TSI INTERNATIONAL SOFTWARE LTD, S-1/A, 1997-06-06

TSI INTERNATIONAL SOFTWARE LTD
S-1/A, 1997-06-06
PREPACKAGED SOFTWARE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1997

REGISTRATION NO. 333-27293
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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PRE-EFFECTIVE

AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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TSI INTERNATIONAL SOFTWARE LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7372 06-1132156
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

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45 DANBURY ROAD
WILTON, CT 06897
(203)761-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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CONSTANCE F. GALLEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TSI INTERNATIONAL SOFTWARE LTD.
45 DANBURY ROAD
WILTON, CT 06897
(203)761-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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

COPIES TO:
MARK C. STEVENS, ESQ. LAWRENCE S. WITTENBERG, ESQ.
JEFFREY R. VETTER, ESQ. HEATHER M. STONE, ESQ.
G. CHIN CHAO, ESQ. TESTA, HURWITZ & THIBEAULT, LLP
FENWICK & WEST LLP HIGH STREET TOWER
TWO PALO ALTO SQUARE 125 HIGH STREET
PALO ALTO, CA 94306 BOSTON, MA 02110
(415) 494-0600 (617) 248-7000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of earlier effective registration statement for
the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JUNE 6, 1997

4,000,000 SHARES

LOGO
COMMON STOCK

Of the 4,000,000 shares of Common Stock offered hereby, 3,000,000 shares are
being sold by TSI International Software Ltd. ("TSI" or the "Company") and
1,000,000 shares are being sold by the Selling Stockholders. See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders. Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $7.00 and
$9.00 per share. See "Underwriting" for information relating to the method of
determining the initial public offering price.

-----------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
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Total(2)...................... $ $ $ $
</TABLE>
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(1) Before deducting expenses payable by the Company, estimated at $700,000.

(2) Certain of the Selling Stockholders have granted to the Underwriters a 30-
day option to purchase an aggregate of up to an additional 600,000 shares
of Common Stock solely to cover over-allotments, if any. See
"Underwriting." If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Selling
Stockholders will be $ , $ and $ , respectively.

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The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that the delivery of such shares will be
made through the offices of Robertson, Stephens & Company LLC ("Robertson,
Stephens & Company"), San Francisco, California, on or about , 1997.

ROBERTSON, STEPHENS & COMPANY

SOUNDVIEW FINANCIAL GROUP, INC.

WESSELS, ARNOLD & HENDERSON

The date of this Prospectus is , 1997.
<PAGE>

The inside front cover contains a picture with a title "Integrating Islands of
Automation" at the bottom of the graphic. The graphic contains a compass in the
upper right hand corner of the picture. The picture has the Company's Mercator
product logo labeled as "Mercator" with dotted lines emanating in a spoke like
pattern to pictures of islands, each with a graphic of a piece of computer
hardware. These islands are labeled (clockwise from the upper left corner to the
lower left corner) "Customers, Suppliers, Other Partners," "EDI," "Web
Applications," "Legacy Systems," "SAP R/3," "Best of Breed Applications," and
"Data Warehouses."

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>

NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, BY ANY SELLING STOCKHOLDER OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES, OR AN OFFER TO, OR THE SOLICITATION OF, ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary................................................................ 4
Risk Factors........................................................... 6
Use of Proceeds........................................................ 17
Dividend Policy........................................................ 17
Capitalization......................................................... 18
Dilution............................................................... 19
Selected Financial Data................................................ 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 21
Business............................................................... 31
Management............................................................. 42
Certain Transactions................................................... 50
Principal and Selling Stockholders..................................... 51
Description of Capital Stock........................................... 53
Shares Eligible for Future Sale........................................ 55
Underwriting........................................................... 57
Legal Matters.......................................................... 58
Experts................................................................ 58
Additional Information................................................. 59
Index to Financial Statements.......................................... F-1
</TABLE>

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The Company was incorporated in Connecticut in 1985 and reincorporated in
Delaware in September 1993. The Company's principal executive offices are
located at 45 Danbury Road, Wilton, CT 06897 and its telephone number is (203)
761-8600. The Company has additional offices in Boca Raton, Florida,
Bannockburn, Illinois and Cobham, England.

The Company intends to furnish its stockholders with annual reports
containing financial statements certified by an independent public accounting
firm and, upon request, quarterly reports containing unaudited financial
statements for the first three quarters of each year.

TSI, the TSI logo, Mercator, Trading Partner, OnCall and KEY/MASTER are
registered trademarks, and Mercator for R/3, Trading Partner EC, Trading
Partner PC, Trading Partner PC/32 and OnCall*EDI are trademarks, of the
Company. This Prospectus also contains trademarks and trade names of other
companies.

3
<PAGE>

SUMMARY

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus. The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors," and the Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus.

THE COMPANY

TSI International Software Ltd. ("TSI" or the "Company") is a leading
provider of software and related services that enable organizations to
integrate their business applications both internally and with external
business partners. The Company's flagship product, Mercator, is a data
transformation engine which permits enterprises to exchange information between
internal systems, to implement and integrate advanced client/server
applications such as SAP's R/3 enterprise resource planning ("ERP") system and
to integrate electronic data interchange ("EDI") data and Web-based
applications with their core business systems. In addition to Mercator, the
Company's Trading Partner products permit businesses to exchange information
with business partners and to integrate EDI data with back office applications.

The evolution of enterprise computing has resulted in a proliferation of
business software applications across disparate and heterogeneous computing
systems. To improve effectiveness, efficiency and competitive positioning,
organizations are increasingly seeking to integrate and coordinate these
applications, both within the enterprise and with a growing number of external
business partners. The traditional approach to application integration -- in-
house custom development of interfaces -- is limited in its effectiveness and
is expensive, with integration costs for purchased business applications often
exceeding the cost of the applications themselves. The requirement for
integration, and the need for software tools which automate the integration
process, is increased with each new client/server, electronic commerce or Web-
based application added to the enterprise.

TSI's products provide comprehensive off-the-shelf integration solutions that
can be quickly implemented and easily maintained and that provide support for a
broad range of applications, platforms, and data types. Mercator was the first
product to be certified by SAP for use with its Application Link Enabling
("ALE") architecture, an inter-application messaging technology developed by
SAP as a standard for interfacing with R/3. Mercator addresses the need of SAP
customers to integrate R/3 with legacy and third-party applications in less
time and at lower cost than developing in-house custom interfaces. Similarly,
for external applications, the Company's Mercator and Trading Partner tools
permit customers to integrate business processes across their supply and demand
chains by leveraging the Internet and other transport mechanisms for EDI.

The Company's strategy is to be the market leader in providing solutions that
integrate business applications within the enterprise and between business
partners. Specifically, the Company seeks to extend its technology leadership
in application integration, particularly with respect to its Mercator product
line, and intends to target the market for enterprise application integration
with tools and solutions for the SAP R/3 and other enterprise applications
markets. In addition to these market and product strategies, the Company
intends to expand its existing channels of distribution, leverage its customer
base by marketing additional products and services to existing customers, and
to expand its professional services capability to augment its software
offerings.

The Company markets its products and services through its direct sales force
and a network of value added resellers ("VARs"), independent software vendors
("ISVs"), systems integrators ("SIs") and distributors. TSI has directly
licensed its products to over 6,000 customers worldwide, representing a broad
range of industries. The Company's customers include Allegiance Corporation,
American Express Travel Related Services, Inc., CIGNA Corporation, Citibank,
N.A., Federal Express Corporation, Hewlett-Packard Company, Hoechst AG,
International Business Machines Corporation, Lucent Technologies, Inc., NYNEX
Corporation and Prudential Insurance Company of America.

4
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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company...... 3,000,000 shares
Common Stock offered by the Selling
Stockholders............................ 1,000,000 shares
Common Stock to be outstanding after the
Offering................................ 9,045,942 shares(1)
Use of Proceeds.......................... Repayment of indebtedness and general
corporate purposes, including working
capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol... TSFW
</TABLE>

SUMMARY FINANCIAL INFORMATION
(In thousands, except per share data)

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
----------- ------- ------- ------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $11,358 $12,843 $13,934 $16,061 $19,004 $ 4,089 $ 5,508
Operating income (loss). (4,794) (1,002) 95 907 1,414 162 352
Net income (loss)....... (4,864) (1,228) (113) 823 1,228 121 313
Net income (loss) per
share(2)............... $ 0.14 $ 0.20 $ 0.02 $ 0.05
Weighted average number
of common and common
equivalent shares
outstanding(2)......... 5,753 6,084 5,794 6,525
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------
PRO PRO FORMA AS
ACTUAL FORMA(3) ADJUSTED(3)(4)
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(unaudited)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash........................................... $ 79 $ 79 $19,109
Working capital................................ (158) (158) 18,872
Total assets................................... 8,721 8,721 27,751
Total stockholders' equity (deficiency)........ (2,032) (1,032) 20,588
</TABLE>
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(1) Based on shares outstanding as of May 31, 1997. Excludes (i) an aggregate
of 1,304,757 shares of Common Stock issuable upon the exercise of options
outstanding as of May 31, 1997 under the Company's 1993 Stock Option Plan
(the "1993 Plan") and the Company's 1997 Directors Stock Option Plan (the
"Directors Plan") at a weighted average exercise price of $1.44 per share,
(ii) 711,771 shares of Common Stock issuable upon exercise of outstanding
warrants that will remain outstanding upon the completion of this offering
("Warrants") at an exercise price of $2.00 per share and (iii) an aggregate
of 2,281,764 additional shares of Common Stock reserved for issuance under
the Company's 1997 Equity Incentive Plan, the Directors Plan and 1997
Employee Stock Purchase Plan.
(2) For an explanation of the determination of the number of shares used in
computing per share amounts, see Note 1 of Notes to Financial Statements.

(3) Gives effect to the sale of 50,000 shares of Preferred Stock on May 15,
1997 and the application of the net proceeds therefrom, as if such
transaction had occurred as of March 31, 1997.

(4) Adjusted to reflect the sale of the 3,000,000 shares offered by the Company
hereby at an assumed initial public offering price per share of $8.00 and
the application of the net proceeds therefrom, after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses. See "Capitalization" and "Use of Proceeds."

Unless otherwise indicated, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting." Except
as otherwise noted herein, all information in this Prospectus has been adjusted
to give effect to the Company's reincorporation in Delaware in September 1993,
and reflects (i) a 3-for-1 stock split to be effected immediately prior to the
consummation of this offering, (ii) the conversion, upon completion of this
offering, of all outstanding shares of Preferred Stock of the Company into an
aggregate of 2,759,715 shares of Common Stock and (iii) the exercise of certain
outstanding warrants on a net exercise basis into an aggregate of 286,227
shares of Common Stock upon completion of this offering.

5
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RISK FACTORS

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. In addition to the other information in this Prospectus,
the following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the Common Stock offered by this
Prospectus.

UNCERTAIN PROFITABILITY; ACCUMULATED DEFICIT

Although the Company has been profitable since 1995, the Company incurred
significant operating losses through 1993 and, at March 31, 1997, the
Company's accumulated deficit was approximately $9.7 million. There can be no
assurance that the Company's profitability will continue. The Company
introduced its Mercator product line in December 1993 and released the latest
version of this product in May 1996. The relatively recent introduction of the
Mercator product line and the relative immaturity of its market, together with
the factors described under "-- Potential Fluctuations in Quarterly Results;
Seasonality," make the prediction of future operating results impossible. The
Company's past financial performance should not be considered indicative of
future results. Although the Company has experienced growth in revenues and
net income in recent periods, there can be no assurance that revenues or net
income will continue to increase or not decrease. Future operating results
will depend on many factors, including the growth of the market for business
application integration software and related services, demand for and market
acceptance of the Company's products and related services, particularly its
Mercator products and related services, demand for and market acceptance of
the SAP R/3 system, the level of competition, the Company's success in
expanding its direct sales force, indirect distribution channels and its
professional services business, the ability of the Company to further develop
and market its products, product enhancements and new products, general
economic conditions and other factors. See "-- Potential Fluctuations in
Operating Results; Seasonality" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY

The Company's quarterly and annual operating results have varied
significantly in the past and are expected to do so in the future.
Accordingly, the Company believes that period to period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. The Company's revenues and results
of operations are difficult to forecast and could be adversely affected by
many factors, including, among others: the size, timing and terms of
individual license transactions; the sales cycle for the Company's products;
demand for and market acceptance of the Company's products and related
services (particularly its Mercator products); the number of businesses
implementing the SAP R/3 system as well as the number of such businesses
requiring third party business application integration software and related
services; the Company's ability to expand, and market acceptance of, its
professional services business; the timing of expenditures by the Company in
anticipation of product releases or increased revenue; the timing of product
enhancements and product introductions by the Company and its competitors;
market acceptance of enhanced versions of the Company's existing products and
of new products; changes in pricing policies of the Company and its
competitors; variations in the mix of products and services sold by the
Company; the mix of channels through which products and services are sold; the
success of the Company in penetrating international markets; the buying
patterns and budgeting cycles of customers; personnel changes, the Company's
ability to attract and retain qualified sales, professional services and
research and development personnel and the rate at which such personnel become
productive; and general economic conditions. In particular, the ability of the
Company to achieve growth in the future will depend on its success in adding a
substantial number of sales, professional services and research and
development personnel. Competition for such personnel is intense and there can
be no assurance the Company will be able to attract and retain these
personnel.

6
<PAGE>

Licensing of the Company's software products historically has accounted for
a substantial portion of the Company's revenues, and the Company anticipates
that this trend will continue for the foreseeable future. Software license
revenues are difficult to forecast for a number of reasons. The Company
typically does not have a material backlog of unfilled orders, and revenues in
any quarter are substantially dependent on orders booked and shipped in that
quarter. The length of the sales cycles for the Company's products can vary
significantly from customer to customer and from product to product and, in
certain instances, can be as long as nine months or more. Furthermore, the
terms and conditions of individual license transactions, including prices and
discounts, may be negotiated based on volumes and commitments, and may vary
considerably from customer to customer. In addition, the Company has generally
recognized a substantial portion of its quarterly software licensing revenues
in the last month of each quarter. Accordingly, the cancellation or deferral
of even a small number of purchases of the Company's products has in the past
and could in the future have a material adverse effect on the Company's
business, operating results and financial condition.

The Company's future revenues will also be difficult to predict and the
Company has, in the past, failed to achieve its revenue expectations for
certain periods. The Company's expense levels are based, in part, on its
expectation of future revenues, and expense levels are, to a large extent,
fixed in the short term. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. If revenue
levels are below expectations for any reason, operating results are likely to
be materially and adversely affected. Net income may be disproportionately
affected by a reduction in revenue because a large portion of the Company's
expenses is related to headcount that cannot be easily reduced without
adversely affecting the Company's business. In addition, the Company currently
intends to increase its operating expenses by expanding its research and
product development staff, particularly research and development personnel to
be devoted to the Company's Mercator product line, increasing its professional
services and sales and marketing operations, expanding distribution channels
and hiring personnel in other operating areas. The Company expects to
experience a significant time lag between the date professional services,
sales and technical personnel are hired and the date such personnel become
fully productive. The timing of such expansion and the rate at which new
technical, professional services and sales personnel become productive as well
as the timing of the introduction and success of new distribution channels
could cause material fluctuations in quarterly results of operations.
Furthermore, to the extent such increased operating expenses precede or are
not subsequently followed by increased revenues, the Company's business,
operating results and financial condition could be materially and adversely
affected.

Due to the foregoing factors, it is likely that in some future quarter the
Company's revenue or operating results will not meet the expectations of
public market analysts and investors. In such event, the price of the
Company's Common Stock would likely be materially and adversely affected.

While the Company has not historically experienced any significant seasonal
fluctuations in its revenues or results of operations, it is not uncommon for
software companies to experience strong fourth quarters followed by weaker
first quarters, in some cases with sequential declines in revenues or
operating profit. The Company believes that many software companies exhibit
this pattern in their sales cycles primarily due to customers' buying patterns
and budget cycles. There can be no assurance that the Company will not display
this pattern in future years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

DEPENDENCE ON MERCATOR PRODUCT LINE

The Company introduced its Mercator products in 1993. In recent years, a
significant portion of the Company's revenue has been attributable to licenses
of its Mercator products and related services, and the Company expects that
revenue attributable to its Mercator products and related services will
represent an increasing portion of the Company's total revenue for the
foreseeable future. The development and marketing of its Mercator product line
has required the Company to, among other things, focus its attention and
resources away from some of its traditional products, market its products to a
different customer base and shift a large portion of its development efforts
to the Mercator product line. Accordingly, the Company's

7
<PAGE>

future operating results are highly dependent on the market acceptance and
growth of its Mercator product line and enhancements thereto. There can be no
assurance that market acceptance of the Mercator product line will increase or
remain at current levels or that the Company will be able to successfully
market the Mercator product line and develop extensions and enhancements to
this product line on a long-term basis. In the event the Company's current or
future competitors release new products that provide, or are perceived as
providing, more advanced features, greater functionality, better performance,
better compatibility with other systems or lower prices than the Mercator
product line, demand for the Company's products and services would likely
decline. See "-- Risks Associated with Technological Change, Product
Enhancements and New Product Development" and "-- Competition." A decline in
demand for, or market acceptance of, the Mercator product line as a result of
competition, technological change or other factors would have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Products and Services."

DEPENDENCE ON SAP R/3 SYSTEM IMPLEMENTATIONS

A substantial portion of the Company's sales of its Mercator products and
related services has been attributable to sales of Mercator for R/3 and
related services. The Company believes that its future revenue growth, if any,
will also depend in part upon continued sales of Mercator for R/3 and related
services. The Company has devoted and must continue to devote substantial
resources to identifying potential customers in the R/3 market, building
relationships with strategic partners and attracting and retaining skilled
technical, sales and professional services personnel with expertise in R/3
systems. Personnel with expertise in the R/3 system are in high demand and as
such are typically difficult to hire and retain. Regardless of the investments
the Company makes in pursuing this new market, there can be no assurance that
the Company will be successful in implementing a sales and marketing strategy
appropriate for this market or in attracting and retaining the necessary
skilled personnel.

Demand for and market acceptance of Mercator for R/3 and related services
will be dependent on the continued market acceptance of the SAP R/3 system. As
a result, any factor adversely affecting demand for or use of SAP's R/3 system
could have a material adverse effect on the Company's business, operating
results and financial condition. Implementation of the SAP R/3 system is a
costly and time-consuming process and there can be no assurance that
businesses will choose to purchase such systems. Furthermore, there can be no
assurance that businesses which may implement such systems will wish to commit
the additional resources required to implement Mercator for R/3. In addition,
SAP could in the future introduce business application integration solutions
competitive with Mercator for R/3 and related services. Moreover, any changes
in or new versions of SAP's R/3 system could materially and adversely affect
the Company's business, operating results and financial condition if the
Company were not able to successfully develop or implement any related changes
to Mercator for R/3 in a timely fashion. The Company will also be required to
maintain ALE certification for Mercator for R/3. In order to maintain such
certification, the Company's product must adhere to SAP's technical
specifications which are updated by SAP from time to time, and the Company has
no control over whether and when such specifications will be changed. Any
material change by SAP in such specifications could require the Company to
devote significant development resources to updating this product to comply
with such specifications. In such event, there can be no assurance that the
Company would be able to successfully modify Mercator for R/3 on a timely
basis, if at all, and any failure to do so could materially and adversely
affect the Company's business, operating results and financial condition.

RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE, PRODUCT ENHANCEMENTS AND NEW
PRODUCT DEVELOPMENT

8
<PAGE>

emergence of new industry standards could render existing products obsolete
and unmarketable. Accordingly, the life cycles of the Company's products are
difficult to estimate. The Company's future success will depend in part upon
its ability to anticipate changes and enhance its current products and develop
and introduce new products that keep pace with technological advancements and
address the increasingly sophisticated needs of its customers. The Company's
products may be rendered obsolete if the Company fails to anticipate or react
to change. Development of enhancements to existing products and new products
depends, in part, on the timing of releases of new versions of applications
systems by vendors, the introduction of new applications, systems or computing
platforms, the timing of changes in platforms, the release of new standards or
changes to existing standards, and changing customer requirements, among other
factors. There can be no assurance that the Company will be successful in
developing and marketing product enhancements or new products that respond to
technological change, evolving industry standards and changing customer
requirements, that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of
these products or product enhancements, or that its product enhancements or
new products will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. The Company has in the
past experienced delays in the introduction of product enhancements and new
products and may experience such delays in the future. Furthermore, as the
number of applications, systems and platforms supported by the Company's
products increases, the Company could experience difficulties in developing on
a timely basis product enhancements which address the increased number of new
versions of applications, systems or platforms served by its existing
products. Failure of the Company, for technological or other reasons, to
develop and introduce product enhancements or new products in a timely and
cost-effective manner or to anticipate and respond adequately to changing
market conditions, as well as any significant delay in product development or
introduction, could cause customers to delay or decide against purchases of
the Company's products, which could have a material adverse effect on the
Company's business, operating results and financial condition.

The Company may, in the future, seek to develop and market enhancements to
existing products or new products which are targeted for applications, systems
or platforms which the Company believes will achieve commercial acceptance.
These efforts could require the Company to devote significant development and
sales and marketing personnel as well as other resources to such efforts which
would otherwise be available for other purposes. There can be no assurance
that the Company will be able to successfully identify such applications,
systems or platforms, or that such applications, systems or platforms will
achieve commercial acceptance or that the Company will realize a sufficient
return on its investment. Failure of these targeted applications, systems or
platforms to achieve commercial acceptance or the failure of the Company to
achieve a sufficient return on its investment could have a material adverse
effect on the Company's business, operating results and financial condition.

In addition, the introduction or announcement by the Company, or by one or
more of its current or future competitors, of products embodying new
technologies or features could render the Company's existing products obsolete
or unmarketable. There can be no assurance that the introduction or
announcement of enhanced or new product offerings by the Company or its
current or future competitors will not cause customers to defer or cancel
purchases of existing Company products. Such deferment or cancellation of
purchases could have a material adverse effect on the Company's business,
operating results and financial condition.

DEPENDENCE UPON DEVELOPMENT OF DISTRIBUTION CHANNELS

An integral part of the Company's strategy is to expand both its direct
sales force and its indirect sales channels such as VARs, ISVs, SIs and
distributors. Although VARs, ISVs, SIs and distributors have not accounted for
a substantial percentage of the Company's total revenues historically, the
Company is increasing resources dedicated to developing and expanding its
indirect distribution channels. There can be no assurance that the Company
will be successful in expanding the number of indirect distribution channels
for its products.

9
<PAGE>

Furthermore, any new VARs, ISVs, SIs or distributors may offer competing
products, or have no minimum purchase requirements of the Company's products.
There can also be no assurance that such third parties will provide adequate
levels of services and technical support. The inability of the Company to
enter into additional indirect distribution arrangements, the failure of such
third parties to perform under agreements with the Company and to penetrate
their markets, or the inability of the Company to retain and manage VARs,
ISVs, SIs and distributors with the technical and industry expertise required
to market the Company's products successfully could have a material adverse
effect on the Company's business, operating results and financial condition.
There can be no assurance that the Company's planned efforts to expand its use
of VARs, ISVs, SIs and distributors will be successful. To the extent that the
Company is successful in increasing its sales through indirect sales channels,
it expects that those sales will be at lower per unit prices than sales
through direct channels, and revenue to the Company for each such sale will be
less than if the Company had licensed the same product to the customer
directly.

Selling through indirect channels may limit the Company's contacts with its
customers. As a result, the Company's ability to accurately forecast sales,
evaluate customer satisfaction and recognize emerging customer requirements
may be hindered. The Company's strategy of marketing its products directly to
end-users and indirectly through VARs, ISVs, SIs and distributors may result
in distribution channel conflicts. The Company's direct sales efforts may
compete with those of its indirect channels and, to the extent different
resellers target the same customers, resellers may also come into conflict
with each other. Although the Company has attempted to manage its distribution
channels to avoid potential conflicts, there can be no assurance that channel
conflicts will not materially and adversely affect its relationships with
existing VARs, ISVs, SIs or distributors or adversely affect its ability to
attract new VARs, ISVs, SIs and distributors.

The Company also plans to expand its direct sales force. The Company's
future success will depend in part upon the ability of the Company to attract,
integrate, train, motivate and retain new sales personnel. There can be no
assurance that the Company's efforts to expand its direct sales force will be
successful or that the cost of such efforts will not exceed the revenue
generated. In addition, the Company expects to experience a significant time
lag between the date sales personnel are hired and the date such personnel
become fully productive. The Company's inability to manage its sales force
expansion effectively could have a material adverse effect on the Company's
business, operating results and financial condition.

DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN SALES, PROFESSIONAL
SERVICES AND TECHNICAL PERSONNEL

The Company's future success depends in large part on the continued service
of its key technical, professional services and sales personnel, as well as
senior management. The loss of the services of any of one or more of the
Company's key employees could have a material adverse effect on the Company's
business, operating results and financial condition. All employees are
employed at-will and the Company has no fixed-term employment agreements with
its employees. The Company's future success also depends on its ability to
attract, train and retain highly qualified sales, technical, professional
services and managerial personnel, particularly sales, professional services
and technical personnel with expertise in the SAP R/3 system. An increase in
the Company's sales staff is required to expand both the Company's direct and
indirect sales activities and to achieve revenue growth. Competition for such
personnel is intense, particularly for personnel with expertise in the SAP R/3
system, and there can be no assurance that the Company can attract, assimilate
or retain such personnel. The Company has at times experienced and continues
to experience difficulty in recruiting qualified technical and sales
personnel, and anticipates such difficulties in the future. The Company has in
the past experienced and in the future expects to continue to experience a
significant time lag between the date technical, professional services and
sales personnel are hired and the date such personnel become fully productive.
If the Company is unable to hire and train on a timely basis and subsequently
retain such personnel in the future, the Company's business, operating results
and financial condition could be materially and adversely affected.

10
<PAGE>

MANAGEMENT OF GROWTH

The Company's business has grown in recent periods, with total revenues
increasing from $13.9 million in 1994 to $16.1 million in 1995 and $19.0
million in 1996 and increasing from $4.1 million for the first quarter of 1996
to $5.5 million for the comparable period of 1997. The growth of the Company's
business has placed, and is expected to continue to place, a strain on the
Company's administrative, financial, sales and operational resources and
increased demands on its systems and controls. In particular, the Company
noted an increase in days sales outstanding from December 31, 1996 to March
31, 1997 from approximately 70 days to approximately 86 days, and an increase
in total accounts receivable from $4.4 million to $5.3 million. The Company
believes this increase resulted from difficulties in implementing a new
financial accounting system which have since been resolved, and from a lack of
sufficient collections resources in light of the Company's increased sales
levels.

To deal with these concerns, the Company has implemented or is in the
process of implementing and will be required to implement in the future a
variety of new and upgraded operational and financial systems, procedures and
controls and to hire additional administrative personnel. There can be no
assurance that the Company will be able to complete the implementation of
these systems, procedures and controls or hire such personnel in a timely
manner. The failure of the Company or its management to respond to, and
manage, its growth and changing business conditions, or to adapt its
operational, management and financial control systems to accommodate its
growth could have a material adverse effect on the Company's business,
operating results and financial condition. To promote growth in the Company's
sales and operations, the Company will also have to expand its sales and
marketing organizations, expand and develop its distribution channels, fund
increasing levels of product development and increase the size of its
training, professional services and customer support organization to
accommodate expanded operations, and there can be no assurance that the
Company will be successful in these endeavors. See "Business -- Employees" and
"Management."

DEPENDENCE ON THE INTERNET AND INTRANETS

The Company believes that demand for business application integration
solutions such as those offered by the Company will depend in part upon the
adoption by businesses and end-users of the Internet and intranets as a
platform for electronic commerce and communications both within and outside
the enterprise. The Internet and intranets are new and evolving, and there can
be no assurance of their widespread adoption, particularly for electronic
commerce and communications among businesses. Critical issues concerning the
Internet and intranets, including security, reliability, cost, ease of use and
access and quality of service, remain unresolved at this time, inhibiting
adoption by many enterprises and end-users. If the Internet and intranets are
not widely used by businesses and end-users, particularly for electronic
commerce, this could have an adverse effect on the Company's business,
operating results and financial condition.

COMPETITION

The market for the Company's products and services is extremely competitive
and subject to rapid change. Because there are relatively low barriers to
entry in the software market, the Company expects additional competition from
other established and emerging companies. The Company believes that the
competitive factors affecting the market for the Company's products and
services include product functionality and features; quality of professional
services offerings; product quality, performance and price; ease of product
implementation; quality of customer support services; customer training and
documentation; and vendor and product reputation. The relative importance of
each of these factors depends upon the specific customer environment. Although
the Company believes that its products and services currently compete
favorably with respect to such factors, there can be no assurance that the
Company can maintain its competitive position against current and potential
competitors.

11
<PAGE>

business application integration needs. As a result, the Company must educate
prospective customers as to the advantages of the Company's products and
services as opposed to internally developed solutions and there can be no
assurance that the Company will be able to adequately educate potential
customers to the benefits provided by the Company's products and services. In
the EDI market, the Company's Trading Partner products compete with products
offered by companies offering proprietary Value-Added Network ("VAN") services
as part of their EDI solution and the Company's PC-based Trading Partner
products also compete with PC-based products offered by a number of other EDI
software vendors.

Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical, product
development and marketing resources, greater name recognition and larger
customer bases than the Company. The Company's present or future competitors
may be able to develop products comparable or superior to those offered by the
Company, adapt more quickly than the Company to new technologies, evolving
industry trends or customer requirements, or devote greater resources to the
development, promotion and sale of their products than the Company.
Accordingly, there can be no assurance that the Company will be able to
compete effectively in its markets, that competition will not intensify or
that future competition will not have a material adverse effect on the
Company's business, operating results and financial condition.

The Company expects that it will face increasing pricing pressures from its
current competitors and new market entrants. The Company's competitors may
engage in pricing practices that reduce the average selling prices of the
Company's products and related services. To offset declining average selling
prices, the Company believes that it must successfully introduce and sell
enhancements to existing products and new products on a timely basis and
develop enhancements to existing products and new products that incorporate
features that can be sold at higher average selling prices. To the extent that
enhancements to existing products and new products are not developed in a
timely manner, do not achieve customer acceptance or do not generate higher
average selling prices, the Company's gross margins may decline, and such
decline could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Competition."

DEPENDENCE ON PROPRIETARY TECHNOLOGY

The Company's success is dependent upon its proprietary software technology.
The Company does not currently have any patents and relies principally on
trade secret, copyright and trademark laws, nondisclosure and other
contractual agreements and technical measures to protect its technology. The
Company also believes that factors such as the technological and creative
skills of its personnel, product enhancements and new product developments are
essential to establishing and maintaining a technology leadership position.
The Company enters into confidentiality and/or license agreements with its
employees, distributors and customers, and limits access to and distribution
of its software, documentation and other proprietary information. There can be
no assurance that the steps taken by the Company will prevent misappropriation
of its technology, and such protections do not preclude competitors from
developing products with functionality or features similar to the Company's
products. Furthermore, there can be no assurance that third parties will not
independently develop competing technologies that are substantially equivalent
or superior to the Company's technologies. In addition, effective copyright
and trade secret protection may be unavailable or limited in certain foreign
countries. Any failure by or inability of the Company to protect its
proprietary technology could have a material adverse effect on the Company's
business, operating results and financial condition.

12
<PAGE>

making claims against the Company could secure substantial damages, as well as
injunctive or other equitable relief which could effectively block the
Company's ability to license its products in the United States or abroad. Such
a judgment could have a material adverse effect on the Company's business,
operating results and financial condition. If it appears necessary or
desirable, the Company may seek licenses to intellectual property that it is
allegedly infringing. There can be no assurance, however, that licenses could
be obtained on commercially reasonable terms, if at all, or that the terms of
any offered licensed will be acceptable to the Company. The failure to obtain
the necessary licenses or other rights could have a material adverse effect on
the Company's business, operating results and financial condition. As the
number of software products in the industry increases and the functionality of
these products further overlaps, the Company believes that software developers
may become increasingly subject to infringement claims. Any such claims, with
or without merit, can be time consuming and expensive to defend and could
adversely affect the Company's business, operating results and financial
condition. There are currently no pending claims that the Company's products,
trademarks or other proprietary rights infringe upon the proprietary rights of
third parties. See "Business -- Proprietary Technology."

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

Although international revenues currently account for only approximately 10%
of the Company's total revenues, the Company intends to expand its sales and
marketing resources outside of the United States, which will require
significant management attention and financial resources. The Company also
expects to commit additional time and development resources to customizing its
products for selected international markets and to developing international
sales and support channels. None of the Company's products is currently a
"double byte" product, which is required to localize these products in certain
non-English character set markets such as Asia. The Company believes that it
will be required to develop double byte versions of its products and engage in
other localization activities. There can be no assurance that such efforts
will be successful.

International operations involve a number of additional risks, including the
impact of possible recessionary environments in economies outside the United
States, longer receivables collection periods and greater difficulty in
accounts receivable collection, unexpected changes in regulatory requirements,
dependence on independent resellers, reduced protection for intellectual
property rights in some countries, tariffs and other trade barriers, foreign
currency exchange rate fluctuations, difficulties in staffing and managing
foreign operations, the burdens of complying with a variety of foreign laws,
potentially adverse tax consequences and political and economic instability.
To the extent the Company's international operations expand, the Company
expects that an increasing portion of its international license and service
and other revenues will be denominated in foreign currencies, subjecting the
Company to fluctuations in foreign currency exchange rates. The Company does
not currently engage in foreign currency hedging transactions. However, as the
Company continues to expand its international operations, exposures to gains
and losses on foreign currency transactions may increase. The Company may
choose to limit such exposure by the purchase of forward foreign exchange
contracts or similar hedging strategies. There can be no assurance that any
currency exchange strategy would be successful in avoiding exchange-related
losses. There can be no assurance that the foregoing factors will not have a
material adverse effect on the Company's future international revenue and,
consequently, on the Company's business, operating results and financial
condition. The Company believes that its growth will require expansion of its
sales in foreign markets and expects to rely principally on resellers in those
markets, rather than substantially increase its direct sales force to serve
those markets. There can be no assurance that the Company will be able to
sustain or increase revenue derived from international sources.

RISK OF SOFTWARE DEFECTS; PRODUCT LIABILITY

Software products as complex as those offered by the Company may contain
defects or failures when introduced or when new versions are released. The
Company has in the past discovered software defects in certain of its products
and may experience delays or lost revenue to correct such defects in the
future.

13
<PAGE>

Although the Company has corrected known material defects in its current
products and has not experienced material adverse effects resulting from any
such defects to date, there can be no assurance that, despite testing by the
Company, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of market share or
failure to achieve market acceptance. Any such occurrence could have a
material adverse effect upon the Company's business, operating results and
financial condition.

The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. It is possible, however, that the limitation of liability
provisions contained in the Company's license agreements, especially unsigned
"shrink-wrap" licenses, may not be effective under the laws of certain
jurisdictions. Consequently, the sale and support of the Company's software
entails the risk of such claims in the future. The Company currently has a
standard business owner's insurance policy but does not have insurance
specifically for software product liability risks or software errors and
omissions. Any product liability claim brought against the Company could have
a material adverse effect upon the Company's business, operating results and
financial condition.

POTENTIAL ACQUISITIONS

If appropriate opportunities present themselves, the Company intends to
acquire businesses, products or technologies that the Company believes are
strategic, although the Company currently has no understandings, commitments
or agreements with respect to any material acquisition and no material
acquisition is currently being pursued. There can be no assurance that the
Company will be able to successfully identify, negotiate or finance such
acquisitions, or to integrate such acquisitions with its current business. The
process of integrating an acquired business, product or technology into the
Company may result in unforeseen operating difficulties and expenditures and
may absorb significant management attention that would otherwise be available
for ongoing development of the Company's business. Moreover, there can be no
assurance that the anticipated benefits of any acquisition will be realized.
Acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or amortization
expenses related to goodwill and other intangible assets, which could
materially adversely affect the Company's business, operating results and
financial condition. Any such future acquisitions of other technologies,
products or companies may require the Company to obtain additional equity or
debt financing, which may not be available or may be dilutive.

NO PRIOR MARKET; VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market will
develop or be sustained after this offering. The initial public offering price
will be determined by negotiations among the Company and the representatives
of the Underwriters based on several factors and may not be indicative of the
market price of the Common Stock after this offering. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The market price of the shares of Common Stock is likely to be
highly volatile and may be significantly affected by factors such as actual or
anticipated fluctuations in the Company's operating results, announcements of
technological innovations or new products by the Company or its competitors,
developments with respect to patents, copyrights or proprietary rights,
conditions and trends in the software or other industries, general market
conditions and other factors. In addition, the stock market has from time to
time experienced significant price and volume fluctuations that have
particularly affected the market prices for the common stocks of technology
companies. These broad market fluctuations may adversely affect the market
price of the Company's Common Stock. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often resulted. There can be no assurance that such
litigation will not occur in the future with respect to the Company. Such
litigation could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect upon the
Company's business, operating results and financial condition.

14
<PAGE>

CONTROL BY EXISTING STOCKHOLDERS; FACTORS INHIBITING TAKEOVER

Upon completion of this offering, officers and directors of the Company and
their affiliated entities will beneficially own approximately 48.6% of the
outstanding Common Stock of the Company (47.7% if the Underwriters' over-
allotment option is exercised in full). As a result, such persons and entities
will be able to control the management and affairs of the Company and exercise
significant influence over all matters requiring stockholder approval,
including election of directors, any merger, consolidation or sale of all or
substantially all of the Company's assets, and any other significant corporate
transaction. The concentration of ownership could have the effect of delaying
or preventing a change in control of the Company. See "Principal and Selling
Stockholders." Immediately prior to the completion of this offering, the
Company's Certificate of Incorporation will be amended and restated to include
a provision that allows the Board of Directors to issue up to 5,000,000 shares
of Preferred Stock and to determine the price, rights, preferences,
privileges, and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. Preferred Stock could be
issued, without stockholder approval, that could have voting, liquidation and
dividend rights superior to that of existing stockholders. The issuance of
Preferred Stock could adversely affect the voting powers of holders of Common
Stock and the likelihood that such holders would receive dividend payments and
payments on liquidation. The Company has no current plans to issue any
Preferred Stock. In addition, Section 203 of the Delaware General Corporation
Law ("Section 203") restricts certain business combinations with any
"interested stockholder" as defined by such statute. The issuance of Preferred
Stock as well as the provisions of Section 203 could also make it more
difficult for a third party to acquire control of the outstanding voting stock
of the Company and thereby have the effect of delaying or preventing a change
in control of the Company. See "Description of Capital Stock--Delaware Anti-
Takeover Law."

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price is substantially higher than the net
tangible book value per share of Common Stock. Investors purchasing shares of
Common Stock in this offering will therefore incur immediate and substantial
dilution of $5.72 in the net tangible book value per share of the Common Stock
(at an assumed initial public offering price of $8.00 per share and after
deducting the estimated underwriting discount and estimated offering
expenses). To the extent that options or Warrants to purchase the Company's
Common Stock are exercised, there will be further dilution. See "Dilution."

UNCERTAINTY AS TO USE OF PROCEEDS

Except for the repayment of amounts outstanding under its credit line, the
Company has no specific plans as to the use of a significant portion of the
net proceeds from this offering, other than general working capital purposes.
Accordingly, the Company's management will retain broad discretion to allocate
the net proceeds from this offering to uses that the stockholders may not deem
desirable and there can be no assurance that the proceeds can or will yield a
significant return. See "Use of Proceeds."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of large amounts of the Company's Common Stock in the public market
could adversely affect the market price of the Common Stock and could impair
the Company's future ability to raise capital through offerings of its equity
securities. A substantial number of outstanding shares of Common Stock and
shares of Common Stock issuable upon the exercise of outstanding stock options
and Warrants will become available for resale in the public market at
prescribed times. Upon completion of this offering, there will be 9,045,942
shares of Common Stock of the Company outstanding. The 4,000,000 shares
offered hereby will be eligible for immediate sale in the public market
without restriction. Taking into account certain shares subject to lock-up
agreements and notwithstanding possible earlier eligibility for sale under the
provisions of Rules 144, 144(k) and 701, the number of shares that will be
available for sale in the public market will be as follows: (i) approximately
81,000 shares will be eligible for immediate sale on the effective date, (ii)
approximately 3,555 shares will become eligible for sale 90 days after the
effective date pursuant to the provisions of Rule 144 or

15
<PAGE>

Rule 701, (iii) approximately 48,000 shares will be eligible for sale in
December 1997 subject to certain volume and other resale restrictions under
Rule 144, (iv) approximately 4,763,387 shares will become eligible for sale
180 days after the effective date upon the expiration of certain lock-up
agreements and, as of that date, approximately 4,076,847 of such shares will
be subject to certain volume and other resale restrictions pursuant to Rule
144, and (v) approximately 150,000 shares will become eligible for sale in May
1998, subject to certain volume and other resale restrictions pursuant to Rule
144. Within 90 days after this offering, the Company intends to register
approximately 3,586,521 shares of the Company's Common Stock reserved for
issuance upon exercise of outstanding options or for future grants or
purchases under its stock option plans and stock purchase plan.

In addition, upon completion of this offering, there will remain outstanding
Warrants to purchase 711,771 shares of Common Stock at an exercise price of
$2.00 per share. These Warrants are exercisable at any time on a net exercise
basis. Accordingly, any shares of Common Stock issuable upon such net exercise
would be available for resale in the public market, subject to public
information, volume limitation or notice provisions of Rule 144, in the case
of affiliates.

Following this offering, the holders of 2,567,169 shares of the Company's
Common Stock and holders of Warrants to purchase 711,771 shares of Common
Stock will have certain rights to register those shares of Common Stock under
the Securities Act. See "Shares Eligible for Future Sale."

16
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$21.6 million (at an assumed initial public offering price of $8.00 per share)
after deducting the estimated underwriting discount and commissions and
estimated offering expenses. The Company will not receive any proceeds from
the sale of Common Stock by the Selling Stockholders.

The Company expects to use a portion of such proceeds for the repayment of
approximately $2.6 million of indebtedness under the Company's bank credit
line. A portion of this indebtedness bears interest at the rate of the bank's
prime lending rate plus 1.0% and the remainder bears interest at the rate of
the applicable LIBOR rate plus 3.0% (for a weighted average interest rate of
approximately 8.92% at March 31, 1997). The Company has no current specific
plans for the remainder of the net proceeds of this offering, but the Company
expects to use such net proceeds for general corporate purposes, including
working capital. A portion of the proceeds may also be used to acquire or
invest in complementary businesses or products or to obtain the right to use
complementary technologies. The Company presently has no commitments or
understandings for any such acquisitions or investments, and is not presently
engaged in any discussions or negotiations for any such acquisitions or
investments. Pending use of the net proceeds for the above purposes, the
Company intends to invest such funds in short-term, interest-bearing,
investment-grade obligations.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that it will retain all future
earnings for use in its business and does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. The payment of any
future dividends will be at the discretion of the Company's Board of Directors
and will depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company, general business
conditions and contractual restrictions on payment of dividends, if any. The
Company's credit agreement with its bank prohibits the payment of dividends
without the bank's written consent.

17
<PAGE>

CAPITALIZATION

The following table sets forth, as of March 31, 1997, (i) the actual
capitalization of the Company, (ii) the capitalization of the Company on a pro
forma basis to give retroactive effect to the items referred to in footnote
(1) below and (iii) such pro forma capitalization as adjusted to give effect
to the sale of the 3,000,000 shares of Common Stock offered by the Company
hereby at an assumed offering price of $8.00 per share and the application of
the net proceeds therefrom.

<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED
----------- ------------- ------------
(In thousands, except share data)
<S> <C> <C> <C>
Long-term debt:
Notes payable--bank....... 3,590 2,590 --
Equipment obligations..... 43 43 43
----------- ----------- -----------
Total long-term debt.... 3,633 2,633 43
=========== =========== ===========
Stockholders' equity
(deficiency)(2):
Preferred stock, $0.01 par
value per share;
1,638,166 shares
authorized, 860,969
shares issued and
outstanding, actual;
5,000,000 shares
authorized, no shares
issued or outstanding,
pro forma and pro forma
as adjusted.............. 9 -- --
Common stock, $0.01 par
value per share;
3,888,166 shares
authorized, 3,000,000
shares issued and
outstanding, actual;
20,000,000 shares
authorized, 6,045,942
shares issued and
outstanding, pro forma;
20,000,000 shares
authorized, 9,045,942
shares issued and
outstanding, pro forma as
adjusted(3).............. 30 60 90
Paid-in capital........... 7,888 8,867 30,457
Accumulated deficit....... (9,724) (9,724) (9,724)
Cumulative foreign
currency translation
adjustment............... (170) (170) (170)
Treasury stock at cost.... (65) (65) (65)
----------- ----------- -----------
Total stockholders'
equity (deficiency)..... (2,032) (1,032) 20,588
----------- ----------- -----------
Total capitalization.... 1,601 1,601 20,631
=========== =========== ===========
</TABLE>
- --------

(1) Gives effect to (i) the repayment of $1.0 million principal amount of
indebtedness with the proceeds of the sale of Preferred Stock on May 15,
1997, (ii) the automatic conversion of all outstanding shares of Preferred
Stock into an aggregate of 2,759,715 shares of Common Stock (including
150,000 shares of Common Stock issuable upon conversion of Preferred Stock
sold on May 15, 1997) upon the closing of this offering, and (iii) the
exercise of certain outstanding warrants, on a net exercise basis, into an
aggregate of 286,227 shares of Common Stock (based upon an assumed initial
public offering price of $8.00 per share) upon the closing of this
offering.

(2) See Note 6 of Notes to Financial Statements.

(3) Excludes (i) 1,304,757 shares of Common Stock issuable upon exercise of
stock options outstanding as of May 31, 1997 under the 1993 Plan and the
Directors Plan and (ii) 711,771 shares of Common Stock issuable upon
exercise of Warrants which will remain outstanding after the consummation
of this offering.

18
<PAGE>

DILUTION

The pro forma net tangible book value of the Company as of March 31, 1997,
was $(1.0 million) or approximately $(0.17) per share of Common Stock. Pro
forma net tangible book value per share represents total tangible assets of
the Company (taking into effect the sale by the Company of Preferred Stock on
May 15, 1997), less total liabilities (taking into effect the repayment of
$1.0 million of indebtedness with the proceeds from the sale of Preferred
Stock on May 15, 1997), divided by the number of shares of Common Stock
outstanding, assuming conversion of all outstanding shares of Preferred Stock
(including shares of Preferred Stock sold on May 15, 1997) into an aggregate
of 2,759,715 shares of Common Stock and the exercise of certain outstanding
warrants on a net exercise basis into an aggregate of 286,227 shares of Common
Stock upon completion of this offering. Pro forma net tangible book value
dilution per share represents the difference between the amount per share paid
by purchasers of shares of Common Stock in the offering made hereby and the
pro forma net tangible book value per share of Common Stock immediately after
the offering.

After giving effect to the sale of 3,000,000 shares of Common Stock offered
by the Company hereby (at an assumed initial public offering price of $8.00
per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses), the pro forma net tangible book
value of the Company as of March 31, 1997 would have been $20.6 million or
approximately $2.28 per share. This represents an immediate increase in pro
forma net tangible book value of $2.45 per share to existing stockholders and
an immediate dilution of $5.72 per share to purchasers of Common Stock in this
offering, as illustrated in the following table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $8.00
Pro forma net tangible book value per share at March 31,
1997....................................................... $(0.17)
Increase per share attributable to new investors............ 2.45
------
Pro forma net tangible book value per share after the
offering..................................................... 2.28
-----
Pro forma net tangible book value dilution per share to new
investors.................................................... $5.72
=====
</TABLE>

The following table sets forth on a pro forma basis as of March 31, 1997,
the difference between the existing stockholders and the purchasers of shares
in this offering (at an assumed initial public offering price of $8.00 per
share) with respect to the number of shares purchased from the Company, the
total consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER(1) PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)(2)..... 6,045,942 66.8% $ 8,927,400 27.1% $1.48
New investors................... 3,000,000 33.2 24,000,000 72.9 8.00
--------- ----- ----------- -----
Totals........................ 9,045,942 100.0% $32,927,400 100.0%
========= ===== =========== =====
</TABLE>
- --------

(1) Sales by the Selling Stockholders in this offering will reduce the number
of shares of Common Stock held by existing stockholders to 5,045,942, or
55.8% (4,445,942, or 49.1% if the Underwriters' over-allotment option is
exercised in full) of the total shares of Common Stock outstanding
immediately after this offering, and will increase the number of shares of
Common Stock held by new investors to 4,000,000, or 44.2% (4,600,000, or
50.9% if the Underwriters' over-allotment option is exercised in full) of
the total number of shares of Common Stock outstanding immediately after
this offering. See "Principal and Selling Stockholders."

(2) Includes 2,759,715 shares of Common Stock issuable upon conversion of all
outstanding shares of Preferred Stock (including 150,000 shares of Common
Stock issuable upon conversion of Preferred Stock sold on May 15, 1997)
upon the closing of this offering and an aggregate of 286,227 shares of
Common Stock issuable upon the exercise of warrants on a net exercise
basis upon completion of this offering.

As of May 31, 1997, there were options outstanding to purchase a total of
1,304,757 shares of Common Stock at a weighted average exercise price of $1.44
per share and Warrants outstanding to purchase a total of 711,771 shares of
Common Stock at an exercise price of $2.00 per share, which Warrants will
remain outstanding after the consummation of this offering. To the extent that
any of these options or Warrants are exercised, there will be further dilution
to new investors. See "Capitalization," "Management -- Employee Benefit
Plans," "Description of Capital Stock" and Note 6 of Notes to Financial
Statements.

19
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data are qualified by reference to and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
and Notes thereto included elsewhere in this Prospectus. The statements of
operations data presented below for each of the years in the three year period
ended December 31, 1996 and the balance sheet data as of December 31, 1995 and
1996 are derived from the financial statements of the Company, which financial
statements have been audited by KPMG Peat Marwick LLP, independent certified
public accountants, and are included elsewhere herein. The statements of
operations data presented below for the year ended December 31, 1993, and the
balance sheet data as of December 31, 1992, 1993, and 1994 are derived from
audited financial statements not included in this Prospectus. The statements
of operations data for the year ended December 31, 1992 is unaudited. The
statements of operations data presented below for the three months ended March
31, 1996 and 1997 and the balance sheet data as of March 31, 1997 are derived
from unaudited financial statements included elsewhere herein. The unaudited
financial statements include all adjustments (consisting only of normal
recurring adjustments) that the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. The results of operations for the three months ended March 31, 1997
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997 or any other future period.

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
----------- ------- ------- ------- ------- ------- -------
(unaudited) (unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues:
Software licensing..... $ 4,292 $ 5,242 $ 6,275 $ 7,553 $ 9,310 $ 1,783 $ 2,731
Service, maintenance
and other............. 7,066 7,601 7,659 8,508 9,694 2,306 2,777
------- ------- ------- ------- ------- ------- -------
Total revenues........ 11,358 12,843 13,934 16,061 19,004 4,089 5,508
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Software licensing..... 1,080 934 1,035 725 495 93 174
Service, maintenance
and other............. 2,418 2,276 2,522 2,200 2,006 432 548
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............. 3,498 3,210 3,557 2,925 2,501 525 722
------- ------- ------- ------- ------- ------- -------
Gross profit............ 7,860 9,633 10,377 13,136 16,503 3,564 4,786
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Product development.... 3,807 2,498 2,231 3,068 3,452 779 1,073
Selling and marketing.. 6,598 6,218 6,124 7,160 8,715 1,894 2,584
General and
administrative........ 2,249 1,919 1,927 2,001 2,922 729 777
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 12,654 10,635 10,282 12,229 15,089 3,402 4,434
------- ------- ------- ------- ------- ------- -------
Operating income (loss). (4,794) (1,002) 95 907 1,414 162 352
Other income (expense),
net.................... (70) (226) (208) (84) (186) (41) (39)
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(4,864) $(1,228) $ (113) $ 823 $ 1,228 $ 121 $ 313
======= ======= ======= ======= ======= ======= =======
Net income (loss) per
share(1)............... $ 0.14 $ 0.20 $ 0.02 $ 0.05
======= ======= ======= =======
Weighted average number
of common and common
equivalent shares
outstanding(1)......... 5,753 6,084 5,794 6,525
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------- -----------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................... $ 39 $ 178 $ 450 $ 143 $ 41 $ 79
Working capital......... (1,664) (2,195) (2,630) (2,128) (1,220) (158)
Total assets............ 8,869 7,218 6,387 6,237 7,521 8,721
Total stockholders'
(deficiency)........... (3,679) (4,306) (4,393) (3,570) (2,294) (2,032)
</TABLE>
- -------
(1) For an explanation of the determination of the number of shares used in
computing per share amounts, see Note 1 of Notes to Financial Statements.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus. The following discussion should be read in conjunction
with the Financial Statements and Notes thereto included elsewhere in this
Prospectus.

OVERVIEW

The Company was incorporated in Connecticut in 1985 and reincorporated in
Delaware in September 1993. In June 1991, the Company began developing its
Mercator product and in December 1993 released Version 1.0 of Mercator. The
Company released the latest version of Mercator in May 1996 and released its
Mercator for R/3 product in June 1996.

Historically, the Company has derived a majority of its revenues from
products other than Mercator, primarily its Trading Partner family of products
and its KEY/MASTER product. However, revenue related to Mercator has grown
significantly in each of the last three years and has increased as a
percentage of total revenues. The Company believes that future growth in
revenues, if any, will be mainly attributable to its Mercator product line. In
view of the relatively recent introduction of Mercator, the Company believes
it cannot accurately predict the amount of revenues that will be attributable
to such products or the life of such products. To the extent the Company's
Mercator products do not achieve market acceptance, the Company's business,
operating results and financial condition will be materially and adversely
affected.

The Company's revenues are derived principally from two sources: (i) license
fees for the use of the Company's software products and (ii) service fees for
maintenance, consulting services and training related to the Company's
software products. The Company generally recognizes revenue from software
license fees upon shipment, unless the Company has significant post-delivery
obligations, in which case revenues are recognized when such obligations are
satisfied. The Company's KEY/MASTER product is licensed under term-use
contracts rather than for a one-time license fee, and the Company recognizes
revenue from such arrangements on a present-value basis at the inception of
the contract. Revenues from consulting and training are recognized as services
are performed, and maintenance revenues are recognized ratably over the
maintenance period, typically one year. The Company does not actively market
new term-use contracts for KEY/MASTER but continues to receive KEY/MASTER
revenues, principally maintenance revenues. As a result, KEY/MASTER accounts
for a larger proportion of maintenance revenue than license revenues and
increases the percentage of the Company's total revenues represented by
services, maintenance and other revenues. The Company intends to increase the
scope of its service offerings with the goal of increasing license revenues
from sales of its products. The Company does not believe that the mix of
software licensing and service, maintenance and other revenues will change
substantially in the future.

Mercator can be used by IT professionals as well as VARs, ISVs, SIs or other
third parties who resell, embed or otherwise bundle Mercator with their
products. To date, license fee revenues have been derived principally from
direct sales of software products through the Company's direct sales force.
Although the Company believes that such direct sales will continue to account
for a significant portion of software licensing revenues, the Company intends
to increase its use of distributors and resellers. Furthermore, the Company's
planned expansion of its sales organization is expected to cause sales and
marketing expenses to increase.

The Company markets its products in North America primarily through its
direct sales and telesales organizations. Throughout the rest of the world,
the Company markets its products through distributors, resellers and direct
sales. International revenue accounted for 10.4% and 9.4% of total revenues
for 1996 and the first three months of 1997, respectively. The Company
maintains an international sales and support office

21
<PAGE>

in the United Kingdom. The Company intends to increase its international
direct sales force and focus on establishing additional international
distributor and reseller relationships. See "Risk Factors -- Risks Associated
with International Expansion."

The size of the Company's orders can range from a few thousand dollars to
over $100,000 per order. The loss or delay of large individual orders,
therefore, can have a significant impact on the revenues and other quarterly
results of the Company. In addition, the Company has generally recognized a
substantial portion of its quarterly software licensing revenues in the last
month of each quarter, and as a result, revenue for any particular quarter may
be difficult to predict in advance. Because the Company's operating expenses
are relatively fixed, a delay in the recognitions of revenue from a limited
number of license transactions could cause significant variations in operating
results from quarter to quarter and could result in significant losses. To the
extent such expenses precede, or are not subsequently followed by, increased
revenue, the Company's operating results would be materially and adversely
affected. As a result of these and other factors, operating results for any
quarter are subject to variation, and the Company believes that period-to-
period comparisons of its results of operations are not necessarily meaningful
and should not be relied upon as indications of future performance.

In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed, software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers.
To date, the establishment of technological feasibility of the Company's
products and general release of such software have substantially coincided. As
a result, software development costs qualifying for capitalization have been
insignificant, and therefore, the Company has not capitalized any software
development costs.

22
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain items from the Company's Statements of
Operations.

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------- ----------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licensing.......... 45.0% 47.0% 49.0% 43.6% 49.6%
Service, maintenance and
other...................... 55.0 53.0 51.0 56.4 50.4
-------- -------- -------- ------- -------
Total revenues............ 100.0 100.0 100.0 100.0 100.0
-------- -------- -------- ------- -------
Cost of revenues:
Software licensing.......... 7.4 4.5 2.6 2.3 3.2
Service, maintenance and
other...................... 18.1 13.7 10.6 10.5 9.9
-------- -------- -------- ------- -------
Total cost of revenues.... 25.5 18.2 13.2 12.8 13.1
-------- -------- -------- ------- -------
Gross profit.................. 74.5 81.8 86.8 87.2 86.9
-------- -------- -------- ------- -------
Operating expenses:
Product development......... 16.0 19.1 18.2 19.1 19.5
Selling and marketing....... 44.0 44.6 45.9 46.3 46.9
General and administrative.. 13.8 12.5 15.3 17.8 14.1
-------- -------- -------- ------- -------
Total operating expenses.. 73.8 76.2 79.4 83.2 80.5
-------- -------- -------- ------- -------
Operating income (loss)....... 0.7 5.6 7.4 4.0 6.4
Other income (expense), net... (1.5) (0.5) (0.9) (1.0) (0.7)
-------- -------- -------- ------- -------
Net income (loss)............. (0.8)% 5.1% 6.5% 3.0% 5.7%
======== ======== ======== ======= =======
Gross profit:
Software licensing.......... 83.5% 90.4% 94.7% 94.8% 93.6%
Service, maintenance and
other...................... 67.1 74.1 79.3 81.3 80.3
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996

Revenues

Total Revenues. The Company's total revenues increased 35% from $4.1 million
in the first three months of 1996 to $5.5 million in the comparable period of
1997.

Software Licensing. Software licensing revenues increased 53% from $1.8
million in the first three months of 1996 to $2.7 million in the comparable
period of 1997, primarily as a result of a 96% increase in Mercator license
revenues.

Service, Maintenance and Other. Service, maintenance and other revenues
increased 20% from $2.3 million in the first three months of 1996 to $2.8
million in the comparable period of 1997, primarily as a result of a 136%
increase in professional services revenues primarily associated with sales of
Mercator and, to a lesser extent, an increase in Mercator maintenance revenue,
partially offset by a slight decrease in KEY/MASTER maintenance revenues.
Maintenance revenues attributable to KEY/MASTER were $1.2 million and $1.1
million for the first three months of 1996 and 1997, respectively.

Cost of Revenues

Cost of software licensing revenues consists primarily of media, manuals,
distribution costs and the cost of third party software that the Company
resells. Cost of service, maintenance and other revenues consists primarily of
personnel-related costs in providing maintenance, technical support,
consulting and training to customers. Gross margin on software licensing
revenues is higher than gross margin on service, maintenance and other
revenues, reflecting the low materials, packaging and other costs of software
products compared

23
<PAGE>

with the relatively high personnel costs associated with providing
maintenance, technical support, consulting and training services. Cost of
service, maintenance and other revenues also varies based upon the mix of
maintenance, technical support, consulting and training services.

Cost of Software Licensing. Cost of software licensing revenues increased
87% from $93,000 in the first three months of 1996 to $174,000 in the
comparable period of 1997, primarily due to increased sales of software
licenses. Software licensing gross margin remained relatively constant at 95%
and 94% in the first three months of 1996 and 1997, respectively.

Cost of Service, Maintenance and Other. Cost of service, maintenance and
other revenues increased 27% from $432,000 in the first three months of 1996
to $548,000 in the comparable period of 1997, primarily due to increased
professional services rendered, particularly Mercator-related services.
Service, maintenance and other gross margin remained relatively constant at
81% and 80% in the first three months of 1996 and 1997, respectively.

Operating Expenses

Product Development. Product development expenses include expenses
associated with the development of new products and enhancements to existing
products and consist primarily of salaries, recruiting and other personnel-
related expenses, depreciation of development equipment, supplies, travel and
allocated facilities and communications costs. Product development expenses
increased 38% from $779,000 in the first three months of 1996 to $1.1 million
in the comparable period of 1997, primarily due to increased product
development activities relating to the Company's Mercator product line.
Product development expenses as a percentage of total revenue did not change
significantly in the first three months of 1997 as compared to the first three
months of 1996. The Company believes that a significant level of research and
development expenditures is required to remain competitive. Accordingly, the
Company anticipates that it will continue to devote substantial resources to
research and development. The Company expects that the dollar amount of
research and development expenses will increase through at least the remainder
of 1997. To date, all research and development expenditures have been expensed
as incurred.

Selling and Marketing. Selling and marketing expenses consist of sales and
marketing personnel costs, including sales commissions, recruiting, travel,
advertising, public relations, seminars, trade shows, product descriptive
literature and allocated facilities and communications costs. Selling and
marketing expenses increased 36% from $1.9 million in the first three months
of 1996 to $2.6 million in the comparable period of 1997, primarily due to the
increased number of sales and marketing personnel to address Mercator
marketing opportunities and increased expenditures for Mercator-related
marketing programs. Selling and marketing expenses as a percentage of total
revenues did not change significantly in the first three months of 1997 as
compared to the first three months of 1996. The Company expects to continue
hiring additional sales and marketing personnel and to increase promotional
expenses through at least the remainder of 1997 to address Mercator marketing
opportunities and anticipates that sales and marketing expenses will increase
in absolute dollar amount.

General and Administrative. General and administrative expenses consist
primarily of salaries, recruiting and other personnel-related expenses for the
Company's administrative, executive and finance personnel as well as outside
legal and audit costs. General and administrative expenses increased 7% from
$729,000 in the first three months of 1996 to $777,000 in the comparable
period of 1997, primarily due to increased administrative expenses to support
the Company's growth. General and administrative expenses as a percentage of
total revenue decreased to 14% in the first three months of 1997 from 18% for
the comparable period of 1996, primarily due to increased revenues during the
first three months of 1997. The Company believes that the dollar amount of its
general and administrative expenses will increase as the Company expands its
administrative staff and incurs additional costs (including directors' and
officers' liability insurance, investor relations programs and increased
professional fees) related to being a public company.

24
<PAGE>

Other Income (Expense), Net

Other income represents interest income earned on the Company's term-use
contracts and was negligible in the first three months of 1996 and 1997. Other
expense, principally interest related to the Company's bank revolving line of
credit, was $82,000 in the first three months of 1996 as compared with $69,000
in the first three months of 1997.

YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995

Revenues

Total Revenues. Total revenues increased 18% from $16.1 million in 1995 to
$19.0 million in 1996.

Software Licensing. Software licensing revenues increased 23% from $7.6
million in 1995 to $9.3 million in 1996, primarily due to a 74% increase in
Mercator license revenues, partially offset by a decrease in licenses of the
Company's mainframe-based Trading Partner and KEY/MASTER products.

Service, Maintenance and Other. Service, maintenance and other revenues
increased 14% from $8.5 million in 1995 to $9.7 million in 1996, primarily due
to a 53% increase in professional services revenues, particularly professional
services associated with Mercator and, to a lesser extent, an increase in
Mercator maintenance revenue, offset by a slight decrease in maintenance
revenue related to the Company's mainframe-based Trading Partner and
KEY/MASTER products. Maintenance revenues attributable to KEY/MASTER were $4.9
million and $4.6 million for 1995 and 1996, respectively.

Cost of Revenues

Cost of Software Licensing. Cost of software licensing revenues decreased
32% from $725,000 in 1995 to $495,000 in 1996, primarily due to termination of
amortization relating to the Company's acquisition of Foretell Corp. Software
licensing gross margin increased from 90% in 1995 to 95% in 1996, primarily
due to termination of such amortization.

Cost of Service, Maintenance and Other. Cost of service, maintenance and
other revenues decreased 9% from $2.2 million in 1995 to $2.0 million in 1996.
The decrease was primarily due to a decrease in the number of support
personnel related to the Company's mainframe-based Trading Partner and
KEY/MASTER products. Service, maintenance and other gross margin increased
from 74% in 1995 to 79% in 1996, primarily due to the decrease in such support
personnel.

Operating Expenses

Product Development. Product development expenses increased 13% from $3.1
million in 1995 to $3.5 million in 1996, primarily due to increased headcount
associated with the development of Mercator. Product development expenses
represented 19% and 18% of total revenues for 1995 and 1996, respectively.

Selling and Marketing. Selling and marketing expenses increased 22% from
$7.2 million in 1995 to $8.7 million in 1996. This increase was primarily due
to the increased number of sales and marketing personnel required to address
Mercator marketing opportunities and increased spending on Mercator-related
marketing programs. Selling and marketing expenses represented 44% and 46% of
total revenues for 1995 and 1996, respectively.

General and Administrative. General and administrative expenses increased
46% from $2.0 million in 1995 to $2.9 million in 1996. The increase was
primarily due to increased management and MIS staff, increased provision for
bad debts and increased depreciation. General and administrative expenses
represented 13% and 15% of total revenues for 1995 and 1996, respectively.

25
<PAGE>

Other Income (Expense), Net

Other income decreased from $370,000 in 1995 to $135,000 in 1996 due to a
one-time benefit in 1995 of $177,000 from the settlement of a lawsuit in the
Company's favor and a decrease in the amount of interest earned on term
license contracts. Other expense decreased from $454,000 in 1995 to $322,000
in 1996, primarily due to lower interest expense caused by reduced borrowing
levels.

Taxes

At December 31, 1996, the Company had federal net operating loss
carryforwards of $8.6 million, all of which expire through 2009. Due to the
"change in ownership" provisions of the Internal Revenue Code of 1986, the
availability of net operating loss carryforwards and research tax credits to
offset federal taxable income in future periods could be subject to an annual
limitation if a change in ownership for income tax purposes should occur. See
Note 8 of Notes to Financial Statements.

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994

Revenues

Total Revenues. Total revenues increased 15% from $13.9 million in 1994 to
$16.1 million in 1995.

Software Licensing. Software licensing revenues increased 20% from $6.3
million in 1994 to $7.6 million in 1995. The increase in software licensing
revenues was primarily due to a 118% increase in Mercator license revenues,
partially offset by a decrease in licenses of the Company's mainframe-based
Trading Partner and KEY/MASTER products.

Service, Maintenance and Other. Service, maintenance and other revenues
increased 11% from $7.7 million in 1994 to $8.5 million in 1995. The increase
in service, maintenance and other revenues was primarily due to increases in
revenues for annual maintenance and professional services relating to the
Company's Mercator and Trading Partner products.

Cost of Revenues

Cost of Software Licensing. Cost of software licensing revenues decreased
30% from $1.0 million in 1994 to $725,000 in 1995. The decrease was primarily
due to lower costs related to the roll-out of the Company's OnCall*EDI product
that occurred in 1994, for which the Company accrued $400,000 in 1994.
Software licensing gross margin increased from 84% in 1994 to 90% in 1995,
primarily due to lower costs related to the roll-out of the Company's
OnCall*EDI product.

Cost of Service, Maintenance and Other. Cost of service, maintenance and
other revenues decreased 13% from $2.5 million in 1994 to $2.2 million in
1995. The decrease was primarily due to a reduction of staff supporting the
Company's mainframe-based Trading Partner and KEY/MASTER products. Service,
maintenance and other gross margin increased from 67% in 1994 to 74% in 1995,
primarily due to such staff reduction.

Operating Expenses

Product Development. Product development expenses increased 38% from $2.2
million in 1994 to $3.1 million in 1995, primarily due to expenses related to
the development of Mercator, particularly increased headcount devoted to
product development activities. Product development expenses represented 16%
and 19% of total revenues in 1994 and 1995, respectively.

Selling and Marketing. Selling and marketing expenses increased 17% from
$6.1 million in 1994 to $7.2 million in 1995. This increase was primarily due
to an increase in sales commissions associated with increased revenues,
increased marketing activities and the establishment of a dedicated business
development group. Selling and marketing expenses represented 44% and 45% of
total revenues for 1994 and 1995, respectively.

26
<PAGE>

General and Administrative. General and administrative expenses increased 4%
from $1.9 million in 1994 to $2.0 million in 1995. This increase was primarily
due to increased personnel and expenses relating to the Company's internal
systems. General and administrative expenses represented 14% and 13% of total
revenues for 1994 and 1995, respectively.

Other Income (Expense), Net

Other income increased from $268,000 in 1994 to $370,000 in 1995 due to a
one-time benefit in 1995 of $177,000 from the settlement of a lawsuit in the
Company's favor, offset by a decrease in the amount of interest earned on
term-use contracts. Other expense decreased from $476,000 in 1994 to $454,000
in 1995.

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited quarterly statement of
operations data for each of the nine quarters in the period ended March 31,
1997, as well as such data expressed as a percentage of the Company's total
revenues for the periods indicated. This data has been derived from unaudited
financial statements that have been prepared on the same basis as the audited
financial statements and, in the opinion of management, include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the information. The Company's quarterly results have in the
past been and may in the future be subject to significant fluctuations. As a
result, the Company believes that results of operations for interim periods
should not be relied upon as any indication of the results to be expected in
any future period. See "Risk Factors -- Potential Fluctuations in Operating
Results; Seasonality."

<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licensing..... $1,733 $1,961 $1,921 $1,938 $1,783 $1,878 $2,597 $3,052 $2,731
Service, maintenance
and other............. 2,164 2,066 2,149 2,129 2,306 2,358 2,449 2,581 2,777
------ ------ ------ ------ ------ ------ ------ ------ ------
Total revenues......... 3,897 4,027 4,070 4,067 4,089 4,236 5,046 5,633 5,508
------ ------ ------ ------ ------ ------ ------ ------ ------
Cost of revenues:
Software licensing..... 197 201 143 184 93 88 128 186 174
Service, maintenance
and other............. 707 665 389 439 432 467 505 602 548
------ ------ ------ ------ ------ ------ ------ ------ ------
Total cost of revenues. 904 866 532 623 525 555 633 788 722
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 2,993 3,161 3,538 3,444 3,564 3,681 4,413 4,845 4,786
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Product development.... 680 852 788 748 779 831 882 960 1,073
Selling and marketing.. 1,681 2,033 1,611 1,835 1,894 2,001 2,194 2,626 2,584
General and administra-
tive.................. 481 402 514 604 729 628 761 804 777
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating ex-
penses................ 2,842 3,287 2,913 3,187 3,402 3,460 3,837 4,390 4,434
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss). 151 (126) 625 257 162 221 576 455 352
Other income (expense),
net.................... (59) 129 (57) (97) (41) (35) (58) (52) (39)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $ 92 $ 3 $ 568 $ 160 $ 121 $ 186 $ 518 $ 403 $ 313
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

27
<PAGE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
----------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licensing..... 44.5% 48.7% 47.2% 47.7% 43.6% 44.3% 51.5% 54.2% 49.6%
Service, maintenance
and other............. 55.5 51.3 52.8 52.3 56.4 55.7 48.5 45.8 50.4
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Cost of revenues:
Software licensing..... 5.1 5.0 3.5 4.5 2.3 2.1 2.5 3.3 3.2
Service, maintenance
and other............. 18.1 16.5 9.6 10.8 10.5 11.0 10.0 10.7 9.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Total cost of revenues. 23.2 21.5 13.1 15.3 12.8 13.1 12.5 14.0 13.1
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 76.8 78.5 86.9 84.7 87.2 86.9 87.5 86.0 86.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Operating expenses:
Product development.... 17.4 21.2 19.4 18.4 19.1 19.6 17.5 17.0 19.5
Selling and marketing.. 43.1 50.5 39.6 45.1 46.3 47.2 43.5 46.6 46.9
General and administra-
tive.................. 12.4 9.9 12.5 14.9 17.8 14.9 15.1 14.3 14.1
----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating ex-
penses................ 72.9 81.6 71.5 78.4 83.2 81.7 76.1 77.9 80.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss). 3.9 (3.1) 15.4 6.3 4.0 5.2 11.4 8.1 6.4
Other income (expense),
net.................... (1.3) 3.2 (1.4) (2.4) (1.0) (0.8) (1.1) (0.9) (0.7)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... 2.4% 0.1% 14.0% 3.9% 3.0% 4.4% 10.3% 7.2% 5.7%
===== ===== ===== ===== ===== ===== ===== ===== =====
Gross profit:
Software licensing..... 88.6% 89.8% 92.6% 90.5% 94.8% 95.3% 95.1% 93.9% 93.6%
Service, maintenance
and other............. 67.3 67.8 81.9 79.4 81.3 80.2 79.4 76.7 80.3
</TABLE>

The Company's revenues and operating expenses increased sequentially in each
quarter of 1996 and software licensing revenues decreased in the first quarter
of 1997. The Company believes the decrease in software licensing revenues was
primarily due to the buying patterns and budgeting cycles of its customers.
The increases in revenues and operating expenses during 1996 were primarily
attributable to the increase in Mercator-related revenues as well as Mercator-
related product development and sales and marketing expenses. While the
Company has not historically experienced any significant seasonal fluctuations
in its revenues or results of operations, it is not uncommon for software
companies to experience strong fourth quarters followed by weaker first
quarters, in some cases with sequential declines in revenues or operating
profit. The Company believes that many software companies exhibit this pattern
in their sales cycles primarily due to customers' buying patterns and budget
cycles. There can be no assurance that the Company will not display this
pattern in future years.

28
<PAGE>

the success of the Company in penetrating international markets; the buying
patterns and budgeting cycles of customers; personnel changes, difficulty in
attracting and retaining qualified sales, professional services and research
and development personnel and the rate at which such personnel become
productive; and general economic conditions. In particular, the ability of the
Company to achieve growth in the future will depend on its success in adding a
substantial number of sales, professional services and research and
development personnel. Competition for such personnel is intense and there can
be no assurance the Company will be able to attract and retain these
personnel.

The Company's future revenues will also be difficult to predict and the
Company has, in the past, failed to achieve its revenue expectations for
certain periods. The Company's expense levels are based, in part, on its
expectation of future revenues, and expense levels are, to a large extent,
fixed in the short term. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. If revenue
levels are below expectations for any reason, operating results are likely to
be materially and adversely affected. Net income may be disproportionately
affected by a reduction in revenues because a large portion of the Company's
expenses is related to headcount that cannot be easily reduced without
adversely affecting the Company's business. In addition, the Company currently
intends to increase its operating expenses by expanding its research and
product development staff, particularly research and development personnel to
be devoted to the Company's Mercator product line, increasing its professional
services and sales and marketing operations, expanding distribution channels
and hiring personnel in other operating areas. The Company expects to
experience a significant time lag between the date professional services,
sales and technical personnel are hired and the date such personnel become
fully productive. The timing of such expansion and the rate at which new
technical, professional services and sales personnel become productive as well
as the timing of the introduction and success of new distribution channels
could cause material fluctuations in quarterly results of operations.
Furthermore, to the extent such increased operating expenses precede or are
not subsequently followed by increased revenues, the Company's business,
operating results and financial condition could be materially and adversely
affected.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations to date primarily through private
sales of equity securities, totaling approximately $8.1 million (as of March
31, 1997), and its $4.0 million bank line of credit and cash generated from
operations. On May 15, 1997, the Company raised an additional $1.0 million
through the sale of Preferred Stock to Mitsui & Co., Ltd. and two other
foreign investors. Operating activities provided (used) net cash of $1.3
million, $1.3 million, $730,000 and $(546,000) during 1994, 1995, 1996 and the
first quarter of 1997, respectively. The Company generated net cash from 1994
through 1996 primarily as a result of its improved profitability during these
periods.

Investing activities (used) net cash of $(237,000), $(354,000), $(828,000)
and $(198,000) during 1994, 1995, 1996 and the first quarter of 1997,
respectively, primarily to fund capital expenditures needed to support
expansion of the Company's business. Financing activities generated (used) net
cash of $(818,000), $(1.3 million), $(102,000) and $787,000, for 1994, 1995,
1996 and the first quarter of 1997, respectively, from (repayments) borrowings
of debt. Since December 31, 1996, the Company has experienced an increase in
accounts receivable. In March 1997, additional borrowings were required to
fund higher levels of receivables. As of March 31, 1997, the Company had
outstanding borrowings of $3.6 million under its $4.0 million bank line of
credit. See "Risk Factors--Management of Growth."

As of March 31, 1997, the Company had debt obligations consisting of $3.6
million in borrowings outstanding under its bank line of credit and $115,000
of capital lease obligations. The Company repaid $1.0 million of outstanding
indebtedness under its bank line of credit in May 1997 with the proceeds from
the sale of Preferred Stock in May 1997. At December 31, 1996, the Company
also had commitments under operating lease agreements totalling $4.8 million
through 2012, including $787,000 for 1997. See Note 10 of Notes to Financial
Statements.

29
<PAGE>

Capital expenditures have been, and future capital expenditures are
anticipated to be, primarily for facilities, equipment and computer software
to support expansion of the Company's operations. As of March 31, 1997, the
Company had no material commitments for capital expenditures. The Company's
bank line of credit generally limits capital expenditures to $400,000 per
quarter.

At March 31, 1997, the Company had $79,000 in cash. The Company typically
operates with a relatively small amount of cash at the end of any quarter and
meets any of its additional cash needs with its bank line of credit that
expires in November 1998. The maximum amount that can be borrowed under the
bank line of credit is $4.0 million, with borrowings limited to a percentage
of eligible accounts receivable and term contracts, plus the amount of the
bank line of credit guaranteed by the Connecticut Development Authority
($600,000 as of March 31, 1997). Borrowings may take the form of prime rate
loans (which bear interest at the bank's prime rate plus 1.0%) or LIBOR rate
loans (which bear interest at the applicable LIBOR rate plus 3.0%) and, at
March 31, 1997, the weighted average interest rate on amounts outstanding
under this credit line was 8.92%. The Company's obligations under this credit
line are secured by substantially all of the Company's assets. The bank line
of credit contains certain financial covenants and also prohibits cash
dividends, mergers and acquisitions. The Company is currently in compliance
with these covenants. See Note 5 of Notes to Financial Statements.

The Company believes that the net proceeds from this offering, together with
its current cash and cash equivalent balances, its line of credit and net cash
generated by operations, will be sufficient to meet its anticipated cash needs
for working capital, capital expenditures and business expansion for at least
the next 12 months. Thereafter, if cash generated by operations is
insufficient to satisfy the Company's operating requirements, the Company may
seek additional debt or equity financing. There can be no assurance that such
financing will be available on terms acceptable to the Company. The sale of
additional equity or debt securities could result in dilution to the Company's
stockholders.

30
<PAGE>

BUSINESS

INTRODUCTION

TSI is a leading provider of software and related services that enable
organizations to integrate their business applications both internally and
with external business partners. The Company's flagship product, Mercator, is
a data transformation engine which permits enterprises to exchange information
between internal systems, implement and integrate advanced client/server
applications such as SAP's R/3 ERP system and to integrate EDI data and Web-
based applications with their core business systems. To date, the Company has
directly licensed its products to over 6,000 customers worldwide, representing
a broad range of industries. The Company's customers include Allegiance
Corporation, American Express Travel Related Services, Inc., CIGNA
Corporation, Citibank, N.A., Federal Express Corporation, Hewlett-Packard
Company, Hoechst AG, International Business Machines Corporation, Lucent
Technologies, Inc., NYNEX Corporation and Prudential Insurance Company of
America.

INDUSTRY BACKGROUND

As enterprise computing has evolved, corporations have deployed systems and
software in an effort to improve business processes, reduce costs and increase
organizational effectiveness. Organizations are now faced with a proliferation
of software applications and an increasingly heterogeneous and disparate
computing environment across the enterprise. At the same time, organizations
are increasingly seeking to integrate their various business processes and the
applications that support them through such initiatives as business process
reengineering, supply chain management projects and Web-based electronic
commerce. For many organizations, these factors have made it increasingly
critical yet substantially more difficult to provide application-to-
application interoperability and to share information within and beyond the
enterprise.

The number of applications deployed throughout the enterprise has increased
dramatically, now including both enterprise-wide systems such as SAP's R/3 and
function-specific applications such as sales force automation or customer
support. In addition to purchasing applications from independent software
vendors, most organizations continue to run customized, internally developed
solutions for specific applications. The proliferation of both internally
developed and third party applications has both increased the need to
integrate applications and has greatly complicated the integration process.

As the number of applications has increased, the number and variety of the
computing platforms and systems on which they run has also grown
significantly. The evolution of computing from mainframes to client/server and
then to the Internet and corporate intranets has not led to the emergence of a
single preferred platform, but rather has resulted in a coexistence among new
and legacy architectures. The number of technology architectures being
supported is, in fact, increasing. According to Sentry Market Research, the
typical large organization has an average of 13 different operating systems
and 10 different Database Management Systems ("DBMSs") today, as compared with
6 different operating systems and 5 different DBMSs in 1993. This diversity
compounds the difficulty faced by organizations in providing application-to-
application integration.

In addition to these technological trends within the enterprise, the number
of externally linked business partners is increasing. Many corporations,
seeking to improve their market responsiveness, competitive position and
internal efficiency are creating extended "virtual" organizations among
suppliers and customers using electronic commerce technology. Electronic
commerce, which combines standards for exchanging data such as EDI with low-
cost methods for data transport such as the Internet, now accounts for a wide
variety of business transactions including, among others, electronic payments,
purchase orders, invoices, health claims and mortgage applications. The
proliferation of partners, each with its own internal systems and
applications, and the increased demand for creating electronic information
flows across both the supply and demand chains, have exacerbated the
difficulty in integrating applications between business partners.

Historical approaches to integrating applications have been expensive,
difficult to implement and maintain, and limited in their effectiveness. For
example, the costs of integrating R/3 with existing systems

31
<PAGE>

often equals or exceeds the cost of the R/3 application software itself.
Similarly, the cost of integrating EDI with an organization's business
applications often can be the largest single cost component of implementing
EDI solutions. Traditionally, organizations have approached the integration
problem on a case-specific basis, writing individual programs to allow
applications to share information for a specific task or use. Such custom
coding is time consuming, prone to error, inflexible and difficult to maintain
over time. In addition, an individual solution coded for one specific
application generally cannot be used for other integration needs. As the
number of potential interfaces grows with each new application, the inability
to leverage these home-grown solutions becomes increasingly problematic.
Although some software tools are available to assist developers with the
integration task, most are "point" solutions designed for specific platforms,
applications, DBMSs or data formats and typically require custom coding to
create complete solutions.

As a result, organizations require a new approach to integrating business
applications, both within the enterprise and with external business partners.
A comprehensive, off-the-shelf solution is needed that can be rapidly
implemented and easily maintained, does not require custom interface programs,
and supports a heterogenous mix of platforms, architectures, databases and
third-party applications.

TSI'S SOLUTION

TSI develops and markets software products and related services that allow
organizations to facilitate the exchange of information between enterprise
applications as well as with external business partners. Key benefits of the
TSI solution include:

Comprehensive Internal and External Solution. TSI delivers comprehensive
solutions for integrating business applications both within the enterprise and
between business partners. Mercator achieves this by transforming the business
data from any application so that it can be used by other applications without
modifying the applications, without regard to the number of applications
involved, and despite differing data structures, syntax or business rules. In
addition, Mercator is scaleable to support mission-critical enterprise
integration requirements. The Company's EDI solutions permit its customers to
exchange information with business partners and to integrate EDI data with
back office applications. The Company provides external integration solutions
which leverage the Internet as a transport mechanism for EDI and allow
enterprises to integrate Web-based applications and transactions with existing
enterprise systems.

Broad Application, Platform and Data Type Support. To satisfy the wide-
ranging needs of large organizations, TSI's solutions provide comprehensive
application, platform and data type support. Mercator can be used to integrate
internally developed as well as third party systems regardless of the vendor
of an application, the tools or programming language in which the application
is written or the standards on which the application is based. Mercator links
applications running on a wide variety of operating systems running on popular
PC and UNIX systems, such as HP, Sun Solaris and RS/6000, as well as IBM
mainframes and Digital, AS/400 and Stratus hardware. Mercator transforms data
in any format, including user defined, proprietary formats, industry standard
formats such as EDI, IDocs (SAP applications) and HL7 (healthcare standard for
clinical information), and the Company's EDI solutions support the full range
of EDI standards, both national and international.

Pre-Packaged R/3 Solution. The Company's Mercator for R/3 product is an off-
the-shelf solution enabling customers of SAP's R/3 to more easily integrate
R/3 modules with legacy and third-party applications. Mercator for R/3 was the
first product to be certified by SAP for use with its ALE architecture, the
standard SAP has developed for interfacing with R/3. Mercator for R/3 extends
TSI's core Mercator product by providing tools to automatically capture R/3
data definitions and adapters for integrating with R/3's inter-application
messaging system. Mercator for R/3 allows enterprises to preserve the value of
legacy data, utilize best-of-breed software applications and reduce the cost
of implementing R/3 in distributed computing environments.

32
<PAGE>

Ease of Implementation. The Company's Mercator and Trading Partner products
are off-the-shelf products which install easily and are designed to provide a
rapid return on investment. With Mercator, information technology ("IT")
professionals use a graphical user environment to create complete data
transformation solutions without the need to write custom interfaces or tailor
individual modules of code. Mercator provides a set of pre-built "plug-ins,"
including adapters for specific applications, transactions, DBMSs, and
messaging systems, in order to simplify development of business application
integration solutions. The Company's EDI products enable users to be
"commerce-ready" with little or no customization required.

STRATEGY

The Company's strategy is to be the leading supplier of software solutions
and related services for integrating business applications within the
enterprise and between business partners. Key elements of the Company's
strategy include:

Leverage and Extend Technology Leadership. TSI intends to continue to extend
its leading application integration technologies. Mercator for R/3 was the
first product certified by SAP for ALE. The Company continually seeks to
leverage its core Mercator technology by developing pre-packaged solutions for
additional third party applications, data formats, DBMSs, messaging systems
and computing platforms. The Company is the leading provider of Windows-based
EDI software and has recently introduced Trading Partner PC/32, the first EDI
product designed for Windows 95 and Windows NT.

Target the Enterprise Application Market. The Company believes that
significant opportunity exists for software solutions which enable enterprise
wide ERP systems to be integrated with other applications throughout the
organization. In addition to its core Mercator products, the Company currently
markets Mercator for R/3 for users of SAP's R/3 and intends to develop and
market additional pre-packaged versions of Mercator with functionality
targeted specifically at other popular enterprise application suites.

Expand Distribution Channels. In addition to its direct sales force, TSI is
creating marketing programs to focus on third-party vendors of application
software, connectivity tools, systems integration services and other products
and services which complement the Company's core capabilities. The Company
believes that such relationships can provide market visibility for the
Company's products, additional sales opportunities, and an additional source
of services and technical support for the Company's customers. TSI intends to
expand these third-party channels in both domestic and international markets
in addition to continuing to expand its direct sales force.

Leverage Customer Base. The Company intends to market its products and
services in order to expand their use within existing customer accounts. The
Company believes significant opportunity exists to increase the number of
Mercator licenses sold to its existing Mercator and Trading Partner customers.
In addition, the Company believes that its customers are increasingly pursuing
emerging applications such as Web-based electronic commerce and data
warehousing initiatives and that this provides an opportunity to use Mercator
to integrate these new applications with existing enterprise systems.

Expand Professional Services Capability. As the Company's solutions have
become more central to mission critical applications, there has been an
increased demand for comprehensive service offerings to complement the
Company's products. The Company intends to increase the number of its service
professionals and the scope of its service offerings with the goal of
maximizing license revenues from sales of its products. The Company expects
its service offerings to be focused on opportunities and projects which the
Company believes can lead to widespread deployments of Mercator within an
enterprise. The Company intends to augment its own service offerings by
seeking strategic relationships with major system integrators and other
service providers.

33
<PAGE>

PRODUCTS AND SERVICES

The Company's business application integration products include two software
product lines, the Mercator family and the Trading Partner family. The
following table depicts the Company's current business application integration
product offerings and suggested list prices:

<TABLE>
<CAPTION>
ORIGINAL MOST
PRODUCT NAME RELEASE DATE RECENT RELEASE US SUGGESTED LIST PRICE (1)
------------------------------------- ------------ -------------- ---------------------------
<C> <C> <C> <S>
MERCATOR PRODUCTS:
Mercator:
Authoring System.................. 12/93 5/96 $3,000/seat
Execution Engines................. 12/93 5/96 from $600 Windows/DOS to
$50,000 mainframe
Mercator for R/3..................... 6/96 6/96 from $37,500/system
TRADING PARTNER PRODUCTS:
Trading Partner PC................... 6/88 2/97 $1,495
Trading Partner PC/32................ 10/96 10/96 $1,995
Trading Partner Kits................. 10/92 various from $295
Trading Partner EC................... 11/90 10/95 $75,000
</TABLE>
- --------
(1) The terms and conditions, including sales prices and discounts from list
prices, of individual license transactions may be negotiated based on
volumes and commitments and may vary considerably from customer to
customer.

Mercator Products

The Company's flagship Mercator family of products is an integrated set of
tools used by IT professionals to integrate data between different business
applications. Mercator was initially released in December 1993 and, as of
March 31, 1997, had been licensed to more than 870 customers worldwide.

Mercator. Mercator enables application integration by transforming or
mapping data between and among the unique data formats of business
applications. It provides a Windows-based Authoring System which is used to
define data formats and mapping solutions, and separate run-time Execution
Engines for map execution. Complete data transformations can be created
without writing custom interface programs. Mercator requires no pre-processing
of data prior to mapping, can transform data between multiple sources and
destinations in a single process, and supports map execution on a wide range
of platforms. Customers who deploy a map to run on multiple platforms also
license an Execution Engine for each platform. The Company currently offers
Execution Engines for Window 3.1, Windows 95, Windows NT, PC DOS, SCO UNIX,
HP-UX, Sun Solaris/OS, AIX, Alpha NT, Digital UNIX, VAX VMS, Open VMS, OS/400,
Stratus FTX, VOS and Continuum, MVS, and MVS/CICS.

Mercator for R/3. Initially released in June 1996, Mercator for R/3 is a
version of Mercator that includes specific extensions to meet the needs of R/3
integration. Mercator for R/3 was the first software product to be certified
by SAP for use with its ALE architecture. Mercator for R/3 extends the core
Mercator product by providing tools to automatically capture R/3 data
definitions, and adapters for integrating with R/3's inter-application
messaging system. In addition, Mercator for R/3 provides data transformation
support for other R/3 data conversion and interfacing requirements including
the initial conversion of data to R/3 from existing systems and interfaces
with data warehouses.

Trading Partner Products

The Company's Trading Partner products consist of a set of EDI management
software products and include Trading Partner PC, a Windows-based product, and
Trading Partner EC, a mainframe-based product.

34
<PAGE>

The Trading Partner products can be sold as stand-alone EDI products, but are
often sold in conjunction with Mercator products to enable businesses to both
manage their EDI relationships and to integrate their EDI data into enterprise
applications. Trading Partner products allow customers to communicate with
their partners through direct connections, VANs or the Internet.

Trading Partner PC. Introduced in 1989, Trading Partner PC was the first
Windows-based EDI translator in the United States and has been licensed to
more than 5,000 businesses worldwide. In October 1996, TSI introduced Trading
Partner PC/32, the first Windows 95 desktop solution in the market. The
Company has developed more than 100 "kits" which support a particular trading
partner's EDI specifications and provide "plug and play" solutions for EDI
trading. The Company markets kits for many major EDI trading partners
including Compaq Computer Corporation, International Business Machines
Corporation, J.C. Penney Company, Inc., Sears, Roebuck and Company, Target
Stores and Wal-Mart Stores, Inc. The Company's OnCall*EDI products are a
series of EDI kits for electronic purchasing for the health care provider
market and has been licensed to more than 1,100 hospitals.

Trading Partner EC. Trading Partner EC is a mainframe-based EDI translation
product which provides EDI management capability for companies with large EDI
programs. It includes Mercator as its core data transformation engine and
offers the user the means to integrate EDI data directly into applications
without the need to write custom interface programs commonly required by other
translator products. Using Mercator, customers who plan to migrate their EDI
program from the mainframe can do so without incurring additional cost and
effort for recreating their EDI interfaces. Trading Partner EC and its
predecessor product have been licensed to more than 200 businesses worldwide.

KEY/MASTER

In addition to the Company's applications integration products described
above, the Company's licenses and supports KEY/MASTER, a legacy data entry
product which is used on mainframe terminals or PCs on local area networks,
and is the leading software product for automating the key entry of high
volume, repetitive data from business documents. KEY/MASTER has been licensed
to more than 900 customers worldwide. Because KEY/MASTER is a mature product,
revenues derived from KEY/MASTER are primarily maintenance-related and the
Company expects in the future to make only minor investments in KEY/MASTER to
meet the needs of its current installed base.

Services

Professional Services. TSI offers consulting and professional services to
customers who wish to have the Company's professionals plan, design or
implement their application integration projects. The Company intends to
expand the number of service professionals and the scope of the services
offered as it continues to address the enterprise application integration
needs of large organizations. The Company believes that enterprises
implementing the R/3 system in particular represent a significant opportunity
for the Company to market its professional services in support of Mercator for
R/3.

Training. In order to assure that its customers are successful in using its
products, TSI provides training in its four training centers or at customer
locations. The Company offers a number of courses ranging from two to five
days in length with educational content including basic product functionality
and hands-on use of the product. The Company recommends that its Mercator
customers attend a basic three-day training course and believes that a
majority of its Mercator customers elect to participate in such training.

CUSTOMERS

As of March 31, 1997, TSI had directly licensed its software to more than
6,000 customers worldwide. Numerous others have licensed the Company's
products through VARs, ISVs, SIs or other third parties who distribute its
products to business partners to facilitate the integration of their
respective business applications.

35
<PAGE>

The Company's customer base includes businesses from many industries,
including finance, banking, healthcare, technology, government, retail,
manufacturing, automotive, oil and gas, utilities, communications, insurance
and transportation. The following is a partial list of the Company's end user
and third party Mercator customers:

END USER CUSTOMERS VARS, ISVS AND SIS
_________________________________ _________________________________
<S> <C>
Blue Cross Blue Shield of Actra Business Systems LLC
Massachusetts Allegiance Corporation
Canadian National Railway Company American Express Travel Related
CIGNA Corporation Services, Inc.
Deere & Company American Software, Inc.
Dun & Bradstreet ARI Services Network, Inc.
Eastman Kodak Company Axolotl Corp.
First Chicago NBD Corporation CEBRA Inc.
General Mills, Inc. Citibank, N.A.
Georgia-Pacific Corporation Compaq Computer Corporation
Hoechst AG Connect, Inc.
Home Savings of America Federal Express Corporation
LitleNet, Inc. GTE Data Services Incorporated
Lucent Technologies Inc. HBO & Company
Nestle Canada, Inc. Hewlett-Packard Company
NYNEX Corporation International Business Machines
Petroleos de Venezuela, S.A. Corporation
Prudential Insurance Company of Pivotpoint, Inc.
America RS Information Systems, Inc.
Royal Canadian Mounted Police S2 Systems, Inc.
Sara Lee Hosiery, Inc. Software Consulting Partners, Inc.
The Toronto Dominion Bank

</TABLE>

SALES AND MARKETING

Sales

TSI markets its products and services through both direct and third party
channels. The Company's goal is to achieve broad market penetration by
pursuing multiple channels of distribution.

As of March 31, 1997, the Company's sales organization consisted of 49
employees. The Company's direct field sales force focuses on sales of Mercator
and Trading Partner products to Fortune 1000 companies. The Company also
maintains a telesales organization as part of its direct sales force which
generally targets smaller businesses. The field sales force also includes
alternate channel managers who are responsible for sales through third
parties. The sales organization includes systems engineers who assist with
both pre- and post-sales activities.

An important part of the Company's sales strategy is to continue to develop
its indirect distribution channels such as VARs, ISVs, SIs and distributors.
As of March 31, 1997, approximately 45 third parties had agreements with the
Company to resell, embed or otherwise bundle the Company's products with their
offerings in the United States. See "Risk Factors -- Dependence Upon
Development of Distribution Channels."

The Company markets its products and services outside of North America
through a sales office located in the United Kingdom and through indirect
channels. Although revenues from international customers were approximately
10% of the Company's total revenues during 1996 and the first quarter of 1997,
the international market is important to the Company, and it intends to expand
its sales and marketing efforts

36
<PAGE>

outside North America by adding distributors and additional sales staff. See
"Risk Factors--Risks Associated with International Expansion."

Marketing

TSI utilizes a wide variety of marketing programs which are intended to
attract potential customers and to promote the Company and its brand names.
The Company uses a mix of market research, analyst updates, seminars, direct
mail, print advertising, tradeshows, speaking engagements, public relations,
customer newsletters, and Web site marketing in order to achieve these goals.
The marketing department also produces collateral material for distribution to
prospects including demonstrations, presentation materials, white papers,
brochures, fact sheets, and materials that are specific to the area of
interest. The Company also hosts an annual user conference for its customers
and maintains an Alliance Program designed to support its channel partners
with a variety of programs, incentives, support plans and an annual
conference. As of March 31, 1997, there were 10 employees in the Company's
marketing organization.

TECHNOLOGY

The Company's core Mercator technology provides a platform for creating data
transformation solutions which satisfy application integration requirements
across a variety of computing environments. The architecture of the Mercator
platform is based on object concepts, providing reusability, interoperability
and scaleability during the design process and in the resulting solutions. The
Mercator platform permits the Company to efficiently construct and deliver
integration solutions for specific markets and also allows ISVs and SIs to
embed Mercator functionality within their own offerings.

The central components of the Mercator platform are a Windows-based
Authoring System for creating data transformation "maps" and one or more run-
time Execution Engines for map execution. A map is an executable module that
describes the required transformation and re-ordering of data between source
and destination objects such as files, databases, applications and messages.
The Authoring System provides an intuitive drag-and-drop environment for
defining the source and destination data objects, defining the rules for
mapping the sources to the destinations, and building the resulting map
object. Map objects built using Mercator can be ported automatically to any of
19 different execution environments.

37
<PAGE>

[set forth on this page is an oval shaped graphic. Within the oval are two
rectangular boxes each with a caption heading, top to bottom, "Authoring System"
and "Execution Engine." Also within the oval is an oval with a caption "Map
Object" with a line from each of the boxes. The oval has an additional oval,
labeled "Transaction Workflow Management" surrounding it and three additional
ovals below the oval, connected by lines, labeled "Adapters," "Importers" and
"Application Solutions," from left to right, respectively.]

[FLOWCHART OF THE MERCATOR PLATFORM APPEARS HERE]

Descriptions of source and destination objects are entered by the user
through Mercator's graphical interface. To simplify data definition, the
Company provides pre-packaged objects for a number of commonly used data
standards and the Company also provides importers for creating objects from
higher level (meta) data definitions. Data object definitions within Mercator
include information regarding their format, structure and business rules,
which eliminates the need to explicitly identify the context of a data object
during map construction and maintains the logical integrity of the resulting
mapping solution.

Once the source and destination objects have been defined, the user creates
maps by specifying the rules for transforming data from the sources to the
destinations. For many mapping tasks, the user need only "drag" a source
object and "drop" it on the destination object. Multiple data sources can be
transformed to multiple destinations in a single mapping operation. The user
has point-and-click access to a variety of pre-built functions to enhance the
mapping rules including support for selection, extraction, computation,
logical operations, parsing, substitution, re-ordering, validation and
conversion.

Using Mercator's Authoring System, map objects are built and tested in the
Windows environment. The resulting Mercator map can be implemented using a
Mercator Execution Engine appropriate to the target platform. Target platforms
currently supported include Windows 3.1, Windows 95, Windows NT, PC DOS, SCO
UNIX, HP-UX, Sun Solaris/OS, AIX, Alpha NT, Digital UNIX, VAX VMS, Open VMS,
OS/400, Stratus FTX and VOS, MVS, and MVS/CICS.

The Company provides adapters and importers which interface to and from
specific databases, messaging systems, and applications enabling connectivity
to a specific source or destination that can be defined directly within a
mapping operation. Adapters are currently available for ODBC-compliant
databases, Oracle7 databases, and SAP's ALE. The Company is developing
adapters for additional databases and messaging systems including MQSeries,
IBM's enterprise messaging software. Importers are currently available for
COBOL copybooks, database tables for ODBC-compliant and Oracle7 databases, and
R/3 IDocs. In addition, the Company provides pre-packaged data objects for
national and international standards for EDI and data definitions for specific
industries such as healthcare and transportation.

38
<PAGE>

Mercator was architected so that adapters and importers can be added without
modifying the core Mercator technology. Mercator for R/3, for example, is a
packaged offering which leverages the core Mercator Authoring System and
Execution Engines by providing adapters for communicating with SAP's ALE
architecture and importers for R/3 data definitions ("IDocs"). Other TSI
products also leverage Mercator's core technology. The underlying EDI
translation support for OnCall*EDI is provided by Mercator and Trading Partner
EC incorporates Mercator as the data integration component for integrating EDI
data with existing applications. In addition, TSI customers can use Mercator
to create their own applications where embedded data transformation is a
requirement.

PRODUCT DEVELOPMENT

Since inception, TSI has made substantial investments in research and
development through both internal development and technology acquisition. The
Company expects that most of its enhancements to existing products and new
products will be developed internally. However, the Company will evaluate on
an ongoing basis externally developed technologies for integration into its
product lines.

The Company expects that a substantial majority of its research and
development activities will be related to developing enhancements and
extensions to its Mercator and Trading Partner product lines. Following
Mercator's introduction, product development was initially driven by demand
for additional mapping functionality and support for additional execution
platforms. Later, development focus shifted to automating Mercator support for
specific sources and destinations through an expanded set of adapters and
importers, and development of additional pre-packaged integration solutions
for specific markets.

During the second half of 1997, the Company intends to add a graphical
transaction workflow management tool to the core set of Mercator capabilities.
This tool is designed to support graphical design and specification of
transaction workflows, sources and destinations for maps, triggering events,
and options for map execution. In addition, during the second half of 1997,
the Company intends to release a scaleable client/server electronic commerce
offering based on Mercator technology.

As of March 31, 1997, there were 40 employees in the Company's research and
development organization, more than half of which was dedicated to Mercator.
The Company's product development expenditures for 1994, 1995, 1996 and the
first quarter of 1997 were $2.2 million, $3.1 million, $3.4 million and $1.1
million, respectively. The Company expects that it will continue to commit
significant resources to product development in the future. To date, all
product development expenses have been expensed as incurred.

The market for the Company's products and services is characterized by
extremely rapid technological change, frequent new product introductions and
enhancements, evolving industry standards, and rapidly changing customer
requirements. The introduction of products incorporating new technologies and
the emergence of new industry standards could render existing products
obsolete and unmarketable. The Company's future success will depend in part
upon its ability to anticipate changes and enhance its current products and
develop and introduce new products that keep pace with technological
advancements and address the increasingly sophisticated needs of its
customers. See "Risk Factors -- Risks Associated with Technological Change,
Product Enhancements and New Product Development."

CUSTOMER SUPPORT

TSI believes that a high level of customer service and support is important
to its success, and the Company provides a range of support services to its
customers. The Company maintains product and technology experts on call at all
times and has support call centers located at its offices in Wilton,
Connecticut; Bannockburn, Illinois; and Boca Raton, Florida in the United
States and in its United Kingdom office. The Company is currently installing
an automated Company-wide help desk system to augment its customer support
efforts. This system is currently expected to be implemented during the third
quarter of 1997.

39
<PAGE>

COMPETITION

In the business application integration market, the Company's Mercator
products and related services compete primarily against solutions developed
internally by individual businesses to meet their specific business
application integration needs. As a result, the Company must educate
prospective customers as to the advantages of the Company's products and
services as opposed to internally developed solutions and there can be no
assurance that the Company will be able to adequately educate potential
customers to the benefits provided by the Company's products and services. In
the EDI market, the Company's Trading Partner products compete with products
offered by companies offering proprietary VAN services as part of their EDI
solution and the Company's PC-based Trading Partner products also compete with
PC-based products offered by a number of other EDI software vendors.

PROPRIETARY TECHNOLOGY

40
<PAGE>

can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology, and such protections do not preclude
competitors from developing products with functionality or features similar to
the Company's products. Furthermore, there can be no assurance that third
parties will not independently develop competing technologies that are
substantially equivalent or superior to the Company's technologies. In
addition, effective copyright and trade secret protection may be unavailable
or limited in certain foreign countries. Any failure by or inability of the
Company to protect its proprietary technology could have a material adverse
effect on the Company's business, operating results and financial condition.

Although the Company does not believe its products infringe the proprietary
rights of any third parties, there can be no assurance that infringement
claims will not be asserted against the Company or its customers in the
future. Furthermore, the Company may initiate claims or litigation against
third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. Litigation, either
as plaintiff or defendant, would cause the Company to incur substantial costs
and divert management resources from productive tasks whether or not such
litigation is resolved in the Company's favor, which could have a material
adverse effect on the Company's business, operating results and financial
condition. Parties making claims against the Company could secure substantial
damages, as well as injunctive or other equitable relief which could
effectively block the Company's ability to license its products in the United
States or abroad. Such a judgment could have a material adverse effect on the
Company's business, operating results and financial condition. If it appears
necessary or desirable, the Company may seek licenses to intellectual property
that it is allegedly infringing. There can be no assurance, however, that
licenses could be obtained on commercially reasonable terms, if at all, or
that the terms of any offered licensed will be acceptable to the Company. The
failure to obtain the necessary licenses or other rights could have a material
adverse effect on the Company's business, operating results and financial
condition. As the number of software products in the industry increases and
the functionality of these products further overlaps, the Company believes
that software developers may become increasingly subject to infringement
claims. Any such claims, with or without merit, can be time consuming and
expensive to defend and could adversely affect the Company's business,
operating results and financial condition. There are currently no pending
claims that the Company's products, trademarks or other proprietary rights
infringe upon the proprietary rights of third parties. See "Risk Factors --
Dependence on Proprietary Technology."

EMPLOYEES

As of March 31, 1997, the Company had 151 full-time employees, including 40
in research and development, 34 in professional services and customer support,
59 in sales and marketing and 18 in finance and administration. The Company's
employees are not represented by any union and the Company believes that its
relations with employees are good. See "Risk Factors -- Dependence on Key
Personnel; Need to Attract and Retain Sales, Professional Services and
Technical Personnel."

FACILITIES

TSI's principal executive offices are located in Wilton, Connecticut and
consist of approximately 19,000 square feet under a lease expiring in 2001.
The Company also leases approximately 12,000 square feet of office space in
Bannockburn, Illinois which is used primarily for its telesales operations,
approximately 8,500 square feet of office space in Boca Raton, Florida, which
is used primarily for research and development activities and approximately
3,200 square feet of office space in the United Kingdom. All of the Company's
offices have fully-equipped training centers. The Company believes that its
existing facilities are adequate to support its current needs and that, if
needed, suitable additional facilities will be available on commercially
reasonable terms.

41
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

The executive officers, key employees and directors of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
-------------------------------- --- ----------------------------------------
<S> <C> <C>
Constance F. Galley(1).......... 55 President and Chief Executive Officer
and Director
Eric A. Amster.................. 43 Vice President, Sales
Robert Bouton................... 56 Vice President, Marketing
Ira A. Gerard................... 49 Vice President, Finance and
Administration, Chief Financial Officer
and Secretary
Paul Lemme...................... 62 Vice President, Professional Services
James Monks..................... 41 Vice President, International Operations
David Raye...................... 36 Vice President, Operations
Edward J. Watson................ 59 Executive Vice President, Business
Development
Saydean Zeldin.................. 56 Vice President, Research and Development
Stewart K.P. Gross(1)(2)........ 37 Director
Ernest E. Keet(1)(2)............ 56 Director
John J. Pendray(1)(2)........... 57 Director
Dennis G. Sisco(1)(2)........... 50 Director
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee

Constance F. Galley has been President, Chief Executive Officer and a
director of the Company since 1985, when the Company commenced operating as an
independent entity. Prior to 1985, Ms. Galley directed the Company's Marketing
and Development Operations when the Company was part of the Dun & Bradstreet
Corporation. Ms. Galley is a member of the Board of Directors of the software
division of ITAA and is the Chairperson of SACIA, the Business Council of
Southwestern Connecticut. Ms. Galley holds a Bachelor of Arts degree in
Chemistry from Duke University.

Eric A. Amster has been Vice President, Sales since joining the Company in
December 1995. From February 1992 until December 1995, Mr. Amster was employed
by General DataComm Industries, Inc., a data communications company, where he
served most recently as Vice President of U.S. Federal and Commercial Sales.
Mr. Amster holds a Bachelor of Science degree in Computer Science from the
University of Maryland.

Robert Bouton has been Vice President, Marketing since joining the Company
in March 1992. Prior to March 1992, Mr. Bouton served in various sales and
marketing capacities in the software industry, including Vice President,
Marketing for CGI Systems. Mr. Bouton holds a Bachelor of Science degree in
Electrical Engineering from Cornell University.

Ira A. Gerard has been Vice President, Finance and Administration, Chief
Financial Officer and Secretary since joining the Company in October 1995.
From March 1994 to October 1995, Mr. Gerard served as Vice President and Chief
Financial Officer of Adage Systems International, Inc., an ERP software
company. From July 1993 to March 1994, Mr. Gerard was an independent
consultant. From December 1989 until July 1993, Mr. Gerard was employed by
Gestetner PLC, a photocopier and photographic equipment company, where he
served most recently as Vice President, Finance and Operations. Mr. Gerard
holds a Bachelor of Arts degree in Economics from Union College and a Master
of Business Administration from Harvard University.

42
<PAGE>

Paul Lemme has been the Vice President, Professional Services since joining
the Company in April 1990. Prior to 1990, Mr. Lemme was President of P. Lemme
& Associates, an EDI implementation consulting company. Mr. Lemme is the
author of the book "EDI Success." Mr. Lemme attended The State University of
Iowa.

James Monks has been Vice President, International Operations of the Company
since May 1997 and was Director, International Operations of the Company from
May 1992 until May 1997. From May 1989 until May 1992, Mr. Monks served as the
Company's Director of European Operations and from April 1985 until May 1989,
Mr. Monks served as the Company's U.K. Manager. Prior to April 1985, Mr. Monks
held various technical support and management positions with the Company when
the Company was a part of the Dun & Bradstreet Corporation. Mr. Monks holds an
Honours Degree in Sports Science and Geography from the University of
Loughborough, U.K.

David Raye has been the Vice President, Operations of the Company since June
1994. From August 1992 until May 1994, Mr. Raye served as Vice President,
KEY/MASTER Operations. From August 1991 until July 1992, Mr. Raye served as
the Company's Director of Operations. Prior to August 1991, Mr. Raye served in
various management capacities in the software industry including Director of
Marketing for Information Sciences and Senior Product Marketing Manager for
On-Line Software, International. Mr. Raye holds a Bachelor of Science degree
in Marketing from Rutgers University and a Master of Business Administration
from St. John's University, New York.

Edward J. Watson has been Executive Vice President, Business Development of
the Company since June 1994. From January 1994 until June 1994, Mr. Watson
managed the Company's PC Division. From November 1990 until January 1994, Mr.
Watson was a consultant to the Company and a General Partner of DownEast
Partners, a consulting company. Prior to 1990, Mr. Watson served in various
management capacities in the software industry, including President of TSI
International (the predecessor of the Company) and Higher Order Software. Mr.
Watson is married to Ms. Saydean Zeldin, the Vice President, Research and
Development of the Company. Mr. Watson attended Oxford University.

Saydean Zeldin has been Vice President, Research and Development of the
Company since October 1994. From November 1990 to October 1994, Ms. Zeldin was
a consultant to the Company and a general partner at DownEast Partners, a
consulting company. Prior to 1990, Ms. Zeldin served in several senior
engineering positions in the software industry, including serving as Founder
and President of Touchstone Engineering, a software company that developed a
management planning system using artificial intelligence technology, and
Founder and Executive Vice President of Higher Order Software. Ms. Zeldin was
also responsible for the re-entry guidance development of the Apollo flight
software at the Instrumentation Laboratory, a laboratory of MIT. Ms. Zeldin is
married to Mr. Watson, the Executive Vice President, Business Development of
the Company. Ms. Zeldin holds a Bachelor of Arts degree in Physics from Temple
University.

Stewart K.P. Gross has served as a director of the Company since April 1993.
Mr. Gross is a Managing Director of E.M. Warburg Pincus & Co., LLC and has
been employed by E.M. Warburg Pincus & Co., LLC since 1987. Prior to 1987, Mr.
Gross was employed at Morgan Stanley & Co. Mr. Gross is a director of Vanstar
Corporation, BEA Systems and several privately-held companies.

Ernest E. Keet has served as a director of the Company since April 1985. Mr.
Keet is the Chief Executive Officer and a director of Axolotl Corp. and from
May 1995 until December 1996, was the President of Axolotl Corp. Mr. Keet has
been the President and a member of the Board of Directors of Vanguard Atlantic
Ltd. since April 1984. Mr. Keet also served as the Chairman and Chief
Executive Officer of ECsoft Ltd. from November 1989 to April 1994.

John J. Pendray has served as a director of the Company since April 1985.
Mr. Pendray has been an Executive in Residence at George Mason University
since November 1996. Prior to joining George Mason University, Mr. Pendray was
the President of the International Group at Cincinnati Bell Information
Systems from March 1993 to August 1996. From July 1992 to March 1993, Mr.
Pendray was an independent consultant. From 1985 until July 1992, Mr. Pendray
was a senior partner at Vanguard Atlantic, Ltd.

43
<PAGE>

Dennis G. Sisco has served as a director of the Company since January 1990.
Mr. Sisco has been the President of D&B Enterprises since December 1988. From
July 1963 until early 1997, Mr. Sisco had also been employed by Cognizant
Corporation, formally the Dun & Bradstreet Corporation, most recently as an
Executive Vice President. Mr. Sisco is also a director of the Gartner Group,
Inc., Oacis Healthcare Holdings Corporation and Aspect Development, Inc.

Directors are elected by the stockholders at each annual meeting of
stockholders to serve until the next annual meeting of stockholders or until
their successors are duly elected and qualified. Executive officers are chosen
by, and serve at the discretion of, the Board of Directors. The current
directors were elected pursuant to a stockholders' agreement pursuant to which
certain stockholders agreed to vote their shares to elect Messrs. Gross, Keet,
Pendray and Sisco and Ms. Galley to the Board of Directors. This agreement
will be terminated upon the closing of this offering. Except for Mr. Watson
and Ms. Zeldin, there are no family relationships among any of the Company's
directors or executive officers.

DIRECTOR COMPENSATION

The Company reimburses the members of its Board for expenses associated with
their attendance at Board meetings and at Board Committee meetings. None of
the members of the Board is entitled to receive fees for attendance at Board
meetings or at Board Committee meetings.

In May 1997, the Company adopted and the Company's stockholders approved the
1997 Directors Stock Option Plan (the "Directors Plan") and reserved a total
of 225,000 shares of the Company's Common Stock for issuance thereunder.
Members of the Board who are not employees of the Company, or any parent or
subsidiary of the Company are eligible to receive stock options under the
Directors Plan. Each eligible director who is or becomes a member of the Board
on or after May 10, 1997 will automatically be granted an option for 15,000
shares. Accordingly, each of Messrs. Gross, Keet, Pendray and Sisco received
options to purchase 15,000 shares of Common Stock in May 1997. Upon each one-
year anniversary of the date such director is granted the 15,000 share option,
he or she will receive an additional option grant for 3,750 shares, provided
such director has served continuously as a member of the Board. Each 15,000
share option granted under the Directors Plan will vest over four years as to
25% of the shares on the last day of each twelve-month period following the
date such 15,000 share option was granted. Each 3,750 share option granted
under the Directors Plan will vest as to 100% of the shares on the last day of
the twelve month period following the date such 3,750 share option was
granted. Each option granted under the Directors Plan prior to the effective
date of this offering will be granted at a per share exercise price equal to
the fair market value of a share of the Company's Common Stock as determined
by the Board. Each option granted after the effective date of this offering
will be granted at a per share exercise price equal to the closing price of a
share of the Company's Common Stock on the Nasdaq National Market on the date
of grant. Options granted under the 1997 Plan generally expire three months
after the termination of the optionee's service to the Company or a parent or
subsidiary of the Company, except in the case of death or disability, in which
case the options may be exercised up to 12 months following the date of death
or termination of service. In the event of a merger, consolidation or certain
other change of control transactions, the vesting of all outstanding options
granted pursuant to the Directors Plan will accelerate and become exercisable
in full prior to the close of such corporate transaction. The Directors Plan
will terminate in May 2007, unless terminated earlier in accordance with the
provisions of the Directors Plan.

44
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during 1996 by (i)
the Company's chief executive officer and (ii) the Company's four other most
highly compensated executive officers whose salary exceeded $100,000 and who
were serving as executive officers at the end of that year (together, the
"Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY(1) BONUS(2) COMPENSATION OPTIONS
- --------------------------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Constance F. Galley
President, Chief Executive
Officer and Director............ $165,000 $50,000 $ 5,031(3) --
Edward J. Watson
Executive Vice President,
Business Development............ $150,000 $20,000 $ 2,922(3) --
Ira A. Gerard
Vice President, Finance and
Administration, Chief Financial
Officer and Secretary........... $146,000 $20,000 $ 6,516(3) --
Saydean Zeldin
Vice President, Research and
Development..................... $130,000 $20,000 $ 2,922(3) 36,000
Eric A. Amster
Vice President, Sales........... $125,000 -- $85,951(4) 36,000
</TABLE>
- --------
(1) See "-- Compensation Agreements."
(2) Bonus amounts are reported in the year paid.
(3) Represents the portion of health, life and disability insurance premiums
paid by the Company.
(4) Includes sales commissions paid to Mr. Amster by the Company in the amount
of $80,982 in 1996 and $4,918 for the portion of health, life and
disability insurance premiums paid by the Company.

The following table sets forth information regarding option grants pursuant
to the 1993 Plan during 1996 to each of the Named Officers.

OPTION GRANTS IN 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(1) 1996(2) PER SHARE(3) DATE 5% 10%
- ---- ---------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Constance F. Galley(5).. -- -- -- -- -- --
Edward J. Watson........ -- -- -- -- -- --
Ira A. Gerard........... -- -- -- -- -- --
Saydean Zeldin.......... 36,000 24% $1.67 11/25/06 $409,122 $686,998
Eric A. Amster.......... 36,000 24% $1.67 11/25/06 409,122 686,998
</TABLE>
- --------
(1) Options granted in 1996 vest as to twenty-five percent (25%) of the shares
covered by such option each year following the date of grant, subject to
acceleration under certain circumstances. Under the 1993 Plan, the Board
or a committee of the Board retains discretion, subject to 1993 Plan
limits, to modify the terms of outstanding options. The options have a
term of ten years if the grantee is based in the United States and a term
of seven years if the grantee is based in the United Kingdom subject to
earlier termination in certain situations related to termination of
employment. See "-- Employee Benefit Plans."

45
<PAGE>

(2) Based on a total of 150,000 options granted to all employees during 1996.

(3) All options were granted at an exercise price equal to the fair market
value of the Company's Common Stock as determined by the Board on the date
of the grant. The Company's Common Stock was not publicly traded at the
time of the option grants.

(4) Potential realizable values are calculated based on the fair market value
of the Common Stock at the date of grant (which is assumed to be the
assumed initial public offering price of $8.00 per share) and minus the
exercise price. The 5% and 10% assumed annual rates of compounded stock
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock price. There can be no assurance provided to any
executive officer or any other holder of the Company's securities that the
actual stock price appreciation over the option term will be at the
assumed 5% and 10% levels or at any other defined level. Unless the market
price of the Common Stock appreciates over the option term, no value will
be realized from the option grants made to the executive officers.

(5) On May 8, 1997, Ms. Galley was granted an option under the 1993 Plan to
purchase 112,500 shares of Common Stock at an exercise price of $6.67 per
share. This option expires on May 8, 2007.

The following table sets forth information concerning unexercised options
held at December 31, 1996 with respect to each of the Named Officers. No
options were exercised by the Named Officers during 1996.

AGGREGATE OPTION EXERCISES IN 1996 AND YEAR-END VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
END AT FISCAL YEAR-END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Constance F. Galley...... 142,461 28,500 $189,948 $ 38,000
Edward J. Watson......... 120,000 36,000 $160,000 $ 48,000
Ira A. Gerard............ 36,000 108,000 $ 48,000 $144,000
Saydean Zeldin........... 45,375 79,125 $ 60,500 $ 57,500
Eric A. Amster........... 18,000 90,000 $ 24,000 $ 72,000
</TABLE>
- --------

(1) Based on the fair market value of the option shares at December 31, 1996
($1.67 as determined by the Board of Directors) less the exercise price.

COMPENSATION AGREEMENTS

The Company has entered into agreements with the following executive
officers of the Company: Constance Galley, the Company's President and Chief
Executive Officer; Ira Gerard, the Company's Vice President, Finance and
Administration and Chief Financial Officer; Eric Amster, the Company's Vice
President, Sales; Edward Watson, the Company's Executive Vice President, New
Business Development; and Saydean Zeldin, the Company's Vice President,
Research and Development.

Ms. Galley's agreement provides for an annual base salary of $225,000. Ms.
Galley is also eligible to receive an annual bonus based upon the Company
achieving certain financial objectives for such year. This agreement may be
terminated by the Company at any time for any reason. If Ms. Galley is
terminated without cause, she will continue to receive her base salary for a
one-year period following such termination. In the event that the Company is
acquired by a company that does not continue to employ Ms. Galley, she will
continue to receive her base salary for a one-year period following such
termination.

Mr. Gerard's agreement provides for an initial annual base salary of
$146,000 and a grant of an option to purchase an aggregate of 144,000 shares
of Common Stock. Mr. Gerard currently receives a base salary of $160,000. Mr.
Gerard is eligible to receive a bonus of up to $25,000 per year for meeting
corporate objectives for such year. This agreement may be terminated by the
Company at any time for any reason. If Mr. Gerard is terminated without cause,
he will continue to receive his base salary for a six-month period following
such termination. In the event that the Company is acquired by a company that
does not continue to employ Mr. Gerard, he will continue to receive his base
salary for a six-month period following such termination.

Mr. Amster's agreement provides for an annual base salary of $125,000 and a
grant of an option to purchase an aggregate of 72,000 shares of Common Stock.
Mr. Amster is eligible to receive a bonus and

46
<PAGE>

commissions of up to $145,000 per year upon meeting revenue related goals for
such year. This agreement may be terminated by the Company at any time for any
reason. If Mr. Amster is terminated without cause, he will continue to receive
his base salary for a six-month period following such termination.

Mr. Watson's agreement provides for an initial annual base salary of
$150,000. Mr. Watson currently receives a base salary of $160,000. This
agreement may be terminated by the Company at any time for any reason. If Mr.
Watson is terminated without cause, he will continue to receive his base
salary for a six-month period following such termination. In the event that
the Company is acquired by a company that does not continue to employ Mr.
Watson, he will continue to receive his base salary for a one-year period
following such termination.

Ms. Zeldin's agreement provides for an initial annual base salary of
$130,000. Ms. Zeldin currently receives a base salary of $155,000. This
agreement may be terminated by the Company at any time for any reason. If Ms.
Zeldin is terminated without cause, she will continue to receive her base
salary for a six-month period following such termination. In the event that
the Company is acquired by a company that does not continue to employ Ms.
Zeldin, she will continue to receive her base salary for a one-year period
following such termination.

EMPLOYEE BENEFIT PLANS

1997 Equity Incentive Plan. In May 1997, the Board adopted and the Company's
stockholders approved the 1997 Equity Incentive Plan (the "1997 Plan"), under
which 1,125,000 shares of the Company's Common Stock are reserved for
issuance. In addition to the 1,125,000 shares reserved for issuance
thereunder, shares that are reserved for issuance but that are not subject to
options under the 1993 Plan and shares that are subject to outstanding options
which either terminate without being exercised or that are repurchased by the
Company at the original issue price will be available for issuance under the
1997 Plan. No options have been issued under the 1997 Plan. The 1997 Plan will
become effective on the effective date of the Registration Statement of which
this Prospectus is a part and will terminate in May 2007, unless terminated
earlier in accordance with the provisions of the 1997 Plan. The 1997 Plan
authorizes the award of options, opportunities to purchase restricted stock
and stock bonuses (an "Award"). The 1997 Plan is administered by a committee
appointed by the Board, currently the Compensation Committee, consisting of
Messrs. Keet, Sisco, Pendray and Gross, all of whom are non-employee directors
under applicable federal securities laws and "outside directors" as defined
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Compensation Committee has the authority to construe and
interpret the 1997 Plan and any agreement made thereunder, grant Awards and
make all other determinations necessary or advisable for the administration of
the 1997 Plan.

The 1997 Plan provides for the grant of both incentive stock options
("ISOs") that qualify under Section 422 of the Code and nonqualified stock
options ("NQSOs"). ISOs may be granted only to employees of the Company or of
a parent or subsidiary of the Company. NQSOs may be granted to employees,
officers, directors, consultants, independent contractors and advisors of the
Company or any parent or subsidiary of the Company, provided such consultants,
independent contractors, and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction ("Eligible Service Providers"). The per share exercise price of
ISOs must be at least equal to the fair market value of a share of the
Company's Common Stock on the date of grant. The per share exercise price of
NQSOs must be at least 85% of the fair market value of the Company's Common
Stock unless the option is an ISO granted to a stockholder owning 10% or more
of the Company's capital stock in which case the exercise price must be at
least 110% of the fair market value of the Company's Common Stock. The maximum
term of options granted under the 1997 Plan is ten years if the grantee is
based in the United States and a maximum term of seven years if the grantee is
based in the United Kingdom, unless the option is an ISO granted to a
stockholder owning 10% or more of the Company's stock in which case the
maximum term is five years. Options granted under the 1997 Plan may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of the optionee only by
the optionee. Options granted under the 1997

47
<PAGE>

Plan generally expire three months after the termination of the optionee's
service to the Company or a parent or subsidiary of the Company, except in the
case of death or disability, in which case the options may be exercised up to
12 months following the date of death or termination of service. No person may
receive more than 300,000 shares in any calendar year pursuant to the grant of
Awards under the 1997 Plan. New employees, however, are eligible to receive
Awards up to a total of 450,000 shares in the calendar year in which they are
hired.

Opportunities to purchase shares of the Company's Common Stock ("Restricted
Stock Awards"), and awards of shares of the Company's Common Stock ("Stock
Bonuses"), either of which may be subject to a right of repurchase in favor of
the Company or other restrictions on ownership or transfer, may be given to
Eligible Service Providers. The Compensation Committee which is the
administrator of the 1997 Plan has the authority to determine the restrictions
applicable to the stock. The purchase price of Common Stock sold pursuant to a
Restricted Stock Award must be at least 85% of the fair market value of the
shares on the date of grant. Awards that are granted below 100% of fair market
value are limited under the 1997 Plan. No Eligible Service Provider may
receive more than 150,000 shares pursuant to such Awards under the 1997 Plan
and no more than 300,000 shares may be issued pursuant to such Awards for the
term of the 1997 Plan.

In the event of a merger, consolidation or certain other changes of control
transactions, any outstanding Awards will accelerate by one-year's vesting or
such additional acceleration of vesting as the Compensation Committee in its
discretion may decide, and may be assumed or replaced by the successor
corporation. In lieu of such assumption or replacement, but in addition to the
one-year's additional vesting or such additional acceleration of vesting, the
successor corporation may substitute equivalent Awards or provide
substantially similar consideration to Eligible Service Providers as is
provided to stockholders.

1993 Stock Option Plan. Under the 1993 Plan, 1,558,431 shares of Common
Stock are or have been reserved for issuance under currently outstanding
options. In May 1997 when the 1997 Plan was adopted, the Board resolved that
no further options shall be granted under the 1993 Plan following the closing
of this offering. However, all outstanding options will remain outstanding
until exercised or until they terminate or expire in accordance with their
terms. The terms of options granted under the 1993 Plan and the administration
of the plan are substantially the same as those that pertain to the 1997 Plan.

Profit Participation Plan. The Board maintains the TSI International
Software Ltd. Profit Participation Plan (the "Profit Plan") which allows the
Board at the end of the Company's year-end audit to vote to contribute a
portion of the Company's profits to a profit participation pool which does not
include executive officers or directors of the Company. Distributions from the
pool are usually made to eligible employees in two equal installments, one
distribution upon completion of the fiscal year-end audit and the second
distribution at the end of the next fiscal year. All employees who are
employed by the Company at the end of the fiscal year and who are employed at
the time of the distributions are eligible to receive such a distribution.
Employees who are not employed by the Company for the full fiscal year are
eligible to receive pro-rated distributions based upon the number of months
worked in such fiscal year. Payments under the profit participation pool
amounted to $35,000, $100,000 and $150,000 in 1994, 1995 and 1996,
respectively.

1997 Employee Stock Purchase Plan. In May 1997, the Board adopted and the
Company's stockholders approved the 1997 Employee Stock Purchase Plan (the
"Purchase Plan") and reserved a total of 750,000 shares of the Company's
Common Stock for issuance thereunder. The Purchase Plan will become effective
upon the effective date of the Registration Statement of which this Prospectus
is a part and will permit eligible employees to acquire shares of the
Company's Common Stock through payroll deductions. Eligible employees may
select a rate of payroll deduction between 2% and 15% of their compensation
and are subject to certain maximum purchase limitations described in the
Purchase Plan. Each offering under the Purchase Plan will be for a period of
12 months (the "Offering Period") and will consist of two six-month purchase
periods (each a "Purchase Period"). The purchase price for the Company's
Common Stock purchased under the Purchase Plan is 85% of the lesser of the
closing price of the Company's Common Stock on the first day of the applicable
Offering Period and the last day of the applicable Purchase Period. For the
purposes of the first

48
<PAGE>

Offering Period, eligible employees will be able to acquire shares at 85% of
the lesser of the price at which the shares are offered to the public in this
offering or the closing price of the shares on the last day of the applicable
purchase period in the first Offering Period. The first Offering Period is
expected to begin on the first business day following the effective date of
this Registration Statement and to end on July 31, 1998. The Board of
Directors has the power to set the beginning of any Offering Period and to
change the duration of Offering and Purchase Periods. The Purchase Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

During 1996, the Company had no separate compensation or stock option
committee or other board committee performing equivalent functions, and these
functions were performed by the Company's Board of Directors of which
Constance F. Galley, President and Chief Executive Officer of the Company, was
and is a member. In May 1997, the Company's Board of Directors appointed a
Compensation Committee which currently consists of Stewart K.P. Gross, Ernest
E. Keet, John J. Pendray and Dennis G. Sisco, each a non-employee director of
the Company.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF
LIABILITY

As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Company provide that (i) the Company is required to indemnify
its directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law, (ii) to the fullest extent permitted by the
Delaware General Corporation Law, the Company is required to advance all
expenses, as incurred, to its directors and executive officers in connection
with a legal proceeding (subject to certain exceptions), (iii) the rights
conferred in the Bylaws are not exclusive, (iv) the Company may, in its
discretion indemnify or advance expenses to persons whom the Company is not
obligated to indemnify or advance expenses; (v) the Company is authorized to
enter into indemnification agreements with its directors, officers, employees
and agents or any person serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including employee benefit plans and (vi) the
Company may not retroactively amend the Bylaw provisions relating to
indemnification.

The Company intends to enter into Indemnification Agreements with each of
its current directors and executive officers to give such directors and
officers additional contractual assurances regarding the scope of the
indemnification set forth in the Company's Bylaws and to provide additional
procedural protections. At present, there is no pending litigation or
proceeding involving a director, officer or employee of the Company regarding
which indemnification is sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification.

As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty
as a director to the fullest extent permitted by the Delaware General
Corporation Law.

As authorized by the Company's Bylaws, the Company, with approval of the
Board, is seeking, and expects to obtain, directors' and officers' liability
insurance.

In so far as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.

49
<PAGE>

CERTAIN TRANSACTIONS

Since January 1, 1994, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or
is to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than 5% of any class of voting
securities of the Company or members of such person's immediate family had or
will have a direct or indirect material interest other than (i) the
compensation agreements which are described in "Management," and (ii) the
transactions described below.

From November 1990 until October 1994, Saydean Zeldin, the Company's Vice
President, Research and Development, was a consultant to the Company and a
General Partner at DownEast Partners, a consulting company. Payments to
DownEast Partners for the year ended December 31, 1994 were $122,000.
Edward Watson, the Company's Executive Vice President, Business Development,
was a General Partner of DownEast Partners until January 1994.

From August 1992 to April 1994, the Company subleased its Bannockburn,
Illinois office facility from a subsidiary of Dun & Bradstreet (now Cognizant
Corporation), a holder of more than 5% of the Company's outstanding capital
stock. Payments under the sub-lease were $66,100 for the year ended December
31, 1994. The Company also subleased $130,000 of furniture and fixtures from
the same subsidiary of Dun & Bradstreet (now Cognizant Corporation). The
transaction was accounted for as a capital lease and bore interest at 9% and
required monthly payments of $4,100 through August 1995.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and
its officers, directors and principal stockholders and their affiliates will
be approved by a majority of the Board, including a majority of the
independent and disinterested directors of the Board, and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.

50
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock as of May 31,
1997, and as adjusted to reflect the sale of shares offered hereby, by (i)
each person known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) each of the Company's directors, (iii) each
Named Officer (see "Management-- Executive Compensation"), (iv) all executive
officers and directors as a group and (v) each Selling Stockholder.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1) (2)
EXECUTIVE OFFICERS, DIRECTORS ----------------------- NUMBER OF -------------------------
AND 5% STOCKHOLDERS NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
- ----------------------------- ------------ ---------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Stewart K.P. Gross ..... 2,284,905 35.5 % -- 2,284,905 24.2%
Warburg, Pincus Capital
Company, L.P. (3)
Ernest E. Keet ......... 1,979,970 32.7 178,189 1,801,781 19.9
Vanguard Atlantic, Lim-
ited (4)
Cognizant Corporation
(5).................... 1,280,229 20.4 651,653 628,576 6.8
Constance F. Galley (6). 411,207 6.6 -- 411,207 4.5
Ira A. Gerard (7)....... 36,000 * -- 36,000 *
Eric A. Amster (8)...... 18,000 * -- 18,000 *
Edward J. Watson (9).... 136,500 2.2 -- 136,500 1.5
Saydean Zeldin (10)..... 56,625 * -- 56,625 *
John J. Pendray (11).... 198,057 3.3 46,875 151,182 1.7
Dennis G. Sisco (12).... -- * -- -- *
All executive officers
and directors as a
group
(9 persons) (13)....... 5,121,264 72.3 225,064 4,896,200 48.6
OTHER SELLING STOCKHOLD-
ERS
- ------------------------
Richard Bankosky (14)... 72,705 1.2 22,499 50,206 *
David Raye (15)......... 46,776 * 407 46,369 *
Information Partners
Capital Fund, L.P.
(16)................... 167,616 2.8 100,377 67,239 *
</TABLE>
- --------
* Less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has or shares voting or investment power with
respect to such shares. Unless otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable. A person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60 days of
May 31, 1997, upon exercise of options or warrants and such securities
are reflected in the above table. Shares of Common Stock subject to
options and warrants that are exercisable within 60 days of May 31, 1997
are deemed to be outstanding and to be beneficially owned by the person
holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.

(2) Assumes that the Underwriters' over-allotment option to purchase up to
600,000 shares from certain Selling Stockholders is not exercised. If the
Underwriters' over-allotment options is exercised in full, the Selling
Stockholders will sell an additional 600,000 shares.

(3) Includes 382,281 shares of Common Stock issuable to Warburg, Pincus
Capital Company, L.P. ("Warburg") upon exercise of Warrants. Warburg,
Pincus & Co. is the sole General Partner of Warburg and has a 20%
interest in the profits of Warburg. E.M. Warburg, Pincus & Co., LLC, a
New York limited liability company, manages Warburg. Lionel I. Pincus is
the managing partner of Warburg, Pincus & Co. and the managing member of
E. M. Warburg, Pincus & Co., LLC and may be deemed to

51
<PAGE>

control both such entities. The members of E.M. Warburg, Pincus & Co., LLC
are substantially the same as the partners of Warburg, Pincus & Co. Mr.
Gross, a director of the Company, is a Managing Director and member of
E.M. Warburg, Pincus & Co., LLC and a general partner of Warburg, Pincus &
Co. As such, Mr. Gross may be deemed to have an indirect pecuniary
interest (within the meaning of Rule 16a-1 under the Exchange Act) in an
indeterminate portion of the shares beneficially owned by Warburg. Mr.
Gross disclaims beneficial ownership of these shares within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934. The address of Mr.
Gross and Warburg is 466 Lexington Avenue, New York, N.Y. 10017.

(4) Includes 1,559,325 shares of Common Stock held of record by Vanguard
Atlantic, Ltd. ("Vanguard") and 135,543 shares of Common Stock held of
record by Mr. Keet. Also includes shares of Common Stock issuable to
Vanguard upon exercise of a warrant which will be exercised on a net
exercise basis into 285,102 shares of Common Stock. Mr. Keet, a director
of the Company, is the President of Vanguard and may be deemed to
beneficially own the shares owned by such entity. Mr. Keet disclaims
beneficial ownership of such shares except to the extent of his indirect
pecuniary interest therein. The address of Vanguard is 304 Main Avenue,
Suite 290, Norwalk, Connecticut 06851 and the address of Mr. Keet is 619
Marina Boulevard, San Francisco, CA 94123.

(5) Includes 237,585 shares of Common Stock issuable upon exercise of
Warrants. Cognizant Corporation's address is 200 Nyala Farms Road,
Westport, Connecticut 06880.

(6) Includes 146,961 shares of Common Stock subject to options and 25,005
shares of Common Stock issuable upon exercise of Warrants.

(7) Represents 36,000 shares of Common Stock subject to options.

(8) Represents 18,000 shares of Common Stock subject to options.

(9) Includes 124,500 shares of Common Stock subject to options and 6,000
shares of Common Stock issuable upon exercise of Warrants.

(10) Represents 56,625 shares of Common Stock subject to options.

(11) Includes 1,200 shares of Common Stock subject to options, 30,000 shares
of Common Stock held of record by his wife Linda L. Pendray, 6,000 shares
of Common Stock held of record by each of his children Michael D.
Pendray, Andrew S. Pendray and Stephen L. Pendray. Mr. Pendray disclaims
beneficial ownership of the shares held by his wife and children.
(12) Although no longer employed by Cognizant Corporation, Dennis Sisco serves
on the Board of the Company as Cognizant's nominee.

(13) Includes an aggregate of 380,286 shares of Common Stock subject to
options and 650,871 shares of Common Stock issuable upon exercise of
Warrants and 285,102 shares of Common Stock issuable upon the exercise of
a warrant on a net exercise basis.

(14) Includes shares of Common Stock issuable upon exercise of a warrant which
will be exercised, on a net exercise basis, into 1,125 shares of Common
Stock.

(15) Includes 46,125 shares of Common Stock subject to options.

(16) The address of Information Partners Capital Fund, L.P. is Two Copley
Place, Boston, Massachusetts 02116.

52
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, par value $0.01 per
share, and 5,000,000 shares of Preferred Stock, par value $0.01 per share.
Upon the consummation of this offering, and assuming the conversion of each
outstanding share of Preferred Stock into Common Stock, there will be
outstanding 9,045,942 shares of Common Stock and Warrants to purchase 711,771
shares of Common Stock.

COMMON STOCK

Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board may from time to time determine. Each
stockholder is entitled to one vote for each share of Common Stock held on all
matters submitted to a vote of stockholders. Cumulative voting for the
election of directors is not provided for in the Company's Certificate of
Incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The Common Stock is
not entitled to preemptive rights and is not subject to conversion or
redemption. Upon liquidation, dissolution or winding-up of the Company, the
assets legally available for distribution to stockholders are distributable
ratably among the holders of the Common Stock and any participating Preferred
Stock outstanding at that time after payment of liquidation preferences, if
any, on any outstanding Preferred Stock and payment of other claims of
creditors. Each outstanding share of Common Stock is, and all shares of Common
Stock to be outstanding upon completion of this offering will be, fully paid
and nonassessable.

PREFERRED STOCK

Upon the closing of this offering, all outstanding shares of Preferred Stock
(the "Convertible Preferred"), will be converted into shares of Common Stock.
See Note 6 of Notes to Financial Statements for a description of the
Convertible Preferred. The Board is authorized, subject to any limitations
prescribed by Delaware law, to provide for the issuance of additional shares
of Preferred Stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix the rights,
preferences and privileges of the shares of each wholly unissued series and
any qualifications, limitations or restrictions thereon, and to increase or
decrease the number of shares of any such series (but not below the number of
shares of such series then outstanding), without any further vote or action by
the stockholders. The Board may authorize the issuance of Preferred Stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of Common Stock. Thus, the issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company. The Company has no current plan to issue any shares of
Preferred Stock.

WARRANTS

As of March 31, 1997, the Company had outstanding nine Warrants to purchase
shares of the Company's reserved, but unissued shares of Series D Convertible
Preferred Stock. These Warrants, seven of which will survive the closing of
this offering, will become exercisable into an aggregate of 711,771 shares of
Common Stock. These Warrants have an exercise price of $2.00 per share of
Common Stock and expire in June and August, 2002. These Warrants are also
exerciseable on a net exercise basis.

REGISTRATION RIGHTS

Certain investors holding an aggregate of 2,567,169 shares of Common Stock
and Warrants to purchase 711,771 shares of Common Stock of the Company have
certain "demand" rights to register the shares of Common Stock issuable upon
conversion of the Convertible Preferred and upon exercise of such Warrants to
the extent any of such shares are not included in this offering (the
"Registrable Securities") under the Securities Act. If requested by holders of
more than 50% of the Registrable Securities then outstanding, the Company must
file a registration statement under the Securities Act covering all
Registrable Securities requested to be registered. The Company is required to
effect two such "demand" registrations pursuant to these registration rights.
The "demand" rights of any particular holder of Registrable Securities will
expire three years after the consummation of the Company's initial public
offering.

53
<PAGE>

In addition, holders of Registrable Securities have certain "piggyback"
registration rights. If the Company proposes to register any of its securities
under the Securities Act other than in connection with the Company's employee
benefit plans or a corporate reorganization, the holders of Registrable
Securities may require the Company to include all or a portion of their shares
in such registration, although the managing underwriter, if any, of any such
offering has certain rights to limit the number of Registrable Securities
proposed to be included in such registration.

Further, if requested by holders of more than 50% of the then outstanding
Registrable Securities (assuming there is a reasonably anticipated aggregate
offering price to the public of at least $500,000), the Company must file a
registration statement on Form S-3 with respect to the resale of such
Registrable Securities when such form becomes available to the Company,
subject to certain conditions.

All expenses incurred in connection with the above registrations (other than
the underwriters' and brokers' discounts and commissions) will be borne by the
Company.

The Company's obligation to register the Registrable Securities will
terminate when all such Registrable Securities have been registered and sold
or are no longer outstanding.

DELAWARE ANTI-TAKEOVER LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Anti-Takeover Law") regulating corporate
takeovers. The Anti-Takeover Law prevents certain Delaware corporations,
including those whose securities are listed on the Nasdaq National Market,
from engaging, under certain circumstances, in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with
any "interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date
that such stockholder became an "interested stockholder." A Delaware
corporation may "opt out" of the Anti-Takeover Law with an express provision
in its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
The Company has not "opted out" of the provisions of the Anti-Takeover Law.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is The Bank
of New York.

LISTING

The Company has applied to list its Common Stock on the Nasdaq National
Market under the trading symbol "TSFW."

54
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
Sales of substantial amounts of Common Stock of the Company in the public
market after the lapse of existing resale restrictions could adversely affect
the prevailing market price and the ability of the Company to raise equity
capital in the future.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an affiliate of the Company)
would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of: (i) one percent of the number of shares
of Common Stock then outstanding (which will equal approximately 90,459 shares
immediately after this offering); or (ii) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years (including the holding
period of any prior owner except an affiliate of the Company), is entitled to
sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Unless
otherwise restricted, "144(k) shares" may therefore be sold immediately upon
the completion of this offering.

Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period
requirement, of Rule 144. Any employee, officer or director of or consultant
to the Company who purchased his or her shares pursuant to a written
compensatory plan or contract may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell such shares in reliance
on Rule 144 without having to comply with the holding period, public
information, volume limitation or notice provisions of Rule 144. In both
cases, a holder of Rule 701 shares is required to wait until 90 days after the
date of this Prospectus before selling such shares.

Upon completion of this offering, the Company will have outstanding
approximately 9,045,942 shares of Common Stock. In addition to the 4,000,000
shares of Common Stock offered hereby, as of the effective date of the
Registration Statement of which this Prospectus forms a part (the "Effective
Date"), there will be an additional 5,045,942 shares of Common Stock
outstanding, all of which are "restricted" shares (the "Restricted Shares")
under the Securities Act. Certain stockholders of the Company are subject to
lock-up agreements providing that they will not directly or indirectly offer,
sell, pledge, contract to sell, grant any option to purchase or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of Robertson,
Stephens & Company LLC. Taking into account the lock-up agreements and
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701, the numbers of shares that will be available for
sale in the public market will be as follows: (i) 81,000 Restricted Shares
will be eligible for sale as of the Effective Date, (ii) approximately 3,555
Restricted Shares will become eligible for sale 90 days after the Effective
Date pursuant to the provisions of Rule 144 or Rule 701, (iii) approximately
48,000 Restricted Shares will be eligible for sale in December 1997 subject to
certain volume and other resale restrictions under Rule 144, (iv)
approximately 4,763,387 Restricted Shares will become eligible for sale 180
days after the Effective Date upon expiration of certain lock-up agreements
and,

as of that date, approximately 4,076,847 of such shares will be subject to
certain volume and other resale restrictions pursuant to Rule 144, and (v)
approximately 150,000 Restricted Shares will become eligible for sale in May
1998, subject to certain volume and other resale restrictions pursuant to Rule
144. In addition, upon completion of this offering, there will remain
outstanding Warrants to purchase 711,771 shares of Common Stock at an exercise
price of $2.00 per share. These Warrants are exercisable at any time on a net
exercise

55
<PAGE>

basis. Accordingly, any shares of Common Stock issuable upon such net exercise
would be available for resale in the public market, subject to public
information, volume limitation or notice provisions of Rule 144, in the case
of affiliates.

At May 31, 1997, options to purchase 1,304,757 shares of Common Stock were
outstanding, of which options approximately 612,057 shares were then
exercisable. Immediately after this offering, the Company intends to file a
registration statement on Form S-8 under the Securities Act covering an
aggregate of 3,586,521 shares of Common Stock reserved for issuance pursuant
to outstanding options under the 1993 Plan, and outstanding options or shares
reserved for issuance under the 1997 Plan, Directors Plan and Purchase Plan.
As a result of such registration, shares of Common Stock issuable upon
exercise of options and pursuant to the Purchase Plan will be available for
sale in the public market, subject to Rule 144 volume limitations applicable
to affiliates and subject to lock-up agreements. Beginning 180 days after the
Effective Date, 708,882 shares issuable upon the exercise of vested options
will be eligible for sale in the public market, if such options are exercised.

56
<PAGE>

UNDERWRITING

The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC, SoundView Financial Group, Inc. and
Wessels, Arnold & Henderson, L.L.C. (the "Representatives"), have severally
agreed with the Company and the Selling Stockholders, subject to the terms and
conditions of the Underwriting Agreement, to purchase the number of shares of
Common Stock set forth opposite their respective names below. The Underwriters
are committed to purchase and pay for all such shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Robertson, Stephens & Company LLC........................................
SoundView Financial Group, Inc...........................................
Wessels, Arnold & Henderson, L.L.C.......................................
---------
Total.................................................................. 4,000,000
=========
</TABLE>

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession of not in excess of $ per share, of
which $ may be reallowed to other dealers. After the initial public
offering, the public offering price, concession and reallowance to dealers may
be reduced by the Representatives. No such reduction shall change the amount
of proceeds to be received by the Company as set forth on the cover page of
this Prospectus.

Certain of the Selling Stockholders have granted to the Underwriters an
option, exercisable during the 30-day period after the date of this Prospectus
for this offering, to purchase up to 600,000 additional shares of Common
Stock, at the same price per share as the Company and the Selling Stockholders
will receive for the 4,000,000 shares that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage of such additional shares that the number of shares of Common
Stock to be purchased by it shown in the above table represents as a
percentage of the 4,000,000 shares offered hereby. If purchased, such
additional shares will be sold by the Underwriters on the same terms as those
on which the 4,000,000 shares are being sold.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.

Pursuant to the terms of lock-up agreements, all officers, directors and
certain security holders of the Company have agreed with the Representatives
for a period of 180 days after the effective date of this Prospectus that they
will not, subject to certain exceptions, directly or indirectly offer to sell,
contract to sell, or otherwise sell, dispose of, pledge, grant any rights with
respect to, any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock, or any securities convertible into or exchangeable
for shares of Common Stock, now owned or hereafter acquired directly by such
holders or with respect to which they have the power of disposition, without
the prior written consent of Robertson, Stephens & Company,

57
<PAGE>

which may, in its sole discretion and at any time without notice, release all
or any portion of the securities subject to lock-up agreements. See "Shares
Eligible for Future Sale." In addition, the Company also has agreed that
during the 180 days following the effective date of this Prospectus the
Company will not, without the prior written consent of Robertson, Stephens &
Company, subject to certain exceptions, offer, issue, sell, contract to sell,
or otherwise dispose of any shares of Common Stock, any options or warrants to
purchase any shares of Common Stock, or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock other than the
Company's sales of shares in this offering, the issuance of Common Stock upon
the exercise of outstanding options and the Company's issuance of options
under existing employee and director stock option plans.

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock was determined through negotiations among the Company and the
Representatives. Among the factors considered in such negotiations were
prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company and the Representatives
believe to be comparable to the Company, estimates of the business potential
of the Company, the present state of the Company's development and other
factors deemed relevant.

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

The Underwriters have reserved approximately 190,000 shares of Common Stock
for sale, at the initial public offering price, to directors, officers and
employees of the Company, their business affiliates and related parties, in
each case as such persons have expressed an interest in purchasing such shares
in the offering. The number of shares of Common Stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares of Common Stock. Any reserved shares of Common Stock not so
purchased will be offered by the Underwriters to the general public on the
same basis as the other shares of Common Stock offered pursuant to the
offering.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Fenwick & West LLP, Palo
Alto, California. Certain legal matters will be passed upon for the
Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.

EXPERTS

The financial statements and schedule of the Company as of December 31, 1995
and 1996, and for each of the years in the three year period ended December
31, 1996 included in this Prospectus and elsewhere in the registration
statement, have been included in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

58
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission, a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedule thereto. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedule thereto. Statements contained in this Prospectus regarding the
contents of any contract or any other document to which reference is made are
not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement and the exhibits and schedule
thereto may be inspected without charge at the offices of the Commission at
Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549, and copies of all
or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 upon the payment
of the fees prescribed by the Commission.

59
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets as of December 31, 1995 and 1996 and (unaudited) March 31,
1997..................................................................... F-3
Statements of Operations for the years ended December 31, 1994, 1995 and
1996 and (unaudited) for the three months ended March 31, 1996 and 1997.. F-4
Statements of Stockholders' (Deficiency) as of December 31, 1994, 1995 and
1996 and (unaudited) as of March 31, 1997................................ F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and (unaudited) for the three months ended March 31, 1996 and 1997.. F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
TSI International Software Ltd.:

We have audited the accompanying balance sheets of TSI International
Software Ltd. (the "Company") as of December 31, 1996 and 1995, and the
related statements of operations, stockholders' (deficiency) and cash flows
for each of the years in the three year period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TSI International Software
Ltd. as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the three year period ended December
31, 1996 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP
Stamford, Connecticut
April 14, 1997,
except for note 6,
which is as of May 15, 1997

F-2
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1995 1996 1997
------------ ------------ -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................ $ 142,500 $ 41,300 $ 79,400
Accounts receivable, less allowances
of $158,100, $319,900 and
(unaudited) $288,800............... 2,932,400 4,380,900 5,296,500
Current portion of investment in
licensing contracts receivable, net
of unearned finance income of
$126,100, $84,200 and (unaudited)
$72,100 (note 3)................... 982,500 742,000 773,800
Prepaid expenses and other current
assets............................. 300,800 388,000 499,200
------------ ------------ -----------
Total current assets.............. 4,358,200 5,552,200 6,648,900
Furniture, fixtures and equipment, net
(note 4)............................. 913,000 1,304,400 1,351,300
Investment in licensing contracts
receivable, net of unearned finance
income of $91,900, $50,100 and
(unaudited) $51,000, less current
portion (note 3)..................... 896,400 551,600 600,200
Other assets.......................... 69,600 113,100 120,500
------------ ------------ -----------
$ 6,237,200 $ 7,521,300 $ 8,720,900
============ ============ ===========

LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)

Current liabilities:
Accounts payable.................... $ 439,100 $ 694,800 $ 611,000
Accrued expenses (note 9)........... 1,266,500 1,486,500 1,610,200
Current portion of deferred
maintenance revenue................ 4,780,200 4,591,200 4,585,400
------------ ------------ -----------
Total current liabilities......... 6,485,800 6,772,500 6,806,600
Long-term debt (note 5)............... 2,840,100 2,790,100 3,590,100
Other long-term liabilities........... 79,300 27,400 42,600
Deferred maintenance revenue, less
current portion...................... 401,600 225,000 313,400
------------ ------------ -----------
Total liabilities................. 9,806,800 9,815,000 10,752,700
------------ ------------ -----------
Stockholders' (deficiency) (note 6):
Convertible preferred stock
($8,219,000 aggregate liquidation
preference)........................ 8,600 8,600 8,600
Common stock (3,888,166 shares
authorized, par value $.01)........ 30,000 30,000 30,000
Additional paid-in capital.......... 7,888,800 7,888,800 7,888,800
Accumulated deficit................. (11,264,500) (10,036,600) (9,723,900)
Cumulative foreign currency
translation adjustment............. (167,500) (119,500) (170,300)
Treasury stock, at cost............. (65,000) (65,000) (65,000)
------------ ------------ -----------
Total stockholders' (deficiency).. (3,569,600) (2,293,700) (2,031,800)
------------ ------------ -----------
$ 6,237,200 $ 7,521,300 $ 8,720,900
============ ============ ===========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- ----------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licensing.... $ 6,275,500 $ 7,552,900 $ 9,309,500 $1,782,500 $2,731,100
Service, maintenance
and other............ 7,658,500 8,508,500 9,694,400 2,306,000 2,776,800
----------- ----------- ----------- ---------- ----------
Total revenues...... 13,934,000 16,061,400 19,003,900 4,088,500 5,507,900
----------- ----------- ----------- ---------- ----------
Cost of revenues:
Software licensing.... 1,034,700 724,900 494,800 93,300 173,500
Service, maintenance
and other............ 2,522,000 2,200,800 2,005,700 431,400 548,200
----------- ----------- ----------- ---------- ----------
Total cost of reve-
nues............... 3,556,700 2,925,700 2,500,500 524,700 721,700
----------- ----------- ----------- ---------- ----------
Gross profit............ 10,377,300 13,135,700 16,503,400 3,563,800 4,786,200
----------- ----------- ----------- ---------- ----------
Operating expenses:
Product development... 2,231,400 3,067,600 3,452,300 779,300 1,073,400
Selling and marketing. 6,123,800 7,159,800 8,715,200 1,893,800 2,583,700
General and adminis-
trative.............. 1,926,900 2,001,200 2,921,500 728,300 777,200
----------- ----------- ----------- ---------- ----------
Total operating ex-
penses............. 10,282,100 12,228,600 15,089,000 3,401,400 4,434,300
----------- ----------- ----------- ---------- ----------
Operating income.... 95,200 907,100 1,414,400 162,400 351,900
Borrowing expenses (note
5)..................... (467,200) (419,800) (285,500) (78,500) (63,100)
Interest income......... 268,100 193,200 135,200 40,200 30,500
Other income (note 11).. -- 176,900 -- -- --
----------- ----------- ----------- ---------- ----------
Income (loss) before
income taxes....... (103,900) 857,400 1,264,100 124,100 319,300
Provision for income
taxes (note 8)......... 8,800 34,600 36,200 3,000 6,600
----------- ----------- ----------- ---------- ----------
Net income (loss)... $ (112,700) $ 822,800 $ 1,227,900 $ 121,100 $ 312,700
=========== =========== =========== ========== ==========
Net income (loss) per
share.................. $ (.02) $ .14 $ .20 $ .02 $ .05
=========== =========== =========== ========== ==========
Weighted average number
of common and common
equivalent shares out-
standing............... 5,722,733 5,752,920 6,083,500 5,794,112 6,525,198
=========== =========== =========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

STATEMENTS OF STOCKHOLDERS' (DEFICIENCY)

<TABLE>
<CAPTION>
SERIES A, B AND C
CONVERTIBLE CUMULATIVE
PREFERRED STOCK COMMON STOCK FOREIGN TREASURY STOCK
------------------ ----------------- ADDITIONAL CURRENCY -------------------
PAR PAR PAID-IN ACCUMULATED TRANSLATION
SHARES VALUE SHARES VALUE CAPITAL DEFICIT ADJUSTMENT SHARES VALUE TOTAL
--------- -------- --------- ------- ---------- ------------ ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993........... 860,969 $ 8,600 3,000,000 $30,000 $8,025,500 $(11,974,600) $(169,300) (185,388) $(225,700) $(4,305,500)
Stock options
exercised...... -- -- -- -- (1,700) -- -- 750 2,000 300
Net loss........ -- -- -- -- -- (112,700) -- -- -- (112,700)
Change in
foreign
currency
adjustment..... -- -- -- -- -- -- 24,900 -- -- 24,900
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at
December 31,
1994........... 860,969 8,600 3,000,000 30,000 8,023,800 (12,087,300) (144,400) (184,638) (223,700) (4,393,000)
Stock options
exercised...... -- -- -- -- (135,000) -- -- 71,160 158,700 23,700
Net income...... -- -- -- -- -- 822,800 -- -- -- 822,800
Change in
foreign
currency
adjustment..... -- -- -- -- -- -- (23,100) -- -- (23,100)
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at
December 31,
1995........... 860,969 8,600 3,000,000 30,000 7,888,800 (11,264,500) (167,500) (113,478) (65,000) (3,569,600)
Net income...... -- -- -- -- -- 1,227,900 -- -- -- 1,227,900
Change in
foreign
currency
adjustment..... -- -- -- -- -- -- 48,000 -- -- 48,000
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at
December 31,
1996........... 860,969 8,600 3,000,000 30,000 7,888,800 (10,036,600) (119,500) (113'478) (65,000) (2,293,700)
Net income
(unaudited).... -- -- -- -- -- 312,700 -- -- -- 312,700
Change in
foreign
currency
adjustment
(unaudited).... -- -- -- -- -- -- (50,800) -- -- (50,800)
--------- -------- --------- ------- ---------- ------------ --------- -------- --------- -----------
Balance at March
31, 1997
(unaudited).... 860,969 $ 8,600 3,000,000 $30,000 $7,888,800 $ (9,723,900) $(170,300) (113,478) $ (65,000) $(2,031,800)
========= ======== ========= ======= ========== ============ ========= ======== ========= ===========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

STATEMENTS OF CASH FLOWS
REPRESENTING INCREASES (DECREASES) IN CASH

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------ --------------------
1994 1995 1996 1996 1997
---------- ----------- ----------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income (loss)...... $ (112,700) $ 822,800 $ 1,227,900 $ 121,100 $ 312,700
Adjustments to recon-
cile net income (loss)
to net cash provided
by operating activi-
ties:
Depreciation and amor-
tization of fixed as-
sets.................. 309,900 351,000 436,100 86,500 150,900
Amortization of li-
censes and purchased
software (note 4)..... 291,000 291,300 -- -- --
Provision for losses
on accounts receiv-
able.................. 99,000 65,000 431,700 17,500 19,900
Changes in operating
assets and liabili-
ties:
Accounts receivable... (203,700) (977,200) (1,930,500) 303,300 (981,600)
Investment in licens-
ing contracts re-
ceivable............. 1,004,500 502,900 585,300 228,600 (80,400)
Prepaid expenses and
other current as-
sets................. (25,400) 69,800 (87,200) 40,200 (111,200)
Other assets.......... (21,600) (18,400) (43,500) (7,700) (7,400)
Accounts payable...... (79,600) 133,500 255,700 33,100 (83,800)
Accrued expenses...... (112,100) 155,000 220,000 39,600 123,700
Other long-term lia-
bilities............. (45,800) (57,400) -- -- 28,200
Deferred maintenance
revenue.............. 224,500 (16,100) (365,600) (232,400) 82,600
---------- ----------- ----------- --------- ---------
Net cash provided
(used) by operating
activities.......... 1,328,000 1,322,200 729,900 629,800 (546,400)
---------- ----------- ----------- --------- ---------
Cash used by investing
activities -- Purchase
of furniture, fixtures
and equipment.......... (237,300) (354,300) (827,500) (118,600) (197,800)
Cash flows from financ-
ing activities:
Net borrowings (repay-
ments) under revolving
line of credit........ (646,000) (1,150,000) (50,000) (550,000) 800,000
Payments under capital
leases................ (172,100) (143,500) (51,900) (18,300) (13,000)
Stock options exer-
cised................. 300 23,700 -- -- --
---------- ----------- ----------- --------- ---------
Net cash (used) pro-
vided by financing
activities.......... (817,800) (1,269,800) (101,900) (568,300) 787,000
---------- ----------- ----------- --------- ---------
Effect of exchange rate
changes on cash........ (500) (5,600) 98,300 (9,400) (4,700)
---------- ----------- ----------- --------- ---------
Net change in cash... 272,400 (307,500) (101,200) (66,500) 38,100
Cash at beginning of pe-
riod................... 177,600 450,000 142,500 142,500 41,300
---------- ----------- ----------- --------- ---------
Cash at end of period... $ 450,000 $ 142,500 $ 41,300 $ 76,000 $ 79,400
========== =========== =========== ========= =========
Supplemental informa-
tion:
Cash paid for:
Interest............... $ 291,000 $ 352,200 $ 278,900 $ 72,400 $ 65,400
Income taxes........... -- 21,000 27,100 20,000 20,000
Non-cash investing ac-
tivity --
Acquisition of equip-
ment under capital
leases................ $ 132,900 $ 104,600 $ -- $ -- $ 30,000
========== =========== =========== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

TSI International Software Ltd. (the "Company") develops, markets, licenses,
and supports computer software and related services which allow organizations
to integrate their business applications within the enterprise and with
outside business partners. The Company's customers are located primarily
throughout the U.S. and Western Europe and represent a broad range of
industries.

(a) Revenue Recognition

Software licensing revenues are recognized upon shipment of the product if
there are no significant post-delivery obligations, or at a later date once
such obligations are satisfied. Maintenance contract revenue is recognized
ratably over the term of the contracts, which are generally for one year. The
unrecognized portion of maintenance revenue is classified as deferred
maintenance revenue in the accompanying balance sheets. Consulting and
training revenues are recognized as services are performed.

The Company licenses its KEY/MASTER product on a term-use basis for 15 to 60
month periods. The contracts provide for maintenance and generally do not have
renewal or purchase options. At contract inception, the present value of the
payments to be received under the contract is apportioned between software
licensing revenue and maintenance revenue and recognized as described above.
The present value of the payments to be received are recorded as the
investment in licensing contracts receivable. License interest revenue is
recognized over the term of the contract at a constant rate of return.

(b) Product Development Costs

Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed",
requires that software development costs: (i) be expensed as incurred until
technological feasibility (as defined therein) is achieved; and (ii)
capitalized subsequent to achieving technological feasibility and prior to the
product being available to customers. The establishment of technological
feasibility of the Company's products has essentially coincided with the
products' general release to customers. Accordingly, the Company expenses all
software development costs as incurred.

Purchased software with alternative future use is capitalized and amortized
over its expected useful life.

Furniture, fixtures and equipment are carried at cost less accumulated
depreciation computed using the straight-line method over their estimated
useful lives. Furniture, fixtures and equipment held under capital leases and
leasehold improvements are amortized on a straight-line basis over the lease
term.

(d) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation allowances
are provided for any portion of the deferred tax assets which are not more
likely than not to be realized.

F-7
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

(e) Net Income (Loss) Per Share

Net income (loss) per share is usually calculated using the weighted average
number of common and common equivalent shares outstanding during each period,
after retroactive adjustment for stock splits (see note 6). In addition, the
Securities and Exchange Commission requires that shares issued or options and
warrants granted within one year of an Initial Public Offering ("IPO") at
prices below the IPO price be shown as outstanding (using the Treasury Stock
method) for all periods presented. Further, in connection with the IPO, all
outstanding preferred stock will be converted into common stock on the basis
described in note 6 and, accordingly, are shown as outstanding for all periods
presented. Following are the components of common stock used to calculate net
income (loss) per share:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Weighted average common
shares outstanding....... 2,815,443 2,845,630 2,886,822 2,886,822 2,886,822
Increment for shares is-
sued within one year of
the IPO.................. 297,875 297,875 297,875 297,875 297,875
Common shares expected to
be issued for conversion
of preferred stock....... 2,609,415 2,609,415 2,609,415 2,609,415 2,609,415
Dilutive effect of stock
options.................. -- -- 289,388 -- 731,086
--------- --------- --------- --------- ---------
Weighted average common
and common equivalent
shares outstanding....... 5,722,733 5,752,920 6,083,500 5,794,112 6,525,198
========= ========= ========= ========= =========
</TABLE>

(f) Cash Equivalents

The Company considers securities with maturities of three months or less,
when purchased, to be cash equivalents.

(g) Use of Estimates

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

(h) Accounting Changes

During 1996, the Company adopted SFAS No. 121 -- "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires companies to review assets for possible impairment and
provides guidelines for recognition of impairment losses related to long-lived
assets, certain intangibles and assets to be disposed of. The impact of the
adoption of SFAS No. 121 was not material.

Also during 1996, the Company adopted SFAS No. 123 -- "Accounting for Stock-
Based Compensation." In accordance with SFAS No. 123, the Company elected not
to record any compensation expense for stock options granted to employees at
fair value and will disclose in the notes to its financial statements the
impact on net income and net income per share as if the fair value based
compensation cost had been recognized (see note 6).

F-8
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

(2) FOREIGN OPERATIONS

The Company's balance sheets include foreign branch assets of $1,565,100,
$2,574,400, and $2,642,600 and liabilities of $258,800, $282,200, and $270,700
at December 31, 1995 and 1996, and (unaudited) March 31, 1997, respectively.
The foreign net income (loss) for the years ended December 31, 1994, 1995, and
1996, and (unaudited) the three months ended March 31, 1996 and 1997, after
allocation of corporate charges, was ($106,700), $133,700, $586,200, $129,600,
and $(115,600) respectively.

With the exception of direct sales activities in the United Kingdom and
Canada, the Company utilizes distributors and agents to market its products
outside the United States. Revenues generated through these third parties
amounted to $230,400, $147,100, $288,700, $91,500, and $35,700 for the years
ended December 31, 1994, 1995, and 1996, and (unaudited) for the three months
ended March 31, 1996 and 1997 respectively.

(3) INVESTMENT IN LICENSING CONTRACTS

The net investment in licensing contracts at December 31, 1996 is comprised
of future minimum contract payments receivable, net of unearned interest
income. The interest rate implicit in term-use licensing contracts was 9.5%
for contracts entered into during the years 1995 and 1996 and (unaudited) for
the first quarter of 1997. Total minimum contract payments receivable at
December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997........................................................... $ 826,200
1998........................................................... 394,100
1999........................................................... 147,800
2000........................................................... 48,000
2001........................................................... 11,800
----------
1,427,900
Less unearned interest income.................................. (134,300)
----------
1,293,600
Less current portion........................................... (742,000)
----------
Non current portion............................................ $ 551,600
==========
</TABLE>

There were no transactions during the three months ended March 31, 1997
which would significantly alter these receivables.

(4) CAPITAL ASSETS

(a) Furniture, Fixtures, and Equipment

Furniture, fixtures and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31, USEFUL LIFE
1995 1996 1997 RANGE
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Computer systems......... $ 1,778,700 $ 2,421,700 $ 2,610,000 3-7 years
Furniture and fixtures... 465,800 545,500 553,800 3-7 years
Office equipment......... 302,800 325,800 331,400 3-7 years
Leasehold improvements... 287,600 328,500 326,400 3-10 years
Automobiles.............. 59,000 99,900 97,600 5 years
----------- ----------- -----------
2,893,900 3,721,400 3,919,200
Less accumulated depreci-
ation and amortization.. (1,980,900) (2,417,000) (2,567,900)
----------- ----------- -----------
$ 913,000 $ 1,304,400 $ 1,351,300
=========== =========== ===========
</TABLE>

F-9
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

Computer systems and equipment under capital leases, included in the above
totals, net of accumulated depreciation, was $203,000, $56,200, and $64,300 as
of December 31, 1995 and 1996 and (unaudited) March 31, 1997, respectively.

(b) Purchased Software

In 1990, the Company acquired software from Foretell Corporation which was
available for sale to customers at the time of purchase. The cost of
$1,484,200 was amortized over a five year period which ended in 1995.
Amortization expense for years 1994 and 1995 was $291,000 and $272,100,
respectively.

(5) LONG-TERM DEBT

Since August 1994, the Company has had a line of credit facility with a
bank. The underlying loan agreement, as amended, which expires in November
1998 and is partially guaranteed by the Connecticut Development Authority
(CDA): (a) provides for Company borrowings equal to the lesser of $4,000,000
or the sum of: (i) 80% of eligible accounts receivable, (ii) lesser
percentages of certain other receivables; and (iii) the effective dollar
amount of the guarantee of the CDA (approximately $600,000); (b) requires
interest on borrowings at either the bank's prime rate plus 1.0% or the LIBOR
rate plus 3.0%; (c) collateralizes all assets of the Company as security for
the borrowings; (d) requires the Company to maintain several financial
covenants; and (e) imposes other restrictions, including (i) prohibition on
losses, cash dividends and key management changes and (ii) limitations on
additional debt, mergers and acquisitions, stock repurchases and sales of
assets (except in the normal course of business). The Company was in
compliance with all financial covenants at December 31, 1996 but (unaudited)
was not in compliance with the indebtedness to EBITDA ratio covenant at March
31, 1997. The Company has received a waiver for this non-compliance.

All repayments are due at maturity. Borrowings based on prime can be prepaid
without penalty.

Borrowing costs and effective interest rates under this agreement were as
follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Interest expense........ $395,400 $368,300 $250,200 $ 65,600 $ 60,000
Guarantee fees to CDA... 63,500 31,500 23,600 7,900 3,100
Commitment fees......... 8,300 20,000 11,700 5,000 --
-------- -------- -------- --------- ---------
$467,200 $419,800 $285,500 $ 78,500 $ 63,100
======== ======== ======== ========= =========
Effective interest rate. 10.13% 11.41% 9.51% 11.69% 8.41%
======== ======== ======== ========= =========
</TABLE>

F-10
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) STOCKHOLDERS' (DEFICIENCY)

(a) Recent Developments

On May 8, 1997, the Board of Directors approved an IPO of the Company's
common stock and in connection therewith also approved at the closing of the
IPO: (i) an increase in the number of authorized shares of common stock and
preferred stock to 20,000,000 shares and 5,000,000 shares, respectively; and
(ii) a three-for-one common stock split. The accompanying financial statements
have been retroactively adjusted to reflect this common stock split. Pursuant
to the Company's Certificate of Incorporation, the closing of the IPO will
cause the conversion of all preferred shares into 2,759,715 shares of common
stock.

The Board of Directors also approved the following stock-based plans:

<TABLE>
<CAPTION>
SHARES FORMS OF ISSUANCES
TYPE OF PLAN RESERVED OR GRANTS AWARDED
------------ --------- ------------------
<S> <C> <C>
Equity Incentive 1,125,000 Options, restricted shares and awards.
(replacing the 1993 Grants (under the 1993 Plan) of 142,500
Stock Option Plan) options at exercise prices from $5.00 to
$6.67 a share.
Directors Stock Option 225,000 Grants of 60,000 options at exercise price
of $6.67 a share.
Employee Stock Purchase 750,000 No grants made.
---------
2,100,000
=========
</TABLE>

In addition, on May 15, 1997, three new investors acquired a total of 50,000
shares of Series E convertible preferred stock at $20 a share. At the closing
of the IPO, these shares will be converted into 150,000 shares of common
stock.

(b) Preferred and Common Stock

The Company's Certificate of Incorporation authorizes 1,638,166 shares of
preferred stock, and 3,888,166 shares of common stock, each with a par value
of $.01 a share.

All of the classes of Preferred Stock (a) have the right to vote on an as-
converted basis; (b) convert into common stock; and (c) have certain anti-
dilution rights. The authorized shares of preferred stock have been designated
as follows:

<TABLE>
<S> <C>
Series A Convertible Preferred Stock ("Series A stock")............ 297,405
Series B Convertible Preferred Stock ("Series B stock")............ 115,761
Series C Convertible Preferred Stock ("Series C stock")............ 725,000
Series D Convertible Preferred Stock ("Series D stock")............ 364,469
Undesignated....................................................... 135,531
---------
1,638,166
=========
</TABLE>

Upon liquidation, dissolution or winding up of the Company, before any
distribution in respect of the Series A stock, Series B stock or common stock,
the holders of the Series C stock are entitled to receive an amount equal to
$6.00 a share plus any declared and unpaid dividends. In addition, the Series
C stock is

F-11
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED
entitled to receive preferential non-cumulative dividends, when declared, at
an annual per share amount of $0.48 through December 31, 1997 and cumulative
dividends at $0.72 a share thereafter. The Series C stock may be redeemed at
the Company's option after June 30, 1997 at $6.00 a share plus all accumulated
and unpaid dividends. Further, before any distribution in respect of the
common stock, the holders of shares of the Series B stock and subsequently the
Series A stock are entitled to receive an amount equal to $13.39 a share plus
any declared and unpaid dividends. In addition, the holders of the Series B
and A stock are entitled to receive preferential non-cumulative dividends,
when declared, at an annual per share amount of $1.07 through December 31,
1997 and cumulative dividends at $1.61 a share thereafter. The Series B and A
stock may be redeemed at the Company's option after June 30, 1997 at $13.39 a
share, plus all accumulated and unpaid dividends. No dividends have been or
are required to be declared on these shares.

At December 31, 1996 the following shares of preferred stock were
outstanding:

<TABLE>
<S> <C>
Series A stock....................................................... 297,405
Series B stock....................................................... 115,761
Series C stock....................................................... 447,803
-------
Total outstanding.................................................. 860,969
Series B Stock issuable to prevent dilution.......................... 8,936
-------
869,905
=======
</TABLE>

Certain owners of preferred and common stock hold an aggregate of nine
warrants to purchase Series D stock at $2.00 a share. The warrants expire in
2002 and, seven of which are not expected to be exercised prior to the
proposed IPO. After the IPO, the remaining warrants are exercisable for
711,771 shares of common stock.

The Company maintains a 1993 Stock Option Plan ("Plan") which provides that
the Company may grant options for employees to purchase up to 1,558,431 shares
of the Company's common stock. Options issued to date have been granted at
fair market value, as determined by the Company's Board of Directors. No
options may be granted for a term greater than 10 years.

Transactions under the Plan are summarized below:

<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Shares under option at January 1........................ 739,767 919,857
Options exercised....................................... (71,160) --
Options granted......................................... 367,500 150,000
Options canceled........................................ (116,250) (6,000)
-------- ---------
Shares under option at December 31...................... 919,857 1,063,857
======== =========
Options exercisable at December 31...................... 409,107 576,357
======== =========
</TABLE>

Options were granted in 1995 and prior years at an exercise price of $0.33 a
share and options were granted during 1996 at exercise prices of $0.67 and
$1.67 a share. Substantially all options vest ratably over a four year period
from the date of grant.

There were 422,664 shares available for grant at December 31, 1996 and
(unaudited) 39,000 options were granted at $1.67 a share during the three
months ended March 31, 1997.

F-12
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

As discussed in Note 1, the Company adopted SFAS No. 123 during 1996 and
elected not to recognize compensation expense relating to employee stock
options where the exercise price of the option equaled the fair value (as
estimated by the Company) of the stock on the date of grant. As a non-public
entity, the Company utilized the minimum value method to determine
compensation based on the fair value of the options on the date of grant in
accordance with SFAS No. 123. Following are the resultant pro forma amounts of
net income and net income per share:

<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Net income -- as reported............................... $822,800 $1,227,900
Net income -- pro forma................................. $819,500 $1,216,600
Primary net income per share -- as reported............. $ .14 $ .20
Primary net income per share -- pro forma............... $ .14 $ .20
</TABLE>

The pro forma effect on net income for 1995 and 1996 is not representative
of the pro forma effect on net income in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1995.

The fair value of each option granted in 1995 and 1996 was $.21 and $.87,
respectively based on estimates on the date of grant using the modified Black-
Scholes option pricing model using the following weighted average assumptions:

<TABLE>
<S> <C>
Risk-free interest rate................................................ 6.27%
Expected life in years................................................. 6
Expected volatility.................................................... 0%
Expected dividend yield................................................ 0%
</TABLE>

(7) EMPLOYEE BONUS AND SAVINGS PLANS

The Company maintains a bonus plan for all non-executive officer employees.
The bonus plan is reviewed annually by the Board of Directors and provides for
payments based upon a percentage of pretax income, as defined. Bonus payments
of $40,000, $100,000, and $200,000 were authorized during 1994, 1995, and
1996, respectively.

On July 1, 1990, the Company established a defined contribution plan under
Section 401(k) of the Internal Revenue Code which provides for voluntary
employee salary deferrals but does not require Company matching funds. The
defined contribution plan covers substantially all employees. Employees are
eligible to contribute to the defined contribution plan upon completion of
three months of service with the Company. Contributions are subject to
established limitations as determined by the Internal Revenue Service. There
have been no Company contributions to the plan to date.

(8) INCOME TAXES

The provision for income taxes is composed solely of Federal Alternative
Minimum Taxes (AMT). The AMT for the Company's fiscal year ended April 30,
1995 of $13,200 was prorated to calendar 1994 ($8,800) and 1995 ($4,400). The
AMT for the period May 1 to December 31, 1995 was approximately $32,000. The
AMT for the year ended December 31, 1996 was approximately $36,200.

At December 31, 1996, the Company had: (a) federal tax net operating loss
carryforwards of $8,646,000 expiring between the years 2000 and 2009; (b)
research and experimentation credits of $590,000 expiring between 2003 and
2008; and (c) AMT credit carryforwards of $68,100 which have no expiration
date. Section

F-13
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED
382 of the Internal Revenue Code imposes a limitation on the amount of tax
loss carryforwards which can be utilized in any year after there has been a
50% or greater ownership change of the Company. The ownership change is based
on the number of shares of stock or the aggregate market value of the stock
within any consecutive three year period. Future years' utilization of the
Company's tax loss carryforwards could be subject to this limitation.

At December 31, 1995 and 1996, the components of net deferred taxes
(utilizing a 41.4% combined tax rate) were:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax liabilities.............................. $1,306,900 $1,024,900
Deferred tax assets, net of valuation allowances of
$5,798,200 and $5,294,900 in 1995 and 1996........... 1,306,900 $1,024,900
---------- ----------
Net deferred taxes.................................. $ -- --
========== ==========
</TABLE>

Significant temporary differences which give rise to deferred tax (a)
liabilities and (b) assets are: (a) investment in licensing contracts
receivable and depreciation; and (b) net operating loss carryforwards and
deferred maintenance revenues.

The decrease in the valuation allowance of $503,300 in 1996 is the result of
the utilization of net operating loss carryforwards.

(9) ACCRUED EXPENSES

Included in accrued expenses as of December 31, 1995 and 1996 and
(unaudited) March 31, 1997 are compensation costs (regular payroll, bonus and
profit sharing) of $336,500, $548,300 and $804,200, respectively.

(10) COMMITMENTS AND CONTINGENCIES

The Company rents premises and furniture, fixtures and equipment under
operating leases which expire at various dates through 2010.

Future minimum payments, by year and in the aggregate, under operating and
capital leases at December 31, 1996 are:

<TABLE>
<CAPTION>
CAPITAL OPERATING
-------- ----------
<S> <C> <C>
1997................................................... $ 82,200 $ 787,300
1998................................................... 24,100 743,700
1999................................................... 9,000 705,900
2000................................................... -- 708,200
2001................................................... -- 453,900
Thereafter............................................. -- 1,404,300
-------- ----------
Total................................................ $115,300 $4,803,300
==========
Less amount representing interest...................... (10,200)
--------
Present value of minimum capital lease payments...... $105,100
========
</TABLE>

F-14
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

NOTES TO FINANCIAL STATEMENTS--CONTINUED

There were no significant modifications to the Company's portfolio of leases
during the three months ended March 31, 1997.

Certain of the aforementioned leases provide for additional payments
relating to taxes and other operating expenses. Rental expense for the years
ended December 31, 1994, 1995, and 1996 and (unaudited) the three months ended
March 31, 1996 and 1997 under all operating leases aggregated approximately
$770,900, $820,900, $717,300, $201,600, and $193,100, respectively.

(11) LITIGATION SETTLEMENT

In April 1995 the Company received cash in settlement of a lawsuit which,
after payment of legal expenses, resulted in a non-operating gain of $176,900.

(12) CONDENSED QUARTERLY INFORMATION (UNAUDITED)

The following condensed quarterly information has been prepared by
management on a basis consistent with the Company's audited financial
statements. Such quarterly information may not be indicative of future
results. Amounts are in thousands, except per share data.

<TABLE>
<CAPTION>
1995
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.............................. $3,897 $4,027 $4,070 $4,067
Gross profit................................ 2,993 3,161 3,538 3,444
Net income.................................. 92 3 568 160
Net income per share........................ $ .02 $ -- $ .10 $ .03
Weighted average number of common and common
equivalent shares outstanding.............. 5,723 5,724 5,771 5,794
<CAPTION>
1996
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.............................. $4,089 $4,236 $5,046 $5,633
Gross profit................................ 3,564 3,681 4,413 4,845
Net income.................................. 121 186 518 403
Net income per share........................ $ .02 $ .03 $ .08 $ .06
Weighted average number of common and common
equivalent shares outstanding.............. 5,794 5,946 6,251 6,342
</TABLE>

The sum of the quarterly per share amounts do not agree to the respective
annual amounts due to rounding.

F-15
<PAGE>

The inside back cover contains a chart depicting data transformation. The left
side of the graphic contains pictures of 3 computers in a vertical row with a
cube, pyramid and sphere, respectively next to the computer. Each drawing has an
arrow emanating from it to an oval in the center of the graphic. The oval
contains a vertical row of a cube, pyramid and sphere (in a vertical column)
each with two arrows emanating from it and pointing to two other three
dimensional shapes on the right side of the oval. The right side of the oval has
two arrows emanating from it and pointing towards the right. The top arrow
points to a piece of computer equipment with a three dimensional shape next to
it and the bottom arrow points to a different piece of computer equipment with a
three dimensional "pie" shape next to it.

The TSI Data Transformation Solution
for Integrating Applications

. Concurrent transformation between multiple application sources and
destinations

. Support for any application, message or file format

. Elimination of custom written interface programs

. No modification to the underlying applications

. Support for multiple protocols for data transport

. Scalability and portability across a broad range of computing platforms

. Execution in batch mode, real-time, stand-alone, or embedded within
applications

<PAGE>

[COMPANY LOGO APPEARS HERE]

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth expenses, other than the underwriting
discount and commissions, to be paid by the Registrant in connection with this
offering. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market filing fee:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 12,121
NASD filing fee................................................. 4,500
Nasdaq National Market filing fee............................... 40,665
Accounting fees and expenses.................................... 125,000
Legal fees and expenses......................................... 300,000
Printing and engraving expenses................................. 135,000
Blue sky fees and expenses...................................... 15,000
Transfer agent and registrar fees and expenses.................. 12,500
Miscellaneous................................................... 55,214
--------
Total......................................................... $700,000
========
</TABLE>
- --------
* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty
as a director to the fullest extent permitted by the Delaware General
Corporation Law. As permitted by Section 145 of the Delaware General
Corporation Law, the Bylaws of the Registrant provide that (i) the Registrant
is required to indemnify its directors and executive officers and the
directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law, (ii) to the fullest extent permitted by the
Delaware General Corporation Law, the Registrant is required to advance all
expenses, as incurred, to its directors and executive officers in connection
with a legal proceeding (subject to certain exceptions), (iii) the rights
conferred in the Bylaws are not exclusive, (iv) the Registrant may, in its
discretion indemnify or advance expenses to persons whom the Registrant is not
obligated to indemnify or advance expenses; (v) the Registrant is authorized
to enter into indemnification agreements with its directors, officers,
employees and agents or any person serving at the request of the Registrant as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, including employee benefit plans and
(vi) the Registrant may not retroactively amend the Bylaw provisions relating
to indemnification.

The Registrant intends to enter into indemnity agreements with each of its
directors and executive officers. The indemnity agreements provide that
directors and executive officers will be indemnified and held harmless to the
fullest possible extent permitted by law including against all expenses
(including attorneys' fees), judgments, fines and settlement amounts paid or
reasonably incurred by them in any action, suit or proceeding, including any
derivative action by or in the right of the Registrant, on account of their
services as directors, officers, employees or agents of the Registrant or as
directors, officers, employees or agents of any other company or enterprise
when they are serving in such capacities at the request of the Registrant. The
Registrant will not be obligated pursuant to the agreements to indemnify or
advance expenses to an indemnified party with respect to proceedings or claims
(i) initiated by the indemnified party and not by way of defense, except with
respect to a proceeding authorized by the Board and successful proceedings
brought to enforce a right to indemnification under the indemnity agreements,
(ii) for any amounts paid in settlement of a proceeding unless the Registrant
consents to such settlement; (iii) on account of any suit in which judgment is
rendered against the indemnified party for an accounting of profits made from
the purchase or sale by the indemnified party of securities of the Registrant
pursuant to the provisions of (S)16(b) of the

II-1
<PAGE>

Securities Exchange Act of 1934 and related laws; (iv) on account of conduct
by an indemnified party that is finally adjudged to have been in bad faith or
conduct that the indemnified party did not reasonably believe to be in, or not
opposed to, the best interests of the Registrant; (v) on account of any
criminal action or proceeding arising out of conduct that the indemnified
party had reasonable cause to believe was unlawful; or (vi) if a final
decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful.

The indemnity agreement requires a director or executive officer to
reimburse the Registrant for expenses advanced only to the extent it is
ultimately determined that the director or executive officer is not entitled,
under Delaware law, the Bylaws, his or her indemnity agreement or otherwise to
be indemnified for such expenses. The indemnity agreement provides that it is
not exclusive of any rights a director or executive officer may have under the
Certificate of Incorporation, Bylaws, other agreements, any majority-in-
interest vote of the stockholders or vote of disinterested directors, Delaware
law, or otherwise.

The indemnification provision in the Bylaws, and the indemnity agreements
entered into between the Registrant and its directors and executive officers,
may be sufficiently broad to permit indemnification of the Registrant's
directors and executive officers for liabilities arising under the Securities
Act.

As authorized by the Registrant's Bylaws, the Registrant, with approval by
the Registrants Board, has is seeking, and expects to obtain, directors and
officers liability insurance.

Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:

<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
-------- --------------
<S> <C>
Form of Underwriting Agreement............................. 1.01
Registrant's Certificate of Incorporation.................. 3.01
Registrant's Bylaws........................................ 3.04
1989 Stock Purchase Agreement, as amended.................. 4.03
Form of Indemnification Agreement.......................... 10.06
</TABLE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The following table sets forth information regarding all securities sold by
the Registrant and its Connecticut predecessor since May 1, 1994.

<TABLE>
<CAPTION>
AGGREGATE
NUMBER PURCHASE FORM OF
CLASS OF PURCHASERS DATE OF SALE TITLE OF SECURITIES OF SHARES PRICE CONSIDERATION
------------------- ------------ ------------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Officers, directors and 05/94-05/97 Options to Purchase 772,500 -- --
employees Shares of Common Stock
granted under the
Company's 1993 Stock
Option Plan (1)
Officers, directors and 05/94-05/97 Common Stock purchased 71,910 $ 23,970 cash
employees upon exercise of stock
options
Mitsui & Co., Ltd., May 15, 1997 Series E Convertible 50,000 $1,000,000 cash
Mitsui Knowledge Preferred Stock
Industry Co., Ltd. and
Nippon Venture Capital
Co., Ltd.
</TABLE>
- --------
(1) With respect to the grant of stock options, exemption from registration
under the Securities Act was unnecessary in that none of such transactions
involved a "sale" of securities as such term is used in Section 2(3) of
the Securities Act.

II-2
<PAGE>

All sales of Common Stock made pursuant to the exercise of stock options
granted under the Registrant's stock option plan and issuances to independent
contractors were made pursuant to the exemption from the registration
requirements of the Securities Act afforded by Rule 701 promulgated under the
Securities Act.

All other sales were made in reliance on Registration S promulgated under
the Securities Act or Section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act. This sale was made to three purchasers,
two of which are affiliated, in connection with a distribution arrangement
without general solicitation or advertising. The purchasers were not United
States residents and were sophisticated investors with access to all relevant
information necessary to evaluate the investment who represented to the
Registrant that the shares were being acquired for investment.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed herewith:

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.13 --Letter Agreement, between Registrant and Constance Galley.*
10.14 --Letter Agreement dated as of December 5, 1995 between Registrant
and Eric Amster.+
10.15 --Letter Agreement dated as of October 5, 1995, between Registrant
and Ira Gerard.+
10.16 --Letter Agreement dated as of January 1, 1994 between Registrant
and Edward Watson.+
10.17 --Letter Agreement dated as of October 1, 1994, between Registrant
and Saydean Zeldin.+
10.18 --Series E Preferred Stock Purchase Agreement dated as of May 15,
1997 between the Company and the Purchasers named therein.+
23.01 --Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 --Consent of KPMG Peat Marwick LLP, Independent Accountants.
27.01 --Financial Data Schedule (EDGAR version only).+
24.01 --Power of Attorney (see Page II-6 of this Registration Statement).+
</TABLE>
- --------

* To be filed by amendment.

+ Previously filed.

(b) The following financial statement schedule is filed herewith:

Schedule II -- Valuation and Qualifying Accounts

Other financial statement schedules are omitted because the information
called for is not required or is shown either in the Financial Statements or
the Notes thereto.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wilton, State of Connecticut, on the
5th day of June, 1997.

TSI INTERNATIONAL SOFTWARE LTD.

/s/ Constance F. Galley
By: _________________________________
CONSTANCE F. GALLEY
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

In accordance with the requirements of the Securities Act, this Registration
Statement was signed by the following persons in the capacities and on the
dates indicated.

NAME TITLE DATE
<S> <C> <C>

PRINCIPAL EXECUTIVE OFFICER:

/s/ Constance F. Galley President, Chief
_____________________________________ Executive Officer June 5, 1997
CONSTANCE F. GALLEY and a Director

PRINCIPAL FINANCIAL AND
PRINCIPAL ACCOUNTING OFFICER:

/s/ Ira A. Gerard Vice President,
_____________________________________ Finance and June 5, 1997
IRA A. GERARD Administration and
Chief Financial
Officer
</TABLE>

II-5
<PAGE>

NAME TITLE DATE
---- ----- ----

DIRECTORS:

Director
* June 5, 1997
_____________________________________
STEWART K.P. GROSS

Director
* June 5, 1997
_____________________________________
ERNEST E. KEET

Director
* June 5, 1997
_____________________________________
JOHN J. PENDRAY

Director June 5, 1997
*
_____________________________________
DENNIS G. SISCO

/s/ Ira Gerard Attorney-in-Fact June 5, 1997
*____________________________________
IRA GERARD

II-6
<PAGE>

INDEPENDENT AUDITORS' REPORT ON SCHEDULE

The Board of Directors
TSI International Software Ltd.

The audits referred to in our report dated April 14, 1997 included the
related financial statement schedule for the years ended December 31, 1994,
1995, and 1996, included in the registration statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion of this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects, the information set forth therein.

KPMG Peat Marwick LLP

Stamford, Connecticut
April 14, 1997

S-1
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD

FINANCIAL STATEMENT SCHEDULE

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
CHARGED BALANCE
BALANCE AT TO COSTS CHARGED TO AT END
BEGINNING AND OTHER OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS(2) PERIOD
----------- ---------- -------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts Receivable:
Year ended December 31,
1994................... $399,600 $99,000 $96,600 $(443,100) $152,100
Year ended December 31,
1995................... 152,100 65,000 65,800 (124,800) 158,100
Year ended December 31,
1996................... 158,100 431,700 1,400 (271,300) 319,900
Three months ended March
31, 1996............... 158,100 17,500 -- (14,100) 161,500
Three months ended March
31, 1997............... 319,900 19,900 94,000 (145,000) 288,800
</TABLE>
- --------
(1) Recoveries of balances previously written off.
(2) Write-offs of receivables and reversals of unneeded balances.

S-2
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.01 --Form of Underwriting Agreement.+
3.01 --Registrant's Certificate of Incorporation.+
3.02 --Form of Amended and Restated Certificate of Incorporation to be
filed after the consummation of this offering.
3.03 --Registrant's Bylaws.+
4.01 --Form of Specimen Certificate for Registrant's Common Stock.
4.02 --Stockholders Agreement dated as of June 1, 1989, as amended.+
4.03 --1989 Stock Purchase Agreement dated as of June 1, 1989, as
amended.
5.01 --Opinion of Fenwick & West LLP regarding legality of the securities
being issued.*
10.01 --Registrant's 1993 Stock Option Plan and related documents.+
10.02 --Registrant's 1997 Equity Incentive Plan.+
10.03 --Registrant's 1997 Directors Stock Option Plan.+
10.04 --Registrant's 1997 Employee Stock Purchase Plan.+
10.05 --Registrant's Profit Participation Plan.
10.06 --Form of Indemnification Agreement to be entered into by Registrant
with each of its directors and executive officers.
10.07 --Lease Agreement dated as of January 2, 1990 between Registrant and
Robert D. Scinto, as amended.+
10.08 --Office Building Lease dated as of February 4, 1994 between
Registrant and American National Bank and Trust Company of Chicago,
not individually but solely as Trustee under Trust No. 42978, as
amended.+
10.09 --Lease Agreement dated as of July 1, 1996 between Registrant and
Boca Corners, L.P., Ltd., as amended.+
10.10 --Credit Agreement dated as of July 31, 1994 between Registrant and
The Bank of New York, as amended.+
10.11 --Security Agreement dated as of July 31, 1994 between Registrant
and The Bank of New York.+
10.12 --Guarantee Agreement dated as of August 22, 1994 by and between the
Connecticut Development Authority and The Bank of New York, as
amended.+
10.13 --Letter Agreement, between Registrant and Constance Galley.*
10.14 --Letter Agreement dated as of December 5, 1995 between Registrant
and Eric Amster.+
10.15 --Letter Agreement dated as of October 5, 1995, between Registrant
and Ira Gerard.+
10.16 --Letter Agreement dated as of January 1, 1994 between Registrant
and Edward Watson.+
10.17 --Letter Agreement dated as of October 1, 1994, between Registrant
and Saydean Zeldin.+
10.18 --Series E Preferred Stock Purchase Agreement dated as of May 15,
1997 between the Company and the Purchasers named therein.+
23.01 --Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 --Consent of KPMG Peat Marwick LLP, Independent Accountants.
27.01 --Financial Data Schedule (EDGAR version only).+
24.01 --Power of Attorney (see Page II-6 of this Registration Statement).+
</TABLE>
- --------

* To be filed by amendment.

+ Previously filed.

<PAGE>

Exhibit 3.02

FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TSI INTERNATIONAL SOFTWARE LTD.

Constance Galley and Ira Gerard, President and Secretary, respectively, of
TSI International Software Ltd., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 242 and 245 thereof, DO HEREBY CERTIFY:

FIRST: The name of the corporation is TSI International Software Ltd.
TSI International Software Ltd. was originally incorporated under the same name,
and the original Certificate of Incorporation of the Corporation was filed with
the Secretary of State of the State of Delaware on September 9, 1993.

SECOND: That this amendment and restatement of the Corporation's Restated
Certificate of Incorporation set forth in the following resolution has been
approved by the Corporation's Board of Directors and stockholders and was duly
adopted in accordance with the provisions of Section 242 and 245 of the General
Corporation Law of the State of Delaware, and written notice of the adoption of
this Amended and Restated Certificate of Incorporation has been given as
provided by Section 228 of the General Corporation Law of the State of Delaware
to every stockholder entitled to such notice.

NOW, THEREFORE, BE IT RESOLVED, that the Restated Certificate of
Incorporation of this Corporation be, and it hereby is, amended and restated to
read in its entirety as follows:

ARTICLE I

The name of the corporation is TSI International Software Ltd.

ARTICLE II

The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name
of its registered agent at that address is The Prentice-Hall Corporation System,
Inc.

ARTICLE III

The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
<PAGE>

ARTICLE IV

The total number of shares of all classes of stock which the corporation
has authority to issue is 25,000,000 shares, consisting of two classes:
20,000,000 shares shall be denominated Common Stock, $0.01 par value per share,
and 5,000,000 shares shall be denominated Preferred Stock, $0.01 par value per
share.

The Board of Directors is authorized, subject to any limitations prescribed
by the law of the State of Delaware, to provide for the issuance of the shares
of Preferred Stock in one or more series, and, by filing a Certificate of
Designation pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof,
and to increase or decrease the number of shares of any such series (but not
below the number of shares of such series then outstanding). The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the stock of the corporation entitled to vote,
unless a vote of any other holders is required pursuant to a Certificate or
Certificates establishing a series of Preferred Stock.

Except as otherwise expressly provided in any Certificate of Designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article IV, any new series of Preferred Stock may be designated, fixed
and determined as provided herein by the Board of Directors without approval of
the holders of Common Stock or the holders of Preferred Stock, or any series
thereof, and any such new series may have powers, preferences and rights,
including without limitation, voting rights, dividend rights, liquidation
rights, redemption rights and conversion rights, senior to, junior to or pari
passu with the rights of the Common Stock, the Preferred Stock, or any future
class or series of Preferred Stock or Common Stock.

ARTICLE V

The Board of Directors of the corporation shall have the power to adopt,
amend or repeal Bylaws of the corporation.

ARTICLE VI

Election of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.

ARTICLE VII

To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize

2
<PAGE>

the further elimination or limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.

Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been executed on behalf of the Corporation by Constance Galley, its
President, and Ira Gerard, its Secretary, this ___th day of July 1997.

TSI International Software Ltd.

By: ___________________________
Name: Constance Galley
Title: President

By: ____________________________
Name: Ira Gerard
Title: Secretary

<PAGE>

[Number] TSI INTERNATIONAL SOFTWARE LTD. [Shares]

INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE COMMON STOCK

THIS CERTIFIES THAT CUSIP 872879 10 1
SEE REVERSE FOR
CERTAIN DEFINITIONS
IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.01 PER SHARE OF

TSI INTERNATIONAL SOFTWARE LTD.

(hereinafter the "Corporation"), transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

PRESIDENT AND CHIEF [CORPORATE SEAL] VICE PRESIDENT, FINANCE AND
EXECUTIVE OFFICER ADMINISTRATION
CHIEF FINANCIAL OFFICER AND
SECRETARY
<PAGE>

TSI INTERNATIONAL SOFTWARE LTD.

The Corporation will furnish without charge to each stockholder who so
requests a statement of the designations, powers, preferences and relative
participating, optional or other special of each class of stock or series
thereof of the Corporation and the qualifications, limitations or restrictions
of such preferences and/or rights. Such request may be made to the Corporation
or the Transfer Agent.

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM -- as tenants in UNIF GIFT ACT - __________ Custodian ____________
common (Cust) (Minor)
TEN ENT -- as tenants by under Uniform Gifts to Minors
JT TEN -- as joint tenants Act _____________________________
with right of (State)
survivorship and
not as tenants in common

Additional abbreviations may also be used though not in the above list.

For value received, the undersigned hereby sells, assigns and transfers
unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ shares

of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated________________________________

__________________________________
Notice: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER.

Signature(s) Guaranteed;

_____________________________________

THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.

<PAGE>

EXHIBIT 4.03

PREFERRED STOCK PURCHASE AGREEMENT
BY
AND
AMONG
TSI INTERNATIONAL LTD.,
WARBURG, PINCUS CAPITAL COMPANY, L.P.
AND
VANGUARD ATLANTIC LTD.
<PAGE>

PREFERRED STOCK PURCHASE AGREEMENT

This Preferred Stock Purchase Agreement (the Agreement"), dated as of
the 1st day of June, 1989, by and among TSI International Ltd., a Connecticut
corporation (the "Company"), Vanguard Atlantic Ltd., a Connecticut corporation
("Vanguard") and Warburg, Pincus Capital Company, L.P., a Delaware limited
partnership ("Warburg") (Vanguard and Warburg being sometimes hereinafter
referred to singly as an "Investor" and together as the "Investors").

W I T N E S S E T H :
- - - - - - - - - -

WHEREAS, the Company desires to issue and sell to the Investors shares
of Series A Preferred Stock of the Company (the "Preferred Shares"); and

WHEREAS, the Investors desire to purchase the Preferred Shares from
the Company.

NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:

1. Definitions; Purchase and Sale of Preferred Shares.
--------------------------------------------------

1.1. Definitions. Certain terms as used in this Agreement are
-----------
defined in Section 14 hereof and reference is hereby made to such Section.

1.2. Authorization and Designation of Preferred Shares. On or
-------------------------------------------------
before the Closing Date (as hereinafter defined), the Company shall (a) cause to
be approved by the holders of at least two-thirds (2/3) of the presently
outstanding shares of each class of its capital stock and filed with the
Secretary of State of Connecticut a certificate of amendment (the "Certificate
of Amendment") to the Certificate of Incorporation of the Company, in the form
attached hereto as Exhibit B, which will increase the number of authorized
shares of Common Stock, reclassify and convert the Class A Common Stock, Class B
Common Stock and Class C Common Stock as Common Stock, without preemptive rights
as provided in Section 33-343 of the Connecticut Stock Corporation Act, and
authorize the creation of the Preferred Shares and
<PAGE>

(b) cause to be approved by its Board of Directors and filed with the Secretary
of State of Connecticut a certificate of amendment to the Certificate of
Incorporation of the Company (the "Certificate of Designations"), in the form
attached hereto as Exhibit C, pursuant to which the Company will be authorized
to issue the Preferred Shares having the designations, preferences, and
relative, participating, optional and other special rights set forth in the
Certificate of Designations.

1.3. Sale of Preferred Shares. Subject to the terms and
------------------------
conditions hereof, on the Closing Date the Company hereby agrees to issue and
sell to each Investor, and each Investor agrees to purchase from the Company,
the number of Preferred Shares set forth opposite such Investor's name on
Exhibit A hereto.

1.4. Purchase Price. The purchase price to be paid by the
--------------
Investors for the Preferred Shares is $13.39 per share. The purchase price will
be payable on the Closing Date: (a) by Warburg, by wire transfer of funds or
delivery to the Company of a cashier's check in the amount of $3,682,250 and (b)
by Vanguard, by delivery to the Company of the Company's Promissory Note, dated
April 30, 1986, issued to Vanguard in the original principal amount of $800,000,
which has accrued interest as of the close of business on May 31, 1989 equal to
$5,312.33, $300,002.95 of which principal and accrued interest is being used to
purchase Preferred Shares.

1.5. Closing Date. The closing of the transactions
------------
contemplated by this Agreement (the "Closing") shall take place at the offices
of Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York, at 10:00
A.M. local time on June 2, 1989, or on such other date or time as shall be
mutually agreed to by the parties to this Agreement (the "Closing Date").

2. Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants to the Investors as follows:

2.1. Organization. The Company is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Connecticut. The Company

-2-
<PAGE>

has all requisite corporate power and authority and holds all licenses, permits
and other required authorizations from governmental authorities necessary to
conduct its business as it is now being conducted or as proposed to be conducted
and to own or lease the properties and assets it now owns or holds under lease.
Except as set forth on Schedule 2.1 attached hereto, the Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction wherein the character of its properties or the nature of the
activities conducted by it makes such qualification or licensing necessary and
where failure to so qualify would have a material, adverse effect on the
business or operations of the Company, which jurisdictions are set forth on
Schedule 2.1 attached hereto.

2.2. Charter Documents. The Company has heretofore delivered
-----------------
to counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
the date hereof. Except as set forth on Schedule 2.2, there will be no changes
made to such Certificate of Incorporation or By-Laws between the date hereof and
the Closing Date, except as contemplated by Exhibits B and C hereto.

2.3. Capitalization. As of the Closing Date, the Company's
--------------
authorized capitalization will consist of: 3,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock"), 939,250 of which will be outstanding
and 60,650 of which will be subject to outstanding options; and 750,000 shares
of Preferred Stock, par value $.01 per share, 550,000 of which have been
designated Series A Convertible Preferred Stock and none of which will be
outstanding until issuance pursuant hereto. All outstanding shares of stock of
the Company are validly issued, fully paid and non-assessable. The issuance of
the Preferred Shares and of the shares of Common Stock issuable upon conversion
of the Preferred Shares (the "Conversion Shares") pursuant to the provisions of
this Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Preferred Shares as contemplated by this Agreement with the exception of
certain post-issuance filing

-3-
<PAGE>

requirements with Federal and state securities commissions, including without
limitation filing of a Form D with the Securities and Exchange Commission. A
true and complete list of the holders of all issued and outstanding equity
securities (including options, warrants or other rights to purchase equity
securities), of the Company on the date hereof, including the number of
securities owned by or issuable to each such holder, is set forth on Schedule
2.3 attached hereto. No shareholder of the Company or any other person is
entitled to any preemptive rights with respect to the purchase or sale of any
securities by the Company. When issued and sold to the Investors, the Preferred
Shares will be duly and validly issued, fully paid and non-assessable, will be
free and clear of any liens, pledges or encumbrances and will have the
designations, preferences and relative, participating, optional and other
special rights as set forth in the Certificate of Designations. The Conversion
Shares, when issued and delivered upon conversion of the Preferred Shares, will
be duly and validly issued, fully paid and non-assessable. Except as set forth
on Schedule 2.3 attached hereto, there are no outstanding options, warrants or
other rights, commitments or arrangements, written or oral, to which the Company
is a party or by which it is bound, to purchase or otherwise acquire any
authorized but unissued shares of capital stock of the Company or any security
directly or indirectly convertible into or exchangeable or exercisable for any
capital stock of the Company.

2.4. Ordinary Course of Business. Except as set forth on
---------------------------
Schedule 2.4 attached hereto, since March 31, 1989, the Company has not and,
from the date hereof to the Closing Date, it will not have:

(a) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) in excess of $10,000 individually,
except expenses incurred in the ordinary course of business;

(b) paid any obligations or liabilities in excess of
$10,000 individually, other than current liabilities paid in the ordinary course
of business;

(c) declared or made any payment or distribution in cash,
securities or property to its shareholders or purchased or redeemed any shares
of its capital stock;

-4-
<PAGE>

(d) mortgaged, pledged or subjected to any lien, charge
or any other encumbrance, any material portion of its properties or assets;

(e) sold, assigned or transferred any material portion of
its assets except software and technology licenses in the ordinary course of
business;

(f) suffered any extraordinary losses in excess of
$10,000 individually or waived any rights of material value;

(g) made any capital expenditures or commitments therefor
in excess of $10,000 individually except in the ordinary course of business; or

(h) entered into any material agreement or other
transaction other than in the ordinary course of business.

2.5. Compliance with Other Instruments. To the Company's best
---------------------------------
knowledge, the Company is not in material default in the performance of any
material obligation, agreement, instrument or undertaking to which it is a party
or by which it is bound. The Company is not in violation of its Certificate of
Incorporation or By-Laws. Neither the sale of the Preferred Shares (or the
issuance and delivery of the Conversion Shares), the execution and delivery of
this Agreement, nor the fulfillment of the terms set forth in this Agreement and
the consummation of the transactions contemplated by this Agreement, will: (i)
conflict with or constitute a breach of, or constitute a default under or an
event which, with or without notice or lapse of time or each, would be a breach
of or default under or violation of the Certificate of Incorporation or By-Laws
of the Company or would be a material breach of or material default under or
violation of any material agreement, document, indenture, mortgage or other
instrument or undertaking by which the Company is bound or to which any of its
properties are subject, or would be a material violation of any law,
administrative regulation, judgment, order or decree applicable to the Company;
(ii) result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Company; (iii) result in the loss
of any material license, certificate, legal privilege or legal right enjoyed or
possessed by the Company; (iv) give any party to any material agreement to which
the Company is a party a right of termination;

-5-
<PAGE>

(v) require the consent of any other person or entity under any agreement,
indenture, mortgage, document or other instrument or undertaking by which the
Company is bound or to which any of its properties are subject other than the
consents of People's Bank ("People's") pursuant to Section 5.02 of the Loan and
Security Agreement, dated as of February 18, 1987, by and between People's and
the Company and Section 5.02 of the Loan and Security Agreement, dated as of
August 4, 1987, by and between People's and the Company.

2.6. Authorization. The Company has the full corporate power
-------------
and authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms; except as such enforceability
may be limited by: (a) the effect of applicable bankruptcy and other similar
laws affecting the rights of creditors generally; (b) the effect of rules of law
governing specific performance, injunctive relief and other equitable remedies;
or (c) the enforceability of the indemnification provisions of Section 8.4. The
Company, in light of its business or proposed business, does not require any
consent, approval, authorization or order of, or declaration, filing or
registration with, any court or governmental or regulatory agency or board in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

2.7. Taxes. Except as set forth on Schedule 2.7 attached
-----
hereto, the Company has filed all necessary federal, state, local and foreign
tax returns and reports and all taxes, fees, assessments and governmental
charges of any nature shown by such returns to be due and payable have been
paid, except for those amounts being contested in good faith and for which
appropriate amounts have been reserved in accordance with generally accepted
accounting principles. There is no tax deficiency which has been asserted
against the Company which would materially adversely affect the business or
operations, or proposed business or operations, of the Company. The Company has
not been, and is not now being, audited by any federal, state, local

-6-
<PAGE>

or foreign tax authorities. The Company has made all required deposits for taxes
applicable to the current tax year. To the best of the Company's knowledge, all
tax returns and reports of the Company were prepared in accordance with the
relevant rules and regulations of each taxing authority having jurisdiction over
the Company.

2.8. Litigation. Except as set forth on Schedule 2.8 attached
----------
hereto, there is not now pending, and to the best knowledge of the Company there
is not threatened in writing, any litigation, action, suit or proceeding: (i) to
which the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body; or (ii) to which any of the officers
or employees of the Company is or will be a party in or before or by any court
or governmental or regulatory agency or body, concerning termination by such
person of his employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.

2.9. Properties. Except as set forth on Schedule 2.9 attached
----------
hereto, the Company has good and marketable title to all of the properties and
assets it purports to own, and a good and valid leasehold interest in all
property it has leased, whether such property is real or personal, free and
clear of all material liens, charges, encumbrances or restrictions of any nature
whatsoever. The Company owns or leases all such properties as are necessary in
any material respect to its operations as now conducted and such properties are
in good operating condition and repair in all material respects.

2.10. Compliance with Law. The Company is in compliance in all
-------------------
material respects with all applicable statutes and regulations of the United
States and of all states, municipalities and agencies in respect of the conduct
of its business.

2.11. Trademarks. The Company owns or possesses sufficient
----------
rights to all patents, trademarks, service marks, trade names or copyrights
necessary for its business as

-7-
<PAGE>

now conducted and as proposed to be conducted. The business of the Company does
not, and will not cause the Company to, violate any patent, trademark, service
mark, trade name, trade secret, copyright, license or proprietary interest of
any other person. The Company possesses sufficient rights to all proprietary
technology necessary for the conduct of its business, both as proposed to be and
as presently conducted.

2.12. Subsidiaries. Except as set forth on Schedule 2.12
------------
attached hereto, the Company does not have any investment or other ownership
interest in any other corporation, joint venture, general partnership, limited
partnership or other business entity.

2.13. Registration Rights. Except as to the rights granted to
-------------------
the Investors in this Agreement, there are no rights outstanding which permit or
allow the holder thereof to cause the Company to file a registration statement
or which permit or allow the holder thereof to include securities of the Company
in a registration statement filed by the Company.

2.14. Contracts and Commitments. Except as set forth on Schedule
-------------------------
2.14 attached hereto, the Company is not a party to or bound by any agreements
which obligate any person, including, without limitation, the Company, to make
payments in the case of each agreement in an amount exceeding $50,000 in the
current year, in any future year or in the immediately preceding fiscal year or
which are otherwise material to the conduct and operation of its business or
proposed business and its properties and assets, including, without limitation,
all loan agreements, leases, purchase commitments, royalty agreements,
distribution agreements, license agreements, employment and consulting
agreements and employee benefit plans and arrangements to which the Company is a
party or by which it is bound. Schedule 2.14 also lists all material agreements,
written or oral, or formal, written proposals therefor, between the Company and
any of its officers, directors, employees or shareholders, except for standard
agreements regarding cash or stock compensation. All of the foregoing agreements
are legal, valid and binding obligations of the Company and, to the best of the
Company's knowledge, of each of the other parties thereto, enforceable in
accordance with their respective terms; except as such enforceability may be
limited by: (a) the effect of applicable bankruptcy and other similar

-8-
<PAGE>

laws affecting the rights of creditors generally; or (b) the effect of rules of
law governing specific performance, injunctive relief and other equitable
remedies. To the best of the Company's knowledge, all such agreements are in
full force and effect in all material respects and there is no material default
under any of such agreements.

2.15. Outstanding Indebtedness. Except as reflected in the
------------------------
financial statements referred to in Section 2.22 hereof or as set forth on
Schedules 2.4, 2.8 and 2.14 attached hereto, the Company does not have (a) any
liability or obligation of any nature in excess of $10,000, whether accrued,
absolute, contingent or otherwise, and whether direct, indirect, due or to
become due which would be required to be described in financial statements
prepared in accordance with generally accepted accounting principles,
consistently applied; (b) any power of attorney outstanding, nor any other
agreement of agency, whether as principal or agent, nor has it any obligation or
liability, either actual, accrued, accruing or contingent, as guarantor, surety,
cosigner, endorser, comaker or otherwise in respect of the obligation of any
person; or (c) any liability to any officer, director, shareholder or employee
of the Company for money borrowed by the Company.

2.16. Conflicting Aqreements. To the best knowledge of the
----------------------
Company, no officer or other employee of the Company is a party to or bound by
any agreement, contract or commitment, or subject to any restrictions in
connection with any previous or current employment of any such person, which
adversely affects, or in the future may adversely affect, the business, or the
proposed business, of the Company.

2.17. Disclosure. To the best of the Company's knowledge,
----------
neither this Agreement nor any of the schedules or exhibits hereto, nor the
Business Plan dated January 1989 (the "Business Plan") copies of which have been
delivered to the Investors, read together, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. There exists no fact or circumstance
which, to the knowledge of the Company, materially adversely affects or will
materially adversely affect the business, properties or assets, or condition,
financial or otherwise,

-9-
<PAGE>

of the Company, both at the present and as proposed, except as set forth herein,
in the schedules or exhibits hereto or in the Business Plan.

2.18. Representations and Warranties True on Closing Date. The
---------------------------------------------------
representations and warranties of the Company contained in this Agreement and
all information contained in any exhibit, schedule or attachment hereto will be
true and correct in all material respects at the Closing Date as though then
made and as though the Closing Date were substituted for the date of this
Agreement throughout this Agreement except as affected by the transactions
expressly contemplated by this Agreement.

2.19. Compliance with the Securities Act. All securities of the
----------------------------------
Company heretofore sold and issued by it were sold and issued in compliance with
all applicable Federal and state securities laws. Based upon the representations
of the Investors set forth herein, and assuming the truth of such
representations, the offer, sale and issuance of the Preferred Shares (and the
issuance and delivery of the Conversion Shares) are exempt from the registration
requirements of the Securities Act.

2.20. Pension Plans. Except as set forth on Schedule 2.20
-------------
attached hereto, the Company does not have any pension, health, retirement,
profit sharing, bonus, stock purchase, stock option, severance or similar
employee benefit plans or obligations subject to the Employee Retirement Income
Security Act of 1974, and does not have any other stock purchase or stock option
plans.

2.21. Insurance. The Company maintains valid policies of
---------
workers' compensation insurance and such insurance with respect to its
properties and business of the kinds and in the amounts as set forth on Schedule
2.21 attached hereto. The activities and operations of the Company have been
conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies. Such policies are valid and
enforceable in accordance with their terms and are in full force and effect. The
Company is not in material default with respect to any provision contained in
any such policy and has not materially failed to give any notice or present any
claim under any such policy in due and timely fashion.

-10-
<PAGE>

There are no outstanding unpaid claims under any such policy. The Company has
not received notice of, nor has it knowledge of, any inaccuracy in any
application for such policies, any failure to pay premiums when due or any
similar state of facts that might form the basis for termination of any such
insurance. The Company has not canceled or terminated any insurance policy
listed on Schedule 2.21, nor has any insurance company canceled or terminated
any such insurance policy of the Company.

2.22. Financial Statements. Attached hereto as Exhibit E are the
--------------------
audited balance sheets of the Company at April 30, 1987, and April 30, 1988, and
the related statements of income and retained earnings and changes in financial
position, including the notes thereto, of the Company for the periods then
ended, and the unaudited balance sheet of the Company at March 31, 1989 and the
related statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance sheet fairly
presents the financial condition of the Company as of its date and each
statement of income fairly presents the results of operations of the Company for
the period covered thereby.

3. Representations, Warranties and Covenants of the Investors. Each
----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows:

3.1. Investment Intent. Each Investor is acquiring the Preferred
-----------------
Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act. Each Investor consents to the placement of the following
legend on each certificate representing the Preferred Shares and on each
certificate representing the Conversion Shares:

-11-
<PAGE>

COUNSEL FOR THE HOLDER REASONABLY ACCEPTABLE TO THE ISSUER
HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS
REQUIRED OR (iii) A 'NO ACTION' LETTER OR ITS THEN
EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES
AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER OR
SALE."

3.2. Restricted Securities. Each Investor understands that the
---------------------
Preferred Shares (and any Conversion Shares) will not be registered at the
Closing under the Securities Act for the reason that the sale provided for in
this Agreement is exempt pursuant to Section 4 of the Securities Act and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it is
experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Each Investor is an
accredited investor within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act. Such Investor was not formed solely for the purpose of
investing in the Company. Each Investor further represents that it has had
access during the course of the transaction and prior to its purchase of the
Preferred Shares to such information relating to the Company as it has desired
and that it has had the opportunity to ask questions of and receive answers from
the Company concerning the terms and conditions of the offering and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.

Each Investor understands that the Preferred Shares (and any
Conversion Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act or an exemption therefrom and that in the
absence of an effective registration statement covering the Preferred Shares (or
the Conversion Shares) or an available exemption from registration under the
Securities Act, the Preferred Shares (and any Conversion Shares) must be held
indefinitely. The benefits of Rule 144 promulgated under the Securities Act are
not presently available, the Company has not covenanted to make the benefits of
such Rule available, and the Company has no present plans to make the benefits
of such Rule available.

4. Affirmative Covenants of the Company. The Company covenants and
------------------------------------
agrees with each Qualified Investor that as long as any Preferred Shares are
issued and outstanding:

4.1. Accounting System. It will maintain a system of accounting
-----------------
established and administered in accordance with generally accepted accounting
principles consistently applied.

4.2. Periodic Reports; Budgets.
-------------------------
(a) It will furnish to each Qualified Investor as soon as
practicable, and in any event within 90 days after the end of each fiscal year
of the Company, audited financial statements of the Company, including an
audited balance sheet as at the end of such fiscal year and audited statements
of income and retained earnings and cash flow for such fiscal year, setting
forth in each case in comparative form corresponding figures for the preceding
fiscal year and for the budget for the fiscal year just completed (provided,
however, that information as to the budgeted figures will not be audited), all
of which will fairly present the financial condition of the Company at the date
shown and the results of its operations for the

-12-
<PAGE>

period then ended. Such financial statements shall be accompanied by the report
thereon of nationally recognized independent public accountants to the effect
that such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior years
(except as otherwise specified in such report). The Company will use its best
efforts to conduct its business so that such report of the independent public
accountants will not contain any qualifications as to the scope of the audit,
the continuance of the Company, or with respect to the Company's compliance with
generally accepted accounting principles consistently applied, except for
changes in methods of accounting in which such accountants concur.

(b) It will furnish to each Qualified Investor, as soon
as practicable and in any event within 30 days after the end of each calendar
month, a monthly report of the Company consisting of an unaudited balance sheet
as at the end of such month and an unaudited statement of income and statement
of cash flows for such month and for the fiscal year to date, setting forth in
each case in comparative form the corresponding figures for the preceding year
and for the budget. All such reports shall be certified to by the chief
financial officer of the Company to fairly present the financial condition of
the Company at the date shown and the results of its operations for the period
then ended and to have been prepared in accordance with generally accepted
accounting principles for interim financial information consistently applied
except for normal year end adjustments. The reports for each calendar month
shall include a narrative discussion prepared by the Company describing the
business and operations of the Company during the preceding calendar month.

(c) It will furnish to its Board of Directors as early as
practicable prior to the end of each fiscal year of the Company for its
approval, and promptly after obtaining such approval will furnish to each
Qualified Investor, an annual Business Plan for the Company as approved by the
Company's Board of Directors for (i) the succeeding fiscal year, containing
projections of profit and loss and cash flow for each month of such fiscal year
and ending balance sheets for each quarter of such fiscal year, and (ii) the
succeeding two fiscal years,

-13-
<PAGE>

containing projections of profit and loss, cash flow and ending balance sheets
for each of such years. Promptly upon preparation thereof, the Company will
furnish to each such holder any other budgets that the Company may prepare and
provide to the Board of Directors generally and any revisions of such previously
furnished budgets.

(d) It will furnish to each Qualified Investor, promptly
after receipt, each audit response letter, accountant's management letter and
other reports submitted to the Company by its independent public accountants in
connection with an annual or interim audit of the books of the Company.

4.3. Certificates of Compliance. Concurrently with the
--------------------------
furnishing of the reports pursuant to Sections 4.2(a) and 4.2(b) hereof, it will
furnish to each recipient a certificate of an officer stating that the Company
is not in material default under, and has not materially breached, this
Agreement, or if any such default or breach exists, specifying the nature
thereof and what actions the Company has taken and proposes to take with respect
thereto. Concurrently with the furnishing of the reports pursuant to Section
4.2(a) hereof, the Company will cause to be furnished to each Qualified Investor
a statement of the independent public accountants of the Company to the effect
that they have caused the provisions of this Agreement to be reviewed and that
in the course of their audit of the Company nothing has come to their attention
to lead them to believe that any default hereunder exists or, if such is not the
case, specifying such default or possible default and the nature thereof. The
Company covenants that promptly after the occurrence of any material default
hereunder or any material default under or breach of any material agreement, it
will deliver to its Board of Directors a certificate of an officer specifying in
detail the nature and period of existence thereof, and what actions the Company
has taken and proposes to take with respect thereto.

4.4. Other Reports and Inspection. It will furnish to each
----------------------------
Qualified Investor, as soon as practicable after issuance, copies of any
financial statements or reports prepared by the Company for and furnished to its
stockholders or the Commission. It will furnish promptly to each Qualified
Investor such other documents, reports and financial data as such

-14-
<PAGE>

holder may reasonably request to the extent such data is readily available. It
will, upon reasonable prior notice, make available to each such holder or such
holder's representatives or designees during normal business hours (a) all
assets, properties and business records of the Company for inspection and
copying and (b) the directors, officers and employees of the Company for
interviews concerning the business, affairs and finances of the Company.

4.5. Insurance. It will maintain valid policies of worker's
---------
compensation insurance and such other insurance with financially sound insurers
with respect to its properties and business of the kinds and in amounts similar
to those listed on Schedule 2.21 attached hereto. The activities and operations
of the Company will be conducted in a manner so as to conform in all material
respects to all applicable provisions of such insurance policies.

4.6. Licenses. It will obtain and keep in full force and effect
--------
all licenses, permits and other authorizations from governmental authorities
which shall be necessary to the conduct of its business.

4.7. Material Changes. It will promptly advise each Qualified
----------------
Investor of any litigation or governmental proceeding pending or, to the best
knowledge of the Company, threatened in writing against the Company or against
any officer or key employee of the Company.

4.8. Compliance with Law. It will comply in all material
-------------------
respects with all applicable statutes, rules and regulations of the United
States, of the states thereof and their counties, municipalities and other
subdivisions and of any other jurisdiction applicable to the Company, and will
do all things necessary to preserve, renew and keep in full force and effect and
in good standing its corporate existence and authority necessary to continue its
business in all material respects.

4.9. Agreements with Employees. The Company will cause all key
-------------------------
employees of the Company to enter into the Company's standard form of
confidentiality agreement, the form of which has been furnished to counsel to
the Investors.

-15-
<PAGE>

4.10. Board of Directors. Commencing on the Closing Date, the
------------------
Company shall use its best efforts to have its Board of Directors consist of
seven persons, two of whom shall be designees of Warburg (or its Affiliates and
Associates), two of whom shall be designees of Vanguard, one of whom shall be
the chief executive officer of the Company, one of whom shall be a designee of
XIST LTD. (or its Affiliates or Associates) and one of whom shall be a person
not employed by the Company mutually agreeable to the Qualified Investors and
management of the Company. Each of the Investors (so long as no Event of
Default, as defined in the Certificate of Designations, has occurred and is
continuing) and Vanguard and XIST LTD. agree to vote their shares of Common
Stock of the Company to effectuate the election of the persons nominated as
directors in accordance with the foregoing provisions. Unless otherwise agreed
to by the Investors, the Company covenants that at all times its By-Laws will
contain provisions authorizing no more than seven directors (subject to increase
upon the occurrence of an Event of Default, as defined in the Certificate of
Designations) and indemnifying its directors to the fullest extent permitted
under applicable law. The Board of Directors shall hold regular meetings at
least once every three months.

4.11. Reservation of Common Stock. The Company shall reserve and
---------------------------
keep available out of its authorized but unissued Common Stock the number of
shares of Common Stock required for issuance upon the conversion of all of the
Preferred Shares (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Preferred Shares).

4.12. Compensation and Audit Committees. The Company will promptly
---------------------------------
after the Closing Date establish and thereafter at all times maintain a
Compensation Committee and an Audit Committee of the Board of Directors of the
Company. At least a majority of the members of each such committee shall
consist of directors who are not members of management of the Company. The
Compensation Committee shall make recommendations t the Board of Directors
regarding all matters of compensation for the officers of the Company and stock
options for employees of the Company.

-16-
<PAGE>

4.13. Agreements with Shareholders. Until the Company shall have
----------------------------
completed its initial Public Offering, all persons who are or who become
shareholders of the Company shall enter into an agreement, substantially in the
form of Exhibit D hereto, pursuant to which such shareholders shall agree: (a)
that for a period beginning with the effective date of the Company's initial
Public Offering and ending at least 150 days after such effective date such
shareholders will not, directly or indirectly, sell, offer to sell or otherwise
dispose of securities of the Company other than securities which are included
and sold in such initial Public Offering without permission from a
representative of the underwriters; and (b) to grant to the Company and then to
the holders of 10% or more of the Company's outstanding shares of Common Stock
on a fully diluted basis (assuming conversion of Preferred Shares and exercise
of all outstanding options) a right of first refusal with respect to any
securities of the Company which such shareholders propose to sell or otherwise
dispose of.

4.14. Conflicting Agreements. The Company will not enter into any
----------------------
agreement which, by its terms, would restrict the performance of the Company's
obligations under this Agreement, the Certificate of Designations or any of the
other agreements attached as exhibits hereto, including, but not limited to,
registration rights or the payment of dividends on, or the redemption, voting or
conversion of, the Preferred Shares.

4.15. Key Person Insurance. The Company shall obtain, as soon as
--------------------
practicable following the Closing, a key person life and disability insurance
policy with respect to Constance Galley, which life insurance policy shall be in
the amount of $1,000,000 and which disability insurance policy shall be in such
amount as shall be reasonably acceptable to the Investors. Such policy shall
name the Company as beneficiary. The Company shall take such action as shall be
necessary in order to obtain and to maintain, at its sole cost and expense, such
policy.

5. Negative Covenants of the Company. The Company covenants and agrees
---------------------------------
with the Qualified Investors that, without the prior approval of at least a
majority of the Company's Board of Directors:

-17-
<PAGE>

5.1. Merger; Sale of Assets. The Company will not become a party
----------------------
to any merger or consolidation, or sell, lease or otherwise dispose of any
material portion of its assets, other than sales and leases of assets and
licenses of software and technology in the ordinary course of business and other
than the replacement of outmoded or damaged equipment with new equipment. The
Company will not voluntarily dissolve, liquidate or wind up the Company or carry
out any partial liquidation of the Company.

5.2. Business. The Company will not engage in any business other
--------
than as set forth in the Business Plan.

5.3. Stock Repurchases. Except as provided in this Agreement or in
-----------------
the Certificate of Designations, the Company will not purchase or redeem any
shares of its capital stock other than pursuant to agreements with officers or
employees of the Company relating to repurchase of stock after termination of
employment.

5.4. Dividends. Except for payment of dividends or the Preferred
---------
Shares, the Company will not declare or pay any dividend or make any
distribution in cash or property to the shareholders of the Company.

5.5. Indebtedness. The Company will not create, incur or assume or
------------
otherwise become or remain liable with respect to Indebtedness to be incurred in
any one year or make or commit to make capital expenditures in any one year in
excess of $100,000.

5.6. Amendments. The Company will not amend its Certificate of
----------
Incorporation or By-Laws. In addition to the negative covenants contained in
Sections 5.1 through 5.5 above, the Company and the Investors agree that,
without the prior approval of the holders of a majority of the Preferred Shares
then outstanding, the Company will not (a) authorize, create or issue any series
or shares of capital stock senior or pari passu to the Preferred Shares, or
adopt or otherwise institute any stock option or stock purchase plan for, or
otherwise issue any stock options to, employees, consultants or directors of the
Company except that the Company may authorize and issue options, stock
purchases, stock bonuses or similar arrangements (collectively, the "Options")
for employees, directors or consultants to purchase up

-18-
<PAGE>

to 68,750 shares of Common Stock; provided, however, that nothing contained
-------- -------
herein will limit the Company's ability to resell any shares from time to time
contained in the treasury of the Company or (b) take any action which would
materially alter or adversely affect the rights of the holders of Preferred
Shares.

5.7. Affiliate Transactions. The Company will not engage in any
----------------------
transaction with, nor enter into any contract, agreement or other arrangement
providing for, the rental of real or personal property from, or otherwise
requiring payments to, any officer, director or shareholder of the Company or
any Affiliate or Associate of such persons or entities, except for employment
arrangements travel advances and similar arrangements entered into in the
ordinary course of business.

6. Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company under this Agreement are subject to the satisfaction of the following
conditions on or prior to the Closing Date, any of which may be waived in whole
or in part by the Company:

6.1. Representations and Warranties. All of the representations and
------------------------------
warranties of the Investors contained in this Agreement shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if made on the Closing Date.

6.2. Consideration. The purchase price set forth in Section 1.4
-------------
hereof to be paid on the Closing Date shall be paid by the Investors to the
Company.

6.3. Articles Amended. The Certificate of Amendment, substantially
----------------
in the form attached hereto as Exhibit B, and the Certificate of Designations,
substantially in the form attached hereto as Exhibit C, will have been filed
with the Secretary of State of the State of Connecticut.

7. Conditions to Obligations of the Investors. The obligations of the
------------------------------------------
Investors to fulfill their obligations under this Agreement are subject to the
satisfaction of the following conditions on or prior to the Closing Date, any of
which may be waived in whole or in part by the Investors:

-19-
<PAGE>

7.1. Representations and Warranties. All of the representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
on the Closing Date with the same effect as if made on the Closing Date, except
as affected by the transactions specifically contemplated by this Agreement.

7.2. Performance of Covenants. All of the covenants and agreements
------------------------
of the Company contained in this Agreement and required to be performed on or
before the Closing Date shall have been performed in all respects to the
satisfaction of the Investors.

7.3. Opinion of Counsel to the Company. On the Closing Date, the
---------------------------------
Investors shall have received an opinion of counsel to the Company, Fenwick,
Davis & West, addressed to the Investors, substantially in the form attached
hereto as Exhibit F.

7.4. Officer's and Other Certificates. The Company shall have
--------------------------------
delivered to each Investor the following:

(a) an officer's certificate, dated the Closing Date, stating
that the conditions specified in Sections 7.1, 7.2, 7.5, 7.7, 7.10 and 7.11 have
been satisfied;

(b) incumbency certificates for the officers of the Company
executing this Agreement or any documents delivered in connection with this
Agreement;

(c) copies of the resolutions adopted by the Company's Board
of Directors and the shareholders of the Company authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, including the Certificate of Amendment and Certificate of Designations,
certified to by the Secretary of the Company as being in full force and effect
on the Closing Date;

(d) a certified copy of the Certificate of Incorporation of
the Company as filed with the Secretary of State of Connecticut;

(e) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of and the payment of
taxes by the Company in such State;

-20-
<PAGE>

(f) a stock certificate registered in the name of such
Investor representing the Preferred Shares purchased by such Investor on the
Closing Date;

(g) a certified copy of the Certificate of Designations, as
filed with the Secretary of State of Connecticut;

(h) a copy of the Company's By-laws, certified to by the
Secretary of the Company as being in full force and effect on the Closing Date;

(i) a certified copy of the Certificate of Amendment, as filed
with the Secretary of State of Connecticut; and

(j) such other certificates or documents as such Investor or
its counsel may reasonably request relating to the transactions contemplated
hereby.

7.5. Legal Action. There shall not have been instituted or
------------
threatened any legal proceeding seeking to prohibit or threaten the consummation
of the transactions contemplated by this Agreement. None of the parties hereto
shall be prohibited by any order, writ, injunction or decree of any governmental
body of competent jurisdiction from consummating the transactions contemplated
by this Agreement.

7.6. Review. Prior to the Closing Date, each Investor shall have
------
completed its due diligence and business review of the Company and the results
of such review shall be satisfactory to such Investor in its sole discretion.

7.7. Agreement. The agreement referred to in Section 4.13 shall
---------
have been entered into and shall be satisfactory to the Investors.

7.8. Adverse Change. There shall have been no material adverse
--------------
change in the business, property or condition, financial or otherwise, of the
Company.

7.9. Warburg Purchase. Warburg shall have acquired, pursuant to
----------------
agreements substantially in the forms attached hereto as Exhibit G (a) 150,000
shares of Common Stock owned by XIST LTD. for a purchase price of $13.39 per
share and (b) an option to acquire an additional 50,000 shares of Common Stock
owned by XIST LTD. at an exercise price of $15.39 per share.

-21-
<PAGE>

7.10. Vanguard Debt. Any indebtedness of the Company to Vanguard
-------------
which shall not have been converted into Preferred Shares shall have been paid
in full and Vanguard shall have delivered to the Company executed Forms UCC-2 to
release all security interests currently filed with respect to such
indebtedness.

7.11. Conversion of Common Stock. All outstanding shares of Class A
--------------------------
Common Stock, Class B Common Stock and Class C Common Stock shall have been
converted into an equal number of shares of Common Stock, without class
designation.

7.12. Termination of Covenants. Sections 7.1, 7.3, 7.4.1, 7.5, 7.6
------------------------
and 7.7 of that certain Asset Purchase Agreement dated as of April 11, 1985, as
amended, among Vanguard Atlantic Financial Corp., TSI International Ltd. (then
known as Vanguard Atlantic Operations Ltd.), Vanguard Atlantic Properties, Inc.,
XIST Ltd. (then known as TSI International Ltd.) and TSI Software International,
B.V. shall have been waived in their entirety insofar as such sections relate to
the Company or its stock.

8. Registration Rights.
-------------------

8.1. Required Registration. If at any time following the third
---------------------
anniversary of the Closing Date the holders of at least 50% of the Registrable
Securities shall decide to sell or otherwise dispose of Registrable Securities
of the Company then owned by such holders, such holders may give written notice
to the Company of the proposed disposition, specifying the number of Registrable
Securities so to be sold or disposed of (which must include at least 50% of the
Registrable Securities) and requesting that the Company prepare and file a
registration statement under the Securities Act covering such Registrable
Securities. The Company shall, within 10 days thereafter, give written notice
to the other holders of Registrable Securities of such request and each of the
other holders shall have the option, for a period of 10 days after receipt by it
of such notice from the Company, to include its Registrable Securities in such
registration statement. The Company shall use its best efforts to cause an
appropriate registration statement (the "Registration Statement") covering such
Registrable Securities to be filed with the Commission and to become effective
as soon as reasonably practicable and to

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<PAGE>

remain effective until the completion of the distribution of the Registrable
Securities to be offered or sold but not longer than 90 days after effectiveness
of the Registration Statement. (The holders whose Registrable Securities are
included in a Registration Statement are hereinafter referred to as the "Selling
Investors"). The Company shall not be obligated to file more than two
Registration Statements pursuant to the foregoing provisions of this Section
8.1. The Company shall bear all of the Costs and Expenses of the two
Registration Statements. In addition to the foregoing and without regard to
there first having been filed either of the two Registration Statements provided
for in the foregoing provisions of this Section 8.1, the holders of Registrable
Securities will be entitled to demand an unlimited number of Registration
Statements on Form S-3 or any successor form allowing substantial incorporation
by reference to Securities Exchange Act reports filed by the Company, but only
if the Company is eligible to use Form S-3 or such successor Form, at such
holders' Cost and Expense, provided however, that at least $500,000 in aggregate
sales price less underwriters discounts and commissions of Registrable
Securities are proposed to be sold pursuant thereto and no more than one such
Registration Statement is demanded in any twelve month period of time. A demand
for registration under this Section 8.1 will not count as such until it has
become effective and unless the holders of Registrable Securities are able to
register and sell at least 80% of the Registrable Securities included in such
Registration Statement; provided, however, that if the initiating holders
withdraw a request for registration before the Registration Statement becomes
effective, then the initiating holders at their option either shall (i) bear the
Costs and Expenses thereof pro rata on the basis of the number of shares
requested to be included therein or (ii) have such Registration Statement
applied to and counted as one of the two Registration Statements for which the
Company has agreed to bear the Costs and Expenses.

8.2. Procedure for Registration. In connection with the filing of a
--------------------------
Registration Statement pursuant to Section 8.1 hereof, and in supplementation
and not in limitation of the provisions hereof, the Company shall:

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<PAGE>

(a) Notify the Selling Investors as to the filing of the
Registration Statement and of all amendments or supplements thereto filed prior
to the effective date of said Registration Statement;

(b) Notify the Selling Investors, promptly after the Company
shall receive notice thereof, of the time when said Registration Statement
became effective or when any amendment or supplement to any prospectus forming a
part of said Registration Statement has been filed;

(c) Notify the Selling Investors promptly of any request by
the Commission for the amending or supplementing of such Registration Statement
or prospectus or for additional information;

(d) Prepare and promptly file with the Commission and promptly
notify the Selling Investors of the filing of any amendments or supplements to
such Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, any
event with respect to the Company shall have occurred as a result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading; and, in addition, prepare and
file with the Commission, promptly upon the Selling Investors' written request,
any amendments or supplements to such Registration Statement or prospectus which
may be reasonably necessary or advisable in connection with the distribution of
the Registrable Securities;

(e) Prepare, promptly upon request of the Selling Investors or
any underwriters for the Selling Investors, such amendment or amendments to such
Registration Statement and such prospectus or prospectuses as may be reasonably
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Securities Act;

(f) Advise the Selling Investors promptly after the Company
shall receive notice or obtain knowledge of the issuance of any stop order by
the Commission

-24-
<PAGE>

suspending the effectiveness of any such Registration Statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its best efforts to prevent the issuance of any stop order or
obtain its withdrawal promptly if such stop order should be issued;

(g) Use its best efforts to qualify, as soon as reasonably
practicable, the Registrable Securities for sale under the securities or blue-
sky laws of such states and jurisdictions within the United States as shall be
reasonably requested by the Selling Investors; provided, that the Company shall
not be required in connection therewith or as a condition thereto to qualify to
do business, to become subject to taxation or to file a consent to service of
process generally in any of the aforesaid states or jurisdictions;

(h) Furnish the Selling Investors, as soon as available,
copies of any Registration Statement and each preliminary or final prospectus,
or supplement or amendment required to be prepared pursuant hereto, all in such
quantities as the Selling Investors may, from time to time, reasonably request;
and

(i) If requested by the Selling Investors, enter into an
agreement with the underwriters of the Registrable Securities being registered
containing customary provisions and reflecting the foregoing.

8.3. Incidental Registration. If at any time the Company shall
-----------------------
propose the filing of a Registration Statement on an appropriate form under the
Securities Act of any securities of the Company, otherwise than pursuant to
Section 8.1 hereof and other than a registration statement on Forms S-8 or S-4
or any equivalent form then in effect, then the Company shall give the holders
of Registrable Securities, XIST LTD. and Vanguard notice of such proposed
registration and shall include in any Registration Statement relating to such
securities all or a portion of the Registrable Securities and Common Stock then
owned by such holders, which such holders shall request (such holders to be
considered Selling Investors), by notice given by such holders to the Company
within 30 days after the giving of such notice by the Company, to be so
included. In the event of the inclusion of Registrable Securities and Common

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<PAGE>

Stock pursuant to this Section 8.3, the Company shall bear all of the Costs and
Expenses of such registration; provided, however, that the Selling Investors
shall pay, pro rata based upon the number of Registrable Securities and Common
Stock included therein, the underwriters discounts and compensation. In the
event the distribution of securities of the Company covered by a Registration
Statement referred to in this Section 8.3 is to be underwritten, then the
Company's obligation to include Registrable Securities and Common Stock in such
Registration Statement shall be subject, at the option of the Company, to the
following further conditions:

(a) The distribution for the account of the Selling Investors shall
be underwritten by the same underwriters who are underwriting the distribution
of the securities for the account of the Company and/or any other persons whose
securities are covered by such Registration Statement, and the Selling Investors
will enter into an agreement with such underwriters containing customary
provisions;

(b) If the underwriting agreement entered into with the aforesaid
underwriters contains restrictions upon the sale of securities of the Company,
other than the securities which are to be included in the proposed distribution,
for a period not exceeding 150 days from the effective date of the Registration
Statement, then such restrictions will be binding upon the Selling Investors
and, if requested by the Company, the Selling Investors will enter into a
written agreement to that effect; and

(c) If the underwriters state in writing that they are unwilling to
include any or all of the Selling Investors' securities in the proposed
underwriting because such inclusion will materially interfere with the orderly
sale and distribution of the securities being offered by the Company, then the
number of Selling Investors' securities to be included will be reduced pro rata
on the basis of the number of shares owned by such holders, or there will be no
inclusion of Selling Investors' securities in the registration statement and
proposed distribution, in accordance with such statement by the underwriters.

8.4. Indemnification by the Company. The Company will indemnify and
------------------------------
hold harmless each Selling Investor, any underwriter (as defined in the
Securities Act) for

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<PAGE>

such Selling Investor, each partner, officer and director of such Selling
Investor, and each person, if any, who controls such Selling Investor or such
underwriter within the meaning of the Securities Act (but, in the case of an
underwriter or a controlling person, only if such underwriter or controlling
person indemnifies the persons mentioned in subdivision (b) of Section 8.5
hereof in the manner set forth therein), against any losses, claims, damages or
liabilities, joint or several, to which such Selling Investor or any such
underwriter, partner, officer, director or controlling person becomes subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) are caused by any untrue
statement or alleged untrue statement of any material fact contained in any
preliminary prospectus (if used prior to the effective date of the Registration
Statement and not corrected or supplied in the final prospectus for such
Registration Statement), or contained, on the effective date thereof, in any
Registration Statement under which Registrable Securities were registered under
the Securities Act, the prospectus contained therein, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse such Selling Investor and any such underwriter, partner, officer,
director or controlling person for any legal or other expenses reasonably
incurred by such Selling Investor, or any such partner, officer, director,
underwriter or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable to any such persons in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information furnished to
the Company in writing by such person expressly for inclusion in any of the
foregoing documents.

8.5. Indemnification by Selling Investors. Each Selling Investor shall:
------------------------------------
(a) Furnish in writing all information to the Company concerning
itself and its holdings of securities of the Company as shall be required in
connection

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<PAGE>

with the preparation and filing of any Registration Statement covering any
Registrable Securities; and

(b) Indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed a Registration Statement, each person, if
any, who controls the Company within the meaning of the Securities Act and any
underwriter (as defined in the Securities Act) for the Company, against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, controlling person or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) are caused by any untrue or alleged
untrue statement of any material fact contained in any preliminary prospectus
(if used prior to the effective date of the Registration Statement) or contained
on the effective date thereof, in any Registration Statement under which
Registrable Securities were registered under the Securities Act, the prospectus
contained therein, or any amendment or supplement thereto, or arising out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished to the Company by
such Selling Investor expressly for inclusion in any of the foregoing documents,
and such Selling Investor shall reimburse the Company and any such underwriter,
officer, director or controlling person for any legal or other expenses
reasonably incurred by the Company or any such director, officer or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action. Notwithstanding the foregoing provisions of this
Section 8.5, no Selling Investor shall be required to indemnify the Company or
any such underwriter, officer, director or controlling persons for any amount in
excess of the amount of the proceeds received by such Selling Investor.

8.6. Notification by Selling Investors. Each Selling Investor and
---------------------------------
each other person indemnified pursuant to Section 8.4 hereof will, in the event
it receives notice of the

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<PAGE>

commencement of any action against it which is based upon an alleged act or
omission which, if proven, would result in the Company's having to indemnify it
pursuant to Section 8.4 hereof, promptly notify the Company, in writing, of the
commencement of such action and permit the Company, if the Company so notifies
such Selling Investor within 10 days after receipt by the Company of notice of
the commencement of the action, to participate in and to assume the defense of
such action with counsel reasonably satisfactory to such Selling Investor or
such other indemnified person, as the case may be; provided, however, that such
Selling Investor shall be entitled to retain its own counsel at the Company's
expense if they have defenses available to them which are not available to the
Company or if there exists a potential for conflict of interest between the
Company and such Selling Investor which would render such dual representation
impractical. The omission to notify the Company promptly of the commencement of
any such action shall not relieve the Company of any liability to indemnify such
Selling Investor or such other indemnified person, as the case may be, under
Section 8.4 hereof, except to the extent the Company shall suffer any loss by
reason of such failure to give notice and shall not relieve the Company of any
other liabilities which it may have under this or any other agreement.

8.7. Notification by Company. The Company agrees that, in the event
-----------------------
it receives notice of the commencement of any action against it which is based
upon an alleged act or omission which, if proven, would result in any Selling
Investor having to indemnify the Company pursuant to subdivision (b) of Section
8.5 hereof, the Company will promptly notify such Selling Investor in writing of
the commencement of such action and permit such Selling Investor, if such
Selling Investor so notifies the Company within 10 days after receipt by it of
notice of the commencement of the action, to participate in and to assume the
defense of such action with counsel reasonably satisfactory to the Company. The
omission to notify such Selling Investor promptly of the commencement of any
such action will not relieve such Selling Investor of liability to indemnify the
Company under subdivision (b) of Section 8.5 hereof, except to the extent that
such Selling Investor suffers any loss by reason of such failure to give notice
and shall

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<PAGE>

not relieve such Selling Investor of any other liabilities which it may have
under this or any other agreement.

8.8. Costs and Expenses. As used in this Agreement, "Costs and
------------------
Expenses" shall include all of the costs and expenses relating to the
Registration Statement involved, including but not limited to registration,
filing and qualification fees, blue-sky expenses, printing expenses, reasonable
fees and disbursements of counsel to the Company and counsel for the Selling
Investors as the Selling Investors may designate, provided, however, that no
more than one such counsel for the Selling Investors will be so designated on
any occasion, and accounting fees; provided however, that underwriting discounts
and commissions and reimbursable underwriters' expenses will be borne pro rata
by the holders of the securities included in the Registration Statement.

8.9. Rule 144 Reporting. After the Company becomes subject to the
------------------
reporting requirements of Sections 13 or l5(d) of the Securities Exchange Act,
and with a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the Preferred Shares
or the Conversion Shares without registration, the Company agrees to:

(a) Cause public information with respect to the Company to be
available, as set forth in Rule 144 or any comparable rule or regulation under
the Securities Act, at all times;

(b) Use its best efforts to tile with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act; and

(c) To furnish to each holder of Registrable Securities forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 and of the Securities Act and the
Securities Exchange Act.

9. Expenses.
--------

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<PAGE>

The Company and XIST LTD. agree, in the event the transactions
contemplated hereby are consummated, to pay on a pro rata basis based on the
proceeds received by each of them from the consummation of this Agreement and
the agreements attached as Exhibit G hereto, and save the Investors harmless
against liability for the payment of, the reasonable fees and expenses of
Stroock & Stroock & Lavan, counsel for the Investors, arising in connection with
the negotiation, execution and consummation of this Agreement and the
transactions contemplated hereby, which fees and expenses will be paid promptly
after presentation of such counsel's statement, reasonably itemized as to hours
and dates worked, attorneys and other professionals performing services and
nature of the work on each such date. The Company also agrees to pay, and save
the Investors harmless against liability for the payment of, (a) fees and
expenses (including without limitation, reasonable attorneys' fees) incurred
with respect to any amendments or waivers requested by the Company (whether or
not the same become effective) under or in respect of this Agreement and the
transactions contemplated hereby, (b) stamp and other transfer taxes which may
be payable in respect of the execution and delivery of this Agreement or the
issuance of the Preferred Shares or the Conversion Shares and (c) fees and
expenses (including, without limitation, reasonable attorneys' fees) incurred in
respect of the enforcement by the Investors of the rights granted to the
Investors under this Agreement and the transactions contemplated hereby.

10. Right of First Refusal.
----------------------
(a) The Company agrees that until there is a Public Offering of its
securities if it sells any New Securities it will offer to the Qualified
Investors the right to purchase additional shares of such New Securities of the
Company in accordance with, and subject to, the provisions of this Section
10(a). The Company shall immediately notify the Qualified Investors of the
terms for the sale of such New Securities by the Company (the "Company's
Notice"). Each of the Qualified Investor wishing to purchase such New
Securities pursuant to the Company's Notice (hereinafter referred to as a
"Purchasing Party") shall notify the Company by written notice within 15 days
after receipt of the Company's Notice how many of such shares it

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<PAGE>

desires to purchase. Each Purchasing Party shall be entitled to purchase up to
that number of shares of New Securities specified in its notice which is equal
to a number of shares of New Securities which, when added to the Conversion
Shares then held by such Investor (assuming conversion of all Preferred Shares),
is in the same proportion to the total number of shares of securities of the
Company then outstanding (assuming conversion of all convertible securities and
exercise of all outstanding options and including the New Securities to the
extent outstanding), as the number of Conversion Shares held by such Investor
(assuming conversion of all Preferred Shares) bears to the total number of
shares of securities of the Company outstanding immediately prior to the
issuance of any New Securities (assuming conversion of all convertible
securities and exercise of all outstanding options). If the Company later
changes the terms of the sale in any material respect, the Company shall first
reoffer such New Securities to the Investors pursuant to the procedure set forth
above. Any New Securities which are sold (or issued) by the Company otherwise
than for cash shall be offered to the Investors for an equivalent cash value as
determined by the Board of Directors of the Company in good faith.

(b) Whether or not the terms and conditions of a sale of New
Securities provide for the purchaser to have any registration rights, the
Company agrees with the Investors that in the event any Investor acquires any
New Securities pursuant to paragraph (a) above, such Investor may elect either
to (i) have such New Securities be deemed Registrable Securities for the
purposes of Section 8 hereof or (ii) have the registration rights provided in
such sale.

(c) The closing of the purchase of shares pursuant to this Section 10
shall occur at the principal office of the Company not later than 45 days after
the closing of the sale of New Securities, or at such other time as the
Purchasing Parties and the Company may mutually determine. At the closing, the
Company shall deliver to each Purchasing Party, the certificate or certificates
representing such shares, free and clear of all liens and encumbrances
whatsoever (other than those imposed by this Agreement), and such Purchasing
Party shall pay to the Company, in cash or by delivery of a cashier's check, or
by wire transfer, the amount of the

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<PAGE>

purchase price for the shares of New Securities purchased by such Purchasing
Party pursuant to this Section 10.

11. Conduct Prior to the Closing Date.
---------------------------------

The Investors, their counsel, accountants, employees or other
representatives may, prior to the Closing Date, make such investigations of the
properties, plants and operations of the Company and such audit of the financial
condition of the Company for such purposes as it deems necessary or advisable in
connection with the transactions contemplated hereby; such investigation shall
not, however, affect the representations and warranties of the Company
hereunder. Prior to the Closing Date, the Company agrees to permit the
Investors and their counsel, accountants, employees or other representatives to
have, after the date hereof and upon reasonable advance notice, full access
during normal business hours to the premises and to all books and records of the
Company and the Investors shall have the right to make copies thereof and
excerpts therefrom, and the Company will furnish the Investors with such
financial and operating data and other information with respect to the business
and properties of the Company as is otherwise readily available and as the
Investors may, from time to time, reasonably request. Prior to the Closing
Date, the Company agrees to permit the Investors and their counsel, accountants,
employees or other representatives to communicate with and visit suppliers,
customers and others having business relations with the Company. The Company
acknowledges that the rights set forth in this Section 11 are essential to the
Investors as a means of evaluating the assets and business of the Company and
agree that in no event will they make any claim of any kind as a result of the
exercise by the Investors of such rights and hereby waive any and all rights
they may have to make such claims.

12. No Brokers.
----------

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<PAGE>

to indemnify and save harmless the Company in respect of such claim. In the
event of a claim by any broker or finder based upon his or her representing or
being retained by the Company the Company agrees to indemnify and save harmless
the Investors in respect of such claim.

13. Survival of Representations. All representations, warranties,
---------------------------
covenants and agreements contained in this Agreement or in any document,
exhibit, schedule or certificate delivered in connection herewith shall survive
the execution and delivery of this Agreement and the Closing Date and any
investigation at any time made by the Investors or on their behalf for a period
of six months from the Closing Date. If the Company shall be required to file a
report with the Commission pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act by reason of the Company having registered any of its securities
pursuant to Section 12 of the Securities Exchange Act or Section 5 of the
Securities Act (a "Reporting Event") then the Company shall be under no further
obligation to perform the covenants contained in Sections 4 and 5 hereof, except
for the covenants contained in Sections 4.1, 4.8, 4.11 and 5.6 (second sentence)
hereof which shall survive the Reporting Event.

14. Definitions.
-----------

For purposes of this Agreement, the following terms have the
respective meanings set forth below:

14.1. "Affiliate" has the meaning such term is given in Rule 405
promulgated under the Securities Act.

14.2. "Associate" has the meaning such term is given in Rule 405
promulgated under the Securities Act.

14.3. "Commission" means the Securities and Exchange Commission.

14.4. "Indebtedness" means all obligations, contingent or otherwise,
which in accordance with generally accepted accounting principles should be
classified on the obligor's balance sheet as liabilities, but in any event
including liabilities secured by any mortgage, pledge, lien or other security
interest existing on property owned or acquired by the obligor,

-34-
<PAGE>

whether or not the liability secured thereby shall have been assumed, all
guarantees of such Indebtedness and other contingent obligations in respect of
the Indebtedness of others.

14.5. "New Securities" means shares of Common Stock of the Company,
or any security which is convertible into or exchangeable for Common Stock, or
any right, option or warrant to acquire any Common Stock of the Company, except
for Conversion Shares, Preferred Shares or Options.

14.6. "Public Offering" means a distribution of securities in an
underwritten public offering to the general public pursuant to a Registration
Statement filed with and declared effective by the Commission pursuant to the
Securities Act.

14.7. "Qualified Investor"' means each holder of Preferred Shares or
Conversion Shares, or shares of Common Stock or other securities convertible
into or exercisable for shares of Common Stock, which, assuming conversion or
exercise of the Preferred Shares and such other securities, constitutes 10% or
more of the outstanding Common Stock of the Company on a fully diluted basis
(assuming conversion of all convertible securities and exercise of all
outstanding options).

14.8. "Registrable Securities" means (a) the Preferred Shares issued
hereunder; (b) any Conversion Shares issued or to be issued pursuant to
conversion of the Preferred Shares issued hereunder; (c) any other securities
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Preferred Shares issued hereunder or the Conversion
Shares; provided, however, that if any of the foregoing securities are sold
pursuant to a Registration Statement such securities shall no longer constitute
Registrable Securities.

14.9. "Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal law then in force.

14.10. "Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended, or any similar Federal law then in force.

15. Miscellaneous Provisions.
------------------------

-35-
<PAGE>

15.1. Construction and Enforcement. This Agreement shall be
----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.

15.2. Notices. All notices hereunder shall be in writing and shall
-------
be deemed to have been given at the time when mailed by certified mail,
addressed to the address below stated of the party to which notice is given, or
to such changed address as such party may have fixed by notice:

To the Company:

TSI International Ltd.
295 Westport Avenue
Norwalk, Connecticut 06856
Attn: Constance Galley, President

-with a copy to-

Fenwick, Davis & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens, Esq.

-36-
<PAGE>

To the Investors:

Warburg, Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York 10017
Attn: Jeffrey A. Harris

and

Vanguard Atlantic Ltd.
405 Danbury Road
Wilton, Connecticut 06897
Attn: E. Lee Keet

-with a copy to-

Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell, Esq.

To XIST LTD:

c/o The Dun & Bradstreet Corporation
299 Park Avenue
New York, New York 10171
Attn: Mr. Peter Lessler

-with a copy to-

The Dun & Bradstreet Corporation
1225 Worcester
Natick, Massachusetts 01760
Attn: James Alberg, Esq.

provided, however, that any notice of change of address shall be effective only
upon receipt.

15.3. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its
rights or obligations under this Agreement without the prior written consent of
the Investors. The Investors may assign all or any part of their respective
rights and obligations hereunder. A person to whom all or a part of either
Investor's rights are assigned shall become a party to this Agreement, entitled
to all the rights and benefits hereunder. The rights and powers of the
Investors hereunder are granted to the

-37-
<PAGE>

Investors as owners of the Preferred Shares and the Conversion Shares, if any.
Any subsequent owner of any Preferred Shares or Conversion Shares, whether
becoming such by transfer, assignment, operation of law or otherwise, shall be
deemed to be an Investor hereunder, shall have the same rights and powers which
an Investor owning the same number of shares has hereunder, and shall be
entitled to exercise them in full and no transfer or assignment shall divest
such Investor or any subsequent owner of such rights and powers until such
Investor or subsequent owner no longer owns any Preferred Shares or any
Conversion Shares; provided that no such transferee will be entitled to the
benefits of Sections 4, 5, 8 or 10 hereof unless such transferee is also a
Qualified Investor.

15.4. Amendments and Waivers. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares
or, in the case of any amendment to Sections 8 or 10 of this Agreement which
adversely affects the rights of the Qualified Investors, by the written consent
or waiver of all persons or entities who at such time are Qualified Investors.

15.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

15.6. Headings. The headings in this Agreement are for reference
--------
purposes only and shall not constitute a part hereof.

15.7. Confidentiality. The Investors acknowledge that much of the
---------------
financial and other information provided to them hereunder is of a sensitive and
confidential

-38-
<PAGE>

nature and, accordingly, the Investors will keep such information confidential
and will protect such information as it protects its own information of similar
importance.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.

TSI INTERNATIONAL LTD.

By: /s/ Constance Galley
---------------------------------------
Constance Galley, President

INVESTORS:

WARBURG, PINCUS CAPITAL COMPANY, L.P.

By: Warburg, Pincus & Co.,
General Partner

By: /s/ Jeff Horing
-----------------------------------------
Partner

VANGUARD ATLANTIC LTD.

By: /s/ Catherine J. Phillips
-------------------------
Sections 4.10 and 9
Accepted and Agreed to:

XIST LTD.

By: /s/ James L. Alberg, Vice President
-----------------------------------

[NO SCHEDULES OR EXHIBITS ATTACHED]

-39-
<PAGE>

1991 PREFERRED STOCK PURCHASE AGREEMENT
---------------------------------------

This 1991 Preferred Stock Purchase Agreement (the "Agreement"), dated as of
the 30th day of April, 1991, by and among TSI International Ltd., a Connecticut
corporation (the "Company"), and the investors listed on Schedule A hereto
(collectively, the "Investors").

W I T N E S S E T H :
- - - - - - - - - - -

WHEREAS, the Company desires to issue and sell to the Investors shares of
Series A Preferred Stock of the Company (the "Preferred Shares");

WHEREAS, the Investors desire to purchase the Preferred Shares from the
Company; and

WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989 (the
"1989 Agreement");

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:

1. Purchase and Sale of Preferred Shares.
-------------------------------------

1.1. Sale of Preferred Shares. Upon receipt by the Company of the
------------------------
purchase price, the Company hereby issues and sells to each Investor, and each
Investor hereby purchases from the Company, the number of Preferred Shares set
forth opposite such Investor's name on Schedule A hereto.

1.2 Purchase Price. The purchase price being paid by the Investors
--------------
for the Preferred Shares is $13.39 per share. The purchase price will be paid by
noon, New York time, on May 7, 1991, by wire transfer of same-day funds or
delivery to the Company of a cashier's check in the amount set opposite each
Investor's name on Schedule A.
<PAGE>

2. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to the Investors as follows:

2.1. Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of
Connecticut. The Company has all requisite corporate power and authority and
holds all licenses, permits and other required authorizations from governmental
authorities necessary to conduct its business as it is now being conducted or as
proposed to be conducted and to own or lease the properties and assets it now
owns or holds under lease.

2.2. Charter Documents. The Company has heretofore delivered to
-----------------
counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
June 5, 1989. There have not been any changes made to such Certificate of
Incorporation or By-Laws since June 5, 1989.

2.3. Capitalization. As of the date hereof, the Company's authorized
--------------
capitalization consists of 3,000,000 shares of Common Stock, par value $.01 per
share, and 750,000 shares of Preferred Stock, par value $.01 per share, of which
934,000 and 297,405 shares, respectively, are outstanding. The issuance of the
Preferred Shares and of the shares of Common Stock issuable upon conversion of
the Preferred Shares (the "Conversion Shares") pursuant to the provisions of
this Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Preferred Shares as contemplated by this Agreement. A true and complete
list of the holders of all issued and outstanding equity securities of the
Company on the date hereof, including the number of securities owned by each
such holder, is set forth on Schedule 2.3 attached hereto. Except pursuant to
the 1989 Agreement, no shareholder of the Company or any other person is
entitled to any preemptive rights with respect to the purchase or sale of any
securities by the Company.

2
<PAGE>

When issued and sold to the Investors, the Preferred Shares will be duly and
validly issued, fully paid and non-assessable, will be free and clear of any
liens, pledges or encumbrances and will have the designations, preferences and
relative, participating, optional and other special rights as set forth in the
Company's Certificate of Incorporation. The Conversion Shares, when issued and
delivered upon conversion of the Preferred Shares, will be duly and validly
issued, fully paid and non-assessable. Except as set forth on Schedule 2.3
attached hereto, there are not outstanding options, warrants or other rights,
commitments or arrangements, written or oral, to which the Company is a party or
by which it is bound, to purchase or otherwise acquire any authorized but
unissued shares of capital stock of the Company or any security directly or
indirectly convertible into or exchangeable or exercisable for any capital stock
of the Company.

2.4. Compliance with Other Instruments. The Company is not in
---------------------------------
violation of this Certificate of Incorporation or By-Laws. Neither the sale of
the Preferred Shares (or the issuance and delivery of the Conversion Shares),
the execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will: (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice or
lapse of time or each, would be a breach of or default under or violation of the
Certificate of Incorporation or By-Laws of the Company or would be a breach of
or default under or violation of any material agreement, document, indenture,
mortgage or other instrument or undertaking by which the Company is bound or to
which any of its properties are subject, or would be a material violation of any
law, administrative regulation, judgment, order or decree applicable to the
Company; (ii) result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company; (iii) result in the
loss of any material license, certificate, legal privilege or legal right
enjoyed or possessed by the Company; (iv) give any party to any material
agreement to which the Company is a party a right of termination; or (v) except
as

3
<PAGE>

provided for in this Agreement, require the consent of any other person or
entity under any agreement, indenture, mortgage, document or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject.

2.5. Authorization. The Company has the full corporate power and
-------------
authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

2.6. Compliance with the Securities Act. Based upon the
----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Preferred Shares (and
the issuance and delivery of the Conversion Shares) are exempt from the
registration requirements of the Securities Act of 1933.

2.7. Reservation of Common Stock. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common Stock required for issuance upon the conversion of all of the
Preferred Shares (including any additional shares of Common Stock which may
become so issuable by reason of the operation of anti-dilution provisions of the
Preferred Shares).

4
<PAGE>

3.1. Investment Intent. Each Investor is acquiring the Preferred
-----------------
Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933. Each Investor consents to the placement of the
following legend on each certificate representing the Preferred Shares and on
each certificate representing the Conversion Shares:

"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
TRANSFERRED OR SOLD UNLESS (i) A REGISTRATION STATEMENT
UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT THERETO, (ii)
A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OF MESSRS.
STROOCK & STROOCK & LAVAN OR OTHER COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE
EFFECT THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO
ACTION' LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT
TO SUCH TRANSFER OR SALE."

3.2. Restricted Securities. Each Investor understands that the
---------------------
Preferred Shares (and any Conversion Shares) have not been registered under the
Securities Act of 1933 for the reason that the sale provided for in this
Agreement is exempt pursuant to Section 4 of the Securities Act of 1933 and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it is
experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Such Investor was not formed
solely for the purpose of investing in the Company. Each Investor further
represents that it has had access during the course of the transaction and prior
to its purchase of the Preferred Shares to such information relating to the
Company as it has desired and that it has had

5
<PAGE>

the opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of the offering and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.

Each Investor understands that the Preferred Shares (and any Conversion
Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act of 1933 or an exemption therefrom and that
in the absence of an effective registration statement covering the Preferred
Shares (or the Conversion Shares) or an available exemption from registration
under the Securities Act of 1933, the Preferred Shares (and any Conversion
Shares) must be held indefinitely. The benefits of Rule 144 promulgated under
the Securities Act of 1933 are not presently available, the Company has not
covenanted to make the benefits of such Rule available, and the Company has no
present plans to make the benefits of such Rule available.

4. Deliveries of the Company. On May 7, 1991, as a condition to the
-------------------------
Investors' obligation to pay the purchase price, the Company will deliver to the
Investors the following:

(a.) an opinion of counsel to the Company, Fenwick & West,
addressed to the Investors, in form and substance satisfactory to the Investors
and to counsel to the Investors, Stroock & Stroock & Lavan;

(b.) copies of the resolutions adopted by the Company's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;

(c.) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of the Company in such
State;

(d.) a stock certificate registered in the name of such Investor
representing the Preferred Shares purchased by such Investor; and

6
<PAGE>

(e.) a certificate signed by the President of the Company that
the representations and warranties in Section 2 are true and correct as of May
7, 1991.

5. 1989 Agreement.
--------------

(a) All references in the 1989 Agreement to Preferred Shares
shall be deemed to refer also to the Preferred Shares issued to the Investors
hereunder, and such Preferred Shares and the holders thereof shall be entitled
to all the rights and benefits of holders of Preferred Shares under the 1989
Agreement, including, but not limited to, the benefits of Sections 4, 5, 8 and
10 of the 1989 Agreement. Section 14.8 of the 1989 Agreement is hereby amended
to include as Registrable Securities all Preferred Shares and Conversion Shares
issued pursuant to this Agreement. The Investors hereby waive the provisions of
Sections 5.6 and 10 of the 1989 Agreement, and consent pursuant to Section 6(b)
of the Certificate of Incorporation, to the extent necessary to permit the
issuance of the Preferred Shares hereunder and the issuance of Options (as
defined in said Section 10) for employees, directors or consultants to purchase
up to 28,940 additional shares of Common Stock in addition to those provided for
in said Section 5.6.

(b) Each Investor hereunder which is not a party to the
Stockholders' Agreement dated as of June 1, 1989 by and among the Company and
its shareholders, as amended (the "Stockholders Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in such agreement.

(c) Pursuant to Section 14 of the Stockholders Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders Agreement to add the following to the last
sentence of Section 7 thereof: "and of that certain 1991 Preferred Stock
Purchase Agreement among the Company and certain investors."

7
<PAGE>

6. Expenses.
--------

The Company agrees to pay and save the Investors harmless against
liability for the payment of, the reasonable fees and expenses of Stroock &
Stroock & Lavan, counsel for the Investors, arising in connection with the
negotiation, execution and consummation of this Agreement and the transactions
contemplated hereby.

7. No Brokers.
----------

Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company the Company
agrees to indemnify and save harmless the Investors in respect of such claim.

8. Survival of Representations.
---------------------------

All representations, warranties, covenants and agreements contained in
this Agreement or in any document, exhibit, schedule or certificate delivered in
connection herewith shall survive the execution and delivery of this Agreement
and any investigation at any time made by the Investors or on their behalf for a
period of six months from the date hereof.

9. Miscellaneous Provisions.
------------------------

9.1. Constructions and Enforcement. This Agreement shall be
-----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.

8
<PAGE>

9.2. Notices. All notices hereunder shall be in writing and shall be
-------
deemed to have been given at the time when mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:

To the Company:
TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President

- with a copy to -

Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens

To the Investors:

To the addresses set forth on Schedule A

- with a copy to -

Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell

provided, however, that any notice of change of address shall be effective only
upon receipt.

9.3. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its
rights or obligations under this Agreement without the prior written consent of
the Investors. The Investors may assign all or any part of their respective
rights and obligations hereunder. A person to whom all or a part of the
Investor's rights are assigned shall become a party to this Agreement, entitled
to all the rights and benefits hereunder. The rights and powers of the
Investors

9
<PAGE>

hereunder are granted to the Investors as owners of the Preferred Shares and the
Conversion Shares, if any. Any subsequent owner of any Preferred Shares or
Conversion Shares, whether becoming such by transfer, assignment, operation of
law or otherwise, shall be deemed to be an Investor hereunder, shall have the
same rights and powers which an Investor owning the same number of shares has
hereunder, and shall be entitled to exercise them in full and no transfer or
assignment shall divest such Investor or any subsequent owner of such rights and
powers until such Investor or subsequent owner no longer owns any Preferred
Shares or any Conversion Shares; provided, that no such transferee shall be
entitled to the benefits of Sections 4, 5, 8 or 10 of the 1989 Agreement unless
such transferee is also a Qualified Investor as defined therein.

9.4. Amendments and Waivers. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares.

9.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

9.6 Headings. The headings in this Agreement are for reference purposes
--------
only and shall not constitute a part hereof.

9.7 Additional Investors. The persons or entities listed on Schedule B
--------------------
(the "Additional Investors") shall have the right for a period of 60 days from
the date hereof, to acquire up to an additional number of Preferred Shares set
forth opposite their names on the same terms as contained herein. If such right
is exercised, the Additional

10
<PAGE>

Investors shall execute this Agreement in counterparts and shall be deemed for
all purposes to be, and shall become and be considered as, an Investor as
defined in this Agreement. To the extent that the Additional Investors purchase
the additional shares after 45 days from the date hereof but on or before the
expiration of the 60-day period, the Additional Investors agree to pay to TSI,
in addition to the purchase price for the additional shares, an amount specified
by TSI for late closing costs not to exceed $5,625. If the Additional Investors
do not purchase all of such shares by the expiration of such 60-day period, then
Warburg, Pincus Capital Company, L.P. and Vanguard Atlantic Ltd. or affiliates
thereof shall have the right, but not the obligation, to purchase on a pro-rata
basis (based upon their relative as-converted share ownership in the Company)
any such shares not so purchased by the Additional Investors for a period of up
to ten days after the expiration of such 60-day period. Warburg, Pincus Capital
Company. L.P. and Vanguard Atlantic Ltd. or affiliates thereof may also indicate
when they exercise the foregoing rights a number of additional Preferred Shares
in excess of their pro-rata share, if any, that they would be willing to
purchase if such remain unsold and any unsold shares shall be sold to them on a
pro-rata basis. In the event any such Preferred Shares are purchased under this
Section 9.7, the Company will deliver a stock certificate registered in the name
of such Investor representing the Preferred Shares purchased by such Investor on
the date thereof.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]

11
<PAGE>

TSI INTERNATIONAL LTD.

By: /s/Constance F. Galley
-------------------------------
Constance F. Galley, President

INVESTORS:

WARBURG, PINCUS CAPITAL COMPANY, L.P.

By: Warburg, Pincus & Co.,
General Partner

By: /s/William Janeway
-------------------------------
Partner

VANGUARD ATLANTIC LTD.

By: /s/Ernest Keet
-------------------------------

[NO EXHIBITS OR SCHEDULES ARE ATTACHED]

<PAGE>

SUPPLEMENT TO 1991 PREFERRED STOCK PURCHASE AGREEMENT

Supplement dated as of July 16, 1991 to 1991 Preferred Stock Purchase
Agreement, dated as of April 30, 1991 (the "1991 Agreement"), by and among TSI
International Ltd., a Connecticut Corporation, and the investors listed on
Schedule A to the 1991 Agreement (the "Investors").

WI T N E S S E T H :
--------------------

WHEREAS, the Company and the Investors desire to supplement the provisions
of the 1991 Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:

1. Definitions. Terms defined in the 1991 Agreement shall have the same
-----------
meaning when used herein.

2. Additional Purchase. In accordance with the provisions of Section 9.7
-------------------
of the 1991 Agreement, Information Partners Capital Fund, L.P. ("IP") hereby
purchases from the Company 37,342 Preferred Shares and by this Supplement is
deemed to have executed the 1991 Agreement and for all purposes is, and shall be
considered as, an Investor under the 1991 Agreement.

3. Qualified Investor. So long as IP owns any Preferred Shares of the
------------------
Company, IP shall be deemed a Qualified Investor and a Qualified Shareholder (as
defined in the Stockholders Agreement).

4. Priority. The Company and the Investors agree that (a) the Preferred
--------
Shares purchased pursuant to the 1991 Agreement (including those purchased by IP
pursuant to this Supplement) (the "Senior Preferred Shares") will be identical
in all respects with the Preferred Shares purchased pursuant to the 1989
Agreement (the "Junior Preferred Shares") except that the Senior Preferred
Shares shall be senior to the Junior Preferred Shares in the event of the
voluntary
<PAGE>

of involuntary liquidation, dissolution or winding up of the Company or the
sale, lease, conveyance or other disposition of all or substantially all of the
Company's property and business and (b) when the Company consummates the sale of
more than 5% of its equity securities or securities convertible into, or
exercisable or exchangeable for, more than 5% of its equity securities, the
Company and the Investors will use their best efforts to amend the Company's
certificate of incorporation to provide for the creation of Senior Preferred
Shares and Junior Preferred Shares in accordance with the provisions of
subparagraph (a) above.

5. Miscellaneous. Except as supplemented hereby, the 1991 Agreement
-------------
remains unmodified and in full force and effect.

6. Counterparts. This Supplement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]

2
<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Supplement as of the
day and year first above written.

TSI INTERNATIONAL LTD.

By:/s/ Constance Galley
--------------------------------
Constance F. Galley, President

WARBURG, PINCUS CAPITAL COMPANY, L.P.

By: Warburg, Pincus & Co.,
General Partner

By:/s/ William Janeway
-------------------------------
Partner

VANGUARD ATLANTIC LTD.

By:/s/ Ernest Keet
-------------------------------

INFORMATION PARTNERS CAPITAL FUND, L.P.

By:/s/ Stephen Pagliuro
-------------------------------
By:/s/ Constance Galley
-------------------------------
CONSTANCE F. GALLEY

3
<PAGE>

1992 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

AND

AMENDMENT TO 1989 PREFERRED STOCK PURCHASE AGREEMENT

AND

STOCKHOLDERS' AGREEMENT

This 1992 Preferred Stock and Warrant Purchase Agreement and Amendment
to 1989 Preferred Stock Purchase Agreement and Stockholders' Agreement (the
"Agreement"), dated as of the 10th day of June, 1992 (the "Closing Date"), is
entered into by and among TSI International Ltd., a Connecticut corporation (the
"Company"), and the investors listed on Schedule A hereto who execute this
Agreement (collectively, the "Investors").

W I T N E S S E T H:
-------------------

WHEREAS, the Company has amended its Certificate of Incorporation, as
provided in the Certificate Amending Certificate of Incorporation filed with the
Connecticut Secretary of State on June 5, 1992 attached hereto as Exhibit 1
("Certificate of Amendment"), to provide for the conversion of 115,761 shares of
its Series A Convertible Preferred Stock (the "Series A Stock) into 115,761
shares of Series B Convertible Preferred Stock (the "Series B Stock"), to
authorize the issuance of 725,000 shares of Series C Convertible Preferred Stock
(the "Series C Stock") and to authorize 500,000 shares of undesignated Preferred
Stock;

WHEREAS, the Company has further amended its Certificate of
Incorporation, as provided in the Certificate of Amendment Adopted by Resolution
of the Board of Directors filed with the Connecticut Secretary of State on June
9, 1992, attached hereto as Exhibit 2 ("Series D Certificate"), to designate and
authorize the issuance of 344,469 shares of Preferred Stock as Series D
Convertible Preferred Stock (the "Series D Stock");

WHEREAS, the Company desires to issue and sell to the Investors shares
of Series C Stock of the Company (the "Preferred Shares") and warrants in the
form attached hereto as Exhibit
<PAGE>

3 (the "Warrants") to purchase shares of Series D Stock (the Preferred Shares
and the Warrants are collectively referred to herein as the "Securities");

WHEREAS, the Investors desire to purchase the Securities from the
Company; and

WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989, as
amended (the "1989 Agreement"), which agreement will be amended by this
Agreement, and a 1991 Preferred Stock Purchase Agreement dated as of April 30,
1991 and supplemented by a Supplement to 1991 Preferred Stock Purchase Agreement
dated as of July 16, 1991 (collectively, the "1991 Agreement");

NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:

1. Purchase and Sale of Units.
---------------------------

1.1. Sale of Units. Upon receipt by the Company of the
--------------
purchase price therefor, the Company hereby issues and sells to each Investor,
and each Investor hereby purchases from the Company, in one or more closings as
provided herein, the number of Units set forth opposite such Investor's name on
Schedule A hereto, where a "Unit" is one Preferred Share and a Warrant to
purchase one Exercise Share, as defined below.

1.2. Purchase Price. The purchase price being paid by the
---------------
Investors for the Securities together is $6.00 per Unit. Except as provided in
Section 1.3 below, the Investors listed on Schedule A will pay by noon Eastern
Time, on the Closing Date, by wire transfer of same-day funds or delivery to the
Company of a cashier's check, the amount set forth opposite each Investor's name
on Schedule A (the "Purchase Price").

1.3. Supplemental Closing. If XIST Ltd. or another Dun &
---------------------
Bradstreet affiliate ("Dun & Bradstreet Affiliate") does not purchase the
Securities listed on Schedule A opposite the name "Dun & Bradstreet Affiliate"
(the "Supplemental Securities") by noon Eastern Time on the Closing Date, then
Vanguard Atlantic Ltd. and Warburg, Pincus Capital Company,

-2-
<PAGE>

L.P. (the "Supplemental Investors") will have the right to purchase, at the
Purchase Price specified above, pro rata according to their Common Stock
equivalent interest in the Company prior to

-3-
<PAGE>

the Closing Date, such Supplemental Securities. In the event that either
Supplemental Investor does not purchase its pro rata share of the Supplemental
Securities, the other Supplemental Investor may purchase the remaining shares of
Supplemental Securities not subscribed for by such Supplemental Investor. The
purchase and sale of the Supplemental Securities must occur no later than noon
Eastern Time on June 17, 1992 (the "Supplemental Closing") and any Supplemental
Securities purchased at the Supplemental Closing will be Securities for all
purposes under this Agreement. It shall not be a condition precedent to the
Investors' obligations hereunder to purchase their respective Securities on the
Closing Date that a Dun & Bradstreet Affiliate purchase the Supplemental
Securities.

2. Representations and Warranties of the Company. The Company hereby
----------------------------------------------
represents and warrants to the Investors as follows effective as of the Closing
Date.

2.1. Organization. The Company is a corporation duly
-------------
organized, validly existing and in good standing under the laws of the State of
Connecticut. Except as set forth in Schedule 2.1, the Company has all requisite
corporate power and authority and holds all licenses, permits and other required
authorizations from governmental authorities necessary to conduct its business
as it is now being conducted or as proposed to be conducted and to own or lease
the properties and assets it now owns or holds under lease.

2.2. Charter Documents. The Company has heretofore delivered
------------------
to counsel for the Investors true, correct and complete copies of the Company's
Certificate of Incorporation and By-Laws, each as in full force and effect on
the Closing Date.

2.3. Capitalization. As of the date hereof, the Company's
---------------
authorized capitalization consists of 3,888,166 shares of Common Stock, par
value $.01 per share, of which 938,229 shares are outstanding; and 1,638,166
shares of Preferred Stock, par value $.01 per share, of which 297,405 shares
have been designated Series A Convertible Preferred Stock, all of which are
outstanding, 115,761 shares have been designated Series B Convertible Preferred
Stock, all of which are outstanding, 725,000 shares have been designated Series
C Preferred Stock, none of which are outstanding, 344,469 shares have been
designated as Series D Convertible Preferred

-4-
<PAGE>

Stock, none of which are outstanding, and 155,531 shares remain undesignated and
unissued. The issuance of the Securities and of the shares of Series D Stock
issuable upon exercise of the Warrants (the "Exercise Shares") and the Common
Stock issuable upon conversion of the Preferred Shares and Exercise Shares
(collectively, the "Conversion Shares") pursuant to the provisions of this
Agreement have been duly and validly authorized. No further approval or
authorization of the shareholders or the directors of the Company or of any
governmental authority or agency will be required for the issuance and sale of
the Securities as contemplated by this Agreement. Schedule 2.3 attached hereto
is a list of the aggregate number of outstanding securities of the Company.
Except pursuant to the 1989 Agreement and the 1991 Agreement, no shareholder of
the Company or any other person is entitled to any preemptive rights with
respect to the purchase or sale of any securities by the Company. When issued
and sold to the Investors, the Preferred Shares and Exercise Shares will be duly
and validly issued, fully paid and non-assessable, will be free and clear of any
liens, pledges or encumbrances and will have the designations, preferences and
relative, participating, optional and other special rights as set forth in the
Company's Certificate of Incorporation. The Conversion Shares, when issued and
delivered upon conversion of the Preferred Shares and Exercise Shares, will be
duly and validly issued, fully paid and non-assessable. Except as set forth on
Schedule 2.3 attached hereto, there are no outstanding options, warrants or
other rights, commitments or arrangements, written or oral, to which the Company
is a party or by which it is bound, to purchase or otherwise acquire any
authorized but unissued shares of capital stock of the Company or any security
directly or indirectly convertible into or exchangeable or exercisable for any
capital stock of the Company.

2.4. Compliance with Other Instruments. Except as set forth in
----------------------------------
Schedule 2.4, to the Company's best knowledge, the Company is not in material
default in the performance of any material obligation, agreement, instrument or
undertaking to which it is a party or by which it is bound. The Company is not
in violation of its Certificate of Incorporation or By-Laws. Neither the sale
of the Preferred Shares or Exercise Shares (or the issuance and delivery of the
Conversion Shares), the execution and delivery of this Agreement, nor the
fulfillment of the terms set forth in

-5-
<PAGE>

this Agreement and the consummation of the transactions contemplated by this
Agreement, will: (i) conflict with or constitute a breach of, or constitute a
default under or an event which, with or without notice or lapse of time or
each, would be a breach of or default under or violation of the Certificate of
Incorporation or By-Laws of the Company or would be a breach of or default under
or violation of any material agreement, document, indenture, mortgage or other
instrument or undertaking by which the Company is bound or to which any of its
properties are subject, or would be a material violation of any law,
administrative regulation, judgment, order or decree applicable to the Company;
(ii) result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Company; (iii) result in the loss
of any material license, certificate, legal privilege or legal right enjoyed or
possessed by the Company; (iv) give any party to any material agreement to which
the Company is a party a right of termination; or (v) except as provided for in
this Agreement, require the consent of any other person or entity under any
agreement, indenture, mortgage, document or other instrument or undertaking by
which the Company is bound or to which any of its properties are subject.

2.5. Authorization. The Company has the full corporate power
--------------
and authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

2.6. Compliance with the Securities Act. Based upon the
-----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Securities and
Exercise Shares (and the issuance and delivery of the Conversion Shares) are
exempt from the registration requirements of the Securities Act of 1933.

-6-
<PAGE>

2.7. Reservation of Common Stock. The Company shall reserve
----------------------------
and keep available out of its authorized but unissued Common Stock the number of
shares of Common Stock required for issuance upon the conversion of all of the
Preferred Shares and Exercise Shares (including any additional shares of Common
Stock which may become so issuable by reason of the operation of anti-dilution
provisions of the Preferred Shares and the Exercise Shares).

2.8. Litigation. Except as set forth on Schedule 2.8 attached
----------
hereto, there is not now pending, and to the best knowledge of the Company there
is not threatened in writing, any litigation, action, suit or proceeding: (i)
to which the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body; or (ii) to which any of the officers
or employees of the Company is or will be a party in or before or by any court
or governmental or regulatory agency or body, concerning termination by such
person of his or her employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.

2.9. Compliance with Law. The Company is in compliance in all
-------------------
material respects with all applicable statutes and regulations of the United
States and of all states, municipalities and agencies in respect of the conduct
of its business.

2.10. Financial Statements. Attached hereto as Schedule 2.10
--------------------
are the audited balance sheets of the Company at April 30, 1991, and the related
statements of income and retained earnings and changes in financial position,
including the notes thereto, of the Company for the periods then ended, and the
unaudited balance sheet of the Company at March 31, 1992 and the related
statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance

-7-
<PAGE>

sheet fairly presents the financial condition of the Company as of its date and
each statement of income fairly presents the results of operations of the
Company for the period covered thereby.

3. Representations, Warranties and Covenants of the Investors. Each
-----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows effective as of the delivery of the Purchase Price and the
exercise of the Warrants:

3.1. Investment Intent. Each Investor is acquiring the
------------------
Securities and Exercise Shares (and any Conversion Shares) for its own account
and not with a present view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act of 1933. Each Investor consents to
the placement of the following legend on each certificate representing the
Preferred Shares, on each certificate representing the Exercise Shares, on each
certificate representing the Conversion Shares and/or each Warrant:

"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED
OR SOLD UNLESS (i) A REGISTRATION STATEMENT UNDER SUCH ACT IS
THEN IN EFFECT WITH RESPECT THERETO, (ii) A WRITTEN OPINION
FROM COUNSEL FOR THE ISSUER OR MESSRS. STROOCK & STROOCK &
LAVAN OR OTHER COUNSEL FOR THE HOLDER REASONABLY ACCEPTABLE
TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR ITS
THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER OR SALE."

3.2. Restricted Securities. Each Investor understands that the
----------------------
Securities and Exercise Shares (and any Conversion Shares) have not been
registered under the Securities Act of 1933 for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4 of the Securities
Act of 1933 and that the reliance of the Company on such exemption is predicated
in part on such Investor's representations set forth herein. Each Investor
represents that it is experienced in evaluating companies such as the Company,
is able to fend for itself, has such knowledge and experience in financial and
business matters as to be capable of evaluating the

-8-
<PAGE>

merits and risks of its investment, and has the ability to suffer the total loss
of its investment. Such Investor was not formed solely for the purpose of
investing in the Company. Each Investor further represents that it has had
access during the course of the transaction and prior to its purchase of the
Securities and Exercise Shares to such information relating to the Company as it
has desired and that it has had the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the offering and
to obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.

Each Investor understands that the Securities and Exercise Shares (and
any Conversion Shares) may not be sold, transferred or otherwise disposed of
without registration under the Securities Act of 1933 or an exemption therefrom
and that in the absence of an effective registration statement covering the
Securities and Exercise Shares (or the Conversion Shares) or an available
exemption from registration under the 1933 Act, the Securities and the Exercise
Shares (and any Conversion Shares) must be held indefinitely. The benefits of
Rule 144 promulgated under the Securities Act of 1933 are not presently
available, the Company has not covenanted to make the benefits of such Rule
available, and the Company has no present plans to make the benefits of such
Rule available.

4. Deliveries of the Company. On the Closing Date, as a condition
-------------------------
to the Investors' obligation to pay the Purchase Price provided under Section
1.2 hereof, the Company will deliver to the Investors executing this Agreement
the following:

(a) an opinion of counsel to the Company, Fenwick & West,
addressed to the Investors, in form and substance satisfactory to the Investors
and to counsel to the Investors, Stroock & Stroock & Lavan;

(b) copies of the resolutions adopted by the Company's Board
of Directors authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby;

-9-
<PAGE>

(c) a certificate, dated as of a recent date, of the Secretary
of State of Connecticut attesting as to the good standing of the Company in such
State;
(d) a stock certificate registered in the name of such
Investor representing the Preferred Shares purchased by such Investor in
consideration of the Purchase Prise therefor;

(e) a Warrant in the Investor's name to purchase the number of
Exercise Shares set forth opposite each Investor's name on Schedule A;

(f) a certificate signed by the President or Vice President of
the Company that the representations and warranties in Section 2 are true and
correct as of the Closing Date; and

(g) a copy of the Certificate of Amendment and the Series D
Certificate.

5. Deliveries of the Company Upon Supplemental Closing. As a
------------------------------------------- -------
condition to the obligations of the Supplemental Investors participating in the
Supplemental Closing to pay the Purchase Price for the Supplemental Securities
purchased in the Supplemental Closing, the Company will deliver to the
Supplemental Investors a stock certificate registered in the name of each such
Supplemental Investor representing the Preferred Shares purchased by such
Supplemental Investor in the Supplemental Closing and a Warrant in the
Supplemental Investor's name to purchase the number of Exercise Shares equal to
the number of Preferred Shares purchased by the Supplemental Investor in the
Supplemental Closing.

6. 1989 Agreement and Stockholders Agreement.
------------------------------------------

(a) The 1989 Agreement is hereby amended so that all
references to Preferred Shares and Conversion Shares in Sections 4, 5, 8, 10 and
14 of the 1989 Agreement shall be deemed to refer also to the Series B Stock
issued in connection with the conversion of 115,761 shares of Series A Stock
purchased in 1991, into 115,761 shares of Series B Stock.

(b) The holders of Preferred Shares purchased hereunder, the
Exercise Shares, the Conversion Share and the Series B Stock shall be entitled
to all the rights and benefits of holders of Preferred Shares under Sections 4,
5, 8 and 10 of the 1989 Agreement, provided that

-10-
<PAGE>

with respect to the provisions of Sections 5.6, 8 and 10 of the 1989 Agreement
and any consents under the 1989 Agreement requiring the consent of the holders
of a majority of the Series A Stock, the Preferred Shares sold hereunder and the
Exercise Shares issuable upon exercise of the Warrants will participate pari
passu as a single class with the shares of the Series A Stock sold under the
1989 Agreement and the shares of the Series B Stock sold under the 1991
Agreement on an as-converted to Common Stock basis. Section 14.8 of the 1989
Agreement is hereby amended to include as Registrable Securities all Series B
Stock, Preferred Shares, Exercise Shares and Conversion Shares issued pursuant
to this Agreement or upon exercise of the Warrants. The Investors that are
holders of Series A Stock and Series B Stock, on behalf of themselves as holders
of a majority of the outstanding Series A Stock and Series B Stock, hereby waive
the provisions of Sections 5.6 and 10 of the 1989 Agreement, and consent,
pursuant to Section III(6)(b) of the Certificate of Amendment, to the extent
necessary to permit the issuance of the Securities hereunder and the Exercise
Shares upon issuance of the Warrants.

(c) Each Investor hereunder which is not a party to the
Stockholders' Agreement dated as of June 1, 1989 by and among the Company and
its shareholders, as amended (the "Stockholders' Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in the Stockholders' Agreement.

(d) Pursuant to Section 14 of the Stockholders' Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders' Agreement to: (i) add the following to
the last sentence of Section 7 thereof: "and of that certain 1992 Preferred
Stock and Warrant Purchase Agreement and Amendment to 1989 Stock Purchase
Agreement and Stockholders' Agreement among the Company and certain investors
and the exercise of the warrants purchased thereunder"; (ii) add each Investor
who is not a party to the Stockholders' Agreement and the Preferred Shares,
Warrants and Exercise Shares to Annex A

-11-
<PAGE>

thereto; and (iii) provide that the definition of "Securities" includes all
securities received in exchange for or upon conversion, exercise or in
replacement of the Securities listed on Schedule A.

(e) The Investors, on behalf of themselves as holders of Series A
Stock and Series B Stock, hereby waive their right to receive any additional
shares of Common Stock upon any conversion of their Series A Stock or Series B
Stock as a result of the application of Section 4(g) of the Certificate of
Amendment to the issuance of the Securities hereunder or the Exercise Shares
upon exercise of the Warrants.

7. Expenses.
---------

8. No Brokers.
-----------

9. Survival of Representations.
----------------------------

10. Miscellaneous Provisions.
-------------------------

-12-
<PAGE>

10.1. Construction and Enforcement. This Agreement shall be
-----------------------------
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York without giving any effect to principles of conflicts of
laws. The Company agrees that it will not assert against any limited partner of
any Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.

10.2. Notices. All notices hereunder shall be in writing and
--------
shall be deemed to have been given at the time when mailed by certified mail,
addressed to the address below stated of the party to which notice is given, or
to such changed address as such party may have fixed by notice:

TO THE COMPANY:

TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President

-WITH A COPY TO

Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens

TO THE INVESTORS:

To the addresses set forth on Schedule A

-WITH A COPY TO

Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Martin H. Neidell

provided, however, that any notice of change of address shall be effective only
upon receipt.

-13-
<PAGE>

10.3. Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its rights
or obligations under this Agreement without the prior written consent of the
Investors. The Investors may assign all or any part of their respective rights
and obligations hereunder. A person to whom all or a part of the Investor's
rights are assigned shall become a party to this Agreement, entitled to all the
rights and benefits hereunder. The rights and powers of the Investors hereunder
are granted to the Investors as owners of the Securities, the Exercise Shares
and the Conversion Shares, if any. Any subsequent owner of any Securities,
Exercise Shares or Conversion Shares, whether becoming such by transfer,
assignment, operation of law or otherwise, shall be deemed to be an Investor
hereunder, shall have the same rights and powers which an Investor owning the
same number of shares has hereunder, and shall be entitled to exercise them in
full and no transfer or assignment shall divest such Investor or any subsequent
owner of such rights and powers until such Investor or subsequent owner no
longer owns any Securities, Exercise Shares or any Conversion Shares; provided,
that no such transferee shall be entitled to the benefits of Sections 4, 5, 8 or
10 of the 1989 Agreement unless such transferee is also a Qualified Investor as
defined therein.

10.4. Amendments and Waivers. This Agreement and all exhibits
-----------------------
and schedules hereto set forth the entire understanding of the parties with
respect to the transactions contemplated hereby. This Agreement may be amended,
the Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares, Exercise Shares and
Conversion Shares.

10.5. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

-14-
<PAGE>

10.6. Headings. The headings in this Agreement are for reference
---------
purposes only and shall not constitute a part hereof.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.

TSI INTERNATIONAL LTD.

By: /s/ Constance Galley
---------------------------------

INVESTORS:

WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.,
General Partner

By: /s/ William Janeway
---------------------------------
Partner

VANGUARD ATLANTIC LTD.

By: /s/ Ernest Keet
---------------------------------

DUN & BRADSTREET AFFILIATE:

XIST LTD.
-------------------------------------

By: /s/ James Alberg
---------------------------------

CONSTANCE F. GALLEY

/s/ Constance Galley
-------------------------------------

RICHARD BANKOSKY

/s/ Richard Bankosky
-------------------------------------

-15-
<PAGE>

TED WATSON

/s/ Ted Watson
-------------------------------------

JAMES WATTS

/s/ James Watts
-------------------------------------

PAUL LEMME

/s/ Paul Lemme
-------------------------------------

-16-

No exhibits or schedules attached

<PAGE>

FIRST AMENDMENT TO
1992 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AND AMENDMENT TO 1989 PREFERRED STOCK
PURCHASE AGREEMENT AND STOCKHOLDERS' AGREEMENT

This Amendment is entered into as of August 10, 1992 among TSI
International Ltd., a Connecticut corporation (the "Company") and the parties
listed on the signature page hereto.

WITNESSETH:

WHEREAS, the parties listed on the signature page hereto under the heading
"Shareholders" (the "Shareholders") are parties to that certain 1992 Preferred
Stock and Warrant Purchase Agreement and Amendment to 1989 Preferred Stock
Purchase Agreement and Stockholders' Agreement dated as of June 10, 1992 (the
"Purchase Agreement"), which amended the Preferred Stock Purchase Agreement
dated as of June 1, 1989, as amended (the "1989 Agreement");

WHEREAS, the Company desires to sell, and FSC Corp. (the "Bank") desires to
purchase, 20,000 shares (the "Preferred Shares") of the Company's Series C
Convertible Preferred Stock (the "Series C Stock") and warrants (the "Warrants")
to purchase 20,000 shares (the "Exercise Shares") of the Company's Series D
Convertible Preferred Stock (the "Series D Stock") pursuant to the terms and
conditions of the Purchase Agrement, as amended by this Amendment (the Preferred
Shares and Warrants being collectively referred to herein as the "Securities");

WHEREAS, the Company's Board of Directors has amended the Company's
Certificate of Incorporation to increase the number of authorized shares of
Series D Stock to 364,469, as set forth in the Amendment to Certificate of
Incorporation Adopted by the Board of Directors of TSI International Ltd.
attached hereto as Exhibit 1 (the "Amendment to Certificate"); and

WHEREAS, the Company and the Shareholders, which constitute holders of more
than 50% of the issued and outstanding shares of Series C Stock for the purposes
of Section 10.4 of the Purchase Agreement, desire to add the Bank as a party to
the Purchase Agreement and to the Stockholders' Agreement dated as of June 1,
1989 (the "Stockholders' Agreement").

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:

1. Amendments.
----------

1.1 Purchase Agreement. the Comapny and the Shareholders hereby
------------------
amend the Purchase Agreement, and consent to the corresponding amendment of the
Stockholders' Agreement and 1989 Agreement, as provided in the Purchase
Agreement, to provide as follows: (a) the Bank is added as, and shall be
deemedn, an "Investor" under the Purchase Agreement and, as set forth in the
Purchase Agreement, and the sale of the Securities hereunder shall be deemed to
have been sales of such Securities under the Purchase Agreement; (c) the
Preferred Shares shall be deemed to be "Preferred Shares" under the Purchase
Agreement; (d) the Warrants shall be deemed to be "Warrants" under the Purchase
Agreement; and (e) the Bank will be deemed a "Qualifed Investor" for the
purposes of Sections 4 (other than the first sentence of Section 4.10), 5 and 8
of the 1989 Agreement.

1.2 Stockholders' Agreement. Pursuant to Section 14 of the
-----------------------
St5ockholders' Agreement, the Shareholders, constituting the holders of a
majority of the Company's outstanding Preferred Stock and the holders of at
least 60% of the Company's outstanding Common Stock, amend the Stockholders'
Agreement to add the following to the last sentence of Section 7 thereof: ", as
amended by the First Amendment to 1992 Preferred Stock Purchase Agreement and
Amendment to 1989 Preferred Stock Purchase Agreement and Stockholders'
Agreement, dated as of Ausgust 10, 1992".

2. Purchase and Sale of Securities.
-------------------------------

2.1 Sale of Securities. Upon receipt by the Company of the purchase
------------------
price therefor, the Company hereby issues and sells to the Bank, and the Bank
hereby purchases from the Company, the Securities. The closing (the "Closing")
of the transactions contemplated hereby will occur at 10:00 a.m. local time on
August 10, 1992 (the "Closing Date") at the offices of the Company or at such
other time and place as the Bank and the Company shall agree.

2.2 Purchse Price. The purchase price being paid by the Bank for the
-------------
Securities together is $6.00 per Unit, where a "Unit" is one Preferred Share and
a Warrant to purchase one share of Series D Stock. The Bank will pay by noon
Eastern Time, on the Closing Date, by wire transfer of same-day funds or
delivery to the Company of a cashier's check, $120,000 (the "Purchase Price") as
payment for the Securities.

2.3 Delivery. As a condition to the obligations of the Bank to pay
--------
the Purchase Price for the Securities:

(i) The Amendment to Certificate shall have been filed with the
Connecticut Secretary of State;

(ii) the Company will deliver to the Bank a stock certificate
registered in the name of the Bank representing the
Preferred Shares;

(iii) the Company will deliver to the Bank a Warrant in the
Bank's name to purchase the Exercise Shares;

(iv) the Company will deliver to the Bank a certificate signed
by the President or Vice President of the Company that the
representations and warranties in Section 3.1 hereof are
true and correct as of the Closing Date; and

(v) Fenwick & West, counsel to the Company, will deliver to the
Bank an opinion in the form attached hereto as Exhibit 3.

3. Representations and Warranties.
------------------------------

3.1 Company Representations and Warranties. The Company hereby
--------------------------------------
represents and warrants to the Bank that the representations and warranties of
the Company set forth in Section 2 of the Purchase Agreement, except as set
forth on Exhibit 2 hereto, are true and correct as of the date hereof and will
be true and correct as of the Closing.

3.2 Bank Representations and Warranties. The Bank hereby represents
-----------------------------------
and warrants to the Company that the representations and warranties of the Bank
set forth in Section 3 of the Purchase Agreement, are true and correct as of the
date hereof and will be true and correct as of the Closing.

4. Agreement to Be Bound.
---------------------

The Bank hereby agrees to become a party to, and to be bound by all
the provisions of, the Purchase Agreement, as an "Invesetor," as defined in such
agreement, and the Stockholders' Agreement, as a "Shareholder," as defined in
such agreement.

5. Waiver of Preemptive Rights.
---------------------------

The Shareholders, as holders of more than 50% of the company's Series
A convertible Preferred Stock, the Company's Series B Convertible Preferred
Stock, and the Series C Stock, on behalf of themselves and all other holders of
such securities, hereby agree to waive the right of first refusla of Section 10
of the 1989 Agreement with respect to the Securities sold hereunder.

6. Limitation of Amendment.
-----------------------

Except as expresssly provided herein, the Purchase Agreement and the
Stockholders' Agreement shall remain in full force and effect in accordance with
their terms.

7. Counterparts.
------------

This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall be deemed to
constitute but one instrument.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
day and year first above written.

TSI INTERNATIONAL LTD. SHAREHOLDERS:

By: /s/ Richard Bankosky Warburg, Pincus Capital Company, L.P.

FSC Corp. By: Warburg, Pincus & Co.,
General Partner
By: /s/ Jay Massimo
By: /s/ William Janeway
-------------------
Partner

Vanguard Atlantic Ltd.

By: /s/ Ernest Keet
----------------

Information Partners

By: /s/ Stephen Pagliuca
--------------------

/s/ Constance Galley
--------------------
/s/ Richard Bankosky
--------------------
/s/ Ted Watson
--------------
/s/ Paul Lemme
--------------
<PAGE>

1993 PREFERRED STOCK PURCHASE AGREEMENT
AND
AMENDMENT TO 1989 PREFERRED STOCK PURCHASE AGREEMENT
AND
STOCKHOLDERS' AGREEMENT

This 1993 Preferred Stock Purchase Agreement and Amendment to 1989
Preferred Stock Purchase Agreement and Stockholders' Agreement (the
"Agreement"), dated as of the 2nd day of September, 1993 (the "Closing Date"),
is entered into by and among TSI International Ltd., a Connecticut corporation
(the "Company"), and the investors listed on Schedule A hereto who execute this
Agreement (collectively, the "Investors").

W I T N E S S E T H:
-------------------

WHEREAS, the Company desires to issue and sell to the Investors shares of
its Series C Convertible Preferred Stock (the "Preferred Shares"); and

WHEREAS, the Investors desire to purchase the Preferred Shares from the
Company; and

WHEREAS, the Company and certain of the Investors are parties to a
Preferred Stock Purchase Agreement dated as of the 1st day of June, 1989 (the
"1989 Agreement"), which agreement was amended by that certain 1992 Preferred
Stock and Warrant Purchase Agreement, as amended (the "1992 Agreement"), and
will be further amended by this Agreement, and a 1991 Preferred Stock Purchase
Agreement dated as of April 30, 1991 and supplemented by a Supplement to 1991
Preferred Stock Purchase Agreement dated as of July 16, 1991 (collectively, the
"1991 Agreement");

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:

1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------

1.1. SALE OF PREFERRED SHARES. Upon receipt by the Company of the
------------------------
purchase price therefor, the Company hereby issues and sells to each Investor,
and each Investor hereby purchases from the Company, in one or more closings as
provided herein, the number of Preferred Shares set forth opposite such
Investor's name on Schedule A hereto.

1.2. PURCHASE PRICE. The purchase price being paid by the Investors
--------------
for the Preferred Shares is $6.00 per share. Except as provided in Section 1.3
below, the Investors listed on Schedule A will pay by noon Eastern Time, on the
Closing Date, by wire transfer of same-day funds or delivery to the Company of a
cashier's check, the amount set forth opposite each Investor's name on Schedule
A (the "Purchase Price").
<PAGE>

1.3. SUPPLEMENTAL CLOSING. If Dun & Bradstreet Divestiture, Inc.
--------------------
("DBDI") does not purchase the Preferred Shares listed on Schedule A hereto
opposite its name by noon Eastern Time on the Closing Date, then DBDI may
purchase, at the Purchase Price specified on Schedule A, such Preferred Shares
no later than noon Eastern Time on September 7, 1993 (the "Supplemental
Closing"), and any such shares purchased at the Supplemental Closing will be
Preferred Shares for all purposes under this Agreement.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
---------------------------------------------
represents and warrants to the Investors as follows effective as of the Closing
Date.

2.1. ORGANIZATION. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of
Connecticut. Except as set forth in Schedule 2.1, the Company has all requisite
corporate power and authority and holds all licenses, permits and other required
authorizations from governmental authorities necessary to conduct its business
as it is now being conducted or as proposed to be conducted and to own or lease
the properties and assets it now owns or holds under lease.

2.2. CHARTER DOCUMENTS. The Company has heretofore made available to
-----------------
the Investors true, correct and complete copies of the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation") and By-Laws, each
as in full force and effect on the Closing Date.

2.3. CAPITALIZATION. As of the date hereof, the Company's authorized
--------------
capitalization consists of 3,888,166 shares of Common Stock, par value $.01 per
share, of which 938,229 shares are outstanding; and 1,638,166 shares of
Preferred Stock, par value $.01 per share, of which 297,405 shares have been
designated Series A Convertible Preferred Stock (the "Series A Stock"), all of
which are outstanding, 115,761 shares have been designated Series B Convertible
Preferred Stock (the "Series B Stock"), all of which are outstanding, 725,000
shares have been designated Series C Convertible Preferred Stock (the "Series C
Stock"), 364,369 shares of which are outstanding, 364,469 shares have been
designated as Series D Convertible Preferred Stock (the "Series D Stock"), none
of which are outstanding (but all of which are subject to exercisable warrants
held by certain of the Investors), and 135,531 shares remain undesignated and
unissued. The issuance of the Preferred shares and the Common Stock issuable
upon conversion of the Preferred Shares (the "Conversion Shares") pursuant to
the provisions of this Agreement have been duly and validly authorized. No
further approval or authorization of the shareholders or the directors of the
Company or of any governmental authority or agency will be required for the
issuance and sale of the Preferred Shares as contemplated by this Agreement.
Schedule 2.3 attached hereto is a list of the aggregate number of outstanding
securities of the Company. Except pursuant to the 1989 Agreement, the 1991
Agreement and the 1992 Agreement, no shareholder of the Company or any other
person is entitled to any preemptive rights with respect to the purchase or sale
of any securities by the Company. When issued and sold to the Investors, the
Preferred Shares will be duly and validly issued, fully paid and non-assessable,
will be free and clear of any liens, pledges or encumbrances and will have the
designations, preferences and relative, participating, optional and other
special rights as set forth in the Company's Certificate of Incorporation. The
Conversion Shares, when issued and delivered

2
<PAGE>

upon conversion of the Preferred Shares, will be duly and validly issued, fully
paid and non-assessable. Except as set forth on Schedule 2.3 attached hereto,
there are no outstanding options, warrants or other rights, commitments or
arrangements, written or oral, to which the Company is a party or by which it is
bound, to purchase or otherwise acquire any authorized but unissued shares of
capital stock of the Company or any security directly or indirectly convertible
into or exchangeable or exercisable for any capital stock of the Company.

2.4. COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth in
---------------------------------
Schedule 2.4, to the Company's best knowledge, the Company is not in material
default in the performance of any material obligation, agreement, instrument or
undertaking to which it is a party or by which it is bound. The Company is not
in violation of its Certificate of Incorporation or By-Laws. Neither the sale of
the Preferred Shares (or the issuance and delivery of the Conversion Shares),
the execution and delivery of this Agreement, nor the fulfillment of the terms
set forth in this Agreement and the consummation of the transactions
contemplated by this Agreement, will: (i) conflict with or constitute a breach
of, or constitute a default under or an event which, with or without notice or
lapse of time or each, would be a breach of or default under or violation of the
Certificate of Incorporation or By-Laws of the Company or would be a breach of
or default under or violation of any material agreement, document, indenture,
mortgage or other instrument or undertaking by which the Company is bound or to
which any of its properties are subject, or would be a material violation of any
law, administrative regulation, judgment, order or decree applicable to the
Company; (ii) result in the creation or imposition of any material lien, charge
or encumbrance upon any property or assets of the Company; (iii) result in the
loss of any material license, certificate, legal privilege or legal right
enjoyed or possessed by the Company; (iv) give any party to any material
agreement to which the Company is a party a right of termination; or (v) except
as provided for in this Agreement, require the consent of any other person or
entity under any agreement, indenture, mortgage, document or other instrument or
undertaking by which the Company is bound or to which any of its properties are
subject.

2.5. AUTHORIZATION. The Company has the full corporate power and
-------------
authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of the terms of this
Agreement by the Company have been duly authorized by all necessary corporate
action. This Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms. The Company, in light of its
business or proposed business, does not require any consent, approval,
authorization or order of, or declaration, filing or registration with, any
court or governmental or regulatory agency or board in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

2.6. COMPLIANCE WITH THE SECURITIES ACT. Based upon the
----------------------------------
representations of the Investors set forth herein, and assuming the truth of
such representations, the offer, sale and issuance of the Preferred Shares (and
the issuance and delivery of the Conversion Shares) are exempt from the
registration requirements of the Securities Act of 1933.

2.7. RESERVATION OF COMMON STOCK. The Company shall reserve and keep
---------------------------
available out of its authorized but unissued Common Stock the number of shares
of Common

3
<PAGE>

Stock required for issuance upon the conversion of all of the Preferred Shares
(including any additional shares of Common Stock which may become so issuable by
reason of the operation of anti-dilution provisions of the Preferred Shares).

2.8. LITIGATION. Except as set forth on Schedule 2.8 attached hereto,
----------
there is not now pending, and to the best knowledge of the Company there is not
threatened in writing, any litigation, action, suit or proceeding: (i) to which
the Company is or will be a party in or before or by any court or governmental
or regulatory agency or body; or (ii) to which any of the officers or employees
of the Company is or will be a party in or before or by any court or
governmental or regulatory agency or body, concerning termination by such person
of his or her employment with any of such person's former employers. In
addition to the foregoing, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company having any material adverse effect
on the business or proposed business or operations, properties, assets or
condition, financial or otherwise, of the Company.

2.9. COMPLIANCE WITH LAW. To its knowledge, the Company is in
-------------------
compliance in all material respects with all applicable statutes and regulations
of the United States and of all states, municipalities and agencies in respect
of the conduct of its business.

2.10. FINANCIAL STATEMENTS. Attached hereto as Schedule 2.10 are the
--------------------
audited balance sheets of the Company at April 30, 1992, and the related
statements of income and retained earnings and changes in financial position,
including the notes thereto, of the Company for the periods then ended, and the
unaudited balance sheet of the Company at April 30, 1993 and the related
statements of income for the period then ended. The financial statements
referred to above have been prepared in conformity with generally accepted
accounting principles consistently applied subject in the case of the interim
statements to normal year-end audit adjustments, and each balance sheet fairly
presents the financial condition of the Company as of its date and each
statement of income fairly presents the results of operations of the Company for
the period covered thereby.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS. Each
----------------------------------------------------------
Investor hereby severally represents and warrants to, and agrees with, the
Company as follows effective as of the delivery of the Purchase Price:

3.1. INVESTMENT INTENT. Each Investor is acquiring the Preferred
-----------------
Shares (and any Conversion Shares) for its own account and not with a present
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933. Each Investor consents to the placement of the
following legend on each certificate representing the Preferred Shares and on
each certificate representing the Conversion Shares:

4
<PAGE>

WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OR COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT
THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A 'NO ACTION' LETTER OR
ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER OR SALE."

3.2. RESTRICTED SECURITIES. Each Investor understands that the
---------------------
Preferred Shares (and any Conversion Shares) have not been registered under the
Securities Act of 1933 for the reason that the sale provided for in this
Agreement is exempt pursuant to Section 4 of the Securities Act of 1933 and that
the reliance of the Company on such exemption is predicated in part on such
Investor's representations set forth herein. Each Investor represents that it
is experienced in evaluating companies such as the Company, is able to fend for
itself, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment, and has the
ability to suffer the total loss of its investment. Such Investor was not
formed solely for the purpose of investing in the Company. Each Investor
further represents that it has had access during the course of the transaction
and prior to its purchase of the Preferred Shares to such information relating
to the Company as it has desired and that it has had the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of the offering and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which it had access.

Each Investor understands that the Preferred Shares (and any Conversion
Shares) may not be sold, transferred or otherwise disposed of without
registration under the Securities Act of 1933 or an exemption therefrom and that
in the absence of an effective registration statement covering the Preferred
Shares (or the Conversion Shares) or an available exemption from registration
under the 1933 Act, the Preferred Shares (and any Conversion Shares) must be
held indefinitely. The benefits of Rule 144 promulgated under the Securities
Act of 1933 are not presently available, the Company has not covenanted to make
the benefits of such Rule available, and the Company has no present plans to
make the benefits of such Rule available.

4. DELIVERIES OF THE COMPANY. On the Closing Date, as a condition to the
-------------------------
Investors' obligation to pay the Purchase Price provided under Section 1.2
hereof, the Company will deliver to the Investors executing this Agreement the
following:

(A) an opinion of counsel to the Company, Fenwick & West, addressed
to the Investors, in form and substance satisfactory to the Investors;

(B) copies of certified resolutions adopted by the Company's Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;

5
<PAGE>

(C) a stock certificate registered in the name of such Investor
representing the Preferred Shares purchased by such Investor in consideration of
the Purchase Price therefor; and

(D) a certificate signed by the President or Vice President of the
Company that the representations and warranties in Section 2 are true and
correct as of the Closing Date.

5. DELIVERIES OF THE COMPANY UPON SUPPLEMENTAL CLOSING. As a condition
---------------------------------------------------
to the obligations of DBDI to pay the Purchase Price for the Preferred Shares
purchased in the Supplemental Closing, if any, the Company will deliver to DBDI
all documents required to be delivered to the Investors on the Closing Date
pursuant to Section 4 hereof.

6. 1989 AGREEMENT AND STOCKHOLDERS AGREEMENT.
-----------------------------------------

(A) The holders of Preferred Shares purchased hereunder and the
Conversion Shares shall be entitled to all the rights and benefits of holders of
Preferred Shares under Sections 4, 5, 8 and 10 of the 1989 Agreement, provided
that with respect to the provisions of Sections 5.6, 8 and 10 of the 1989
Agreement and any consents under the 1989 Agreement requiring the consent of the
holders of a majority of the Series A Stock, Series B and Series C Stock, the
Preferred Shares sold hereunder will participate pari passu as a single class
with the shares of the Series A Stock sold under the 1989 Agreement, the shares
of the Series A Stock sold under the 1991 Agreement (and converted to Series B
Stock upon the effectiveness of the filing of the Company's Amended Certificate
of Incorporation on June 5, 1992), and the shares of Series C Stock sold under
the 1992 Agreement on an as-converted to Common Stock basis. Section 14.8 of the
1989 Agreement is hereby amended to include as Registrable Securities all
Preferred Shares and Conversion Shares issued pursuant to this Agreement. The
Investors that are holders of Series A Stock, Series B Stock and Series C Stock,
on behalf of themselves as holders of a majority of the outstanding Series A
Stock, Series B Stock and Series C Stock, hereby waive the provisions of
Sections 5.6 and 10 of the 1989 Agreement, and consent, pursuant to Section
III(6)(b) of the Certificate of Incorporation, to the extent necessary to permit
the issuance of the Preferred Shares hereunder.

(B) Each Investor hereunder which is not a party to the Stockholders'
Agreement dated as of June 1, 1989 by and among the Company and its
shareholders, as amended (the "Stockholders' Agreement"), hereby agrees to
become a party to, and to be bound by all the provisions of, such agreement as
if such Investor was a Shareholder as defined in the Stockholders' Agreement.

(C) Pursuant to Section 14 of the Stockholders' Agreement, the
Investors, constituting the holders of a majority of the Company's outstanding
Preferred Stock and the holders of at least 60% of the Company's outstanding
Common Stock, amend the Stockholders' Agreement to: (i) add the following to
the last sentence of Section 7 thereof: "and of that certain 1993 Preferred
Stock Purchase Agreement and Amendment to 1989 Stock Purchase Agreement and
Stockholders' Agreement among the Company and certain investors;" (ii) add each
Investor who is not a party to the Stockholders' Agreement and the Preferred
Shares to Annex A thereto;

6
<PAGE>

and (iii) provide that the definition of "Securities" includes all securities
received in exchange for or upon conversion, exercise or in replacement of the
Preferred Shares listed on Schedule A.

(D) The Investors, on behalf of themselves as holders of Series A
Stock, Series B Stock and Series C Stock, hereby waive their right to receive
any additional shares of Common Stock upon any conversion of their Series A
Stock, Series B Stock and Series C Stock as a result of the application of
Section III(4)(g) of the Certificate of Incorporation to the issuance of the
Preferred Shares hereunder.

7. NO BROKERS.
----------

Each of the Company, on the one hand, and the Investors, on the other
hand, represents and warrants to the other that there was no broker or finder
connected with this Agreement or the transactions contemplated hereby. In the
event of a claim by any broker or finder based upon his representing or being
retained by the Investors, the Investors agree to indemnify and save harmless
the Company in respect of such claim. In the event of a claim by any broker or
finder based upon his representing or being retained by the Company, the Company
agrees to indemnify and save harmless the Investors in respect of such claim.

8. SURVIVAL OF REPRESENTATIONS.
---------------------------

9. MISCELLANEOUS PROVISIONS.
------------------------

9.1. CONSTRUCTION AND ENFORCEMENT. This Agreement shall be governed
----------------------------
by, and construed and enforced in accordance with, the internal laws of the
State of New York without giving any effect to principles of conflicts of laws.
The Company agrees that it will not assert against any limited partner of any
Investor, in such person's role as a limited partner, any claim it may have
under this Agreement by reason of any failure or alleged failure by any Investor
to meet its obligations hereunder.

9.2. NOTICES. All notices hereunder shall be in writing and shall be
-------
deemed to have been given at the time when mailed by certified mail, addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:

7
<PAGE>

TO THE COMPANY:

TSI International Ltd.
45 Danbury Road
Wilton, Connecticut 06897
Attn: Constance Galley, President

-WITH A COPY TO

Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attn: Mark C. Stevens, Esquire

TO THE INVESTORS:

To the addresses set forth on Schedule A

; provided, however, that any notice of change of address shall be effective
only upon receipt.

9.3. ASSIGNMENT. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and the respective successors and
permitted assigns of the Investors. The Company may not assign any of its rights
or obligations under this Agreement without the prior written consent of the
Investors. The Investors may assign all or any part of their respective rights
and obligations hereunder. A person to whom all or a part of the Investor's
rights are assigned shall become a party to this Agreement, entitled to all the
rights and benefits hereunder. The rights and powers of the Investors hereunder
are granted to the Investors as owners of the Preferred Shares and the
Conversion Shares, if any. Any subsequent owner of any Preferred Shares or
Conversion Shares, whether becoming such by transfer, assignment, operation of
law or otherwise, shall be deemed to be an Investor hereunder, shall have the
same rights and powers which an Investor owning the same number of shares has
hereunder, and shall be entitled to exercise them in full and no transfer or
assignment shall divest such Investor or any subsequent owner of such rights and
powers until such Investor or subsequent owner no longer owns any Preferred
Shares or any Conversion Shares; provided, that no such transferee shall be
entitled to the benefits of Sections 4, 5, 8 or 10 of the 1989 Agreement unless
such transferee is also a Qualified Investor as defined therein.

9.4. AMENDMENTS AND WAIVERS. This Agreement and all exhibits and
----------------------
schedules hereto set forth the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or waiver of the holders of not less
than 50% of the issued and outstanding Preferred Shares and Conversion Shares.

8
<PAGE>

9.5. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

9.6. HEADINGS. The headings in this Agreement are for reference
--------
purposes only and shall not constitute a part hereof.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

TSI INTERNATIONAL LTD.

By: /s/ Constance Galley
---------------------------------
Title:
------------------------------

INVESTORS:

WARBURG, PINCUS CAPITAL COMPANY, L.P.

By: Warburg, Pincus & Co.,
General Partner

By: /s/ Stewart Gross
---------------------------------
Partner

VANGUARD ATLANTIC LTD.

By: /s/ Ernest Keet
---------------------------------
Title:
------------------------------

D & B DIVESTITURE, INC.

By: /s/ Dennis Sisco
---------------------------------
Title:
------------------------------

9
<PAGE>

FSC CORP.

By: /s/ Jay Massimo
---------------------------------
Title:
------------------------------

JOHN J. PENDRAY

/s/ John Pendray
------------------------------------

CONSTANCE F. GALLEY

/s/ Constance Galley
------------------------------------

ROBERT H. BOUTON

/s/ Bob Bouton
------------------------------------

DAVID M. RAYE

/s/ David Raye
------------------------------------

PAUL A. LEMME

/s/ Paul Lemme
------------------------------------

No exhibits or schedules are attached

<PAGE>

AMENDMENT OF THE PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 1, 1989

This Amendment (this "Amendment") is entered into as of May 29, 1997,
---------
by and between TSI International Software Ltd., a Delaware Corporation (the

"Company"), and the undersigned investors (the "Investors"), on behalf of
- -------- ---------
themselves, the other holders of the Company's Series A, Series B and Series C
Convertible Preferred Stock and the holders of warrants to purchase shares of
the Company's Series D Convertible Preferred Stock.

WHEREAS, the Company and the Investors previously have entered into
that certain Preferred Stock Purchase Agreement, dated as of June 1, 1989, as
amended by that certain (i) 1991 Preferred Stock Purchase Agreement dated as of
April 30, 1991 and supplemented by a Supplement to 1991 Preferred Stock Purchase
Agreement dated as of July 16, 1991; (ii) 1992 Preferred Stock and Warrant
Purchase Agreement dated as June 10, 1992, as amended; and (iii) 1993 Preferred
Stock Purchase Agreement dated as of September 2, 1993. As amended, the
Preferred Stock Purchase Agreement dated as of June 1, 1989 is hereinafter
referred to as the 1989 Agreement;

WHEREAS, Section 4.10 of the 1989 Agreement sets forth certain
requirements with respect to the composition of the Company's Board of Directors
as well as an agreement among certain entities to vote their shares of the
Company's stock for certain nominees to the Company's Board of Directors.

WHEREAS, pursuant to Section 15.4 of the 1989 Agreement, holders of at
least fifty percent (50%) of the issued and outstanding Preferred Shares and
Conversion Shares (as such terms are defined therein) may amend certain sections
of the 1989 Agreement, including Section 4.10.

WHEREAS, in connection with the Company's initial public offering, the
Investors, who in the aggregate hold more than fifty percent (50%) of the
outstanding Preferred Shares and Conversion Shares (as defined in the 1989
Agreement), desire to amend the 1989 Agreement to provide for the termination of
Section 4.10 upon the consummation of the Company's initial public offering of
its securities;

NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. Pursuant to Section 15.4 of the 1989 Agreement, the Investors,
holding more than a majority of the Preferred Shares and Conversion Shares (as
such terms are defined in the 1989 Agreement), on behalf of themselves, the
other holders of the Company's Series A, Series B, and Series C Convertible
Preferred Stock and the holders of warrants to purchase shares of the Company's
Series D Convertible Preferred Stock, hereby amend Section 4.10 of the 1989
Agreement by adding the following sentence to the end of such section:

"This Section 4.10 shall terminate and be of no further force and
effect upon the consummation of a Public Offering of the Company's securities."

2. Counterparts. This Amendment may be executed in counterparts,
------------
each of which shall be an original, and all of which, when taken together, shall
constitute one and the same instrument.

<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first set forth above.

TSI INTERNATIONAL SOFTWARE LTD.

By: /s/ Constance Galley
--------------------

Name: Constance Galley
Title: President and CEO

WARBURG, PINCUS CAPITAL COMPANY, L.P.

By: /s/ Stewart Gross
-----------------
Name: Stewart Gross
Title: Partner

VANGUARD ATLANTIC LTD.

By: /s/ Ernest Keet
---------------
Name: Ernest E. Keet
Title: President

<PAGE>

EXHIBIT 10.05
TSI INTERNATIONAL SOFTWARE LTD.

PROFIT PARTICIPATION PLAN

TSI's Profit Participation Plan was established to emphasize the important
part each employee plays in TSI's success and in its profitability. The Plan is
designed to retain employees and reward them for their sustained contributions
to TSI's bottom line profitability. The Plan is described below.

. Following the completion of TSI's fiscal year-end audit, the TSI Board
of Directors votes to contribute a portion of TSI's profits to a profit
participation pool.

. Usually, one-half of the pool is distributed at the completion of the
fiscal year audit, the second half, at the end of the current fiscal year.

. All non-commissioned employees who were employed by the company at the
fiscal year end, and who are employed at the time of the distribution of the
pool are eligible to receive a distribution from the pool.

. Individuals who are not employed by the company for the full fiscal year
receive distributions pro-rated based upon the number of months worked in the
year.

. Normal income tax and 401(k) deductions are withheld.

<PAGE>

EXHIBIT 10.06

TSI INTERNATIONAL SOFTWARE LTD

INDEMNITY AGREEMENT

This Indemnity Agreement (this "Agreement"), dated as of ________
---------
____, 1997, is made by and between TSI International Software Ltd., a Delaware
corporation (the "Company"), and _________________, a director and/or officer of
-------
the Company (the "Indemnitee").
----------

RECITALS
--------

A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;

B. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
-----
talented and experienced individuals to serve as officers and directors of the
Company, and to encourage such individuals to take the business risks necessary
for the success of the Company, it is necessary for the Company contractually to
indemnify officers and directors and to assume for itself maximum liability for
expenses and damages in connection with claims against such officers and
directors in connection with their service to the Company;

C. Section 145 of the General Corporation Law of Delaware, under
which the Company is organized ("Section 145"), empowers the Company to
-----------
indemnify by agreement its officers, directors, employees and agents, and
persons who serve, at the request of the Company, as directors, officers,
employees or agents of other corporations or enterprises, and expressly provides
that the indemnification provided by Section 145 is not exclusive; and

D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.

NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

1. DEFINITIONS.
-----------

1.1 Agent. For the purposes of this Agreement, "agent" of the
----- -----
Company means any person who is or was a director or officer of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or an affiliate of the
<PAGE>

Company; or was a director or officer of a foreign or domestic corporation which
was a predecessor corporation of the Company, including, without limitation, TSI
International Ltd., a Connectictut corporation, or was a director or officer of
another enterprise or affiliate of the Company at the request of, for the
convenience of, or to represent the interests of such predecessor corporation.
The term "enterprise" includes any employee benefit plan of the Company, its
----------
subsidiaries, affiliates and predecessor corporations.

1.2 Expenses. For purposes of this Agreement, "expenses" includes
-------- --------
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements and other out-
of-pocket costs) actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
-------- -------
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.

1.3 Proceeding. For the purposes of this Agreement, "proceeding"
---------- ----------
means any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.

1.4 Subsidiary. For purposes of this Agreement, "subsidiary" means
---------- ----------
any corporation of which more than 50% of the outstanding voting securities is
owned directly or indirectly by the Company, by the Company and one or more of
its subsidiaries or by one or more of the Company's subsidiaries.

2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or
------------------
continue to serve as an agent of the Company, at the will of the Company (or
under separate agreement, if such agreement exists), in the capacity the
Indemnitee currently serves as an agent of the Company, faithfully and to the
best of his ability, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the charter documents of the
Company or any subsidiary of the Company; provided, however, that the Indemnitee
-------- -------
may at any time and for any reason resign from such position (subject to any
contractual obligation that the Indemnitee may have assumed apart from this
Agreement), and the Company or any subsidiary shall have no obligation under
this Agreement to continue the Indemnitee in any such position.

3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the
----------------------------------
extent that the Board determines it to be economically reasonable, maintain a
policy of directors' and officers' liability insurance ("D&O Insurance"), on
-------------
such terms and conditions as may be approved by the Board.

4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the
-------------------------
Company shall indemnify the Indemnitee:

4.1 Third Party Actions. If the Indemnitee is a person who was or is
-------------------
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of
<PAGE>

anything done or not done by him in any such capacity, against any and all
expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; and

4.2 Derivative Actions. If the Indemnitee is a person who was or is
------------------
a party or is threatened to be made a party to any proceeding by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was an agent of the Company, or by reason of anything done or not done by
him in any such capacity, against any amounts paid in settlement of any such
proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement or appeal of such
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company; except that no
------
indemnification under this subsection shall be made in respect of any claim,
issue or matter as to which such person shall have been finally adjudged to be
liable to the Company by a court of competent jurisdiction due to willful
misconduct of a culpable nature in the performance of his duty to the Company,
unless and only to the extent that the Court of Chancery or the court in which
such proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such amounts which the
Court of Chancery or such other court shall deem proper; and

4.3 Exception for Amounts Covered by Insurance. Notwithstanding the
------------------------------------------
foregoing, the Company shall not be obligated to indemnify the Indemnitee for
expenses or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) to the extent such have been paid directly to the Indemnitee by D&O
Insurance.

5. PARTIAL INDEMNIFICATION AND CONTRIBUTION.
----------------------------------------

5.1 Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding but is not entitled, however, to indemnification for all
of the total amount thereof, then the Company shall nevertheless indemnify the
Indemnitee for such total amount except as to the portion thereof to which the
Indemnitee is not entitled to indemnification.

5.2 Contribution. If the Indemnitee is not entitled to the
------------
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the Delaware General Corporation Law, then in respect
of any threatened, pending or completed proceeding in which the Company is
jointly liable with the Indemnitee (or would be if joined in such
<PAGE>

proceeding), the Company shall contribute to the amount of expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by the Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and the Indemnitee on the other hand from the transaction from
which such proceeding arose and (ii) the relative fault of the Company on the
one hand and of the Indemnitee on the other hand in connection with the events
which resulted in such expenses, judgments, fines or settlement amounts, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Indemnitee on the other hand shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.

6. MANDATORY ADVANCEMENT OF EXPENSES.
---------------------------------

6.1 Advancement. Subject to Section 9 below, the Company shall
-----------
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. The Indemnitee hereby undertakes
to promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the General Corporation
Law of Delaware or otherwise. The advances to be made hereunder shall be paid
by the Company to the Indemnitee within thirty (30) days following delivery of a
written request therefor by the Indemnitee to the Company.

6.2 Exception. Notwithstanding the foregoing provisions of this
---------
Section 6, the Company shall not be obligated to advance any expenses to the
Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith. If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
8.3, 8.4 and 8.5 hereof, with all references therein to "indemnification" being
deemed to refer to "advancement of expenses," and the burden of proof shall be
on the Company to demonstrate clearly and convincingly that, based on the facts
known at the time, the Indemnitee acted in bad faith. The Company may not avail
itself of this Section 6.2 as to a given lawsuit if, at any time after the
occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control. For this purpose, a
change in control shall mean a given person or group of affiliated persons or
groups increasing their beneficial ownership interest in the Company by at least
twenty (20) percentage points without advance Board approval.
<PAGE>

7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
-------------------------------------------

7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.

7.2 If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such D&O Insurance policies.

7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee (which approval shall not be unreasonably withheld),
upon the delivery to the Indemnitee of written notice of its election to do so.
After delivery of such notice, approval of such counsel by the Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
the Indemnitee under this Agreement for any fees of counsel subsequently
incurred by the Indemnitee with respect to the same proceeding, provided that:
--------
(a) the Indemnitee shall have the right to employ his own counsel in any such
proceeding at the Indemnitee's expense; (b) the Indemnitee shall have the right
to employ his own counsel in connection with any such proceeding, at the expense
of the Company, if such counsel serves in a review, observer, advice and
counseling capacity and does not otherwise materially control or participate in
the defense of such proceeding; and (c) if (i) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (ii) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of any such defense or (iii) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of the Indemnitee's counsel shall be at
the expense of the Company.

8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
-----------------------------------------

8.1 To the extent the Indemnitee has been successful on the merits or
otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this
Agreement or in the defense of any claim, issue or matter described therein, the
Company shall indemnify the Indemnitee against expenses actually and reasonably
incurred by him in connection with the investigation, defense or appeal of such
proceeding, or such claim, issue or matter, as the case may be.

8.2 In the event that Section 8.1 is inapplicable, or does not apply
to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee
unless the Company shall prove by clear and convincing evidence to a forum
listed in Section 8.3 below that the
<PAGE>

Indemnitee has not met the applicable standard of conduct required to entitle
the Indemnitee to such indemnification.

8.3 The Indemnitee shall be entitled to select the forum in which the
validity of the Company's claim under Section 8.2 hereof that the Indemnitee is
not entitled to indemnification will be heard from among the following, except
------
that the Indemnitee can select a forum consisting of the stockholders of the
Company only with the approval of the Company:

(a) A quorum of the Board consisting of directors who are not
parties to the proceeding for which indemnification is being sought;

(b) The stockholders of the Company;

(c) Legal counsel mutually agreed upon by the Indemnitee and the
Board, which counsel shall make such determination in a written opinion;

(d) A panel of three arbitrators, one of whom is selected by the
Company, another of whom is selected by the Indemnitee and the last of whom is
selected by the first two arbitrators so selected; or

(e) The Court of Chancery of Delaware or other court having
jurisdiction of subject matter and the parties.

8.4 As soon as practicable, and in no event later than thirty (30)
days after the forum has been selected pursuant to Section 8.3 above, the
Company shall, at its own expense, submit to the selected forum its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim.

8.5 If the forum selected in accordance with Section 8.3 hereof is
not a court, then after the final decision of such forum is rendered, the
Company or the Indemnitee shall have the right to apply to the Court of Chancery
of Delaware, the court in which the proceeding giving rise to the Indemnitee's
claim for indemnification is or was pending or any other court of competent
jurisdiction, for the purpose of appealing the decision of such forum, provided
--------
that such right is executed within sixty (60) days after the final decision of
such forum is rendered. If the forum selected in accordance with Section 8.3
hereof is a court, then the rights of the Company or the Indemnitee to appeal
any decision of such court shall be governed by the applicable laws and rules
governing appeals of the decision of such court.

8.6 Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement unless a court of competent jurisdiction finds
that each of the
<PAGE>

material claims and/or defenses of the Indemnitee in any such proceeding was
frivolous or not made in good faith.

9. EXCEPTIONS. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, except with respect to
------
proceedings specifically authorized by the Board or brought to establish or
enforce a right to indemnification and/or advancement of expenses arising under
this Agreement, the charter documents of the Company or any subsidiary or any
statute or law or otherwise, but such indemnification or advancement of expenses
may be provided by the Company in specific cases if the Board finds it to be
appropriate; or

9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder
------------------------
for any amounts paid in settlement of a proceeding unless the Company consents
in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or

9.3 Securities Law Actions. To indemnify the Indemnitee on account
----------------------
of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or

9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final
------------------------
decision by a court having jurisdiction in the matter shall determine that such
indemnification is not lawful. In this respect, the Company and the Indemnitee
have been advised that the Securities and Exchange Commission takes the position
that indemnification for liabilities arising under the federal securities laws
is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication.

10. NON-EXCLUSIVITY. The provisions for indemnification and
---------------
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any provision
of law, the Company's Certificate of Incorporation or Bylaws, the vote of the
Company's stockholders or disinterested directors, other agreements or
otherwise, both as to action in the Indemnitee's official capacity and to action
in another capacity while occupying his position as an agent of the Company, and
the Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.

11. GENERAL PROVISIONS
------------------

11.1 Interpretation of Agreement. It is understood that the parties
---------------------------
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification and advancement
<PAGE>

of expenses to the Indemnitee to the fullest extent now or hereafter permitted
by law, except as expressly limited herein.

11.2 Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
then: (a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 11.1 hereof.

11.3 Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.

11.4 Subrogation. In the event of full payment under this Agreement,
-----------
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all documents required
and shall do all acts that may be necessary or desirable to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.

11.5 Counterparts. This Agreement may be executed in one or more
------------
counter-parts, which shall together constitute one agreement.

11.6 Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.

11.7 Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing and shall be deemed duly given: (a) if
delivered by hand and receipted for by the party addressee; or (b) if mailed by
certified or registered mail, with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on
the signature page of this Agreement or as subsequently modified by written
notice.

11.8 Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
<PAGE>

11.9 Consent to Jurisdiction. The Company and the Indemnitee each
-----------------------
hereby irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.

11.10 Attorneys' Fees. In the event Indemnitee is required to bring
---------------
any action to enforce rights under this Agreement (including, without
limitation, the expenses of any Proceeding described in Section 3), the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing and
pursuing such action, unless a court of competent jurisdiction finds each of the
material claims of the Indemnitee in any such action was frivolous and not made
in good faith.

IN WITNESS WHEREOF, the parties hereto have entered into this
Indemnity Agreement effective as of the date first written above.

TSI INTERNATIONAL SOFTWARE LTD. INDEMNITEE:
A DELAWARE CORPORATION

By:_____________________________ By:_______________________________

Title:__________________________

Address:________________________ Address:__________________________

________________________________ __________________________________

<PAGE>

EXHIBIT 23.02

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
TSI International Software Ltd.

We consent to the use of our reports included herein and to the reference to
our firm under "Experts" and "Selected Financial Data" in the Prospectus.

KPMG Peat Marwick LLP

Stamford, Connecticut

June 5, 1997