ROSS SYSTEMS INC/CA, DEF 14A, 1999-10-06

ROSS SYSTEMS INC/CA
DEF 14A, 1999-10-06
PREPACKAGED SOFTWARE

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

Filed by the Registrant: [X]
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

ROSS SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)

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

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:

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

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

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 011(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:

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

(3) Filing Party:

(4) Date Filed:

(Amended by Sec Act Rel No. 7331,
Exch Act Rel No. 37692, eff. 10/7/96.)

<PAGE>

ROSS SYSTEMS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 17, 1999

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Ross
Systems, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, November 17, 1999 at 9:00 a.m., local time, at the Company's
executive offices in Atlanta, Georgia located at Two Concourse Parkway, Suite
800, Conference Room, Atlanta, Georgia, 30328, for the following purposes:

1. To elect directors. The Board of Directors intends to nominate
for re-election the five directors identified in the
accompanying Proxy Statement.

2. To ratify the appointment of Arthur Andersen, LLP as
independent auditors of the Company for the fiscal year ending
June 30, 2000.

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

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.

Only stockholders of record at the close of business on October 1,
1999 are entitled to vote at the meeting.

FOR THE BOARD OF DIRECTORS

/s/ Dennis V. Vohs
-------------------------------------
Dennis V. Vohs, CHAIRMAN OF THE BOARD

Atlanta, Georgia
October 12, 1999

IMPORTANT

TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING,
YOU MAY VOTE IN PERSON EVEN IF YOU RETURN A PROXY.

<PAGE>

ROSS SYSTEMS, INC.
TWO CONCOURSE PARKWAY
SUITE 800
ATLANTA, GEORGIA 30328

ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT

INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

The enclosed Proxy is solicited on behalf of the Board of Directors of
Ross Systems, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held Wednesday,
November 17, 1999 at 9:00 a.m., local time, or at any and all continuation(s)
and adjournment(s) thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Company's executive offices in Atlanta, Georgia located at Two
Concourse Parkway, Suite 800, Conference Room, Atlanta, Georgia 30328. The
telephone number at that location is (770) 351-9600.

These proxy solicitation materials were mailed on or about October 12,
1999 to all stockholders entitled to vote at the Annual Meeting.

PURPOSES OF THE ANNUAL MEETING

The purposes of the Annual Meeting are to: (1) elect five directors to
serve for the ensuing year and until their successors are duly qualified and
elected; (2) ratify the appointment of Arthur Andersen, LLP as the Company's
independent accountants for the 2000 fiscal year; and (3) transact such other
business as may properly come before the meeting and any and all continuations
and adjournments thereof.

RECORD DATE, VOTING SECURITIES AND SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND
MANAGEMENT

Only stockholders of record at the close of business on October 1, 1999
(the "Record Date") are entitled to receive notice and vote at the Annual
Meeting. At the Record Date, 23,334,992 shares of the Company's Common Stock
were issued and outstanding and held of record by 423 registered stockholders.
The closing price of the Company's Common Stock on the Record Date, as reported
by the NASDAQ National Market, was $2.719 per share.

The following table sets forth the beneficial ownership of Common Stock
of the Company as of September 10, 1999 by (a) each director, (b) each of the
executive officers identified in the Summary Compensation Table and, (c) all
directors and executive officers as a group. There are no persons known to the
Company who beneficially own 5% or more of the shares outstanding on September
10, 1999. Under the rules of the United States Securities and Exchange
Commission (the "SEC"), beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the right to acquire within 60 days of September
10, 1999 through the exercise of any stock option.

<PAGE>

SHARES OPTIONS EXERCISABLE APPROXIMATE
BENEFICIALLY WITHIN 60 DAYS OF PERCENT
NAME OF BENEFICIAL OWNERS OWNED(1) SEPTEMBER 10, 1999(2) OWNED
- ------------------------- -------- --------------------- -----

<S> <C> <C> <C>
Dennis V. Vohs........................................................ 745,950 278,854 3.2%
J. Patrick Tinley..................................................... 243,669 153,169 1.0%
Oscar Pierre Prats.................................................... 208,388 13,500 *
Joseph L. Southworth.................................................. 100,298 84,248 *
Robert B. Webster..................................................... 79,871 21,750 *
Donald F. Campbell.................................................... 58,825 55,125 *
Peter D. Van Houten................................................... 55,988 34,125 *
Eric W. Musser........................................................ 31,811 21,375 *
J. William Goodhew, III............................................... 30,500 10,500 *
Mario M. Rosati....................................................... 20,000 20,000 *
Bruce J. Ryan......................................................... 20,000 20,000 *
Verome M. Johnston.................................................... 7,500 2,500 *
Malcolm C. Marais..................................................... 4,500 4,500 *
All officers and directors as a group
(13 persons) 1,607,300 719,646 6.9%
</TABLE>

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

* Less than 1%.

(1) The table is based upon information supplied by executive officers,
directors and principal stockholders. Unless otherwise indicated, each
of the stockholders named in the table has sole voting investment
and/or dispositive power with respect to all shares of Common Stock
shown as beneficially owned, subject to community property laws where
applicable and to the information contained in the footnotes to this
table.

(2) These options are included in the Shares Beneficially Owned.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Corporate
Secretary of the Company a written notice of revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.

VOTING; QUORUM; ABSTENTIONS AND BROKER NON-VOTES

Each stockholder is entitled to one vote for each share held as of the
Record Date. Stockholders will not be entitled to cumulate their votes in the
election of directors (Proposal One). A plurality of the Votes Cast (see
definition below) at the Annual Meeting is required for the election of
directors (Proposal One). For all other proposals, the affirmative vote of the
majority of the Votes Cast at the Annual Meeting is required for approval.

The required quorum for the transaction of business at the Annual
Meeting is a majority of the shares of Common Stock issued and outstanding on
the Record Date and entitled to vote at the Annual Meeting, present in person or
represented by proxy. Shares that are voted "FOR," "AGAINST" or "ABSTAIN" from a
matter are treated as being present at the Annual Meeting for purposes of
establishing a quorum and are also treated as votes eligible to be cast by the
Common Stock, present in person or represented by proxy, at the Annual Meeting
and "entitled to vote on the subject matter" (the "Votes Cast") with respect to
such matter. If a quorum is not present or represented, then either the chairman
of the Annual Meeting or the stockholders entitled to vote at the Annual
Meeting, present in person or represented by proxy, will have the power to
adjourn the Annual Meeting from time to time, without notice other than an
announcement at the Annual Meeting, until a quorum is present. At any adjourned
Annual Meeting at which a quorum is present, any business may be transacted that
might have been transacted at the Annual Meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned Annual Meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned Annual Meeting.

2
<PAGE>

Although there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both the presence or
absence of a quorum for the transaction of business and the total number of
Votes Cast with respect to a particular matter. Therefore, in the absence of
controlling precedent to the contrary, the Company intends to treat abstentions
in this manner.

Broker non-votes, however, shall be treated differently. In a 1988
Delaware case, BERLIN V. EMERALD PARTNERS, the Delaware Supreme Court held that,
while broker non-votes may be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, broker non-votes should
not be counted for purposes of determining the number of Votes Cast with respect
to the particular proposal on which the broker has expressly not voted.
Consequently, broker non-votes with respect to proposals set forth in this Proxy
Statement will not be considered Votes Cast and, accordingly, will not affect
the determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.

Therefore, for purposes of the election of directors (Proposal One),
neither abstentions nor broker non-votes will have any effect on the outcome of
the vote. For all other proposals, abstentions will have the same effect as
votes against these proposals and broker non-votes will not have any effect on
the outcome of the vote.

PROXIES IN THE ACCOMPANYING FORM THAT ARE PROPERLY EXECUTED AND
RETURNED WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE INSTRUCTIONS
ON THE PROXY. ANY PROPERLY EXECUTED PROXY ON WHICH THERE ARE NO INSTRUCTIONS
INDICATED ABOUT A SPECIFIED PROPOSAL WILL BE VOTED AS FOLLOWS: (I) FOR THE
ELECTION OF THE FIVE PERSONS NAMED IN THIS PROXY STATEMENT AS THE BOARD OF
DIRECTORS' NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS AND; (II) FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE 2000 FISCAL YEAR. NO BUSINESS OTHER THAN THAT SET FORTH
IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS IS EXPECTED TO COME
BEFORE THE ANNUAL MEETING. SHOULD ANY OTHER MATTER REQUIRING A VOTE OF
STOCKHOLDERS PROPERLY ARISE, THE PERSONS NAMED IN THE PROXY WILL VOTE THE SHARES
THEY REPRESENT AS THE BOARD OF DIRECTORS MAY RECOMMEND. THE PERSONS NAMED IN THE
PROXY MAY ALSO, AT THEIR DISCRETION, VOTE THE PROXY TO ADJOURN THE ANNUAL
MEETING FROM TIME TO TIME.

SOLICITATION

The cost of soliciting proxies will be borne by the Company. The
Company may retain Kissel- Blake, Inc., a proxy solicitation firm, to solicit
proxies in connection with the Annual Meeting at an estimated cost of $10,000.
In addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, facsimile or telegram.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING

Stockholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the proxy roles
promulgated by the SEC. Proposals of stockholders of the Company that are
intended to be presented by such stockholders at the Company's 2000 Annual
Meeting must be received by the Company no later than June 14, 2000 in order
that they may be considered for inclusion in the proxy statement and form of
proxy relating to that meeting. The attached proxy card grants the proxy holders
discretionary authority to vote on any matter properly raised at the Annual
Meeting. If a stockholder intends to submit a proposal at the 2000 Annual
Meeting, which is not eligible for inclusion in the proxy statement and form of
proxy relating to that meeting, the stockholder must do so no later than August
27, 2000. If such stockholder fails to comply with the foregoing notice
provision, the proxy holders will be allowed to use their discretionary voting
authority when the proposal is raised at the 2000 Annual Meeting.

3
<PAGE>

PROPOSAL NO. 1

ELECTION OF DIRECTORS

NOMINEES

A board of five directors has been nominated for election at the Annual
Meeting. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for management's five nominees named below, all of who are
presently directors of the Company. In the event that any nominee of the Company
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them to assure the election of as many of the
nominees listed below as possible. In such event, the specific nominees to be
voted for will be determined by the proxy holders. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected.

PRINCIPAL DIRECTOR
NAME OF NOMINEE AGE OCCUPATION SINCE
- --------------- --- ---------- -----

<S> <C> <C>
Dennis V. Vohs............... 55 Chairman of the Board and Chief Executive Officer of the Company 1988
J. William Goodhew, III...... 61 Vice President of Intelligent Systems Corporation 1997
Mario M. Rosati.............. 53 Attorney, Wilson, Sonsini, Goodrich & Rosati, P.C. 1993
Bruce J. Ryan................ 56 Executive Vice President Finance and Administration of Global Knowledge 1992
Network, Inc.
J. Patrick Tinley............ 51 President and Chief Operating Officer of the Company 1993
</TABLE>

There are no family relationships among any directors or executive
officers of the Company.

Mr. Vohs has served as Chairman of the Board and Chief Executive
Officer of the Company since November 1988. Prior to joining the Company, Mr.
Vohs held various executive positions with Management Science America, Inc., a
software company, over an 18-year period. Prior to that, he held various
technical positions at IBM. Mr. Vohs holds a BA in Industrial Engineering from
The Georgia Institute of Technology.

Mr. Goodhew joined Intelligent Systems Corporation, a publicly traded
technology product and services company, as Vice President in January 1997.
Prior to that, Mr. Goodhew was President of Peachtree Software, Inc., a
privately held software company, from 1984 to 1994. In 1994, Peachtree Software
was purchased by Automatic Data Processing, Inc., a publicly traded company
providing computerized services. Mr. Goodhew remained at Peachtree Software,
Inc. in a managerial capacity until joining Intelligent Systems Corporation. Mr.
Goodhew serves on the Board of Directors of Navision A. S., a Danish software
company, and is the Chairman of its subsidiary Navision U.S.

Mr. Rosati has been an attorney with law firm Wilson Sonsini Goodrich &
Rosati, Professional Corporation, since 1971. Mr. Rosati is a director of Aehr
Test Systems, Inc., Genus, Inc., Sanmina Corporation, and Vivus Inc., all
publicly traded companies, and several privately held companies. Mr. Rosati
holds a BA in history from University of California, Los Angeles and a JD from
Boalt Hall at the University of California, Berkeley.

Mr. Ryan has served as Executive Vice President, Finance and
Administration of Global Knowledge Network, Inc., an independent information
technology education company, since February 1998. Mr. Ryan was Executive Vice
President and Chief Financial Officer of Amdahl Corporation, a computer
solutions company. Mr. Ryan holds a BA in Business Administration from Boston
College and an MBA from Suffolk University.

Mr. Tinley joined the Company in November 1988 as Executive Vice
President, Business Development and has served as Executive Vice President,
Product Development and Executive Vice President, Product Development Client
Services. Mr. Tinley was promoted to President and Chief Operating Officer in
1995 and has been a director of the Company since 1993. Prior to 1988, Mr.
Tinley held management positions with Management Science of America, Inc., a
software company and Royal Crown Companies.

4
<PAGE>

BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company held a total of 6 meetings during
the fiscal year ended June 30, 1999. During fiscal 1999, each director attended
at least 80% of the aggregate of (i) the total number of meetings of the Board
of Directors and (ii) the total number of meetings held by all committees of the
Board of Directors on which such person served. The Board of Directors has an
Audit Committee, a Compensation Committee and a Stock Option Committee. It does
not have a nominating committee or a committee performing the functions of a
nominating committee.

During the year ended June 30, 1999, the Audit Committee of the Board
consisted of directors Rosati, Ryan and Goodhew and held 2 meetings during the
fiscal year ended June 30, 1999. Following the Annual Meeting, the Board intends
to re-appoint directors Rosati, Ryan and Goodhew, with director Ryan as
Committee Chairman. The Audit Committee recommends engagement of the Company's
independent auditors, and is primarily responsible for approving the services
performed by the Company's independent auditors and for reviewing and evaluating
the Company's accounting principles and its system of internal accounting
controls.

During the year ended June 30, 1999, the Compensation Committee of the
Board consisted of directors Rosati, Ryan and Goodhew and held 1 meeting during
the fiscal year ended June 30, 1999. Following the Annual Meeting, the Board
intends to re-appoint directors Rosati, Ryan and Goodhew, with director Goodhew
as Committee Chairman. The Compensation Committee makes recommendations to the
Board regarding the Company's executive compensation policy.

During the year ended June 30, 1999, the Stock Option Committee
consisted of directors Rosati, Ryan and Goodhew. The Board of Directors executed
the responsibilities of the Stock Option Committee during the year ended June
30, 1999. The Stock Option Committee did not hold any meetings during the fiscal
year ended June 30, 1999. Following the Annual Meeting, the Board intends to
re-appoint directors Rosati, Ryan and Goodhew, with director Rosati as Committee
Chairman. The Stock Option Committee grants stock options and administers the
1998 Incentive Stock Option Plan.

COMPENSATION OF DIRECTORS

For the fiscal year ended June 30, 1999, directors were compensated
$2,000 for each Board of Directors meeting attended and $1,000 for participating
in any telephonic Board of Directors meetings which were not regularly
scheduled. In addition, directors are reimbursed for travel expenses incurred in
connection with attending Board of Directors meetings.

Annually, each non-employee director is automatically granted 4,000
stock options to purchase shares of the Company's Common Stock pursuant to the
terms of the 1998 Incentive Stock Option Plan (the "Stock Plan"). Options
granted to non-employee Directors under the Stock Plan are not intended by the
Company to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). Pursuant to the
Stock Plan, on the Annual Meeting date, each non-employee director who is
elected or re-elected at the meeting is granted an option to purchase 4,000
shares of Common Stock. In addition, any non-employee director newly elected to
the Board of Directors receives an option for 10,000 shares of Company Common
Stock. The 10,000-share option vests 25% a year over four years and the 4,000
share options are fully vested on the dates of grant. The price of all options
granted is equal to the closing price of the Company's Common Stock, as quoted
on the NASDAQ National Market, on the date of grant. During fiscal 1999, outside
directors were granted a total of 12,000 stock options at an exercise price of
$3.500.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF DENNIS V. VOHS, MARIO M. ROSATI, BRUCE J. RYAN, J. PATRICK TINLEY
AND J. WILLIAM GOODHEW, III AS DIRECTORS.

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board has selected Arthur Andersen, LLP, independent auditors, to
audit the consolidated financial statements of the Company for the year ending
June 30, 2000. For the year ended June 30, 1999, Arthur Andersen, LLP audited
the Company's North American and European financial statements. Representatives
of Arthur Andersen, LLP are expected to be present at the Annual Meeting with
the opportunity to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPOINTMENT OF ARTHUR ANDERSEN, LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING JUNE 30, 2000.

5
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain information regarding
compensation earned during each of the Company's last three fiscal years by the
Company's Chief Executive Officer, and each of the Company's four other most
highly compensated executive officers, based on salary and bonus earned during
fiscal 1999 (the "Named Executive Officers").

LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
FISCAL COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(3) SARS (#)(1) ($)(2)
- --------------------------- ---- --------- -------- ------ ----------- ------

<S> <C> <C> <C> <C> <C> <C>
Dennis V. Vohs............ 1999 $354,000 $67,511 (4) $10,800 50,000 $1,720
Chairman of the Board 1998 337,570 31,255 10,800 75,000 1,936
and CEO 1997 312,550 - 10,800 50,000 1,936
J. Patrick Tinley......... 1999 $252,875 $46,656 (5) $10,400 50,000 $1,720
President and COO 1998 233,282 31,600 10,400 75,000 1,936
1997 215,998 10,000 10,400 50,000 2,121
Joseph L. Southworth...... 1999 $188,417 $5,000 (6) $10,400 20,000 $1,720
VP, E-Commerce 1998 175,000 32,500 10,400 15,000 1,936
1997 174,999 20,750 10,400 20,000 1,936
Donald F. Campbell........ 1999 $163,625 $5,000 (7) $10,400 20,000 $1,720
VP, Marketing 1998 155,037 19,000 10,000 15,000 1,936
1997 149,999 15,000 10,000 10,000 2,355
Peter D. Van Houten....... 1999 $154,105 $108,725 (8) $10,000 20,000 $1720
VP, Sales North America 1998 145,000 122,544 10,000 15,000 1,886
1997 140,000 140,000 51,623 30,000 1,886
</TABLE>

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

(1) The Company has not granted any stock appreciation rights (SARs).

(2) Represents amounts contributed to the Company's 401(k) plan, on behalf
of the officer by the Company and premiums paid by the Company on
behalf of the officer for term life insurance.

(3) The amounts included in Other Annual Compensation include auto
allowance and relocation reimbursements.

(4) Represents a bonus in the amount of $67,511 earned in fiscal 1998 and
paid in fiscal 1999.

(5) Represents a bonus in the amount of $46,656 earned in fiscal 1998 and
paid in fiscal 1999.

(6) Represents a bonus in the amount of $5,000 earned and paid in fiscal
1999.

(7) Represents a bonus in the amount of $5,000 earned and paid in fiscal
1999. In addition, an award was granted in the amount of $13,800 earned
in fiscal 1999 to be paid in fiscal 2000.

(8) Represents a bonus in the amount of $108,725 earned in fiscal 1998 and
paid in fiscal 1999. In addition, an award was granted in the amount of
$4,579 earned in fiscal 1999 to be paid in fiscal 2000.

6
<PAGE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table describes the grant of options to the Named
Executive Officers during fiscal 1999.

INDIVIDUAL GRANTS IN FISCAL 1999 POTENTIAL REALIZABLE
-------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES
SECURITIES PERCENT OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR OPTION
OPTIONS/SARS GRANTED TO TERM(4)
GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION -------
NAME (#)(1)(2) FISCAL YEAR ($/SH) (3) DATE 5% 10%
- ---- --------- ----------- ---------- ---- -- ---

<S> <C> <C> <C> <C> <C> <C>
Dennis V. Vohs............... 50,000 2.9% $2.8130 10/23/08 $88,454.03 $224,159.88
28,196 * 1.6% 2.5940 4/23/08 43,523.39 108,946.94
29,605 * 1.7% 2.5940 8/29/04 25,719.60 58,225.97
11,037 * .6% 2.5940 8/29/04 9,588.49 21,707.15
31,500 * 1.8% 2.5940 8/29/04 27,365.90 61,952.98
180 * .01% 2.5940 8/29/04 156.38 354.02
44,145 * 2.6% 2.5940 8/29/04 38,351.35 86,822.68
43,009 * 2.5% 2.5940 8/29/04 37,364.44 84,588.44
23,798 * 1.4% 2.5940 9/7/05 24,887.64 57,908.35
21,203 * 1.2% 2.5940 9/7/05 22,173.82 51,593.87
17,387 * 1.0% 2.5940 8/22/06 21,205.38 50,648.42
27,614 * 1.6% 2.5940 8/22/06 33,678.34 80,439.72
39,305 * 2.3% 2.5940 4/23/08 60,671.26 151,871.16
J. Patrick Tinley............ 50,000 2.9% 2.8130 10/23/08 88,454.03 224,159.88
2,499 * .1% 2.5940 8/29/04 2,171.03 4,914.94
16,875 * 1% 2.5940 8/29/04 14,660.30 33,189.10
9,198 * .5% 2.5940 8/29/04 7,990.84 18,090.27
10,800 * .6% 2.5940 8/29/04 9,382.59 21,241.02
46 * .0027% 2.5940 7/1/03 31.17 68.43
5,625 * .3% 2.5940 8/17/04 4,855.55 10,982.77
32,875 * 1.9% 2.5940 9/28/08 53,630.72 135,910.77
12,126 * .7% 2.5940 7/28/05 12,439.98 28,857.37
45,000 * 2.6% 2.5940 9/28/08 73,410.87 186,037.56
39,305 * 2.3% 2.5940 9/28/08 64,120.32 162,493.47
28,196 * 1.6% 2.5940 4/23/08 43,523.39 108,946.94
Joseph L. Southworth......... 20,000 1.2% 3.8130 12/21/08 47,959.50 121,538.80
1,273 * .1% 2.5940 9/28/98 2,076.71 5,262.80
36,000 * 2.1% 2.5940 9/28/08 58,728.70 148,830.05
19,546 * 1.1% 2.5940 8/29/04 16,980.76 38,442.32
4,599 * .3% 2.5940 9/28/08 7,502.59 19,013.04
4,500 * .3% 2.5940 9/28/08 7,341.09 18,603.76
2,955 * .2% 2.5940 8/29/04 2,567.18 5,811.78
18,000 * 1.0% 2.5940 9/28/08 29,364.35 74,415.02
13,500 * .8% 2.5940 11/19/07 19,685.89 48,682.83
Donald F. Campbell........... 20,000 1.2% 3.8130 12/21/08 47,959.50 121,538.80
13,500 * .8% 2.5940 9/28/08 22,023.26 55,811.27
9,000 * .5% 2.5940 9/28/08 14,682.17 37,207.51
18,000 * 1.0% 2.5940 9/28/08 29,364.35 74,415.02
27,000 * 1.6% 2.5940 9/28/08 44,046.52 111,622.53
Peter D. Van Houten.......... 20,000 1.2% 3.8130 12/21/08 47,959.50 121,538.80
13,500 * .8% 2.5940 11/19/07 19,685.89 48,682.83
27,000 * 1.6% 2.5940 8/22/06 32,929.50 78,651.14
9,000 * .5% 2.5940 7/28/05 9,233.04 21,418.13
450 * .03% 2.5940 8/29/04 390.94 885.04
450 * .03% 2.5940 8/29/04 390.94 885.04
225 * .01% 2.5940 8/29/04 195.47 442.52
900 * .05% 2.5940 8/29/04 781.88 1,770.09
</TABLE>

<PAGE>

- -----------
* Represents options that were repriced by the Company in September 1998. The
share amounts were reduced by ten percent from the amount subject to the
original option. The vesting schedules remained the same as the original option.

(1) The Company has not granted any SARs

(2) Based on an aggregate of 1,722,954 options granted to all employees
during fiscal year 1999, including 1,337,654 options that were repriced
and 385,300 new option awards. Options granted in fiscal year 1999
expire in 2008 or 2009 and typically vest annually over four years from
the date of grant.

(3) All options were granted at an exercise price equal to the fair market
value based on the closing market value of Common Stock on the Nasdaq
National Market on the date of grant with the exception of those
options that were repriced as disclosed.

(4) Amounts reported in these columns represent amounts that may be
realized upon exercise of the options immediately prior to the
expiration of their terms assuming the specified compounded rates of
appreciation on the Company's Common Stock over the terms of the
options. These numbers are calculated based on SEC rules and do not
reflect the Company's estimate of future stock price appreciation.
Actual gains, if any are dependent on the timing of option exercises
and the future performance of the Company's Common Stock. There can be
no assurances that the rates of appreciation assumed in this table can
be achieved or that the individuals will realize the amounts reflected.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

The following table provides information related to options exercised
by the Named Executive Officers during fiscal 1999 and the number and value of
options held at June 30, 1999. The Company has not granted any SARs.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON REALIZED JUNE 30, 1999 JUNE 30, 1999(2)
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------ ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Dennis V. Vohs............... - $- 238,228 128,751 $0.00 $0.00
J. Patrick Tinley............ - - 118,169 134,376 0.00 0.00
Joseph L. Southworth......... 9,000 10,125 79,748 41,625 0.00 0.00
Donald F. Campbell........... - - 48,375 39,125 0.00 0.00
Peter D. Van Houten.......... 15,525 17,465 25,125 50,875 0.00 0.00
</TABLE>

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

(1) Based upon the fair market value of one share of the Company's Common
Stock on the date the option was exercised, less the exercise price per
share multiplied by the number of shares received upon exercise of the
option.

(2) Value is based on the difference between the option exercise price and
the fair market value at June 30, 1999 ($2.500 per share) multiplied by
the number of shares underlying the option.

8
<PAGE>

10-YEAR STOCK OPTION REPRICING

The following table sets forth certain information regarding the
participation of any executive officer in the Company's repricing of stock
options for the previous 10 fiscal years.

NUMBER OF LENGTH OF ORIGINAL
SECURITIES OPTION TERM
UNDERLYING MARKET PRICE OF EXERCISE PRICE REMAINING AT DATE
OPTIONS/SARS STOCK AT TIME OF AT TIME OF NEW OF REPRICING OR
REPRICING REPRICED OR REPRICING OR REPRICING OR EXERCISE AMENDMENT
NAME AND TITLE DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) (IN YEARS)
-------------- ---- ----------- ------------- ------------- --------- ----------

<S> <C> <C> <C> <C> <C> <C>
Donald F. Campbell............. 9/28/98 27,000 $2.5940 $5.2500 $2.5940 6.2
VP, Marketing 9/28/98 18,000 $2.5940 $6.3750 $2.5940 6.8
9/28/98 9,000 $2.5940 $5.5000 $2.5940 7.9
9/28/98 13,500 $2.5940 $3.8750 $2.5940 9.1

Verome M. Johnston............. 9/28/98 10,000 $2.5940 $4.4380 $2.5940 9.9
VP, Controller

Malcolm C. Marais.............. 9/28/98 4,500 $2.5940 $3.8750 $2.5940 8.9
VP, Services North America 9/28/98 9,000 $2.5940 $5.0630 $2.5940 9.6

Eric W. Musser................. 9/28/98 50 $2.5940 $3.6250 $2.5940 5.9
VP, Development 9/28/98 950 $2.5940 $5.2500 $2.5940 6.2
9/28/98 1,200 $2.5940 $4.1250 $2.5940 6.6
9/28/98 6,300 $2.5940 $4.1250 $2.5940 6.6
9/28/98 10,000 $2.5940 $5.5000 $2.5940 7.9
9/28/98 2,000 $2.5940 $3.8125 $2.5940 8.6
9/28/98 3,000 $2.5940 $3.8750 $2.5940 8.9
9/28/98 6,500 $2.5940 $3.8750 $2.5940 9.1
9/28/98 5,000 $2.5940 $4.4380 $2.5940 9.9

Oscar Pierre Prats............. 9/28/98 18,000 $2.5940 $5.0630 $2.5940 6.6
VP, Spain 9/28/98 18,000 $2.5940 $6.5000 $2.5940 8.3

Joseph L. Southworth........... 8/29/94 1,414 $3.6250 $5.2600 $3.6250 1.5
VP, E-Commerce 8/29/94 5,109 $3.6250 $5.2600 $3.6250 1.5
8/29/94 5,000 $3.6250 $6.4000 $3.6250 2.0
8/29/94 40,000 $3.6250 $7.2500 $3.6250 3.4
8/29/94 21,717 $3.6250 $8.7500 $3.6250 4.5
9/28/98 1,273 $2.5940 $3.6250 $2.5940 5.9
9/28/98 36,000 $2.5940 $3.6250 $2.5940 5.9
9/28/98 19,546 $2.5940 $3.6250 $2.5940 5.9
9/28/98 4,599 $2.5940 $3.6250 $2.5940 5.9
9/28/98 4,500 $2.5940 $3.6250 $2.5940 5.9
9/28/98 2,955 $2.5940 $3.6250 $2.5940 5.9
9/28/98 18,000 $2.5940 $5.5000 $2.5940 7.9
9/28/98 13,500 $2.5940 $3.8750 $2.5940 9.1
</TABLE>

9
<PAGE>

<S> <C> <C> <C> <C> <C> <C>
J. Patrick Tinley.............. 8/29/94 2,776 $3.6250 $5.2600 $3.6250 1.5
President, COO 8/29/94 10,219 $3.6250 $5.2600 $3.6250 1.5
8/29/94 12,000 $3.6250 $6.4000 $3.6250 2.0
8/29/94 40,000 $3.6250 $7.2500 $3.6250 3.4
8/29/94 18,750 $3.6250 $8.7500 $3.6250 4.5
9/28/98 2,499 $2.5940 $3.6250 $2.5940 5.9
9/28/98 16,875 $2.5940 $3.6250 $2.5940 5.9
9/28/98 9,198 $2.5940 $3.6250 $2.5940 5.9
9/28/98 10,800 $2.5940 $3.6250 $2.5940 5.9
9/28/98 46 $2.5940 $3.6250 $2.5940 5.9
9/28/98 5,625 $2.5940 $3.6250 $2.5940 5.9
9/28/98 32,875 $2.5940 $6.3750 $2.5940 6.8
9/28/98 12,126 $2.5940 $6.3750 $2.5940 6.8
9/28/98 45,000 $2.5940 $5.5000 $2.5940 7.9
9/28/98 39,305 $2.5940 $5.0630 $2.5940 9.6
9/28/98 28,196 $2.5940 $5.0630 $2.5940 9.6

Peter D. Van Houten............ 8/29/94 250 $3.6250 $5.2600 $3.6250 1.5
VP, Sales North America 8/29/94 500 $3.6250 $10.0000 $3.6250 2.4
8/29/94 500 $3.6250 $10.5000 $3.6250 2.7
8/29/94 1,000 $3.6250 $5.1250 $3.6250 9.4
9/28/98 225 $2.5940 $3.6250 $2.5940 5.9
9/28/98 450 $2.5940 $3.6250 $2.5940 5.9
9/28/98 450 $2.5940 $3.6250 $2.5940 5.9
9/28/98 900 $2.5940 $3.6250 $2.5940 5.9
9/28/98 9,000 $2.5940 $6.3750 $2.5940 6.8
9/28/98 27,000 $2.5940 $5.5000 $2.5940 7.9
9/28/98 13,500 $2.5940 $3.8750 $2.5940 9.1

Dennis V. Vohs................. 8/29/94 8,281 $3.6250 $5.2600 $3.6250 1.5
Chairman, CEO 8/29/94 12,263 $3.6250 $5.2600 $3.6250 1.5
8/29/94 35,000 $3.6250 $6.4000 $3.6250 2.0
8/29/94 52,213 $3.6250 $7.2500 $3.6250 3.4
9/28/98 29,605 $2.5940 $3.6250 $2.5940 5.9
9/28/98 11,037 $2.5940 $3.6250 $2.5940 5.9
9/28/98 31,500 $2.5940 $3.6250 $2.5940 5.9
9/28/98 180 $2.5940 $3.6250 $2.5940 5.9
9/28/98 44,145 $2.5940 $3.6250 $2.5940 5.9
9/28/98 43,009 $2.5940 $3.6250 $2.5940 5.9
9/28/98 23,798 $2.5940 $6.5000 $2.5940 6.9
9/28/98 21,203 $2.5940 $6.5000 $2.5940 6.9
9/28/98 17,387 $2.5940 $5.5000 $2.5940 7.9
9/28/98 27,614 $2.5940 $5.5000 $2.5940 7.9
9/28/98 39,305 $2.5940 $5.0630 $2.5940 9.6
9/28/98 28,196 $2.5940 $5.0630 $2.5940 9.6
</TABLE>

<PAGE>

NUMBER OF LENGTH OF ORIGINAL
SECURITIES MARKET PRICE OPTION TERM
UNDERLYING OF STOCK AT REMAINING AT DATE
OPTIONS/SARS TIME OF EXERCISE PRICE AT NEW OF REPRICING OR
REPRICING REPRICED OR REPRICING OR TIME OF REPRICING EXERCISE AMENDMENT
NAME AND TITLE DATE AMENDED (#) AMENDMENT ($) OR AMENDMENT ($) PRICE ($) (IN YEARS)
-------------- ---- ----------- ------------- ------------- --------- ----------

<S> <C> <C> <C> <C> <C> <C>
Robert B. Webster.............. 9/28/98 9,000 $2.5940 $4.6250 $2.5940 9.7
VP, CFO 9/28/98 36,000 $2.5940 $4.6250 $2.5940 9.7

Michael O. Hunt (1)............ 8/29/94 40,000 $3.6250 $5.1250 $3.6250 6.4
Former President,
International Operations

John B. Koontz (1)............. 8/29/94 5,000 $3.6250 $10.7500 $3.6250 4.2
Former Sr. VP, NA Sales 8/29/94 8,500 $3.6250 $5.1250 $3.6250 9.4

Selby F. Little, III (1)....... 8/29/94 40,000 $3.6250 $5.1250 $3.6250 3.7
Former VP, CFO, Secretary 8/29/94 20,000 $3.6250 $8.7500 $3.6250 4.5
</TABLE>

(1) All options to these individuals were canceled within 30 days of
their termination of employment with the Company.

11
<PAGE>

REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS

OPTION REPRICING; CHANGE OF CONTROL

On September 18, 1998, the Company's Board of Directors approved an
adjustment to the exercise price for outstanding stock options held by then
current employees of the Company, which have an exercise price per share of
$3.00 and above. As consideration for the repricing, officers of the Company
participating in the option repricing were required to forfeit 10% of the shares
subject to each option being repriced, while non-officer employees are subject
to a one year exercise black out period on repriced options. The revised
exercise price was established by reference to the closing price of the
Company's Common Stock on September 28, 1998, $2.594 per share.

The offer to reprice options was extended only to then current
employees of the Company. The offer was not extended to options held by
consultants or non-employee directors. Each repriced option has terms
substantially similar to the original option except that in the case of repriced
options held by officers, the number of shares subject to the options was
reduced by 10% and in the case of repriced options held by non-officer
employees, such options cannot be exercised until September 28, 1999, with
certain hardship exceptions in the case of the exercise blackout.

In approving the option repricing, the Board relied in part upon the
views of its outside advisors with respect to the legal, accounting and
compensation issues associated with the action and took into consideration,
among other things, the following factors: (i) the Company historically has both
salary and total compensation packages which were at or below its competitors
market levels and has remained competitive through stock option grants to
employees; (ii) the Company historically has used stock options as its principle
long term incentive investment program; (iii) the employees of the Company
possess marketable skills; and (iv) senior management of the Company believed
that there was potential for increased attrition among its key employees and
that the repricing would significantly help to mitigate such risk. In addition
the Company desires to increase the employee investment stake in the Company and
considered that factor in placing minimal restriction on their ability to
participate in the repricing.

On September 18, 1998, the Company's Board of Directors also approved
an amendment to the 1998 Incentive Stock Plan and amendments to the options
previously granted under the Company's 1988 Incentive Stock Plan to provide for
accelerated vesting and exercisability of 100% of such options (and in the case
of the 1998 Incentive Stock Plan, options granted in the future) in the event of
a change of control of the Company. The Board defined a "change of control" as
the occurrence of any of the following events: (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing 50%
or more of the total voting power represented by the Company's then outstanding
voting securities; or (ii) a change in the composition of the Board of Directors
of the Company as a result of which fewer than a majority of the directors are
"Incumbent Directors." The Board defined "Incumbent Directors" to mean directors
who either (A) are directors of the Company as of September 18, 1998, or (B) are
elected, or nominated for election, to the Board of Directors with the
affirmative votes (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for election
as a director without objection to such nomination) of at least three-quarters
of the Incumbent Directors at the time of such election or nomination.

The Compensation Committee and the Stock Option Committee of the Board
is comprised of three outside directors of the Company, J. William Goodhew, III,
Mario M. Rosati and Bruce J. Ryan. Together these committees are responsible for
recommending to the Board the overall compensation plans which govern the
compensation of the key executive officers, including the Chief Executive
Officer and President, of the Company.

The Company's executive pay programs are designed to provide a strong
and direct link between Company performance and executive compensation. The
Company believes that, in order to attract and retain the most qualified
executives in the industry, its compensation policies must be competitive with
companies in a similar business and of similar size. Accordingly, executive
compensation is based on Company and individual performance in relation to
annual goals for the executive and the Company. The annual goals set for the
executive are based on revenue growth, profitability and cash flow, as
appropriate for the executive's responsibilities. Executives are provided with a
combination of one or more of the following types of compensation: salary,
profit sharing and annual bonus, and long-term incentives.

12
<PAGE>

SALARY: All executive officers (other than the Chief Executive Officer and
President) are provided with a fixed annual salary that is reviewed on an annual
basis by the Compensation Committee and the Chief Executive Officer. Salary and
increases in salary are determined partially by comparison of the executive's
salary to salaries for similar positions at comparable companies, the
executive's annual performance review, the value of contributions made by the
executive and the executive's and the Company's performance in relation to goals
established at the beginning of the period.

In addition to considering the above factors when setting compensation
increases, the Compensation Committee also considers the overall financial
health of the Company. In years where corporate performance does not equal or
exceed Company expectations, executive salary increases for the coming fiscal
year may be either reduced or eliminated altogether.

PROFIT SHARING AND ANNUAL BONUS: As an incentive to help the Company meet
annual goals and become more profitable, all executive officers have a profit
sharing component included in their compensation plans. The executive can earn
profit sharing if the Company and the executive's organization meet or exceed
annual goals for profitability, revenue growth and cash flow. Generally,
executive compensation plans are structured so those higher level executives
have a larger portion of their total compensation based on profit sharing. The
determination of profit sharing is based on a formula in the executive's
compensation plan, which is approved annually by the Compensation Committee. The
Company believes that linking executive compensation to Company profitability
aligns the overall interests of the stockholders with those of the executive. No
profit sharing has been paid for the last three fiscal years.

The Company motivates its executives to make contributions of
outstanding value by providing them the opportunity to earn an annual bonus.
These bonuses, if paid, can represent a significant portion of the executive's
compensation. In fiscal 1999, individual executive bonuses were targeted to be
above 40%, excluding profit sharing, of the executive's salary. Each executive
can potentially earn a percentage of his or her target bonus based on the
achievement of the Company's and his or her organization's goals. For all
executives, except Mr. Vohs, the executive's achievements in relation to
established goals are evaluated by the Chief Executive Officer. The Compensation
Committee evaluates the performance of the Chief Executive Officer and
President. Like other executives, the decision to grant these executives a bonus
is based on the performance of the Company and their contributions to the
Company in the past fiscal year. The bonus plan is designed such that the
executive earns a proportionally higher award if the Company and the executive's
organization exceed their goals and a smaller or no award if the Company and the
executive's organization do not exceed their goals.

LONG-TERM INCENTIVES: The Stock Option Committee of the Board believes that
employee equity ownership provides significant additional motivation to officers
and employees to maximize value for the Company's stockholders, and therefore
periodically grants stock options under the 1998 Incentive Stock Plan. The
Committee grants stock options to executive officers at the prevailing market
price, after considering the recommendation of the Chief Executive Officer, the
positive effects the executive has made on the overall performance of the
Company, stock option granting policies at companies of similar size in similar
industries, and certain other factors. The stock options granted only have value
to the executive if the Company's stock price increases over the exercise price.
Therefore, the Committee believes that stock options serve to align the
interests of option holders closely with those of stockholders because of the
direct benefit executive officers receive through improved stock performance.
During fiscal 1999, the Committee considered and granted stock options to the
executive officers of the Company, including Dennis V. Vohs, the Company's Chief
Executive Officer. Each of the officers received stock options based on his
performance, level of responsibility, historical and expected contribution to
the Company's success and prior grants, including vested and unvested options.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND PRESIDENT: The Salary, Profit
Sharing and Annual Bonus and Long-Term Incentives of Dennis V. Vohs and J.
Patrick Tinley, the Company's Chief Executive Officer and President,
respectively, were determined in accordance with the criteria described in the
"Salary", "Profit Sharing and Annual Bonus," and "Long-Term Incentives" sections
of this report. These amounts were designed to compensate Mr. Vohs and Mr.
Tinley at prevailing market rates when revenue growth, profitability and
cashflow targets are met and at above market rates when revenue growth,
profitability and cash flow targets were exceeded. Accordingly, in view of the
fact that revenue growth, profitability and cash flow were lower than the
targets set at the beginning of the fiscal year, neither Mr. Vohs nor Mr. Tinley
received a bonus for the Company's fiscal year 1999 performance. Mr. Vohs and
Mr. Tinley were awarded salary increases of $22,436 and $21,720 respectively,
based upon the profitable performance achieved in fiscal year 1998 but awarded
in fiscal year 1999. Subsequently, Mr. Vohs and Mr. Tinley, in view of the slow
down in new business close rates, requested that their salaries be temporarily
reduced by $36,000 and $12,750 at the end of the Company's third fiscal quarter.
Mr. Vohs and Mr. Tinley were each awarded stock options of 50,000 shares in
October 1998. In addition, based upon the Company's fiscal 1998 performance, Mr.
Vohs and Mr. Tinley were awarded profit sharing bonuses of $67,511 and $46,656
respectively, which were paid in fiscal 1999. Neither Mr. Vohs nor Mr. Tinley
participated in deliberations concerning their salary, bonus or stock option
grants.

13
<PAGE>

COMPENSATION LIMITATIONS: Under Section 162(m) of the Code and regulations
adopted thereunder by the Internal Revenue Service in August 1993, publicly-held
companies may be precluded from deducting certain compensation in excess of $1.0
million paid to an executive officer in a single year. The regulations exclude
from this limit performance-based compensation and stock options, provided
certain requirements, such as stockholder approval, are satisfied. The Company
is studying these regulations and currently intends to take the necessary
actions to cause its compensation programs and stock option plans to qualify for
the exclusions.

COMPENSATION COMMITTEE STOCK OPTION COMMITTEE

Bruce J. Ryan Bruce J. Ryan
J. William Goodhew, III J. William Goodhew, III
Mario M. Rosati Mario M. Rosati

THE FOREGOING COMPENSATION COMMITTEE REPORT SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE "FILED" WITH 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 THE COMPANY
SPECIFICALLY INCORPORATES IT BY REFERENCE INTO SUCH FILING.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For the fiscal year ended June 30, 1999, directors Goodhew, Rosati and
Ryan served as members of the Compensation Committee of the Board of Directors.
No member of the Compensation Committee was or is an officer or employee of the
Company or any of its subsidiaries. In addition, during the fiscal year ended
June 30, 1999, no officer of the Company had an "interlock" relationship, as the
SEC defines that term, to report.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act requires the Company's executive
officers and directors to file initial reports of share ownership and report
changes in share ownership with the SEC. Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms, which
they file.

Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that for the period July 1, 1998 to June 30, 1999, all Section 16(a)
filings were made on a timely basis.

CERTAIN TRANSACTIONS

During fiscal 1999, Mario M. Rosati, a director of the Company, was
also an attorney with Wilson Sonsini Goodrich & Rosati, Professional Corporation
("Counsel"). The Company retained Counsel as its legal advisers during the
fiscal year. The Company plans to retain Counsel as its legal advisers again
during fiscal 2000. The amounts paid by the Company to Counsel were less than 1%
of Counsel's total gross revenues for its last completed fiscal year

Under the terms of indemnification agreements with each of the
Company's officers and directors, the Company is obligated to indemnify each
officer and director against certain claims and expenses for which the director
might be held liable in connection with past or future service on behalf of the
Company. In addition, the Company's Certificate of Incorporation provide that,
to the extent permitted by Delaware law, the officers and directors shall not be
liable for monetary damages for breach of fiduciary duty as an officer or
director.

On June 30, 1998, J. Patrick Tinley, the Company's President and Chief
Operating Officer, delivered a promissory note to the Company for the principal
sum of $145,000 in connection with Mr. Tinley's exercise of an option to
purchase 40,000 shares of the Company's Common Stock at an exercise price of
$3.625 per share. The Company loaned Mr. Tinley $145,000 and Mr. Tinley promised
to repay the principal amount with simple interest at a rate of 5.58% per annum
on or before June 30, 2003. At the option of the Company, all principal and
interest owing under the note may be payable upon termination of Mr. Tinley's
employment prior to June 30, 2003. This note is secured by the 40,000 shares of
Common Stock of the Company received by Mr. Tinley upon exercise of his stock
options.

On April 20, 1998, the Company delivered a letter to Stan F.
Stoudenmire, the Company's former Vice President, Finance and Administration,
Chief Financial Officer and Secretary, agreeing to provide Mr. Stoudenmire with
payments equal to Mr. Stoudenmire's base salary for 12 months, in the amount of
$150,000 following his departure from the Company. Mr. Stoudenmire's employment
with the Company was terminated on April 20, 1998.

14
<PAGE>

On December 17, 1998, Joseph L. Southworth, the Company's Vice
President, E-Commerce, and Peter D. Van Houten, the Company's Vice
President-Sales North America, each delivered a promissory note to the company
in the connection with the exercise of stock options. Mr. Southworth delivered a
promissory note of $23,346 to purchase 9,000 shares of the Company's Common
Stock; Mr. Van Houten delivered a promissory note of $40,271.85 to purchase
15,525 shares of the Company's Common Stock. All options for both Mr. Southworth
and Mr. Van Houten were at an exercise price of $2.5940 per share. The Company
loaned Mr. Southworth $23,346 and Mr. Southworth promised to repay the principal
amount with simple interest at a rate of 5.58% per annum on or before December
17, 2003. The Company loaned Mr. Van Houten $40,271.85 and Mr. Van Houten
promised to repay the principal amount with simple interest at a rate of 5.58%
per annum on or before December 17, 2003. At the option of the Company, all
principal and interest owing under the note may be payable upon termination of
employment prior to December 17, 2003 for either Mr. Southworth or Mr. Van
Houten. This note is secured by the shares of Common Stock of the Company
received by Messrs. Southworth and Van Houten upon the exercise of these stock
options.

In fiscal 1999, Dennis V. Vohs, J. Patrick Tinley and Robert B. Webster
have entered into employment agreements with the Company. The employment
agreements provide the executives with severance payments and accelerated
vesting of stock options and other incentive awards if the executive's
employment is terminated without "Cause" at any time. Each executive would be
entitled to 100% or 200% of his base compensation and employee benefit coverage
applicable to the executive at the time of termination for one year following
the termination and ninety days to exercise all vested and unvested stock
options and other incentive awards. The employment agreements also provide the
executives with severance payments and accelerated vesting of stock options and
other incentive awards if the executive terminates his employment with the
Company for "Good Reason" or is terminated without "Cause" or as a result of
"Disability" within nine months immediately following a "Change of Control" of
the Company. Each executive would be entitled to 100% or 200% of his base
compensation applicable to the executive at the time of termination for one year
following the termination and employee benefit coverage applicable to the
executive at the time of termination for eighteen months following the
termination and ninety days to exercise all vested and unvested stock options
and other incentive awards. The severance agreements define "Cause" to include a
willful act by the executive which constitutes fraud and which is injurious to
the Company, conviction of, or a plea of "guilty" or "no contest" to, a felony
or the executive's continuing repeated willful failure or refusal to perform his
material duties required by the employment agreement which is injurious to the
Company. The employment agreements define "Good Reason" to include a material
reduction in the executive's powers or duties, one or more reductions in the
executive's base compensation in the cumulative amount of five percent (5%) or
more or notifying the executive that his principal place of work will be
relocated by a distance of 50 miles or more. The employment agreements define
"Disability" as the executive's eligibility to receive immediate long-term
disability benefits under the Company's long-term disability insurance plan or,
if there is no such plan, under the federal Social Security program. The
employment agreements define "Change of Control" to mean the occurrence of any
of the following events: (i) any "person" (as such term in used in sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) by the acquisition or aggregation of securities is or becomes
the beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the "Base
Capital Stock"); except that any change in the relative beneficial ownership of
the Company's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company, or (ii) the stockholders
of the Company approve a definitive agreement (A) to merge or consolidate the
Company with or into another corporation in which the holders of the securities
of the Company before such merger or reorganization will not, immediately
following such merger or reorganization, hold as a group on a fully diluted
basis both the ability to elect at least a majority of the directors of the
surviving corporation and at least a majority in value of the surviving
corporation's outstanding equity securities, or (B) to sell or otherwise dispose
of all or substantially all of the assets of the Company or dissolve or
liquidate the Company.

15
<PAGE>

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
ROSS SYSTEMS, INC., NASDAQ COMPOSITE INDEX, AND
H&Q TECHNOLOGY INDEX

Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Company's Common Stock with the cumulative
total return of the NASDAQ Composite Index and H&Q Technology Index for the
period commencing on June 30, 1994 and ending on June 30, 1999

ROSS SYSTEMS
H&Q TECHNOLOGY INDEX
NASDAQ STOCK MARKET-U.S. INDEX

[CHART]

Assumes that $100.00 was invested on June 30, 1994 in the Company's
Common Stock and each index, and that all dividends paid by companies whose
shares are components of the index were reinvested. No dividends have been
declared on the Company's Common Stock. Stockholder returns over the period
indicated should not be considered indicative of future stockholder returns.

THE FOREGOING STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE "FILED" WITH THE SEC, NOR SHALL SUCH INFORMATION
BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OR
THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES IT
BY REFERENCE INTO SUCH FILING.

OTHER MATTERS

The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the shares they
represent as the Board of Directors may recommend.

THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON REQUEST A
COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO THE CORPORATE
SECRETARY, ROSS SYSTEMS, INC., TWO CONCOURSE PARKWAY, SUITE 800, ATLANTA,
GEORGIA 30328.

<PAGE>

PROXY

ROSS SYSTEMS, INC.

1999 ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Ross Systems, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated October 12, 1999, and hereby appoints Dennis V. Vohs
and J. Patrick Tinley, and each of them, proxies and attorneys-in-fact, each
with full power of substitution, on behalf and in the name of the undersigned,
to represent the undersigned at the 1998 Annual Meeting of Stockholders of Ross
Systems, Inc. to be held on November 17, 1999, and at any adjournment(s)
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
on the reverse side.

Both of such attorneys or substitutes (if both are present and acting at said
meeting or any adjournment(s) thereof, or, if only one shall be present and
acting, then that one) shall have and may exercise all of the powers of said
attorneys-in-fact hereunder.

SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE

<PAGE>

/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE.

THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, AND FOR THE APPOINTMENT OF ARTHUR
ANDERSEN LLP, OR AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING, INCLUDING, AMONG OTHER THINGS, CONSIDERATION
OF ANY MOTION MADE FOR ADJOURNMENT OF THE MEETING.

1. Election of Directors.
Nominees: Dennis V. Vohs, Mario M. Rosati, Bruce J. Ryan, J. Patrick
Tinley, J. William Goodhew, III

FOR WITHHELD
ALL / / FOR ALL / /
NOMINEES NOMINEES

/ /
---------------------------------------------------------------------------
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee(s) name(s) on the line above.

2. Proposal to ratify the appointment of Arthur Andersen, LLP as the
independent auditors of Ross Systems, Inc. for the fiscal year ending June
30, 2000:

FOR AGAINST ABSTAIN

/ / / / / /

And in their discretion upon such other matter(s) which may properly come
before the meeting or and adjournment(s) thereof.

(This Proxy should be marked, dated, and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as a community property, both should sign).

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<S> <C> <C> <C>
Signature: Date: Signature: Date:
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