ULTRADATA CORP, DEFM14A, 1999-07-02

ULTRADATA CORP
DEFM14A, 1999-07-02
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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

ULTRADATA CORPORATION
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[_] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

1) Title of each class of securities to which transaction applies: common
stock, $0.001 par value per share

2) Aggregate number of securities to which transaction applies:

9,908,886 shares of common stock outstanding or subject to options to
purchase ULTRADATA common stock as of June 1, 1999

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11

(Set forth the amount on which the filing fee is calculated and state
how it was determined):

$7.50 per share of common stock, which is the amount of the proposed
cash payment per share to be transferred to the security holders in
this transaction.

4) Proposed maximum aggregate value of transaction: $74,316,645

5) Total fee paid: $14,863

[X] Fee paid previously with preliminary materials.

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

1) Amount Previously Paid:

____________________________________________

2) Form, Schedule or Registration Statement No.:

____________________________________________

3) Filing Party:

____________________________________________

4) Date Filed:

____________________________________________
<PAGE>

[LOGO OF ULTRADATA APPEARS HERE]

July 2, 1999

Dear Stockholder:

We will hold a special meeting of our stockholders on July 23, 1999 at 9:00
a.m., local time, at our offices located at 5000 Franklin Drive, Pleasanton,
California 94588-3354. At the special meeting, you will be asked to vote on
and adopt a merger agreement that will cause ULTRADATA to become a wholly-
owned subsidiary of CFI ProServices, Inc.

If the merger is approved, you will be entitled to receive $7.50 in cash,
subject to reduction for any applicable federal backup or other withholding
taxes, for each share of common stock of ULTRADATA you own.

Attached is a notice of special meeting of stockholders and a proxy
statement relating to the merger. The proxy statement describes the merger in
detail. We encourage you to read it carefully.

After careful consideration, your board of directors unanimously approved
this transaction and concluded that it is in the best interests of ULTRADATA
and its stockholders. Your board of directors unanimously recommends that you
vote "FOR" the merger agreement.

We cordially invite you to attend the meeting. However, whether or not you
plan to attend the meeting, please complete, sign and date the enclosed proxy
and return it to us in the enclosed envelope. If you attend the meeting, you
may vote in person if you wish, even though you have previously returned your
proxy.

Please do not send your stock certificates at this time.

On behalf of the board of directors,
/s/ RONALD H. BISSINGER
Ronald H. Bissinger
Vice President and Chief Financial
Officer

This proxy statement is dated July 2, 1999 and was first mailed to
stockholders on or about July 2, 1999.
<PAGE>

ULTRADATA CORPORATION

5000 Franklin Drive
Pleasanton, California 94588-3354

Notice of Special Meeting of Stockholders

To Our Stockholders:

A special meeting of stockholders of ULTRADATA Corporation will be held at
9:00 a.m., local time, on July 23, 1999 at our offices located at 5000 Franklin
Drive, Pleasanton, California 94588-3354 to consider and vote on a proposal to
adopt a merger agreement with CFI ProServices, Inc. that will cause ULTRADATA
to become a wholly-owned subsidiary of CFI.

No other business will be considered at the meeting.

This proposal is more fully described in the proxy statement that
accompanies this notice, which you should read carefully.

We have fixed the close of business on June 30, 1999 as the record date for
the determination of our stockholders entitled to vote at this meeting.

By order of the board of directors,

/s/ RONALD H. BISSINGER
Ronald H. Bissinger
Secretary

To ensure your representation at the special meeting, please complete, date,
sign and return the enclosed proxy as promptly as possible in the postage-paid
envelope provided whether or not you plan to attend the meeting. If you attend
the special meeting, you may vote in person even if you have returned a proxy.

Pleasanton, California
July 2, 1999
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Questions and Answers about the Merger.................................... 1
Summary................................................................... 2
The Companies........................................................... 2
The ULTRADATA Special Meeting to Consider Approval of the Merger........ 2
Record Date and Required Vote........................................... 2
ULTRADATA Board's Recommendation to the Stockholders.................... 3
ULTRADATA's Reasons for the Merger...................................... 3
CFI's Reasons for the Merger............................................ 3
Regulatory Approvals Required Before the Merger Can Be Completed........ 3
Accounting Treatment of the Merger...................................... 3
Interests of Certain Persons in the Merger.............................. 4
Terms of the Merger..................................................... 4
ULTRADATA Selected Historical Financial Information....................... 7
Market Price and Dividends................................................ 8
Where You Can Find More Information....................................... 9
Forward-Looking Statements................................................ 9
The ULTRADATA Special Meeting............................................. 10
Date, Time and Place of Meeting......................................... 10
Purpose of the Special Meeting.......................................... 10
Record Date............................................................. 10
Voting Rights and Quorum................................................ 10
Required Vote........................................................... 10
Share Ownership of Management........................................... 10
Abstentions; Broker Non-Votes........................................... 10
Expenses of Proxy Solicitation.......................................... 10
Voting of the Proxies................................................... 11
Independent Auditors.................................................... 11
Board Recommendation.................................................... 11
Approval of the Merger and Related Transactions........................... 12
Background of the Merger................................................ 12
ULTRADATA's Reasons for the Merger...................................... 13
CFI's Reasons for the Merger............................................ 14
Material Federal Income Tax Considerations.............................. 15
Regulatory Matters...................................................... 15
Accounting Treatment.................................................... 15
Appraisal Rights........................................................ 16
The Merger................................................................ 18
General................................................................. 18
Effective Time; Closing Date............................................ 18
Payment for Common Stock................................................ 18
Exchange of Certificates................................................ 18
Dissenting Shares....................................................... 19
Treatment of Stock Options.............................................. 19
Representations and Warranties.......................................... 19
Covenants............................................................... 20
Conditions to the Merger................................................ 22
Termination of the Merger Agreement and Break-Up Fee.................... 22
Benefits of the Merger to ULTRADATA Directors and Executive Officers...... 24
Assumption of Stock Options............................................. 24
Acceleration of Stock Options........................................... 24
</TABLE>

i
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Security Ownership of Principal Stockholders and Management of
ULTRADATA............................................................... 26
Business of ULTRADATA.................................................... 28
Products............................................................... 28
Pricing................................................................ 29
Professional Services.................................................. 30
Technology............................................................. 30
Research and Development............................................... 31
Customers.............................................................. 31
Customer Service....................................................... 31
Support................................................................ 31
Sales and Marketing.................................................... 31
Competition............................................................ 32
Proprietary Rights and Licenses........................................ 32
Government Regulation.................................................. 32
Employees.............................................................. 33
Properties............................................................. 33
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 34
Overview............................................................... 34
Results of Operations.................................................. 35
Material Factors Affecting Results of Operations....................... 39
Liquidity and Capital Resources........................................ 41
Quantitative and Qualitative Disclosures About Market Risk............... 42
Financial Statements and Financial Statement Schedule.................... F-1
Appendices
A--Agreement and Plan of Merger........................................ A-1
B--Section 262 of the Delaware General Corporation Law................. B-1
</TABLE>

ii
<PAGE>

QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: What will I receive in the merger?

A: If the merger is completed, you will receive $7.50 in cash, without
interest. This amount will be subject to reduction for any applicable
federal backup or other withholding taxes for each share of common stock of
ULTRADATA you own.

Q: Will I recognize a gain or loss on the transaction?

A: You will recognize gain or loss for United States federal income tax
purposes, depending on your tax basis in your shares. ULTRADATA stockholders
are urged to consult their own tax adviser to determine their particular tax
consequences.

For a more complete description of the tax consequences, see the section
entitled "Material Federal Income Tax Treatment" on page 15.

Q: What do I need to do now?

A: Please mail your signed proxy card in the enclosed return envelope as soon
as possible so that your shares will be counted at the special meeting of
ULTRADATA stockholders. If you attend the special meeting in person you may
vote in person even if you have returned a proxy.

Q: What do I do if I want to change my vote?

A: If you want to change your vote, send the Secretary of ULTRADATA a later-
dated signed proxy card before the meeting or attend the meeting in person.
You also may revoke your proxy by sending written notice to the Secretary of
ULTRADATA before the meeting.

For a more complete description of how to change your vote, see the section
entitled "Voting of Proxies" on page 11.

Q: If my shares are held in "street name" by my broker, will my broker vote my
shares?

A: Your broker will vote your shares only if you provide instructions on how to
vote by following the information provided to you by your broker.

For a more complete description of voting shares held in "street name," see
the section entitled "Voting of Proxies" on page 11.

Q: Should I send in my stock certificates now?

A: No. If the merger is completed, CFI's paying agent will send you written
instructions for exchanging your share certificates.

Q: When do you expect the merger to be completed?

A: We are working towards completing the merger as quickly as possible.
Completion of the merger is subject to, among other things, ULTRADATA
stockholder approval, regulatory approvals and the completion of funding
arrangements by CFI. We hope to complete the merger on or about July 23,
1999.

For a more complete description of the conditions to the merger, see the
section entitled "Conditions to the Merger" on page 22.

Q: Am I entitled to appraisal rights?

A: Under Delaware law, holders of ULTRADATA common stock are entitled to
appraisal rights in the merger.

For a more complete description of appraisal rights, see the section
entitled "Appraisal Rights" on page 16.

Q: Whom should I call with questions?

A: If you have additional questions about the merger or would like additional
copies of this document, you should contact:

ULTRADATA Corporation
5000 Franklin Drive
Pleasanton, California 94588-3031
Attention: Secretary
(925) 463-8356

You also may obtain additional information about ULTRADATA from documents
that we file with the Securities and Exchange Commission by following the
instructions in the section entitled "Where You Can Find More Information"
on page 9.

1
<PAGE>

SUMMARY

Following is a summary of the information contained elsewhere in this proxy
statement. You should read all of this proxy statement and the appendices
because the summary does not contain a complete description of the merger
agreement or the merger.

The Companies

ULTRADATA Corporation
5000 Franklin Drive
Pleasanton, California 94588-3031
(925) 463-8356
Nasdaq stock symbol: ULTD

We provide information management software and solutions for relationship-
oriented financial institutions. These solutions allow our customers to, among
other things, engage in cross-selling, relationship pricing, data mining and
workflow control as well as provide financial services such as checking,
savings and investment accounts, home banking, credit and debit cards,
automated teller machine access and consumer lending. Our products today are
primarily targeted at large and mid-sized credit unions that want to operate
their system in-house. For smaller credit unions, we work through value added
resellers to provide our products.

CFI ProServices, Inc.
400 S.W. Sixth Avenue; Suite 200
Portland, Oregon 97204
(503) 274-7280
Nasdaq stock symbol: PROI

CFI is a leading provider of integrated, personal computer-based software
for financial institutions, including solutions for branch automation, loan
origination, new account opening, call centers, cross-selling of products and
electronic banking. Beginning in 1999 with its acquisition of Modern Computer
Systems, Inc., CFI will also offer hardware and software solutions for the back
office accounting needs of community banks and credit unions. CFI combines its
technology, banking and legal expertise to deliver knowledge-based solutions
that enable institutions to simplify key business processes such as sales and
service, improve productivity, strengthen customer relationships, and maintain
compliance with both internal business policies and external government
regulations.

The ULTRADATA Special Meeting to Consider Approval of the Merger (page 10)

A special meeting of the stockholders of ULTRADATA will be held on Friday,
July 23, 1999, at 9:00 a.m., local time, at our offices located at 5000
Franklin Drive Pleasanton, California 94588-3354. At the ULTRADATA special
meeting, the ULTRADATA stockholders will be asked to consider and vote upon a
proposal to adopt the merger agreement.

Record Date and Required Vote (page 10)

Only holders of record of ULTRADATA stock on June 30, 1999, the record date
for the special meeting, are entitled to notice of and to vote at, the special
meeting and any adjournments or postponements thereof. On the record date,
there were issued and outstanding 7,766,382 shares of ULTRADATA common stock.
The affirmative votes of holders of a majority of the issued and outstanding
shares of ULTRADATA common stock is required to adopt the merger agreement.

2
<PAGE>

ULTRADATA Board's Recommendation to the Stockholders (page 11)

The ULTRADATA board has approved and adopted the merger agreement and the
transactions contemplated by it. The board has approved the merger and has
determined that the merger is fair, from a financial point of view to, and in
the best interests of, ULTRADATA and its stockholders.

ULTRADATA's Reasons for the Merger (page 13)

The following are among the factors considered by the ULTRADATA board of
directors in approving the merger:

. competitive market conditions that affirm ULTRADATA's need to continue to
pursue its strategy of delivering information management solutions to an
increasingly broader base of relationship-oriented financial
institutions, including banks, while retaining its focus on its core
credit union market;

. the market price of ULTRADATA common stock, which has exceeded $6.00 per
share on only six trading days since June 1, 1998, with little trading
volume, and the fact that the offered price of $7.50 per share
represented a 43% premium over $5.25, the closing price of ULTRADATA
common stock on May 14, 1999, the date of the board meeting at which the
merger was approved;

. recent consolidation among financial software companies resulting in
increased pressure to grow to remain competitive with companies having
greater resources and product offerings; and

. constraints on ULTRADATA's acquisition strategy imposed by its current
cash position and the value of its stock as a currency for acquisitions
of other businesses.

CFI's Reasons for the Merger (page 14)

CFI considers the merger to be beneficial to CFI stockholders, and expects
that ULTRADATA will contribute to the success of the combined company because
the merger:

. allows CFI to deliver a total system solution for front-and back-end
technologies to small and mid-sized banks and credit unions;

. positions CFI as a leader in offering real-time host processing
capabilities to community banks and credit unions;

. adds a business segment based on a recurring service fees model,
resulting in more predictable and consistent revenues for CFI; and

. provides CFI's customers with the tools they need to develop, manage and
enhance profitable customer relationships.

Regulatory Approvals Required Before the Merger Can Be Completed (page 15)

We are prohibited by U.S. antitrust laws from completing the merger until
after we have furnished information to the Antitrust Division of the Department
of Justice and the Federal Trade Commission and a required waiting period has
ended. Both ULTRADATA and CFI have filed the required notification and report
forms. The waiting period ended June 28, 1999. However, the Department of
Justice, the Federal Trade Commission and various other parties continue to
have authority to challenge the merger on antitrust grounds before or after the
merger is completed. The merger must also satisfy the requirements of Delaware
corporate law.

Accounting Treatment of the Merger (page 16)

The merger is being accounted for as a purchase by CFI for financial
reporting and accounting purposes, under generally accepted accounting
principles. After the merger, the results of operations of ULTRADATA will be
included in the consolidated financial statements of CFI.

3
<PAGE>

Interests of Certain Persons in the Merger (page 24)

In considering the merger and the recommendation of ULTRADATA's board of
directors regarding the merger, you should be aware of interests which certain
ULTRADATA executive officers and directors have in the merger which differ from
your interests as stockholders. These interests include the acceleration of
stock options for:

. Robert J. Majteles, President and Chief Executive Officer and a director
of ULTRADATA,

. Ronald H. Bissinger, Vice President and Chief Financial Officer of
ULTRADATA,

. David J. Robbins, Vice President, Products and Services of ULTRADATA,

. Cindy L. Cooper, Vice President, Product Development of ULTRADATA,

. James R. Berthelsen, Vice President, Marketing of ULTRADATA, and

. Lawrence M. Howell, M. Mel Stuckey and John F. Carlson, directors of
ULTRADATA.

Terms of the Merger (page 18)

What will happen (page 18)

The merger agreement provides for the merger of UFO Acquisition, a wholly-
owned subsidiary of CFI, with and into ULTRADATA. As a result of the merger,
the separate existence of UFO will end and ULTRADATA will survive as a wholly-
owned subsidiary of CFI. The former holders of ULTRADATA common stock will be
entitled to receive $7.50 in cash, without interest, subject to reduction for
any applicable federal backup or other withholding taxes, for each share of
ULTRADATA common stock they held immediately prior to the effective time.

Treatment of Stock Options (page 19)

At the effective time, outstanding options issued under ULTRADATA's 1994
Equity Incentive Plan will be assumed by CFI and converted into options for CFI
common stock. The number of shares subject to the option and the exercise price
under the option will be adjusted accordingly. The number of shares of
ULTRADATA common stock subject to the option will be multiplied by 0.718, and
the exercise price of ULTRADATA common stock under the option will be divided
by 0.718. All of the other terms and conditions of each assumed option will
remain unchanged in all material respects. Any shares issued under options
exercised prior to the closing of the merger will entitle the holder to receive
cash consideration as a stockholder of ULTRADATA in the merger.

CFI agreed in a separate agreement to pay cash for shares of ULTRADATA
common stock subject to options granted under the 1994 Equity Incentive Plan
that are vested and exercisable at the effective time to each optionholder who
has elected to receive cash. At the closing, CFI will pay to each optionholder
who has elected an amount equal to:

. the difference between $7.50 and the exercise price of the ULTRADATA
option, multiplied by

. the number of shares of ULTRADATA common stock subject to that option
that are vested and exercisable at the effective time.

In addition, on the closing date, CFI will pay to each holder of options to
purchase shares of ULTRADATA common stock that have been granted under the 1995
Director Stock Option Plan and an aggregate of options to purchase an aggregate
of 1,200,000 shares of ULTRADATA common stock granted outside of ULTRADATA's
stock option plans an amount equal to:

4
<PAGE>

. the difference between $7.50 and the exercise price of the ULTRADATA
option, multiplied by

. the number of shares of ULTRADATA common stock subject to that option
that are vested and exercisable at the effective time.

ULTRADATA Cannot Solicit Another Possible Acquirer (page 21)

We have agreed that we will not encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
third party concerning any merger, sale of assets, sale of shares of our
capital stock or other similar transactions. We also will not authorize or
permit any of our officers, directors, employees, representatives or agents to
undertake any of these prohibited actions. However, we may furnish information
and access to a third party in response to a third party's unsolicited
proposal, and may participate in discussions and negotiate with that third
party, if the board of directors determines in good faith that it is necessary
to explore the proposal in order to meet its fiduciary duties to the
stockholders.

Financing by CFI (page 22)

Before the merger can close, CFI must complete financing arrangements for
the funds necessary to consummate the merger and to make the cash payments to
ULTRADATA stockholders.

Conditions to the Merger (page 22)

The completion of the merger depends on a number of conditions being
satisfied, including the following:

. ULTRADATA stockholders will have approved the terms of the merger
agreement;

. CFI and ULTRADATA will have obtained all governmental authorizations
required for the merger; and

. at the closing, the representations and warranties of CFI and ULTRADATA
will be true and CFI and ULTRADATA will have performed their respective
covenants in the merger agreement.

Termination of the Merger Agreement and Break-Up Fee (page 22)

The merger agreement may be terminated before the merger becomes effective,
whether before or after approval of the merger by ULTRADATA stockholders:

. by mutual consent of ULTRADATA and CFI;

. by either ULTRADATA or CFI if there is a permanent injunction or other
court order prohibiting the merger or making it illegal; or

. by either ULTRADATA or CFI if the merger is not completed by August 31,
1999, other than as a result of a breach of the merger agreement by the
terminating party.

. by ULTRADATA if:

. ULTRADATA enters into a definitive agreement or receives a bona fide
proposal concerning a merger, sale of assets, sale of shares of
ULTRADATA capital stock or a similar transaction that the board of
directors, based on the written advice of a financial advisor of
nationally recognized reputation, determines in good faith to be more
favorable to ULTRADATA stockholders than the merger with CFI;

. ULTRADATA fails to obtain stockholder approval by August 31, 1999; or

. CFI breaches a representation or warranty or breaches any covenant or
agreement under the merger agreement if the breach has a material
adverse effect on the consummation of the merger, if either breach is
not cured by August 31, 1999; or

5
<PAGE>

. by CFI if:

. ULTRADATA's board of directors (1) withdraws, modifies or changes its
approval or recommendation of the merger, or (2) recommends another
proposal concerning a merger, sale of assets, sale of shares of
ULTRADATA capital stock or a similar transaction;

. ULTRADATA fails to obtain stockholder approval by August 31, 1999; or

. ULTRADATA breaches a representation or warranty, or breaches any
covenant or agreement that has a material adverse effect on ULTRADATA or
the consummation of the merger, if either breach is not cured by August
31, 1999.

Terminating the merger agreement will generally terminate the obligations of
the parties to perform their covenants in the merger agreement, except that the
parties will continue to comply with various miscellaneous provisions,
including CFI's agreement to refrain from divulging or using the confidential
information of ULTRADATA, except as required by the merger agreement.

ULTRADATA will pay CFI a $5.0 million break-up fee if ULTRADATA terminates
the merger agreement for a more favorable acquisition proposal, it fails to
obtain stockholder approval or CFI terminates the merger agreement for any of
the reasons listed above. CFI will pay a termination fee of $5.0 million if
ULTRADATA terminates the merger agreement for CFI's breach of a representation,
warranty, covenant or agreement in the merger agreement.

6
<PAGE>

ULTRADATA Selected Historical Financial Information

The following selected historical financial information of ULTRADATA has
been derived from its historical financial statements and should be read in
conjunction with those consolidated financial statements and the related notes,
which are included elsewhere in this proxy statement. The unaudited historical
financial statement information for ULTRADATA as of March 31, 1999, and for the
three months ended March 31, 1998 and 1999, have been prepared on the same
basis as the historical information in the audited financial statements and, in
the opinion of management of ULTRADATA, contain all adjustments, consisting
only of normal recurring adjustments, necessary for the fair presentation of
the results of operations for those periods. Operating results for the three
months ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1999 or any future
period.

<TABLE>
<CAPTION>
Three Months
Ended March 31, For the Years Ended December 31,
------------------------ -------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ --------- ------- -------- -------- -------- --------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Revenues
Software.............. $2,608 $ 2,522 $11,063 $ 7,062 $ 9,452 $ 10,396 $ 6,431
Services.............. 4,509 3,752 16,501 16,548 16,741 12,446 12,194
------ ------- ------- -------- -------- -------- --------
Subtotal............ 7,117 6,274 27,564 23,610 26,193 22,842 18,625
Hardware.............. 211 988 3,197 5,493 14,251 8,292 7,066
------ ------- ------- -------- -------- -------- --------
Total revenues.......... 7,328 7,262 30,761 29,103 40,444 31,134 25,691
------ ------- ------- -------- -------- -------- --------
Gross margin............ 4,102 3,526 15,049 12,184 14,409 15,865 12,473
Operating income
(loss)................. 245 33 1,321 (3,830) (7,289) 574 1,028
Net income (loss)....... 242 40 1,219 (3,460) (6,960) 334 610
Basic net income (loss)
per share.............. $ 0.03 $ 0.01 $ 0.16 $ (0.46) $ (0.97) $ 0.06 $ 0.11
Diluted net income
(loss) per share....... $ 0.03 $ 0.01 $ 0.15 $ (0.46) $ (0.97) $ 0.05 $ 0.11
<CAPTION>
December 31,
March 31, ---------------------------------------------
1999 1998 1997 1996 1995 1994
--------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Cash and cash equivalents...... $ 3,113 $ 2,418 $ 486 $ 3,003 $ 1,124 $ 881
Total assets................... 13,240 14,889 13,569 20,521 15,135 9,186
Long term liabilities.......... 567 1,314 1,233 1,636 1,585 427
Stockholders' equity........... 8,163 7,830 6,298 9,496 1,518 1,664
Other Data
Cash dividends per share of
common stock.................. -- -- -- -- $ 0.07 --
Book value per share of common
stock......................... $1.05 $1.01 $0.83 $1.26 $0.26 $0.29
</TABLE>

7
<PAGE>

MARKET PRICE AND DIVIDENDS

Our common stock is traded on the Nasdaq National Market under the symbol of
"ULTD" The following table sets forth the quarterly high and low closing prices
for our common stock since January 1, 1997.

<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Fiscal 1999
Second Quarter (through June 30, 1999)........................... $7.19 $3.75
First Quarter.................................................... 6.06 4.00
Fiscal 1998
Fourth Quarter................................................... $5.63 3.75
Third Quarter.................................................... 6.00 3.50
Second Quarter................................................... 7.50 4.50
First Quarter.................................................... 5.25 2.63
Fiscal 1997
Fourth Quarter................................................... $5.50 $2.88
Third Quarter.................................................... 4.39 2.00
Second Quarter................................................... 4.00 2.13
First Quarter.................................................... 5.25 3.63
</TABLE>

To help you in your analysis of the proposed merger, we have included the
following table which sets forth the high and low prices per share of our
common stock on the Nasdaq National Market on May 17, 1999, which was the last
trading day before the announcement of the proposed merger.

We have not declared or paid any cash dividends on our common stock in the
past three years. We currently anticipate that we will retain all future
earnings for use in our business and do not anticipate paying any cash
dividends in the foreseeable future.

As of June 30, 1999, there were 7,766,382 shares of ULTRADATA common stock
outstanding which were held of record by 25 stockholders.

8
<PAGE>

WHERE CAN YOU FIND MORE INFORMATION

We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may inspect the documents ULTRADATA files with the
SEC and copy them, at prescribed rates, at the public reference facilities
maintained by the SEC:

Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 2400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661

Copies of these materials can also be obtained by mail, at prescribed rates,
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at (800) SEC-0330. You may also
read our filings at the SEC's web site at http://www.sec.gov.

FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," variations of these words and similar expressions are intended to
identify these forward-looking statements. In particular, statements regarding
expected synergies, advantages and other effects of the merger described in
"Approval of the Merger and Related Transactions--ULTRADATA's Reasons for the
Merger," and "--CFI's Reasons for the Merger" and elsewhere in this proxy
statement are forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result
of many factors, including those described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Material Factors
Affecting Future Operating Results."

Projections or estimates of future performance are necessarily subject to a
high degree of uncertainty and may vary materially from actual results. Neither
CFI nor ULTRADATA undertakes any obligation to release publicly the results of
any revision to these forward-looking statements which may be made to reflect
events or circumstances arising after the date of this proxy statement.

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THE ULTRADATA SPECIAL MEETING

Date, Time and Place of Meeting

A special meeting of the stockholders of ULTRADATA will be held Friday, July
23, 1999, at 9:00 a.m., local time, at our offices located at 5000 Franklin
Drive, Pleasanton, California 94588-3354.

Purpose of the Special Meeting

At the ULTRADATA special meeting, the ULTRADATA stockholders will be asked
to consider and vote upon a proposal to adopt the merger agreement and to
transact other business as may properly come before the special meeting.

Record Date

Voting Rights and Quorum

Each holder of ULTRADATA common stock will be entitled to one vote for each
share of ULTRADATA common stock held of record on June 30, 1999. The presence,
in person or by proxy, of holders of record of a majority of the issued and
outstanding shares of ULTRADATA common stock constitutes a quorum for action at
the special meeting.

Required Vote

The affirmative votes of holders of a majority of the issued and outstanding
shares of ULTRADATA common stock is required to adopt the merger agreement.

Share Ownership of Management

On the record date, directors and executive officers of ULTRADATA as a group
beneficially owned 1,267,970 shares of ULTRADATA common stock, or approximately
16.4% of the outstanding shares on that date.

Abstentions; Broker Non-Votes

Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business, and have the
same effect as votes against the adoption of the merger agreement.

Expenses of Proxy Solicitation

ULTRADATA will pay the expenses of soliciting proxies to be voted at the
meeting. Following the original mailing of the proxies and other soliciting
materials, ULTRADATA and its agents also may solicit proxies by mail,
telephone, telegraph or in person. Following the original mailing of the
proxies and other soliciting materials, ULTRADATA will request brokers,
custodians, nominees and other record holders of common stock to forward copies
of the proxy and other soliciting materials to persons for whom they hold
shares of common stock and to request authority for the exercise of proxies.
Upon the request of the record holders, ULTRADATA will reimburse them for their
reasonable expenses.

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The proxy accompanying this proxy statement is solicited on behalf of the
ULTRADATA board of directors for use at the meeting. You are requested to
complete, date and sign the accompanying proxy and promptly return it in the
enclosed envelope or otherwise mail it to ULTRADATA. All properly signed
proxies received by ULTRADATA prior to the vote at the meeting that are not
revoked will be voted at the meeting according to the instructions indicated on
the proxies or, if no direction is indicated, to approve the adoption of the
merger agreement.

Voting of Proxies

You may revoke your proxy at any time before it is exercised at the meeting,
by taking any of the following actions:

. delivering to the Secretary of ULTRADATA, by any means, including
facsimile, a written notice, bearing a date later than the date of the
proxy, stating that the proxy is revoked;

. signing and so delivering a proxy relating to the same shares and bearing
a later date prior to the vote at the meeting; or

. attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy.

Please note, however, that if your shares are held of record by a broker,
bank or other nominee and that you wish to vote at the meeting, you must bring
to the meeting a letter from the broker, bank or other nominee confirming your
beneficial ownership of the shares.

Independent Auditors

Deloitte & Touche LLP, our independent auditors, will be present at the
special meeting, will have the opportunity to make a statement at the special
meeting, if they desire to do so, and will be available to respond to
appropriate questions.

Board Recommendation

AFTER CAREFUL CONSIDERATION, THE ULTRADATA BOARD UNANIMOUSLY RECOMMENDS A
VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.

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APPROVAL OF THE MERGER AND RELATED TRANSACTIONS

This section contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," variations of these words and similar expressions are
intended to identify these forward-looking statements. Actual results could
differ materially from those projected in the forward-looking statements as a
result of many factors, including those under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Material Factors
Affecting Results of Operations." You should not place undue reliance on
forward-looking statements in this document, which reflect the analysis of the
management of either CFI or ULTRADATA only as of the date of this document.

Background of the Merger

We provide information management solutions for relationship-oriented
financial institutions. Our products today are primarily targeted at credit
unions. During the past two years, we have focused on growing our business
within the credit union market with next-generation software solutions and
aggressive sales efforts. However, our long-term strategy has been to expand
the business by leveraging our technology and expertise in other related
markets. As a result, between June 1997 and March 1999, we discussed strategic
alliances and combinations with a number of other developers of technology for
financial institutions.

In the early summer of 1998, Robert J. Majteles, ULTRADATA's President and
Chief Executive Officer, called Matt Chapman, CFI's President and Chief
Executive Officer, to become acquainted and discuss industry trends. Messrs.
Chapman and Majteles discussed in general the possibility of the two companies
working together in some way and determined to meet in person to continue their
discussions.

On July 31, 1998, Mr. Chapman visited Mr. Majteles at ULTRADATA's offices.
Messrs. Chapman and Majteles executed a non-disclosure agreement and discussed
possible strategic relationships between the two companies. From August 1998 to
March 1999, Messrs. Chapman and Majteles had infrequent contact, and did not
formally discuss any arrangement between the two companies.

In early March 1999, Mr. Majteles contacted Mr. Chapman to initiate
discussions regarding a potential business combination between CFI and
ULTRADATA. Mr. Majteles discussed ULTRADATA's strategy of expanding into
additional markets and Mr. Chapman explained CFI's growth strategy.

On March 15, 1999, representatives of ULTRADATA's management team visited
CFI's headquarters in Portland, Oregon and held preliminary discussions with
CFI management. The parties considered a number of alternative structures. As a
result of the discussions, CFI indicated an interest in acquiring ULTRADATA.
Shortly after this visit, Mr. Majteles initiated regular discussions with Nigel
P. Gallop, ULTRADATA's Chairman, regarding the possibility of a business
combination with CFI.

On March 22, 1999, Mr. Chapman called Mr. Majteles and stated that CFI had
been in discussions with several financial institutions in an effort to finance
the purchase price of the ULTRADATA shares. Mr. Chapman indicated that the
initial reaction to the financing request was positive, and CFI was willing to
make a cash offer for all of the outstanding shares of ULTRADATA, subject to
CFI's receiving a commitment for this financing. Following this call, Mr.
Majteles initiated frequent calls to the members of the ULTRADATA board to
update them on the status of the discussions between the parties.

On April 1, 1999, CFI provided ULTRADATA with a draft definitive agreement.
From April 5 through April 7, 1999, representatives of CFI and its legal and
accounting advisers visited ULTRADATA's Pleasanton, California headquarters to
conduct due diligence. In addition, representatives from a potential lender
also visited ULTRADATA's headquarters to conduct financial due diligence.

Between April 1 and April 9, 1999, ULTRADATA and CFI negotiated the terms of
the merger agreement, in particular a mutual breakup fee of $5.0 million, which
would apply to CFI, among other things, in the case

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<PAGE>

that the merger were not consummated as a result of CFI's failure to receive
financing. Mr. Majteles called a meeting of the ULTRADATA board to be held on
April 10, 1999 to review the proposed merger agreement.

While the parties were negotiating the merger agreement, CFI was working
with financial institutions and with an investment banking firm, U.S. Bancorp
Libra, a division of U.S. Bancorp Investments, Inc., to secure commitments and
other arrangements for funding of the purchase price in the merger. On April 9,
1999, the CFI board engaged in extensive deliberations on the benefits and
risks of the proposed acquisition and the related financing. As of the end of
the day, however, CFI informed ULTRADATA that it had not at that time received
adequate financing commitments, and postponed further negotiations. As a
result, ULTRADATA postponed its scheduled board meeting.

On April 22, 1999, the audit committee of the ULTRADATA board of directors
met at its regularly scheduled meeting. Later that day, the board held its
regularly scheduled meeting, during which Mr. Majteles reviewed with the board
the principal terms of the proposed merger with CFI.

On April 29, 1999, representatives of U.S. Bancorp Libra visited ULTRADATA's
headquarters to conduct further due diligence.

Between April 10 and May 3, 1999, CFI continued to work to secure financing
for the merger. The CFI board met on May 3, 1999 and May 12, 1999, and received
status reports from CFI's management at both meetings on pending negotiations
with ULTRADATA, including CFI's financing efforts.

Between May 3 and May 13, 1999, the parties continued to negotiate the terms
of the merger agreement and the possible financial structure of the merger.
During this period, Mr. Majteles held individual discussions with Mr. Gallop
and other members of the ULTRADATA board regarding the proposed terms.

On May 14, 1999, CFI received from U.S. Bancorp Libra a letter stating that
U.S. Bancorp Libra was highly confident that it would be able to place the
funds necessary for CFI to acquire ULTRADATA. The CFI board deliberated again
on the benefits and risks of the merger and the proposed financing terms. The
CFI board then authorized CFI to execute the definitive merger agreement with
ULTRADATA substantially on the terms presented at the meeting. After review and
discussion of alternative structures and pricing terms, Mr. Chapman
communicated to ULTRADATA that CFI would offer $7.50 in cash for ULTRADATA's
outstanding stock.

On May 14, 1999, at a special meeting of the ULTRADATA board, management
reviewed the possible benefits and risks relating to the proposed merger. The
directors reviewed with legal counsel the principal terms of the merger
agreement which had been provided to them prior to the meeting and discussed
the benefits and risks of the merger. After discussion of the issues pertaining
to the merger agreement and CFI's offer, the ULTRADATA board approved the
principal terms of the merger agreement and the proposed merger.

On May 17, 1999, CFI, its merger subsidiary and ULTRADATA executed and
delivered the merger agreement, and the parties issued a joint press release
announcing the merger.

ULTRADATA's Reasons for the Merger

The following are among the factors considered by the ULTRADATA board of
directors in approving the merger:

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. recent consolidation among financial software companies resulting in
increased pressure to grow to remain competitive with companies having
greater resources and product offerings;

. constraints on ULTRADATA's acquisition strategy imposed by its current
cash position and the value of its stock as a currency for acquisitions
of other businesses;

. the financial and other terms and conditions of the merger agreement
relative to the market price of ULTRADATA common stock;

. the attractiveness of a cash offer from CFI relative to the opportunities
and feasibility of other possible strategic alternatives to enhance long-
term stockholder value;

. the fact that payment in cash eliminates any uncertainties in valuing the
consideration to be received by the ULTRADATA stockholders; and

. the $5.0 million breakup fee payable by CFI to ULTRADATA in the event
that the merger agreement is terminated for, among other things, CFI's
failure to receive financing for the purchase price to be paid in the
merger.

The board also considered the following negative factors concerning the
merger:

. the fact that ULTRADATA stockholders will receive cash in the merger,
which will not afford them the opportunity to participate in any growth
in the business of the combined company as a stockholder of CFI; and

. the risk that the merger would not be completed, and the disruption of
ULTRADATA's business if the merger is abandoned.

In examining the risk that the merger would not be completed, the board
examined a copy of the letter addressed to CFI from U.S. Bancorp Libra
indicating that U.S. Bancorp Libra was highly confident of being able to raise
funding for CFI to pay the approximately $63.0 million purchase price in the
merger. The board further noted that the merger agreement provides for a $5.0
million breakup fee payable by CFI to ULTRADATA in the event that the merger
agreement is terminated for, among other things, failure of CFI to receive
financing for the purchase price to be paid in the merger.

This discussion of the information and factors considered by the ULTRADATA
board is not intended to be exhaustive but includes all material factors
considered by the board. In view of the complexity and wide variety of
information and factors considered, both positive and negative, the ULTRADATA
board did not find it practical to quantify, rank or otherwise assign relative
or specific weights to these factors. In addition, the ULTRADATA board did not
reach any specific conclusion with respect to each of the factors considered,
or any aspect of any particular factor, but conducted an overall analysis of
these factors, including thorough discussions with ULTRADATA's management and
legal and accounting advisers. Individual members of the ULTRADATA board may
have given different weight to different factors. After taking into
consideration all of these factors, the board concluded that the merger was
fair to, and in the best interests of, ULTRADATA and its stockholders and that
ULTRADATA should proceed with the merger.

CFI's Reasons for the Merger

CFI considers the merger to be beneficial to CFI's stockholders and
customers and expects that it will contribute to the success of the combined
company because the merger:

. allows CFI to deliver a total system solution for front-and back-end
technologies to small and mid-sized banks and credit unions;

. positions CFI as a leader in offering real-time host processing
capabilities to community banks and credit unions;

. adds a business segment based on a recurring service fees model,
resulting in more predictable and consistent revenues for CFI;

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<PAGE>

. provides CFI's customers with the tools they need to develop, manage and
enhance profitable customer relationships;

. adds a state-of-the-art customer support group, backed by innovative and
effective technology solutions; and

. broadens the base of financial institutions to which CFI can market and
sell its integrated technology solutions.

Material Federal Income Tax Considerations

The receipt of cash for shares of ULTRADATA common stock under the merger
agreement will be a taxable transaction for federal income tax purposes. In
general, a holder of ULTRADATA common stock will recognize gain or loss for
federal income tax purposes equal to the difference between $7.50 times the
number of ULTRADATA shares held by the stockholder and the stockholder's
adjusted tax basis in the shares. Assuming the shares constitute capital assets
in the hands of the stockholder, the gain or loss will constitute capital gain
or loss. The gain or loss will be long-term capital gain or loss provided that
the shares exchanged were held by the stockholder for more than twelve months.
Under current law, long-term capital gains of individuals are taxed at a
maximum rate of 20% and a minimum rate of 10%. Capital gains that are not long-
term capital gains are taxed at ordinary income rates. To the extent the cash
received by the stockholder is attributable to accrued and unpaid dividends,
that amount will be treated as ordinary income to the extent of ULTRADATA's
current and accumulated earnings and profits as determined for U.S. federal
income tax purposes.

A stockholder who exchanges shares of ULTRADATA common stock may be subject
to a 31% backup withholding tax unless the stockholder provides its taxpayer
identification number, or unless an exemption applies. If backup withholding
applies to a stockholder, CFI's paying agent will be required to withhold 31%
from payments to the stockholder. Backup withholding is not an additional tax.
Rather, the amount of the backup withholding can be credited against the
federal income tax liability of the person subject to the backup withholding,
provided that the required information is given to the IRS. If backup
withholding results in an overpayment of tax, a refund can be obtained by the
stockholder upon filing an income tax return.

Regulatory Matters

The merger may be reviewed by the Antitrust Division of the Department of
Justice and the Federal Trade Commission to determine whether it complies with
applicable antitrust laws. Under the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, the merger may not be consummated until
ULTRADATA and CFI furnish information to the Department of Justice and the FTC
and the specified waiting period requirements of the HSR Act have been
satisfied. The notification and waiting period imposed upon ULTRADATA and CFI
under the HSR Act expired on June 28, 1999.

At any time, the Department of Justice, the FTC, state attorneys general,
foreign regulatory agencies or a private person or entity could challenge the
merger under the antitrust laws and seek, among other things, to enjoin the
merger, to cause CFI to divest itself of significant assets of ULTRADATA and
CFI, or to impose conditions on CFI with respect to the business operations of
the combined companies. Based on information available to them, ULTRADATA and
CFI believe that the merger will not violate federal or state antitrust laws.

We are aware of no other material governmental or regulatory approvals
required for consummation of the merger, other than compliance with Delaware
corporate law.

Accounting Treatment

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Appraisal Rights

You are entitled to appraisal rights under Section 262 of Delaware law as to
shares of ULTRADATA common stock owned by you. Set forth below is a summary
description of Section 262, which is reprinted in its entirety as Appendix B to
this proxy statement. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the ULTRADATA shares. A person having
a beneficial interest in shares that are held of record in the name of another
person, such as a broker or nominee, must act promptly to cause the record
holder to follow the steps summarized below properly and in a timely manner to
perfect whatever appraisal rights the beneficial owner may have.

This summary and Appendix B should be reviewed carefully by any stockholder
who wishes to exercise statutory appraisal rights or who wishes to preserve the
right to do so because failure to comply strictly with the procedures set forth
in this proxy statement and in Appendix B will result in the loss of appraisal
rights.

In accordance with Section 262, any stockholder may, before the vote at the
special meeting upon the proposal to adopt the merger agreement, demand in
writing from ULTRADATA the appraisal of the fair value of the stockholder's
shares. The demand must reasonably inform ULTRADATA of the identity of the
stockholder and that the stockholder intends to demand the appraisal of the
stockholder's shares. In order to be entitled to appraisal rights with respect
to any shares, a stockholder must:

. be the record holder of the shares on the date of the demand;

. continuously hold the shares through the effective time of the merger;

. properly demand an appraisal as described in this section; and

. not vote in favor of the proposal to approve and adopt the merger
agreement.

A stockholder who elects to exercise appraisal rights must mail or deliver a
written demand to:

ULTRADATA Corporation
5000 Franklin Drive
Pleasanton, California 94588-3354
Attention: Secretary

A vote against the merger or a failure to vote for the merger would not by
itself give ULTRADATA sufficient notice of a stockholder's election to exercise
appraisal rights.

Any stockholder, other than a record owner who is acting as a nominee holder
for different beneficial owners, seeking to exercise appraisal rights for a
portion, but not all, of the stockholder's shares should consult with legal
counsel before taking action. ULTRADATA believes that Delaware law has not
clearly addressed the ability of a stockholder to exercise appraisal rights
with respect to a portion, but not all, of a stockholder's shares. Should a
stockholder, other than a record owner who is acting as a nominee holder for
different beneficial owners, seek to exercise appraisal rights with respect to
a portion, but not all, of the stockholder's shares, ULTRADATA presently
intends to assert that by doing so the stockholder has waived appraisal rights.
Stockholders should be aware that a Delaware court may find that the
stockholder has so waived the stockholder's appraisal rights.

A demand for appraisal must be signed by or for the stockholder of record as
the stockholder's name appears on the certificate or certificates representing
his or her shares. If the shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian, or custodian, the demand must be signed by the
fiduciary. If the shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand must be signed by all joint
owners. An authorized agent, including an agent for two or more joint owners,
may sign the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, he or she is acting as agent for the record owner. A
record owner, such as a broker, who holds shares as a nominee for others, may
exercise appraisal rights with respect to the shares held for all or less than
all beneficial owners of shares as to which

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the person is the record owner. In this case, the written demand must set forth
the number of shares covered by the demand. Where the number of shares is not
expressly stated, the demand will be presumed to cover all shares outstanding
in the name of the record owner. Beneficial owners who are not record owners
and who intend to exercise appraisal rights should instruct the record owner to
comply strictly with the statutory requirements with respect to the exercise of
appraisal rights.

From and after the effective time of the merger, no stockholder who has duly
demanded appraisal in compliance with Section 262 will be entitled to vote for
any purpose the shares subject to the demand or to receive payment of dividends
or other distributions on the shares, except for dividends or distributions
payable to stockholders of record at a date prior to the effective time of the
merger.

At any time within 60 days after the effective time of the merger, any
stockholder who has previously made a demand for appraisal rights will have the
right to withdraw the stockholder's demand for appraisal and to accept the
terms offered in the merger agreement; after this period expires, a stockholder
may withdraw the stockholder's demand for appraisal only with the consent of
ULTRADATA, as the surviving corporation of the merger.

Within 120 days after the effective time of the merger, either ULTRADATA, as
the surviving corporation, or any stockholder who has complied with the
required conditions of Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the shares of the
dissenting stockholders. If a petition for an appraisal is timely filed, after
a hearing on the petition, the Court of Chancery will determine which
stockholders are entitled to appraisal rights and will appraise the shares
formerly owned by these stockholders, determining the fair value of their
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining the fair
value, the Court of Chancery is to take into account all relevant factors.

The cost of the appraisal proceeding may be determined by the Court of
Chancery and taxed against the parties as the Court of Chancery deems equitable
in the circumstances. Upon application of a dissenting stockholder, the Court
of Chancery may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares entitled to
appraisal.

If no petition for appraisal is filed with the Court of Chancery within 120
days after the effective time of the merger, stockholders' rights to appraisal
will cease, and all stockholders who had previously demanded appraisal will
thereafter be entitled to receive cash in exchange for their shares of
ULTRADATA common stock under the merger agreement, upon valid surrender of the
certificates that formerly represented their ULTRADATA shares. Since ULTRADATA
has no obligation to file a petition, and has no present intention to do so,
any stockholder who desires a petition to be filed is advised to file it on a
timely basis.

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THE MERGER

The following discussion summarizes the material provisions of the merger
agreement and the other related agreements and transactions. The following is
not, however, a complete statement of all the provisions of the merger
agreement and related agreements. Detailed terms of and conditions to the
merger are contained in the merger agreement, a copy of which is attached to
this document as Appendix A and is incorporated herein by reference. For a
complete presentation of this information, you are urged to read the more
detailed information set forth in Appendix A.

General

The merger agreement provides for the merger of UFO Acquisition (a wholly-
owned subsidiary of CFI) with and into ULTRADATA. As a result of the merger,
the separate existence of UFO will end and ULTRADATA will survive as a wholly-
owned subsidiary of CFI. Any time before the closing of the merger, CFI may
require that a wholly-owned subsidiary of CFI other than UFO be merged with and
into ULTRADATA, or that ULTRADATA be merged with and into UFO, or another
wholly-owned subsidiary of CFI, with UFO or the other wholly-owned subsidiary
surviving as a wholly-owned subsidiary of CFI. Whichever corporation survives
the merger will be referred to as the surviving corporation. The former holders
of ULTRADATA common stock will be entitled to receive $7.50 in cash, without
interest, subject to reduction for any applicable federal backup or other
withholding taxes, for each share of ULTRADATA common stock they held
immediately prior to the effective time of the merger.

Effective Time; Closing Date

The merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware, or at whatever time is
stated in the certificate of merger. The closing will occur at a date and time
agreed upon by ULTRADATA and CFI, no later than two days after all conditions
to closing have been satisfied or waived. Assuming all conditions to closing
are satisfied or waived, we currently anticipate that the effective time of the
merger and the closing will be on or about July 23, 1999.

Payment for Common Stock

At the effective time of the merger, each share of ULTRADATA common stock
issued and outstanding immediately prior to the effective time of the merger,
other than dissenting shares, shares owned by any subsidiary of ULTRADATA, and
shares owned by CFI or any of its subsidiaries, will be converted into the
right to receive $7.50 in cash, without interest, subject to reduction for any
applicable federal backup or other withholding taxes.

Exchange of Certificates

As a result of the merger, all shares of ULTRADATA common stock outstanding
immediately prior to the effective time of the merger will be converted into
the right to receive cash as set forth above. Consequently, after the effective
time of the merger, no further transfers of ULTRADATA common stock will be
recorded in the stock transfer books of ULTRADATA. Soon after the effective
time, CFI's paying agent will mail to ULTRADATA stockholders a letter of
transmittal and instructions for use in surrendering ULTRADATA stock
certificates in exchange for cash. In the event that your stock certificate has
been lost or destroyed, you will have to execute an affidavit of lost
certificate and post a bond satisfactory to CFI as indemnity against any claim
that may be made against CFI with respect to that stock certificate. Promptly
after receipt by CFI's paying agent of your ULTRADATA stock certificate or an
affidavit of lost certificate accompanied by a bond, an executed letter of
transmittal and any other required documents, your stock certificates will be
canceled and you will receive cash as set forth above.

You should not submit your ULTRADATA stock certificates for exchange unless
and until you receive the transmittal instructions and a form of letter of
transmittal from CFI's paying agent.

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Dissenting Shares

Holders of shares of ULTRADATA common stock who have complied with all
requirements for perfecting appraisal rights under Delaware law will be
entitled to receive the fair value of their stock as appraised by the Delaware
Court of Chancery instead of the cash payment described above. For more
information, see "Appraisal Rights" on page 16.

Treatment of Stock Options

At the effective time of the merger, outstanding options issued under
ULTRADATA's 1994 Equity Incentive Plan will be assumed by CFI and converted
into options for CFI common stock. The number of shares subject to the option
and the exercise price under the option will be adjusted accordingly. The
number of shares of ULTRADATA common stock subject to the option will be
multiplied by 0.718, and the exercise price of ULTRADATA common stock under the
option will be divided by 0.718. All of the other terms and conditions of each
assumed option will remain unchanged in all material respects. Any shares
issued under options exercised prior to the closing of the merger will entitle
the holder to receive cash consideration as a stockholder of ULTRADATA in the
merger.

. the difference between $7.50 and the exercise price of the ULTRADATA
option, multiplied by

. the number of shares of ULTRADATA common stock subject to that option
that are vested and exercisable at the effective time of the merger.

. the difference between $7.50 and the exercise price of the ULTRADATA
option, multiplied by

. the number of shares of ULTRADATA common stock subject to that option
that are vested and exercisable at the effective time of the merger.

Representations and Warranties

The merger agreement contains various representations and warranties of
ULTRADATA, including representations and warranties as to:

. our due organization, valid existence, good standing and our corporate
power and authority to own and operate our properties and carry on our
business;

. our lack of any subsidiaries, or ownership of or investment in any other
entity;

. our capitalization and the ownership of our capital stock;

. our power and authority to enter into and perform under the merger
agreement;

. compliance with the Securities Act of 1933 and the Securities Exchange
Act of 1934;

. the accuracy of the information we supply for this proxy statement and
the compliance of this proxy statement with the Securities Exchange Act
of 1934, as amended;

. the third-party consents required for the merger and the absence of
conflict between (1) the merger agreement and (2) our corporate documents
and agreements with third parties and applicable law;

. the accuracy of our financial statements and the absence or certain
changes with respect to our business since December 31, 1998;

. the absence of litigation pending or threatened against us;

. compliance with all applicable laws, including employment and
environmental laws and regulations and our employee benefit plans;

19
<PAGE>

. the timely filing of our tax returns and our liabilities for taxes;

. ownership of intellectual property and the absence of infringement of
third-party intellectual property rights by us;

. the absence of any brokerage, finder's or other fees or commissions owed
by us to anyone in connection with the merger agreement;

. material contracts and our compliance with the terms of those contracts;
and

. the accuracy of our disclosure made under and pursuant to the merger
agreement.

The merger agreement contains representations and warranties of CFI as to:

. CFI's due organization, valid existence and good standing, and CFI's
corporate power and authority to own and operate its properties and carry
on its business;

. CFI's corporate power and authority to enter into and perform under the
merger agreement;

. the accuracy of the information CFI supplies for this proxy statement;

. the third-party consents required for the merger and the absence of
conflict between (1) the merger agreement and (2) CFI's corporate
documents and third-party agreements and applicable law;

. the absence of litigation pending or threatened against CFI;

. the absence of any brokerage, finder's or other fees or commissions owed
by CFI to anyone in connection with the merger agreement, other than fees
that may be payable to placement agents or lenders in connection with any
debt financing obtained by CFI in connection with the merger; and

. CFI's receipt as of the signing of the merger agreement of commitments or
highly confident letters from financially responsible third parties to
obtain the funds necessary to consummate the merger and to make the cash
payments to ULTRADATA stockholders, and CFI's receipt as of the closing
of the merger of the funds necessary to consummate the merger and to make
the cash payments to ULTRADATA stockholders. As of the date of this proxy
statement, CFI has not completed the financing arrangements for the
necessary funds, but has received a letter from U.S. Bancorp Libra
indicating that U.S. Bancorp Libra is highly confident that it will be
able to place sufficient funds to enable CFI to pay the merger
consideration.

Covenants

ULTRADATA Covenants

A complete list of the covenants of both parties is set forth in Section 4
of the merger agreement, which is included as Appendix A.

General Affirmative Covenants

In the merger agreement, ULTRADATA has agreed that until the earlier of the
effective time of the merger or the termination of the merger agreement, it
will:

. provide CFI with access to its files, books, records and offices as may
be reasonably required;

. obtain the government approvals and third-party consents necessary for
the merger;

. promptly notify CFI of any event that is likely to cause any
representation or warranty of ULTRADATA to be materially untrue or
inaccurate, any material failure to comply with any of covenant,
condition or agreement under the merger agreement, any notice relating to
the breach of any material agreement, any notice from a third-party
alleging that its consent is required in connection with the merger, and
any material adverse change to its business, financial condition or
assets or any litigation pending or threatened against it;

. release and have terminated all liens relating to its loan and security
agreement with Silicon Valley Bank;

20
<PAGE>

. if requested by CFI, terminate its 401(k) Employee Retirement Plan; and

. use reasonable best efforts to cause the merger to be completed.

Conduct of Business

In the merger agreement, we agreed that, until the effective time of the
merger or until termination of the merger agreement, we will conduct our
operations in the ordinary course, consistent with past practice, strive to
keep our current officers and employees and to preserve our relationships with
customers, suppliers and other third parties. We also agreed that we will not,
without CFI's consent:

. amend our certificate of incorporation or bylaws;

. issue stock, except through our existing stock option plans;

. authorize any stock splits or reclassifications, or pay any dividends or
other distributions on our stock;

. adopt any complete or partial liquidation or restructuring of our
corporate structure;

. incur or assume any debt;

. change, amend or terminate any employee benefit plans except as may be
required by law;

. acquire, sell, lease or dispose of any assets outside of the ordinary
course of business, except as contemplated by the merger agreement;

. change any of our accounting principles or practices except as may be
required by law;

. re-value any of our assets;

. acquire any corporation, partnership or other business organization,
enter into any agreement other than in the ordinary course of business,
amend any material agreement, authorize any new capital expenditures or
expenditures exceeding an aggregate of $150,000 or enter into or amend
any agreement or arrangement that is prohibited by the merger agreement;

. make or revoke any tax election or settle or compromise any material tax
liability;

. pay out or settle any material claims, liabilities or obligations except
in the ordinary course of business or as contemplated by the merger
agreement;

. settle any pending or threatened suit relating to the merger, except as
contemplated by the merger agreement; and

. take or propose to take any action that would make our representations
and warranties untrue.

No Other Negotiations

During the pre-closing period, we will not encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information to,
any third party concerning any merger, sale of assets, sale of shares of our
capital stock or other similar transactions. We also will not authorize or
permit any of our officers, directors, employees, representatives or agents to
undertake any of these prohibited actions.

However, we may furnish information and access to a third party in response
a third party's unsolicited proposal, and may participate in discussions and
negotiate with that third party, if the board of directors determines in good
faith that it is necessary to explore the proposal in order to meet its
fiduciary duties to the stockholders. The ULTRADATA board must provide a copy
of any written proposal and a summary of any oral proposal to CFI within 24
hours of its receipt. In addition, the board must promptly advise CFI of any
material developments concerning the proposal.

CFI Covenants

In the merger agreement, CFI promises that it will:

. obtain the government approvals and third-party consents necessary for
the merger;

. promptly notify ULTRADATA of any event that is likely to cause any
representation or warranty of CFI to be materially untrue or inaccurate,
any material failure to comply with any of covenant,

21
<PAGE>

condition or agreement under the merger agreement, any notice relating to
the breach of any material agreement, any notice from a third-party
alleging that its consent is required in connection with the merger;

. amend CFI's 401(k) Employee Retirement Plan to provide that ULTRADATA
employees may commence participation in CFI's 401(k) Employee Retirement
Plan; and

. use reasonable best efforts to cause the merger to be completed.

Conditions to the Merger

Conditions to the Obligations of Both Parties

The obligations of both parties to effect the merger are conditioned upon:

. approval of the merger agreement by ULTRADATA stockholders;

. the absence of any statute, rule, regulation, executive order, decree,
ruling or injunction which would prohibit or restrict the consummation of
the merger; or

. the receipt or filing of any governmental or regulatory notices or
approvals.

Conditions to the Obligations of ULTRADATA

The obligations of ULTRADATA to effect the merger are conditioned upon:

. the representations and warranties of CFI will be true and correct in all
material respects on and as of the closing date, including but not
limited to its representation and warranty that it will have the funds
necessary to consummate the merger, and ULTRADATA will have received a
certificate to that effect from CFI; and

. CFI will have performed and complied in all material respects with all of
its covenants on or before the closing, and ULTRADATA will have received
a certificate to that effect from CFI.

Conditions to the Obligations of CFI

The obligations of CFI to effect the merger are conditioned upon:

. the representations and warranties of ULTRADATA will be true and correct
in all material respects on and as of the closing date, and CFI will have
received a certificate to that effect from ULTRADATA;

. ULTRADATA will have performed and complied in all material respects with
all of its covenants on or before the closing, and CFI will have received
a certificate to that effect from ULTRADATA;

. ULTRADATA will have received all consents necessary to continue in full
force all of its material contracts;

. the absence of any material adverse change on ULTRADATA; and

. each employee of ULTRADATA and its subsidiaries will have entered into a
proprietary rights and confidentiality agreement.

Termination of the Merger Agreement and Break-Up Fee

The merger agreement may be terminated before the merger becomes effective,
whether before or after approval of the merger by the ULTRADATA stockholders:

. by mutual consent of ULTRADATA and CFI;

. by either ULTRADATA or CFI if there is a permanent injunction or other
court order prohibiting the merger or making it illegal;

. by either ULTRADATA or CFI if the merger is not completed by August 31,
1999, other than as a result of a breach of the merger agreement by the
terminating party;

22
<PAGE>

. by ULTRADATA if:

. ULTRADATA enters into a definitive agreement or receives a bona fide
proposal concerning a merger, sale of assets, sale of shares of
ULTRADATA capital stock or a similar transaction that the board of
directors, based on the written advice of a financial adviser of
nationally recognized reputation, determines in good faith to be more
favorable to ULTRADATA stockholders than the merger with CFI;

. ULTRADATA fails to obtain stockholder approval by August 31, 1999; or

. CFI breaches a representation or warranty or breaches any covenant or
agreement in the merger agreement if the breach has a material adverse
effect on the consummation of the merger, if either breach is not cured
by August 31, 1999; or

. by CFI if:

. ULTRADATA fails to obtain stockholder approval by August 31, 1999; or

. ULTRADATA breaches a representation or warranty, or breaches any
covenant or agreement that has a material adverse effect on ULTRADATA
or the consummation of the merger, if either breach is not cured by
August 31, 1999.

In addition, upon termination of the merger agreement, each party will bear
its own expenses in connection with the merger agreement, except that ULTRADATA
and CFI have to pay a termination fee of $5.0 million and pay the other party's
out-of-pocket fees and expenses, not to exceed $250,000 upon the occurrence of
the events described below.

ULTRADATA will pay CFI a termination fee and reimburse CFI for fees and
expenses, if:

. ULTRADATA terminates the merger agreement because ULTRADATA receives a
bona fide merger or acquisition proposal more favorable to ULTRADATA
stockholders than the merger with CFI;

. either party terminates the merger agreement because ULTRADATA fails to
obtain stockholder approval by August 31, 1999; or

. CFI terminates the merger agreement because (1) ULTRADATA's board of
directors withdraws, modifies or changes its approval or recommendation
of the merger, or recommends another merger or acquisition proposal; or
(2) ULTRADATA breaches a representation or warranty in the merger
agreement or breaches any covenant or agreement that has a material
adverse effect on ULTRADATA or the consummation of the merger, if either
breach is not cured by August 31, 1999;

CFI will pay ULTRADATA a termination fee and reimburse ULTRADATA for fees
and expenses if ULTRADATA terminates the merger agreement because CFI breaches
a representation or warranty or breaches a covenant or agreement if the breach
has a material adverse effect on the consummation of the merger, if either
breach is not cured by August 31, 1999, including but not limited to CFI's
obligation to obtain adequate financing for the funds necessary to consummate
the merger.

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<PAGE>

BENEFITS OF THE MERGER TO ULTRADATA
DIRECTORS AND EXECUTIVE OFFICERS

When you consider the ULTRADATA board of directors' recommendation to vote
for the merger, you should be aware of interests which some of the ULTRADATA
directors and executive officers have in the merger that are different from
your and their interests as ULTRADATA stockholders. The ULTRADATA board was
aware of these and other interests and considered them before approving and
adopting the merger agreement.

Assumption of Stock Options

The following director and executive officers hold options to purchase a
total of 530,800 shares of ULTRADATA common stock granted under ULTRADATA's
1994 Equity Incentive Plan:

. Nigel P. Gallop, a director of ULTRADATA,

. Robert J. Majteles, President and Chief Executive Officer of ULTRADATA,

. Ronald H. Bissinger, Vice President and Chief Financial Officer of
ULTRADATA,

. David J. Robbins, Vice President, Products and Services of ULTRADATA,

. Cindy L. Cooper, Vice President, Product Development of ULTRADATA, and

. James R. Berthelsen, Vice President, Marketing of ULTRADATA

At the effective time of the merger, CFI will assume all of the outstanding
vested and unvested options to purchase ULTRADATA common stock granted under
the 1994 Equity Incentive Plan, including options granted to Messrs. Gallop,
Majteles, Bissinger, Robbins and Berthelsen and to Ms. Cooper. Each of these
new CFI options will contain the same material terms and conditions as the
existing ULTRADATA options except that the number of shares of ULTRADATA common
stock subject to the option will be multiplied by 0.718, and the exercise price
of ULTRADATA common stock under the option will be divided by 0.718

The option holders who elect to exercise any of their vested options prior
to the effective time of the merger will receive the merger consideration
payable to holders of ULTRADATA common stock in exchange for the shares issued
upon exercise, less the exercise price of the vested option.

Acceleration of Stock Options

The completion of the merger will cause the full vesting of the following
number of options to purchase the following number of shares of ULTRADATA
common stock held by the following executive officers:

<TABLE>
<CAPTION>
Name and Title No. of Options
-------------- --------------
<S> <C>
Robert J. Majteles, President and Chief Executive Offi-
cer..................................................... 700,000
Ronald H. Bissinger, Vice President and Chief Financial
Officer................................................. 75,000
David J. Robbins, Vice President, Products and Services.. 120,000
Cindy L. Cooper, Vice President, Product Development..... 100,000
James R. Berthelsen, Vice President, Marketing........... 100,800
</TABLE>

CFI will terminate options to purchase 600,000 shares of common stock
granted to Mr. Majteles and pay to him an amount equal to the product of:

. the difference between $7.50 and the exercise price of the ULTRADATA
option, multiplied by

. the number of shares of ULTRADATA common stock subject to the option.

24
<PAGE>

The completion of the merger will cause the full vesting of options to
purchase the following number of shares of ULTRADATA common stock held by the
following directors:

<TABLE>
<CAPTION>
Name No. of Options
---- --------------
<S> <C>
Lawrence M. Howell......................................... 40,000
M. Mel Stuckey............................................. 40,000
John F. Carlson............................................ 30,000
</TABLE>

Nigel P. Gallop, ULTRADATA's Chairman, holds fully vested options to
purchase 600,000 shares of ULTRADATA common stock.

CFI will terminate options granted each of Messrs. Gallop, Howell, Stuckey
and Carlson and pay to each an amount equal to the product of:

. the difference between $7.50 and the exercise price of the ULTRADATA
option, multiplied by

. the number of shares of ULTRADATA common stock subject to that option.

25
<PAGE>

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS ANDMANAGEMENT OF ULTRADATA

The following table sets forth certain information, as of June 15, 1999,
with respect to the beneficial ownership of ULTRADATA common stock by:

. each stockholder known by ULTRADATA to be the beneficial owner of more
than 5% of the ULTRADATA common stock;

. each director;

. ULTRADATA's Chief Executive Officer and each of the four other most
highly compensated executive officers of ULTRADATA based on ULTRADATA's
fiscal year 1998 compensation; and

. all directors and executive officers as a group.

For purposes of this table, beneficial ownership of securities is defined
according to the rules of the Securities and Exchange Commission and means
generally the power to vote or exercise investment discretion with respect to
securities, regardless of any economic interests therein. ULTRADATA believes
that the beneficial owners of shares of ULTRADATA common stock listed below
have sole investment and voting power with respect to the shares, subject to
community property laws where applicable. In addition, for purposes of this
table, a person or group is deemed to have beneficial ownership of any shares
which the person has the right to acquire within 60 days after June 15, 1999.
For purposes of calculating the percentage of outstanding shares held by each
person named above, any shares which the person has the right to acquire within
60 days after June 15, 1999 are deemed to be outstanding, but the shares are
not deemed to be outstanding for the purpose of calculating the percentage
ownership of any other person.

26
<PAGE>

The third column shows separately shares which may be acquired by exercise
of stock options within 60 days after June 15, 1999 or upon acceleration of the
stock options in connection with the merger by the directors and executive
officers individually and as a group as shown. These shares are included in the
numbers expressed in the first column.

<TABLE>
<CAPTION>
Percent of Options
Amount and Nature of Outstanding Exercisable
Name and Address of Beneficial Owner Beneficial Ownership Common Stock Within 60 Days
- ------------------------------------ --------------------- ------------- --------------
<S> <C> <C> <C>
Directors and Officers
Nigel P. Gallop............. 1,840,000 21.9% 635,000
c/o ULTRADATA Corporation
5000 Franklin Drive
Pleasanton, California
94588-3544
Robert J. Majteles.......... 725,000 8.6% 700,000
c/o ULTRADATA Corporation
5000 Franklin Drive
Pleasanton, CA 94588-3354
David J. Robbins............ 125,146 1.6% 120,000
James Berthelsen............ 109,865 1.4% 100,800
Cindy L. Cooper............. 105,959 1.4% 100,000
Ronald H. Bissinger......... 75,000 1.0% 75,000
Lawrence M. Howell.......... 56,300 * 40,000
M. M. Stuckey............... 42,500 * 40,000
John F. Carlson............. 30,000 * 30,000
All executive officers and
directors as a group
(9 persons)................ 3,108,770 32.4% 1,840,800
5% Stockholders
Andrew J. Phelan............ 1,128,000 14.5%
c/o ULTRADATA Australia
25 Richardson Street
West Perth 6005
Australia
Brian N. Dean............... 980,742 12.7%
c/o ULTRADATA Australia
1919 Malvern Road
East Malvern Victoria
Australia 3145
Malcolm R. McKellar......... 868,500 11.2%
10-12 Hibiscus Court
Rocky Point, FNQ 4783
Australia
David M. Greenhouse......... 820,800 10.6%
Austin W. Marxe
153 East 53rd Street
New York, NY 10022
Lipkin Capital Management,
Inc........................ 414,500 5.4%
161 Ferndale Avenue South
Wayzata, MN 55391
</TABLE>
- --------
* Less than 1%

27
<PAGE>

BUSINESS OF ULTRADATA

We provide information management software and solutions for relationship-
oriented financial institutions. Currently these solutions allow our customers
to, among other things, engage in cross-selling, relationship pricing, data
mining, and workflow control as well as to provide financial services such as
checking, savings and investment accounts, home banking, credit and debit
cards, automated teller machine access and consumer lending. Our products today
are primarily targeted at large and mid-sized credit unions for use as an in-
house installation and to value-added resellers for distribution to small-sized
credit unions that operate in service bureau environments. Combining the in-
house installations with services provided by our value added resellers, the
approximately 430 credit unions using our software represent over 5,700,000
members and $30.0 billion in assets.

A credit union is a member-owned, not-for-profit financial institution.
Credit unions compete by providing customer relationship management. Although
historically targeting credit unions, we envision potentially expanding into
markets containing other relationship-oriented financial institutions.

Products

In addition to our ULTRAFIS(R) transaction processing engine, we offer a
family of information management modules consisting of a number of applications
that can be purchased together or separately to enhance the services and
information management, professional services and software maintenance. In
1998, we substantially phased out direct sales of hardware. We also have
established value added reseller relationships with service organizations to
provide service bureaus environments for customers that wish to utilize the
ULTRAFIS system and related information management modules without the
accompanying information systems infrastructure.

Our information management modules include:

. the Financial Service Platform--Front Office(TM) module which provides a
relationship management environment for tellers, member services and call
center operations;

. the FSP--ALPS(TM) Automated Loan Processing System, which automates the
processing, cross-selling and evaluation of consumer loan applications;

. the FSP--Collections(TM) module which manages the handling and collection
of delinquent loan accounts;

. the Ultra-Access(R) NT-based suite of remote banking products which give
financial institutions and their members efficient, reliable and secure
remote banking capabilities via personal computers using Internet,
Intranet or private dial-up access and self-service kiosks; and

. the Ultra-Voice(TM) NT-based voice response system for member inquiries,
loan applications and transaction processing.

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<PAGE>

The following chart summarizes the principal features of our products:

<TABLE>
<CAPTION>
Product Description
- ------- -----------
<S> <C>
ULTRAFIS..................... Core transaction processing engine which also
provides a number of optional interfaces to
third-party applications, including interfaces
for mortgage loan processing, student loan
processing, asset/liability management,
investment portfolio accounting, marketing
analysis systems and document management

Automated Teller Machine
processing.................. Supported for off-line and online processing

Ultra-Link................... Provides an online and optional terminal driving
system for automated teller machine, debit card
and point of sale processing and supports a wide
array of automated teller machine transactions,
including savings and checking deposits and
withdrawals, transfers between savings and
checking accounts, loan payment and balance
inquiry, and statement printing, as determined
by the credit union

Ultra-Sales.................. Provides sales automation and relationship
management capabilities allowing credit unions
to retrieve pertinent information and complete
sales cycles

OnBase(R) Electronic Document Facilitates archival, retrieval and workflow of
Management System........... documents
</TABLE>

Prior to 1997, we sold third-party products supported by the ULTRAFIS
system, including RISC/UNIX based workstations from major suppliers such as
Hewlett-Packard and IBM and resold associated peripheral equipment such as
printers, tape drives and networking devices. In the fall of 1997, we
established a non-exclusive relationship with a value added reseller hardware
vendor to whom we transferred these hardware sales. The hardware vendor
configures, sells, distributes and provides service for our customers' hardware
needs so that we can concentrate our efforts on the core business of software,
maintenance and services. In the first quarter of 1999, we began using a
different value added reseller hardware vendor. We also re-license software
products used with the system, such as the UNIX operating system, the
UniData(R) relational database from Ardent Software, Inc., Uniplex office
automation products from Uniplex(TM) Software, Inc. and a variety of networking
software.

Pricing

The price for a complete suite of software products, including our core
ULTRAFIS system, information management modules, and installation and training
services ranges from $250,000 to $2,000,000, depending primarily on the
customer size and requested modules.

Pricing for information management modules, such as the FSP--Front Office,
FSP--ALPS, FSP--Collections and Ultra-Access modules, typically range from
$10,000 to $125,000.

We also charge a recurring software maintenance fee for software support and
periodic software updates. Currently, all of our customers subscribe to the
maintenance services, for which they pay a fee equal to a percentage of the
purchase price for the selected software. We also charge for related training,
implementation and professional services.

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<PAGE>

Professional Services

We offer a variety of product and technical professional services as well as
application training to our customers, including on-site customer training and
continuing education either at the customer's site or at our offices. For
financial institutions, the installation of a new data processing or customer
information management system is a complex and time-critical undertaking.
Typically, a new system must be installed and made fully operational with data
converted from the prior system over a single weekend and without any period of
parallel operation with the system it replaces. After selecting us as the
solution provider, the installation process typically requires a minimum of
four months of preparation and planning to successfully install and convert
from the customer's legacy system. Once our system is installed, we offer
additional professional services to assist with product utilization, training
and future applicability of additional information management modules.

We offer an optional service that allows customers to continue to operate
their ULTRAFIS systems in the event of a catastrophic system failure at their
own site through our Disaster Recovery Center in Carrollton, Texas.

Technology

Our technology strategy is to employ the latest open computing standards.
This approach allows us and our customers to take advantage of performance
improvements and cost reductions in software, operating systems, databases and
hardware.

The core ULTRAFIS software was originally released in 1981 and was
significantly reengineered in 1990 to operate on the industry-standard open
architecture UNIX operating system. The re-engineered software is able to run
on a wide range of platforms, including those of Hewlett-Packard and IBM.
Because UNIX provides for scalability, adaptability to growth, and is
expandable and open to a variety of hardware, software and networking products,
we believe that products based on the UNIX operating system provide a
competitive advantage in the development of systems for financial services
providers. We also plan to release our core ULTRAFIS software on the NT
platform in 1999.

The ULTRAFIS system uses the UniData relational database management system
and data warehouse from Ardent Software. The data warehouse allows for enhanced
customer information management through the use of data cubes. The database is
designed for high-volume, online transaction processing. This nested, three-
dimensional database uses the industry-standard structured query language to
interface with the leading third-party management and reporting packages. This
model allows for significant improvements in system performance and in data
storage compared to a relational system. This database allows the ULTRAFIS
system to take advantage of leading-edge technology such as multi-processor
hardware, distributed processing using TCP/IP and other standard networking
protocols and client/server technology, as well as providing a seamless
interface to popular personal computer software products, such as the Microsoft
Corporation suite of products and other advanced information tools. Under our
agreement with Ardent, Ardent has granted us a nonexclusive license to
distribute and sublicense certain of Ardent's database products in North
America.

For our client/server products, we use Microsoft(R) Windows and Windows 2000
NT operating systems, which provide easy-to-use graphical user interfaces and
enable the user to take advantage of the wide variety of personal computer
applications that operate with these operating systems. We are developing our
products to take advantage of new products and standards produced by Microsoft
such as Windows 2000 NT, Visual Basic and Visual Voice. FSP is an architecture
developed by us for delivery of its client/server information management
modules. This environment provides a consistent look-and-feel to the products,
a standard for design and navigation, and a shortened development cycle for
delivery of new products and features within the architecture.

Our technology approach also provides for independence in local and wide
area networking. Our customers use a wide variety of networking hardware and
software. We believe that network independence is

30
<PAGE>

critical for our customers with multiple branches, automated teller machines
and other remote banking needs such as remote electronic banking and electronic
financial services.

Research and Development

The markets for our products are characterized by changing technology and
improvements in database technology, network operating systems, programming
tools, programming languages, operating systems and computer hardware.

The principal focus of our development activities is the enhancement of
existing product offerings and development of new information management
applications such as data mining and customer relationship management. Our
success will depend in part upon the development and sale of these products to
our current customers and future customers outside of our traditional credit
union base, including potential customers such as banks, investment firms,
brokerages, savings and loan associations, and other financial services
providers.

Customers

Our current installed base includes approximately 430 credit unions using
the ULTRAFIS software either in an in-house or a service bureau environment.
Our credit union market strategy is to target in-house systems to credit unions
with over 10,000 members and to provide our software to smaller credit unions
through value added resellers. Our installed base currently serves
approximately 5,700,000 members, or 8%, of the approximately 71,000,000 total
credit union members in the United States. No customer represents 10% or more
of our revenues.

Customer Service

Customer service and support are key elements of our business. The services
and support products offered to our customers include product installation and
training, conversion programming services, custom programming, consulting,
disaster recovery planning and training services and telephone customer
support.

Support

We offer standard, extended and emergency telephone customer support to
assist customers in resolving problems. Under our standard maintenance
agreements, support is provided from 3:00 a.m. to 11:00 p.m., Pacific Standard
Time, Monday through Friday, and from 9:00 a.m. to 5:00 p.m., Pacific Standard
Time, on Saturday. We offer 24-hour and emergency customer support for an
additional hourly charge.

Sales and Marketing

We sell our products and services in the United States primarily through a
direct sales force of sales representatives located in our main offices in
Pleasanton, California, and in sales offices in Connecticut, Florida, Michigan,
Minnesota, North Dakota, Texas and Utah. Additionally, the sales force is
supported by a technical team of system consultants. While the sales cycle
varies substantially from customer to customer, the sale to a new customer
typically extends from three to twelve months while information management
module sales cycles can be considerably shorter.

We also have been successful in marketing our products through value added
resellers. We anticipate that we will further develop and rely in part upon
distribution relationships to market our products. There can be no assurance
that we will be successful in establishing relationships or that any entities
with which we establish relationships will be successful in marketing or
selling our products.

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<PAGE>

Competition

The market for information processing services to the credit union industry
is highly competitive and somewhat fragmented. We compete primarily with
independent computer service firms and internal data processing departments of
potential customers. Our products are generally priced at the higher end of the
market because we believe that our products generally provide more
functionality, versatility and higher levels of integration than its
competitors' products.

We believe that the principal competitive factors in our target markets are
product functionality, flexibility, ease-of-use, quality, performance, customer
service and support, company reputation, price and use of new industry standard
technologies. Although we believe that we compete effectively with respect to
each of these factors, there can be no assurance that we can maintain our
competitive position against current and potential competitors, some of which
have greater financial, marketing and other resources than us.

Our principal competitors are different across the credit union market, as
the size and complexity of financial institutions have different functionality
or pricing requirements. Our principal competitors include various entities
owned by:

. FISERV, Inc.,

. XP Systems,

. Users Inc.,

. Symitar Systems, Inc., and

. EDS Credit Union Services.

Proprietary Rights and Licenses

We seek to protect our software, documentation and other proprietary
information under trade secret, copyright and trademark laws, which afford only
limited protection. We have no patents. ULTRADATA, Ultra-Access, ULTRAFIS, and
the ULTRADATA logo are registered U.S. trademarks of ULTRADATA. FSP--Front
Office, FSP--ALPS, FSP--Collections, Ultra-Link, Ultra-Sales and Ultra-Voice
are trademarks of ULTRADATA.

There are currently no pending claims that our products, trademarks or other
proprietary rights infringe upon the proprietary rights of third parties. A
successful claim of infringement against us or our failure to develop or
license a substitute technology could have a material adverse effect on our
business, financial condition and results of operations.

Government Regulation

We are not directly subject to federal or state regulations applicable to
credit unions and other financial institutions. As a provider of products to
these entities, however, we must take into account applicable regulations in
order to provide products that help our customers comply with these
regulations. Credit unions that utilize our products are regulated by the
National Credit Union Association, a federal government agency, and various
state regulatory authorities. The use by financial institutions of our products
is subject to a number of laws and regulations promulgated by the National
Credit Union Association and the Federal Reserve Board. The implementation of
our products by our customers is reviewed from time to time by government
regulators in connection with compliance audits of the customers' operations
and we also monitor regulatory changes on our own and implement changes to our
products as appropriate. Failure to reflect in our products the terms of these
regulations in a timely or accurate manner could subject us to liabilities that
could have a material adverse effect on our business, financial condition and
results of operations. Furthermore, changes to these regulations and standards
or the adoption of new regulations or standards that affect our products could
affect the performance of our products and have a material adverse effect on
our business, financial condition and results of operations.

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Employees

We had approximately 168 employees as of April 30, 1999. None of our
employees are represented by a labor union. We have experienced no work
stoppages and believe that our employee relationships are good.

Properties

Our headquarters in Pleasanton, California consists of two facilities under
lease through January 1, 2007. We have consolidated our headquarters operations
into the larger of the two facilities, which has approximately 60,000 square
feet of office space, and have subleased our smaller facility to another entity
through July 2002. We believe that the larger facility will meet our growth
needs for the foreseeable future.

We also have an office in Carrollton, Texas which houses the corporate and
customer disaster recovery center. The facility is under lease until December
2001.

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

This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes forward-looking statements which reflect our current
views with respect to future events and financial performance. These forward-
looking statements are subject to certain risks and uncertainties, including
those discussed below, that could cause results to differ materially from
historical results or those anticipated. In this report the words "expects,"
"anticipates," "believes" and similar expressions identify forward-looking
statements, which speak only as of the date hereof.

Overview

We provide information management software and solutions for relationship-
oriented financial institutions. These solutions allow our customers to, among
other things, engage in cross-selling, relationship pricing, data mining and
workflow control. These solutions also allow our customers to provide financial
services such as checking, savings and investment accounts, home banking,
credit and debit cards, automated teller machine access and consumer lending.
Our products are primarily targeted at large and mid-sized credit unions that
want to operate their system in-house. For smaller credit unions, we work
through value added resellers to provide our products. Combining the in-house
installations with services provided by our value added resellers, the
approximately 430 credit unions using our software represent over 5,700,000
members and $30.0 billion in assets.

We derive our revenues primarily from software license fees, professional
service fees including training and installation, custom services, disaster
recovery and software maintenance fees. A significant portion of our revenues
is derived from substantial contracts with organizations that have long
decision-making cycles, typically from three to twelve months. Each new
customer system generally consists of our ULTRAFIS product and selected
information management modules and selected professional services.

In the fall of 1997, we established a non-exclusive relationship with a
value added reseller hardware vendor to configure, sell, distribute and provide
service for the Hewlett-Packard and IBM hardware products and operating systems
used in conjunction with our software products. Further, the hardware vendor
builds, integrates, delivers and supports our Ultra-Access suite of remote
banking products including Ultra-Access Browser Banking, self-serve kiosks,
voice response systems and firewalls. This relationship was formed to allow us
to focus on our core capabilities of providing software and related services to
our customers. In the first quarter of 1999, we began using a different value
added reseller hardware vendor.

In the second quarter of 1997, we entered into a distributor agreement with
Applied Communications, Inc., formerly USSI, Inc., a division of Transaction
Systems Architects, Inc., to develop and license our Ultra-Link online and
optional terminal driving system. The Ultra-Link system is used for automated
teller machine and debit card processing that supports a wide array of
automated teller machine transactions, including savings and checking deposits
and withdrawals, transfers between savings and checking accounts, loan payment
and balance inquiry and statement printing, as determined by the credit union.
In the first quarter of 1999, we renegotiated our relationship with Applied
Communications to reduce the number of licenses purchased and provide for
maintenance required by the Ultra-Link system. We replaced the payments
required under the 1997 agreement with an initial payment of $500,000 in May
1999 and monthly payments totaling $700,000 payable over the following 24
months for which we executed an irrevocable standby letter of credit. Our
failure to successfully sell and implement this product in our customer base
could have a material adverse effect on our business, financial condition and
results of operations.

In the third quarter of 1997, we transferred our direct service bureau
operations to Premier Systems, Incorporated, our largest service bureau value
added reseller. The sale resulted in a gain of $558,000 in the third quarter of
1997 and provides for an additional annual amount totaling $350,000 to be paid
to us in four quarterly installments commencing December 31, 1998, contingent
upon renewal of service bureau contracts

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transferred to Premier Systems. As of December 31, 1998, we had received
$162,000 from Premier Systems. We expect that we will only provide service
bureau services through value added resellers in the future.

Results of Operations

Comparison of Years Ended December 31, 1998 and 1997

Revenues

Our revenues are comprised of software license fees, services, including
maintenance and other revenues, and hardware revenues. Total revenues were
$30.8 million in fiscal 1998, compared to $29.1 million in 1997. Revenues in
our core business, excluding hardware sales, were $27.6 million in 1998
compared to $23.6 million in 1997.

Software revenues increased 57% or $4.0 million to $11.1 million in 1998,
compared to $7.1 million in 1997. The increase in software sales was primarily
attributable to an increase in add-on module sales. Four new system sales were
made in 1997 and 1998; however, an additional four new systems were signed in
1998 for which revenue was deferred into 1999.

Our services revenue in 1998 was comparable to 1997. Maintenance service
revenues are derived from quarterly, annual and multi-year support agreements
with our customers. Maintenance revenue increased $0.7 million due to the
growth of system and module installations. Other services revenues include
training and installations, custom development, service bureau operation fees
and disaster recovery contracts. Other service revenues decreased by $0.6
million primarily due to the sale of our service bureau business to Premier
Systems in the third quarter of 1997.

Hardware revenues decreased 42% in 1998 to $3.2 million from $5.5 million in
1997 due to the transfer of hardware sales to a value added reseller hardware
vendor. In the fall of 1997, we began to transfer hardware sales so that we
could concentrate our efforts on the core business of software, maintenance and
services. We receive a portion of the hardware vendor's hardware revenues as a
referral fee. We expect that any future hardware sales made directly by us will
be immaterial.

Gross Margins

Gross margin as a percentage of total revenues increased to 49% in 1998 from
42% in 1997. The primary cause of the increase was a result of a greater
portion of software sales which have a higher gross margin than hardware or
services.

Software gross margin was 82% in 1998 and 85% in 1997. Services gross margin
increased from 29% in 1997 to 34% in 1998 primarily as a result of hardware
referral fees included in 1998 revenue as well as improved staff utilization.

Hardware gross margin decreased during 1998 to 11% compared to 25% in 1997.
Hardware margins fluctuate depending on the mix of items sold. With our
alliance with Ex-Cel, there were fewer new system hardware sales, resulting in
a higher proportion of lower-end add-on hardware sales.

Operating Expenses

Product development expenses increased slightly to $4.7 million in 1998 from
$4.6 million in 1997. The increase in 1998 was due to increased third-party
development costs partially offset by a decrease in overall fixed staff
expenses. Product development expenses as a percent of total revenue were 15%
in 1998 and 16% in 1997.

Selling, general and administrative expenses decreased to $9.2 million in
1998 from $12.0 million in 1997. The decrease was attributable to continued
emphasis on general cost reductions.

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<PAGE>

Interest Income and Interest Expense

Interest income was $40,000 in 1998 and $120,000 in 1997. Interest expense
was $179,000 in 1998 of which $125,000 was due to interest related to the
advance purchase of third-party licenses pursuant to our agreement with ACI.

Other Income

Other income in 1998 was $59,000 and was comprised of a taxes payable
reversal offset by losses from disposal of fixed assets. Other income in 1997
was $352,000 and was primarily a gain from the sale of our 50% interest in a
value added reseller service bureau, unrelated to our gain on the transfer of
service bureau contracts from our internal service bureau.

Income Tax Expense

We recorded provisions for income taxes of $22,000 for 1998 none for 1997.
The difference between the "expected" income tax expense and the actual expense
for 1998 is primarily attributable to net loss carryforwards. No tax expense
was recorded for 1997 due to the net loss incurred for that year.

Comparison of Years Ended December 31, 1997 and 1996

Revenues

Total revenues decreased $11.3 million to $29.1 million in 1997 from $40.4
million in 1996. Revenues in our core business, excluding hardware sales,
decreased $2.6 million to $23.6 million in 1997 from $26.2 million in 1996.

Software revenues were $7.1 million in 1997 compared to $9.5 million in
1996. This decline was associated with the high volume of sales in 1996 and the
emphasis we placed on our new client/server applications for which demand
outpaced our ability to perform and which resulted in lower system sales. The
decline was partially offset by re-licensing fees on our software.

Our service revenue in 1997 was comparable to 1996 with an increase in
maintenance revenue of $2.0 million offset by a decline in other service
revenue of $2.1 million. The increase in maintenance revenue was primarily a
result of growth in new ULTRAFIS system customer installations and the volume
of new information management application modules introduced and installed in
1996 and 1997. The decline in other service revenue was primarily attributable
to the decline in new system sales and the sale of our service bureau business
to Premier Systems in the third quarter of 1997.

Hardware revenues decreased 61% in 1997 to $5.5 million, compared to $14.3
million in 1996. The hardware revenue decrease was primarily attributable to
the decrease in new systems sales compared to 1996. In addition, in the fourth
quarter of 1997, we began to transfer our hardware sales to Ex-Cel to enable us
to focus on our core business.

Gross Margins

Gross margin as a percentage of total revenues increased to 42% in 1997 from
36% in 1996. The primary cause of the increase was a result of a greater
portion of software sales which have a higher gross margin than hardware or
services. Installations and training for new system conversions, a large
component of the services and other segments, operated at a loss for 1996 due
to cost overruns on committed contracts and associated travel expenses.

Software gross margin as a percentage of software revenue increased in 1997
to 85% from 77% in 1996. Software margins fluctuate based on the mix of sales
of our software and third-party software, which is sold at lower margins. The
increase in margins in 1997 was due to a reduction in software sales that
include a third-party software component.

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<PAGE>

Hardware gross margin as a percentage of hardware revenues decreased
slightly during 1997 to 25% compared to 28% in 1996.

Operating Expenses

Product development expenses decreased to $4.6 million in 1997 from $6.2
million in 1996. Product development expenses as a percent of total revenue
increased to 16% in 1997 compared to 15% in 1996. The decrease in total dollar
spending in 1997 compared to 1996 was primarily the result of a reallocation
of resources to focus us on client-server product lines, product
standardization and customer support, the reduction of the number of
consultants used in product development and a reduction in other product
development overhead expenses.

Selling, general and administrative expenses decreased to $12.0 million in
1997 from $15.5 million in 1996. The decrease in 1997 from 1996 was primarily
attributable to significant cost reductions in overhead expenses in 1997,
including consolidating our headquarters from two facilities to one in the
first quarter of 1997 as well as other general cost reductions. Additionally,
we made significant reductions in staffing levels to support lower new account
sales volumes in 1997.

Interest Income and Interest Expense

Interest income in 1997 and 1996 was $120,000 and $365,000, respectively.
Interest expense was $102,000 in 1997 compared to interest expense of $36,000
in 1996. Higher earnings in 1996 resulted from the investment of the funds
generated by our initial public offering.

Other Income

Other income in 1997 was $352,000 and was primarily a gain from the sale of
our direct service bureau operations.

Income Tax Expense

We recorded no provisions for income taxes in 1997 or 1996 due to losses
incurred during those years.

Comparison of Three Months Ended March 31, 1998 and 1999

Revenues for the three months ended March 31, 1999 were comparable to the
same period in 1998. Revenues from our core business, which excludes hardware,
increased 13% from $6.3 million in the first quarter of 1998 to $7.1 million
in the first quarter of 1999.

The following table sets forth our revenues and gross margin and gross
margin as a percentage of revenues for the three-month periods ended March 31,
1999 and 1998:

<TABLE>
<CAPTION>
Revenues Gross Margin Gross Margin
(in thousands) (in thousands) %
Three Months Three Months Three Months
Ended Ended Ended
March 31, % March 31, March 31, %
--------------- Increase ---------------- ---------------- Increase
1999 1998 (Decrease) 1999 1998 1999 1998 (Decrease)
------- ------- ---------- ------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Software................ $ 2,608 $ 2,522 3% $ 1,851 $ 2,291 71% 91% (20%)
Services and other...... 4,509 3,752 20% 2,253 1,120 50% 30% 20%
------- ------- --- ------- ------- ------ ------ ---
Subtotal core.......... 7,117 6,274 13% 4,104 3,411 58% 54% 4%
Hardware................ 211 988 (79%) (2) 115 (1%) 12% (13%)
------- ------- --- ------- ------- ------ ------ ---
Total Revenues.......... $ 7,328 $ 7,262 1% $ 4,102 $ 3,526 56% 49% 7%
======= ======= === ======= ======= ====== ====== ===
</TABLE>

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<PAGE>

Software revenues increased slightly to $2.6 million in the first quarter of
1999 from $2.5 million in the first quarter of 1998.

Services and other revenues increased 20% from $3.8 million in the first
quarter of 1998 to $4.5 million in the first quarter of 1999. Service and other
revenues primarily consist of installation, training and maintenance or support
revenue. The increase in revenue was due to maintenance revenues from an
increased installed base of software products and increased training and
installation services.

Hardware revenues decreased 79% from $1.0 million in the first quarter of
1998 to $0.2 million in the first quarter of 1999 due to the transfer of our
hardware sales to Ex-Cel. We expect direct hardware revenues in 1999 to
continue to decline as the remaining hardware orders from before the transfer
are fulfilled.

Gross Margin

Gross margin increased from 49% in the first quarter of 1998 to 56% in the
first quarter of 1999 primarily as a result of an increase in the gross margin
on services partially offset by a decrease in the gross margin from software
sales.

Software gross margin decreased from 91% in the first quarter of 1998 to 71%
in the first quarter of 1999 due to a higher proportion of sales of software
purchased and licensed from third parties as well as the $149,000 charge
related to the renegotiation of a license agreement. See Note 6 to the
Condensed Financial Statements.

Gross margin percentage from service and other revenues increased from 30%
in the first quarter of 1998 to 50% in the first quarter of 1999. The increase
was primarily due a reduction in the number of staff associated with
maintenance activities, improved staff utilization in training and
installations and the reduction in support staff providing maintenance
services.

Hardware gross margin as a percentage of hardware revenues decreased to (1%)
for the first quarter of 1999 from 12% for the first quarter of 1998 primarily
due to the write-off of damaged inventory and a larger portion of low cost
items sold with lower margins.

Operating Expenses

<TABLE>
<CAPTION>
Three Months
Ended Increase As a percent
March 31, (Decrease) of Revenue
------------- ------------- ---------------
1999 1998 $ % 1999 1998
------ ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating expenses
Product development............ $ 996 $1,195 $ (199) (17%) 14% 16%
Selling, general and
administrative................ 2,861 2,298 563 24% 39% 32%
------ ------ ------ ---- ------ ------
$3,857 $3,493 $ 364 10% 53% 48%
====== ====== ====== ==== ====== ======
</TABLE>

Product development expenses decreased from $1.2 million in the first
quarter of 1998 to $1.0 million in the first quarter of 1999 due to a reduction
in administrative support following a corporate restructuring.

Selling, general and administrative expenses increased from $2.3 million in
first quarter 1998 to $2.9 million in first quarter 1999. The increase was due
to an increase in inside sales personnel, an increase in the number of sales
representatives and consulting expenses associated with the implementation of
new accounting and sales support systems.

Net interest expense in the first quarter of 1999 was $42,000 resulting from
interest expense of $64,000 from debt obligations for product licenses offset
by $22,000 of interest income. Net interest expense in the first quarter of
1998 was $0 resulting from interest expense of $18,000 from debt obligations
for product licenses offset by $18,000 of interest income.

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<PAGE>

Other income was $74,000 in the first quarter of 1999 and $7,000 in the
first quarter of 1998. Other income in 1999 consisted primarily of additional
payments from the sale of our direct service bureau operations.

Income tax expense for the first quarter of 1999 was $35,000 due to state
tax provisions. No income tax expense was recorded for the first quarter of
1998 due to net operating loss carryforwards.

Material Factors Affecting Results of Operations

Market conditions affect demand for our products

Our future operating results will depend upon market conditions that may
affect demand for our products and our ability to enhance our existing products
and introduce new products that meet market demands on a timely basis. We must
also manage growth and change effectively as failure to do so could materially
and adversely affect our business and operating results.

Year 2000 issues may have an effect on our sales

Our customers are required by the National Credit Union Association to test
their critical systems for Year 2000 compliance. Due to this extensive testing
process, our products have been undergoing Year 2000 compliance testing since
June 1998 at many customer sites. While no significant issues have been
reported, we believe that some potential and existing customers may defer
purchases and/or implementation of core processing systems and/or additional
software modules until later in 1999 or into 2000 due to Year 2000 concerns.

Our operating results fluctuate significantly

Our quarterly and annual revenues and operating results have varied
significantly in the past, and may do so in the future. Operating results may
fluctuate due to factors such as:

. the demand for our products,

. the introduction and acceptance of new products and product enhancements
by us or our competitors,

. changes in the levels of operating expenses,

. customer order deferrals in anticipation of new products,

. competitive conditions in the credit union and financial services
markets, and

. economic conditions generally or in various industry segments.

In addition, a significant portion of our business has been derived from
substantial contracts with large organizations with long decision-making
cycles, and the timing of orders has caused material fluctuations in our
operating results. Our expense levels are based in part on our expectations
regarding future revenues and in the short term are fixed to a large extent.
Therefore, we may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. As a result, if anticipated revenues do
not occur or are delayed, our operating results would be disproportionately
affected. We expect quarterly and annual fluctuations to continue for the
foreseeable future. Accordingly, we believe that period-to-period comparisons
of our financial results should not be relied upon as an indication of future
performance.

Complexity associated with the installation of our ULTRAFIS system

Installation of our ULTRAFIS system is a complex process that must typically
be done without any disruption of the customer's service. Our failure to
successfully install an ULTRAFIS system could result in significant loss of
revenue in a particular quarter and fluctuation in our results of operations.
Although we schedule product installations several months in advance, our
ability to achieve our revenue plans, both in the near term and in the long
term, depends on our continued ability to sign new customer contracts and to

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complete contracts on schedule. Failure to close new customer contracts as a
result of lost sales or deferrals of customer decisions could have a material
adverse impact on future operating results. There can be no assurance that
sales or installations will continue to occur at historical rates or in
accordance with our expectations. Because our operating expenses are based on
anticipated revenue levels and a high percentage of our expenses are relatively
fixed, a small variation in the timing of the recognition of specific revenues
could cause significant variations in operating results from quarter to
quarter.

Technological change and obsolescence; risks associated with development and
introduction of new products

We have previously experienced delays in the development and introduction of
new products and product enhancements, including certain of our client/server
products. The length of these delays has varied depending upon the size and
scope of the project and the nature of the problems encountered. In addition,
software products as complex as those offered by us often contain undetected
errors or failures when first introduced or as new versions are released. There
can be no assurance that, despite testing by us and by current customers,
errors will not be found in new products after commencement of commercial
shipments. The occurrence of errors could result in loss of, or delay in,
market acceptance of our products, which could have a material adverse effect
on our business, financial condition and results of operations.

We must manage growth effectively

We must manage growth and change effectively as failure to do so could
materially and adversely affect our business and operating results. In
connection with the audit of our 1996 financial statements, our independent
accountants identified certain "reportable conditions" relating to material
weaknesses in our internal controls. With respect to our process for new
product releases, our independent accountants noted material weaknesses in our
field testing procedures and customer communication, resulting in installation
delays and aging of receivables and unbilled revenues. In addition, our
shipment of products in advance of our capacity to install on a timely basis
resulted in a significant increase in unbilled revenues. Material weaknesses
were also identified in our procedures for timely analyzing customer balances,
estimating the overall cost of training and installation obligations and the
cost to complete at any particular time. These material weaknesses were
exacerbated by inefficiencies in our accounting system. As a result of these
material weaknesses in our accounting system, the auditors expressed
significant concerns about our ability to report timely, accurate financial
information in the future. We believe we have addressed all of these issues and
corrected, in all material respects, the weaknesses noted.

We depend on ULTRAFIS

A substantial portion of our revenues historically have been related to the
ULTRAFIS system. Our success will depend in large part on our ability to sell,
install, maintain and enhance the ULTRAFIS system and information management
modules and to develop, on a timely and cost-effective basis using new
technologies, information management modules that meet evolving customer needs.

We depend on hardware suppliers

In the fall of 1997, we established a non-exclusive relationship with Ex-Cel
to configure, sell, distribute, and provide service for the Hewlett-Packard and
IBM hardware products and operating systems used in conjunction with our
software products. Additionally, Ex-Cel builds, integrates, delivers, and
supports our Ultra-Access suite of remote banking products including Ultra-
Access Browser Banking, self-serve kiosks, voice response systems and
firewalls. In the first quarter of 1999, we began using a different value added
hardware reseller with no significant impact to our business or operations.
There can be no assurance that future operations would not be materially
impacted by adverse developments at any or all of our hardware vendors.

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<PAGE>

Competition

The market for our products is highly competitive. Any failure by us to
anticipate or to respond adequately to new and changing market conditions,
enhance the ULTRAFIS system and client server products, develop application
modules, compete with new product offerings by third parties, complete new
standalone product offerings, respond to emerging industry standards, adapt to
changing technologies, maintain sales of our products or continue to sign and
complete new customer contracts would have a material adverse effect on our
results of operations.

Year 2000 compliance

Many software computer programs in the industry rely on an internal date
format using two-digit data programs to perform computation and decision-making
functions that may cause computer systems generally to malfunction with respect
to dates beginning with the Year 2000. Our products use an internal date format
that has never relied on two-digit data programs. We believe that date entry
will not be a material issue either with our information management software
products or our own information management applications.

The costs for Year 2000 compliance have been immaterial. We estimate that
costs we have incurred through December 31, 1998 have been substantially less
than $100,000. These costs have primarily resulted from our investment of staff
time understanding Year 2000 compliance issues as well as understanding
obligations of our customers to undergo extensive Year 2000 compliance testing
of their critical systems.

We have conducted our own Year 2000 compliance testing of our currently
marketed products, including third party products, and have found no
significant Year 2000 related issues.

We have not evaluated our customers' Year 2000 compliance status. Our
customers are, however, required by the National Credit Union Association to
test their critical systems for Year 2000 compliance prior to December 31,
1998. Due to this extensive testing process, our products have been undergoing
Year 2000 compliance testing since June 1998 at many customer sites. To date,
our customers have not reported significant issues.

We have considered obtaining Year 2000 compliance insurance as well as
developing various contingency plans. Given that both internal and customer
testing has indicated our current products are Year 2000 compliant, we have
concluded that neither Year 2000 compliance insurance nor contingency plans are
necessary. For these same reasons, we have also concluded that any future Year
2000 compliance costs, if any, will not be material.

We have assessed all of our major internal systems, which include our
finance, sales and payroll systems for Year 2000 compliance. We have received
written confirmation from our vendor that our finance system is Year 2000
compliant. We will upgrade our sales and payroll systems to Year 2000 compliant
systems during the second quarter of 1999. We plan to continue to evaluate our
key suppliers but expect that any Year 2000 issues of key supplier and other
vendors will not have a material impact on our business, financial condition
and results of operations.

Although we believe that our Year 2000 plans will be successful, there can
be no assurance that there will be no unforeseen problems which could have a
material adverse effect on us.

Liquidity and Capital Resources

Our management believes current cash and cash equivalents and expected cash
generated from operations will satisfy our expected working capital and capital
expenditure requirements for the foreseeable future.

Until January 1999, we had a factoring agreement and a capital equipment
facility. The factoring agreement provided for a 0.5% administrative fee for
each receivable purchased and a 1.75% monthly finance charge for as long as
each purchased receivable remains outstanding. As of December 31, 1998, we had
not utilized the factoring agreement. As of December 31, 1998, the outstanding
balance on the capital equipment

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<PAGE>

facility was $321,000. The capital equipment facility bears interest at prime
plus 0.25%. In January 1999, we paid off the balance of the capital equipment
facility in full and retired the factoring agreement and capital equipment
facility.

Our operating activities provided $1.8 million in 1998, and used $0.4
million in 1997 and $11.9 million in 1996. The cash provided by operating
activities during 1998 was primarily the result of the net income of
$1.2 million adjusted for depreciation of $1.5 million, and decreases in
accounts payable of $0.7 million and deferred revenue of $0.8 million, offset
by decreases in inventories and other assets. The cash used in 1997 by
operating activities was primarily a result of the net loss as adjusted by
decreases in accounts payable, deferred revenue and accrued expenses offset by
decreases in accounts receivable and income tax receivable. The net cash used
in 1996 by operating activities was primarily a result of the net loss as
adjusted by increases in accounts payable offset by depreciation.

Our operating activities provided $1.0 and $0.5 million in the first quarter
of 1999 and 1998, respectively. The increase in cash provided by operating
activities was primarily a result of the decrease in accounts receivable,
inventory, accounts payable and deferred revenue in the first quarter of 1999.

Net cash used for investing activities was $0.1 million in 1998, $0.8
million in 1997 and $1.7 million in 1996. Cash used to purchase capital
equipment of $0.4 million in 1998 was primarily for computer equipment
partially offset by the sale of short term investments. Cash used to purchase
capital equipment in 1997 primarily consisted of furniture and fixtures for our
new headquarters facility and purchased software of $3.0 million offset by the
sale of short term investments of $1.1 million. Cash used for investing
activities in 1996 primarily consisted of capital expenditures of $1.7 million
and purchases of short term investments of $4.3 million offset by sales of
short term investments $2.9 million and the repayment of stockholder notes
receivable of $1.5 million.

Net cash used for investing activities was $0.2 million in the first quarter
of 1999 and cash provided by investing activities was $41,000 in the first
quarter of 1998. Cash used for capital expenditures was $0.2 million in the
first quarter of 1999 and $0.3 million in the first quarter of 1998. In the
first quarter of 1998, cash provided from the sale of short term investments
offset the capital expenditures.

Net cash provided by financing activities was $0.2 million in 1998, $0.1
million in 1997 and $14.1 million in 1996. Cash provided by financing
activities is due to the sale of common stock with the proceeds from our
initial public offering being the primary source of cash in 1996.

Net cash used from financing activities for the first quarter of 1999 was
$0.1 million as a result of the payoff of our line of credit which released the
restrictions on $0.3 million of cash and repayment of $0.5 million in debt.
Cash provided from financing activities was $83,000 for the first quarter of
1998 due to the net proceeds from the issuance of common stock.

In 1997, we entered into an agreement with Applied Communications to
distribute certain products developed by a third-party. In the first quarter of
1999, we renegotiated this agreement which effectively reduced the number of
licenses purchased, which had been recorded as inventory, long-term debt
obligations and the related maintenance commitments. Under the revised
agreement, payments totaling $1.2 million are due through April 2001 and
include payments of $0.4 million for maintenance. This revision resulted in a
charge of $149,000 during the quarter ended March 31, 1999, which is included
in software cost of revenues in the accompanying income statement.

In connection with the renegotiated agreement, in April 1999, we executed an
irrevocable standby letter of credit for $700,000 as collateral for the amounts
due under the agreement.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have fixed rate long-term debt of approximately $0.6 million as of
December 31, 1998 and a hypothetical 10% decrease in interest rates would not
have a material impact on the fair market value of this debt. We do not hedge
any interest rate exposures.

42
<PAGE>

ULTRADATA Corporation
Index to Financial Statements and Financial Statement Schedule

<TABLE>
<CAPTION>
Page
----
<S> <C>
Audited Financial Statements
Independent Auditors' Report--Deloitte & Touche LLP...................... F-2
Independent Auditors' Report--KPMG LLP................................... F-3
Balance Sheets as of December 31, 1998 and 1997.......................... F-4
Statements of Operations for the years ended December 31, 1998, 1997 and
1996................................................................... F-5
Statements of Stockholders' Equity for the years ended December 31, 1998,
1997 and 1996.......................................................... F-6
Statements of Cash Flows for the years ended December 31, 1998, 1997
and 1996............................................................... F-7
Notes to Financial Statements............................................ F-8
Financial Statements Schedule--Valuation and Qualifying Accounts for each
of the three years ended December 31, 1998, 1997 and 1996.............. F-18

Unaudited Financial Statements
Condensed Balance Sheets as of March 31, 1999 and December 31, 1998...... F-19
Condensed Statements of Operations for the three months ended March 31,
1999 and 1998.......................................................... F-20
Condensed Statements of Cash Flows for the three months ended March 31,
1999 and 1998.......................................................... F-21
Notes to Condensed Financial Statements.................................. F-22
</TABLE>

F-1
<PAGE>

Independent Auditors' Report

To the Board of Directors and Stockholders of
ULTRADATA Corporation:

We have audited the accompanying balance sheet of ULTRADATA Corporation
("Company") as of December 31, 1998, and the related statements of operations,
stockholders' equity, and cash flows for the year then ended. Our audit also
included the financial statement schedule of valuation and qualifying accounts
related to the year ended December 31, 1998 listed in the foregoing index.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the 1998 financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1998, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule related to the year ended December
31, 1998, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

San Jose, California
February 5, 1999

F-2
<PAGE>

Independent Auditors' Report

Board of Directors
ULTRADATA Corporation:

We have audited the accompanying balance sheet of ULTRADATA Corporation as
of December 31, 1997, and the related statements of operations, stockholders'
equity and cash flows for each of the years in the two year period ended
December 31, 1997. In connection with our audits of the financial statements,
we have also audited the accompanying financial statement schedule for the
years ended December 31, 1997 and 1996. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ULTRADATA Corporation as of
December 31, 1997, and the results of its operations and its cash flows for
each of the years in the two year period ended December 31, 1997, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ KPMG LLP

KPMG LLP

Mountain View, California
February 12, 1998

F-3
<PAGE>

ULTRADATA CORPORATION
Balance Sheets
(In thousands, except per share amounts)

<TABLE>
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................... $ 2,418 $ 486
Short term investments...................................... -- 303
Restricted cash............................................. 321 536
Trade accounts receivable, net.............................. 6,523 6,387
Inventories, including third-party product licenses......... 1,932 815
Prepaid expenses and other current assets................... 383 456
Income tax receivable....................................... -- 53
------- -------
Total current assets....................................... 11,577 9,036
Property and equipment, net.................................. 3,312 4,533
------- -------
Total assets.............................................. $14,889 $13,569
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of capital lease and debt obligations....... $ 481 $ 663
Current portion, third-party product licenses............... 594 --
Accounts payable............................................ 1,545 2,284
Accrued expenses............................................ 1,646 1,239
Deferred revenue and customer advances...................... 1,479 1,852
------- -------
Total current liabilities.................................. 5,745 6,038
Deferred revenue and customer advances....................... 682 1,113
Capital lease and debt obligations........................... 7 120
Long-term portion, third-party product licenses.............. 625 --
------- -------
Total liabilities.......................................... 7,059 7,271
------- -------
Commitments and contingencies (Notes 4 and 8)
Stockholders' equity:
Preferred stock; par value $.001; 2,000,000 shares
authorized; none outstanding............................... -- --
Common stock; par value $.001; 23,000,000 shares authorized;
7,725,674 and 7,607,133 shares outstanding in 1998 and
1997, respectively......................................... 8 8
Additional paid in capital................................... 15,515 15,202
Accumulated deficit.......................................... (7,693) (8,912)
------- -------
Total stockholders' equity................................. 7,830 6,298
------- -------
Total liabilities and stockholders' equity................ $14,889 $13,569
======= =======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

ULTRADATA CORPORATION
Statements of Operation
(In thousands, except per share amounts)

<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenue
Software........................................ $ 11,063 $ 7,062 $ 9,452
Services........................................ 16,501 16,548 16,741
-------- -------- --------
Subtotal....................................... 27,564 23,610 26,193
Hardware........................................ 3,197 5,493 14,251
-------- -------- --------
Total revenue.................................... 30,761 29,103 40,444
-------- -------- --------
Cost of goods sold
Software........................................ 1,979 1,034 2,202
Services........................................ 10,889 11,770 13,502
-------- -------- --------
Subtotal....................................... 12,868 12,804 15,704
Hardware........................................ 2,844 4,115 10,331
-------- -------- --------
Total cost of goods sold......................... 15,712 16,919 26,035
-------- -------- --------
Gross margin..................................... 15,049 12,184 14,409
-------- -------- --------
Product development............................. 4,689 4,608 6,180
Selling, general and administrative............. 9,201 11,964 15,518
Gain on transfer of service bureau contracts.... (162) (558) --
-------- -------- --------
Total operating expenses....................... 13,728 16,014 21,698
-------- -------- --------
Operating income (loss).......................... 1,321 (3,830) (7,289)
Interest income.................................. 40 120 365
Interest expense................................. (179) (102) (36)
Other income..................................... 59 352 --
-------- -------- --------
Income (loss) before income taxes................ 1,241 (3,460) (6,960)
Income tax expense............................... 22 -- --
-------- -------- --------
Net income (loss)................................ $ 1,219 $ (3,460) $ (6,960)
======== ======== ========
Net income (loss) per share information:
Basic net income (loss) per share............... $ 0.16 $ (0.46) $ (0.97)
Diluted net income (loss) per share............. 0.15 (0.46) (0.97)
Shares used to compute basic net income (loss)
per share...................................... 7,687 7,585 7,195
Shares used to compute dilutive net income
(loss) per share............................... 7,924 7,585 7,195
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

ULTRADATA CORPORATION
Statements of Stockholders' Equity
(In thousands)

<TABLE>
<CAPTION>
Common Stock Retained
------------------ Additional Earnings Total
Shares Paid-In (Accumulated Stockholders'
Outstanding Amount Capital Deficit) Equity
----------- ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances as of January
1, 1996................ 5,742,000 $ 6 $ 4 $ 1,508 $ 1,518
Net proceeds from
initial public
offering............... 1,650,000 1 14,241 -- 14,242
Net proceeds from
issuance of common
stock.................. 133,864 -- 696 -- 696
Net loss................ -- -- -- (6,960) (6,960)
--------- ---- ------- ------- -------
Balances as of December
31, 1996............... 7,525,864 7 14,941 (5,452) 9,496
Net proceeds from
issuance of common
stock.................. 81,269 1 261 -- 262
Net loss................ -- -- -- (3,460) (3,460)
--------- ---- ------- ------- -------
Balances as of December
31, 1997............... 7,607,133 8 15,202 (8,912) 6,298
Net proceeds from
issuance of common
stock.................. 118,541 -- 313 -- 313
Net income.............. -- -- -- 1,219 1,219
--------- ---- ------- ------- -------
Balances as of December
31, 1998............... 7,725,674 $ 8 $15,515 $(7,693) $ 7,830
========= ==== ======= ======= =======
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

ULTRADATA CORPORATION
Statements of Cash Flows
(In thousands)

<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $ 1,219 $ (3,460) $ (6,960)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
Depreciation and amortization................... 1,528 1,436 864
Deferred income taxes........................... -- -- 907
Gain on sale of joint venture................... -- (238) --
Equity in earnings of unconsolidated
subsidiary..................................... -- (16) (62)
Loss on disposition of property and equipment... 67 -- 250
Changes in operating assets and liabilities:
Trade accounts receivable, net................. (136) 4,069 (3,962)
Inventories.................................... 365 358 78
Prepaid expenses and other assets.............. 73 579 (253)
Income taxes receivable........................ 53 1,023 (958)
Accounts payable............................... (739) (1,375) (1,560)
Accrued expenses............................... 158 (887) 166
Deferred revenue and customer advances......... (804) (1,856) (458)
------- -------- ---------
Net cash provided by (used for) operating
activities................................... 1,784 (367) (11,948)
------- -------- ---------
Cash flows from investing activities:
Capital expenditures............................ (353) (2,997) (1,706)
Proceeds from disposition of service bureau
assets......................................... -- 192 --
Proceeds from disposition of other assets....... -- 368 --
Sale of joint venture........................... -- 500 --
Purchases of short-term investments............. -- -- (4,276)
Sale of short-term investments.................. 303 1,117 2,856
Repayment of stockholder notes receivable....... -- -- 1,453
------- -------- ---------
Net cash used for investing activities........ (50) (820) (1,673)
------- -------- ---------
Cash flows from financing activities:
Bank borrowings and long term obligations, net.. -- 474 (1,000)
Proceeds from debt.............................. -- 250 388
Decrease (increase) in restricted cash.......... 215 (536) --
Repayment of debt............................... (330) (360) (246)
Net proceeds from initial public offering....... -- -- 14,242
Net proceeds from issuance of common stock...... 313 262 696
------- -------- ---------
Net cash provided by financing activities..... 198 90 14,080
------- -------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... 1,932 (1,097) 459
Cash and cash equivalents at beginning of year... 486 1,583 1,124
------- -------- ---------
Cash and cash equivalents at end of year......... $ 2,418 $ 486 $ 1,583
======= ======== =========
Non cash operating, investing and financing
activities:
Property and equipment acquired under capital
leases......................................... $ 21 $ -- $ --
======= ======== =========
Remaining obligation on third-party product
licenses....................................... $ 1,482 $ -- $ --
======= ======== =========
Supplemental disclosure of cash flow information:
Cash paid for taxes............................. $ 22 $ 1 $ 87
Cash paid for interest.......................... $ 179 $ 102 $ 36
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements
December 31, 1998, 1997 and 1996

Note 1 Summary of Significant Accounting Policies

The Company

ULTRADATA Corporation (the "Company") provides information management
software and solutions for relationship-oriented financial institutions. These
solutions allow the Company's customers to provide, among other things,
financial services such as checking, savings and investment accounts, home
banking, credit and debit cards, automated teller machine access and consumer
lending. The Company's products are primarily targeted at large and mid-sized
credit unions for use as an in-house installation and to value-added resellers
("VARs") for distribution to small-sized credit unions that operate in service
bureau environments.

Revenue Recognition

The Company recognizes revenues from licenses of computer software provided
that a noncancelable license agreement has been signed, the software and
related documentation have been shipped, there are no material uncertainties
regarding customer acceptance, and collection of the resulting receivable is
deemed probable. Maintenance revenues are deferred and recognized over the
related contract period, generally three months to five years. Services and
other revenues generated from professional consulting and training services and
software customization services are recognized as the services are performed.
Hardware revenues are recognized upon shipment.

Software cost of revenues includes direct costs of software purchased from
third parties and royalties. Services and other cost of revenues include
maintenance, the direct and indirect costs of providing training and
installation, and consulting services relating to customer contracts. Hardware
cost of revenues includes the costs of the hardware and freight.

Statement of Position (SOP) 97-2 "Software Revenue Recognition," which was
issued October 27, 1997, supersedes SOP 91-1 and became effective for the
Company in 1998.

Concentration of Credit Risk and Fair Value of Financial Instruments

Financial instruments that potentially expose the Company to a concentration
of credit risk principally consist of cash and cash equivalents, restricted
cash, trade accounts receivable and short term investments. The carrying value
of the Company's financial instruments approximates fair market value.

The Company's current customers are primarily comprised of credit unions
throughout the United States. Although the Company is directly affected by the
financial cycles of the credit union industry, management does not believe that
significant credit risks existed as of December 31, 1998. The Company maintains
a reserve for potential bad debts aggregating $521,000 and $1,094,000 as of
December 31, 1998 and 1997, respectively.

No customer accounted for more than 10% of the Company's total revenues in
1998, 1997 or 1996. No customer accounted for more than 10% of the Company's
accounts receivables in 1998. One customer accounted for 13% of total trade
accounts receivable at December 31, 1997.

Financial Statement Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Such estimates include allowances for

F-8
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

potentially uncollectible accounts receivable, sales returns and a valuation
allowance for deferred tax assets. Actual results could differ from those
estimates.

Cash and Cash Equivalents

Cash equivalents consist of short-term financial instruments with original
maturities of three months or less that are carried at cost, which approximates
market.

Short-Term Investments

Short-term investments as of December 31, 1997 consisted of municipal
obligations with amortized cost approximating fair market value.

Inventories

Inventories consist of hardware and software purchased from third parties
pending shipment to customers recorded at the lower of cost or market, on a
first in, first out basis.

Software Development Costs

Capitalization of computer software costs, when material, begins upon the
establishment of technological feasibility. Such costs are amortized over
periods not exceeding three years. To date, software development costs incurred
subsequent to the establishment of technological feasibility have not been
material.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straightline method over the shorter of the estimated useful life (three to
five years for computer equipment and software and five to ten years for
furniture and fixtures) or the lease term.

Income Taxes

The Company utilizes the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are established to recognize the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. The measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance for any tax benefits of which future
realization is uncertain.

Net Income (Loss) Per Share

Basic income (loss) per share excludes dilution and is computed by dividing
net income (loss) by the weighted-average number of common shares outstanding,
less shares subject to repurchase by the Company, for the period. Diluted
income (loss) per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. Common share equivalents are excluded from the computation
in loss periods as their effect would be antidilutive.

Stock-Based Compensation

The Company accounts for its stock-based compensation plans in accordance
with the provisions of Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.

F-9
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

Impairment of Long-Lived Assets and Long-Lived Assets To Be Disposed Of

The Company evaluates its long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount
of an asset to the future net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds
the fair value of the assets. Assets to be disposed of are reported at the
lower of carrying amount or fair value less costs to sell.

Reclassifications

Certain amounts in the accompanying 1997 and 1996 financial statements have
been reclassified to conform with the 1998 presentation.

Recently Issued Accounting Standards

In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," which requires an
enterprise to report, by major components and as a single total, the change in
net assets during the period from nonowner sources. Adoption of this standard
did not have an impact on the Company's financial position, results of
operations or cash flows. During 1998, 1997 and 1996 the Company's sole source
of comprehensive income is its net income (loss).

The Financial Accounting Standards Board issued SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 131
establishes annual and interim reporting standards for an enterprise's business
segments and related disclosures about its products, services, geographic areas
and major customers. The Company has determined that it operates in three
segments: software, services and hardware. Management reviews the operating
results of these segments only at the gross margin level and assets are not
allocated by operating segment.

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS No. 133 will be effective for
the Company's year ending December 31, 2000. Management believes that this
statement will not have a significant impact on the Company's financial
position, results of operations or cash flows.

Note 2 Accounts Receivable

Accounts receivable consists of (in thousands):

<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------ -------
<S> <C> <C>
Trade accounts receivable..................................... $3,998 $ 4,520
Unbilled revenues............................................. 3,046 2,961
------ -------
Accounts receivable, gross.................................. 7,044 7,481
Allowance for bad debts....................................... (521) (1,094)
------ -------
Accounts receivable, net.................................... $6,523 $ 6,387
====== =======
</TABLE>

F-10
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

Note 3 Property and Equipment

Property and equipment consists of (in thousands):

<TABLE>
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C>
Computer equipment........................................... $ 4,073 $ 3,958
Furniture and fixtures....................................... 2,841 2,687
Software..................................................... 1,432 1,424
------- -------
Property and equipment, gross.............................. 8,346 8,069
Accumulated depreciation and amortization.................... (5,034) (3,536)
------- -------
Property and equipment, net................................ $ 3,312 $ 4,533
======= =======
</TABLE>

Note 4 Accrued Expenses

Accrued expenses consists of (in thousands):

<TABLE>
<CAPTION>
December 31,
-------------
1998 1997
------ ------
<S> <C> <C>
Accrued royalties and loss contract accrual...................... $ 314 $ 305
Accrued vacation................................................. 613 598
Other............................................................ 719 336
------ ------
Total accrued expenses......................................... $1,646 $1,239
====== ======
</TABLE>

Note 5 Bank Borrowings and Debt

Bank Borrowings

In 1997 the Company entered into a factoring agreement which provides for
borrowing by the Company of up to $1.5 million, to be effected by the bank's
purchase of eligible accounts receivable and payment to the Company of an
amount equal to 80% of the purchased accounts receivable. Purchases of
receivables and corresponding advances to the Company are at the discretion of
the bank. There is a 0.5% administrative fee for each receivable purchased and
a 1.75% monthly finance charge for as long as each purchased receivable remains
outstanding. The agreement also provides that the borrowings under the
factoring agreement are secured by all tangible and intangible assets of the
Company. To date, no amounts have been borrowed under the factoring agreement.
In addition, as of December 31, 1998 and 1997, the outstanding balance on a
capital equipment facility was $321,000 and $539,000, respectively. The capital
equipment facility bears interest at a rate equal to 0.25% above the prime rate
and will be due in June of 2000. This facility was secured by cash collateral,
and was retired in January 1999.

F-11
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

Other Debt

In the second quarter of 1997, the Company entered into an agreement to
distribute certain products developed by a third-party. As a part of this
agreement, the Company purchased certain products with payments due through
2001 with interest imputed at 12.5%. Future principal payments under this
agreement as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
Principal
Year Ending December 31, Payments
------------------------ --------------
(in thousands)
<S> <C>
1999...................................................... $ 741
2000...................................................... 323
2001...................................................... 302
------
Total Payments.......................................... $1,366
======
</TABLE>

In addition, the Company entered into a non-cancelable maintenance agreement
related to the purchased licenses with an annual expense of $204,000 in 1998
and $326,000 each year thereafter through 2004.

Interest expense incurred during the years ended December 31, 1998, 1997,
and 1996 was $179,000, $102,000 and $36,000, respectively.

Note 6 Income Taxes

The components of income tax expense (benefit) for the years ended December
31, 1998, 1997, and 1996 consisted of the following (in thousands):

<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
1998:
Federal.............................................. $ 15 $-- $ 15
State................................................ 7 -- 7
----- ---- -----
Total income tax expense.......................... $ 22 $-- $ 22
===== ==== =====
1997:
Federal.............................................. $ (25) $-- $ (25)
State................................................ 25 -- 25
----- ---- -----
Total income tax expense.......................... $ -- $-- $ --
===== ==== =====
1996:
Federal.............................................. $(932) $621 $(311)
State................................................ 25 286 311
----- ---- -----
Total income tax expense.......................... $(907) $907 $ --
===== ==== =====
</TABLE>

F-12
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

The difference between the "expected" income tax expense (benefit) computed
at the 35% statutory federal income tax rate and the Company's actual income
tax expense for the years ended December 31, 1998, 1997 and 1996 was as follows
(in thousands):

<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------
1998 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
Computed "expected" tax expense
(benefit)............................... $ 434 $ (1,176) $ (2,366)
State income taxes, before valuation
allowance adjustment, net of federal
income tax effect....................... 72 25 25
Change in the beginning of the year
valuation allowance on deferred tax
assets.................................. (672) -- 907
Current year losses and temporary
differences for which no benefit was
recognized.............................. 185 1,134 1,329
Nondeductible expenses.................... 3 39 37
Other, net................................ -- (22) 68
--------- ----------- -----------
Actual income tax expense............... $ 22 $ 0 $ 0
========= =========== ===========
</TABLE>

The tax effects of significant temporary differences that comprise deferred
tax assets are as follows (in thousands):

<TABLE>
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable reserves................................ $ 223 $ 628
Vacation accrual............................................ 208 244
Deferred revenue............................................ 915 787
Net operating loss carryforwards............................ 1,199 1,867
Tax credit carryforwards.................................... 922 894
Other....................................................... 242 12
------- -------
Gross deferred tax assets................................... 3,709 4,432
Less valuation allowance................................. (3,609) (4,281)
------- -------
Deferred tax assets, net of valuation allowance............. 100 151
------- -------
Deferred tax liabilities--accumulated depreciation............ (100) (151)
------- -------
Net deferred tax assets....................................... $ -- $ --
======= =======
</TABLE>

The net change in the valuation allowance for the year ended December 31,
1998 and 1997 was a decrease of approximately $672,000 and an increase of
approximately $1,277,000. Management believes that sufficient uncertainty
exists as to whether the deferred tax assets will be realized, and accordingly,
a valuation allowance is required.

The Company has net operating loss carryforwards for federal and California
income tax purposes of approximately $3,200,000 and $1,000,000, respectively.
The federal net operating loss carryforward will expire if it is not utilized
by the year 2011 through 2012. The California net operating loss carryforward
will expire if it is not utilized by the year 2001 through 2002. The Company
has research credit carryforwards for federal and California income tax
purposes of approximately $540,000 and $320,000, respectively. The federal
research credit carryforward will expire if not utilized beginning in the year
2008 through 2011. The California research credit carries forward indefinitely
until utilized. The Company also has minimum tax credit carryforwards for
federal income tax purposes of approximately $62,000, which will carry forward
indefinitely until utilized.

F-13
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

The Tax Reform Act of 1986 and the California Conformity Act of 1987 impose
restrictions on the utilization of net operating loss and tax credit
carryforwards in the event of an "ownership change" as defined by the Internal
Revenue Code. If an "ownership change," as defined by the Internal Revenue
Code, has occurred, the Company's ability to utilize its net operating loss and
tax credit carryforwards may be subject to restriction pursuant to these
provisions.

Note 7 Stockholders' Equity

The following is a reconciliation of the denominators used in computing
diluted net income (loss) per share (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Shares used to compute basic net income (loss) per share--
weighted average number of common shares outstanding....... 7,687 7,585 7,195
Effect of dilutive common equivalent shares--stock
options outstanding........................................ 237 -- --
----- ----- -----
Shares used to compute diluted net income (loss) per share... 7,924 7,585 7,195
===== ===== =====
</TABLE>

For the above mentioned periods, the Company had options outstanding of
1,910,587, 1,911,740 and 1,820,149 as of the end of 1998, 1997 and 1996,
respectively which could potentially dilute basic and diluted net income (loss)
per share in the future but were excluded in the computation of diluted net
income (loss) per share in the periods presented as their effect would have
been antidilutive.

Employee Stock Option and Purchase Plans

1994 Equity Incentive Plan

The 1994 Equity Incentive Plan (the "1994 Plan") was adopted in March 1994.
The 1994 Plan provides for the grant of incentive stock options and stock
bonuses and the issuance of restricted stock by the Company to its employees,
officers, directors, consultants, independent contractors and advisers. There
are 1,300,000 shares of the Company's common stock reserved for issuance under
the 1994 plan, of which 318,243 are available for grant as of December 31,
1998. These options vest 25% after one year and ratably over thirty-six months
thereafter, and expire ten years from the date of grant.

1995 Directors Stock Option Plan

The 1995 Directors Stock Option Plan (the "Directors Plan") was adopted in
July 1996. The Directors Plan provides non-qualified stock options to non-
employee directors of the Company. There are 150,000 shares of the Company's
common stock reserved for issuance, of which 55,000 are available for grant as
of December 31, 1998. Members of the Board of Directors who are not employees,
consultants or independent contractors of the Company, or any parent,
subsidiary or affiliate of the Company are eligible to participate in the
Directors Plan. These options vest 25% in each of four consecutive years. As of
December 31, 1998, 95,000 options have been granted under the Directors Plan.

Nonqualified Stock Option Grants

On July 31, 1995, the Company granted to the Company's then Chief Executive
Officer, who is currently a director of the Company, outside of the 1994 Plan,
nonqualified options to purchase 600,000 shares of common stock at $6.00 per
share all of which were vested by December 31, 1998. On October 17, 1996, the
Company granted to the Company's current President, outside of the 1994 Plan,
nonqualified options to

F-14
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

purchase 600,000 shares of common stock at $3.50 per share. Options for 25% of
this grant vested on October 17, 1997 and the remaining shares vest in equal
monthly increments over the following 36 months.

1995 Employee Stock Purchase Plan

In September 1995, the Board of Directors adopted the 1995 Employee Purchase
Plan (the "Purchase Plan") and reserved 250,000 shares of the Company's common
stock for issuance thereunder. The Purchase Plan permits eligible employees to
acquire shares of the Company's common stock through payroll deductions. Each
offering under the Purchase Plan will be for a period of six months commencing
on February 1 and August 1 of each year. Eligible employees may select a rate
of payroll deduction between 2% and 10% of their compensation, up to an
aggregate total payroll deduction not to exceed $21,250 in any calendar year.

The purchase price for the Company's common stock purchased under the
Purchase Plan is 85% of the lesser of the fair market value of the Company's
common stock on the first day of the applicable offering period or the last day
of that offering period.

Accounting for Stock-Based Compensation

A summary of the status of the Company's fixed option plans and nonplan
grants is presented below:

<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 1,911,740 $4.71 1,820,149 $5.16 1,209,663 $5.64
Granted................. 334,050 $4.87 475,600 $3.91 918,600 $4.76
Exercised............... (25,609) $4.12 -- $ -- (103,747) $5.00
Canceled................ (72,331) $4.54 (384,009) $5.83 (204,367) $6.27
--------- ----- --------- ----- --------- -----
Outstanding at end of
year................... 2,147,850 $4.75 1,911,740 $4.71 1,820,149 $5.16
========= ===== ========= ===== ========= =====
Exercisable at end of
year................... 1,255,490 $5.13 952,142 $5.47 561,119 $5.67
========= ===== ========= ===== ========= =====
Weighted-average fair
value of options
granted during the year
at exercise price equal
to fair value at grant
date................... $1.94 $1.97 $2.39
</TABLE>

The Company has elected to use the intrinsic value-based method to account
for all of its employee stock-based compensation plans. Under APB Opinion No.
25, Accounting for Stock Issued to Employees, the Company has recorded no
compensation costs related to its stock options granted to employees for the
years ended December 31, 1998, 1997, and 1996 because the exercise price of
each option equaled or exceeded the fair value of the underlying common stock
as of its grant date.

Pursuant to SFAS No. 123, Accounting for Stock-Based Compensation, the
Company is required to disclose the pro forma effects on net income (loss) and
net income (loss) per basic and diluted share as if the Company had elected to
use the fair value approach to account for all of its employee stock-based
compensation plans. Had compensation cost for the Company's plans been
determined consistent with the fair value approach described in SFAS No. 123,
the Company's net income (loss) and net income (loss) per basic

F-15
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

and diluted share for the years ended December 31, 1998, 1997 and 1996 would
have been as indicated below (in thousands, except per share data):

<TABLE>
<CAPTION>
Years Ended
December 31,
-----------------------
1998 1997 1996
------ ------- -------
<S> <C> <C> <C>
Net income (loss):
As reported......................................... $1,219 $(3,460) $(6,960)
Pro forma........................................... $ 502 $(4,261) $(7,623)
Basic net income (loss) per share:
As reported......................................... $ 0.16 $ (0.46) $ (0.97)
Pro forma........................................... $ 0.07 $ (0.56) $ (1.06)
Diluted net income (loss) per share:
As reported......................................... $ 0.15 $ (0.46) $ (0.97)
Pro forma........................................... $ 0.06 $ (0.56) $ (1.06)
</TABLE>

The Company's fair value calculations on stock-based awards were made using
the Black-Scholes option pricing model with the following weighted average
assumptions: expected life, 3.5 years from the date of grant in 1996 and 1997,
and 4.25 years in 1998; stock volatility, 63% in 1996 and 1997 and 51% in 1998;
risk-free interest rate, 6.08% in 1996 and 1997 and 5% in 1998; and no
dividends during the expected term. The Company's calculations are based on a
single option award valuation approach, and forfeitures are recognized as they
occur. The Company's fair value calculations on stock-based awards under the
Purchase Plan for all years presented were also made using the Black-Scholes
option pricing model with the following weighted average assumptions: expected
life, 6 months; stock volatility, 51%; risk-free interest rate, 5%; and no
dividends during the expected term.

The following table summarizes information about fixed stock options
outstanding as of December 31, 1998:

<TABLE>
<CAPTION>
Options Outstanding Options Vested
------------------------------------------------- --------------------
Weighted Options Weighted
Options Average Weighted Vested Average
Range of Outstanding at Remaining Average at December Exercise
Exercise Prices December 31, 1998 Contractual Life Exercise Price 31, 1998 Price
- --------------- ----------------- ---------------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 2.63-
3.50 785,550 7.7 $3.46 368,341 $3.48
$ 4.00-
6.00 1,254,900 7.1 $5.32 817,268 $5.65
$ 6.25-
11.00 107,400 7.1 $7.52 69,881 $7.69
--------- ---------
$ 2.63-
11.00 2,147,850 7.4 $4.75 1,255,490 $5.13
========= =========
</TABLE>

Note 7 Employee Benefit Plan

In 1987, the Company adopted a defined contribution retirement plan (the
"Retirement Plan"), which has been determined by the Internal Revenue Service
to be qualified under Section 401(k) of the Internal Revenue Code of 1986. The
Retirement Plan covers essentially all full-time employees. Eligible employees
may make voluntary contributions to the Retirement Plan up to 15% of their
annual compensation. The Company contributed $187,000, $177,000 and $0 to the
plan during the years ended December 31, 1998, 1997 and 1996, respectively.

F-16
<PAGE>

ULTRADATA CORPORATION
Notes to Financial Statements--(Continued)
December 31, 1998, 1997 and 1996

Note 8 Commitments

Leases

The Company leases its principal facility under a noncancelable operating
lease through January 2007. The Company is also party to a lease for its prior
office space which has been subleased through July 2002. The Company has an
office in Carrollton, Texas, which houses the corporate and customer disaster
recovery center. The Company signed a new lease for this facility for 36 months
beginning January 1, 1999. Rental expense for operating leases for the years
ended December 31, 1998, 1997 and 1996 amounted to $746,000, $1,070,000 and
$1,060,000, respectively, net of 1998 and 1997 rental income of $310,000 and
$124,000, respectively, under the sublease.

The Company leases its facilities and certain equipment under noncancelable
capital and operating leases. Future minimum lease payments under the Company's
capital and operating leases and the present value of minimum lease payments
under capital leases as of December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31, Leases Leases
- ------------------------ ------- ---------
<S> <C> <C>
1999.......................................................... $ 16 $ 739
2000.......................................................... 9 739
2001.......................................................... -- 783
2002.......................................................... -- 902
2003.......................................................... -- 1,116
Thereafter.................................................... -- 3,784
---- ------
Future minimum lease payments................................. $ 25 $8,063
======
Amounts representing interest................................. (5)
----
Present value of future minimum lease payments................ $ 20
====
</TABLE>

Future payments under operating leases are net of sub-lease payments
totaling approximately $276,000 for each of the years 1999 through 2001 and
approximately $161,000 for 2002.

F-17
<PAGE>

ULTRADATA Corporation
Valuation and Qualifying Accounts
(In thousands)

<TABLE>
<CAPTION>
Charged
Balance at to Costs, Balance at
Beginning Expenses, Write- End of
Account Description of Period or Revenues offs Period
- ------------------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1998
Allowance for doubtful accounts... $1,094 $ (58) $ (515) $ 521

Year ended December 31, 1997
Allowance for doubtful accounts... $2,059 $1,425 $(2,390) $1,094

Year ended December 31, 1996
Allowance for doubtful accounts... $ 55 $2,304 $ (300) $2,059
</TABLE>

F-18
<PAGE>

ULTRADATA CORPORATION
Condensed Balance Sheets
(In thousands, except share and per share data)

<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and equivalents................................ $ 3,113 $ 2,418
Restricted cash..................................... -- 321
Trade accounts receivable, net...................... 5,803 6,523
Inventories......................................... 879 1,932
Prepaid expenses and other current assets........... 277 383
------- -------
Total current assets.............................. 10,072 11,577
Property and equipment, net........................... 3,168 3,312
------- -------
Total assets...................................... $13,240 $14,889
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Bank borrowings and current portion of long-term
obligations........................................ $ 965 $ 1,075
Accounts payable.................................... 779 1,545
Accrued expenses.................................... 1,589 1,646
Deferred revenue and customer advances.............. 1,177 1,479
------- -------
Total current liabilities......................... 4,510 5,745
Deferred revenue and customer advances................ 562 682
Long-term obligations, excluding current portion...... 5 632
------- -------
Total liabilities................................. 5,077 7,059
------- -------
Stockholder's' equity:
Preferred stock; par value $.001; 2,000,000 shares
authorized; none outstanding....................... -- --
Common stock; par value $.001; 23,000,000 shares
authorized; 7,746,132 and 7,725,674 shares issued
and outstanding in 1999 and 1998, respectively..... 8 8
Additional paid in capital.......................... 15,606 15,515
Accumulated deficit................................. (7,451) (7,693)
------- -------
Total stockholders' equity.......................... 8,163 7,830
------- -------
Total liabilities and stockholders' equity........ $13,240 $14,889
======= =======
</TABLE>

See accompanying notes to condensed financial statements.

F-19
<PAGE>

ULTRADATA CORPORATION
Condensed Statements of Operations
(In thousands, except per share data)
(Unaudited)

<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues:
Software................................................. $ 2,608 $ 2,522
Services and other....................................... 4,509 3,752
--------- ---------
Subtotal............................................... 7,117 6,274
Hardware................................................. 211 988
--------- ---------
Total revenues......................................... 7,328 7,262
--------- ---------
Cost of revenues:
Software................................................. 757 231
Services and other....................................... 2,256 2,632
Hardware................................................. 213 873
--------- ---------
Total cost of revenues................................. 3,226 3,736
--------- ---------
Gross margin........................................... 4,102 3,526
--------- ---------
Operating expenses:
Product development...................................... 996 1,195
Selling, general and administrative...................... 2,861 2,298
--------- ---------
Total operating expenses............................... 3,857 3,493
--------- ---------
Operating income........................................... 245 33
Interest expense, net...................................... (42) --
Other income............................................... 74 7
--------- ---------
Income before income taxes................................. 277 40
--------- ---------
Income tax expense......................................... 35 --
--------- ---------
Net income............................................. $ 242 $ 40
========= =========
Earnings (loss) per share information:
Basic net income per share............................... $ 0.03 $ 0.01
Diluted net income per share............................. 0.03 0.01
Shares used to compute basic net income per share........ 7,740 7,637
Shares used to compute diluted net income per share...... 8,000 7,705
</TABLE>

See accompanying notes to condensed financial statements.

F-20
<PAGE>

ULTRADATA CORPORATION
Condensed Statements of Cash Flows
In thousands
(Unaudited)

<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ 242 $ 40
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization........................ 330 515
Write off related to renegotiation of agreement...... 149 --
Changes in operating assets and liabilities:
Trade accounts receivable, net..................... 720 291
Inventories........................................ 276 65
Prepaid expenses and other current assets.......... 106 (349)
Income taxes receivable............................ -- 24
Accounts payable................................... (348) 167
Accrued expenses................................... (57) (6)
Deferred revenue and customer advances............. (422) (198)
--------- ---------
Net cash provided by operating activities........ 996 549
--------- ---------
Cash flows from investing activities:
Capital expenditures................................... (186) (262)
Sale of short-term investments......................... -- 303
--------- ---------
Net cash provided by (used for) investing
activities...................................... (186) 41
--------- ---------
Cash flows from financing activities:
Decrease in restricted cash............................ 321 --
Repayment of debt...................................... (527) (18)
Net proceeds from issuance of common stock............. 91 101
--------- ---------
Net cash provided by (used for) financing
activities...................................... (115) 83
--------- ---------
Net increase (decrease) in cash and equivalents.......... 695 673
Cash and equivalents at beginning of period.............. 2,418 486
--------- ---------
Cash and equivalents at end of period.................... $ 3,113 $ 1,159
========= =========
</TABLE>

See accompanying notes to condensed financial statements.

F-21
<PAGE>

ULTRADATA CORPORATION
Notes to Condensed Financial Statements
March 31, 1999 and 1998

1 Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange
Commission for interim financial statements, therefore, certain information and
footnote disclosures normally contained in annual financial statements have
been condensed or omitted. These financial statements should be read in
conjunction with the audited financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.

The accompanying unaudited condensed financial statements of the Company
reflect all adjustments, consisting solely of adjustments of a normal recurring
nature which are, in the opinion of management, necessary to fairly present the
financial position as of March 31, 1999 and the results of operations and cash
flows for the interim periods presented. The results for the interim period
ended March 31, 1999 are not necessarily indicative of the results to be
expected for the entire year.

2 Revenue Recognition

3 Inventories

Inventories consist of hardware and software purchased from third parties
pending shipment to customers and are recorded at the lower of cost or market.

4 Computation of Earnings Per Share (in thousands except per share data)

The following is a reconciliation of the denominator in the computation of
diluted earnings per share (the numerator equals net income):

<TABLE>
<CAPTION>
Three
Months
Ended
March 31,
-----------
1999 1998
----- -----
<S> <C> <C>
Net income......................................................... $ 242 $ 40
===== =====
Weighted average outstanding shares................................ 7,740 7,637
Common stock equivalents........................................... 260 68
----- -----
Shares used to compute diluted net income per share................ 8,000 7,705
===== =====
Antidilutive common stock equivalents excluded..................... 1,122 1,081
===== =====
</TABLE>

F-22
<PAGE>

5 Recent Accounting Pronouncements

In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," which requires an
enterprise to report, by major components and as a single total, the change in
net assets during the period from nonowner sources. Adoption of this standard
did not have an impact on the Company's financial position, results of
operations or cash flows. During the quarters ended March 31, 1999 and 1998,
the Company's sole source of comprehensive income is its net income.

6 Short-Term Obligations

In 1998, the Company entered into an agreement ("License Agreement") to
distribute certain products developed by a third-party. In the first quarter of
1999, the Company renegotiated this agreement which effectively reduced the
number of licenses purchased (which had been recorded as inventory), long-term
debt obligations and the related maintenance commitments. Under the revised
License Agreement, payments totaling $1.2 million are due through April 2001
and include payments of $0.4 million for maintenance. This revision resulted in
a charge of $149,000 during the quarter ended March 31, 1999, which is included
in software cost of revenues in the accompanying income statement.

In connection with the renegotiated License Agreement, in April 1999, the
Company executed an irrevocable standby letter of credit for $700,000 as
collateral for the amounts due under the License Agreement.

7 Subsequent Event

In May 1999, the Company was notified that a hardware vendor asserted that
the Company and/or another vendor had misappropriated trade secrets and
interfered with or breached the agreement the hardware vendor had with the
Company. The Company has agreed to forgive approximately $123,000 in payables
owed to the Company by the hardware vendor and to restructure certain
provisions of the agreement between the Company and the hardware vendor. This
settlement will result in a charge of $123,000 to earnings in the quarter ended
June 30, 1999. The Company's management believes the impact of this
restructuring of the agreement will not have a material adverse effect on the
financial condition or results of operation of the Company.

F-23
<PAGE>

Appendix A

AGREEMENT AND PLAN OF MERGER

DATED AS OF MAY 17, 1999

AMONG

CFI PROSERVICES, INC.,

UFO ACQUISITION CO.

AND

ULTRADATA CORPORATION
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
1.THE MERGER............................................................... A-1
1.1The Merger............................................................ A-1
1.2Effective Time........................................................ A-1
1.3Closing of the Merger................................................. A-1
1.4Effects of the Merger................................................. A-1
1.5Certificate of Incorporation and Bylaws............................... A-2
1.6Directors............................................................. A-2
1.7Officers.............................................................. A-2
1.8Conversion of Shares.................................................. A-2
1.9Payment for Shares.................................................... A-2
1.10Dissenting Shares.................................................... A-3
1.11Stock Options........................................................ A-4

2.REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ A-5
2.1Organization and Qualification........................................ A-5
2.2Capitalization of the Company and its Subsidiaries.................... A-5
2.3Authority Relative to this Agreement; Consents and Approvals.......... A-6
2.4SEC Reports; Financial Statements..................................... A-6
2.5Information Supplied.................................................. A-7
2.6Consents and Approvals; No Violations................................. A-7
2.7No Default............................................................ A-7
2.8No Undisclosed Liabilities; Absence of Changes........................ A-8
2.9Litigation............................................................ A-8
2.10Compliance with Applicable Law....................................... A-8
2.11Employee Benefit Plans............................................... A-8
2.12Environmental Laws and Regulations................................... A-10
2.13Tax Matters.......................................................... A-10
2.14Intangible Property.................................................. A-10
2.15Brokers.............................................................. A-11
2.16Material Contracts................................................... A-11
2.17Disclosure........................................................... A-11
2.18Termination of Certain Contracts..................................... A-12

3.REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB......................... A-12
3.1Organization.......................................................... A-12
3.2Authority Relative to this Agreement.................................. A-12
3.3Information Supplied.................................................. A-12
3.4Consents and Approvals; No Violations................................. A-13
3.5Litigation............................................................ A-13
3.6Brokers............................................................... A-13
3.7Financing............................................................. A-13

</TABLE>

-i-
<PAGE>

<TABLE>
<S> <C>
4.COVENANTS............................................................... A-13
4.1Conduct of Business of the Company................................... A-13
4.2Preparation of Proxy Statement and Stockholders' Meeting............. A-15
4.3No Solicitation...................................................... A-15
4.4Access to Information................................................ A-16
4.5Additional Agreements; Reasonable Best Efforts....................... A-17
4.6Consents............................................................. A-17
4.7Public Announcements................................................. A-17
4.8Notification of Certain Matters...................................... A-17
4.9Release of Liens..................................................... A-18
4.10Company 401(k) Plan................................................. A-18
4.11Parent 401(k) Plan.................................................. A-18

5.CONDITIONS TO CONSUMMATION OF THE MERGER................................ A-18
5.1Conditions to Each Party's Obligations to Effect the Merger.......... A-18
5.2Conditions to the Obligations of the Company......................... A-18
5.3Conditions to the Obligations of Parent and Sub...................... A-19

6.TERMINATION; AMENDMENT; WAIVER.......................................... A-19
6.1Termination.......................................................... A-19
6.2Effect of Termination................................................ A-20
6.3Fees and Expenses.................................................... A-20
6.4Amendment............................................................ A-21
6.5Extension; Waiver.................................................... A-21

7.MISCELLANEOUS........................................................... A-22
7.1Nonsurvival of Representations and Warranties........................ A-22
7.2Entire Agreement; Assignment......................................... A-22
7.3Validity............................................................. A-22
7.4Notices.............................................................. A-22
7.5Governing Law........................................................ A-23
7.6Descriptive Headings................................................. A-23
7.7Parties in Interest.................................................. A-23
7.8Severability......................................................... A-23
7.9Specific Performance................................................. A-23
7.10Subsidiaries........................................................ A-23
7.11Brokers............................................................. A-24
7.12Counterparts........................................................ A-24
</TABLE>

-ii-
<PAGE>

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of May 17, 1999, is among CFI
PROSERVICES, INC., an Oregon corporation ("Parent"), UFO ACQUISITION CO., a
Delaware corporation and a direct wholly owned subsidiary of Parent ("Sub"),
and ULTRADATA CORPORATION, a Delaware corporation (the "Company").

WHEREAS, the Boards of Directors of the Company, Parent and Sub each have,
in light of and subject to the terms and conditions set forth herein, (i)
determined that the Merger (as defined in Section 1.1) is fair to their
respective stockholders and in the best interests of such stockholders and (ii)
approved the Merger in accordance with this Agreement.

NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent and Sub hereby agree as follows:

1. THE MERGER

1.1 The Merger

At the Effective Time and upon the terms and subject to the conditions of
this Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") and the separate corporate existence of Sub shall
cease. At the option of Parent, upon five days prior written notice to the
Company, the Merger may be structured so that, and this Agreement shall
thereupon be deemed to be amended to provide that, either another direct or
indirect subsidiary of the Parent shall be merged with and into the Company or
the Company shall be merged with and into the Sub or another direct or indirect
wholly owned subsidiary of Parent, with the Sub or such other subsidiary of
Parent continuing as the Surviving Corporation; provided that, no such change
in structure will be deemed to apply for purposes of the Company's
representations and warranties contained in Section 2 hereof.

1.2 Effective Time

Subject to the provisions of this Agreement, Parent, Sub and the Company
shall cause the Merger to be consummated by filing an appropriate Certificate
of Merger or other appropriate documents (the "Certificate of Merger") with the
Secretary of State of the State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of the DGCL, as soon as
practicable on or after the Closing Date (as defined in Section 1.3). The
Merger shall become effective upon such filing or at such time thereafter as is
provided in the Certificate of Merger (the "Effective Time").

1.3 Closing of the Merger

The closing of the Merger (the "Closing") will take place at a time and on a
date to be specified by the parties, which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in
Article 5 (the "Closing Date"), at the offices of Perkins Coie LLP, 1211 S.W.
Fifth Avenue, Suite 1500, Portland, Oregon, unless another time, date or place
is agreed to in writing by the parties hereto.

1.4 Effects of the Merger

The Merger shall have the effects set forth in the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all the properties, rights, privileges, powers and franchises of the Company
and Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.

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1.5 Certificate of Incorporation and Bylaws

The Restated Certificate of Incorporation of the Company in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable law. The Bylaws of the
Company in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.

1.6 Directors

The directors of Sub at the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation until
such director's successor is duly elected or appointed and qualified.

1.7 Officers

The officers of Sub at the Effective Time shall be the initial officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation until
such officer's successor is duly elected or appointed and qualified.

1.8 Conversion of Shares

(a) At the Effective Time, each share of common stock, par value $0.001 per
share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (individually a "Share" and
collectively, the "Shares") (other than (i) Shares held by any subsidiary
of the Company and (ii) Shares held by Parent, Sub or any other subsidiary
of Parent or Sub and (iii) Dissenting Shares (as defined in Section 1.10
hereof)) shall, by virtue of the Merger and without any action on the part
of Sub, the Company or the holder thereof, be converted into the right to
receive (a) $7.50 in cash, payable to the holder thereof without interest
thereon, upon surrender of the certificate formerly representing such Share
(the "Merger Consideration").

(b) At the Effective Time, each outstanding share of the common stock, par
value $0.001 per share, of Sub shall be converted into one share of common
stock, par value $0.001 per share, of the Surviving Corporation.

(c) At the Effective Time, each share of Company Common Stock held by
Parent, Sub or any subsidiary of Parent, Sub or the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of Sub, the Company or the holder thereof, be canceled,
retired and cease to exist and no payment shall be made with respect
thereto.

1.9 Payment for Shares

(a) As of the Effective Time, Chase Mellon Shareholder Services, L.L.C., or
another bank or trust company designated by Parent and reasonably
acceptable to the Company shall act as paying agent (the "Paying Agent") in
effecting the payment of the Merger Consideration for certificates that
formerly represented Shares entitled to payment of the Merger Consideration
pursuant to Section 1.8 hereof. On or before the Effective Time, Parent or
Sub shall deposit, or cause to be deposited, in trust with the Paying
Agent, the aggregate Merger Consideration to which holders of Shares shall
be entitled at the Effective Time pursuant to Section 1.8 hereof.

(b) As soon as reasonably practicable after the Effective Time, the Paying
Agent shall mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding
Shares (the "Certificates") whose Shares were converted into the right to
receive the Merger Consideration pursuant to Section 1.8: (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the

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Paying Agent and shall be in such form and have such other provisions as
Parent and the Company may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates and receiving the Merger
Consideration therefor. Upon surrender of a Certificate for cancellation to
the Paying Agent, the Paying Agent shall pay the holder of such Certificate
the Merger Consideration multiplied by the number of Shares formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares
which is not registered in the transfer records of the Company, the
appropriate Merger Consideration for such surrendered Certificate may be
paid to a transferee if the Certificate representing such Shares is
presented to the Paying Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 1.9, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender
the aggregate Merger Consideration relating thereto. No interest shall be
paid or accrued on the Merger Consideration.

(c) Promptly following the date which is one year after the Effective Time,
the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent's duties
shall terminate. Thereafter, each holder of a Certificate formerly
representing a Share may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in consideration therefor the aggregate Merger
Consideration relating thereto, without any interest or dividends thereon.

(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates formerly representing Shares are presented to
the Surviving Corporation or the Paying Agent, they shall be surrendered
and canceled in return for the payment of the aggregate Merger
Consideration relating thereto, subject to applicable law in the case of
Dissenting Shares.

(e) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such certificate to be lost, stolen or destroyed, the
Paying Agent shall pay to such holder in exchange for such lost, stolen, or
destroyed certificate the aggregate Merger Consideration relating thereto,
if any, as may be required pursuant to this Agreement; provided, however,
that Parent may, in its discretion, require the delivery of a suitable bond
or indemnity.

(f) Neither Parent nor the Company shall be liable to any holder of Shares
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.

1.10 Dissenting Shares

Notwithstanding anything in this Agreement to the contrary, Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with Section 262 of the
DGCL, if such Section 262 provides for appraisal rights for such Shares in the
Merger ("Dissenting Shares"), shall not be converted into the right to receive
the Merger Consideration as provided in Section 1.8 hereof, unless and until
such holder fails to perfect or withdraws or otherwise loses his right to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Shares shall thereupon be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration, if
any, to which such holder is entitled, without interest or dividends thereon.
The Company shall give Parent prompt notice of any demands received by the
Company for appraisal of Shares and, prior to the Effective Time, Parent shall
have the right to participate in all negotiations and proceedings with respect
to such demands. Prior to the Effective Time, the Company shall not, except
with the prior written consent of Parent, make any payment with respect to, or
settle or offer to settle, any such demands.

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1.11 Stock Options

(a) At the Effective Time, each outstanding option to purchase Company
Common Stock issued pursuant to the Company's 1994 Equity Incentive Plan
(the "Assumed Plan"), whether vested or unvested, shall be assumed by
Parent and shall constitute an option (an "Assumed Option") to acquire, on
the same terms and conditions as were applicable under such option prior to
the Effective Time, the number of shares of Common Stock, no par value, of
Parent ("Parent Common Stock"), rounded down to the nearest whole number,
determined by multiplying .718 by the number of shares of Company Common
Stock then subject to purchase pursuant to such option. The exercise price
for such Assumed Options shall be equal to the aggregate exercise price for
the shares of Company Common Stock then subject to purchase pursuant to
such option divided by the number of shares of Parent Common Stock deemed
to be purchasable pursuant to such Assumed Option. With respect to an
option for shares of Company Common Stock to which Section 421 of the
Internal Revenue Code of 1986, as amended (the "Code") applies by reason of
its qualification under Section 422 or 423 of the Code (a "qualified stock
option"), in no event shall the terms of any Assumed Option give the holder
of a qualified stock option additional benefits that he or she did not have
under such qualified stock option. Any references in each Assumed Option or
Assumed Plan to the Company shall be deemed to refer to Parent, where
appropriate, and Parent shall assume the obligations of the Company under
the Assumed Options and the Assumed Plan. Parent shall file as soon as
reasonably practicable following the Closing Date, and maintain the
effectiveness of, a registration statement on Form S-8 with respect to the
Parent Common Stock subject to the Assumed Options for so long as such
Assumed Options remain outstanding. Parent shall use reasonable efforts to
take such actions as are necessary for the conversion of the Assumed
Options pursuant to this Section 1.11(b), including the reservation,
issuance and listing of shares of Parent Common Stock as is necessary to
effectuate the transactions contemplated by this Section 1.11(b). Following
the Effective Time, Parent will prepare and distribute to holders of
Assumed Options a notice explaining the effect of the conversion of such
holder's unvested options into Assumed Options.

(b) Except as provided herein or as otherwise agreed to by the parties, (i)
the Company shall not take any action (or refrain from taking action) the
effect of which would cause any options to accelerate in connection with
the Merger (which options would not have otherwise accelerated pursuant to
their terms or the terms of any existing employment agreement disclosed to
Parent), (ii) the 1995 Director Stock Option Plan shall terminate as of the
Effective Time and the provisions in any other plan, program or
arrangement, providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any of its subsidiaries
(other than the Assumed Plan) shall be canceled as of the Effective Time
and (iii) no holder of options to purchase Company Common Stock or any
participant in any of the Company's stock option plans or any other plans,
programs or arrangements shall have any right thereunder to acquire any
equity securities of the Company, the Surviving Corporation or any
subsidiary thereof, other than with respect to the Assumed Options. With
respect to the options to purchase 100,000 shares of Company Common Stock
that have been granted under the 1995 Director Stock Option Plan as of the
date hereof and the options to purchase an aggregate of 1.2 million shares
of Company Common Stock outside of the Company's stock option plans, on the
Closing Date the Company shall pay to each holder of such options an amount
in respect thereof equal to the product of (A) the excess of $7.50 over the
exercise price thereof and (B) the number of shares of Company Common Stock
subject to such option.

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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to each of Parent and
Sub as follows:

2.1 Organization and Qualification

(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as now being conducted.

(b) The Company has no subsidiaries and does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity.

(c) The Company is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect (as defined below) on the Company. When
used in connection with the Company, the term "Material Adverse Effect"
means any change or effect that, when taken together with all other adverse
changes and effects (i) is or is reasonably likely to be materially adverse
to the properties, business, results of operations or condition (financial
or otherwise) of the Company, or (ii) may impair the ability of the Company
to consummate the transactions contemplated hereby.

(d) The Company has heretofore delivered to Parent accurate and complete
copies of the certificate of incorporation and by-laws, as currently in
effect, of the Company.

2.2 Capitalization of the Company and its Subsidiaries

(a) The authorized capital stock of the Company consists of 25 million
shares consisting of 2 million shares of preferred stock, $0.001 par value,
and 23 million shares of Company Common Stock. No preferred shares and
7,748,382 shares of Company Common Stock are issued and outstanding. All of
the issued and outstanding shares of Company Common Stock have been validly
issued, and are fully paid, nonassessable and free of preemptive rights.
The Company has reserved an aggregate of 2,750,000 shares of Company Common
Stock for issuance in connection with the Company's stock option plans and
otherwise. The Company has reserved an aggregate of 1,300,000 shares of
Company Common Stock under the 1994 Equity Incentive Plan, of which 131,781
shares have been issued upon the exercise of options and an aggregate of
862,504 shares of Company Common Stock are currently subject to outstanding
grants under such plan. The Company has reserved an aggregate of 250,000
shares of Company Common Stock under the 1995 Directors Plan and options to
purchase an aggregate of 100,000 shares of Company Common Stock have been
granted under such plan. Options to purchase an aggregate of 1.2 million
shares have been granted outside of such plans to Nigel P. Gallop and
Robert J Majteles (in the amount of 600,000 shares each). Schedule 2.2 sets
forth, for each of option plans and for options that were granted outside
of the plans, the number of option shares currently vested and exercisable,
the number of additional option shares that will vest, by their existing
terms, at various specified dates prior to the Effective Time, and the
numbers of additional options that will become vested immediately prior to
the Merger as a result thereof. The Company has reserved 250,000 shares of
Company Common Stock for issuance under the Company's Employee Stock
Purchase Plan (the "ESPP"). A maximum of 13,000 shares of Company Common
Stock will be issued to participants under the ESPP after the date hereof
and prior to the Effective Time. The ESPP will terminate on or before the
Effective Time and, except as set forth in the preceding sentence, no
additional shares of Company Common Stock will be issued under the ESPP
between the date hereof and the Closing Date. Except as set forth above,
there are

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outstanding (i) no shares of capital stock or other voting securities of
the Company, (ii) no securities of the Company or its subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire from
the Company, and no obligations of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company, and (iv) no equity
equivalents, interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (including stock appreciation rights)
(collectively, "Company Securities"). There are no outstanding obligations
of the Company to repurchase, redeem or otherwise acquire any Company
Securities. There are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or to which it
is bound relating to the voting of any shares of capital stock of the
Company.

(b) The Company Common Stock constitutes the only class of securities of
the Company or its subsidiaries registered or required to be registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

2.3 Authority Relative to this Agreement; Consents and Approvals

(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company (the "Company Board")
and no other corporate proceedings on the part of the Company are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby (other than, with respect to the Merger, the approval and adoption
of this Agreement by the holders of a majority of the then outstanding
shares of Company Common Stock). This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid, legal and
binding agreement of the Company, enforceable against the Company in
accordance with its terms.

(b) The Company Board has, by unanimous vote of those present, duly and
validly approved, and taken all corporate actions required to be taken by
the Company Board for the consummation of the transactions, including the
Merger, contemplated hereby and resolved to recommend that the stockholders
of the Company approve and adopt this Agreement; provided, however, that
such approval and recommendation may be withdrawn, modified or amended in
the event that the Company Board by majority vote determines in its good
faith judgment, after consultation with and based upon the advice of
independent legal counsel, that it is necessary to do so in order to comply
with its fiduciary duties to stockholders under applicable law. No state
takeover statute or similar statute or regulation applies or purports to
apply to the Merger, this Agreement or any of the transactions contemplated
hereby.

2.4 SEC Reports; Financial Statements

(a) The Company has filed all required forms, reports and documents with
the Securities and Exchange Commission (the "SEC") since February 14, 1996,
each of which has complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities
Act") and the Exchange Act, each as in effect on the dates such forms,
reports and documents were filed. The Company has heretofore delivered to
Parent, in the form filed with the SEC (including any amendments thereto),
(i) its Annual Reports on Form 10-K for each of the fiscal years ended
December 31, 1996, 1997 and 1998, (ii) all definitive proxy statements
relating to the Company's meetings of stockholders (whether annual or
special) held since February 14, 1996 and (iii) all other reports or
registration statements filed by the Company with the SEC since February
14, 1996 (the "Company SEC Reports"). None of such forms, reports or
documents, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained, when
filed, any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Reports complied as
to form in all

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material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto and fairly present,
in conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP") (except as may be indicated in the notes
thereto), the financial position of the Company as of the dates thereof and
its results of operations and changes in financial position for the periods
then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments). Since December 31, 1998,
except as set forth in the Company SEC Reports, there has not been any
change, or any application or request for any change, by the Company or any
of its subsidiaries in accounting principles, methods or policies for
financial accounting or tax purposes.

(b) The Company has heretofore made available to Parent a complete and
correct copy of any material amendments or modifications, which have not
yet been filed with the SEC, to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Exchange Act.

2.5 Information Supplied

None of the information with respect to the Company to be included in the
Proxy Statement (as defined in this Section below) will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated thereunder. The letters
to stockholders, notices of meeting, preliminary proxy statement, definitive
proxy statement and forms of proxies to be distributed to stockholders in
connection with the Merger, and any schedules to be filed with the SEC in
connection therewith are collectively referred to as the "Proxy Statement."

2.6 Consents and Approvals; No Violations

Except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Exchange Act, the
filing and recordation of the Certificate of Merger as required by the DGCL,
and the approval of the stockholders of the Company, no filing with or notice
to, and no permit, authorization, consent or approval of, any court or
tribunal or administrative, governmental or regulatory body, agency or
authority (a "Governmental Entity") or any other person or entity is necessary
for the execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby. Neither
the execution, delivery and performance of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the certificate
of incorporation or bylaws of the Company, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, amendment, cancellation
or acceleration or Lien (as defined below)) (collectively, a "Default") under
any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument
or obligation to which the Company is a party or by which it or any of its
properties or assets may be bound (collectively, "Agreements") or would result
in a Default under any of the Company's Agreements (whether or not such
Agreement is material) which would have a Material Adverse Effect on the
Company, or (iii) violate any order, writ, injunction, decree, law, statute,
rule or regulation applicable to the Company or any of its properties or
assets. For purposes of this Agreement, "Lien" means, with respect to any
asset (including, without limitation, any security) any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset.

2.7 No Default

The Company is not in default or violation (and no event has occurred which
with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (i) its certificate of
incorporation or bylaws, or (ii) any order, writ, injunction, decree, law,
statute, rule or regulation applicable to

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the Company or any of its properties or assets, except in the case of
subsection (ii) for violations, breaches or defaults that would not have a
Material Adverse Effect on the Company.

2.8 No Undisclosed Liabilities; Absence of Changes

Except as and to the extent publicly disclosed by the Company in the
Company SEC Reports, as of December 31, 1998, the Company had no liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
and whether due or to become due or asserted or unasserted, which would be
required by GAAP to be reflected in, reserved against or otherwise described
in the balance sheet of the Company (including the notes thereto) as of such
date or which could reasonably be expected to have a Material Adverse Effect
on the Company. Except as publicly disclosed by the Company in the Company SEC
Reports, since December 31, 1998, the business of the Company has been carried
on only in the ordinary and usual course, the Company has not incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
and whether due or to become due or asserted or unasserted which could
reasonably be expected to have, and there have been no events, changes or
effects with respect to the Company having or which could reasonably be
expected to have, a Material Adverse Effect on the Company.

2.9 Litigation

Except as publicly disclosed by the Company in the Company SEC Reports,
there is no suit, claim, action, proceeding or investigation pending or, to
the knowledge of the Company, threatened against the Company or any of its
properties or assets which (a) could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
(b) as of the date hereof, questions the validity of this Agreement or any
action to be taken by the Company in connection with the consummation of the
transactions contemplated hereby or could otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
publicly disclosed by the Company, the Company is not subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, could reasonably be expected to have a Material Adverse
Effect on the Company or would prevent or delay the consummation of the
transactions contemplated hereby.

2.10 Compliance with Applicable Law

Except as publicly disclosed by the Company in the Company SEC Reports, the
Company holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of its
business (the "Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which could not
reasonably be expected to have a Material Adverse Effect on the Company.
Except as publicly disclosed by the Company in the Company SEC Reports, the
Company is in compliance with the terms of the Company Permits, except where
the failure so to comply could not reasonably be expected to have a Material
Adverse Effect on the Company. Except as publicly disclosed by the Company in
the Company SEC Reports, the business of the Company is not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity
except for violations or possible violations which do not, and, insofar as
reasonably can be foreseen, will not, have a Material Adverse Effect on the
Company. Except as publicly disclosed by the Company in the Company SEC
Reports, to the best knowledge of the Company no investigation or review by
any Governmental Entity with respect to the Company is pending or threatened,
nor, to the best knowledge of the Company, has any Governmental Entity
indicated an intention to conduct the same.

2.11 Employee Benefit Plans

(a) The Company Disclosure Schedule contains a list of all top hat or
excess benefit plans for a select group of management or highly compensated
employees, Code Section 401(a) plans, employee bonus plans, Code Section
125 plans, medical, dental, vision, hospitalization and life insurance,
tuition reimbursement, disability plans in excess of state law required
benefits, paid time off and vacation

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benefits, severance (including change in control agreements), stock
purchase, stock option, stock appreciation rights, fringe benefit and other
employee benefit plans and programs (including, without limitation, each
"employee benefit plan," as defined in section 3(3) of ERISA) and each
employment or consulting contract or agreement which provides for base
annual compensation in excess of $75,000, (i) sponsored, maintained or
contributed to by the Company or any ERISA Affiliate, (ii) covering or
benefiting any current or former officer, employee, director or independent
contractor of the Company or any ERISA Affiliate or (iii) with respect to
which the Company or any ERISA Affiliate has any material obligation or
liability (individually, an "Employee Benefit Plan" and, collectively, the
"Employee Benefit Plans"). Neither the Company nor any ERISA Affiliate has
any agreement to create any additional employee benefit plan or program, or
to modify or amend any existing Employee Benefit Plan. For purposes of this
Agreement, "ERISA Affiliate" means any Subsidiary and any other
corporation, trade, business or other entity that must be aggregated with
either the Company or any Subsidiary under Section 414(b), (c), (m) or (o)
of the Code. The Company has delivered to Parent true, complete and
accurate copies of all Employee Benefit Plans (including all amendments
thereto and summary plan descriptions thereof).

(b) There has been no amendment, written interpretation or announcement
(whether or not written) by either the Company or any ERISA Affiliate
relating to a change in participation or coverage under any Employee
Benefit Plan that, either alone or together with any other such items or
events, could increase the expense of maintaining such Plan above the level
of expense incurred with respect thereto for the most recent fiscal year
included in the Company's or any ERISA Affiliate's audited financial
statements.

(c) With respect to each Employee Benefit Plan (i) such Employee Benefit
Plan and any related trust agreements, insurance contracts or annuity
contracts (or any related trust instruments) are and at all times since
inception have been maintained, administered, operated and funded in
accordance with their terms and in compliance with each applicable
provision of ERISA, the Code and any other applicable laws, including,
without limitation, rules promulgated pursuant thereto or in connection
therewith, (ii) each Employee Benefit Plan that is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been the
subject of a favorable determination letter issued by the IRS and, to the
best knowledge of the Company, no circumstances exist that have or are
likely to adversely affect, or result in the revocation of, such
determination, and (iii) no transaction, event or omission has occurred or
failed to occur that could subject the Company or any ERISA Affiliate,
directly or indirectly, to a tax, fine, penalty or related charge under any
applicable law, including, without limitation, Chapter 43 of Subtitle D of
the Code and Section 502(c), 502(i), 502(l) or 4071 of ERISA;

(d) All contributions, premiums and other payments due or required to be
made to (or with respect to) each Employee Benefit Plan under the terms of
such Employee Benefit Plan or under applicable law have been made on or
before their due dates in accordance with the terms of such Employee
Benefit Plan or applicable law, or, if not yet due, have been properly
accrued on the financial statements of the Company. The costs of
administering the Employee Benefit Plans, including, without limitation,
fees for the trustees and other service providers which are customarily
paid by the Company or any ERISA Affiliate, have been timely paid, or will
be timely paid or accrued on the financial statements of the Company;

(e) Neither the Company nor any ERISA Affiliate sponsors, maintains or
contributes to, or has ever sponsored, maintained or contributed to (or
been obligated to contribute to), (i) any multiemployer plan within the
meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the
Code, (ii) any multiple employer plan within the meaning of Section 4063 or
4064 of ERISA or Section 413(c) of the Code, or (iii) any employee benefit
plan, fund, program, contract or arrangement that is subject to Section 412
of the Code or Section 302 or Title IV of ERISA;

(f) There are no pending or threatened claims, lawsuits or arbitration
asserted or instituted against any Employee Benefit Plans, fiduciaries or
any officers, employees, directors, agents or owners of the Company or any
ERISA Affiliate with respect to such Plan, and the Company has no knowledge
of any

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facts which would give rise to or could reasonably be expected to give rise
to any such claims, lawsuits or arbitrations. No Employee Benefit Plan is
currently under investigation, audit or review by the IRS, Department of
Labor or any other governmental entity or agency, and the Company has no
knowledge of any facts which could give rise to or could reasonably be
expected to give rise to any such claims, lawsuits or arbitrations;

(g) Neither the execution and delivery of this Agreement or any related
agreement nor the consummation of the transactions contemplated by this
Agreement or any related agreement will (i) entitle any current or former
officer, employee, director, agent or independent contractor of the Company
or any ERISA Affiliate to severance pay, unemployment compensation or any
other payment from the Company, any ERISA Affiliate or any other Person, or
otherwise increase the amount of compensation due to any such individual,
(ii) result in any benefit or right becoming established or increased, or
accelerate the time of payment or vesting of any benefit, under any
Employee Benefit Plan, (iii) require the Company or any ERISA Affiliate to
make any contribution to a trust or other funding arrangement or to
increase its contributions to any Employee Benefit Plan, or (iv) conflict
with the terms of any Employee Benefit Plan, whether or not some other
subsequent action or event would be required to trigger any of the items
specified in this paragraph.

2.12 Environmental Laws and Regulations

(a) Except as publicly disclosed by the Company in the Company SEC Reports,
(i) the Company is in compliance with all applicable federal, state and
local laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for non-compliance that could
not reasonably be expected to have a Material Adverse Effect on the
Company, which compliance includes, but is not limited to, the possession
by the Company of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof; (ii) the Company has not received
written notice of, and, to the best knowledge of the Company, the Company
is not the subject of, any action, cause of action, claim, investigation,
demand or notice by any person or entity alleging liability under or non-
compliance with any Environmental Law (an "Environmental Claim"); and (iii)
to the best knowledge of the Company, there are no circumstances that are
reasonably likely to prevent or interfere with such material compliance in
the future.

(b) Except as publicly disclosed by the Company in the Company SEC Reports,
there are no Environmental Claims that are pending or, to the best
knowledge of the Company, threatened against the Company or, to the best
knowledge of the Company, against any person or entity whose liability for
any Environmental Claim the Company has or may have retained or assumed
either contractually or by operation of law.

2.13 Tax Matters

The Company has accurately prepared in all material respects and duly filed
with the appropriate federal, state, local and foreign taxing authorities all
tax returns, information returns and reports that are, individually and in the
aggregate, material and are required to be filed with respect to the Company
and has paid in full or made adequate provision for the payment of all
material Taxes (as defined below). The Company is not delinquent in the
payment of any material Taxes. As used herein, the term "Taxes" means all
federal, state, local and foreign taxes, including, without limitation,
income, profits, franchise, employment, transfer, withholding, property,
excise, sales and use taxes (including interest penalties thereon and
additions thereto).

2.14 Intangible Property

The Company owns or possesses adequate licenses or other valid rights to
use all material patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets,

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applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with the
business of the Company as currently conducted or as contemplated to be
conducted, and the Company is unaware of any assertion or claim challenging
the validity of any of the foregoing. The conduct of the business of the
Company as heretofore and currently conducted has not and does not conflict in
any way with any license, trademark, trademark right, trade name, trade name
right, service mark, copyright or, to the Company's best knowledge, any patent
or patent right of any third party. To the best knowledge of the Company,
there are no infringements of any proprietary rights owned by or licensed by
or to the Company.

2.15 Brokers

No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission or expense reimbursement in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of the Company or any of its affiliates. The Company
shall be responsible for all such fees and expenses, except as otherwise
provided in Section 6.3.

2.16 Material Contracts

(a) The Company has delivered or otherwise made available to Parent true,
correct and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side letters to
which the Company is a party affecting the obligations of any party
thereunder) to which the Company is a party or by which any of its
properties or assets are bound that are, material to the business,
properties or assets of the Company, including, without limitation, to the
extent any of the following are, individually or in the aggregate, material
to the business, properties or assets of the Company, all: (i) employment,
product design or development, personal services, consulting, non-
competition, severance or indemnification contracts (including, without
limitation, any contract to which the Company is a party involving
employees of the Company); (ii) licensing, publishing, merchandising or
distribution agreements; (iii) contracts granting a right of first refusal
or first negotiation; (iv) partnership or joint venture agreements; (v)
agreements for the acquisition, sale or lease of material properties or
assets of the Company (by merger, purchase or sale of assets or stock or
otherwise); (vi) contracts or agreements with any Governmental Entity;
(vii) notes, bonds, mortgages, indentures and leases; and (viii) all
commitments and agreements to enter into any of the foregoing
(collectively, together with any such contracts entered into in accordance
with Section 4.1 hereof, the "Contracts"). The Company is not a party to or
bound by any severance, golden parachute or other agreement with any
employee or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of
compensation as a result of the consummation of the transactions
contemplated hereby.

(b) Each of the Contracts is valid and enforceable in accordance with its
terms, and there is no default under any Contract so listed either by the
Company or, to the knowledge of the Company, by any other party thereto,
and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by the Company or, to
the knowledge of the Company, any other party, in any such case in which
such default or event could reasonably be expected to have a Material
Adverse Effect on the Company. No party to any such Contract has given
notice to the Company of or made a claim against the Company with respect
to any breach or default thereunder.

(c) No party to any such Contract has given notice to the Company of or
made a claim against the Company with respect to any breach or default
thereunder.

2.17 Disclosure

No representation or warranty by the Company contained in this Agreement
and no statement contained in any certificate delivered by the Company to Sub
or Parent pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading when taken together in
light of the circumstances in which they were made.

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2.18 Termination of Certain Contracts

The Company has terminated its Distributor Agreement and has no other
agreements with ACI Worldwide Inc. (as successor to USSI, Inc., "ACI")
(provided that the Company may continue to distribute 50 licenses of ACI's
Trans24 software and appropriate provisions of the Distributor Agreement will
continue to apply to such licenses). On or prior to the closing the Company
shall terminate its agreements with UniKix Technologies. The Company has
received a release and settlement providing for a complete release from any
and all claims now existing or arising in the future against the Company and
its affiliates by ACI (other than with respect to the ongoing licenses and
settlement payments) for an amount payable by the Company as described in the
Company Disclosure Schedule. On or prior to the Closing the Company will have
reached an agreement with UniKix Technologies to provide for software licenses
in connection with the Trans24 software licenses with payments not to exceed
the amount provided for in the Company Disclosure Schedule.

3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB

Parent and Sub hereby represent and warrant to the Company as follows:

3.1 Organization

(a) Each of Parent and Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its businesses as now
being conducted.

(b) Each of Parent and Sub is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not have a Material Adverse Effect (as defined below)
on Parent. When used in connection with Parent or Sub, the term "Material
Adverse Effect" means any change or effect that, when taken together with
all other adverse changes and effects (i) is or is reasonably likely to be
materially adverse to the properties, business, results of operations or
condition (financial or otherwise) of Parent and its subsidiaries, taken as
a whole, or (ii) may impair the ability of Parent and/or Sub to consummate
the transactions contemplated hereby.

(c) Parent has heretofore delivered to the Company accurate and complete
copies of the articles of incorporation and by-laws of Parent as currently
in effect.

3.2 Authority Relative to this Agreement

Each of Parent and Sub has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the boards of directors of Parent and Sub and by Parent
as the sole stockholder of Sub, and no other corporate proceedings on the part
of Parent or Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Sub and constitutes a valid,
legal and binding agreement of each of Parent and Sub, enforceable against
each of Parent and Sub in accordance with its terms.

3.3 Information Supplied

None of the information with respect to Parent or Sub to be supplied by
Parent or Sub in writing specifically for inclusion in the Proxy Statement
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

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<PAGE>

3.4 Consents and Approvals; No Violations

Except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Exchange Act, and
the filing and recordation of the Certificate of Merger as required by the
DGCL, no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity or any other person or entity is necessary
for the execution and delivery by Parent or Sub of this Agreement or the
consummation by Parent or Sub of the transactions contemplated hereby. Neither
the execution, delivery and performance of this Agreement by Parent or Sub nor
the consummation by Parent or Sub of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
certificate of incorporation or bylaws of Parent or Sub, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent or Sub is a party
or by which any of them or any of their respective properties or assets may be
bound, or (iii) violate any order, writ, injunction, decree, law, statute, rule
or regulation applicable to Parent or Sub or any of Parent's subsidiaries or
any of their respective properties or assets.

3.5 Litigation

Except as publicly disclosed by Parent in reports filed by Parent with the
SEC (the "Parent SEC Reports"), there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent or Sub, threatened against
Parent or Sub or any of their respective properties or assets which as of the
date hereof, questions the validity of this Agreement or any action to be taken
by Parent in connection with the consummation of the transactions contemplated
hereby or could otherwise prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as publicly disclosed by Parent in
Parent's SEC Reports, neither Parent nor Sub is subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably foreseen,
could reasonably be expected to have a Material Adverse Effect on Parent or
would prevent or delay the consummation of the transactions contemplated
hereby.

3.6 Brokers

No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Sub or any of their affiliates, except for fees that may be payable
to placement agents or lenders in connection with any debt financing obtained
by Parent or Sub.

3.7 Financing

Parent or Sub has received commitments or highly confident letters from
financially responsible third parties to obtain, and will have at the time of
acceptance for payment and purchase of Shares at the Effective Time, the funds
necessary to consummate the Merger and to pay the Merger Consideration and
related fees and expenses.

4. COVENANTS

4.1 Conduct of Business of the Company

Except as contemplated by this Agreement, during the period from the date
hereof to the Effective Time, the Company will, and will cause each of its
subsidiaries to, conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, seek to
keep available the service of its current officers and employees and seek to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and

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<PAGE>

ongoing businesses shall be unimpaired at the Effective Time. Without limiting
the generality of the foregoing, and except as otherwise expressly provided in
this Agreement, prior to the Effective Time, neither the Company nor any of
its subsidiaries will, without the prior written consent of Parent:

(a) amend its certificate of incorporation or bylaws;

(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except for the issuance of up to 2,162,504 shares of
Company Common Stock pursuant to the exercise of currently granted stock
options under the Company's stock option plans and existing option
agreements;

(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any
of its securities or any securities of any of its subsidiaries;

(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
the Company or any of its subsidiaries (other than the Merger);

(e) alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of any subsidiary
(other than the Merger);

(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person; (iii) make any loans, advances or capital
contributions to, or investments in, any other person; (iv) pledge or
otherwise encumber shares of capital stock of the Company or its
subsidiaries; or (v) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material Lien
thereupon;

(g) except as may be required by law or as contemplated by this Agreement,
enter into, adopt or amend or terminate any Employee Benefit Plan (as
defined in Section 2.11), or increase the compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by any
Employee Benefit Plan as in effect as of the date hereof (including,
without limitation, the granting of stock appreciation rights or
performance units);

(h) acquire, sell, lease or dispose of any assets outside the ordinary
course of business or any assets which in the aggregate are material to the
Company and its subsidiaries taken as a whole, enter into any commitment or
transaction outside the ordinary course of business or grant any exclusive
distribution rights, except as contemplated by Section 2.18 hereof;

(i) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;

(j) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business or as
required by GAAP;

(k) (i) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement, other than in the ordinary course of business or as
contemplated in Section 2.18 or amend in any material respect any of the
Contracts or the agreements referred to in Section 2.16; (iii) authorize
any

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new capital expenditure or expenditures other than up to an aggregate of
$150,000, provided such expenditures are in accordance with the Company's
capital budget previously provided to Parent; or (iv) enter into or amend
any contract, agreement, commitment or arrangement providing for the taking
of any action that would be prohibited hereunder;

(l) make or revoke any tax election or settle or compromise any tax
liability material to the Company and its subsidiaries taken as a whole or
change (or make a request to any taxing authority to change) any material
aspect of its method of accounting for tax purposes;

(m) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved against
in, or contemplated by, the financial statements (or the notes thereto) of
the Company or incurred in the ordinary course of business consistent with
past practice, except as contemplated by Section 2.18 hereof;

(n) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby, except as contemplated by
Section 2.18 hereof; or

(o) take (other than to Parent in seeking its consent to the taking of any
such action), propose to take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(a) through 4.1(n) or any
action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect in any material
respect.

4.2 Preparation of Proxy Statement and Stockholders' Meeting

(a) In order to consummate the Merger, the Company, acting through the
Board, shall, in accordance with applicable law:

(i) duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") as soon as practicable for the
purpose of considering and taking action upon this Agreement;

(ii) prepare and file with the SEC a preliminary proxy statement
relating to the Merger and this Agreement and use its reasonable efforts
(x) to obtain and furnish the information required to be included by the
SEC in the Proxy Statement and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the
preliminary Proxy Statement and cause a definitive Proxy Statement to be
mailed to its stockholders and (y) to obtain the necessary approvals of
the Merger and this Agreement by its stockholders; and

(iii) subject to the fiduciary obligations of the Board under applicable
law as advised by outside counsel, include in the Proxy Statement the
recommendation of the Board that stockholders of the Company vote in
favor of the approval of the Merger and the adoption of this Agreement.

(b) Parent agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, Sub or any of its other subsidiaries in favor of
the approval of the Merger and the adoption of this Agreement.

4.3 No Solicitation

(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore
with respect to any acquisition of all or any material portion of the
assets of, or any equity interest in, the Company or its subsidiaries or
any business combination with the Company or its subsidiaries. The Company
may, directly or indirectly, furnish information and access, in each case
only in

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response to unsolicited requests therefor, to any corporation, partnership,
person or other entity or group pursuant to confidentiality agreements, and
may participate in discussions and negotiate with such entity or group
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction involving the Company or any subsidiary or division of
the Company, if such entity or group has submitted a proposal to the
Company (whether or not in writing) relating to any such transaction and
the Company Board by a majority vote determines in its good faith judgment,
after consultation with and based upon the advice of independent legal
counsel, that it is necessary to do so to comply with its fiduciary duties
to stockholders under applicable law. The Company Board shall provide a
copy of any such written proposal and a summary of any oral proposal to
Parent within 24 hours after receipt thereof and thereafter keep Parent
promptly advised of any material development with respect thereto. Except
as set forth above, neither the Company nor any of its affiliates shall,
nor shall the Company authorize or permit any of its or their respective
officers, directors, employees, representatives or agents to directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation,
partnership, person or other entity or group (other than Parent and Sub,
any affiliate or associate of Parent and Sub or any designees of Parent and
Sub) concerning any merger, sale of assets, sale of shares of capital stock
or similar transaction involving the Company or any subsidiary or division
of the Company; provided, however, that nothing herein shall prevent the
Company Board from taking, and disclosing to the Company's stockholders, a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to any tender offer; provided, further, that
nothing herein shall prevent the Company Board from making such disclosure
to the Company's stockholders as, in the good faith judgment of the Company
Board, after consultation with and based upon the advice of independent
legal counsel, is necessary to comply with its fiduciary duties to
stockholders under applicable law.

(b) Except as set forth in this Section 4.3, the Company Board shall not
approve or recommend, or cause the Company to enter into any agreement with
respect to any Third Party Transaction (as defined in Section 6.1(d)).
Notwithstanding the foregoing, if the Board of Directors of the Company,
after consultation with and based upon the advice of independent legal
counsel, determines in good faith that it is necessary to do so in order to
comply with its fiduciary duties to stockholders under applicable law, the
Company Board may approve or recommend a Superior Proposal (as defined
below) or cause the Company to enter into an agreement with respect to a
Superior Proposal, but in each case only (i) after providing reasonable
written notice to Parent (a "Notice of Superior Proposal") advising Parent
that the Company Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal and (ii) if Parent does not make
within five days of Parent's receipt of the Notice of Superior Proposal, an
offer which the Company Board, after consultation with its financial
advisors, determines is superior to such Superior Proposal. For purposes of
this Agreement, a "Superior Proposal" means any bona fide proposal to
acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 50% of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Company Board determines in its good faith
judgment (based on the written advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders
than the Merger.

4.4 Access to Information

(a) Between the date hereof and the Effective Time, the Company will give
to Parent or Sub and their authorized representatives reasonable access to
all employees, plants, offices, warehouses and other facilities and to all
books and records of its and its subsidiaries, will permit such inspections
as may reasonably be required and will cause their officers and those of
their subsidiaries to furnish such financial and operating data and other
information with respect to their business, properties and personnel as may
from time to time be reasonably requested, provided that no investigation
pursuant to this Section 4.4(a) shall affect or be deemed to modify any of
the representations or warranties made in this Agreement.

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(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent (i) within five business days after the delivery thereof
to management, such monthly financial statements and data as are regularly
prepared for distribution to management and (ii) at the earliest time they
are available, such quarterly and annual financial statements as are
prepared for its SEC filings, which (in the case of this clause (ii)) shall
be in accordance with their books and records.

(c) Parent and Sub will hold and will cause their consultants and advisors
to hold in confidence all documents and information received in connection
with the transactions contemplated by this Agreement.

4.5 Additional Agreements; Reasonable Best Efforts

Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) cooperation in the preparation and filing
of the Proxy Statement; (ii) the taking of all action reasonably necessary,
proper or advisable to secure any necessary consents under existing contracts
of the Company and its subsidiaries or amend the agreements relating thereto
to the extent required by such agreements; (iii) contesting any legal
proceeding relating to the Merger; and (iv) the execution of any additional
instruments, including the Certificate of Merger, necessary to consummate the
transactions contemplated hereby; provided, however, that the Company may
postpone a previously-scheduled meeting of Company stockholders in the event
that the Company Board by majority vote determines in its good faith judgment,
after consultation with and based upon the advice of independent legal
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to stockholders under applicable law and, at the time of such
determination, the Company has received a bona fide proposal to effect an
alternate sale that is a Superior Proposal and that has not been withdrawn. In
case at any time after the Effective Time any further action is necessary to
carry out the purposes of this Agreement, the proper officers and directors of
each party hereto shall take all such necessary action.

4.6 Consents

Parent, Sub and the Company each will use all reasonable efforts to obtain
consents of all third parties and Governmental Entities necessary, proper or
advisable for the consummation of the transactions contemplated by this
Agreement.

4.7 Public Announcements

Each of Parent, Sub and the Company will consult with one another before
issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement, including, without
limitation, the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law or by obligations pursuant to any listing agreement with the
Nasdaq Stock Market, as determined by Parent, Sub or the Company, as the case
may be.

4.8 Notification of Certain Matters

The Company shall give prompt notice to Parent and Sub, and Parent and Sub
shall give prompt notice to the Company, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time, (ii) any material failure of the Company, Parent or Sub, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, (iii) any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by the Company or any of its
subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract or

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agreement material to the financial condition, properties, businesses or
results of operations of it and its subsidiaries taken as a whole to which it
or any of its subsidiaries is a party or is subject, (iv) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement, or (v) any material adverse change in the Company's
financial condition, properties, business, results of operations or prospects,
other than changes resulting from general economic conditions; provided,
however, that the delivery of any notice pursuant to this Section 4.8 shall
not cure such breach or non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.

4.9 Release of Liens

Prior to the Closing, the Company shall have all Liens relating to its loan
agreement and security agreement with Silicon Valley Bank terminated and
released.

4.10 Company 401(k) Plan

If requested in writing by Parent, on or prior to the Closing Date, the
Company will adopt a resolution that terminates its 401(k) Employee Retirement
Plan and cause to be filed with the IRS an application for a determination
that the termination of the plan does not adversely affect the qualified
status of the plan under Section 401(a) of the Code. The Company shall provide
Parent with a copy of such resolution and determination letter application
prior to the Closing Date.

4.11 Parent 401(k) Plan

Parent will make such amendments to its 401(k) Plan to provide that the
Company's employees may commence participation in the Parent's 401(k) Plan,
effective upon or within a reasonable period following the Closing Date
pursuant to the terms of the plan.

5. CONDITIONS TO CONSUMMATION OF THE MERGER

5.1 Conditions to Each Party's Obligations to Effect the Merger

The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:

(a) this Agreement shall have been approved and adopted by the requisite
vote of the stockholders of the Company;

(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger;
and

(c) any other governmental or regulatory notices or approvals required with
respect to the transactions contemplated hereby shall have been either
filed or received.

5.2 Conditions to the Obligations of the Company

The obligation of the Company to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:

(a) the representations of Parent and Sub contained in this Agreement or in
any other document delivered pursuant hereto shall be true and correct in
all material respects at and as of the Effective Time with the same effect
as if made at and as of the Effective Time, and at the Closing Parent and
Sub shall have delivered to the Company a certificate to that effect signed
by the chief executive officer of each of Parent and Sub; and

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(b) each of the obligations of Parent and Sub to be performed at or before
the Effective Time pursuant to the terms of this Agreement shall have been
duly performed in all material respects at or before the Effective Time and
at the Closing Parent and Sub shall have delivered to the Company a
certificate to that effect signed by the chief executive officer of each of
Parent and Sub.

5.3 Conditions to the Obligations of Parent and Sub

The respective obligations of Parent and Sub to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:

(a) the representations of the Company contained in this Agreement or in
any other document delivered pursuant hereto shall be true and correct in
all material respects at and as of the Effective Time with the same effect
as if made at and as of the Effective Time, and at the Closing the Company
shall have delivered to Parent and Sub a certificate to that effect signed
by the chief executive officer of the Company;

(b) each of the obligations of the Company to be performed at or before the
Effective Time pursuant to the terms of this Agreement shall have been duly
performed in all material respects at or before the Effective Time and at
the Closing the Company shall have delivered to Parent and Sub a
certificate to that effect signed by the chief executive officer of the
Company;

(c) the Company shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Company or any subsidiary of the
Company under any loan or credit agreement, note, mortgage, indenture,
lease or other agreement or instrument, except for those for which failure
to obtain such consents and approvals would not, individually or in the
aggregate, have a Material Adverse Effect on the Company;

(d) there shall have been no events, changes or effects with respect to the
Company or its subsidiaries having or which could reasonably be expected to
have, a Material Adverse Effect on the Company; and

(e) each employee of the Company and its subsidiaries shall have entered
into a Proprietary Rights and Confidentiality Agreement, in the form
attached hereto as Exhibit A.

6. TERMINATION; AMENDMENT; WAIVER

6.1 Termination

This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time:

(a) by mutual written consent of Parent, Sub and the Company;

(b) by Parent and Sub or the Company if (i) any court of competent
jurisdiction in the United States or other United States governmental
authority shall have issued a final order, decree or ruling or taken any
other final action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Merger has not been consummated by August
31, 1999; provided that no party may terminate this Agreement pursuant to
this clause (ii) if such party's failure to fulfill any of its obligations
under this Agreement shall have been the reason that the Effective Time
shall not have occurred on or before said date;

(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Sub set forth in this
Agreement, or if any representation or warranty of Parent or Sub shall have
become untrue, in either case such that the conditions set forth in Section
5.2(a) would be incapable of

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being satisfied by August 31, 1999 (or as otherwise extended), (ii) there
shall have been a breach by Parent or Sub of any of their respective
covenants or agreements hereunder materially adversely affecting (or
materially delaying) the consummation of the Merger, and Parent or Sub, as
the case may be, has not cured such breach by August 31, 1999 (or as
otherwise extended), (iii) the Company enters into a definitive agreement
relating to a Superior Proposal in accordance with Section 4.3(b) (provided
that such termination shall not be effective until payment of the amount
required under Section 6.3(a)), (iv) the Company shall have convened one or
more meetings of its stockholders to vote upon the Merger and shall have
failed to obtain the requisite vote of its stockholders prior to August 31,
1999, or (v) the Company Board by a majority vote determines in its good
faith judgment, after consultation with and based upon the advice of
independent legal counsel, that it is necessary to do so to comply with its
fiduciary duties to stockholders, provided that such termination under this
clause (v) shall not be effective unless at the time of such determination
the Company has received a bona fide proposal to effect a Third Party
Transaction (as defined below) that is a Superior Proposal and that has not
been withdrawn as of the time of such termination (provided that such
termination shall not be effective until payment of the amount required
under Section 6.3(a)); or

(d) by Parent and Sub if (i) there shall have been a breach of any
representation or warranty on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in Section
5.3(a) would be incapable of being satisfied by August 31, 1999 (or as
otherwise extended), (ii) there shall have been a breach by the Company of
its covenants or agreements hereunder having a Material Adverse Effect on
the Company or materially adversely affecting (or materially delaying) the
consummation of the Merger, and the Company has not cured such breach by
August 31 1999 (or as otherwise extended), (iii) the Company Board shall
have withdrawn, modified or changed its approval or recommendation of this
Agreement or the Merger, shall have recommended to the Company's
stockholders a Third Party Transaction or shall have failed to call, give
notice of, convene or hold a stockholders' meeting to vote upon the Merger,
or shall have adopted any resolution to effect any of the foregoing, or
(iv) the Company shall have convened a meeting of its stockholders to vote
upon the Merger and shall have failed to obtain the requisite vote of its
stockholders by August 31, 1999 (or as otherwise extended).

"Third Party Transaction" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Parent, Sub or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of more than 30% of the
total assets of the Company and its subsidiaries, taken as a whole; or (iii)
the acquisition by a Third Party of 30% or more of the outstanding shares of
Company Common Stock.

6.2 Effect of Termination

In the event of the termination and abandonment of this Agreement pursuant
to Section 6.1, this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party hereto or its affiliates,
directors, officers or stockholders, other than the provisions of this Section
6.2 and Sections 4.4(c), 6.3, 7.5, 7.7, 7.9 and 7.11 hereof. Nothing contained
in this Section 6.2 shall relieve any party from liability for any breach of
this Agreement.

6.3 Fees and Expenses

(a) In the event that this Agreement shall be terminated pursuant to
Section 6.1(d)(i) through 6.1(d)(iv) or Section 6.1(c)(iii), (iv), or (v)
Parent and Sub would suffer direct and substantial damages, which damages
cannot be determined with reasonable certainty. To compensate Parent and
Sub for such damages, the Company shall pay to Parent the amount of $5.0
million as a termination fee on the date of such termination. It is
specifically agreed that the amount to be paid pursuant to this Section
6.3(a) represents a negotiated termination fee and is not a penalty.

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(b) In the event that this Agreement shall be terminated pursuant to
Section 6.1(c)(i) or (ii), the Company would suffer direct and substantial
damages, which damages cannot be determined with reasonable certainty. To
compensate the Company for such damages, Parent shall pay to the Company
the amount of $5.0 million as a termination fee on the date of such
termination. It is specifically agreed that the amount to be paid pursuant
to this Section 6.3(b) represents a negotiated termination fee and is not a
penalty.

(c) Upon the termination of this Agreement pursuant to Sections
6.1(c)(iii), (iv) or (v) or 6.1(d)(i) through (iv), the Company shall
reimburse Parent, Sub and their affiliates (not later than ten business
days after submission of statements therefor) for all actual documented
out-of-pocket fees and expenses, not to exceed $250,000, actually and
reasonably incurred by any of them or on their behalf in connection with
the Merger and the consummation of all transactions contemplated by this
Agreement (including, without limitation, fees payable to counsel to any of
the foregoing, and accountants). If Parent or Sub shall submit a request
for reimbursement hereunder, Parent or Sub will provide the Company in due
course with invoices or other reasonable evidence of such expenses upon
request. The Company shall in any event pay the amount requested (not to
exceed $250,000) within ten business days of such request, subject to the
Company's right to demand a return of any portion as to which invoices are
not received in due course.

(d) Upon the termination of this Agreement pursuant to Sections 6.1(c)(i)
or (ii), Parent shall reimburse the Company and their affiliates (not later
than ten business days after submission of statements therefor) for all
actual documented out-of-pocket fees and expenses, not to exceed $250,000,
actually and reasonably incurred by any of them or on their behalf in
connection with the Merger and the consummation of all transactions
contemplated by this Agreement (including, without limitation, fees payable
to counsel to any of the foregoing, and accountants). If the Company shall
submit a request for reimbursement hereunder, the Company will provide
Parent in due course with invoices or other reasonable evidence of such
expenses upon request. Parent shall in any event pay the amount requested
(not to exceed $250,000) within ten business days of such request, subject
to Parent's right to demand a return of any portion as to which invoices
are not received in due course.

(e) Except as specifically provided in this Section 6.3, each party shall
bear its own expenses in connection with this Agreement and the
transactions contemplated hereby. The cost of printing the Proxy Statement
shall be paid by the Company.

6.4 Amendment

This Agreement may be amended by action taken by the Company, Parent and
Sub at any time before or after approval of the Merger by the stockholders of
the Company (if required by applicable law) but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.

6.5 Extension; Waiver

At any time prior to the Effective Time, each party hereto (for these
purposes, Parent and Sub shall together be deemed one party and the Company
shall be deemed the other party) may (i) extend the time for the performance
of any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document, certificate or writing delivered pursuant
hereto or (iii) waive compliance by the other party with any of the agreements
or conditions contained herein. Any agreement on the part of either party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of either
party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.

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7. MISCELLANEOUS

7.1 Nonsurvival of Representations and Warranties

The representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.

7.2 Entire Agreement; Assignment

This Agreement (a) constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise; provided, however, that Sub may assign any or all of its
rights and obligations under this Agreement to any subsidiary of Parent, but no
such assignment shall relieve Sub of its obligations hereunder if such assignee
does not perform such obligations.

7.3 Validity

If any provision of this Agreement, or the application thereof to any person
or circumstance, is held invalid or unenforceable, the remainder of this
Agreement, and the application of such provision to other persons or
circumstances, shall not be affected thereby, and to such end, the provisions
of this Agreement are agreed to be severable.

7.4 Notices

All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by cable, telegram, facsimile or
telex, or by registered or certified mail (postage prepaid, return receipt
requested), to the other party as follows:

if to Parent or Sub:

CFI ProServices, Inc.
Suite 200
400 S.W. Sixth Avenue
Portland, OR 97204
Fax: (503) 274-7280
Attn: President

with a copy to:

Perkins Coie LLP
Suite 1500
1211 S.W. Fifth Avenue
Portland, OR 97204
Fax: (503) 727-2222
Attn: Roy W. Tucker

and a copy to:

Farleigh, Wada & Witt, P.C.
Suite 600
121 S.W. Morrison
Portland, OR 97204
Fax: (503) 228-1741
Attn: F. Scott Farleigh

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<PAGE>

if to the Company to:

Ultradata Corporation
5000 Franklin Drive
Pleasanton, CA 94588
Fax: (925) 224-9879
Attn: Chief Financial Officer

with a copy to:

Fenwick & West LLP
100 The Embarcadero, Suite 300
San Francisco, CA 94105
Fax: (415) 281-1350
Attn: Robert B. Dellenbach

or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.

7.5 Governing Law

This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the principles of conflicts of
law thereof.

7.6 Descriptive Headings

The descriptive headings herein are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.

7.7 Parties in Interest

This Agreement shall be binding upon and inure solely to the benefit of each
party hereto and its successors and permitted assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.

7.8 Severability

If any term or other provision of this Agreement is invalid, illegal or
unenforceable, all other provisions of this Agreement shall remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.

7.9 Specific Performance

The parties hereto acknowledge that irreparable damage would result if this
Agreement were not specifically enforced, and they therefore consent that the
rights and obligations of the parties under this Agreement may be enforced by a
decree of specific performance issued by a court of competent jurisdiction.
Such remedy shall, however, not be exclusive and shall be in addition to any
other remedies, including arbitration, which any party may have under this
Agreement or otherwise.

7.10 Subsidiaries

The term "subsidiary" shall mean, when used with reference to any entity,
any entity more than fifty percent (50%) of the outstanding voting securities
or interests (including membership interests) of which are owned directly or
indirectly by such former entity.

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7.11 Brokers

Except as otherwise provided in Section 6.3, the Company agrees to indemnify
and hold harmless Parent and Sub, and Parent and Sub agree to indemnify and
hold harmless the Company, from and against any and all liability to which
Parent and Sub, on the one hand, or the Company, on the other hand, may be
subjected by reason of any brokers, finders or similar fees or expenses with
respect to the transactions contemplated by this Agreement to the extent such
similar fees and expenses are attributable to any action undertaken by or on
behalf of the Company, or Parent or Sub, as the case may be.

7.12 Counterparts

This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and
the same agreement.

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.

Ultradata Corporation

/s/ Robert J. Majteles
By:__________________________________
Name: Robert J. Majteles
Title: President & CEO

CFI Proservices, Inc.

/s/ Matt Chapman
By:__________________________________
Name: Matt Chapman
Title: Chairman & CEO

UFO Acquisition Co.

/s/ Robert Channess
By:__________________________________
Name: Robert Channess
Title: President

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Appendix B

DELAWARE GENERAL CORPORATION LAW

TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION

(S)262. Appraisal Rights.

(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such
shares through the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal
by the Court of Chancery of the fair value of the stockholder's shares of
stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership or membership
interest of a member of a nonstock corporation; and the words "depository
receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the
depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation
to be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264
of this title:

(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date
fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting of stockholders to act upon the agreement of merger
or consolidation, were either (i) listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the stockholders of
the surviving corporation as provided in subsection (f) of (S)251 of
this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation
pursuant to (S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

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<PAGE>

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware
corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identify of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or

(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice
a copy of this section; provided that, if the notice is given on or
after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation
that are entitled to appraisal rights. Such notice may, and, if given on
or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within
20 days after the date of mailing of such notice, demand in writing from
the surviving or resulting corporation the appraisal of such holder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger
or consolidation, either (i) each such constituent corporation shall
send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of
stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second

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notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20
days following the sending of the first notice, such second notice need
only be sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or
of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger
or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw such stockholder's demand for appraisal
and to accept the terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and
(d) hereof, upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor
of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the

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<PAGE>

amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including
the rate of interest which the surviving or resulting corporation would
have had to pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed
to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that
such stockholder is not entitled to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation
to the stockholders entitled thereto. Interest may be simple or compound,
as the Court may direct. Payment shall be so made to each such stockholder,
in the case of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this
State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as
provided in subsection (d) of this section shall be entitled to vote such
stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions payable
to stockholders of record at a date which is prior to the effective date of
the merger or consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection (e) of this
section, or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of such stockholder's demand for an
appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as provided
in subsection (e) of this section or thereafter with the written approval
of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms
as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.

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<PAGE>

ULTRADATA CORPORATION

5000 Franklin Drive
Pleasanton, California 94588-3354

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Robert J. Majteles and Ronald H.
Bissinger as proxies, each with full powers of substitution, and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock, $0.001 par value, of Ultradata Corporation (the "Company") held
of record by the undersigned on June 30, 1999, at the Special Meeting of
Stockholders of the Company to be held on Friday, July 23, 1999, and at any
adjournments or postponements thereof.

This Proxy, when properly executed and returned in a timely manner, will
be voted at the Special Meeting and any adjournments thereof in the manner
described herein. If no contrary indication is made, the proxy will be voted
FOR Proposal 1 and in accordance with the judgment of the persons named as
proxies herein on any other matters that may properly come before the Special
Meeting.

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

CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE

SEE REVERSE SIDE

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

[X]Please mark
votes as in this
example.

The Board of Directors unanimously recommends that you vote FOR Proposal 1.

1. Proposal to adopt the Agreement FOR AGAINST ABSTAIN
and Plan of Merger among [_] [_] [_]
ULTRADATA Corporation, CFI
ProServices, Inc. and UFO
Acquisition Co.

In accordance with their judgment, the proxies are authorized to vote upon
such other matters as may properly come before the Special Meeting or any
adjournment thereof.

This Proxy must be signed exactly as your name appears hereon. If more than
one name appears, all persons so designated should sign. Attorneys, executors,
administrators, trustees and guardians should indicate their capacities. If
the signer is a corporation, please print full corporate name and indicate
capacity of duly authorized officer executing on behalf of the corporation. If
the signer is a partnership, please print full partnership name and indicate
capacity of duly authorized person executing on behalf of the partnership.

Signature: Date: , 1999

(Reverse Side)

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE ENCLOSED
ENVELOPE.