BORLAND INTERNATIONAL INC /DE/, PRE 14A, 1998-04-17

BORLAND INTERNATIONAL INC /DE/
PRE 14A, 1998-04-17
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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

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

[_] Definitive Additional Materials

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

BORLAND INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

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

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

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

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

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

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

(1) Amount Previously Paid:

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

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(3) Filing Party:

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(4) Date Filed:

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Notes:

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[LOGO OF BORLAND INTERNATIONAL, INC.]

BORLAND INTERNATIONAL, INC.

100 BORLAND WAY
SCOTTS VALLEY, CALIFORNIA 95066

APRIL 27, 1998

Re: Annual Meeting

Dear Stockholders:

On behalf of the Board of Directors, I am pleased to invite you to attend
the annual meeting of Borland International, Inc. (the "Company") to be held
on Friday, June 5, 1998, at 10 o'clock in the morning, at the Stanford Park
Hotel located at 100 El Camino Real, Menlo Park, California.

The agenda for this year's meeting includes a number of items, each of which
is described in the enclosed materials. While all the issues to be considered
are significant, I want to point out that your Board of Directors considers
its proposal to change the Company's name from Borland International, Inc. to
to be especially important. The proxy statement describes in
detail the proposed change of name, as well as all the other items to be
presented to the stockholders at the meeting. I encourage you to read the
proxy carefully.

Please note that for this year's meeting you will be able to vote your
shares by telephone. We believe you will find this "vote-by-phone" option to
be convenient and easy to use. The toll-free number and instructions to use
the "vote-by-phone" option are included in the proxy card. If you prefer to
vote your shares by written proxy rather than by telephone, you may do so.

I am delighted you have chosen to invest in the Company and hope that,
whether or not you plan to attend the annual meeting, you will vote as soon as
possible, either by phone or by completing, signing and returning the enclosed
proxy card in the envelope provided. Your vote is important. Voting by phone
or by written proxy will ensure your representation at the annual meeting if
you do not attend in person.

I look forward to seeing you at the annual meeting.

Very truly yours,

/s/ Delbert W. Yocam
DELBERT W. YOCAM
Chairman of the Board and
Chief Executive Officer
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[LOGO OF BORLAND INTERNATIONAL, INC.]
BORLAND INTERNATIONAL, INC.

100 BORLAND WAY
SCOTTS VALLEY, CALIFORNIA 95066

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 1998

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of Borland International, Inc., a Delaware corporation (the
"Company"), will be held on Friday, June 5, 1998 at 10:00 a.m. at the Stanford
Park Hotel, 100 El Camino Real, Menlo Park, California, for the following
purposes:

1. To elect three Class III directors to serve a three-year term expiring
upon the 2001 Annual Meeting of Stockholders or upon election and
qualification of their duly elected successors.
2. To consider and vote upon a proposal to amend the Company's Restated
Certificate of Incorporation to change the name of the Company to
[ ].
3. To consider and vote upon a proposal to amend the Company's 1997 Stock
Option Plan to increase the number of shares of Common Stock reserved
for issuance thereunder by 2,400,000.
4. To consider and vote upon a proposal to amend the Company's 1997
Employee Stock Purchase Plan, to increase the number of shares of Common
Stock available for purchase thereunder by 100,000.
5. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the calendar year ending December 31, 1998.
6. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.

These items are fully discussed in the following pages, which are made part
of this Notice. Only stockholders of record at the close of business on April
10, 1998, will be entitled to notice of, and to vote at, the Annual Meeting
and any adjournments or postponements thereof.

By Order of the Board of Directors

/s/ Hobart McK. Birmingham
HOBART McK. BIRMINGHAM
Vice President, General Counsel, and
Secretary

Scotts Valley, California
April 27, 1998

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
URGED TO VOTE AS SOON AS POSSIBLE, EITHER BY PHONE OR BY COMPLETING, SIGNING
AND RETURNING THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. ANY
STOCKHOLDER ATTENDING THE MEETING MAY VOTE IN PERSON, EVEN THOUGH HE OR SHE
HAS RETURNED A PROXY CARD.

YOUR VOTE IS IMPORTANT.
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BORLAND INTERNATIONAL, INC.

INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board"), of Borland International, Inc., a Delaware corporation ("Borland" or
the "Company") for use in voting at the annual meeting of stockholders (the
"Annual Meeting") to be held at the Stanford Park Hotel, 100 El Camino Real,
Menlo Park, California on Friday, June 5, 1998, at 10:00 a.m. local time.
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries, and custodians to forward to beneficial owners of Common Stock of
the Company ("Common Stock") or beneficial owners of Series B Convertible
Preferred Stock of the Company (the "Series B Preferred Stock") held in their
names. The cost of solicitation of proxies, including expenses in connection
with preparing and mailing this Proxy Statement will be borne by the Company.
The Company has retained Georgeson & Company, Inc. to assist it in connection
with the solicitation, at an estimated fee of $8,500 plus reimbursement of
out-of-pocket expenses. In addition, the Company will reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram, and personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to
directors, officers or other regular employees for such services. This Proxy
Statement and the accompanying form of proxy will be mailed on or about April
27, 1998, together with the Company's Annual Report to Stockholders for the
nine-month period ended December 31, 1997, to all holders of Common Stock and
Series B Preferred Stock entitled to vote at the Annual Meeting.

VOTING RIGHTS AND OUTSTANDING SHARES

Only stockholders of record at the close of business on April 10, 1998 will
be entitled to notice of, and to vote at, the Annual Meeting. As of April 10,
1998, the Company had outstanding 50,911,922 shares of Common Stock and 550
shares of Series B Preferred Stock. On each proposal that will come before the
Annual Meeting, each share of Common Stock is entitled to one vote and each
share of Series B Preferred Stock, par value $.01 per share is entitled to
7,207 votes. A majority of the votes represented by outstanding shares of
Common Stock and Series B Preferred Stock will constitute a quorum at the
Annual Meeting. Shares that are voted "FOR", "AGAINST" or "ABSTAIN" in a
matter are treated as being present at the meeting for purposes of
establishing the Quorum, but only shares voted "FOR" or "AGAINST" are treated
as shares "represented and voting" at the Annual Meeting (the "Votes Cast")
with respect to such matter. Accordingly, abstentions and broker non-votes
will be counted for purpose of determining the presence or absence of the
Quorum for the transaction of business, but they will not be counted for
purposes of determining the number of Votes Cast with respect to a proposal.

Any stockholder giving a proxy has the power to revoke it at any time before
it is exercised. A stockholder may revoke a proxy by filing an instrument of
revocation or a duly executed proxy bearing a later date with the Secretary of
the Company at its principal executive office. A stockholder may also revoke a
proxy by attendance at the Annual Meeting and election to vote in person.

The Company's principal executive office is located at 100 Borland Way,
Scotts Valley, California 95066 and the telephone number is (408) 431-1000.

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PROPOSAL 1

ELECTION OF DIRECTORS

The Board of Directors is divided into three classes. One class of directors
is elected each year for a three-year term. Management's nominees for the
Class III directors are David Heller, William F. Miller and Harry J. Saal. The
Class III directors elected in 1998 will serve for a term of three years which
expires at the Company's 2001 Annual Meeting of Stockholders or when their
successors are elected and qualified or upon their earlier resignation or
removal. It is intended that the persons named as Proxies will vote for
Messrs. Heller, Miller and Saal for election to the Board of Directors as
Class III directors.

Messrs. Heller, Miller and Saal are at present available for election.
However, if any nominee(s) should for any reason be unable or unwilling to
serve, the Proxies will be voted for such substitute nominee(s) as management
may designate. The vote of the holders of a plurality of the Common Stock and
the Series B Convertible Preferred Stock, voting as a single class on an as-
if-converted basis, present or represented by proxy and entitled to vote at
the Annual Meeting will be required to elect Messrs. Heller, Miller and Saal.
If Messrs. Heller, Miller and Saal are elected by the Company's stockholders
at the Annual Meeting, the Board of Directors will consist of six directors,
of whom five, Messrs. Hara, Heller, Lewis, Miller and Saal, have principal
occupations outside the Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NAMED NOMINEES

BIOGRAPHICAL INFORMATION

Certain biographical information about the Company's directors is set forth
below:

NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL
MEETING--CLASS III DIRECTORS

David Heller has served as a director of Borland since April 1984. Mr.
Heller is a founder, a director and the President of Pacific Technology
Capital Corporation, a financial advisory and investment banking firm; a
director of Tie Rack U.S., a clothing accessory company and a director of
America West Golf Manufacturing, Inc., a golf club manufacturing company.

William F. Miller has served as a director of Borland since January 1996.
Dr. Miller is the Herbert Hoover Professor Emeritus, Graduate School of
Business, Stanford University and President Emeritus of SRI International. He
is also Professor Emeritus of Computer Science, School of Engineering,
Stanford University. In 1990, Dr. Miller retired after 11 years as President
and CEO of SRI International. Until recently he served on the board of
directors of Wells Fargo Bank and Co., Varian Associates, Pacific Gas and
Electric Company, First Interstate Bancorp and Fireman's Fund Insurance
Company. Dr. Miller serves on the board of several private companies and non-
profit organizations and is Chairman of WhoWhere?, Inc.

Harry J. Saal has served as a director of Borland since January 1996. Dr.
Saal is a director of Network Associates, a network management and analysis
company. Dr. Saal founded Network General Corporation and was Chairman of
Network General Corporation prior to its acquisition by McAffee Associates in
December 1997. Dr. Saal founded Nestar Systems, Inc., a local area network
systems company. Dr. Saal is also chairman of Imaging Technologies
Corporation, a designer of controllers for laser printers and related devices.
He is also a director of GlobalNet Systems, Ltd., an internet service
provider, and serves on the board of several non-profit organizations.

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DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING-CLASS II
DIRECTOR

Delbert W. Yocam has been the Chairman of the Board and Chief Executive
Officer of Borland since December 1996. From November 1994 to December 1996,
he served as an independent consultant. From 1992 to 1994, he served as
President, Chief Operating Officer and a director of Tektronix, Inc., a
measurement, color printing, video and networking company based in
Wilsonville, Oregon. From 1989 to 1992, Mr. Yocam served as an independent
consultant. Prior to 1989, Mr. Yocam served in a variety of executive
management positions for ten years at Apple Computer, Inc., a personal
computer company. He served as President of Apple Pacific from 1988 to 1989;
as Executive Vice President and Chief Operating Officer from 1986 to 1988; as
Executive Vice President of Product Operations from 1985 to 1986; and as
Executive Vice President and General Manager of the Apple II group from 1983
to 1985. Prior to managing the Apple II group, he was Vice President of
Operations and Vice President of Manufacturing. Mr. Yocam is a member of the
board of directors of Adobe Systems Inc., a desktop publishing and application
software company; Hollywood Park, Inc., a hotel and entertainment company;
Raster Graphics, Inc., a large format color printing company; and Xircom,
Inc., a network access company.

DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING-CLASS I
DIRECTORS

George Hara has served as a director of Borland since April 1990. Mr. Hara
has been a managing partner of DEFTA Partners, a venture capital firm
specializing in the information technology area since . He is the founder
of Data Control Ltd., a computer network provider, for which he served as
President from 1984 until March 31, 1997. Mr. Hara is also a director of
Futuretel, a MPEG editing system developer; Pixera, a digital camera
manufacturer; Base Technologies, a systems integrator company; and Cybergold,
an internet based direct marketing company; OREN Semiconductor, a digital
noise filtering technology company and Tradex, an electronic commerce software
company.

Stephen J. Lewis has served as a director of Borland since October 1993. Mr.
Lewis has been a managing director of Generation Ventures, L.L.C., a China
focused venture capital firm since November 1994. Mr. Lewis was a managing
director of SCM International Ltd., an international investment bank from 1993
to 1994. Mr. Lewis was employed with Booz-Allen & Hamilton, Inc., a management
consulting and technology firm from 1981 to 1993, most recently serving as a
Vice President and Partner in the Operations management practice. Mr. Lewis is
also a director of Invision Interactive, Inc., a multimedia sound company.

BOARD OF DIRECTORS' MEETINGS AND COMMITTEES

During the nine-month period ended December 31, 1997, the Board of Directors
held seven meetings. The Board of Directors has a standing Audit Committee and
Organization and Compensation Committee.

The Audit Committee recommends the independent public accountants to the
Board of Directors. The independent public accountants meet with the Audit
Committee, with and without the presence of the Company's management, to
review and discuss various matters including the Company's financial
statements, the report of the independent public accountants on the results,
scope and approach of their work, and their recommendations concerning
financial practices and procedures. During the nine-month period ended
December 31, 1997, the Audit Committee consisted of three non-employee
directors, Messrs. Hara, Heller and Lewis. The Audit Committee met twice
during the nine-month period ended December 31, 1997.

The Organization and Compensation Committee (the "Compensation Committee")
administers the Company's stock option and stock purchase plans, approves
salaries, bonuses and other compensation arrangements for the Company's
officers, and approves loans to, or loan guarantees for, the Company's
officers and employees. During the nine-month period ended December 31, 1997,
the Compensation Committee consisted of two non-employee directors, Messrs.
Heller and Lewis. The Compensation Committee met seven times and took action
by unanimous written consent twice during the nine-month period ended December
31, 1997.

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No incumbent director attended fewer than 75% of the aggregate of (i) the
total number of meetings of the Board which such director was eligible to
attend during the fiscal year and (ii) the total number of meetings held by
any committee of the Board upon which such director served.

DIRECTOR COMPENSATION

The Company currently pays directors who are not otherwise employed by the
Company an annual retainer of $24,000. Non-employee directors also currently
receive fees of $1,000 for attendance at each meeting of the Board of
Directors and for each meeting of a committee of the Board on which they
serve. A non-employee director, if he or she served as Chairman of the Board
of Directors of the Company, would receive an additional $24,000 annual
retainer. Directors who are employed by the Company do not receive any fees
for attendance at meetings of the Board or its committees.

Prior to January 1, 1998, directors who were not otherwise employed by the
Company received an annual retainer of $20,000. Non-employee directors also
received fees of $500 for attendance at each meeting of the Board of
Directors, $250 for attendance at each meeting of a committee of the Board
and, if serving as a committee chairman, an additional $1,000 per year. A non-
employee director, if he or she served as Chairman of the Board of Directors
of the Company, would receive an additional $20,000 annual retainer, and a
non-employee director who served as Chairman of the Board of Directors of
Borland Company, Ltd. (Japan) received an additional $10,000 annual retainer.
Directors who were employed by the Company did not receive any fees for
attendance at meetings of the Board or its committees. In addition to his
annual director's fees for serving as a director of the Company, Mr. Hara
received $7,500 in director fees for serving as Chairman of the Board of
Directors of Borland Company, Ltd. (Japan).

Non-employee directors also participate in the Company's 1997 Stock Option
Plan, which provides options to purchase 30,000 shares of Common Stock as of
the date an individual becomes a non-employee director. In addition, at every
annual meeting of the stockholders of the Company each then-serving non-
employee director will receive an option to purchase 7,500 shares. All options
granted under the 1997 Stock Option Plan have a ten-year term and an exercise
price equal to 100% of the fair market value of the underlying stock on the
date of grant. The options may not be exercised until the non-employee
director has served as a member of the Board of Directors for one year from
the date the option is granted.

On September 5, 1997 options were granted to Messrs. Hara, Heller, Lewis,
Miller and Saal to purchase 7,500 shares of the Company's Common Stock at an
exercise price of $8.8750 per share, the fair market value of the Company's
Common Stock on the date of the grant.

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PROPOSAL 2

APPROVAL OF AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO EFFECT NAME CHANGE

The Company is asking the stockholders to vote on a proposal to amend the
Company's Restated Certificate of Incorporation (the "Certificate") in order
to change the name of the Company to [ ]. The Board of Directors
has unanimously approved such an amendment to the Certificate. If the
corporate name change is approved by the stockholders, it is anticipated that
the Company's Common Stock will be traded under the symbol " ."

The Company desires to change the name of the Company from Borland
International, Inc. to [ ] in order to align the Company's name
with the marketplace for its products and to emphasize the transition of the
Company's business from a vendor of desktop software applications to a vendor
of enterprise solutions.

Upon consummation of the proposed name change it will not be necessary to
surrender stock certificates. Instead, when certificates are presented for
transfer, new certificates bearing the name, [ ], will be issued. If
there exists any circumstance which would make consummation of the name change
inadvisable in the judgment of the Board of Directors, the proposal to amend
the Certificate may be terminated by the Board of Directors either before or
after approval of the name change by the stockholders.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

The affirmative vote of the holders of a majority of the shares of Common
Stock and Series B Preferred Stock entitled to notice of, and to vote at, the
Annual Meeting, voting as a single class on an as-if-converted basis, is
required to adopt the proposal to amend the Certificate to change the name of
the Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
CERTIFICATE TO CHANGE THE NAME OF THE COMPANY TO [ ].

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PROPOSAL 3

APPROVAL OF ADDITIONAL SHARES FOR THE 1997 STOCK OPTION PLAN

At the Annual Meeting, the stockholders will be asked to approve an
amendment to the Company's 1997 Stock Option Plan (the "1997 Option Plan") in
order to increase by 2,400,000 the number of shares of Common Stock reserved
for issuance thereunder.

As of March 31, 1998 there were 1,180,000 shares available for future
issuance under the 1997 Option Plan, a number that the Board of Directors has
determined to be insufficient to meet the Company's anticipated needs. The
Board of Directors believes that increasing the number of shares available
under the 1997 Option Plan will provide the Company with equity award
opportunities to continue to attract, retain and motivate the best available
talent for the successful conduct of the Company's business. The proposed
amendment to the 1997 Option Plan is intended to ensure that the Company will
continue to have available a reasonable number of shares in order to meet
these goals.

SUMMARY OF THE 1997 OPTION PLAN

The following summary of the 1997 Option Plan is qualified in its entirety
by the specific language of the 1997 Option Plan, a copy of which is available
to any stockholder upon written request to the Company's Secretary at the
Company's principal executive office.

General. The purpose of the 1997 Option Plan is to advance the interests of
the Company and its stockholders by providing an incentive to attract, retain
and reward the Company's employees, directors and consultants and by
motivating such persons to contribute to the Company's growth and
profitability. The 1997 Option Plan provides for grants to employees of
incentive stock options within the meaning of section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and grants to employees,
directors and consultants of nonstatutory stock options.

Shares Subject to Plan; Grant Limits. Currently, a maximum of 3,300,000 of
the authorized but unissued or reacquired shares of Common Stock of the
Company may be issued under the 1997 Option Plan. As amended, subject to
stockholder approval, the maximum number of shares issuable under the 1997
Option Plan would be increased to 5,700,000. In order for the Company to
deduct in full, for federal income tax purposes, the compensation recognized
by certain executive oficers in connection with options granted under the 1997
Option Plan, the plan is designed to qualify such compensation as
"performance-based compensation" under Section 162(m) of the Code. To comply
with Section 162(m), the 1997 Option Plan limits the number of shares for
which options may be granted to any employee in any fiscal year of the
Company. For continuing employees such limit is 1,000,000 shares; the plan
authorizes an additional one-time grant to new hires of 2,000,000 shares
(together, the "Grant Limits"). Appropriate adjustments will be made to the
shares subject to the 1997 Option Plan, the Grant Limits, the automatic non-
employee director grants discussed below and to outstanding options upon any
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of
the Company. If any outstanding option expires, terminates or is canceled, or
if shares acquired subject to a company repurchase option are repurchased by
the Company, the expired or repurchased shares are returned to the 1997 Option
Plan and again become available for grant.

Administration. The 1997 Option Plan is administered by the Compensation
Committee of the Board of Directors, which, in the case of options intended to
qualify for the performance-based compensation exemption under Section 162(m)
of the Code, must be comprised solely of two or more "outside directors"
within the meaning of Section 162(m). Subject to the provisions of the 1997
Option Plan, the Compensation Committee determines the persons to whom options
are to be granted, the number of shares to be covered by each option, whether
an option is to be an incentive stock option or a nonstatutory stock option,
the timing and terms of exercisability and vesting of each option, the
purchase price and the type of consideration to be paid to the Company upon
the exercise of each option, the time of expiration of each option, and all
other terms and conditions of the options. The Compensation Committee may
amend, modify, extend, cancel, renew, or grant a

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new option in substitution for, any option, waive any restrictions or
conditions applicable to any option, and accelerate, continue, extend or defer
the exercisability or vesting of any option, including with respect to the
period following an optionee's termination of service with the Company. The
1997 Option Plan provides, subject to certain limitations, for indemnification
by the Company of any director, officer or employee against all reasonable
expenses, including attorneys' fees, incurred in connection with any legal
action arising from such person's action or failure to act in administering
the plan. The 1997 Option Plan permits the Compensation Committee to delegate
to an officer the authority to grant one or more options for not more than an
aggregate of 250,000 shares in any fiscal year to any person eligible under
the plan who is not an officer or a director of the Company, subject to
guidelines established by the Compensation Committee. The Compensation
Committee will interpret the 1997 Option Plan and options granted thereunder,
and all determinations of the Compensation Committee will be final and binding
on all persons having an interest in the 1997 Option Plan or any option.

Eligibility. Options may be granted under the 1997 Option Plan to employees,
directors and consultants of the Company or of any present or future parent or
subsidiary corporations of the Company. In addition, options may be granted to
prospective service providers in connection with written employment offers,
provided that no shares may be purchased prior to such person's commencement
of service. As of March 31, 1998, the Company had approximately 947 full-time
equivalent employees and contractors, including 5 executive officers and 5
non-employee directors who would be eligible under the 1997 Option Plan. While
any eligible person may be granted a nonstatutory stock option, only employees
may be granted incentive stock options.

Terms and Conditions of Options. Each option granted under the 1997 Option
Plan is evidenced by a written agreement between the Company and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option, consistent with the requirements of the plan. The
exercise price of each incentive stock option may not be less than the fair
market value of a share of Common Stock on the date of grant, while the
exercise price of a nonstatutory stock option may not be less than 85% of such
fair market value. However, any incentive stock option granted to a person who
at the time of grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation of the Company (a "Ten Percent Stockholder") must have
an exercise price equal to at least 110% of the fair market value of a share
of Common Stock on the date of grant. As of March 31, 1998, the closing price
of the Company's Common Stock, as reported on the Nasdaq National Market, was
$8.97 per share.

The 1997 Option Plan provides that the option exercise price may be paid in
cash, by check, or in cash equivalent, by the assignment of the proceeds of a
sale or loan with respect to some or all of the shares being acquired upon the
exercise of the option, to the extent legally permitted, by tender of shares
of Common Stock owned by the optionee having a fair market value not less than
the exercise price or by means of a promissory note if the optionee is an
employee, by such other lawful consideration as approved by the Compensation
Committee, or by any combination of these. Nevertheless, the Compensation
Committee may restrict the forms of payment permitted in connection with any
option grant. No option may be exercised until the optionee has made adequate
provision for federal, state, local and foreign taxes, if any, relating to the
exercise of the option.

Options will become vested and exercisable at such times or upon such events
and subject to such terms, conditions, performance criteria or restrictions as
specified by the Compensation Committee. The maximum term of an incentive
stock option granted under the 1997 Option Plan is ten years, provided that an
incentive stock option granted to a Ten Percent Stockholder must have a term
not exceeding five years. Unless his or her service is terminated for cause,
an optionee's option generally will remain exercisable for three months
following termination of service, provided that if termination results from
the optionee's death or disability, the option generally will remain
exercisable for twelve months following the optionee's termination of service.
In any event the option must be exercised no later than its expiration date.
The Compensation Committee, in its discretion, may provide for longer or
shorter post-service exercise periods in particular instances.

Incentive stock options are nontransferable by the optionee other than by
will or by the laws of descent and distribution, and are exercisable during
the optionee's lifetime only by the optionee. Nonstatutory stock options
granted under the 1997 Option Plan may be assigned or transferred to the
extent permitted by the Compensation Committee and set forth in the optionee's
option agreement.

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Automatic Grant of Non-Employee Director Options. In addition to authorizing
the Compensation Committee to grant options to employees, directors and
consultants on a discretionary basis, the 1997 Option Plan provides for the
nondiscretionary, automatic grant of options to directors who, at the time of
grant, are not employees of the Company or of any parent or subsidiary
corporation of the Company (a "non-employee director"). Upon initial election
or appointment to the Board, each non-employee director will be granted
automatically on the date of such initial election or appointment an option to
purchase 30,000 shares of Common Stock (an "Initial Option"). In addition, on
the date of each annual meeting of the stockholders, each non-employee
director remaining in office will be granted automatically an option to
purchase 7,500 shares of Common Stock (an "annual option"). The exercise price
per share of each non-employee director option will equal the fair market
value of Common Stock on the date of grant, generally the closing price
reported on the Nasdaq National Market. Unless earlier terminated under the
terms of the 1997 Option Plan, non-employee director options will expire ten
years after grant. Initial Options will become exercisable in full on their
first anniversary, while annual options will become exercisable in full on the
day preceding the first annual meeting of the stockholders following the date
of grant. Non-employee directors options will remain exercisable for six
months following the director's termination of service unless such termination
results from the director's death or disability, in which case the option will
remain exercisable for twelve months, provided that in no event may the option
be exercised after its expiration date.

Change in Control. The 1997 Option Plan provides that in the event of (i) a
sale or exchange by the stockholders in a single or series of related
transactions of more than 50% of the Company's voting stock, (ii) a merger or
consolidation in which the Company is a party, (iii) the sale, exchange or
transfer of all or substantially all of the assets of the Company, or (iv) a
liquidation or dissolution of the Company wherein, upon any such event, the
stockholders of the Company immediately before such event do not retain
immediately after such event direct or indirect beneficial ownership of more
than 50% of the total combined voting power of the voting stock of the
Company, its successor, or the corporation to which the assets of the Company
were transferred (a "Change in Control"), the surviving, continuing, successor
or purchasing corporation or parent corporation thereof may either assume the
Company's rights and obligations under the outstanding options or substitute
substantially equivalent options for such corporation's stock. The 1997 Option
Plan authorizes the Compensation Committee to provide in any option agreement
under the 1997 Option Plan for the acceleration of the vesting and
exercisability of options upon such circumstances in connection with a Change
in Control and to such extent as the Compensation Committee determines in its
discretion. To the extent that the outstanding options are not assumed,
replaced or exercised prior to the Change in Control, they will terminate.

Termination or Amendment. The 1997 Option Plan will continue in effect until
the earlier of its termination by the Board or the date on which all shares
available for issuance under the plan have been issued and all restrictions on
such shares under the terms of the plan and the agreements evidencing options
granted under the plan have lapsed, provided that all incentive stock options
must be granted within ten years of the date on which the Board adopted the
1997 Option Plan. The Compensation Committee may terminate or amend the 1997
Option Plan at any time. However, without stockholder approval, the
Compensation Committee may not amend the 1997 Option Plan to increase the
total number of shares of Common Stock issuable thereunder, change the class
of persons eligible to receive incentive stock options, or effect any other
change that would require stockholder approval under any applicable law,
regulation or rule. No termination or amendment may adversely affect an
outstanding option without the consent of the optionee, unless the amendment
is required to preserve an option's status as an incentive stock option or is
necessary to comply with any applicable law, regulation or rule.

FEDERAL INCOME TAX CONSEQUENCES

The following summary is intended only as a general guide to the principal
U.S. federal income tax consequences of the 1997 Option Plan. This discussion
is based on current provisions of the Code, the Treasury regulations
promulgated thereunder, and administrative and judicial interpretations
thereof as in effect on the date hereof. The summary does not address any
foreign, state or local tax consequences of participation in the 1997 Option
Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.

8
<PAGE>

In general, the grant of an option will not be a taxable event to the
recipient, and it will not result in a deduction to the Company. The tax
consequences associated with the exercise of an option and the subsequent
disposition of shares of Common Stock acquired on the exercise of such option
depend on whether the option is an incentive stock option or a nonstatutory
stock option.

Upon the exercise of a nonstatutory stock option, the optionee will
recognize ordinary taxable income equal to the excess of the fair market value
of the shares of Common Stock received upon exercise over the exercise price.
The Company will generally be able to claim a deduction in an equivalent
amount. Any gain or loss upon a subsequent sale or exchange of the shares of
Common Stock will be capital gain or loss. If the holding period for the
shares is not more than one year, the gain or loss will be short-term capital
gain or loss. Short-term capital gain is taxable at the same rates as ordinary
income. If the holding period is more than one year, the gain or loss will be
long-term capital gain or loss. In general, long-term capital gain is subject
to lower maximum federal income tax rates than ordinary income. Currently, the
maximum federal income tax rate for long-term capital gain on assets held for
more than eighteen months is generally 20%, and the maximum rate on capital
gain on assets held for more than one year not more than than eighteen months
("mid-term gain") is 28%.

Generally, an optionee will not recognize ordinary taxable income at the
time of exercise of an incentive stock option and no deduction will be
available to the Company, provided the option is exercised while the optionee
is an employee or within three months following termination of employment
(longer, in the case of termination of employment by reason of disability or
death). If an incentive stock option granted under the 1997 Option Plan is
exercised after these periods, the exercise will be treated for federal income
tax purposes as the exercise of a nonstatutory stock option. Also, an
incentive stock option granted under the 1997 Option Plan will be treated as a
nonstatutory stock option to the extent it (together with any other incentive
stock options granted under other plans of the Company and its subsidiaries)
first becomes exercisable in any calendar year for shares of Common Stock
having a fair market value, determined as of the date of grant, in excess of
$100,000.

If shares of Common Stock acquired upon exercise of an incentive stock
option are sold or exchanged more than one year after the date of exercise and
more than two years from the date of grant of the option, any gain or loss
will be mid-term or long-term capital gain or loss, taxable as discussed above
at either a maximum federal income tax rate of 20% or 28% depending on the
holding period. If shares of Common Stock acquired upon exercise of an
incentive stock option are disposed of prior to the expiration of these one-
year or two-year holding periods (a "Disqualifying Disposition"), the optionee
will recognize ordinary income at the time of disposition, and the Company
will generally be able to claim a deduction, in an amount equal to the excess
of the fair market value of the shares of Common Stock at the date of exercise
over the exercise price. Any additional gain will be treated as capital gain,
long-term, mid-term or short-term, depending on how long the shares of Common
Stock have been held. Where shares of Common Stock are sold or exchanged in a
Disqualifying Disposition (other than certain related party transactions) for
an amount less than their fair market value at the date of exercise, any
ordinary income recognized in connection with the Disqualifying Disposition
will be limited to the amount of gain, if any, recognized in the sale or
exchange, and any loss will be a long-term or short-term capital loss,
depending on how long the shares of Common Stock have been held.

Although the exercise of an incentive stock option as described above may
not produce ordinary taxable income to the optionee, it generally will result
in an increase in the optionee's alternative minimum taxable income and may
result in an alternative minimum tax liability.

NEW PLAN BENEFITS AND ADDITIONAL INFORMATION

With the exception of the automatic grant of options to non-employee
directors as described above, the future grant of options under the 1997
Option Plan will be made at the discretion of the Compensation Committee, and,
accordingly, are not yet determinable. In addition, benefits under the 1997
Option Plan will depend on a number of factors, including the fair market
value of the Company's Common Stock on future dates and the exercise decisions
made by the optionees. Consequently, it is not possible to determine the
benefits that might be received by optionees receiving discretionary grants
under the 1997 Option Plan. In calendar year 1998,

9
<PAGE>

options for an aggregate of 37,500 shares will be granted automatically under
the 1997 Option Plan to the Company's current non-employee directors, provided
that the nominees are elected. The numbers of shares of Common Stock subject
to options granted under the 1997 Option Plan to certain persons during the
nine-month fiscal period ended December 31, 1997 are as follows: Messrs.
Yocam, Floisand, LeFaivre, Birmingham and Ms. Fisher were granted options to
purchase 580,000 shares, 420,000 shares, 420,000 shares, 140,000 shares and
315,000 shares, respectively; all current executive officers as a group were
granted options to purchase an aggregate of 1,875,000 shares; all current
directors who are not executive officers as a group were granted options to
purchase an aggregate of 37,500 shares; Messrs. Hara, Heller, Miller, Lewis
and Saal were each granted options to purchase 7,500 shares; and all current
employees, including officers who are not executive officers, as a group were
granted options to purchase an aggregate of 1,524,291 shares. During such
nine-month period ended December 31, 1997, no options were granted under the
1997 Option Plan to any associates of any current directors who are not
executive officers, of nominees or of any executive officers, and no person
other than those individuals set forth above was granted five percent or more
of the total amount of options granted under the 1997 Option Plan during that
period.

VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION

The affirmative vote of the holders of a majority of the Votes Cast at the
Annual Meeting of Stockholders is required for approval of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF ADDITIONAL
SHARES TO THE 1997 STOCK OPTION PLAN

10
<PAGE>

PROPOSAL 4

APPROVAL OF ADDITIONAL SHARES FOR
1997 EMPLOYEE STOCK PURCHASE PLAN

At the Annual Meeting, the stockholders will be asked to approve an
amendment to the Company's 1997 Employee Stock Purchase Plan (the "1997
Purchase Plan") to increase by 100,000 the number of shares of Common Stock
issuable thereunder. The Board of Directors believes that future employee
participation will require additional shares to be made available under the
1997 Purchase Plan. The Board believes that the 1997 Purchase Plan benefits
the Company and its stockholders by providing its employees with an
opportunity through payroll deductions to purchase shares of the Company's
Common Stock that is helpful in attracting, retaining, and motivating valued
employees. The proposed amendment is necessary to ensure that the Company will
continue to have available a sufficient number of shares to continue offering
employees a stock purchase opportunity under the 1997 Purchase Plan.

SUMMARY OF THE 1997 PURCHASE PLAN

The following summary of the 1997 Purchase Plan is qualified in its entirety
by the specific language of the 1997 Purchase Plan, a copy of which is
available to any stockholder upon written request to the Company's Secretary
at the Company's principal executive office.

General. The 1997 Purchase Plan is intended to qualify as an "employee stock
purchase plan" under section 423 of the Code. Each participant in the 1997
Purchase Plan is granted at the beginning of each offering under the plan (an
"Offering") the right to purchase through accumulated payroll deductions up to
a number of shares of the Company's Common Stock (a "Purchase Right")
determined on the first day of the Offering. The Purchase Right is
automatically exercised on each purchase date during the Offering unless the
participant has withdrawn from participation in the 1997 Purchase Plan prior
to such date.

Shares Subject to Plan. Currently, a maximum of 400,000 of the Company's
authorized but unissued or reacquired shares of Common Stock may be issued
under the 1997 Purchase Plan. The Board has amended the 1997 Purchase Plan,
subject to stockholder approval, to increase the maximum number of shares of
the Company's Common Stock issuable thereunder to an aggregate of 500,000
shares. Appropriate adjustments will be made to the shares issuable under the
1997 Purchase Plan and to outstanding Purchase Rights in the event of any
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of
the Company, or in the event of any merger, sale of assets or other
reorganization of the Company. If any Purchase Right expires or terminates,
the shares subject to the unexercised portion of such Purchase Right will
again be available for issuance under the 1997 Purchase Plan.

Administration. The 1997 Purchase Plan is administered by the Compensation
Committee of the Board of Directors. Subject to the provisions of the 1997
Purchase Plan, the Compensation Committee determines the terms and conditions
of Purchase Rights granted under the plan. The Compensation Committee will
interpret the 1997 Purchase Plan and Purchase Rights granted thereunder, and
all determinations of the Compensation Committee will be final and binding on
all persons having an interest in the 1997 Purchase Plan or any Purchase
Right. The 1997 Purchase Plan provides, subject to certain limitations, for
indemnification by the Company of any director, officer or employee against
all reasonable expenses, including attorneys' fees, incurred in connection
with any legal action arising from such person's action or failure to act in
administering the plan.

Eligibility. Any employee of the Company or of any present or future parent
or subsidiary corporation of the Company designated by the Compensation
Committee for inclusion in the 1997 Purchase Plan is eligible to participate
in an Offering under the plan so long as the employee is customarily employed
for at least 20 hours per week and more than five months in any calendar year.
However, no employee who owns or holds options to purchase, or who, as a
result of participation in the 1997 Purchase Plan, would own or hold options
to purchase, five percent or more of the total combined voting power or value
of all classes of stock of the Company or of

11
<PAGE>

any parent or subsidiary corporation of the Company is eligible to participate
in the 1997 Purchase Plan. As of March 31, 1998, approximately 947 full-time
equivalent employees, including 5 executive officers, were eligible to
participate in the 1997 Purchase Plan.

Offerings. The 1997 Purchase Plan is implemented through two series of
Offerings, the terms of which are referred to herein as "Offering Periods." A
twelve-month "Annual Offering Period" will generally begin on or about
December 1 of each year, and a six-month "Half-Year Offering Period" will
generally begin on or about June 1 of each year. An employee may not
participate simultaneously in more than one Offering. Generally, each Annual
Offering Period is comprised of two six-month "Purchase Periods" ending on or
about the last day of May and November of each year, while each Half-Year
Offering Period is comprised of a single Purchase Period. However, the
Compensation Committee may establish a different term for one or more
Offerings or different commencement or ending dates for any Offering Period or
Purchase Period. The initial Annual Offering Period commenced on October 1,
1997 and will end on November 30, 1998.

Participation and Purchase of Shares. Participation in an Offering under the
1997 Purchase Plan is limited to eligible employees who authorize payroll
deductions prior to the first day of an Offering Period (the "Offering Date").
Payroll deductions may not exceed 15% (or such other rate as the Compensation
Committee determines) of an employee's compensation on any pay day during the
Offering Period. An employee who becomes a participant in the 1997 Purchase
Plan will automatically participate in each subsequent Offering Period
beginning immediately after the last day of the Offering Period in which he or
she is a participant until the employee withdraws from the 1997 Purchase Plan,
becomes ineligible to participate, or terminates employment.

Subject to any uniform limitations or notice requirements imposed by the
Company, a participant may increase or decrease his or her rate of payroll
deductions or withdraw from the 1997 Purchase Plan at any time during an
Offering. Upon withdrawal, the Company will refund without interest the
participant's accumulated payroll deductions not previously applied to the
purchase of shares. Once a participant withdraws from an Offering, that
participant may not again participate in the same Offering. If the fair market
value of a share of Common Stock on the Offering Date of the current Offering
in which employees are participating is greater than such fair market value on
the Offering Date of a new Offering, then, unless a participant elects
otherwise, each participant will be automatically withdrawn from the current
Offering after purchasing shares and enrolled in the new Offering.

Subject to certain limitations, each participant in an Offering is granted a
Purchase Right for a number of whole shares determined by dividing (i)
$2,083.33 multiplied by the number of months in the Offering Period by (ii)
the fair market value of a share of Common Stock on the Offering Date.
However, the maximum number of shares a participant may purchase in any
Offering Period is equal to 208.33 multiplied by the number of months in the
Offering Period. As a further limitation, no participant may purchase shares
of Common Stock under the 1997 Purchase Plan or any other employee stock
purchase plan of the Company having a fair market value exceeding $25,000 in
any calendar year (measured by the fair market value of the Company's Common
Stock on the first day of the Offering Period in which the shares are
purchased). Purchase Rights are nontransferable and may only be exercised by
the participant.

On the last day of each Purchase Period (a "Purchase Date"), the Company
issues to each participant in the Offering the number of shares of the
Company's Common Stock determined by dividing the amount of payroll deductions
accumulated for the participant during the Purchase Period by the purchase
price, limited in any case by the number of shares subject to the
participant's Purchase Right for that Offering. The price at which shares are
sold under the 1997 Purchase Plan is established by the Compensation Committee
but may not be less than 85% of the lesser of the fair market value per share
of Common Stock on the Offering Date or on the Purchase Date. The fair market
value of the Common Stock on any relevant date generally will be the closing
price per share as reported on the Nasdaq National Market. On March 31, 1998,
the closing price per share of Common Stock was $8.97. Any payroll deductions
under the 1997 Purchase Plan not applied to the purchase of shares will be
returned to the participant without interest, unless the amount remaining is
less than the amount necessary to purchase a whole share of Common Stock, in
which case the remaining amount may be applied to the next Purchase Period.

12
<PAGE>

Change in Control. The 1997 Purchase Plan provides that, in the event of (i)
a sale or exchange by the stockholders in a single or series of related
transactions of more than 50% of the Company's voting stock, (ii) a merger or
consolidation in which the Company is a party, (iii) the sale, exchange or
transfer of all or substantially all of the assets of the Company, or (iv) a
liquidation or dissolution of the Company wherein, upon any such event, the
stockholders of the Company immediately before such event do not retain
immediately after such event direct or indirect beneficial ownership of more
than 50% of the total combined voting power of the voting stock of the
Company, its successor, or the corporation to which the Company's assets were
transferred (a "Change in Control"), the surviving, continuing, successor or
purchasing corporation or parent corporation thereof may assume the Company's
rights and obligations under the 1997 Purchase Plan. However, if such
corporation elects not to assume the outstanding Purchase Rights, the Purchase
Date of the then current Purchase Period will be accelerated to a date before
the Change in Control specified by the Compensation Committee. Any Purchase
Rights that are not assumed or exercised prior to the Change in Control will
terminate.

Termination or Amendment. The 1997 Purchase Plan will continue until
terminated by the Compensation Committee or until all of the shares reserved
for issuance under the plan have been issued. The Compensation Committee may
at any time amend or terminate the 1997 Purchase Plan, except that the
approval of the Company's stockholders is required within twelve months of the
adoption of any amendment increasing the number of shares authorized for
issuance under the 1997 Purchase Plan, or changing the definition of the
corporations which may be designated by the Compensation Committee as
corporations the employees of which may participate in the 1997 Purchase Plan.

FEDERAL INCOME TAX CONSEQUENCES

The following is intended only as a general summary of the U.S. federal
income tax consequences to employees participating in the 1997 Purchase Plan
and to the Company, based upon current provisions of the Code, the Treasury
regulations promulgated thereunder and administrative and judicial
interpretations thereof, and does not address the consequences under any other
applicable tax laws. The provisions of the Code, regulations thereunder and
related interpretations are complicated and their impact in any one case may
depend upon the particular circumstances relating thereto.

Rights to purchase stock under the 1997 Purchase Plan are referred to in the
Code as "options." A participating employee will not recognize income at the
time options are granted to such employee at the commencement of an Offering
Period or when the employee exercises such options and purchases shares of
Common Stock at the end of a Purchase Period. An employee will be taxed on
amounts withheld from salary under the 1997 Purchase Plan as if actually
received, and the Company will be entitled to deduct a corresponding amount.

If an employee does not dispose of the shares of Common Stock purchased
pursuant to the 1997 Purchase Plan until more than two years after the date of
grant of the options and one year after the transfer of the shares to the
employee, or if the employee dies without having disposed of such shares, such
employee must include in gross income as compensation (as ordinary income and
not as capital gain) for the taxable year of disposition or death an amount
equal to the lesser of (i) the excess of the fair market value of the shares
at the time of disposition or death over the amount paid for the shares, or
(ii) the excess of the fair market value of the shares at the date of grant of
the options over the exercise price (determined as if the option were
exercised on the date of grant). If the amount realized upon such a
disposition by way of sale or exchange of the shares exceeds the purchase
price plus the amount, if any, included in income as compensation, such excess
will be capital gain. If the holding period for the shares is not more than
one year, the gain or loss will be short-term capital gain or loss. Short-term
capital gain is taxable at the same rates as ordinary income. If the holding
period is more than one year, the gain or loss will be long-term capital gain
or loss. In general, long-term capital gain is subject to lower maximum
federal income tax rates than ordinary income. Currently, the maximum rate for
long-term capital gain on assets held for more than eighteen months is
generally 20%, and the maximum rate on capital gain on assets held for more
than one year but not more than eighteen months ("mid-term gain") is 28%.

13
<PAGE>

The Company will not be entitled to any deduction in respect of options
granted under the 1997 Purchase Plan or shares of Common Stock issued and
delivered pursuant to the exercise of such options, if the holding period
requirements are met or the employee dies prior to disposing of the shares
acquired upon exercise.

If an employee disposes of the shares of Common Stock within two years from
the date of grant of the option or within one year from the date of exercise,
the employee will recognize ordinary income at the time of disposition which
will equal the excess, if any, of the fair market value of the shares on the
date of exercise over the amount paid for such shares. The Company may be
required to withhold taxes related to such ordinary income from other payments
due the employee. The Company will generally be entitled to a deduction in an
amount equal to such income. The excess, if any, of the amount realized on
disposition of such shares over the fair market value of such shares on the
date of exercise will be long-term, mid-term or short-term capital gain,
depending upon the holding period for the shares. If an employee disposes of
such shares for less than his or her basis in the shares, the difference
between the amount realized and such basis will be a long-term or short-term
capital loss, depending upon the holding period for the shares.

NEW PLAN BENEFITS AND ADDITIONAL INFORMATION

Benefits obtained by employees under the 1997 Purchase Plan will depend on
their individual elections to participate and the fair market value of the
Company's Common Stock at various future dates. Accordingly, it is not
possible to determine the benefits that will be received by executive officers
and other employees under the 1997 Purchase Plan. Non-employee directors are
not eligible to participate in the 1997 Purchase Plan. No shares of Common
Stock were purchased under the 1997 Purchase Plan during the nine-month period
ended December 31, 1997.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

The affirmative vote of the holders of a majority of the Votes Cast at the
Annual Meeting of Stockholders is required for approval of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF ADDITIONAL
SHARES TO THE 1997 PURCHASE PLAN

14
<PAGE>

PROPOSAL 5

RATIFICATION OF INDEPENDENT ACCOUNTANTS

The Board of Directors, upon the recommendation of the Company's Audit
Committee, has appointed Price Waterhouse LLP, as the Company's independent
accountants, to audit the consolidated financial statements of the Company for
the calendar year ending December 31, 1998. Price Waterhouse LLP served as the
Company's independent accountants for the last nine-months ended December 31,
1997. The Board of Directors recommends that stockholders vote FOR
ratification of the appointment of Price Waterhouse LLP as the Company's
independent accountants for the succeeding year. A representative of Price
Waterhouse LLP will be present at the Annual Meeting and will be available to
respond to appropriate questions from the stockholders and will be given an
opportunity to make a statement if he or she desires to do so.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

The affirmative vote of the holders of a majority of the Votes Cast at the
Annual Meeting of Stockholders, is required for approval of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF PRICE
WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE CALENDAR YEAR
ENDING DECEMBER 31, 1998

15
<PAGE>

ADDITIONAL INFORMATION

EXECUTIVE OFFICERS

Officers are appointed annually by the Board of Directors and serve at the
discretion of the Board of Directors. Set forth below is information regarding
the current executive officers of the Company who are not directors of the
Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Delbert W. Yocam........ 54 Chief Executive Officer
John Floisand........... 54 Senior Vice President, Worldwide Sales
Richard A. LeFaivre..... 51 Senior Vice President, Research and Development
Hobart McK. Birmingham.. 53 Vice President, General Counsel and Secretary
Kathleen M. Fisher...... 43 Vice President, Finance and Chief Financial Officer
</TABLE>

John Floisand joined Borland in April 1997 as Vice President, U.S. Sales. He
was promoted to Vice President, Worldwide Sales in July 1997 and was promoted
to Senior Vice President in February 1998. Prior to joining Borland, Mr.
Floisand served in a variety of executive management positions for 11 years at
Apple Computer, Inc., a personal computer company, most recently as Senior
Vice President of Worldwide Sales. Prior to joining Apple Computer, Mr.
Floisand served as Managing Director of Base2.

Richard A. LeFaivre joined Borland in May 1997 as Vice President, Research
and Development and Chief Technology Officer. In February 1998 Mr. LeFaivre
was promoted to Senior Vice President of Research and Development. Prior to
joining Borland, Mr. LeFaivre served as Vice President, Advanced Technology
Group at Apple Computer, Inc., a personal computer company. From April 1996 to
January 1997, Mr. LeFaivre served as Senior Vice President, Product
Development at Viacom, Inc., a diversified entertainment and publishing
company. From June 1995 to April 1996, Mr. LeFaivre served as Vice President,
Engineering at Silicon Graphics Computer Systems, Inc., a computer company.
From March 1991 to June 1995, Mr. LeFaivre served as Vice President, Advanced
Technology Group at Apple Computer, Inc.

Hobart McK. Birmingham joined Borland in February 1997 as Vice President and
General Counsel, and was appointed Secretary in March 1997. Prior to joining
Borland, Mr. Birmingham served as Senior Director and Associate General
Counsel at Apple Computer, Inc. from 1995 to 1997. From 1988 to 1995 Mr.
Birmingham was a partner with the law firm of Graham & James. Additionally,
Mr. Birmingham was an associate and partner (1979) with the law firm of
Bronson, Bronson & McKinnon from 1974 through 1988.

Kathleen M. Fisher joined Borland in May 1997 as Vice President of Finance
and Chief Financial Officer. Prior to joining Borland, Ms. Fisher served as
Vice President of Finance, Treasurer, and Chief Financial Officer at Phoenix
Publishing Systems, Inc., a software publishing company. From 1993 to 1995 Ms.
Fisher served as Vice President of Finance, Treasurer and Chief Financial
Officer of Glacier Water Services, Inc., a purified water manufacturer. Ms.
Fisher also served as Vice President of Finance & Business Development of
Vitarel Microelectronics, a multi-chip modules company from 1990 to 1993.

16
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of March 31, 1998, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
stockholder known to the Company to be the beneficial owner of more than five
percent (5%) of the Company's Common Stock; (ii) each current director and
nominee for director; (iii) each executive officer named in the Summary
Compensation Table; and (iv) all current executive officers and directors as a
group. Except as indicated in the footnotes to this table, the persons named
in the table have sole voting and investment power with respect to all shares
shown as beneficially owned by them, subject to community property laws where
applicable.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS
---- -------------------- ----------------
<S> <C> <C>
5% STOCKHOLDERS:
Merrill Lynch & Co., Inc.(1)........... 5,498,100 10.8%
Neuberger & Berman, LLC(2)............. 3,976,900 7.8%
EXECUTIVE OFFICERS AND DIRECTORS:
Delbert W. Yocam(3).................... 1,052,482 2%
George Hara(4)......................... 112,500 *
David Heller(5)........................ 197,500 *
Stephen J. Lewis(6).................... 88,140 *
William F. Miller(7)................... 105,000 *
Harry J. Saal(8)....................... 67,500 *
John Floisand(9)....................... 119,536 *
Richard A. LeFaivre(10)................ 113,625 *
Hobart McK. Birmingham(11)............. 98,960 *
Kathleen M. Fisher(12)................. 84,141 *
David McGlaughlin(13).................. 77,382 *
All current directors and executive
officers as a group (11 persons)(14).. 2,116,766 3.9%
</TABLE>
- --------
* Less than 1%
(1) Information is based on a Schedule 13G/A filing dated February 4, 1998.
Number of shares which may be deemed beneficially owned includes shares
held by various funds related to or managed by Merrill Lynch & Co., Inc.
The address of Merrill Lynch & Co., Inc. is World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281.
(2) Information is based on a Schedule 13G filing filed February 13, 1998.
Number of shares which may be deemed beneficially owned includes shares
held by various funds related to or managed by Neuberger & Berman LLC and
Neuberger & Berman Management Inc. The address of Neuberger & Berman is
605 Third Ave., New York, New York 10158.
(3) Represents options exercisable within 60 days of March 31, 1998 to
acquire 1,052,482 shares.
(4) Represents options exercisable within 60 days of March 31, 1998 to
acquire 112,500 shares.
(5) Represents options exercisable within 60 days of March 31, 1998 to
acquire 197,500 shares.
(6) Includes options exercisable within 60 days of March 31, 1998 to acquire
82,500 shares.
(7) Represents options exercisable within 60 days of March 31, 1998 to
acquire 105,000 shares.
(8) Represents options exercisable within 60 days of March 31, 1998 to
acquire 67,500 shares.
(9) Represents options exercisable within 60 days of March 31, 1998 to
acquire 119,536 shares.
(10) Represents options exercisable within 60 days of March 31, 1998 to
acquire 113,625 shares.
(11) Represents options exercisable within 60 days of March 31, 1998 to
acquire 98,960 shares.
(12) Represents options exercisable within 60 days of March 31, 1998 to
acquire 84,141 shares.
(13) Represents options exercisable within 60 days of March 31, 1998 to
acquire 77,382 shares.
(14) Includes options exercisable within 60 days of March 31, 1998 to acquire
2,111,126 shares.

17
<PAGE>

BOARD ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The following is the Report of the Compensation Committee of the Company,
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to compensation paid to such executive
officers for the nine month period ended December 31, 1997. The information
contained in this report shall not be deemed "soliciting material" or to be
"filed" with the Securities and Exchange Commission (the "SEC") nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.

The Company's executive compensation program is administered by the
Organization and Compensation Committee (the "Committee") of the Board of
Directors. The role of the Committee, which is comprised entirely of outside,
non-employee directors, is to review and approve salaries, bonuses and stock
option grants of the directors, executive officers and employees of the
Company. The goal of the Committee is to align compensation packages with the
long term interests of the Company's stockholders. In structuring compensation
programs, the Committee has been particularly mindful of the financial
performance of the Company in recent years, the extremely competitive
environment for attracting senior level management in the technology sector,
and the continuous and extraordinary efforts which have been made by
competitors of the Company to lure away management and other key personnel.
The Committee believes it is critical to the long term prospects of the
Company to establish compensation programs which will allow the Company to
attract management possessing the type of experience necessary for the Company
to realize upon its strategic objectives and to retain such management for a
sufficient period of time.

The Company adjusted its fiscal year end, resulting in a shortened, three
quarter fiscal year for the nine months ended December 31, 1997. During the
first half of calendar 1997, the Committee continued to focus its attention on
recruiting the final management talent necessary to implement the Company's
turnaround strategy. During the latter part of 1997, the Committee's approach
emphasized rewarding executive officers and key employees for achieving
performance based goals.

Compensation Philosophy

The Committee believes that the compensation of the executive officers and
other key employees of the Company should result in the creation of long-term
stockholder value and be based on the Company's and the individual's
performance. Consistent with this philosophy, the Company's compensation
programs include a combination of salary, bonus and stock options aimed at the
retention, reward and motivation of individuals within the Company.

Base Salary. The base salary of most of the Company's current officers was
individually negotiated at the time each officer joined the Company, or
assumed his or her current position. The Committee reviews each executive
officer's base salary annually, and when doing so, the Committee considers
individual and corporate performance, levels of responsibility, prior
experience, breadth of knowledge and competitive pay practices. The Committee
approved changes in the compensation packages for senior management, effective
January 1, 1998. The Committee believes that the current executive salaries
are comparable to the salaries in effect at companies that compete with the
Company for executive talent.

Bonus. The Company's bonus plans provide for quarterly bonuses to be awarded
to executive officers and key employees based on the achievement of specific
goals set by the Company, and the level of contribution made by these
individuals. In calculating bonus awards certain Company performance
objectives are considered, including operating, strategic and financial goals
necessary for the achievement of the Company's short and long term objectives.
The Committee has approved an Executive Bonus Incentive Program to provide
appropriate incentives to management and periodically reviews the actions to
be taken pursuant to such program.

Options. The purpose of the Company's stock option plans is to provide
employees of the Company with an opportunity to share, along with stockholders
of the Company, in the long-term performance of the Company.

18
<PAGE>

The Committee makes periodic grants of stock options to eligible employees,
generally upon commencement of employment or following a significant change in
job responsibilities. Stock options usually vest over four years and expire
ten years from the date of grant. The exercise price of options is normally
100% of fair market value of the underlying stock on the date of grant. In
awarding stock options, the Committee considers individual performance,
overall contribution to the Company, retention, the number of unvested stock
options and the total number of stock options to be awarded. During the last
half of calendar 1997, the Company made significant discretionary grants to
executive officers and other key employees directed at maintaining a high
level of motivation among these individuals. In addition to the criteria
discussed above, the Committee considered the executive officers' current
position, comparable grants made to other executive officers and the
individual's potential for growth within the Company. The grants were set at
levels deemed appropriate to create the opportunity for substantial stock
ownership, thus aligning management and stockholders' interests.

Section 162(m) of the Internal Revenue Code (the "Code") imposes limitations
on the deductibility for federal income tax purposes of compensation over $1
million paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code. Given the attention to the
overall challenges faced by the Company in recruiting and retaining key
management, the Compensation Committee has not yet established a policy for
determining which forms of incentive compensation awarded to its Named
Executive Officers shall be designed to qualify as "performance-based
compensation" other than any options that may be granted under the 1997 Stock
Option Plan. The Compensation Committee intends to continue to evaluate the
effects of the statute and any Treasury regulations and to comply with Code
Section 162(m) in the future to the extent consistent with the best interests
of the Company.

CEO Compensation

The annual base salary and performance bonus of Mr. Yocam, the Chairman of
the Board and Chief Executive Officer, is determined according to an
employment agreement (the "Agreement") entered into in November, 1996.
Pursuant to his employment agreement, during the nine month period ended
December 31, 1997, Mr. Yocam received a base salary of approximately $270,000
and a performance bonus equal to his base salary. Mr. Yocam's agreement was
amended during the course of the year in recognition of the progress of the
Company since Mr. Yocam joined the Company and in order to continue to align
Mr. Yocam's interests with the long term interests of the stockholders. See
"Employment Contracts, Termination of Employment and Change in Control
Arrangements". The Committee believes that the compensation arrangements
entered into with Mr. Yocam are consistent with the compensation paid to other
CEO's in similarly situated and comparable companies.

Organization and Compensation
Committee

Stephen Lewis
David Heller

April 27, 1998

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As indicated above, the Compensation Committee during the nine-month period
ended December 31, 1997 consisted of David Heller and Stephen J. Lewis,
neither of whom are, or have been at any time, officers or employees of the
Company. No executive officer of the Company served as a member of a
compensation committee or board of directors of any other entity which has an
executive officer serving as a member of the Company's Board of Directors or
Compensation Committee.

19
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table provides certain summary information concerning
compensation paid to or accrued for the Company's Chief Executive Officer, and
each of the four most highly compensated executive officers of the Company
(determined as of December 31, 1997) (hereinafter referred to as the "Named
Executive Officers") for the fiscal years ended March 31, 1996 and 1997 and
for the three quarter fiscal year for the nine months ended December 31, 1997:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ---------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATION($)(1)
------------------ ---- --------- --------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Delbert W. Yocam(2)..... 1998 276,923 240,000 55,333(3) 580,000 2,077
Chairman of the Board 1997 110,769 3,864,184(4) 3,849,908(5) 1,100,000 --
and Chief Executive
Officer
Hobart McK.
Birmingham(6).......... 1998 146,154 57,000 15,506(7) 140,000 1,425
Vice President and 1997 21,923 175,000
General Counsel
Kathleen M. Fisher(8)... 1998 130,769 66,665 -- 315,000 808
Vice President, Finance
and Chief Financial
Officer
John Floisand(8)........ 1998 181,506 275,000(9) 5,261(10) 420,000 1,250
Senior Vice President,
World Wide Sales
Richard A. LeFaivre(8).. 1998 167,308 191,665(11) -- 420,000 1,790
Senior Vice President,
Research and
Development
David McGlaughlin(12)... 1998 126,810 80,537 3,513(13) -- --
Former Vice President, 1997 192,000 92,092 8,400(13) 99,673(14) --
International Sales and 1996 185,513 107,209 21,639(13) -- --
Operations
</TABLE>
- --------
(1) Unless otherwise noted, consists of the Company's matching payments under
its 401(k) Plan.
(2) The person indicated was not an executive officer of the Company during
fiscal year 1996.
(3) Consists of relocation expenses.
(4) Includes a $3,744,184 one time sign-on bonus.
(5) Includes a $3,827,364 payment for the purchase of a residence. See
"Employment Contracts, Termination of Employment and Change in Control
Arrangements".
(6) The person indicated joined the Company as an executive officer in
February 1997.
(7) Consists of housing allowance.
(8) The person indicated was not an executive officer of the Company during
fiscal years 1997 and 1996.
(9) Includes a $200,000 one time sign-on bonus.
(10) Consists of car allowance.
(11) Includes a $125,000 one time sign-on bonus.
(12) The person indicated ceased to be an executive and full time employee of
the Company during fiscal year ended December 31, 1997.
(13) The person indicated is a resident of Canada and an employee of the
Company's subsidiary, Borland Canada Software, Inc. Consists of car and
housing allowance.
(14) Includes options amended on February 3, 1997 to reduce the exercise price
to the market closing price on such date. Excludes option for equal
number of shares that may be deemed canceled on such date as a
consequence of the repricing.

20
<PAGE>

Stock Option Grants

The following table sets forth information concerning the grant of stock
options to each of the Named Executive Officers for the nine-month period
ended December 31, 1997:

OPTION/SAR GRANTS IN THE NINE MONTH PERIOD ENDED DECEMBER 31, 1997 (*)

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZED
TOTAL VALUE AT ASSUMED
OPTIONS/ ANNUAL RATES OF
NUMBER OF SARS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(4)
OPTIONS/SARS IN FISCAL BASE EXPIRATION -------------------
NAME GRANTED(#)(1) YEAR(2) PRICE($/SH) DATE(3) 5%($) 10%($)
---- ------------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Delbert W. Yocam........ 580,000(5)(6) 17.06% 8.875 9/5/07 3,237,235 8,203,789
John Floisand........... 225,000(6)(7) 6.62% 6.8125 4/7/07 963,978 2,442,908
195,000(6)(8) 5.7365% 10.375 10/21/07 1,272,332 3,224,340
Richard A. LeFaivre..... 250,000(6)(9) 7.35% 6.8125 04/30/07 1,071,086 2,714,343
170,000(6)(9) 5% 10.375 10/21/07 1,109,213 2,810,963
Hobart McK. Birmingham.. 140,000(6)(10) 4.12% 10.375 10/21/07 913,469 2,314,910
Kathleen M. Fisher...... 200,000(6)(11) 5.88% 7.0625 5/5/07 888,314 2,251,161
115,000(6)(11) 3.38% 10.375 10/21/07 750,350 1,901,534
David McGlaughlin....... -- -- -- -- -- --
</TABLE>
- --------
(*) No stock appreciation rights were granted to executive officers for the
nine-month period ended December 31, 1997.
(1) The Company's option plans are currently administered by the Organization
and Compensation Committee (the "Committee") of the Board of Directors.
The Committee determines the eligibility of employees and consultants,
the number of shares to be granted, and the terms of such grants. All
options granted during the nine-month period ended December 31, 1997 have
an exercise price equal to the fair market value on the date of grant.
Options generally vest 25% one year from the date of grant and ratably
over the remaining three years either on a daily or a monthly basis.
Certain options have been granted that vest daily or monthly over a
specified vesting period from the date of grant. Options expire at the
earlier of either three months after termination of employment or ten
years after the date of grant.
(2) The Company granted options to purchase an aggregate of 3,436,791 shares
to all employees and consultants for the nine-month period ended December
31, 1997.
(3) Options may terminate before their expiration date upon the termination
of optionee's status as an employee or consultant or upon the optionee's
death or disability.
(4) Under rules promulgated by the Securities and Exchange Commission, the
amounts in these two columns represent the hypothetical gain that would
exist for options in this table based on assumed stock price appreciation
from the date of grant until the end of such options' ten-year term at
assumed annual appreciation rates of 5% and 10%. Annual compounding
results in total stock price appreciation of 63% (at 5% per year) and
159% (at 10% per year). If the price of a share of the Company's Common
Stock were to increase at such rates from the price at the end of the
nine-month period ended December 31, 1997 ($7.3125 per share) over the
next 10 years, the resulting stock price at 5% and 10% appreciation would
be $11.91 and $18.97, respectively. The 5% and 10% assumed annual rates
of appreciation do not represent the Company's estimate or projection of
future stock price growth.
(5) The options vest at 509 shares per day beginning November 15, 1997 with
an additional 275,000 shares vesting on November 14, 1998, until all
shares are vested.
(6) Upon an acquisition or a change in control of the Company the vesting of
all options will be accelerated and shall be exercisable in full.
(7) 33 1/3% of the options vest on April 7, 1998; the remaining 66 2/3 % of
the options vest thereafter over two years on a daily basis.

21
<PAGE>

(8) Approximately 16% of the options vest on April 7, 1998, 30% of the
options vest daily thereafter for two years with the remaining 54% of the
options vesting daily from April 8, 2000 through April 7, 2001.
(9) 25% of the options vest on April 30, 1998; the remaining 75% of the
options vest thereafter over three years on a daily basis
(10) 25% of the options vest on February 10, 1998; the remaining 75% of the
options vest thereafter over three years on a daily basis.
(11) 25% of the options vest on May 5, 1998; the remaining 75% of the options
vest thereafter over three years on a daily basis.

1998 Aggregated Option Exercises and Year End Option/Sar Values

The following table sets forth, with respect to the Named Executive Officers
certain information concerning the exercise of options during the nine-month
period ended December 31, 1997 and the number and value of unexercised options
held as of the end of last fiscal year:

AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
SHARES NUMBER OF SECURITIES IN-THE-MONEY
ACQUIRED ON VALUE UNDERLYING UNEXERCISED OPTIONS/SARS
NAME EXERCISE(#) REALIZED($) OPTIONS/SARS AT FY END(#) AT FY END($)(1)
---- ----------- ----------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Delbert W. Yocam........ 0 0 Exercisable 777,892 1,367,491
Unexercisable 902,108 626,259
John Floisand........... 0 0 Exercisable 0 0
Unexercisable 420,000 112,500
Richard A. LeFaivre..... 0 0 Exercisable 0 0
Unexercisable 420,000 125,000
Hobart McK. Birmingham.. 0 0 Exercisable 0 0
Unexercisable 315,000 164,062
Kathleen M. Fisher...... 0 0 Exercisable 0 0
Unexercisable 315,000 50,000
David McGlaughlin....... 0 0 Exercisable -- --
Unexercisable -- --
</TABLE>
- --------
(1) Market value of underlying securities based on the closing price of
Company's Common Stock on December 31, 1997 on the Nasdaq National Market
System of $7.3125, minus the exercise price.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

The Company and Delbert W. Yocam are parties to an at will employment
agreement (the "Agreement") pursuant to which the Company employs Mr. Yocam as
its Chairman of the Board and Chief Executive Officer through December 31,
2000. The term of the Agreement may be extended by Mr. Yocam for an additional
30 month period if he so elects between June 2, 1998 and December 2, 1998. Mr.
Yocam may elect to serve the final 12-month period solely as Chairman of the
Board, which would result in his salary and future stock option grants being
adjusted commensurate with his new duties and responsibilities. Mr. Yocam has
agreed to give not less than six months notice of his intent to resign as CEO
of the Company. In accordance with the terms of the Agreement Mr. Yocam
received a signing bonus in an amount calculated to net Mr. Yocam $2 million
after taxes, resulting in a gross payment by the Company of approximately
$3,744,184. The Agreement provides that Mr. Yocam will receive an annual base
salary of $360,000 during the term of the Agreement and an annual performance
bonus ranging from 50% to 300% of base salary. The Agreement also entitles Mr.
Yocam to all standard benefits available to other executives of the Company.
The salary, bonus and benefits elements of Mr. Yocam's compensation are
guaranteed during the term of the Agreement unless he is terminated for cause
or voluntarily terminates his employment other than for good reason or upon a
constructive termination.

22
<PAGE>

Under the Agreement and the accompanying nonstatutory stock option
agreement, Mr. Yocam was granted an option to purchase 1,100,000 shares of the
Company's Common Stock at a price of $5.50 per share. From November 14, 1996
to November 14, 1997, the option vested at the rate of 1,222 shares per day.
On November 14, 1997, an additional 275,000 shares vested. From November 15,
1997 to May 14, 1999, the option vests at the rate of 713 shares per day.
Vesting continues so long as Mr. Yocam remains an employee, officer or
director of the Company. The option becomes completely vested if Mr. Yocam is
terminated without cause, if he is constructively terminated or if he
voluntarily terminates his employment for good reason. If Mr. Yocam
voluntarily terminates his employment for any reason within six months after a
"change of control", then that number of shares which would have vested over
the 12 months following such termination of employment become vested
automatically. The Agreement defines "change of control" to include any
transaction or series of transactions (i) in which any person (excluding Mr.
Yocam or a group including Mr. Yocam) obtains beneficial ownership of ten
percent (10%) or more of the Company's outstanding voting securities or (ii)
which results in a transfer of more than 50% of the voting control of the
Company.

The Company must determine on or before September 5th of each year, the
projected total outstanding shares of the Company's Common Stock for that
fiscal year. The Company must calculate the number of nonstatutory stock
options to be granted to Mr. Yocam in order to provide him with four percent
(4%) of the projected total outstanding shares. The option price of such grant
would be the fair market value on the date of the grant and will vest on a pro
rata basis over the remaining term of the Agreement without consideration of
extensions, unless a shorter period is provided in the grant. All stock
options granted under the Agreement, and any amendment thereto, will vest
fully if Mr. Yocam's employment terminates after a change in control, as
defined above. In the event that any excise or premium federal or state tax is
charged to Mr. Yocam as a result of stock or stock option awards or vesting
which occur in response to a change in control, the Company agrees to pay such
additional compensation to Mr. Yocam in order to allow him to pay such taxes
without any loss of the full value of the stock or stock options. Mr. Yocam
was awarded 580,000 shares of Common Stock of the Company at a price of $8.875
per share under the 1992 and 1997 Stock Option Plans. The option vests at 509
shares per day, beginning November 15, 1997, with an additional 275,000 shares
vesting on November 14, 1998, until all shares are vested.

The Agreement further provided for an unsecured, interest free loan in the
amount of two million dollars paid to Mr. Yocam to assist with the purchase of
a new residence in California. The Company agreed to forgive the entire loan
balance as of February 28, 1997 and to pay all income and other tax
liabilities of Mr. Yocam associated with such forgiveness, resulting in a
gross payment by the Company of approximately $3,827,364. The agreement also
required the Company to reimburse Mr. Yocam for all moving and other
relocation expenses in connection with relocating his residence to California
and for temporary living expenses, up to a maximum of $200,000. On July 22,
1997, the Company entered into a second amendment to the Agreement (the
"Second Amendment") pursuant to which the allocation of the $200,000 was
changed such that the relocation and temporary residence benefits payable to
Mr. Yocam were reduced from $150,000 to $125,000, and his reasonable living
and travel expenses were increased from $50,000 to $75,000. It was also agreed
that Mr. Yocam would be reimbursed for living and travel expenses, up to
$100,000, if incurred during the term of his Agreement with the Company.

In March 1997, the Company entered into an at will employment agreement with
Mr. Floisand pursuant to which Mr. Floisand was appointed as Vice President,
U.S. Sales. The agreement entitles Mr. Floisand to an annual base salary of
$250,000, an annual performance bonus of 40% of base salary, a signing bonus
of $200,000, a car allowance and all standard benefits available to other
executives of the Company. Mr. Floisand was granted options to purchase
225,000 shares of the Company's Common Stock at a price of $6.8125 per share
under the 1992 Stock Option Plan.

In April 1997, the Company entered into an at will employment agreement with
Mr. LeFaivre pursuant to which Mr. LeFaivre was appointed as Vice President,
Research and Development and Chief Technology Officer. The agreement entitles
Mr. LeFaivre to an annual base salary of $250,000, an annual performance bonus
not to exceed $100,000, a sign on bonus of $125,000, and all standard benefits
available to other executives of the

23
<PAGE>

Company. Mr. LeFaivre was granted options to purchase 250,000 shares of the
Company's Common Stock at a price of $6.8125 per share under the 1992 and 1993
Stock Option Plans.

In February 1997, the Company entered into an at will employment agreement
with Mr. Birmingham pursuant to which Mr. Birmingham was appointed Vice
President and General Counsel. The agreement entitles Mr. Birmingham to an
annual base salary of $190,000, an annual performance bonus of up to 100% of
base salary, a housing allowance not to exceed $1,500 per month, and all
standard benefits available to other executives of the Company. Mr. Birmingham
was granted options to purchase 175,000 shares of the Company's Common Stock
at a price of $6.3750 per share under the 1992 Stock Option Plan.

In May 1997, the Company entered into an at will employment agreement with
Ms. Fisher pursuant to which Ms. Fisher was appointed Vice President, Finance
and Chief Financial Officer. The agreement entitles Ms. Fisher to an annual
base salary of $200,000, an annual performance bonus of $100,000, and all
standard benefits available to other executives of the Company. Ms. Fisher was
granted options to purchase 200,000 shares of the Company's Common Stock at a
price of $7.0625 per share under the 1992 Stock Option Plan.

The options granted to Messrs. Floisand, LaFaivre, and Birmingham and Ms.
Fisher are subject to the standard terms and conditions of the Company's stock
options plans, with one quarter of the options vesting one year after the date
of the grant, and the remaining options vesting daily over the following three
years. In the event that the Company is acquired or subject to change in
control, the vesting will be accelerated and the options vest in full.

In the agreements between the Company and Messrs. Floisand, LeFaivre,
Birmingham and Ms. Fisher, the term "acquisition of the Company" shall mean a
merger or other transaction in which the Company or substantially all its
assets is sold or merged and as a result of such transaction, the holders of
the Company's Common Stock prior to such transaction do not own or control a
majority of the outstanding shares of the successor corporation, and the term
"change in control" shall mean the election of nominees constituting a
majority of the Company's Board of Directors prior to such election or
acquisition by a third party of twenty percent (20%) or more of the Company's
outstanding shares which acquisition was without approval of a majority of the
Board of Directors of the Company in office prior to such acquisition.

Effective October 31, 1997, Mr. McGlaughlin resigned as Vice President,
International Sales and Operations. Pursuant to an agreement entered into in
August 1997, Mr. McGlaughlin remains employed as a non-officer Vice President
on a part time basis until October 31, 1998. The agreement entitles Mr.
McGlaughlin to an annual salary of $60,000 and such benefits as were available
to him prior to the agreement, as well as an additional $10,000 per month in
the event that his employment with the Company exceeds an agreed upon 40 hours
per month.

CERTAIN TRANSACTIONS WITH MANAGEMENT

During the nine-month period ended December 31, 1997, the Company amended
the employment agreement entered into with Mr. Yocam in November 1996. See
"Employment Contracts, Termination of Employment and Change-in-Control
Arrangements" for additional information.

During the nine-month period ended December 31, 1997, there were no other
transactions between the Company and its directors, executive officers or
known holders of more than five percent (5%) of the Company's Common Stock or
Series B Preferred Stock in which the amount involved exceed $60,000 and in
which any of the foregoing persons had or will have a material interest.

24
<PAGE>

COMPARISON OF STOCKHOLDER RETURN

The graph below compares the cumulative total stockholder return on the
Company's Common Stock from March 1992 through December 1997 compared to the
CRSP Total Return Index for Nasdaq Stock Market US Companies and the CRSP
Total Return Index for Nasdaq Computer and Data Processing Services Stocks.

The information contained in the performance graph shall not be deemed
"soliciting material" or to be "filed" with the Securities and Exchange
Commission nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
and Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference into such filing. The comparisons in
the graph below are based upon historical data and are not indicative of, nor
intended to forecast, future performance of the Company's Common Stock.

[PERFORMANCE GRAPH APPEARS HERE]

CUMULATIVE TOTAL RETURN

<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------------------
3/92 3/93 3/94 3/95 3/96 3/97 12/97
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Borland International, Inc............. BORL 100 41 27 17 34 13 14
Nasdaq Stock Market (U.S.)............. INAS 100 115 124 138 187 208 270
Nasdaq Computer & Data Processing...... INAD 100 112 114 154 219 240 316
</TABLE>

* The graph assumes that $100.00 was invested in the Company's Common Stock
and in each index on March 31, 1992. The total return for the Company's
Common Stock and the indices used assumes the reinvestment of dividends,
even though dividends have not been declared on the Company's Common Stock.

25
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the SEC and Nasdaq. Directors, executive officers,
and greater than ten percent holders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received or written
representations from certain reporting persons, the Company believes that,
during the nine-month period ended December 31, 1997, all filing requirements
under Section 16(a) applicable to its directors and executive officers were
met.

STOCKHOLDER PROPOSALS

Stockholders of the Company who wish to present proper proposals at the
Company's 1999 Annual Meeting of Stockholders must submit their proposals in
writing to the Secretary of the Company no later than December 28, 1998 and
must otherwise comply with the requirements of Rule 14a-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") in order to be included
in the proxy statement and form of proxy relating to that meeting.

OTHER MATTERS

The Board of Directors does not know of any other matters which may come
before the Annual Meeting. If any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise to act, in accordance with their best judgment on
such matters.

The Company's Annual Report for the nine-month period ended December 31,
1997 is being mailed to the Company's stockholders herewith. A copy of the
Company's Annual Report on Form 10-K Report for the nine-month period ended
December 31, 1997 as filed with the Securities and Exchange Commission, is
available upon written request to:

Investor Relations Department
Borland International, Inc.
100 Borland Way
Scotts Valley, CA 95066

The Board of Directors hopes that stockholders will attend the Annual
Meeting. Whether or not you plan to attend, you are urged to vote as soon as
possible, either by phone or by completing, signing and returning the enclosed
proxy card in the envelope provided. Stockholders who attend the Annual
Meeting may vote their shares personally even though they have sent in their
proxies.

By Order of the Board of Directors

/s/ Hobart McK. Birmingham
HOBART McK. BIRMINGHAM, Secretary

Scotts Valley, CA
April 27, 1998

26
<PAGE>

BORLAND INTERNATIONAL, INC.
100 BORLAND WAY
SCOTTS VALLEY, CA 95066

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby appoints Hobart McK. Birmingham and Kathleen M.
Fisher as proxies, each with the power to appoint a substitute, and hereby
authorizes them to represent and to vote as designated below, all the shares of
Common Stock and Series B Convertible Preferred Stock of Borland International,
Inc. held of record by the undersigned on April 10, 1998, at the Annual Meeting
of Stockholders to be held on June 5, 1998 or any adjournment thereof.

Please mark this proxy as indicated on the reverse side to vote on any
item. If you wish to vote in accordance with the Board of Directors'
recommendations, please sign the reverse side, no boxes need be checked.

(Continued and to be signed on other side)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE

YOUR VOTE IS IMPORTANT:

You can vote in one of two ways:

1. Call toll free 1-800-840-1208 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.

2. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.

PLEASE VOTE
<PAGE>

- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR each of these Please mark
proposals. This proxy when properly executed, will be voted your votes
in the manner directed herein by the undersigned stockholder. as indicated [X]
If no direction is made, this proxy will be voted FOR
Proposals 1, 2, 3, 4, 5 and 6.

WITHHELD FOR:
(Write the nominee's
FOR WITHHOLD name in the space
nominees AUTHORITY provided below).
<S> <C> <C> <C>
1. Election of Class III Directors: [_] [_] [_]
Nominees: 01 David Heller, 02 William F. Miller
and 03 Harry J. Saal

____________________________________________________________

*** IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE
INSTRUCTIONS BELOW ***

FOR AGAINST ABSTAIN
2. Approval to amend the Company's Restated Certificate of Incorporation to change [_] [_] [_]
the name of the Company to (________ _____________).

3. Approval to amend the Company's 1997 Stock Option Plan to increase the number of [_] [_] [_]
shares of Common stock reserved for issuance thereunder by 2,400,000.

4. Approval to amend the Company's 1997 Employee Stock Purchase Plan, to increase [_] [_] [_]
the number of shares of Common Stock available for purchase thereunder by 100,000.

5. Ratification of the appointment of Price Waterhouse LLP as the Company's [_] [_] [_]
independent accountants for the calendar year ending December 31, 1998.

6. To transact such other business as may properly come before the Annual Meeting or [_] [_] [_]
any adjournments or postponements thereof.
</TABLE>

Signature: _____________________________

Date: __________________________________

Signature: _____________________________

Date: __________________________________

NOTE: Please sign as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.

PLEASE SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE

VOTE BY TELEPHONE

QUICK * * * EASY * * * IMMEDIATE

Your telephone vote authorizes the named proxies to vote shares in the same
manner as if you marked, signed and returned your proxy card.

* You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.

- -------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL proposals: Press
1.
- -------------------------------------------------------------------------------

YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL

- -------------------------------------------------------------------------------
OPTION #2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
- -------------------------------------------------------------------------------

Proposal 1: To vote FOR ALL nominees, PRESS 1; to WITHHOLD FOR ALL Nominees.
press 9.

To withhold FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.

Proposal 2: To vote FOR press 1; AGAINST, press 9, ABSTAIN, press 0.

The instructions are the same for all remaining proposals.

YOUR NOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.

- -------------------------------------------------------------------------------
If you vote by telephone, there is no need for you to mail your proxy.
THANK YOU FOR VOTING.
- -------------------------------------------------------------------------------

CALL * * TOLL FREE * * ON A TOUCH TONE TELEPHONE --------------
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call. --------------
CONTROL NUMBER