Vice President of Finance Employment Agreement

EMPLOYMENT AGREEMENT


This Employment Agreement (the "Agreement") is made and entered into as of the 13th day of July, 2006, by and between Comverse Technology, Inc., a New York corporation (together with its successors and assigns permitted under this Agreement, the "Company"), and Mr. Avi Aronovitz (the "Executive").


W I T N E S S E T H


WHEREAS, the Executive is currently serving as Vice President of Finance, Treasurer and Interim Chief Financial Officer of the Company;


WHEREAS, the Company desires to continue to employ the Executive as its Vice President of Finance and Treasurer, as well as its Interim Chief Financial Officer until such time as the Company appoints a permanent Chief Financial Officer, and to enter into an employment agreement embodying the terms of such employment;


WHEREAS, the Company desires to assure itself of the continued availability of the Executive's services at a time when extraordinary time, effort and commitment may be required of the Executive and shall therefore provide the Executive with additional incentives as set forth in Section 5(b) below; and


WHEREAS, the Executive desires to enter into this Agreement and to accept such continued employment, subject to the terms and provisions of this Agreement;


NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is mutually acknowledged, the Company and the Executive (individually a "Party" and together the "Parties"), intending to be legally bound, agree as follows:


1. Definitions.


(a) "Base Salary" shall mean the Executive's base salary as determined in accordance with Section 4 below, including any applicable increases.


(b) "Board" shall mean the Board of Directors of the Company.


(c) "Bonus Opportunity" shall mean the annual bonus for which the Executive is eligible, as described in Section 5(a) below and Exhibit A hereto.


(d) "Cause" shall mean a good faith finding by the Company of:


(i) a conviction of the Executive of, or a plea of nolo
contendere by the Executive to, any felony;


(ii) a material violation by the Executive of federal or
state securities laws, as determined by a court or
other governmental body of competent jurisdiction;


(iii) willful misconduct or gross negligence by the
Executive resulting in material and demonstrable harm
to the Company;


(iv) a material violation by the Executive of any Company
policy or procedure provided to the Executive resulting
in material and demonstrable harm to the Company
including, without limitation, a material violation of
the Company's Code of Business Conduct and Ethics;


(v) the repeated and continued failure by the Executive to
carry out, in all material respects, the reasonable and
lawful directions of the Chief Executive Officer or the
Board that are within the Executive's individual
control and consistent with the Executive's status as a
senior executive of the Company and his duties and
responsibilities hereunder, except for a failure that
is attributable to the Executive's illness, injury or
Disability; or


(vi) fraud, embezzlement, theft or material dishonesty by
the Executive against the Company,


provided that no finding of Cause pursuant to subsections (iii), (iv) or (v) hereof shall be effective unless and until the Company has provided the Executive with written notice thereof in accordance with Section 24 below stating with specificity the facts and circumstances underlying the finding of Cause and, if the basis for such finding of Cause is capable of being cured by the Executive, providing the Executive with an opportunity to cure the same within thirty (30) calendar days after receipt of such notice in accordance with Section 24 below.


(e) "Change in Control" shall occur upon:


(i) any person, entity or affiliated group becoming the
beneficial owner or owners of more than fifty percent
(50%) of the outstanding equity securities of the
Company, or otherwise becoming entitled to vote shares
representing more than fifty percent (50%) of the
undiluted total voting power of the Company's
then-outstanding securities eligible to vote to elect
members of the Board (the "Voting Securities");


(ii) a consolidation or merger (in one transaction or a
series of related transactions) of the Company pursuant
to which the holders of the Company's equity securities
immediately prior to such transaction or series of
related transactions would not be the holders
immediately after such transaction or series of related
transactions of more than fifty percent (50%) of the
Voting Securities of the entity surviving such
transaction or series of related transactions;


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(iii) the sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all
or substantially all of the assets of the Company; or


(iv) a change in the composition of the Board occurring
within a one (1) year period, as a result of which
fewer than a majority of the directors are Incumbent
Directors.


"Incumbent Directors" will mean directors who either (A) are members of the Board as of the Effective Date, or (B) are elected or nominated for election to the Board with the affirmative votes of at least a majority of the Board at the time of such election or nomination.


(f) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.


(g) "Compensation Committee" shall mean the Compensation Committee of the Board or another committee of the Board that performs the functions typically associated with a compensation committee.


(h) "Competitive Activity" shall mean the Executive's engaging in an activity, whether as an employee, consultant, principal, member, agent, officer, director, partner or shareholder (except for a passive investment as a less than three percent (3%) shareholder of a publicly-traded company), that is competitive with any business of the Company at any time during the Executive's employment with the Company; provided, however, that the Executive may be employed by or otherwise associated with a business of which a subsidiary, division, segment, unit, etc. is in competition with the Company but as to which such subsidiary, division, segment, unit, etc. the Executive has absolutely no direct or indirect responsibilities or involvement.


(i) "Disability" shall mean the Executive's inability to substantially perform his duties and responsibilities under this Agreement for a period of six (6) consecutive months or nine (9) out of twelve (12) nonconsecutive months due to a physical or mental disability, as the term "physical or mental disability" is defined in the Company's long-term disability insurance plan then in effect (or would be so found if the Executive applied for coverage or benefits under such plan).


(j) "Effective Date" shall mean June 1, 2006.


(k) "Good Reason" shall mean, without the Executive's prior written consent, the occurrence of any of the following events or actions, provided that no finding of Good Reason shall be effective unless and until the Executive has provided the Company, within sixty (60) calendar days of becoming aware of the facts and circumstances underlying the finding of Good Reason, with written notice thereof in accordance with Section 24 below stating with specificity the facts and circumstances underlying the finding of Good Reason and, if the basis for such finding of Good Reason is capable of being cured by the Company, providing the Company with an opportunity to cure the same within thirty (30) calendar days after receipt of such notice in accordance with Section 24 below:


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(i) any reduction in the Executive's Base Salary or Bonus
Opportunity, other than as part of an across-the-board
reduction applicable to all senior executives of
Comverse Technology, Inc.;


(ii) an actual relocation of the Executive's principal
office from the Company's office location as of the
Effective Date to outside the borough of Manhattan;


(iii) any change in the Executive's title, position or
reporting status as Vice President of Finance and
Treasurer, unless the Executive is provided with a
comparable title, position or reporting status, or any
diminution of the Executive's duties or
responsibilities as Vice President of Finance and
Treasurer;


(iv) a failure of the Company to obtain the assumption in
writing of its obligations under this Agreement by any
successor to all or substantially all of the assets of
the Company within ten (10) calendar days after
completion of a merger, consolidation, sale or similar
transaction; or


(v) a material breach by the Company of any provision of
this Agreement.


(l) "Noncompetition/Nonsolicitation Period" shall mean the period commencing on the Effective Date and ending on the first anniversary of the date of termination.


(m) "Term of Employment" shall mean the period specified in Section 2 below, as such period may be extended.


2. Term of Employment.


The Company hereby continues to employ the Executive, and the Executive hereby accepts such continued employment, for the period commencing on the Effective Date and ending on May 31, 2008, subject to earlier termination of the Term of Employment in accordance with the terms of this Agreement. This Agreement shall be automatically renewed for additional one (1) year periods on each anniversary of the Effective Date thereafter, unless either Party notifies the other Party in writing of his or its intention not to renew this Agreement not less than thirty (30) calendar days prior to such expiration date or anniversary, as the case may be.


3. Position, Duties and Responsibilities; Reporting.


As of the Effective Date and continuing for the remainder of the Term of Employment, the Executive shall be employed as the Vice President of Finance and Treasurer. The Executive shall also be employed as the Interim Chief Financial Officer until such time as the Company appoints a permanent Chief Financial Officer. In this capacity, the Executive shall be assigned only such duties and responsibilities as are appropriate for a person holding the offices set forth in this section. The Executive shall serve the Company faithfully, conscientiously and to the best of the Executive's ability and shall promote the interests and reputation of the Company. Unless prevented by illness, injury or


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Disability, the Executive shall devote all of the Executive's time, attention, knowledge, energy and skills during normal working hours, and at such other times as the Executive's duties may reasonably require, to the duties of the Executive's employment; provided, however, that the Executive may (a) serve on civic or charitable boards or committees; or (b) with the approval of the Chief Executive Officer of the Company or the Board, serve on corporate boards or committees. The Executive shall report to the Chief Executive Officer in carrying out his duties under this Agreement.


4. Base Salary.


As of the Effective Date and for the remainder of fiscal year 2006, the Executive shall be paid a Base Salary of three hundred ten thousand dollars ($310,000), payable in accordance with the regular payroll practices of the Company. Thereafter, the Base Salary shall be reviewed and increased no less frequently than annually, though the amount of such increase shall be determined in the discretion of the Board or the Compensation Committee. After giving effect to the preceding two sentences, the Base Salary may not be decreased from such increased amount unless the Executive provides his prior written consent to such decrease.


5. Incentive Compensation Arrangements.


(a) During the Term of Employment, the Executive shall be entitled to participate in any Company incentive compensation plans, programs and/or arrangements applicable to senior-level executives as established and modified from time to time by the Board or the Compensation Committee in its sole discretion. In addition, the Executive shall receive a bonus of no less than one hundred fifty thousand dollars ($150,000) annually (the "Bonus Compensation"), payable each February on the first payroll date after the close of the applicable fiscal year. The first Bonus Compensation payment shall be due and payable in February 2007. The formula to be used to calculate the Bonus Compensation payable to the Executive will be set out in Exhibit A hereto and mutually agreed upon annually. In the event such formula changes by mutual agreement of the Parties, the Parties will sign and attach such revised formulae, if any, to Exhibit A (e.g., Exhibit A-1, etc.).


(b) In view of the fact that the Executive is entering into this Agreement at a time when extraordinary time, effort and commitment may be required of the Executive, the Company shall pay the Executive a special retention bonus (the "Special Retention Bonus") equal to four hundred thirty thousand dollars ($430,000), which shall be due and payable as follows: $250,000 on May 15, 2007 and the balance of $180,000 in three (3) equal installments on each of July 31, 2006, January 31, 2007 and June 1, 2007, provided that the Executive remains employed by the Company on a continuous basis through each such date.


6. Long-Term Incentive Compensation Programs.


(a) The Parties acknowledge that, pursuant to the Company's 2005 Stock Incentive Compensation Plan (the "2005 Plan") and a Deferred Stock Award Agreement dated the date hereof (the "Deferred Stock Award Agreement"), the Compensation Committee awarded to the Executive forty thousand (40,000) shares of common stock of the Company in the form of deferred stock (the "Deferred Stock"), which shall vest as to twenty-five percent (25%) of the original number


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of shares subject thereto on each of May 31, 2007, May 31, 2008, May 31, 2009 and May 31, 2010, subject to accelerated vesting as otherwise provided herein. Shares of common stock in settlement of the Deferred Stock award (or, at the Company's election, cash in lieu of shares based on the fair market value thereof on the Settlement Date (as defined in the Deferred Stock Award Agreement)) shall be delivered to the Executive in accordance with the provisions of the Deferred Stock Award Agreement.


(b) During the Term of Employment, the Executive shall be entitled to participate in any other Company plans, programs and/or arrangements (including any equity-based plans, programs or arrangements) applicable to senior-level executives as established, modified and administered from time to time by the Board or the Compensation Committee in its sole discretion.


(c) In approving the grant of the Deferred Stock, the Compensation Committee will also be asked to give its advance, irrevocable approval of any election that the Executive may choose to make under Section 14.2 of the 2005 Plan (or any successor provision or plan) with respect to causing the Company to withhold shares of Common Stock to pay the "Withholding Tax," as such term is defined in that Section 14.2.


7. Employee Benefit Programs.


During the Term of Employment, the Executive shall be entitled to participate in all employee welfare and pension benefit plans, programs and/or arrangements applicable to senior-level executives.


8. Reimbursement of Business Expenses.


During t ...