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

Filed by the Registrant [X]
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Check the appropriate box:

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

MRO SOFTWARE, INC.
(Name of Registrant as Specified In Its Charter)

Not Applicable
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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[X] No fee required.
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previously. Identify the previous filing by registration statement number,
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* * * * *

MRO SOFTWARE, INC.

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Annual Meeting of Stockholders
March 5, 2002

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

Notice is hereby given that the Annual Meeting of Stockholders of MRO
Software, Inc. (the "Company") will be held at the offices of the Company, 100
Crosby Drive, Bedford, Massachusetts 01730 on Tuesday, March 5, 2002, beginning
at 10:00 A.M., local time, for the following purposes:

1. To elect Norman E. Drapeau, Jr. and Richard P. Fishman as Class III
Directors of the Company for a term of three years;

2. To approve an amendment to the Company's Amended and Restated 1999
Equity Incentive Plan to provide that stock awards may be granted to
Non-Employee Directors on a discretionary basis;

3. To approve the adoption of the Company's 2002 Employee Stock Purchase
Plan, for which 750,000 shares of Common Stock have been reserved for
issuance;

4. To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent public accountants
for the current fiscal year; and

5. To transact such further business as may properly come before the
Meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on Tuesday, January
8, 2002, as the record date for the determination of the stockholders of the
Company entitled to notice of, and to vote at, said Meeting and any adjournment
thereof. Only stockholders of record on such date are entitled to notice of,
and to vote at, said Meeting or any adjournment thereof.

By Order of the Board of Directors,

/s/ C. Newfield
Craig Newfield
Vice President, General Counsel &
Clerk

Bedford, Massachusetts
January 31, 2002

YOUR VOTE IS IMPORTANT

Please sign and return the enclosed proxy, whether or not you
plan to attend the Meeting.

MRO SOFTWARE, INC.
100 Crosby Drive
Bedford, Massachusetts 01730
(781) 280-2000

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PROXY STATEMENT

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ANNUAL MEETING OF STOCKHOLDERS
March 5, 2002

This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about January 31, 2002 in connection with the solicitation
by the Board of Directors of MRO Software, Inc. (the "Company") of proxies to
be used at the Annual Meeting of Stockholders of the Company, to be held on
Tuesday, March 5, 2002, and at any and all adjournments thereof (the "Annual
Meeting"). When proxies are returned properly executed, the shares represented
will be voted in accordance with the stockholders' directions. Stockholders are
encouraged to vote on the matters to be considered. If no choice has been
specified by a stockholder with respect to a proposal as to which the Board of
Directors has made a recommendation, however, the shares covered by any
executed proxy will be voted as indicated in this proxy statement. Any
stockholder may revoke his proxy at any time before it has been exercised.

The Board of Directors of the Company has fixed the close of business on
Tuesday, January 8, 2002, as the record date for the determination of the
stockholders of the Company entitled to notice of, and to vote at, the Annual
Meeting. Only stockholders of record on such date are entitled to notice of,
and to vote at, the Annual Meeting. At the close of business on the record
date, there were issued and outstanding 22,438,004 shares of the Company's
Common Stock, $.01 par value (the "Common Stock"). Each share of Common Stock
outstanding on the record date will be entitled to cast one vote.

QUORUM AND TABULATION OF VOTES

The By-Laws of the Company provide that the holders of a majority of shares
of Common Stock issued and outstanding and entitled to vote thereat will
constitute a quorum at the Annual Meeting. Shares of Common Stock represented
by a properly signed and returned proxy will be treated as present at the
Annual Meeting for purposes of determining a quorum. In general, votes withheld
from any nominee for election as director, abstentions (if applicable) and
broker "non-votes" (if applicable) are counted as present or represented for
purposes of determining the presence or absence of a quorum for the Annual
Meeting. A "non-vote" occurs when a broker or nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because, in respect of such other proposal, the broker or nominee does not have
discretionary voting power and has not received instructions from the
beneficial owner.

The affirmative vote of a plurality of the shares of Common Stock properly
cast at the Annual Meeting will be necessary to elect each Class III Director
(Proposal One). Votes "withheld" from director-nominees, and broker "non-votes"
will not be included in calculating the number of votes cast for election of
the Class III Directors. The affirmative vote of a majority of the shares of
Common Stock properly cast at the Annual Meeting will be necessary to approve
Proposals Two, Three and Four. Abstentions and broker "non-votes" will not be
included in calculating the number of votes cast on such Proposals.

Votes will be tabulated by the Company's transfer agent, EquiServe Trust
Company, N.A. The vote on each matter submitted to stockholders will be
tabulated separately.

PROPOSAL ONE

ELECTION OF DIRECTORS

The Company, as a Massachusetts corporation with a class of voting stock
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which elected in 1996 to be subject to relevant provisions of
Massachusetts law, has a Board of Directors consisting of six directors,
divided into three classes, as nearly equal in size as practicable, referred to
as Class I, Class II and Class III.

The terms of the Company's Class I Directors, Robert L. Daniels and John A.
McMullen, will expire at the annual meeting to be held with respect to the
Company's 2002 fiscal year. Mr. Daniels and Mr. McMullen were elected to the
Board of Directors at the Company's Special Meeting in Lieu of Annual Meeting
held on April 25, 2000. The terms of the Company's Class II Directors, Alan L.
Stanzler and Stephen B. Sayre, will expire at the annual meeting to be held
with respect to the Company's 2003 fiscal year. Mr. Stanzler was first elected
to the Board in 1998, and was re-elected in 2001. Mr. Sayre was first elected
to the Board of Directors by the members of the then existing Board to fill a
vacancy on the Board, and was re-elected by the Company's stockholders in March
2001. The terms of the Company's Class III Directors, Norman E. Drapeau, Jr.
and Richard P. Fishman, will expire at the annual meeting to be held on March
5, 2002. Mr. Drapeau and Mr. Fishman were elected to the Board of Directors at
the Company's Special Meeting in Lieu of Annual Meeting held on March 24, 1999.
The Directors in each Class serve for a term of three years and until their
successors are duly elected and qualified. As the term of one Class expires, a
successor director or directors for that Class are elected at the annual
meeting of stockholders for that year.

The Board of Directors has nominated Mr. Drapeau and Mr. Fishman for
election to an additional three year term as a Class III Director. Mr. Drapeau
and Mr. Fishman have each agreed to serve if elected, and the Company has no
reason to believe that either of them will be unable to serve. In the event
that Mr. Drapeau or Mr. Fishman is unable or declines to serve as a director at
the time of the Annual Meeting, proxies will be voted for such other nominee as
is then designated by the Board.

Unless authority to do so has been limited in a proxy, it is the intention
of the persons named as proxies to vote the shares represented by the proxy FOR
the election of Mr. Drapeau and Mr. Fishman as Class III Directors.
The Board of Directors recommends that you vote FOR the election of Mr.
Drapeau and Mr. Fishman as Class III Directors.

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

Name Age Position
---- --- --------

Norman E. Drapeau, Jr........ 41 President, Chief Executive Officer and Director--Class III
Robert L. Daniels............ 59 Executive Chairman of the Board--Class I
Patricia C. Foye............. 46 Executive Vice President--Global Marketing & Strategic
Alliances
Peter J. Rice................ 49 Executive Vice President--Finance and Administration, Chief
Financial Officer and Treasurer
William J. Sawyer............ 55 Executive Vice President--Operations
Ted D. Williams.............. 53 Executive Vice President--Worldwide Sales
John W. Young................ 49 Executive Vice President--Products and Technology
Craig Newfield............... 42 Vice President, General Counsel and Clerk
Richard P. Fishman (1)....... 55 Director--Class III
John A. McMullen (1)(2)...... 59 Director--Class I
Stephen B. Sayre (2)......... 50 Director--Class II
Alan L. Stanzler (2)......... 58 Director--Class II

- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee

Norman E. Drapeau, Jr. joined the Company in 1982 as an applications
analyst. Since that time, he has held various positions with the Company,
including, from 1984 to 1987, that of Manager of Customer Support and from 1989
through 1991, that of Director, Product Marketing. In 1991, Mr. Drapeau was
appointed Vice President, Corporate Marketing, in 1992 was appointed Vice
President--Americas and in July 1996 was appointed Executive Vice
President--Worldwide Sales and Marketing, serving in that capacity until
January 1998. In January 1998, Mr. Drapeau was appointed Executive Vice
President and Chief Operating Officer and was also elected a director of the
Company. In May 1998, Mr. Drapeau was elected President and Chief Executive
Officer.

Robert L. Daniels founded the Company in 1968 and has been a director since
that time. Mr. Daniels served as Chairman of the Board and Chief Executive
Officer from 1968 to 1996 and as President from 1968 to 1995. In May 1998, Mr.
Daniels was elected Executive Chairman of the Board.

Patricia C. Foye joined the Company in July 2001 as Executive Vice
President, Global Marketing and Strategic Alliances. From September 2000 to May
2001, Ms. Foye was Vice President, Worldwide Sales and Marketing of HMS
Software, Inc., an application software company focused on the aerospace
defense markets. From May 1999 to May 2000, Ms. Foye was President of
Allenbrook, Inc., a private firm focused on the development of a policy
management system for insurance and financial markets. From 1998 to 1999, Ms.
Foye was Vice President and General Manager of QAD, Inc., leading the
Electronics and Industrial business segment, the largest vertical business for
QAD. From 1994 to 1998, Ms. Foye held senior management positions at Digital
Equipment Corporation, a hardware and software vendor, and Marcam Corporation,
an ERP applications vendor.

Peter J. Rice joined the Company in 2000 as Executive Vice President of
Finance and Administration, Chief Financial Officer and Treasurer. From 1998 to
2000, Mr. Rice was Vice President of Finance and Administration, Chief
Financial Officer and Treasurer of Interleaf, Inc., a developer of e-publishing
and e-content software products. Interleaf was sold to Broadvision, Inc. in
2000. From 1995 to 1998, Mr. Rice was Vice President, Chief Financial Officer
and Treasurer of Media 100, Inc., a provider of digital media and content
design, creation and delivery tools. From 1990 to 1995, Mr. Rice was Vice
President, Corporate Controller and Chief Accounting Officer of M/A Com, Inc.
Prior thereto, Mr. Rice held senior financial management positions at Apollo
Computer and Atex, Inc. On December 10, 2001, Mr. Rice was appointed to the
board of directors of Engage, Inc.

William J. Sawyer joined the Company in 1978 as an applications consultant
and served in various sales and services positions from 1978 to 1984. Mr.
Sawyer was a Vice President of the Company from 1984 to 1990 and Executive Vice
President from 1990 until November 1997. In November 1997, Mr. Sawyer left the
Company and joined Peritus Software Services, Inc., a software application
company, as Vice President, Operations. Mr. Sawyer rejoined the Company in
October 1998 as Executive Vice President, Operations.

Ted D. Williams originally joined the Company in 1984 and served as
Director, MAXIMO until 1988. From 1988 to 1993, Mr. Williams was President and
Chief Operating Officer of Comac Systems Corporation, a software application
company. In 1993, Mr. Williams rejoined the Company as Director, Eastern
Regional Sales. He was appointed Vice President-North American Sales in 1996
and Vice President-Worldwide sales in January 1998. In October 1998, Mr.
Williams was appointed Executive Vice President-Worldwide Sales.

John W. Young originally joined the Company in 1985 and served until 1988 as
MAXIMO Product Manager. From 1988 to 1992, Mr. Young was Vice President of
Sales of Comac Systems Corporation, a software application company. In 1992 he
rejoined the Company as Director of MAXIMO Product Design, was appointed Vice
President--Research and Development of the Company in 1995, and was appointed
Executive Vice President--Products and Technology of the Company in 1998.

Craig Newfield joined the Company as Vice President, General Counsel and
Clerk in September 2000. From October 1997 through August 2000, Mr. Newfield
was Vice President, General Counsel and Clerk of Interleaf, Inc., a developer
of e-publishing and e-content software products. Interleaf was sold to
Broadvision, Inc. in 2000. From April 1996 through September 1997, Mr. Newfield
was General Counsel and Secretary of OneWave, Inc., since renamed Primix
Solutions, an IT services provider. From February 1993 to April 1996,
Mr. Newfield served as in-house counsel of Marcam Corporation.

Rishard P. Fishman was elected as a director in March 1999. Mr. Fishman is
currently Executive Vice President at MacAndrews & Forbes Group, Inc., where he
is responsible for venture capital investing. From 1995 to 1997, Mr. Fishman
served as Managing Director of GeoPartners Research, Inc., a strategy and
management consulting firm, where he headed the firm's venture capital
activities. From 1995 to 1997, Mr. Fishman was also Of Counsel at the law firm
of Atkin, Gump, Strauss, Hauer & Feld L.L.P. Mr. Fishman served as President
and Chief Executive Officer of Thinking Machines Corporation from 1993 to 1994,
and was a partner at the law firm of Milbank, Tweed, Hadley & McCoy from 1987
until 1993.

John A. McMullen was elected as a director in April 2000. Mr. McMullen is
the Managing Principal of Cambridge Meridian Group, Inc., a strategy-consulting
firm that serves Fortune 500 and technology-based companies, with which he has
been employed since 1985. Mr. McMullen taught business strategy at Harvard Law
School from the mid 1980's to 1990 and, as one of the original members of
CMGI's Board of Directors, served on that Board from 1988 through 1999. He
currently serves on the Board of Ezenia!, Inc., a Nasdaq listed company, in a
term that began last year. In addition, he serves, or has served, on the boards
of twelve other private, chiefly technology-oriented companies. From 1993 to
1997 he was an informal advisor to Senator Bill Bradley (NJ). In 1998 he ran
for the United States Senate from Vermont.

Stephen B. Sayre was first elected as a director in September 1998, and
re-elected in March 2001. Mr. Sayre is currently the Vice President of
Marketing and Business Development for Endeca Technologies, Inc., a provider of
software infrastructure for information delivery. From June 2000 to March 2001,
Mr. Sayre was Vice President of Marketing for Idiom, Inc., a provider of
software and services for enterprise globalization. From 1994 to 2000, he was
the Senior Vice President of Marketing at Lotus Development Corporation, a
subsidiary of IBM Corporation, a hardware and software vendor. Prior to joining
Lotus in 1994, Mr. Sayre was President of Boston Treasury Systems and has held
other senior executive level positions with Cullinet Software and Easel
Corporation.

Alan L. Stanzler was first elected as a director in May 1998, and re-elected
in March 2001. Mr. Stanzler served as a director of the Company from 1992 to
1994, and as Clerk of the Company from 1990 to 1996.

Mr. Stanzler is Of Counsel at the law firm of Stanzler, Funderburk & Castellon,
L.L.P. From 1998 to September 2001, Mr. Stanzler was a partner of the law firm
of Maselan Jones & Stanzler, P.C. From 1995 to 1998, Mr. Stanzler was a member
of the law firm of Davis, Malm & D'Agostine, P.C.

All directors hold office until the expiration of their respective terms as
described above and until their respective successors are duly elected and
qualified. Executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors.

Committees and Meetings of the Board

During the fiscal year ended September 30, 2001 ("fiscal 2001"), the Board
met eleven times. No incumbent director attended fewer than 75% of the total
number of meetings held by the Board and Committees of the Board on which he
served.

The Board of Directors has an Audit Committee and a Compensation Committee,
but does not have a nominating committee or other committee performing similar
function. The Audit Committee (currently composed of Messrs. Sayre, Stanzler
and McMullen) reviews the internal accounting procedures of the Company and
consults with and reviews the services provided by the Company's independent
auditors. The Audit Committee met four times during fiscal 2001. The
Compensation Committee (currently composed of Messrs. Fishman and McMullen) has
general responsibility for the Company's executive compensation policies and
practices, including making specific recommendations to the Board concerning
compensation for the Company's executive officers and administering the
Company's Amended and Restated 1999 Equity Incentive Plan (the "1999 Equity
Plan"), 1994 Incentive and Nonqualified Stock Option Plan (the "1994 Stock
Option Plan") and 1994 Employee Stock Purchase Plan (the "Stock Purchase
Plan"). The Compensation Committee met four times during fiscal 2001.

Report of the Audit Committee

The Board of Directors has appointed an Audit Committee consisting of three
non employee directors. All members of the Audit Committee are "independent" of
the Company and management, as that term is defined in the Marketplace Rules of
The Nasdaq Stock Market.

The primary purposes of the Audit Committee are (i) to make such
examinations as are necessary to monitor the Company's financial reporting, its
external audits and its process for compliance with laws and regulations, (ii)
to provide to the Board of Directors the results of its examinations and
recommendations derived therefrom, (iii) to propose to the Board of Directors
improvements in internal accounting controls, (iv) to make recommendations to
the Board of Directors on the engagement of the Company's independent
accountants, (v) to review the results and scope of the annual audit of the
Company's financial statements conducted by the Company's independent
accountants, (vi) to review the scope of other services provided by the
Company's independent accountants, and (vii) to provide to the Board of
Directors such additional information and materials as it may deem necessary to
make the Board aware of significant financial matters that require Board
attention.

Management has the primary responsibility for the Company's financial
statements and the reporting process, including the systems of internal
controls and for the preparation of financial statements in accordance with
generally accepted accounting principles. The Company's independent accountants
are responsible for auditing the financial statements and expressing an opinion
on the conformity of those audited financial statements with generally accepted
accounting principles. The responsibility of the Audit Committee is to monitor
and review these processes. Audit Committee members are not professionally
engaged in the practice of accounting or auditing and are not experts in the
fields of accounting or auditing, including with respect to auditors'
independence, and they are not responsible for the preparation of the Company's
financial statements.

In fulfilling its oversight responsibilities, the Audit Committee discussed
with representatives of PricewaterhouseCoopers LLP, the Company's independent
accountants for fiscal 2001, the overall scope and

plans for PricewaterhouseCoopers LLP's audit of the Company's financial
statements for fiscal 2001. The Audit Committee met with PricewaterhouseCoopers
LLP, with and without Company management present, to discuss the results of
PricewaterhouseCoopers LLP's examinations and evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.

The Audit Committee reviewed and discussed the Company's audited financial
statements for fiscal 2001 with management and PricewaterhouseCoopers LLP. The
Audit Committee discussed with PricewaterhouseCoopers LLP the matters required
to be discussed by Statement of Auditing Standards No. 61 "Communication's with
Audit Committees" as amended, including a discussion of PricewaterhouseCoopers
LLP's judgments as to the quality, not just the acceptability, of the Company's
financial statements, changes in accounting policies, sensitive accounting
estimates, accounting principles and such other matters as are required to be
discussed with audit committees under generally accepted auditing standards.

In addition, the Audit Committee received from and discussed with
PricewaterhouseCoopers LLP the written disclosures and the letter required by
Independence Standards Board Standard No. 1 "Independence Discussions with
Audit Committees" and discussed the disclosures with PricewaterhouseCoopers
LLP, as well as other matters relevant to PricewaterhouseCoopers LLP's
independence from management and the Company. The Audit Committee considered
whether the services PricewaterhouseCoopers LLP provided to the Company beyond
their audit of the Company's financial statements was compatible with
maintaining PricewaterhouseCoopers LLP's independence. The Audit Committee also
considered the amount of fees PricewaterhouseCoopers LLP received for audit and
non audit services.

Based on the Audit Committee's reviews, meetings and discussions referred to
above, the Audit Committee recommended to the Board of Directors, and the Board
directed, that the Company's audited financial statements be included in its
Annual Report on Form 10-K for the year ended September 30, 2001 for filing
with the Securities and Exchange Commission. The Audit Committee and the Board
of Directors also have recommended that PricewaterhouseCoopers LLP be selected
as the Company's independent public accountants for fiscal 2002. See Proposal
Four for detailed information.

The Audit Committee is governed by a written charter, adopted by the Board
of Directors, a copy of which was included as Appendix A to the Definitive
Proxy Statement in connection with the annual meeting of stockholders held on
March 6, 2001, as filed with the Securities and Exchange Commission on February
6, 2001.

The Audit Committee

Stephen B. Sayre
Alan L. Stanzler
John A. McMullen

REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS

Directors' Compensation

The compensation paid to members of the Board of Directors who are not
employees of the Company or one of the Company's subsidiaries ("Non-Employee
Directors") was amended during fiscal 2001. Through March 31, 2001, each
Non-Employee Director received a quarterly stipend of $2,500, plus fees of
$1,000 for each meeting of the Board of Directors and $750 for each meeting of
a committee of the Board which he attended; provided, that the per-meeting fees
were $500 when the director attended telephonically, and no fees were paid with
respect to any committee meeting which was held on the same date as a Board
meeting. Commencing April 1, 2001, Non-Employee Directors receive a quarterly
stipend of $7,500, with no additional fees being payable for attendance at
Board or committee meetings. Non-Employee Directors are also reimbursed for
out-of-pocket expenses incurred in the performance of their duties as directors
of the Company. Directors who are employees of the Company are not paid any
separate fees for serving as directors.

Pursuant to the 1999 Equity Plan, each Non-Employee Director elected or
appointed to the Board at the time of an annual meeting of stockholders or
special meeting in lieu thereof, upon first joining the Board, is automatically
granted an option to purchase 27,000 shares of Common Stock (an "Initial
Option"). Each Non-Employee Director automatically receives an additional
option to purchase 27,000 shares of Common Stock (an "Additional Option") as
follows: upon the Final Vesting Date, as defined below, of any Initial Option
or Additional Option held by a Non-Employee Director whose term in office will
continue after such Final Vesting Date (or who has been nominated by the Board
of Directors for election to a term that will continue after such date), such
Non-Employee Director is automatically granted an Additional Option.

In lieu of a grant of an Initial Option as described above, in the event
that a Non-Employee Director is first elected or appointed to the Board at any
time other than at an annual meeting of stockholders or special meeting in lieu
thereof, such Non-Employee Director upon first being so elected or appointed is
automatically granted an option for a number of shares of Common Stock equal to
the sum of (i) 18,000 plus (ii) 9,000 multiplied by N/365 where "N" is the
number of days remaining between the date of such election or appointment of
such Non-Employee Director and the first anniversary of the date of the
Company's most recent annual meeting of stockholders or special meeting in lieu
thereof (the "Prorated Shares").

Each Initial Option and each Additional Option has an exercise price equal
to the fair market value of the Common Stock on the date of grant (determined
in accordance with the terms of the 1999 Equity Plan). All Initial Options
granted to Non-Employee Directors elected or appointed to the Board at the time
of an annual meeting of stockholders or special meeting in lieu thereof, and
all Additional Options, vest in three equal installments immediately before
each of the first three annual meetings of stockholders or special meetings in
lieu thereof following the date of grant of such option, provided in each case
that at such time the Non-Employee Director is then in office as a director.
With respect to an Initial Option granted to a Non-Employee Director who is
elected or appointed to the Board at any time other than at an annual meeting
of stockholders or special meeting in lieu thereof, the option vests as to the
Prorated Shares immediately before the first annual meeting of stockholders or
special meeting in lieu thereof following the date of grant of such Initial
Option and as to the remaining 18,000 shares in two equal installments
immediately before each of the second and third annual meetings of stockholders
or special meetings in lieu thereof following the date of grant of such Initial
Option, provided in each case that at such time the Non-Employee Director is
then in office as a director. The date on which the last such installment of
any option vests is herein referred to as its "Final Vesting Date." All such
options expire on the date which is five years from the date of grant.

Options granted to Non-Employee Directors are subject to acceleration of
vesting in certain circumstances (see Proposal Two for detailed information).

During fiscal 2001, the Board became concerned that the existing provisions
under the 1999 Equity Plan for stock option grants to Non-Employee Directors
were inadequate, and that the Company would have difficulty in

attracting new directors and retaining its existing Board members. After
consultation with independent experts in these matters, on June 18, 2001, the
Board amended the 1999 Equity Plan by adding a provision that would permit the
granting of additional stock bonus or restricted stock awards under the Plan
covering up to (but not to exceed) 25,000 shares of Common Stock in total. The
Board then voted to approve a one-time grant to each Non-Employee Director of
6,250 shares of restricted stock under the terms of the 1999 Equity Plan,
vesting on a quarterly basis over three years, with twelve equal installments
vesting on the 15/th/ day of the second month of each quarter (the first such
installment vesting on August 15, 2001), subject to 100% acceleration (i) in
the event of a change in control of the Company, (ii) upon death, disability or
retirement of the Director, or (iii) in the event that the average of the
closing share prices of the Company's Common Stock for any ten consecutive
trading days reaches or exceeds $31.10.

If Proposal Two is approved by stockholders, the arrangement under which
stock awards are issued to Non-Employee Directors would be changed to eliminate
the provisions for automatic grants of Initial Options and Additional Options,
and to provide that Non-Employee Directors are eligible to receive Stock Awards
under the 1999 Equity Plan in the same manner and to the same degree as all
other eligible persons, as determined by the Board of Directors on a
discretionary basis.

Executive Compensation

Summary Compensation Table. The following table sets forth certain
information concerning the compensation earned by the Company's Chief Executive
Officer and the five other most highly paid executive officers of the Company
(collectively, the "named executive officers") for services rendered in all
capacities to the Company during fiscal 2001.

Summary Compensation Table

Long-Term
Compensation
Annual Awards
Compensation Securities All Other
------------------ Other Annual Underlying Compensation
Name and Principal Position Fiscal Year Salary($) Bonus($) Compensation Options(#)(1) ($)(2)
--------------------------- ----------- --------- -------- ------------ ------------- ------------

Norman E. Drapeau, Jr...................... 2001 $343,750 $376,773(3) -- 150,000 $2,625
President and Chief Executive 2000 $317,500 $137,495(4) -- 200,000 $2,400
Officer 1999 $295,000 $375,414(5) -- 200,000 $2,500

Robert L. Daniels.......................... 2001 $343,750 $376,773(3) $ 11,027(6) -- --
Executive Chairman of the 2000 $317,500 $137,495(4) -- -- --
Board 1999 $295,000 $375,414(5) -- -- --

John W. Young.............................. 2001 $211,250 $185,157(3) -- 30,000 $2,625
Executive Vice President 2000 $197,500 $ 67,690(4) -- 60,000 $2,400
Products and Technology 1999 $185,000 $ 88,166(5) -- 90,000 $2,500

William J. Sawyer.......................... 2001 $211,250 $185,157(3) -- 30,000 $2,625
Executive Vice President of 2000 $196,672 $ 67,690(4) -- 55,000 $2,400
Operations 1999 $172,591 $ 88,166(5) $ 30,000(7) 90,000 $2,500

Ted D. Williams............................ 2001 $211,250 $185,157(3) -- 30,000 $2,625
Executive Vice President 2000 $192,502 $ 67,926(4) -- 55,000 $2,400
Worldwide Sales 1999 $168,750 -- $174,983(8) 70,000 $2,500

Peter J. Rice.............................. 2001 $211,250 $185,157(3) -- 50,000 --
Executive Vice President 2000 $ 51,539 $ 4,748(4) $ 20,000(9) 102,000 --
Finance & Administration, Chief Financial 1999 -- -- -- -- --
Officer and Treasurer

- --------
(1) Represents shares of Common Stock issuable upon exercise of stock options
granted under the Company's 1994 Stock Option Plan or under the 1999 Equity
Plan.
(2) The amounts reported represent contributions made by the Company pursuant
to the Company's 401(k) Plan and Trust.
(3) Represents bonuses paid under the Company's 2001 Executive Bonus Plan.
(4) Represents bonuses paid under the Company's 2000 Executive Bonus Plan.
(5) Represents bonuses paid under the Company's 1999 Executive Bonus Plan.
(6) Represents reimbursement of certain expenses.
(7) Represents a bonus paid when Mr. Sawyer was rehired by the Company in
October 1998.
(8) Represents commissions paid under Mr. Williams's individual incentive
compensation plan as Vice President Worldwide Sales designed to reward him
for achievement of quarterly and annual revenue and contribution targets.
(9) Represents a sign-on bonus paid to Mr. Rice upon his employment with the
Company.

Option Grants in Last Fiscal Year. The following table sets forth certain
information regarding stock options granted during fiscal 2001 by the Company
to the named executive officers.

Option Grants in Last Fiscal Year

Potential Realizable Value
Percent of at Assumed Annual Rate
Number of Total Options of Stock Price
Securities Granted to Appreciation for Option
Underlying Employees in Term (5)
Options Granted Fiscal Year(%) Exercise Price Expiration --------------------------
Name (#) (1) (2) ($/Sh) (3) Date (4) 5%($) 10%($)
---- --------------- -------------- -------------- ---------- -------- ----------

Norman E. Drapeau, Jr . 150,000 13.3% $8.50 03/22/11 $804,000 $2,035,500
Robert L. Daniels...... -- -- -- -- -- --
John W. Young.......... 30,000 2.7% $8.50 03/22/11 $160,800 $ 407,100
William J. Sawyer...... 30,000 2.7% $8.50 03/22/11 $160,800 $ 407,100
Ted D. Williams........ 30,000 2.7% $8.50 03/22/11 $160,800 $ 407,100
Peter J. Rice.......... 50,000 4.4% $8.50 03/22/11 $268,000 $ 678,500

- --------
(1) Represents shares of Common Stock issuable upon exercise of incentive stock
options granted under the Company's 1999 Equity Plan. All such options vest
over four years, first becoming exercisable as to 25% of the shares covered
on the first anniversary of the date of grant, and as to a further 2.08%
each month thereafter, subject to acceleration in certain circumstances.
(2) In fiscal 2001, the Company granted to employees options to purchase an
aggregate of 1,125,000 shares of Common Stock, pursuant to the 1999 Equity
Plan.
(3) All options were granted at exercise prices not less than the fair market
value of the Common Stock on the date of grant.
(4) All such options expire ten years after the date of grant.
(5) Potential realizable value means the value of the shares of Common Stock
underlying the option, at the specified assumed annual rates of stock price
appreciation, compounded over the option term (10 years). Actual gains, if
any, realized on stock option exercises are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the values reflected in this table will be
realized.

Option Exercises and Fiscal Year-End Values. The following table sets forth
certain information concerning stock options exercised during fiscal 2001 and
stock options held as of September 30, 2001 by each of the named executive
officers.

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values

Value of Unexercised
Number of Unexercised In-The-Money Options at
Shares Options at Fiscal Year-End Fiscal Year End ($) (1)
Acquired Value -------------------------- -------------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------

Norman E. Drapeau, Jr........ -- -- 274,498 415,000 $164,567 $113,750
Robert L. Daniels............ -- -- -- -- -- --
John W. Young................ -- -- 94,998 130,000 $ 39,812 $ 51,188
William J. Sawyer............ -- -- 43,750 116,250 $ 11,625 $ 68,438
Ted D. Williams.............. -- -- 47,106 111,250 $ 29,006 $ 90,812
Peter J. Rice................ -- -- 25,500 126,500 -- $ 85,000

- --------
(1) Value is based on the last sale price of the Common Stock on September 30,
2001, as reported by The Nasdaq Stock Market ($10.20 per share), less the
applicable option exercise price. These values have not been and may never
be realized. Actual gains, if any, on exercise will depend on the value of
the Common Stock on the date of the sale of the shares.

Compensation Committee Interlocks and Insider Participation

From the commencement of fiscal 2001 until the 2001 Annual Meeting of
Stockholders, Stephen B. Sayre and Alan L. Stanzler served on the Compensation
Committee. John A. McMullen and Richard P. Fishman served on the Compensation
Committee for the balance of fiscal 2001. Neither Messrs. Sayre, Stanzler,
McMullen or Fishman, nor any executive officer of the Company, has any
relationship requiring disclosure by the Company pursuant to item 402(j) of
Regulation S-K promulgated by the SEC.

Compensation Committee Report on Executive Compensation

The Compensation Committee established by the Board of Directors is composed
of two non-employee directors of the Company, currently Mr. Fishman and Mr.
McMullen. The Compensation Committee has general responsibility for the
Company's executive compensation policies and practices, including making
specific recommendations to the Board concerning compensation for the Company's
executive officers. The following report is made by Messrs. Fishman and
McMullen, as the members of the Compensation Committee during the second half
of fiscal 2001, and summarizes the Company's executive officer compensation
policies for fiscal 2001.

Compensation Objectives

The Company's executive compensation programs are generally designed to
relate a substantial part of executive compensation to attainment of the
Company's internal goals for financial performance and corresponding increases
in stockholder value. Decisions concerning executive compensation are guided by
the following underlying principles:

. to establish incentives which will link executive officer compensation to
the Company's financial performance and will motivate executives to attain
the Company's quarterly and annual financial targets; and

. to provide a total compensation package which is competitive within the
software industry and which will assist the Company in attracting and
retaining executives who will contribute to the long term financial
success of the Company.

The Securities and Exchange Commission requires that this Report comment
upon the Compensation Committee's policy with respect to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Tax Code"), which limits the
Company's tax deduction with regard to compensation in excess of $1 million
paid to the chief executive officer and the four most highly compensated
officers (other than the chief executive officer) at the end of any fiscal year
unless the compensation qualifies as "performance-based compensation." The
Compensation Committee's policy with respect to Section 162(m) is to make every
reasonable effort to cause compensation to be deductible by the Company while
simultaneously providing executive officers of the Company with appropriate
rewards for their performance.

Executive Compensation Programs

The Company's compensation package normally consists of three principal
components: (1) salary; (2) cash bonuses tied to quarterly and annual revenue,
earnings, stock price and personal performance; and (3) where appropriate to
provide longer-term incentive to executive officers, stock options. The
Company's executive officers are also eligible to participate in other employee
benefit plans, including health and life insurance plans, a 401(k) retirement
plan and a stock purchase plan, on substantially the same terms as other
employees who meet applicable eligibility criteria, subject to any legal
limitations on the amounts that may be contributed or the benefits that may be
payable under these Company plans.

The Company's executive officer compensation policy emphasizes bonuses and
stock options which align the interests of management with the stockholders'
interest in the financial performance of the Company for fiscal quarters, the
fiscal year and the longer term. Consistent with this approach, in fiscal 2001
a substantial part of potential cash compensation for all executives was tied
to the Company's performance. In setting salaries, primary consideration was
given to the executive officers' salaries for the previous fiscal year, with
adjustments for certain officers in light of promotions within the Company,
industry conditions, individual contributions and the improved financial
performance of the Company.

In fiscal 2001, the Company maintained an Executive Bonus Plan (the "2001
Executive Bonus Plan") intended by the Compensation Committee to align the
interests of its participants with those of the stockholders and provide
additional incentive to executives to enhance Company performance. The
participants in the 2001 Executive Bonus Plan were Ms. Foye and Messrs.
Drapeau, Daniels, Young, Sawyer, Williams, Rice and Newfield. Under the 2001
Executive Bonus Plan a participant's bonus was determined as follows:

. 40% of the bonus was based on the Company's quarterly revenue and
earnings-per-share ("EPS") performance, with payment starting at 95% of
goal attainment and capped at 125% of the on-target amount;

. 20% of the bonus was based on the Company's annual revenue and EPS
performance, with payment starting at 95% of goal attainment and capped at
125% of the on-target amount;

. 20% of the bonus was based on appreciation of the price of the Company's
Common Stock during the course of fiscal 2001;

. 20% of the bonus was based on achievement of individual performance goals
evaluated by the Company's Chief Executive Officer; and

. In the case of the CEO and Executive Chairman, 20% of the bonus was based
on achievement of overall performance goals, as evaluated by the
Compensation Committee.

During fiscal 2001, the Company met at least 95% of its revenue targets and
profitability goals for all of the four quarters. The value of the Company's
Common Stock at the end of fiscal 2001 was not greater than its value at the
beginning of fiscal 2001, and no amounts were paid with respect to this
component of the plan. Performance against individual performance goals was
measured for each executive. As a result, the Company paid $1,589,863 in
bonuses to its eight executive officers under the 2001 Executive Bonus Plan.

In fiscal 2001, stock options were a component of the Company's approach to
compensation for its executive officers. Options under the Company's 1999
Equity Plan were granted to Ms. Foye and to Messrs.

Drapeau, Sawyer, Williams, Young, Rice and Newfield in order to provide them
additional long term incentives to act on behalf of the Company. See "Option
Grants in Last Fiscal Year". In determining the size of stock option grants to
executive officers, the Compensation Committee emphasized the seniority,
responsibilities and performance of the executive and the number of options
previously granted to the executive officers. The Compensation Committee
believes that stock options with future vesting dates provide a significant
incentive to executive officers to continue their employment with the Company
and create long term value for its stockholders.

Chief Executive Officer and Executivce Chairman Compensation

Consistent with the overall executive officer compensation policy, the
Company's approach to the Chief Executive Officer's and the Executive
Chairman's compensation packages in fiscal 2001 was to be competitive with
other successful companies in the software industry and to tie a large
percentage of the Chief Executive Officer's and the Executive Chairman's total
compensation packages to Company performance. The Compensation Committee
believes that this approach provides additional incentives to the Chief
Executive Officer and the Executive Chairman to achieve the Company's
performance goals and enhance stockholder value.

Salaries for the Company's Chief Executive Officer and the Executive
Chairman were designed to give them assurance of a base level of compensation
commensurate with each of their position and duration of employment with the
Company, and to be competitive with salaries for officers holding comparable
positions in the software industry. The Chief Executive Officer and the
Executive Chairman were each a participant in the 2001 Executive Bonus Plan,
and his bonus for fiscal 2001 was based on the factors and criteria discussed
above. Mr. Drapeau was Chief Executive Officer and Mr. Daniels was Executive
Chairman of the Company during fiscal 2001.

The Compensation Committee

Richard P. Fishman
John A. McMullen

Performance Graph

The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index, the Nasdaq
Stock Market Composite Index for U.S. Companies, and a published industry
index, the Nasdaq Computer & Data Processing Index. The cumulative stockholder
returns for shares of the Company's Common Stock and for the market and
industry indices are calculated through September 29, 2001 (the last trading
day of fiscal 2001), assuming $100 was invested on September 29, 1996 (the last
trading day preceding the Company's 1997 fiscal year). The Company paid no cash
dividends during the periods shown. The performance of the market and industry
indexes is shown on a total return (dividends reinvested) basis.

Comparison of Five Year Cumulative Return /(1)/
Among MRO Software, Inc., The Nasdaq Stock Market (U.S.) Composite Index
And the Nasdaq Computer & Data Processing Index

[CHART]

MRO Nasdaq Computer Nasdaq
Software,Inc. and Data Composite
Processing
----- ------ ------
9/30/1997 100 100 100
9/30/1998 57 130 100
9/30/1999 234 220 163
9/29/2000 136 276 218
9/28/2001 89 99 89

- --------
(1) $100 invested on 9/26/96 in stock or index - including reinvestment of
dividends.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Stockholders

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 8, 2002 by (i)
each person known by the Company to own beneficially more than five percent of
the Common Stock as of such date, (ii) each director of the Company, (iii) each
named executive officer, (iv) each nominee as a director of the Company, and
(v) all executive officers and directors of the Company as a group:

Shares Beneficially
Owned (1)
------------------
Name Number Percent
---- --------- -------

Robert L. Daniels (2)(3).................................... 4,693,313 20.9%
100 Crosby Drive
Bedford, MA 01730

Kopp Investment Advisors, Inc. (4).......................... 1,936,358 8.6%
6600 France Avenue
South Edina, MN 55435

Westport Asset Management, Inc. (5)......................... 1,253,800 5.6%
253 Riverside Avenue
Westport, CT 06880

Susan H. Daniels (2)(3)(6).................................. 1,248,558 5.6%
100 Crosby Drive
Bedford, MA 01730

Norman E. Drapeau, Jr. (7).................................. 359,498 1.6%

John W. Young (7)........................................... 134,998 *

William J. Sawyer (8)....................................... 77,792 *

Ted D. Williams (9)......................................... 66,937 *

Peter J. Rice (10).......................................... 35,162 *

Alan L. Stanzler (11)....................................... 69,750 *

Stephen B. Sayre (12)....................................... 43,250 *

Richard P. Fishman (13)..................................... 42,850 *

John A. McMullen (14)....................................... 14,730 *

All directors and executive officers as a group (12 persons)
(2)(3)(7)(8)(9)(10)(11)(12)(13)(14)....................... 5,553,420 23.9%

- --------
* Less than one percent.
(1) The persons named in this table have sole voting and investment power with
respect to the shares listed, except as otherwise indicated. The inclusion
herein of shares listed as beneficially owned does not constitute an
admission of beneficial ownership.

(2) Excludes 179,400 shares held for the benefit of Mr. Daniels' two adult
children, 9,800 shares held by Mr. Daniels as custodian for the benefit of
two minor children. Each of Robert L. Daniels and Susan H. Daniels
disclaims beneficial ownership of these shares. Also excludes 72,700
shares held by Anja Eckbo-Daniels, Mr. Daniels' spouse.
(3) Includes 1,202,258 shares owned by Susan H. Daniels over which Robert L.
Daniels has voting control, pursuant to a Shareholders' Agreement dated as
of August 1, 2001 (the "Voting Agreement"). Mr. Daniels also owns
3,491,055 shares free of the Voting Agreement, and Susan Daniels also owns
46,300 shares free of the Voting Agreement. Each of Robert and Susan
Daniels disclaims beneficial ownership of the shares beneficially owned by
the other. Robert and Susan Daniels are divorced.
(4) This information is as of September 30, 2001 and is based upon a report on
Schedule 13F filed by Kopp Investment Advisors, Inc. with the Securities
and Exchange Commission as disclosed by Nasdaq.
(5) This information is as of September 30, 2001 and is based upon a report on
Schedule 13F filed by Westport Asset Management, Inc. with the Securities
and Exchange Commission as disclosed by Nasdaq.
(6) Excludes 7,700 shares held by Susan H. Daniels as Trustee of the Susan
Daniels Family Charitable Foundation. Susan H. Daniels disclaims
beneficial ownership of these shares.
(7) Represents shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(8) Includes 72,500 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(9) Includes 65,856 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(10) Includes 25,500 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(11) Includes 50,000 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(12) Includes 37,000 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(13) Includes 24,000 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.
(14) Includes 9,000 shares issuable pursuant to outstanding stock options
exercisable within 60 days of the date of this table.

Change-in-Control Arrangements

Under a plan adopted by the Company's Board of Directors, each of the
Company's executive officers will receive a payment equal to (i) such officer's
base salary for the current year plus (ii) one times the average of the
officer's bonuses for the three most recent years in the event that such
officer is terminated or terminates his employment for Good Reason in
connection with a change-in-control. Good Reason for termination by an
executive of his employment will exist if (i) within two years after the
change-in-control the Company, or any successor entity then employing the
executive, materially diminishes the responsibilities and authority of the
executive or materially reduces the rate of compensation of the executive
(including by way of determining the eligibility of such executive to earn
bonus or incentive compensation), in either case compared with his
responsibilities and authority or rate of compensation, as the case may be, in
effect immediately prior to such change-in-control and (ii) within 30 days
following such diminution or reduction the executive resigns from his
employment.

Certain Relationships and Related Transactions

In December 2001, the Company's Board of Directors engaged Alan L. Stanzler,
a non-Employee Director, as Executive Director to perform certain consulting
services at the rate of $7,500 per month through June 2002. Marc Daniels, 28,
has been employed by the Company since 1999 in various capacities, and is
currently a Senior Product Manager with compensation at market rates, in excess
of $60,000 per year. Marc Daniels is Robert L. Daniels' son.

PROPOSAL TWO

APPROVAL OF AMENDMENT TO 1999 EQUITY PLAN

Summary of the 1999 Equity Plan

The Board of Directors adopted the 1999 Equity Plan and the stockholders
approved it in March 1999. An amendment and restatement of the 1999 Equity Plan
was adopted by the Board of Directors in March 2000 and approved by the
Company's stockholders in April 2000. An amendment of the 1999 Plan to increase
the number of shares of Common Stock issuable thereunder was adopted by the
Board of Directors in November 2000, and approved by the Company's stockholders
in March 2001. On January 16, 2002, the Company's Board of Directors adopted
amendments to the 1999 Equity Plan to change the arrangement under which stock
awards are granted to Non-Employee Directors. Stockholder approval of the
proposed amendments to the 1999 Equity Plan is required under the Tax Code and
under The Marketplace Rules of the Nasdaq National Market. The affirmative vote
of a majority of the shares of Common Stock properly cast at the Annual Meeting
will be necessary to approve the amendments to the 1999 Equity Plan. Set forth
below is a summary description of the 1999 Equity Plan, which includes a
summary of the amendments to the 1999 Equity Plan adopted in January 2002.

General Information; Number of Shares Issuable. The 1999 Equity Plan
authorizes the grant of (i) options to purchase Common Stock intended to
qualify as incentive stock options ("Incentive Options"), as defined in Section
422 of the Tax Code, (ii) options that do not so qualify ("Nonstatutory Stock
Options", and together with Incentive Options, "Options"), (iii) stock bonuses,
the terms and conditions of which are determined by the Committee (as defined
below), (iv) rights to purchase restricted stock, the terms and conditions of
which are determined by the Committee (v) rights to receive cash payments based
on or measured by appreciation in the market price of the Common Stock ("Stock
Appreciation Rights") and (vi) other awards based upon the Company's Common
Stock on such terms and conditions as the Committee may determine (together
with Incentive Options, Nonstatutory Stock Options, stock bonuses, restricted
stock and Stock Appreciation Rights, "Stock Awards"). Up to 4,050,000 shares of
Common Stock (subject to adjustment upon certain changes in the capitalization
of the Company) are issuable in total pursuant to the 1999 Equity Plan.

The last sale price of the Common Stock on January 8, 2002, as reported by
Nasdaq, was $23.97. Accordingly, the market value of the 4,050,000 shares
authorized for issuance under the 1999 Equity Plan as of January 8, 2002 was
$97,078,500.

Amendments to be Approved. The Board of Directors voted on January 16, 2002
to change the manner in which stock awards are granted to Non-Employee
Directors, subject to approval of the Company's stockholders. The existing
provisions for the grant of options to Non-Employee Directors, and the proposed
amendments, are described below under "Stock Awards For Non-Employee Directors".

Administration of the 1999 Equity Plan. The 1999 Equity Plan is
administered by a committee (the "Committee") of the Board of Directors
consisting of at least two (2) members who qualify as "Non-Employee Directors"
under Section 16b-3 of the Exchange Act and as "outside directors" under
Section 162(m) of the Tax Code. Currently the Company's Compensation Committee
is acting as the Committee. The Committee selects the individuals to whom Stock
Awards are granted and determines the terms of each Stock Award, subject to the
provisions of the 1999 Equity Plan. Stock Awards may be granted under the 1999
Equity Plan to officers, directors, employees and consultants. As of January 8,
2002, four directors (excluding Messrs. Drapeau and Daniels, who are also
employees of the Company), seven executive officers and approximately 1,032
non-officer employees were eligible to participate in the 1999 Equity Plan.

Incentive Options and Nonstatutory Stock Options. Awards of Options under
the 1999 Equity Plan may be made until March 4, 2009. No Incentive Options may
extend for more than ten years from the date of grant (five years in the case
of an optionee who owns stock possessing more than 10% of the total combined
voting power

of all classes of stock of the Company or any parent or subsidiary (a
"greater-than-ten-percent-stockholder")). The exercise price of Incentive
Options granted under the 1999 Equity Plan must be at least equal to the fair
market value of the Common Stock on the date of grant (110% of fair market
value in the case of a greater-than-ten-percent-stockholder). The aggregate
fair market value (determined at the time of grant) of shares issuable pursuant
to Incentive Options which first become exercisable by an employee or officer
in any calendar year may not exceed one hundred thousand dollars ($100,000).
Incentive Options are non-transferable except by will or by the laws of descent
or distribution and are exercisable, during the optionee's lifetime, only by
the optionee.

The exercise price for Nonstatutory Stock Options will be set by the
Committee at the time of grant. A Nonstatutory Stock Option may be transferable
to the extent permitted under the option agreement governing such Nonstatutory
Stock Option. No Nonstatutory Stock Options may extend for more than ten years
from the date of grant.

Options held by employees generally expire (i) three months after
termination of the optionee's employment with the Company for any reason other
than death or disability or (ii) one year following the optionee's termination
of employment with the Company by reason of death or disability. In all other
cases, the Committee has the discretion to establish the expiration date.
Payment of the exercise price of the shares subject to the Option may be made
(i) in cash at the time the Option is exercised or (ii) at the discretion of
the Committee, either at the time of grant or exercise of the Option (a) by
delivery to the Company of shares of Common Stock of the Company, (b) according
to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other Common Stock of the Company)
with the person to whom the Option is granted or to whom the Option is
transferred or (c) in any other form of legal consideration that may be
acceptable to the Committee on terms determined by the Committee.

At the discretion of the Committee, Options may include a so-called "reload"
feature pursuant to which an optionee exercising an Option by the delivery of a
number of shares of Common Stock would automatically be granted an additional
Option (with an exercise price equal to the fair market value of the Common
Stock on the date the additional Option is granted, with the same expiration
date as the original option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Common Stock equal
to the number delivered to exercise the original Option.

Limitations on Option Re-Pricing. Under the 1999 Equity Plan, the Board of
Directors or the Committee has the authority to effect the repricing of
outstanding Options and/or Stock Appreciation Rights, or to cancel Options
and/or Stock Appreciation Rights and grant in substitution new Options and/or
Stock Appreciation Rights covering the same or different numbers of shares of
Company Common Stock. However, the Company's Board of Directors has amended the
1999 Equity Plan to provide that the Company shall obtain stockholder approval
of any such repricing (or cancellation and substitute grant), as provided under
the Marketplace Rules of The Nasdaq Stock Market.

Stock Awards for Non-Employee Directors. Under the 1999 Equity Plan, each
Non-Employee Director elected or appointed to the Board at the time of an
annual meeting of stockholders or special meeting in lieu thereof, upon first
joining the Board, is automatically granted an option to purchase 27,000 shares
of Common Stock (an "Initial Option"). Each Non-Employee Director is eligible
to receive an additional option to purchase 27,000 shares of Common Stock (an
"Additional Option") as follows: upon the Final Vesting Date, as defined below,
of any Initial Option or Additional Option held by a Non-Employee Director
whose term in office will continue after such Final Vesting Date, or who has
been nominated by the Board of Directors for election to a term that will
continue after such date, such Non-Employee Director is automatically granted
an Additional Option.

option for a number of shares of Common Stock equal to the sum of (i) 18,000
plus (ii) 9,000 multiplied by N/365 where "N" is the number of days remaining
between the date of such election or appointment of such Non-Employee Director
and the first anniversary of the date of the Company's most recent annual
meeting of stockholders or special meeting in lieu thereof (the "Prorated
Shares").

Each Initial Option and each Additional Option has an exercise price equal
to the fair market value of the Common Stock on the date of grant (determined
in accordance with the terms of the 1999 Equity Plan). All Initial Options
granted to Non-Employee Directors elected or appointed to the Board at the time
of an annual meeting of stockholders or special meeting in lieu thereof, and
all Additional Options, vest in three equal installments immediately before
each of the first three annual meetings of stockholders or special meetings in
lieu thereof following the date of grant of such option, provided in each case
that at such time the Non-Employee Director is then in office as a director.
With respect to an Initial Option granted to a Non-Employee Director who is
elected or appointed to the Board at any time other than at an annual meeting
of stockholders or special meeting in lieu thereof, the option vests as to the
Prorated Shares immediately before the first annual meeting of stockholders or
special meeting in lieu thereof following the date of grant of such Initial
Option and as to the remaining 18,000 shares in two equal installments
immediately before each of the second and third annual meetings of stockholders
or special meetings in lieu thereof following the date of grant of such Initial
Option, provided in each case that at such time the Non-Employee Director is
then in office as a director. The date on which the last such installment of
any option vests is herein referred to as its "Final Vesting Date." All options
granted to Non-Employee Directors expire on the date which is five years from
the date of grant.

The proposed amendments would change the arrangement for granting of Stock
Awards to Non-Employee Directors as follows. First, the provision for automatic
grants of Initial Options and Additional Options would be eliminated. Second,
the Company's Non-Employee Directors would be eligible to receive Stock Awards
under the 1999 Equity Plan in the same manner and to the same degree as all
other eligible persons, as determined by the Board of Directors on a
discretionary basis.

Stock Bonuses. Each Stock Bonus will be in such form and will contain such
terms and conditions as the Committee shall deem appropriate. A Stock Bonus
may, in the discretion of the Committee, be granted in consideration for past
services actually rendered to the Company for its benefit. Except as otherwise
provided elsewhere in the 1999 Equity Plan, no rights under a Stock Bonus
agreement shall be assignable by any participant under the 1999 Equity Plan,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the rights are granted only by such person.

Restricted Stock. Employees and consultants may be granted the right to
purchase restricted stock from the Company under the 1999 Equity Plan. Any
restricted stock purchase agreement shall be in such form and shall contain
such terms and conditions as the Committee shall deem appropriate. The purchase
price under each restricted stock purchase agreement shall be such amount as
the Committee shall determine and designate in such agreement. Except as
otherwise provided in the 1999 Equity Plan, no rights under a restricted stock
purchase agreement shall be assignable by any participant under the 1999 Equity
Plan, either voluntarily or by operation of law, except by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of
the person to whom the rights are granted only by such person. The purchase
price of stock acquired pursuant to a restricted stock purchase agreement shall
be paid either: (i) in cash at the time of purchase; (ii) at the discretion of
the Committee, according to a deferred payment or other arrangement with the
person to whom the stock is sold; or (iii) in any other form of legal
consideration that may be acceptable to the Committee in its discretion on
terms determined by the Committee. Shares of Common Stock sold or awarded under
the 1999 Equity Plan may, but need not, be subject to a repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Committee.

Limitations on Stock Bonuses and Restricted Stock Purchases. Under the 1999
Equity Plan, no more than two hundred thousand (200,000) shares of Company
Common Stock may be subject to Stock Bonuses or restricted stock purchase
rights.

Stock Appreciation Rights. Each Stock Appreciation Right shall entitle the
holder to a distribution based on the appreciation in the fair market value per
share of a designated amount of the Company's Common Stock. Three types of
Stock Appreciation Rights are authorized for issuance under the Plan:

Tandem Stock Appreciation Rights. Tandem Rights may be granted appurtenant
to an Option and will require the holder to elect between the exercise of the
underlying Option for shares of Common Stock and the surrender, in whole or in
part, of such Option for an appreciation distribution equal to the excess of
(A) the fair market value (on the date of Option surrender) of vested shares of
Common Stock purchasable under the surrendered Option over (B) the aggregate
exercise price payable for such shares. Tandem Rights may be tied to either
Incentive Stock Options or Nonstatutory Stock Options. Each such right shall
generally be subject to the same terms and conditions applicable to the
particular Option to which it pertains. If Tandem Rights are granted
appurtenant to an Incentive Stock Option, they must satisfy any applicable
Treasury Regulations so as not to disqualify such Option as an Incentive Stock
Option under the Tax Code.

Concurrent Stock Appreciation Rights. Concurrent Rights will be granted
appurtenant to an Option and may apply to all or any portion of the shares of
Common Stock subject to the underlying Option and will be exercised
automatically at the same time the Option is exercised for those shares. The
appreciation distribution to which the holder of such concurrent right shall be
entitled upon exercise of the underlying Option shall be in an amount equal to
such portion as shall be determined by the Board or the Committee at the time
of grant of the excess of (A) the aggregate fair market value (at date of
exercise) of the vested shares purchased under the underlying Option with such
concurrent rights over (B) the aggregate exercise price paid for those shares.
Concurrent Rights may be tied to any or all of the shares of Common Stock
subject to any Incentive Stock Option or Nonstatutory Stock Option grant made
under the 1999 Equity Plan. A Concurrent Right shall, except as specifically
set forth below, be subject to the same terms and conditions applicable to the
particular option grant to which it pertains.

Independent Stock Appreciation Rights. Independent Rights may be granted
independently of any Option and will entitle the holder upon exercise to an
appreciation distribution equal in amount to the excess of (A) the aggregate
fair market value (at date of exercise) of a number of shares of Common Stock
equal to the number of vested share equivalents exercised at such time over (B)
the aggregate fair market value of such number of shares of Common Stock at the
date of grant. Independent Rights will generally be subject to the same terms
and conditions applicable to Nonstatutory Stock Options. They will be
denominated in share equivalents.

Change In Control. The 1999 Equity Plan provides for accelerated vesting in
the event the Company undergoes a Change in Control (as defined below). Upon
and following the occurrence of a Change of Control, the time for exercise of
each unvested installment of any then outstanding Option or Stock Appreciation
Right will be accelerated, so that:

(i) immediately upon such Change of Control, if the holder is then an
employee or consultant of the Company twenty-five percent (25%) of any such
unvested installment shall be exercisable;

(ii) on the date that is nine months after such Change in Control, if the
holder is then an employee or consultant of the Company one-third (33 1/3%)
of any installment of such Option or Stock Appreciation Right that has not
yet vested in accordance with its original terms or by virtue of the 1999
Equity Plan's change in control provisions shall become exercisable;

(iii) on the date that is eighteen months after such Change in Control,
if the holder is then an employee or consultant of the Company fifty percent
(50%) of any installment of such Option or Stock Appreciation Right that has
not yet vested in accordance with its original terms or the 1999 Equity
Plan's change in control provisions shall become exercisable; and

(iv) on the second anniversary of such Change in Control, if the holder
is then an employee or consultant of the Company any remaining installment
of such Option or Stock Appreciation Right that has not yet vested in
accordance with its original terms or the 1999 Equity Plan's change in
control provisions shall become exercisable.

The foregoing clauses (i) through (iv) provide for vesting that is in
addition to, and not in lieu of, the vesting schedule originally provided in
any Option or Stock Appreciation Right outstanding at the time of a Change in
Control, and, except to the extent accelerated by such clauses, each such
Option or Stock Appreciation Right shall continue to vest in accordance with
its original terms.

Upon the occurrence of a Change of Control, the restrictions and conditions
contained in any Stock Bonus or restricted stock purchase agreement under the
1999 Equity Plan shall automatically be appropriately modified so that under
its terms additional shares of Common Stock vest in a manner essentially
equivalent to the additional vesting described above for Options and Stock
Appreciation Rights. The determination of the Committee as to such
modifications will be final, binding and conclusive.

If the Company is merged with or into or consolidated with another
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%)
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation or
if the Company is liquidated, or sells or otherwise disposes of substantially
all of its assets to another corporation while unexercised Options remain
outstanding under the 1999 Equity Plan, then in such event either:

(i) subject to the provisions of clause (ii) below, after the effective
date of such merger, consolidation, liquidation, sale or disposition, as the
case may be, each holder of an outstanding Option will be entitled, upon
exercise of such Option, to receive, in lieu of the shares of Common Stock
as to which such Option was exercisable immediately prior to such event, the
number and class of shares of stock or other securities, cash or property
(including, without limitation, shares of stock or other securities of
another corporation or common stock) to which such holder would have been
entitled pursuant to the terms of the merger, consolidation, liquidation,
sale or disposition if, immediately prior to such event, such holder had
been the holder of a number of shares of Common Stock equal to the number of
shares as to which such Option shall be so exercised; or

(ii) the Committee may accelerate the time for exercise of some or all
unexercised and unexpired Options or Stock Appreciation Rights so that from
and after a date prior to the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, specified by the
Committee such accelerated Options or Stock Appreciation Rights shall be
exercisable in full.

If, within two years following a Change in Control, the employment of any
optionee who immediately prior to such Change in Control was employed by the
Company as an officer within the meaning of Section 16 of the Exchange Act
(each such optionee being hereafter referred to as a "Designated Executive") is
terminated by the Company other than for cause, or is terminated by the
Designated Executive for Good Reason (as defined below), then in such event all
unvested Options Stock Appreciation Rights, Stock Bonuses and other Stock
Awards held by such Designated Executive at the date of such termination shall
thereupon immediately become exercisable in full. "Good Reason" for termination
by a Designated Executive of his employment will be deemed to have existed only
if (i) within two years after a Change in Control, the Company, or any
successor entity then employing the Designated Executive, materially diminishes
the responsibilities and authority of the Designated Executive or materially
reduces the rate of compensation of the Designated Executive (including by way
of a change in the method of determining the eligibility of such Designated
Executive to earn bonus or incentive compensation), in either case as compared
with his responsibilities and authority or rate of compensation, as the case
may be, in effect immediately prior to such Change in Control, and (ii) within
thirty (30) days following such diminution or reduction the Designated
Executive resigns from his employment by the Company or such successor entity.

If, within two years following a Change in Control, a Non-Employee Director
is terminated or resigns from the Board of Directors for Good Reason, then in
such event all unvested Options held by such Non-Employee Director at the date
of such resignation shall thereupon immediately become exercisable in full. For
purposes of

this paragraph, "Good Reason" for resignation by a Non-Employee Director shall
be deemed to have existed only if (i) within two years after a Change in
Control, the Company, or any successor entity, shall materially diminish the
responsibilities and authority of the Non-Employee Director or shall materially
reduce the rate of compensation of the Non-Employee Director, in either case as
compared with his responsibilities and authority or rate of compensation, as
the case may be, in effect immediately prior to such Change in Control, and
(ii) within thirty (30) days following such diminution or reduction the
Non-Employee Director shall resign from his position as a Director.

Under the 1999 Equity Plan, "Change in Control" means the occurrence of any
one of the following events:

(a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) becomes a "beneficial owner" (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan
of the Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities; or

(b) persons who constitute the Company's Board immediately prior to any
tender offer, proxy contest, consent solicitation, business combination,
merger or similar transaction cease to constitute at least a majority of the
Board as a result of such tender offer, proxy contest, merger or similar
transaction; or

(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation or other entity, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or

(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.

Authority to Amend the 1999 Equity Plan. The Board may amend the 1999
Equity Plan at any time, provided that no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary for the 1999 Equity Plan to satisfy the requirements of Section
422 of the Tax Code, Section 16b-3 of the Securities Act of 1933, as amended,
and the listing or eligibility for quotation requirements of the Nasdaq or any
similar organization or of any national securities exchange upon which shares
of the Company's Common Stock are listed or eligible for trading. The Board of
Directors may terminate or suspend the 1999 Equity Plan at any time. Unless
sooner terminated, the 1999 Equity Plan shall terminate on March 4, 2009.

Options Granted to Date Under the 1999 Equity Plan. Norman E. Drapeau, Jr.,
the Company's President and Chief Executive Officer, has received options to
purchase 350,000 shares under the 1999 Equity Plan. Robert L. Daniels,
Executive Chairman of the Board, has not received any options under the 1999
Equity Plan. Peter J. Rice, the Company's Executive Vice President--Finance &
Administration, Chief Financial Officer and Treasurer has received options to
purchase 152,000 shares under the 1999 Equity Plan. John W. Young, the
Company's Executive Vice President--Products and Technology, has received
options to purchase 90,000 shares under the 1999 Equity Plan. William J.
Sawyer, the Company's Executive Vice President--Operations, has received
options to purchase 85,000 shares under the 1999 Equity Plan. Ted D. Williams,
the Company's Executive Vice President--Worldwide Sales, has received options
to purchase 85,000 shares under the 1999 Equity Plan. All current executive
officers of the Company as a group have received options to purchase 917,000
shares under the 1999 Equity Plan. The current Directors who are not also
executive officers have received options to purchase 159,000 shares under the
1999 Equity Plan. Employees of the Company who are not

executive officers have received options to purchase 1,635,000 shares under the
1999 Equity Plan. At January 1, 2001, 2,678,500 shares were subject to
outstanding options granted under the 1999 Equity Plan, 11,000 shares had been
purchased upon exercises of options granted thereunder and 1,358,000 shares
remained available for future grants. As of January 1, 2002, option prices and
expiration dates for outstanding options granted under the 1999 Equity Plan
ranged from $7.68 to $85.00 per share and from April 1, 2009 to November 5,
2011, respectively.

New Plan Benefits

The adoption of the proposed amendments to the 1999 Equity Plan will not
result in any new benefits to (i) any of the executive officers, (ii) the
current executive officers, as a group, or (iii) employees who are not
executive officers, as a group. Upon approval of the proposed amendment by the
Company's stockholders, the Company intends to issue to each Non-Employee
Director an option to purchase 24,000 shares of Company Common Stock, each
option having an exercise price equal to Fair Market Value on the date of
grant, having a term of ten years, and vesting one year from the date of grant.
The Company is unable to determine the dollar value and number of any
additional plan benefits which will be received by or allocated to the current
directors who are not executive officers, as a group, including nominees for
election as a director, because Stock Awards are granted to Non-Employee
Directors on a discretionary basis.

Federal Income Tax Information with Respect to the 1999 Equity Plan. The
grantee of a Nonstatutory Stock Option ordinarily recognizes no income for
federal income tax purposes on the grant thereof. On the exercise of a
Nonstatutory Stock Option, the difference between the fair market value of the
underlying shares of Common Stock on the exercise date and the option exercise
price is treated as compensation to the holder of the option taxable as
ordinary income in the year of exercise, and such fair market value becomes the
basis for the underlying shares which will be used in computing any capital
gain or loss upon disposition of such shares. Subject to certain limitations,
the Corporation may deduct for the year of exercise an amount equal to the
amount recognized by the option holder as ordinary income upon exercise of a
Nonstatutory Stock Option.

The grantee of an Incentive Stock Option recognizes no income for federal
income tax purposes on the grant thereof. Except as described below with
respect to the alternative minimum tax, there is no tax upon exercise of an
Incentive Option. If no disposition of shares acquired upon exercise of the
Incentive Stock Option is made by the option holder within two years from the
date of the grant of the Incentive Stock Option or within one year after
exercise of the Incentive Option, any gain realized by the option holder on the
subsequent sale of such shares is treated as a long-term capital gain for
federal income tax purposes. If the shares are sold prior to the expiration of
such periods, the difference between the lesser of the value of the shares at
the date of exercise or at the date of sale and the exercise price of the
Incentive Stock Option is treated as compensation to the employee taxable as
ordinary income and the excess gain, if any, is treated as capital gain (which
will be long-term capital gain if the shares are held for more than one year).
The excess of the fair market value of the underlying shares over the option
price at the time of exercise of an Incentive Stock Option will constitute an
item of tax preference for purposes of the alternative minimum tax. Taxpayers
who incur the alternative minimum tax are allowed a credit which may be carried
forward indefinitely to be used as a credit against the regular tax liability
in a later year; however, the alternative minimum tax credit can not reduce the
regular tax below the alternative minimum tax for that carryover year. In
connection with the sale of the shares covered by Incentive Options, the
Corporation is allowed a deduction for tax purposes only to the extent, and at
the time, the option holder receives ordinary income (for example, by reason of
the sale of shares by the holder of an Incentive Stock Option within two years
after the date of the granting of the Incentive Stock Option or one year after
the exercise of the Incentive Option), subject to certain limitations on the
deductibility of compensation paid to executives.

Full Text of the 1999 Equity Plan. The full text of the 1999 Equity Plan,
as amended, is printed as Appendix A, beginning on page A-1.

Unless authority to do so has been limited in a proxy, it is the intention
of the persons named as proxies to vote the shares represented by the proxy FOR
the approval of the amendments to the 1999 Equity Plan.

The Board of Directors recommends that stockholders vote FOR the proposal to
approve the amendments to the Amended and Restated 1999 Equity Incentive Plan.

PROPOSAL THREE

APPROVAL OF 2002 EMPLOYEE STOCK PURCHASE PLAN

On January 16, 2002, the Board of Directors adopted the 2002 Employee Stock
Purchase Plan (the "Purchase Plan") authorizing the issuance of up to 750,000
shares of the Company's Common Stock. The Board of Directors also voted to
terminate the Company's 1994 Employee Stock Purchase Plan, effective May 30,
2002, which is the expiration date of the current offering period under that
plan. The full text of the Purchase Plan is attached as Exhibit B to this Proxy
Statement. The essential features of the Purchase Plan are outlined below:

Purpose

The purpose of the Purchase Plan is to provide a means by which all
full-time employees of the Company (and any parent or subsidiary of the Company
designated by the Board of Directors to participate in the Purchase Plan) may
be given an opportunity to purchase Common Stock of the Company through payroll
deductions, to assist the Company in retaining the services of its employees,
to secure and retain the services of new employees, and to provide incentives
for such persons to exert maximum efforts for the success of the Company.
Approximately 1,024 of the Company's approximately 1,028 employees are eligible
to participate in the Purchase Plan. The rights to purchase Common Stock
granted under the Purchase Plan are intended to qualify as options issued under
an "employee stock purchase plan" as that term is defined in Section 423(b) of
the Code.

Administration

The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power to delegate
administration of the Purchase Plan to a committee of not less than two Board
members. The Board may terminate any such delegation at any time and revest in
itself the administration of the Purchase Plan. The Board has delegated
responsibility for administration of the Purchase Plan to the Compensation
Committee.

Offerings

The Board of Directors has broad discretion to structure offerings under the
Purchase Plan, including the determination of the period and the purchase
date(s) under each Offering and the maximum percentage that participants may
withhold from their compensation. As currently implemented, the offerings are
six months in duration with purchase dates occurring on a monthly basis, and a
contribution limit of ten (10%) of participants' eligible compensation.

Eligibility

Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan. As implemented by the Directors, any eligible employee, including an
employee who is first hired during an offering period, is eligible to
participate in the Purchase Plan as of the first business day of the month
following the date of hire.

Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee
may purchase under all outstanding rights and options), nor will any employee
be granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.

Participation in the Purchase Plan

Eligible employees become participants in the Purchase Plan by delivering to
the Company, prior to the date selected by the Board as the offering date for
the offering, or as determined by the Board for new employees, an agreement
authorizing payroll deductions of up to a percentage determined by the Board of
such employees' total compensation during the purchase period.

Purchase Price

The purchase price per share at which shares are sold in an offering under
the Purchase Plan is 85% of the lower of the closing price of Common Stock on
(i) the first day of the Offering or, (ii) the Purchase Date.

Payment of Purchase Price; Payroll Deductions

The purchase price of the shares is accumulated by payroll deductions over
the offering period. At any time during the purchase period, a participant may
reduce or terminate his or her payroll deductions. A participant may increase
or begin such payroll deductions after the beginning of any purchase period,
but only on specified dates. All payroll deductions made for a participant are
credited to his or her account under the Purchase Plan and deposited with the
general funds of the Company. A participant may not make any additional
payments into such account.

Purchase of Stock

By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Plan specifies a maximum number of shares any
employee may be granted the right to purchase and the maximum aggregate number
of shares which may be purchased pursuant to such offering by all participants.
If the aggregate number of shares to be purchased upon exercise of rights
granted in the offering would exceed the maximum aggregate number, the Board
would make a pro rata allocation of shares available in a uniform and equitable
manner. Unless the employee's participation is discontinued, his right to
purchase shares is exercised automatically at the end of the purchase period at
the applicable price. See "Withdrawal" below.

Withdrawal

While each participant in the Purchase Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering to the
Company a notice of withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of the applicable offering period.

Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from
an offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan.

Termination of Employment

Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.

Restrictions on Transfer

Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.

Duration, Amendment and Termination

The Board may suspend, terminate or amend the Purchase Plan at any time. The
Board may amend the Purchase Plan at any time. Any amendment of the Purchase
Plan must be approved by the stockholders within 12 months of its adoption by
the Board if the amendment would (a) increase the number of shares of Common
Stock reserved for issuance under the Purchase Plan, or (b) modify the
provisions as to eligibility for participation or any other provision of the
Purchase Plan in a manner that would require shareholder approval in order to
comply with the requirements of Rule 16b-3 under the Exchange Act, and Section
423 of the Tax Code.

Rights granted before amendment or termination of the Purchase Plan will not
be altered or impaired by any amendment or termination of such plan without
consent of the person to whom such rights were granted.

Effect of Certain Corporate Events

In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation either will assume the rights under the
Purchase Plan or substitute similar rights, or the exercise date of any ongoing
offering will be accelerated such that the outstanding rights may be exercised
immediately prior to any such event.

Stock Subject to Purchase Plan

If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.

New Plan Benefits

The Company is unable to determine the dollar value and number of any
additional plan benefits which will be received by or allocated to (i) any of
the executive officers, (ii) the current executive officers, as a group, or
(iii) employees who are not executive officers, as a group, because
participation in the Purchase Plan and the rate of withholding is voluntary and
determined by each eligibale person in his or her sole discretion. The adoption
of the Purchase Plan will not result in any new benefits to the current
directors who are not executive officers, as a group, including nominees for
election as a director, because such persons are not eligible to participate in
the Purchase Plan.

Federal Income Tax Information

Rights granted under the Purchase Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan which qualifies under provisions of Section 423 of the Code.

A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.

If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering
period over the exercise price (determined as of the beginning of the offering
period) will be treated as ordinary income. Any further gain or any loss will
be taxed as a capital gain or loss. Capital gains currently are generally
subject to lower tax rates than ordinary income.

If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of
the stock on the exercise date over the exercise price will be treated as
ordinary income at the time of such disposition. The balance of any gain will
be treated as capital gain. Even if the stock is later disposed of for less
than its fair market value on the exercise date, the same amount of ordinary
income is attributed to the participant, and a capital loss is recognized equal
to the difference between the sales price and the fair market value of the
stock on such exercise date.

There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Purchase Plan. The Company is entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness, the provisions of Section 162(m)
and the satisfaction of a tax reporting obligation).

The Board of Directors recommends that stockholders vote FOR the proposal to
approve the adoption of the 2002 Employee Stock Purchase Plan.

PROPOSAL FOUR

RATIFICATION OF APPOINTMENT OF ACCOUNTANTS

Although Massachusetts law does not require that the selection by the Board
of Directors of the Company's accountants be approved each year by the
stockholders, the Board believes it is appropriate to submit its selection to
the stockholders for their approval and to abide by the result of the
stockholders' vote. The Board of Directors recommends that the stockholders
ratify the appointment of PricewaterhouseCoopers LLP as independent accountants
to audit the financial statements of the Company for the fiscal year ending
September 30, 2002.

Audit Fees. The total fees paid and payable to PricewaterhouseCoopers LLP
in connection with PricewaterhouseCoopers LLP's audit and quarterly reviews of
financial statements for fiscal 2001, were $270,680. Financial information
systems design and implementation fees for fiscal 2001 were $0. All other fees
for fiscal 2001 were $140,446.

Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if they wish, and will be
available to respond to appropriate questions from stockholders.

The Board of Directors recommends that stockholders vote FOR the proposal to
ratify the selection of PricewaterhouseCoopers LLP as independent accountants
for the fiscal year ending September 30, 2002.

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 who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater-than-ten-percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.

Based solely upon review of Forms 3 and 4 and amendments thereto furnished
to the Company during fiscal 2001, and Forms 5 and amendments thereto furnished
to the Company with respect to fiscal 2001, or representations that Form 5 was
not required, the Company believes that all Section 16(a) filing requirements
applicable to its officers, directors and greater-than-ten percent stockholders
were fulfilled in a timely manner, except that Mr. Williams reported four
transactions which were reportable on Form 4s, on a Form 5. After investigating
these matters, the Company has concluded that any omissions were inadvertent,
and that none of the transactions gave rise to liability under Section 16(b) of
the Exchange Act for recapture of short-swing profits.

SOLICITATION

No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses
incurred in obtaining instructions from beneficial owners of the Common Stock.
In addition to the solicitation by mail, special solicitation of proxies may,
in certain instances, be made personally or by telephone by directors, officers
and certain employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.

STOCKHOLDER PROPOSALS

Stockholder proposals for inclusion in the proxy materials related to the
2003 Annual Meeting of Stockholders or Special Meeting in lieu thereof must be
received by the Company at its Executive Offices no later than October 9, 2002
or, if the date of such meeting is more than 30 calendar days before or after
March 5, 2003, a reasonable time before the solicitation of proxies by the
Company with respect to such meeting is made.

In addition, the Company's By-Laws provide that a stockholder must give
written notice to the Company of any business to be conducted at any meeting of
stockholders in accordance with the procedural requirements fully set forth in
Article III of the Company's By-Laws. In the case of a regularly scheduled
annual meeting, such notice must be given not less than sixty days prior to the
scheduled annual meeting describing any proposal to be brought before such
meeting, even if such item is not to be included in the Company's proxy
statement relating to such meeting. To bring an item of business before the
2003 Annual Meeting, a stockholder must deliver the requisite notice of such
item to the Company no later than January 3, 2002.

MISCELLANEOUS

The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this Proxy Statement to stockholders, of any
other business which properly may be presented for action at the Annual
Meeting. If any other business should come before the Annual Meeting, the
persons present will have discretionary authority to vote the shares they own
or represent by proxy in accordance with their judgment.

AVAILABLE INFORMATION

Stockholders of record on January 8, 2002 will receive a Proxy Statement and
the Company's Annual Report to Stockholders, which contains detailed financial
information concerning the Company. The Annual Report is not incorporated
herein and is not deemed a part hereof.

APPENDIX A: Amended and Restated 1999 Equity Incentive Plan
APPENDIX B: 2002 Employee Stock Purchase Plan

APPENDIX A

MRO SOFTWARE, INC.

AMENDED AND RESTATED 1999 EQUITY INCENTIVE PLAN

1. INTRODUCTION: PURPOSES

(a) This Amended and Restated 1999 Equity Incentive Plan (the "1999 Plan" or
"the Plan") amends and restates the 1999 Equity Incentive Plan of MRO Software,
Inc. (the "Company") adopted on March 24, 1999. Options granted under the 1994
Incentive and Nonqualified Stock Option Plan shall continue to be governed by
the terms of the 1994 Incentive and Nonqualified Stock Option Plan, as amended
to date.

(b) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) Stock Bonuses, (iv) rights to purchase
Restricted Stock, (v) Stock Appreciation Rights, and (vi) other awards based
upon the Company's Common Stock on such terms and conditions as the Board of
Directors of the Company(the "Board") may determine.

(c) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.

(d) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c)
hereof, be either (i) Options granted pursuant to Sections 6 and 7 hereof,
including Incentive Stock Options and Nonstatutory Stock Options, (ii) Stock
Bonuses or rights to purchase restricted stock granted pursuant to Section 8
hereof, (iii) Stock Appreciation Rights granted pursuant to Section 9 hereof or
(iv) other stock based awards granted pursuant to Section 10 hereof. All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant, and shall be in such form as required
pursuant to Sections 6 and 7 hereof, and a separate certificate will be issued
for shares purchased upon exercise of each type of Option.

2. DEFINITIONS AND RULES OF INTERPRETATION

(a) Definitions.

For the purposes of the Plan, in addition to the definitions set forth
above, the following terms shall have the respective meanings set forth below:

(i) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections
424(e) and (f) respectively, of the Code.

(ii) "Board" means the Board of Directors of the Company.

(iii) "Change in Control" means the occurrence of any one of the
following events:

(a) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) (other than
the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), directly
or indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or

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(b) persons who constitute the Company's Board immediately prior to
any tender offer, proxy contest, consent solicitation, business
combination, merger or similar transaction cease to constitute at least
a majority of the Board as a result of such tender offer, proxy contest,
merger or similar transaction; or

(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation or other entity, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than fifty percent (50%)
of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or

(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.

(iv) "Change in Stock" means any change in the Company Common Stock
subject to the Plan, or subject to any Stock Award, without receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, stock split, spin-off,
split-up, spin-out, dividend in property other than cash, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by
the Company); provided however, that the conversion of any convertible
securities of the Company shall not be treated as a "transaction not
involving the receipt of consideration by the Company."

(v) "Code" means the Internal Revenue Code of 1986, as amended.

(vi) "Committee" means the Committee appointed by the Board in accordance
with subsection 3 of the Plan.

(vii) "Company" means MRO Software, Inc. a corporation organized under
the laws of Massachusetts.

(viii) "Company Common Stock" means the common stock of the Company, par
value $.01 per share

(ix) "Concurrent Stock Appreciation Right" or "Concurrent Right" means a
right granted pursuant to subsection 9(b)(ii) hereof.

(x) "Consultant" means any person, including an advisor, engaged by the
Company, or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant" shall not
include a Director acting solely in his capacity as such.

(xi) "Continuous Status as an Employee or Consultant" means the
employment or relationship as Consultant is not interrupted or terminated by
the Company or any Affiliate. The Committee, in its sole discretion, may
determine whether Continuous Status as an Employee, or Consultant shall be
considered interrupted in the case of any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave;
provided, however, that for purposes of Incentive Stock Options and Stock
Appreciation Rights appurtenant thereto, any such leave may not exceed
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute.

(xii) "Director" means a member of the Board.

(xiii) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.

(xiv) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as
a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.

(xv) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(xvi) "Fair Market Value" means, the closing sales price as of the date
of grant for Company Common Stock (or the closing bid, if no sales were
reported) as quoted on the Nasdaq National Market or any similar

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organization or if Company Common Stock is listed on any national securities
exchange, as quoted on such national securities exchange, as applicable, as
reported in the Wall Street Journal or other source as the Board deems
reliable, and if Company Common Stock is not traded on the Nasdaq National
Market or any similar organization or on any national securities exchange,
the value as determined in good faith by the Committee, based on the
information available to it.

(xvii) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

(xviii) "Independent Stock Appreciation Right" or "Independent Right"
means a right granted under subsection 9(b)(iii) hereof.

(xix) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does
not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a Consultant or in any
capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K (or any
successor regulation of similar import) promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any
other transaction as to which disclosure would be required under Item 404(a)
of Regulation S-K (or any successor regulation of similar import), and is
not engaged in a business relationship as to which disclosure would be
required under Item 404(b) of Regulation S-K (or any successor regulation of
similar import); or (ii) is otherwise considered a "non-employee director"
for purposes of Rule 16b-3 of the Exchange Act.

(xx) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.

(xxi) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(xxii) "Option" means a stock option granted pursuant to the Plan.

(xxiii) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.

(xxiv) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.

(xxv) "Outside Director" means for any given date of grant a Director who
either (i) is not then a current employee of the Company or an "affiliated
corporation" (within the meaning of Treasury regulations promulgated under
Section 162(m) of the Code), is not a former employee of the Company or an
"affiliated corporation" receiving compensation from the Company or such
affiliated corporation for prior services (other than benefits under a tax
qualified pension plan) during the then current taxable year, was not an
officer of the Company or an "affiliated corporation" at any time (other
than as its Clerk or Assistant Clerk), and is not then currently receiving
direct or indirect remuneration from the Company or an "affiliated
corporation" for services in any capacity other than as a Director, and (ii)
is otherwise considered an "outside director" for purposes of Section 162(m)
of the Code.

(xxvi) "Plan" or "1999 Plan" mean this Amended and Restated 1999 Equity
Incentive Plan.

(xxvii) "Plan Year" means the calendar year.

(xxiii) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3.

(xxix) "Securities Act" means the Securities Act of 1933, as amended.

(xxx) "Stock Appreciation Right" means any of the various types of rights
which may be granted under Section 9 hereof.

(xxxi) "Stock Award" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.

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(xxxii) "Stock Award Agreement" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of
an individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.

(xxxiii) "Stock Bonus" means any stock bonus of the type which may be
granted under Section 8 hereof.

(xxxiv) "Tandem Stock Appreciation Right" or "Tandem Right" means a right
granted under subsection 9(b)(i) hereof.

The foregoing terms are not the exclusive definitions as used in the Plan
and reference is made to other capitalized terms defined in the context of
their first use herein.

(b) Rules of Interpretation.

(i) The headings and subheadings used herein or in any Option or other
instrument evidencing a Stock Award are solely for convenience of reference
and shall not constitute a part of the Plan or such document or affect the
meaning, construction or effect of any provision thereof.

(ii) All definitions set forth herein shall apply to the singular as well
as the plural form of such defined term, and all references to the masculine
gender shall include reference to the feminine or neuter gender and visa
versa, as the context may require. (iii) References to "including" means
including without limiting the generality of any description preceding such
term.

(iv) Unless otherwise expressly stipulated, any reference in the Plan to
any statute, act, regulation or specific provision thereof shall also extend
to any amendment, restatement or other modification to such statute, act,
regulation or specific provision thereof or any successor statute, act,
regulation or provision of similar import.

(v) Unless otherwise expressly provided, any reference in the Plan to any
specific provision of any statute or act shall include any regulations
promulgated thereunder from time to time and interpretations thereof as may
be applicable to the Plan.

3. ADMINISTRATION

(a) Administration of the Plan shall be delegated to a committee composed of
not fewer than two (2) members (the "Committee"), all of the members of which
Committee shall be Non-Employee Directors and Outside Directors. The Committee
shall have, in connection with the administration of the Plan, the powers set
forth in the Plan, subject, however, to such resolutions, not inconsistent with
the provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revisit in the Board the
administration of the Plan. The Board shall have the authority to correct any
defect, omission or inconsistency in the Plan and to amend the Plan as provided
in Section 16. The Board shall have the authority to appoint the Committee and
to fill any vacancy created on the Committee by reason of the death,
resignation or removal of any member thereof by appointing an eligible
successor. Notwithstanding anything in this Section 3 to the contrary, at any
time the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act and to eligible
persons with respect to whom the Company does not wish to comply with
Section 162(m) of the Code.

(b) The Committee shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a Stock Bonus, a right to purchase restricted
stock, a Stock

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Appreciation Right, another stock-based award or a combination of the
foregoing; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; whether a person shall be permitted
to receive stock upon exercise of an Independent Stock Appreciation Right;
and the number of shares with respect to which Stock Awards shall be granted
to each such person.

(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Committee, in the exercise of this power, may correct
any defect, omission or inconsistency in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the
Stock Award Agreement fully effective.

(iii) To amend any Stock Award.

(iv) Generally, to exercise such powers and to perform such acts as the
Committee deems necessary or expedient to promote the best interests of the
Company and which are not in conflict with the provisions of the Plan.

4. SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 15 hereof relating to adjustments
upon Changes in Stock, the number of shares of stock that may be issued
pursuant to Stock Awards under the Plan shall be equal to 4,050,000 shares of
Company Common Stock (which reflects the stock split effected by means of a
stock dividend on December 15, 1999). If any Stock Award shall for any reason
expire or otherwise terminate without having been exercised in full, the
Company Common Stock not purchased shall again become available for issuance
under the Plan. Notwithstanding the foregoing, shares of Company Common Stock
subject to Stock Appreciation Rights exercised in accordance with Section 8
hereof shall not be available for subsequent issuance under the Plan.

(b) The Company Common Stock subject to the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares. Subject to Section
4(a) hereof, no more than two hundred thousand (200,000) shares of Company
Common Stock may be subject to Stock Bonus or restricted stock purchase.

5. ELIGIBILITY.

(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Other Stock Awards may be granted to
Employees, Directors or Consultants.

(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) Company Common Stock possessing more than ten
percent (10%) of the total combined voting power of all classes of capital
stock of the Company or of any of its Affiliates unless the exercise price of
such Incentive Stock Option is at least one hundred ten percent (110%) of the
Fair Market Value of such Company Common Stock at the date of grant and the
Incentive Stock Option is not exercisable after the expiration of five (5)
years from the date of grant.

(c) No person shall be eligible to be granted Stock Awards covering more
than two hundred thousand (200,000) shares of Company Common Stock in any Plan
Year.

6. OPTION PROVISIONS.

Each Option Agreement shall be in such form and shall contain such terms and
conditions as the Committee shall deem appropriate. The provisions of separate
Option Agreements need not be identical, but each Option Agreement shall
include (through incorporation of provisions hereof by reference in the Option
Agreement or otherwise) the substance of each of the following provisions
except as otherwise specifically provided elsewhere in the Plan:

(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.

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(b) Price. Subject to subsection 5(b) hereof, the exercise price of each
Incentive Stock Option shall be not less than one hundred percent (100%) of the
Fair Market Value of the Company Common Stock subject to the Option on the date
the Option is granted. The exercise price of each Nonstatutory Stock Option
shall be set by the Committee at the time each Option is granted.

(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either: (i) in cash at the time the Option is exercised, or (ii)
at the discretion of the Committee, either at the time of the grant or exercise
of the Option, (A) by delivery to the Company of other Common Stock of the
Company owned by the Optionee for a period of at least six months,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other Common Stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d) hereof, or (C) in any other
form of legal consideration that may be acceptable to the Committee on terms
determined by the Committee.

In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions
of the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.

(d) Transferability. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock
Option is granted only by such person. A Nonstatutory Stock Option may be
transferable to the extent specified in the Option Agreement, in which case the
Option may be transferred upon such terms and conditions as are set forth in
the Option Agreement, as the Committee shall determine in its sole discretion,
including (without limitation) pursuant to a "domestic relations order" within
the meaning of such rules, regulations or interpretation of the Securities and
Exchange Commission as are applicable for purposes of Section 16 of the
Exchange Act, or to family members, or to trusts or other entities maintained
for the benefit of family members. Notwithstanding the foregoing, the person to
whom an Option is granted may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event
of the death of the Optionee, shall thereafter be entitled to exercise the
Option.

(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. During the remainder of
the term of the Option (if its term extends beyond the end of the installment
periods), the Option may be exercised from time to time with respect to any
shares then remaining subject to the Option. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of
shares as to which an Option may be exercised.

(f) Termination of Employment or Relationship as A Consultant. In the event
an Optionee's Continuous Status as an Employee or Consultant terminates (other
than upon the Optionee's death or Disability), the Optionee may exercise his or
her Option, but only within such period of time ending on the earlier of (i)
the date three (3) months after termination of the Optionee's Continuous Status
as an Employee or Consultant (or such longer (but only in the case of a
Nonstatutory Stock Option) or shorter period of time specified in the Option
Agreement), or (ii) the expiration of the Option's term, and only to the extent
that the Optionee was entitled to exercise it at the date of termination (but
in no event later than the expiration of the term of such Option as set forth
in the Option Agreement). If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become

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available for issuance under the Plan. If, after termination, the Optionee does
not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.

(g) Disability of Optionee. In the event an Optionee's Continuous Status as
an Employee or Consultant terminates as a result of the Optionee's Disability,
the Optionee may exercise his or her Option, but only within such period of
time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period of time as specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement). If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.

(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance, or by a person designated to
exercise the Option upon the Optionee's death pursuant to subsection 6(d)
hereof, but only within the period ending on the earlier of (i) the date twelve
(12) months following the date of death (or such longer or shorter period
specified in the Option Agreement) or (ii) the expiration of the term of such
Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.

(i) Early Exercise. The Option Agreement may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee,
Director or Consultant to exercise the Option as to any part or all of the
shares subject to the Option prior to the full vesting of the Option. If such a
provision is included in an Option Agreement, the Option Agreement shall also
contain provisions establishing a vesting schedule for the purchased shares and
a right of the Company to repurchase any unvested shares or, as a condition to
the exercise of the relevant Option, requiring the Optionee to enter into an
agreement with the Company establishing such vesting and such rights.

(j) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any required minimum federal, state or
local tax withholding obligation relating to the exercise of such Option by any
of the following means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the shares of the
Common Stock otherwise issuable to the participant as a result of the exercise
of the Option; or (3) delivering to the Company owned and unencumbered shares
of the Common Stock of the Company.

(k) Re-Load Options. Without in any way limiting the authority of the
Committee to make or not to make grants of Options hereunder, the Committee
shall have the authority (but not an obligation) to include as part of any
Option Agreement a provision entitling the Optionee to a further Option (a
"Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
Company Common Stock in accordance with the Plan and the terms and conditions
of the Option Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the exercise
price of such Option, (ii) shall have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) shall have an exercise price which is equal to one
hundred percent (100%) of the Fair Market Value of the Company Common Stock
subject to the Re-Load Option on the date of exercise of the original Option
or, in the case of a Re-Load Option which is an Incentive Stock Option and
which is granted to a 10% stockholder (as described in

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subsection 5(c) hereof), shall have an exercise price which is equal to one
hundred ten percent (110%) of the Fair Market Value of the Company Common Stock
subject to the Re-Load Option on the date of exercise of the original Option
and shall have a term which is no longer than five (5) years.

Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Committee may designate at the time of the grant of the
original Option, provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 13(d) hereof and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
hereof and shall be subject to such other terms and conditions as the Committee
may determine which are not inconsistent with the express provisions of the
Plan regarding the terms of the Options.

7. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.

(a) The Committee may grant Nonstatutory Stock Options, and other Stock
Awards pursuant to Sections 8, 9 or 10 below, to the Company's Non-Employee
Directors, in the Committee's sole discretion.

(b) Each Nonstatutory Stock Option granted to Non-Employee Directors shall
have an exercise price equal to the Fair Market Value of the Common Stock on
the date of grant. All options granted under this Section 7 prior to March 5,
2002 shall expire on the date which is five years from the date of grant. All
options granted under this Section 7 on or after March 5, 2002 shall expire on
a date determined by the Committee which is not more than ten years from the
date of grant.

(c) The Committee shall adopt such provisions, in its sole discretion, as to
the time, any limitations or restrictions and the manner of the exercise or
vesting of Nonstatutory Stock Options granted under this Section 7 in respect
of the matters set forth under the provisions of Subsections 6(d), (j) and (k)
hereof.

8. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

Each Stock Bonus or restricted stock purchase agreement related to a Stock
Award shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of Stock Bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
Stock Bonus or restricted stock purchase agreement shall include (through
incorporation of provisions herein by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:

(a) Purchase Price. The purchase price under each restricted stock purchase
agreement shall be such amount as the Committee shall determine and designate
in such agreement. Notwithstanding the foregoing, the Committee may determine
that eligible participants in the Plan may be granted a Stock Award pursuant to
a Stock Bonus agreement in consideration for past services actually rendered to
the Company for its benefit.

(b) Transferability. Except as otherwise provided elsewhere in the Plan, no
rights under a Stock Bonus or restricted stock purchase agreement shall be
assignable by any participant under the Plan, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution,
and shall be exercisable during the lifetime of the person to whom the rights
are granted only by such person. The person to whom the Stock Award is granted,
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of such person,
shall thereafter be entitled to exercise the rights held by such person under
the Stock Bonus or restricted stock purchase agreement.

(c) Consideration. The purchase price of stock acquired pursuant to a Stock
Award in the form of a stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the

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Committee, according to a deferred payment or other arrangement with the person
to whom the stock is sold; or (iii) in any other form of legal consideration
that may be acceptable to the Committee in its discretion; including delivery
of a promissory note of the Optionee to the Company on terms determined by the
Committee. Notwithstanding the foregoing, the Committee may grant a Stock Award
pursuant to a Stock Bonus agreement in consideration for past services actually
rendered to the Company or for its benefit.

(d) Vesting. Shares of Company Common Stock sold or awarded under the Plan
may, but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Committee.

(e) Termination of Employment or Relationship as a Consultant. In the event
a Participant's Continuous Status as an Employee or Consultant terminates, the
Company may repurchase or otherwise reacquire any or all of the shares of
Company Common Stock held by that person which have not vested as of the date
of termination under the terms of the Stock Bonus or restricted stock purchase
agreement between the Company and such person.

9. STOCK APPRECIATION RIGHTS.

(a) The Committee shall have full power and authority, exercisable in its
sole discretion, to grant Stock Appreciation Rights to Employees or Consultants
to the Company or its Affiliates under the Plan. Each such right shall entitle
the holder to a distribution based on the appreciation in the Fair Market Value
per share of a designated amount of Company Common Stock.

(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:

(i) Tandem Stock Appreciation Rights. Tandem Rights will be granted
appurtenant to an Option and will require the holder to elect between the
exercise of the underlying Option for shares of Company Common Stock and the
surrender, in whole or in part, of such Option for an appreciation
distribution equal to the excess of (A) the Fair Market Value (on the date
of Option surrender) of vested shares of Company Common Stock purchasable
under the surrendered Option over (B) the aggregate exercise price payable
for such shares.

(ii) Concurrent Stock Appreciation Rights. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of Company Common Stock subject to the underlying Option and will be
exercisedautomatically at the same time the Option is exercised for those
shares. The appreciation distribution to which the holder of such concurrent
right shall be entitled upon exercise of the underlying Option shall be in
an amount equal to such portion as shall be determined by the Board or the
Committee at the time of grant of the excess of (A) the aggregate Fair
Market Value (at date of exercise) of the vested shares purchased under the
underlying Option with such concurrent rights over (B) the aggregate
exercise price paid for those shares.

(iii) Independent Stock Appreciation Rights. Independent Rights may be
granted independently of any Option and will entitle the holder upon
exercise to an appreciation distribution equal in amount to the excess of
(A) the aggregate Fair Market Value (at date of exercise) of a number of
shares of Company Common Stock equal to the number of vested share
equivalents exercised at such time (as described in subsection 8(c)(iii))
hereof over (B) the aggregate Fair Market Value of such number of shares of
Company Common Stock at the date of grant.

(c) The terms and conditions applicable to each Tandem Right, Concurrent
Right and Independent Right shall be as follows:

(i) TANDEM RIGHTS:

A. Tandem Rights may be tied to either Incentive Stock Options or
Nonstatutory Stock Options. Each such right shall, except as
specifically set forth below, be subject to the same terms and

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conditions applicable to the particular Option to which it pertains. If
Tandem Rights are granted appurtenant to an Incentive Stock Option, they
shall satisfy any applicable Treasury Regulations so as not to
disqualify such Option as an Incentive Stock Option under the Code.

B. The appreciation distribution payable on the exercised Tandem
Right shall be in cash in an amount equal to the excess of (i) the Fair
Market Value (on the date of the Option surrender) of the number of
shares of Company Common Stock covered by that portion of the
surrendered Option in which the Optionee is vested over (ii) the
aggregate exercise price payable for such vested shares.

(ii) CONCURRENT RIGHTS:

A. Concurrent Rights may be tied to any or all of the shares of
Company Common Stock subject to any Incentive Stock Option or
Nonstatutory Stock Option grant made under the Plan. A Concurrent Right
shall, except as specifically set forth below, be subject to the same
terms and conditions applicable to the particular option grant to which
it pertains.

B. A Concurrent Right shall be automatically exercised at the same
time as the underlying Option is exercised with respect to the
particular shares of Company Common Stock to which the Concurrent Right
pertains.

C. The appreciation distribution payable on an exercised Concurrent
Right shall be in cash in an amount equal to such portion as shall be
determined by the Board or the Committee at the time of grant of the
excess of (i) the aggregate Fair Market Value (on the date the Option is
exercised) of the vested shares of Company Common Stock purchased under
the underlying Option which have Concurrent Rights appurtenant to them
over (ii) the aggregate exercise price paid for such shares.

(iii) INDEPENDENT RIGHTS:

A. Independent Rights shall, except as specifically set forth below,
be subject to the same terms and conditions applicable to Nonstatutory
Stock Options as set forth in Section 6 hereof. They shall be
denominated in share equivalents.

B. The appreciation distribution payable on the exercised Independent
Right shall be in cash in an amount equal to the excess of (I) the
aggregate Fair Market Value (on the date of the exercise of the
Independent Right) of a number of shares of Company Common Stock equal
to the number of share equivalents in which the holder is vested under
such Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (II) the aggregate
Fair Market Value (on the date of the grant of the Independent Right) of
such number of shares of Company Common Stock.

(iv) TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT RIGHTS AND INDEPENDENT
RIGHTS:

A. To exercise any outstanding Tandem, Concurrent or Independent
Right, the holder must provide written notice of exercise to the Company
in compliance with the provisions of the instrument evidencing such
right.

B. If a Tandem, Concurrent, or Independent Right is granted to an
individual who is at the time subject to Section 16(b) of the Exchange
Act (a "Section 16(b) Insider"), then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to assure
that the subsequent exercise of such right shall qualify for the
safe-harbor exemption from short-swing profit liability provided by Rule
16b-3.

C. Except as otherwise provided in this Section 9, no limitation
shall exist on the aggregate amount of cash payments the Company may
make under the Plan in connection with the exercise of Tandem,
Concurrent or Independent Rights.

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10. OTHER STOCK-BASED AWARDS.

The Committee shall have the right to grant other Awards based upon Company
Common Stock having such terms and conditions as the Committee may determine,
including the grant of shares based upon certain conditions and grant of
securities convertible into Company Common Stock.

11. CANCELLATION AND RE-GRANT OF OPTIONS.

(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and the grant in
substitution therefor of new Options and/or Stock Appreciation Rights under the
Plan covering the same or different numbers of shares of Company Common Stock,
but having an exercise price per share not less than eighty five percent (85%)
of the Fair Market Value (one hundred percent (100%)) of the Fair Market Value
in the case of an Incentive Stock Option or, in the case of an Incentive Stock
Option granted to a 10% stockholder (as described in subsection 5(c) hereof,
not less than one hundred ten percent (110%) of the Fair Market Value) per
share of Company Common Stock on the new grant date.

(b) Shares of Company Common Stock subject to an Option or Stock
Appreciation Right canceled under this Section 11 shall continue to be counted
against the maximum award of Options and Stock Appreciation Rights permitted to
be granted to a person pursuant to subsection 5(c) hereof. The repricing of an
Option and/or Stock Appreciation Right under this Section 11, resulting in a
reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such repricing, both
the original and the substituted Options and Stock Appreciation Rights shall be
counted against the maximum awards of Options and Stock Appreciation Rights
permitted to be granted to a person pursuant to subsection 5(c) hereof. The
provisions of this subsection 11(b) shall be applicable only to the extent
required by Section 162(m) of the Code.

(c) The Company shall obtain stockholder approval as provided under the
Marketplace Rules of The Nasdaq National Stock Market of any stock option or
stock appreciation right repricing effected under this Section 11.

12. COVENANTS OF THE COMPANY.

(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of Company Common Stock required to satisfy
such Stock Awards up to the number of shares of Company Common Stock authorized
under the Plan.

(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of Company Common Stock under the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act or any securities law of any state either the Plan, any
Stock Award or any stock issued or issuable pursuant to any such Stock Award.
The Company shall not be required to sell or issue any shares under any Stock
Award if the issuance of such shares shall constitute a violation by the holder
of the Stock Award or by the Company of any provision of any law or regulation
of any governmental authority. In the event the shares of Company Common Stock
issuable on exercise of Stock Award are not registered under the Securities
Act, the Company may imprint upon any certificate representing shares so issued
any legend which counsel for the Company considers necessary or advisable to
comply with the Securities Act and with applicable state securities laws. The
Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares.

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13. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of Company Common Stock pursuant to Stock Awards
shall constitute general funds of the Company.

14. MISCELLANEOUS.

(a) The Committee shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.

(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) hereof shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Company Common
Stock subject to such Option unless and until such person has satisfied all
requirements for exercise of the Option pursuant to its terms.

(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant,
Optionee, or other holder of Stock Awards any right to continue in the employ
of the Company or any Affiliate (or to continue acting as a Director or
Consultant) or shall affect the right of the Company or any Affiliate to
terminate the employment or relationship as a Director or Consultant of any
Employee, Director, Consultant or Optionee, with or without cause.

(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of Company Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year under all plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.

15. ADJUSTMENTS UPON CHANGE IN STOCK.

In the event of any Change in Stock, the Plan will be appropriately adjusted
in the class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) hereof and the maximum number of shares subject to Options and
Stock Awards pursuant to subsection 5(c) hereof, and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of shares and
price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Committee, the determination of which shall be
final, binding and conclusive.

16. VESTING AND PAYMENT UPON CHANGE IN CONTROL.

(a) After a merger of one or more corporations with or into the Company or
after a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, each holder of an outstanding Option shall, at
no additional cost, be entitled upon exercise of such Option to receive in lieu
of the shares of Company Common Stock as to which such Option was exercisable
immediately prior to such event, the number and class of shares of stock or
other securities, cash or property (including, without limitation, shares of
stock or other securities of another corporation or Company Common Stock) to
which such holder would have been entitled pursuant to the terms of the
agreement of merger or consolidation if, immediately prior to such merger or
consolidation, such holder had been the holder of record of a number of shares
of Company Common Stock equal to the number of shares for which such Option
shall be so exercised.

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(b) Upon and following the occurrence of a Change of Control, the time for
exercise of each unvested installment of any then outstanding Option or Stock
Appreciation Right shall be accelerated, so that:

(i) immediately upon such Change of Control, if the holder or optionee is
then an employee or consultant of the Company, twenty-five percent (25%) of
any such unvested installment shall be exercisable;

(ii) on the date that is nine months after such Change in Control, if the
holder or optionee is then an employee or consultant of the Company, one
third (33 1/3%) of any installment of such Option or Stock Appreciation
Right that has not yet vested in accordance with its original terms or by
virtue of this Section 16 shall become exercisable;

(iii) on the date that is eighteen months after such Change in Control,
if the holder or optionee is then an employee or consultant of the Company,
fifty percent (50%) of any installment of such Option or Stock Appreciation
Right that has not yet vested in accordance with its original terms or by
virtue of this Section 16 shall become exercisable; and

(iv) on the second anniversary of such Change in Control, if the holder
or optionee is then an employee or consultant of the Company, any remaining
installment of such Option or Stock Appreciation Right that has not yet
vested in accordance with its original terms or by virtue of this Section 16
shall become exercisable.

The foregoing clauses (i) through (iv) are intended to provide for vesting
that is in addition to, and not in lieu of, the vesting schedule originally
provided in any Option or Stock Appreciation Right outstanding at the time of a
Change in Control, and, except to the extent accelerated by such clauses, each
such Option or Stock Appreciation Right shall continue to vest in accordance
with its original terms.

(c) Upon the occurrence of a Change of Control, the restrictions and
conditions contained in any Stock Bonus granted to a then current Employee or
Consultant or restricted stock purchase agreement related to a Stock Award to
which a then current Employee or Consultant is a party shall automatically be
appropriately modified so that under the terms thereof additional shares of
Company Common Stock vest in a manner essentially equivalent to the additional
vesting provided for in Section 16(b) for Options and Stock Appreciation
Rights. The determination of the Committee as to such modifications shall be
final, binding and conclusive.

The foregoing subparagraph (c) is intended to provide for vesting that is in
addition to, and not in lieu of, the vesting schedule originally provided in
any Stock Bonus or restricted stock purchase agreement related to a Stock Award
outstanding at the time of a Change in Control, and, except to the extent
accelerated by such clauses, each such Stock Bonus or restricted stock purchase
agreement related to a Stock Award shall continue to vest in accordance with
its original terms.

(d) If the Company is merged with or into or consolidated with another
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%)
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation; or
if the Company is liquidated, or sells or otherwise disposes of substantially
all of its assets to another corporation while unexercised Options remain
outstanding under the Plan, then either in such event:

(i) subject to the provisions of clause (iii) below, after the effective
date of such merger, consolidation, liquidation, sale or disposition, as the
case may be, each holder of an outstanding Option shall be entitled, upon
exercise of such Option, to receive, in lieu of the shares of Company Common
Stock as to which such Option was exercisable immediately prior to such
event, the number and class of shares of stock or other securities, cash or
property (including, without limitation, shares of stock or other securities
of another corporation or common stock) to which such holder would have been
entitled pursuant to the terms of the

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merger, consolidation, liquidation, sale or disposition if, immediately
prior to such event, such holder had been the holder of a number of shares
of Company Common Stock equal to the number of shares as to which such
Option shall be so exercised; or

(e) If, within two years following a Change in Control, the employment of
any Optionee who immediately prior to such Change in Control was employed by
the Company as an Officer (each such Optionee being hereafter referred to as a
"Designated Executive") shall be terminated by the Company other than for
cause, or shall be terminated by the Designated Executive for Good Reason, then
in such event all unvested Options, Stock Appreciation Rights, Stock Bonuses
and other Stock Awards held by such Designated Executive at the date of such
termination shall thereupon immediately become exercisable in full. For
purposes of this paragraph, "Good Reason" for termination by a Designated
Executive of his employment shall be deemed to have existed only if (i) within
two years after a Change in Control, the Company, or any successor entity then
employing the Designated Executive, shall materially diminish the
responsibilities and authority of the Designated Executive or, shall materially
reduce the rate of compensation of the Designated Executive (including by way
of a change in the method of determining the eligibility of such Designated
Executive to earn bonus or incentive compensation), in either case as compared
with his responsibilities and authority or rate of compensation, as the case
may be, in effect immediately prior to such Change in Control, and (ii) within
thirty (30) days following such diminution or reduction the Designated
Executive shall resign from his employment by the Company or such successor
entity.

(f) If, within two years following a Change in Control, a Non-Employee
Director is terminated or resigns from the Board of Directors for Good Reason,
then in such event all unvested Options held by such Non-Employee Director at
the date of such termination or resignation shall thereupon immediately become
exercisable in full. For purposes of this paragraph, "Good Reason" for
resignation by a Non-Employee Director shall be deemed to have existed only if
(i) within two years after a Change in Control, the Company, or any successor
entity, shall materially diminish the responsibilities and authority of the
Non-Employee Director or shall materially reduce the rate of compensation of
the Non-Employee Director, in either case as compared with his responsibilities
and authority or rate of compensation, as the case may be, in effect
immediately prior to such Change in Control, and (ii) within thirty (30) days
following such diminution or reduction the Non-Employee Director shall resign
from his position as a Director.

17. AMENDMENT OF THE PLAN AND STOCK AWARDS.

(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 hereof relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3, or
the listing or eligibility for quotation requirements of the Nasdaq National
Market or any similar organization or of any national securities exchange upon
which shares of Company Common Stock are listed or eligible for trading.

(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.

(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.

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(d) Rights and obligations under any Stock Award granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.

(e) The Committee at any time, and from time to time, may amend the terms of
any one or more Stock Awards; provided, however, that the rights and
obligations under any Stock Award shall not be altered or impaired by any such
amendment unless (i) the Company requests the consent of the person to whom the
Stock Award was granted and (ii) such person consents in writing.

18. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on March 4, 2009. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan,
except with consent of the person to whom the Stock Award was granted.

19. LOCK-UP AGREEMENT.

The Committee may in its discretion specify upon granting an Option that
upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities, the Optionee shall agree in writing that
for a period of time (not to exceed 180 days) from the effective date of any
registration of securities of the Company, the Optionee will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares issued pursuant to the exercise of such Option, without the prior
written consent of the Company or such underwriters, as the case may be.

20. GOVERNING LAW.

The provisions of the Plan and all Stock Awards made hereunder shall be
governed by and interpreted in accordance with the internal laws of the
Commonwealth of Massachusetts without regard to any applicable conflicts of law
principles thereof.

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APPENDIX B

MRO SOFTWARE, INC.

2002 EMPLOYEE STOCK PURCHASE PLAN
Adopted January 16, 2002
[Approved By Stockholders on March 5, 2002]

1. PURPOSE.

(a) The purpose of the 2002 Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of MRO Software, Inc., a Massachusetts
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.

(b) The word "Affiliate" as used in the Plan means any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").

(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.

(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.

2. ADMINISTRATION.

(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.

(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which
need not be identical).

(ii) To designate from time to time which Affiliates of the Company shall
be eligible to participate in the Plan.

(iii) To construe and interpret the Plan and rights granted under it, and
to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

(iv) To amend the Plan as provided in paragraph 13.

(v) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of Section
423 of the Code.

(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee")
constituted in accordance with the requirements of Rule 16b-3 under

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the Securities Exchange Act of 1934. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.

3. SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate seven hundred fifty (750,000)
thousand shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.

(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4. GRANT OF RIGHTS; OFFERING.

The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall
deem appropriate, which shall comply with the requirements of Section 423(b)(5)
of the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 5 through 8, inclusive.

5. ELIGIBILITY.

(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees
of any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment equal or exceed two (2) years. In
addition, unless otherwise determined by the Board or the Committee and set
forth in the terms of the applicable Offering, no employee of the Company or
any Affiliate shall be eligible to be granted rights under the Plan, unless, on
the Offering Date, such employee's customary employment with the Company or
such Affiliate is for at least twenty (20) hours per week and at least five (5)
months per calendar year.

(b) The Board or the Committee may provide that, each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:

(i) the date on which such right is granted shall be the "Offering Date"
of such right for all purposes, including determination of the exercise
price of such right;

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(ii) the period of the Offering with respect to such right shall begin on
its Offering Date and end coincident with the end of such Offering; and

(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that
Offering.

(c) No employee shall be eligible for the grant of any rights under the Plan
if, immediately after any such rights are granted, such employee owns 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 Affiliate. For purposes
of this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply
in determining the stock ownership of any employee, and stock which such
employee may purchase under all outstanding rights and options shall be treated
as stock owned by such employee.

(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty five thousand dollars
($25,000) of fair market value of such stock (determined at the time such
rights are granted) for each calendar year in which such rights are outstanding
at any time.

(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.

6. RIGHTS; PURCHASE PRICE.

(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company: (i) purchasable with a percentage
designated by the Board or the Committee not exceeding ten (10%) percent of
such employee's Earnings (as defined by the Board or the Committee in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board or the Committee determines for a particular Offering) and
ends on the date stated in the Offering, which date shall be no later than the
end of the Offering, or (ii) designated by the Board or the Committee. The
Board or the Committee shall establish one or more dates during an Offering
(the "Purchase Date(s)") on which rights granted under the Plan shall be
exercised and purchases of Common Stock carried out in accordance with such
Offering.

(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.

(i) an amount equal to eighty-five percent (85%) of the fair market value
of the stock on the Offering Date; or

(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.

B-3

7. PARTICIPATION; WITHDRAWAL; TERMINATION.

(a) An eligible employee may become a participant in the Plan pursuant to an
Offering by delivering a participation agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering (as defined by the Board or Committee in each Offering). The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of the
Company. A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.

(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.

(c) Notwithstanding (a) and (b) above, an eligible employee may also become
a participant pursuant to an Offering without delivering a participation
agreement if the terms of the Offering so provide.

(d) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee) under the Offering, without interest.

(e) Rights granted under the Plan shall not be transferable by a participant
otherwise than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14 and, otherwise during his
or her lifetime, shall be exercisable only by the person to whom such rights
are granted.

8. EXERCISE.

(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and
the applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the
amount required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant
withdraws from such next Offering, as provided in subparagraph 7(b), or is no
longer eligible to be granted rights under the Plan, as provided in paragraph
5, in which case such amount shall be distributed to the participant after such
final Purchase Date, without interest. The amount, if any, of accumulated
payroll deductions remaining in any participant's account after the purchase of
shares which is equal to the amount required to purchase whole shares of stock
on the final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest. For an Offering in
which no payroll deductions are required, a participant's rights shall be
exercised as provided in the Offering.

B-4

(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan
is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that
the Purchase Date shall not be delayed more than twelve (12) months and the
Purchase Date shall in no event be more than twenty-seven (27) months from the
Offering Date. If on the Purchase Date of any Offering hereunder, as delayed to
the maximum extent permissible, the Plan is not registered and in such
compliance, no rights granted under the Plan or any Offering shall be exercised
and all payroll deductions accumulated during the Offering (reduced to the
extent, if any, such deductions have been used to acquire stock) shall be
distributed to the participants, without interest.

9. COVENANTS OF THE COMPANY.

(a) During the terms of the rights granted under the Plan, the Company shall
keep available at all times the number of shares of stock required to satisfy
such rights.

(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.

10. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.

11. RIGHTS AS A STOCKHOLDER.

A participant shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to rights granted under
the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.

12. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")

(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are

B-5

converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) the acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Exchange Act or any
comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or any Affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, then, as determined by the
Board in its sole discretion (i) any surviving or acquiring corporation may
assume outstanding rights or substitute similar rights for those under the
Plan, (ii) such rights may continue in full force and effect, or (iii)
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the
participants' rights under the ongoing Offering terminated.

13. AMENDMENT OF THE PLAN.

(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:

(i) Increase the number of shares reserved for rights under the Plan;

(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section
423 of the Code or to comply with the requirements of Rule 16b-3 promulgated
under the Exchange Act as amended ("Rule 16b-3")); or

(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the
requirements of rule 16b-3.

It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.

(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.

14. DESIGNATION OF BENEFICIARY.

(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.

(b) Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such shares and/or
cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such shares and/or
cash to the

B-6

spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

15. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.

(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
as expressly provided in the Plan or with the consent of the person to whom
such rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of
the Code.

16. EFFECTIVE DATE OF PLAN.

The Plan shall become effective on June 1, 2002 (the "Effective Date"), but
no rights granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board or the Committee,
which date may be prior to the Effective Date.

B-7

DETACH HERE

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MRO SOFTWARE, INC.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.
MRO SOFTWARE, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 5, 2002

The undersigned stockholder of MRO Software, Inc. (the "Company"), revoking
all prior proxies, hereby appoints Norman E. Drapeau, Jr., Peter J. Rice and
Craig Newfield, and each of them acting singly, as proxies, with full power of
substitution, to vote all shares of capital stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
at the offices of Company, 100 Crosby Drive, Bedford, Massachusetts, 01730 on
Tuesday, March 5, 2002, beginning at 10:00 A.M., local time, and at any
adjournments thereof, upon matters set forth in the Notice of Annual Meeting
dated January 31, 2002 and the related Proxy Statement, copies of which have
been received by the undersigned, and in their discretion upon any business that
may properly come before the meeting or any adjournments thereof. Attendance of
the undersigned at the meeting or any adjourned session thereof will not be
deemed to revoke this proxy unless the undersigned shall affirmatively indicate
the intention of the undersigned to vote the shares represented hereby in person
prior to the exercise of this proxy.

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

MRO SOFTWARE, INC.
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398

DETACH HERE ZMRO11

[x] Please mark
votes as in
this example.

The shares represented by this proxy will be voted as directed. If no direction
is given with respect to the Proposals below, the shares represented by this
proxy will be voted FOR all Proposals.

FOR AGAINST ABSTAIN
1. To elect (01) Norman E. Drapeau, Jr. 2. To approve an amendment to the Company's Amended and [ ] [ ] [ ]
and (02) Richard P. Fishman as Class Restated 1999 Equity Incentive Plan to provide that
III Directors of the Company for a stock awards may be granted to Non-Employee Directors
term of three years; on a discretionary basis;

FOR AGAINST [ ] MARK HERE 3. To approve the adoption of the Company's 2002 Employee FOR AGAINST ABSTAIN
[ ] [ ] FOR ADDRESS Stock Purchase Plan, for which 750,000 shares of [ ] [ ] [ ]
CHANGE AND Common Stock have been reserved for issuance;
NOTE BELOW [ ] [ ] [ ]
[ ]_____________________ [ ] MARK HERE 4. To ratify the appointment by the Board of Directors
For all nominees IF YOU PLAN of PricewaterhouseCoopers L.L.P. as the Company's
except as noted TO ATTEND independent public accountants for the current fiscal year; and
above THE MEETING
5. To transact such further business as may properly come before the Meeting or any
adjournment thereof.

Please promptly date and sign this proxy and mail it in the enclosed envelope to assure
representation of your shares. No postage need be affixed if mailed in the United States.

Please sign exactly as name(s) appear(s) on stock certificate. If stockholder is a
corporation, please sign full corporate name by president or other authorized officer
and, if a partnership, please sign full partnership name by an authorized partner or
other person.

Signature: _________________________________ Date: ______________ Signature: _________________________________ Date: _____________