SYSTEMSOFT CORP, DEF 14A, 1998-05-28

SYSTEMSOFT CORP
DEF 14A, 1998-05-28
PREPACKAGED SOFTWARE

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<PAGE> 1

SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

SYSTEMSOFT 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)(4) 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
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:

- --------------------------------------------------------------------------------
<PAGE> 2

SYSTEMSOFT CORPORATION
ONE INNOVATION DRIVE
NATICK, MASSACHUSETTS 01760

May 28, 1998

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders of
SystemSoft Corporation (the "Company") to be held at 8:30 a.m., Massachusetts
time, on July 1, 1998, at the Crowne Plaza Hotel, 1360 Worcester Road (Route 9
East), Natick, Massachusetts 01760.

At this meeting, you will be asked to elect five directors to the Company's
Board of Directors, each to serve until the next annual meeting of stockholders
of the Company and to approve an amendment to the Company's 1994 Employee Stock
Purchase Plan. The Board of Directors unanimously recommends that you vote FOR
each of these proposals.

Whether or not you plan to attend the meeting, please complete, sign and
date the accompanying proxy card and return it in the enclosed postage prepaid
envelope. It is important that your shares be voted whether or not you attend
the meeting in person. If you attend the meeting, you may vote in person even if
you have previously returned your proxy card. Your prompt cooperation will be
greatly appreciated.

We look forward to seeing you.

Sincerely,

ROBERT F. ANGELO
Chief Executive Officer and
Chairman of the Board
<PAGE> 3

SYSTEMSOFT CORPORATION
ONE INNOVATION DRIVE
NATICK, MASSACHUSETTS 01760

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 1, 1998

To the Stockholders of SystemSoft Corporation:

Notice is hereby given that the Annual Meeting of Stockholders of
SystemSoft Corporation, a Delaware corporation (the "Company"), will be held at
8:30 a.m., Massachusetts time, on July 1, 1998, at the Crowne Plaza Hotel, 1360
Worcester Road (Route 9 East), Natick, Massachusetts 01760, for the following
purposes:

1. To elect five directors to the Company's Board of Directors, each to
serve until the next annual meeting of stockholders of the Company and
until the director's successor is elected and qualified, or until the
director resigns, is removed or becomes disqualified.

2. To approve an amendment to the Company's 1994 Employee Stock Purchase
Plan increasing the number of shares issuable thereunder from 700,000 to
1,100,000.

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

Only stockholders of record at the close of business on May 5, 1998 are
entitled to notice of and to vote at the meeting.

All stockholders are cordially invited to attend the meeting in person. To
ensure your representation at the meeting, however, you are urged to sign and
return the enclosed proxy card as promptly as possible in the enclosed
postage-prepaid envelope. You may revoke your proxy in the manner described in
the accompanying Proxy Statement at any time before it has been voted at the
annual meeting. Any stockholder attending the annual meeting may vote in person
even if he or she has returned a proxy.

By Order of the Board of Directors,

JEFFREY R. WAKELY
Secretary

May 28, 1998

- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
- --------------------------------------------------------------------------------
<PAGE> 4

SYSTEMSOFT CORPORATION
ONE INNOVATION DRIVE
NATICK, MA 01760

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

PROXY STATEMENT
MAY 28, 1998

This Proxy Statement is being furnished to holders of common stock, par
value $.01 per share ("Common Stock"), of SystemSoft Corporation, a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board") for use at the Annual
Meeting of the Company's stockholders to be held at 8:30 a.m., Massachusetts
time, on July 1, 1998, and at any adjournments or postponements thereof (the
"Meeting"), at the Crowne Plaza Hotel, 1360 Worcester Road (Route 9 East),
Natick, Massachusetts 01760. The Company's 1998 Annual Report, containing
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations for the fiscal year ended January 31, 1998,
is being mailed contemporaneously with this Proxy Statement to all stockholders
entitled to vote at the Meeting. This Proxy Statement and the form of proxy were
first mailed to stockholders on or about May 28, 1998.

The purpose of the Meeting is to (i) elect five directors to the Company's
Board of Directors, each to serve until the next annual meeting of stockholders
of the Company and until the director's successor is elected and qualified, or
until the director resigns, is removed or becomes disqualified and (ii) approve
an amendment to the Company's 1994 Employee Stock Purchase Plan increasing the
number of shares issuable thereunder from 700,000 to 1,100,000.

The Board has fixed the close of business on May 5, 1998 as the record date
(the "Record Date") for the determination of the Company's stockholders entitled
to notice of, and to vote at, the Meeting. Accordingly, only holders of record
of Common Stock as of the close of business on the Record Date will be entitled
to notice of, and to vote at, the Meeting or an adjournment thereof. As of the
Record Date, 26,698,751 shares of the Company's Common Stock were issued and
outstanding. The holders of Common Stock are entitled to one vote per share on
any proposal presented at the Meeting. Stockholders may vote in person or by
proxy. Execution of a proxy will not in any way affect a stockholder's right to
attend the Meeting and vote in person. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
voted. Proxies may be revoked by (1) filing with the Secretary of the Company,
before the taking of the vote at the Meeting, a written notice of revocation
bearing a later date than the proxy, (2) duly executing a later dated proxy
relating to the same shares and delivering it to the Secretary of the Company
before the taking of the vote at the Meeting or (3) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to SystemSoft Corporation,
One Innovation Drive, Natick, Massachusetts 01760, Attention: Secretary, at or
before the taking of the vote at the Meeting.

The persons named as attorneys in the proxy are Robert F. Angelo, Paul J.
Pedevillano and Deborah M. Besemer. All shares of Common Stock that are entitled
to vote and are represented at the Meeting by properly executed proxies received
prior to or at the Meeting and not duly and timely revoked, will be voted at
such Meeting in accordance with the instructions indicated in such proxies. If
no instructions are indicated, such proxies will be voted FOR the matters set
forth in the accompanying Notice of Meeting.
<PAGE> 5

The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business at the Meeting. Votes
withheld from any nominee, abstentions and broker "non-votes" are counted as
present or represented for purposes of determining the presence or absence of a
quorum. A "non-vote" occurs when a broker holding shares for a beneficial owner
votes on one proposal, but does not vote on another proposal because the broker
does not have discretionary voting power and has not received instructions from
the beneficial owner. Directors are elected by a plurality of the votes cast by
stockholders entitled to vote at the Meeting. With respect to the amendment to
the Company's 1994 Employee Stock Purchase Plan (the "Purchase Plan"), the
Purchase Plan and federal tax regulations provide that the affirmative vote of
the majority of stock present or represented by proxy, and voting for or against
this matter, is required for approval. The Delaware courts have interpreted
"abstention" to mean the voluntary decision not to vote and therefore
abstentions are included in the number of shares present or represented and
voting on each matter. Broker "non votes," on the other hand, are not considered
to have been voted for this matter and have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated. An
automated system administered by the Company's transfer agent tabulates the
votes. The vote on each matter submitted to stockholders is tabulated
separately.

The Board knows of no other matter to be presented at the Meeting. If any
other matters are properly presented for consideration at the Meeting (or any
adjournment or postponements thereof), the persons named in the enclosed form of
proxy and voting thereunder will have the discretion to vote on such matters in
accordance with their best judgment.

2
<PAGE> 6

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of May 5, 1998 (i) by each person who
is known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) by each director of the Company, (iii) by each
executive officer of the Company named in the Summary Compensation Table and
(iv) by all directors and executive officers of the Company as a group. Unless
otherwise indicated below, to the knowledge of the Company, all persons listed
below have sole voting and investment power with respect to their shares of
Common Stock, except to the extent authority is shared by spouses under
applicable law.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE OF SHARES
NAME OF BENEFICIAL OWNER OWNED BENEFICIALLY OWNED
------------------------ ------------------- --------------------
<S> <C> <C>
Robert F. Angelo................................... 643,250(1) 2.4%
Jonathan L. Joseph................................. 219,896(2) *
William J. O'Connell............................... 158,687(3) *
David P. Sommers................................... 98,129(4) *
Paul J. Pedevillano................................ 189,127(5) *
Thomas W. Higgins.................................. 86,150(6) *
Robert N. Goldman.................................. 259,640(7) *
W. Frank King, Ph.D................................ 51,530(8) *
David J. McNeff.................................... 12,500(9) *
Deborah M. Besemer................................. 10,000 *

Intel Corporation.................................. 2,004,292(10) 7.5%
2200 Mission College Blvd.
Santa Clara, CA 95052

All directors and executive officers as a group (7
persons)(11)..................................... 1,385,943(12) 5.2%
</TABLE>

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

* Represents less than 1% of the outstanding Common Stock.

(1) Includes 611,250 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options. Also includes 32,000 shares held by Mr.
Angelo's spouse.

(2) Includes 178,500 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options.

(3) Includes 108,499 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options.

(4) Consists of 98,129 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options.

(5) Includes 134,750 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options.

(6) Includes 4,222 shares held by Mr. Higgins' spouse and 74,124 shares which
may be acquired within sixty days of May 5, 1998 by exercise of stock
options.

(7) Includes 59,374 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options.

(8) Includes 32,500 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options.

3
<PAGE> 7

(9) Consists of 12,500 shares which may be acquired within sixty days of May 5,
1998 by exercise of stock options.

(10) Based solely on information contained in a Schedule 13G filed with the
Securities and Exchange Commission on February 7, 1997. As of May 5, 1998,
no more recently dated Schedule 13G was on file with the Securities and
Exchange Commission with respect to the shares held by Intel Corporation.

(11) Consists of executive officers and directors as of May 5, 1998, which
include Mr. Angelo, Mr. Joseph, Mr. Pedevillano, Mr. Goldman, Mr. King, Mr.
McNeff and Ms. Besemer.

(12) Includes 32,000 shares held by Mr. Angelo's spouse and 1,028,874 shares
that the executive officers and directors as a group may acquire within
sixty days of May 5, 1998 by exercise of stock options.

PROPOSAL 1

ELECTION OF DIRECTORS

There are currently five members of the Board of Directors. The Board has
fixed the number of directors for the ensuing year at five and nominated Robert
F. Angelo, Deborah M. Besemer, Robert N. Goldman, W. Frank King and David J.
McNeff for reelection to the Board. Directors elected at the meeting will serve
until the next annual meeting of stockholders and until their successors are
elected and qualified or until the directors resign, are removed or become
disqualified.

The following information is furnished with respect to each nominee for
election as a director.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
BUSINESS EXPERIENCE DURING
DIRECTOR LAST FIVE YEARS;
NAME AND AGE AS OF MAY 5, 1998 SINCE DIRECTORSHIPS OF PUBLIC COMPANIES
------------------------------ -------- ---------------------------------

<S> <C> <C>
Robert F. Angelo, 51............................ 1990 The founder of the Company, Mr. Angelo has
been Chief Executive Officer and a director
of the Company since its inception in
January 1990, President from January 1990
until November 1997 and Chairman of the
Board of Directors since February 1996.

Deborah M. Besemer, 43.......................... 1997 Ms. Besemer joined the Company in November
1997 as President, Chief Operating Officer
and a director. Prior to joining the
Company, Ms. Besemer served as executive
vice president of worldwide field operations
from October 1996 to November 1997, senior
vice president of worldwide sales from
September 1995 to October 1996, and vice
president of the Americas from 1990 to 1995
for Lotus Development Corp., a software and
services company.
</TABLE>

4
<PAGE> 8

<S> <C> <C>
Robert N. Goldman, 48........................... 1991 Mr. Goldman served as Chairman of the Board
of Directors of the Company from April 1992
until February 1996. Mr. Goldman has been
President, Chief Executive Officer and
Chairman of the Board of Directors of Object
Design Inc., a marketer of object-oriented
software products, since November 1995. Mr.
Goldman was Chairman of the Board of Trinzic
Corporation (formerly AI Corp.), a marketer
of knowledge base/computer-aided software
engineering products, from September 1992 to
August 1995, after having served as its
Chief Executive Officer from August 1986 to
September 1992. Mr. Goldman is a director of
Intersolv, a software development and
marketing company, Citrix Systems, Inc., a
multi-user application server software
company, and Parametric Technology
Corporation, a developer of mechanical
design software.

W. Frank King, Ph.D., 58........................ 1992 Dr. King has been President of PSW
Technologies, Inc. (formerly Pencom
Software), a software services firm, since
October 1992 and Chief Executive Officer and
a director since October 1996. From March
1988 to October 1991, Dr. King was Senior
Vice President of the Software Business
Group at Lotus Development Corp. Dr. King is
a director of Excalibur Technologies
Corporation, a document management company,
Auspex Systems, Inc., a file server software
company, and Natural Microsystems, Inc., a
developer and marketer of hardware and
software for the telecommunications and
computer telephony marketplace.

David J. McNeff, 46............................. 1995 Mr. McNeff has been President of Peak
Productivity Systems, an executive sales
training company and principal of Boston
Corporate Advisors, an executive benefits
company, since October 1997. From November
1993 to September 1997 Mr. McNeff was the
President of The Bullfinch Group, Inc., an
insurance and investment agency. From 1977
to October 1993, Mr. McNeff was the owner
and President of McNeff and Associates, an
insurance and investment agency.
</TABLE>

All shares of Common Stock that are entitled to vote and are represented at
the Meeting by properly executed proxies received prior to or at the Meeting and
not duly and timely revoked, will be voted at such Meeting in accordance with
the instructions indicated in such proxies. Shares represented by all proxies

5
<PAGE> 9

received by the Board and not marked so as to withhold authority to vote for any
nominee to the Board will be voted (unless the nominees are unable or unwilling
to serve) FOR the election of the nominees named above. The election of the
directors will be determined by a plurality of the votes cast at the Meeting.
The Board knows of no reason why any of the nominees would be unable or
unwilling to serve, but if such should be the case, proxies may be voted for the
election of other persons.

DIRECTORS' COMPENSATION

During the fiscal year ended January 31, 1998 ("Fiscal 1998"), members of
the Board received $2,500 for each meeting of the Board attended and $1,000 for
each meeting of the audit committee attended. Directors are also reimbursed for
their reasonable out-of-pocket expenses incurred in attending meetings. There
are no family relationships among any of the executive officers or directors of
the Company.

The Company's 1994 Non-Employee Director Stock Option Plan (the "Directors
Plan") is administered by the Compensation Committee of the Company. Subject to
availability of shares under the Directors Plan, a director who is not a current
or former employee or officer of the Company shall be automatically granted at
each annual meeting of the Board during the term of the Directors Plan an option
to purchase 10,000 shares of Common Stock at fair market value as of the date of
grant. Each person who becomes a director who is not a current or former
employee or officer of the Company will receive a grant of 30,000 shares on the
date such person is first elected to the Board. As of May 5, 1998, options to
purchase 75,000 shares of Common Stock were outstanding under the Directors
Plan, of which options to purchase 15,049 shares of Common Stock were then
exercisable, and 110,000 shares of Common Stock were reserved for future option
grants under the Directors Plan.

The Company's 1992 Directors' Stock Option Plan, as amended (the "1992
Directors' Plan") was adopted by the Board of Directors and approved by the
stockholders on January 30, 1992. The 1992 Directors' Plan provides for the
grant to non-employee directors of options for the purchase of up to 150,000
shares of Common Stock of the Company, all of which were outstanding as of May
5, 1998. The Board of Directors has provided that no further grants shall be
made under the 1992 Directors' Plan.

MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES

The Board met five times and took action by unanimous written consent three
times during Fiscal 1998. The Board has a standing Audit Committee and a
standing Compensation Committee. The Audit Committee, which oversees the
accounting and financial functions of the Company and consults with and reviews
the services provided by the Company's independent auditors, met four times
during Fiscal 1998. Messrs. Goldman, King and McNeff are the current members of
the Audit Committee. The Compensation Committee of the Company, which reviews
and makes recommendations to the Board concerning executive compensation and
employee benefits policy, and administers the Company's stock option plans and
Directors Plan, transacted business through three meetings and twelve written
consents during Fiscal 1998. Messrs. King and McNeff are the current members of
the Compensation Committee. The Board does not have a standing nominating
committee for directors.

During Fiscal 1998, all of the Company's directors attended at least 75
percent of the total number of meetings of the Board and at least 75 percent of
the total number of meetings of all committees of the Board on which they
served, except for Mr. King who attended at least 50 percent of the total number
of meetings of the Board and at least 50 percent of the total number of meetings
of all committees of the Board on which he served.

6
<PAGE> 10

EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation for
services rendered to the Company, in all capacities, for the fiscal years ended
January 31, 1998, January 31, 1997 and January 31, 1996, of those persons who
were at January 31, 1998 (i) the chief executive officer, (ii) the other four
most highly compensated executive officers and (iii) one former executive
officer who would have been one of the four other most highly compensated
executive officer had he remained an executive officer, in the case of clauses
(ii) and (iii) whose total salary and bonus exceeded $100,000 during the fiscal
year ended January 31, 1998 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- -------------
SECURITIES
UNDERLYING/ ALL OTHER
YEAR SALARY BONUS OPTIONS(#)(1) COMPENSATION(2)
---- ------ ----- ------------- ---------------

<S> <C> <C> <C> <C> <C>
Robert F. Angelo(3)........................ 1998 $225,000 $158,000(4) 150,000 $19,775
President, Chief Executive Officer and 1997 225,000 -- 500,000 22,099
Chairman of the Board of Directors 1996 200,000 100,000 40,000 23,111

Jonathan L. Joseph......................... 1998 207,014(5) -- 62,500 465
Executive Vice President, Marketing 1997 197,565(5) -- 112,500 1,942
Business and Product Strategy 1996 195,066(5) 35,000 20,000 994

Paul J. Pedevillano........................ 1998 177,011(6) 30,000 57,000 --
Executive Vice President Finance, 1997 144,500(6) -- 27,000 2,302
Chief Financial Officer and Treasurer 1996 130,000 40,000 20,000 998

William J. O'Connell(7).................... 1998 235,014(8) -- 63,000 8,050
Executive Vice President, Sales 1997 173,841(8) -- 113,000 1,273
1996 271,202(8) -- 25,000 994

Thomas W. Higgins(9)....................... 1998 199,708(10) -- 63,000 854
Vice President, Global Account Sales 1997 138,483(10) -- 13,000 862
1996 226,043(10) 10,000 220,000 874

David P. Sommers(11)....................... 1998 150,644 -- -- 65,171(12)
Senior Vice President, 1997 129,083 16,100 147,500 4,600
Finance, Chief Financial Officer and 1996 -- -- -- --
Treasurer
</TABLE>

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

(1) The Company did not grant any restricted stock awards or stock appreciation
rights or make any long-term incentive plan payouts during the year ended
January 31, 1998.

(2) Represents premiums paid by the Company on group life insurance policies
for the benefit of each of the Named Executive Officers and a whole life
policy for the benefit of Mr. Angelo.

(3) On November 25, 1997 Deborah M. Besemer replaced Mr. Angelo as President of
the Company.

(4) $75,000 of the bonus paid to Mr. Angelo in fiscal year 1998 was due to the
cancellation of options granted in fiscal year 1997.

(5) Includes sales commissions of $60,000, $37,565 and $38,816 for fiscal years
1998, 1997 and 1996, respectively.

(6) Includes sales commissions of $20,000 and $14,500 for fiscal years 1998 and
1997, respectively.

(7) Mr. O'Connell resigned his employment with the Company on February 26,
1998.

(8) Includes sales commissions of $60,000, $31,341 and $141,202 for fiscal
years 1998, 1997 and 1996, respectively.

7
<PAGE> 11

(9) Mr. Higgins resigned his employment with the Company on May 8, 1998.

(10) Includes sales commissions of $75,000, $28,483 and $122,293 for fiscal
years 1998, 1997 and 1996, respectively.

(11) Mr. Sommers joined the Company in February 1996 and resigned his employment
with the Company in July 1997.

(12) Includes $64,000 paid by the Company to Mr. Sommers in consideration of the
cancellation of certain stock options previously granted to Mr. Sommers.

OPTIONS AND STOCK PLANS

Option Grant Table. The following table sets forth certain information
regarding options granted during Fiscal 1998 by the Company to the Named
Executive Officers.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATE OF STOCK
PERCENT OF PRICE APPRECIATION
TOTAL OPTIONS FOR OPTION
GRANTED TO TERM(3)($)
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR(1)(%) BASE PRICE(2)($) DATE 5% 10%
---- ---------- ----------------- ---------------- ---------- -------- ----------

<S> <C> <C> <C> <C> <C> <C>
Robert F. Angelo......... 150,000 6.45% $7.375 5/2/07 $695,715 $1,763,078
Jonathan L. Joseph....... 50,000 2.15% 7.375 5/2/07 231,905 587,693
12,500 0.54% 7.375 5/2/07 57,976 146,923
Paul J. Pedevillano...... 50,000 2.15% 7.375 5/2/07 231,905 587,693
7,000 0.30% 7.375 5/2/07 32,467 82,277
William J. O'Connell..... 50,000 2.15% 7.375 5/2/07 231,905 587,693
13,000 .56% 7.375 5/2/07 60,295 152,800
Thomas W. Higgins........ 50,000 2.15% 7.375 5/2/07 231,905 587,693
13,000 .56% 7.375 5/2/07 60,295 152,800
David P. Sommers......... -- -- -- -- -- --
</TABLE>

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

(1) Based on 2,326,900 options granted to employees in Fiscal 1998.

(2) All options were granted at fair market value as of the last business day
immediately preceding the date of the grant, which means the last reported
sale price on that date of the Common Stock on the Nasdaq National Market.

(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration dates. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not represent
an estimate by the Company of its future stock price growth. Actual gains,
if any, on stock option exercises and Common Stock holdings are dependent on
the timing of such exercise and the future performance of Common Stock.
There can be no assurances that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by the
individuals.

8
<PAGE> 12

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Value Table. The following table sets forth information with respect to options
to purchase the Company's Common Stock granted under the Company's 1994 Omnibus
Stock Plan to the Named Executive Officers who are listed in the Summary
Compensation Table above, including (i) the number of shares of Common Stock
purchased upon exercise of options in the fiscal year ended January 31, 1998;
(ii) the net value realized upon such exercise; (iii) the number of unexercised
options outstanding at January 31, 1998; and (iv) the value of such unexercised
options at January 31, 1998:

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED,
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED YEAR-END(#) YEAR-END(1)($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Robert F. Angelo.............. -- -- 520,000 468,750 $997,688 $70,313
Jonathan L. Joseph............ -- -- 161,625 124,375 330,206 32,969
Paul J. Pedevillano........... -- -- 112,875 76,875 324,281 24,219
William J. O'Connell.......... -- -- 118,499 126,251 153,567 31,915
Thomas W. Higgins............. -- -- 61,624 152,500 133,437 86,094
David P. Sommers.............. -- -- 89,380 50,620 -- --
</TABLE>

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

(1) Value is based on the difference between the option exercise price and the
fair market value on the last day of Fiscal 1998 ($5.375 per share)
multiplied by the number of shares underlying the option.

9
<PAGE> 13

STOCK PERFORMANCE GRAPH

The Stock Price Performance Graph set forth below compares the cumulative
total stockholder return on Common Stock from August 4, 1994, the effective date
of the Company's initial public offering, to January 31, 1998, with the
cumulative total return of the Standard & Poor's Computer Software and Services
Index and the Standard & Poor's 500 Index. The comparison assumes $100 was
invested on August 4, 1994 in the Company's Common Stock, in the Standard &
Poor's Computer Software and Services Index and in the Standard & Poor's 500
Index and assumes reinvestment of dividends, if any.

[PERFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
Computer
Measurement Period SystemSoft S&P 500 (Software &
(Fiscal Year Covered) Corp. Index SVC)-500
<S> <C> <C> <C>
8/94 100.00 100.00 100.00
1/95 129.55 103.80 114.70
1/96 231.86 143.93 175.31
1/97 500.09 181.85 285.20
1/98 195.49 230.78 391.42
</TABLE>

The stock price performance shown on the graph above is not necessarily
indicative of future price performance. Information used in the graph was
obtained from Standard & Poor's Compustat, Custom Products Division, a source
believed to be reliable, but the Company is not responsible for any errors or
omissions in such information.

10
<PAGE> 14

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is comprised of two
outside directors. The Compensation Committee works with management to develop
compensation plans for the Company and is directly responsible for determining
the compensation of the Chief Executive Officer and recommending such
compensation to the Board of Directors. The compensation of the other executive
officers is determined by both the Chief Executive Officer and the Compensation
Committee.

The Company's executive compensation program is designed to align executive
compensation with the Company's business objectives and the executive's
individual performance and to enable the Company to attract, retain and reward
executive officers who contribute, and are expected to continue to contribute,
to the Company's long-term success. In establishing executive compensation, the
Compensation Committee is guided by the following principals: (i) the total
compensation payable to executive officers should be sufficiently competitive
with the compensation paid by other companies in the software industry for
officers in comparable positions so that the Company can attract and retain
qualified executives; (ii) individual compensation should include components
that reflect the financial performance of the Company and the performance of the
individual, including leadership and the achievement of corporate objectives;
and (iii) align the interests of management with those of stockholders by
including long-term equity incentives.

The compensation of the Company's executive officers consists of a
combination of base salary, equity-based compensation, incentive bonuses and
commissions paid to those executive officers with direct sales responsibilities.
The Compensation Committee believes that executive compensation should be
designed to motivate executives to increase shareholder value and further
believes that executive officers can best increase shareholder value by
increasing the operating profit of the Company and by conceiving, developing and
positioning the best products in the Company's chosen markets.

In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply to compensation that
constitutes "qualified performance based compensation" within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder. The
Compensation Committee does not expect cash compensation in the fiscal year
ended January 31, 1999 paid to its Chief Executive Officer or any other named
executive officer to exceed $1 million. Certain stock based compensation awards
have been granted without regard to Section 162(m).

Base Salaries. The Compensation Committee sets the base salary for the
Chief Executive Officer. The Chief Executive Officer sets the base salaries for
the other executives by reviewing the salaries for comparable positions in other
companies, the historical compensation levels of the Company's executives and
the individual performance of the executives in the preceding year. Both the
Compensation Committee and the Chief Executive Officer utilize salary surveys
for reference purposes but their salary determinations are not subject to
specific criteria. In addition, executive officers whose primary
responsibilities are in the area of sales and marketing are entitled to receive
commissions based primarily on the Company's revenues or a specific portion of
these revenues.

Incentive Bonus Program. Each year, the Compensation Committee prescribes
a management incentive plan which reflects the Compensation Committee's belief
that a portion of each executive officer's compensation should be tied to the
achievement by the Company of its profit goals and by each executive officer of
his or her individual objectives. The Company's incentive bonus program is paid
to executive officers on a quarterly basis and is based on achievement of the
Company's financial goals and on individual merit.

Equity-Based Compensation. Awards of stock options under the Company's
stock option plans are designed to more closely tie the long-term interests of
the Company's executives and its shareholders and to assist in the retention of
executives. The Compensation Committee selects the executive officers, if any,
to

11
<PAGE> 15

receive stock options and determines the number of shares subject to each
option. The Compensation Committee's determination of the size of option grants
is generally intended to reflect an executive's position with the Company and
his or her contributions to the Company. Options generally have a four-year
vesting period to encourage key employees to continue in the employ of the
Company. The Compensation Committee reviews the outstanding unvested options of
the key executives from time to time and may grant additional options to
encourage the retention of key executives. Despite the fact that the Company did
not meet its earnings goals for Fiscal 1998, the Compensation Committee believes
that the stock-based compensation was necessary to help ensure the retention of
those executives whose performance is critical to the Company's ability to
respond successfully to the challenges it faces.

Compensation of Chairman of the Board and Chief Executive Officer. The
Chief Executive Officer's compensation level was based on the Compensation
Committee's subjective assessment of the Company's Fiscal 1997 financial
performance, external market data regarding executive compensation levels at
other local companies and the Company's accomplishments in Fiscal 1997. The
Compensation Committee granted 150,000 additional stock options to Mr. Angelo in
May, 1997 because the Compensation Committee believed that it was critical to
the Company to insure the continued services of its founder and Chief Executive
Officer. A significant portion of Mr. Angelo's Fiscal 1998 bonus was paid due to
the cancellation of options previously granted in Fiscal 1997. These options
were cancelled because the grant inadvertently exceeded the limitations under
the Company's 1994 Omnibus Stock Plan. The remaining bonus compensation was paid
to Mr. Angelo for achieving revenue and profitability goals in the first and
second quarter of Fiscal 1998.

Compensation of President and Chief Operating Officer. In November 1997,
Deborah M. Besemer was appointed Chief Operating Officer, President and a
Director of the Company. The Compensation Committee considered multiple factors
in determining the appropriate compensation package for Ms. Besemer, including,
but not limited to, Ms. Besemer's prior compensation package as Executive Vice
President of worldwide field operations at Lotus Development Corp., and industry
peer compensation packages for presidents of similarly situated high-tech
companies. The Compensation Committee found that it needed a larger compensation
package than what Mr. Angelo was then receiving as the President to attract the
talent and experience that the Compensation Committee believed was necessary to
lead the Company. As part of the Besemer compensation plan, the Compensation
Committee decided to issue a significant number of stock options to Ms. Besemer
to renew and reinforce the Company's commitment to use stock options as a
significant component of long-term compensation for executive officers and to
align the executive's interests with the long term growth of the Company.

Ms. Besemer and the Company entered into an employment agreement dated
January 8, 1998. Pursuant to the employment agreement, Ms. Besemer's annual base
salary was established as $250,000, with a guaranteed annual bonus of $100,000
payable concurrently with base salary. Ms. Besemer may be entitled to an
additional bonus of 50% of base salary and guaranteed annual bonus, which is
$175,000, provided certain revenue and profit goals are attained. Ms. Besemer
was granted stock options on November 25, 1997 to purchase an aggregate of
1,000,000 shares of Common Stock at an exercise price of $6.5625 per share of
which 25% vest on November 25, 1998, and the remaining options vest at the rate
of 6.25% every three months thereafter until fully vested. Such options were
subsequently repriced by the Board on February 11, 1998 to $4.50 per share, the
closing price per share of Common Stock on the NASDAQ National Market as of
March 9, 1998.

Compensation Committee

W. Frank King, Ph.D.
David J. McNeff

12
<PAGE> 16

EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company has entered into the following employment and/or severance
agreements with the Named Executive Officers:

Mr. Angelo and the Company entered into an employment agreement dated June
28, 1991. The employment agreement provides that Mr. Angelo's employment may be
terminated by either party upon sixty days' prior written notice or by the Board
of Directors immediately for cause. In the event of termination by the Company
with or without cause, and as partial consideration for Mr. Angelo's continuing
covenant not to compete against the Company for one year following such
termination, Mr. Angelo will be entitled to 80% of base salary for six months
from the date of termination and 20% of base salary for the subsequent six
months and the continuation of certain fringe benefits. These payments and
benefits continue even if Mr. Angelo accepts employment with another company.
The employment agreement also provides for the Company's proprietary right to
all confidential information, intellectual property and work product. Mr.
Angelo's base salary for Fiscal 1998 was $225,000. Mr. Angelo's agreement
provides for certain fringe benefits and leaves to the Board of Directors'
discretion any bonus payments and increases in base salary.

Mr. Joseph and the Company entered into an employment agreement dated
January 8, 1998. The employment agreement provides that Mr. Joseph's employment
may be terminated immediately by either party upon notice by the terminating
party. In the event of termination by the Company without cause, and as partial
consideration for the employee's continuing covenant not to compete against the
Company for one year following such termination, Mr. Joseph will be entitled to
the salary and bonus benefits guaranteed under the employment agreement for a
period of one year from the date of such termination. These payments continue
even if Mr. Joseph accepts employment with another company. The employment
agreement also provides for the Company's proprietary right to all confidential
information, intellectual property and work product. Mr. Joseph's employment
agreement provides for a base salary in the amount of $175,000, an annual bonus
of up to 50% of base salary provided certain goals are attained, and certain
fringe benefits, but leaves to the Board of Directors' discretion any increases
in base salary.

Mr. Pedevillano and the Company entered into an employment agreement dated
April 26, 1993. The employment agreement may provides that Mr. Pedevillano's
employment be terminated immediately by either party upon notice by the
terminating party. In the event of termination by the Company without cause, and
as partial consideration for Mr. Pedevillano's continuing covenant not to
compete against the Company for one year following such termination, Mr.
Pedevillano will be entitled to 80% of base salary for a period of six months
from the date of termination and 20% of base salary for the subsequent six
months and the continuation of certain fringe benefits. These payments and
benefits continue even if Mr. Pedevillano accepts employment with another
company. The employment agreement also provides for the Company's proprietary
right to all confidential information, intellectual property and work product.
Mr. Pedevillano's initial base salary of $130,000 for Fiscal 1998 was increased
to $175,000 during the year. Mr. Pedevillano's agreement provides for certain
fringe benefits and leaves to the Board of Directors' discretion any bonus
payments and increases in base salary.

Mr. Higgins and the Company entered into an employment agreement dated
September 20, 1995. The employment agreement may be terminated immediately by
either party upon notice by the terminating party. In the event of termination
by the Company without cause, and as partial consideration for Mr. Higgins'
continuing covenant not to compete against the Company for one year following
such termination, Mr. Higgins will be entitled to 80% of base salary for six
months from the date of such termination and 20% of base salary for the
subsequent six months and the continuation of certain fringe benefits. These
payments and benefits continue even if Mr. Higgins accepts employment with
another company. The employment agreement also provides for the Company's
proprietary right to all confidential information, intellectual property and
work product. Mr. Higgins' initial base salary of $110,000 for Fiscal 1998 was
increased to

13
<PAGE> 17

$130,000 during the year. Mr. Higgins' agreement provides certain fringe
benefits and leaves to the Board of Directors' discretion any increases in base
salary and bonus payments. On May 8, 1998, Mr. Higgins' employment with the
Company was terminated.

In connection with Mr. Sommers' resignation of his employment as of July
31, 1997, Mr. Sommers and the Company entered into a severance and release
agreement dated July 16, 1997. Pursuant to the severance and release agreement,
the Company agreed to provide a one year continuation of Mr. Sommers' base
salary in the amount of $150,000 which is payable semi-monthly, a payment of
$64,000 in exchange for cancellation of options to purchase 7,500 shares of
Common Stock and accelerated vesting of options to purchase 50,000 shares of
Common Stock. Additionally, the Company appointed Mr. Sommers to its Advisory
Committee until at least May 31, 1998 and provided that as long as Mr. Sommers
remains a member of such committee, any options previously granted to Mr.
Sommers shall not be canceled and shall continue to vest in accordance with
terms thereof. The severance and release agreement also provides for a mutual
release between Mr. Sommers and the Company.

Mr. O'Connell and the Company entered into an employment agreement dated
December 28, 1997. The employment agreement was terminated by Mr. O'Connell
effective February 28, 1998. Prior to its termination, the employment agreement
provided for a base salary in the amount of $175,000 and an annual bonus of
$87,500 to be paid at the discretion of the Company, but left to senior
management's discretion any increases in base salary. The employment agreement
also granted to Mr. O'Connell a right to exercise any stock options granted to
him at any time regardless of whether the options had vested, and provided that
until such options had vested in accordance with the terms of the stock option
grant, the Company had the right to purchase the shares of stock issued pursuant
to the exercise of the grant price paid by Mr. O'Connell (the "Stock Option
Rights"). Pursuant to the employment agreement and a letter agreement dated
February 26, 1998, the Company agreed to hire Mr. O'Connell as a consultant to
the Company for a fourteen week period commencing March 2, 1998 and ending June
15, 1998 for consulting fees in the aggregate amount of $70,000. Pursuant to the
employment agreement, as partial consideration for a continuing covenant not to
compete against the Company and as additional consideration for entering into
the consulting arrangement, commencing March 2, 1998, the Company agreed to
provide eighteen months continuation of Mr. O'Connell's base salary in the
aggregate amount of $262,500, which is payable semi-monthly. These payments
continue even if Mr. O'Connell accepts employment with another company. The
Company agreed to appoint Mr. O'Connell to the Company Advisory Committee as of
March 1, 1998 and continuing until August 31, 1999, during which time any
options previously granted to Mr. O'Connell shall not be canceled and the
vesting thereof shall continue according to the terms of the respective options.
Additionally, during this period, the Company continues to provide Mr. O'Connell
with the Stock Option Rights and certain fringe benefits. The Company also paid
$50,380 to Mr. O'Connell for the sole purpose of paying the exercise price for
options to purchase 26,875 shares of Common Stock which were issued to Mr.
O'Connell as of February 18, 1998.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee are Messrs. King and McNeff. No
member of the Compensation Committee was at any time during the past year an
officer or employee of the Company or any of its subsidiaries, or was formerly
an officer of the Company or any of its subsidiaries.

The Company retains PSW Technologies, Inc. ("PSW"), a software services
firm, to provide engineering consulting services to the Company in connection
with certain product development. Mr. King, a director of the Company, is
President, Chief Executive Officer, a Director and an owner of seven percent of
the outstanding common stock of PSW. In connection with the consulting services
provided by PSW, the Company has paid to PSW, $865,007 and $530,981, in Fiscal
1998 and 1997, respectively.

14
<PAGE> 18

During the last year, no executive officer of the Company served as a
member of the compensation committee (or other Board of Directors committee
performing equivalent functions or, in the absence of any such committee, the
entire Board of Directors) of another entity, one of whose executive officers
served as a member of the Compensation Committee or as a director of the
Company. In addition, during the last year, no executive officer of the Company
served on the Board of Directors of another entity, one of whose executive
officers served as a member of the Compensation Committee.

CERTAIN TRANSACTIONS

In December 1993, the Company entered into a Development and License
Agreement (the "Intel Agreement") with Intel Corporation ("Intel"), which
currently owns approximately 7.5% of the Company's Common Stock, pursuant to
which Intel licenses certain technologies to the Company. The Company develops,
markets and supports the software developed from Intel's technology. The final
payment under the Intel Agreement was received in September 1995. In
consideration of Intel's technology provided and licensed to the Company under
the Intel Agreement, the Company is obligated to pay Intel royalties based on a
percentage of revenues generated on all licensed works developed under the Intel
Agreement. Royalties are based upon a percentage of revenues generated on PC
Card software from February 1, 1994 through January 31, 1999 or beyond such
dates if the Company's PC Card software contains Intel's licensed technology.
The royalties paid to Intel are included in cost of revenues. Intel has the
right on sixty days notice to convert any exclusive license to a non-exclusive
license, however such conversion would reduce the royalty payments by fifty
percent.

In October 1995 the Intel Agreement was amended to include engineering
services on additional products. The agreement provides the Company with
engineering service payments up to $3,600,000, which included an initial payment
of $600,000 and subsequent quarterly payments of $375,000 commencing on January
1, 1996, through October 1, 1997. Payments to the Company can be made by
offsetting amounts from royalties due to Intel under the Intel Agreement, to the
extent, if any, that such earned royalties are less than the amounts payable to
the Company. Royalties earned by Intel of $1,164,080, $951,507 and $452,278 were
used to offset amounts owed to the Company in fiscal 1998, 1997 and 1996,
respectively. In December 1997, the Company entered into an agreement with Intel
which requires the Company to make guaranteed payments of $4,263,000 in lieu of
future royalties which would have been paid over the life of certain of the
Company's call avoidance software products. The guaranteed payments are
comprised of $1,022,000 of cash payments made in fiscal 1998 and $3,241,000 of
cash payments to be paid at various dates during fiscal 1999 and 2000.

PROPOSAL 2

AMENDMENT TO THE 1994 EMPLOYEE STOCK PURCHASE PLAN

On May 1, 1998, the Board of Directors of the Company adopted an amendment
to the 1994 Employee Stock Purchase Plan (the "Purchase Plan"), subject to the
approval of the Company's stockholders, increasing the number of shares issuable
thereunder from 700,000 to 1,100,000. The purpose of the increase in the
aggregate number of shares available for issuance is to permit the Company to
continue to provide its employees with an opportunity to participate in the
growth of the Company through the purchase of Common

15
<PAGE> 19

Stock at a discount from the market value of the Company's Common Stock for
issuance in order to continue to attract, retain and motivate employees of the
Company.

Approval by stockholders of this amendment increasing the number of shares
issuable under the Purchase Plan is sought in order to meet the stockholder
approval requirements of the Purchase Plan itself and Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), which require
stockholder approval of any increase in the number of shares that may be issued
under an employee stock purchase plan. The Board of Directors unanimously
recommends a vote FOR the approval of this amendment to the Purchase Plan.

The following is a summary description of the Purchase Plan, which is
qualified in its entirety by reference to the complete text of the form of
Purchase Plan, as amended and restated which is attached as Appendix A to this
Proxy Statement.

SUMMARY OF THE COMPANY'S PURCHASE PLAN

The Purchase Plan was adopted by the Board of Directors on June 8, 1994 and
approved by the stockholders on July 28, 1994. It was subsequently amended by
the Board of Directors on November 28, 1995, with the approval of the
stockholders on June 19, 1996. An aggregate of 700,000 shares of Common Stock is
reserved for issuance pursuant to this plan. The Purchase Plan will remain in
effect until June 8, 2004, subject to the Board's right to terminate it earlier.

The Purchase Plan is administered by the Board of Directors. All employees
of the Company whose customary employment is in excess of 20 hours per week and
more than five months per year, other than those employees who own 5% or more of
the stock of the Company, are eligible to participate in the Purchase Plan. The
Purchase Plan will be implemented by one or more offerings of such duration as
the Board may determine, provided that no offering period may be longer than 27
months. An eligible employee participating in an offering will be able to
purchase Common Stock at a price equal to the lesser of: (i) 85% of its fair
market value on the date the right was granted; or (ii) 85% of its fair market
value on the date the right was exercised. Payment for Common Stock purchased
under the Purchase Plan will be through regular payroll deduction or lump sum
cash payment, or both, as determined by the Board. The maximum value of Common
Stock an employee may purchase during an offering period is 15% of the
employee's base compensation during such period, calculated on the basis of the
employee's compensation rate on the date the employee elects to participate in
that offering, provided that no participant may purchase in any calendar year
shares of Common Stock having an aggregate fair market value of greater than
$25,000. As of May 5, 1998 there were 115,594 shares of Common Stock available
for issuance under the Purchase Plan.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

Federal Income Tax Consequences. The Purchase Plan is intended to qualify
as an Employee Stock Purchase Plan under Section 423 of the Code. Assuming the
Purchase Plan so qualifies, the following discussion summarizes certain U.S.
federal income tax considerations for persons receiving options under the
Purchase Plan and certain tax effects on the Company, based upon the provisions
of the Code as in effect on the date of this Proxy Statement, current
regulations and existing administrative rulings of the IRS. However, the summary
is not intended to be a complete discussion of all the federal income tax
consequences of this plan:

1. The amounts deducted from an employee's pay under the Purchase Plan
will be included in the employee's compensation subject to Federal income
tax. Subject to certain requirements, generally no additional income will
be recognized by the employee either at the time options are granted
pursuant to the Purchase Plan or at the time the employee purchases shares
pursuant to the Purchase Plan.

16
<PAGE> 20

2. If the employee disposes of Common Stock purchased pursuant to the
Purchase Plan more than two years after the first business day of the
Payment Period in which the employee acquired the shares, then upon such
disposition the employee will recognize ordinary income in an amount equal
to the lesser of:

(a) the excess, if any, of the fair market value of the shares at
the time of disposition over the amount the employee paid for the
shares, or

(b) the excess of the fair market value of the shares on the first
business day of the Payment Period over the option price.

3. If the employee disposes of shares purchased pursuant to the
Purchase Plan within two years after the first business day of the Payment
Period in which the employee acquired the shares, then upon disposition the
employee will generally recognize ordinary income in an amount equal to the
excess, if any, of the fair market value of the shares on the last business
day of the applicable Payment Period over the amount the employee paid for
the shares.

In addition, the employee generally will recognize capital gain or
loss in an amount equal to the difference between the amount realized upon
the sale of the shares and the employee's tax basis in the shares (i.e.,
the amount the employee paid for the shares plus the amount, if any, taxed
to the employee as ordinary income). If the employee's holding period for
the shares is more than one year, such gain or loss will generally be
long-term capital gain or loss.

4. If the employee disposes of shares purchased pursuant to the
Purchase Plan more than two years after the first business day of the
Payment Period, the Company will not be entitled to a corresponding Federal
income tax deduction with respect to such shares. If this two-year holding
period is not satisfied, the Company generally will be entitled to a
federal income tax deduction in an amount equal to the amount which is
taxable to the employee as ordinary income.

OPTION INFORMATION

The following table sets forth the number of shares which have been issued
to date under the Purchase Plan to (i) each Named Executive Officer, (ii) the
current (as of May 5, 1998) executive officers as a group, (iii) each person who
received five percent (5%) of such options and (iv) all employees, including all
current officers who are not executive officers, as a group. Non-employee
directors are not eligible to participate in the Purchase Plan.

<TABLE>
<S> <C>
Robert F. Angelo, Chief Executive Officer and Chairman of
the Board of Directors.................................... 13,800
Jonathan L. Joseph, Executive Vice President, Marketing..... 12,796
Paul J. Pedevillano, Executive Vice President Finance,
Chief Financial Officer and Treasurer..................... 9,928
William J. O'Connell, Executive Vice President, Sales(1).... 15,884
Thomas W. Higgins Vice President, Global Account Sales(2)... 13,665
David P. Sommers, Senior Vice President, Finance, Chief
Financial Officer and Treasurer(3)........................ --
Current executive officers as a group (7 persons)........... 36,524
Any person who has received 5%.............................. --
All employees who are not executive officer as a group...... 547,882
</TABLE>

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

(1) Mr. O'Connell resigned his employment with the Company on February 26, 1998.

(2) Mr. Higgins resigned his employment with the Company on May 8, 1998.

(3) Mr. Sommers resigned his employment with the Company in July 1997.

17
<PAGE> 21

INDEPENDENT ACCOUNTANTS

The Board of Directors has selected the firm of Coopers & Lybrand L.L.P.,
independent certified accountants, to serve as auditors for the fiscal year
ending January 31, 1999. Coopers & Lybrand L.L.P. has served as the Company's
auditors since 1991. It is expected that a member of the firm of Coopers &
Lybrand L.L.P. will be present at the Meeting, will have an opportunity to make
a statement if so desired and will be available to respond to appropriate
questions from the Company's stockholders.

OTHER MATTERS

The Board does not intend to bring any matters before the Meeting other
than those specifically set forth in the Notice of Annual Meeting and it knows
of no matters to be brought before the Meeting by others. If any other matters
properly come before the Meeting, it is the intention of the persons named in
the accompanying proxies to vote such proxies in accordance with the judgment of
the Board.

EXPENSES AND SOLICITATION

The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have Common Stock registered in the
names of a nominee and, if so, will reimburse such banks, brokers and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket costs.
Solicitation by the Company's officers and employees may also be made of some
stockholders in person or by mail, telephone or telegraph following the original
solicitation. The Company may, if appropriate, retain an independent proxy
solicitation firm to assist in soliciting proxies. If the Company does retain a
proxy solicitation firm, the Company will pay such firm customary fees and
expenses.

SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons owning more than 10% of the outstanding
Common Stock of the Company to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% holders of Common Stock of the Company are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that all of its officers, directors and owners of greater than 10% of its Common
Stock complied with all filing requirements applicable to them with respect to
transactions during Fiscal 1998, except that: (i) Mr. Angelo filed a late Form 4
with respect to one transaction; (ii) Mr. Berns filed two late Forms 4 with
respect to two transactions; (iii) David Klein, a former officer of the Company,
filed a late Form 4 with respect to one transaction; and (iv) Mr. McNeff filed a
late Form 4 with respect to one transaction.

STOCKHOLDER PROPOSALS

The Company currently intends to hold its 1999 Annual Meeting of
Stockholders during June 1999. To be included in the Proxy Statement and form of
proxy for the Company's 1999 Annual Meeting of Stockholders, stockholder
proposals must be received by the Company on or before January 28, 1999. Such
stockholder proposals should be submitted to SystemSoft Corporation, One
Innovation Drive, Natick, Massachusetts 01760, Attention: Secretary.

18
<PAGE> 22

APPENDIX A

SYSTEMSOFT CORPORATION

FORM OF
AMENDED AND RESTATED 1994 EMPLOYEE STOCK PURCHASE PLAN

EFFECTIVE AS OF JULY , 1998

1. PURPOSE. The purpose of this Employee Stock Purchase Plan (the "Plan")
is to provide employees of SystemSoft Corporation, a Delaware corporation (the
"Company"), and its subsidiaries, an opportunity to purchase Common Stock, $.01
par value, of the Company (the "Shares"). The Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code").

2. ADMINISTRATION OF THE PLAN. The Board of Directors (the "Board") or
any committee or persons to whom it delegates its authority (the
"Administrator") shall administer, interpret and apply all provisions of the
Plan. The Administrator may waive such provisions of the Plan as it deems
necessary to meet special circumstances not anticipated or covered expressly by
the Plan. Nothing contained in this Section shall be deemed to authorize the
Administrator to alter or administer the provisions of the Plan in a manner
inconsistent with the provisions of Section 423 of the Code. No member of the
Administrator shall be liable for any action or determination made in good faith
with respect to the Plan or any right granted under it.

3. ELIGIBLE EMPLOYEES. Subject to the provisions of paragraphs 8, 9 and
10 below, any individual who is in the full-time employment (as defined below)
of the Company or any of its subsidiaries (as defined in Section 424(f) of the
Code), the employees of which are designated by the Board as eligible to
participate in the Plan, is eligible to participate in any Offering of Shares
(as defined in paragraph 4 below) made by the Company hereunder. Full-time
employment shall include all employees whose customary employment is:

(a) at least 20 hours per week; and

(b) more than five months in the relevant calendar year.

4. OFFERING DATES. From time to time the Company, by action of the Board,
will grant rights to purchase Shares to employees eligible to participate in the
Plan pursuant to one or more offerings (each of which is an "Offering") on a
date or series of dates (each of which is an "Offering Date") designated for
this purpose by the Board.

5. PRICES. The price per share for each grant of rights hereunder shall
be the lesser of:

(a) eighty-five percent (85%) of the fair market value of a Share on
the Offering Date on which such right was granted; or

(b) eighty-five percent (85%) of the fair market value of a Share on
the date such right is exercised. At its discretion, the Board may
determine a higher price for a grant of rights.

For purposes of this Plan, the term "fair market value" on any date means (i)
the average (on that date) of the high and low prices for shares of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
Nasdaq National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average

A-1
<PAGE> 23

of bid prices) last quoted (on that date) by an established quotation service
for over-the-counter securities, if the Common Stock is not listed on the Nasdaq
National Market or on a national securities exchange. If the Common Stock is not
publicly traded at the time a right is granted under this Plan, "fair market
value" shall mean the fair market value of the Common Stock as determined by the
Administrator after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of
shares of the Common Stock in private transactions negotiated at arm's length.

6. EXERCISE OF RIGHTS AND METHOD OF PAYMENT.

(a) Rights granted under the Plan will be exercisable periodically on
specified dates as determined by the Board.

(b) The method of payment for Shares purchased upon exercise or rights
granted hereunder shall be through regular payroll deductions or by lump
sum cash payment, or both, as determined by the Board. No interest shall be
paid upon payroll deductions unless specifically provided for by the Board.

(c) Any payments received by the Company from a participating employee
and not utilized for the purchase of Shares upon exercise of a right
granted hereunder shall be promptly returned to such employee by the
Company after termination of the right to which the payment relates.

7. TERM OF RIGHTS. Rights granted on any Offering Date shall be
exercisable upon the expiration of such period ("Offering Period"), as shall be
determined by the Board when it authorizes the Offering, provided that such
Offering Period shall in no event be longer than twenty-seven (27) months.

8. SHARES SUBJECT TO THE PLAN. No more than 1,100,000 Shares may be sold
pursuant to rights granted under the Plan; provided, however, that appropriate
adjustment shall be made in such number, in the number of Shares covered by
outstanding rights granted hereunder, in the exercise price of the rights and in
the maximum number of Shares which an employee may purchase (pursuant to
paragraph 9 below) to give effect to any mergers, consolidations,
reorganizations, recapitalizations, stock splits, stock dividends or other
relevant changes in the capitalization of the Company occurring after the
effective date of the Plan, provided that no fractional Shares shall be subject
to a right and each right shall be adjusted downward to the nearest full Share.
Any agreement of merger or consolidation will include provisions for protection
of the then existing rights of participating employees under the Plan. Either
authorized and unissued Shares or issued Shares heretofore or hereafter
reacquired by the Company may be made subject to rights under the Plan. If for
any reason any right under the Plan terminates in whole or in part, Shares
subject to such terminated right may again be subjected to a right under the
Plan.

9. LIMITATIONS ON GRANTS.

(a) No employee shall be granted a right hereunder if such employee,
immediately after the right is granted, would own stock or rights to
purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company, or of any
subsidiary, computed in accordance with Sections 423(b)(3) and 424(d) of
the Code.

(b) No employee shall be granted a right which permits his right to
purchase shares under all employee stock purchase plans of the Company and
its subsidiaries to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) (or such other maximum as may be prescribed from time to
time by the Code) of the fair market value of such Shares (determined at
the time such right is granted) for each calendar year in which such right
is outstanding at any time in accordance with the provisions of Section
423(b)(8) of the Code.

(c) No rights granted to participating employees under a single
Offering shall cover more shares than may be purchased at an exercise price
equal to 15% of the compensation payable to the employees

A-2
<PAGE> 24

during the Offering not taking into consideration any changes in the
employee's rate of compensation after the date the employee elects to
participate in the Offering, or such other maximum percentage of employees'
compensation as determined by the Board from time to time.

10. LIMIT ON PARTICIPATION. Participation in an Offering shall be limited
to eligible employees who elect to participate in such Offering in the
manner and within the time limitation established by the Board when it
authorizes the offering.

11. CANCELLATION OF ELECTION TO PARTICIPATE. An employee who has elected
to participate in an Offering may, unless the employee has waived this
cancellation right at the time of such election in a manner
established by the Board, cancel such election as to all (but not
part) of the rights granted under such Offering by giving written
notice of such cancellation to the Company before the expiration of
the Offering Period. Any amounts paid by the employee for the Shares
or withheld for the purchase of Shares from the employee's
compensation through payroll deductions shall be paid to the employee,
without interest, upon such cancellation.

12. TERMINATION OF EMPLOYMENT. Upon termination of employment for any
reason, including the death of the employee, before the date on which
any rights granted under the Plan are exercisable, all such rights
shall immediately terminate and amounts paid by the employee for the
Shares or withheld for the purchase of Shares from the employee's
compensation through payroll deductions shall be paid to the employee
or to the employee's estate, without interest.

13. EMPLOYEE'S RIGHTS AS STOCKHOLDER. No participating employee shall
have any rights as a stockholder in the Shares covered by a right
granted hereunder until such right has been exercised, full payment
has been made for the corresponding Shares and a certificate
representing such Shares has been issued.

14. RIGHTS NOT TRANSFERABLE. Rights under the Plan are not assignable or
transferable by a participating employee and are exercisable only by
the employee.

15. LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN. The Plan is
intended to provide shares of Common Stock for investment and not for
resale. The Company does not, however, intend to restrict or influence
any employee in the conduct of his/her own affairs. An employee may,
therefore, sell Shares purchased under the Plan at any time the
employee chooses, subject to compliance with any applicable Federal or
state securities laws; provided, however, that because of certain
Federal tax requirements, each employee agrees, by entering the Plan,
to promptly give the Company notice of any Shares disposed of within
two years after the date of grant of the applicable right, indicating
the number of such Shares disposed of. THE EMPLOYEE ASSUMES THE RISK
OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.

16. AMENDMENTS TO OR DISCONTINUANCE OF THE PLAN. The Board may at any
time terminate or amend this Plan without notice and without further
action on the part of stockholders of the Company, provided:

(a) that no such termination or amendment shall adversely affect the
then existing rights of any participating employee;

(b) that any such amendment which:

(i) increases the number of Shares subject to the Plan (subject to
the provisions of paragraph 7);

A-3
<PAGE> 25

(ii) changes the class of persons eligible to participate under the
Plan; or

(iii) materially increases the benefits accruing to participants
under the Plan shall be subject to approval of the stockholders of the
Company.

17. EFFECTIVE DATE AND APPROVALS. The Plan is being adopted by the Board
on June 8, 1994 to become effective as of said date. The Company's obligation to
offer, sell and deliver its Shares under the Plan is subject to the approval of
its stockholders not later than June 7, 1995 and of any governmental authority
required in connection with the authorized issuance or sale of such Shares and
is further subject to the Company receiving the opinion of its counsel that all
applicable securities laws have been complied with.

18. TERM OF PLAN. No rights shall be granted under the Plan after June 7,
2004.

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

Adopted by the Board of Directors on June 8, 1994, with the approval of the
stockholders on July 22, 1994. Amended by the Board of Directors on February 28,
1996, with the approval of the stockholders on June 19, 1996, as amended by the
Board of Directors on May 1, 1998. The share numbers set forth in the Plan
reflect the effect of the Company's two for one stock split, in the form of 100%
stock dividend, that was effective on July 3, 1996.

A-4
<PAGE> 26

SYSCM-PS-98
<PAGE> 27

SYSTEMSOFT CORPORATION

Proxy Solicited by the Board of Directors for Annual Meeting on July 1, 1998

The undersigned stockholder of SystemSoft Corporation hereby acknowledges
receipt of the Notice of Annual Meeting and related Proxy Statement and
appoints Robert F. Angelo, Deborah M. Besemer and Paul J. Pedevillano, or any
one or more of them, attorneys and proxies for the undersigned with power of
substitution in each to act for and to vote, as designated below, with the same
force and effect as the undersigned, all shares of SystemSoft Corporation
common stock standing in the name of the undersigned at the Annual Meeting of
Stockholders of SystemSoft Corporation to be held at the Crowne Plaza Hotel,
1360 Worcester Road (Route 9 East), Natick, Massachusetts 01760 on July 1, 1998
at 8:30 a.m., local time and any adjournments thereof.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY CARD WILL
BE VOTED "FOR" THE NOMINEES FOR DIRECTORS AND "FOR" THE PROPOSAL TO AMEND THE
SYSTEMSOFT CORPORATION 1994 EMPLOYEE STOCK PURCHASE PLAN. THE PROXY WILL BE
VOTED IN ACCORDANCE WITH THE HOLDER'S BEST JUDGEMENT AS TO ANY OTHER MATTERS.

SEE REVERSE SIDE. If you wish to vote in accordance with the Board of
Directors' recommendations, just sign on the reverse side. You need not mark
any boxes.

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

PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.

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

Signature of all joint owners is required. Fiduciaries please indicate your
full title. If any other matters properly come before the meeting about which
the proxy holders were not aware prior to the time of the solicitation,
authorization is given the proxy holders to vote in accordance with the views
of management thereon. Management is not aware of any such matters.

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

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

- ----------------------------------- -----------------------------------
<PAGE> 28
[X]PLEASE MARK VOTES
AS IN EXAMPLE

<TABLE>

<S> <C>
- ------------------------ THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
SYSTEMSOFT CORPORATION
- ------------------------
1. Election of Directors. For All With- For All
Nominees hold Except
Robert F. Angelo W. Frank King
Deborah M. Besemer David J. McNeff [ ] [ ] [ ]
Robert N. Goldman

Mark box at right if an address change or comment has [ ] NOTE: If you do not wish your shares voted "For" a particular
been noted on the reverse side of this card. nominee, mark the "For All Except" box and strike a line through
the name(s) of the nominee(s). Your shares will be voted for the
remaining nominee(s).

RECORD DATE SHARES:
For Against Abstain
2. Approve an amendment to the SystemSoft [ ] [ ] [ ]
Corporation 1994 Employee Stock Purchase
Plan increasing the number of shares
issuable thereunder from 700,000 to
1,100,000.

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
------
Please be sure to sign and date this Proxy. Date
- -------------------------------------------------------

- ----- Stockholder sign here ----- Co-owner sign here --

DETACH CARD DETACH CARD

</TABLE>