEMBER 31, 1994
                     ON      VALUE    -----------------------------  --------------------------
NAME              EXERCISE  REALIZED   EXERCISABLE    UNEXERCISABLE  EXERCISABLE  UNEXERCISABLE
- - - ----------------  --------  --------  --------------  -------------  -----------  -------------
<S>               <C>       <C>       <C>             <C>            <C>          <C>
 
Kobi Alexander           -         -         563,750        500,000   $5,329,506       $937,500
Carmel Vernia            -         -         150,000        125,000   $  648,750       $187,500
Igal Nissim              -         -           2,000         20,000   $   19,350       $ 18,750
</TABLE>

     See "Security Ownership of Certain Beneficial Owners and Management -
Options to Purchase Subsidiary Shares" for information regarding the grant to
certain executive officers of options to purchase shares of subsidiaries of the
Corporation.


EMPLOYMENT AGREEMENTS

   Mr. Alexander serves as Chairman of the Board, President and Chief Executive
Officer of the Corporation under an agreement extending through June 30, 2000 at
a current base annual salary of $308,300.  Pursuant to the agreement, Mr.
Alexander received bonus compensation of $364,020 for services rendered during
1994 and is entitled to receive bonus compensation in 1995 and succeeding years
in an amount to be negotiated annually, but not less than 3% of the Company's
consolidated after tax net income in each year.  Mr. Alexander also receives
various supplemental medical, insurance and other personal benefits from the
Corporation under the terms of his employment, including the use of an
automobile leased by the Corporation.

   Upon the termination of his employment with the Corporation for any reason,
Mr. Alexander is entitled to receive a severance payment in an amount equal to
$70,000 times the number of years (plus any partial years) of his employment by
the Corporation commencing with 1983, increased by 10% per annum starting on
December 31, 1995, plus continued employment-related benefits for the period of
36 months following termination.  In the event that Mr. Alexander's employment
is terminated by the Corporation without cause, by Mr. Alexander as a result of
a material breach by the Corporation of its obligations under the agreement or
by his resignation within the period of six months following a change in control
of the Corporation, Mr. Alexander is entitled to an additional severance payment
equal to 299% of the average annual cash compensation (including salary and any
bonus payments) received by him from the Corporation during the most recent
three fiscal years plus an amount equal to the income tax liability to Mr.
Alexander resulting from such payment.  The agreement also requires the
Corporation to grant to Mr. Alexander an option to purchase up to 7.5% of the
shares of each subsidiary of the Corporation, other than Efrat, for a price
equal to the greater of the fair market value or the book value of such shares
at the date of option grant.

                                     - 7 -
<PAGE>
 
   Mr. Alexander serves as Chairman of the Board of Efrat under an agreement
that extends through July 31, 1997 at a current basic salary (the "Basic
Salary") of $3,500 per month.  Efrat has also agreed to reimburse Mr. Alexander
for certain business-related expenses, to provide him with the use of a company-
owned automobile and to pay certain amounts for his account into defined
contribution insurance and training funds in Israel.  In addition, if Mr.
Alexander conducts business activities abroad, including in the United States,
Efrat is required to bear his reasonable lodging and living expenses, which
shall in any event be not less than the per diem allowance customarily provided
to senior executive managers of Israeli companies, and if the period of his stay
abroad is in excess of eight weeks, his Basic Salary during such period shall be
increased to an amount which will support a standard of living comparable to
that provided in Israel by the Basic Salary and other benefits afforded under
the agreement.  Efrat is also required to pay any taxes incurred by Mr.
Alexander in respect of benefits provided to him under the agreement and certain
professional fees incurred for the benefit of Mr. Alexander.  In the event that
Efrat unilaterally terminates or fundamentally breaches the agreement, it must
pay, as liquidated damages, an amount equal to the Basic Salary due for the
remainder of the term of the agreement plus an amount equal to the present value
of all non-monetary benefits under the agreement.  The present value of the non-
monetary benefits under the agreement is not readily determinable but is
estimated at approximately 25% of such salary.

   Mr. Vernia is employed as Managing Director of Efrat and Chief Operating
Officer of the Corporation under an agreement providing for a base monthly
salary at a current rate of 32,481 Israeli shekels, subject to Israeli statutory
cost of living adjustment (resulting in a current annual salary equal to
approximately $129,000) and an annual bonus in an amount to be determined.  The
agreement may be terminated by either party only with prior notice of at least
one year.  Mr. Vernia is entitled under the agreement to receive various
insurance and supplemental benefits and the use of an automobile owned or leased
by Efrat.  Mr. Nissim receives a base annual salary from the Corporation of
$100,170 and incidental benefits, including the use of an automobile leased by
the Corporation.

COMPENSATION OF DIRECTORS

   Each director who is not an employee of the Corporation or otherwise
compensated by the Corporation for services rendered in another capacity, and
whose position on the Board of Directors is not attributable to any contract
between the Corporation and such director or any other entity with which such
director is affiliated, receives compensation in the amount of $2,250 for each
meeting of the Board of Directors and of certain committees of the Board of
Directors attended by him during the year.  Each of such eligible directors is
also entitled to receive an annual stock option grant under the Corporation's
Stock Option Plans entitling him to purchase 6,000 shares of Common Stock at a
price per share equal to the fair market value of the Common Stock as reported
on the NASDAQ System on the date two business days after the publication of the
audited year-end financial statements of the Corporation. Such options are
subject to forfeiture to the extent of 1,200 shares per meeting in the event
that the option holder, during the year of grant, fails to attend at least five
meetings of the Board of Directors and any of its committees of which the option
holder is a member.  Each director who resides outside of the United States and
is not an officer or employee of the Corporation is entitled to reimbursement of
expenses incurred for attendance at meetings of the Board, up to the amount of
$2,000 for each meeting attended.

OPTIONS TO PURCHASE SUBSIDIARY SHARES

     The Corporation has granted to certain key executives options to acquire
shares of certain of its subsidiaries, other than Efrat, as a means of providing
incentives directly tied to the performance of those business units for which
those executives have primary responsibility and general oversight.  Such
options granted to date consist of the following:

                                     - 8 -
<PAGE>
 
<TABLE>
<CAPTION>
                                                                NUMBER OF    PERCENT OF
                                                                  SHARES       TOTAL
                                                                SUBJECT TO  OUTSTANDING
OPTION HOLDER      SUBSIDIARY                                     OPTION       SHARES
- - - -------------      ----------                                   ----------  ------------
<S>                <C>                                          <C>         <C>
 
Kobi Alexander     Telemesser Ltd.                                  10.125         7.50%
                   Applied Silicon Inc. (Canada)                 1,402.650         7.50%
                   Startel Corporation                               7.500         7.50%
                   Comverse Government Systems Corp.                 7.500         7.50%
                   Interactive Information Systems Corporation      15.000         7.50%
                   CTI Capital Corp.                               150.000         7.50%
                   Dale, Gesek, McWilliams & Sheridan, Inc.          7.500         7.50%
 
Carmel Vernia      Comverse Government Systems Corp.                 3.250         3.25%
                   Interactive Information Systems Corporation       7.500         3.75%
 
Other employees    Comverse Government Systems Corp.                 4.250         4.25%
                   Applied Silicon Inc. (Canada)                   467.550         2.50%
                   Interactive Information Systems Corporation       7.500         3.75%
                   Startel Corporation                               3.000         3.00%
                   Telemesser Ltd.                                   7.105         5.00%
                   CTI Capital Corp.                               273.000        12.00%
</TABLE>

     Each of these options has a term of ten years and becomes exercisable and
vests in equal ratable annual increments over periods of up to five years
following the date of initial grant.  The exercise price of each option is equal
to the higher of the book value of the underlying shares at the date of grant or
the fair market value of such shares at that date determined on the basis of an
arms'-length transaction with a third party or, if no such transactions had
occurred, on any other reasonable basis considered by the Remuneration and Stock
Option Committee of the Board of Directors to be appropriate in the
circumstances.  Upon the exercise in whole or in part of any option, the
Corporation will receive an irrevocable proxy to vote the underlying shares and
a right of first refusal to purchase the shares upon any proposed sale, transfer
or other disposition, until the shares shall have been sold in a bona fide open
market transaction.

     These options (and any shares received by the holders upon exercise)
provide the option holders with a potentially larger equity interest in the
respective subsidiaries than in the Corporation, which, under certain
circumstances, could cause the option holders' interests to conflict with those
of the Corporation's shareholders generally.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Corporation paid William F. Sorin, a director of the Corporation, an
aggregate of approximately $309,000 for legal services rendered to the
Corporation during the year ended December 31, 1994.

                                     - 9 -
<PAGE>
 
             REPORT OF THE REMUNERATION AND STOCK OPTION COMMITTEE
                       CONCERNING EXECUTIVE COMPENSATION

   The Board of Directors believes that an essential element of the
Corporation's continued success will be its ability to provide compensation
arrangements that enable it to attract, motivate and retain executive officers
who are capable of developing and executing the Corporation's short-term and
long-term business plans.  The Remuneration and Stock Option Committee of the
Board of Directors (the "Committee") has the primary responsibility for
establishing compensation levels for senior management and administering the
Corporation's stock option plans.

   The principal components of the Corporation's executive compensation
arrangements are base salary, cash bonus awards and stock options.  Compensation
arrangements for senior management personnel in certain instances include a
performance-based component as well as discretionary bonus awards.  With the
exception of the employment agreements with Messrs. Alexander and Vernia
described in this Proxy Statement, no agreement, plan or arrangement is in
effect between the Corporation and any executive officer that is not terminable
by the Corporation without liability on notice of 270 days or less.

   Salary levels throughout the organization are reviewed annually, and are
adjusted periodically when the Corporation believes that adjustment is required,
taking into account competitive factors in the industries and locations of the
Corporation's activities.  In establishing compensation levels throughout the
organization, the Corporation relies to a significant extent on its direct
experience in the recruitment of personnel as well as reported compensation
levels of senior management of other publicly-held companies.  Supplemental cash
bonus awards are made periodically to reflect superior performance by individual
employees, in accordance with recommendations by senior management, and in
certain instances in accordance with formulas based on the profitability of the
Corporation or its individual business units.

   Historically, employees of the Corporation have benefited from the
Corporation's practice of awarding stock options to personnel throughout the
organization, and the resulting value associated with the increase in the market
price of the Corporation's shares in recent years.  The Board of Directors
believes that equity-based incentive arrangements, such as employee stock
options, are among the most effective means available to the Corporation of
aligning the interests of employees with the objectives of shareholders
generally, and of building their long term commitment to the organization.  The
Corporation emphasizes stock option awards as an essential element of the
remuneration package available to its executives and employees.  Stock options
typically vest in annual increments over periods of three or four years to
encourage long-term commitment to the Corporation by the grantees.

   The Corporation has also adopted the practice of awarding to key executives
options entitling them to acquire shares of certain of the Corporation's
subsidiaries, as a means of providing incentives directly tied to the
performance of those business units for which different executives have direct
responsibility.  (See "Options to Purchase Subsidiary Shares").  These options
(and any shares received by the holders upon exercise) provide the option
holders with a potentially larger equity interest in the respective subsidiaries
than in the Corporation, which, under certain circumstances, could cause the
option holders' interests to conflict with those of the Corporation's
shareholders generally.  However, the Committee believes that the potential for
conflict is outweighed by the benefits derived by the Corporation from the use
of these option arrangements as an incentive to key personnel.

   The Corporation considers both available competitive data and subjective
performance evaluations in determining the number of options to grant to its
officers and key employees.  During 1994, grants of options to purchase an
aggregate of 1,176,000 shares of Common Stock were made to all employees,
including options to purchase an aggregate of 710,000 shares awarded to
executive officers of the Corporation.  Options granted to executive officers
during 1994 vest in increments over periods of up to four years from the date of
grant.

                                     - 10 -
<PAGE>
 
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

   Mr. Alexander has served as President and Chief Executive Officer of the
Corporation since 1987 under agreements providing for fixed annual salary, bonus
compensation and employment-related benefits.  The terms of Mr. Alexander's
employment agreements, as currently in effect, are described above.

   The terms of Mr. Alexander's employment, as set forth in his agreement with
the Corporation, have been established by direct negotiation between Mr.
Alexander and the Committee.  In approving such terms, the Committee has taken
into account the growth in the Corporation's business, and particularly the
increase in its net income, throughout the period that Mr. Alexander has served
as Chief Executive Officer, and compensation levels of chief executive officers
of other publicly-held companies.

   In this regard, the Committee has taken note of the significant growth in the
Corporation's annual revenues, net income, stockholder's equity and assets over
the past five years, under Mr. Alexander's leadership as Chief Executive
Officer, as shown in the following table:

<TABLE>
<CAPTION>
                                                                             FIVE YEAR
                                          DOLLARS IN THOUSANDS              COMPOUNDED
                         1990     1991      1992       1993       1994    RATE OF GROWTH
<S>                     <C>      <C>      <C>        <C>        <C>       <C>
 
Total Revenues          $16,389  $21,929    $38,422   $ 70,438  $ 98,843       56.7%
                                                                             
Net Income              $ 1,004  $ 2,476    $ 5,677   $ 12,707  $ 11,770       85.0%
                                                                             
Net Income Per Share    $  0.08  $  0.17    $  0.37   $   0.65  $   0.57       63.4%
 
Stockholders' Equity    $11,684  $15,595    $32,176   $ 90,450  $102,572       72.1%
 
Total Assets            $15,407  $21,213    $50,475   $169,130  $187,677       86.8%
</TABLE>

   The foregoing table does not reflect the operating results or assets of
DGM&S, Inc., a Delaware corporation acquired by the Corporation in September
1995 through its merger with a subsidiary of the Corporation.


                       THE REMUNERATION AND STOCK OPTION COMMITTEE

                                John H. Friedman, Chairman
                                Sam Oolie
                                Yechiam Yemini

                                     - 11 -
<PAGE>
 
STOCK PERFORMANCE GRAPH

   The following table compares the five year cumulative return on a
hypothetical investment in Comverse Technology, Inc. (CMVT), the S&P 500 Index
and the S&P High Tech Composite Index, assuming an investment of $100 on
December 31, 1989 and the reinvestment of any dividends.

                         [GRAPH APPEARS HERE]
 
<TABLE>
<CAPTION>
                   COMPARISON OF FIVE YEAR CUMULATIVE RETURN
    AMONG Comverse Technology, Inc., S&P 500 INDEX and High Tech Composite INDEX

Measurement period      Comverse        S&P 500         High Tech Composite
(Fiscal year Covered)   Tech. Inc.      Index           Index
- - - ---------------------   ---------       ---------       ---------
<S>                     <C>             <C>             <C>
Measurement PT - 
FYE 12/31/89            $100.00         $100.00         $ 100.00
FYE 12/31/90            $ 42.79         $ 96.89         $ 102.12
FYE 12/31/91            $128.60         $126.42         $ 116.50
FYE 12/31/92            $393.36         $136.05         $ 121.31
FYE 12/31/93            $320.37         $149.76         $ 149.22
FYE 12/31/94            $271.74         $151.74         $ 173.92
</TABLE>  

                                     - 12 -
<PAGE>
 
                PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING

ELECTION OF DIRECTORS

   It is the intention of the Board of Directors to nominate for election to the
Board of Directors at the Annual Meeting each of the individuals named below, to
serve until the next Annual Meeting of Shareholders or their earlier resignation
or removal.  In the event that any of such nominees should become unwilling or
unable to stand for election at the Annual Meeting for any reason, at present
unknown, it is intended that votes will be cast pursuant to the accompanying
proxy for such substitute nominee or nominees as the Board of Directors may
designate.

                  Kobi Alexander
                  Zvi Alexander
                  John H. Friedman
                  Sam Oolie
                  William F. Sorin
                  Yechiam Yemini

   The election of directors will be made by plurality of votes cast at the
Annual Meeting, with the six nominees receiving the greatest number of votes
being elected.  THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION AT THE ANNUAL
MEETING OF THE SIX INDIVIDUALS NAMED ABOVE.

ADOPTION OF 1995 STOCK OPTION PLAN

     The Board of Directors intends to present at the Annual Meeting a proposal
to approve the adoption of the Corporation's 1995 Stock Option Plan (the "1995
Plan") and to reserve an aggregate of 1,000,000 shares of Common Stock for
future issuance thereunder.

   The Board of Directors adopted the 1995 Plan on October 13, 1995, subject to
its approval by the shareholders of the Corporation at the Annual Meeting.  A
copy of the 1995 Plan appears as an appendix to this Proxy Statement.

   The Board of Directors believes that stock options have proven to be a highly
useful and economical means for the Corporation to attract and retain qualified
employees.  By affording participating employees the opportunity to share in the
growth and appreciation in the value of the Corporation, such options provide an
incentive for employees to devote their maximum efforts to the success of the
Corporation.  The Board of Directors further believes that the use of stock
options as a means of compensating participating employees has enabled the
Corporation to attract and retain highly qualified personnel with a smaller out-
of-pocket cost than would otherwise be necessary, permitting the Corporation to
preserve cash needed for the expansion of its operations.  The shares reserved
for issuance under the Corporation's prior stock option plans have been
substantially depleted.  The proposed 1995 Plan will increase the number of
shares of Common Stock available for issuance under employee stock options and
will enable the Corporation to continue to provide the incentive of equity
ownership to current and future employees on a basis consistent with the past
practices of the Corporation and of other companies in the high-technology
industries.

   The Corporation adopted its prior stock option plans on October 5, 1984 (the
"1984 Plan"), October 9, 1987 (the "1987 Plan") and December 7, 1994 (the "1994
Plan").  Except as specifically noted below, the 1995 Plan is identical in all
material respects to the terms of the 1994 Plan.  Pursuant to the provisions of
all of the Corporation's stock options plans (collectively, the "Option Plans"),
employees of the Corporation or any of its subsidiaries (including officers,
whether or not they are members of the Board of Directors) and, except in the
case of the 1984 Plan, others rendering services to the Corporation, are
eligible to be granted options to purchase Common Stock.  Each of the Option
Plans has a ten year term, 

                                     - 13 -
<PAGE>
 
subject to earlier termination by the Board of Directors. There are currently
approximately 900 employees of the Corporation and its subsidiaries eligible to
receive options under the Option Plans.

   All options granted under the 1984 Plan and options so designated under the
other Option Plans are intended to qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").  The exercise price of such options may not be less than 100% of the
fair market value of the Common Stock on the date of grant and the term of any
such option may not exceed ten years.  With respect to any employee who directly
and by attribution owns stock possessing more than 10% of the voting power of
the outstanding capital stock of the Corporation or any of its subsidiaries, the
exercise price of any incentive stock option must be at least equal to 110% of
the fair market value of such shares at the time of grant, and the term may not
exceed five years.  Under the terms of the 1984 Plan, the aggregate fair market
value (determined at the date of the option grant) of the Common Stock for which
any employee is granted incentive stock options in any calendar year may not
exceed $100,000 plus certain unused limit carryovers (as defined in the Code)
for such year.  Under the subsequent Option Plans, the aggregate fair market
value (determined at the date of grant) of the Common Stock with respect to
which incentive stock options are exercisable for the first time by an employee
during any particular calendar year shall not exceed $100,000.  Except in the
case of the 1984 Plan, options granted under the Option Plans which are not
intended to qualify as incentive stock options may be granted at an exercise
price determined without regard to the fair market value of the underlying
shares (but not less than the par value thereof) and without limitation as to
amount.

   Options granted under the Option Plans are not transferable (except by the
laws of descent and distribution) and, with certain exceptions, may be exercised
by the optionee only during the period of his or her employment or within three
months after termination of employment.  Any shares subject to options that
expire or otherwise terminate without having been exercised in full are
available for future grant under the Option Plans.  Subject to certain
exceptions, options typically vest incrementally over periods of three or four
years from the date of grant or of the commencement of the optionee's employment
with the Corporation or any of its subsidiaries.

   The Option Plans (other than the 1984 Plan) provide for the annual grant to
each director who is not an employee of or otherwise compensated in any capacity
by the Corporation, and whose membership on the Board of Directors is not
attributed to any contract between the Corporation and such director or any
other entity with which such director is affiliated, of options to purchase an
aggregate of 6,000 shares of Common Stock with an exercise price equal to the
fair market value of the Common Stock as reported on the NASDAQ system on the
date two business days after the publication of the audited year-end financial
statements of the Corporation.  Such options are subject to forfeiture to the
extent of 1,200 shares per meeting in the event that the option holder, during
the year of grant, fails to attend at least five meetings of the Board of
Directors and any of its committees of which the option holder is a member.  The
options have terms of ten years under the 1995 Plan and five years under the
prior Option Plans.

   Subject to certain restrictions, the Board of Directors, or any committee to
which the Board may delegate its authority (the "Option Committee"), is
authorized to designate the recipients of options under the Option Plans, the
number of shares to be covered by each option, the period during which each
option may be exercised, the method of payment and other terms and conditions of
the options.  There is no established formula for determining the persons to
whom options will be granted, the number of shares subject to an option or
additional terms and conditions with respect thereto.  In making any such
determination, the Board or Option Committee may take into account the nature of
the services rendered by the grantee, his or her present or potential
contributions to the Corporation and such other factors as the Board or the
Option Committee shall deem relevant.

   The Board of Directors has the power to terminate or to amend the Option
Plans from time to time in such respects as it deems advisable, except that
approval by the Corporation's shareholders is required in respect of any
amendment which would (i) increase the total number of shares of Common Stock
which may be issued and sold pursuant to options granted under the Option Plans,
(ii) change the designation or 

                                     - 14 -
<PAGE>
 
the class of employees or other persons eligible to receive options, (iii)
decrease the minimum option prices as stated in the Option Plans or (iv) extend
the period during which an option may be granted or exercised beyond the maximum
period specified in the Option Plans. Except to the extent necessary to govern
outstanding options, each Option Plan will terminate ten years from the date of
its initial adoption by the Board of Directors, and no additional options may be
granted thereafter.

   The Corporation believes that, under the applicable provisions of the Code
and the regulations of the United States Treasury Department currently in
effect, a grantee will not incur any United States Federal income tax upon the
grant of an option which is an incentive stock option.  In addition, if the
grantee has been an employee of the Corporation or any of its subsidiaries from
the date of grant to the date three months prior to the date of exercise, the
grantee will not incur any Federal income tax upon the exercise of such option.
If the grantee does not dispose of shares acquired upon exercise of such option
within one year after the issuance of such shares or within two years from the
date of grant of the option (the "Holding Period"), then the difference, if any,
between the exercise price and the amount realized on a sale of the shares after
such Holding Period will generally be treated as capital gain or capital loss,
as the case may be, provided the shares are a capital asset in the hands of the
grantee.  In such case, the employer corporation will not be entitled to a
compensation deduction for Federal income tax purposes either upon the grant or
exercise of the option or upon disposition of the shares.

   For purposes of the alternative minimum tax, the excess, if any, over the
exercise price of an incentive stock option of the fair market value of the
shares as of the date (on or after the time of exercise) on which the shares
become transferable or not subject to a substantial risk of forfeiture will be
included in alternative minimum taxable income for the year of exercise or for
the year in which the shares become transferable or not subject to a substantial
risk of forfeiture (see discussion of "Restricted Shares", below).  For this
purpose, the fair market value is determined without regard to any restriction
other than a restriction which, by its terms, will never lapse (the fair market
value as so determined is referred to herein as the "Market Value").  In
determining the amount of gain or loss on the sale of shares acquired upon
exercise of an option which qualifies as an incentive stock option for purposes
of the alternative minimum tax, the basis of such shares is increased by the
amount included in alternative minimum taxable income with respect to exercise
of the option.  If the shares are disposed of in the same taxable year as
exercise in a sale or exchange with respect to which a loss (if sustained) would
be recognized, the amount included in alternative minimum taxable income of the
grantee is limited to the excess (if any) of the amount realized on the sale or
exchange over the exercise price.

   If the grantee disposes of the shares during the Holding Period (a
"Disqualifying Disposition"), the excess, if any, of the Market Value of the
shares on the date the option was exercised (or on the date on which the Common
Stock became transferable or not subject to a substantial risk of forfeiture)
over the exercise price will be includable in the grantee's gross income as
ordinary income in the year of disposition.  Any remaining gain will generally
be capital gain, provided the shares are capital assets in the hands of the
grantee.  The employer corporation will be entitled to a deduction in the year
of a Disqualifying Disposition in an amount equal to the amount included in the
income of the grantee as ordinary income.  In the case of a Disqualifying
Disposition, where the disposition is a sale or exchange with respect to which a
loss (if sustained) would be recognized, the amount of ordinary income of the
grantee, and the amount of the employer corporation's deduction, are limited to
the excess (if any) of the amount realized on the sale or exchange over the
exercise price.

   Subject to the requirements described above, a grantee will not recognize
gain or loss upon the exercise of an incentive stock option, even if shares of
the Corporation's Common Stock are used in payment of all or part of the
exercise price.  However, if the shares of Common Stock used in payment were
previously acquired by exercise of an incentive stock option and were not held
for the Holding Period when so applied, such application will be considered a
Disqualifying Disposition of the shares and will result in the recognition of
compensation income.  If the exercise price of the option is paid solely in
shares, the basis of the shares of Common Stock acquired will be the basis of
the Common Stock used in payment, increased by the amount, if any, of
compensation income recognized upon exercise, provided that, to the 

                                     - 15 -
<PAGE>
 
extent that the market value of the Common Stock acquired exceeds the market
value of the Common Stock used in payment, the basis of any shares of Common
Stock acquired in excess of the market value of Common Stock used in payment
will be zero.

   The Corporation believes that options granted under the Option Plans that are
not incentive stock options will not have a readily ascertainable fair market
value, as defined by Treasury Regulation Section 1.83-7.  Therefore, a grantee
will not recognize income until shares are acquired upon the exercise of the
option.  Upon exercise, the excess, if any, of the Market Value of the shares
acquired over the exercise price thereof will be recognized by the grantee as
compensation income.  In the event shares received on the exercise of the option
are not transferable and are subject to a substantial risk of forfeiture as
defined in Code Section 83 ("Restricted Shares") the holder will not be taxable
until the shares become transferable or are no longer subject to such risk of
forfeiture and then will be taxable in an amount equal to the excess of the
Market Value of the shares as of such date over the exercise price.  A grantee,
in such case, may elect under Code Section 83(b) to be taxed in the year in
which the Restricted Shares are received.  So long as the sale of shares at a
profit could subject a person to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended, such person's rights in such shares are deemed
to be subject to a substantial risk of forfeiture and not transferable.  The
grantee's tax basis will be an amount equal to the cash paid upon the exercise
of the option, increased by any amount includable in gross income of the
grantee.  Upon a later disposition of shares received as a result of exercise of
the option, gain or loss will be measured by the difference between the sale
proceeds and such tax basis.  The gain or loss will generally be treated as
capital gain or capital loss, provided the shares are capital assets in the
hands of the grantee.

   If a grantee surrenders shares of Common Stock in payment of all or part of
the aggregate exercise price of an option which is not an incentive stock
option, the grantee will recognize compensation income if the Market Value of
the shares received exceeds the exercise price thereof.  If the shares so
received are Restricted Shares, the rules regarding Restricted Shares discussed
above will apply.  Additional considerations may apply if the shares surrendered
are subject to restrictions which may affect the value of such shares.  If the
exercise price of the option is paid solely in shares, the grantee's aggregate
tax basis for the shares received will be the grantee's basis for the
surrendered shares plus the amount of compensation income recognized.

   The employer corporation is generally entitled to a tax deduction in an
amount equal to the compensation income recognized by a grantee as a result of
the exercise of an option which is not an incentive stock option.

   The proposal to approve the adoption of the 1995 Plan and to reserve an
aggregate of 1,000,000 shares of Common Stock for future issuance thereunder
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL.


RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

   Shareholders will be requested at the Annual Meeting to ratify the selection
of Deloitte & Touche to serve as independent auditors of the Corporation for the
year ending December 31, 1995.  Deloitte & Touche has served as the
Corporation's auditors since 1988.  A representative of the firm is expected to
be present at the Annual Meeting, will have the opportunity to make a statement
and will be available to respond to appropriate questions.  THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE PROPOSAL.

                                     - 16 -
<PAGE>
 
                 SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING

   Any shareholder proposal intended to be presented at the next Annual Meeting
of Shareholders of the Corporation must be received by the Corporation by June
19, 1996 to be considered for inclusion in the Corporation's proxy solicitation
materials for such meeting.

                                 OTHER BUSINESS

   The Board of Directors does not know of any matter to be brought before the
Annual Meeting other than the matters specified in the Notice of Annual Meeting
accompanying this Proxy Statement.  The persons named in the form of proxy
solicited by the Board of Directors will vote all proxies that have been
properly executed.  If any matters not set forth in the Notice of Annual Meeting
are properly brought before the Annual Meeting, such persons will vote thereon
in accordance with their best judgment.


                            By Order of the Board of Directors,

                            William F. Sorin
                            Secretary

Woodbury, New York
October 17, 1995

                                     - 17 -
<PAGE>
 
                           COMVERSE TECHNOLOGY, INC.

                             1995 STOCK OPTION PLAN

1.        Purpose.
          ------- 

          The purpose of this 1995 Stock Option 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
Comverse Technology, Inc. (the "Company"), and its present and future subsidiary
corporations (each of which is hereinafter referred to as a "Subsidiary"), 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") 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 October 13, 1995, 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, $0.10 par value, of the
Company (the "Common Stock") present in person or by proxy at the 1995 Annual
Meeting of Shareholders of the Company.

3.        Stock Subject to Plan.
          --------------------- 

          1,000,000 of the authorized but unissued shares of the Common Stock
are hereby reserved for issue upon the exercise of Options; 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 issue upon the
exercise of Options.  If any Options expire or terminate for any reason without
having been exercised in full, the unpurchased 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 option agreements (which need not be identical), to determine the
individuals (the "Participants") to whom and the times and the prices at which
Options shall be granted, to establish the option periods, the number of shares
of the Common Stock to be subject to each Option, whether each Option shall be
exercisable 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.
<PAGE>
 
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 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.

6.        Eligibility.
          ----------- 

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

          B.  An Option which is not an incentive stock option may be granted
only to key employees of the Company or a Subsidiary, independent contractors
hired by the Company or a Subsidiary and, upon the terms and subject to the
conditions set forth in paragraph C of this Section, members of the Board who
are not employees of the Company or a Subsidiary.

          C.  Each director of the Company who is not an employee of the Company
or any Subsidiary, who does not receive compensation from the Company or any
Subsidiary in any capacity other than as a director of the Company and whose
membership on the Board is not attributable to any contract between the Company
and such director or any other entity with which such director is affiliated,
shall receive in each fiscal year of the Company Options to purchase 6,000
shares of Common Stock having an option price per share equal to the fair market
value of a share of Common Stock determined (in accordance with Paragraph C of
Section 7) as of the date two business days after the publication of the audited
year-end financial statements of the Company for the immediately preceding
fiscal year, such Options to be forfeited to the extent of 1,200 shares per
meeting in the event that such director, during the year of grant, fails to
attend, in the aggregate, at least five meetings of the Board and any committees
of the Board of which such director is a member; provided, however, that during
the continuation of the Company's previously-adopted Stock Option Plans, options
granted thereunder shall be deemed to be granted under the Plan for the purposes
of this Section 6.

7.        Option Prices.
          ------------- 

          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 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 $0.10; provided, that the initial
per share option price of any Option granted to a member of the Board who is not
an employee of the Company or any Subsidiary shall be fixed in accordance with
paragraph C of Section 6.

          C.  For the purposes hereof, the fair market value of a share of the
Common Stock on any date shall be equal to 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 

                                     - 2 -
<PAGE>
 
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 determined in good faith by the Committee in compliance with Section
422(b)(4) of the Code and the applicable regulations promulgated thereunder.

8.        Option Term.
          ----------- 

          Participants shall be granted Options for such term as the Committee
shall determine, not in excess of ten 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 years from the date of the granting
thereof.

9.        Limitation on Amount of Incentive Stock Options Granted.
          ------------------------------------------------------- 

          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.

10.       Exercise of Options.
          ------------------- 

          A.  Options granted to employees of and consultants to the Company or
any Subisidary shall become exercisable at such times and in such installments
as the Committee shall determine at the time of the grant thereof.  Options
received by directors other than employees of the Company or any Subsidiary
shall become exercisable on the first day of the fiscal year of the Company next
following the year in respect of which such Options are granted.

          B.  Except as hereinbefore otherwise set forth, an Option may be
exercised either in whole or in part at any time or from time to time.

          C.  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, on the date
of delivery (as determined in the manner set forth in paragraph C of Section 7
hereof), equal to the portion of the option price so paid.

11.       Transferability.
          --------------- 

          No Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any Participant,
each Option granted to him may be exercised only by him.

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 and the Subsidiaries 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 Option
theretofore granted to him which shall not have expired or otherwise been
cancelled shall, to the 

                                     - 3 -
<PAGE>
 
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 90 days after such termination of employment or service or (ii) the
date specified in said Option.

          B.  In the event a Participant's employment or service with the
Company and the Subsidiaries terminates by reason of his death, each Option
theretofore granted to him which shall not have expired or otherwise been
cancelled 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 Option.

          C.  In the event a Participant's employment or service with the
Company and the Subsidiaries terminates by reason of his retirement, whether
voluntarily or as may be required by any pension plan, or by reason of his
disability (as such term is defined in section 22(e) of the Code), each Option
theretofore granted to him which shall not have expired or otherwise been
cancelled 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 90 days after the date of
such Participant's retirement or disability or (ii) the date specified in said
Option.

          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 Subsidiary 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 of the Subsidiaries, as the Committee or the Board may determine
to be appropriate in any particular instance.

13.       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 Option 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 Option 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 Option 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 Option, 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 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 cancelled shall
become immediately exercisable in full and shall terminate upon the later to
occur of (i) the expiration of 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 13, 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 

                                     - 4 -
<PAGE>
 
number or kind of shares then subject to any Option and the number or kind of
shares reserved for issuance in accordance with the provisions of the Plan but
not yet covered by an Option, such adjustment shall be made by the Committee and
shall be effective and binding for all purposes of the Plan and of each stock
option 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 13, 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 13.  No
adjustment or substitution provided for in this Section 13 shall require the
Company to sell a fractional share under any stock option agreement.

14.       Purchase for Investment and Waivers.
          ----------------------------------- 

          A.  Unless the shares to be issued upon the exercise of an Option 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.

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

          C.  Each Participant shall be required, as a condition of exercising
any Option which is not an incentive stock option, to make such arrangements
with the Company with respect to withholding as the Committee shall determine.

15.       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 Subsidiary, the exercise price and terms and conditions of
the exercise thereof may not be amended more than once in any period of six
months, except as may be required to comply with changes in the Code or the
Employee Retirement Income Security Act of 1974, as amended, 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 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 13 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 option price, or extend the period
during which an Option may be granted or exercised.  Except as otherwise
provided in Section 16 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.

16.       Expiration and Termination of the Plan.
          -------------------------------------- 

          The Plan shall terminate on October 12, 2005 or at such earlier time
as the Board may determine.  Options may be granted under the Plan at any time
and from time to time prior to its termination.  Any Option outstanding under
the Plan at the time of the termination of the Plan shall remain in effect until
such Option shall have been exercised or shall have expired in accordance with
its terms.

                                     - 5 -
<PAGE>
 
17.       Options 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 a
Subsidiary of the Company (such corporation being hereinafter referred to as an
"Acquired Subsidiary"), Options may be granted hereunder to key employees of an
Acquired Subsidiary in exchange for then outstanding options to purchase
securities of the Acquired Subsidiary, such Options 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 a Subsidiary for any required period of time and may
contain such other provisions not inconsistent with the Plan, or the requirement
set forth in Section 15 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 Options.

                                     - 6 -


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