SANCHEZ COMPUTER ASSOCIATES INC, 424B3, 1996-11-19

SANCHEZ COMPUTER ASSOCIATES INC
424B3, 1996-11-19
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>

PROSPECTUS
3,226,500 Shares
SANCHEZ COMPUTER ASSOCIATES, INC.
Common Stock
(including Rights to acquire up to 3,226,500 of such shares)

Sanchez Computer Associates, Inc. ("Sanchez" or the "Company") is granting to
holders of the outstanding common stock ("Safeguard Common Shares") of Safe-
guard Scientifics, Inc. ("Safeguard") of record at the close of business on No-
vember 12, 1996 (the "Record Date") transferable rights (the "Company Rights")
to purchase up to 3,075,000 common shares of Sanchez, no par value (the "Common
Stock"). Safeguard and certain other selling stockholders (the "Selling Stock-
holders") have agreed to sell an aggregate of 1,068,500 shares of Common Stock
owned by them upon the exercise of the Company Rights. A record holder of Safe-
guard Common Shares will receive one Company Right for every ten Safeguard Com-
mon Shares owned on the Record Date. Each Company Right will entitle the holder
to purchase one share of Common Stock at a purchase price of $5.50 (the "Exer-
cise Price") per share. This Prospectus also relates to transferable rights
(the "Direct Rights") to purchase 151,500 additional shares of Common Stock
that are being granted by the Company to certain persons selected by the Com-
pany having a relationship with the Company, Safeguard, one of Safeguard's
other partnership companies or other persons selected by the Company (the "Di-
rect Purchasers"). Each Direct Right will entitle the holder to purchase one
share of Common Stock at the Exercise Price. The Company Rights and the Direct
Rights are sometimes collectively referred to as the "Rights." The exercise pe-
riod for the Rights will expire at 5:00 p.m., New York City time, on December
18, 1996 (the "Expiration Date"). PERSONS MAY NOT EXERCISE RIGHTS FOR FEWER
THAN 50 SHARES OF COMMON STOCK. THIS MINIMUM EXERCISE REQUIREMENT APPLIES TO
EACH ACCOUNT IN WHICH SAFEGUARD COMMON SHARES ARE HELD. ACCORDINGLY, PERSONS
HOLDING FEWER THAN 50 RIGHTS WILL NOT HAVE THE OPPORTUNITY TO EXERCISE SUCH
RIGHTS UNLESS ACTION IS TAKEN TO COMPLY WITH SUCH MINIMUM EXERCISE REQUIRE-
MENTS. See "The Offering--Exercise Privilege."
(Continued on next page)

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FAC-
TORS" COMMENCING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.

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

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSUMED UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
EXERCISE PRICE DISCOUNT (1) COMPANY (1)(2)(3) STOCKHOLDERS (1)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $5.50 Min.$.165 Max.$5.335 Max.$5.335
Max.$.385 Min.$5.115 Min.$5.115
- ------------------------------------------------------------------------------
Total(3) $17,745,750 Min.$532,373 Max.$11,512,930 Max.$5,700,448
Max.$1,067,413 Min.$11,071,500 Min.$5,606,838
- ------------------------------------------------------------------------------
</TABLE>
(1)In connection with the Offering, the Underwriters will receive (a) a finan-
cial advisory fee in an amount equal to 3% of the Exercise Price of each share
of Common Stock sold in the Offering (the "Financial Advisory Fee"), and (b) an
additional fee of 4% of the Exercise Price of each share of Common Stock actu-
ally purchased by the Underwriters pursuant to the Standby Underwriting Agree-
ment or the Underwriters' exercise of Rights in certain instances (the "Under-
writing Discount" and, together with the Financial Advisory Fee, the "Total Un-
derwriting Discount"). If all of the Rights granted hereby are exercised, no
shares of Common Stock will be required to be purchased by the Underwriters
pursuant to the Standby Underwriting Agreement. The "Minimum" Total Underwrit-
ing Discount assumes that no shares of Common Stock are purchased by the Under-
writers. The "Maximum" Total Underwriting Discount assumes (i) that only the
Chairman and Chief Executive Officer of Safeguard and/or his assignees will
elect to acquire shares upon the exercise of Company Rights (for an aggregate
of approximately 343,000 shares) and that such shares will be sold by the Sell-
ing Stockholders, (ii) that 300,000 shares of Common Stock are sold by the
Selling Stockholders to the Other Purchasers (defined below), (iii) that
151,500 shares are sold by the Company upon the exercise of the Direct Rights,
and (iv) that a total of 2,432,000 shares of Common Stock are purchased by the
Underwriters pursuant to the Standby Underwriting Agreement. In addition, the
Company has agreed under certain circumstances, to pay to the Underwriters cer-
tain amounts as a non-accountable expense allowance. The Company and the Sell-
ing Stockholders have agreed to indemnify the Underwriters against certain lia-
bilities, including liabilities under the Securities Act of 1933, as amended.
See "Underwriting."
(2)Before deduction of expenses estimated to be $600,000 and payment of a non-
accountable expense allowance to the Underwriters, both of which are payable by
the Company.
(3)The Company and Selling Stockholders have granted the Underwriters a 20-day
option commencing on the Expiration Date to purchase a maximum of 307,500 addi-
tional shares of Common Stock to cover over-allotments, if any, of which,
151,500 would be sold by the Company and an aggregate of 156,000 would be sold
by the Selling Stockholders. See "Underwriting." If such option is exercised in
full, the net incremental proceeds to the Company and Selling Stockholders from
the exercise of such option would be $774,923 and an aggregate of $797,940, re-
spectively, and the Total Underwriting Discount with respect to all such shares
issued pursuant to such option would be $118,388.

J.P. MORGAN & CO. WHEAT FIRST BUTCHER SINGER

November 13, 1996.
<PAGE>

(Continued from previous page)

Shares of Common Stock that are not purchased upon exercise of Rights (the
"Unsubscribed Shares") will be sold, as to the first 300,000 Unsubscribed
Shares, at the Exercise Price to certain persons selected by the Company hav-
ing a relationship with the Company, Safeguard, one of Safeguard's other part-
nership companies or other persons selected by the Company (the "Other Pur-
chasers") and will be sold, as to the number of Unsubscribed Shares exceeding
the 300,000 shares of Common Stock offered to the Other Purchasers (the "Ex-
cess Unsubscribed Shares"), at the Exercise Price (less the Total Underwriting
Discount) to J.P. Morgan Securities Inc. and Wheat, First Securities, Inc.
(the "Underwriters") pursuant to a Standby Underwriting Agreement (the
"Standby Underwriting Agreement"). See "The Offering--Sales of Unsubscribed
Shares; Standby Commitment." The Underwriters' standby underwriting obliga-
tions are subject to certain conditions, including the condition that the
Other Purchasers have purchased the first 300,000 Unsubscribed Shares, al-
though the Underwriters may elect to purchase all, but not less than all,
Unsubscribed Shares in the event such condition is not met. Accordingly, there
is no assurance that the Other Purchasers or the Underwriters will purchase
any Unsubscribed Shares and the Rights Offering will be canceled if all of the
Unsubscribed Shares are not purchased. See "Underwriting." and "The Offering--
Cancellation of Rights Offering." The Rights Offering and the offering of Com-
mon Stock to the Other Purchasers are collectively referred to in this Pro-
spectus as the "Offering."

The number of Company Rights which will be granted to the holders of Safeguard
Common Shares is solely dependent upon the number of Safeguard Common Shares
which are outstanding on the Record Date. Accordingly, less than 3,075,000
Company Rights will be granted to holders of Safeguard Common Shares if there
are less than 30,750,000 Safeguard Common Shares outstanding on such date. The
shares of Common Stock subject to such undistributed Company Rights (the "Un-
distributed Rights"), however, will be offered by the Company to the Other
Purchasers at the Exercise Price. As a consequence, a total of 3,075,000
Rights will be granted in the Rights Offering.

Of the shares of Common Stock offered hereby, 2,158,000 shares of Common Stock
will be sold by the Company and an aggregate of 1,068,500 shares of Common
Stock will be sold by the Selling Stockholders. The Company will receive no
proceeds from the sale of any shares by the Selling Stockholders. Warren V.
Musser, the Chairman and Chief Executive Officer of Safeguard, and/or his as-
signees are expected to exercise all Company Rights distributed to them and
acquire approximately 343,000 shares of Common Stock through the Rights Offer-
ing. See "The Offering--Agreement Concerning the Exercise of Rights." After
the completion of the Offering, the Selling Stockholders, in the aggregate,
will beneficially own approximately 58.4% of the outstanding Common Stock. See
"Principal and Selling Stockholders."

THE RIGHTS BEING GRANTED IN THE RIGHTS OFFERING ARE SUBJECT TO CANCELLATION IF
CERTAIN CONDITIONS ARE NOT SATISFIED. IN THAT EVENT, ANY PAYMENTS RECEIVED BY
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS RIGHTS AGENT, IN RESPECT OF THE
EXERCISE PRICE OF THE RIGHTS SHALL BE PROMPTLY RETURNED. SEE "THE OFFERING--
CANCELLATION OF RIGHTS OFFERING."

Prior to the Rights Offering, there has been no public market for the Common
Stock or the Rights. See "The Offering--Background" for factors considered in
determining the Exercise Price of the Rights. As a consequence, there can be
no assurance that a public market will develop, although the Rights and the
Common Stock have been approved for quotation on the Nasdaq National Market.

Prior to the Expiration Date, the Underwriters may offer shares of Common
Stock on a when-issued basis, including shares to be acquired through the pur-
chase and exercise of Rights, at prices set from time to time by the Under-
writers. Each such price when set will not exceed, if applicable, the highest
price at which a dealer not participating in the distribution is then offering
the Common Stock to other dealers, plus an amount equal to a dealer's conces-
sion, and an offering price set on any calendar day will not be increased more
than once during such day. After the Expiration Date, the Underwriters may of-
fer shares of Common Stock, whether acquired pursuant to the Standby Under-
writing Agreement, the exercise of Rights or the purchase of Common Stock in
the market, to the public at a price or prices to be determined. The Under-
writers may thus realize profits or losses independent of the underwriting
compensation specified herein. Shares of Common Stock subject to the Standby
Underwriting Agreement will be offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters. It is ex-
pected that delivery of the shares of Common Stock will be made against pay-
ment therefor on or about December 27, 1996 at the offices of J.P. Morgan Se-
curities Inc., 60 Wall Street, New York, New York.

<PAGE>

No dealer, salesperson or other person has been authorized to give any infor-
mation or to make any representations other than those contained in this Pro-
spectus in connection with the Offering made hereby, and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company, the Selling Stockholders or any Underwriters. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any security other than the securities covered by this Prospectus, nor
does it constitute an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized, or in which the person
making such an offer or solicitation is not qualified to do so or to any per-
son to whom it is unlawful to make such an offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any cir-
cumstances, create any implication that there has been no change in the af-
fairs of the Company since the dates as of which information is furnished or
the date hereof.

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary..................... 5
Risk Factors........................... 9
The Offering........................... 16
Use of Proceeds........................ 22
Dividend Policy........................ 22
Capitalization......................... 23
Dilution............................... 24
Selected Consolidated Financial Data... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 26
Business............................... 34
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Management............................................................ 46
Certain Transactions.................................................. 52
Principal and Selling Stockholders.................................... 53
Description of Capital Stock.......................................... 55
Shares Eligible for Future Sale....................................... 56
Underwriting.......................................................... 58
Legal Matters......................................................... 60
Experts............................................................... 60
Additional Information................................................ 60
Glossary.............................................................. 61
Index to Consolidated Financial Statements............................ F-1
</TABLE>

UNTIL JANUARY 12, 1997 (25 DAYS AFTER THE EXPIRATION DATE OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.

The Company intends to furnish to its stockholders annual reports containing
financial statements audited by independent certified public accountants.

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OR THE RIGHTS OR BOTH AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER
MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.

3
<PAGE>

Prospectus Summary

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Except as otherwise indicated, all information in this
Prospectus (i) assumes no exercise of the Underwriters' over-allotment option;
and (ii) gives effect to a 6-for-5 split of the Common Stock effected prior to
the Offering. Unless the context otherwise indicates, Sanchez Computer
Associates, Inc. and its subsidiaries are referred to collectively herein as
"Sanchez" or the "Company." Technical terms related to the Company's business
are defined in the Glossary beginning on page 63 herein.

The Company

Sanchez Computer Associates, Inc. ("Sanchez" or the "Company") designs,
develops, markets, implements and supports comprehensive banking software,
called PROFILE(R) ("PROFILE"), for financial services organizations worldwide.
Sanchez's highly flexible PROFILE family of products is comprised of three
integrated modules which operate on open, client-server platforms. The primary
module, called PROFILE/Anyware, is a multi-currency bank production system which
supports deposit, loan, customer, transaction processing and bank management
requirements through multiple distribution channels, including the Internet. The
other modules are PROFILE/FMS, a multi-company, multi-currency, financial
management and accounting system, and PROFILE/ITS, a system that processes
treasury transactions including foreign exchange, money market, securities
trading (capital markets), futures, options and trade finance. The PROFILE
system is currently licensed to 23 clients in nine countries serving more than
300 financial institutions. Historically, the Company has focused its marketing
efforts in Central Europe and North America. Currently, the Company is targeting
two market segments, the Emerging Banking Market in which the Company seeks to
expand on its existing successes and increase its market share, and the Direct
Banking Market in which the Company is seeking to establish itself as a
significant participant.

Financial services organizations in the Emerging Banking Market can generally be
characterized as being located in areas with growing consumer banking bases,
often with a large number of branches and little enterprise-wide automation.
Sanchez, through the implementation of its PROFILE products, provides these
organizations with a fully automated system which addresses all core areas of
their data processing requirements, including head office operations, domestic
and international payments, new product introduction, customer analysis,
budgeting and forecasting, branch automation, treasury, trade finance and
deposit and loan processing. The PROFILE products have the ability to adapt to
diverse accounting, operational and regulatory environments and have the
flexibility to support a broad spectrum of banking products and services.
Because the PROFILE products are scalable, they can be implemented within an
infrastructure that supports an organization's current operational requirements
and thereafter be incrementally expanded as the client's operational
requirements increase. Since 1991, the Company has principally targeted banks in
Central Europe and Canada; and, in 1996, the Company expanded its marketing
efforts to include financial services organizations located in the Asian-Pacific
Rim.

Since 1987, the Company has maintained a series of strategic alliance agreements
with Digital Equipment Corporation ("Digital") and has marketed its products
principally through leads generated by the Digital sales force. In 1995, the
Company entered into an agreement with Hewlett-Packard Company
("Hewlett-Packard") and ported its software to Hewlett-Packard's HP-UX platform.
Also in 1995, the Company entered into an agreement with Oracle Corporation
("Oracle") to port the PROFILE products to the Oracle database. These porting
activities are currently under way. In mid-1996, the Company entered into an
agreement with International Business Machines Corporation ("IBM") and ported
its software to IBM's AIX platform. The Company markets PROFILE products through
alliances with all four of these vendors as well as its own enhanced direct
sales force.

4
<PAGE>

together with the availability and acceptance of computer technology, will
ultimately cause a dramatic change in the consumer banking practices of many of
their customers. The Company predicts that the growth of electronic commerce
will result in a large increase in the volume of financial transactions which
occur on-line as well as a greater demand for customized products and services.
Because of these factors, in early 1996, the Company determined that a
significant opportunity exists for it in the Direct Banking Market and it has
subsequently committed substantial human and financial resources to position
itself in that market. The Company believes that the capabilities already
contained in the PROFILE product line, along with specific enhancements that it
has identified, will provide financial services organizations with the
technology to strategically respond to this consumer banking evolution. As of
the date of this Prospectus, however, the Company has not recognized any
revenues as a result of its activities in the Direct Banking Market.

The Company has recently engaged the electronic banking division of Price
Waterhouse LLP ("Price Waterhouse") to assist the Company in jointly defining
future enhancements to PROFILE/Anyware for the Direct Banking Market. In
connection with this engagement, Price Waterhouse and the Company are conducting
joint marketing activities, including Price Waterhouse's introduction of the
Company to prospective clients. In addition, the Company anticipates forming
alliances with other complimentary service organizations in the areas of home
banking interface, network security and other consumer-based financial
applications. The Company anticipates that these alliances, along with the
alliances mentioned in the previous paragraphs, will facilitate its entrance
into the Direct Banking Market.

The Sanchez Strategy

The Company believes its most promising opportunities for growth lie in
increasing market share in the Emerging Banking Market, broadening its scope of
services in the Emerging Banking Market, and positioning itself as one of the
first production system entries in the Direct Banking Market. The Company plans
to pursue these objectives through the following strategic activities.

Increase Market Share in the Emerging Banking Market

The Company intends to expand its presence in the Emerging Banking Market,
principally by increasing its marketing activities in Central Europe and the
Asian-Pacific Rim. The Company expects to emphasize its strategic relationships
with its hardware and software company partners. In addition, the Company plans
to increase its own direct marketing efforts and has recently opened offices in
Prague, Warsaw and Jakarta in furtherance of this objective.

Broaden the Scope of Services Provided in the Emerging Banking Market

The Company believes that the reception its products and services have received
in the Emerging Banking Market, particularly in Central Europe, provides the
opportunity to expand the scope of services which the Company offers to
organizations in this market. Accordingly, the Company intends to market
additional services and products to these organizations, including more
expansive consulting services, credit bureau services, technology infrastructure
planning, and systems integration.

Become a Significant Participant in the Direct Banking Market

5
<PAGE>

The Company was incorporated in Pennsylvania in 1981. The Company's principal
executive offices are located at 40 Valley Stream Parkway, Malvern, Pennsylvania
19355, and its telephone number is (610) 296-8877. The Company maintains a site
on the World Wide Web. Information contained in the Company's web site shall not
be deemed to be part of this Prospectus.

6
<PAGE>

The Offering

Terms of Rights Offering....... Holders of record at the close of business on
November 12, 1996 of the outstanding Safeguard
Common Shares will receive one Company Right for
every ten Safeguard Common Shares. The Direct
Purchasers will be granted the Direct Rights.
Each Right will entitle the holder to purchase
one share of Common Stock at a purchase price of
$5.50 per share. Persons may not exercise Rights
for fewer than 50 shares of Common Stock.
Holders of Rights will have the opportunity to
acquire an aggregate of approximately 3,226,500
shares of Common Stock upon exercise of the
Rights.

Exercise Price................. $5.50 per share of Common Stock.

Expiration Date for Rights..... December 18, 1996 at 5:00 p.m., New York City
time.

Rights......................... Rights will be evidenced by transferable
certificates that will be exercisable by the
holder until the Expiration Date, at which time
unexercised rights will be null and void. See
"The Offering."

Exercise by Safeguard CEO...... The Chairman and Chief Executive Officer of
Safeguard and/or his assignees are expected to
exercise all Company Rights distributed to them
and acquire approximately 343,000 shares of
Common Stock.

Sales to Other Persons......... The first 300,000 Unsubscribed Shares will be
sold by the Selling Stockholders to the Other
Purchasers, the Direct Rights will be granted by
the Company to the Direct Purchasers and the
shares of Common Stock subject to the
Undistributed Rights will be sold by the Company
to the Other Purchasers.

Standby Underwriting........... The number of Unsubscribed Shares exceeding the
300,000 shares of Common Stock to be sold by the
Selling Stockholders to the Other Purchasers
will be sold to the Underwriters and offered to
the public by the Underwriters. See "The
Offering--Sales of Unsubscribed Shares; Standby
Commitment" and "Underwriting."

Common Stock Offered:

by the Company.............. 2,158,000 shares

by the Selling Stockholders. 1,068,500 shares

Common Stock to be
Outstanding After the Rights

Offering..................... 10,707,755 shares (1)

Use of Proceeds................ For working capital, capital expenditures, and
general corporate purposes. A portion of the net
proceeds may be used for acquisitions, although
the Company has no commitments or understan-
dings with respect to future acquisitions. See
"Use of Proceeds."

Nasdaq National Market Symbols:

Rights.................... SCAIR

Common Stock.............. SCAIV (when-issued)
SCAI (thereafter)

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

(1) Excludes (i) 815,569 shares of Common Stock issuable upon the exercise of
options outstanding as of October 31, 1996 (of which 436,142 were exercisable as
of October 31, 1996) at a weighted average exercise price of $2.81 per share,
and (ii) warrants to purchase an aggregate of 360,000 shares of Common Stock at
an exercise price of $1.39 per share. See "Management--1995 Equity Compensation
Plan."

7
<PAGE>

Summary Consolidated Financial Information
<TABLE>
<CAPTION>
------------------------------------------------------------- ---------------------
Nine Months
Year Ended December 31, Ended
September 30,
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
In thousands, except per share (Unaudited) (Unaudited)
data

Statement of Operations Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ $9,399 $11,881 $11,317 $15,516 $16,842 $11,602 $12,796
Income from operations.............. 680 359 546 2,074 2,616 755 854
Net income.......................... 542 332 463 3,038 1,587 479 684
Net income per common share......... $ .06 $ .04 $ .05 $ .33 $ .17 $ .05 $ .07

Weighted average number of
shares outstanding............... 8,988 8,928 9,068 9,284 9,588 9,589 9,224

Other Operating Data:
Backlog:
License and services................ $ 8,510 $ 3,901 $ 1,576 $ 9,438 $ 5,816 $ 8,853 $ 8,196

Maintenance......................... 1,508 3,843 5,484 10,284 11,809 12,354 11,200

Total backlog....................... 10,018 7,744 7,060 19,722 17,625 21,207 19,396

Revenue per full time equivalent
employee............................ 96 88 91 121 114 103 122
</TABLE>

<TABLE>
<CAPTION> -------------------------------
As of September 30, 1996
Actual As Adjusted(1)
In thousands (Unaudited)
Balance Sheet Data:
<S> <C> <C>
Cash and cash equivalents ............................................. $ 6,250 $16,597
Working capital........................................................ 5,385 15,732
Total assets........................................................... 13,531 23,878
Long-term debt, including current portion.............................. 407 407
Total stockholders' equity............................................. 6,631 16,978
</TABLE>

(1) Adjusted to give effect to the sale by the Company of 2,158,000 shares of
Common Stock and the receipt of approximately $10,346,500 in net proceeds from
the Offering, after deducting the maximum Total Underwriting Discount with
respect to such shares of approximately $797,500 and estimated offering expenses
of $725,000 (including $125,000 representing the maximum applicable non-
accountable expense allowance to the Underwriters).

8
<PAGE>

Risk Factors

In addition to the other information in this Prospectus, the following factors
should be considered carefully by prospective investors in evaluating the
Company and its business before transferring Rights or purchasing Common Stock
offered hereby.

Dependence on Financial Services Industry

The Company has in the past derived, and may in the future derive, all of its
revenues from the marketing of its PROFILE products to financial services
companies. In particular, the Company's revenues are highly dependent on
information technology expenditures by these organizations. The Company's
operations could be materially and adversely affected by certain economic
changes within the financial services industry or the reduction in information
technology expenditures in that industry. Merger and acquisition activity has
been widespread in the financial services industry in recent years and is
expected to continue in future years. As a result, the industry has experienced
consolidation on a large scale, and this consolidation has had and will continue
to have the effect of reducing the number of potential customers of the Company.
Any significant increase in the level of such consolidation could adversely
affect the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."

Dependence on International Sales

The Company has in the past derived, and may in the future derive, a significant
portion of its revenues from financial services companies based in Central
Europe. Revenues derived by the Company from financial services companies based
in Central Europe accounted for approximately 23%, 29% and 51% of revenues
during 1993, 1994 and 1995, respectively. The Company in the future expects to
continue to expand its international operations, including in the Asian-Pacific
Rim. The Company's international business activities are subject to a variety of
potential risks, including political, regulatory and trade and economic policy
risks. Furthermore, the laws of a number of foreign countries do not protect the
Company's proprietary rights to as great an extent as those of the U.S. Given
the Company's relatively large concentration of international sales, the
realization by the Company of any of these risks may likely have a material
adverse effect on the Company's business, operating results and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Intense Competition

The financial services institutions software market is intensely competitive,
rapidly evolving and subject to rapid technological change. Competitors vary in
size and in the scope and breadth of their products and services. The Company
encounters competition from a number of organizations which offer production
software to financial services companies. Some of the Company's current and
potential competitors have longer operating histories, better name recognition,
and significantly greater financial, sales, marketing, technical and other
competitive resources than the Company. As a result, they may be able to adapt
more quickly than the Company to new or emerging technologies and changes in
customer preferences or to devote greater resources than the Company to the
development, promotion and sale of products. In addition, many of the Company's
competitors have established, or may in the future establish, cooperative
relationships or strategic alliances among themselves or with third parties to
compete with the Company's products. Furthermore, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire market
share.

As many financial services companies continue to evaluate the replacement of
their existing legacy systems, the Company believes that the financial services
institutions software market will continue to attract new competitors and new
technologies, possibly involving technologies that are more sophisticated and
cost effective than the Company's technology. There can be no assurance that the
Company will be able to compete successfully against

9
<PAGE>

any of these competitive pressures, any of which could result in lost orders or
could compel the Company to make significant price reductions. The inability of
the Company to avert these pressures successfully could result in a material
adverse effect on the Company's business, operating results and financial
condition. See "Business--Competition."

Rapid Technological Change; Development of New Products; Risk of Product Errors

The client/server application software market is characterized by rapid
technological change, frequent new product introductions and evolving industry
standards. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable in short periods of time. The Company expects new products and
services, and enhancements to existing products and services, to be developed
and introduced by others, which will compete with the products and services
offered by the Company. The life cycles of the Company's products are difficult
to estimate. The Company's future success will depend upon its ability to
enhance its current products and to develop and introduce new products that keep
pace with technological developments and emerging industry standards and address
the increasingly sophisticated needs of its customers. There can be no assurance
that the Company will be successful in developing and marketing new products or
produce enhancements that meet these changing demands, that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these products or that its new products and
product enhancements will adequately meet the demands of the marketplace and
achieve market acceptance. If the Company is unable to develop and introduce new
products or product enhancements in a timely manner, or if a release of a new
product does not achieve market acceptance, the Company's business, operating
results and financial condition will be materially adversely affected. Software
products such as those offered by the Company may contain errors or otherwise
fail to function properly when first introduced or when new versions are
released. There can be no assurance that errors will not be found in new
products or releases after commencement of commercial shipments resulting in
loss or delay in market acceptance, which could have a material adverse effect
upon the Company's business, operating results and financial condition.

Continued Growth and Development of the Direct Banking Market

A portion of the Company's growth strategy is dependent upon the development and
expansion of the market for direct banking services (which include alternate
delivery channels such as the networks which comprise the Internet) as well as
market acceptance of the Company's products and services. The market for direct
banking services has only recently begun to develop, and market acceptance of
the Company's products and services is uncertain. The Company began marketing
its products to the Direct Banking Market in 1996 and, as of the date of this
Prospectus, the Company has not received any revenues from this market. Certain
critical issues concerning commercial use of alternate delivery channels,
including capacity, security, reliability, ease and cost of access, and quality
of service are evolving and may adversely impact the growth in the use of these
channels. Despite the implementation of security measures, the use of the
Internet remains subject to unknown security risks which may further deter
financial institutions from licensing the Company's PROFILE products and
individuals from conducting transactions via electronic commerce. Accordingly,
the Company cannot predict the size of the market for direct banking services or
the rate at which such market will grow. If the market for direct banking
services fails to grow, grows more slowly than anticipated, or becomes saturated
with competitors, the Company's prospects could be adversely affected.

Reliance on Intellectual Property and Proprietary Rights

The Company's success is heavily dependent upon the proprietary architecture and
design of its PROFILE products. The Company relies primarily on a combination of
copyright and trademark laws, trade secrets, confidentiality procedures and
contractual provisions to protect its proprietary rights. The Company seeks to
protect its software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection. The Company
presently has no patents or patent applications pending. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. There can be no assurance that the Company's

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<PAGE>

means of protecting its proprietary rights will be adequate or that the
Company's competitors will not develop similar technology independently.

In general, while the most important features of PROFILE have been internally
developed, the Company also relies on software provided by certain third parties
for development languages, database environments and certain application modules
for PROFILE/ITS. The Company believes, however, that if such software was no
longer available to the Company, it could obtain substitute software from other
sources.

The Company is not aware that any of its products, or the software provided it
by third parties, infringe the proprietary rights of any person or entity. There
can be no assurance, however, that third parties will not claim infringement by
the Company with respect to current or future products. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or license
agreements or cause the Company to discontinue the use of the challenged
tradename, service mark or technology at potentially significant expense to the
Company associated with the marketing of a new name or the development or
purchase of replacement technology, all of which could have a material adverse
effect on the Company. Such royalty or license agreements, if required, may not
be available on terms acceptable to the Company, or at all, which could have a
material adverse effect upon the Company's operating results and financial
condition.

Concentration and Mix of Revenues; Ability to Obtain New Client Engagements

Generally, in any given year a small number of customers historically have each
accounted for at least 10% of the Company's revenues. In 1995, four customers
accounted for approximately 71% of the Company's revenues. In 1994, four
customers accounted for approximately 60% of the Company's revenues. Since the
installation of a large software application can be a complex, time intensive
and costly process, customers generally only undertake these projects on an
irregular basis and the projects often take approximately ten to 15 months to
implement. As a result, the amount of revenues derived from any given customer
may vary significantly from year to year. Accordingly, the Company expects that
the identity of customers accounting for large portions of revenues will change
from year to year. The inability of the Company from year to year to obtain
large installation engagements could have a material adverse effect on the
Company's business, operating results and financial condition. See Footnote 4 to
the Consolidated Financial Statements appearing elsewhere in this Prospectus.

Fluctuations in Quarterly Operating Results; Fourth Quarter Operating Results

The Company has experienced and may in the future continue to experience
fluctuations in its quarterly operating results. Factors that may cause the
Company's quarterly operating results to vary include the timing of new contract
closings, the initiation of license and service fee revenue recognition,
one-time payments from clients for license expansion rights, and the completion
of large installation projects. Certain of these factors may also affect the
Company's personnel utilization rates which may cause further variation in
quarterly operating results. Due to all of the foregoing factors, it is likely
that in some future quarters the Company's operating results will be below the
expectations of stock market analysts and investors. Regardless of the general
outlook for the Company's business, the announcement of quarterly results of
operations below analyst and investor expectations is likely to result in a
decline in the trading price of the Common Stock. Management anticipates that
net income in the fourth quarter of 1996 will be less than the comparable
quarter in 1995 due to the following reasons: (i) anticipated increases in
expenses, especially in product development and sales and marketing, which the
Company believes will enhance its future growth potential; (ii) the timing of
the start of new contracts currently being pursued; and (iii) the fourth quarter
of 1995 included one-time contract settlement totaling approximately $625,000.
See " Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Reliance on Strategic Relationships

The Company has established non-exclusive partnership arrangements with several
organizations, including Hewlett- Packard, IBM, Digital, and Oracle, that it
believes are important to its sales, marketing and support

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<PAGE>

activities. In particular, the Company's relationship with Digital has been
instrumental in the Company's achievement of its historical revenue levels.
While the establishment of strategic alliances with third parties has been
important to the Company's past success and such alliances are a key to its
future prospects, the Company does not believe that its written understandings
with such third parties are necessary for the delivery of its products and
services. However, the failure of the Company to maintain satisfactory
relationships with its strategic partners could have a material adverse effect
on the Company's business, operating results and financial condition. See
"Business."

Dependence on Key Personnel

The Company believes that its continued success depends to a significant extent
upon the efforts and abilities of its senior management. In particular, the loss
of the services of Michael A. Sanchez, the Company's Chairman and Chief
Executive Officer, or Frank R. Sanchez, the Company's President and Chief
Operating Officer, or any of the Company's other executive officers or senior
managers could have a material adverse effect on the Company's business,
operating results and financial condition. The Company does not have employment
agreements with any of its executive officers other than Richard H. Jefferson.
See "Management--Employment Agreement."

Ability to Attract and Retain Key Technical Employees

The Company believes that its future success will also depend in large part upon
its ability to attract and retain highly skilled technical, management and sales
and marketing personnel. Moreover, because the development of the Company's
software requires knowledge of computer hardware, operating system software,
system management software and application software, key technical personnel
must be proficient in a number of disciplines. Competition for such technical
personnel is intense, and the failure of the Company to hire and retain talented
technical personnel or the loss of one or more key employees could have an
adverse effect on the Company's business, operating results and financial
condition.

Future growth, if any, of the Company will require additional engineering, sales
and marketing, financial and administrative personnel, to expand customer
services and support and to expand operational and financial systems. There can
be no assurance that the Company will be able to attract and retain the
necessary personnel to accomplish its growth strategies or that it will not
experience constraints that will adversely affect its ability to satisfy
customer demand in a timely fashion. If the Company's management is unable to
manage growth effectively, the Company's business, operating results and
financial condition could be adversely affected.

Control by Principal Stockholders

After the completion of the Offering, Michael A. Sanchez, Frank R. Sanchez,
Safeguard, and Radnor Venture Partners, L.P. ("Radnor"), the four largest
stockholders of the Company (collectively, the "Principal Stockholders") and the
Selling Stockholders in the Offering, will beneficially own in the aggregate
approximately 58.8% of the outstanding Common Stock. As a result, such
stockholders will collectively have the voting power to elect the Company's
entire Board of Directors and to approve all matters requiring stockholder
approval. See "Management--Executive Officers and Directors," "Principal and
Selling Stockholders," "Certain Transactions" and "Shares Eligible for Future
Sale."

Broad Discretion in Application of Proceeds; Acquisitions

The Company intends to use the net proceeds from the Offering for working
capital, capital expenditures and general corporate purposes. In addition, a
portion of the net proceeds may be used to make acquisitions. Accordingly, the
specific uses for the net proceeds will be at the complete discretion of the
Board of Directors of the Company and may be allocated based upon circumstances
arising from time to time in the future. In addition, no assurance can be given
that acquisitions will be available on terms and conditions acceptable to the
Company. Acquisitions involve numerous risks, including, among other things,
difficulties and expenses incurred in connection with the acquisitions and the
subsequent assimilation of the operations and services of the acquired
businesses, the diversion of management's attention from other business concerns
and the potential loss of key employees of the acquired business. Acquisitions
of foreign businesses may involve additional risks, including assimilating
differences in foreign business practices, overcoming language barriers and
transacting in foreign currencies. Furthermore, the failure of the operations of
an acquired business to achieve anticipated results could be

12
<PAGE>

expected to have a material adverse effect on the Company's business, results of
operations and financial condition. See "Use of Proceeds."

Dilution

As of September 30, 1996, the average price per share paid upon the original
issuance by the Company of Common Stock prior to the Offering was $.74.
Purchasers of the Common Stock of the Company offered hereby will suffer an
immediate dilution of $3.97 in the net tangible book value per share of the
Common Stock from the Exercise Price of the Rights. See "Dilution."

Benefits of Offering to Current Stockholders

The Offering will provide significant benefits to the current stockholders of
the Company, including the creation of a public market for the Common Stock and
the receipt of proceeds from the sale of Common Stock in the Offering by the
Selling Stockholders. As a result, the Company's current stockholders will
generally have greater liquidity with respect to their investment in the Common
Stock and their holdings of Common Stock will potentially have a greater value.
The Principal Stockholders and the Company's other executive officers and
directors will beneficially own approximately 7,155,990 shares of Common Stock.
Based on the Exercise Price of $5.50, such shares beneficially owned will have
an aggregate market value of approximately $39.4 million.

Requirements for Listing Securities on the Nasdaq National Market; Application
of the Penny Stock Rules

The Common Stock and Rights (the "Listed Securities") have been approved for
listing on the Nasdaq National Market (upon completion of the Offering with
respect to the Common Stock and from the date of this Prospectus through the
Expiration Date with respect to the Rights). If the Company is unable to
maintain the standards for continued listing, the Listed Securities could be
subject to delisting from the Nasdaq National Market. Trading, if any, in the
Listed Securities would thereafter be conducted on an electronic bulletin board
established for securities that do not meet the Nasdaq listing requirements or
in what is commonly referred to as the "pink sheets." As a result, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as to
the price of, the Company's securities.

In addition, if the Company's securities were delisted, they would be subject to
the so-called penny stock rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally defined as an investor
with a net worth in excess of $1 million or annual income exceeding $200,000, or
$300,000 together with a spouse). For transactions covered by this rule, the
broker-dealer must make a special suitability determination for the purchaser
and must have received the purchaser's written consent to the transaction prior
to sale. Consequently, delisting, if it occurs, may affect the ability of
broker-dealers to sell the Company's securities and the ability of purchasers in
the Offering to sell their securities in the secondary market.

The Securities and Exchange Commission (the "Commission") has adopted
regulations that define a "penny stock" to be any equity security that has a
market price (as defined in the regulations) of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a disclosure schedule relating to the
penny stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. As a result, if the Common Stock is determined
to be "penny stock," an investor may find it more difficult to dispose of the
Company's Common Stock.

No Prior Market; Possible Volatility of Stock Price

Prior to the Offering, there has been no public market for the Common Stock or
the Rights, and there can be no assurance that an active public market will
develop or be sustained. The Exercise Price of the Rights and purchase price of
the Common Stock under the Standby Underwriting Agreement has been determined
solely by negotiations between the Company, the Selling Stockholders and the
Underwriters and does not necessarily reflect the price at which shares of
Common Stock may be sold in the public market during or after the Offering. See
"The Offering--Background" for a discussion of the factors considered in
determining the Exercise Price. The public markets, in general, have from time
to time experienced extreme price and volume fluctuations, which have in some
cases been unrelated to the operating performance of particular companies, and
the market for technology stocks,

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<PAGE>

such as the Common Stock, can be subject to greater price volatility than the
stock market in general. In addition, factors such as announcements of
technological innovations, announcements of new products by the Company's
competitors or third parties, and market conditions in the information
technology industry may have a significant impact on the market price of the
Common Stock.

Shares Eligible for Future Sale

A substantial number of outstanding shares of Common Stock and shares of Common
Stock issuable upon exercise of outstanding stock options and warrants will
become eligible for future sale in the public market at various times. In
addition to the factors affecting the stock market in general and the market for
the Common Stock discussed above, sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock. Upon completion of the
Offering, the Company will have 10,707,755 shares of Common Stock outstanding,
excluding 1,175,569 shares of Common Stock subject to stock options and warrants
outstanding as of October 31, 1996 and any stock options or warrants granted by
the Company after October 31, 1996. Of these shares, the Common Stock sold by
the Company in the Offering and the Selling Stockholders, except for certain
shares described below, will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Act"). The
remaining 7,481,255 shares of Common Stock (the "Restricted Shares") were sold
by the Company in reliance on exemptions from the registration requirements of
the Act and are "restricted securities" as defined in Rule 144 under the Act
("Rule 144") and may not be sold in the absence of registration under the Act
unless an exemption is available, including an exemption afforded by Rule 144 or
Rule 701 ("Rule 701") under the Act. Without considering the contractual
restrictions described below, approximately (i) 539,696 Restricted Shares are
eligible for sale in the public market in accordance with Rule 144(k) under the
Act, (ii) 257,194 Restricted Shares will be eligible for sale 90 days after the
date of this Prospectus, subject to volume and other resale conditions imposed
by Rule 701, and (iii) 6,684,365 Restricted Shares will be eligible for future
sale subject to the holding period and other conditions imposed by Rule 144.
Certain restrictions on shares of Common Stock are applicable to (i) any shares
of Common Stock purchased in the Offering by affiliates of the Company, which
may generally only be sold in compliance with the limitations of Rule 144,
except for the holding period requirements thereunder, and (ii) the shares of
Common Stock beneficially owned by the Principal Stockholders that are not being
offered hereby, all of which, together with the shares of Common Stock
beneficially owned by the seven other executive officers of the Company, each
director of the Company and Warren V. Musser and his assignees, are subject to
lock-up agreements (the "Lock-Up Agreements") and pursuant to such agreements
will not be eligible for sale or other disposition until 180 days after the
Expiration Date (the "Lock-Up Expiry Date") without the prior written consent of
the Underwriters. In addition, the Company has granted Radnor and Safeguard
certain registration rights whereby they may cause the Company to register their
shares of Common Stock. See "Shares Eligible for Future Sale."

It is anticipated that a registration statement (the "Form S-8 Registration
Statement") covering the Common Stock that may be issued pursuant to the
exercise of options awarded by the Company will be filed and become effective
prior to the Lock-Up Expiry Date, and that shares of Common Stock that are so
acquired or offered thereafter pursuant to the Form S-8 Registration Statement
generally may be resold in the public market without restriction or limitation.
Subject to the provisions of any Lock-Up Agreement, shares of Common Stock may
be resold in the public market beginning 90 days after the date of this
Prospectus pursuant to Rule 701 (i) by persons who are not affiliates of the
Company, without compliance with the public information, holding period, volume
limitation or notice provisions of Rule 144 and (ii) by affiliates of the
Company, without compliance with the holding period requirements of Rule 144.
See "Management--1995 Equity Compensation Plan," "Shares Eligible for Future
Sale--Options and Warrants" and "Underwriting."

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<PAGE>

Possible Issuances of Preferred Stock

Shares of preferred stock may be issued by the Company in the future without
stockholder approval and upon such terms as the Board of Directors may
determine. The rights of the holders of the Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding stock of the Company and potentially prevent the
payment of a premium to stockholders in an acquisition transaction. The Company
has no present plans to issue any shares of preferred stock. See "Description of
Capital Stock--Preferred Stock."

No Dividends

To date, the Company has not paid any cash dividends on its Common Stock and
does not expect to declare or pay any cash or other dividends in the foreseeable
future. The Company's financing arrangements currently do not prohibit the
Company from declaring or paying dividends or making other distributions on the
Common Stock. See "Dividend Policy."

Cancellation of Rights Offering

If the conditions precedent to the sale to the Underwriters of the Excess
Unsubscribed Shares on the sixth business day after the Expiration Date (the
"Closing Date") are not satisfied (assuming that there are Excess Unsubscribed
Shares), the Underwriters may elect, on or before the Closing Date, to cancel
the Rights Offering and the Company and the Selling Stockholders will not have
any obligations with respect to the Rights except to return, without interest,
any payment received in respect of the Exercise Price. See "The
Offering--Cancellation of Rights Offering" and "Underwriting." The Company has
been advised by the NASD that it is likely that trades in the Rights and the
when-issued shares of Common Stock in the market would be canceled if the Rights
Offering is not consummated.

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<PAGE>

The Offering

The Company is granting, at no cost, to the holders of Safeguard Common Shares
of record at the close of business on the Record Date, the Company Rights, on
the basis of one Company Right for every ten Safeguard Common Shares. The
Selling Stockholders have agreed with the Company to sell 1,068,500 shares of
Common Stock upon the exercise of the Company Rights and the Company will sell
the remaining 2,006,500 shares of Common Stock upon the exercise of the Company
Rights. The Company is granting, at no cost, the 151,500 Direct Rights to the
Direct Purchasers. Each Right enables the holder to purchase one share of Common
Stock at an Exercise Price of $5.50 per share. As of the close of business on
the day before the date of this Prospectus, there were 30,528,725 Safeguard
Common Shares outstanding. Accordingly, subject to changes in the number of
outstanding Safeguard Common Shares through the Record Date (principally as a
result of the exercise of options and the conversion of convertible securities
to purchase Safeguard Common Shares), a total of approximately 3,052,873 Company
Rights are expected to be issued to holders of Safeguard Common Shares
outstanding on the Record Date. In the event that Company Rights to purchase
fewer than 3,075,000 shares of Common Stock are issued to holders of Safeguard
Common Shares, the shares of Common Stock subject to such Undistributed Rights
will be offered by the Company to the Other Purchasers at the Exercise Price.

Background

The Company has agreed with the Selling Stockholders to make a Rights Offering
to holders of Safeguard Common Shares on the terms set forth in this Prospectus.
The Company believes that the Rights Offering offers several advantages over a
traditional initial public offering, including, the opportunity to offer its
Common Stock to investors who, as Safeguard shareholders, already have some
knowledge of the Company's business, the opportunity to achieve a broader
distribution to a more stable shareholder base and the minimization of
underwriting discounts and commissions. In addition, Safeguard has advised the
Company that it prefers the Rights Offering to a traditional initial public
offering because it allows its shareholders the opportunity to purchase shares
of Common Stock at the initial offering price before such shares are offered to
the general public by the Underwriters.

Prior to the Rights Offering, there has been no public market for the Common
Stock or the Rights. Consequently, the Exercise Price was determined by
negotiations among the Company, the Selling Stockholders and the Underwriters.
In determining the Exercise Price, the Underwriters, and the Boards of Directors
of the Company and Safeguard, Michael A. Sanchez, Frank R. Sanchez and Radnor
considered such factors as the future prospects and historical growth rate in
revenues and earnings of the Company; its industry in general and the Company's
position in its industry; revenues, earnings and certain other financial and
operating information of the Company in recent periods; market valuations of the
securities of companies engaged in activities similar to those of the Company;
and the management of the Company.

Exercise Privilege

Each Right will entitle the holder thereof to receive, upon payment of the
Exercise Price, one share of Common Stock, subject to the restrictions described
herein (the "Exercise Privilege"). Persons may not exercise Rights for fewer
than 50 shares of Common Stock. In the event that a holder of Rights meeting the
minimum exercise requirement elects to exercise in multiple transactions and one
such transaction involves less than the minimum exercise requirement, such
holder should provide to the Rights Agent a letter stating that such holder has
already exercised a sufficient number of Rights to satisfy the minimum exercise
requirement. For purposes of the Rights Offering, a person that holds Safeguard
Common Shares in multiple accounts must meet the 50 share minimum purchase
requirement in each account. Accordingly, persons holding fewer than 50 Rights
in an account should consider the advisability of consolidating the Rights in
one account, selling Rights, or purchasing additional Rights to comply with the
minimum exercise requirements of the Rights Offering. The Company has
established these minimum exercise requirements primarily to limit the costs
associated with a significant number of odd lots of the Common Stock.

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<PAGE>

No Fractional Rights

No fractional Rights will be issued in the Rights Offering and a holder of a
number of Safeguard Common Shares not evenly divisible by ten will be entitled
to receive the next higher whole number of Rights. For purposes of this rounding
process, record holders of Safeguard Common Shares known to be acting as
nominees for beneficial holders of Safeguard Common Shares will be disregarded,
and the rounding process will take place with respect to the aggregate holdings
of Safeguard Common Shares by the beneficial holder.

Expiration Date

The Rights Offering will terminate, and the Rights will expire, at 5:00 p.m.,
New York City time, on December 18, 1996, the Expiration Date. After the
Expiration Date, unexercised Rights will be null and void. Neither the Company
nor any Selling Stockholder will be obligated to honor any purported exercise of
Rights received by ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent")
after the Expiration Date, regardless of when the documents relating to such
exercise were sent, except pursuant to the delayed delivery procedures described
below under "-- Method of Exercising Rights."

Method of Transferring Rights

Rights may be transferred, in whole or in part, by endorsing and delivering to
the Rights Agent, at the addresses set forth below under "-- Method of
Exercising Rights," a Rights certificate that has been properly endorsed for
transfer, with instructions to reissue the Rights, in whole or in part, in the
name of the transferee. The Rights Agent will reissue certificates for the
transferred Rights to the transferee, and will reissue a certificate for the
balance, if any, to the holder of the Rights, in each case to the extent it is
able to do so prior to the Expiration Date. Safeguard and the Company believe
that a market for the Rights may develop during the period preceding the
Expiration Date. The Rights have been approved for quotation by the Nasdaq
National Market and will trade under the symbol "SCAIR" during such period.
Any questions regarding the transfer of Rights should be directed to the
Rights Agent at P.O. Box 798,Midtown Station, New York, NY 10018, Attention:
Reorganization Department, telephone number (800) 223-6554.

Because persons may not exercise Rights for fewer than 50 shares of Common
Stock, persons holding fewer than 491 Safeguard Common Shares in one account
will not be entitled to exercise Company Rights unless they consolidate Company
Rights received in multiple accounts or acquire enough additional Company Rights
in the market to satisfy the 50 share minimum exercise requirement. Such holders
should consult with their investment advisor and review various alternatives,
including acquiring additional Rights or selling or otherwise transferring their
Rights. All commissions, fees and other expenses (including brokerage
commissions and any transfer taxes) incurred in connection with the purchase or
sale of Rights are for the account of the transferor and transferee of Rights,
and none of such commissions, fees or expenses will be paid by the Company or
the Selling Stockholders.

Method of Exercising Rights

Rights may be exercised by completing and signing the election to purchase form
that appears on the back of each Rights certificate. The completed and signed
election to purchase form, accompanied by payment in full of the Exercise Price
for all shares for which the Exercise Privilege has been exercised, must be
received by the Rights Agent on or before the Expiration Date. Neither the
Company nor any Selling Stockholder will be obligated to honor any purported
exercise of Rights received by the Rights Agent after the Expiration Date,
regardless of when the documents relating to such exercise were sent, except
pursuant to the delayed delivery procedures described below. Therefore, the
Company and Safeguard suggest, for the holders' protection, that Rights be
delivered to the Rights Agent by overnight or express mail courier, or, if
mailed, by registered mail. Persons may not exercise Rights for fewer than 50
shares of Common Stock in each account.

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<PAGE>

The Rights and Exercise Price, if any, should be mailed or delivered to the
Rights Agent as follows:

By Mail: By Hand or by Overnight/Express Mail
Courier:

ChaseMellon Shareholder
Services, L.L.C. ChaseMellon Shareholder
Reorganization Department Services, L.L.C.
P.O. Box 798 Reorganization Department
Midtown Station 120 Broadway, 13th Floor
New York, NY 10018 New York, NY 10271

Payment of the Exercise Price must be made in U.S. dollars by cash, check or
money order payable to "Safeguard Escrow Account." Mellon Bank N.A. will serve
as the escrow agent of the Safeguard Escrow Account.

An exercise also will be in acceptable form if, on or before the Expiration
Date, the Rights Agent has received payment in full of the Exercise Price for
shares to be purchased pursuant to the Exercise Privilege and a letter or
telegraphic notice from a bank, trust company or member firm of the New York or
American Stock Exchanges setting forth the subscriber's name, address and
taxpayer identification number, the number of shares subscribed for pursuant to
the Exercise Privilege, and guaranteeing that a properly completed and signed
election to purchase form will be delivered to the Rights Agent within three
business days after the Expiration Date. Acceptance of subscriptions in the
foregoing manner will be subject to receipt of the duly executed election to
purchase form with respect to the Exercise Privilege within such three business
day period. No formal arrangements for the deposit of election to purchase forms
have been made with any bank, trust company or member firm.

A holder of Rights who purchases less than all the shares of Common Stock
represented by his Rights certificate will receive from the Rights Agent a new
Rights certificate representing the balance of the unsubscribed Rights, to the
extent that the Rights Agent is able to reissue a Rights certificate prior to
the Expiration Date.

Certificates representing the Common Stock purchased by exercising the Exercise
Privilege will be issued as soon as practicable after the sale of the
Unsubscribed Shares and in no event later than six business days after the
Expiration Date. See "--Sales of Unsubscribed Shares; Standby Commitment." All
funds received by the Rights Agent in payment of the Exercise Price will be
retained in escrow by the Rights Agent and will not be delivered to the Company
or the Selling Stockholders until the certificates representing Common Stock
have been issued.

Record holders of Safeguard Common Shares who hold such shares for the account
of others (e.g., brokers or depositories for securities), and who thus receive
Rights certificates representing Rights for the account of more than one
beneficial owner, should provide such beneficial owners with copies of this
Prospectus and should ascertain and execute on their behalf the intentions of
such beneficial owners as to the exercise or transfer of such Rights.

All questions as to the validity, form, eligibility (including times of receipt,
beneficial ownership and compliance with minimum exercise provisions) and
acceptance of subscription forms and the Exercise Price will be determined by
Safeguard, whose determination will be final and binding. Once made,
subscriptions are irrevocable, and no alternative, conditional or contingent
subscriptions will be accepted. Safeguard reserves the absolute right to reject
any or all purchases not properly submitted or the acceptance of which would, in
the opinion of its counsel, be unlawful. Safeguard also reserves the right to
waive any irregularities (or conditions) and Safeguard's interpretations of the
terms (and conditions) of the Rights Offering shall be final and binding. Any
irregularities in connection with purchases must be cured within five business
days of the giving of notice of defect by the Rights Agent, but no later than
three business days after the Expiration Date, unless waived by Safeguard. The
Company, the Selling Stockholders, the Underwriters and the Rights

18
<PAGE>

Agent are not under any duty to give notification of defects in such
subscriptions and will not have any liability for failure to give such
notifications. Exercises will not be deemed to have been made until such
irregularities have been cured or waived and rejected exercises and the Exercise
Price paid therefor will be returned promptly by the Rights Agent to the
appropriate holders of the Rights.

Investor Information

Investors who desire additional copies of this Prospectus or additional
information should contact Frances M. Hurley at J.P. Morgan Securities Inc., 60
Wall Street, New York, New York 10260-0060, telephone number (212) 648- 1442 or
Franklin M. Stokes at Wheat, First Securities, Inc., Riverfront Plaza, 901 East
Byrd Street, Richmond, Virginia 23219, telephone number (804) 782-3446.

Expectations Concerning the Exercise of Rights

Warren V. Musser, the Chairman and Chief Executive Officer of Safeguard, and/or
his assignees are expected to exercise all Rights distributed to them and
acquire approximately 343,000 shares of Common Stock through the Rights
Offering.

Sales of Unsubscribed Shares; Standby Commitment

The Unsubscribed Shares will be sold, as to the first 300,000 Unsubscribed
Shares, at the Exercise Price to the Other Purchasers (who are comprised of
persons selected by the Company) and, as to the number of Unsubscribed Shares
exceeding the 300,000 shares of Common Stock offered to the Other Purchasers
(the "Excess Unsubscribed Shares"), to the Underwriters at the Exercise Price
less the Total Underwriting Discount pursuant to the Standby Underwriting
Agreement.

The Selling Stockholders are offering the first 300,000 Unsubscribed Shares at
the Exercise Price to the Other Purchasers and expect to enter into, prior to
the Expiration Date, agreements obligating them to sell up to an aggregate of
300,000 Unsubscribed Shares to the Other Purchasers and obligating the Other
Purchasers to purchase from them up to an aggregate of 300,000 Unsubscribed
Shares. In the event that less than 300,000 Unsubscribed Shares are available
for sale to the Other Purchasers as of the Expiration Date, the number of
remaining Unsubscribed Shares will be sold to each Other Purchaser, on a
discretionary basis, as derived by multiplying the maximum number of
Unsubscribed Shares each Other Purchaser has agreed to purchase by the fraction
obtained after dividing the aggregate number of remaining Unsubscribed Shares by
300,000. In the event that the Other Purchasers fail to purchase any of the
Unsubscribed Shares which they are obligated to purchase such circumstances
would result in the failure to satisfy a condition precedent to the
Underwriters' obligation to purchase Excess Unsubscribed Shares under the
Standby Underwriting Agreement which would result in the termination of the
Rights Offering and the return of payments received in respect of the Exercise
Price, without interest, unless the Underwriters elect to purchase all, but not
less than all, of the remaining Unsubscribed Shares. See "--Cancellation of
Rights Offering" and "Underwriting."

In accordance with the Standby Underwriting Agreement, the Underwriters (i) will
receive the Financial Advisory Fee equal to 3% of the Exercise Price of each
share of Common Stock subject to the Offering, and (ii) will purchase, within
six business days after the Expiration Date and subject to the terms and
conditions of the Standby Underwriting Agreement, the Excess Unsubscribed Shares
at a price per share equal to the Exercise Price less the Underwriting Discount
equal to 4% of the Exercise Price for each Unsubscribed Share in addition to the
Financial Advisory Fee for such share. Under certain circumstances, the
Underwriters may be entitled to receive the Underwriting Discount for shares of
Common Stock acquired by them pursuant to the exercise of Rights purchased by
them. See "Underwriting." The Excess Unsubscribed Shares acquired by the
Underwriters pursuant to the Standby Underwriting Agreement, the Common Stock
acquired by the Underwriters pursuant to the exercise of Rights and the Common
Stock acquired by the Underwriters in the market will be offered by the
Underwriters to the public at prices which may vary from the Exercise Price. If
all of the Rights are exercised, or if the number of Unsubscribed Shares is
300,000 or less, there will be no Excess Unsubscribed Shares and the
Underwriters will not

19
<PAGE>

be required to purchase any Common Stock pursuant to the Standby Underwriting
Agreement unless the Other Purchasers do not fulfill their obligations to
purchase the Unsubscribed Shares. The Underwriters may terminate their
obligations under the Standby Underwriting Agreement if certain events occur, or
if the Company or any Selling Stockholder fails to comply with any of their
respective obligations under the Standby Underwriting Agreement. See
"Underwriting." The Company and Selling Stockholders have granted to the
Underwriters a 20-day option commencing on the Expiration Date to purchase a
maximum of 307,500 additional shares of Common Stock to cover over-allotments,
if any, of which 151,500 shares of Common Stock would be sold by the Company and
an aggregate of 156,000 shares of Common Stock would be sold by the Selling
Stockholders. See "Underwriting." The Company intends to supplement the
Prospectus after the Expiration Date to set forth the results of the Rights
Offering, the transactions by the Underwriters during the Exercise Period, the
number of Unsubscribed Shares purchased by the Other Purchasers, if any, the
number of Unsubscribed Shares purchased by the Underwriters, if any, and the
subsequent reoffering thereof.

Cancellation of Rights Offering

If the conditions precedent to the sale to the Underwriters of the Excess
Unsubscribed Shares on the sixth business day after the Expiration Date (the
"Closing Date") are not satisfied (assuming that there are Excess Unsubscribed
Shares), the Underwriters may elect, on or before the Closing Date, to cancel
the Offering and the Company and the Selling Stockholders will not have any
obligations with respect to the Rights except to return, without interest, any
payment received in respect of the Exercise Price. See "Underwriting." The
Company has been advised by the NASD that it is likely that trades in the Rights
and the when-issued shares of Common Stock in the market would be canceled if
the Offering is not consummated.

Federal Income Tax Consequences

The following is a summary of the material federal income tax consequences
affecting holders of Safeguard Common Shares receiving Company Rights in the
Offering. In the opinion of Morgan, Lewis & Bockius LLP, the distribution of the
Company Rights by the Company may constitute taxable income to holders of
Safeguard Common Shares under the Internal Revenue Code of 1986, as amended (the
"Code"), and may also be subject to state or local income taxes. Because of the
complexity of the provisions of the Code referred to below and because tax
consequences may vary depending upon the particular facts relating to each
holder of Safeguard Common Shares, such holders should consult their own tax
advisors concerning their individual tax situations and the tax consequences of
the Offering under the Code and under any applicable state, local or foreign tax
laws.

Safeguard has been advised by Morgan, Lewis & Bockius LLP that, under current
interpretations of case law, the Code, and applicable regulations thereunder,
the federal income tax consequences applicable to holders of Safeguard Common
Shares receiving Company Rights in the Offering generally are as follows:

Distribution of Company Rights to Holders of Safeguard Shares

The Company Rights, representing the right to acquire shares of Common Stock
from the Company or the Selling Stockholders, can be considered as constituting
"property" within the meaning of Section 317(a) of the Code. The federal income
tax consequences of a distribution by the Company of the Company Rights which
are considered "property" to holders of Safeguard Common Shares, as determined
under the Code and the regulations thereunder, are as follows: (i) each
noncorporate holder of Safeguard Common Shares will be deemed to have received a
distribution from Safeguard, generally taxable as ordinary dividend income, in
an amount equal to the fair market value (if any) of the Company Rights, as of
the date of distribution, (ii) each corporate holder of Safeguard Common Shares
(other than foreign corporations and S corporations) will be deemed to have
received a distribution from Safeguard (generally taxable as a dividend subject
to the dividends received deduction for corporations (generally 70%, but 80%
under certain circumstances)) in an amount equal to the fair market value (if
any) of the Company Rights, as of the date of distribution; and (iii) the tax
basis of the Company Rights in the hands of each holder (whether corporate or
noncorporate) of Safeguard Common Shares will be equal to the fair market value
(if

20
<PAGE>

any) of the Company Rights as of the date of distribution. Because of the
predominantly factual nature of determining the fair market value, if any, of
the Company Rights, Morgan, Lewis & Bockius LLP has expressed no opinion with
respect to the fair market value of the Company Rights.

Since the fair market value of the Company Rights will determine the amount of
taxable income deemed received by the holders of Safeguard Common Shares, the
determination of the fair market value of each Right as of the date of
distribution is critical. The Exercise Price was determined through arms-length
negotiations among the Company, the Selling Stockholders and the Underwriters.
Based on these negotiations and because Safeguard views the Company Rights as
merely a mechanism that permits the purchase of the Common Stock, Safeguard's
Board of Directors believes that the per share value of Common Stock represented
by the Company Rights at the date of the commencement of the Offering
approximates the Exercise Price, and that the Company Rights should have no
value for federal income tax purposes. However, the Internal Revenue Service is
not bound by this determination. See "--Background."

Exercise of Rights

Holders of Company Rights, whether corporate or noncorporate, will recognize
neither gain nor loss upon the exercise of the Company Rights. A holder of
Company Rights who receives shares of Common Stock upon the exercise of the
Company Rights will acquire a tax basis in such shares equal to the sum of the
Exercise Price paid under the Offering and the tax basis (if any) of the holder
of Company Rights in the Company Rights.

Transfer of Rights

The transferable nature of the Company Rights will permit a holder of Company
Rights to sell Company Rights prior to exercise. Pursuant to Section 1234 of the
Code, a Company Rights holder who sells Company Rights prior to exercise will be
entitled to treat the difference between the amount received for the Company
Rights and the adjusted tax basis (if any) of the holder of Company Rights in
the Company Rights as a short-term capital gain or capital loss, provided that
Common Stock subject to the Company Rights would have been a capital asset in
the hands of the holder had it been acquired by him. The gain or loss so
recognized will be short-term since the Company Rights will have been held for
not longer than one year.

Non-Exercise of Rights

The income tax treatment applicable to holders of Company Rights who fail to
exercise or transfer their Company Rights prior to the Expiration Date also is
set forth in Section 1234 of the Code. Holders of Company Rights who allow their
Company Rights to lapse are deemed under the Code to have sold their Company
Rights on the date on which the Company Rights expire. Since upon such lapse no
consideration will be received by a holder of Company Rights, and since the
Company Rights will have been held for not longer than one year, a short-term
capital loss equal to the tax basis (if any) in the Company Rights will be
sustained by the holder on such lapse, provided that Common Stock subject to the
Company Rights would have been a capital asset in the hands of the holder had it
been acquired by him.

21
<PAGE>

Use of Proceeds

The minimum net proceeds to the Company from the sale of the 2,158,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$10,346,500 after deducting estimated offering expenses allocable to and payable
by the Company (including the maximum applicable non-accountable expense
allowance to the Underwriters) and assuming the sale of all such shares pursuant
to the Standby Underwriting Agreement (other than the 151,500 shares upon the
exercise of Direct Rights), the payment to the Underwriters of the Total
Underwriting Discount with respect to the shares sold by the Company pursuant to
the Standby Underwriting Agreement and the payment of only the Financial
Advisory Fee with respect to the shares of Common Stock sold by the Company to
the Direct Purchasers upon the exercise of Direct Rights. In the event more of
the shares of Common Stock offered hereby are sold pursuant to the exercise of
Rights, the Company will not be obligated to pay the Underwriting Discount with
respect to such shares and will, therefore, realize an amount of net proceeds
greater than approximately $10,346,500. See "The Offering--Sales of Unsubscribed
Shares; Standby Commitment" and "Underwriting." The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders.

The principal reason for the Offering is to establish a stronger capital base
for the Company to support the continued expansion of its business. The Company
intends to use the net proceeds, together with cash flow from operations, for
working capital, capital expenditures and general corporate purposes. The
Company may expand its technical and marketing capabilities through the
acquisition of other companies or businesses that are complementary to the
Company's current business. A portion of the net proceeds from the Offering may
be used in the future for such acquisitions, although the Company has no
commitments or understandings with respect to future acquisitions. The Company
has not determined the amounts it intends to utilize on each of the listed uses,
or the timing of such uses. The amounts actually expended for each use may vary
significantly depending upon a number of factors, including future revenue
growth, if any, the amount of cash generated or used by the Company's operations
and the status of acquisition opportunities, if any, presented to the Company.
The Company believes that the net proceeds from the sale of the Common Stock
offered hereby, together with its current cash balances and cash flow from
future operations will be sufficient to fund its operating requirements for the
foreseeable future. Pending such uses, the net proceeds of the Offering will be
invested in short-term, investment-grade, interest-bearing securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources."

Dividend Policy

To date, the Company has not paid any cash dividends on its Common Stock. The
Company currently intends to retain future earnings for use in its business and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The payment of future dividends, if any, will depend, among other
things, on the Company's results of operations and financial condition and on
such other factors as the Company's Board of Directors may, in its discretion,
consider relevant. The Company's financing arrangements currently do not
prohibit the Company from declaring or paying dividends or making other
distributions on the Common Stock.

22
<PAGE>

Capitalization

The following table sets forth the total capitalization of the Company as of
September 30, 1996, and as adjusted to reflect the sale of 2,158,000 shares of
Common Stock by the Company pursuant to the Offering and the application of the
estimated net proceeds of approximately $10,346,500 therefrom. This table should
be read in conjunction with the Consolidated Financial Statements and related
notes thereto and other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>

As of September 30, 1996
Actual As Adjusted
------ -----------
Dollars in thousands (Unaudited)
<S> <C> <C>
Long-term debt, including current portion ............................ $ 407 $ 407

Stockholders' equity:

Common stock, no par value; 15,000,000 shares authorized, and
8,549,755 and 10,707,755 (as adjusted) shares issued ......... 85 107
Additional paid-in capital......................................... 6,354 16,679
Retained earnings.................................................. 844 844
Notes due on common stock purchases................................ (652) (652)
Total stockholders' equity......................................... 6,631 16,978

Total capitalization............................................... $7,038 $17,385
======= ========
</TABLE>

23
<PAGE>

Dilution

The net tangible book value of the Company as of September 30, 1996 was
approximately $5,985,000 or $.70 per share of Common Stock. Net tangible book
value per share of Common Stock represents the amount of the Company's tangible
assets less its total liabilities, divided by the total number of shares of
Common Stock outstanding. Without taking into account any changes in net
tangible book value after September 30, 1996, other than to give effect to the
items described in Note 1 appearing immediately below the following table, the
pro forma net tangible book value of the Company as of September 30, 1996 would
have been approximately $16,331,500 or $1.53 per share. This represents an
immediate increase in such pro forma net tangible book value of $.83 per share
to existing stockholders and an immediate dilution of $3.97 per share to
investors purchasing Common Stock at the Exercise Price in the Offering. New
stockholders that acquire Common Stock from the Underwriters at a price greater
than the Exercise Price will experience greater dilution. The following table
illustrates this per share dilution in net tangible book value:
<TABLE>
<CAPTION>
<S> <C>
Exercise Price ......................................................... $ 5.50
Net tangible book value per share as of September 30, 1996 ........... $ .70
Increase per share attributable to new stockholders(1) ............... .83
Pro forma net tangible book value per share as of September 30, 1996... 1.53

Dilution per share to new stockholders ................................. $ 3.97
</TABLE>

- --------------------
(1) Reflects the sale by the Company of 2,158,000 shares of Common Stock and the
receipt of approximately $10,346,500 in net proceeds from the Offering after
deducting the maximum Total Underwriting Discount with respect to such shares of
approximately $797,500 and estimated offering expenses of $725,000 (including
$125,000 representing the maximum applicable non-accountable expense allowance
to the Underwriters).

The following table sets forth, on an adjusted basis as of September 30, 1996,
the number of shares of Common Stock issued by the Company, the total
consideration paid and the average price per share paid upon original issuance
to stockholders prior to the Offering and by new investors before deducting the
Underwriters' compensation and estimated offering expenses:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Shares Purchased(1) Total Consideration
------------------- -------------------
Average Price
Number Percentage Amount Percentage Per Share
------ ---------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 8,549,755 79.8% $ 6,286,000 34.6% $ .74
New stockholders............ 2,158,000 20.2 11,869,000 65.4 $5.50
----------- ------ ----------- -----
Total............... 10,707,755 100.0% $18,155,000 100.0%
========== ===== =========== =====
</TABLE>
- --------------------

(1) Sales by the Selling Stockholders in the Offering will cause the number of
shares held by existing stockholders to be reduced to approximately 7,481,255
shares or 69.9% of the total shares of Common Stock to be outstanding after the
Offering, and will increase the number of shares held by new investors to
approximately 3,226,500 shares, or 30.1% of the total shares of Common Stock to
be outstanding after the Offering. See "Principal and Selling Stockholders."

The foregoing tables assume no exercise of outstanding options or warrants. As
of September 30, 1996, there were outstanding (i) options to purchase an
aggregate of 816,889 shares of Common Stock (of which

24
<PAGE>

365,753 were exercisable at September 30, 1996) at a weighted average exercise
price of $2.81 per share and (ii) warrants to purchase an aggregate of 360,000
shares of Common Stock at an exercise price of $1.39 per share. As of September
30, 1996, the Company had an additional 1,251,364 shares of Common Stock
available for future grants and other issuances under its 1995 Equity
Compensation Plan. See "Management--1995 Equity Compensation Plan" and Note 8 to
the Consolidated Financial Statements appearing elsewhere in this
Prospectus.

Selected Consolidated Financial Data

The selected consolidated financial data presented below as of December 31,
1992, 1993, 1994 and 1995 and for the four-year period ended December 31, 1995
have been derived from the Company's audited consolidated financial statements.
In management's opinion, the Company's unaudited consolidated financial
statements as of December 31, 1991 and for the year then ended and as of
September 30, 1995 and 1996 and for the nine months then ended include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation. Consolidated operating results for the nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the entire year. The data presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements and the notes
thereto and other financial information appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
-------------------------------------------------------------
Year Ended December 31,
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
In thousands, except per share data (Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Revenues:
Software license fees................. $ 4,365 $ 3,755 $ 2,184 $ 6,111 $ 6,532
Product enhancement fees.............. 620 2,131 2,045 1,564 1,797
Implementation and consulting
services.............................. 1,990 3,394 3,729 4,347 4,496
Software maintenance fees.............. 2,424 2,601 3,359 3,494 4,017
------ ------ ------ ------ ------
Total revenues 9,399 11,881 11,317 15,516 16,842

Operating expenses:
Product development................... 2,565 3,369 2,991 3,805 3,300
Product support....................... 1,597 1,923 2,509 2,315 2,515
Implementation and consulting......... 1,322 2,434 2,436 2,678 3,176
Sales and marketing................... 1,377 1,630 993 1,282 2,080
Royalties and sublicense fees......... 320 587 331 1,477 1,331
General and administrative............ 1,538 1,579 1,511 1,885 1,824
------ ------ ------ ------ ------
Total operating expenses ............... 8,719 11,522 10,771 13,442 14,226
------ ------ ------ ------ ------
Income from operations.................. 680 359 546 2,074 2,616
Interest income (expense), net.......... (111) (2) (28) 6 93
------ ------ ------ ------ ------
Income before income taxes.............. 569 357 518 2,080 2,709
Income tax provision (benefit).......... 27 25 55 (958) 1,122
------ ------ ------ ------ ------
Net income.............................. $ 542 $ 332 $ 463 $ 3,038 $ 1,587
====== ====== ====== ======= ======

Net income per common share $ .06 $ .04 $ .05 $ .33 $ .17
Weighted average number of shares
outstanding 8,988 8,928 9,068 9,284 9,588
- ----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1996
------ ------
In thousands, except per share data (Unaudited)

Statement of Operations Data
Revenues:
<S> <C> <C>
Software license fees................. $3,985 $5,623
Product enhancement fees.............. 1,164 709
Implementation and consulting
services.............................. 3,372 3,294
Software maintenance fees 3,081 3,170
------ -------
Total revenues..................... 11,602 12,796

Operating expenses:
Product development................... 2,567 2,750
Product support....................... 2,001 2,142
Implementation and consulting......... 2,435 2,097
Sales and marketing................... 1,516 2,191
Royalties and sublicense fees......... 874 1,721
General and administrative............ 1,454 1,041
------ ------
Total operating expenses................ 10,847 11,942
------ ------
Income from operations.................. 755 854
Interest income (expense), net.......... 51 213
------ ------
Income before income taxes.............. 806 1,067
Income tax provision (benefit).......... 327 383
------ ------
Net income.............................. $ 479 $ 684
======== =======

Net income per common share............. $ .05 $ .07
Weighted average number of shares
outstanding........................... 9,589 9,224
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------
As of December 31, As of September
30,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
In thousands (Unaudited) (Unaudited)
- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ....... $ 1,007 $ 257 $ 365 $ 2,656 $ 5,546 $ 262 $ 6,250
Working capital ................. (1,282) (1,298) (320) 2,318 4,751 3,036 5,385
Total assets .................... 3,622 3,868 3,593 8,530 12,147 9,727 13,531
Long-term debt, including current
portion ......................... 234 179 174 242 341 385 407
Total stockholders' equity ...... (21) 284 747 3,785 5,605 4,497 6,631
</TABLE>

26
<PAGE>

Management's Discussion and Analysis of Financial Condition
and Results of Operations

The following information should be read in connection with the information
contained in the Consolidated Financial Statements and notes thereto appearing
elsewhere in this Prospectus.

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."

Overview

The Company designs, develops, markets, implements and supports comprehensive
banking software, called PROFILE, for financial services organizations
worldwide. Sanchez's highly flexible PROFILE family of products is comprised of
three integrated modules which operate on open, client-server platforms. The
primary module, called PROFILE/Anyware, is a multi-currency bank production
system which supports deposit, loan, customer, transaction processing and bank
management requirements through multiple distribution channels, including the
Internet. The other modules are PROFILE/FMS, a multi-company, multi-currency,
financial management and accounting system, and PROFILE/ITS, a system that
processes treasury transactions including foreign exchange, money market,
securities trading (capital markets), futures, options and trade finance. The
PROFILE system is currently licensed to 23 clients in nine countries serving
more than 300 financial institutions.

Founded in 1979, the Company initially generated all of its revenue from U.S.
based financial institutions. In the early 1990s, the Company identified two
niches: the Canadian Credit Union marketplace and the Emerging Banking Market in
Central Europe. For the three year period ended December 31, 1995, 54% of the
Company's revenues were generated from these two markets, although in 1995, when
62% of the Company's revenue was generated from these two markets, 51% was from
Central Europe and only 11% was from Canada. The Company anticipates that a
significant portion of its revenues in the future will be derived from the
Emerging Banking Market and the Direct Banking Market (see "Business--Industry
Overview" for descriptions of these markets),although, as of the date of this
Prospectus, the Company has not recognized any revenues from the Direct Banking
Market. For more information about the Company's revenues from foreign
operations, see Note 4 to the Consolidated Financial Statements.

The Company prices its software products in three primary components: (i)
license fees for PROFILE software products and from the licensing and delivery
of software of third party vendors; (ii) fees for a full range of services which
complement its software products, including product enhancement fees and
implementation, consulting, conversion, training and installation services; and
(iii) support and maintenance revenue. License, product enhancement,
implementation, consulting, conversion, training and installation fees are paid
in stages upon the completion by the Company of certain defined deliverables.
The client implementation projects generally take from ten to 15 months to
complete. The Company recognizes revenue from these fees using the
percentage-of-completion contract accounting method and recognizes revenue from
maintenance contracts ratably over the periods covered. For the three year
period ended December 31, 1995, license fees accounted for 34% of total
revenues. If the Company's strategies related to the Direct Banking Market are
successful, it is anticipated that the license fee component of total revenue
will increase.

The Company's backlog at September 30, 1996 amounted to $19.4 million. The
components of the backlog were $8.2 million for software license, product
enhancement and implementation and consulting revenues and $11.2 million for
maintenance and support. The Company anticipates recognizing approximately $3.7
million of this backlog in the fourth quarter of 1996 and $10.0 million in the
year 1997. At September 30, 1995, the Company's backlog amounted to $21.2
million, consisting of $8.9 million for software license, product enhancement
and implementation and consulting revenues and $12.3 million for maintenance and
support.

27
<PAGE>

Historically, the Company's revenues were dependent upon opportunities developed
by its first hardware manufacturing partner, Digital, and by the Company 's
direct marketing efforts. Since the beginning of 1995, the Company has
established marketing agreements with IBM, Hewlett-Packard, Oracle, and most
recently, Price Waterhouse . Although substantially all of the Company's revenue
to date has been generated in conjunction with systems running on Digital
platforms, the Company is currently in several bids with Hewlett-Packard and
anticipates identifying opportunities with all of its partners going forward. In
addition, the Company has been investing additional resources to enhance its own
direct marketing efforts.

The Company has historically experienced a certain degree of variability in its
quarterly revenue and earnings patterns. This variability is typically driven by
significant events which directly impact the recognition of project related
revenues. Examples of such events include the timing of new business contract
closings and the initiation of license and service fee revenue recognition (see
"Risk Factors--Concentration and Mix of Revenues"), "one-time" payments from
existing clients for license expansion rights (required to process a greater
number of customer accounts or expand the number of permitted users), and
completion of a significant implementation project roll out and the related
revenue recognition. Fluctuations in the timing and amounts of additional sales
and marketing and general and administrative expenses may also cause
profitability to fluctuate somewhat from one quarter to another.

The Company made a strategic decision in early 1996 to increase its investment
in technology and product development, in particular as it relates to
PROFILE/Anyware, as well as certain other projects such as the development of
its graphical user interface (GUI) client and the completion of the adaptation,
or "porting," of the Company's software to operate on different computer
systems. In addition, the Company decided to increase its investment in sales
and marketing activities, partially due to the implementation of the
PROFILE/Anyware strategy, but also as part of a focused effort to increase its
direct sales efforts in both the Emerging Banking Market and Direct Banking
Market. As indicated below, expenses in these categories increased in the nine
month period ended September 30, 1996 when compared to the similar period in
1995. Management anticipates that net income in the fourth quarter of 1996 will
be less than the comparable quarter in 1995 due to the following reasons: (i)
the increased expenses, described above, which the Company believes will enhance
its future growth potential; (ii) the timing of the start of new contracts
currently being pursued; and (iii) the fourth quarter of 1995 included one-time
contract settlement totaling approximately $625,000.

28
<PAGE>

Results of Operations

The following table sets forth for the periods indicated selected statements of
operations data:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Nine months ended
Year Ended December 31, September 30,
Dollars in thousands 1993 1994 1995 1995 1996
------------- ------------- ------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues
Software license fees.............................. $ 2,184 $ 6,111 $ 6,532 $ 3,985 $ 5,623
Product enhancement fees........................... 2,045 1,564 1,797 1,164 709
Implementation and consulting services............. 3,729 4,347 4,496 3,372 3,294
Software maintenance fees.......................... 3,359 3,494 4,017 3,081 3,170
--------- --------- ------ ------- -------
Total revenues.................................. $11,317 $15,516 $16,842 $11,602 $12,796
======= ======= ======= ======== =======
Percentage Relationship to Total Revenues
Revenues
Software license fees.............................. 19.3% 39.4% 38.8% 34.3% 43.9%
Product enhancement fees........................... 18.1 10.1 10.7 10.0 5.6
Implementation and consulting services............. 32.9 28.0 26.7 29.1 25.7
Software maintenance fees ......................... 29.7 22.5 23.8 26.6 24.8
----- ----- ----- ----- -----
Total revenues.................................. 100.0 100.0 100.0 100.0 100.0

Operating expenses
Product development............................... 26.4 24.5 19.6 22.1 21.5
Product support................................... 22.2 14.9 14.9 17.3 16.7
Implementation and consulting..................... 21.5 17.3 18.9 21.0 16.4
Sales and marketing............................... 8.8 8.3 12.4 13.1 17.1
Royalties and sublicense fees..................... 2.9 9.5 7.9 7.5 13.5
General and administrative........................ 13.4 12.1 10.8 12.5 8.1
----- ----- ----- ----- -----
Total operating expenses........................ 95.2 86.6 84.5 93.5 93.3
----- ----- ----- ----- -----
Income from operations............................... 4.8 13.4 15.5 6.5 6.7
Interest income (expense), net....................... (.2) -- .6 .4 1.6
----- ----- ----- ----- -----
Income before income taxes........................... 4.6 13.4 16.1 6.9 8.3
Income tax provision (benefit)....................... .5 (6.2) 6.7 2.8 3.0
----- ----- ----- ----- -----
Net income........................................... 4.1% 19.6% 9.4% 4.1% 5.3%
====== ====== ===== ====== =====
</TABLE>

29
<PAGE>

Nine months ended September 30, 1996 compared to nine months ended September 30,
1995

Revenues. Revenues increased $1.2 million, or 10.3%, in the nine month period
ended September 30, 1996 primarily due to an increase in software license fees
of $1.6 million. The most significant contributors to this increase were two
major implementation projects underway in the Polish marketplace, along with a
license fee expansion earned from one of the Company's key European customers.
Partially offsetting this increase was a $455,000 decline in product enhancement
fees, due primarily to a higher level of funded technology development in 1995.
Implementation and consulting services fees and software maintenance fees were
relatively stable during the two nine month periods, despite the inclusion in
the 1995 period of a one-time settlement payment resulting from the termination
of a client software maintenance contract.

Product development. Product enhancement fee revenue represents client or
partner funding of a certain portion of software development costs. Most of the
Company's product development is internally funded. The Company, however,
periodically is able to obtain partial funding for certain development from its
partners or clients. Such fees are included in revenues, entitled product
enhancement fees.

Product development expenses increased $183,000 or 7.1%, in the nine month
period ended September 30, 1996, due to the strategic decision to increase
investment in development for various technology projects, including , the
porting of its software to additional platforms and enhancements to
PROFILE/Anyware. Additionally, capitalized software development costs increased
by $275,000 in the 1996 nine month period, due primarily to capitalization of
costs related to the GUI client project. As a result of the higher 1996 year-to-
date revenues, the expense relationship to revenues declined slightly when
compared to the corresponding 1995 period.

Product Support. Product support expenses increased by $141,000 or 7.0%, in the
nine months ended September 30, 1996, primarily due to incremental costs related
to the Company's establishment of European support offices.

Implementation and consulting. Implementation and consulting expenses declined
$338,000 or 13.9%, in the nine months ended September 30, 1996, in conjunction
with a $78,000 decline in related revenues. The percent relationship to related
revenues declined in 1996 to 63.7% from 72.2% in 1995 due to a lower utilization
of more expensive third party consultants to deliver a portion of the services
in 1996. The percent relationship to total revenues declined to 16.4% from 21.0%
in the 1995 period due to the lower expenses and the increased software license
fees as discussed above.

Sales and marketing. Sales and marketing expenses increased $675,000, or 44.5%
in the 1996 period, due to the Company's continuing increased investment in this
area during 1996. The Company has historically relied primarily on Digital to
generate its client prospects. Although the Company will continue to rely on
Digital, as well as its new partners, the Company believes it is important for
it to increase its direct sales efforts. Additionally, sales and marketing
expenses increased substantially due to the promotional and advertising campaign
related to PROFILE/Anyware. As a result, sales and marketing expenses as a
percent of revenues increased to 17.1% from 13.1% in the 1995 period.

Royalties and sublicense fees. The Company is obligated to pay royalties to
Digital and to certain clients based on the collection of certain license fees.
These obligations have varying expiration terms. The Company also is obligated
to pay sublicense and maintenance fees to certain third party licensors,
primarily related to its PROFILE/ITS product and also for the M programming
language and data base. These amounts will vary depending on the applicable
revenue components subject to such fees. For the nine months ended September 30,
1996, this expense category increased $847,000, primarily due to an increase of
$468,000 in third party license fees due to higher third party license
revenue.

30
<PAGE>

General and administrative. These expenses declined $413,000, or 28.4%, due
primarily to the absence of costs associated with two executives, the former
Co-President and former Managing Director of Europe, both of whom resigned in
late 1995. The Company did not replace the Co-President, but did replace the
Managing Director of Europe in May, 1996. Additionally, one senior executive
was transferred into the Sales and Marketing area effective January, 1996.

Interest income (expense) net. Interest income, net, increased $162,000 due to
income earned on higher invested cash balances.

1995 Compared to 1994

Revenues. The Company's revenues increased 8.5% to $16.8 million in 1995, as
each revenue category improved over the prior year. Software license fees
increased 6.9% due primarily to a one-time payment of approximately $625,000
from a customer in conjunction with a contract termination settlement due to a
decision by this customer's management to restructure its business by
terminating its retail banking business. Product enhancement fees increased
14.9% due primarily to increased product enhancement work generated from the
Company's first client in Poland. Maintenance fees increased $523,000, or 15.0%,
due to the revenues generated from the increasing client base.

Product development. These costs in 1995 declined $505,000, or 13.3%, when
compared to 1994, primarily due to a reduced utilization of higher priced third
party consultants.

Product support. These costs increased $200,000, or 8.6%, in 1995, when compared
to 1994, as the Company increased its investment in this area to support a
larger customer base.

Implementation and consulting. Implementation and consulting costs increased
$498,000 or 18.6% in 1995, primarily due to a higher utilization of more
expensive third party consultants and additional staffing required to support
the higher level of revenue. The percentage relationship to the related revenues
increased in 1995 to 70.6% when compared to 61.6% in 1994 due primarily to the
utilization of higher price consultants.

Sales and marketing. Sales and marketing costs increased 62.2%, or $798,000, as
the Company increased its direct coverage in this area. This strategy is further
evidenced by the increase in sales and marketing expense from 8.3% of revenues
in 1994 to 12.4% in 1995.

Royalties and sublicense fees. During 1995, these fees declined $146,000, or
9.9%, due to lower third party sublicense fees. Royalty expense approximated
$760,000 for both 1994 and 1995. The decline in the percent relationships to
revenues from 9.5% in 1994 to 7.9% in 1995 was due to an increase in revenues in
1995 not subject to royalties.

General and administrative. These expenses declined 3.2% in 1995 when compared
to 1994, partially due to more direct involvement in sales and marketing
activities of personnel normally classified in this expense category and the
absence of year end bonuses in 1995. Similarly, general and administrative
expenses, as a percentage of sales, declined from 12.1% to 10.8% in 1995.

Interest income (expense), net. Interest income (expense), net increased $87,000
in 1995, due primarily to interest earned on higher average invested cash
balances resulting from increasing cash flows from operations over the past two
years.

Income tax provision (benefit). Taxes in 1995 were 41.4% of income before income
taxes, when compared to a net recovery recognized in 1994. At December 31, 1994,
it was determined that the Company's financial performance and contract backlog
had improved to such a degree that it was more likely than not that the
Company's previously recognized net operating losses and credits would be
available to offset future income. Therefore, the net recovery

31
<PAGE>

of $958,000 was recognized in 1994 as a result of the elimination of the net
operating loss valuation reserves previously established.

1994 Compared to 1993

Revenues. The Company's revenues increased 37.1% to $15.5 million in 1994 from
$11.3 million in 1993. This increase was due primarily to increased license
fees, as two large European banks chose PROFILE. Implementation and consulting
revenue increased $618,000, or 16.6%, due to services delivered in conjunction
with the previously mentioned new European clients. Partially offsetting these
increases was a $481,000, or 23.5%, decline in product enhancement revenue, due
to extensive 1993 enhancement fees for the Canadian marketplace coupled with
significant post-conversion development provided to the Company's first Central
European client throughout most of 1993.

Product development. Product development costs increased $814,000, or 27.2%, in
1994 when compared to 1993 due to increased staffing related to the
establishment of the Company's Product Management Group and also increased
consultant utilization related to the Company's new treasury product
(PROFILE/ITS) offering. Even though these expenses increased substantially on an
actual dollar basis, the expense relationship to revenues declined from 26.4% to
24.5% primarily due to the 37.1% increase in revenues in 1994.

Product support. Product support expenses declined $194,000, or 7.7%, in 1994
when compared to 1993 primarily due to the phasing out of two older product
lines which had been acquired in 1989.

Implementation and consulting. The percentage relationship to the related
revenues declined from 65.3% in 1993 to 61.6% in 1994, even though overall
expenses increased $242,000, or 9.9%. This improved percentage relationship was
primarily attributable to more profitable implementation projects in progress in
1994 versus 1993. These increased expenses were primarily attributed to a higher
utilization of more expensive third party contractors in 1994. The decline in
the percentage relationship to total revenues was primarily attributable to the
$3.9 million increase in the software license fee revenue.

Sales and marketing. Sales and marketing expenses increased $289,000, or 29.1%,
in 1994, as the Company began to implement its strategy of increasing its direct
marketing costs. In addition, commission expenses increased $60,000 due to the
higher revenue levels in 1994.

Royalty and sublicense fees. These fees increased $1.1 million in 1994, due
primarily to the significant increase in royalty fees incurred related to the
increase in related license fee revenue earned in 1994. Most of the license fee
revenue earned in 1993 was not subject to royalties.

General and administrative. These expenses increased $374,000, or 24.8%, in
1994, primarily due to the addition of two individuals in the executive area to
support the anticipated revenue growth in 1994 as well as the activities related
to this improvement. The percent relationship to revenue, however, declined
slightly due to the increase in revenues far exceeding the level of expense
increase.

Quarterly Financial Results

Set forth below are selected unaudited statements of operations data for the
last eleven fiscal quarters of the Company. In management's opinion, the results
below have been prepared on the same basis as the audited financial statements
contained herein and include all material adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the information for
the periods when read in conjunction with the Consolidated Financial Statements
and notes thereto contained elsewhere in this Prospectus.

32
<PAGE>

Unaudited Quarterly Statements of Operations
----------------------------------------------------------------------------------------------
1994 Quarter Ended 1995 Quarter Ended
In thousands, except per share Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
data ------ ------- ------- ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 3,051 $ 3,408 $ 4,311 $ 4,746 $ 3,829 $ 3,435 $ 4,338 $5,240
Income before income taxes 196 352 526 1,006 321 24 460 1,904
Net income 174 317 449 2,098 192 $ 15 272 1,108
Net income per share $ 0.02 $ 0.03 $ 0.05 $ 0.22 $ 0.02 -- $ 0.03 $ 0.12
Weighted average number of
shares outstanding 9,067 9,374 9,367 9,393 9,517 9,639 9,636 9,597

<CAPTION>
1996 Quarter Ended
In thousands, except per share Mar 31 June 30 Sept 30
data -------- -------- -------
<S> <C> <C> <C>
Revenues $ 3,477 $ 4,773 $ 4,546
Income before income taxes 31 608 428
Net income $ 19 358 307
Net income per share -- $ 0.04 $ 0.03
Weighted average number of
shares outstanding 9,273 9,178 9,198
</TABLE>

The Company believes that its business is generally not seasonal; however, the
Company has historically experienced a certain degree of variability in its
quarterly revenue and earnings patterns. This variability is typically driven by
significant events which directly impact the recognition of project related
revenues. Examples of such events include the timing of new business contract
closings and the initiation of license and service fee revenue recognition (see
"Risk Factors--Concentration and Mix of Revenues"), "one-time" payments from
existing clients relative to license expansion rights (required to process a
greater number of customer accounts or expand the number of permitted users),
and completion of a significant implementation project roll out and the related
revenue recognition. Certain of these same factors may also cause fluctuations
in terms of personnel utilization rates as well, thereby impacting the timing
and amount of certain service fee revenues. Fluctuations in the timing and
amounts of additional sales and marketing and general and administrative
expenses may also cause profitability to fluctuate somewhat from one quarter to
another. Results of operations for any previous fiscal quarter are not
necessarily indicative of results for any future periods, and future quarterly
results could be adversely impacted by these, and other, factors. In addition,
net income per share calculations for each of the Company's quarters are based
on the weighted average number of shares outstanding in each quarter.
Accordingly, the sum of the net income per share for each of the quarters in a
fiscal year may not equal the actual year-to-date net income per share.

Liquidity and Capital Resources

Cash and cash equivalents were $2.7 million at December 31, 1994, $5.5 million
at December 31, 1995 and $6.2 million at September 30, 1996. Cash flow from
operations was $2.9 million in 1994, $3.2 million in 1995, and $1.2 million in
the nine-month period ended September 30, 1996. The increase in 1994 and 1995
was attributable to profitable operations and the timing of cash collections.
The reduced rate of cash flow in the 1996 period was primarily caused by the
lower net income levels as well as variability in the timing of major contract
milestone payments.

The Company's business is not capital intensive and capital asset expenditures
in any given year normally are not significant. Capital expenditures amounted to
$376,000 in 1994, $458,000 in 1995 and $437,000 for the nine months ended
September 30, 1996. These expenditures consisted primarily of personal computers
and upgrades to the Company's network systems. The Company has financed these
additions through a combination of funds provided by a $500,000 fixed asset line
of credit ($130,000 available at September 30, 1996), a $148,000 lease purchase
and internally generated funds.

In March 1995, the Company offered its employees an opportunity to exercise
vested options granted prior to December 31, 1993 by remitting a minimum of 5%
of the exercise price in cash, with the remaining obligation due pursuant to a
ten-year note. Such notes require annual interest payments calculated at 7.75%
plus a 10% annual principal payment. In March 1996, the Company deferred the
first principal payment on the notes, but did collect interest due. The
remaining note obligations, totaling $652,000 at September 30, 1996, are
reflected as a reduction in equity. The Company has collected $234,000 in
principal payments through September 30, 1996

33
<PAGE>

pursuant to this program. The notes have a provision requiring a balloon payment
to cover any amounts outstanding two years after the consummation of the
Company's initial public offering.

The Company may expand its capabilities through the acquisition of other
businesses that are complementary to the Company's business. A portion of the
net proceeds from the Offering may be used in the future for such acquisitions,
although the Company is not currently engaged in active discussions with respect
to any acquisition. See "Use of Proceeds".

The Company currently anticipates that the net proceeds received by the Company
from the Offering, together with cash generated from operations and existing
cash balances will be sufficient to satisfy its operating cash needs for the
foreseeable future and at a minimum through 1997. Should the Company's business
expand more rapidly than expected, the Company believes that additional bank
credit would be available to fund such operating and capital requirements. In
addition, the Company could consider seeking additional public or private debt
or equity financing to fund future growth opportunities.

Recently Issued Accounting Standards

Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), was issued in October 1995. SFAS 123 gives companies
the option to adopt the fair value method for expense recognition of employee
stock options and stock based awards or to continue to account for such items
using the intrinsic value method as outlined under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), with pro
forma disclosures of net income and net income per share as if the fair value
method had been applied. The Company has adopted SFAS 123 effective January 1,
1996 by electing to continue to apply APB 25 for future stock options and stock
based awards, and, accordingly, does not anticipate that SFAS 123 will have a
material impact on its results of operations or financial position. In
accordance with the disclosure provisions of SFAS 123, the Company will
initially present the disclosure required by SFAS 123 in its financial
statements as of and for the periods ending December 31, 1996.

34
<PAGE>

Business

Sanchez Computer Associates, Inc. ("Sanchez" or the "Company") designs,
develops, markets, implements and supports comprehensive banking software,
called PROFILE(R) ("PROFILE"), for financial services organizations worldwide.
Sanchez's highly flexible PROFILE family of products is comprised of three
integrated modules which operate on open, client-server platforms. The primary
module, called PROFILE/Anyware, is a multi-currency bank production system which
supports deposit, loan, customer, transaction processing and bank management
requirements through multiple distribution channels, including the Internet. The
other modules are PROFILE/FMS, a multi-company, multi-currency, financial
management and accounting system, and PROFILE/ITS, a system that processes
treasury transactions including foreign exchange, money market, securities
trading (capital markets), futures, options and trade finance. The PROFILE
system is currently licensed to 23 clients in nine countries serving more than
400 financial institutions. Historically, the Company has focused its marketing
efforts in Central Europe and North America. Currently, the Company is targeting
two market segments, the Emerging Banking Market in which the Company seeks to
expand on its existing successes and increase its market share, and the Direct
Banking Market in which the Company is seeking to establish itself as a
significant participant.

The Company intends to expand its business into the Direct Banking Market. The
Company defines the Direct Banking Market as the on-line retail banking business
conducted via alternate distribution channels by large financial services
institutions located throughout the world. The Company believes that these
organizations recognize that the emergence of electronic commerce, together with
the availability and acceptance of computer technology, will ultimately cause a
dramatic change in the consumer banking practices of many of their customers.
The Company predicts that the growth of electronic commerce will result in a
large increase in the volume of financial transactions which occur on-line as
well as a greater demand for customized products and services. Because of these
factors, in early 1996, the Company determined that a significant opportunity
exists for it in the Direct Banking Market and it has subsequently committed
substantial human and financial resources to position itself in that market. The
Company believes that the capabilities already contained in the PROFILE product
line, along with specific enhancements that it has identified, will provide
financial services organizations with the technology to strategically respond to
this consumer banking evolution. As of the date of this Prospectus, however, the
Company has not recognized any revenues from the Direct Banking Market.

35
<PAGE>

The Company has recently engaged the electronic banking division of Price
Waterhouse LLP ("Price Waterhouse") to assist the Company in jointly defining
future enhancements to PROFILE/Anyware for the Direct Banking Market. In
connection with this engagement, Price Waterhouse and the Company are conducting
joint marketing activities, including Price Waterhouse's introduction of the
Company to prospective clients. In addition, the Company anticipates forming
alliances with other complimentary service organizations in the areas of home
banking interface, network security and other consumer-based financial
applications. The Company believes that these alliances, along with the
alliances mentioned in the previous paragraphs, will facilitate its entrance
into the Direct Banking Market.

Revenues and income from operations have grown consistently since 1993 and in
the nine months ended September 30, 1996. In particular, revenues increased by
10.3% to $12.8 million for the nine months ended September 30, 1996 from the
same prior year period and by 8.5% to $16.8 million from 1994 to 1995. The
Company's income from operations increased by 13.1% to $854,000 for the nine
months ended September 30, 1996 from the same prior year period and by 26.1% to
$2.6 million from 1994 to 1995.

Industry Overview

Emerging Banking Markets

Banks which comprise the Emerging Banking Market are generally located within
countries or regions which have experienced dramatic political, social and/or
economic changes during the past decade such as Central Europe, Russia, the
Asian-Pacific Rim, Mexico and Latin America. Many of these nations have also
aggressively embraced the privatization of industry, resulting in greater wealth
held by private citizens. As a result of such developments, financial services
organizations within the Emerging Banking Market have experienced large
increases in the demand for retail banking products. Financial services
organizations in the Emerging Banking Market, however, face significant
infrastructure impediments to meeting this increased demand. While these
organizations have often established extensive branch networks, these branches
normally operate as autonomous business units. Typically, selected customer and
transaction data are exchanged with the main office infrequently. The lack of
enterprise level integration has constrained the development and deployment of
sophisticated financial products and services, disabled the efficient
utilization of resources, and prevented bank management from acquiring
management information on a timely basis.

For these reasons, financial services organizations in the Emerging Banking
Market are faced with the necessity of modernizing their entire information and
processing infrastructure. In response, they have demonstrated a willingness to
invest in a centralized enterprise-server based solution. One of the principal
advantages of the technology contained in the Company's PROFILE/Anyware product
is that it provides on-line access to up-to-date customer and balance sheet data
throughout the organization. The Company also believes that an on-line
enterprise-wide database is a requirement for electronic delivery channels such
as Automated Teller Machine (ATM) networks, Point of Sale (POS) networks, and
home banking, which are rapidly being introduced into these markets.

The global market for international retail production banking solutions, which
encompasses the Emerging Banking Market, is so diverse and fragmented that
reliable market figures are not available. However, The Tower Group, a leading
financial industry research organization, estimates that, at any time, 950 bank
production system selections are being contemplated within the international
retail banking systems market, and it believes that number will increase about
6% per year as more banks in developing countries seek to modernize.

Direct Banking Market

The Company believes that the competitive challenges presented by the emergence
of electronic commerce and the consumer demand for greater product and service
flexibility threaten to fundamentally alter traditional retail banking practices
in North America. The Company believes that this process will be further spurred
as the speed and commercial use of the Internet increases with the development
and deployment of higher bandwidth communication (the ability to transmit more
information in a shorter time). Furthermore, expanded Internet access through a
myriad of affordable devices (such as personal computers, Internet access
terminals, televisions

36
<PAGE>

personal digital assistants) will also contribute to greater use of the
Internet. As a result, consumers will be more easily and effectively able to
search for the most attractive financial products and services thereby reducing
the relationship value provided by banks and further increasing the commodity
nature of their products. The Company believes those consumers who are likely to
utilize electronic commerce in this fashion comprise a significant percentage of
a typical organization's highly profitable customers.

In response to these market challenges, financial services organizations within
the Direct Banking Market have begun to develop direct banking services by
offering a subset of their existing products and services through electronic
channels. Services currently provided include the ability to transfer funds, pay
bills, obtain account balances and track checks and deposits via personal
computer. The ability of these organizations to offer more innovative products
and services, however, is considerably constrained by their current information
technology systems. These systems, called production or transaction processing
systems, typically consist of large mainframe computers that are based on
software technology initially developed in the 1970s. Organizations in the
Direct Banking Market are dependent upon this technology and have made enormous
investments in it and the infrastructure required to support it. For these
reasons, they have historically resisted the wholesale replacements of these
legacy systems. Rather, they have chosen to surround these systems on the front
end with modern user interfaces and on the back end with data warehouse and
executive information applications.

The Company, however, believes that these efforts will not provide these
organizations with the necessary infrastructure to create the innovative
products and services required to preserve and expand market share. It also
believes that the current delivery cost structure of these organizations will
impair their ability to competitively price products. Due to the unique product
tailoring capability and delivery channel independence of the PROFILE/Anyware
products, the Company believes that it is positioned to supply the next
generation of infrastructure to these organizations.

Within the global Direct Banking Market, the Company has initially targeted
financial services institutions in the U.S. and Canada with assets of $4 billion
or more. This targeted group includes the top 100 banks in the U.S. and
approximately the top ten banks in Canada. After it achieves initial success
within the targeted groups, the Company intends to broaden its market scope both
internationally and to smaller institutions.

The Sanchez Strategy

The Company believes its most promising opportunities for growth lie in
increasing market share in the Emerging Banking Market, broadening its scope of
services in the Emerging Banking Market, and positioning itself as one of the
first production system entries in the new Direct Banking Market. The Company
plans to pursue these objectives through the following strategic activities.

Increase Market Share in the Emerging Banking Market

The Company intends to expand its presence in the Emerging Banking Market,
principally by increasing its marketing activities in Central Europe and the
Asian-Pacific Rim. The Company believes that the marketing efforts of the
Company's strategic partners, such as Hewlett-Packard, IBM and Digital, will
result in the generation of additional sales leads for the Company in this
market. In addition, the Company plans to increase its own direct marketing
efforts and has recently opened offices in Prague, Warsaw and Jakarta.

Broaden the Scope of Services provided in the Emerging Banking Market

The Company believes that the reception its products and services have received
in the Emerging Banking Market, particularly in Central Europe, provides the
opportunity to expand the scope of services which the Company provides to
organizations in this market. Accordingly, the Company intends to market
additional services and products to these organizations, including more
expansive consulting services, credit bureau services, technology infrastructure
planning, and systems integration.

Become a Significant Participant in the Direct Banking Market

37
<PAGE>

The Company intends to become a significant participant in the Direct Banking
Market by marketing its PROFILE family of products as a financial services
organization's most appropriate response to the evolution in consumer banking
spurred by the emergence of electronic commerce. The Company is positioning its
PROFILE/Anyware product as part of a separate infrastructure focused
specifically on direct banking channels, as opposed to as a replacement for the
existing production systems. The Company is establishing strategic relationships
with partners whom it believes will together comprise a comprehensive direct
bank solution. To this end, the Company has established a relationship with the
direct banking consulting unit of Price Waterhouse to jointly define a direct
banking product and to engage in joint marketing activities. In addition, the
Company anticipates forming alliances with other complimentary service
organizations in the areas of home banking interface, network security and other
consumer-based financial applications.

The Sanchez Solution

Sanchez's PROFILE product line simultaneously addresses the needs of financial
services organizations in both the Emerging Banking Market and the Direct
Banking Market. Sanchez believes that there is a trend toward globalization of
banking practices which will create a convergence of requirements between the
Emerging Banking Market and the Direct Banking Market. The broad range of U.S.
and western banking functionality contained in the system enables financial
services providers in the Emerging Banking Market to offer financial products
and services previously unavailable to their customers. The multiple channel
delivery architecture also provides these institutions with the infrastructure
to support the rapidly evolving service expectations of their customer base.
Using the same software application and technology, Sanchez will enable
organizations within the Direct Banking Market to effectively respond to changes
in consumer banking preferences brought on by the rapid increase in electronic
commerce. The underlying capability of the PROFILE product line to tailor
products and services for individual bank customers and to deliver them over a
wide variety of consumer interfaces can create the differentiation necessary for
banks to compete in a modern marketplace.

A summary of the principal benefits of the PROFILE solution include:

Functional Benefits

o Enables financial services organizations to dynamically create new
products and services and to tailor them for individual customers
("mass customization")

o Allows updates to the integrated on-line database to occur directly,
providing real-time reporting, processing, and analytic capabilities

o Supports a variety of national and international wholesale,
commercial and retail payment systems, offering multiple payment and
clearing options

o Features integrated customer, deposit, loan and general ledger
modules which share a common database and software components, thus
eliminating traditional functional boundaries

o Supports a combined set of North American and international product,
service, operational and transactional requirements providing a
"global" solution

o Contains integrated data management and decision support tools,
supporting analytic, regulatory and production analysis and reporting
requirements

Operational Benefits

o Runs on multiple operating systems and multiple platforms (32 and 64
bit)

o Offers a solution to both start-ups and multi-million account
institutions due to high degree of scalability

o Enables database archiving which provides permanent, low-cost,
transaction storage and on-line retrieval

o Runs over multiple protocols (TCP/IP, DecNet) on local area and wide
area networks

Technical Benefits

o Contains a messaging architecture which provides for the rapid
integration of existing and new delivery channels

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o Features standard industry application interfaces (APIs) which
support client/server model and cross application integration

o Features two-tier and three-tier client/server architecture which
optimizes performance and workload distribution

o Contains a data dictionary and other meta-data elements, including
forms, reports, documents and interface definitions which are managed
through a tool set that the Company has developed called DATA-QWIK,
which enables the Company and its customers to rapidly modify and
extend the base application

o Features the entity/relationship data model which can be projected
over relational, key indexed, and object database systems, insulating
the application from the underlying database management system

The Sanchez Products

The PROFILE line of products is a comprehensive software solution that addresses
the major operational requirements of commercial, retail, international and
wholesale banking institutions. The PROFILE product line consists of the
following three modules: (i) the PROFILE/Anyware universal banking system; (ii)
the PROFILE/FMS Financial Management System; and (iii) the PROFILE/ITS
Integrated Treasury System. While each of these applications can operate
independently, they can also be integrated into a cohesive and powerful
enterprise-wide banking solution. In general, while the most important features
of PROFILE have been internally developed, the Company currently also relies on
software provided by certain third parties for development languages, database
environments and certain application modules for PROFILE/ITS. The Company
believes, however, that if such software were no longer available to the
Company, it could obtain substitute software from other sources.

PROFILE/Anyware

PROFILE/Anyware is a client/server application comprised of a wide-area
enterprise server, a local area, branch/department server, and a graphical
client. An integrated set of application codes provide a full range of customer,
deposit, lending, and branch functionality, which includes management reports,
decision support functions, and data analysis functions. PROFILE/Anyware
provides both on-line and batch interfaces to support a bank's transaction
processing and inter/intra clearing requirements. A detailed description of
certain other key features of PROFILE/Anyware follows:

Electronic Manufacturing. The architecture of PROFILE/Anyware was developed
utilizing a product manufacturing paradigm. This is in contrast to most banking
software in use today which was designed to automate accounting and transaction
processing activities. The Company believes that this is a fundamental
distinction. In a manufacturing environment, products are composed of
subassemblies and components. PROFILE/Anyware contains thousands of individual
software components that can be hierarchically assembled into subassemblies,
products, and product packages. The components are shared across traditional
business lines and product boundaries within an institution.

The electronic manufacturing paradigm is further enhanced by the unique ability
of PROFILE/Anyware to assemble unique products for market segments as small as
an individual customer, a concept referred to as "mass customization." Within
this "electronic factory," a financial services organization can provide the
services of a value added intermediary and package products and services that
support the specific requirements of the individual. In a future release of
PROFILE/Anyware, the Company plans to offer software that will allow consumers
themselves to access these capabilities through a self-directed origination
component that will be integrated into their home banking application.

Customer Oriented. PROFILE/Anyware contains all customer records, loan and
deposit account records and transactions in an integrated database. Different
customer types can be defined by the institution, and specific data can be
captured and maintained for each customer type. Customer demographics, interest
yields, profitability and transaction activity are available real-time for
inquiry or analysis. These data can be used to provide service-use incentives,
bundled product packages and integrated reporting. The system provides the
ability to "drill down" from summary data to individual account activity, to the
source document images that support customer transactions. Customers can be
linked to each other to create affinity groups or other meaningful market
segments.

The data dictionary, along with other meta-data definitions such as input and
display forms, document layouts and reports can be modified or extended through
a tool set provided by the Company called DATA-QWIK to support a

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<PAGE>

bank's unique customer requirements. This feature supports the integration of
data from applications and databases operated outside of PROFILE/Anyware with
the customer database.

Open Architecture, Channel Independent, and Scalable. PROFILE/Anyware is a
client-server based application that supports a variety of industry standard
application interfaces (APIs) and message protocols. The supported APIs
currently include DLL, DDE, HTML and SQL (with ODBC compliance in development
and expected to be available in the first quarter of 1997). The system can
operate as either a database server (two-tier) or application server
(three-tier), or both, depending on the client application requirements. The
PROFILE graphical client utilizes both models to operate most efficiently and
reliably over a wide area network. The standard APIs allow PROFILE/Anyware to
function as a server for best-in-class client and desktop applications.

PROFILE/Anyware is a message based application which allows it to be interfaced
to a wide variety of interface devices including traditional branches, ATM
networks, POS networks, kiosk devices, home banking applications on dedicated
networks and the Internet, and mobile computing devices.

PROFILE/Anyware currently runs on IBM's AIX platform, Hewlett-Packard's HP-UX
platform and Digital's UNIX/RISC platform, as well as Digital Open VMS. The
Company believes that these platforms provide the best price/performance ratios
available for commercial applications and are more scalable than current Intel
based platforms. PROFILE/Anyware has been installed and operated in institutions
ranging in size from startup banks with no initial customers to universal
regional banks with hundreds of branches and over 1.5 million accounts. It has
also been installed in service bureaus operating centrally for many
institutions. The Company believes that the ability to process very large
databases (25 million accounts and ten million transactions per day), will
become a requirement for both of its target markets and is currently developing
technology that it believes can support these volume levels.

On-line, Real-time, Continuous Availability. PROFILE/Anyware accepts on-line and
batch transactions from a variety of transaction sources and processes them in
real-time, ensuring the most up-to-the minute database state. Inquiries from any
client device can access the system on-line and retrieve the current status of
the database. Currently, the system accepts financial transactions 24 hours a
day. The Company intends to enhance the software in a future release to accept
non-financial activity, such as account origination and maintenance, 24 hours a
day as well. The Company believes that this real-time capability will become a
requirement for direct banking applications.

International Functionality. PROFILE/Anyware is currently operating or being
installed in nine countries and in six languages. It is a full multi-currency
system that denominates products and accounts in their base currency. It
supports and balances multiple cash currencies and provides exchange and
revaluation functions. The system contains the product components that support
the combined requirements of North American and international financial
institutions. The system also supports both the U.S. style payment system (ACH
and checks) and the European style electronic payment system
(payment/collection/standing orders, GIRO and SWIFT). The Company believes that
the requirements of its target markets will ultimately converge and that the
qualities of North American retail products and European payment systems will be
integrated into the other market.

PROFILE/FMS

PROFILE/FMS is an on-line, real-time, multi-company, multi-currency, cost center
based accounting system. It contains a very flexible financial reporting tool
that allows banks to develop their own portfolio of sophisticated bank
management and executive reports. This application allows users to record,
consolidate, report and plan all financial activity within an institution.
PROFILE/FMS modules include general ledger, accounts payable, fixed assets,
prepaid accrued and deferred item processing, financial and statistical
reporting, budgeting and bank reconciliation. It is tightly integrated with
PROFILE/Anyware and shares a common database and application components.

PROFILE/ITS

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PROFILE/ITS provides the ability to process treasury transactions including
foreign exchange, money market, securities trading (capital markets), futures,
options and trade finance. PROFILE/ITS assists financial institutions with risk
measurement analysis and control. PROFILE/ITS is integrated with other PROFILE
modules and enables institutions to access various functions, including
sophisticated monitoring of liquidity and funding needs, exchange risk, interest
sensitivity exposure and on-line portfolio pricing capabilities. These
capabilities allow an institution to monitor counterparty and country risk
limits, exposure to industry groups and nostro cash flow on-line along with the
institution's liquidity, profitability, asset and liability durations, gaps and
interest rate risk, all on an institution-wide basis.

The Sanchez Services

While PROFILE software license fees represent a material portion of the
Company's revenues, the Company also derives significant revenues from services.
The Company's primary service offerings include the following:

Project Services

Project Services are services provided on a one-time basis either during the
initial implementation or as contracted for by clients after conversion to
PROFILE. Implementation service revenues can range from $500,000 to over $4
million for an individual project, and are typically delivered over a period of
ten to 15 months. Other project services typically delivered during the
implementation period include training, conversion, localization and software
customization. These project services are staffed by professionals trained in
the financial services industry who primarily work at the clients' locations and
follow a published methodology employing proven project management and
measurement techniques.

Project services delivered after a client converts to PROFILE typically include
software customization, training or version upgrade consulting. The Company has
a specific group of employees who are focused on delivering these types of
services, although others from within the Company may also render such services.

While some project services are contracted for on a time and materials basis,
most projects are contracted on a fixed price, fixed scope basis. This approach
is more accepted by the market. Utilizing a well defined scope presents
opportunities for additional revenues resulting from change orders.

Maintenance and Support Services

Currently, the major portion of the Company's delivery of worldwide customer
service and support is handled by a group in its headquarters in Malvern. This
group is responsible for help desk, research and product quality assurance. A
response team made up of research, quality assurance and programming personnel
are assigned when maintenance issues are identified. This team works together to
ensure that the customer issue is understood and dispatched accordingly. All
issues are tracked and measured and daily and weekly reports are generated for
management review and action.

The Company believes that service response considerations play a major role in
an institution's selection of banking software products. To respond to this
need, the Company is continuing to enhance its ability to deliver localized
customer support and installation capability worldwide. Currently, the Company
provides direct customer service and application support from its office in
Lisbon, and is in the process of staffing its new offices in Prague and Warsaw
to provide similar services. Senior application support personnel from the
Malvern office are being temporarily relocated to Prague to assist the
transition to local support. Currently, the Jakarta office is used for sales
support and will house an application support capability as soon as new business
dictates. Additionally, plans are being drafted, pending an anticipated new
client contract closure in the fourth quarter of 1996, to create a local
application support presence in Kuala Lumpur by mid-1997.

Clients and Representative Client Engagements

The Company's 23 clients are located in nine countries and are providing
financial services to more than 400 financial institutions. All PROFILE users
are in the financial sector and reflect a broad range of financial

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institutions including retail banks, commercial banks, private banks, co-
operatives, credit unions, wholesale banks, specialty financial institutions,
international banks and service bureaus. PROFILE's range of capabilities allows
a financial institution in any niche to compete in other niches as the product
lines formerly differentiating financial institutions become blurred.

The following brief descriptions summarize a few of the major projects in which
the Company has played a significant role.

Cue Data West - Vancouver, Canada

In 1991, Cue Data West ("CDW"), a Vancouver, Canada based service bureau
servicing approximately 50 clients, was searching for a system to replace its
obsolete hardware and inflexible software. These systems were of an older
generation design and could not be easily upgraded to allow the credit unions to
compete effectively. CDW selected PROFILE in order to provide its clients with
an integrated processing and financial management system that also allowed them
to design, produce and deliver new products and reports much more quickly than
their previous system permitted. The Company's installation personnel provided
project management, environmental definition, application consulting and
technical assistance throughout the implementation of the client's first three
credit unions. Additionally, the Company made certain technical modifications to
meet client and market specific needs. During the installation of the first
three credit unions, the Company successfully transferred its implementation
methodology to CDW so that it could continue its conversions of the remaining
credit unions without the Company's ongoing assistance. Today, CDW's clients are
using the system to effectively compete against the country wide banking
institutions and niche players in their markets.

Investicni Postovni Bank - Czech Republic

The Company installed PROFILE at Investicni Postovni Bank ("IPB"), the third
largest bank in the Czech Republic, during 1992 and 1993. As a result, PROFILE
became the first on-line centralized banking system to be implemented in Central
Europe. PROFILE has provided IPB with an integrated and flexible system and a
competitive advantage which has facilitated the bank's growth. IPB had fewer
than 300,000 accounts when it converted to PROFILE in 1993. Today, IPB has over
one million accounts processed by PROFILE. Additionally, the bank has recently
acquired a bank with another three million accounts which it expects to convert
to PROFILE by the end of 1997.
First Citizens Bank - Trinidad, Tobago

In 1992, Workers Bank in Trinidad, Tobago was looking for a system which would
provide this small bank with the ability to compete effectively with its much
larger competitors. In PROFILE, the bank identified a system that provided it
the opportunity to view a relationship banking model of each customer, the
ability to react quickly to market change and the flexibility to customize
products down to the individual customer level. In 1994, the National Bank
merged this bank with two larger institutions, creating First Citizens National
Bank. Because of the flexibility of PROFILE, the newly-merged bank migrated all
its accounts to the PROFILE system. The Company assisted First Citizens National
Bank in this consolidation.

Rural Informatica - Lisbon, Portugal

The Company has been involved in a project with Rural Informatica ("RI"), in
Lisbon, Portugal since 1993 to install PROFILE to support the over 200
independent member financial institutions of this bank co-operative. RI's
headquarter operations were converted to PROFILE in 1994. The first member bank
was converted in 1995. The roll out to the other member banks commenced in 1996
and will continue through 1997. As each of these institutions, regardless of
their size, begin processing through RI's systems, they will be able to quickly
deliver customized products and services to their clients which will enable them
to compete effectively with the large metropolitan based national banking
conglomerate. In selecting PROFILE, RI focused on the system's flexibility and
its ability to combine information from the independent institutions so that
better reports and audit trails could be generated for the Central Bank in
Portugal.

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Bank Przemyslowo-Handlowy and Powszechny Bank Kredytowz-Poland

The Company is currently implementing PROFILE at Bank Przemyslowo-Handlowy, S.A.
("BPH") in Krakow, Poland and at Powszechny Bank Kredytowz, S.A. Warzawie
("PBK") in Warsaw, Poland, two of the nine largest banks in Poland. The BPH
contract was awarded to Digital and the Company in the third quarter of 1995
through the World Bank bidding process. BPH is the Company's first client in
Poland. PBK awarded the Company a contract in June 1996. Together these banks
acquired license rights to process over three million accounts. Both banks
selected PROFILE due to its flexibility, scalability, technical features and
direction, and on-line integrated processing capability.

Sales and Marketing

Enhanced Direct Sales and Marketing Activities

The Company has a direct sales force of six persons, consisting of three persons
located at the Company's offices in Malvern, Pennsylvania, two persons located
in Europe and one person located in Jakarta. The Company is actively recruiting
additional resources to increase its existing direct sales capacity, both
domestically and internationally.

The Company launched a comprehensive marketing campaign early in 1996 to develop
recognition in the Direct Banking Market for PROFILE/Anyware. The program
includes a combination of print advertising, public relations, partnering
programs, white papers, and an informative home page on the World Wide Web. The
trade media has responded with a substantial amount of coverage of the Company
and its products, including a number of lead articles. The Company's executives
also speak periodically at industry trade shows and universities both in the
U.S. and abroad. The Company intends to continue to expand its marketing efforts
as its initial investment has resulted in an increase in prospective customers.
Third-Party Relationships

Since 1987, the Company has maintained a strategic alliance relationship
with Digital and has marketed its products principally through leads generated
by the Digital sales force. In 1995, the Company entered into an alliance with
Hewlett-Packard and ported its software to that platform. In mid-1996, the
Company entered into similar activities with IBM. The PROFILE product is
currently available on all three platforms.

The Company is currently engaged in joint marketing and engineering activities
with its hardware alliance partners and has recently submitted joint proposals
with both Hewlett-Packard and Digital in the Emerging Banking Market. The
Company believes that the strategic alliance that it entered into with IBM in
1996 will significantly enhance its competitiveness in the Direct Banking Market
where IBM is the current dominant hardware vendor. The Company also believes
that the recent strategic alliances with both IBM and Hewlett-Packard will
increase its competitiveness in all markets and will result in greater lead
generation.

In 1995, the Company entered into an agreement with Oracle, the leading
relational database vendor in the world, to port the PROFILE products to the
Oracle database. The porting activities are currently underway and the two
companies are involved in joint marketing activities. The Company currently
offers its graphical branch and treasury products on the Oracle database and
plans to offer all of its PROFILE products on the Oracle database in 1997. In
the future, the Company plans to offer its PROFILE products on other commercial
relational database products as well.

The Company has recently entered into a strategic alliance with the electronic
banking division of Price Waterhouse. Pursuant to this alliance, Price
Waterhouse and the Company will jointly define future enhancements for
PROFILE/Anyware and will jointly market their respective products and services
to the Direct Banking Market. In addition, the Company anticipates forming
alliances with other complimentary service organizations in the areas of home
banking interface, network security and other consumer-based financial
applications. The Company anticipates that these alliances, along with the
alliances mentioned in the previous paragraphs, will facilitate its entrance
into the Direct Banking Market.

While the establishment of strategic alliances with third parties has been
important to the Company's past success and are a key to future prospects, the
Company does not believe that its written understandings with such third parties
are necessary for the delivery of its products and services.
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Pricing Strategy

The Company prices its software products in three primary components: (i)
one-time license fees for the software up to a usage limit (for example, number
of users or number of customer accounts), (ii) fees for a full range of services
which complement its software products, including product enhancement fees and
implementation, consulting, conversion, training and software customization
services and (iii) recurring support and software maintenance revenue. Customers
who exceed the usage limit through growth or acquisition pay additional license
fees. Software maintenance fees are paid in advance while all other fees and
services are paid in stages upon the completion by the Company of certain
defined deliverables.

In the Direct Banking Market, the Company intends to charge an ongoing monthly
fee which will cover licensing and support for PROFILE/Anyware based on use,
specifically the number of customer accounts processed, although the Company in
the future may employ other pricing models in response to market conditions.

Product Development

The Company believes that it must constantly evolve and enhance both the
functional scope and technical foundation of its products to remain competitive.
In order to accomplish this, the Company has historically incurred significant
expenses related to development activities and may increase this investment in
the future. Total development expenses for 1993, 1994 and 1995 were $3.0
million, $3.8 million and $3.3 million, respectively. In addition to its
internal investment, the Company has obtained funding from its customers and
partners for numerous projects, including the development of European payment
system and SWIFT enhancements, Treasury integration, UNIX ports, and product
internationalization. This revenue is reflected in product enhancement fees.
Normally, customer or partner funding is provided in exchange for a commitment
by the Company to provide product enhancements, to support and maintain the
software, or to design the software to the client's needs. In certain cases,
however, royalty agreements have been negotiated with its customers or partners
whereby the Company pays them royalties based on the revenues received by the
Company from the licensing of specific software products to end users. These
royalty agreements ordinarily expire after a period of years and the Company is
thereafter free to license the products to end users without having to pay any
additional royalties.

Product development follows a formal software development life cycle process.
The Company has developed and acquired products that assist it in defining,
planning, tracking, measuring and managing the development process. The Company
realizes that large software projects can incur substantial cost, schedule and
technical risk. However, to date the Company has not canceled any of its
development projects.

In order to efficiently focus on both functional and technical requirements, the
product development area is subdivided into two groups called the Product
Development Group and the Technology Development Group. The Product Development
Group is primarily responsible for defining plans for new product versions and
developing application software enhancements to the existing PROFILE/Anyware and
PROFILE/FMS modules. This group is also directly involved in sales and sales
support events such as customer demonstrations and request for proposal (RFP)
responses. The Company believes that interacting with customers and prospects
during the sales process transfers customer requirements and exposes product
strengths and weaknesses directly to the product management staff, resulting in
a more competitive offering.

The Technology Development Group is primarily responsible for defining
technology and platform layer enhancements to the existing PROFILE/Anyware and
PROFILE/FMS modules. This group evaluates and implements operating system ports,
programming languages, database systems, and development and productivity tools.
After this group successfully implements a new technology component under an
existing application component, it is responsible for propagating the technology
through the Company.

Employees

As of October 31, 1996, the Company had 135 full-time employees, 39 of whom were
engaged in product development (including 11 of whom were employed in technology
development), 11 of whom were engaged in

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sales and marketing, 16 of whom were engaged in finance and administration and
69 of whom were engaged in operations/client services. The Company's employees
are not represented by any collective bargaining agreements, and the Company has
never experienced a work stoppage.

In addition to full-time employees, the Company has historically utilized the
services of between eight and 12 independent contractors, primarily for European
implementation projects and sales support.

Competition

Financial institutions have two fundamental alternatives for obtaining data
processing capabilities: (i) in-house applications, either those that are
developed internally or those that are purchased from third party vendors; and
(ii) outsourcing, either as a part of a total outsourcing solution or where a
third party acts as a service bureau. Until the introduction of client/server
technology, the only in-house processing systems offered were systems running on
mainframe or minicomputer hardware. In the U.S. market, client/server
application software has only recently been made available to banks, but it is
gaining market acceptance and market share. In the international market, there
are a number of client/server alternatives available, as well as traditional
mainframe and mini-computer based systems.

To date, in the Emerging Banking Market, the Company's primary competitors in
this market have been FiServe, Inc., Baton Rouge International and ALLTEL
Information Services, Inc. In addition, there are several UNIX based vendors
which in the future could become primary competitors as well as a number of
local software organizations.

The Company believes that the principal competitive factors in the Emerging Bank
Market include the ability to (i) demonstrate robust retail and international
banking functionality, including multi-currency and multi-language processing,
support of local regulations, and support of local payment systems, (ii) operate
on UNIX platforms, (iii) service a high volume of accounts and branches, (iv)
demonstrate a proven track record of successful implementations; and (v) develop
local presence directly or through partnerships.

While the Company believes the Direct Banking Market is a totally new market, it
expects competition from the entrenched production system vendors. Hogan
Systems, Inc., Marshall & Ilsley Corp. and ALLTEL Information Services, Inc.
have the largest presence in the top 100 U.S. Banks. Kirchman Corporation,
FiServe, Inc. and Electronic Data Systems Corp. have a smaller presence,
primarily in the second 50 banks. Many of the top 100 U.S. banks are creating
strategies for direct banking and their decisions will direct the course of this
new market. As banks determine their requirements for direct banking, the six
major domestic competitors may develop alternative solutions by building or
buying web client interfaces that will fulfill the requirements.

The Company believes that the principal competitive factors in the Direct
Banking Market include the ability to (i) position direct banking as a market
segmentation strategy versus a delivery channel, (ii) reach decision makers of
financial institutions in the U.S. and Canada with assets in excess of $4
billion, (iii) connect PROFILE/Anyware to a wide variety of payment (e.g., Check
Free and Visa), middleware (e.g., Five Paces Software and Edify) and client
systems (e.g., Netscape and Intuit), and (iv) establish alliances and
partnerships with the above named vendors.

The Company believes that none of its current competitors offers application
software that provides the level of product manufacturing flexibility and
international scope of functionality that is featured in the Company's system.
The Company, however, expects additional competition from other established and
emerging companies as the client/server market continues to develop and expand.
In addition, competition could increase as a result of software industry
consolidations.

Backlog

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<PAGE>

software license, product enhancement and implementation and consulting revenues
and $12.3 million for maintenance and support.

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<PAGE>

Facilities

The Company's headquarters and principal administrative, sales and marketing,
and application development operations are located in approximately 31,000
square feet of leased space in Malvern, Pennsylvania. This lease expires in
1998. The Company also leases office space in Warsaw, Poland, Prague, Czech
Republic, Lisbon, Portugal and Jakarta, Indonesia. The Company anticipates that
additional space will be required as business expands and believes that it will
be able to obtain suitable space as needed.

Legal Proceedings

In the opinion of management, there are no claims or actions against the Company
the ultimate disposition of which will have a material adverse effect on the
Company's results of operations or consolidated financial position.

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<PAGE>

Management

Executive Officers and Directors

The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name Age Position
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Michael A. Sanchez (1)............ 38 Chairman of the Board of Directors and
Chief Executive Officer

Frank R. Sanchez.................. 39 President, Chief Operating Officer and
Director
Joseph F. Waterman................ 45 Senior Vice President, Treasurer and Chief
Financial Officer
Deborah C. Kovacs................. 33 Senior Vice President - Product Management
Thomas F. McAllister.............. 48 Senior Vice President - Client Services
Dan S. Russell.................... 46 Senior Vice President - Technology
Development

Michael L. Turner................. 42 Senior Vice President - Business
Development
Stewart A. Jack................... 48 Managing Director of European Operations
Richard H. Jefferson.............. 40 Managing Director, Asian-Pacific Rim
Warren V. Musser (1).............. 69 Director
Ira M. Lubert..................... 46 Director
Lawrence Chimerine (1)(2)......... 56 Director
John D. Loewenberg (1)(2)......... 56 Director
Thomas C. Lynch(2)................ 54 Director
</TABLE>

- --------------------
(1) Member of Compensation Committee (Michael A. Sanchez is a non-voting member)

(2) Member of Audit Committee

Michael A. Sanchez founded the Company in 1979 and has been its Chairman and
Chief Executive Officer since its inception. In addition to providing strategic
direction for the Company, Mr. Sanchez is currently responsible for overseeing
Sanchez' direct banking marketing activities. Mr. Sanchez has over seventeen
years' experience in financial services organization data processing systems.
Mr. Sanchez is the brother of Frank R. Sanchez, the Company's President and
Chief Operating Officer.

Frank R. Sanchez has been the President and Chief Operating Officer of the
Company since 1994 and a Director of the Company since his employment with the
Company began in 1980. In his capacity as Chief Operating Officer, Mr. Sanchez
is responsible for the daily operations of the Company excluding the direct
banking marketing function. He is also responsible for developing the Company's
product and technical strategy. From 1980 until 1994, Mr. Sanchez was the
Executive Vice president in charge of Technology and Product Development and was
the principal architect of the PROFILE integrated banking system. Mr. Sanchez is
the brother of Michael A. Sanchez, the Company's Chairman and Chief Executive
Officer.

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<PAGE>

Joseph F. Waterman has been a Vice President and the Chief Financial Officer of
the Company since he joined the Company in August 1992. Mr. Waterman is
generally responsible for the Company's financial, legal, human resources and
internal technical activities. Prior to joining the Company, Mr. Waterman was
employed by Safeguard and/or certain of its partnership companies for 13 years.
In particular, from 1990 to 1992, Mr. Waterman served as Vice President of
Finance of Computer Factory (an organization that had been acquired by CompuCom
Systems, Inc. ("CompuCom")) and from 1987 to 1988, Mr. Waterman served as the
Chief Financial Officer of CompuCom.

Deborah C. Kovacs has been employed by the Company since 1988 and has been the
Senior Vice President of Product Management since August 1994. Ms. Kovacs, who
has over ten years of experience in the design, development and implementation
of banking and trust systems, is responsible for functional enhancements to the
PROFILE product line. Upon her employment with the Company, Ms. Kovacs served as
a Product Analyst until 1992 when she was promoted to Product Manager for the
European Banking System. Prior to joining the Company, from 1985 to 1988, Ms.
Kovacs was employed by Premier Systems, Inc., a developer of trust and
investment software and a Safeguard partnership company, as Manager of the
Application Team and Technical Consultant where she was responsible for
implementing scheduled system enhancements.

Thomas F. McAllister has been the Senior Vice President-Client Services since
joining the Company in August 1994. In this position he is responsible for the
Company's client management activities, including support, implementation and
training services. Prior to joining the Company, from 1987 to 1994, Mr.
McAllister was the Principal of Thomas F. McAllister and Associates where he
provided expertise in the areas of general operations, information technology
management, TQM and strategic and tactical planning. Mr. McAllister has over 26
years of banking industry experience, which included service as Senior Vice
President of Operations and MIS for First New Hampshire Banks.

Dan S. Russell has been employed by Sanchez since 1985 and has been the Senior
Vice President of Technical Development since 1994. Mr. Russell, who has over 24
years of industry experience, is generally responsible for all technology-based
development and the underlying architecture of the PROFILE product line. When
Mr. Russell joined the Company in 1985, he served as the Manager of Development
and was promoted to Vice President of Development in 1987 where he was
responsible for both product and technology development. Mr. Russell remained in
the latter position until his promotion to Senior Vice President in 1994.

Michael L. Turner joined the Company in August 1991. He has served as Senior
Vice President of Business Development since 1994. He is responsible for
world-wide sales of the Company's products and services. From August 1991 to
1994, Mr. Turner served as Vice President Services. Prior to joining the
Company, Mr. Turner held various senior management positions in various
information technology services business, including Vice President for Finance
and Operations of GDK Systems, Vice President, Business Management at SEI, Inc.
and as a Senior Manager with Andersen Consulting.

Stewart A. Jack joined the Company as Managing Director, European Operations, in
May 1996. Mr. Jack's principal responsibility is developing opportunities in the
European marketplace. From 1992 through May 1996, Mr. Jack was the Managing
Partner of IDOM Poland. His principal activity in that capacity was to develop
information technology strategies and evaluate information technology options
for financial institutions. From 1989 to 1992, Mr. Jack was employed by
Hofflinghose, a Bermuda-based commodities trading group where he was the
Controller. Prior to his joining Hofflinghose, Mr. Jack had a 20-year career in
banking operations and information technology management at financial
institutions in Saudi Arabia, the United Arab Emirates and the United Kingdom.

Richard H. Jefferson has served as Managing Director, Asian-Pacific Rim, since
January 1996. His responsibilities include business direction and performance
for the Company in the Asian-Pacific Rim. Prior to joining the Company as an
employee, from 1989 to December 1995, Mr. Jefferson worked as an independent
consultant for the Company on various banking projects, including
internationalization of software. During this time, Mr. Jefferson was also
co-founder of two banking-related software companies. Mr. Jefferson has over 15
years of experience in system architecture and database design.

Warren V. Musser, a Director of the Company since 1987, has been Chairman of the
Board and Chief Executive Officer of Safeguard since 1953. Mr. Musser is also
the Chairman of the Board of Cambridge Technology Partners

49
<PAGE>

(Massachusetts), Inc., a director of Coherent Communications Systems Corporation
and CompuCom, and a trustee of Brandywine Realty Trust. Mr. Musser also serves
on a variety of civic, educational and charitable Boards of Directors including
the Board of Overseers of The Wharton School of the University of Pennsylvania
and serves as Vice President/Development, Cradle Liberty Council, Boy Scouts of
America, as Vice Chairman of The Eastern Technology Council, and as Chairman of
the Pennsylvania Council on Economic Education.

Ira M. Lubert, a Director of the Company since 1989, has served as a managing
director of Radnor Venture Management Company since 1988, a managing director
since 1991 and a general partner since 1995 of Technology Leaders Management
L.P. and a managing director and a general partner of Technology Leaders II
Management L.P. since 1994. Mr. Lubert is a director of CompuCom , National
Media Corporation and The Score Board, Inc.

Lawrence Chimerine has been a Director of the Company since 1987, the Managing
Director and Chief Economist of the Economic Strategy Institute since August
1993 and the President of Radnor Consulting Services since August 1991. From
June 1991 to March 1994, Dr. Chimerine was a Senior Economic Advisor of
DRI-McGraw/Hill. Dr. Chimerine is a director of Bank United Corp.

John D. Loewenberg became a Director of the Company in September 1996. He was an
Executive Vice President and Chief Administrative Officer of Connecticut Mutual,
a life insurance company, from May 1995 through March 1996. Prior to joining
Connecticut Mutual, Mr. Loewenberg served as Senior Vice President of Aetna Life
and Casualty, a multi-line insurer, and as Chief Executive Officer of Aetna
Information Technology, the information systems company of Aetna Life and
Casualty, from March 1989 to May 1995. Mr. Loewenberg was Chairman of Precision
Systems, Inc. until April 1996 and is a director of CompuCom.

Thomas C. Lynch became a Director of the Company in September 1996. He has been
a Senior Vice President of Safeguard since November 1995. Prior to that time,
Mr. Lynch retired from the U.S. Navy as an Admiral after 31 years, including
serving as Superintendent of the U.S. Naval Academy from 1991 through 1994 and
the Director, Navy Roles and Missions from 1994 through 1995. Mr. Lynch
currently serves as director of The Eastern Technology Council and is a member
of the Cradle Liberty Council, Boy Scouts of America and the U.S. Naval Academy
Foundation.

Compensation Committee Interlocks and Insider Participation

In 1995, decisions concerning compensation of executive officers were made by
the Compensation Committee of the Board of Directors which included Mr. Michael
A. Sanchez, the Chairman and Chief Executive Officer of the Company. Mr.
Sanchez, however, did not take part in decisions regarding his compensation. On
March 1, 1995 the Company made a loan to Michael A. Sanchez in the amount of
$114,000 to provide Mr. Sanchez with funding to exercise certain stock options
for the purchase of Common Stock. This loan was made as part of a Company-wide
program enabling all employees who had been granted options prior to December
31, 1993 to exercise similar options. As of the date hereof, the outstanding
principal balance of this loan was $114,000. Mr. Sanchez is expected to retire
his loan upon the consummation of the Offering. See "Certain Transactions" and
Note 8 to the Consolidated Financial Statements.

Employment Agreement

The Company entered into a two-year employment contract effective January 1,
1996 with Richard H. Jefferson, the Managing Director of the Company's
Asian-Pacific Rim activities. This agreement provides for the payment of a base
salary plus commissions, the reimbursement of relocation expenses to Jakarta and
the payment of certain living expenses. The Company has the option to terminate
this agreement at any time, subject to a severance payment equal to three months
base salary if such termination is for any reason other than non-performance.

Certain Relationships

Radnor Venture Management Company, a general partnership, is the sole general
partner of Radnor Venture Partners, L.P., a venture capital fund. SSI Management
Company, Inc., one of the general partners of Radnor Venture Management Company,
is a wholly-owned subsidiary of Safeguard. PMG Management Advisors, the other
general partner of Radnor Venture Management Company is not affiliated with
Safeguard or the Company. Radnor Venture

50
<PAGE>

Management Company is managed and controlled by its executive committee which
currently consists of seven persons including (i) Warren V. Musser and Ira M.
Lubert, each of whom may be deemed to be designees of SSI Management Company,
Inc., (ii) two designees of PMG Management Advisors, and (iii) two designees of
other investors in Radnor Venture Partners, L.P. SSI Management Company, Inc.
also has the right to designate one additional member of the executive
committee. Mr. Lubert is one of the two Managing Directors of Radnor Venture
Management Company, who manage the day-to-day operation of Radnor Venture
Partners, L.P., subject to the control and direction of the executive committee.

Executive Compensation

The following table sets forth certain information concerning compensation paid
or accrued for the calendar year ended December 31, 1995 with respect to the
Company's Chief Executive Officer, its four other most highly compensated
executive officers at December 31, 1995 and two individuals who were no longer
executive officers of the Company on January 1, 1996 (collectively, the "Named
Officers"):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------

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

<S> <C> <C> <C> <C> <C>
Michael A. Sanchez............... 1995 $160,200 24,000 $7,956
Chairman and Chief
Executive Officer
Frank R. Sanchez................. 1995 160,200 24,000
President and Chief
Operating Officer
Michael L. Turner................ 1995 122,152 $40,000 4,800 5,797
Senior Vice President -
Business Development
Thomas F. McAllister............. 1995 137,738 20,000
Senior Vice President -
Client Services
Joseph F. Waterman............... 1995 134,167 31,200 5,375
Senior Vice President and
Chief Financial Officer
Adnan Elassad(3)................. 1995 200,250 5,607
Former Co-President
E. Miguel Rangel(4).............. 1995 171,167 5,000
Former Managing
Director of Europe
</TABLE>
-------------------------
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Officers which are
available generally to all salaried employees of the Company and certain
perquisites and other personal benefits, securities or property received by the
Named Officers which do not exceed the lesser of $50,000 or 10% of the aggregate
of any such Named Officer's salary and bonus in 1995.
(2) Represents a contribution under the Company's 401(k) plan.
(3) Mr. Elassad resigned from the Company and its Board of Directors effective
January 1, 1996 to pursue other business opportunities.
(4) Mr. Rangel resigned from the Company effective November 30, 1995 to pursue
other business opportunities.

The following table provides information on stock options granted by the Company
in 1995 to the Named Officers. All Company option grants depicted below were
made pursuant to the 1995 Equity Compensation Plan.

51
<PAGE>

Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------

Number of Percent of
Shares Total Options Realizable Potential Value at

Underlying Granted to Exercise Assumed Annual Rate of Stock

Options Employees in Price Per Expiration Price Appreciation for Option

Name Granted(1) Fiscal Year Share Date Term(2)
- ---- ---------- ------------- ---------- ---------- ------------------------------

<S> <C> <C> <C> <C> <C> <C>
5% 10%
-- ---
Michael A. Sanchez....... 24,000 7.8% $3.625 10/08/05 $54,714 $138,656

Frank R. Sanchez......... 24,000 7.8 3.625 10/08/05 54,714 138,656

Joseph F. Waterman....... 31,200 10.1 3.625 10/08/05 71,128 180,252

Thomas F. McAllister..... -- -- -- -- -- --

Michael L. Turner........ 4,800 1.6 3.625 10/08/05 10,943 27,731

</TABLE>
- --------------------
(1) These options vest in equal installments over a four-year period beginning
one year after the date of grant.
(2) The amounts shown are calculated assuming that the market value of the
Common Stock was equal to the exercise price per share as of the date of grant
of the options. This value is the approximate price per share at which shares of
the Common Stock would have been sold in private transactions on or about the
date on which the options were granted. The dollar amounts under these columns
assume a compounded annual market price increase for the underlying shares of
the Common Stock from the date of grant to the end of the option term of 5% and
10%. This format is prescribed by the Commission and is not intended to forecast
future appreciation of shares of the Common Stock. The actual value, if any, a
Named Officer may realize, will depend on the excess of the market price for
shares of the Common Stock on the date the option is exercised over the exercise
price. Accordingly, there is no assurance that the value realized by a Named
Officer will be at or near the value estimated above.

The following table sets forth information concerning options exercised during
1995 and the number and the hypothetical value of certain unexercised options of
the Company held by the Named Officers as of December 31, 1995. This table is
presented solely for purposes of complying with the Commission's rules and does
not necessarily reflect the amounts the optionees will actually receive upon any
sale of the shares acquired upon exercise of the options.
<TABLE>
<CAPTION>

Aggregated Option Exercises and
Last Fiscal Year-End Option Values

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

Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Options at Money Options at
December 31, 1995 December 31, 1995 (2)
------------------------------------ -----------------------------------

<S> <C> <C> <C> <C> <C> <C>
Shares Acquired Value
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable

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

Michael A. Sanchez.... 72,000 $4,800 3,600 25,800 $7,050 $3,525

Frank R. Sanchez...... 72,000 4,800 3,600 25,800 7,050 3,525

Joseph F. Waterman.... 93,600 6,240 3,600 33,000 7,050 3,525

Thomas F. McAllister.. -- -- 18,000 36,000 34,050 68,100

Michael L. Turner..... 14,400 960 90,000 6,600 176,250 3,525

</TABLE>
(1) Assumes, for presentation purposes only, a per share fair market value of
$1.73 (the exercise price of the most recently issued options at that date).
(2) Assumes, for presentation purposes only, a per share fair market value of
$3.625 (the exercise price of the most recently issued options at that date).

52
<PAGE>

1995 Equity Compensation Plan

The Company has adopted the 1995 Equity Compensation Plan (the "Plan") pursuant
to which it has awarded and may in the future award stock options and equity
compensation awards to its employees, officers, non-employee directors and
independent contractors.

The Plan provides for the issuance to employees, officers, non-employee
directors and independent contractors of up to 1,680,000 shares of Common Stock
pursuant to the grant of incentive stock options ("ISOs"), non-qualified stock
options ("NQSOs"), Stock Appreciation Rights ("SARs") and restricted stock
awards. The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). Subject to the provisions of the Plan, the
Committee has the authority to determine to whom stock options and equity
compensation awards will be granted and the terms of the awards granted,
including the number of shares subject to each award, vesting provisions and the
duration of an award.

As of October 31, 1996, options to purchase a total of 815,569 shares of Common
Stock, at a weighted average exercise price per share of $2.81, were
outstanding. Of these options, 436,142 options were fully vested and exercisable
as of October 31, 1996. As of October 31, 1996, the Company had an additional
1,251,964 shares of Common Stock available for future grants and other issuances
under the Plan.

The Board of Directors generally may amend or revise the terms of the Plan in
any respect whatsoever, provided, that certain amendments to the Plan are
subject to shareholder approval. Unless sooner terminated, the Plan will
terminate in 2005.

53
<PAGE>

Certain Transactions

Pursuant to an Administrative Services Agreement between the Company and
Safeguard, the Company paid Safeguard $100,000 in each of 1993, 1994 and 1995 in
consideration for certain general management, financial management, human
resources management and legal services provided by Safeguard. The Company
expects to pay Safeguard a similar amount in 1996 for such services.

In 1995, the Company paid Oaktree Systems, Inc, approximately $111,000 in
consideration for certain consulting services and the Company expects to pay
such entity in excess of $60,000 in 1996 in consideration of additional
consulting services from this entity. The owner of Oaktree Systems, Inc. is the
father of Michael A. Sanchez and Frank R. Sanchez.

On March 1, 1995 the Company made loans to each of Michael A. Sanchez, Frank R.
Sanchez and Joseph F. Waterman in the amounts of $114,000, $114,000 and
$148,200, respectively. The Company made these loans to provide these executive
officers with funding to exercise certain stock options for the purchase of
Common Stock as part of a Company-wide program enabling all employees who had
been granted options prior to December 31, 1993 to exercise similar options. As
of the date hereof, the outstanding principal balances of these loans were
$114,000, $114,000 and $0 for Michael A. Sanchez, Frank R. Sanchez and Joseph F.
Waterman, respectively. Michael A. Sanchez is expected to retire his loan upon
the consummation of the Offering. See Note 8 to the Consolidated Financial
Statements.

During 1994, 1995 and January 1996, Safeguard and the Company entered into
certain arrangements whereby the Company would lend to Safeguard its excess cash
and receive a negotiated interest rate which was higher than the rate the
Company might realize by independently investing the funds, but which was less
than Safeguard's cost of funds. The applicable interest rates charged by the
Company during the periods covered by these arrangements ranged between five and
seven percent. The highest principal balance of these borrowings during the
period covered by these arrangements was $3,500,000.

In 1993, Safeguard made several short-term advances to the Company (maximum
amount outstanding was $400,000) with an interest rate of seven percent. In
1995, Safeguard made a 29 day advance to the Company in the amount of $600,000 ,
with interest rates ranging from 9.5% to 9.75%.

54
<PAGE>

Principal and Selling Stockholders

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of the date of this Prospectus and as adjusted
to reflect the sale of the shares offered hereby (i) by each person who is known
by the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) by each director of the Company, (iii) by each Named Officer,
(iv) by each Selling Stockholder, and (v) by all directors and executive
officers of the Company as a group. Unless otherwise indicated below, to the
knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their shares of Common Stock, except to the
extent authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
Number of Shares to
Beneficial Ownership be Sold in the Beneficial Ownership
Prior to the Offering (1) Offering After the Offering (1)
------------------------- ------------------- --------------------------

Number of Number of
Name and Address Shares Percentage Shares Percentage
---------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Safeguard Scientifics, Inc. (2) 3,829,482 43.0 759,272 3,070,210 27.7
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087...................
Michael A. Sanchez (3) 1,976,848 23.1 87,106 1,889,742 17.6
40 Valley Stream Parkway
Malvern, PA 19355,
Radnor Venture Partners L.P.(4)....... 886,384 10.4 178,568 707,816 6.6
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Frank R. Sanchez (5)................. 849,600 9.9 43,554 806,046 7.5
40 Valley Stream Parkway
Malvern, PA 19355
Joseph F. Waterman (6)................ 105,000 1.2 105,000 1.0
Thomas F. McAllister (7)............. 36,000 * -- 36,000 *
Michael L. Turner (8)................. 105,600 1.2 -- 105,600 1.0
Warren V. Musser (9)................. 144,000 1.7 -- 144,000 1.3
Ira M. Lubert (10).................... 89,042 1.0 -- 89,042 *
Lawrence Chimerine.................... 72,000 * -- 72,000 *
John D. Loewenberg.................... -- * -- -- *
Thomas C. Lynch (11)................. -- * -- -- *
All executive officers and directors
as a group (14 persons) (12)......... 3,508,624 40.2 130,660 3,377,964 31.0
</TABLE>
- --------------------------

* Less than 1% of the outstanding Common Stock

(1) Solely for the purpose of the percentage ownership calculation for each
beneficial owner depicted herein, the number of shares of Common Stock deemed
outstanding prior to the Offering (i) assumes 8,549,755 shares of Common Stock
outstanding as of the date of this Prospectus; (ii) assumes 10,707,755 shares of
Common Stock will be outstanding upon the successful completion of the Offering;
and (iii) includes additional shares issuable pursuant to options or warrants
held by such owner which may be exercised within 60 days after the date of this
Prospectus ("presently exercisable options"), as set forth below. The beneficial
ownership after the Offering does not account for the exercise of Rights by such
stockholders in the Offering.
(2) Includes a warrant exercisable for 360,000 shares of Common Stock. The
shares and warrant are held of record by Safeguard Scientifics (Delaware), Inc.,
a wholly-owned subsidiary of Safeguard. Excludes shares beneficially

55
<PAGE>

owned by Radnor, in which Safeguard has a beneficial interest. See "Management--
Certain Relationships" for a description of the relationships between Safeguard
and Radnor.

(3) Includes 9,600 shares of Common Stock issuable pursuant to presently
exercisable options. Excludes 80 shares of Common Stock obtainable upon the
exercise of Company Rights.
(4) See "Management--Certain Relationships" for a description of the
relationships between Safeguard and Radnor.

(5) Includes 9,600 shares of Common Stock issuable pursuant to presently
exercisable options.

(6) Includes 11,400 shares of Common Stock issuable pursuant to presently
exercisable options. Excludes approximately 27,870 shares of Common Stock
obtainable upon the exercise of Company Rights.

(7) Consists of 36,000 shares of Common Stock issuable pursuant to presently
exercisable options.

(8) Includes 91,200 shares of Common Stock issuable pursuant to presently
exercisable options. Excludes approximately 300 shares of Common Stock
obtainable upon the exercise of Company Rights.

(9) Does not include 3,829,482 shares beneficially owned by Safeguard. Mr.
Musser serves as Chairman and Chief Executive Officer of Safeguard. See
"Management--Executive Officers and Directors." Mr. Musser disclaims beneficial
ownership of such shares. Excludes approximately 343,000 shares of Common Stock
obtainable upon the exercise of Company Rights.

(10) Does not include 886,384 shares beneficially owned by Radnor. See
"Management--Certain Relationships" for a description of the relationship
between Mr. Lubert and Radnor. Mr. Lubert disclaims beneficial ownership of such
shares. Excludes approximately 620 shares of Common Stock obtainable upon the
exercise of Company Rights .

(11) Does not include 3,829,482 shares beneficially owned by Safeguard. Mr.
Lynch serves as the Senior Vice President of Safeguard. See "Management--
Executive Officers and Directors." Mr. Lynch disclaims beneficial ownership of
such shares.

(12) Includes, in the aggregate, 183,625 shares of Common Stock issuable
pursuant to presently exercisable options. Excludes approximately 372,070 shares
of Common Stock obtainable upon the exercise of Company Rights.

56
<PAGE>

Description of Capital Stock
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, no par value, and 10,000,000 shares of Preferred Stock, no par
value. On November 7, 1996, the Company's shareholders approved (i) an increase
in the Company's authorized Common Stock from 15,000,000 shares to 50,000,000
shares and (ii) the creation of the Preferred Stock.

Common Stock

As of October 31, 1996, there were 8,549,755 shares of Common Stock outstanding
and held of record by approximately 45 stockholders. After giving effect to the
issuance of the 2,158,000 shares of Common Stock offered by the Company hereby,
there will be 10,707,755 shares of Common Stock outstanding.

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

Rights

The Company is granting on the date hereof the Company Rights to the holders of
Safeguard Common Shares and the Direct Rights to the Direct Purchasers. The
Rights, subject to minimum exercise requirements, are each exercisable for one
share of Common Stock at an exercise price of $5.50 per share. Persons may not
exercise Rights for fewer than 50 shares of Common Stock. For purposes of the
Offering, a person that holds Safeguard Common Shares in multiple accounts must
meet the 50 share minimum purchase requirement in each account. Accordingly,
persons holding fewer than 50 Rights in an account should consider the
advisability of consolidating the Rights in one account, selling Rights, or
purchasing additional Rights to comply with the minimum exercise requirements of
the Offering. Rights may be transferred, in whole or in part, by endorsing and
delivering to the Rights Agent a Rights certificate that has been properly
endorsed for transfer, with instructions to reissue the Rights, in whole or in
part, in the name of the transferee. The Rights Agent will reissue certificates
for the transferred Rights to the transferee, and will reissue a certificate for
the balance, if any, to the holder of the Rights, in each case to the extent it
is able to do so prior to the Expiration Date. The Offering will terminate and
the Rights will expire at 5:00 p.m., New York City time, on the Expiration Date,
which is December 18, 1996. After the Expiration Date, unexercised Right
will be null and void. For more information about the Rights and the Offering
process, reference should be made to "The Offering" and to "Risk Factors--
Cancellation of the Offering."

Preferred Stock

The Company, by resolution of the Board of Directors and without any further
vote or action by the stockholders, has the authority, subject to certain
limitations prescribed by law, to issue from time to time up to an aggregate of
10,000,000 shares of Preferred Stock in one or more classes or series and to
determine the designation and the number of shares of any class or series as
well as the voting rights, preferences, limitations and special rights, if any,
of the shares of any such class or series, including the dividend rights,
dividend rates, conversion rights and terms, voting rights, redemption rights
and terms, and liquidation preferences. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change of control of the
Company. As of the date of this Prospectus, there are no shares of Preferred
Stock outstanding, and the Company has no plans to issue any shares of Preferred
Stock.

Transfer Agent and Registrar

57
<PAGE>

The transfer agent and registrar for the Common Stock is ChaseMellon Shareholder
Services, L.L.C., Reorganization Department, P.O. Box 798, Midtown Station, New
York, New York 10018.

Shares Eligible for Future Sale

Upon completion of the Offering, the Company will have 10,707,755 shares of
Common Stock outstanding, excluding 1,175,569 shares of Common Stock subject to
stock options and warrants outstanding as of October 31, 1996 and any stock
options or warrants granted by the Company after October 31, 1996. Of these
shares, the Common Stock sold in the Offering, except for certain shares
described below, will be freely tradeable without restriction or further
registration under the Act. The remaining 7,481,255 shares of Common Stock (the
"Restricted Shares") were sold by the Company in reliance on exemptions from the
registration requirements of the Act and are "restricted securities" as defined
in Rule 144 and may not be sold in the absence of registration under the Act
unless an exemption is available, including an exemption afforded by Rule 144 or
Rule 701. See "Risk Factors--Shares Eligible for Future Sale."

In general, under Rule 144 as currently in effect, if three years have elapsed
since the date of acquisition of restricted securities from the Company or any
affiliate and the acquiror or subsequent holder is not deemed to have been an
affiliate of the Company for at least 90 days prior to a proposed transaction,
such person would be entitled to sell such shares under Rule 144(k) without
regard to the limitations described below. If two years have elapsed since the
date of acquisition of restricted securities from the Company or any affiliate,
the acquiror or subsequent holder thereof (including persons who may be deemed
affiliates of the Company) is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then-outstanding
shares of Common Stock or the average weekly trading volume in the Common Stock
on the Nasdaq National Market during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain provisions regarding the
manner of sale, notice requirements and the availability of current public
information about the Company. Without considering the contractual restrictions
described below, approximately (i) 539,696 Restricted Shares will be eligible
for sale in the public market in accordance with Rule 144(k) under the Act, (ii)
257,194 Restricted Shares will be eligible for sale 90 days after the date of
this Prospectus, subject to manner of sale and other resale conditions imposed
by Rule 701, and (iii) 6,684,365 Restricted Shares will be eligible for future
sale subject to the holding period and other conditions imposed by Rule 144.
Certain restrictions apply to any shares of Common Stock purchased in the
Offering by affiliates of the Company, which may generally only be sold in
compliance with the limitations of Rule 144, except for the holding period
requirements thereunder. See "Risk Factors--Shares Eligible for Future
Sale."

Rule 144A under the Act provides a nonexclusive safe harbor exemption from the
registration requirements of the Act of specified resales of restricted
securities to certain institutional investors. In general, Rule 144A allows
unregistered resales of restricted securities to a "qualified institutional
buyer," which generally includes an entity, acting for its own account or for
the account of other qualified institutional buyers, that in the aggregate owns
or invests at least $100 million in securities that, when issued, were of the
same class as securities listed on a national securities exchange or quoted on
Nasdaq. The shares of Common Stock outstanding as of the date of this Prospectus
would be eligible for resale under Rule 144A because such shares, when issued,
were not of the same class as any listed or quoted securities.

Options and Warrants
As of October 31, 1996, there were outstanding (i) options to purchase an
aggregate of 815,569 shares of Common Stock (of which 436,142 were exercisable
at October 31, 1996) at a weighted average exercise price of $2.81 per share and
(ii) warrants to purchase an aggregate of 360,000 shares of Common Stock at an
exercise price of $1.39 per share. As of October 31, 1996, the Company had an
additional 1,251,964 shares of Common Stock available for future grants and
other issuances under the Plan. The holders of options and

58
<PAGE>

warrants to purchase a total of 735,303 shares are subject to Lock-Up
Agreements, which restrict, until after the Lock-Up Expiry Date (without the
Underwriters' prior written consent), the holders' ability to sell or otherwise
dispose of Common Stock acquired upon the exercise of such options and warrants.
See "Management--1995 Equity Compensation Plan."

The Company issued options and underlying shares of Common Stock to employees of
the Company who were not executive officers and directors of the Company
pursuant to Rule 701. Under Rule 701, such employees of the Company who prior to
the Offering purchased shares pursuant to the Plan are entitled to sell such
shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 commencing 90 days after the
date of this Prospectus. Rule 701 also permits the shares subject to unexercised
options under such Plan to be sold upon exercise without having to comply with
such provisions of Rule 144. As of October 31, 1996, (i) approximately 257,194
shares of Common Stock will be eligible for sale under Rule 701 by Company
employees, commencing 90 days after the date of this Prospectus, and (ii)
approximately 440,266 shares of Common Stock subject to unexercised options will
be eligible for sale under Rule 701 by Company employees (subject to applicable
vesting provisions).

It is anticipated that a Form S-8 Registration Statement covering the Common
Stock that may be issued pursuant to the exercise of options after the
effectiveness of the Form S-8 Registration Statement will be filed and declared
effective prior to the Lock-Up Expiry Date and that shares of Common Stock that
are so acquired and offered thereafter pursuant to the Form S-8 Registration
Statement generally may be resold in the public market without restriction or
limitation, except in the case of affiliates of the Company, which generally may
only resell such shares in compliance with Rule 144, except for the holding
period requirements thereunder.

Lock-Up Agreements

The Principal Stockholders, who will own 6,094,614 shares of Common Stock after
the completion of the Offering and will be deemed to beneficially own an
additional 379,200 shares of Common Stock, each other Named Officer, each
director of the Company and Warren V. Musser and his assignees have agreed with
the Underwriters that they will not sell or otherwise dispose of any shares of
Common Stock (other than shares of Common Stock sold in the Offering) until
after the Lock-Up Expiry Date without the prior written consent of the
Underwriters.

Registration Rights

The Company has granted certain registration rights to Radnor and Safeguard. In
particular, under certain circumstances and subject to certain limitations,
Radnor can require the Company to register under the Act (i) a minimum of 25% of
the aggregate number of the shares of Common Stock held by Radnor or its
transferees, provided that the Company is not obligated to effect more than one
such registration and (ii) on Form S-3 such number of shares of Common Stock
having a market value of at least $100,000, provided that the Company is not
required to effect more than one such registration during any twelve-month
period. Radnor and Safeguard were granted certain "piggy-back" registration
rights whereby under certain circumstances and subject to certain conditions,
they may include shares of Common Stock in any registration of shares of Common
Stock under the Act.

59
<PAGE>

Underwriting

The Company, the Selling Stockholders and the Underwriters have entered into the
Standby Underwriting Agreement on the date hereof, pursuant to which the
Underwriters are required, subject to certain terms and conditions (all of which
are summarized below), to purchase the Excess Unsubscribed Shares in accordance
with the percentages set forth below. If all of the Rights are exercised, or if
the number of Unsubscribed Shares is 300,000 or less, there will be no Excess
Unsubscribed Shares and the Underwriters will not be required to purchase any
shares of Common Stock.
---------------
Underwriters % of Shares
-----------
J.P. Morgan Securities Inc. .................................... 50%
Wheat, First Securities, Inc. .................................. 50%

The Underwriters have agreed, severally and not jointly, subject to the
condition that the Company and the Selling Stockholders comply with their
respective obligations under the Standby Underwriting Agreement and subject to
the Underwriters' right to terminate their obligations under the Standby
Underwriting Agreement (as specified below), to purchase all of the Excess
Unsubscribed Shares. The Company and the Selling Stockholders will pay the
Underwriters the Financial Advisory Fee equal to 3% per share for each share of
Common Stock included in the Offering. The Financial Advisory Fee is for
services and advice rendered in connection with the structuring of the Offering,
valuation of the business of the Company, and financial advice to the Company
and the Selling Stockholders before and during the Offering. An additional fee
of 4% per share will be paid to the Underwriters (i) for each share of Common
Stock purchased by the Underwriters pursuant to the Standby Underwriting
Agreement and (ii) for each share of Common Stock purchased upon the
Underwriters' exercise of Rights if such Rights were purchased by the
Underwriters at a time when the Common Stock was trading (on a "when issued"
basis) at a per share price of less than $6.00 or if the Underwriters purchase
such Rights with the Company's prior acknowledgment that it would be entitled to
receive the Underwriting Discount for Common Stock purchased pursuant to the
exercise of such Rights. In addition, the Company has agreed to pay the
Underwriters a non-accountable expense allowance in the aggregate amount of
$125,000, provided, however, such non-accountable expense allowance shall be
reduced to $50,000 or zero if, on the Expiration Date, the closing price for the
Common Stock traded on a "when issued" basis is at least $10.00 per share or
greater than $12.00 per share, respectively. The Company and the Selling
Stockholders have granted to the Underwriters a 20-day option commencing on the
Expiration Date to purchase a maximum of 307,500 additional shares of Common
Stock at a per share price equal to the Exercise Price less the Total
Underwriting Discount. The Underwriters may exercise such option in whole or in
part only to cover over-allotments made in connection with the sale of shares of
Common Stock by the Underwriters.

Prior to the Expiration Date, the Underwriters may offer shares of Common Stock
on a when-issued basis, including shares to be acquired through the purchase and
exercise of Rights, at prices set from time to time by the Underwriters. Each
such price when set will not exceed, if applicable, the highest price at which a
dealer not participating in the distribution is then offering the Common Stock
to other dealers, plus an amount equal to a dealer's concession, and an offering
price set on any calendar day will not be increased more than once during such
day. After the Expiration Date, the Underwriters may offer shares of Common
Stock, whether acquired pursuant to the Standby Underwriting Agreement, the
exercise of the Rights or the purchase of Common Stock in the market, to the
public at a price or prices to be determined. The Underwriters may thus realize
profits or losses independent of the Underwriting Discount and the Financial
Advisory Fee. Shares of Common Stock subject to the Standby

60
<PAGE>

Underwriting Agreement will be offered by the Underwriters when, as and if sold
to, and accepted by, the Underwriters and will be subject to their right to
reject orders in whole or in part.

In connection with the solicitation of Rights exercises, unless the Underwriters
are granted an exemption by the Commission from Rule 10b-6, the Underwriters
will be prohibited from engaging in any market making activities with respect to
the Company's when-issued Common Stock and Common Stock until the Underwriters
have completed their participation in the distribution of the shares offered
hereby. As a result, the Underwriters may be unable to provide a market for the
Company's when-issued Common Stock and Common Stock should it desire to do so,
during certain periods while the Rights are exercisable.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities arising out of or based upon
misstatements or omissions in this Prospectus or the Registration Statement of
which this Prospectus is a part and certain other liabilities, including
liabilities under the Act, and to contribute to certain payments that the
Underwriters may be required to make.

The Underwriters may terminate their obligations under the Standby Underwriting
Agreement if (i) any calamitous domestic or international event or act or
occurrence has disrupted or, in the Underwriters' opinion, will in the immediate
future materially disrupt, the general securities market in the U.S.; (ii)
trading in the Common Stock (on a when-issued basis) shall have been suspended
by the Commission or Nasdaq; (iii) trading on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; (iv) the U.S.
shall have become involved in a war or major hostilities which, in the
Underwriters' opinion, will affect the general securities market in the U.S.;
(v) a banking moratorium has been declared by a New York, Pennsylvania, Virginia
or federal authority; (vi) a moratorium in foreign exchange trading has been
declared; (vii) the Company shall have sustained a loss material to the Company
by fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act, whether or not such loss shall have been insured, or
from any labor dispute or any legal or governmental proceeding; (viii) there
shall be such material adverse market conditions (whether occurring suddenly or
gradually between the date of this Prospectus and the closing of the Offering)
affecting markets generally or technology issues particularly as in the
Underwriters' reasonable judgment would make it inadvisable to proceed with the
offering, sale or delivery of the shares of Common Stock offered hereby; (ix)
there shall have been such material adverse change, or any development involving
a prospective material adverse change (including a change in management or
control of the Company), in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company since December 31,
1995; or (x) the Other Purchasers fail to purchase their aggregate allotment of
Unsubscribed Shares. The Underwriters, however, may elect to purchase all, but
not less than all, Unsubscribed Shares in the event the Other Purchasers fail to
purchase any of the Unsubscribed Shares which they are obligated to purchase.

The Company has agreed that, without the prior written consent of the
Underwriters, it will not offer, sell, grant any option for the sale of, or
otherwise dispose of any shares of Common Stock (or securities convertible into
shares of Common Stock) (collectively, the "Securities") acquired in the
Offering or held by it as of the date hereof until after the Lock-Up Expiry
Date, other than (i) Common Stock to be sold in the Offering, (ii) Company
option issuances and sales of Common Stock pursuant to the Stock Option Plan and
(iii) Securities issued as consideration for an acquisition if the party being
issued the Securities agrees not to transfer, sell, offer for sale, contract or
otherwise dispose of such Securities until after the Lock-Up Expiry Date. The
Principal Stockholders, who will own 6,094,614 shares of Common Stock after the
completion of the Offering and will be deemed to beneficially own an additional
379,200 shares of Common Stock, each executive officer, each director of the
Company and Warren V. Musser and his assignees have agreed to certain
restrictions concerning the sale of Common Stock pursuant to Lock-Up Agreements.
See "Management--1995 Equity Compensation Plan" and "Shares Eligible for Future
Sale."

61
<PAGE>

Legal Matters

The validity of the shares of Common Stock and the Rights offered hereby will be
passed upon for the Company by Morgan, Lewis & Bockius LLP, Philadelphia,
Pennsylvania. Certain legal matters in connection with the Offering are being
passed upon for the Underwriters by Drinker Biddle & Reath, Philadelphia,
Pennsylvania.

Experts

The consolidated financial statements of Sanchez Computer Associates, Inc. as of
December 31, 1994 and 1995 and for each of the years in the three year period
ended December 31, 1995 included in this Prospectus and elsewhere in the
Registration Statement have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given upon the authority of
that firm as experts in accounting and auditing.

Additional Information

The Company has filed with the Commission a Registration Statement on Form S-1
(including all amendments thereto, the "Registration Statement") under the Act
with respect to the Common Stock and Rights offered hereby. As permitted by the
rules and regulations of the Commission, this Prospectus omits certain
information contained in the Registration Statement. For further information
with respect to the Company and the Common Stock and Rights offered hereby,
reference is hereby made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding the
contents of any agreement or other document filed as an exhibit to the
Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such agreement filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, DC 20549, and copies of all or
any part thereof may be obtained from such office upon payment of the prescribed
fees. In addition, registration statements and certain other filings made with
the Commission through its Electronic Data Gathering, Analysis and Retrieval
("EDGAR") systems are publicly available through the Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov. The Registration
Statement, including all exhibits thereto and amendments thereof, has been filed
with the Commission through EDGAR.

62
<PAGE>

Glossary

ACH Automated Clearing House. A processing and delivery system
that provides for the distribution and settlement of
electronic credits and debits among a large number of
financial institutions.

AIX IBM's implementation of the UNIX operating environment.

API Application Programming Interface. A defined calling
standard for a software module that provides a consistent,
standard set of calls to access the functions provided by
the module.

Client/Server System architecture in which the server component acts as
Architecture the source of data and the client component uses the data
to perform various functions.

DCS Distributed Control System. A control system architecture
developed in the 1970s.

DDE Dynamic Data Exchange. A Microsoft(R) standard for
communicating data between two programs.

DLL Dynamic Link Library. A DLL contains a library of machine-
language procedures that can be linked to programs as
needed at run time. Programs do not need to include code to
perform common functions because that code is available in
the DLL. Changes can be made once to the DLL routine
instead of each individual program.

DecNet Digital Equipment Corporation software that provides a
network linkage between Digital computers to allow users to
access information and resources across systems.

Digital UNIX/RISC The UNIX operating system for Digital's Alpha processor.
The Alpha processor uses a Reduced Instruction Set Chip
(RISC) architecture.

Digital OpenVMS Digital Equipment Corporation's proprietary operating
system for its VAX and AXP machines.

GIRO A payment method, similar to a check, used in many European
countries.

GUI Graphical User Interface.

HP-UX Hewlett-Packard's implementation of the UNIX operating
environment.

HTML Hypertext Markup Language. The language used to display web
pages.

LAN Local-Area Network. A high speed network connecting
personal computers, workstations and, in some cases,
mainframe computers.

M programming A high-level interactive computer programming language
developed for use in complex data handling operations. M is
an ANSI standard language.

Meta data The data which defines the data. For example, a relational
database table definition is data, but acts to define the
lower-level information contained within the table being
defined.

Multi-platform Processes or pieces of hardware that operate on various
hardware and software systems without modification.

ODBC Open Database Connectivity. The Microsoft(R) standard that
provides a database independent mechanism through which a
Windows or Windows NT(TM) application can query and update
data in a variety of relational database management
systems. The ODBC API (Application Programming
Instruction), for example, allows a single Windows
application to access Oracle, Sybase and other
databases.

63
<PAGE>

Open Systems System design that allows users to take advantage of
Architecture applications from multiple vendors by permitting open
access to all internal components and by supporting a
wide variety of standards, operating environments and
connectivity methodologies.

Port The process of moving a software application to a new
hardware platform, operating system, or language
environment.

RDBMS Relational Database Management System. A software system
that stores data as a related set of data tables, allows
the data to be queried and updated and enforces the
integrity of the data. RDBMSs typically act as servers
for multiple clients on a network.

Real-Time Characteristic of a process that recognizes changes in
dynamic data as the changes occur, communicates those
changes and manages the resultant effects of the changes.

Relational Database File structure that is logically connected by one or more
data structures in a separate file.

SQL Structured Query Language. A standardized language used
by RDBMSs to query, update and manage a database.

SWIFT Society of Worldwide Interbank Financial
Telecommunication. SWIFT provides institutions with an
automated communication link between financial
institutions.

Systems Integrator A Company that specializes in integrating products from
multiple vendors to provide an information systems
solution to a customer.

TCP/IP Transmission Control Protocol/Internet Protocol. TCP/IP
provides a low level transport mechanism, similar to
DECNet, for linking a variety of computers together in a
network. TCP/IP is the common network protocol for UNIX
systems and is used as the network for the Internet.

Turnkey Hardware and software applications that fulfill all of a
customer's predefined requirements at the time of
purchase.

UNIX UNIX is a highly modular operating system or family of
operating systems that provides multi-user, multi-tasking
capabilities on a wide variety of platforms.

WAN Wide-Area Network. A network that allows communications
between locations.

64
<PAGE>

Sanchez Computer Associates, Inc.

Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants ............................................................................ F-2

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of December 31, 1994 and 1995 ........................................... F-3

Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995.............. F-4

Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 ....................................................................... F-5

Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995.............. F-6

Notes to Consolidated Financial Statements ............................................................. F-7

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheet as of September 30, 1996 .................................................... F-16

Consolidated Statements of Operations for the nine months ended
September 30, 1995 and 1996 ............................................................................ F-17

Consolidated Statements of Cash Flows for the nine months ended
September 30, 1995 and 1996 ............................................................................ F-18

Notes to Consolidated Financial Statements ............................................................. F-19
</TABLE>
F-1
<PAGE>

Report of Independent Accountants

To the Stockholders and Board of Directors
Sanchez Computer Associates, Inc.

We have audited the accompanying consolidated balance sheets of Sanchez Computer
Associates, Inc. as of December 31, 1994 and 1995, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sanchez Computer
Associates, Inc. as of December 31, 1994 and 1995, and the consolidated results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 2, 1996, except as to information in Note 13,
for which the date is September 11, 1996

F-2
<PAGE>

Sanchez Computer Associates, Inc.
Consolidated Balance Sheets
December 31, 1994 and 1995
(in thousands, except share data)

<TABLE>
<CAPTION>
-----------------------
ASSETS 1994 1995
---- ----
<S> <C> <C>
Current assets
Cash and cash equivalents............ $ 2,656 $ 5,546
Accounts receivable, net of allowance
for doubtful accounts of $40....... 3,120 4,360
Deferred income taxes................ 742 587
Prepaid and other current assets..... 253 490
------ -------
Total current assets............... 6,771 10,983

Property and equipment
Equipment............................ 1,176 1,497
Furniture and fixtures............... 345 221
Leasehold improvements............... 61 61
------ -------
1,582 1,779

Accumulated depreciation and amortization... (830) (976)
------ -------
Net property and equipment........... 752 803

Deferred income taxes....................... 636 --

Capitalized software costs, net of
amortization of $844 in 1994 and
$1,071 in 1995........................... 371 361
------ -------
Total assets....................... $ 8,530 $12,147
====== =======
<CAPTION>

-----------------------
LIABILITIES 1994 1995
---- ----
<S> <C> <C>
Current liabilities
Current portion of long-term debt.... $ 82 $ 168
Accounts payable, trade.............. 340 345
Accrued expenses..................... 1,558 1,258
Income taxes payable ................ 339 401
Deferred revenue..................... 2,134 4,060
------ -------
Total current liabilities.......... 4,453 6,232

Long-term debt - net of current portion..... 160 173
Deferred rent............................... 132 137
------ -------

Total liabilities.................. 4,745 6,542

Commitments (Note 10)

STOCKHOLDERS' EQUITY
<S> <C> <C>
Common stock, $no par value
Authorized-15,000,000 shares
Issued-8,061,853 and 8,409,356 shares
in 1994 and 1995, respectively....... 81 84
Additional paid-in capital.................. 5,250 6,024
Retained earnings (deficit)................. (1,426) 161
Notes due on common stock purchases......... -- (664)
Treasury stock, at cost (216,000 shares).... (120) --
------ -------

Total stockholders' equity......... 3,785 5,605
------ -------

Total liabilities and stockholders' equity.. $ 8,530 $12,147
====== =======
</TABLE>

F-3
<PAGE>

Sanchez Computer Associates, Inc.
Consolidated Statements of Operations
for the years ended December 31, 1993, 1994, and 1995
(in thousands, except per share data)

<TABLE>
<CAPTION>
--------------------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues
Software license fees ........................... $ 2,184 $ 6,111 $ 6,532
Product enhancement fees......................... 2,045 1,564 1,797
Implementation and consulting services........... 3,729 4,347 4,496
Software maintenance fees........................ 3,359 3,494 4,017
------- ------- -------

Total revenues............................. 11,317 15,516 16,842

Operating Expenses
Product development ............................. 2,991 3,805 3,300
Product support.................................. 2,509 2,315 2,515
Implementation and consulting.................... 2,436 2,678 3,176
Sales and marketing.............................. 993 1,282 2,080
Royalties and sublicense fees.................... 331 1,477 1,331
General and administrative....................... 1,511 1,885 1,824
------- ------- -------

Total operating expenses................... 10,771 13,442 14,226
------- ------- -------

Income from operations ................................ 546 2,074 2,616

Interest income (expense), net......................... (28) 6 93
------- ------- -------

Income before income taxes............................. 518 2,080 2,709

Income tax provision (benefit)......................... 55 (958) 1,122
------- ------- -------

Net income............................................. $ 463 $ 3,038 $ 1,587
======== ======= =======

Net income per common share............................ $.05 $.33 $.17

Weighted average number of shares outstanding.......... 9,068 9,284 9,588
------- ------- -------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

Sanchez Computer Associates, Inc.
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1993, 1994, and 1995
(in thousands, except share amounts)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Common Stock Notes due Treasury Stock
------------ Additional Retained on common --------------
paid-in earnings stock
Shares Amount capital (deficit) purchases Shares Amount
------ ------ ------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1993 8,061,853 $81 $5,250 $(4,927) -- 216,000 $ (120)
Net income -- -- -- 463 -- -- --
--------- --- ------ ------- ----- ------- ------

Balances at December 31, 1993 8,061,853 81 5,250 (4,464) -- 216,000 (120)
Net income -- -- -- 3,038 -- -- --
--------- --- ------ ------- ----- ------- ------

Balances at December 31, 1994 8,061,853 81 5,250 (1,426) -- 216,000 (120)
Net income -- -- -- 1,587 -- -- --
Exercise of stock options 347,503 3 774 -- $(892) (216,000) 120
Stock option loan repayments -- -- -- -- 228 -- --
--------- --- ------ ------- ----- ------- ------

Balances at December 31, 1995 8,409,356 $84 $6,024 $ 161 $(664) -- $ --
========== === ====== ======= ===== ====== ======
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

Sanchez Computer Associates, Inc.
Consolidated Statements of Cash Flows
for the years ended December 31, 1993, 1994, and 1995
(in thousands)

<TABLE>
<CAPTION>
-----------------------------------------

1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 463 $3,038 $1,587
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Deferred taxes -- (1,378) 791
Depreciation and amortization 691 557 605
Other 13 56 39
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable (29) (1,250) (1,240)
Prepaid and other current assets (26) (177) (237)
Accounts payable, accrued expenses and income taxes payable 290 1,211 (233)
Deferred revenues (955) 804 1,926
Other liabilities 78 -- --
------ ------ -------

Net cash provided by operating activities 525 2,861 3,238

Cash flows from investing activities:

Capitalized computer software costs (180) (113) (217)
Capital expenditures (41) (376) (458)
Other 5 -- --
------ ------ -------

Net cash used in investing activities (216) (489) (675)

Cash flows from financing activities:
Proceeds from issuance of long-term debt -- -- 244
Repayment of notes due on common stock purchases -- -- 228
Borrowings under line of credit agreement 200 -- --
Repayments under line of credit agreement (350) -- --
Principal payments under capital lease obligation (8) (38) (51)
Principal payment under long-term notes (43) (43) (94)
------ ------ -------

Net cash provided by (used in) financing activities (201) (81) 327
------ ------ -------

Net increase in cash and cash equivalents 108 2,291 2,890
Cash and cash equivalents at beginning of year 257 365 2,656
------ ------ -------
Cash and cash equivalents at end of year $ 365 $2,656 $ 5,546
====== ====== =======
</TABLE>

See notes to consolidated financial statements

F-6
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(1.) Description of Business

Sanchez Computer Associates, Inc. ("Sanchez" or the "Company") designs,
develops, markets, implements and supports comprehensive banking software,
called PROFILE(R), for financial services organizations worldwide.
Sanchez's highly flexible PROFILE family of products is comprised of three
integrated modules which operate on open, client-server platforms. The
primary module, called PROFILE/Anyware, is a multi-currency bank
production system which supports deposit, loan, customer, transaction
processing and bank management requirements through multiple distribution
channels, including the Internet. The other modules are PROFILE/FMS, a
multi-company, multi-currency, financial management and accounting system
and PROFILE/ITS, a treasury system that includes a sophisticated set of
asset and liability tools.

(2.) Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Sanchez Software Ltd. and Sanchez
Computer Associates International, Inc. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Use of Management Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to continuously make
estimates and assumptions that affect the reported amounts of certain
assets, liabilities, revenues and expenses at the date of the financial
statements and during the reporting period. Actual results could differ
from these estimates. The most significant estimates are the
percentage-of-completion method for revenue recognition.

Revenue Recognition

The Company recognizes revenue from client implementation projects,
customized software development, and software license fees using the
percentage-of-completion contract accounting method. Revenue is deferred
to the extent of cash received or fees billed prior to satisfying such
percentage completion criteria. Losses on contracts are recognized when
determinable.

Revenue from software maintenance contracts is recognized ratably over the
term of the maintenance contract.

Warranties

The Company's products are warranted by the Company against design defects
for a period generally not to exceed ninety days after customer
conversion. Provision for future claims has been recorded based on
historical experience, which to date has not been significant.

Cash and Cash Equivalents

The Company's policy is to maintain its uninvested cash at minimal levels.
Cash and cash equivalents include amounts on deposit with Safeguard
Scientifics, Inc. ("Safeguard"), the Company's major shareholder, in
conjunction with demand promissory notes dated July 1994 and December
1995. The July 1994 note provided

F-7
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(2.) Summary of Significant Accounting Policies, continued

for interest at prime minus 2% throughout 1995, and the December 1995
note bears interest at Safeguard's effective borrowing rate minus 1%. At
December 31, 1994 and 1995, advances to Safeguard under these demand
notes amounted to $2,250 and $3,500 respectively. Interest income from
these advances amounted to $49 in 1994 and $81 in 1995. The advances to
Safeguard were repaid fully in the first quarter of 1996.

Property and Equipment

Property and equipment is carried at cost, except for assets under
capital leases which are recorded at the lower of the present value of
future lease payments or the fair value of the equipment at the inception
of the lease. Expenditures for major renewals, improvements and
betterments are capitalized and minor repairs and maintenance are charged
to expense as incurred. When assets are sold, the related cost and
accumulated depreciation are removed from the accounts and any gain or
loss from such disposition is included in operations.

Capitalized Software Costs

Certain development costs of the Company's software products are
capitalized subsequent to the establishment of technological feasibility
and up to the time the product becomes available for general release.
Amortization is provided on a product-by-product basis at the greater of
the amount computed using (a) the ratio of current revenues for a product
to the total of current and anticipated future revenues or (b) the
straight-line method over the remaining estimated economic life of the
product. Generally, an original estimated economic life of four years is
assigned to capitalized software development costs. Costs of software
program maintenance are charged to expense as incurred.

All capitalized software costs are written down to net realizable value
when the carrying amount is in excess thereof.

Total costs capitalized for the years ended 1993, 1994 and 1995 were
approximately $180, $113 and $217, respectively. Amortization of
capitalized software costs amounted to $469, $306 and $227 in 1993, 1994
and 1995, respectively.

Taxes on Income

Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Deferred income taxes are recognized for all temporary differences
between the tax and financial reporting bases of the Company's assets and
liabilities based on currently enacted tax laws and statutory rates.
Additionally, the benefits of utilizing net operating loss carryforwards
and credit carryforwards are recognized to the extent management of the
Company believes that it is more likely than not that the benefits will
be realized in future periods.

Depreciation and Amortization

Depreciation and amortization are provided over the estimated useful life
of the related assets using a combination of accelerated and straight
line depreciation methods.

F-8
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(2.) Summary of Significant Accounting Policies, continued

Net Income Per Share

Net income per share is computed using the weighted average number of
shares of common and common equivalent shares (stock options and
warrants) outstanding. As required by a Staff Accounting Bulletin issued
by the Securities and Exchange Commission, common and common equivalent
shares issued by the Company during the twelve-month period preceding the
Offering have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method
and assuming an initial public offering price of $5.50 per share).

Recently Issued Accounting Standards

Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), was issued in October 1995. SFAS 123
gives companies the option to adopt the fair value method for expense
recognition of employee stock options and stock based awards or to
continue to account for such items using the intrinsic value method as
outlined under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25), with pro forma disclosures of net
income and net income per share as if the fair value method had been
applied. The Company has adopted SFAS 123 effective January 1, 1996 by
electing to continue to apply APB 25 for future stock options and stock
based awards, and, accordingly, does not anticipate that SFAS 123 will
have a material impact on its results of operations or financial
position. In accordance with the disclosure provisions of SFAS 123, the
Company will initially present the disclosure required by SFAS 123 in its
financial statements as of and for the periods ending December 31, 1996.

(3.) Additional Cash Flow Statement Information

The Company's non-cash investing and financing activities and cash
payments for interest and income taxes are as follows:

<TABLE>
<CAPTION>
-------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Equipment additions by capital lease $46 $148 --

Cash paid during the year for interest 30 29 $ 38

Cash paid during the year for income taxes 4 134 273
</TABLE>

(4.) Client Revenue Data

Revenue derived from certain software implementation projects comprises a
substantial portion of the Company's total annual revenues.

F-9
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(4.) Client Revenue Data, continued

The following table summarizes the percentage of revenues from the
Company's significant clients (listing those clients that exceed 10% in
the applicable year):

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
Client 1993 1994 1995
------ ---- ---- ----
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
A 11% 11% *
B 14% * *
C 17% * 10%
D * 15% *
E * 16% 18%
F * 18% 22%
G * * 21%
- --------------------------------------------------------------------------------
</TABLE>

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

* Less than 10%

At December 31, 1994 and 1995, the same four customers in each year
accounted for $1,557 (or 50%) and $2,719 (or 62%) of total receivables,
respectively. The Company does not require its customers to provide
collateral relative to accounts receivable balances.

The Company classifies its operations into one industry segment,
licensing and servicing of software products to the financial services
industry. Revenue derived from customers in various geographic regions
for each of the three years ended December 31, 1995 is as follows:

<TABLE>
<CAPTION>
-------------------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Canada $ 3,144 $ 2,789 $ 1,802
Central Europe 2,652 4,463 8,569
Other European 963 3,355 4,048
U.S. and Caribbean 4,558 4,909 2,423
------- ------- -------
$11,317 $15,516 $16,842
======= ======= =======
</TABLE>

(5.) Accounts Receivable

Accounts receivable balances as reported include unbilled receivables
which amounted to approximately $515 and $2,150 at December 31, 1994 and
1995, respectively.

Unbilled receivables on fixed-price contracts arise as revenues are
recognized under the percentage of completion method. These amounts are
billable at specified dates, when deliveries are made or at contract
completion, which is expected to occur within one year. All amounts
included in unbilled receivables are related to long-term contracts and
are reduced by appropriate progress billings.

F-10
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(5.) Accounts Receivable, continued

The Company has not experienced any significant bad debts during the
three years ended December 31, 1995. A reserve for doubtful accounts,
totaling $40, was reflected on each of the year end balance sheets during
that same three year period.

(6.) Accrued Liabilities

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
---------------------
1994 1995
---- ----
<S> <C> <C>
Accrued compensation and related items................ $ 945 $ 390
Accrued royalties..................................... 257 264
Other................................................. 356 604
--- ---
$1,558 $1,258
====== ======
</TABLE>

(7.) Long-Term Debt

Long-term debt at December 31, 1994 and 1995 consists of the following:

<TABLE>
<CAPTION>
---------------------
1994 1995
---- ----
<S> <C> <C>
Bank term note at 11% payable through October 1996........ $ 86 $ 43
Bank Term Notes at prime + 1% payable through June 1998... -- 194
Capital leases at 12% to 12.4% payable through March 1999. 156 104
--- ---
242 341
Less current portion...................................... 82 168
--- ---
$160 $173
==== ====
</TABLE>

The 11% bank note relates to an acquisition in 1989 and is guaranteed by a
third party.

The bank notes at prime + 1% were issued in conjunction with a $500
revolving credit facility for capital equipment purchases established as of
March, 1995. The Company had available approximately $306 under this
facility as of December 31, 1995. All advances under the facility are
amortized over a 36 month term.

F-11
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(7.) Long-Term Debt, continued

Future maturities of long-term debt at December 31, 1995 are as follows:

<TABLE>
<CAPTION>
Year Ending Amount
----------- ------
<S> <C>
1996 $168
1997 127
1998 40
1999 6
---
$341
====
</TABLE>

(8.) Stock Options

The 1995 Equity Compensation Plan was approved by the Company's board of
directors in October 1995. The plan provides for the issuance of a
maximum of 1,680,000 shares of Common Stock upon the exercise of stock
options, stock appreciation rights, and/or restricted stock awards. There
will be no further options granted under the previously in-place 1988
Incentive Stock Option Plan for Key Employees.

A summary of stock options outstanding under the 1995 and 1988 Plans at
December 31, 1993, 1994 and 1995 is as follows:

<TABLE>
<CAPTION>
----------------------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Shares under option, beginning of year 1,120,950 901,656 1,614,658
Options granted -- 786,600 308,436
Options exercised -- -- (563,503)
Options canceled (219,294) (73,598) (135,215)
--------- --------- ---------
Shares under option, end of year 901,656 1,614,658 1,224,376
========= ========= =========
Options exercisable 661,802 1,026,058 668,735
Shares available for future grants 448,344 365,342 1,388,364
</TABLE>

The options are exercisable at prices ranging from $1.00 to $3.63 per
share. Generally, outstanding options vest over a two to four year period
after the date of grant and expire ten years after the date of grant.

For options exercised in early 1995, 5% of the exercise price was paid
upon exercise, with the remaining obligation evidenced by a note with a
maximum term of ten years. Such optionees executed full recourse
interest-bearing notes, with such notes being reported as "Notes due on
common stock purchases" in the accompanying balance sheet. In 1995,
interest income earned on these notes amounted to $43. In conjunction
with the issuance of shares pursuant to these option exercises, the
Company utilized 216,000 shares previously held as treasury shares.

F-12
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(8.) Stock Options, continued

In addition to the stock options outstanding pursuant to the 1988 and
1995 plans, the Company has issued 144,000 non-qualified stock options to
two non-employee directors which are exercisable at $1.67 per share.
These options are fully vested and expire as of June 30, 1997.

(9.) Income Taxes

The Company utilized net operating loss carryforwards to offset current
and deferred tax liabilities for the years ended December 31, 1993, 1994
and 1995. The components of the income tax provision (benefit) for the
years ended December 31, 1993, 1994 and 1995 are as follows:

<TABLE>
<CAPTION>
-------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current taxes:
Federal $10 $ 70 $ 60
State 45 200 113
Foreign -- 150 158
--- -------- ------
55 420 331
Deferred taxes -- (1,378) 791
--- -------- ------
Total provision (benefit) $55 $ (958) $1,122
=== ======= ======
</TABLE>

A reconciliation of the tax provision (benefit) based on the federal
statutory tax rate to the effective tax rate is as follows:

<TABLE>
<CAPTION>
-------------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory tax provision (34%) $176 $707 $921
Decrease in valuation allowance
for deferred tax assets, net (27) (1,927) --
State income taxes, net
of federal income tax benefit 30 132 75
Foreign income taxes, net
of federal income tax benefit -- 100 104
Change in tax credit carryforward,
net (91) (42) 69
Other, net (33) 72 (47)
---- ------ ------
$ 55 $ (958) $1,122
==== ====== ======
</TABLE>

F-13
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(9.) Income Taxes, continued

The tax effects of loss carryforwards, credit carryforwards, and
temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31, 1994 and
1995 are presented below.

<TABLE>
<CAPTION>
---------------------------
1994 1995
------ ------
<S> <C> <C>
Deferred tax assets:
Tax loss carryforwards $ 742 --
Tax credit carryforwards 513 $ 444
Accrued liabilities 219 212
Other 30 49
------ -----
Total deferred tax assets 1,504 705

Deferred tax liabilities:

Capitalized software costs (126) (118)
------ -----
Net deferred tax assets $1,378 $ 587
====== =====
</TABLE>

The Company provided a valuation allowance equal to all of its net
deferred tax assets of $1,954 as of December 31, 1992 in conjunction with
its initial adoption of Statement of Financial Accounting Standards
(SFAS) No. 109 "Accounting for Income Taxes." The net change in the
valuation allowance during the year ended December 31, 1993 was a
decrease of $27, due primarily to the benefit of operating loss
carryforwards utilized during 1993 of $157, partially offset by increases
in the credit carryforward component of the Company's deferred tax
assets. In the year ended December 31, 1994, the valuation reserve for
deferred tax assets was entirely eliminated, with $588 of the decrease in
the allowance resulting from utilization of net operating loss
carryfowards in 1994, and the remaining decrease in the allowance of
$1,339 related to the full reversal of the remaining valuation allowance.
The $1,339 reversal of the remaining valuation allowance resulted from
management's determination that the Company's ongoing profitability and
contracted backlog made it more likely than not that the remaining
operating loss and credit carryforwards would be utilized.

Utilization of net operating loss carryforwards amounted to $741 in 1993,
$2,388 in 1994 and $2,146 in 1995. Also, at December 31, 1995, the
Company has approximately $444 in income tax credit carryforwards
available to offset regular federal income taxes payable, expiring
between the years 2002 and 2010.

F-14
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(10.) Commitments

The Company leases office facilities subject to operating leases. Future
minimum lease payments under non-cancelable operating leases with initial
or remaining terms of one year or more at December 31, 1995 are as
follows:

<TABLE>
<S> <C>
1996 $326
1997 381
1998 202
----
$909
====
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
approximately $417, $357 and $364, respectively.

The Company is also party to certain software customization agreements,
primarily with Digital, whereby funding has been provided to the Company
to facilitate product development targeted at specific geographic
markets. Under the terms of these agreements, the Company retains
ownership of the products developed, and has agreed to pay royalties to
Digital, contingent upon the subsequent achievement of certain
contractually defined product license fee sales.

When applicable, such royalty amounts typically equate to 15% to 20% of
the Company's software license fees, subject to various exceptions and
limitations. Royalty expense relative to these agreements amounted to
$167 in 1993, $761 in 1994 and $762 in 1995.

(11.) Other Related Party Transactions

Safeguard holds warrants to purchase 360,000 shares of the Company's
common stock at an exercise price of $1.39 per share, subject to certain
terms and restrictions. These warrants are currently exercisable and
expire April 30, 1998.

The Company has entered into an administrative services agreement with
Safeguard, which provides for payment, subject to achieving certain sales
levels, of a maximum fee of $25 per quarter. The Company expensed $100 in
each of the years ended December 31, 1993, 1994 and 1995.

The Company had a demand line of credit agreement with Safeguard which
expired effective December 31, 1994. The line provided for borrowings of
up to $750 through December 31, 1993 and up to $500 throughout 1994.
Additionally, Safeguard made a 29 day advance to the Company in the
amount of $600 in 1995. Interest expense on borrowings from Safeguard
amounted to $12 in 1993 and $4 in 1995.

The Company has entered into a consulting contract with the principal of
Oaktree Systems, Inc., a stockholder of the Company. During the years
ended December 31, 1993, 1994 and 1995, the Company incurred expenses
under this agreement of $157, $225 and $111, respectively.

F-15
<PAGE>

Notes to Consolidated Financial Statements
(in thousands, except share related data)

(12.) Profit Sharing Trust Plan

The Company maintains a Profit Sharing Trust Plan (the Plan) which
permits eligible participating members to contribute up to fifteen
percent of their gross earnings. The Company will typically make a
contribution equal to 100% of the first 3% which an employee
contributes and may also make additional voluntary contributions. The
Company expensed $78, $103 and $148 related to the Plan during the
years ended December 31, 1993, 1994 and 1995, respectively.

(13.) Subsequent Events

On September 11, 1996, the Board of Directors declared a six-for-five
stock dividend which has been accounted for as a stock split. All
references to the number of shares and per share amounts have been
restated to reflect the effect of the split. Additionally, the Board
voted to increase the Company's authorized common shares from
15,000,000 to 50,000,000 and to authorize the creation of 10,000,000
shares of preferred stock, each contingent upon the approval by the
Company's stockholders (which approval was obtained on November 7,
1996).

Also on September 11, 1996, the Company's Board of Directors
authorized the filing of a Registration Statement on Form S-1
covering 3,226,500 shares of common stock to be sold in the initial
public offering transaction. The majority of shares (2,158,000) are
being offered by the Company and the remainder (1,068,500) by selling
stockholders. This offering will be conducted as a rights offering to
Safeguard's stockholders.

F-16
<PAGE>

Sanchez Computer Associates, Inc.
Consolidated Balance Sheets

September 30, 1996
(Unaudited)

(in thousands, except share data)

<TABLE>
<CAPTION>
ASSETS

Current assets
<S> <C>
Cash and cash equivalents $ 6,250
Accounts receivable, net of allowance for
doubtful accounts of $40.......................... 4,891
Deferred income taxes................................. 430
Prepaid and other current assets...................... 433
--------
Total current assets.......................... 12,004

Property and equipment
Equipment............................................ 1,917
Furniture and fixtures............................... 233
Leasehold improvements............................... 64
--------
2,214

Accumulated depreciation and amortization................. (1,333)
--------

Net property and equipment........................... 881

Capitalized software costs, net of accumulated
amortization of $1,226.............................. 646
--------

Total assets.................................. $13,531
========

LIABILITIES

Current liabilities

Current portion of long-term debt..................... $ 206
Accounts payable, trade............................... 518
Accrued expenses...................................... 1,987
Income taxes payable.................................. 63
Deferred revenue...................................... 3,845
---------
Total current liabilities...................... 6,619
---------
Long-term debt - net of current portion.................... 201
Deferred rent.............................................. 80
---------
Total liabilities.............................. 6,900
---------
Commitments (Note 4)

STOCKHOLDERS' EQUITY

Common stock, no par value

Authorized - 15,000,000 shares
Issued - 8,549,755 shares............................. 85
Additional paid-in capital............................. 6,354
Retained earnings...................................... 844
Notes due on common stock purchases.................... (652)
---------
Total stockholders' equity............................. 6,631
---------
Total liabilities and stockholders' equity................. $ 13,531
========
</TABLE>

F-17
<PAGE>

See notes to consolidated financial statements.
Sanchez Computer Associates, Inc.
Consolidated Statements of Operations

for the nine months ended September 30, 1995 and 1996
(Unaudited)
(in thousands, except per share data)

<TABLE>
<CAPTION>
-----------------
1995 1996
---- ----
<S> <C> <C>
Revenues
Software license fees.................................... $3,985 $5,623
Product enhancement fees................................. 1,164 709
Implementation and consulting services................... 3,372 3,294
Software maintenance fees................................ 3,081 3,170
-------- --------
Total revenues................................... 11,602 12,796

Operating Expenses
Product development...................................... 2,567 2,750
Product support.......................................... 2,001 2,142
Implementation and consulting............................ 2,435 2,097
Sales and marketing...................................... 1,516 2,191
Royalties and sublicense fees............................ 874 1,721
General and administrative............................... 1,454 1,041
-------- --------
Total operating expenses..................................... 10,847 11,942

Income from operations....................................... 755 854

Interest income (expense), net............................... 51 213
-------- --------
Income before income taxes................................... 806 1,067

Provision for income taxes................................... 327 383
-------- --------
Net income................................................... $ 479 $ 684
======== ========

Net income per common share.................................. $.05 $.07

Weighted average number of shares outstanding................ 9,589 9,224
</TABLE>

F-18
<PAGE>

Sanchez Computer Associates, Inc.
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1995 and 1996
(Unaudited)
(in thousands)

<TABLE>
<CAPTION>
--------------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................................... $479 $684
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Deferred taxes................................................................ -- 157
Depreciation and amortization................................................. 466 513
Other......................................................................... 12 (57)
------- ------
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable........................................................... (3,393) (531)
Prepaid and other current assets.............................................. (140) 57
Accounts payable, accrued expenses and income taxes payable................... 322 564
Deferred revenues............................................................. 20 (215)
------- ------
Net cash provided by (used in) operating activities.............................. (2,234) 1,172

Cash flows from investing activities:
Capitalized computer software costs............................................. (165) (440)
Capital expenditures............................................................ (366) (437)
------- ------
Net cash used in investing activities............................................. (531) (877)

Cash flows from financing activities:
Proceeds from issuance of long-term debt........................................ 244 261
Repayment of notes due on common stock purchases................................ 228 7
Proceeds from exercise of stock options......................................... -- 336
Principal payments under capital lease obligation............................... (38) (68)
Principal payments under long-term notes........................................ (63) (127)
------- ------

Net cash provided by financing activities......................................... 371 409
------- ------
Net decrease in cash and cash equivalents......................................... (2,394) 704

Cash and cash equivalents at beginning of period.................................. 2,656 5,546
------- ------
Cash and cash equivalents at end of period........................................ $ 262 $6,250
======= ======
</TABLE>

F-19
<PAGE>

Notes to Consolidated Financial Statements (Unaudited)
(in thousands, except share related data)

(1.) Basis of Presentation

The accompanying unaudited consolidated financial statements of Sanchez Computer
Associates, Inc. (the "Company") have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principals have been condensed or
omitted.

The financial statements as of September 30, 1996 and for the nine months ended
September 30, 1995 and 1996 are unaudited; however, in the opinion of
management, such statements include all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of the results for the
periods presented.

The interim financial statements should be read in conjunction with the
financial statements for the fiscal year ended December 31, 1995 and notes
thereto included in the Company's audited consolidated financial statements
included elsewhere herein.

The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for the future interim periods or for the
full year ended December 31, 1996.

(2.) Additional Cash Flow Statement Information

The Company's non-cash investing and financing activities and cash payments for
interest and income taxes were as follows:

<TABLE>
<CAPTION>
--------------
1995 1996
---- ----
<S> <C> <C>
Cash paid during the year for interest......... $ 29 $ 25

Cash paid during the year for income taxes..... 251 468
</TABLE>

(3.) Accrued Liabilities

Accrued liabilities consist of the following:

<TABLE>
<S> <C>
Accrued compensation and related items............ $ 733

Accrued royalties................................. 619

Other............................................. 635
------
$1,987
======
</TABLE>

F-20
<PAGE>

Notes to Consolidated Financial Statements (Unaudited)
(in thousands, except share related data)

(4.) Commitments

Commitments as of September 30, 1996 were substantially the same as those
disclosed in Note 10 of the Notes to Consolidated Financial Statements as of
December 31, 1995.

(5.) Net Income Per Share

Net income per common share was computed by dividing income by the weighted
average number of shares outstanding during each period, after giving
retroactive effect to the six-for-five stock split effective September 1996,
including common stock equivalents which would arise from the exercise of stock
options and warrants.

Stock options and warrants granted with exercise prices below the proposed
offering price during the twelve-month period preceding the initial filing date
of the offering have been included in the calculation of common stock
equivalents using the treasury stock method, assuming an offering price of $5.50
per share, as if they were outstanding for all periods presented.

(6.) Initial Public Offering

In late 1996, the Company proposes to commence an initial public stock offering
for the sale of 2,158,000 shares of its common stock, based upon an offering
price of $5.50 per share. The estimated net proceeds to be raised by the Company
is $10.3 million.
F-21
<PAGE>

================================================================================

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the Offering made hereby, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, the Selling Stockholders or any Underwriters. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any security other than the securities covered by this Prospectus, nor
does it constitute an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized, or in which the person
making such an offer or solicitation is not qualified to do so or to any person
to whom it is unlawful to make such an offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the dates as of which information is furnished or
the date hereof.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----

<S> <C>
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 7
The Offering................................................................ 13
Use of Proceeds............................................................. 19
Dividend Policy............................................................. 19
Capitalization.............................................................. 20
Dilution.................................................................... 21
Selected Consolidated Financial Data........................................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 23
Business.................................................................... 30
Management.................................................................. 42
Certain Transactions........................................................ 48
Principal and Selling Stockholders.......................................... 49
Description of Capital Stock................................................ 51
Shares Eligible for Future Sale............................................. 52
Underwriting................................................................ 54
Legal Matters............................................................... 56
Experts..................................................................... 56
Additional Information...................................................... 56
Glossary.................................................................... 57
Index to Consolidated Financial Statements.................................. F-1
</TABLE>

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

Until , 1997 (25 days after the expiration date of the offering), all
dealers effecting transactions in the Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a Prospectus
when acting as Underwriters and with respect to unsold allotments or
subscriptions.

================================================================================

3,181,500 Shares

Sanchez Computer
Associates, Inc.
[LOGO]

Common Stock
(no par value)

J.P. Morgan & Co.

Wheat First Butcher Singer

, 1996

================================================================================