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Mr. Brew. Mr. Brew served as Acting Co-Chief Executive Officer and President of the Company from May 1994 until November 1994 when he was elected President, Chief Executive Officer and a director. In June 1995 he was elected Chairman of the Board of Directors. Prior to joining the Company, Mr. Brew was a founder and had served since 1988 as Executive Vice President of Argus Management Corporation, a firm which provides interim management services in crisis situations.

Mr. Kaplan. Mr Kaplan has been Executive Vice President and Chief Financial Officer of The Coleman Company, Inc., a diversified manufacturer of outdoor recreation and hardware products, since August 1996. From 1993 to August 1996 he was an independent financial and strategy consultant, assisting companies, buy-out firms and venture capital firms to identify, assess, structure and negotiate mergers, acquisitions, strategic investments and divestitures as well as helping firms develop and implement business plans and financial strategies. During 1994, Mr. Kaplan served as Chief Financial Officer of Marcam Corporation, a software company, and from 1990 to 1992, he was Executive Vice President, Chief Financial Officer and Chief Strategic Officer of AM International, Inc., a graphics art equipment and supplies company. Prior thereto, Mr. Kaplan was Senior Vice President, Chief Strategic Officer of AM International and President of Harris Graphics Web Group, a manufacturing division of AM International. Before joining AM International, Mr. Kaplan was a Vice President and partner of the Boston Consulting Group.

Mr. Kurzweil. Mr. Kurzweil is a founder of the Company and has been Chief Technology Officer since its inception in 1982. From 1982 until 1995 he was also Chairman of the Board of Directors. He served as Chief Executive Officer from 1982 to 1991 and as Co-Chief Executive Officer from 1991 to November 1994. Mr. Kurzweil serves as a director of Wang Laboratories, Inc. and as Chairman of its Strategy and Technology Committee.

Mr. Lonergan. Mr. Lonergan was a general partner of Oxford Partners, a venture capital partnership, from 1983 to 1995. Prior to 1983, he was with Xerox Corporation for eight years, most recently as Vice President Business Development. Mr. Lonergan serves as a director of Zitel Corporation, a memory systems company, Dataware Technologies, Inc. a CD ROM software company and Medical Sterilization, Inc.

Mr. Steadman. Mr. Steadman has been President of Atlantic Management Associates, Inc., a management services firm since 1988. From 1990 to 1994, Mr. Steadman served as President and Chief Executive Officer of Integra--A Hotel and Restaurant Company, and from 1987 to 1988, as Chairman and Chief Executive Officer of GCA Corporation, a manufacturer of automated semiconductor capital equipment. From 1980 to 1987 Mr. Steadman was a Vice President of Raytheon Company, a defense electronics manufacturer, and served in various management positions, most recently as President of its venture capital division. Mr. Steadman is Chairman of the Board of Directors of Technology Service Group, Inc., a manufacturer of high technology pay telephone components and Wahlco Environmental Systems, Inc., a manufacturer of environmental conditioning systems. He is also a director of Aavid Thermal Technologies, Inc., which manufactures thermal management products and produces computational fluid dynamics software, and Vitronics Corporation, a manufacturer of reflow soldering ovens.

Mr. Storey. Mr. Storey has been a business consultant and investment manager since 1993. From 1987 to 1992, Mr. Storey was President of Wellingsley Corporation, a private investment company. From 1981 to 1986, Mr. Storey was President and Chief Executive Officer of Codex Corporation, a manufacturer of data communications equipment, and a Vice President of its parent company, Motorola, Inc. Mr. Storey is a director of Progress Software Corporation and Westerbeke Corporation, a manufacturer of marine engines and generator sets.

The business experience of Messrs. Brew and Kurzweil is set forth above under the listing of directors of the Company.

Mr. Doherty. Mr. Doherty became the Company's Vice President of Finance, Treasurer and Chief Financial Officer on November 1, 1994. He had been serving as Acting Chief Financial Officer of the Company since May 23, 1994. Prior thereto, Mr. Doherty had been a financial consultant at Argus since 1988.

Mr. Flanagan. Mr. Flanagan joined the Company in January 1993 and was elected Vice President of Business Development in May 1993. Mr. Flanagan was elected Executive Vice President in June 1994. Prior to joining the Company, Mr. Flanagan served as President and Chief Executive Officer of Lotus Publishing Corporation, a subsidiary of International Data Group, Inc. from 1991 to 1992. Mr. Flanagan also worked at Lotus Development Corporation from 1988 to 1991 in various positions including President of Lotus Publishing Corporation and Vice President of Corporate Marketing from 1988 to 1989.

Mr. Ganong. Mr. Ganong joined the Company in 1982 and became Vice President, Research in May 1993. Mr. Ganong was formerly Director of Research. Mr. Ganong holds a Ph.D. and is a graduate of MIT and Harvard.

Mr. Scarcella. Mr. Scarcella joined the Company in 1985 as a Sales Manager for its Mid-Atlantic territory. Prior to being elected Vice President of Sales in September 1995, he served as Vice President of National Accounts and Government Operations.

(1) Includes sales commissions.

(2) [Other Annual Compensation: none awarded] Excludes perquisites and other personal benefits if the aggregate amount of such items of compensation is less than the lesser of either $50,000 or 10% of the total annual salary and bonus of the named executive officer.

(3) Effective July 31, 1996 the Compensation Committee voted to reduce the exercise price per share of employee stock options, the exercise price of which was in excess of the per share market value of the Company's common stock ("Common Stock") on that date ($2.437) to that per share market value if the optionee agreed to amend each of his or her option agreements so that the portion of the re-priced option that was vested at April 30, 1996 would cease to be vested and would then vest in two substantially equal installments on July 31, 1997 and July 31, 1998. Under the rules and regulations of the Securities and Exchange Commission, the re-priced option shares are deemed to have been granted on the date of the re-pricing. See "Report on Ten Year Option Re-Pricings."

(4) Mr. Brew joined the Company in the fourth quarter of fiscal 1995. Of the number of shares shown as underlying options granted in fiscal 1997, 250,000 shares are covered by options granted in prior years which were re-priced in July 1996 (see footnote 3, above).

(5) Mr. Doherty joined the Company in the fourth quarter of fiscal 1995. Of the number of shares shown as underlying options granted in fiscal 1997, 60,000 shares are covered by options granted in prior years which were re- priced in July 1996 (see footnote 3, above).

(6) Of the number of shares shown as underlying options granted in fiscal 1997, 60,000 shares are covered by options granted in prior years which were re-priced in July 1996 (see footnote 3, above).

(7) Mr. Kurzweil's salary in fiscal 1997 reflects employment on a 35% basis and in fiscal 1996 and fiscal 1995 reflects employment on a 75% basis. The number of shares shown as underlying options granted in fiscal 1997 are shares covered by options granted in prior years which were re-priced in July 1996 (see footnote 3, above).

(8) Mr. Scarcella became an executive officer of the Company in fiscal 1996. The number of shares shown as underlying options granted in fiscal 1997 are shares covered by options granted in prior years which were re-priced in July 1996 (see footnote 3, above).

* These options were granted in prior years, but were re-priced in July 1996. See footnote 2, below.

** In the event of a change in control of the Company the options of Messrs. Brew, Doherty and Flanagan become exercisable in full. A change in control for purposes of the option agreements will occur if the Merger is consummated. See "General" and "Employment Agreements, Termination of Employment and Change-in-Control Arrangements," below.

(1) Based on a total of 1,012,646 shares of which (i) 322,000 shares are subject to options granted to employees in the fiscal year ended January 31, 1997, plus (ii) 690,646 shares subject to options granted in prior years that were re-priced in July 1996. See footnote 2, below.

(2) The original exercise price per share of each option was equal to the market value on the date of grant. Effective July 31, 1996, the exercise price per share was reduced to $2.437, the closing price per share of Common Stock on the Nasdaq National Market on that date. These re-pricings were part of a Company-wide re-pricing of options authorized by the Compensation Committee of the Board of Directors on July 31, 1996. Optionees who elected the re-pricing of their options were required, in consideration, to agree to the amendment of their re-priced options so that shares vested as of April 30, 1996 would cease to be so vested and instead would vest in two substantially equal installments on July 31, 1997 and July 31, 1998. See "Report on Ten-Year Option Re-Pricings," below.

(3) The potential realizable value is calculated based on the term of the option at its date of grant (or in the case of re-priced options, the date of re- pricing) by assuming that the stock price on the date of grant appreciates at the indicated annual rate compounded annually for the entire term of the option. However, the optionee will not actually realize any benefit from the option unless the market value of Common Stock exceeds the option exercise price at the time of exercise.

(4) The option to purchase 50,000 shares was granted to Mr. Brew in May 1996 pursuant to his November 1994 Employment Agreement to offset the percentage dilutive effects of the shares issued in connection with the settlement of stockholder litigation pending against the Company in 1994. See "Employment Agreements, Termination of Employment and Change-in-Control Arrangements," below. As a result of the re-pricing of options in July 1996 (see footnote 2, above), Mr. Brew's options to purchase 150,000 shares vest in equal quarterly installments on the last day of each calendar quarter, commencing June 30, 1996, and options to purchase 150,000 shares vest in two equal installments on July 31, 1997 and July 31, 1998.

(5) As a result of the re-pricing of options in July 1996 (see footnote 2, above), Mr. Doherty's options to purchase 53,000 shares vest in equal quarterly installments on the last day of each fiscal quarter, commencing July 31, 1996, and options to purchase 27,000 shares vest in two equal installments on July 31, 1997 and July 31, 1998.

(6) As a result of the re-pricing of options in July 1996 (see footnote 2, above), Mr. Flanagan's options to purchase 52,285 shares vest in equal quarterly installments on the last day of each fiscal quarter, commencing July 31, 1996, and options to purchase 27,715 shares vest in two equal installments on July 31, 1997 and July 31, 1998.

(7) As a result of the re-pricing of options in July 1996 (see footnote 2, above), Mr. Kurzweil's options to purchase 15,000 shares vest in equal quarterly installments on the last day of each fiscal quarter, commencing July 31, 1996, and options to purchase 35,000 shares vest in two equal installments on July 31, 1997 and July 31, 1998.

(8) As a result of the re-pricing of options in July 1996 (see footnote 2, above), Mr. Scarcella's options to purchase 1,056 shares vest in equal quarterly installments on the last day of each calendar quarter, commencing June 30, 1996; options to purchase 30,053 shares vest in equal quarterly installments on the last day of each fiscal quarter, commencing July 31, 1996; and options to purchase 3,411 shares vest in two equal installments on July 31, 1997 and July 31, 1998.

(1) The option re-pricing of July 31, 1996 was carried out in connection with the sale of approximately 2.24 million aggregate shares of Common Stock pursuant to two private placements in May 1996 and July 1996, which the Compensation Committee believes had a dilutive effect on the Company's stock price. Optionees who elected the re-pricing of their options were required, in consideration, to agree to the amendment of their re-priced options so that shares vested as of April 30, 1996 would cease to be so vested and instead would vest in two substantially equal installments on July 31, 1997 and July 31, 1998. All but nine eligible employees elected to re-price some or all of their options.

(2) The option re-pricing of October 19, 1994 was carried out in connection with the formation of a new management team in late 1994. At that time the Company was suffering from the actions of certain members of prior management (all of whom have left the Company) that had resulted in the improper recording of revenues and the erroneous recording of capitalization costs. In anticipation of Messrs. Brew and Doherty commencing full-time employment with the Company and the granting of options to them in that connection, the Compensation Committee decided that it was appropriate to re-price all options with an exercise price of $9.00 per share (held by a total of 52 optionees) as an inducement to them to remain with the Company and to assist it in achieving a financial recovery.

The performance of the indices is shown on a total return (dividend reinvestment) basis; however, the Company paid no dividends during the period shown. The graph lines connect the beginning and end of the measuring periods and do not reflect fluctuations between those dates. The price of the Common Stock during the period shown is not necessarily indicative of its future performance.

The Performance Graph and the Report of the Compensation Committee on Executive Compensation in this Annual Report on Form 10-KSB are not and shall not be deemed incorporated by reference into any filings of the Company with the Securities and Exchange Commission by implication or by any reference in any such filings to this Annual Report on Form 10-KSB.

(1) Special Situations Fund L.P. purchased 1,320,050 of these shares on May 9, 1996 and the balance on April 15, 1997.

(2) Excludes 168,222 shares owned by Fuji Xerox Co., Ltd. as to which Xerox disclaims beneficial ownership, and includes 53,143 shares issuable on the exercise of currently exercisable warrants to purchase Common Stock.

(3) According to a Form 13D dated February 4, 1997 and filed by WisdomTree Capital Management, Inc., WisdomTree Offshore, Ltd. and WisdomTree Associates, L.P., WisdomTree Capital Management, Inc. has shared voting and dispositive power as to 475,700 of these shares, and WisdomTree Offshore, Ltd. has shared voting and dispositive power as to 261,500 of these shares. The foregoing entities may be deemed to be a group under applicable securities laws, but the entities disclaim group membership.

(4) Includes 100,000 shares subject to purchase under stock options exercisable within 60 days of April 15, 1997 at a price of $2.437 per share.

(5) Includes 18,666 shares subject to purchase under stock options exercisable within 60 days of April 15, 1997 at a price of $2.437 per share.

(6) These shares are subject to purchase under stock options exercisable within 60 days of April 15, 1997 at a price of $2.437 per share.

(7) Includes 161,268 shares subject to purchase under stock options exercisable within 60 days of April 15, 1997 at prices ranging from $1.50 to $2.437 per share. Mr. Kurzweil disclaims beneficial ownership of the following shares included in this number: (i) 466 shares held in an irrevocable trust (of which Mr. Kurzweil is a trustee and has sole voting and investment power) for the benefit of Mr. Kurzweil's children, mother, sister and his sister's children; (ii) 1,066 shares held in an irrevocable trust for the benefit of Mr. Kurzweil's children; (iii) 2,133 shares held in a separate irrevocable trust for the benefit of Mr. Kurzweil's wife; (iv) 133 shares held in a separate irrevocable trust for the benefit of Mr. Kurzweil's sister; and (v) 1,066 shares held directly by Mr. Kurzweil's wife.

(8) Includes 9,320 shares subject to purchase under stock options exercisable within 60 days of April 15, 1997 at prices ranging from $1.50 to $2.437 per share.

(9) These shares are subject to purchase under stock options exercisable within 60 days of April 15, 1997 at prices ranging from $2.875 to $4.375 per share.

(10) Includes 12,250 shares subject to purchase under stock options exercisable within 60 days of April 15, 1997 at prices ranging from $2.875 to $4.375 per share.

(11) Includes 378,356 shares subject to purchase under stock options exercisable within 60 days of April 15, 1997 at prices ranging from $1.50 to $4.375 per share.