CENTIGRAM COMMUNICATIONS CORP, DEF 14A, 1998-02-27

CENTIGRAM COMMUNICATIONS CORP
DEF 14A, 1998-02-27
TELEPHONE & TELEGRAPH APPARATUS

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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:
[ ] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[X] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))

Centigram Communications Corporation
- --------------------------------------------------------------------------------
(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:

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

(1) Amount Previously Paid:

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

(3) Filing Party:

(4) Date Filed:

IMAGE OMITTED CENTIGRAM
COMMUNICATIONS CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 31, 1998

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Centigram
Communications Corporation, a Delaware corporation (the "Company"), will be
held on Tuesday, March 31, 1998 at 10:00 a.m., at the offices of the Company,
91 East Tasman Drive, San Jose, California 95134, for the following purposes:

1. To elect three (3) directors to Class III of the Board of Directors.

2. To approve an amendment to the Company's 1997 Stock Option Plan to
increase the number of shares of the Company's Common Stock reserved
for issuance thereunder from 375,000 shares to 730,000 shares.

3. To approve an amendment to the Company's 1991 Employee Stock Purchase
Plan to increase the number of shares of the Company's Common Stock
reserved for issuance thereunder from 675,000 shares to 775,000
shares.

4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending October 31, 1998.

5. To transact such other business as may properly come before the
meeting or any adjournment(s) 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 February 6, 1998
are entitled to notice of and to vote at the Annual Meeting.

All stockholders are cordially invited to attend the meeting in person.
However, to assure 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. Any stockholder attending the
meeting may vote in person even if he or she has returned a proxy.

By order of the Board of Directors

/s/ LARRY W. SONSINI

LARRY W. SONSINI
Secretary

San Jose, California
February 27, 1998

<PAGE>

IMAGE OMITTED CENTIGRAM
COMMUNICATIONS CORPORATION

PROXY STATEMENT

GENERAL

The enclosed Proxy is solicited on behalf of the Board of Directors of
Centigram Communications Corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on Tuesday, March 31, 1998 at 10:00 a.m.
at the offices of the Company, 91 East Tasman Drive, San Jose, California
95134, or at any adjournment or adjournments thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting. The Company's
principal executive offices are located at 91 East Tasman Drive, San Jose,
California 95134, and its telephone number is (408) 944-0250.

These proxy solicitation materials and the Annual Report on Form 10-K for
the year ended November 1, 1997 were first mailed on or about February 27,
1998 to all stockholders entitled to vote at the meeting.

RECORD DATE; OUTSTANDING SHARES; PROCEDURAL MATTERS

Stockholders of record as of the close of business on February 6, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
On February 6, 1998, 7,171,000 shares of the Company's common stock, $.001
par value (the "Common Stock"), were issued and outstanding. Each share has
one vote on all matters. For information regarding holders of more than 5%
of the outstanding Common Stock, see "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT." The closing sale price of the Company's
Common Stock as reported on the Nasdaq National Market System on February 6,
1998 was $12.56 per share.

REVOCABILITY OF PROXIES

A stockholder may revoke any proxy given pursuant to this solicitation by
attending the Annual Meeting and voting in person, or by delivering to the
Company's Corporate Secretary at the Company's principal executive offices
referred to above prior to the Annual Meeting a written notice of revocation,
or by delivering a duly executed proxy bearing a date later than that of the
previous proxy.

The solicitation of proxies is made on behalf of the management of the
Company and the associated costs will be borne by the Company. The Company
has engaged American Stock Transfer & Trust Company to assist in the
solicitation of proxies for the meeting.

In addition to solicitation by mail and by American Stock Transfer & Trust
Company, the Company may use the services of its directors, officers and others
to solicit proxies, personally or by telephone. Arrangements may also be made
with brokerage houses and other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of the stock held of record by
such persons and the Company may reimburse them for reasonable out-of-pocket
and clerical expenses incurred by them in so doing.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR ANNUAL MEETING FOR FISCAL
YEAR 1998

Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1999 Annual Meeting must be received by the
Company no later than October 23, 1998 to be included in the proxy statement
and form of proxy relating to that meeting.

FISCAL YEAR END
The Company's Fiscal Year ends on October 31. The Company's last fiscal
year ended on October 31, 1997 and is referred to herein as the "Last Fiscal
Year."

<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS

There are currently seven members of the Board of Directors, divided
into three classes. Class I presently consists of two directors who are
serving a three-year term expiring in 1999. Class II presently consists
of two directors who are serving a three-year term expiring in 2000.
Class III presently consists of three directors who are serving three-year
terms expiring on the date of this Annual Meeting. At each annual meeting
of stockholders, directors elected to succeed those in the class whose
terms expire will be elected for a three-year term so that the term of one
class of directors will expire each year. In each case, a director serves
for the designated term and until his or her respective successor is
elected and qualified.

Three Class III directors are to be elected at this Annual Meeting to
serve a three-year term expiring in 2001. The Board has nominated Doug
Chance, James F. Gibbons and Edward R. Kozel for election to the Class III
board seats. Holders of proxies solicited by this Proxy Statement will
vote the proxies received by them as directed on the proxy card or if no
direction is made, for the election of the Board of Directors' nominees.
If any of the nominees is unable or declines to serve as a director at the
time of the Annual Meeting, the proxy holders will vote for a nominee
designated by the present Board of Directors to fill the vacancy. It is
not presently expected that any of the nominees will be unable or will
decline to serve as a director.

The names of the nominees of the Company and certain information
about them as of January 1, 1998 are set forth below. The names of and
certain information about the Company's current directors as of January 1,
1998 are also set forth below. Information as to the stock ownership of
each director and all current directors and executive officers of the
Company as a group is set forth below under "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."

Director
Name of Nominee Age Principal Occupation and Directorship Since
- -------------------- --- -------------------------------------- --------
CLASS I DIRECTORS
James H. Boyle 43 President of Boyle Enterprises, Inc. 1988

Robert L. Puette 55 President and Chief Executive Officer 1997
of the Company

CLASS II DIRECTORS
David S. Lee 60 Chairman of the Board of Cortelco 1997
Systems Holding Corp., and of
CMC Industries, Inc.

Dean O. Morton 65 Retired Executive Vice President, Chief 1993
Operating Officer and Director of
Hewlett-Packard Company

CLASS III DIRECTORS
Doug Chance(1) 55 President and Chief Executive Officer 1997
of WYSE Technology Inc.

James F. Gibbons(1) 66 Professor of Electrical Engineering 1992
and Special Counsel to the
President, School of Engineering
of Stanford University;
Consultant, SRI International

Edward R. Kozel(1) 52 Chief Technical Officer and Senior 1998
Vice President, Business Development,
Cisco Systems, Inc.

- ---------------
(1) Nominee for Class III Director.

Except as set forth below, each of the directors has been engaged in
his principal occupation set forth above during the past five years. There
are no family relationships between any director or executive officer of
the Company.

Mr. Boyle was elected to the Centigram Board in November 1988. Mr.
Boyle is President of Boyle Enterprises, Inc., a management and investment
consulting firm. From 1988 to 1991, Mr. Boyle was Vice President of BCE
Ventures, which at that time managed venture capital investments for B.C.E.
Inc., and Northern Telecom. Mr. Boyle was Manager of Venture Capital for
Northern Telecom from 1985 to 1988. Mr. Boyle serves as a director of
Nhancement Technologies, Inc.

Mr. Puette was elected to the Centigram Board in September 1997, at
which time he became President and Chief Executive Officer of the Company.
Before joining Centigram, Mr. Puette served as President, CEO and Chairman
of the Board at NetFRAME Systems, a high-availability computer server
company, from January 1995 to September 1997. Prior to that, Mr. Puette
was President and Chief Executive Officer of Puette Consulting, a marketing
and sales consulting firm, from November 1993 to December 1994. Mr. Puette
held the position of President of Apple USA from June 1990 to October 1993,
and was a Group General Manager at the Hewlett-Packard Company prior to
that time. Mr. Puette is also a director of Cisco Systems, Inc. and
Quality Semiconductor Corporation.

Mr. Lee was elected to the Centigram Board in March 1997. Mr. Lee is
the Chairman of the Board of Cortelco Systems Holding Corp., a
telecommunications company, and of CMC Industries, Inc., an electronics
contract manufacturing company, and serves as a director of Linear
Technology Corporation, an analog semiconductor company. From 1983 to
1985, Mr. Lee served as a Vice President of ITT Corporation and as Group
Executive and Chairman of its Business Information Systems Group.

Mr. Morton was elected to the Centigram Board in November 1993, and
became Chairman of the Board in April 1997. Prior to his retirement in
October 1992, Mr. Morton was Executive Vice President, Chief Operating
Officer and a director of the Hewlett-Packard Company. Mr. Morton is a
member of the boards of directors of ALZA Corp., BEA Systems, Inc., Cephid,
The Clorox Company, Raychem Corp., KLA-Tencor Corporation and a number of
private companies.

Mr. Chance was elected to the Centigram Board in 1997. Mr. Chance
has been the President and Chief Executive Officer and a director of WYSE
Technology Inc., a manufacturer of computer display products, since 1994.
Prior to that time, Mr. Chance was the President and Chief Executive
Officer of Octel Communications Corporation from November 1990 to November
1993, and before that served as Executive Vice President, Network Systems
Sector, at the Hewlett-Packard Company.

Dr. Gibbons was elected to the Centigram Board in June 1992. He
joined the Stanford University faculty in 1957, was appointed Professor of
Electrical Engineering in 1964 and served as Dean of the School of
Engineering from 1984 to 1996. He was appointed as Special Counsel to the
President in June 1996. In addition, since January 1996, Dr. Gibbons has
served as a consultant for SRI International. He is a director of Cisco
Systems, Inc., Lockheed Martin Corporation, Raychem Corporation and El Paso
Energy Corporation.

Mr. Kozel was elected to the Centigram Board in January 1998.
Mr. Kozel has served as the Chief Technology Officer and Senior Vice
President of Business Development of Cisco Systems, Inc. since 1989.

BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company met a total of eight (8) times
during the Last Fiscal Year.

From November 1996 to October 1997, the Audit Committee of the Board
of Directors consisted of directors James H. Boyle, James F. Gibbons, J.
Michael Jarvis and Dean O. Morton. From October 1997 to the end of the
fiscal year, the Audit Committee consisted of Dean Morton, David Lee and
James Gibbons. David Lee serves as the Chairman of the Audit Committee.
The Audit Committee met four times during the last fiscal year. This
Committee is primarily responsible for reviewing the services performed by
the Company's independent auditors and evaluating the Company's accounting
policies and its system of internal controls.

From November 1996 to October 1997, the Compensation Committee of the
Board of Directors consisted of directors James H. Boyle, James F.
Gibbons, J. Michael Jarvis and Dean O. Morton. From October 1997 to the
end of the fiscal year, the Compensation Committee consisted of Dean O.
Morton, David S. Lee and James F. Gibbons. James Gibbons serves as
Chairman of the Compensation Committee. Such committee did not meet during
the last fiscal year. This Committee is primarily responsible for
reviewing and recommending compensation to be paid to officers of the
Company.

The Board of Directors has no nominating committee or any committee
performing such functions.

During the last fiscal year, no director attended less than 75% of
the aggregate of all meetings of the Board of Directors and the committees,
if any, upon which such director served and which were held during the
period of time that such person served on the Board or such committee.

DIRECTORS' FEES

Directors who are not employees of the Company are paid a fee of
$1,100 per Board meeting attended in person, $750 if the meeting is held by
telephone conference call (or if a meeting held in person is attended by
conference call), $500 to each Board committee member for each committee
meeting when held concurrently with a meeting of the Board, whether
attended in person or by conference call, and $800 to each board committee
member for each committee meeting attended on a day other than a day on
which a meeting of the full Board is held. In addition, each non-employee
director is paid an annual retainer fee of $12,000, paid quarterly. Under
the 1997 Stock Plan, each outside director of the Company is granted
options to purchase 20,000 shares of Common Stock at the time of initial
appointment or election to the Board, and 7,500 shares of Common Stock
annually thereafter on the date of each Annual Meeting of the Stockholders;
provided the Director has been a member of the Board for at least six
months. In addition, in May 1997, David Lee and Dean Morton were each
granted options to purchase 5,000 shares of the Company's Common Stock and
in December 1997, James H. Boyle, Dean O. Morton, David S. Lee and James F.
Gibbons were each granted options to purchase 5,000 shares of the Company's
Common Stock. The Company also reimburses non-employee directors for
travel and related expenses incurred in attending meetings of the Board and
its committees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between the Company's Board of
Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past.

REQUIRED VOTE

The nominees receiving a majority of affirmative votes will be
elected as Class III directors of the Company.

RECOMMENDATION

The Company's Board of Directors recommends a vote FOR the nominees
listed above.

PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT TO THE
1997 STOCK OPTION PLAN

The Company's 1997 Stock Option Plan (the "1997 Plan") was approved
by the stockholders in March 1997. The 1997 Plan is designed to retain,
motivate and reward senior personnel by providing such personnel long term
equity participation in the Company relating directly to the financial
performance and long-term growth of the Company. A total of 375,000 shares
of the Company's Common Stock have been reserved for issuance upon the
exercise of options granted under the 1997 Plan. In December 1997, the
Board of Directors adopted, subject to stockholder approval, an amendment
to the 1997 Plan to increase the number of shares reserved for issuance
thereunder from 375,000 shares to 730,000 shares. Including the proposed
355,000 share increase, a total of 371,750 shares remain available for
grant under the 1997 Plan on February 6, 1998.

In 1993, Section 162(m) was added to the Internal Revenue Code of
1986, as amended (the "Code"). Section 162(m) limits the Company's
deduction in any one fiscal year for federal income tax purposes to
$1,000,000 per person with respect to the Company's Chief Executive
Officers and its four other highest paid executive officers who are
employed on the last day of the fiscal year unless the compensation was not
otherwise subject to the deduction limit. Compensation which is
performance-based and approved by the Company's stockholders is not subject
to the deduction limit.

PROPOSAL

The proposed amendment to the Company's 1997 Plan is to increase the
number of shares of the Company's Common Stock reserved for issuance
thereunder from 375,000 shares to 730,000 shares.

RECOMMENDATION

The Board of Directors has unanimously approved the amendment of the
1997 Plan and recommends that stockholders vote FOR such adoption.

DESCRIPTION OF THE 1997 PLAN

The essential features of the 1997 Plan are outlined below. Such
outline is qualified in its entirety by the provisions of the 1997 Plan, a
copy of which was filed by the Company with the Securities and Exchange
Commission and is incorporated herein by reference. Copies of the 1997
Plan are available upon written request to the Company at 91 East Tasman
Drive, San Jose, California 95134, Attn: Chief Financial Officer.

General

The 1997 Plan was approved by the stockholders in March 1997. The
1997 Plan authorizes the Board of Directors (the "Board"), or one or more
committees which the Board may appoint from among its members (a
"Committee"), to grant stock options. To date, a total of 375,000 shares
of Common Stock has been reserved for issuance under the 1997 Plan.
Options granted under the 1997 Plan may be either "Incentive Stock Options"
as defined in Section 422 of the Code, or nonstatutory stock options, as
determined by the Board or the Committee.

Additionally, the 1997 Plan provides for the automatic grant of
nonstatutory stock options to purchase 20,000 shares of Common Stock to
outside directors at the time of such director's initial appointment or
election to the Board, and the automatic grant of nonstatutory stock
options to purchase 7,500 shares of Common Stock annually thereafter on the
date of each Annual Meeting of Stockholders, provided the director has been
a member of the Board for at least six months.

Purpose

The general purpose of the 1997 Plan is to attract and retain quality
personnel for positions of substantial responsibility, to create additional
incentive for senior personnel of the Company by offering long term equity
participation in the Company, and to promote the success of the Company's
business.

Eligibility

The Option Plan provides that options may be granted thereunder to
employees, consultants and directors ("Optionees") of the Company. The
Board of Directors selects the Optionees and determines the number of
shares subject to each option. In making such determination, the duties
and responsibilities of the Optionee, the value of the Optionee's services,
his or her present and potential contributions to the success of the
Company and other relevant factors are considered.

Administration

The 1997 Plan may be administered by the Board or a Committee
(collectively the "Administrator"). Subject to the other provisions of the
1997 Plan, the Administrator has the authority to: (i) determine the fair
market value of the Common Stock; (ii) select the Optionees to whom options
may be granted thereunder; (iii) determine whether and to what extent
options are granted thereunder; (iv) determine the number of shares of
Common Stock to be covered by each option granted thereunder; (v) approve
forms of agreement for use under the 1997 Plan; (vi) determine the terms
and conditions, not inconsistent with the terms of the 1997 Plan, of any
award granted thereunder (such terms and conditions include, but are not
limited to, the exercise price, the time or times when options may be
exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any option or the shares of Common Stock relating
thereto, based in each case on such factors as the Administrator, in its
sole discretion, shall determine); (vii) reduce the exercise price of any
Option to the then current fair market value if the fair market value of
the Common Stock covered by such Option shall have declined since the date
the Option was granted; (viii) construe and interpret the terms of the 1997
Plan and awards granted pursuant to the 1997 Plan; (ix) prescribe, amend
and rescind rules and regulations relating to the 1997 Plan, including
rules and regulations relating to sub-plans established for the purpose of
qualifying for preferred tax treatment under foreign tax laws; (x) modify
or amend each option, including the discretionary authority to extend the
post-termination exercisability period of options longer than is otherwise
provided for in the 1997 Plan; and (xi) make all other determinations
deemed necessary or advisable for administering the 1997 Plan.

Terms and Conditions of Options

Each option granted under the 1997 Plan is evidenced by a written
stock option agreement ("Notice of Grant") between the Optionee and the
Company and is subject to the following terms and conditions:

(a) Exercise Price. The Administrator determines the exercise
price of options to purchase shares of Common Stock at the time the options
are granted. However, excluding options issued to 10% stockholders (an
Optionee who owns more than 10% of the combined total voting power of all
classes of outstanding stock of the Company), the exercise price under an
incentive stock option must not be less than 100% of the fair market value
of the Common Stock on the date the option is granted. If the Common Stock
is listed on any established stock exchange or a national market system,
including without limitation the NASDAQ National Market of the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
System, the fair market value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
system or exchange (or the exchange with the greatest value of trading in
Common Stock) on the last trading day preceding the day of determination,
as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; provided, however, that in the event the fair
market value as so determined is more than 20% greater or more than 20%
less than the closing sales prices for such stock as so quoted on the date
of determination, then the Administrator shall be entitled to determine the
fair market value in good faith, at a price within the range of prices from
the fair market value as otherwise determined above to the closing price
(or closing bid, as applicable) on the date of determination. If the
Common Stock is quoted on the NASDAQ System (but not on the NASDAQ National
Market thereof) or is regularly quoted by a recognized securities dealer
but selling prices are not provided, the fair market value of a share of
Common Stock shall be the average of the means between the high bid and low
asked prices for the Common Stock on the five market trading days
immediately preceding the date of determination, as reported in The Wall
Street Journal or such other source as the Administrator of the 1997 Plan
deems reliable; provided, however, that in the event the fair market value
as so determined is more than 20% greater or more than 20% less than the
mean between the high bid and low asked prices for such stock as so quoted
on the date of determination, then the Administrator shall be entitled to
determine the fair market value in good faith, at a price within the range
of prices from the fair market value as otherwise determined above to the
mean between the high bid and low asked prices on the date of
determination. In the absence of an established market for the Common
Stock, the fair market value shall be determined in good faith by the
Administrator.

(b) Form of Consideration. The means of payment for shares issued
upon exercise of an option is specified in each option agreement and
generally may be made by cash, check, promissory note, other shares of
Common Stock of the Company owned by the Optionee, delivery of an exercise
notice together with irrevocable instructions to a broker to deliver the
exercise price to the Company from sale or loan proceeds, reduction of any
Company liability to the Optionee or, by a combination thereof.

(c) Exercise of the Option. Each stock option agreement will
specify the term of the option and the date when the option is to become
exercisable. However, in no event shall an option granted under the 1997
Plan be exercised more than 10 years after the date of grant or such
shorter term as may be provided in the Notice of Grant. In the case of an
Incentive Stock Option granted to an Optionee who, at the time the
Incentive Stock Option is granted, owns stock representing more the ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.

(d) Termination of Employment. Upon termination of an Optionee's
continuous status as an employee or consultant with the Company, such
Optionee may exercise his or her option to the extent that he or she was
entitled to exercise it as of the date of such termination. Such exercise
may occur only before the end of the period determined by the Administrator
for exercise following termination. In the case of an Incentive Stock
Option, such period shall not exceed three (3) months and in the event that
no period is specified in any stock option agreement, such period shall be
30 days. In no event shall such period extend beyond the expiration date
of the term of the option as set forth in the applicable option agreement.
An Optionee's change of status from employee to consultant shall not be
treated as a termination of the Optionee's continuous status as an employee
or consultant, and any option held by the Optionee shall remain in effect,
except as provided herein below. Any Incentive Stock Option held by such
Optionee shall automatically cease to be treated for tax purposes as an
Incentive Stock Option and shall be treated as a Nonstatutory Stock Option
on the ninety-first (91st) day following such change of status.
Notwithstanding the above, within thirty (30) days after any such change of
status, the Administrator may in its discretion determine that such change
of status shall be treated as a termination of the Optionee's continuous
status as an employee or consultant. To the extent that the Optionee is
not entitled to exercise his or her option at the date of such termination,
or if the Optionee does not exercise such option to the extent so entitled
within the time specified herein, the option shall terminate.

(e) Disability. If an employee is unable to continue as an
employee or consultant with the Company as a result of disability, then all
options held by such Optionee under the 1997 Plan shall expire upon the
earlier of (i) twelve months after the date of termination of the
Optionee's employment or (ii) the expiration date of the term of such
option. The Optionee may exercise all or part of his or her option at any
time before such expiration to the extent that such option was exercisable
at the time of termination of employment. To the extent that the Optionee
is not entitled to exercise his or her option at the date of such
termination, or if the Optionee does not exercise such option to the extent
so entitled within the time specified herein, the option shall terminate.

(f) Death. Upon the death of an Optionee, the option may be
exercised at any time within twelve (12) months following the date of death
(but in no event later than the expiration of the term of such option as
set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the option by bequest or inheritance,
only to the extent that the Optionee was entitled to exercise the option at
the date of death. If at the time of death, the Optionee was not entitled
to exercise his or her entire option, the shares of Common Stock covered by
the unexercisable portion of the option shall immediately revert to the
1997 Plan. If, after death, the Optionee's estate or person who acquired
the right to exercise the option by bequest or inheritance does not
exercise the option within the time specified herein, the option shall
terminate, and the shares covered by such option shall revert to the 1997
Plan.

(g) Nontransferability of Options. In general, an option may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and
may be exercised, during the lifetime of the Optionee, only by the
Optionee.

(h) Value Limitation. If the aggregate fair market value of all
shares of Common Stock subject to an Optionee's Incentive Stock Option
which are exercisable for the first time during any calendar year exceeds
$100,000, the excess options shall be treated as nonstatutory stock
options.

(i) Other Provisions. The stock option agreement may contain such
terms, provisions and conditions not inconsistent with the 1997 Plan as may
be determined by the Board or Committee.

Adjustments Upon Changes in Capitalization, Dissolution Liquidation,
Merger or Asset Sale

In the event that the capital stock of the Company is changed by
reason of recapitalization, dissolution, liquidation, merger or asset sale,
the following provisions will apply:

(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding option, and the number of shares of Common
Stock which have been authorized for issuance under the 1997 Plan but as to
which no options have yet been granted or which have been returned to the
1997 Plan upon cancellation or expiration of an option, as well as the
price per share of Common Stock covered by each such outstanding option,
shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt
of consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common
Stock subject to an option.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an option has
not been previously exercised, it will terminate immediately prior to
consummation of such proposed action. The Board may, in the exercise of
its sole discretion in such instances, declare that any option shall
terminate as of a date fixed by the Board and give each Optionee the right
to exercise his or her option as to all or any part of the optioned stock,
including shares as to which the Option would not otherwise be exercisable.

(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company, each outstanding option may be assumed or an
equivalent option may be substituted by the successor corporation or a
parent or subsidiary of the successor corporation. The Administrator may,
in lieu of such assumption, provide for the Optionee to have the right to
exercise the option as to all or a portion of the optioned stock, including
shares as to which it would not otherwise be exercisable. If the
Administrator makes an option exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee that the option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the option
will terminate upon the expiration of such period. For the purposes of
this paragraph, the option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or
receive, for each share of optioned stock subject to the option immediately
prior to the merger or sale of assets, the consideration (whether stock,
cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each share held on the effective date
of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the
successor corporation or its parent, the Administrator may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the option, for each share of optioned stock
subject to the option, to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger of sale of
assets.

Amendments, Suspensions and Termination of the 1997 Plan

The Board may amend, suspend or terminate the 1997 Plan at any time;
provided, however, that stockholder approval is required for any amendment
to the extent necessary to comply with Section 422 of the Code, or any
similar rule or statute. In any event, the 1997 Plan will terminate
automatically in 2006.

Federal Tax Information for 1997 Plan

The following is a summary of the effect of federal income taxation
upon the Optionee and the Company with respect to the grant and exercise of
options under the 1997 Plan. Options granted under the 1997 Plan may be
either "Incentive Stock Options," as defined in Section 422 of the Code, or
nonstatutory stock options.

An Optionee who is granted an Incentive Stock Option will not
recognize taxable income either at the time the option is granted or upon
its exercise, although the exercise may subject the Optionee to the
alternative minimum tax. Upon the sale or exchange of the shares more than
two years after grant of the option and one year after exercising the
option, any gain or loss will be treated as long-term capital gain or loss.
If these holding periods are not satisfied, the Optionee will recognize
ordinary income at the time of sale or exchange equal to the difference
between the exercise price and the lower of (i) the fair market value of
the shares at the date of the option exercise or (ii) the sale price of the
shares. A different rule for measuring ordinary income upon such a
premature disposition may apply if the Optionee is also an officer,
director, or 10% stockholder of the Company. The Company will be entitled
to a deduction in the same amount as the ordinary income recognized by the
Optionee. Any gain or loss recognized on such a premature disposition of
the shares in excess of the amount treated as ordinary income will be
characterized as long-term or short-term capital gain or loss, depending on
the holding period.

All other options which do not qualify as Incentive Stock Options are
referred to as nonstatutory stock options. An Optionee will not recognize
any taxable income at the time he or she is granted a nonstatutory stock
option. However, upon its exercise, the Optionee generally will recognize
taxable income generally measured as the excess of the then fair market
value of the shares purchased over the purchase price. Any taxable income
recognized in connection with an option exercise by an Optionee who is also
an employee of the Company may be subject to tax withholding by the
Company. Upon resale of such shares by the Optionee, any difference
between the sales price and the Optionee's purchase price, to the extent
not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding
period. The Company will be entitled to a tax deduction in the same amount
as the ordinary income recognized by the Optionee with respect to shares
acquired upon exercise of a nonstatutory stock option.

THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT OF
FEDERAL INCOME TAXATION UPON HOLDERS OF OPTIONS OR UPON THE COMPANY. IT ALSO
DOES NOT REFLECT PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.

PLAN BENEFITS

The Company cannot now determine the exact number of options to be
granted in the future under the 1997 Plan to the executive officers named
under "EXECUTIVE OFFICER COMPENSATION Summary Compensation Table," all
current executive officers as a group or all employees (including executive
officers) as a group. See "EXECUTIVE OFFICER COMPENSATION Stock Option
Grants and Exercises" for the number of stock options granted to the
executive officers named in the Summary Compensation Table in the fiscal
year ended November 1, 1997.

REQUIRED VOTE

The affirmative vote of the majority of the Votes Cast will be
required under Delaware law to approve the amendment to the 1997 Plan. For
this purpose, the term "Votes Cast" is defined under Delaware law to be the
shares of the Company's Common Stock present in person or represented by
proxy at the Annual Meeting and "entitled to vote on the subject matter."
Votes that are cast against the proposal will be counted for purposes of
determining (i) the presence or absence of a quorum for the transaction of
business and (ii) the total number of Votes Cast with respect to the
proposal. While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions in the counting of votes
with respect to a proposal such as the amendment to the 1997 Plan, the
Company believes that abstentions should be counted for purposes of
determining both (i) the presence or absence of a quorum for the
transaction of business and (ii) the total number of Votes Cast with
respect to the proposal. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner.
Accordingly, abstentions will have the same effect as a vote against the
proposal. In a 1988 Delaware case, Berlin v. Emerald Partners, the
Delaware Supreme Court held that, while broker nonvotes may be counted for
purposes of determining the presence or absence of a quorum for the
transaction of business, broker nonvotes 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. Accordingly, broker
nonvotes with respect to this proposal will not be counted as Votes Cast.

PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO
1991 EMPLOYEE STOCK PURCHASE PLAN

The 1991 Employee Stock Purchase Plan (the "Purchase Plan") provides
employees of the Company and its designated subsidiaries with an
opportunity to purchase Common Stock of the Company through accumulated
payroll deductions.

PROPOSED AMENDMENT

At the Annual Meeting, the stockholders are being asked to approve an
increase in the number of shares reserved for issuance under the Purchase
Plan from 675,000 shares to 775,000 shares. This increase was approved by
the Board of Directors, subject to stockholder approval, on December 5,
1997. Including the proposed 100,000 share increase, a total of 149,761
shares remained available for grant under the plan on February 6, 1998.

RECOMMENDATION

THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED AMENDMENT TO THE
PURCHASE PLAN AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR SUCH AMENDMENT.

DESCRIPTION OF PURCHASE PLAN

The essential features of the Purchase Plan are outlined below. Such
outline is qualified in its entirety by the provisions of the Purchase
Plan, a copy of which has been filed by the Company with the Securities and
Exchange Commission, and is incorporated herein by reference. Copies of
the Purchase Plan are available upon written request to the Company at 91
East Tasman Drive, San Jose, California 95134, Attn: Chief Financial
Officer.

Purpose

The purpose of the Purchase Plan is to provide employees (including
officers) of the Company with an opportunity to purchase Common Stock of
the Company through payroll deductions. The Purchase Plan is intended to
qualify under Sections 421 and 423 of the Code as an "employee stock
purchase plan."

Administration

The Purchase Plan is administered by the Board of Directors or a
Committee of the Board (the "Administrator").

Eligibility

Only employees employed by the Company or its subsidiaries on the
first day of an offering period may participate in the Purchase Plan. For
this purpose, an "employee" is any person who is regularly employed at
least twenty hours per week and at least five months per calendar year by
the Company or any of its subsidiaries. No employee shall be granted an
option under the Purchase Plan if immediately after the grant of the
option, the employee (or any other person whose stock would be attributed
to the employee pursuant to Section 424(d) of the Code) would own five
percent (5%) or more of the total combined voting power or value of the
stock of the Company or any of its subsidiaries. Subject to these
eligibility criteria, the Purchase Plan permits eligible employees to
purchase Common Stock through payroll deductions subject to certain
limitations described below.

Offering Period

Each offering of Common Stock under the Purchase Plan ("Offering") is
for a period of six months ("Offering Period"), unless the participant
withdraws or terminates employment earlier. The Administrator may change
the timing and duration of the Offering Periods without stockholder
approval if such change is announced at least fifteen (15) days prior to
the beginning of the first Offering Period to be affected. The initial
Offering Period under the Purchase Plan began on November 2, 1991. To
participate in the Purchase Plan, each eligible employee must authorize
payroll deductions pursuant to the Purchase Plan. Such payroll deductions
may not exceed 10% of a participant's eligible compensation. Once an
employee becomes a participant in the Purchase Plan, the employee will
automatically participate in each successive Offering Period until such
time as the employee withdraws from the Purchase Plan or the employee's
employment terminates. Eligible employees may participate in only one
Offering at a time.

Grant and Exercise of Option

At the beginning of each Offering Period, each participant is
automatically granted an option to purchase shares of the Company's Common
Stock. The option may be exercised at the end of an Offering Period to the
extent of the payroll deductions accumulated during such Offering Period.
In the event the option is not exercised, the option expires at the end of
the Offering Period or upon termination of employment, whichever is
earlier. The number of shares subject to the option will not exceed a
number determined by dividing $12,500 by the fair market value of the
Common Stock on the first day of the Offering Period. Participants may not
purchase shares having a fair market value exceeding $25,000 in any
calendar year. The Company may make a pro rata reduction in the number of
shares subject to options if the total number of shares which would
otherwise be subject to options granted at the beginning of an offering
period exceeds the number of shares remaining available for issuance under
the Purchase Plan. Unless an employee withdraws his or her participation
in the Purchase Plan by giving written notice to the Company of his or her
election to withdraw all accumulated payroll deductions prior to the end of
a purchase period, the employee's option for the purchase of shares will be
exercised automatically at the end of the purchase period, and the maximum
number of full shares subject to option which are purchasable with the
accumulated payroll deductions in his or her account will be purchased at
the applicable purchase price determined as provided below.

Purchase Price

The purchase price per share at which shares are sold to
participating employees is 85% of the lower of the fair market value per
share of the Common Stock on (i) the first day of the Offering Period or
(ii) the last day of the Offering Period. The fair market value of the
Common Stock on a given date is determined by reference to the last
reported sales price on the NASDAQ National Market System.

Payroll Deductions

The purchase price of the shares acquired is accumulated by payroll
deductions over the six-month Offering Period. The deductions may not
exceed 10% of a participant's aggregate eligible compensation. Eligible
compensation shall include all base straight time gross earnings, payments
for overtime, shift premium, incentive compensation, incentive payments,
bonuses, commissions and other compensation, provided that eligible
compensation shall include only base straight time gross earnings in the
event the first payroll following the offering date and continue until
participation is terminated. A participant may reduce the rate of payroll
deductions at any time during the Offering Period. Any participant may
discontinue his or her participation in the Purchase Plan at any time. The
rate of participation may be increased only for a new plan period. Upon
the withdrawal of a participant from the Purchase Plan, the Company returns
to the participant all funds credited to a participant's payroll deduction
account, without interest.

Termination of Employment

Termination of a participant's employment for any reason, including
retirement or death, or the failure of the participant to remain in the
continuous employ of the Company for in excess of 20 hours per week and 5
months per year during the applicable Offering Period, cancels his or her
option and his or her participation in the Purchase Plan immediately. In
such event, the payroll deductions credited to the participant's account
will be returned to him or her or, in the case of death, to the person or
persons entitled thereto as provided in the Purchase Plan.

Capital Changes

In the event any change is made in the Company's capitalization in
the middle of an Offering Period, such as a stock split or stock dividend,
which results in an increase or decrease in the number of shares of Common
Stock outstanding without receipt of consideration by the Company,
appropriate adjustment shall be made in the purchase price and in the
number of shares subject to options under the Purchase Plan.

Amendment and Termination of the Plan

The Board of Directors may at any time amend, alter or terminate the
Purchase Plan. No amendment may be made to the Purchase Plan without
approval of the stockholders of the Company if such amendment would
increase the number of shares reserved under the Purchase Plan, change the
standards of eligibility for participation in the Purchase Plan or
materially increase the benefits accruing to participants in the Purchase
Plan. In the event the Purchase Plan is terminated, the Board may elect to
terminate all outstanding options either immediately or upon completion of
the purchase of shares on the next purchase date, or may elect to permit
options to expire in accordance with their terms (and participation to
continue through such expiration dates).

Federal Income Tax Information

The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and
423 of the Code. Under these provisions, no income will be taxable to a
participant at the time of grant of the option or purchase of the shares.
Upon disposition of the shares, the participant will generally be subject
to tax. If the shares have been held by the participant for more than two
years after the date of option grant and more than one year after the
purchase date of the shares, the lesser of (a) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price of the shares subject to the option, or (b) 15% of the fair
market value of the shares on the first day of the offering period will be
treated as ordinary income, and any further gain upon such disposition will
be treated as long-term capital gain. If the shares are disposed of before
the expiration of the holding periods described above, the excess of the
fair market value of the shares on the exercise date over the option price
will be treated as ordinary income, and further gain or loss on such
disposition will be capital gain or loss. However, if the shares are
disposed of for less than the exercise price there is no ordinary income
and the participant recognizes a capital loss measured by the difference
between the exercise price and the sales price. Different rules may apply
with respect to participants subject to Section 16(b) of the Exchange Act.
The Company is not entitled to a deduction for amounts taxable to a
participant except to the extent of ordinary income taxable to a
participant upon disposition of shares prior to the expiration of the
holding periods described above.

THE FOREGOING IS ONLY A SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
PURCHASE PLAN TO PARTICIPANTS AND THE COMPANY. IN ADDITION, THE SUMMARY DOES NOT
DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF
ANY STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.

PLAN BENEFITS

The Company cannot now determine the exact number of shares to be
issued in the future under the Purchase Plan to the executive officers
named under "EXECUTIVE OFFICER COMPENSATION - Summary Compensation Table,"
all current executive officers as a group or all employees (including
executive officers) as a group. In the fiscal year ended November 1, 1997,
an aggregate of 7,445 shares of Common Stock of the Company were issued to
all executive officers as a group and an aggregate of 120,626 shares of
Common Stock of the Company were issued to all employees (including
executive officers) under the Purchase Plan.

REQUIRED VOTE

The affirmative vote of the majority of the Votes Cast will be
required under Delaware law to approve the amendment to the Purchase Plan.
For this purpose, the term "Votes Cast" is defined under Delaware law to be
the shares of the Company's Common Stock present in person or represented
by proxy at the Annual Meeting and "entitled to vote on the subject
matter." Votes that are cast against the proposal will be counted for
purposes of determining (i) the presence or absence of a quorum for the
transaction of business and (ii) the total number of Votes Cast with
respect to the proposal. While there is no definitive statutory or case
law authority in Delaware as to the proper treatment of abstentions in the
counting of votes with respect to a proposal such as the amendments of the
Purchase Plan, the Company believes that abstentions should be counted for
purposes of determining both (i) the presence or absence of a quorum for
the transaction of business and (ii) the total number of Votes Cast with
respect to the proposal. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner.
Accordingly, abstentions will have the same effect as a vote against the
proposal. In a 1988 Delaware case, Berlin v. Emerald Partners, the
Delaware Supreme Court held that, while broker nonvotes may be counted for
purposes of determining the presence or absence of a quorum for the
transaction of business, broker nonvotes 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. Accordingly, broker
nonvotes with respect to this proposal will not be counted as Votes Cast.

PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has appointed Ernst & Young LLP as the
Company's independent auditors to audit the books, records and accounts of
the Company for the current fiscal year ending October 31, 1998. Such
appointment is being presented to the stockholders for ratification at the
Annual Meeting. Representatives of Ernst & Young LLP will be present at
the Annual Meeting, will have the opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions
from stockholders.

THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE RAITIFCATION OF ITS
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.

<PAGE>

MANAGEMENT

The executive and other officers of the Company, and their ages as of January
1, 1998, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- -------------------- --- ------------------------------------------------
<S> <C> <C>
Robert L. Puette 55 President and Chief Executive Officer and Director

Dennis P. Wolf 45 Senior Vice President, Finance and Chief Financial
Officer

Robert M. Krueger 50 Senior Vice President, Product Development

Thomas E. Brunton 50 Vice President, Controller and Treasurer

James A. Donnelly 45 Vice President, Domestic Service Provider, Sales
and Service

Kevin J. Gralen 35 Vice President, Marketing

Catherine L. McMahon 45 Vice President, Domestic CPE Sales and Service

Carrie Perzow 40 Vice President, Human Resources

Chusak Siripocanont 44 Vice President, Manufacturing

John D. VerMeulen 56 Vice President, International Sales and Service

</TABLE>

Mr. Wolf joined Centigram in January 1997 as Senior Vice President,
Finance and Chief Financial Officer. From October 1995 to January 1997 he
was Vice President and Chief Financial Officer of Pyramid Technology, Inc.
From October 1993 to October 1995 he served as Vice President, Finance and
Chief Financial Officer of Dynacraft, Inc. From 1989 to 1993 Mr. Wolf held
various finance director positions with Apple Computer. His earlier
experience included his position as Finance Director of Sun Microsystems,
as well as management positions at Tandem Computers and IBM Corporation.

Mr. Krueger joined the Company as Senior Vice President, Product
Development in December 1997. Prior to joining the Company, Mr. Krueger
was the Vice President and General Manager of the Network Products Division
at Advanced Micro Devices, Inc. from 1990 to 1997. From 1968 to 1990,
Mr. Krueger held various management positions in product development at
Digital Equipment Corporation, Datapoint Corporation and Texas Instruments
Incorporated.

Mr. Brunton joined Centigram in March 1991 as Controller and became
Vice President and Controller in July 1995, and Treasurer in August 1997.
Mr. Brunton also serves as director of several subsidiaries of the Company:
Centigram Asia Limited, Centigram Australasia Pty Limited, Centigram
Communications (Barbados), Inc., Centigram Europe B.V., and Centigram UK
Limited. He earlier held accounting management positions with 3Com
Corporation and Sun Microsystems, Inc., and he was employed for eight years
by Coopers & Lybrand LLP in various auditing positions.

Mr. Donnelly joined Centigram in May 1997 as Vice President, Domestic
Service Provider, Sales and Service, and is responsible for overseeing all
North American sales and service activities for the service provider
segment of Centigram's business. Over the past 15 years, Mr. Donnelly has
held management positions in operations, sales and product management at
AT&T. He has also held engineering positions at Westinghouse Electric
Corporation, and prior to that, positions in sales at IBM and finance at
Ford Motor Company.

Mr. Gralen joined Centigram in December 1992 as Director of Strategic
Accounts. In April 1996, he was promoted to Senior Director of Strategic
Accounts. He became Vice President, Marketing in November 1996. Before
coming to Centigram, he held various management positions with IBM/Rolm.

Ms. McMahon joined Centigram in November 1989 and has held several
sales positions within the Company and became the Vice President, Customer
Premises Equipment Sales and Service in November 1997. Prior to joining
Centigram, Ms. McMahon held both sales and marketing positions at Octel
Communications Corporation and IBM/Rolm.

Ms. Perzow joined the Company as a Director of Human Resources in
February 1995 and became Vice President, Human Resources in September 1996.
Prior to joining the Company she served as a Senior Human Resources Manager
at Sun Microsystems, Inc. from 1989 to 1995, as a Human Resources
Generalist at 3Com Corporation from 1988 to 1989 and as a Human Resources
Director with Scientific Micro Systems from 1984 to 1988.

Mr. Siripocanont joined Centigram as Vice President, Manufacturing in
October 1993. From 1991 to 1993 he was Vice President, Manufacturing of
E-Mu Systems, Inc., a manufacturer of digital audio systems which became a
subsidiary of Creative Technology, Inc. in 1993. From 1988 to 1991 he
served as Director of Corporate Quality and Manufacturing Management for
Octel Communications Corporation. From 1980 to 1988, he held various
manufacturing management positions at IBM/Rolm.

Mr. VerMeulen joined the Company as a Sales Director in June 1989 and
became Vice President, Sales, Northern Region in November 1992, and Vice
President, International Sales and Service in October 1994. From 1986 to
1989 he was Vice President, Sales and Marketing of ComDev, Inc., a
telecommunications equipment manufacturer. Earlier, he served in various
sales and marketing positions, including Vice President, North Central
Division, and Vice President, National Accounts at United Technologies
Communications Company, a telecommunications equipment manufacturer.

CERTAIN TRANSACTIONS

The Company has entered into indemnification agreements with each of
its directors and executive officers. Such agreements require the Company
to indemnify such individuals to the fullest extent permitted by law.

The Company provided a loan of $300,000 to George Sollman, the
Company's then-President and Chief Executive Officer, on April 15, 1996,
pursuant to a full recourse note which was secured by 20,428 shares of
Common Stock. The Board of Directors of the Company approved the
substitution of a security interest in certain real property of Mr.
Sollman's for such Common Stock as collateral for the note. Interest on
the loan is 5.88% per annum, compounded annually, and the principal plus
all accrued but unpaid interest on the note are due on April 15, 2001. Mr.
Sollman resigned from his positions as the Company's President and Chief
Executive Officer, effective April 15, 1997.

In August 1997, the Company and Mr. Sollman entered into a Settlement
Agreement and Mutual Release (the "Settlement Agreement"). Pursuant to the
Settlement Agreement, the Company agreed to pay Mr. Sollman a net sum of
$289,320. In addition, the Company agreed to forgive a loan by the Company
to Mr. Sollman in principal amount of $300,000. Mr. Sollman agreed to
remain a consultant to the Company through May 1, 1998.

The Company provided a loan in the amount of $100,000 to Dennis
Barsema, pursuant to a promissory note dated February 18, 1997. Interest
on the loan was 5.81% per annum, compounded annually. The principal and
all accrued but unpaid interest was due on February 18, 2000, but
Mr. Barsema resigned as the Company's Senior Vice President and General
Manager, Service Provider, on November 3, 1997 and paid off the note with
accrued interest in December 1997.

OTHER INFORMATION

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

Section 16(a) of the Exchange Act requires certain of the Company's
executive officers, as well as its directors and persons who own more than
ten percent (10%) of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the Securities
and Exchange Commission.

Based solely on its review of the copies of such forms received by
the Company, or written representations from certain reporting persons, the
Company believes that during the Last Fiscal Year all executive officers
and directors complied with their filing requirements under Section 16(a)
for all reportable transactions during the year except that Robert Puette
filed one late Form 3.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of January 1, 1998 information
relating to the beneficial ownership of the Company's Common Stock by each
person known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Common Stock, by each director
and nominee for director, by each of the executive officers named in the
Summary Compensation Table, and by all directors and executive officers as
a group. As of January 1, 1998, 7,171,000 shares of the Company's Common
Stock were outstanding. Unless otherwise indicated, all persons named as
beneficial owners of Common Stock have sole voting power and sole
investment power with respect to the shares indicated as beneficially
owned.

Number Approximate
of Shares Percentage
Name Owned Owned
- ------------------------------------------ ---------------- -----------
Kopp Investment Advisors (1) ............. 1,514,199 21.1%
7701 France Avenue, Suite 500
Edina, MN 55435
Parnassus Investments (2) ................ 535,000 7.5%
One Market Steuart Tower
Suite 1600
San Francisco, CA 94105
Dimensional Fund Advisers, Inc. (3) ...... 411,100 5.7%
1099 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Robert L. Puette ...................... 0 *
George H. Sollman(4) ................... 124,679 1.7%
Dennis L. Barsema .................... 10,293 *
Dennis P. Wolf (4) ..................... 15,118 *
Michael J. Wagner ...................... 2,045 *
Thomas E. Brunton (4) .................. 27,454 *
Carrie J. Perzow (4) ................... 14,472 *
James H. Boyle(4) ...................... 16,416 *
Doug Change (4) ........................ 3,111 *
James F. Gibbons(4) .................... 37,083 *
Edward R. Kozel ........................ 0 *
David S. Lee (4) ....................... 8,333 *
Dean O. Morton(4) ...................... 32,833 *
All directors and executive officers
as a group (13 persons)(4) .......... 291,837 4.0%

- ------------------
* Less than one percent (1%).
(1) Based on information provided in Schedule 13G filed by Kopp Investment
advisors on November 9, 1997, Kopp Investment Advisors has sole voting
power as to 240,000 shares.
(2) Based on information provided in the Form N-30D filed by Parnassus
Investments on November 17, 1997.
(3) Based on information provided in the Form 13-F filed by Dimensional
Fund Advisors, Inc. on January 8, 1998.
(4) Includes shares issuable upon exercise of stock options presently
exercisable within 60 days of January 1, 1998 as follows: Mr. Sollman,
34,329 shares; Mr. Wolf, 13,454 shares; Mr. Brunton, 13,907 shares;
Ms. Perzow, 13,858 shares; Mr. Boyle, 15,416 shares; Mr. Chance, 1,111
shares; Mr. Gibbons, 17,083 shares; Mr. Lee, 8,333 shares; Mr. Morton,
30,833 shares; and all directors and executive officers as a group,
148,324 shares.

EXECUTIVE OFFICER COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows, as to each Chief Executive Officer during
the Last Fiscal Year, each of the four other most highly compensated
executive officers whose salary plus bonus exceeded $100,000 and up to two
former executive officers who would have been included if they had been
executive officers at the end of the Last Fiscal Year, information
concerning compensation paid for services to the Company in all capacities
during the Last Fiscal Year as well as the total compensation paid to each
such individual for the Company's previous two fiscal years (if such person
was the Chief Executive Officer or an executive officer, as the case may
be, during any part of the Last Fiscal Year).

Long Term All
Annual Compensation Compensation Other
-------------------------------------------- ------------- Compen-
Name and Principal Position Year Salary Bonus (1) Other (2) Options (3) sation
(S) ($) ($) ($) ($)
- --------------------------- ------ --------- -------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Puette(4) 1997 31,386 -- -- 350,000 937 (5)
President and Chief
Executive Officer

George H. Sollman(6) 1997 674,572 (7) -- 4,150 125,000 41,259 (5)
President and Chief 1996 250,473 70,000 1,085 50,000 17,787 (8)
Executive Officer 1995 243,006 30,000 1,922 30,000 13,042 (9)

Dennis L. Barsema(6) 1997 362,523 (7)(10)254,177 (11) 1,000 103,999 10,564 (5)
Senior Vice President 1996 129,787 100,878 (12) -- 105,000 74,835 (8)
and General Manager,
Service Provider
Division

Dennis P. Wolf 1997 145,387 72,800 1,500 120,000 5,056 (5)
Senior Vice President,
Chief Financial Officer

Michael J. Wagner(6) 1997 182,311 (7) -- -- 51,996 7,382 (5)
Senior Vice President, 1996 145,970 25,000 -- 40,000 6,197 (8)
Operations and Services 1995 90,860 20,000 -- 25,000 4,445 (9)

Thomas E. Brunton 1997 150,048 25,000 275 51,098 6,185 (5)
Vice President, Controller 1996 137,312 25,000 215 -- 5,604 (8)
and Treasurer 1995 125,888 20,000 215 13,600 2,395 (9)

Carrie J. Perzow 1997 150,000 45,000 1,000 57,399 5,296 (5)
Vice President, 1996 131,244 15,000 -- 28,500 580 (7)
Human Resources

<FN>
- ----------------
(1) Bonus amounts are reported for the fiscal year in which earned without
regard to when paid.
(2) The amounts included in this column represent amounts reimbursed by the
Company for tax preparation fees.
(3) Represents number of shares granted under stock options. The Company has
not granted stock appreciation rights or restricted stock awards.
(4) Mr. Puette became President and Chief Executive Office of the Company
in September 1997.
(5) The amounts disclosed in the "All Other Compensation" column include:
(a) Payments by the Company in 1997 of premiums for term life insurance on
behalf of each of: Mr. Puette, $437; Mr. Sollman, $7,680;
Mr. Barsema, $677; Mr. Wolf, $756; Mr. Wagner, $1,403; Mr. Brunton,
$1,385; and Ms. Perzow, $496. This benefit is extended to all
employees.
(b) Payment by the Company in 1997 of car allowances as follows:
Mr. Puette, $500; Mr. Sollman, $2,500; Mr. Barsema, $9,600;
Mr. Wolf, $4,300; Mr. Wagner, $4,800; Mr. Brunton, $4,800;
and Ms. Perzow, $4,800.
(c) Payment by the Company of expenses for annual physical examinations in
the amount of $287 on behalf of Mr. Barsema.
(d) Payment of consulting fees of $15,200 and Board of Director meeting
fees in the amount of $14,700 on behalf of Mr. Sollman.
(e) Payments by the Company in 1997 of travel expenses in the amount
of $1,179 for Mr. Sollman, and $1,179 for Mr. Wagner, which
represents the cost of their spouses' attendance of the annual
sales recognition trip.
(6) Mr.Sollman, Mr. Barsema, and Mr. Wagner no longer serve as executive
officers of the Company.
(7) Includes $541,639, $176,563, and $81,730 paid as severance to Mr.
Sollman, Mr. Barsema, and Mr. Wagner, respectively.
(8) The amounts disclosed in the "All Other Compensation" column include:
(a) Payments by the Company in 1996 of premiums for group term life
insurance on behalf of each of Mr. Sollman, $10,890; Mr. Barsema,
$435; Mr. Wagner, $1,397; Mr. Brunton, $804; and Ms. Perzow, $280.
This benefit is extended to all employees.
(b) Payment by the Company in 1996 of car allowances as follows:
Mr. Sollman, $6,000; Mr. Barsema, $4,400; Mr. Wagner, $4,800;
Mr. Brunton, $4,800; and Ms. Perzow, $300.
(c) Payment by the Company of expenses for annual physical examinations
in the amount of $604 on behalf of Mr. Sollman.
(d) Payment by the Company of relocation expenses on behalf of Mr.
Barsema in the amount of $70,000.
(e) Payment by the Company of car insurance on behalf of Mr. Sollman
in the amount of $293.
(9) The amounts disclosed in the "All Other Compensation" column include:
(a) Payments by the Company in 1995 of premiums for group term life
insurance on behalf of each of Mr. Sollman, $6,222; Mr. Wagner,
$845; and Mr. Brunton, $695. This benefit is extended to all
employees.
(b) Payment by the Company in 1995 of car allowances in the amount of
$6,000 to Mr. Sollman; $3,600 to Mr. Wagner; and $1,700 to Mr.
Brunton.
(c) Payment by the Company in 1995 of personal travel expenses in the
amount of $820 on behalf of Mr. Sollman, which represents the
cost of Mr. Sollman's spouse's attendance of the annual sales
recognition trip.
(10) Includes $176,538 accrued compensation paid in fiscal 1998.
(11) Includes a commission paid in 1997 in the amount of $16,577.
(12) Includes a commission paid in 1996 in the amount of $65,878.

</FN>
</TABLE>

STOCK OPTION GRANTS AND EXERCISES

The following tables set forth information with respect to options
granted to the named executive officers and the options exercised by such
named executive officers during the Last Fiscal Year.

STOCK OPTION GRANTS IN FISCAL YEAR 1997

The Option Grant Table sets forth hypothetical gains or "option
spreads" for the options at the end of their respective five-year terms, as
calculated in accordance with the rules of the Securities and Exchange
Commission. Each gain is based on an arbitrarily assumed annualized rate
of compound appreciation of the market price at the date of grant of five
percent (5%) and ten percent (10%) from the date the option was granted to
the end of the option term. Actual gains, if any, on option exercises are
dependent on the future performance of the Company's Common Stock and
overall market conditions.

STOCK OPTION GRANTS IN FISCAL YEAR 1997
Individual Grants
--------------------------------------------
% of Potential Realizable
Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted Exercise Price Appreciation for
Underlying to or base Expir- Option Term
Options Employees Price ation -----------------------
Name Granted (1) in 1997 ($/share) Date 5% ($) 10% ($)
- --------------------- ----------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Puette 350,000 17.27 16.94 09/30/07 4,190,508 10,184,625
George H. Sollman(2) 125,000 6.17 13.50 12/10/06(4) 1,086,711 2,729,968
Dennis L. Barsema(2)(3) 20,000 0.99 11.50 05/27/07(4) 136,501 353,592
45,655 2.25 10.38 09/12/06(4) 361,114 811,889
11,832 0.58 10.38 06/02/07(4) 101,330 234,099
26,512 1.31 10.38 01/03/06(4) 193,638 423,916
Dennis P. Wolf 50,000 2.46 17.75 10/24/07 553,094 1,406,406
50,000 2.46 9.63 03/24/07 302,406 766,739
20,000 0.99 11.50 05/27/07 136,501 353,592
Michael J. Wagner(2)(3) 3,999 0.20 10.38 07/25/00(4) 12,712 21,256
3,999 0.20 10.38 12/01/00(4) 13,656 23,406
15,999 0.80 10.38 02/27/00(4) 46,610 75,519
27,999 1.38 10.38 09/12/06(4) 221,462 497,910
Thomas E. Brunton(3) 10,000 0.49 13.50 12/10/06 86,937 218,397
7,500 0.37 11.50 05/27/07 51,188 132,597
23,598 1.16 10.38 12/10/06 117,456 240,159
10,000 0.49 17.75 10/24/07 110,619 281,281
Carrie J. Perzow (3) 10,000 0.49 11.50 05/27/07 68,251 176,796
23,554 1.16 10.38 06/02/07 201,718 466,021
8,845 0.44 10.38 09/12/06 69,961 157,292
15,000 0.74 17.75 10/24/07 165,928 421,922

<FN>

- ----------------
(1) Represents number of shares granted under stock options. The Company did
not grant stock appreciation rights or restricted stock awards in fiscal
1997.
(2) Mr. Sollman, Mr. Barsema, and Mr. Wagner no longer serve as executive
officers of the Company.
(3) Included in these grants in fiscal year 1997 were shares granted as a
result of the Company's June 1997 stock option repricing. As part of this
stock repricing, shares previously granted under the Company's stock plans
were canceled and new grants were issued in a 5-for-4 exchange ratio.
Stock option grants issued in fiscal 1997 as part of this repricing
program were as follows: Mr. Barsema, 83,999 shares; Mr. Wagner, 51,996
shares;Mr. Brunton, 23,598 shares; and Ms. Perzow, 32,399 shares.
(4) All options granted to Messrs. Sollman, Barsema, and Wagner have expired,
as they are no longer employed by the Company.

</FN>
</TABLE>

AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1997 AND YEAR-END VALUES

The following table sets forth information with respect to the named
executive officers concerning the exercise of options during 1997, and
unexercised options held as of November 1, 1997.

Total Value
of Unexercised
Number of Unexercised In-the-Money Stock
Shares Stock Options Held Options Held at
Acquired at Fiscal Year End, 1997 atFiscal Year End (1)
on Value -------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- --------- ----------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Puette -- -- -- 350,000 -- --
George H. Sollman(2).... -- -- 124,754 100,480 $76,748 $314,502
Dennis L. Barsema(2) ... -- -- 28,543 75,456 178,394 449,200
Dennis P. Wolf ......... -- -- -- 120,000 -- 452,600
Michael J. Wagner(2)... -- -- 23,032 28,964 143,950 181,025
Thomas E. Brunton ...... 2,500 21,875 12,513 28,585 78,206 107,756
Carrie J. Perzow ....... -- -- 11,452 45,947 71,206 182,588

<FN>
- ---------------
(1) Total value of vested options based on fair market value of Company Common
Stock of $16.63 per share as of November 1, 1997.
(2) Mr. Sollmon, Mr. Barsema, and Mr. Wagner no longer serve as executive
officers of the Company.
</FN>
</TABLE>

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

The Board of Directors on October 24, 1997 approved change-in-control
agreements with all of the Company's outside directors and executive
officers, and certain key employees of the Company. The change-in-control
agreements provide that in the event of a merger, consolidation, tender
offer, sale of assets or similar event resulting in stockholders of
Centigram receiving less than fifty percent (50%) of the outstanding voting
stock of the surviving corporation (a "Change in Control"), the vesting of
such person's outstanding options will be accelerated by two (2) years from
the date of the Change in Control, in the case of executive officers and
key employees, and in the case of outside directors, the options shall
become fully vested. In the event an executive officer or key employee is
involuntarily terminated within twelve (12) months of a Change in Control,
all of such person's outstanding options will become fully vested, and such
person will receive as severance pay six (6) months of his or her base
salary, in the case of a key employee, or twelve (12) months of his or her
base salary and bonus, in the case of an executive officer. Involuntary
terminations for willful misconduct do not trigger the change-in-control
provisions.

In August 1997, the Company and George Sollman, the Company's former
President and Chief Executive Officer, entered into a Settlement Agreement
and Mutual Release. See "Certain Transactions."

In September 1997, Mr. Puette was hired as the Company's President
and Chief Executive Officer pursuant to an offer letter dated September 24,
1997. Pursuant to the offer letter, Mr. Puette will receive an annual base
salary of $340,000 and will participate in the Company's Executive Bonus
Program. Mr. Puette also received an option to purchase 350,000 shares of
the Company's Common Stock. In the event of a Change in Control of the
Company, the vesting of Mr. Puette's option will be accelerated by two
years. Additionally, in the event of Mr. Puette's involuntary termination
for reasons other than cause within one year after such a change in
control, Mr. Puette will receive accelerated vesting of all of his
outstanding options as of the date of termination, and severance pay equal
to eighteen months of his base salary and bonus, as well as eighteen months
of ongoing benefits. The Company intends to formalize Mr. Puette's
employment relationship with the Company with an employment agreement.

COMPENSATION COMMITTEE REPORT

From November 1996 to October 1997, the Compensation Committee of the
Company consisted of James H. Boyle, James F. Gibbons, J. Michael Jarvis
and Dean O. Morton, and from October 1997 to the end of the fiscal year,
the Compensation Committee consisted of Dean Morton, David Lee and James
Gibbons. Each of such directors at the time of serving on the Compensation
Committee was an independent director of the Company. The Committee is
responsible for administering the Company's compensation and benefits
programs. The Committee sets executive salary levels, establishes the
Company's executive bonus plan and determines target bonuses thereunder,
and determines option grants under the Company's stock option programs.

The Company's executive compensation program has been designed to
ensure that the compensation provided to executive officers is closely
aligned with the Company's financial performance and, ultimately, the
creation of stockholder value, and to ensure that the Company can attract
and retain key executives critical to the Company's long-term success.

The Committee establishes the salary of each executive officer,
including the Chief Executive Officer, by considering (i) the salaries of
executive officers in similar positions with comparably sized companies in
the Company's and related industries, based upon survey data obtained from
various sources, (ii) the experience and contribution levels of the
individual executive officers, (iii) the Company's financial performance
during the past year, and (iv) in the case of executive officers other than
the Chief Executive Officer, the recommendations of the Chief Executive
Officer.

Under the Company's executive bonus plan for the Last Fiscal Year,
executive officers were entitled to receive bonuses based primarily upon
achievement by the Company of operating income performance objectives
established by the Compensation Committee at the commencement of the Last
Fiscal Year. Executive officers, including the CEO, were also entitled to
receive additional bonuses at the discretion of the Committee based upon
individual performance. For financial performance below a specified level,
executive officers were not entitled to any bonus except at the discretion
of the Committee, and for performance in excess of plan executives were
entitled to the full performance-based bonus plus such additional bonuses
as the Committee might determine in its discretion. Based upon the
Company's financial performance in the Last Fiscal Year, the Committee
awarded bonuses to executive officers other than the Chief Executive
Officer, consisting of discretionary bonuses awarded for performance
relative to personal objectives, in the amount of up to 66% of base salary.
The Chief Executive Officer did not receive a bonus during the Last Fiscal
Year.

For fiscal 1998, the executive bonus program provides for the payment
of performance-related bonuses based upon achievement by the Company of
operating income performance objectives established by the Committee at the
commencement of the fiscal year, and, at the discretion of the Committee,
performance against individual goals. In the event that the Company
achieves operating income performance less than a specified level, the
executive officers will receive no bonuses except at the discretion of the
Committee. If the Company meets its financial performance goals, and if
the executive officers meet their specified individual goals, the Chief
Executive Officer is entitled to a performance-based bonus of 50% of base
salary and other executive officers are entitled to performance-based
bonuses of 10% to 40% of base pay, and higher performance-based bonuses
can be earned for operating income achieved above the target levels.

The fiscal year 1997 bonus program provides for a portion of the
full-year performance bonus to be paid at mid-year, based upon achievement
of targeted operating income performance for the first half of the year.

The Committee also grants stock options to executive officers to
provide long-term incentive to the executive officers aligned with the
creation of increased stockholder value over time. The Committee grants
options based upon a number of factors, including each such officer's
responsibilities and position in the Company, any changes in the executive
officer's responsibility and position, and the executive officer's existing
equity interest in the Company in the form of vested and unvested options.
All options are granted at the current market price of the Company's Common
Stock on the date of grant. During the Last Fiscal Year, the Committee
granted options to purchase an aggregate of 475,000 shares of Common Stock
to the Chief Executive Officers at an exercise price of from $13.50 to
$16.94 per share. Options to purchase an aggregate of 574,587 shares of
Common Stock were also granted to nine other executive officers (including
four who no longer serve as executive officers) at exercise prices ranging
from $10.38 to $17.75 per share. Included in these shares granted to
executive officers were 255,670 shares granted in fiscal year 1997 as part
of the Company's June 1997 stock option repricing (the "Repricing"). As
part of the Repricing, 319,587 shares previously granted were canceled.

The principal purpose of the Company's 1997 Plan is to provide an
equity incentive to employees to remain in the employment of the Company
and to work diligently in its best interests. The Board of Directors
determined that this purpose would not be achieved for employees holding
options exercisable at prices above the market price of the Company's
Common Stock, and further determined that it was critical to the best
interests of the Company and to its stockholders that the Company retain
the services of these employees. As such, the Board of Directors offered
to all employees, other than individuals currently serving on the Board of
Directors, with outstanding options to purchase the Common Stock of the
Company the opportunity to exchange such options for new nonstatutory
and/or incentive stock options at a price per share equal to the closing
price of the Company's Common Stock on the Nasdaq National Market System on
April 11, 1997. The following table provides information with respect to
the Repricing.

TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at New Remaining at
Options Time of Time of Exercise Date of
Name Date Repriced Repricing Repricing Price Repricing
($) ($) ($) ($)
- -------------------- --------- --------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Puette 6/2/97 -- -- -- -- --
George L. Sollman 6/2/97 -- -- -- -- --
Dennis L. Barsema 6/2/97 35,998 11.63 19.50 10.38 3.59 years
6/2/97 48,001 11.63 15.63 10.38 9.28 years
Dennis P. Wolf 6/2/97 -- -- -- -- --
Michael J. Wagner 6/2/97 15,999 11.63 14.63 10.38 2.74 years
6/2/97 3,999 11.63 13.75 10.38 3.15 years
6/2/97 3,999 11.63 21.50 10.38 3.50 years
6/2/97 27,999 11.63 15.63 10.38 9.28 years
Thomas E. Brunton 6/2/97 1,999 11.63 13.50 10.38 9.52 years
6/2/97 2,400 11.63 35.50 10.38 1.39 years
6/2/97 2,000 11.63 19.00 10.38 2.42 years
6/2/97 3,200 11.63 12.63 10.38 2.65 years
6/2/97 7,999 11.63 13.75 10.38 3.15 years
6/2/97 6,000 11.63 13.50 10.38 9.52 years
Carrie J. Perzow 6/2/97 9,600 11.63 14.63 10.38 2.70 years
6/2/97 2,800 11.63 21.50 10.38 3.50 years
6/2/97 19,999 11.63 15.63 10.38 9.28 years

</TABLE>

No member of the Compensation Committee is a former or current
executive officer or employee of the Company.

Compensation Committee

J. Michael Jarvis (from November 1996 to October 1997)
James H. Boyle (from November 1996 to October 1997)
David S. Lee (from October 1997 to Present)
James F. Gibbons
Dean O. Morton

<PAGE>
PERFORMANCE GRAPH

Set forth below is a line graph comparing the annual percentage
change in the cumulative total return among Centigram Communications
Corporation, the S&P 500 Index and the H&Q Technology Index, from October
3, 1992 through November 1, 1997, the end of the Last Fiscal Year.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*

[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<TABLE>
<CAPTION>

10/03/92 10/02/93 10/01/94 10/28/95 11/02/96 11/01/97
- ------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Centigram Communications Corporation 100 464 236 304 188 238
S & P 500 100 113 117 151 188 248
Hambrecht & Quist Technology 100 132 151 268 286 386

*$100 invested on 10/03/92 in stock or on
9/30/92 in index, including reinvestment
of dividends.
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee has a relationship that would
constitute an interlocking relationship with executive officers or
directors of another entity.

OTHER MATTERS

The Board of Directors does not intend to bring before the meeting
any matters other than those set forth herein, and has no present knowledge
that any other matters will or may be brought before the meeting by others.
If, however, 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
proxies in accordance with their judgment.

Dated: February 27, 1998

BY ORDER OF THE
BOARD OF DIRECTORS

<PAGE>
APPENDIX A

CENTIGRAM COMMUNICATIONS CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Robert L. Puette and Dennis P. Wolf, and
each of them, as Proxies, each with the power to appoint his or her substitute
and hereby authorizes them to represent and to vote, as designated on the
reverse side, all the shares of Common Stock, par value $0.001 per share
("Common Stock") of Centigram Communications Corporation ("Centigram") held of
record by the undersigned on February 6, 1998, at the annual meeting of
stockholders to be held on March 31, 1998 and any adjournment thereof.

---------------
SEE REVERSE
SIDE
--------------

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

<PAGE>

[X] Please mark votes as in this example.

This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Doug Chance, James F. Gibbons and Edward R. Kozel as Directors and will be
voted FOR Proposals 2, 3 and 4.

1. ELECTION OF CLASS III DIRECTORS TO THE BOARD OF DIRECTORS OF CENTIGRAM:

Nominees: Doug Chance, James F. Gibbons and Edward R. Kozel.

FOR [ ] WITHHOLD [ ]

[ ] __________________________________________
For three nominees except as noted above

2. PROPOSAL TO APPROVE AN AMENDMENT TO THE CENTIGRAM 1997 STOCK OPTION PLAN
to increase the number of shares of Common Stock reserved for issuance
thereunder from 375,000 to 730,000 shares:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. PROPOSAL TO APPROVE AMENDMENT OF THE CENTIGRAM 1991 EMPLOYEE STOCK PURCHASE
PLAN to increase the number of shares of Common Stock reserved for issuance
thereunder from 675,000 shares to 775,000 shares:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. PROPOSAL TO RATIFY the appointment to Ernst & Young LLP as Centigram's
independent auditors for the fiscal year ending October 31, 1998:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

5. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

Signature: Date:
----------------------------------- -----------------
Signature: Date:
------------------------------------ -----------------