SOFTWARE 2000 INC /MA/, 424B1, 1996-05-10

SOFTWARE 2000 INC /MA/
424B1, 1996-05-10
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE> 1

PROSPECTUS
2,870,000 Shares

LOGO

Common Stock

Of the 2,870,000 shares of Common Stock offered hereby, 500,000 shares are
being sold by Software 2000, Inc. ("Software 2000" or the "Company") and
2,370,000 shares are being sold by the Selling Stockholders (as defined herein).
The Company will not receive any of the proceeds from the sale of the shares
being sold by the Selling Stockholders. The Common Stock is traded on the Nasdaq
National Market under the symbol "SFWR." The last sale price for the Common
Stock on May 9, 1996, as reported on the Nasdaq National Market, was $15 per
share.

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(3)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share............................... $14.75 $0.85 $13.90 $13.90
Total(3)................................ $42,332,500 $2,439,500 $6,950,000 $32,943,000

<FN>
- ---------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $300,000.
(3) Certain Selling Stockholders have granted the Underwriters a 30-day option
to purchase up to an additional 430,500 shares of Common Stock solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company and Proceeds to Selling Stockholders will be $48,682,375,
$2,805,425, $6,950,000 and $38,926,950, respectively. See "Underwriting."
</TABLE>

The shares of Common Stock offered hereby are offered, subject to prior
sale, when, as and if accepted by the several Underwriters and subject to
approval of certain legal matters by Skadden, Arps, Slate, Meagher & Flom,
counsel for the Underwriters. It is expected that certificates representing the
shares of Common Stock will be available for delivery in New York, New York, on
or about May 15, 1996.

SoundView Financial Group, Inc.
Needham & Company, Inc.
The Robinson-Humphrey Company, Inc.
May 9, 1996
<PAGE> 2
[LOGO]

The object-oriented Infinium client/server product line includes
Infinium:Financial Management and Infinium:Human Resources. Infinium products
utilize business objects modeled after real-world business items and
acitvities. The Infinium environment provides superior data access and
analysis, user customization without coding, an object-oriented user interface
and simplified navigation.

INFINIUM:FINANCIAL MANAGEMENT includes general ledger, payables ledger,
accounts receivable, and currency management functionality. Through an
intelligent desktop, users interact with accounting business objects such as
Vendors or Accounts to retrieve and analyze data.

[PHOTO OF A COMPUTER SCREEEN]

[PHOTOS OF COMPUTER SCREENS]

[PHOTO OF A COMPUTER SCREEN]

[LOGO]

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

"Software 2000" and "Infinium" are trademarks of the Company. This Prospectus
also contains other trademarks and registered trademarks of the Company and
other Companies.

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."

2
<PAGE> 3
- --------------------------------------------------------------------------------

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
Except as otherwise indicated, the information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option.

THE COMPANY

Software 2000 develops, markets and supports enterprise-level business
software applications for the financial management, human resource management
and materials management functions of organizations in a broad range of
industries worldwide. The Company also offers a specialized manufacturing system
designed to manage process manufacturing operations. The Company's current line
of products has been designed to take full advantage of the IBM AS/400 computing
environment in a client/server configuration. The Company is currently
developing versions of its principal products designed to run on additional
hardware platforms using the UNIX and Microsoft Windows NT operating systems and
to take advantage of World Wide Web technologies. The Company's more than 1,300
customers include Abbott Laboratories, Circus Circus Enterprises, Coca-Cola
Enterprises, EDS Automotive Retail Group, Samsonite, Starbucks, TRW Information
Systems & Services and Warner Bros. Records. See "Business -- Customers."

For many years businesses have used packaged software applications to
cost-effectively automate back-office accounting and payroll functions.
Recently, heightened competitive pressures and rapidly changing market
conditions have forced many organizations to reduce costs, increase productivity
and become more responsive to customer requirements. In addition, because many
business professionals use desktop productivity tools such as spreadsheets, they
are requiring similar ease of use in their business applications. As a result,
businesses are replacing their traditional mainframe-type accounting and payroll
software applications with new, more flexible systems which not only keep track
of accounting records but also help management monitor and measure the
performance of their business operations and make timely access to performance
and record keeping data easy for non-technical business professionals. In
response to this shift, there is a corresponding shift occurring in the
computing platforms that run these business applications. Centralized
host/terminal-type systems ("legacy" systems) with their character-based user
interfaces are being replaced by client/server computing platforms.

In 1995, the Company released for general availability its first
client/server products, Infinium:Human Resources, Infinium:Financial Management
and Infinium:Desktop Manager. The Company's Infinium applications utilize
object-oriented technology to provide enhanced data access and analysis
capabilities that enable non-technical business professionals to "mine" the
information contained in the applications' databases using an innovative and
intelligent user interface. The goal of this next generation "object-oriented
user interface" is to enable end users to spend less time searching for data and
to devote more of their time to analysis and decision-making. The Company
believes that the Infinium architecture, which allows its existing suite of
AS/400 applications to function as either traditional host-based applications or
object-oriented client/server applications, provides the Company with a distinct
competitive advantage and enables the Company's customers to migrate to
client/server computing without replacing their existing AS/400 business
applications or investing in new computer systems. The Company's Infinium
client/server products accounted for approximately half of the Company's
software license revenues during the first six months of fiscal 1996.

Software 2000's objective is to deliver leading client/server business
solutions on multiple computer hardware, operating system and database
platforms, including the AS/400, for enterprise-level use. In addition, the
Company intends to expand its international distribution, extend the
capabilities of its products through complementary relationships with third
parties and build long-term product advantages through investment in the
object-oriented Infinium architecture. The Company is currently building
extensions to its products and customer support offerings which are designed to
take advantage of Internet technologies and allow users to access the Company's
applications and services using popular World Wide Web browsers.

The Company currently offers its products and services primarily through a
direct sales force in the United States, Canada and the United Kingdom and
through business partners in other parts of the world. The Company believes that
customer selection of its application products is based in part on the quality
of consulting, product maintenance and customer support services provided by the
Company.

The Company was incorporated in Massachusetts in 1981. The Company's
executive offices are located at 25 Communications Way, Hyannis, Massachusetts
02601, and its telephone number is (508) 778-2000.

- --------------------------------------------------------------------------------
3
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<TABLE>
THE OFFERING

<S> <C>
Common Stock offered by the Company.......................... 500,000 shares
Common Stock offered by the Selling Stockholders............. 2,370,000 shares
Common Stock to be outstanding after the offering............ 10,854,242 shares(1)
Use of proceeds.............................................. For general corporate
purposes, including working
capital, product development,
capital expenditures and
possible acquisitions. See
"Use of Proceeds."
Nasdaq National Market symbol................................ SFWR

<FN>
- ---------------

(1) Based upon the number of shares of Common Stock outstanding on March 31,
1996, plus an additional 449,029 shares to be issued pursuant to the
exercise of stock options outstanding at March 31, 1996 by certain Selling
Stockholders in connection with this offering. Excludes 2,054,449 shares of
Common Stock issuable upon exercise of stock options and 49,412 shares of
Common Stock issuable upon exercise of warrants outstanding as of March 31,
1996. See "Capitalization" and "Management -- Stock Plans."
</TABLE>

<TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<CAPTION>
YEAR ENDED
----------------------------------------------------- SIX MONTHS ENDED
AUGUST 31, MARCH 31,
------------------------------------- SEPTEMBER 30, -----------------
1991 1992 1993 1994 1995(1) 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues.............................. $31,287 $45,128 $49,045 $56,800 $63,163 $27,752 $32,826
Gross profit.......................... 22,632 35,127 36,026 40,559 44,001 18,306 22,897
Income (loss) from operations......... (6,894) 2,354 844 2,241 5,380 765 1,352
Net income (loss)..................... (5,219) 781 539 1,502 3,684 504 1,268
Net income (loss) per share(2)........ $ (0.54) $ 0.08 $ 0.05 $ 0.15 $ 0.40 $ 0.06 $ 0.12
Weighted average common and common
equivalent shares
outstanding(2)(3)................... 10,071 10,214 10,495 10,825 9,401 9,458 10,805
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED(4)
-------- ---------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............................ $29,121 $37,335
Total assets................................................................ 58,294 66,508
Deferred revenues........................................................... 24,651 24,651
Total liabilities........................................................... 38,103 38,103
Stockholders' equity........................................................ 20,191 28,405

<FN>
- ---------------

(1) The Company changed its fiscal year end from August 31 to September 30
effective with the fiscal year ended September 30, 1995. Accordingly, the
September 1994 results are not included in the data presented above. See
Note 2 to Consolidated Financial Statements.

(2) See Note 2 to Consolidated Financial Statements.

(3) The Company repurchased 1,632,000 shares of Common Stock from venture
capital investors in September 1994. See Note 8 to Consolidated Financial
Statements.

(4) Adjusted to give effect to the sale of 500,000 shares of Common Stock
offered by the Company hereby, at the public offering price of $14.75 per
share, after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, and the anticipated application of
the net proceeds therefrom. Also adjusted to give effect to the issuance of
449,029 shares pursuant to the exercise of stock options outstanding at
March 31, 1996 at an average exercise price of $3.48 per share. See "Use of
Proceeds" and "Capitalization."
</TABLE>

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RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares offered in this Prospectus. To the extent
that forward-looking statements appear or are described in this Prospectus they
are made pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that all forward-looking
statements involve risks and uncertainty, including, without limitation, risks
relating to rapid technological change, dependence on the IBM AS/400 computer
platform and relationship with IBM, intense competition, risks of international
sales and operations, dependence upon key personnel, as well as general market
conditions, as more fully set forth in this Prospectus.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY

The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Such fluctuations may result in volatility in the price
of the Company's Common Stock. Quarterly revenues and operating results may
fluctuate as a result of a variety of factors, including the Company's lengthy
sales cycle, the proportion of revenues attributable to license fees versus
service revenues, changes in the level of operating expenses, demand for the
Company's products, the introduction of new products and product enhancements by
the Company or its competitors, changes in customer budgets, competitive
conditions in the industry and general economic conditions. Further, the
purchase of the Company's products often involves a significant commitment of
capital by its customers with the attendant delays frequently associated with
large capital expenditures and authorization procedures within an organization.
For these and other reasons, the sales cycles for the Company's products are
typically lengthy and subject to a number of significant risks over which the
Company has little or no control, including customers' budgetary constraints and
internal authorization reviews. The Company historically has operated with
little software license backlog because its software products are generally
shipped as orders are received. The Company has often recognized a substantial
portion of its revenues in the last month of the quarter and often in the last
week of that month. As a result, license fees in any quarter are substantially
dependent on orders booked and shipped in the last month or last week of that
quarter. Accordingly, a small variation in the timing of recognition of revenues
for specific transactions is likely to adversely and disproportionately affect
the Company's operating results for a quarter because the Company establishes
its spending levels on the basis of its expected future revenues and only a
small portion of the Company's expenses vary with its revenues. Accordingly, the
Company believes that period to period comparisons of operating results are not
necessarily meaningful and should not be relied upon as indicative of future
performance. Although the Company has been profitable in recent quarterly
periods, there can be no assurance that the Company will remain profitable on a
quarterly basis, if at all.

The Company's business has experienced and is expected to continue to
experience significant seasonality. In recent years, the Company has had greater
demand for its products in its fourth fiscal quarter and has experienced lower
revenues in its succeeding first and second fiscal quarters. The fluctuations
are caused primarily by customer purchasing patterns and the Company's sales
recognition programs which reward and recognize sales personnel on the basis of
achievement of annual performance quotas, as well as the factors described
above. Accordingly, although the Company expects that it will experience growth
in its revenues during the next six months of fiscal 1996, the rate of growth
will be dependent upon the foregoing factors, and there can be no assurance that
such rate of growth will equal or exceed that achieved during the comparable
period in fiscal 1995 or during the first six months of fiscal 1996.

Due to all of the foregoing factors, it is likely that in some future
quarter the Company's operating results will be below the expectations of the
Company and public market analysts and investors. In such event, the price of
the Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Selected Quarterly Financial Results."

5
<PAGE> 6

RAPID TECHNOLOGICAL CHANGE

The business applications software market is characterized by rapid
technological change, frequent new product introductions, evolving industry
standards and changes in customer demands. The introduction of products
embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. The Company's future success
will depend in part on its ability to enhance existing products and services and
to develop and introduce new products and services to meet changing client
requirements. In 1995, the Company introduced its first client/server products,
Infinium:Human Resources, Infinium:Financial Management and Infinium:Desktop
Manager, which presently account for approximately half of the Company's
software license revenues. The Company is currently developing enhancements to
its products that are intended to enable them to run on additional hardware
platforms using UNIX and Microsoft Windows NT operating systems and to operate
over the Internet and within corporate intranets. The Company is also utilizing
World Wide Web technologies to provide its customers with rapid and low-cost
access to customer support and service applications. The development of new
products and services or enhanced versions of existing products and services,
including new versions of existing applications that utilize World Wide Web
technologies, entails significant technical risks. There can be no assurance
that the Company will be successful in developing and marketing product
enhancements or new products that respond to technological change or evolving
industry standards, that the Company will not experience difficulties that could
delay or prevent the successful development, introduction, implementation and
marketing of these products and enhancements, or that any new products and
product enhancements it may introduce will achieve market acceptance. See
"Business -- Industry Background," "-- Products" and "-- Competition."

Software products as complex as those offered by the Company often
encounter development delays and may contain undetected defects when introduced
or when new versions are released. The Company has encountered delays and
defects in the past in the introduction of new products and product
enhancements. There can be no assurance that the Company will not encounter
product development delays in the future or that, despite testing by the
Company, errors will not be found in new products or product enhancements after
commencement of commercial shipments, resulting in loss of market share, delay
in market acceptance, or warranty claims which could have a material adverse
effect upon the Company's business, operating results and financial condition.
See "Business -- Product Development."

DEPENDENCE ON IBM AS/400 COMPUTER PLATFORM; RELATIONSHIP WITH IBM

The Company's products, and maintenance and other services related thereto,
are presently designed for users of IBM AS/400 mid-range computers. To date,
virtually all of the Company's revenues have been derived from the AS/400
customer base. Future revenues from licenses of present products and sales of
services and recurring maintenance revenues are therefore dependent on continued
widespread use of the AS/400 and the continued support of such computers by IBM.
While the Company believes that customers will continue to use, and IBM will
continue to support, the AS/400, there can be no assurance of such continued use
and/or support. Because the Company's primary current source of revenues comes
from customers using IBM mid-range computers, a significant shift in the way the
Company's customers use computers may have a material adverse effect on the
Company's business. In particular, many users of business applications software
have implemented and will in the future continue to implement, client/server
computing systems based upon the open UNIX operating system. The Company's
Infinium products are based upon a client/server computing architecture which
currently employs the AS/400 and IBM's proprietary OS/400 operating system as
the server platform. There can be no assurance that existing users of AS/400
systems or other potential customers will continue to adopt the AS/400 as a
server platform within a client/server computing environment. In addition,
because the Company's current product line requires the use of IBM's OS/400
operating system, the Company may be required to adapt its products to any
changes made in such operating system in the future. The Company's inability to
adapt to future changes in the OS/400 operating system, or delays in doing so,
could have a material adverse effect on the Company's business, operating
results and financial condition. Although the Company is porting its software
applications to other hardware platforms and operating systems, such as the UNIX
and Microsoft Windows NT operating

6
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systems, there can be no assurance that the Company will be successful in
developing and implementing such multi-platform capabilities. See
"Business -- Industry Background," "-- The Software 2000 Solution" and
"-- Strategy."

The Company participates in several formal and informal programs with IBM
which the Company believes afford it valuable experience with IBM's AS/400
products and insights into its marketing plans. There can be no assurance that
the Company will be able to maintain its relationship with IBM in the future.
The Company believes that its relationship with IBM has been a significant
factor in its success to date, and any deterioration or termination of that
relationship could have a material adverse effect on the Company's business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Strategic Relationships."

INTENSE COMPETITION

The business applications software market is highly competitive and rapidly
changing. A number of companies offer products similar to the Company's products
and target the same customers as the Company. The Company believes its ability
to compete depends upon many factors within and outside its control, including
the timely development and introduction of new products and product
enhancements, product functionality, performance, price, reliability, customer
service and support, sales and marketing efforts and product distribution. The
Company's primary competitors are presently J.D. Edwards & Company, Lawson
Software, PeopleSoft and SAP AG. The Company believes, however, that competition
in its industry is undergoing rapid change and that the barriers to competition
between market segments that have previously existed are decreasing. For
example, SAP AG and PeopleSoft, which are currently major competitors within the
UNIX and Microsoft Windows NT client/server markets, have announced their
intention to deliver AS/400 client/server products. Due to the relatively low
barriers to entry in the software market, the Company expects additional
competition from other established and emerging companies as the client/server
business applications software market continues to develop and expand. The
Company's primary competitors and potential competitors are substantially larger
than the Company and have significantly greater financial, technical and
marketing resources and established, extensive direct and indirect channels of
distribution. As a result, they may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products than the
Company. The Company also expects that competition will increase as a result of
software industry consolidation. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
prospective customers. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which would have a material adverse
effect on the Company's business, operating results and financial condition.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures will not
have a material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Competition."

INTERNATIONAL SALES AND OPERATIONS AND EXPANSION OF INDIRECT CHANNELS

Revenues from customers outside North America represented 5.7% and 8.7% of
the Company's total revenues in fiscal 1994 and fiscal 1995, respectively, and
9.8% of the Company's total revenues for the first six months of fiscal 1996.
The Company believes that its revenues and future operating results will depend,
in part, on its ability to increase sales in international markets. There can be
no assurance that the Company will be able to maintain or increase its current
level of international revenues. An important part of the Company's strategy is
to expand its indirect marketing channels in international markets. There can be
no assurance that the Company will be able to attract and retain international
distributors and resellers that will be able to market the Company's products
effectively and will be qualified to provide timely and cost-effective customer
support and service. The inability to attract and retain important resellers
could materially and adversely affect the Company's business, operating results
and financial condition. Other risks inherent in the Company's

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<PAGE> 8

international business activities generally include unexpected changes in
regulatory requirements, tariffs and other trade barriers, costs and
difficulties of localizing products for foreign countries, lack of acceptance of
localized products in foreign countries, longer accounts receivable payment
cycles, difficulties in managing international operations, potentially adverse
tax consequences including restrictions on the repatriation of earnings, the
burdens of complying with a wide variety of foreign laws and economic
instability. The Company does not currently engage in international currency
hedging transactions. To the extent that the dollar strengthens against foreign
currencies in international markets in which the Company maintains operations,
the net assets of the Company that are denominated in such foreign currencies
will be devalued, resulting in a foreign exchange loss to the Company. Included
in the Company's net earnings of $3.7 million for the fiscal year ended
September 30, 1995 was a foreign exchange loss of $121,000. The Company's
foreign exchange loss for the first six months of fiscal 1996 was $65,000. There
can be no assurance that such factors would not have a material adverse effect
on the Company's future international revenues and, consequently, on the
Company's business, operating results and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Sales and Marketing Relationships," "-- Strategic Relationships"
and Notes 2 and 5 to "Consolidated Financial Statements."

MANAGEMENT OF CHANGING BUSINESS; DEPENDENCE ON MANAGEMENT AND KEY EMPLOYEES

The Company has experienced significant changes in its business, including
an expansion in the Company's staff and customer base, the establishment of new
and demanding strategic relationships, and the expansion of its product lines,
including the introduction of the Company's Infinium client/server product line
in 1995. Such changes have placed and may continue to place a significant strain
on the Company's management and operations. In order to manage such change in
the future, the Company must continue to enhance its operational, financial and
management information systems and to hire, train and manage employees. If the
Company is unable to implement these systems and manage such changes
effectively, the Company's business, operating results and financial condition
could be materially and adversely affected. In addition, because of the Cape Cod
location of the Company's headquarters, the Company may have difficulty in
attracting and retaining qualified management and technical employees who may be
required to move to become employed by the Company. There are no other
comparable software companies on Cape Cod.

The Company's success depends to a significant extent on the performance
and continued services of its senior management and certain other key employees,
the loss of one or more of whom could have a material adverse effect upon the
Company. The Company does not have any employment agreements with its executive
officers. The Company believes that its future success will also depend in large
part upon its ability to attract and retain highly skilled technical, managerial
and marketing personnel. Competition for such personnel is intense. There can be
no assurance that the Company will be successful in attracting and retaining the
personnel it requires to continue to grow. See "Business -- Employees."

PROTECTION OF INTELLECTUAL PROPERTY

The Company's success is heavily dependent upon its confidential and
proprietary intellectual property. The Company presently has no patents or
patent applications pending. The Company relies primarily on a combination of
copyright, trademark and trade secrets laws, confidentiality procedures and
contractual provisions to protect its proprietary rights. Trade secret and
copyright laws afford only limited protection. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's products or to obtain and use information that the Company
regards as proprietary. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to as great an extent as do the laws of
the United States. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.

The Company is not aware that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim infringement by the Company with respect to current or future
products. The Company expects that software product developers such as itself
will increasingly be subject to infringement claims as the number of products
and competitors in the business

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applications software market grows and the functionality of products in this
market overlap. Defense of any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all, which could have a material adverse effect upon the
Company's business, operating results and financial condition. See
"Business -- Intellectual Property, Proprietary Rights and Licenses."

POTENTIAL VOLATILITY OF STOCK PRICE

The market price of the Company's Common Stock could be subject to wide
fluctuations in response to quarter-to-quarter variations in operating results,
the gain or loss of significant contracts, announcements of technological
developments or new products by the Company and its competitors, changes in
earnings estimates by analysts, and market conditions in the industry, as well
as general economic conditions. In addition, the stock market has experienced
volatility that has particularly affected the market prices for many companies'
stock and that often has been unrelated to the operating performance of such
companies. These market fluctuations may adversely affect the market price of
the Company's Common Stock. See "Risk Factors -- Potential Fluctuations in
Quarterly Results; Seasonality."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of shares of the Company's Common Stock in the
public market following this offering could adversely affect the market price of
the Common Stock. In addition to the shares of Common Stock offered hereby,
approximately 2,472,100 shares are currently eligible for sale in the public
market without restriction. On May 15, 1996, an additional approximately 859,500
outstanding shares which were previously subject to lock-up agreements with the
underwriters in the initial public offering, will become eligible for sale in
the public market subject to volume limitations in certain circumstances. The
officers and directors of the Company and the Selling Stockholders have agreed
not to sell until 90 days after the date of this Prospectus any of the
approximately 4,652,600 shares of Common Stock they will own after the offering
made hereby that would otherwise have been eligible for sale in the public
market, without the prior consent of the Underwriters. See "Shares Eligible for
Future Sale."

POTENTIAL ADVERSE EFFECTS OF ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF
PREFERRED STOCK

The Company's Restated Articles of Organization and Restated By-Laws
contain provisions that may make it more difficult for a third party to acquire,
or discourage acquisition bids for, the Company. Moreover, the Company is
subject to an anti-takeover provision of the Massachusetts General Laws which
prohibits, subject to certain exceptions, a holder of 5% or more of the
outstanding voting stock of the Company from engaging in certain transactions
with the Company, including a merger or stock or asset sale. These provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Company's Common Stock. In addition, shares of the
Company's Preferred Stock may be issued in the future without further
stockholder approval and upon such terms and conditions, and having such rights,
privileges and preferences, as the Board of Directors may determine. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of any holders of Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or
discouraging a third party from acquiring, a majority of the outstanding voting
stock of the Company. The Company has no present plans to issue any shares of
Preferred Stock. See "Description of Capital Stock."

9
<PAGE> 10

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 500,000 shares of
Common Stock offered by the Company pursuant to this offering are approximately
$6.65 million, after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company will not receive
any proceeds from the sale of Common Stock by the Selling Stockholders, although
it will also receive approximately $1.56 million from the exercise of stock
options by certain selling stockholders in connection with this offering. See
"Principal and Selling Stockholders."

The principal purposes of this offering are to increase the Company's
working capital and equity base. The Company expects to use the net proceeds for
general corporate purposes, including working capital, product development and
capital expenditures. A portion of the net proceeds may also be used for the
acquisition of businesses, products and technologies that are complementary to
those of the Company. The Company has no present plans, intentions, commitments
or understandings for any such acquisitions, and no portion of the net proceeds
has been allocated for any specific acquisition. Pending such uses, the Company
intends to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing securities.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "SFWR." Public trading of the Common Stock commenced on November 17,
1995. Prior to that time, there was no public market for the Company's Common
Stock. The following table sets forth the high and low sale prices for the
Common Stock as reported by Nasdaq for the periods indicated:

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
FISCAL 1996:
First quarter (from November 17)..................................... $11 1/4 $ 7
Second quarter....................................................... 18 7
Third quarter (through May 9)........................................ 17 3/8 13 3/4
</TABLE>

On May 9, 1996, the last reported sale price of the Common Stock on the
Nasdaq National Market was $15 per share. As of such date there were
approximately 237 holders of record of the Common Stock.

The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to fund the development and growth
of its business. In addition, the Company's current bank line of credit contains
covenants that prohibit the Company from paying dividends, other than stock
dividends, without the bank's prior written consent. See Note 7 to Consolidated
Financial Statements.

10
<PAGE> 11

CAPITALIZATION

<TABLE>
The following table sets forth the capitalization of the Company at March
31, 1996 and as adjusted to reflect the sale of 500,000 shares of Common Stock
offered hereby by the Company and the application of the estimated net proceeds
therefrom, at the public offering price of $14.75 per share and after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by the Company. The following table also is adjusted to give effect to
the issuance of 449,029 shares of Common Stock pursuant to the exercise of stock
options outstanding as of March 31, 1996 by certain Selling Stockholders in
connection with this offering at an average exercise price of $3.48 per share.
This table should be read in conjunction with the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.

<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED
------- ------------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity(1)
Common stock, $0.01 par value
40,000,000 shares authorized; 9,905,213 shares issued (actual);
and 10,854,242 shares issued (as adjusted)(2)................... $ 99 $ 109
Additional paid-in capital....................................... 16,269 24,473
Retained earnings................................................ 3,823 3,823
------- --------
Total stockholders' equity..................................... 20,191 28,405
------- --------
Total capitalization........................................ $20,191 $ 28,405
======= ========

<FN>
- ---------------
(1) See Notes 8 and 11 to Consolidated Financial Statements.

(2) Excludes 2,054,449 shares of Common Stock issuable pursuant to the exercise
of stock options and 49,412 shares issuable upon exercise of warrants
outstanding at March 31, 1996. See "Management -- Stock Plans."
</TABLE>

11
<PAGE> 12

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
The selected consolidated financial data set forth below at August 31, 1994
and September 30, 1995 and for each of the fiscal years ended August 31, 1993
and 1994 and September 30, 1995 and for the one-month period ended September 30,
1994 have been derived from, and are qualified by reference to, the Company's
audited consolidated financial statements, included elsewhere in this
Prospectus, which have been audited by Price Waterhouse LLP, independent
accountants. The selected consolidated financial data presented below at August
31, 1991,1992 and 1993 and for each of the fiscal years ended August 31, 1991
and 1992 have been derived from the Company's consolidated financial statements,
not included in this Prospectus. The interim consolidated financial data set
forth below at March 31, 1996 and for the six-month periods ended March 31, 1995
and 1996 have been derived from unaudited consolidated financial statements
included elsewhere in this Prospectus. The unaudited consolidated financial
statements include all adjustments, consisting only of normal recurring
adjustments, that the Company considers necessary for a fair presentation of the
financial position and results of operations for those periods. Operating
results for the six-month period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the entire fiscal year ending
September 30, 1996. The data set forth below should be read in conjunction with,
and are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and Notes thereto, included elsewhere in this Prospectus.

<CAPTION>
YEAR ENDED
-----------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, MONTH ENDED MARCH 31,
CONSOLIDATED STATEMENTS OF ------------------------------------- SEPTEMBER 30, SEPTEMBER 30, ---------------------
OPERATIONS DATA: 1991 1992 1993 1994 1995 1994(1) 1995 1996
------- ------- ------- ------- ------------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software license fees............ $16,150 $22,900 $20,679 $20,163 $21,080 $ 521 $ 7,228 $ 9,512
Service revenues................. 15,137 22,228 28,366 36,637 42,083 3,086 20,524 23,314
------- ------- ------- ------- ------- ------- ------- -------
Total revenues................. 31,287 45,128 49,045 56,800 63,163 3,607 27,752 32,826
------- ------- ------- ------- ------- ------- ------- -------
Costs and expenses:
Cost of software license fees.... 1,325 1,378 1,923 2,845 3,829 264 1,884 1,825
Cost of services................. 7,330 8,623 11,096 13,396 15,333 1,207 7,562 8,104
Research and development......... 10,574 9,208 8,911 12,980 12,725 917 6,019 6,802
Sales and marketing.............. 13,384 16,502 19,747 20,008 19,651 1,328 8,781 11,297
General and administrative....... 5,568 5,258 6,524 5,330 6,245 492 2,741 3,446
Write-off of goodwill(2)......... -- 1,805 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating costs and
expenses..................... 38,181 42,774 48,201 54,559 57,783 4,208 26,987 31,474
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations...... (6,894) 2,354 844 2,241 5,380 (601) 765 1,352
Other income (expense), net........ (79) (367) 62 (83) 293 68 11 629
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before provision for
income taxes and cumulative
effect of change in accounting
principle........................ (6,973) 1,987 906 2,158 5,673 (533) 776 1,981
Provision (benefit) for income
taxes............................ (1,754) 1,206 367 916 1,989 (187) 272 713
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before cumulative
effect of change in accounting
principle........................ (5,219) 781 539 1,242 3,684 (346) 504 1,268
Cumulative effect of change in
accounting principle............. -- -- -- 260 -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss).................. $(5,219) $ 781 $ 539 $ 1,502 $ 3,684 $ (346) $ 504 $ 1,268
======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per share(3)..... $ (0.54) $ 0.08 $ 0.05 $ 0.15 $ 0.40 $ (0.04) $ 0.06 $ 0.12
======= ======= ======= ======= ======= ======= ======= =======
Weighted average common and common
equivalent shares
outstanding(3)(4)................ 10,071 10,214 10,495 10,825 9,401 9,313 9,458 10,805
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
AUGUST 31,
------------------------------------- SEPTEMBER 30, MARCH 31,
CONSOLIDATED BALANCE SHEET DATA: 1991 1992 1993 1994 1995(1) 1996
------- ------- ------- ------- ------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash, cash equivalents and marketable securities.............. $ 7,141 $13,790 $13,581 $15,222 $16,183 $29,121
Total assets.................................................. 26,738 30,953 35,380 43,495 44,004 58,294
Deferred revenues............................................. 9,388 12,885 17,951 22,531 25,017 24,651
Long-term obligations under capital leases.................... 4,096 2,275 849 -- -- --
Total liabilities............................................. 21,373 25,280 29,159 35,635 39,172 38,103
Mandatorily redeemable common stock........................... 7,752 7,752 7,752 7,752 -- --
Stockholders' equity (deficit)................................ $(2,387) $(2,079) $(1,531) $ 108 $ 4,832 $20,191

<FN>
- ---------------
(1) The Company changed its fiscal year end from August 31 to September 30
effective with the fiscal year ended September 30, 1995. Accordingly, the
results for the month of September 1994 are not included in the year ended
September 30, 1995 data presented above. See Note 2 to Consolidated
Financial Statements.
(2) Goodwill (representing the excess of the purchase price over the fair value
of the net assets acquired at the date of acquisition) was determined to be
permanently impaired and therefore written off based on significantly less
than anticipated results of operations subsequent to the acquisition and
lower projected future results.
(3) See Note 2 to Consolidated Financial Statements.
(4) The Company repurchased 1,632,000 shares of Common Stock from venture
capital investors in September 1994. See Note 8 to Consolidated Financial
Statements.
</TABLE>

12
<PAGE> 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, and the other financial
information included elsewhere in this Prospectus.

OVERVIEW

Software 2000 was founded in 1981 and offers a broad range of financial
management, human resource management and materials management business software
applications that presently run on the IBM AS/400 hardware platform. The Company
also offers a specialized manufacturing system designed to manage process
manufacturing operations. The Company's revenues are derived from two sources:
software license fees and service revenues. License fees include revenues from
noncancellable software license agreements entered into between the Company and
its customers with respect to both the Company's products and third party
products distributed by the Company. Revenues are recognized upon shipment of
the software and when all significant contractual obligations have been
satisfied.

The Company released for general availability its first client/server
products, the Infinium line, during the second quarter of fiscal 1995. From
fiscal 1992 through the second quarter of fiscal 1995, software license fees
were relatively constant due to the unavailability of such client/server
products. Service revenues continued to grow, however, due to the increase in
the Company's installed base of customers and the growth in the Company's
consulting services practice.

The Company did not have any client/server revenues in fiscal 1994.
Revenues from the Company's client/server products for the year ended September
30, 1995 were $6.2 million, which constituted 29.4% of total license fees and
9.8% of total revenues for such fiscal year. Client/server revenues accounted
for 14.8% of the Company's total license fees for the second fiscal quarter of
1995, 25.0% of the Company's third fiscal quarter license fees and 51.6% of the
Company's fourth fiscal quarter license fees. Client/server revenues presently
account for approximately half of the Company's total software license revenues,
specifically 51.3% for the six-month period ended March 31, 1996.

<TABLE>
The Company's service revenues are comprised of software maintenance fees
and fees for consulting services. Maintenance fees are billed separately and are
recognized ratably over the period of the maintenance agreement, which is
typically one year. The Company's growing customer base has led to continued
growth in maintenance fees. For the year ended September 30, 1995, the Company
experienced a maintenance renewal rate in excess of 90%. Gross margins for the
Company's maintenance revenues are typically higher than gross margins for the
Company's other sources of revenues. In addition to offering maintenance
services, the Company commenced a consulting services practice in fiscal 1992 to
offer implementation, consulting and training services for Software 2000
products. Consulting services revenues are recognized as the services are
performed. The table below summarizes the composition and growth in the
Company's service revenues.

<CAPTION>
YEAR ENDED
------------------------------------- SIX MONTHS ENDED
AUGUST 31, MARCH 31,
------------------- SEPTEMBER 30, -------------------
1993 1994 1995 1995 1996
------- ------- ------------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Software maintenance revenues......... $18,409 $21,698 $25,952 $12,744 $14,467
Consulting services revenues.......... 9,957 14,939 16,131 7,780 8,847
------- ------- ------- ------- -------
Total service revenues...... $28,366 $36,637 $42,083 $20,524 $23,314
======= ======= ======= ======= =======
</TABLE>

The Company changed its fiscal year end from August 31 to September 30
effective with the fiscal year ended September 30, 1995. Accordingly, the
results of operations for the year ended September 30, 1995 do not include the
results of operations for the month of September 1994. See Note 2 to
Consolidated Financial Statements.

13
<PAGE> 14

RESULTS OF OPERATIONS

<TABLE>
The following table sets forth for the periods indicated the Company's
consolidated income statement data expressed as a percentage of total revenues.

<CAPTION>
YEAR ENDED
---------------------------------
SIX MONTHS ENDED
AUGUST 31, MARCH 31,
--------------- SEPTEMBER 30, -----------------
1993 1994 1995 1995 1996
----- ----- ------------- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Software license fees....................... 42.2% 35.5% 33.4% 26.0% 29.0%
Service revenues............................ 57.8 64.5 66.6 74.0 71.0
----- ----- ----- ----- -----
Total revenues........................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs and expenses:
Cost of software license fees............... 3.9 5.0 6.1 6.8 5.6
Cost of services............................ 22.6 23.6 24.3 27.2 24.7
Research and development.................... 18.2 22.9 20.1 21.7 20.7
Sales and marketing......................... 40.3 35.2 31.1 31.6 34.4
General and administrative.................. 13.3 9.4 9.9 9.9 10.5
----- ----- ----- ----- -----
Total operating costs and expenses....... 98.3 96.1 91.5 97.2 95.9
----- ----- ----- ----- -----
Income from operations........................ 1.7 3.9 8.5 2.8 4.1
Other income (expense), net................... 0.1 (0.1) 0.5 -- 1.9
----- ----- ----- ----- -----
Income before provision for income taxes...... 1.8 3.8 9.0 2.8 6.0
Provision for income taxes.................... 0.7 1.6 3.2 1.0 2.1
----- ----- ----- ----- -----
Income before cumulative effect of change in
accounting principle........................ 1.1 2.2 5.8 1.8 3.9
Cumulative effect of change in accounting
principle................................... -- 0.5 -- -- --
----- ----- ----- ----- -----
Net income.................................... 1.1% 2.7% 5.8% 1.8% 3.9%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31, 1995

REVENUES. Total revenues, consisting of software license fees and service
revenues, increased 18.3%, from $27.8 million for the six months ended March 31,
1995 to $32.8 million for the six months ended March 31, 1996. Revenues in North
America increased 16.8%, from $25.4 million for the six months ended March 31,
1995 to $29.6 million for the six months ended March 31, 1996. International
revenues grew 33.9%, from $2.4 million for the six months ended March 31, 1995
to $3.2 million for the six months ended March 31, 1996.

License fee revenues increased 31.6%, from $7.2 million for the six months
ended March 31, 1995 to $9.5 million for the six months ended March 31, 1996.
The growth was due primarily to continued market acceptance of the Company's
Infinium client/server products and continued growth in international revenues,
primarily in the Asia/Pacific Region. Service revenues increased 13.6%, from
$20.5 million for the six months ended March 31, 1995 to $23.3 million for the
six months ended March 31, 1996. The increase was primarily attributable to an
increase in the installed base of customers resulting in an increase in both
maintenance revenues and consulting services revenues.

Although the Company expects that it will continue to experience growth in
its revenues during the next six months of fiscal 1996, the rate of growth will
be dependent upon a number of factors, including the mix of software license
fees and services revenues, growth of international revenues and competitive
factors, and there can be no assurance that such rate of growth will equal or
exceed that achieved during the comparable period in fiscal 1995 or during the
first six months of fiscal 1996. See "Risk Factors -- Potential Fluctuations in
Quarterly Results; Seasonality."

14
<PAGE> 15

COST OF SOFTWARE LICENSE FEES. Cost of software license fees consists
primarily of the cost of product media, manuals, shipping and amortization of
capitalized software development costs. Cost of software license fees was
relatively constant, at $1.9 million for the six months ended March 31, 1995 and
$1.8 million for the six months ended March 31, 1996. Cost of software license
fees as a percentage of software license fee revenues decreased from 26.1% for
the six months ended March 31, 1995 to 19.2% for the six months ended March 31,
1996. The decrease in expense was primarily due to a $160,000 write-off of
certain capitalized software development costs in the first fiscal quarter of
1995 partially offset by increased capitalized software amortization in fiscal
1996.

COST OF SERVICES. Cost of services consists of costs to provide training,
technical support and implementation consulting services to licensees of
Software 2000 products. Cost of services increased 7.2%, from $7.6 million for
the six months ended March 31, 1995 to $8.1 million for the six months ended
March 31, 1996. Cost of services as a percentage of service revenues decreased
from 36.8% for the six months ended March 31, 1995 to 34.8% for the six months
ended March 31, 1996. The increase in the dollar amount of such costs resulted
primarily from normal salary increases for service consultants and customer
support personnel.

<TABLE>
RESEARCH AND DEVELOPMENT. Research and development expenses (net of
capitalized software development costs) consist primarily of engineering
personnel costs. Software 2000 has made significant investments in research and
development spending (that is, research and development expenses as reflected in
the Company's consolidated statements of income plus capitalized software
development costs and funded research) in the past several fiscal years to bring
the Infinium client/server products to market. The Company believes that this
significant level of research and development spending is critical to building
long-term product and technology advantages in the market. The following table
sets forth for the periods indicated the relationship between the Company's
research and development expenses as recorded on its consolidated statements of
income and its total research and development spending.

<CAPTION>
YEAR ENDED
--------------------------------- SIX MONTHS
ENDED
AUGUST 31, MARCH 31,
----------------- SEPTEMBER 30, ---------------
1993 1994 1995 1995 1996
------- ------- ---- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Research and development expenses............... $ 8,911 $12,980 $12,725 $6,019 $6,802
Capitalized software development costs.......... 2,251 3,166 2,542 904 1,696
Funded research................................. -- -- 1,131 1,131 --
------- ------- ------- ------ ------
Research and development spending............... $11,162 $16,146 $16,398 $8,054 $8,498
======= ======= ======= ====== ======
Research and development spending as a
percentage of revenues........................ 22.7% 28.4% 26.0% 29.0% 25.9%
</TABLE>

Research and development expenses increased 13.0%, from $6.0 million for
the six months ended March 31, 1995 to $6.8 million for the six months ended
March 31, 1996. Research and development expenses as a percentage of total
revenues were 21.7% for the six months ended March 31, 1995 and 20.7% for the
six months ended March 31, 1996. Research and development spending increased
4.9%, from $8.1 million for the six months ended March 31, 1995 to $8.5 million
for the six months ended March 31, 1996. The increase in research and
development expense and spending was due primarily to the hiring of software
engineers, principally in the quality assurance, product management and open
server areas as well as normal salary increases. The Company capitalized
$904,000 of software development costs for the six months ended March 31, 1995
and $1.7 million for the six months ended March 31, 1996. The Company received
$1.1 million in research funding from a business partner in the first six months
of fiscal 1995 which resulted in lower net research and development expenses and
lower than normal capitalized software development costs in that period. There
was no external funding in fiscal 1996. The Company is currently developing
versions of its principal products designed both to run on hardware platforms
that use the UNIX and Microsoft Windows NT operating systems and to take
advantage of World Wide Web technologies, and anticipates that research and
development expenditures in future periods may increase.

15
<PAGE> 16

SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions, travel, promotional expenses, facilities and computers
and communications costs for direct sales offices. Sales and marketing expenses
increased 28.7%, from $8.8 million for the six months ended March 31, 1995 to
$11.3 million for the six months ended March 31, 1996. Sales and marketing
expenses as a percentage of total revenues increased from 31.6% for the six
months ended March 31, 1995 to 34.4% for the six months ended March 31, 1996.
The increase in dollar amount as well as the percentage of total revenues was
attributable to increased staffing in the direct sales force and an increase in
commissions expense due to increased software license fees, including an
increase in the sale of Software 2000 products by business partners in
international markets which typically carry higher commission costs. The Company
is in the process of expanding its distribution channels, both domestically and
internationally, with an emphasis on the Asia/Pacific, Western Europe and Latin
American markets. Accordingly, sales and marketing expenses may continue to
increase in the future.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries of executive, administrative, financial and legal
personnel, as well as provisions for doubtful accounts and outside professional
fees. General and administrative expenses increased 25.7%, from $2.7 million for
the six months ended March 31, 1995 to $3.4 million for the six months ended
March 31, 1996. General and administrative expenses as a percentage of total
revenues increased from 9.9% for the six months ended March 31, 1995 to 10.5%
for the six months ended March 31, 1996. The increase in general and
administrative expenses, both in dollar amount as well as the percentage of
total revenues, was related primarily to an increase in the provision for
doubtful accounts and additional costs and professional fees related to
operating as a public company.

PROVISION FOR INCOME TAXES. The provisions for federal, state and foreign
income taxes were $272,000 and $713,000 for the six months ended March 31, 1995
and March 31, 1996, respectively. The effective tax rates were 35.1% for the six
months ended March 31, 1995 and 36.0% for the six months ended March 31, 1996.
The increase in the effective tax rate was due primarily to an increase in the
provision for state income taxes.

YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO YEAR ENDED AUGUST 31, 1994

REVENUES. Total revenues increased 11.2%, from $56.8 million for the year
ended August 31, 1994 to $63.2 million for the year ended September 30, 1995.
The increase was primarily due to growth in maintenance fees, and to a lesser
extent, software license fees and consulting services revenues.

License fee revenues increased 4.5%, from $20.2 million for the year ended
August 31, 1994 to $ 21.1 million for the year ended September 30, 1995. This
modest growth was due to the unavailability of the Company's client/server
products until late in the second quarter of fiscal 1995. After the introduction
of client/server product software, license fees grew 23.0% in the last two
quarters of fiscal 1995 as compared to the last two quarters of fiscal 1994,
from $11.3 million to $13.9 million, respectively.

Service revenues increased 14.9%, from $36.6 million for the year ended
August 31, 1994 to $42.1 million for the year ended September 30, 1995. The
increase was primarily attributable to an increase in the installed base of
customers, and to a lesser extent, increases in consulting services and training
revenues.

Revenues in North America increased 7.7%, from $53.5 million for the year
ended August 31, 1994 to $57.7 million for the year ended September 30, 1995.
Income from operations in North America increased from $3.9 million in fiscal
1994 to $5.7 million in fiscal 1995. Europe and other international revenues
grew 68.1%, from $3.3 million for the year ended August 31, 1994 to $5.5 million
for the year ended September 30, 1995 due to greater market penetration in
Europe and the Asia/Pacific Region. Loss from operations in Europe decreased
from $1.8 million in fiscal 1994 to $864,000 in fiscal 1995. Operating losses in
Europe can be attributed to the investment in infrastructure for the European
market. Income from operations in other international areas increased from
$128,000 in fiscal 1994 to $518,000 in fiscal 1995. See Note 10 to Consolidated
Financial Statements.

COST OF SOFTWARE LICENSE FEES. Cost of software license fees increased
34.6%, from $2.8 million for the year ended August 31, 1994 to $3.8 million for
the year ended September 30, 1995. Cost of software license

16
<PAGE> 17

fees as a percentage of software license fee revenues increased from 14.1% for
the year ended August 31, 1994 to 18.2% for the year ended September 30, 1995.
The increase in dollar amount and as a percentage of revenues was primarily due
to a $510,000 increase in amortization expense related to capitalized software
development costs and a $160,000 write-off of certain capitalized software
development costs relating to a foreign language version of the Company's
financial management products for a market the Company decided not to enter into
in the near term. All associated capitalized software development costs were
written off.

COST OF SERVICES. Cost of services increased from $13.4 million for the
year ended August 31, 1994 to $15.3 million for the year ended September 30,
1995. Cost of services as a percentage of service revenues remained relatively
constant at 36.6% for the year ended August 31, 1994 and 36.4% for the year
ended September 30, 1995. The increase in dollar amount of such costs resulted
primarily from increased staffing in the consulting and support organizations in
response to increased demand for consulting services, continued growth in the
customer base and the resulting increase in customer support call volume.

RESEARCH AND DEVELOPMENT. Research and development expenses remained
relatively constant at $13.0 million for the year ended August 31, 1994 and
$12.7 million for the year ended September 30, 1995. Research and development
expenses as a percentage of total revenues were 22.9% for the year ended August
31, 1994 and 20.1% for the year ended September 30, 1995. Research and
development spending increased 1.6%, from $16.1 million for the year ended
August 31, 1994 to $16.4 million for the year ended September 30, 1995. The
Company capitalized $3.2 million of software development costs for the year
ended August 31, 1994 and $2.5 million for the year ended September 30, 1995. In
addition, the Company and a business partner entered into an agreement under
which the business partner has partially funded certain of the Company's
client/server development activities. See "Business--Strategic Relationships."
Of the funding received under this agreement, $1.1 million has been reflected as
a reduction of research and development expenses for the year ended September
30, 1995.

SALES AND MARKETING. Sales and marketing expenses remained relatively
constant at $20.0 million for the year ended August 31, 1994 and $19.7 million
for the year ended September 30, 1995. Sales and marketing expenses as a
percentage of total revenues decreased from 35.2% for the year ended August 31,
1994 to 31.1% for the year ended September 30, 1995. The decrease as a
percentage of total revenues for the year ended September 30, 1995 was
attributable to the increase in service revenues, which typically have lower
sales and marketing costs relative to license fee revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
17.2%, from $5.3 million for the year ended August 31, 1994 to $6.2 million for
the year ended September 30, 1995. General and administrative expenses as a
percentage of total revenues increased from 9.4% for the year ended August 31,
1994 to 9.9% for the year ended September 30, 1995. The increases in dollar
amount and as a percentage of revenues resulted primarily from a $296,000
increase in the provision for doubtful accounts due to continued growth in the
customer base as well as a $359,000 related to an increase in staffing necessary
to support growth, principally from the creation of internal training and
quality standards departments.

PROVISION FOR INCOME TAXES. The provisions for federal, state and foreign
income taxes were $916,000 and $2.0 million for the year ended August 31, 1994
and for the year ended September 30, 1995, respectively. The effective tax rates
were 42.4% for the year ended August 31, 1994 and 35.1% for the year ended
September 30, 1995. The decrease in the effective tax rate was primarily due to
a reduction in permanent differences between net income for financial statement
and income tax purposes for the year ended September 30, 1995. The Company has
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." The adoption of this standard did not have a material impact on
the Company's financial position or results of operations. See Note 6 to
Consolidated Financial Statements.

17
<PAGE> 18

YEAR ENDED AUGUST 31, 1994 COMPARED TO YEAR ENDED AUGUST 31, 1993

REVENUES. Total revenues increased 15.8% from $49.0 million in fiscal 1993
to $56.8 million in fiscal 1994. Software license fees declined slightly, from
$20.7 million in fiscal 1993 to $20.2 million in fiscal 1994 as a result of
weakness in demand for AS/400 systems, the Company's primary market. Service
revenues increased 29.2% from $28.4 million in fiscal 1993 to $36.6 million in
fiscal 1994 as a result of increased demand for such services and continued
growth in the customer base.

Revenues in North America increased 13.1%, from $47.3 million in fiscal
1993 to $53.5 million in fiscal 1994. Income from operations in North America
remained constant at $3.9 million in both fiscal 1993 and fiscal 1994. Europe
and other international revenues grew 73.7%, from $1.9 million in fiscal 1993 to
$3.3 million in fiscal 1994. Loss from operations in Europe decreased from $2.8
million in fiscal 1993 to $1.8 million in fiscal 1994, while income from
operations in other international areas increased from a loss of $252,000 in
fiscal 1993 to income of $128,000 in fiscal 1994.

COST OF SOFTWARE LICENSE FEES. Cost of software license fees increased
47.9%, from $1.9 million in fiscal 1993 to $2.8 million in fiscal 1994. Cost of
license fees as a percentage of software license fee revenues increased from
9.3% in fiscal 1993 to 14.1% in fiscal 1994, primarily due to an increase in
amortization expense related to capitalized software development costs from $1.1
million in fiscal 1993 to $1.8 million in fiscal 1994.

COST OF SERVICES. Cost of services increased 20.7%, from $11.1 million in
fiscal 1993 to $13.4 million in fiscal 1994. Cost of services as a percentage of
service revenues decreased from 39.1% in fiscal 1993 to 36.6% in fiscal 1994.
The increase in dollar amount and as a percentage of revenues resulted primarily
from increased staffing in the consulting and support organizations in order to
meet demand.

RESEARCH AND DEVELOPMENT. Research and development expenses increased
45.7%, from $8.9 million in fiscal 1993 to $13.0 million in fiscal 1994.
Research and development expenses as a percentage of total revenues was 18.2% in
fiscal 1993 and 22.9% in fiscal 1994. The increase in research and development
expenses reflected an increase in expenses related to the development of the
Infinium client/server product line. The Company capitalized $2.3 million of
software development costs in fiscal 1993 and $3.2 million in fiscal 1994.

SALES AND MARKETING. Sales and marketing expenses were relatively constant
at $19.7 million in fiscal 1993 and $20.0 million in fiscal 1994. Sales and
marketing expenses as a percentage of total revenues decreased from 40.3% in
1993 to 35.2% in fiscal 1994 due to the increase in service revenues relative to
software license fee revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
18.3%, from $6.5 million in fiscal 1993 to $5.3 million in fiscal 1994. General
and administrative expenses as a percentage of total revenues decreased from
13.3% in fiscal 1993 to 9.4% in fiscal 1994. The decrease in general and
administrative expenses both in dollar amount and as a percentage of revenues
resulted primarily from a reduction of the Company's international
administrative costs.

PROVISION FOR INCOME TAXES. The provisions for federal, state and foreign
income taxes were $367,000 and $916,000 in fiscal 1993 and fiscal 1994,
respectively. The effective tax rates were 40.5% in fiscal 1993 and 42.4% in
fiscal 1994. The higher effective tax rate in fiscal 1994 was primarily due to
favorable foreign tax rate differentials offset in part by lower research and
development credits.

18
<PAGE> 19

SELECTED QUARTERLY OPERATING RESULTS

The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Such fluctuations may result in volatility in the price
of the Company's Common Stock. Quarterly revenues and operating results may
fluctuate as a result of a variety of factors, including the Company's lengthy
sales cycle, the proportion of revenues attributable to license fees versus
service revenues, changes in the level of operating expenses, demand for the
Company's products, the introduction of new products and product enhancements by
the Company or its competitors, changes in customer budgets, competitive
conditions in the industry and general economic conditions. Further, the
purchase of the Company's products often involves a significant commitment of
capital by its customers with the attendant delays frequently associated with
large capital expenditures and authorization procedures within an organization.
For these and other reasons, the sales cycles for the Company's products are
typically lengthy and subject to a number of significant risks over which the
Company has little or no control. The Company historically has operated with
little software license backlog because its software products are generally
shipped as orders are received. The Company has often recognized a substantial
portion of its revenues in the last month of the quarter and often in the last
week of that month. As a result, license fees in any quarter are substantially
dependent on orders booked and shipped in the last month or last week of that
quarter. Accordingly, a small variation in the timing of recognition of revenues
for specific transactions is likely to adversely and disproportionately affect
the Company's operating results for a quarter because the Company establishes
its expenditure levels on the basis of its expected future revenues and only a
small portion of the Company's expenses vary with its revenues. Accordingly, the
Company believes that period to period comparisons of results of operations are
not necessarily meaningful and should not be relied upon as indicative of future
performance. Although the Company has been profitable in recent quarterly
periods, there can be no assurance that the Company will remain profitable on a
quarterly basis, if at all.

The Company's business has experienced and is expected to continue to
experience significant seasonality with respect to software license fees. In
recent years, the Company has had greater demand for its products in its fourth
fiscal quarter and has experienced lower revenues in its succeeding first and
second fiscal quarters. These fluctuations are caused primarily by customer
purchasing patterns and the Company's sales recognition programs which reward
sales personnel for the achievement of annual performance quotas.

The following tables present certain consolidated financial information for
the last eight fiscal quarters. In management's opinion, this unaudited
information has been prepared on the same basis as the audited Consolidated
Financial Statements and includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information for
the quarters presented, when read in conjunction with the audited Consolidated
Financial Statements and Notes thereto, included elsewhere in this Prospectus.
The results of operations for any quarter are not necessarily indicative of
results for any future period.

19
<PAGE> 20

<TABLE>
<CAPTION>
FISCAL 1994 QUARTER
ENDED FISCAL 1995 QUARTER ENDED FISCAL 1996 QUARTER ENDED
----------------------- --------------------------------------------------- ---------------------------
MAY 31, AUGUST 31, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1994 1994(1) 1994 1995 1995 1995 1995 1996
------- ---------- ------------ --------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENTS OF
INCOME DATA:
Revenues:
Software license
fees............ $ 4,280 $ 6,980 $ 3,836 $ 3,392 $ 5,324 $ 8,528 $ 4,802 $ 4,710
Services
revenues........ 9,521 10,341 10,320 10,204 10,482 11,077 11,519 11,795
------- -------- -------- ------- -------- ------- -------- -------
Total
revenues...... 13,801 17,321 14,156 13,596 15,806 19,605 16,321 16,505
------- -------- -------- ------- -------- ------- -------- -------
Costs and expenses:
Cost of software
license fees.... 715 789 1,080 804 960 985 935 890
Cost of
services........ 3,549 4,167 3,718 3,844 3,852 3,919 4,052 4,052
Research and
development..... 3,002 3,949 3,035 2,984 3,144 3,562 3,366 3,436
Sales and
marketing....... 4,835 5,743 4,399 4,382 4,720 6,150 5,515 5,782
General and
administrative... 1,203 1,671 1,460 1,281 1,792 1,712 1,629 1,817
------- -------- -------- ------- -------- ------- -------- -------
Total operating
costs and
expenses...... 13,304 16,319 13,692 13,295 14,468 16,328 15,497 15,977
------- -------- -------- ------- -------- ------- -------- -------
Income from
operations........ 497 1,002 464 301 1,338 3,277 824 528
Other income
(expense), net.... 6 (61) 19 (8) 119 163 295 334
------- -------- -------- ------- -------- ------- -------- -------
Income before
provision for
income taxes...... 503 941 483 293 1,457 3,440 1,119 862
Provision for income
taxes............. 213 401 169 103 511 1,206 400 313
------- -------- -------- ------- -------- ------- -------- -------
Net income.......... $ 290 $ 540 $ 314 $ 190 $ 946 $ 2,234 $ 719 $ 549
======= ======== ======== ======= ======== ======= ======== =======
</TABLE>

<TABLE>
<CAPTION>
FISCAL 1994 QUARTER
ENDED FISCAL 1995 QUARTER ENDED FISCAL 1996 QUARTER ENDED
----------------------- --------------------------------------------------- ---------------------------
MAY 31, AUGUST 31, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1994 1994(1) 1994 1995 1995 1995 1995 1996
------- ---------- ------------ --------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF
TOTAL REVENUES:
Revenues:
Software license
fees............ 31.0% 40.3% 27.1% 24.9% 33.7% 43.5% 29.4% 28.5%
Service
revenues........ 69.0 59.7 72.9 75.1 66.3 56.5 70.6 71.5
----- ----- ----- ----- ----- ----- ----- -----
Total
revenues...... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- -----
Costs and expenses:
Cost of software
license fees.... 5.2 4.6 7.6 5.9 6.1 5.0 5.7 5.4
Cost of
services........ 25.7 24.1 26.3 28.3 24.4 20.0 24.8 24.6
Research and
development..... 21.8 22.8 21.4 21.9 19.9 18.2 20.6 20.8
Sales and
marketing....... 35.0 33.1 31.1 32.2 29.9 31.4 33.8 35.0
General and
administrative... 8.7 9.6 10.3 9.5 11.3 8.7 10.0 11.0
----- ----- ----- ----- ----- ----- ------ -----
Total operating
costs and
expenses...... 96.4 94.2 96.7 97.8 91.6 83.3 94.9 96.8
----- ----- ----- ----- ----- ----- ----- -----
Income from
operations........ 3.6 5.8 3.3 2.2 8.4 16.7 5.1 3.2
Other income
(expense), net.... -- (0.4) 0.1 (0.1) 0.8 0.8 1.8 2.0
----- ----- ----- ----- ----- ----- ----- -----
Income before
provision for
income taxes...... 3.6 5.4 3.4 2.1 9.2 17.5 6.9 5.2
Provision for income
taxes............. 1.5 2.3 1.2 0.7 3.2 6.1 2.5 1.9
----- ----- ----- ----- ----- ----- ----- -----
Net income.......... 2.1% 3.1% 2.2% 1.4% 6.0% 11.4% 4.4% 3.3%
===== ===== ===== ===== ===== ===== ===== =====

<FN>
- ---------------
(1) The Company changed its fiscal year end from August 31 to September 30
effective with the fiscal year ended September 30, 1995. Accordingly, the
September 1994 results are not included in the data presented above. See
Note 2 to Consolidated Financial Statements.
</TABLE>

20
<PAGE> 21

LIQUIDITY AND CAPITAL RESOURCES

From inception through the beginning of fiscal 1996, the Company financed
its operations principally through cash flows from operating activities and, to
a lesser extent, equipment financing arrangements and a private placement of
Common Stock to venture capital investors in June 1989. In the quarter ended
December 31, 1995, the Company completed an initial public offering of Common
Stock, raising $12.8 million after underwriting discounts and offering expenses.

As of March 31, 1996, the Company had cash, cash equivalents and marketable
securities of $29.1 million, an increase of $12.9 million from the $16.2 million
of cash, cash equivalents and marketable securities held at September 30, 1995.
During the first six months of fiscal 1996, the principal sources of cash were
the net proceeds from the Company's initial public offering of Common Stock as
well as operating activities. The principal uses of cash during the period were
net purchases of marketable securities, expenditures to fund software
development and purchases of computers and equipment.

The Company presently has available a $5.0 million working capital
revolving line of credit with a bank, which is secured by the Company's accounts
receivable. This facility is limited to the lesser of a percentage of the
Company's qualifying accounts receivable or $5.0 million and will expire in
October 1996. The agreement under which the line of credit was established
contains certain covenants, including provisions requiring the Company to
maintain specified financial ratios. The Company has not made any borrowings
under this facility and no amounts were outstanding at March 31, 1996.

The Company's accounts receivable balances, net of the allowance for
doubtful accounts, were $10.8 million at March 31, 1996 and $11.8 million at
September 30, 1995. Days sales of receivables outstanding increased to 60 days
at March 31, 1996 from 54 days at September 30, 1995. The increase in days sales
outstanding is attributable to several large contracts concluded in the last
quarter of the prior fiscal year that were collected in full in that quarter.
The Company expects its days sales outstanding to continue to increase as its
international revenues grow due to longer payment periods typically associated
with international sales. Deferred revenues were $24.7 million at March 31, 1996
and $25.0 million at September 30, 1995. Included in the March 31, 1996 deferred
revenues balance were $13.4 million of deferred maintenance revenues, $8.0
million of deferred consulting service revenues and $3.3 million of deferred
software license fee revenues.

The Company believes that cash and marketable securities, cash flows from
operations and funds available under the line of credit will be sufficient to
fund its operations at least for the next twelve months.

21
<PAGE> 22

BUSINESS

INDUSTRY BACKGROUND

For many years businesses have used packaged software applications to
cost-effectively automate back-office accounting and payroll functions.
Recently, heightened competitive pressures and rapidly changing market
conditions have forced many organizations to reduce costs, increase the
productivity of their personnel and become more responsive to customer
requirements. In addition, because many business professionals use desktop
productivity tools such as spreadsheets and graphing programs, they are
requiring similar ease of use in their financial management and human resource
systems. As a result, businesses are replacing their traditional mainframe-type
accounting and payroll software applications with new, more flexible systems
which not only keep track of accounting records but also help management monitor
and measure the performance of their business operations and make timely access
to performance and record keeping data easy for non-technical business
professionals.

In response to this shift, there is a corresponding shift occurring in the
computing platforms that run these business applications. Centralized
host/terminal-type systems ("legacy" systems) with their character-based user
interfaces are being replaced by client/server computing platforms. These
client/server systems provide an intelligent desktop -- typically a personal
computer -- that allows some of the application functionality to be distributed
to the desktop and some to be performed on the server. The client/server
environment facilitates widespread access by non-technical business
professionals to corporate data through easy-to-use graphical user interfaces,
enables integration with desktop productivity tools such as spreadsheets and
allows applications to be more readily customized to meet changes in business
requirements. In addition, there is a growing tendency among users of these
financial management, human resource and similar business systems to acquire
entire suites of integrated applications that are designed to work together
rather than to purchase single components, such as a general ledger or accounts
payable system.

The requirement for more flexible business applications and the resulting
shift to client/server computing has created a strong demand for new software
applications for financial management, human resource and other areas of the
business. For example, International Data Corporation (IDC) estimates that the
worldwide market for client/server accounting software across all platforms was
in excess of $1.2 billion in 1995 and is predicted to grow at a 32% compounded
annual rate through 1999.

With more than 360,000 systems installed, the IBM AS/400 is one of the
world's most popular mid-range business computing systems. Shipments of new
AS/400 systems in 1995 were approximately 70,000 units, partly as the result of
new models introduced by IBM which offer improved price performance and more
industry standard "open" features. These new models include more server-oriented
systems and recently announced RISC-based processors, both of which facilitate
the use of the AS/400 as the server in a client/server computing architecture.

Until the introduction of the new server-oriented AS/400 models, AS/400
users wanting to move to client/server computing had to replace their systems
and business applications. Now, client/server applications designed specifically
for the AS/400 market offer customers the benefits of client/server computing
without sacrificing their investment in existing systems or incurring the risk
of an overall system conversion. As a result, the AS/400 has become a viable
platform for new client/server implementations.

22
<PAGE> 23

The Company believes that the AS/400 is widely used because of the large
number of business application software packages available for it and because
fewer skilled technical professionals are required to implement and maintain it,
resulting in a lower cost of ownership compared to other systems. Due to the
conservative nature of many AS/400 customers and the relative cost and
complexity of client/server systems, the AS/400 market has been dominated by
host/terminal systems and is now transitioning to client/server computing.
Nonetheless, while many AS/400 users continue to successfully run their legacy
applications, they are seeking to migrate incrementally to client/server
computing using the AS/400 system as their server. See "Risk
Factors -- Dependence on IBM AS/400 Computer Platform; Relationship with IBM."

THE SOFTWARE 2000 SOLUTION

Software 2000 is a provider of enterprise-level business software
applications for the financial management, human resource management and
materials management functions of mid-sized organizations and business units of
large companies. The Company also offers a fully integrated process
manufacturing solution for mid-sized process manufacturing operations. Software
2000's principal products run on the AS/400 in either a client/server or a
traditional host/terminal configuration. The Company is currently developing
versions of its principal products designed to run on additional hardware
platforms using the UNIX and Microsoft Windows NT operating systems and to take
advantage of World Wide Web technologies. Although customers continue to
purchase the Company's host/terminal applications, the Company's Infinium
client/server products accounted for approximately half of the Company's
software license revenues during the first six months of fiscal 1996.

The Company's products enable businesses to automate their financial
management, human resource management, materials management and process
manufacturing operations with highly functional software products that afford
them the flexibility and ease of use of client/server computing while retaining
the low cost of ownership that the AS/400 has historically provided. Software
2000's products are designed based on the following principles:

- ROBUST FUNCTIONALITY AND SCALABILITY. Software 2000's products are
designed to provide high-end features and transaction processing
functionality while providing flexibility and ease of use features that
have not been attainable on mainframe platforms. In addition, Software
2000's products operate in integrated suites of applications which
provide users with a consistent user interface and the ability to easily
access data and perform operations that span multiple applications. The
Company's products are scalable to support increasing and changing levels
of operations as customers' businesses expand.

- HIGH DEGREE OF FLEXIBILITY. Software 2000's products are designed to
function within a wide range of organizations. Infinium enables
individual users to customize their desktop environments to respond to
business changes and to streamline their daily operations. Software 2000
believes the flexible chart of accounts scheme within its General Ledger
2000 product differentiates it from its competitors and facilitates the
use of General Ledger 2000 for monitoring the performance of a wide range
of operating and financial measurements as well as record keeping for
accounting and financial statement purposes.

- INCREMENTAL MIGRATION TO CLIENT/SERVER. The Company's Infinium products
are designed to enable AS/400 customers to migrate to client/server
computing at their own pace. PC-based Infinium software products can be
added rapidly to already installed Software 2000 AS/400 applications
without interruption of normal business processing. Infinium customers
can attach three different types of client software to a single, common
server application at the same time. Data entry workers, for example, can
use their traditional character-based terminals to enter data while
managers with PC's can use a graphical user interface or the full
object-oriented Infinium desktop to perform decision-making analysis and
reporting. The Company believes that this capability is unique in the
application software market.

- SUPERIOR DATA ACCESS AND ANALYSIS THROUGH OBJECT-ORIENTED USER
INTERFACE. The Company's Infinium product line is designed to allow
non-technical business professionals to "mine" the information contained
in the application databases without knowledge of the underlying database
structure. Infinium's innovative "drag and drop" object-oriented user
interface represents the underlying data in

23
<PAGE> 24

the form of graphical icons and allows the end user to interactively
access data by manipulating the icons. The Company believes that its
"object-oriented user interface" represents an advance over standard
graphical user interfaces and a competitive advantage in the application
software market.

- CURRENT PRODUCTS OPTIMIZED FOR THE AS/400. Software 2000's current line
of products is specifically designed for the AS/400 computing
environment. The Company's products take full advantage of the many
unique characteristics of the OS/400 operating system and database to
maximize performance for its customers.

STRATEGY

Software 2000's objective is to be a leading provider of client/server
business software applications operating on the AS/400 and additional hardware,
operating system and database platforms for enterprise-level use. Accordingly,
the Company is developing versions of its products that deliver the same
features and benefits as its AS/400 based products for users of the UNIX and
Microsoft Windows NT operating systems. The Company is committed to enhancing
its core competencies in the areas of financial management, human resource
management and materials management, and delivering systems which can
interoperate with other applications within an organization. The key elements of
the Company's strategy are:

- PROVIDE CLIENT/SERVER SOLUTIONS TO THE AS/400 MARKET. The Company has
targeted organizations that use the IBM AS/400 computer and are migrating
to client/server as the initial target market for its Infinium product
line. The Company's server products were initially designed for the
AS/400 and the Company has traditionally served the AS/400 market
exclusively. The Company believes that it has established a strong
reputation and a loyal base of more than 1,300 customers within the
AS/400 market, which it intends to continue to leverage with its Infinium
products. See "Risk Factors -- Dependence on IBM AS/400 Computer
Platform; Relationship with IBM."

- PORT APPLICATIONS TO ADDITIONAL SERVER PLATFORMS. The Company is
developing versions of its applications to run on additional server
platforms in order to compete in additional client/server markets. In
particular, the Company is porting its financial management, human
resource management and materials management product lines to UNIX
servers from Hewlett-Packard and IBM, and to servers running the
Microsoft Windows NT operating system. See "Risk Factors -- Rapid
Technological Change."

- BUILD LONG-TERM PRODUCT ADVANTAGE WITH OBJECT-ORIENTED INFINIUM
ARCHITECTURE. The Company believes that non-technical business
professionals must be able to change the critical business rules
contained within their application software without depending on
information systems professionals. The Company believes that
object-oriented technology is the most effective way to accomplish this
goal and therefore plans to continue its investment in object-oriented
Infinium applications. See "Risk Factors -- Rapid Technological Change."

- INVEST TO DELIVER PRODUCT FEATURE/FUNCTION LEADERSHIP. The Company plans
to continuously enhance its products to respond to changes in customer
requirements, improve functionality and performance, and incorporate
relevant new technologies. In particular, the Company plans to add new
features to the client component of its Infinium products, to develop a
Web browser version of its Infinium client, and to develop Infinium
versions of its materials management products in the future. See "Risk
Factors -- Rapid Technological Change."

- EXPAND INTERNATIONAL DISTRIBUTION AND SUPPORT CAPABILITIES. The Company
is continuing to expand its international sales and customer support
operations, principally through arrangements with independent software
distributors and systems integrators. The Company also plans to make
investments in product functionality to support the requirements of
additional international markets. The Company has recently entered into
relationships with several international distributors, primarily in the
Asia/Pacific markets. See "Risk Factors -- International Sales and
Operations and Expansion of Indirect Channels."

24
<PAGE> 25

- EXTEND THE CAPABILITIES OF PRODUCTS THROUGH COMPLEMENTARY RELATIONSHIPS
AND ALLIANCES. The Company has developed, and will continue to develop,
relationships with third parties that provide software products which add
value to the solution offered by Software 2000 and with service providers
who can supplement Software 2000's staff and assist in installing and
customizing the Company's products and addressing customers' networking
needs.

- INCORPORATE INTERNET TECHNOLOGIES. The Company is currently developing
enhancements to its products that will enable them to operate over the
Internet and within corporate intranets. The Company is also utilizing
World Wide Web technologies to provide its customers with rapid and
low-cost access to customer support and service applications through the
planned Infinium:Web Manager product. See "Risk Factors -- Rapid
Technological Change."

PRODUCTS

Software 2000 offers enterprise-level business software applications
designed to automate the back-office operations of mid-sized organizations and
business units of large companies. The Company's products can function as
stand-alone applications or as integrated suites of applications and may be
interfaced with products from other vendors. The Company offers business
applications that automate the financial management, human resources management,
materials management and process manufacturing functions.

The Company's "2000 series" of products are AS/400 server-based products
which can function in a traditional host/terminal configuration or, with the
addition of the Company's Infinium:Desktop Manager, in a host/PC configuration
with a graphical user interface on the users' desktops. In addition, the Company
is developing versions of its products that deliver the same features and
benefits as its AS/400 based products for users of the UNIX and Microsoft
Windows NT operating systems.

The Company's Infinium:Financial Management and Infinium:Human Resources
object-oriented software products can be added to the AS/400-based Financial
Management 2000 and Human Resources 2000 product lines to provide a
client/server computing architecture. In this configuration, some of the product
functions traditionally provided by the AS/400 host application are distributed
to the users' personal computers, providing more intuitive data access and
analytical capabilities.

The Company's Infinium products run under the Microsoft Windows 3.1,
Windows 95, Windows NT and IBM OS/2 operating systems for personal computers.

The Infinium product line is designed to allow non-technical business
professionals to "mine" the information contained in the application databases
without knowledge of the underlying database structure. The Company believes
that Infinium's innovative "drag and drop" object-oriented user interface is an
advance over standard graphical user interfaces because it represents the
underlying data in the form of graphical icons and allows the user to
interactively access data by manipulating the icons. For example, as illustrated
on the inside front cover of this Prospectus, a user can simply drag the Vendor
icon and drop it on an Invoice icon to see the invoice data for that particular
company. Successive drag and drop operations can take the user to successively
lower levels of detail as needed. In addition, the data in an Infinium
application can be easily moved into popular spreadsheets or word processors for
incorporation into reports or presentations. As a result, users spend less time
searching for data and can devote more time to analysis and decision-making. The
Company believes that its "object-oriented user interface" represents a
competitive advantage in the business application software market.

The Company believes that the Infinium architecture, which allows the
Company's 2000 series AS/400 applications to function as either traditional
host/terminal applications or object-oriented client/server applications,
provides the Company's base of more than 1,300 customers with a means of
migrating to client/server without replacing their existing AS/400 business
applications and offers a competitive solution to customers seeking to combine
the benefits of client/server computing with the performance, stability and low
cost of ownership of an AS/400 server-based architecture.

25
<PAGE> 26

INFINIUM APPLICATION ARCHITECTURE FOR THE AS/400

[PICTURE OF AN AS/400 SERVER]
[PICTURE OF A LAN SERVER]
[PICTURE OF A COMPUTER]

[PICTURE OF A CHARACTER-BASED TERMINAL]
[PICTURE OF A COMPUTER]
[PICTURE OF A COMPUTER]

The Company presently offers enterprise-level business application products
in the areas of financial management, human resource management, materials
management and process manufacturing. In addition, the Company offers the
Infinium:Desktop Manager product to allow customers of its character-based
AS/400 host/terminal applications to add a graphical user interface. The product
suites and included applications currently offered by Software 2000 are as
follows:

<TABLE>
<S> <C>
FINANCIAL MANAGEMENT HUMAN RESOURCES/PAYROLL
Infinium:Financial Management Infinium:Human Resources
General Ledger 2000 Payroll 2000
Payables Ledger 2000 Personnel 2000
Accounts Receivable 2000 Flexible Benefits 2000
Fixed Assets 2000 Training 2000
Currency Management 2000 Industrial Health 2000
Global Taxation 2000
PROCESS MANUFACTURING
MATERIALS MANAGEMENT Regulatory Management 2000
Purchase Management 2000 Formula Management 2000
Inventory Control 2000 Material Planning 2000
Order Processing 2000 Manufacturing Control 2000
</TABLE> Laboratory Analysis 2000

26
<PAGE> 27

FINANCIAL MANAGEMENT. The Company's Financial Management products provide
key financial management and accounting functions for mid-sized organizations
and business units of large companies. Infinium:Financial Management provides
these applications with icon-based user access to the underlying accounting,
statistical and performance data through graphical "drag and drop" operations.
Software 2000's Financial Management products are in use at more than 700
companies. The Company's primary Financial Management applications are currently
available in English, French, German, Spanish and Dutch versions for
multi-national and international businesses. The current list license fees for
Financial Management server products range from $7,500 to $244,000 per
application. License fees vary based on a number of factors, including hardware
configuration, number of users and application options licensed. The current
list license fee for Infinium:Financial Management is $3,000 for a single user,
and multiple user discounts are available.

<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------
INFINIUM: Provides end user data access and analysis, user customization without
FINANCIAL coding, and simplified navigation; incorporates intelligent user
MANAGEMENT interface with accounting business objects, such as Vendors or Accounts,
that allows user to retrieve and analyze data.
- ------------------------------------------------------------------------------------------
GENERAL Provides traditional General Ledger functionality with highly flexible
LEDGER 2000 chart of accounts structure; open design allows integration to Software
2000 as well as non-Software 2000 subsidiary ledgers; integrated
financial report writer and consolidation functionality; full
multi-currency, budgeting and statistical account processing.
- ------------------------------------------------------------------------------------------
PAYABLES Provides accounts payable processing from invoice receipt through
LEDGER 2000 invoice payment and transfer of accounting transactions to general
ledger; numerous payment methods supported, both paper and electronic.
- ------------------------------------------------------------------------------------------
ACCOUNTS Provides accounts receivable processing from invoice creation through
RECEIVABLE collection and transfer of accounting transactions to the General
2000 Ledger; extensive customer credit management and control functionality.
- ------------------------------------------------------------------------------------------
FIXED Provides capital asset information and management functionality;
ASSETS 2000 provides depreciation calculations, asset transfers and asset
retirements.
- ------------------------------------------------------------------------------------------
CURRENCY Provides currency and exchange rate information for use by the Software
MANAGEMENT 2000 product line; offers multiple exchange rate types to allow daily
2000 exchange rates, historical averages, etc.
- ------------------------------------------------------------------------------------------
</TABLE>

27
<PAGE> 28

HUMAN RESOURCES/PAYROLL. The Company's Human Resources/Payroll products
are designed to handle the requirements of mid-sized organizations and business
units of large companies. For example, the Royal Mail Letters division of the
British Post Office produces payroll for more than 160,000 employees weekly
using Software 2000's Human Resources products. See "Business -- Customers."
Infinium:Human Resources provides these applications with icon-based user access
to the underlying accounting, statistical and performance data through graphical
"drag and drop" operations. The Company's Human Resources/Payroll products are
in use at more than 600 organizations. While the Company offers versions of its
Human Resources systems for use around the world, the Payroll system is
localized and currently available for use in the United States, Canada, United
Kingdom, Australia and New Zealand. The current list license fees for Human
Resources/Payroll server products range from $10,000 to $239,000 per
application. License fees vary based on a number of factors, including hardware
configuration, number of users and application options licensed. The current
list license fee for Infinium:Human Resources is $3,000 for a single user, and
multiple user discounts are available.

<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C>
INFINIUM: Provides end user data access and analysis, user customization without
HUMAN coding and simplified navigation; incorporates intelligent user
RESOURCES interface with human resources business objects, such as Applicants or
Employees, that allows user to perform typical tasks such as hiring an
applicant and retrieving and analyzing data.
- ------------------------------------------------------------------------------------------
PAYROLL Provides flexible payroll processing for multi-site, multi-unit
2000 organizations; includes features such as unlimited check history,
interactive check update, multiple timesheet entry options, and on-line
manual check calculations, including "net-to-gross" calculations;
completely integrated with Software 2000's entire human resources and
financial management applications.
- ------------------------------------------------------------------------------------------
PERSONNEL Provides interactive maintenance and comprehensive reporting of
2000 personnel management; multiple company support, user-defined code tables
with interactive code value look-up, a comprehensive employee database
with unlimited employee history, applicant tracking, employee skill
inventory, employee absence tracking, data inquiry, and
health-and-safety tracking and reporting.
- ------------------------------------------------------------------------------------------
FLEXIBLE Provides support for user-defined benefit plans and payroll integration
BENEFITS features, including user-defined benefits election form, confirmation
2000 statement, spending and reimbursement checks, employee statements of
spending account activity, and one-step employee enrollment.
- ------------------------------------------------------------------------------------------
TRAINING Provides automatic tracking of employee training records and on-the-job
2000 performance reviews, and determines appropriate career path based on
employee training needs and skills; automatic course reservation,
enrollment, and grading; supports employee and non-employee enrollment.
- ------------------------------------------------------------------------------------------
INDUSTRIAL Provides on-line maintenance, inquiry, and reporting of data relating to
HEALTH 2000 on-site hazardous materials, maintenance of employee health profiles and
toxicological testing schedules; trend analysis supports pro-active
protection of workers; provides regulatory reporting compliance.
- ------------------------------------------------------------------------------------------
</TABLE>

28
<PAGE> 29

MATERIALS MANAGEMENT. The Company's Materials Management products are
targeted mainly to non-manufacturing businesses, such as hospitals, hotels,
transportation companies, service organizations and utilities. These products
integrate closely with the Financial Management product line, and are often
considered an extension of the core financial applications. The Company's
Materials Management products are in use at approximately 200 companies. The
current list license fees for Materials Management products range from $15,000
to $143,000 per application. License fees vary based on a number of factors,
including hardware configuration, number of users and application options
licensed.

<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C>
PURCHASE Provides the ability to automate the entire supply cycle from
MANAGEMENT requisitions through receipts and inspections; provides invoice matching
2000 with payables ledger.
- ------------------------------------------------------------------------------------------
INVENTORY Provides an automated multi-company inventory environment with choice of
CONTROL 2000 several costing methods.
- ------------------------------------------------------------------------------------------
ORDER Provides order entry, which is integrated real-time with the inventory
PROCESSING and purchasing systems for consolidated up-to-date information to
2000 support efficient handling of customer orders.
- ------------------------------------------------------------------------------------------
</TABLE>

PROCESS MANUFACTURING. The Company's Process Manufacturing products cover
a full range of formula-based process manufacturing operations. These products
are fully integrated with the Company's Financial Management 2000 product line.
The Company's Process Manufacturing products are in use at more than 50
companies principally in the paint, sealant, adhesive and specialty chemical
industries. The current list license fees for Process Manufacturing products
range from $5,000 to $139,000 per application. License fees vary based on a
number of factors, including hardware configuration, number of users and
application options licensed.

<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C>
REGULATORY Provides generation of information required for government
MANAGEMENT 2000 regulatory and right-to-know reports, including Occupational
Safety and Health Act (OSHA) and Superfund Amendment and
Reauthorization Act (SARA) reporting.
- ------------------------------------------------------------------------------------------
FORMULA Provides for the definition of ingredients, quantities and cost
MANAGEMENT 2000 components required for production, as well as manufacturing
instructions and quality control parameters.
- ------------------------------------------------------------------------------------------
MATERIAL PLANNING Provides user-configurable master production scheduling and
2000 materials resource planning (MRP) capabilities.
- ------------------------------------------------------------------------------------------
MANUFACTURING Provides detailed, real-time information for production,
CONTROL 2000 including batch scheduling, processing instructions, and printing
batch tickets or production orders.
- ------------------------------------------------------------------------------------------
LABORATORY Provides the ability to perform cost modeling of a formula,
ANALYSIS 2000 rebulk a formula for ingredient weight and volume, and
automatically reformulate to determine the desired results.
- ------------------------------------------------------------------------------------------
</TABLE>

29
<PAGE> 30

INFINIUM:DESKTOP MANAGER. Infinium:Desktop Manager is designed to provide
AS/400 customers with a first step toward client/server computing.
Infinium:Desktop Manager provides a graphical user interface (GUI) and PC-based
desktop to any of the Company's 2000 series business applications. Customers not
yet ready to make a full commitment to client/server computing with the
Infinium:Financial Management or Infinium:Human Resources products can still
provide users with the productivity and ease-of-use of a graphical desktop by
using Infinium:Desktop Manager. An Infinium:Desktop Manager Extended version is
also available which provides the same GUI interface across non-Software 2000
character-based AS/400 applications, providing businesses with a consistent look
and feel across all of their AS/400 applications to simplify training and
support. The current list license fee for Infinium:Desktop Manager is $1,500 for
a single user, and multiple user discounts are available.

CUSTOMER SUPPORT AND PRODUCT MAINTENANCE

The Company believes that providing a high level of support to its
customers is a critical requirement for customer satisfaction and the long-term
success of the Company. The Company believes that it has established a strong
history of responsiveness to customer requirements and a high level of support
which has resulted in a loyal customer base. As of March 31, 1996 the Company
had 73 employees in its customer support operations.

The Company provides product updates and enhancements and customer support
services under an annual maintenance agreement. Initial maintenance fees are
based on a percentage of the list price of the licensed software products. As of
March 31, 1996, the Company's deferred revenues attributable to maintenance
contracts were $13.4 million. The renewal rate for annual maintenance agreements
for the Company's products was over 90% for the year ended September 30, 1995.
Under the Company's standard license agreement, customers have the right to
modify or enhance the Company's products; generally, in such event, the
Company's obligation to provide warranty or maintenance service will terminate.
Any modifications or enhancements developed by the customer that do not contain
software code of the Company are owned by the customer.

The Company's primary customer support center is located at the Company's
headquarters in Hyannis, Massachusetts. The Company also maintains a support
operation in its United Kingdom office, servicing customers outside the United
States. First-line support services for customers outside North America and the
United Kingdom are typically provided by the Company's independent distributors
for those areas. The Company also offers an electronic support capability,
called "S2K Link," which is based on IBM/Lotus Notes and which allows customers
to access product release information, product bulletins and updates, and tip
and technique information as well as to pursue ordinary customer support
dialogues. The Company has recently launched a version of S2K Link that allows
customers to access the Company's customer support services using Web browsers.
The Company's Hyannis customer support operations have been certified under ISO
9001 quality standards since March 1995. ISO 9001 is a set of international
standards promulgated by the International Organization of Standardization
relating to quality assurance. ISO 9001 certification indicates that the Company
adheres to such standards.

EDUCATION AND CONSULTING SERVICES

The Company offers a comprehensive series of fee-based training courses to
its customers. Courses can be taken at the Company's headquarters in Hyannis,
Massachusetts, or at regional training centers in the Atlanta, Chicago, Los
Angeles, London and Toronto metropolitan areas. Course offerings can also be
delivered at a customer's site.

Software 2000's consulting services organization provides fee-based
services to the Company's customers, including implementation assistance,
project management, application extension or customization, integration with
existing customer applications and similar services. The Company also trains and
certifies third-party organizations, such as consulting firms and system
integrators, to complement the Company's own service operation. The Company had
62 employees in its consulting services organization as of March 31, 1996.

30
<PAGE> 31

CUSTOMERS

The Company's products are used by more than 1,300 customers in a wide
range of industries. No single customer accounted for 10% or more of revenues in
fiscal years 1993, 1994 or 1995. A representative list of current major
customers, segmented by industry concentration, who are currently active on
maintenance with the Company and who have generated at least $100,000 in total
revenues during the last five years, is shown below:

<TABLE>
<S> <C>
AUTOMOTIVE COMMUNICATIONS
- ---------- --------------
EDS Automotive Retail Group Hearst Magazines
Mazda Motor of America MCA/Universal Studios/MCA Records
Porsche Cars North America Newsweek Data Center
Rolls-Royce Motor Cars USA Network
Volvo North America Warner Bros. Records

CONSUMER PRODUCTS DISTRIBUTION AND TRANSPORTATION
- ----------------- -------------------------------
Nintendo of America BOC Distribution Services
NordicTrack Builders Transport
Playtex Apparel Burlington Motor Carriers
Samsonite M.S. Carriers
Timberland Roadway Logistic Systems

FINANCIAL AND INSURANCE SERVICES FOOD AND BEVERAGE PROCESSING
- -------------------------------- ----------------------------
Blue Cross and Blue Shield of Blue Diamond Growers
Maryland Coca-Cola Enterprises
Countrywide Credit Industries Sunkist Growers
The FINOVA Group Sysco
Texas Workers Insurance Universal Foods
Compensation Fund
TRW Information Systems & Services

HEALTH CARE HOSPITALITY
- ----------- -----------
Abbey Medical Circus Circus Enterprises
Catholic Healthcare West Embassy Suites
Landmark Medical Center Harrah's
Optima Health MGM Grand Hotel
York County Hospital New York New York Hotel

MANUFACTURING PHARMACEUTICALS
- ------------- ---------------
Alberta-Pacific Forest Industries Abbott Laboratories
Crown Cork & Seal Company Bausch & Lomb
General Electric Canada Ciba Vision
Harley-Davidson Ortho McNeil
Saint Gobain Corporation Smithkline Beecham Animal Health

RESTAURANTS UTILITIES
- ----------- ---------
Arby's Northwestern Public Service Company
Baskin Robbins Southern Union Company
Brinker International Florida Public Utilities Co.
McDonalds-Australia Buckeye Pipeline Company
Starbucks Pacific Energy
</TABLE>

31
<PAGE> 32

SALES AND MARKETING

The Company offers its products and services primarily through a direct
sales force in the United States, Canada and the United Kingdom and through
independent distributors in other geographic locations.

The Company's sales efforts in North America are conducted by a direct
sales force with offices in the Atlanta, Boston, Chicago, Dallas, Houston,
Irvine and Toronto metropolitan areas. Recently, the Company established a
telesales operation in its Hyannis, Massachusetts headquarters to sell training
and consulting services to the Company's existing customer base. The Company
conducts comprehensive marketing programs which include advertising, direct
mail, telemarketing, seminars, public relations, trade shows and customer
relations from its headquarters in Hyannis, Massachusetts. The Company's sales
and marketing organization consisted of 116 employees as of March 31, 1996.

The Company believes that its continued growth and profitability will
require it to expand its existing international operations and enter new
international markets. The Company's strategy is to substantially expand its
network of independent distributors to provide a worldwide sales and marketing
presence for its products. In particular, the Company intends to expand its
distribution capabilities in the Asia/Pacific, Western Europe and Latin American
markets by entering into business partner relationships with established third
party software distribution and support organizations. The Company has recently
entered into relationships with several international distributors, primarily in
the Asia/Pacific markets. The Company had revenues of $1.9 million, $3.3
million, and $5.5 million from sales to customers outside North America for the
fiscal years ended August 31, 1993 and 1994 and the fiscal year ended September
30, 1995, representing 3.9%, 5.7% and 8.7% of total revenues, respectively. For
the six months ended March 31, 1995 and 1996, the Company had revenues of $2.4
million and $3.2 million outside North America, representing 8.6% and 9.8% of
total revenues, respectively.

PRODUCT DEVELOPMENT

The Company devotes substantial resources to research and development in
order to enhance and maintain the competitiveness of its products. The Company's
research and development priorities fall into three principal areas: first,
AS/400 product enhancements, including the development of new product features
and functions, the incorporation of Internet-related technologies, the further
internationalization of the Company's product lines and integration with third
party complementary products; second, the development of versions of the
Company's products that operate on computing platforms in addition to the
AS/400, such as UNIX and Microsoft Windows NT; and third, the ongoing
development of the Company's object-oriented Infinium architecture as the basis
for its long-term product differentiation.

The Company's primary research and development operations are located in
Hyannis, Massachusetts, with smaller development teams located in the Company's
Burlington, Massachusetts, Louisville, Kentucky and London, England area
facilities. The Company's Hyannis-based AS/400 development operations have been
certified under ISO 9001 quality standards since March 1995. As of March 31,
1996, the Company had 151 employees in its research and development operations.
The Company's research and development spending was approximately $11.2 million,
$16.1 million and $16.4 million for the fiscal years ended August 31, 1993 and
1994 and for the fiscal year ended September 30, 1995, respectively, and
approximately $8.5 million for the six months ended March 31, 1996.

32
<PAGE> 33

STRATEGIC RELATIONSHIPS

IBM RELATIONSHIP

Software 2000 has maintained a strategic relationship with IBM in a number
of key areas, including sales, marketing and research and development. The
Company participates in several formal and informal programs with IBM which the
Company believes afford it valuable experience with IBM's AS/400 products and
insights into its marketing plans. The Company is one of IBM's designated
"Premier Business Partners" and has, in recent years, received numerous awards
and recognitions from IBM, including IBM's Mark of Quality for its high-quality
management practices and standards, the International Rightsizing Leadership
Award and the IBM National Business Partner of the Year Award.

The Company is a member of IBM's Market Development Program and has
received funding and other assistance from IBM for the purposes of jointly
marketing the Company's products and IBM AS/400 systems. As a prime provider of
AS/400 business solutions, the Company has served as a test site for new IBM
AS/400 and object-oriented products, obtaining valuable early experience with
these technologies. The Company is a member of IBM's "Partners in Development"
program, providing IBM with feedback regarding the design and development of the
database and operating system of the AS/400 Advanced Server. See "Risk
Factors -- Dependence on IBM AS/400 Computer Platform; Relationship with IBM."

OPEN SERVER INITIATIVE

Software 2000 has entered into strategic relationships with other major
vendors in the hardware and software industry in addition to IBM. As part of the
Company's initiative to develop versions of its application products that can
operate on multiple open client/server platforms such as UNIX and Microsoft
Windows NT, the Company has established relationships with Hewlett-Packard,
Microsoft Corporation and Oracle Corporation.

SALES AND MARKETING RELATIONSHIPS

The Company has entered into arrangements with several third party software
vendors to jointly market their products along with the Infinium client/server
product lines in order to provide a more comprehensive solution to Software 2000
customers. In 1995, the Company entered into marketing relationships with
ShowCase Corporation for the ShowCase VistaPro product, a graphical query and
report writer; Criterion Incorporated for the Blueprint product, an extension to
Human Resources for career development and organizational maintenance; Hunt
Systems Group for the Essbase Consolidation Auditor product, a financial
consolidation system that is based on the Arbor Software Essbase
multi-dimensional database engine; and Edify Corporation for the Edify
Electronic Workforce and Agent Trainer products that provide workflow routing
and voice or telephone kiosk capabilities. In 1995, the Company also entered
into a relationship with Stream International to provide customers with a total
networking services solution. In addition, the Company has had a marketing
relationship with Marsh Software Systems since 1992 for the Marsh Project
Management System.

COMPETITION

The Company's primary competitors are presently J.D. Edwards & Company,
Lawson Software, PeopleSoft and SAP AG. The Company believes, however, that
competition in its industry is undergoing rapid change and that the barriers to
competition between market segments that have previously existed are decreasing.
For example, SAP AG and PeopleSoft, which are currently major competitors within
the UNIX and Microsoft Windows NT client/server markets, have announced AS/400
client/server products. J.D. Edwards & Company has recently introduced its
AS/400 client/server product. Due to the relatively low barriers to entry in the
software market, the Company expects additional competition from these and other

33
<PAGE> 34

established and emerging companies as the client/server business application
software market continues to develop and expand. Certain of the Company's
existing and potential competitors are substantially larger than the Company and
have significantly greater financial, technical and marketing resources and
established, extensive direct and indirect channels of distribution. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products than the Company. The Company
also expects that competition will increase as a result of software industry
consolidation. In addition, current and potential competitors have established
or may establish cooperative relationships among themselves or prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. Increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which would have a material adverse effect on the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressures will not have a material
adverse effect on the Company's business, operating results and financial
condition. See "Risk Factors -- Intense Competition."

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of contract, copyright, trademark and trade secret laws and other measures to
protect its proprietary intellectual property. The Company has no patents, and
existing copyright laws afford only limited protection. The Company believes
that, because of the rapid rate of technological change in the computer software
industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability and experience of the Company's
employees, frequent product enhancements and the timeliness and quality of
support services.

The Company provides its products to customers under non-exclusive
licenses, which generally are nontransferable and have a perpetual term. The
Company generally licenses its products solely for the customer's internal
operations and only on designated computers. In certain circumstances, the
Company makes available enterprise-wide licenses. The Company provides source
code to its customers for certain of its products and has escrowed its source
code with a commercial bank for the benefit of all customers. The provision of
source code may increase the likelihood of misappropriation or other misuse of
the Company's intellectual property. See "Risk Factors -- Protection of
Intellectual Property."

From time to time, the Company licenses software from third parties for use
with its products. The Company believes that no such license agreement to which
it is presently a party is material and that if any such license agreement were
to terminate for any reason, the Company would be able to obtain a license or
otherwise acquire other comparable technology or software on terms that would
not be materially adverse to the Company.

EMPLOYEES

As of March 31, 1996, the Company employed 462 people, including 116 in
sales and marketing, 151 in product development, 135 in customer support and
field services and 60 in administration. The Company's success will depend in
large part upon its ability to continue to attract and retain qualified
employees. None of the Company's employees is represented by a labor union or is
subject to a collective bargaining agreement. The Company believes that its
relations with its employees are good. See "Risk Factors -- Management of
Changing Business; Dependence on Management and Key Employees."

FACILITIES

The Company is headquartered in Hyannis, Massachusetts, where it leases an
aggregate of 75,000 square feet of space. Administrative, marketing, product
development and customer support and service operations are located in the
Hyannis space. The Company also leases an aggregate of 13,500 additional square
feet of space in Burlington, Massachusetts and Louisville, Kentucky for product
development operations. In addition, the Company leases an aggregate of 54,000
additional square feet for its field operations located in Atlanta, Boston,
Chicago, Dallas, Houston, Irvine, Toronto and London. The Company believes that
its existing

34
<PAGE> 35

facilities are adequate to meet current needs and that suitable additional space
will be available as needed to accommodate any further physical expansion of
corporate operations and for additional sales and service field offices.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
results of operations or financial position.

35
<PAGE> 36

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

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

<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Robert A. Pemberton........................ 55 Director, Chairman of the Board and Chief
Executive Officer

Frederick J. Lizza......................... 41 Director, President and Chief Operating
Officer

John W. Baumstark.......................... 33 Senior Vice President, Field Operations

Daniel J. Kossmann......................... 39 Chief Financial Officer, Vice President and
Treasurer

Anne Marie Monk............................ 38 General Counsel, Vice President, Secretary
and Assistant Clerk

R. Stephen Cheheyl(1)...................... 50 Director

Manuel Correia(2).......................... 61 Director

Roland D. Pampel(2)........................ 61 Director

Robert P. Schechter(1)..................... 47 Director

<FN>
- ---------------
(1) Member of Audit Committee

(2) Member of Compensation Committee
</TABLE>

Robert A. Pemberton founded the Company and has served as Chief Executive
Officer, Chairman of the Board and a Director since 1981. He served as President
from 1981 to 1990 and from 1993 to early 1996. Prior to founding the Company,
Mr. Pemberton held management positions at State Street Bank in Boston and was a
Vice President at Boston Safe Deposit and Trust Company. Mr. Pemberton holds an
A.B. from Boston College.

Frederick J. Lizza joined the Company in January 1995 as Executive Vice
President, Product Development and Marketing and assumed responsibility for
Customer Support in September 1995. Since February 1996, Mr. Lizza has served as
President and Chief Operating Officer of the Company and was elected as a
Director of the Company in April 1996. Prior to joining the Company, Mr. Lizza
held various executive positions at Trinzic Corporation from 1986 to January
1995, most recently as Vice President and General Manager, Data Access Product
Group. Previously, Mr. Lizza held various marketing management positions at
Software International (a subsidiary of General Electric Information Services)
and at Arthur Andersen & Company. He holds an M.B.A. in Marketing from Harvard
Business School and a B.S. in Accounting from Boston College.

John W. Baumstark joined the Company in April 1989 and has been Senior Vice
President, Field Operations since July 1995, after having served as Vice
President, Worldwide Sales and Services Operations from October 1994 to July
1995, Vice President, North American Operations from September 1993 to October
1994 and Regional Sales Manager from December 1991 to September 1993. Prior to
joining the Company, Mr. Baumstark held various sales and marketing positions at
NCR from June 1984 to March 1986 and at Management Science America from March
1986 to April 1989. He holds a B.A. from Colorado College in Business and
Economics.

Daniel J. Kossmann joined the Company in June 1992 as Chief Financial
Officer and Vice President. He is responsible for the Finance, Information
Systems, Human Resources and Operations functions. Prior to joining the Company,
Mr. Kossmann was Vice President, Finance and Administration and Chief Financial
Officer of Datalogix International from 1989 to June 1992, and held various
management positions at National Education Corporation from 1981 to 1988. From
1978 to 1981, Mr. Kossmann was employed by Price Waterhouse LLP. Mr. Kossmann
holds a B.B.A. in Accounting from Niagara University and is a Certified Public
Accountant.

36
<PAGE> 37

Anne Marie Monk joined the Company in October 1991 as General Counsel and
has served as General Counsel and Vice President since February 1993. She is
responsible for the Legal, Contracts Administration, Customer Relations and
Quality functions. Prior to joining the Company, Ms. Monk was associated with
the Boston law firms of Csaplar & Bok and Gaston & Snow from 1985 to 1991. Ms.
Monk holds a J.D. from Boston College Law School and a B.A. in Economics from
Boston College.

R. Stephen Cheheyl has been a Director of the Company since July 1995. From
October 1994 until he retired in December 1995, Mr. Cheheyl served as Executive
Vice President of Bay Networks, Inc., when Bay Networks was formed through the
merger of Wellfleet Communications, Inc. ("Wellfleet") and Synoptics
Communications Inc. From December 1990 to October 1994, Mr. Cheheyl served as
Senior Vice President, Finance and Administration, of Wellfleet. He also serves
as a director of Auspex Systems, Inc., ON Technology Corporation and Sapient
Corporation. Mr. Cheheyl holds an M.B.A. from Northwestern University and an
A.B. from Dartmouth College.

Manuel Correia joined the Company's Board of Directors in September 1993.
Mr. Correia has served as Vice President, Applications Engineering Operations of
Cadence Design Systems since 1993 and as Vice President, Customer Service since
1990. Mr. Correia holds an M.S. in Management Science from the State University
of New York and a B.S. in Electrical Engineering from Northeastern University.
Mr. Correia is also a director of C.ATS.

Roland D. Pampel joined the Company's Board of Directors in July 1995. Mr.
Pampel has been the President, Chief Executive Officer and a director of
Microcom since March 1994. Prior to joining Microcom, Mr. Pampel served as the
President, Chief Executive Officer and a director of Nicolet Instrument
Corporation from September 1991 to February 1994, and as President, Chief
Executive Officer and a director of Bull HN Information Systems from July 1989
to August 1991. Mr. Pampel holds a B.S. in Electrical Engineering from the
University of Connecticut. Mr. Pampel is also a director of Best Power
Technology.

Robert P. Schechter joined the Company's Board of Directors in July 1995.
Mr. Schechter has been the President, Chief Executive Officer and a director of
Natural MicroSystems Corporation since April 1995. From 1987 to 1994, Mr.
Schechter held various senior executive positions at Lotus Development
Corporation and from 1980 to 1987 was a partner of Coopers & Lybrand L.L.P. Mr.
Schechter holds an M.B.A. from the Wharton School of the University of
Pennsylvania and a B.S. from Rensselaer Polytechnic Institute. Mr. Schechter is
also a director of MRS Technology and Groundwater Technology.

Each director currently holds office until the next annual meeting of
stockholders and until that director's successor has been elected and qualified.
The Company's Board of Directors is divided into three classes. Messrs. Correia
and Lizza serve in the class whose term expires in 1996; Messrs. Pemberton and
Schechter serve in the class whose term expires in 1997; and Messrs. Pampel and
Cheheyl serve in the class whose term expires in 1998. Upon the expiration of
the term of a class of directors, directors within such class will be elected
for a three-year term at the annual meeting of stockholders in the year in which
such term expires.

Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until the next annual meeting of the Board of
Directors and until their successors have been duly elected and qualified. There
are no family relationships among any of the executive officers or directors of
the Company.

BOARD COMMITTEES

The Company's Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee is responsible for nominating the Company's
independent accountants for approval by the Board of Directors; reviewing the
scope, results and costs of the audit with the Company's independent
accountants; and reviewing the financial statements and audit practices of the
Company. The members of the Audit Committee are Messrs. Cheheyl and Schechter.
The Compensation Committee is responsible for recommending compensation and
benefits for the executive officers of the Company to the Board of Directors and
for administering the Company's 1984 Incentive Stock Option Plan, as amended
(the "1984 Plan"), the 1989 Stock Option Plan (the "1989 Plan"), the 1995 Stock
Plan (the "1995 Plan"), the 1995 Employee Stock Purchase Plan (the "Purchase
Plan") and the 1995 Non-Employee Director Stock Option Plan (the "Director
Plan"). The members of the Compensation Committee are Messrs. Correia and
Pampel.

37
<PAGE> 38

DIRECTOR COMPENSATION

Each non-employee director of the Company receives $10,000 annually (paid
at the rate of $2,500 per quarter) for serving as a director and an additional
$1,000 for each Board meeting attended. The non-employee directors of the
Company are Messrs. Cheheyl, Correia, Pampel and Schechter. The Company also
reimburses non-employee directors for expenses incurred in attending Board
meetings. No additional compensation is paid to directors for attending Board or
committee meetings.

Under the Company's Director Plan, beginning at the Company's annual
meeting of stockholders for the fiscal year ending September 30, 1996 and at
each successive annual meeting, each non-employee director of the Company will
receive an option to purchase 4,000 shares of Common Stock, which will be
exercisable over a four-year period at the rate of 25% per year. In addition,
any person who first becomes a non-employee director on or after October 2, 1995
shall receive an option to purchase 28,000 shares, which will also be
exercisable over a four-year period at the rate of 25% per year. The exercise
price per share for all options granted under the Director Plan will be equal to
the market price of the Common Stock on the date of grant. See
"Management -- Stock Plans."

EXECUTIVE COMPENSATION

<TABLE>
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the fiscal
year ended September 30, 1995 by (i) the Company's Chief Executive Officer and
(ii) the four most highly compensated other executive officers who received
annual compensation in excess of $100,000 (collectively, the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<CAPTION>
LONG-TERM
COMPENSATION(2)
---------------
AWARDS
ANNUAL COMPENSATION ---------------
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) OPTIONS(#) COMPENSATION
- ------------------------------ -------- ------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Robert A. Pemberton........... $242,000 $27,316 -- -- $127,989(3)
Chief Executive Officer
Frederick J. Lizza(4)......... 124,744 39,507 -- 196,000 63,181(5)
President
John W. Baumstark............. 160,000 46,894 $57,742(6) 84,000 3,200(7)
Senior Vice President
Daniel J. Kossmann............ 152,000 39,507 -- 56,000 3,040(7)
Chief Financial Officer
Anne Marie Monk............... 100,000 33,863 -- 42,000 2,000(7)
General Counsel

<FN>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total of annual salary and bonuses for the Named
Executive Officer for such year.

(2) Represents stock options granted during fiscal 1995 under the Company's 1989
Stock Option Plan. The Company did not make any restricted stock awards,
grant any stock appreciation rights or make any long-term incentive plan
payouts during fiscal 1995.

(3) Represents (a) disability insurance premiums paid on policies maintained by
the Company, (b) the Company matching contributions under the 401(k) Plan
and (c) the dollar value of the benefit to Mr. Pemberton of split-dollar
life insurance premiums paid on policies maintained by the Company,
determined on an actuarial basis. See "Certain Transactions."

(4) Mr. Lizza, who joined the Company in January 1995, received an annual salary
of $175,000 in fiscal 1995.

(5) Represents a $15,000 signing bonus and $48,181 paid for relocation expenses.

(6) Represents sales commissions for fiscal 1995.

(7) Represents Company matching contributions under the 401(k) Plan.
</TABLE>

38
<PAGE> 39

EXECUTIVE COMPENSATION PLAN

For fiscal 1995, each of the executive officers of the Company participated
in an incentive bonus plan which provided cash bonuses based upon the attainment
of certain corporate quarterly and annual performance goals. The amounts of
these bonuses are included in the compensation table set forth above.

The executive bonus plan for fiscal 1996 contains substantially the same
terms as the 1995 plan. In addition, the plan provides that each Named Executive
Officer will be entitled to receive severance pay from the Company, in the case
of termination without cause, in a lump sum equal to the total annual target
compensation for the year (salary, commissions and bonuses)and employee benefits
for one year following the date of termination. In addition, the plan contains
provisions for the acceleration of options under certain conditions in the event
of termination of employment.

OPTION GRANTS

<TABLE>
The following table sets forth certain information concerning grants of
stock options made during fiscal 1995 to the Named Executive Officers. No stock
appreciation rights ("SARs") were granted during fiscal 1995.

OPTION GRANTS IN LAST FISCAL YEAR

<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
------------------------------------------------------------ AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SECURITIES TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERM(4)
OPTIONS TO EMPLOYEES IN BASE PRICE PER EXPIRATION -------------------------
NAME GRANTED(1) FISCAL YEAR(2) SHARE(3) DATE 5% 10%
- ------------------- --------- --------------- -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Pemberton -- -- -- -- -- --
Frederick J. Lizza 196,000 22.8% $4.10 1/30/05 $505,680 $1,279,880
John W. Baumstark 84,000 9.8 4.10 10/3/04 216,720 548,520
Daniel J. Kossmann 56,000 6.5 4.10 10/3/04 144,480 365,680
Anne Marie Monk 42,000 4.9 4.10 10/3/04 108,360 274,260

<FN>
- ---------------
(1) Options granted become exercisable at the rate of 25% annually over four
years from the date of grant.

(2) Based on an aggregate of 859,242 shares subject to options granted to
employees of the Company in fiscal 1995.

(3) The exercise or base price per share of each option was equal to the fair
market value of the Common Stock on the date of grant, as determined by the
Compensation Committee of the Board of Directors.

(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date and are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. The gains shown are
net of the option exercise price, but do not include deductions for taxes or
other expenses associated with the exercise of the options or the sale of
the underlying shares. The actual gains, if any, on the stock option
exercises will depend on the future performance of the Common Stock, the
optionholder's continued employment through the option vesting period and
the date on which the options are exercised.
</TABLE>

39
<PAGE> 40

YEAR-END OPTION TABLE

<TABLE>
The following table sets forth certain information concerning the number
and value of unexercised stock options held by each of the Named Executive
Officers as of September 30, 1995. No SARs or stock options were exercised
during fiscal 1995.

FISCAL YEAR-END OPTION VALUES

<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert A. Pemberton........................ -- -- -- --
Frederick J. Lizza......................... -- 196,000 -- $1,350,400
John W. Baumstark.......................... 60,200 135,800 $459,382 968,506
Daniel J. Kossmann......................... 81,200 142,800 651,700 1,063,580
Anne Marie Monk............................ 39,900 72,100 320,649 521,507

<FN>
- ---------------
(1) There was no public trading market for the Common Stock as of September 30,
1995. Accordingly, as permitted by the rules of the Securities and Exchange
Commission, these values have been calculated on the basis of an assumed
market value of $11.00 per share, which was the public offering price in
the Company's November 1995 initial public offering.
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In fiscal 1995, the Company had a Compensation Committee comprised of Mr.
Pemberton, an executive officer of the Company, and one former outside board
member. In fiscal 1995, none of the executive officers of the Company served on
the board of directors of another entity. The current members of the
Compensation Committee are Messrs. Correia and Pampel.

STOCK PLANS

1984 INCENTIVE STOCK OPTION PLAN. The Company's 1984 Plan provides for the
issuance of a maximum of 1,400,000 shares of Common Stock pursuant to the
exercise of incentive stock options granted to employees of the Company.

The 1984 Plan is administered by the Compensation Committee of the Board of
Directors, which has the authority to select the optionees and determine the
terms of the options granted, including (i) the number of shares subject to each
option, (ii) option exercise terms, (iii) the exercise price of the option,
which cannot be less than the market price of the Common Stock as of the date of
grant and (iv) the duration of the option. An option is not transferable by the
optionholder except by will or by the laws of descent and distribution.
Generally, no incentive stock option may be exercised more than three months
following termination of employment unless the termination is due to death or
disability, in which case the option is exercisable for a maximum of one year
after such termination.

As of March 31, 1996, options to purchase 35,378 shares of Common Stock at
an average exercise price of $2.84 were outstanding under the 1984 Plan, all of
which options were exercisable within 60 days, and options to purchase 1,277,122
shares had been exercised at an average exercise price of $0.34 per share.
Authority to grant additional options under the 1984 Plan has expired.

1989 STOCK OPTION PLAN. The Company's 1989 Plan provides for the issuance
of a maximum of 2,800,000 shares of Common Stock pursuant to the exercise of
incentive stock options granted to employees and nonqualified stock options
granted to employees, consultants, directors and key advisers of the Company.

40
<PAGE> 41

The 1989 Plan is administered by the Compensation Committee of the Board of
Directors, which has the authority to select the optionees and determine the
terms of the options granted, including (i) the number of shares subject to each
option, (ii) option exercise terms, (iii) the exercise price of the option
(which in the case of an incentive stock option cannot be less than the market
price of the Common Stock as of the date of grant) and (iv) the duration of the
option. An option is not transferable by the optionholder except by will or by
the laws of descent and distribution. Generally, no incentive stock option may
be exercised more than three months following termination of employment or more
than one year following retirement. Generally, vested options which are
transferred by will or by the laws of descent and distribution may be exercised
within three months of the original optionholder's death.

As of March 31, 1996, options to purchase 1,998,240 shares of Common Stock
at an average exercise price of $3.77 were outstanding under the 1989 Plan, of
which 1,016,624 shares were exercisable within 60 days and options to purchase
174,143 shares had been exercised at an average exercise price of $3.92 per
share. Authority to grant additional options under the 1989 Plan was terminated
as of October 2, 1995.

1995 STOCK PLAN. On October 2, 1995, the Board of Directors adopted, and
on October 20, 1995 the stockholders approved, the Company's 1995 Plan. The 1995
Plan provides for the issuance of a maximum of 3,500,000 shares of Common Stock
pursuant to the exercise of incentive stock options and nonqualified stock
options, stock awards or purchase rights granted to employees, consultants,
directors and officers of the Company.

The 1995 Plan is administered by the Compensation Committee of the Board of
Directors. Subject to the provisions of the 1995 Plan, the Compensation
Committee has the authority to select the optionees or stock recipients and
determine the terms of the options or restricted stock granted, including (i)
the number of shares, (ii) option exercise terms, (iii) the exercise or purchase
price (which in the case of an incentive stock option cannot be less than the
market price of the Common Stock as of the date of grant), (iv) the duration of
the option and (v) the time, manner and form of payment for restricted stock and
upon exercise of an option. An option is not transferable by the optionholder
except by will or by the laws of descent and distribution, or, in the case of
nonqualified options only, pursuant to a valid domestic relations order.
Generally, no incentive stock option may be exercised more than 90 days
following termination of employment unless the termination is due to death or
disability, in which case the option is exercisable for a maximum of 180 days
after such termination.

As of March 31, 1996, options to purchase 469,860 shares of Common Stock at
an average exercise price of $10.23 were outstanding under the 1995 Plan, of
which 525 shares were exercisable.

1995 EMPLOYEE STOCK PURCHASE PLAN. On October 2, 1995, the Board of
Directors adopted, and on October 20, 1995 the stockholders approved, the
Purchase Plan, which provides for the issuance of a maximum of 1,400,000 shares
of Common Stock pursuant to the exercise of nontransferable rights granted to
participating employees.

The Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company (except employees who own five
percent or more of the Company's stock) whose customary employment is more than
20 hours per week are eligible to participate in the Purchase Plan. To
participate in the Purchase Plan, an employee must authorize the Company to
deduct an amount (not less than one percent nor more than ten percent of a
participant's regular pay) from his or her pay during six-month periods (each a
"Payment Period"). The first such period commenced on November 17, 1995 and will
end on June 30, 1996. The maximum number of shares of Common Stock that an
employee may purchase in any Payment Period is 500 shares. The exercise price
for the option for each Payment Period is 85% of the lesser of the market price
of the Company's Common Stock on the first or last business day of the Payment
Period. An employee's rights under the Purchase Plan terminate upon his or her
voluntary withdrawal from the plan at any time or upon termination of
employment. To date, no shares of Common Stock have been issued under the
Purchase Plan.

41
<PAGE> 42

1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. On October 2, 1995, the
Board of Directors adopted, and on October 20, 1995 the stockholders approved,
the Director Plan, which provides for the issuance of a maximum of 210,000
shares of Common Stock of the Company pursuant to the exercise of options
granted to non-employee directors of the Company.

The Director Plan is administered by the Compensation Committee of the
Board of Directors. Each person who becomes a director of the Company after the
effective date of the Company's initial public offering and who is not also an
employee or officer of the Company shall be granted, on the date on which he or
she becomes a director, an option to purchase 28,000 shares of Common Stock,
which will be exercisable over a period of four years at the rate of 25% per
year. In addition, beginning at the Company's annual meeting of stockholders for
the fiscal year ended September 30, 1996 and at each successive annual meeting,
each non-employee director will receive an option to purchase 4,000 shares of
Common Stock, which will also be exercisable over a period of four years at the
rate of 25% per year. The exercise price per share for all options granted under
the Director Plan will be equal to the market price of the Common Stock on the
date of grant. The term of each option will be for a period of ten years from
the date of grant. Options may not be assigned or transferred except by will or
by the laws of descent and distribution, or pursuant to a domestic relations
order, and are exercisable to the extent vested only while the optionee is
serving as a director or consultant of the Company or within 90 days after the
optionee ceases to serve as a director or consultant of the Company, subject to
limited extension (except that if a director dies or becomes disabled while he
or she is serving as a director or consultant of the Company, the option is
exercisable until the scheduled expiration date of the option).

401(K) PLAN. The Company maintains a 401(k) retirement savings plan (the
"401(k) Plan"). All employees of the Company who have completed at least one
year of service are eligible to participate in the 401(k) Plan. The 401(k) Plan
provides that each participant may contribute from 1% to 15% of his or her pre-
tax salary (up to a statutorily prescribed annual limit, $9,500 in 1996) to the
401(k) Plan, although the percentage elected by certain highly compensated
participants may be required to be lower. All amounts contributed to the 401(k)
Plan by employee participants and earnings on these contributions are fully
vested at all times. The Company may match employee contributions to the 401(k)
Plan in an amount equal to a percentage of the employee's eligible compensation
contributed to the 401(k) Plan (not to exceed 2% of employee compensation).
Employee participants may elect to invest their contributions in various
established funds, which include fixed income, growth and equity funds.

42
<PAGE> 43

CERTAIN TRANSACTIONS

The Company has adopted a policy whereby all future transactions between
the Company and its officers, directors and affiliates will be on terms no less
favorable to the Company than could be obtained from unrelated third parties and
will be approved by a majority of the disinterested members of the Company's
Board of Directors.

The Company has engaged Donald K. Emery, who owns 8.3% of the outstanding
Common Stock of the Company as of March 31, 1996, for consulting services
provided to the Company under various agreements since July 1, 1984. The current
agreement was amended on September 13, 1995 to provide that Mr. Emery will be
paid for such consulting services in the future at a rate of $650 per day, plus
reimbursement for expenses. For fiscal years 1995, 1994 and 1993, the Company
paid Mr. Emery a total of $144,000, $157,200 and $128,000, respectively, for
consulting services rendered to the Company. For the first six months of fiscal
1996, Mr. Emery was paid $37,000 for consulting services rendered to the
Company, but has not performed any consulting services since December 1995.

Mr. Pemberton, Mr. Emery and John M. Sloane, as principal stockholders of
the Company, have various life insurance and disability insurance policies which
are maintained by the Company, including split-dollar life insurance policies.
The split-dollar life insurance policies are owned by separate trusts for the
benefit of family members of Messrs. Pemberton, Emery and Sloane. The
split-dollar life insurance policies provide total coverage of $10,000,000,
$3,500,000 and $3,500,000, respectively, for each of Messrs. Pemberton, Emery
and Sloane. In addition to the split-dollar life insurance policies, the Company
maintains a universal life insurance policy on the life and for the benefit of
each of Messrs. Pemberton, Emery and Sloane in the amount of $1,000,000 and a
disability policy which provides each with $2,000 monthly disability income. The
Company pays the annual premiums on all policies. The premium payments made by
the Company under the split-dollar life insurance policies are advances for the
benefit of the trusts which are secured by assignments of the related insurance
policies. In October 1994, the three principal stockholders of the Company
waived their right to the cash surrender value of the policies through that
date, which had a value of $1,275,000 and was recorded as a noncash capital
contribution. In fiscal 1995, two of Mr. Pemberton's trusts borrowed $600,000
against the cash surrender value of certain of the policies which the trusts
then loaned to Mr. Pemberton. Also in fiscal 1995, two of Mr. Emery's trusts
borrowed $275,000 of the cash surrender value of certain of the policies which
the trusts then loaned to Mr. Emery. Their obligations to repay those loans to
the trusts have been secured by pledges of an aggregate of 330,000 shares of
stock in the Company. The trusts have assigned their interest in the pledges to
the Company as replacement collateral for the cash surrender value that was
borrowed. The premium advances made by the Company under the split-dollar plans
will be repaid (without interest) out of the death benefits payable under the
policies.

43
<PAGE> 44

PRINCIPAL AND SELLING STOCKHOLDERS

<TABLE>
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1996 and as adjusted to
reflect the sale of the shares offered hereby by (i) each person who is known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director and Named Executive Officer of the Company, (iii) all
directors and executive officers of the Company as a group, and (iv) each
Selling Stockholder. Unless otherwise indicated below, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.

<CAPTION>
SHARES SHARES TO BE
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING(1) SHARES TO BE AFTER OFFERING(1)
5% STOCKHOLDERS, NAMED -------------------- SOLD IN --------------------
EXECUTIVE OFFICERS AND DIRECTORS NUMBER PERCENT OFFERING(2) NUMBER PERCENT
- ---------------------------------------- ---------- ------- ---------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Robert A. Pemberton(3).................. 3,204,050 32.3% 399,587 2,804,463 25.8%
c/o Software 2000, Inc.
25 Communications Way
Hyannis, MA 02601
Donald K. Emery(4)...................... 819,906 8.3 300,000 519,906 4.8
Apt. 12J
201 West 74th St.
New York, NY 10023
John M. Sloane(5)....................... 706,464 7.1 225,000 481,464 4.4
c/o Software 2000, Inc.
25 Communications Way
Hyannis, MA 02601
Frederick J. Lizza(6)................... 54,600 * 24,654 29,946 *
John W. Baumstark(7).................... 96,600 * 25,000 71,600 *
Daniel J. Kossmann(7)................... 131,601 1.3 25,000 106,601 *
Anne Marie Monk(7)...................... 56,700 * 11,200 45,500 *
R. Stephen Cheheyl...................... 12,000 * -- 12,000 *
Manuel Correia.......................... 21,000 * -- 21,000 *
Roland D. Pampel........................ 7,000 * -- 7,000 *
Robert P. Schechter..................... 7,000 * -- 7,000 *
All Executive Officers and Directors
as a group (nine persons)(8).......... 3,590,551 35.1 485,441 3,105,110 28.0
</TABLE>

<TABLE>
<CAPTION>
OTHER SELLING STOCKHOLDERS
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
The Pemberton Children's Trust(9)....... 420,000 4.2 140,001 279,999 2.6
Glenn F. Schafer(10).................... 276,066 2.8 130,000 146,066 1.3
John V. Lococo(11)...................... 211,518 2.1 150,000 61,518 *
John W. Murphy(12)...................... 189,615 1.9 75,000 114,615 1.1
Marcia J. Heusted....................... 129,822 1.3 86,822 43,000 *
Jeffrey Broberg(13)..................... 123,200 1.2 122,200 1,000 *
R. Douglas MacIntyre(14)................ 111,345 1.1 111,345 -- --
Peter A. Morgan(15)..................... 77,893 * 75,000 2,893 *
Jane C. Sloane(16)...................... 46,736 * 46,736 -- --
Other Selling Stockholders(17).......... 663,486 6.5 422,455 241,031 2.2

<FN>
- ---------------
* Less than 1% of the outstanding Common Stock.

44
<PAGE> 45
<FN>
(1) Applicable percentage of ownership as of March 31, 1996 is based upon
9,905,213 shares of Common Stock outstanding. Applicable percentage of
ownership after this offering is based upon 10,854,242 shares of Common
Stock outstanding. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission, and includes voting
and investment power with respect to the shares. Shares of Common Stock
subject to options currently exercisable or exercisable within 60 days
after May 15, 1996 are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.

(2) Includes shares issued to Selling Stockholders upon exercise of vested
options immediately prior to this offering and assumes no exercise of the
Underwriters' over-allotment option.

(3) Includes 22,400 shares held by two of Mr. Pemberton's children and as to
which he disclaims beneficial ownership.

(4) Mr. Emery has provided consulting services to the Company under various
agreements since July 1, 1984. See "Certain Transactions."

(5) Mr. Sloane, a co-founder of the Company, served as a member of the Board of
Directors of the Company until September 1995 and is currently Chief
Technologist of the Company. He has been an employee of the Company since
May 1981. Mr. Sloane disclaims beneficial ownership of the record shares of
Common Stock held by his wife, Jane Sloane.

(6) Includes 49,000 shares beneficially owned prior to this offering pursuant
to stock options exercisable within 60 days of May 15, 1996, of which
24,654 are intended to be sold in this offering.

(7) Consists of Common Stock beneficially owned pursuant to stock options
exercisable within 60 days of May 15, 1996.

(8) Includes 333,901 shares beneficially owned prior to the Offering pursuant
to stock options exercisable within 60 days of May 15, 1996 of which 85,854
are intended to be sold in this offering.

(9) The Pemberton Children's Trust is a generation skipping trust managed by an
independent trustee. Accordingly, the shares owned by the trust are not
deemed to be beneficially owned by Mr. Pemberton.

(10) Mr. Schafer was formerly a Director and Vice President of the Company and
is currently an employee of the Company.

(11) Mr. Lococo was formerly a Vice President of the Company.

(12) Mr. Murphy was formerly the Chief Financial Officer and a Vice President of
the Company.

(13) Mr. Broberg was formerly a Vice President of the Company. His shares
consist of shares beneficially owned pursuant to stock options exercisable
within 60 days of May 15, 1996.

(14) Mr. MacIntyre was formerly a Director and the President of the Company.

(15) Mr. Morgan was formerly a Vice President of the Company.

(16) Ms. Sloane is married to John M. Sloane and is currently an employee of the
Company. Ms. Sloane disclaims beneficial ownership of the record shares of
Common Stock held by her spouse.

(17) There are sixty other Selling Stockholders, each of whom beneficially owns
less than 1% of the outstanding Common Stock prior to the offering.
Forty-two of the Other Selling Stockholders are non-officer employees of
the Company. These shares include 312,447 shares beneficially owned
pursuant to stock options exercisable within 60 days of May 15, 1996 of
which 239,915 are intended to be sold in this offering.

</TABLE>

45
<PAGE> 46

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock, $.01 par value per share, and 1,000,000 shares of preferred
stock, $.01 par value per share (the "Preferred Stock"), which may be issued in
one or more series.

COMMON STOCK

As of March 31, 1996, there were 9,905,213 shares of Common Stock
outstanding and held of record by approximately 235 stockholders. Based upon the
number of shares outstanding as of that date and giving effect to the issuance
of the shares of Common Stock offered by the Company hereby, and assuming the
exercise of outstanding stock options to purchase 449,029 shares of Common Stock
by certain Selling Stockholders in connection with this offering, there will be
10,854,242 shares of Common Stock outstanding upon the closing of this offering.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of the Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this offering will be, when issued and paid for, fully
paid and nonassessable. The rights, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future. Upon the closing of this offering, there will
be no shares of Preferred Stock outstanding.

PREFERRED STOCK

The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 1,000,000 shares of Preferred Stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change of control of the Company. The Company has no present plans to issue any
shares of Preferred Stock. See "Risk Factors -- Potential Adverse Effects of
Anti-Takeover Provisions; Possible Issuance of Preferred Stock."

MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S RESTATED ARTICLES
OF ORGANIZATION AND BY-LAWS

The Company has more than 200 stockholders, thus making it subject to
Chapter 110F of the Massachusetts General Laws, an anti-takeover law. In
general, this statute prohibits a publicly held Massachusetts corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless (i) the interested stockholder obtains
the approval of the Board of Directors prior to becoming an interested
stockholder, (ii) the interested stockholder acquires 90% of the outstanding
voting stock of the corporation (excluding shares held by certain affiliates of
the corporation) at the time it becomes an interested stockholder, or (iii) the
business combination is approved by both the Board of Directors and the holders
of two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). An "interested stockholder" is a
person who, together with affiliates and associates, owns (or at

46
<PAGE> 47

any time within the prior three years did own) 5% or more of the outstanding
voting stock of the Company. A "business combination" includes a merger, a stock
or asset sale, and certain other transactions resulting in a financial benefit
to the interested stockholder.

Massachusetts General Laws Chapter 156B, Section 50A generally requires
that publicly held Massachusetts corporations have a classified board of
directors consisting of three classes as nearly equal in size as possible,
unless the corporation elects to opt out of the statute's coverage. The
Company's Restated Articles and the Restated By-Laws, as amended (the "Restated
By-Laws"), contain provisions which give effect to Section 50A. See
"Management -- Executive Officers and Directors."

The Restated By-Laws include a provision excluding the Company from the
applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions." In general, this statute provides that any
stockholder of a corporation subject to this statute who acquires 20% or more of
the outstanding voting stock of a corporation may not vote such stock unless the
stockholders of the corporation so authorize. The Board of Directors may amend
the Company's Restated By-Laws at any time to subject the Company to this
statute prospectively.

The Restated By-Laws also require that a stockholder seeking to have any
business conducted at a meeting of stockholders give notice to the Company not
less than 90 and not more than 120 days prior to the scheduled meeting, provided
in certain circumstances that a ten-day notice rule applies. The notice from the
stockholder must describe the proposed business to be brought before the meeting
and include information about the stockholder making the proposal, any
beneficial owner on whose behalf the proposal is made, and any other stockholder
known to be supporting the proposal. The Restated By-Laws require the Company to
call a special stockholders meeting at the request of stockholders holding at
least 40% of the voting power of the Company.

The Restated By-Laws provide that the directors and officers of the Company
shall be indemnified by the Company to the fullest extent authorized by
Massachusetts law, as it now exists or may in the future be amended, against all
expenses and liabilities reasonably incurred in connection with service for or
on behalf of the Company. In addition, the Restated Articles provide that the
directors of the Company will not be personally liable for monetary damages to
the Company for breaches of their fiduciary duty as directors, unless they
violated their duty of loyalty to the Company or its stockholders, acted in bad
faith, knowingly or intentionally violated the law, authorized illegal dividends
or redemptions or derived an improper personal benefit from their action as
directors.

The Restated Articles provide that any amendment to the Restated Articles,
the sale, lease or exchange of all or substantially all of the Company's
property and assets, or the merger or consolidation of the Company into or with
any other corporation may be authorized by the approval of the holders of a
majority of the shares of each class of stock entitled to vote thereon, rather
than by two-thirds as otherwise provided by statute, provided that the
transactions have been authorized by a majority of the members of the Board of
Directors then in office and the requirements of any other applicable provisions
of the Restated Articles have been met.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.

47
<PAGE> 48

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 10,854,242 shares
of Common Stock outstanding (assuming no exercise of outstanding options or
warrants after March 31, 1996 other than 449,029 shares purchased upon exercise
of stock options by certain Selling Stockholders in connection with this
offering). Of these shares, the 2,870,000 shares sold in this offering, together
with the 2,300,000 shares of Common Stock sold by the Company and selling
stockholders in the Company's initial public offering in November 1995, will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except that any
shares held by "affiliates" of the Company, as that term is defined in Rule 144
("Rule 144") under the Securities Act ("Affiliates"), may generally only be sold
in compliance with the limitations of Rule 144 described below.

SALES OF RESTRICTED SHARES

The remaining 5,684,242 shares of Common Stock are deemed "Restricted
Shares" under Rule 144. Of the Restricted Shares, approximately 1,031,600 shares
of Common Stock, which are not subject to 90-day lock-up agreements (the
"Lock-Up Agreements") with the Underwriters described below, will be eligible
for immediate sale in the public market pursuant to Rule 144(k) or Rule 701
under the Securities Act on May 15, 1996.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least two years is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock (approximately
109,000 shares immediately after this offering) or (ii) the average weekly
trading volume in the Common Stock in the over-the-counter market during the
four calendar weeks preceding the date on which notice of such sale is filed. In
addition, under Rule 144(k), a person who is not an Affiliate and has not been
an Affiliate for at least three months prior to the sale and who has
beneficially owned Restricted Shares for at least three years may resell such
shares without compliance with the foregoing requirements. In meeting the two-
and three-year holding periods described above, a holder of Restricted Shares
can include the holding periods of a prior owner who was not an Affiliate. See
"Risk Factors -- Shares Eligible for Future Sale," and "-- Potential Volatility
of Stock Price."

Rule 701 under the Securities Act provides that the shares of Common Stock
acquired upon the exercise of currently outstanding options may be resold by
persons, other than Affiliates, beginning 90 days after the date of the
Company's initial public offering, subject only to the manner of sale provisions
of Rule 144, and by Affiliates under Rule 144 without compliance with its
two-year minimum holding period, subject to certain limitations.

OPTIONS

As of March 31, 1996, options to purchase a total of 2,054,449 shares of
Common Stock were outstanding (excluding the 449,029 shares subject to options
to be exercised by certain Selling Stockholders in connection with this
offering), of which options to purchase 959,176 shares were then exercisable.
Approximately 321,600 of these shares are subject to the Lock-Up Agreements. As
of March 31, 1996, an additional approximately 4,640,100 shares of Common Stock
were available for future issuance under the Company's stock plans. See
"Management -- Stock Plans."

The Company intends to file a registration statement on Form S-8 under the
Securities Act to register all shares of Common Stock issued or issuable under
the Company's stock option plans on or about May 15, 1996. Such registration
statement is expected to become effective upon filing, and shares covered by
this registration statement will thereupon be eligible for sale in the public
market, subject to Rule 144 limitations applicable to Affiliates.

48
<PAGE> 49

WARRANTS

As of March 31, 1996, Silicon Valley Bank held a warrant to purchase up to
49,412 shares of Common Stock on or before June 10, 1999 at an exercise price of
$6.07 per share.

LOCK-UP AGREEMENTS

All executive officers and directors of the Company and the Selling
Stockholders, who upon the closing of this offering will hold in the aggregate
approximately 4,652,600 shares of Common Stock and presently exercisable options
to purchase 321,600 shares of Common Stock, have agreed, pursuant to the Lock-Up
Agreements, that they will not, without the prior written consent of SoundView
Financial Group, Inc., directly or indirectly offer to sell, sell, or otherwise
dispose of any shares of Common Stock beneficially owned by them for a period of
90 days after the date of this Prospectus, subject to certain exceptions. On May
15, 1996 approximately 859,500 outstanding shares, which were previously subject
to lock-up agreements with the underwriters in the initial public offering, will
become eligible for sale in the public market subject to volume limitations in
certain circumstances.

REGISTRATION RIGHTS

At the completion of this offering, two securityholders of the Company (the
"Rightsholders") will be entitled to require the Company to register under the
Securities Act up to a total of 569,318 shares of Common Stock, including 49,412
shares subject to an outstanding warrant (the "Registrable Shares"), under the
terms of two separate agreements among the Company and each of such
Rightsholders (the "Registration Agreements"). The Registration Agreements
provide that in the event the Company proposes to register any of its securities
under the Securities Act at any time or times, each of such Rightsholders,
subject to certain exceptions, shall be entitled to include Registrable Shares
in such registration. Under one of the Registration Agreements, the managing
underwriter of any such offering may exclude for marketing reasons any or all of
such Registrable Shares from such registration. Under the other Registration
Agreement, the Rightsholder has, subject to certain conditions and limitations,
the additional right to require the Company to prepare and file a registration
statement under the Securities Act with respect to his Registrable Shares. The
Company is generally required to bear the expenses of all such registrations,
except underwriting discounts and commissions.

49
<PAGE> 50

UNDERWRITING

<TABLE>
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below (the
"Underwriters"), have severally agreed to purchase, and the Company and the
Selling Stockholders have agreed to sell to them, the aggregate number of shares
of Common Stock set forth opposite their respective names below.

<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
SoundView Financial Group, Inc. .................................................. 956,668
Needham & Company, Inc. .......................................................... 956,666
The Robinson-Humphrey Company, Inc. .............................................. 956,666
---------
Total................................................................... 2,870,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to certain conditions precedent, and that the Underwriters are committed
to purchase and pay for all of such shares if any are purchased.

The Company has been advised by the Underwriters that they propose to offer
the shares of Common Stock to the public initially at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $0.50 per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain other dealers. After the initial offering to the public, the
offering price and other selling terms may from time to time be changed by the
Underwriters.

Certain Selling Stockholders have granted the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 430,500 additional shares of Common Stock at the initial public
offering price, less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. The Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, made in connection with the
offering of the shares of Common Stock hereby. To the extent the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage of such additional shares that the
number of shares of Common Stock to be purchased by it shown in the above table
represents as a percentage of the 2,870,000 shares offered hereby. If purchased,
such additional shares will be sold by the Underwriters on the same terms as
those on which the 2,870,000 shares are being sold.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.

The Company, its directors and officers and the Selling Stockholders have
agreed not to offer, sell or otherwise dispose of, directly or indirectly, any
shares of Common Stock for a period of 90 days after the date of this Prospectus
without the prior written consent of SoundView Financial Group, Inc., except for
the shares of Common Stock offered hereby and except that the Company may issue
securities pursuant to the Company's stock option plans and upon the exercise of
outstanding options and warrants.

The Underwriters have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject any order for the purchase of shares in whole or in part.

Certain of the Underwriters and selling group members (if any) that
currently act as market makers for the Common Stock may engage in "passive
market making" in the Common Stock on Nasdaq National Market in accordance with
Rule 10b-6A under the Exchange Act. Rule 10b-6A permits, upon the satisfaction
of certain conditions, underwriters and selling group members participating in a
distribution that are also Nasdaq market makers in the security being
distributed to engage in limited market making transactions

50
<PAGE> 51

during the period when Rule 10b-6 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") would otherwise prohibit such activity. Rule 10b-6A
prohibits underwriters and selling group members engaged in passive market
making generally from entering a bid or effecting a purchase at a price that
exceeds the highest bid for those securities displayed on Nasdaq by a market
maker that is not participating in the distribution. Under Rule 10b-6A, each
underwriter or selling group member engaged in passive market making is subject
to a daily net purchase limitation equal to 30% of such entity's average daily
trading volume during the two full consecutive calendar months immediately
preceding the date of the filing of the registration statement under the
Securities Act pertaining to the security to be distributed.

LEGAL MATTERS

The validity of the shares of Common Stock offered by this Prospectus will
be passed upon for the Company and the Selling Stockholders by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts, and certain matters will be passed upon
for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, Boston,
Massachusetts and New York, New York.

EXPERTS

The consolidated financial statements as of August 31, 1994 and September
30, 1995 and for each of the two years in the period ended August 31, 1994, for
the one-month period ended September 30, 1994 and for the year ended September
30, 1995 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act with respect to
the shares of Common Stock offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any agreement
or other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is made to the copy of such
agreement filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. In addition, the Company is
subject to the information requirements of the Exchange Act and in accordance
therewith is required to file periodic reports, proxy statements and other
information with the Commission. Copies of such materials may be obtained from
the Commission, 450 Fifth Street, N.W., Washington, DC 20549.

The Registration Statement, including the exhibits and schedules thereto,
and such reports, proxy statements and other information may also be inspected
and copied at the public reference facilities maintained by the Commission
referred to above, and at the Commission's regional offices at Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois, and 7 World Trade
Center, Suite 1300, New York, New York. This material may also be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.

51
<PAGE> 52

SOFTWARE 2000, INC.

<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<S> <C>
Report of Independent Accountants...................................................... F-2
Consolidated balance sheets at August 31, 1994, September 30, 1995 and March 31,
1996................................................................................. F-3
Consolidated statements of income for the years ended August 31, 1993 and 1994
and the year ended September 30, 1995 and for the six-month periods ended
March 31, 1995 and 1996.............................................................. F-4
Consolidated statements of stockholders' equity (deficit) for the years ended August
31, 1993 and 1994 and the year ended September 30, 1995 and for the six-month period
ended
March 31, 1996....................................................................... F-5
Consolidated statements of cash flows for the years ended August 31, 1993 and 1994
and the year ended September 30, 1995 and for the six-month periods ended
March 31, 1995 and 1996.............................................................. F-6
Notes to consolidated financial statements............................................. F-7
</TABLE>

F-1
<PAGE> 53

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Software 2000, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of stockholders' equity (deficit) and of cash
flows present fairly, in all material respects, the financial position of
Software 2000, Inc. and its subsidiaries at August 31, 1994 and September 30,
1995, and the results of their operations and their cash flows for each of the
two years in the period ended August 31, 1994, for the one-month period ended
September 30, 1994 and for the year ended September 30, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for income taxes as of September 1, 1993.

PRICE WATERHOUSE LLP

Boston, Massachusetts
October 19, 1995

F-2
<PAGE> 54

SOFTWARE 2000, INC.

<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

AUGUST 31, SEPTEMBER 30, MARCH 31,
1994 1995 1996
---------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $13,221 $ 8,161 $ 5,616
Marketable securities at fair market value............ 2,001 8,022 23,505
Accounts receivable, less allowance for doubtful
accounts of $1,250 at August 31, 1994 and $1,145 at
September 30, 1995 and March 31, 1996.............. 13,458 11,836 10,824
Deferred income taxes................................. 2,495 2,583 2,574
Prepaid expenses and other current assets............. 2,024 2,444 3,456
------- ------- -------
Total current assets.......................... 33,199 33,046 45,975
Property and equipment, net............................. 5,011 4,053 4,879
Capitalized software development costs, net............. 5,285 5,371 5,770
Other assets (Note 11).................................. -- 1,534 1,670
------- ------- -------
Total assets.................................. $43,495 $44,004 $58,294
======= ======= =======
LIABILITIES, MANDATORILY REDEEMABLE COMMON STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Obligations under capital leases...................... $ 884 $ 94 $ --
Accounts payable...................................... 2,810 3,165 3,019
Accrued expenses...................................... 6,499 7,064 7,343
Income taxes payable.................................. 734 2,375 1,605
Deferred revenues..................................... 22,531 25,017 24,651
------- ------- -------
Total current liabilities..................... 33,458 37,715 36,618
------- ------- -------
Deferred income taxes................................... 2,177 1,457 1,485
------- ------- -------
Mandatorily redeemable common stock, $.01 par value (at
redemption value); 1,632 shares issued and outstanding
at August 31, 1994 and no shares issued and
outstanding at September 30, 1995 and March 31, 1996
(Note 8).............................................. 7,752 -- --
------- ------- -------
Commitments (Notes 12 and 13)
Stockholders' equity:
Common stock, $.01 par value; authorized 40,000
shares, issued and outstanding 8,246, 8,258 and
9,905 shares at August 31, 1994, September 30, 1995
and March 31, 1996, respectively................... 82 83 99
Additional paid-in capital............................ 1,266 2,573 16,269
Retained earnings (accumulated deficit)............... (783) 2,555 3,823
Notes receivable -- stockholders...................... (457) (379) --
------- ------- -------
Total stockholders' equity.................... 108 4,832 20,191
------- ------- -------
Total liabilities, mandatorily redeemable
common stock and stockholders' equity....... $43,495 $44,004 $58,294
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements.

F-3
<PAGE> 55

SOFTWARE 2000, INC.

<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<CAPTION>
YEAR ENDED SIX MONTHS ENDED
------------------------------------------- MARCH 31,
AUGUST 31, AUGUST 31, SEPTEMBER 30, -------------------
1993 1994 1995 1995 1996
---------- ---------- ------------- ------- -------
(NOTE 2) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license fees............. $20,679 $20,163 $21,080 $ 7,228 $ 9,512
Service revenues.................. 28,366 36,637 42,083 20,524 23,314
------- ------- ------- ------ ------
Total revenues............ 49,045 56,800 63,163 27,752 32,826
------- ------- ------- ------ ------
Costs and expenses:
Cost of software license fees..... 1,923 2,845 3,829 1,884 1,825
Cost of services.................. 11,096 13,396 15,333 7,562 8,104
Research and development.......... 8,911 12,980 12,725 6,019 6,802
Sales and marketing............... 19,747 20,008 19,651 8,781 11,297
General and administrative........ 6,524 5,330 6,245 2,741 3,446
------- ------- ------- ------ ------
Total operating costs and
expenses................ 48,201 54,559 57,783 26,987 31,474
------- ------- ------- ------ ------
Income from operations.............. 844 2,241 5,380 765 1,352
Other income (expense), net......... 62 (83) 293 11 629
------- ------- ------- ------ ------
Income before provision for income
taxes and cumulative effect of
change in accounting principle.... 906 2,158 5,673 776 1,981
Provision for income taxes.......... 367 916 1,989 272 713
------- ------- ------- ------ ------
Income before cumulative effect of
change in accounting principle.... 539 1,242 3,684 504 1,268
Cumulative effect of change in
accounting principle.............. -- 260 -- -- --
------- ------- ------- ------ ------
Net income.......................... $ 539 $ 1,502 $ 3,684 $ 504 $ 1,268
======= ======= ======= ====== ======
Per share data:
Income before cumulative effect of
change in accounting
principle...................... $ 0.05 $ 0.12 $ 0.40 $ 0.06 $ 0.12
Cumulative effect of change in
accounting principle........... -- 0.03 -- -- --
------- ------- ------- ------ ------
Net income per share........... $ 0.05 $ 0.15 $ 0.40 $ 0.06 $ 0.12
======= ======= ======= ====== ======
Weighted average common and common
equivalent shares outstanding..... 10,495 10,825 9,401 9,458 10,805
======= ======= ======= ====== ======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE> 56

SOFTWARE 2000, INC.

<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<CAPTION>
RETAINED TOTAL
COMMON ADDITIONAL EARNINGS NOTES STOCKHOLDERS'
SHARES COMMON PAID-IN (ACCUMULATED RECEIVABLE- EQUITY
ISSUED STOCK CAPITAL DEFICIT) STOCKHOLDERS (DEFICIT)
------ ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1992....... 8,203 $82 $ 1,142 $(2,824) $(479) $(2,079)
Stock issued upon exercise of
stock options.................. 29 4 4
Repayments of notes receivable --
stockholders................... 5 5
Net income for the year.......... 539 539
----- --- ------- ------- ----- -------
Balance at August 31, 1993....... 8,232 82 1,146 (2,285) (474) (1,531)
Stock issued upon exercise of
stock options.................. 14 40 40
Compensatory stock option
issuance....................... 80 80
Repayments of notes receivable --
stockholders................... 17 17
Net income for the year.......... 1,502 1,502
----- --- ------- ------- ----- -------
Balance at August 31, 1994....... 8,246 82 1,266 (783) (457) 108
Net loss for the one-month period
ended September 30, 1994
(Note 2)....................... (346) (346)
----- --- ------- ------- ----- -------
Balance at September 30, 1994.... 8,246 82 1,266 (1,129) (457) (238)
Stock issued upon exercise of
stock options.................. 12 1 32 33
Repayments of notes receivable --
stockholders................... 78 78
Capital contributions from
stockholders (Note 11)......... 1,275 1,275
Net income for the year.......... 3,684 3,684
----- --- ------- ------- ----- -------
Balance at September 30, 1995.... 8,258 83 2,573 2,555 (379) 4,832
Stock issued upon exercise of
stock options (unaudited)...... 313 3 882 885
Repayments of notes receivable --
stockholders (unaudited)....... 379 379
Net proceeds from initial public
offering (unaudited)........... 1,334 13 12,814 12,827
Net income for the period
(unaudited).................... 1,268 1,268
----- --- ------- ------- ----- -------
Balance at March 31, 1996
(unaudited).................... 9,905 $99 $16,269 $ 3,823 $ -- $20,191
===== === ======= ======= ===== =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements

F-5
<PAGE> 57

SOFTWARE 2000, INC.

<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<CAPTION>
YEAR ENDED SIX MONTHS ENDED
--------------------------------------- MARCH 31,
AUGUST 31, AUGUST 31, ------------------
1993 1994 SEPTEMBER 30, 1995 1996
---------- ---------- 1995 ------- --------
-------------
(NOTE 2) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 539 $ 1,502 $ 3,684 $ 504 $ 1,268
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization......... 3,675 4,357 4,641 2,502 2,280
Allowance for doubtful accounts....... 447 474 770 130 300
Compensation expense related to stock
options............................. -- 80 -- -- --
Deferred income taxes................. (468) (96) (620) -- 37
Changes in operating assets and
liabilities:
Accounts receivable................. (3,510) (4,481) (2,455) 776 712
Prepaid expenses and other current
assets........................... (159) (121) (266) 132 (1,012)
Refundable income taxes............. 297 -- -- -- --
Other assets........................ -- -- (259) (137) (136)
Accounts payable.................... 902 455 1,301 (383) (146)
Accrued expenses.................... 491 872 1,843 372 278
Income taxes payable................ (570) 274 1,601 -- (770)
Deferred revenues................... 5,064 4,582 4,590 101 (366)
------- -------- -------- ------- --------
Net cash provided by operating
activities..................... 6,708 7,898 14,830 3,997 2,445
------- -------- -------- ------- --------
Cash flows from investing activities:
Purchase of marketable securities........ (10,728) (11,547) (15,939) (6,580) (29,736)
Sale of marketable securities............ 11,264 12,513 10,461 4,545 14,253
Purchase of property and equipment....... (2,506) (1,727) (1,358) (806) (1,808)
Capitalization of software development
costs................................. (2,251) (3,166) (2,542) (904) (1,696)
------- -------- -------- ------- --------
Net cash used in investing
activities....................... (4,221) (3,927) (9,378) (3,745) (18,987)
------- -------- -------- ------- --------
Cash flows from financing activities:
Proceeds from initial public offering of
common stock.......................... -- -- -- -- 12,827
Proceeds from exercise of stock
options............................... 4 40 33 26 885
Proceeds from repayments of notes
receivable -- stockholders............ 5 17 78 -- 379
Principal payments under capital lease
obligations........................... (2,169) (1,421) (672) (506) (94)
------- -------- -------- ------- --------
Net cash provided by (used in)
financing activities............. (2,160) (1,364) (561) (480) 13,997
------- -------- -------- ------- --------
Net increase in cash and cash
equivalents.............................. 327 2,607 4,891 (228) (2,545)
Cash and cash equivalents, beginning of
period................................... 10,287 10,614 3,270 3,270 8,161
------- -------- -------- ------- --------
Cash and cash equivalents, end of period... $10,614 $ 13,221 $ 8,161 $ 3,042 $ 5,616
======= ======== ======== ======= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE> 58

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

1. THE COMPANY

Software 2000, Inc. (the "Company") was incorporated in 1981. The Company
develops, markets and supports enterprise level business software applications
for the financial management, human resource management, materials management
functions of organizations in a broad range of industries worldwide. In
addition, the Company provides post-contract support ("maintenance") and
consulting services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned domestic and foreign subsidiaries. All significant
intercompany transactions and balances have been eliminated.

FISCAL YEAR

The Company changed its fiscal year end from August 31 to September 30
effective with the fiscal year ended September 30, 1995. The consolidated
statements of income and cash flows are presented for each of the two years in
the period ended August 31, 1994 and for the year ended September 30, 1995,
exclusive of September 1994 results.

<TABLE>
The Company's results of operations for the month of September 1994 are as
follows:

<S> <C>
Revenues:
Software license fees.......................................... $ 521
Service revenues............................................... 3,086
------
Total revenues............................................ 3,607
Costs and expenses:
Cost of software license fees.................................. 264
Cost of services............................................... 1,207
Research and development....................................... 917
Sales and marketing............................................ 1,328
General and administrative..................................... 492
------
Total operating costs and expenses........................ 4,208
------
Loss from operations................................................ (601)
Other income, net................................................... 68
------
Loss before tax benefit........................................ (533)
Tax benefit......................................................... 187
------
Net loss............................................................ $ (346)
======
Net loss per share.................................................. $(0.04)
======
</TABLE>

During the month of September 1994, net cash of $1,306, $776 and $7,869 was
used in operating, investing and financing activities, respectively. Net cash
used in financing activities included $7,752 of cash used to repurchase 1,632
shares of the Company's mandatorily redeemable common stock from investors (Note
8). The resulting $9,951 net decrease in cash and cash equivalents during the
period reduced the $13,221 of cash at the beginning of September to $3,270 at
the end of September.

F-7
<PAGE> 59

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

REVENUE RECOGNITION

Revenues from software license fees are recognized when a contract has been
executed, the product has been shipped, all significant contractual obligations
have been satisfied and collection of the related receivable is probable.

Maintenance revenues, including those bundled with the initial license fee,
are deferred and recognized ratably over the service period. Consulting and
training service revenues are recognized as the services are performed based on
the ratio that the total costs incurred to date bear to estimated total costs at
completion. These contracts are assessed for losses and such losses are provided
for in total in the period in which the losses become known.

CASH EQUIVALENTS AND MARKETABLE SECURITIES

The Company invests its excess cash primarily in securities of government
agencies, high-grade commercial paper and mutual funds which invest primarily in
the securities of government agencies. These investments are subject to minimal
credit and market risk. For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Marketable
securities include securities purchased with an original maturity of greater
than three months.

Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("FAS 115"), "Accounting for Certain Investments in
Debt and Equity Securities," on a prospective basis. Under this standard, the
Company is required to classify its marketable securities into one or more of
the following categories: held-to-maturity, trading or available-for-sale. FAS
115 requires that, except for debt securities classified as held-to-maturity,
investments in debt and equity securities should be reported at fair value. The
adoption of FAS 115 did not have a material effect on the Company's financial
condition or results of operations. At September 30, 1995, all of the Company's
investments are classified as available-for-sale. Marketable securities at
August 31, 1994 are recorded at cost plus accrued interest, which approximates
market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets.
Equipment held under capital leases is stated at the lower of the fair market
value of the equipment or the present value of the minimum lease payments at the
inception of the lease and is amortized on a straight-line basis over the
shorter of the life of the related asset or the lease term. Repair and
maintenance costs are expensed as incurred.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially expose the Company to
concentrations of credit risk include accounts receivable. To minimize this
risk, the Company generally requires a cash deposit upon contract signing. In
addition, the Company maintains reserves for potential credit losses and such
losses, in the aggregate, have not exceeded management expectations.

RESEARCH AND DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Research and development expenses, other than certain software development
costs, are charged to expense as incurred. In accordance with the provisions of
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed," the Company
capitalizes certain software development costs upon technological feasibility.
Amortization of

F-8
<PAGE> 60

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

capitalized software development costs is provided upon commercial release of
the products at the greater of the ratio of current product revenues to the
total of current and anticipated product revenues or on a straight-line basis
over the estimated economic life of the software, which the Company has
determined is not more than three years.

Amortization expense during the years ended August 31, 1993 and 1994 and
the year ended September 30, 1995 amounted to approximately $1,061, $1,815 and
$2,485, respectively. Included in amortization expense in fiscal 1995 are $160
of certain capitalized software development costs relating to a foreign language
version of the Company's financial management products which were determined not
to be realizable, and accordingly, all associated capitalized software
development costs were written off. Accumulated amortization of capitalized
software development costs was $3,784 and $6,237 at August 31, 1994 and
September 30, 1995, respectively. Included in capitalized software development
costs at August 31, 1994 and September 30, 1995 are $1,776 and $1,381,
respectively, related to products which have not yet been commercially released.
Accordingly, amortization of these costs had not commenced.

FOREIGN CURRENCY TRANSLATION

The functional currency of the Company's foreign subsidiaries is the U.S.
dollar. Monetary assets and liabilities of the subsidiaries are translated into
U.S. dollars at the exchange rate in effect at period end and nonmonetary assets
and liabilities are remeasured at historic exchange rates. Income and expenses
are remeasured at the average exchange rate for the period. Translation gains
and losses are reflected in the consolidated statements of income.

INCOME TAXES

Effective September 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes," on a
prospective basis. The consolidated financial statements for prior years have
not been restated. The cumulative effect of this accounting change on years
prior to 1994, which was recorded upon adoption, was to increase net income by
$260 or $0.03 per share.

FAS 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, FAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Prior to the adoption of FAS 109, income tax expense was determined using the
deferred method. Deferred tax expense was based on items of income and expenses
that were reported in different years in the financial statements and tax
returns and were measured at the tax rate in effect in the year the difference
originated.

NET INCOME (LOSS) PER SHARE

Net income (loss) per share is determined by dividing net income (loss)
applicable to common stock by the weighted average number of common shares and
common equivalent shares outstanding during the period. Common share equivalents
are computed using the modified treasury stock method and consist of common
stock which may be issuable upon exercise of outstanding common stock options
and warrants to purchase common stock, when dilutive.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock options granted by the Company during the twelve months
preceding the offering date have been included in the calculation of common and
common equivalent shares outstanding as if they were outstanding for all periods
presented prior to the Company's initial public offering.

F-9
<PAGE> 61

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INTERIM FINANCIAL DATA (UNAUDITED)

The interim financial data at March 31, 1996 and for the six months ended
March 31, 1995 and 1996 included in the accompanying financial statements is
unaudited; however, in the opinion of the Company, the interim financial data
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results of the interim periods. The
interim financial data are not necessarily indicative of the results of
operations for a full fiscal year.

3. CASH EQUIVALENTS AND MARKETABLE SECURITIES

<TABLE>
Following is a summary of the fair market value of available-for-sale
securities, by balance sheet classification:

SEPTEMBER 30, MARCH 31,
1995 1996
------------- -----------
(Unaudited)
<S> <C> <C>
Cash equivalents:
U.S. Government obligations.............................. $ 1,984 $ --
Corporate debt obligations............................... 1,496 --
Foreign government obligations........................... 497 --
Money market fund........................................ 890 2,781
Marketable securities:
U.S. Government obligations.............................. 7,922 19,409
Corporate debt obligations............................... -- 3,996
Other.................................................... 100 100
------- -------
$12,889 $26,286
======= =======
</TABLE>

Marketable securities are carried at fair market value, which approximates
amortized cost. The contractual maturities of all available-for-sale securities
classified as cash equivalents are less than three months. All of the Company's
marketable securities are classified as current as these funds are highly liquid
and are available to meet working capital needs and to fund current operations.

At September 30, 1995, available-for-sale securities classified as
marketable securities with fair market values of $7,018, $500 and $504 have
contractual maturities of less than one year, two years and ten years,
respectively. Gross unrealized gains and losses as of September 30, 1995 and
realized gains and losses on sales of securities for the year ended September
30, 1995 were not significant.

At March 31, 1996 (unaudited), available-for-sale securities classified as
marketable securities with fair market values of $20,477 and $3,028 have
contractual maturities of less than one year and less than two years,
respectively. Gross unrealized gains and losses as of March 31, 1996 and
realized gains and losses of securities for the six months ended March 31, 1996
were not significant.

F-10
<PAGE> 62

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

4. BALANCE SHEET COMPONENTS

<TABLE>
Property and equipment consists of the following:

<CAPTION>
AUGUST 31, SEPTEMBER 30,
USEFUL LIFE 1994 1995
------------ ---------- -------------
<S> <C> <C> <C>
Computer equipment..................................... 2 to 5 years $12,456 $13,533
Furniture and fixtures................................. 5 years 3,228 3,497
Leasehold improvements................................. Lease term 1,953 2,009
------- -------
17,637 19,039
Less-accumulated depreciation and amortization......... 12,626 14,986
------- -------
$ 5,011 $ 4,053
======= =======
</TABLE>

<TABLE>
Accrued expenses consist of the following:

<CAPTION>
AUGUST 31, SEPTEMBER 30,
1994 1995
---------- -------------
<S> <C> <C>
Employee compensation and benefits................................... $4,745 $4,151
Accrued royalties.................................................... -- 593
Accrued professional fees............................................ 461 268
Other................................................................ 1,293 2,052
------ ------
$6,499 $7,064
====== ======
</TABLE>

The cost of equipment under capital lease obligations, primarily computer
equipment, was $9,315 at August 31, 1994 and September 30, 1995. Amortization
expense relating to equipment under capital lease obligations amounted to
$1,170, $1,263, and $677, for the years ended August 31, 1993 and 1994 and the
year ended September 30, 1995, respectively. Accumulated amortization of
equipment under capital lease obligations was $8,414 and $9,172 at August 31,
1994 and September 30, 1995, respectively.

Capital lease obligations of $32 were incurred during fiscal 1993. There
were no capital lease obligations incurred during the years ended August 31,
1994 and September 30, 1995.

5. OTHER INCOME (EXPENSE), NET

<TABLE>
Other income (expense), net consists of the following:

YEAR ENDED
--------------------------------- SIX MONTHS ENDED
AUGUST 31, SEPTEMBER 30, MARCH 31,
--------------- ------------ -------------------------
1993 1994 1995 1995 1996
----- ----- ---- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income............... $ 347 $421 $ 456 $ 141 $697
Interest expense.............. (444) (420) (42) (28) (3)
Foreign exchange gain
(loss)...................... 159 (84) (121) (102) (65)
----- ---- ----- ----- ----
$ 62 $(83) $ 293 $ 11 $629
===== ==== ===== ===== ====
</TABLE>

F-11
<PAGE> 63

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

6. INCOME TAXES

<TABLE>
The components of the provision (benefit) for income taxes, excluding the
cumulative effect of the change in accounting principle, are as follows:

<CAPTION>
YEAR ENDED
---------------------------------
AUGUST 31, SEPTEMBER 30,
--------------- ------------
1993 1994 1995
----- ---- ----
<S> <C> <C> <C>
Current:
Federal............................................. $ 719 $583 $2,339
State............................................... 121 120 230
Foreign............................................. (5) 48 40
----- ---- ------
Total current............................... 835 751 2,609
----- ---- ------
Deferred:
Federal............................................. (320) 139 (496)
State............................................... (148) 26 (124)
----- ---- ------
Total deferred.............................. (468) 165 (620)
----- ---- ------
$ 367 $916 $1,989
===== ==== ======
</TABLE>

<TABLE>
The income tax provision differs from an amount computed by applying the
U.S. statutory federal income tax rate to pretax income as follows:

<CAPTION>
YEAR ENDED
---------------------------------
AUGUST 31, SEPTEMBER 30,
--------------- ------------
1993 1994 1995
----- ----- ----
<S> <C> <C> <C>
Statutory federal income tax rate...................... 34.0% 34.0% 34.0%
State income taxes..................................... 7.3 4.5 1.2
Research and development credit........................ (18.4) (11.0) (7.8)
Foreign tax rate differential.......................... 10.3 2.0 0.6
Other.................................................. 7.3 12.9 7.1
----- ----- ----
40.5% 42.4% 35.1%
===== ===== ====
</TABLE>

F-12
<PAGE> 64

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
Deferred tax assets and liabilities are comprised of the following:

<CAPTION>
AUGUST 31, SEPTEMBER 30,
1994 1995
---------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $ 143 $ 180
Deferred revenues.......................................... 1,939 2,437
Accrued expenses and reserves not currently deductible..... 914 817
Other...................................................... 194 382
------ ------
Gross deferred tax assets.................................. 3,190 3,816
Deferred tax asset valuation allowance..................... (143) --
------ ------
Total deferred tax assets.......................... 3,047 3,816
------ ------
Deferred tax liabilities:
Prepaid expenses deducted currently........................ 356 395
Capitalized software development costs..................... 1,930 1,908
Foreign translation losses................................. 329 274
Other...................................................... 114 113
------ ------
Total deferred tax liabilities..................... 2,729 2,690
------ ------
$ 318 $1,126
====== ======
</TABLE>

As of September 30, 1995, the Company had federal net operating loss
carryforwards of $529 which expire at various dates through 2010.

Ownership changes, as defined in the Internal Revenue Code, including those
resulting from the issuance of common stock in connection with the Company's
planned initial public offering, may limit the amount of net operating loss and
tax credit carryforwards that can be utilized to offset future taxable income or
tax liability. The amount of the annual limitation is determined in accordance
with Section 382 of the Internal Revenue Code.

Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries because those earnings are
intended to be permanently reinvested. Such earnings would become taxable upon
the sale or liquidation of these foreign subsidiaries or upon the remittance of
dividends. It is not practicable to estimate the amount of additional tax that
might be payable on the foreign earnings. Upon remittance, certain foreign
countries impose withholding taxes that are then available, subject to certain
limitations, for use against the Company's U.S. tax liability. The amount of
withholding tax that would be payable upon remittance of the entire amount of
undistributed earnings would not be material.

Cash paid for income taxes totaled $1,143, $608 and $1,013 for the years
ended August 31, 1993 and 1994 and the year ended September 30, 1995,
respectively.

7. REVOLVING LINE OF CREDIT

The Company has a revolving line of credit agreement with a bank under
which it can borrow up to $5,000 for working capital. Borrowings under the
credit line are subject to a borrowing base, as defined in the agreement, and
are collateralized by the Company's accounts receivable. Outstanding borrowings
bear interest at the bank's prime rate (8.75% at September 30, 1995) plus 2.0%
(subject to adjustment under the terms of the agreement), payable monthly. Under
the terms of the agreement, the Company is required to comply with certain
covenants, including that the Company maintain minimum amounts of working
capital. Other restrictive covenants limit indebtedness, liens, mergers and
acquisitions and additional stock issuances. The

F-13
<PAGE> 65

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Company is in compliance with those covenants at September 30, 1995. The line of
credit expires in October 1996. There were no borrowings outstanding under the
agreement at either August 31, 1994 or September 30, 1995.

8. STOCKHOLDERS' EQUITY

INITIAL PUBLIC OFFERING (UNAUDITED)

The Company completed an initial public offering of its common stock on
November 17, 1995. A total of 2,300 shares were sold at $11.00 per share, of
which 1,334 were sold by the Company and 966 by selling stockholders. Proceeds
to the Company were $12,800, net of underwriting discounts and offering
expenses.

RECAPITALIZATION

On October 2, 1995, the Company's Board of Directors authorized 1,000
shares of $0.01 par value preferred stock. Preferred stock may be issued at the
discretion of the Board of Directors of the Company (without stockholder
approval) with such designations, rights and preferences as the Board of
Directors may determine from time to time. The preferred stock may have
dividend, liquidation, redemption, conversion, voting or other rights which may
be more expansive than the rights of the holders of the common stock.

The Company's Board of Directors declared a 2-for-1 stock split, effected
in the form of a stock dividend, paid in August 1995 to stockholders of record
on August 14, 1995. On October 2, 1995, the Company's Board of Directors
approved an increase in the authorized number of shares of common stock from
10,000 shares to 40,000 shares, subject to stockholder approval. The Company's
Board of Directors also declared a 1.4-for-1 stock split, effected in the form
of a stock dividend paid to stockholders of record on November 13, 1995. All
shares and per share amounts included in the consolidated financial statements
have been adjusted to give retroactive effect to the stock splits for all
periods presented.

PRIVATE PLACEMENT

Through a private placement pursuant to a securities purchase agreement
dated June 16, 1989, the Company sold 1,053 shares of its common stock for $4.75
per share and warrants to purchase 322 shares of common stock exercisable at
$4.75 per share to venture capital investors. Certain stockholders also sold 580
shares of common stock to the investors for $4.75 per share.

The securities purchase agreement contained a put option. This put option
allowed the investors to obligate the Company to repurchase any of the shares of
common stock at their original purchase price per share. On June 16, 1994, the
investors notified the Company of their intention to exercise the put option.
The put was exercised for the repurchase of all 1,632 shares on September 16,
1994, and the Company repurchased the shares for $7,752. This amount was
classified as mandatorily redeemable common stock in the consolidated balance
sheet at August 31, 1994. The warrants expired unexercised on June 16, 1994.

STOCK OPTIONS

In September 1989, the Company's Board of Directors approved the 1989
Incentive Stock Option Plan (the "1989 Plan"), which, as amended, authorizes the
granting of options for the purchase of up to 2,100 shares of common stock. On
February 3, 1995, the Company's Board of Directors approved an increase in the
number of shares issuable under the 1989 Plan from 2,100 to 2,800. The 1989 Plan
permits the granting of both qualified and nonqualified options to employees,
consultants, directors and key advisers of the Company. The options are
generally exercisable over three to five year periods, as determined by the Plan
Committee.

F-14
<PAGE> 66

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The Plan Committee is comprised of members of the Company's Board of Directors.
The option price is set at the fair market value of the Company's stock on the
date of the option grant, as determined by the Plan Committee.

<TABLE>
The Company also has a 1984 Incentive Stock Option Plan (the "1984 Plan"),
with authorized options for 1,400 shares of common stock under terms similar to
those described in the preceding paragraph. Authority to grant additional
options under the 1984 Plan has expired. Aggregate stock option activity under
both the 1989 Plan and the 1984 Plan is as follows for the years ended August
31, 1993 and 1994, the one-month period ended September 30, 1994 and for the
year ended September 30, 1995:

<CAPTION>
SHARES OPTION PRICE
------ ---------------
<S> <C> <C>
Outstanding at August 31, 1992............................. 2,087 $0.03 to $2.85
Granted.................................................. 291 3.57
Exercised................................................ (29) 0.03 to 2.85
Canceled................................................. (670) 2.77 to 2.85
-----
Outstanding at August 31, 1993............................. 1,679 0.71 to 3.57
Granted.................................................. 1,502 3.57 to 4.10
Exercised................................................ (14) 2.85 to 3.57
Canceled................................................. (920) 2.85 to 4.10
-----
Outstanding at August 31, 1994............................. 2,247 0.71 to 4.10
Granted.................................................. 22 4.10
Canceled................................................. (58) 2.85 to 3.57
------
Outstanding at September 30, 1994.......................... 2,211 0.71 to 4.10
Granted.................................................. 859 4.10 to 5.35
Exercised................................................ (12) 2.77 to 4.10
Canceled................................................. (661) 2.85 to 4.10
-----
Outstanding at September 30, 1995.......................... 2,397 $0.71 to $5.35
=====
Exercisable at September 30, 1995.......................... 946
=====
</TABLE>

1995 STOCK PLAN

On October 2, 1995, the Board of Directors approved the 1995 Stock Plan
(the "1995 Plan") which provides for the issuance of up to 3,500 shares of
common stock pursuant to the grant of qualified and non-qualified stock options,
stock awards or purchase rights to employees, consultants, directors and
officers of the Company under terms similar to those of the 1989 Plan and the
1984 Plan. The 1995 Plan is administered by the Compensation Committee of the
Board of Directors. To date, no stock options have been granted under the 1995
Plan. In conjunction with the approval of the 1995 Plan, the Board of Directors
formally terminated the 1989 Plan and as such no future grants will be made
under this plan. At September 30, 1995, the Company had 665 shares of its common
stock available for future grant and had reserved 3,062 shares of its common
stock for issuance upon exercise of outstanding stock options and warrants under
the Plans.

1995 EMPLOYEE STOCK PURCHASE PLAN

On October 2, 1995, the Board of Directors approved (subject to stockholder
approval) the 1995 Employee Stock Purchase Plan (the "Purchase Plan") which
enables eligible employees to purchase shares of the Company's common stock. The
Purchase Plan is administered by the Compensation Committee of the Board of
Directors. Under the Purchase Plan, eligible employees may purchase common
shares during six-

F-15
<PAGE> 67

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

month payment periods, the first such period to commence on the effective date
of the Company's initial public offering and to end on or before June 30, 1996.
The exercise price per share is 85% of the lesser of the market price per share
on the first or last business day of the six-month period. The maximum number of
shares of common stock that an employee may purchase in any six-month period is
five hundred shares. An employee's rights under the Purchase Plan terminate upon
voluntary withdrawal from the plan at any time or upon termination of
employment. The Company has reserved 1,400 shares of common stock for issuance
under the Purchase Plan.

1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

On October 2, 1995, the Board of Directors approved (effective upon the
closing of the Company's initial public offering) the 1995 Non-Employee Director
Stock Option Plan (the "Director Plan") under which options to purchase a
maximum of 210 shares of the Company's common stock may be granted to non-
employee directors. Under the Director Plan, each non-employee director will be
granted an option to purchase 28 shares of common stock upon first joining the
Board of Directors and 4 shares at each successive annual meeting of
stockholders, beginning at the Company's annual meeting of stockholders for the
fiscal year ending September 30, 1996, at an exercise price per share equal to
the then fair market value per common share. Options granted under the Director
Plan become exercisable in four equal annual installments commencing one year
after the date of grant provided that the optionee then remains a director or
consultant. The term of each option granted under the Director Plan will be for
a period of ten years from the date of the grant.

COMMON STOCK WARRANTS

In connection with the revolving line of credit agreement discussed in Note
7, warrants were issued for the purchase of 49 shares of the Company's common
stock. The warrants are exercisable at an initial per share price of $6.07,
subject to adjustment under the terms of the agreement, and expire on June 10,
1999. The value of the warrants at the issuance date was immaterial.

9. RETIREMENT SAVINGS PLAN

The Company has a savings and profit-sharing plan covering all eligible
employees which is qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended. The Company may, at its option, provide matching
contributions up to 50% of each participating employee's contributions to the
plan, subject to a maximum of 2% of salary. Total contributions by the Company
to the plan for the years ended August 31, 1993 and 1994 and the year ended
September 30, 1995 were $185, $232 and $261, respectively.

F-16
<PAGE> 68

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

10. INDUSTRY SEGMENT, GEOGRAPHIC INFORMATION AND CUSTOMER INFORMATION

The Company operates in a single industry segment: the design, development,
sale, service and support of proprietary software products.

<TABLE>
The Company operates in diverse geographic areas. Income (loss) from
operations by geographic area is as follows:

<CAPTION>
YEAR ENDED
------------------------------------
AUGUST 31, SEPTEMBER 30,
------------------ -------------
1993 1994 1995
------- ------ -------------
<S> <C> <C> <C>
North America (principally the United States)....... $ 3,920 $3,870 $ 5,726
Europe (principally the United Kingdom)............. (2,824) (1,757) (864)
Other international................................. (252) 128 518
------- ------- ------
$ 844 $2,241 $ 5,380
======= ======= ======
</TABLE>

No geographic area outside North America accounted for more than 10% of the
Company's consolidated revenues or identifiable assets for the years ended
August 31, 1993 and 1994 or the year ended September 30, 1995.

No single customer accounted for more than 10% of the Company's
consolidated revenues for the years ended August 31, 1993 and 1994 or the year
ended September 30, 1995.

11. RELATED PARTY TRANSACTIONS

NOTES RECEIVABLE -- STOCKHOLDERS

In connection with a business combination in September 1991, which was
accounted for as a purchase, the Company loaned an aggregate of $500 to two
owners of the acquired company. Such owners became stockholders of the Company
in connection with the business combination. The notes, which bear interest at
9.0%, are payable in minimum semi-monthly installments. In addition, any bonuses
and severance pay earned by the holders and any proceeds to the holders from the
sale of common stock of the Company are offset against the notes until the
entire principal and interest due on the notes are paid. The notes are
collateralized by, among other things, any proceeds from the sale of common
stock by the holders and, accordingly, are included as a reduction of
stockholders' equity in the consolidated balance sheets.

LIFE INSURANCE TRUSTS

Three principal stockholders of the Company have split-dollar life
insurance policies (the "Policies"). The Policies are owned by various trusts.
The trusts have executed Collateral Assignment Agreements for the benefit of the
Company. Under the Collateral Assignment Agreements, the Company pays the annual
premiums of the Policies, which approximated $263 for each of the years ended
August 31, 1993 and 1994 and for the year ended September 30, 1995,
respectively. The premium payments made under the Policies are recorded as
advances to the trusts and are secured by the cash surrender value of related
insurance policies. Cash advances in excess of the cash surrender value of the
related insurance policies are expensed when advanced. Total advances to the
trusts of $1,534 at September 30, 1995 are included in other assets in the
consolidated balance sheets. Each Collateral Assignment Agreement can be
terminated at any time on thirty days' notice by either the Company or the
related trust. Upon termination, (i) the Company and the trust can agree on
disposition of the policy, or (ii) the trust can repay the advances to the
Company or (iii) the net cash surrender value would be distributed to the
Company to the extent of the advances with the balance of the net cash surrender
value being paid to the trust. If a Collateral Assignment Agreement is not
terminated and the

F-17
<PAGE> 69

SOFTWARE 2000, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

principal stockholder dies, the death benefits will be paid first to the Company
to the extent of the advances. There is no agreement between the Company and any
of the principal stockholders as to whether the Collateral Assignment Agreement
would be terminated on the disassociation of the stockholder from the Company.

In October 1994, the three principal stockholders of the Company waived
their right to the cash surrender value of the Policies through that date.
Advances to the trusts equal to the cash surrender value at October 1, 1994 of
$1,275, were recorded as other assets in the consolidated balance sheet as a
noncash capital contribution.

During 1995, the trusts borrowed $875 of the cash surrender value of the
Policies. The trusts' obligations to repay those funds have been secured by a
pledge of an aggregate of 330 shares of the Company's common stock owned by the
principal stockholders. The trusts have assigned the stock pledges to the
Company as replacement collateral.

CONSULTING ARRANGEMENT

The Company has engaged a principal stockholder of the Company, for
consulting services provided to the Company under various agreements since July
1, 1984. The current agreement was amended on September 13, 1995 to provide that
the principal stockholder will be paid for such consulting services in the
future at an agreed upon rate per day, plus reimbursement for expenses. For
fiscal years 1995, 1994 and 1993, the Company paid this principal stockholder a
total of $144, $157 and $128, respectively, for consulting services rendered to
the Company. There were no significant amounts owed to the principal stockholder
at August 31, 1994 or September 30, 1995.

12. RESEARCH AND DEVELOPMENT AGREEMENT

In August 1994, the Company entered into an arrangement whereby a third
party agreed to fund certain research and development activities of the Company.
Product development fees received under the agreement for research and
development activities are recorded as a reduction of research and development
expenses on a percentage-of-completion basis. Payments received for previously
developed products have been recorded as liabilities in light of the Company's
future royalty obligations. Through September 30, 1995, the Company has received
cumulative product development fees of $1,911, of which $1,318 was recorded as a
reduction of research and development expenses and $593 was recorded as a
liability.

The agreement provides for future royalty payments based on revenues
generated by products resulting from the funded activities. Total payments,
which are based on a percentage of the related product revenues, are limited to
130% of the funds received by the Company under the agreement. Royalties of $36
were incurred during the year ended September 30, 1995.

13. COMMITMENTS

LEASES

The Company has several operating lease agreements primarily involving real
estate and computers and equipment. These leases are noncancelable and expire on
various dates through 2000 except for the Company's U.K. facility lease, which
expires in 2015. The Company also has capital leases for computers and other
equipment at interest rates ranging from 10.0% to 14.0%.

F-18
<PAGE> 70

SOFTWARE 2000, INC.

<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Future minimum lease payments under capital and operating leases with
initial or remaining terms of one year or more are as follows:

<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
------------------------------------------------------------------ ------- ---------
<S> <C> <C>
1996.............................................................. $ 90 $ 3,581
1997.............................................................. 7 2,812
1998.............................................................. 3 2,176
1999.............................................................. -- 1,504
2000.............................................................. -- 1,245
Thereafter........................................................ -- 8,547
---- -------
Total future minimum lease payments............................... 100 $19,865
=======
Less-amount representing interest................................. 6
----
Present value of future minimum lease payments.................... 94
Less-current portion.............................................. 94
----
Long-term obligations under capital leases........................ $ --
====
</TABLE>

The current portion of obligations under capital leases at August 31, 1994
was $884. Total rent expense for operating leases was $4,304, $3,841, and $4,594
for the years ended August 31, 1993 and 1994 and the year ended September 30,
1995, respectively. Cash paid for interest totaled $464, $304 and $46 for the
years ended August 31, 1993 and 1994 and the year ended September 30, 1995,
respectively.

F-19
<PAGE> 71
SOFTWARE THAT GETS TO THE POINT. AND CLICKS.

[PHOTO: A man wearing sunglasses with the Infinium:HR and Infinium:FM screens
reflected in them.]

Infinium: Human Resources and Infinium: Financial Management
eliminate the cumbersome steps required in traditional business applications.
Users can quickly identify, access and analyze specific information using
simple point-and-click, drag-and-drop PC techniques.
And Infinium's intuitive customization capabilities, combined with the strength
of the AS/400[Trademark] Advanced Server, dramatically reduce the complexity
of implementation.
All pointing to software that clicks. For everyone concerned.

[LOGO]

Long-term business advantage. Rapid return on investment.
<PAGE> 72

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN SHARES OF COMMON STOCK TO WHICH THIS PROSPECTUS
RELATES, OR AN OFFER IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................... 3
Risk Factors................................. 5
Use of Proceeds.............................. 10
Price Range of Common Stock and Dividend
Policy..................................... 10
Capitalization............................... 11
Selected Consolidated Financial Data......... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 13
Business..................................... 22
Management................................... 36
Certain Transactions......................... 43
Principal and Selling Stockholders........... 44
Description of Capital Stock................. 46
Shares Eligible For Future Sale.............. 48
Underwriting................................. 50
Legal Matters................................ 51
Experts...................................... 51
Additional Information....................... 51
Index to Consolidated Financial Statements... F-1
</TABLE>

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

2,870,000 Shares

LOGO

Common Stock

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

PROSPECTUS
-----------------------

SoundView Financial Group, Inc.
Needham & Company, Inc.
The Robinson-Humphrey
Company, Inc.
May 9, 1996

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