OPENVISION TECHNOLOGIES INC, 424B1, 1996-05-07

OPENVISION TECHNOLOGIES INC
424B1, 1996-05-07
COMPUTER PROGRAMMING SERVICES

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-1724

2,735,000 SHARES

LOGO

COMMON STOCK
------------------

Of the 2,735,000 shares of Common Stock offered hereby, 2,500,000 shares
are being sold by OpenVision Technologies, Inc. ("OpenVision" or the "Company")
and 235,000 shares are being sold by the Selling Stockholders. See "Principal
and Selling Stockholders." The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders. Prior to this offering, there
has been no public market for the Common Stock of the Company. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. The Common Stock has been approved for quotation
on the Nasdaq National Market under the symbol "OPVN."

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

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

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

<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNT AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Per Share........... $14.00 $0.98 $13.02 $13.02
- ------------------------------------------------------------------------------------------------
Total(3)............ $38,290,000 $2,680,300 $32,550,000 $3,059,700
- ------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
(1) See "Underwriting" for information relating to indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $1,000,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 410,250 shares of Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$44,033,500, $3,082,345 and $37,891,455, respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about May 10,
1996.

ALEX. BROWN & SONS
INCORPORATED

LEHMAN BROTHERS
SOUNDVIEW FINANCIAL GROUP, INC.

THE DATE OF THIS PROSPECTUS IS MAY 7, 1996.

<PAGE> 2

[ARTWORK ]

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

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and Consolidated Financial Statements
(including the notes thereto), appearing elsewhere in this Prospectus.
THE COMPANY

OpenVision Technologies, Inc. ("OpenVision" or the "Company") develops,
markets and supports systems management software for client/server computing
environments. OpenVision's AXXiON products address three essential areas of
systems management -- storage, operations and security. The Company's highly
scalable products can be used independently and certain products can be combined
to provide interoperable client/server systems management solutions. AXXiON
products offer centralized administration with a high degree of automation,
enabling customers to manage complex, distributed environments cost-effectively
by increasing system administrator productivity and system availability. The
Company's largest customer installation to date consists of more than 2,400
nodes in a heterogeneous hardware and software environment. The Company also
provides a comprehensive range of services to assist customers in planning and
implementing systems management solutions. OpenVision has licensed its AXXiON
applications to more than 800 customers.

Historically, large organizations depended on centralized mainframe and
mini-computers as the primary computing resource for mission-critical
applications and as the central repository for essential data. The market for
mainframe systems management software evolved as a result of the need to monitor
and control the availability, performance and integrity of these host-based
computing environments and, according to Gartner Group, totaled approximately
$3.0 billion in 1995. In recent years, however, many large organizations have
moved their information systems from mainframe and
mini-computer based architectures to distributed client/server computing
environments. Client/server environments are more complex than mainframe
environments, because they include various types of servers, such as file,
application and database servers, and potentially thousands of clients. These
environments frequently include a variety of operating systems, networking
protocols, database management systems and software applications. In order to
monitor and control the availability, performance and integrity of these newer
client/server computing environments, there is a need for client/server systems
management software. According to Gartner Group, the market for client/server
systems management software for storage, operations and security products is
expected to expand from $950 million in 1995 to more than $2.6 billion in 1999.

The Company provides a broad range of client/server systems management
software that performs storage, operations and security management functions
across multiple hardware platforms, operating systems, relational databases and
networks. OpenVision's products feature a client/server architecture and
automated, event-driven technology, enabling its products to scale from a few
nodes to several thousand nodes, thereby addressing the needs of large,
dispersed enterprises. Using the Company's scalable architecture, it is possible
for a single system administrator to centrally define policies and monitor and
manage thousands of nodes effectively. The Company's ten principal products are
independently packaged and certain of the products are designed to be
interoperable in order to provide customers flexibility in purchasing and
deployment.

The Company believes that customers will acquire and deploy client/server
systems management products and services in a phased manner. Accordingly, the
Company's strategy is to cultivate long-term customer relationships that foster
ongoing and additive purchases of the Company's products and services. The
Company markets its products through both direct sales and indirect sales
channels, and its service organization assists customers in designing systems
management strategies and implementing OpenVision products. The Company's
customers include: AT&T, Boeing, British Gas, British Telecom, Chrysler,
Motorola, the NASD, Nomura International, Sun Microsystems and Wells Fargo Bank.

The Company was incorporated in June 1992 and has acquired a significant
part of its technology through ten acquisitions of companies, divisions of
companies or products, all of which were completed prior to July 31, 1993. The
Company's operating results in the past four fiscal quarters have benefited from
increased market acceptance of the Company's products and a significant
reduction in operating expenses due to expense and headcount reductions
implemented in a restructuring in late fiscal 1994 and the first half of fiscal
1995.

As of March 31, 1996, the Company had 206 full-time employees. The Company's
headquarters are located at 7133 Koll Center Parkway, Pleasanton, CA 94566, and
its telephone number is (510) 426-6400. In addition, the Company has ten sales
offices and four development offices throughout the United States, Canada and
Europe.

3
<PAGE> 4

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company...................... 2,500,000 shares
Common Stock offered by the Selling Stockholders......... 235,000 shares
Common Stock to be outstanding after the offering........ 18,006,887 shares(1)
Use of proceeds.......................................... To retire indebtedness and for general
corporate purposes, including working
capital. See "Use of Proceeds."
Nasdaq National Market symbol............................ OPVN
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
------------------------------ -----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Total net revenue.............................................. $ 1,774 $ 15,624 $ 18,524 $12,311 $20,325
Gross profit (loss)............................................ (932) 95 12,174 7,045 17,677
Total operating expenses(3).................................... 15,589 42,142 29,837 22,780 18,728
Income (loss) from operations.................................. (16,521) (42,047) (17,663) (15,735) (1,051)
Net income (loss).............................................. (16,424) (42,727) (18,112) (15,459) (1,546)
Pro forma net income (loss) per share(4)....................... $ (1.15) $ (0.10)
Pro forma shares used in per share calculations(4)............. 15,751 15,775
Supplemental pro forma net income (loss) per share(5).......... $ (1.09) $ (0.07)
Supplemental pro forma shares used in per share
calculations(5).............................................. 16,251 16,275
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Total net revenue.............................................. $ 6,213 $ 5,140 $ 7,351 $ 7,834
Gross profit (loss)............................................ 5,129 4,332 6,424 6,921
Total operating expenses....................................... 7,057 6,035 6,210 6,483
Income (loss) from operations.................................. (1,928) (1,703) 214 438
Net income (loss).............................................. (2,653) (1,811) 30 235
Pro forma net income (loss) per share(4)....................... $ (0.17) $ (0.11) $ 0.00 $ 0.01
Pro forma shares used in per share calculations(4)............. 15,773 15,773 15,773 16,114
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED(6)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:

Cash and cash equivalents............................................................. $ 1,697 $ 24,677
Working capital (deficit)............................................................. (4,129) 22,421
Total assets.......................................................................... 13,947 36,927
Notes payable, less current portion................................................... 5,463 463
Stockholders' equity (deficit)........................................................ (6,222) 25,328
</TABLE>

- ---------------
(1) Based on the number of shares outstanding as of March 31, 1996. Excludes
options and warrants to purchase 1,128,158 shares of Common Stock
outstanding as of March 31, 1996 at a weighted average exercise price per
share of $1.02. See "Management -- 1992 Stock Plan" and Note 6 of Notes to
Consolidated Financial Statements.

(2) The financial data presented reflects financial data of the Company for all
years since its incorporation in June 1992.

(3) Includes (i) charges for acquired technologies of $2.6 million and $3.3
million for fiscal 1993 and 1994, respectively, and (ii) charges for
restructuring of $1.4 million in fiscal 1994.

(4) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in calculating pro forma net income
(loss) per share.

(5) Supplemental pro forma net income (loss) per share and supplemental pro
forma shares used in per share calculations gives effect to the intended use
of approximately $5.0 million of the net proceeds of this offering to retire
the outstanding principal amount of indebtedness payable to a stockholder
under the Company's subordinated debt agreement, as if such repayment had
occurred at the beginning of each period.

(6) Adjusted to reflect the sale of the 2,500,000 shares of Common Stock offered
by the Company hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

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

OpenVision, the OpenVision logo and SecureMax are registered trademarks of
the Company, and AXXiON is a trademark of the Company. This Prospectus also
includes trademarks of companies other than the Company.
------------------------

Except as set forth in the Consolidated Financial Statements or as otherwise
indicated, all information in this Prospectus (i) reflects the conversion of all
of the Company's outstanding shares of Preferred Stock into shares of Common
Stock, and the conversion of outstanding warrants to purchase Preferred Stock
into warrants to purchase Common Stock, which will occur automatically upon the
closing of this offering, (ii) does not reflect the exercise of options or
warrants after March 31, 1996, (iii) reflects a one-for-two reverse stock split
effected on April 4, 1996, (iv) includes as Common Stock 3,247,142 shares of
nonvoting Class B Common Stock and (v) assumes that the Underwriters'
over-allotment option is not exercised. Unless otherwise indicated herein,
references to Consolidated Financial Statements shall mean references to the
consolidated financial statements of OpenVision Technologies, Inc. and its
subsidiaries. See "Description of Capital Stock" and "Underwriting."

4
<PAGE> 5

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus. The discussion in this Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as those discussed elsewhere in this Prospectus.

Limited Operating History; No Assurance of Profitability; Early Stage of
Development and Deployment. The Company was incorporated in 1992 and did not
begin shipping products until March 1993. Accordingly, the Company has a very
limited operating history, which makes the prediction of future results
difficult or impossible. The Company has incurred significant net losses since
its inception, including losses of approximately $16.4 million, $42.7 million,
$18.1 million and $1.5 million for fiscal 1993, 1994, 1995 and the nine months
ended March 31, 1996, respectively. At March 31, 1996, the Company had an
accumulated deficit of approximately $78.8 million. Although the Company
achieved net income of approximately $30,000 for the quarter ended December 31,
1995 and $235,000 for the quarter ended March 31, 1996, there can be no
assurance that the Company will continue to be profitable in any future period
and recent operating results should not be considered indicative of future
financial performance. The Company is subject to the risks inherent in the
operation of a new business enterprise, and there can be no assurance that the
Company will be able to successfully address these risks. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Although the Company's strategy is to derive a significant portion of its
revenue from the licensing of software, the Company's revenue to date has been
limited. The Company's software products are designed for client/server
computing environments, which have been utilized only for the past several
years. The Company's product strategy is initially to integrate selected product
pairs to enhance systems management functionality and to integrate certain
products throughout its entire product line through the availability of a common
set of services by late 1997. Currently the Company is in the initial phase of
this product integration. The success of the Company's strategy is dependent in
significant part on its ability to integrate its products as planned and on the
Company's software products achieving market acceptance by end users and
hardware and software vendors. No assurance can be given that the Company will
successfully integrate its products as planned or that the Company's software
products will achieve market acceptance. The success of the Company's strategy
is also dependent on the Company's ability to expand its direct sales, service
and marketing organizations and to establish indirect distribution channels,
including resellers, VARs, hardware distributors, application software vendors
and systems integrators. If the Company is unable to expand its direct sales,
service and marketing organizations and develop appropriate distribution
channels on a timely basis, the Company's business, operating results and
financial condition would be materially adversely affected. See
"Business -- Products" and "-- Sales and Marketing."

Risk of Significant Fluctuations in Quarterly Operating Results. The
Company has experienced, and expects to continue to experience, significant
fluctuations in quarterly operating results that may be caused by many factors,
including, among others: the size and timing of orders; introduction or
enhancement of products by the Company or its competitors; changes in pricing
policy of the Company or its competitors; increased competition; technological
changes in computer systems and environments; the ability of the Company to
timely develop, introduce and market new products; quality control of products
sold; market readiness to deploy systems management products for distributed
computing environments; market acceptance of new products and product
enhancements; seasonality of revenue; customer order deferrals in anticipation
of new products and product enhancements; the Company's success in expanding its
sales and marketing programs; personnel changes; foreign currency exchange
rates; mix of products sold; acquisition

5
<PAGE> 6

costs; and general economic conditions. The Company's operating results are
highly sensitive to the timing of larger orders. Orders typically range from a
few thousand dollars to several hundred thousand dollars. In the quarter ended
December 31, 1995, the Company recognized license revenue of $1.4 million
related to one order and in the quarter ended December 31, 1993, the Company
recognized license revenue of $0.8 million related to another order. Revenue is
difficult to forecast because the client/server systems management software
market is an emerging market that is highly fragmented and subject to rapid
change. The Company's revenue in its first fiscal quarter is typically lower
than its revenue in the immediately preceding quarter ended June 30 due to
seasonality in customer buying patterns and the structure of the Company's sales
commission programs which can increase sales incentives, in the Company's fourth
fiscal quarter. The Company expects this seasonality to continue. The Company's
sales cycle varies substantially from customer to customer. As a result of all
of these factors, the Company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance. The Company has had net income only
in the quarters ended December 31, 1995 and March 31, 1996, and there can be no
assurance that the Company will have net income in future quarters or on an
annual basis.

The Company's future revenue is difficult to predict, and the Company has
in the past not achieved its revenue expectations. Because the Company generally
ships software products within a short period after receipt of an order, it
typically does not have a material backlog of unfilled orders, and revenue in
any quarter is substantially dependent on orders booked and shipped in that
quarter. In addition, the Company typically recognizes a significant portion of
license revenue in the last two weeks of a quarter. The Company's expense levels
are based, in part, on its expectations as to future revenue and to a large
extent are fixed in the short term. The Company expects to increase expense
levels in each of the next several quarters primarily to support increased sales
and marketing efforts and research and development efforts. The Company is
unable to adjust expenses in the short term to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall of revenue in relation
to the Company's expectations or any material delay of customer orders would
have an immediate adverse effect on its business, operating results and
financial condition and on the Company's ability to achieve or maintain
profitability. Due to all the foregoing factors, it is possible that in future
quarters the Company's operating results may be below the expectations of public
market analysts and investors. In such event, the price of the Company's Common
Stock would be materially and adversely affected. See "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

Rapid Technological Change and Requirement for Frequent Product
Transitions. The market for the Company's products is intensely competitive,
highly fragmented and characterized by rapid technological developments,
evolving industry standards and rapid changes in customer requirements. The
introduction of products embodying new technologies, the emergence of new
industry standards or changes in customer requirements could render the
Company's existing products obsolete and unmarketable. As a result, the
Company's success depends upon its ability to continue to enhance existing
products, respond to changing customer requirements and develop and introduce in
a timely manner new products that keep pace with technological developments and
emerging industry standards. Customer requirements include, but are not limited
to, operability across distributed and changing heterogeneous hardware
platforms, operating systems, relational databases and networks. For example, as
certain of the Company's customers start to utilize WindowsNT or other emerging
operating platforms, it will be necessary for the Company to enhance its AXXiON
products to operate on such platforms in order to meet these customers'
requirements. There can be no assurance that the Company's products will achieve
market acceptance or will adequately address the changing needs of the
marketplace or that the Company will be successful in developing and marketing
enhancements to its existing products or new products incorporating new
technology on a timely basis. If the Company is unable to develop and introduce
new products, or enhancements to existing products, in a timely manner in
response to changing market conditions

6
<PAGE> 7

or customer requirements, the Company's business, operating results and
financial condition will be materially and adversely affected.

The Company has a number of ongoing development projects. During January
and February 1996, the Company released new versions of its AXXiON-NetBackup,
AXXiON-HA, AXXiON-HSM and AXXiON-SecureMax products that incorporate a
three-tiered client/server architecture. There can be no assurance that the
features incorporated in these products are the features required to achieve
market acceptance. In addition, the Company is conducting ongoing research and
development of new and improved software products. The Company believes that it
will need to devote significant time and resources to these efforts, and no
assurance can be given that such efforts will be successful. From time to time
the Company or its competitors may announce new products, capabilities or
technologies that have the potential to replace or shorten the life cycles of
the Company's existing products. There can be no assurance that announcements of
currently planned or other new products will not cause customers to defer
purchasing existing Company products. The Company has in the past experienced
delays in product development, and there can be no assurance that the Company
will not experience further delays in connection with its current product
development or future development activities. Delays or difficulties associated
with new product introductions or product enhancements could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Research and Development."

Risk of Software Defects. Software products as complex as those offered by
the Company frequently contain errors or defects, especially when first
introduced or when new versions or enhancements are released. Despite product
testing, the Company has in the past released products with defects, discovered
software errors in certain of its new products after introduction and
experienced delayed or lost revenue during the period required to correct these
errors. In late 1993, the Company introduced three products (none of which
continue to be offered by the Company) in which defects were subsequently
discovered. These defects included architectural problems that resulted in
increased maintenance costs and code management problems. As a result of these
defects, the Company experienced adverse customer reactions and negative
publicity, which harmed the Company's reputation in the marketplace, and
adversely affected the Company's business and operating results. Although the
Company believes it has repaired its reputation in the marketplace and that
acceptance of its current products is not adversely affected by the past
defects, this past harm to the Company's reputation could adversely affect
future market acceptance of the Company's products. The Company regularly
introduces enhancements to its existing products and periodically introduces new
products. During January and February 1996, the Company released new versions of
its AXXiON-NetBackup, AXXiON-HA, AXXiON-HSM and AXXiON-SecureMax products that
incorporate a three-tiered client/server architecture. There can be no assurance
that despite testing by the Company and by current and potential customers,
defects and errors will not be found in existing products or in new products,
versions or enhancements after commencement of commercial shipments. Any such
defects and errors could result in adverse customer reactions, negative
publicity regarding the Company and its products, harm to the Company's
reputation, loss of or delay in market acceptance or require expensive product
changes, any of which could have a material adverse effect upon the Company's
business, operating results and financial condition. See "Business -- Products."

Intense Competition. The market for client/server systems management
software is intensely competitive, highly fragmented and characterized by rapid
technological developments, evolving standards and rapid changes in customer
requirements. To maintain and improve its position in this market, the Company
must continue to enhance current products, enhance the operability of its
products with one another and develop new products in a timely fashion. The
Company competes primarily with: (i) hardware and software vendors that offer a
management platform or framework to support vendor-created and third-party
systems management applications; (ii) vendors that provide systems management
software for the mainframe environment and are migrating their products to the
client/server environment; (iii) vendors that provide "point" products that
address specific

7
<PAGE> 8

problems and offer specific functionality, such as job scheduling or security
audit tools; and (iv) vendors that provide integrated and interoperable
solutions. The Company believes that its principal competitors that offer
products in all of its product areas -- storage, operations and security -- are
Computer Associates International, Inc., Hewlett-Packard Company, IBM
Corporation, Platinum technology, Inc. and several smaller private companies.
The Company believes that additional principal competitors with respect to each
of the Company's three product areas include: Legato Systems, Inc. and Spectra
Logic for storage; Novadigm, Inc., Tivoli Systems Inc. (which has been acquired
by IBM Corporation), BMC Software, Inc., Compuware Corporation and Sun
Microsystems, Inc. for operations; and Axent Technologies and Cybersafe
Corporation for security. In competing with hardware vendors, the Company may be
at a competitive disadvantage because hardware vendors are able to package
combinations of hardware and software, thereby offering the customer a
single-vendor solution at a lower total cost.

Many of the Company's competitors have longer operating histories and have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base, than
the Company. The Company's current and future competitors could introduce
products with more features, higher scalability, greater functionality and lower
prices than the Company's products. These competitors could also bundle existing
or new products with other, more established products in order to compete with
the Company. The Company's focus on client/server systems management software
may be a disadvantage in competing with vendors that offer a broader range of
products. Moreover, as the client/server systems management software market
develops, a number of companies with significantly greater resources than those
of the Company could attempt to increase their presence in this market by
acquiring or forming strategic alliances with competitors or business partners
of the Company. For example, IBM Corporation recently purchased Tivoli Systems
Inc., a competitor of the Company. In addition, because there are relatively low
barriers to entry for the software market, the Company expects additional
competition from other established and emerging companies. Increased competition
is likely to result in price reductions, reduced gross margins and loss of
market share, any of which could materially and adversely affect the Company's
business, operating results and financial condition. Any material reduction in
the price of the Company's products would negatively affect gross margins and
would require the Company to increase software unit sales in order to maintain
gross profits. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and the failure to
do so would have a material adverse effect upon the Company's business,
operating results and financial condition. See "Business -- Competition."

Dependence on Growth of Market for Client/Server Systems Management
Software and Services. All of the Company's business is in the market for
client/server systems management software and services, which is still an
emerging market that is intensely competitive, highly fragmented and
characterized by rapid technological developments, evolving industry standards
and rapid changes in customer requirements. The Company's future financial
performance will depend in large part on continued growth in the number of
companies adopting client/server technology and systems management solutions for
their client/server computing environments. There can be no assurance that the
market for client/server systems management software and services will continue
to grow. If the client/server systems management software and services market
fails to grow or grows more slowly than the Company currently anticipates, the
Company's business, operating results and financial condition would be
materially and adversely affected. During recent years, segments of the computer
industry have experienced significant economic downturns characterized by
decreased product demand, production overcapacity, price erosion, work slowdowns
and layoffs. The Company's financial performance may in the future experience
substantial fluctuations as a consequence of such industry patterns, general
economic conditions affecting the timing of orders, and other factors affecting
capital spending. There can be no assurance that such factors will not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Industry Background."

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<PAGE> 9

Product Sales Concentration. The Company's storage products accounted for
38% and 54% of the Company's license revenue in fiscal 1995 and the nine months
ended March 31, 1996, respectively. The Company believes its storage products
will continue to account for a significant portion of its license revenue in the
foreseeable future. The Company's AXXiON-HA product accounted for 13% and 17% of
the Company's license revenue in fiscal 1995 and the nine months ended March 31,
1996, respectively. A decline in unit price or demand for the Company's storage
products or its AXXiON-HA product as a result of competition, technological
change or other factors could have a material adverse effect on the business,
operating results and financial condition of the Company. See
"Business -- Products."

Dependence on and Need to Hire Additional Key Personnel; Management of
Growth. The Company's future performance depends to a significant degree upon
the continued service of its key members of management, as well as marketing,
sales, consulting and product development personnel, none of whom are bound by
an employment contract. The Company does not have and does not intend to obtain
key man life insurance on its personnel. The loss of one or more of the
Company's key personnel could have a material adverse effect on the Company's
business, operating results and financial condition. The Company believes its
future success will also depend in large part upon its ability to attract and
retain highly skilled management, marketing, sales, consulting and product
development personnel. Competition for such personnel is intense, and there can
be no assurance that the Company can retain its key employees or that it will be
successful in attracting, assimilating and retaining such personnel in the
future. In recent periods, after a significant reduction in personnel as part of
a restructuring in late fiscal 1994 and the first half of fiscal 1995, the
Company increased the number of employees, primarily in its consulting, product
development and sales and marketing organizations. These reductions and
increases in personnel have resulted in substantial demands on the Company's
management resources. The Company's Chief Financial Officer joined the Company
in December 1995. Difficulties in assimilating new personnel and departures of
existing personnel, particularly in key positions, in the past has resulted in
increased employee turnover, increased employee training and replacement costs,
decreased sales productivity and delays in product development schedules, and
may in the future result in these and other adverse effects, any of which may be
material to the Company's business, operating results and financial condition.
Failure to attract, assimilate and retain key personnel could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Employees" and "Management -- Executive Officers and
Directors."

The Company's ability to manage its staff and growth effectively will
require it to continue to improve its operational, financial and management
controls, reporting systems and procedures, to train, motivate and manage its
employees and, as required, install new management information and control
systems. There can be no assurance that the Company will implement improvements
to such management information and control systems in an efficient and timely
manner. The Company generally recognizes revenue from license agreements upon
shipment of the software, if no significant future obligations remain and
collection of the resulting receivable is probable. For those agreements with
significant future obligations, revenue is recognized when the obligations are
satisfied. In fiscal 1994 the Company recognized revenues in several
transactions and subsequently learned that certain additional commitments that
were not recorded in the written contracts had been made with customers that
entailed significant future obligations. As a result, in fiscal 1995 the Company
restated its fiscal 1994 results of operations to reverse approximately $3.2
million of revenue which it previously recognized from these customers. The
Company subsequently implemented procedures and business policies to improve its
internal controls for revenue recognition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Risks Associated With International Operations. International revenue
(from sales outside the United States and Canada) accounted for 0%, 9%, 29% and
27% in fiscal 1993, 1994, 1995 and the nine months ended March 31, 1996,
respectively. The Company believes that its success depends

9
<PAGE> 10

upon continued expansion of its international operations. The Company currently
has sales and service offices in Canada, England, Germany and France. The
Company also has 17 resellers in Asia Pacific, Mexico, South America and the
Middle East. International expansion may require that the Company establish
additional foreign offices, hire additional personnel and recruit additional
international resellers. This may require significant management attention and
financial resources and could adversely affect the Company's operating margins.
To the extent the Company is unable to effect these additions efficiently and in
a timely manner, its growth, if any, in international sales will be limited, and
the Company's business, operating results and financial condition could be
materially and adversely affected. There can be no assurance that the Company
will be able to maintain or increase international market demand for its
products.

The Company's international business involves a number of risks, including
lack of acceptance of localized products, cultural differences in the conduct of
business, longer accounts receivable payment cycles, greater difficulty in
accounts receivable collection, seasonality due to the slow-down in European
business activity during the Company's first fiscal quarter, unexpected changes
in regulatory requirements and royalty and withholding taxes that restrict the
repatriation of earnings, tariffs and other trade barriers, and the burden of
complying with a wide variety of foreign laws. The Company's international sales
are generated primarily through its international sales subsidiaries and are
currently denominated in local currency, creating a risk of foreign currency
translation gains and losses. To the extent profit is generated or losses are
incurred in foreign countries, the Company's effective income tax rate may be
materially and adversely affected. In some markets, localization of the
Company's products is essential to achieve market penetration. The Company may
incur substantial costs and experience delays in localizing its products, and
there can be no assurance that any localized product will ever generate
significant revenue. There can be no assurance that any of the factors described
herein will not have a material adverse effect on the Company's future
international sales and, consequently, its business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Sales and Marketing."

Risks Associated with Obtaining Export Licenses. The Company's
AXXiON-Authenticate product includes encryption technology that subjects it to
certain federal regulations that require an export license from the U.S. State
Department for the international shipment of that product. Obtaining an export
license from the U.S. State Department has generally taken the Company
approximately three months, but can take longer in the event that the U.S. State
Department requires modifications to products for national security and other
purposes deemed appropriate by the U.S. State Department. It has taken the
Company as long as six months to obtain an export license for a version of
AXXiON-Authenticate. The Company may experience delays in obtaining necessary
licenses for security-related products in the future, which could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Products."

Dependence on Proprietary Technology; Risks of Infringement. The Company's
success depends upon its proprietary technology. The Company relies on a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and licensing arrangements to establish and protect its proprietary
rights. The Company presently has no patents but intends to file patent
applications in the future. As part of its confidentiality procedures, the
Company generally enters into non-disclosure agreements with its employees,
distributors and corporate partners, and license agreements with respect to its
software, documentation and other proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's products or technology without authorization, or to
develop similar technology independently. Policing unauthorized use of the
Company's products is difficult and although the Company is unable to determine
the extent to which piracy of its software products exists, software piracy can
be expected to be a persistent problem. In selling its products, the Company
relies on signed license agreements, but may in the future rely on "shrink wrap"
licenses that are not signed by licensees and, therefore, may be unenforceable
under the laws of certain jurisdictions. In

10
<PAGE> 11

addition, effective protection of intellectual property rights is unavailable or
limited in certain foreign countries. There can be no assurance that the
Company's protection of its proprietary rights, including any patent that may be
issued, will be adequate or that the Company's competitors will not
independently develop similar technology, duplicate the Company's products or
design around any patents issued to the Company or other intellectual property
rights.

The Company is not aware that any of its products infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim such infringement by the Company with respect to current or
future products. The Company expects that software product developers will
increasingly be subject to such claims as the number of products and competitors
in the Company's industry segment grows and the functionality of products in the
industry segment overlaps. Any such claims, with or without merit, could result
in costly litigation that could absorb significant management time, which could
have a material adverse effect on the Company's business, operating results and
financial condition. Such claims might require the Company to enter into royalty
or license agreements. 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 business, operating results and
financial condition. See "Business -- Proprietary Rights."

Past and Future Acquisitions. Between October 1992 and July 1993, the
Company concluded an aggregate of ten acquisitions of companies, divisions of
companies or products. The Company may make additional acquisitions in the
future. Acquisitions of companies, divisions of companies or products entail
numerous risks, including an inability to successfully assimilate acquired
operations and products, diversion of management's attention and loss of key
employees of acquired companies. Several of the products acquired required
significant additional development, such as restructuring software codes to
support larger scale environments, porting products to additional operating
system platforms, regression testing and improving network and device support,
before they could be marketed and some failed to generate any revenue for the
Company. In addition, the numerous acquisitions resulted in the Company managing
a research and development effort that was spread over as many as ten
development centers. The distributed research and development effort resulted in
redundant capital equipment needs, overlapping products, disparately developed
products that the Company was unable to integrate or had difficulty integrating,
substantial additional travel, conflicting employee cultures and difficulty
implementing and managing engineering processes and standards setting, all of
which had a material adverse effect on the Company's business, operating results
and financial condition in fiscal 1994 and the first half of fiscal 1995. No
assurance can be given that the Company will not incur these same problems in
future acquisitions. Any such problems could have a material adverse effect on
the Company's business, operating results and financial condition. In addition,
future acquisitions by the Company may result in dilutive issuances of equity
securities, the incurrence of additional debt, large one-time write-offs and the
creation of goodwill or other intangible assets that could result in
amortization expense. These factors could have a material adverse effect on the
Company's business, operating results and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Legal Matters."

Product Liability. The Company's license agreements with customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. To the extent the Company may in the future
rely on "shrink wrap" licenses that are not signed by licensees and, therefore,
may be unenforceable under the laws of certain jurisdictions, the limitation of
liability provisions contained in such license agreements may not be effective.
The Company's products are generally used to manage data critical to
organizations, and, as a result, the sale and support of products by the Company
may entail the risk of product liability claims. Although the Company maintains
errors and omissions product liability insurance, a successful liability claim
brought against the Company could have a material adverse effect upon the
Company's business, operating results and financial condition. See
"Business -- Legal Matters."

11
<PAGE> 12

Uncertainty of Realizability of Deferred Tax Assets. At December 31, 1995,
the Company had approximately $28.5 million of gross deferred tax assets
comprised primarily of net operating loss carryforwards. The Company believes
that, based on a number of factors, the available objective evidence creates
sufficient uncertainty regarding the realizability of the deferred tax assets
such that a full valuation allowance has been recorded. These factors include
the Company's history of net losses since its inception, the Company's limited
profitability in recent periods, the fact that the market in which the Company
competes is intensely competitive and characterized by rapidly changing
technology, and the uncertainty regarding market acceptance of new versions of
the Company's AXXiON products. The Company believes that, based on the currently
available evidence, it is more likely than not that the Company will not
generate taxable income and accordingly will not realize the Company's deferred
tax assets. The Company will continue to assess the realizability of the
deferred tax assets based on actual and forecasted operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

No Prior Public Market; Determination of Public Offering Price; Possible
Volatility of Stock Price. Prior to this offering, there has been no public
market for shares of the Common Stock, and there can be no assurance that an
active public trading market will develop following completion of this offering
or, if developed, that such market will be sustained. The initial public
offering price of the shares of Common Stock was determined by negotiation
between the Company and representatives of the Underwriters and will not
necessarily reflect the market price of the Common Stock following this
offering. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price.

The market price for the Common Stock following this offering will be
affected by a number of factors, including the announcement of new products or
product enhancements by the Company or its competitors, quarterly variations in
the Company's results of operations or results of operations of its competitors
or companies in related industries, changes in earnings estimates or
recommendations by securities analysts, developments in the Company's industry,
general market conditions and other factors, including factors unrelated to the
operating performance of the Company or its competitors. In addition, stock
prices for many companies in the technology and emerging growth sectors have
experienced wide fluctuations that have often been unrelated to the operating
performance of such companies. Such factors and fluctuations, as well as general
economic, political and market conditions, such as recessions, may materially
adversely affect the market price of the Company's Common Stock.

Control By Management and Current Stockholders. After this offering, the
Company's officers and directors, and their affiliates, in the aggregate, will
control 59.8% of the Company's Common Stock with full voting rights and
beneficially own 67.1% of the Company's Common Stock. In particular, Warburg,
Pincus Investors, L.P. ("Warburg") will control 49.0% of the Company's Common
Stock with full voting rights and will beneficially own 58.2% of the Company's
Common Stock. As a result, these stockholders will be able to exercise
significant influence over all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions. In
addition, the Board of Directors has the authority to issue undesignated
Preferred Stock and, subject to certain limitations, to determine the rights,
preferences, privileges and restrictions, including voting rights, of such
shares without any further vote or action by the stockholders. The voting power
of Warburg and the Company's officers or the issuance of Preferred Stock under
certain circumstances could have the effect of delaying or preventing a change
in control of the Company. The Company has entered into agreements with its
officers and directors indemnifying them against losses they may incur in legal
proceedings arising from their service to the Company. See "Principal and
Selling Stockholders" and "Description of Capital Stock."

Effect of Certain Charter Provisions; Antitakeover Effects of Certificate
of Incorporation, Bylaws and Delaware Law. The Company's Board of Directors has
the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions,

12
<PAGE> 13

including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of 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 could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. In addition, the
Company is subject to the antitakeover provisions of Section 203 of the Delaware
General Corporation Law, which will prohibit the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change of control of the Company. Further, certain provisions of
the Company's Certificate of Incorporation and Bylaws and of Delaware law could
delay or make more difficult a merger, tender offer or proxy contest involving
the Company, which could adversely affect the market price of the Company's
Common Stock. See "Description of Capital Stock -- Preferred Stock" and
"-- Antitakeover Effects of Provisions of the Certificate of Incorporation,
Bylaws and Delaware Law."

Shares Eligible for Future Sale; Registration Rights. Sales of a
substantial number of shares of Common Stock in the public market following this
offering could adversely affect the market price for the Company's Common Stock.
The number of shares of Common Stock available for sale in the public market is
limited by restrictions under the Securities Act of 1933, as amended (the
"Securities Act"), and lock-up agreements under which the holders of such shares
have agreed not to sell or otherwise dispose of any of their shares for a period
of 180 days after the effective date of this offering without the prior written
consent of Alex. Brown & Sons Incorporated. However, Alex. Brown & Sons
Incorporated may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to lock-up agreements. As a result
of these restrictions, based on shares outstanding and options granted as of
March 31, 1996, the 2,735,000 shares offered hereby will be eligible for sale on
the date of this Prospectus, 11,525,636 shares will be eligible for sale 180
days after the date of this Prospectus and 3,746,251 shares will be eligible for
sale pursuant to Rule 144 upon the expiration of their respective two-year
holding periods. In addition, the Company intends to register on a registration
statement on Form S-8/S-3, 3,597,474 shares of Common Stock subject to
outstanding options or reserved for issuance under the Company's 1992 Stock
Plan, the 1996 Director Option Plan and 1996 Employee Stock Purchase Plan and
648,869 shares previously issued pursuant to the 1992 Stock Plan, which shares
will be eligible for sale upon expiration of the lock-up agreements referred to
above, subject to vesting and exercisability restrictions. Furthermore, upon
expiration of the lock-up agreements referred to above, holders of approximately
14,504,452 shares of Common Stock and the holder of a warrant to purchase 21,739
shares of Common Stock will be entitled to certain registration rights with
respect to such shares. If such holders, by exercising their registration
rights, cause a large number of shares to be registered and sold in the public
market, the sale of such sales could have a material adverse effect on the
market price for the Company's Common Stock and could materially adversely
affect the Company's ability to raise additional capital when or if required.
See "Shares Eligible for Future Sale."

Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the book value per share of Common Stock. Investors
purchasing shares of Common Stock in this offering will experience immediate and
substantial dilution in net tangible book value of $12.59 per share. The Company
has issued options and warrants at prices significantly below the public
offering price. To the extent outstanding options and warrants to purchase
shares of Common Stock are exercised, there will be further dilution in net
tangible book value. See "Dilution."

Lack of Dividends. The Company has not paid any cash dividends and does
not anticipate paying any cash dividends in the foreseeable future. In addition,
the Company's line of credit agreement currently prohibits the payment of cash
dividends on its capital stock without the lender's consent. See "Dividend
Policy."

13
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock being offered by the Company are estimated to be $31.6 million,
after deducting underwriting discounts and commissions and estimated offering
expenses ($36.9 million if the over-allotment option is exercised in full). The
Company presently intends to apply approximately $2.5 million of the net
proceeds to the repayment of outstanding indebtedness plus accrued interest
thereon under the Company's bank line of credit. This line of credit, which has
been used to fund the Company's working capital requirements, bears interest at
the London Interbank Offered Rate (LIBOR) plus 5.125% and expires in October
1996. The Company also presently intends to apply approximately $6.1 million of
the net proceeds to the repayment of outstanding indebtedness plus accrued
interest thereon payable to a stockholder under the Company's subordinated debt
agreement. This debt, which has been used to fund the Company's long term
capital requirements, bears interest at the prime rate plus 1.0% and is due in
July 1997. The Company expects to use the balance of the net proceeds for its
working capital requirements and other general corporate purposes. The Company
may also use a portion of the net proceeds to fund acquisitions of complementary
companies, divisions of companies or products, although there are no current
agreements or negotiations with respect to any such transactions. Pending such
uses, the Company will invest the net proceeds in short-term, investment-grade,
income producing securities. The Company will not receive any proceeds from the
sale of Common Stock by the Selling Stockholders. See "Certain Transactions."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock and does not expect to pay cash dividends in the foreseeable future. In
addition, the Company's line of credit agreement currently prohibits the payment
of cash dividends on its capital stock without the lender's consent. Any payment
of cash dividends on shares of Common Stock will be within the discretion of the
Company's Board of Directors and will depend upon the earnings of the Company,
the Company's capital requirements, applicable requirements of the Delaware
General Corporation Law and other factors that are considered relevant by the
Company's Board of Directors.

14
<PAGE> 15

CAPITALIZATION

The following table sets forth the pro forma consolidated capitalization of
the Company at March 31, 1996 after giving effect to the conversion of all
outstanding shares of Preferred Stock into Common Stock and the filing of an
Amended and Restated Certificate of Incorporation upon the closing of the
offering and as adjusted to reflect the sale of the 2,500,000 shares of Common
Stock offered by the Company hereby, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under bank line of credit................................ $ 2,504 $ --
========= ==========
Notes payable, less current portion(1).............................. $ 5,463 $ 463
--------- -----------
Stockholders' equity (deficit):
Convertible Preferred stock: $.01 par value, 5,000,000 shares
authorized; no shares outstanding.............................. -- --
Common stock: $.001 par value, 50,000,000 shares authorized,
12,259,745 shares issued and outstanding pro forma; 14,759,745
shares issued and outstanding as adjusted(2)................... 12 15
Class B Common stock: $.001 par value, 3,400,000 shares
authorized, 3,247,142 shares issued and outstanding pro forma
and
as adjusted.................................................... 3 3
Additional paid-in-capital........................................ 73,110 104,657
Accumulated deficit............................................... (78,809 ) (78,809)
Notes receivable from stockholders................................ (302 ) (302)
Deferred compensation............................................. (121 ) (121)
Foreign currency translation adjustment........................... (115 ) (115)
--------- -----------
Total stockholders' equity (deficit)........................... (6,222 ) 25,328
--------- -----------
Total capitalization (deficit)............................... $ (759 ) $ 25,791
========= ==========
</TABLE>

- ---------------
(1) See Note 5 of Notes to Consolidated Financial Statements.

(2) Excludes (i) 1,093,919 shares of Common Stock issuable upon the exercise of
stock options outstanding as of March 31, 1996 at a weighted average
exercise price of $0.81 per share, (ii) 34,239 shares of Common Stock
issuable upon the exercise of outstanding warrants at a weighted average
exercise price of $7.48 per share, 1,953,555 shares of Common Stock reserved
for grant of future options or direct issuances as of March 31, 1996 under
the Company's 1992 Stock Plan, 250,000 shares reserved for issuance under
the 1996 Director Option Plan and 300,000 shares reserved for issuance under
the 1996 Employee Stock Purchase Plan. See "Management -- 1992 Stock Plan,"
"-- 1996 Director Option Plan," "-- 1996 Employee Stock Purchase Plan," and
Note 6 of Notes to Consolidated Financial Statements.

15
<PAGE> 16

DILUTION

The pro forma net tangible book value of the Company at March 31, 1996 was
$(6,222,000), or $(0.40) per share of Common Stock. "Pro forma tangible book
value per share" represents the amount of the Company's total tangible assets
less the Company's total liabilities divided by the number of shares of Common
Stock outstanding, assuming conversion of each outstanding share of Preferred
Stock into one share of Common Stock. After giving effect to the sale of the
2,500,000 shares of Common Stock offered by the Company hereby, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company and the initial application of the net proceeds therefrom, the
pro forma net tangible book value of the Company at March 31, 1996 would have
been $25,328,000 or $1.41 per share of Common Stock, representing an immediate
increase in net tangible book value of $1.81 per share to existing stockholders
and an immediate dilution of $12.59 per share to persons purchasing shares of
Common Stock offered hereby ("New Investors"). The following table illustrates
this dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share.......................... $14.00
Pro forma net tangible book value per share at March 31,
1996........................................................ $(0.40)
Increase in pro forma net tangible book value per share
attributable to New Investors............................... 1.81
------
Pro forma net tangible book value per share after offering....... 1.41
------
Dilution per share to New Investors.............................. $12.59
======
</TABLE>

The following table sets forth, as of March 31, 1996, the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company and the average price paid per share by existing stockholders and to be
paid by purchasers of shares of Common Stock offered hereby before deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company.

<TABLE>
<CAPTION>
SHARES PURCHASED(1)
TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 15,506,887 86.1% $ 74,142,000 67.9% $ 4.78
New Investors....................... 2,500,000 13.9 35,000,000 32.1 14.00
---------- --- ---------- ---
Total..................... 18,006,887 100.0% $109,142,000 100.0%
========== === ========== ===
</TABLE>

- ---------------
(1) Sales by the Selling Stockholders in the offering made hereby will reduce
the number of shares held by existing stockholders to 15,271,887 shares, or
84.8% of the total number of shares of Common Stock outstanding, and will
increase the number of shares held by New Investors to 2,735,000 shares, or
15.2% of the total number of shares of Common Stock outstanding after this
offering.

The above tables exclude (i) 1,093,919 shares issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $0.81 and (ii)
34,239 shares issuable upon the exercise of outstanding warrants at a weighted
average exercise price of $7.48. To the extent outstanding options or warrants
are exercised, New Investors will experience further dilution. See
"Management -- 1992 Stock Plan," "-- 1996 Director Option Plan" and "-- 1996
Employee Stock Purchase Plan" and Note 6 of Notes to Consolidated Financial
Statements."

16
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data is qualified by
reference to, and should be read in conjunction with, the Company's Consolidated
Financial Statements and notes thereto included elsewhere in this Prospectus.
The selected consolidated balance sheet data as of June 30, 1994 and 1995 and
the selected consolidated statement of operations data for the years ended June
30, 1993, 1994 and 1995 have been derived from and should be read in conjunction
with the audited consolidated financial statements of the Company and the notes
thereto included elsewhere in this Prospectus. The consolidated statement of
operations data for the nine months ended March 31, 1995 and 1996 have been
derived from unaudited consolidated financial statements that have been prepared
on the same basis as the audited consolidated financial statements and, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial position
and results of operations of the Company for the unaudited interim period.
Operating results for the nine months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the entire year ended June
30, 1996.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------ ------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenue:
License..................................................... $ 1,494 $ 11,520 $ 10,828 $ 6,690 $14,426
Service..................................................... 280 4,104 7,696 5,621 5,899
-------- -------- -------- -------- -------
Total net revenue....................................... 1,774 15,624 18,524 12,311 20,325
-------- -------- -------- -------- -------
Cost of revenue:
License..................................................... 2,160 10,598 1,787 1,520 979
Service..................................................... 546 4,931 4,563 3,746 1,669
-------- -------- -------- -------- -------
Total cost of revenue................................... 2,706 15,529 6,350 5,266 2,648
-------- -------- -------- -------- -------
Gross profit (loss)........................................... (932) 95 12,174 7,045 17,677
Operating expenses:
Selling and marketing....................................... 1,785 14,245 15,538 11,591 11,164
Research and development.................................... 4,483 14,794 7,541 5,762 4,420
General and administrative.................................. 6,727 8,361 6,758 5,427 3,144
Acquired technologies....................................... 2,594 3,295 -- -- --
Restructuring............................................... -- 1,447 -- -- --
-------- -------- -------- -------- -------
Total operating expenses................................ 15,589 42,142 29,837 22,780 18,728
-------- -------- -------- -------- -------
Loss from operations.......................................... (16,521) (42,047) (17,663) (15,735) (1,051)
Other income (expense), net................................... 97 (680) (449) 276 (495)
-------- -------- -------- -------- -------
Loss before income taxes...................................... (16,424) (42,727) (18,112) (15,459) (1,546)
Income tax.................................................... -- -- -- -- --
-------- -------- -------- -------- -------
Net loss...................................................... $(16,424) $(42,727) $(18,112) $(15,459) $(1,546)
======== ======== ======== ======== =======
Pro forma net loss per share(2)............................... $ (1.15) $ (0.10)
Pro forma shares used in per share calculations(2)............ 15,751 15,775
Supplemental pro forma net income (loss) per share(3)......... $ (1.09) $ (0.07)
Supplemental pro forma shares used in per share
calculations(3)............................................. 16,251 16,275
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------------------ ---------
1993 1994 1995 1996
-------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Cash and cash equivalents............................................ $ 2,290 $ 4,724 $ 4,083 $ 1,697
Working capital (deficit)............................................ (2,800) (344) (2,726) (4,129 )
Total assets......................................................... 21,810 21,889 13,645 13,947
Notes payable, less current portion.................................. 5,300 8,505 6,232 5,463
Stockholders' equity (deficit)....................................... 8,578 (1,580) (4,797) (6,222 )
</TABLE>

- ---------------
(1) The financial data presented reflects financial data of the Company for all
years since its incorporation in June 1992.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in calculating pro forma net loss per
share.
(3) Supplemental pro forma net income (loss) per share and supplemental pro
forma shares used in per share calculations gives effect to the intended use
of approximately $5.0 million of the net proceeds of this offering to retire
the outstanding principal amount of indebtedness payable to a stockholder
under the Company's subordinated debt agreement, as if such repayment had
occurred at the beginning of each period.

17
<PAGE> 18

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

This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Prospectus contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly 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" and "Business."

OVERVIEW

OpenVision designs, develops, markets and supports systems management
software for large organizations with client/server computing environments. The
Company currently offers software products for client/server computing across
three systems management product lines and provides a range of services,
including maintenance, technical support, consulting and training. The Company
markets its products internationally through a direct sales force, distributors
and resellers.

The Company has a very limited operating history, which makes the
prediction of future results difficult or impossible. The Company has incurred
significant net losses since its inception, including losses of approximately
$16.4 million, $42.7 million, $18.1 million and $1.5 million for fiscal 1993,
1994, 1995 and the nine months ended March 31, 1996, respectively. At March 31,
1996, the Company had an accumulated deficit of approximately $78.8 million.
Although the Company achieved net income of approximately $30,000 for the
quarter ended December 31, 1995 and $235,000 for the quarter ended March 31,
1996, there can be no assurance that the Company will continue to be profitable
in any future period and recent operating results should not be considered
indicative of future financial performance.

The Company's operating results in the past five fiscal quarters have
benefited from increased market acceptance of the Company's products and a
significant reduction in operating expenses resulting from expense and headcount
reductions implemented in the Company's restructuring in late fiscal 1994 and
the first half of fiscal 1995. The Company was incorporated in June 1992 and has
acquired a significant part of its technology through ten acquisitions of
companies, divisions of companies or products, all of which were completed prior
to July 31, 1993. These transactions were accounted for under the purchase
method of accounting. See Note 11 of Notes to Consolidated Financial Statements.
The numerous acquisitions resulted in the Company managing a distributed
development effort with as many as ten development centers and a significant
increase in number of staff. Several of the products acquired required
significant additional development before they could be marketed and some failed
to generate any revenue for the Company. In addition, the Company quickly made
large investments in capital equipment to support this organization.

During fiscal 1994, the Company's infrastructure increased primarily as a
result of the acquisitions and in anticipation of higher revenue, which did not
materialize to the Company's expectations. The Company believes that the
client/server systems management market did not evolve as quickly as it
expected, and the sales cycle was longer than originally anticipated. Because of
the impact of the acquisitions and the slower than expected revenue growth,
during late fiscal 1994 and the first half of fiscal 1995, the Company
implemented a restructuring plan involving a reduction of overlapping positions
within the acquired companies, consolidation of development centers, and
reorganization of the sales force. The restructuring plan resulted in a
reduction in more than 100 employees and the vacating of noncancelable operating
leases. During fiscal 1995, the Company disposed of a product that did not fit
its target market through an asset sale and eliminated duplicate product lines.
Operating results have improved since the restructuring.

18
<PAGE> 19

to enhance systems management functionality and to integrate certain products
throughout its entire product line through the availability of a common set of
services by late 1997. Currently the Company is in the initial phase of this
product integration. The success of the Company's strategy is dependent in
significant part on its ability to integrate its products as planned and on the
Company's software products achieving market acceptance by end users and
hardware and software vendors. No assurance can be given that the Company will
successfully integrate its products as planned or that the Company's software
products will achieve market acceptance. The success of the Company's strategy
is also dependent on the Company's ability to expand its direct sales, service
and marketing organizations and to establish indirect distribution channels,
including resellers, VARs, hardware distributors, application software vendors
and systems integrators. If the Company is unable to expand its direct sales,
service and marketing organizations and develop appropriate distribution
channels on a timely basis, the Company's business, operating results and
financial condition would be materially adversely affected.

All of the Company's business is in the market for client/server systems
management software and services, which is still an emerging market that is
intensely competitive, highly fragmented and characterized by rapid
technological developments, evolving industry standards and rapid changes in
customer requirements. The Company's future financial performance will depend in
large part on continued growth in the number of companies adopting client/server
technology and systems management solutions for their client/server computing
environments. There can be no assurance that the market for client/server
systems management software and services will continue to grow. If the
client/server systems management software and services market fails to grow or
grows more slowly than the Company currently anticipates, the Company's
business, operating results and financial condition would be materially and
adversely affected.

The Company acquired its sales subsidiaries in Germany and the United
Kingdom in June 1993, and, consequently, no revenue was generated by
international operations in fiscal 1993. In fiscal 1994, international revenue
was generated primarily by the sale of the products that accompanied the
acquisition of the acquired subsidiaries. In late fiscal 1994, the Company
expanded its international operations by forming a sales subsidiary in France.
The Company also added products to the product offerings of its subsidiaries
from other acquired software businesses and products, started offering
consulting services and focused more management attention on international
operations. The combination of the above factors resulted in international
revenue growing from 9% of total net revenues in fiscal 1994 to 29% in fiscal
1995. International revenue was 27% of total net revenues for the nine months
ended March 31, 1996.

The Company's international sales subsidiaries operating expenses are
primarily related to the sales process, and, consequently, the operating income
break-even point for the international sales subsidiaries is lower than for the
Company's United States and Canadian operations, whose operating expenses
include research and development. The operating expenses of the international
subsidiaries were also favorably affected by the restructuring plan implemented
during fiscal 1995. The combination of the increased international revenue and
lower operating expenses as a percentage of total net revenues resulted in the
achievement of operating income in the United Kingdom in fiscal 1995 and in
other European countries in the six months ended December 31, 1995.

Since much of the Company's international operating expenses are also
incurred in local currencies, the relative impact of exchange rates on net
income or loss is less than on revenues. The Company's operating and pricing
strategies take into account changes in exchange rates over time.

19
<PAGE> 20

However, the Company's results of operations may be significantly affected in
the short term by fluctuations in foreign currency exchange rates.

The Company's storage products accounted for 38% and 54% of the Company's
license revenue in fiscal 1995 and the nine months ended March 31, 1996,
respectively. The Company believes its storage products will continue to account
for a significant portion of its license revenue in the foreseeable future. The
Company's AXXiON-HA product accounted for 13% and 17% of the Company's license
revenue in fiscal 1995 and the nine months ended March 31, 1996, respectively. A
decline in unit price or demand for the Company's storage products as a result
of competition, technological change or other factors could have a material
adverse effect on the business, operating results and financial condition of the
Company. See Note 9 of Notes to Consolidated Financial Statements for a summary
of operating information and certain year-end balance sheet information by
geographic regions.

The Company generally recognizes revenue from license agreements upon
shipment of the software, if no significant future obligations remain and
collection of the resulting receivable is probable. For those agreements with
significant future obligations, revenue is recognized when the obligations are
satisfied. The cost of insignificant future obligations, if any, is accrued at
the time revenue is recognized. Allowances for estimated future returns and
warranty costs are provided for at the time of shipment. Maintenance and
technical support revenue is recognized over the term of the agreement,
typically 12 months. Consulting and training revenue is recognized as services
are provided. See Note 1 of Notes to Consolidated Financial Statements.

The Company's ability to manage its staff and growth effectively will
require it to continue to improve its operational, financial and management
controls, reporting systems and procedures, to train, motivate and manage its
employees and, as required, install new management information and control
systems. There can be no assurance that the Company will implement improvements
to such management information and control systems in an efficient and timely
manner. In fiscal 1994 the Company recognized revenues in several transactions
and subsequently learned that certain additional commitments that were not
recorded in the written contracts had been made with customers that entailed
significant future obligations. As a result, in fiscal 1995 the Company restated
its fiscal 1994 results of operations to reverse approximately $3.2 million of
revenue which it previously recognized from these customers. The Company
subsequently implemented procedures and business policies to improve its
internal controls for revenue recognition.

20
<PAGE> 21

RESULTS OF OPERATIONS

The following table sets forth certain items in the Company's Consolidated
Statements of Operations as a percentage of total net revenue and gross margins
for license and service revenue for the periods indicated.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
-------------------------- ---------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net revenue:
License.................................. 84% 74% 58% 54% 71%
Service.................................. 16 26 42 46 29
---- ---- ---- ---- ----
Total net revenue................ 100 100 100 100 100
---- ---- ---- ---- ----
Cost of revenue:
License.................................. 122 68 10 12 5
Service.................................. 31 31 25 30 8
---- ---- ---- ---- ----
Total cost of revenue............ 153 99 35 42 13
---- ---- ---- ---- ----
Gross margin (loss)........................ (53) 1 65 58 87
Operating expenses:
Selling and marketing.................... 101 91 84 94 55
Research and development................. 253 95 41 47 22
General and administrative............... 379 54 36 44 15
Acquired technologies.................... 146 21 -- -- --
Restructuring............................ -- 9 -- -- --
---- ---- ---- ---- ----
Total operating expenses......... 879 270 161 185 92
---- ---- ---- ---- ----
Loss from operations....................... (932) (269) (96) (127) (5)
Other income (expense), net................ 5 (4) (2) 1 (3)
---- ---- ---- ---- ----
Loss before income taxes................... (927) (273) (98) (126) (8)
Income tax credit.......................... -- -- -- -- --
---- ---- ---- ---- ----
Net loss................................... (927)% (273)% (98)% (126)% (8)%
==== ==== ==== ==== ====
Gross margin (loss):
License.................................. (45)% 8% 84% 77% 93%
Service.................................. (95)% (20)% 41% 33% 72%
</TABLE>

NINE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1996

Net Revenue

Total net revenue increased 65% from $12.3 million for the nine months
ended March 31, 1995, to $20.3 million for the nine months ended March 31, 1996.
The Company believes that the percentage increases in total revenue achieved in
prior periods are not indicative of future results. The Company's revenue is
comprised of license revenue and service revenue. Growth in license revenue has
been driven primarily by increasing market acceptance of the Company's products
and introduction of new products. Service revenue is derived primarily from
contracts for software maintenance and technical support and, to a lesser
extent, consulting and training services. The growth in service revenue has been
driven primarily by increased sales of service and support contracts on new
license sales and, to a lesser extent, by increasing renewals of these contracts
as the Company's installed base of licenses has increased. License revenue for
the nine months ended March 31, 1996 increased to 71% of total net revenue from
54% for the nine months ended March 31, 1995.

License Revenue. License revenue increased 116% from $6.7 million for the
nine months ended March 31, 1995 to $14.4 million for the nine months ended
March 31, 1996. The increase in overall license revenue was primarily the result
of the continued growth in market acceptance of the Company's software products,
including an increase in indirect sales. During the nine months

21
<PAGE> 22

ended March 31, 1996, the Company recognized revenue of $1.6 million related to
a single order from one customer.

Service Revenue. Service revenue increased 5% from $5.6 million for the
nine months ended March 31, 1995 to $5.9 million for the nine months ended March
31, 1996, primarily due to increased sales of service and support contracts on
new licenses and, to a lesser extent, renewal of service and support contracts
on existing licenses, partially offset by a decrease in consulting revenue.
Service revenue increased at a slower rate than license revenue for the same
period. Consulting revenue decreased during the same period as a result of
reduction in the personnel providing consulting services.

The Company's international sales are generated primarily through its
international sales subsidiaries. International revenue outside the United
States and Canada, most of which is collectible in foreign currencies, accounted
for 0%, 9%, 29% and 27% of total net revenue in fiscal 1993, 1994 and 1995 and
the nine months ended March 31, 1996, respectively. Since much of the Company's
international operating expenses are also incurred in local currencies, the
relative impact of exchange rates on net income or loss is less than on
revenues. Although the Company's operating and pricing strategies take into
account changes in exchange rates over time, the Company's operating results may
be significantly affected in the short term by fluctuations in foreign currency
exchange rates. The Company believes that its success depends upon continued
expansion of its international operations. The Company currently has sales and
service offices in Canada, England, Germany and France. The Company also has 17
resellers located in Europe, Asia Pacific, South America, Mexico and the Middle
East. International expansion may require that the Company establish additional
foreign offices, hire additional personnel and recruit additional international
resellers. This may require significant management attention and financial
resources and could adversely affect the Company's operating margins. To the
extent the Company is unable to effect these additions efficiently and in a
timely manner, its growth, if any, in international sales will be limited, and
the Company's business, operating results and financial condition could be
materially and adversely affected. There can be no assurance that the Company
will be able to maintain or increase international market demand for its
products.

The Company's international business involves a number of risks, including
lack of acceptance of localized products, cultural differences in the conduct of
business, longer accounts receivable payment cycles, greater difficulty in
accounts receivable collection, seasonality due to the slow-down in European
business activity during the Company's first fiscal quarter, unexpected changes
in regulatory requirements and royalty and withholding taxes that restrict the
repatriation of earnings, tariffs and other trade barriers, and the burden of
complying with a wide variety of foreign laws. The Company's international sales
are generated primarily through its international sales subsidiaries and are
currently denominated in local currency, creating a risk of foreign currency
translation gains and losses. To the extent profit is generated or losses are
incurred in foreign countries, the Company's effective income tax rate may be
materially and adversely affected. In some markets, localization of the
Company's products is essential to achieve market penetration. The Company may
incur substantial costs and experience delays in localizing its products, and
there can be no assurance that any localized product will ever generate
significant revenue. The Company has experienced delays in obtaining an export
license for a version of AXXiON-Authenticate and may experience delays in
obtaining necessary licenses for security-related products in the future, which
could have a material adverse effect on the Company's business, operating
results and financial condition.

Cost of Revenue

Cost of license revenue consists primarily of media, manuals, distribution
costs, amortization of purchased software and royalties. Cost of service revenue
consists primarily of personnel-related costs in providing maintenance,
technical support, consulting and training to customers. Gross margin on license
revenue is substantially higher than gross margin on service revenue, reflecting

22
<PAGE> 23

the low materials, packaging and other costs of software products compared with
the relatively high personnel costs associated with providing maintenance,
technical support, consulting and training services. Cost of service revenue
also varies based upon the mix of maintenance, technical support, consulting and
training services.

Cost of License Revenue. Cost of license revenue decreased 36% from $1.5
million for the nine months ended March 31, 1995 to $1.0 million for the nine
months ended March 31, 1996. Gross margin on license revenue increased from 77%
for the nine months ended March 31, 1995 to 93% for the nine months ended March
31, 1996 primarily due to lower purchased software amortization and, to a lesser
extent, a greater percentage of revenue from products with lower royalty rates.
The Company does not expect further improvements in gross margin on license
revenue.

Cost of Service Revenue. Cost of service revenue decreased 55% from $3.7
million for the nine months ended March 31, 1995 to $1.7 million for the nine
months ended March 31, 1996. Gross margin on service revenue increased from 33%
for the nine months ended March 31, 1995 to 72% for the nine months ended March
31, 1996 primarily due to reduction in headcount and better utilization of
consulting and education resources as well as lower costs associated with
product implementation and non-billable support. The Company monitors consulting
and education services utilization by comparing actual service revenue generated
by each consultant to a targeted revenue amount that is a multiple of the costs
of providing such consulting and education services. In the nine months ended
March 31, 1995, the Company undertook certain activities to support the sales
process in advance of the recognition of license revenue. These services were
not continued after the license revenue was recognized and were provided to
facilitate market acceptance of the Company's AXXiON products. The provision of
non-billable consulting and educational services was substantially decreased in
fiscal 1996. The Company does not expect the provision of non-billable
consulting and educational services to adversely affect its service gross margin
in future periods, nor does the Company expect further significant improvements
in gross margin from service revenue.

Operating Expenses

Selling and Marketing. Selling and marketing expenses consist primarily of
salaries, related benefits, commissions, consultant fees and other costs
associated with the Company's sales and marketing efforts. Selling and marketing
expenses decreased 4% from $11.6 million for the nine months ended March 31,
1995 to $11.2 million for the nine months ended March 31, 1996. As a percentage
of total net revenue, selling and marketing expenses decreased from 94% to 55%.
These decreases reflect the Company's restructuring of the sales and marketing
organization. The Company intends to continue to expand its global sales and
marketing infrastructure and expects to generate an increasing percentage of its
sales through indirect sales. Accordingly, the Company expects its selling and
marketing expenses to increase in the future, although such expenses may decline
as a percentage of total net revenue to the extent revenue increases.

Research and Development. Research and development expenses consist
primarily of salaries, related benefits, third-party consultant fees and other
costs. Research and development expenses decreased 23% from $5.8 million for the
nine months ended March 31, 1995 to $4.4 million for the nine months ended March
31, 1996, primarily reflecting the reduction of engineering personnel and
consolidation of the number of development sites that the Company operates.
Research and development expenses as a percentage of revenue decreased from 47%
to 22% between these periods. The Company believes that a significant level of
research and development investment is required to remain competitive and
expects such expenses will increase in future periods, although such expenses
may decline as a percentage of total net revenue to the extent revenue
increases.

General and Administrative. General and administrative expenses consist
primarily of salaries and related benefits, amortization of certain intangible
assets, and fees for professional services, such as legal and accounting.
General and administrative expenses decreased 42% from $5.4 million for

23
<PAGE> 24

the nine months ended March 31, 1995 to $3.1 million for the nine months ended
March 31, 1996, primarily due to decreased staffing and restructuring in finance
and administration. General and administrative expenses as a percentage of total
net revenue decreased between these periods from 44% to 15%. General and
administrative expenses are expected to increase in future periods to the extent
the Company expands its operations and as a result of costs associated with
being a public company, but may continue to decline as a percentage of total net
revenue.

Loss from Operations. For the nine months ended March 31, 1995, the
Company had a loss from operations of $15.7 million, compared to a loss from
operations of $1.1 million for the nine months ended March 31, 1996. The loss
from operations for the nine months ended March 31, 1995 resulted principally
from revenue not meeting expectations. The reduction in the loss from operations
for the nine months ended March 31, 1996 reflects an improvement over the
comparable 1995 results primarily due to increased revenue and cost reductions
from the restructuring efforts that the Company has undertaken.

Other Income (Expense), Net. Other income (expense), net decreased from a
net income of $0.3 million for the nine months ended March 31, 1995 to a net
expense of $0.5 million for the nine months ended March 31, 1996, due primarily
to a $1.1 million gain on disposal of a product in an asset sale in the 1995
period.

Income Taxes. The Company accounts for its income taxes under Statement of
Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." As a result of operating losses, no provisions for income taxes have
been recorded. Under FAS 109, deferred tax liabilities and assets are recognized
for the expected future tax consequences of temporary differences between the
carrying amount of assets and liabilities for financial reporting and the
amounts used for income taxes. At December 31, 1995, the Company had
approximately $28.5 million of gross deferred tax assets comprised primarily of
net operating loss carryforwards. The Company believes that, based on a number
of factors, the available objective evidence creates sufficient uncertainty
regarding the realizability of the deferred tax assets such that a full
valuation allowance has been recorded. These factors include the Company's
history of net losses since inception, the Company's limited profitability in
recent periods, the fact that the market in which the Company competes is
intensely competitive and characterized by rapidly changing technology, and the
uncertainty regarding market acceptance of new versions of the Company's AXXiON
products. The Company believes that, based on the currently available evidence,
it is more likely than not that the Company will not generate taxable income and
accordingly will not realize the Company's deferred tax assets. The Company will
continue to assess the realizability of the deferred tax assets based on actual
and forecasted operating results.

FISCAL YEARS ENDED JUNE 30, 1993, 1994 AND 1995

Net Revenue

License Revenue. License revenue increased 671% from $1.5 million in
fiscal 1993 to $11.5 million in fiscal 1994 and decreased 6% to $10.8 million in
fiscal 1995. The increase from fiscal 1993 to fiscal 1994 was primarily
attributable to the increased market acceptance of the Company's products
resulting in a growth in overall unit shipments. The decrease in fiscal 1995 was
primarily attributable to the Company's disposal of a product through an asset
sale and, to a lesser extent, turnover in the sales force.

Service Revenue. Service revenue increased by 1366% from $0.3 million in
fiscal 1993 to $4.1 million in fiscal 1994 and increased 88% to $7.7 million in
fiscal 1995. The increase from fiscal 1993 to fiscal 1994, was primarily due to
a significant increase in maintenance, technical support, consulting and
training services and a significant increase in service and support contracts
that grew proportionately with the large increase in license revenue. Service
revenue increased in fiscal 1995

24
<PAGE> 25

primarily due to increased sales of service and support contracts and, to a
lesser extent, an increase in revenue from consulting and training services.

Cost of Revenue

Cost of License Revenue. Cost of license revenue increased 391% from $2.2
million in fiscal 1993 to $10.6 million in fiscal 1994 and decreased 83% to $1.8
million in fiscal 1995. Gross margin on license revenue was negative 45% in
fiscal 1993, 8% in fiscal 1994 and 84% in fiscal 1995. Cost of license revenue
includes amortization of purchased software of $2.0 million, $8.8 million and
$0.5 million in fiscal 1993, fiscal 1994 and fiscal 1995, respectively.

Cost of Service Revenue. Cost of service revenue increased 803% from $0.5
million in fiscal 1993 to $4.9 million in fiscal 1994 and decreased 7% to $4.6
million in fiscal 1995. Gross margin on service revenue was negative 95% in
fiscal 1993, negative 20% in fiscal 1994 and 41% in fiscal 1995. The negative
margin in both fiscal 1993 and fiscal 1994 was due to the large costs associated
with providing non-billable consulting and education services in anticipation of
license sales, higher headcount and lower utilization of consulting and
education resources. These non-billable services were not continued after the
license revenue was recognized and were provided to facilitate market acceptance
of the Company's products. The significant improvement in fiscal 1995 was the
result of a greater portion of service revenue attributable to higher margin
service and support contracts.

Operating Expenses

Selling and Marketing. Selling and marketing expenses increased 698% from
$1.8 million in fiscal 1993 to $14.2 million in fiscal 1994 and 9% to $15.5
million in fiscal 1995. Selling and marketing expenses decreased as a percentage
of total net revenue from 101% in fiscal 1993 to 91% in fiscal 1994 and to 84%
in fiscal 1995. The increase in absolute dollars from fiscal 1993 to fiscal 1994
is primarily attributable to growth in the Company's sales organization and the
expansion of the Company's domestic sales and marketing infrastructure to
support greater sales volumes. The increase in absolute dollars from fiscal 1994
to fiscal 1995 is primarily related to the moderate expansion of the worldwide
sales organization partially offset by a decrease in marketing expenses.

Research and Development. Research and development expenses increased 230%
from $4.5 million in fiscal 1993 to $14.8 million in fiscal 1994 and decreased
49% to $7.5 million in fiscal 1995. Research and development expenses decreased
as a percentage of total revenue from 253% in fiscal 1993 to 95% in fiscal 1994
and to 41% in fiscal 1995. Research and development expenses increased in fiscal
1994 from fiscal 1993 primarily because of the significant number of
acquisitions. These expenses decreased in absolute dollars in fiscal 1995
primarily as a result of the restructuring plan that significantly reduced
research and development headcount.

General and Administrative. General and administrative expenses increased
24% from $6.7 million in fiscal 1993 to $8.4 million in fiscal 1994 and
decreased 19% to $6.8 million in fiscal 1995. General and administrative
expenses as a percentage of revenue were 379%, 54% and 36% in fiscal 1993, 1994
and 1995, respectively. The increase in fiscal 1994 was primarily attributable
to amortization of certain intangible assets resulting from acquisitions and
additional personnel in the general and administrative functions and the finance
organization. The decrease in absolute dollars and as a percentage of revenue in
fiscal 1995 was primarily the result of a reduction in personnel related in part
to accompanied the Company's restructuring and, to a lesser extent, a reduction
in the amortization of intangible assets.

Acquired Technologies. Acquired technologies consists of nonrecurring
charges for in-process research and development taken upon the acquisition of
companies, divisions of companies or products and, in fiscal 1994, the write-off
of purchased software costs related to certain acquired products that failed to
generate adequate revenues. Acquired technologies charges totaled $2.6 million
in fiscal 1993 and $3.3 million in fiscal 1994.

25
<PAGE> 26

Restructuring Charge. During fiscal 1994 and fiscal 1995, the Company
implemented a restructuring plan involving a reduction of overlapping positions
within the Company, consolidation of development centers, reorganization of the
sales force and consolidation and centralization of certain operational
activities as a result of integrating the Company's operations. The plan
resulted in a reduction in the number of employees and vacating noncancelable
operating leases. The amount charged to operations for restructuring activities
was $1.4 million in fiscal 1994, which represented the accrual of estimated
costs of severance compensation, benefits, noncancelable minimum lease payments,
and other obligations.

Income (Loss) from Operations. Losses from operations of $16.5 million,
$42.0 million and $17.7 million in fiscal 1993, 1994 and 1995, respectively,
were the result of operating expenses increasing in excess of revenue. The
fiscal 1994 operations were also adversely affected by a $1.4 million
restructuring charge. The losses in fiscal 1994 and fiscal 1995 were also
adversely affected by acquired technology charges of $2.6 million and $3.3
million, respectively. Operating costs were substantially lower in fiscal 1995
due in large part to the Company's restructuring.

Other Income (Expense), Net. Other income (expense), net decreased from
income of $0.1 million in fiscal 1993 to expense of $0.7 million in fiscal 1994
and an expense of $0.4 million in fiscal 1995. The fiscal 1994 expense was due
to interest expense incurred on larger average debt balances partially offset by
larger amounts of interest income being earned on higher average cash balances.
The fiscal 1995 expense decrease was due to a $1.1 million gain on disposal of
product partially offset by larger amounts of interest expense incurred on
larger average debt balances and by lower amounts of interest income being
earned on reduced cash balances. Fluctuations in foreign currency have not had a
significant effect on the Company's results of operations.

26
<PAGE> 27

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth unaudited consolidated results of operations
data for each of the seven quarters in the period ended March 31, 1996 and the
percentage of the Company's net revenue represented by certain line items, and
the gross margins for license and service revenue in each of the respective
quarters. This information has been derived from unaudited consolidated
financial statements of the Company that, in the opinion of management, reflect
all recurring adjustments necessary to fairly present this information when read
in conjunction with the Company's Consolidated Financial Statements and notes
thereto appearing elsewhere in this Prospectus. The results of operations for
any quarter are not necessarily indicative of the results to be expected for any
future period.

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1994 1994 1995 1995 1995 1995 1996
--------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License............................... $ 1,564 $ 2,141 $ 2,985 $ 4,138 $ 3,395 $5,443 $ 5,588
Service............................... 1,831 1,740 2,050 2,075 1,745 1,908 2,246
------- ------- ------- ------- ------- ------- -------
Total net revenue................... 3,395 3,881 5,035 6,213 5,140 7,351 7,834
Cost of revenue:
License............................... 637 490 393 267 248 376 355
Service............................... 1,664 1,174 908 817 560 551 558
------- ------- ------- ------- ------- ------- -------
Total cost of revenue............... 2,301 1,664 1,301 1,084 808 927 913
------- ------- ------- ------- ------- ------- -------
Gross profit............................ 1,094 2,217 3,734 5,129 4,332 6,424 6,921
Costs and expenses:
Selling and marketing................. 4,160 3,887 3,544 3,947 3,379 3,678 4,107
Research and development.............. 2,169 1,931 1,662 1,779 1,444 1,486 1,490
General and administrative............ 1,472 2,608 1,347 1,331 1,212 1,046 886
------- ------- ------- ------- ------- ------- -------
Total operating expenses............ 7,801 8,426 6,553 7,057 6,035 6,210 6,483
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations........... (6,707) (6,209 ) (2,819) (1,928 ) (1,703) 214 438
------- ------- ------- ------- ------- ------- -------
Other income (expense), net......... (253) 779 (250) (725 ) (108) (184) (203)
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes....... (6,960) (5,430 ) (3,069) (2,653 ) (1,811) 30 235
Provision for income taxes.............. -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)....................... $(6,960) $(5,430 ) $(3,069) $(2,653 ) $(1,811) $ 30 235
======= ======= ======= ======= ======= ======= =======
Pro forma net income (loss) per share... $ (0.44) $ (0.34 ) $ (0.19) $ (0.17 ) $ (0.11) $ 0.00 $ 0.01
Pro forma shares used in per share
calculation........................... 15,648 15,745 15,773 15,773 15,773 15,773 16,114
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUE
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License............................... 46% 55% 59% 67% 66% 74% 71%
Service............................... 54 45 41 33 34 26 29
---- ---- --- --- --- --- ---
Total net revenue................... 100 100 100 100 100 100 100
Cost of revenue:
License............................... 19 13 8 4 5 5 5
Service............................... 49 30 18 13 11 8 7
---- ---- --- --- --- --- ---
Total cost of revenue............... 68 43 26 17 16 13 12
Gross profit............................ 32 57 74 83 84 87 88
Costs and expenses:
Selling and marketing................. 123 100 70 64 66 50 52
Research and development.............. 64 50 33 29 28 20 19
General and administrative............ 43 67 27 21 23 14 11
---- ---- --- --- --- --- ---
Total operating expenses............ 230 217 130 114 117 84 82
Income (loss) from operations........... (198) (160) (56) (31) (33) 3 6
---- ---- --- --- --- --- ---
Other income (expense), net......... (7) 20 (5) (12) (2) (3) (3)
---- ---- --- --- --- --- ---
Income (loss) before
income taxes.......................... (205) (140) (61) (43) (35) 0 3
Provision for income taxes.............. -- -- -- -- -- -- --
---- ---- --- --- --- --- ---
Net income (loss)....................... (205)% (140)% (61)% (43)% (35)% 0% 3%
==== ==== === === === === ===
Gross margin
License revenue....................... 59% 77% 87% 94% 93% 93% 94%
Service revenue....................... 9% 33% 56% 61% 68% 71% 75%
</TABLE>

The larger general and administrative expense for the quarter ended
December 31, 1994 was attributable to severance costs and noncancelable minimum
lease payments. Selling and marketing expenses in the quarter ended June 30,
1995 reflect a higher sales commission expense attributable to the structure of
the Company's sales commission program, which can increase sales incentives, in

27
<PAGE> 28

the Company's fourth fiscal quarter ended June 30. The Company expects this
seasonality to continue. For the quarter ended June 30, 1995, research and
development expenses reflect certain one-time write-offs associated with
equipment disposals. For the quarter ended September 30, 1995, license revenue
and service revenue decreased from the quarter ended June 30, 1995 due to
seasonality in customer buying patterns and the structure of the Company's sales
commission program. During the quarter ended March 31, 1996, the Company
improved its collections and, as a result of this improvement and the write-off
of specific accounts receivable, was able to reduce its allowance for doubtful
accounts from $682,000 to $488,000, which had a favorable impact on operating
results.

The Company has experienced, and expects to continue to experience,
significant fluctuations in quarterly operating results that may be caused by
many factors, including, among others: the size and timing of orders;
introduction or enhancement of products by the Company or its competitors;
changes in pricing policy of the Company or its competitors; increased
competition; technological changes in computer systems and environments; the
ability of the Company to timely develop, introduce and market new products;
quality control of products sold; market readiness to deploy systems management
products for distributed computing environments; market acceptance of new
products and product enhancements; seasonality of revenue; customer order
deferrals in anticipation of new products and product enhancements; the
Company's success in expanding its sales and marketing programs; personnel
changes; foreign currency exchange rates; mix of products sold; acquisition
costs; and general economic conditions. The Company's operating results are
highly sensitive to the timing of larger orders. Orders typically range from a
few thousand dollars to several hundred thousand dollars. In the quarter ended
December 31, 1995, the Company recognized license revenue of $1.4 million
related to a single order from one customer and in the quarter ended December
31, 1993, the Company recognized license revenue of $0.8 million related to
another order. Revenue is difficult to forecast because the client/server
systems management software market is an emerging market that is highly
fragmented and subject to rapid change. The Company's sales cycle varies
substantially from customer to customer. As a result of all of these factors,
the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. The Company has had net income only in the
quarters ended December 31, 1995 and March 31, 1996, and there can be no
assurance that the Company will have net income in future quarters or on an
annual basis.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations primarily through
private sales of capital stock totaling $72.8 million and issuance of long-term
debt. Although at March 31, 1996 the Company had $1.7 million in cash and cash
equivalents, it had a working capital deficit of

28
<PAGE> 29

approximately $4.1 million, as compared to $4.1 million in cash and cash
equivalents and $2.7 million in working capital deficit at the end of fiscal
1995. The Company currently has a line-of-credit agreement with a bank providing
for borrowings up to $5.0 million, based on the Company's accounts receivables,
at LIBOR plus 5.125% (10.8% at December 31, 1995). The line-of-credit agreement
provides for loans to be collateralized by accounts receivable, equipment and
other assets, and expires October 12, 1996. At March 31, 1996, the Company had
$2.5 million outstanding under this line-of-credit.

In addition to its credit line, the Company has a note payable to a
principal stockholder under a loan agreement dated as of July 31, 1995. The loan
agreement provides for borrowings of $5.0 million at the prime interest rate
plus 1% (9.25% at March 31, 1996). At March 31, 1996, the Company had $5.0
million in borrowings under this note payable, due July 1, 1997.

Net cash used in operating activities was $8.6 million, $22.5 million,
$15.5 million and $3.1 million in fiscal 1993, 1994, 1995 and the nine months
ended March 31, 1996, respectively. Cash flows from operations improved from
fiscal 1994 to 1995 due to lower net losses partially offset by reductions in
accounts payable and in other liabilities balances. Cash used in operating
activities for the nine months ended March 31, 1996 resulted from an increase in
accounts receivable and funding the operating loss partially offset by
depreciation expense and an increase in deferred revenue.

OpenVision's investing activities used cash of $13.3 million in fiscal
1993, and $9.9 million in fiscal 1994, while generating cash of $3.5 million in
fiscal 1995. Investing activities during those periods consisted primarily of
cash expenditures in connection with the acquisition of businesses and software
products, of $11.2 million in fiscal 1993 and 1994 and capital expenditures of
$2.7 million, $4.8 million and $0.7 million, for fiscal 1993, 1994 and 1995,
respectively. Investing activities used cash of $0.5 million for the nine months
ended March 31, 1996 for capital expenditures.

Financing activities provided cash of $24.3 million in fiscal 1993, $34.8
million in fiscal 1994, and $11.6 million in fiscal 1995 primarily from the
aggregate net proceeds from private sales of equity securities and, to a lesser
extent, the net proceeds from the issuance of debt. The Company used cash from
financing activities to make payments under certain notes payable of $4.7
million in fiscal 1994 and $3.5 million in fiscal 1995. Financing activities
generated cash of $1.3 million for the nine months ended March 31, 1996.

The Company's operating results are highly sensitive to the timing of
larger orders. In addition, the Company typically recognizes a significant
portion of license revenue in the last two weeks of a quarter. As a result, the
Company's accounts receivable balance during a quarter may fluctuate
significantly. Accordingly, the Company may from time to time experience large
fluctuations in operating cash flow. For example, in December 1995 the Company
recognized $1.4 million in revenue related to one order.

The Company may make additional acquisitions of companies, divisions of
companies or products in the future. Acquisitions entail numerous risks,
including difficulties or an inability to successfully assimilate acquired
operations and products, diversion of management's attention and loss of key
employees of acquired companies, all of which the Company has encountered with
previous acquisitions. Future acquisitions by the Company may result in dilutive
issuances of equity securities, the incurrence of additional debt, large
one-time write-offs and the creation of goodwill or other intangible assets that
could result in amortization expense. These factors could have a material
adverse effect on the Company's business, operating results and financial
condition.

The Company believes that the net proceeds from this offering, together
with cash flow from operations, existing cash balances and available borrowings
under the Company's revolving line of credit, will be sufficient to meet its
working capital requirements for at least the next 12 months. Thereafter, the
Company may require additional funds to support its working capital requirements
or for other purposes and may seek to raise such additional funds through public
or private equity financing or from other sources. There can be no assurance
that additional financing will be available at all or that, if available, such
financing will be obtainable on terms favorable to the Company.

29
<PAGE> 30

BUSINESS

OpenVision Technologies, Inc. ("OpenVision" or the "Company") provides
systems management applications and services for client/server computing
environments. OpenVision's AXXiON (pronounced "action") products address three
essential areas of systems management -- storage, operations and security. The
Company's highly scalable products can be used independently and certain
products can be combined to provide interoperable client/server systems
management solutions. AXXiON products offer centralized administration with a
high degree of automation, enabling customers to manage complex, distributed
environments cost-effectively by increasing system administrator productivity
and system availability. The Company's largest customer installation to date
consists of more than 2,400 nodes in a heterogeneous hardware and software
environment. The Company also provides a comprehensive range of services to
assist customers in planning and implementing systems management solutions.
OpenVision has licensed its AXXiON applications to more than 800 customers.

INDUSTRY BACKGROUND

The Company believes that the market for client/server products in large
organizations has been characterized by four principal stages of evolution. The
first stage was the introduction of low cost, high performance, compact hardware
systems with advanced technology, accompanied by communications and networking
systems. The second stage was the adoption of relational database systems and
application development tools to enable the creation of business applications.
The third stage evolved with the availability of enterprise and end-user
applications, including data access and packaged office automation and business
applications. Although the first three stages have resulted in widespread
adoption of client/server computing, they have, in many cases, resulted in a
complex environment that has proven difficult to implement and scale as well as
labor intensive to operate and maintain.

Enterprise-wide client/server computing environments are inherently more
complex than mainframe environments as they frequently encompass a variety of
servers, such as file, application and database servers, as well as potentially
thousands of clients that must access the information and applications on those
servers. These environments frequently include a variety of operating systems,
networking protocols, database management systems and software applications that
are geographically dispersed. Further, the Company believes that organizations
are expanding their computing architectures to enable communication with their
"extended enterprise," such as customers and vendors. Organizations are now
faced with managing new technologies, such as World Wide Web servers, internet
servers and web browsers. As a result, many organizations have experienced high
costs of managing these complex client/server environments, offsetting the
expected cost savings of moving from mainframe to client/server architectures.
To address the need for availability, performance and integrity of client/server
enterprise computing environments, the Company believes the market for
client/server products is now entering the fourth stage, in which customers are
adopting and implementing client/server systems management technologies.

According to Gartner Group, the market for client/server systems management
software is expected to expand from $950 million in 1995 to more than $2.6
billion in 1999. In addition, a 1994 Deloitte & Touche survey of nearly 400
chief information officers estimated that in 1995

30
<PAGE> 31

approximately 58% of business applications would run on client/server
distributed computing environments compared to 5% in 1992. Based upon its
experience in the client/server systems management market, the Company believes
the average development time for complex business applications is approximately
two to four years and, therefore, believes that the results of this survey
support industry analyst forecasts of a significant market opportunity for
client/server systems management software to manage the environments in which
these applications are to operate.

Client/server systems management products must address an organization's
availability, performance and integrity requirements across a large number of
heterogeneous client/server systems. For example, backing up valuable company
data must now occur for thousands of desktops, hundreds of workstations and
multiple database servers, as opposed to a small number of mainframe and
minicomputers. Early detection and response to system problems in order to avoid
costly downtime must be done on a distributed basis without generating
unnecessary network traffic. All systems, regardless of location or type of
network connection, must be secured from unauthorized access.

To meet the requirements of enterprise-wide client/server computing,
systems management software solutions should:

- scale to provide management capabilities for thousands of systems;

- support heterogeneous operating systems, databases and networking
protocols;

- be interoperable with existing network management frameworks;

- automate routine management tasks;

- provide centralized management of all systems;

- be highly configurable and customizable to address the specific business
policies of an organization; and

- be adaptive to support a broad range of operating platforms, network
protocols, database management systems, network management frameworks and
hardware devices.

The client/server systems management software industry has been divided
among four types of vendors: (i) hardware and software vendors that offer a
management platform or framework that supports vendor-created and third-party
systems management applications; (ii) vendors that provide systems management
software for the mainframe environment and are migrating their products to the
client/server environment; (iii) vendors that provide "point" products that
address specific problems and offer specific functionality, such as job
scheduling or security audit tools; and (iv) vendors that provide integrated and
interoperable solutions.

The Company believes solutions should be based on interoperable products
that are independently packaged in order to provide customers maximum
flexibility in purchasing and deployment. The Company further believes solutions
offered by management platform and framework vendors, traditional mainframe
vendors and "point" product vendors do not provide the integrated and
interoperable solutions necessary to address the needs of the client/server
systems management market. Although management platform and framework vendors
provide an environment in which multiple systems management applications from
different vendors can be integrated by the end-user, this integration is often a
complex task, because it may require modification of applications and
coordination among different vendors. Further, applications may need
modification to operate optimally within a given management platform or
framework and the ability to integrate and scale distinct systems management
applications may be compromised. Vendors of systems management solutions for
traditional mainframe environments face significant challenges in migrating
their products to serve the complex client/server environment. Traditional
technology used to manage mainframe systems is, in many cases, ineffective in
addressing the greater complexity of the client/server environment. Managing
hundreds or thousands of systems requires a different product architecture than
that of managing a single mainframe. Vendors of "point" products are able to
solve only a specific subset of the problems encountered in assuring

31
<PAGE> 32

availability, performance and integrity of distributed computing environments.
Without integrated solutions, information technology organizations must
administer multiple systems management applications, creating another level of
complexity.

THE OPENVISION SOLUTION

OpenVision delivers interoperable, highly scalable client/server systems
management products that create a reliable, secure production environment. The
OpenVision AXXiON products address the storage, operations and security needs of
large, complex computing environments. The products enable customers to manage
these environments cost-effectively by increasing system administrator
productivity and system availability. By combining comprehensive service with
its products, the Company strives to build strategic relationships with its
customers.

The Company's client/server systems management solutions offer the
following key elements:

- Scalability. OpenVision's client/server architecture and automated,
event-driven technology enable its products to scale from a few nodes to several
thousand nodes, addressing the systems management needs of large, dispersed
enterprises. The Company's largest customer installation is currently over 2,400
nodes.

- Automated, event-driven operations. AXXiON products provide automatic,
localized problem detection and correction, minimizing network traffic by
notifying the system administrator only if attention is required. Compared to
systems that poll clients, AXXiON products reduce the resources required to
manage large client/server environments.

- Centralized management. OpenVision applications allow a system
administrator to manage large client/server environments, comprised of
heterogeneous systems and databases, from a single workstation. Policies set by
the system administrator are automatically distributed to specified nodes
without having to remotely login to each client. Centralized management
significantly reduces the amount of time spent on routine tasks. One of the
Company's customers uses the Company's products to enable six systems
administors to analyze, monitor and manage activity for 900 dispersed locations
from a centralized operations center.

- Interoperability. Most of the AXXiON products are interoperable and can
be combined to provide integrated solutions that greatly enhance systems
management functionality. For example, by combining event and storage
management, a system can detect that all quarterly sales transactions were
transmitted to the company database and can automatically perform a hot database
backup without operator intervention.

- Adaptive. Most of the AXXiON products are highly configurable and
support a broad range of operating platforms, network protocols, database
management systems, network management frameworks and hardware devices. This
range of support and configuration flexibility means that the AXXiON products
are easily adapted to a large array of computing environments.

THE OPENVISION STRATEGY

The Company's objective is to be a leading provider of systems management
software for medium to large organizations with client/server computing
environments. To achieve this objective, the Company's strategy includes the
following key elements:

Provide a Broad Range of Systems Management Applications. The Company's
product strategy is to provide leading systems management software that performs
storage, operations and security management functions across multiple hardware
platforms, operating systems, relational databases, networks, web sites,
internet and intranet servers. A key aspect of this strategy is to provide
interoperable products that are independently packaged in order to provide
customers maximum flexibility in purchasing and deployment. In addition to
development of new products and product enhancements, the Company intends to
continue to evaluate the acquisition of products and technologies that support
and expand its product offerings.

32
<PAGE> 33

Establish Worldwide Distribution. The Company's objective is to provide
systems management products and extensive maintenance, consulting and training
worldwide. The Company uses a combination of direct sales and indirect channels
(resellers, VARs, hardware distributors, application software vendors and
systems integrators). The Company intends to continue to expand its direct sales
force in North America and Western Europe and to initiate direct sales efforts
in other selected international markets, including Japan, Australia, certain
countries in South America (such as Brazil and Argentina), and certain countries
in Northern Europe (such as Sweden and Finland). The Company also plans to
expand its indirect distribution channels, particularly in international
markets.

Maintain Long-Term Customer Relationships. The Company's strategy is to
cultivate long-term customer relationships that foster ongoing and additive
purchases of the Company's products. The Company also provides a comprehensive
range of services to assist customers in planning and implementing systems
management solutions. The Company believes that major customers will acquire and
deploy systems management products and services in a phased manner. Customers
typically implement one area (e.g., storage or security), and fully deploy it
before moving to a second area. The Company's product integration strategy is
intended to facilitate smooth deployment of subsequent applications and, along
with its global distribution strategy, provide a consistent level of service for
multinational customers.

Pursue Strategic Relationships. The Company's strategy is to leverage its
products and technology by pursuing strategic relationships with selected
hardware vendors, software vendors, internet technology providers, systems
integrators and industry standards organizations that affect the implementation
and distribution of comprehensive systems management solutions for large
organizations. The Company currently has marketing alliances with major hardware
vendors such as Digital Equipment Corporation, Hewlett-Packard, IBM, and Sun
Microsystems and major software vendors such as Informix, Oracle and Sybase. In
addition, the Company currently has a development alliance with a firewall
technology provider to integrate its AXXiON-HA product, providing highly
available firewall services.

PRODUCTS

<TABLE>
<CAPTION>
STORAGE OPERATIONS SECURITY
- ----------------- --------------------------- --------------------
<S> <C> <C>
AXXiON-NetBackup AXXiON-Event Manager AXXiON-SecureMax
AXXiON-HSM AXXiON-HA AXXiON-Authenticate
AXXiON-Scheduler AXXiON-Authorize
AXXiON-Performance Manager
AXXiON-Xfer
</TABLE>

OpenVision licenses its products on a perpetual, fully-paid and
non-assignable basis. The North American prices of the Company's products range
from $3,200 to $20,000 per server and from $50 to $2,100 per client. Pricing is
based on a combination of the complexity and functionality of the product and
the number of nodes in a system. The Company's services, including maintenance
and technical support, consulting and training, are priced separately.

Storage Management

OpenVision provides solutions for four major functional areas of storage
management: file system backup, restore and archive; database backup;
hierarchical storage management ("HSM"); and media management. OpenVision's
storage management products are designed to provide scalable storage management
capabilities to users in diverse, client/server computing environments

33
<PAGE> 34

that can be managed from a single location. The scalable architecture permits
customers to manage from a few to several thousand client nodes and expand the
system as storage management needs increase. The Company's largest installation
is currently managing over 2,400 nodes in a heterogeneous hardware and software
environment. The Company's products provide disaster recovery backup and handle
long-term storage needs with common interfaces and policy management. These
products manage data migration throughout an enterprise to help maximize the
efficiency and cost utilization of storage hardware.

[INSERT GRAPHIC]

OpenVision's storage management products include the following:

AXXiON-NetBackup -- Reduces the workload for systems administrators of
heterogeneous platforms by providing easily configured centralized backup
scheduling, user-directed backups and restores, automated distribution and
installation of client software over the network, and easy configuration of
clients. AXXiON-NetBackup has a database extension that provides
comprehensive on-line and hot database backup for Oracle, Sybase and
Informix databases that can be acquired and deployed by customers on an
as-needed basis.

AXXiON-HSM -- Automatically moves data between file systems and storage
devices supporting most disk, tape, optical and robotics devices.
AXXiON-HSM is a server-based, policy driven migration tool that works in
conjunction with AXXiON-NetBackup. AXXiON-HSM has an enterprise extension
that provides a simple, cost-effective means to transparently migrate,
purge and cache files between file systems on various platforms.

The Company's storage products accounted for 38% and 54% of the Company's
license revenue in fiscal 1995 and the nine months ended March 31, 1996,
respectively.

Operations Management

OpenVision's operations management products are designed to maintain the
smooth operation of large numbers of distributed systems in heterogeneous
environments, with minimal human intervention. These products address the
principal functional areas of operations management, including problem event
management, software distribution, job scheduling, performance monitoring and
analysis, and failover and restart services. These products provide automated,
"lights out," event-driven solutions for distributed environments. They offer
centralized management using

34
<PAGE> 35

single-screen real-time views of essential performance parameters on large
numbers of systems across heterogeneous platforms.

[INSERT GRAPHIC]

The Company's operations management products include the following:

AXXiON-Event Manager -- Allows event-driven automation and monitoring of
critical system, database and application activities and automatic error
correction through its intelligent agent technology. Users can set
thresholds and alarms to monitor processor, swapping, memory, network and
I/O activity. When a threshold has been reached, AXXiON-Event Manager can
take automatic corrective action or alert an administrator by e-mail or
page. This product has a highly scalable architecture and centralized
administration. The Company's largest installation is currently monitoring
over 900 heterogeneous server nodes at multiple locations.

AXXiON-HA -- Provides high availability ("HA") protection for systems,
databases and applications and reduces the danger of service interruptions
to mission-critical applications. The product allows users to automatically
switch services to another server, monitor services on their primary
server, and start, restart or stop services as their needs require.

AXXiON-Scheduler -- Allows users to automate routine scheduling tasks in a
distributed environment. Unlike standard UNIX, AXXiON-Scheduler offers a
user-friendly screen-based navigation system.

AXXiON-Performance Manager -- Allows users to have a single-screen view of
many different real-time and historical performance parameters for a large
number of heterogeneous systems and databases. The product's event-driven
architecture lets users set relevant thresholds and uses a graphical
representation of the distributed configuration to notify users when a
performance problem is imminent. The user can customize the data collection
agents to display the historical performance data needed to track, isolate
and resolve performance problems in a distributed environment.

AXXiON-Xfer -- Automates deployment of software from a central point to
computers across the network and monitors the installation process. The
product also provides reliable error recovery, record keeping and
application security. The Company distributes and packages this product
under a non-exclusive licensing agreement with a third party.

35
<PAGE> 36

The Company's AXXiON-HA product accounted for 13% and 17% of the Company's
license revenue in fiscal 1995 and the nine months ended March 31, 1996,
respectively.

Security Management

OpenVision's security management products provide three key elements for
security in distributed computing environments -- authentication, authorization
and auditing. Authentication ensures that users signing on to the network are
who they say they are. Authorization ensures that users obtain access only to
the data and resources to which they are entitled. Auditing provides activity
reporting and can be used to identify and correct potential security weakness.

[INSERT GRAPHIC]

The Company's security management products include the following:

AXXiON-SecureMax -- Centrally audits security of UNIX, WindowsNT and
OpenVMS systems by determining the security status of each system and
reporting its vulnerabilities. AXXiON-SecureMax has a broad range of
reports and analysis tools that help identify exposures, allowing them to
be resolved quickly.

AXXiON-Authenticate -- Provides authentication, message integrity and
message confidentiality services that can be administered through a
graphical user interface. This product is based on the MIT Kerberos model,
the industry standard for authentication. Based on discussions with the
U.S. State Department, the Company believes that it is one of the first
companies to obtain an export license from the U.S. State Department that
provides for distribution of a product based on the MIT Kerberos model
without requiring separate export approval for each order.

AXXiON-Authorize -- Allows a security administrator to centrally control
system access for a network, including login access, super-user access and
password controls. Only minimal technical knowledge is required to
customize policies for individuals or groups.

Software products as complex as those offered by the Company frequently
contain errors or defects, especially when first introduced or when new versions
or enhancements are released.

36
<PAGE> 37

Despite product testing, the Company has in the past released products with
defects, discovered software errors in certain of its new products after
introduction and experienced delayed or lost revenue during the period required
to correct these errors. In late 1993, the Company introduced three products
(none of which continue to be offered by the Company) in which defects were
subsequently discovered. As a result of these defects, the Company experienced
adverse customer reactions and negative publicity, which harmed the Company's
reputation in the marketplace and adversely affected the Company's business and
operating results. This past harm to the Company's reputation could adversely
affect future market acceptance of the Company's products. The Company regularly
introduces enhancements to its existing products and periodically introduces new
products. During January and February 1996, the Company released new versions of
its AXXiON-NetBackup, AXXiON-HA, AXXiON-HSM and AXXiON-SecureMax products that
incorporate a three-tiered client/server architecture. There can be no assurance
that despite testing by the Company and by current and potential customers,
defects and errors will not be found in existing products or in new products,
versions or enhancements after commencement of commercial shipments. Any such
defects and errors could result in adverse customer reactions, negative
publicity regarding the Company and its products, harm to the Company's
reputation, loss of or delay in market acceptance or require expensive product
changes, any of which could have a material adverse effect upon the Company's
business, operating results and financial condition.

TECHNOLOGY AND ARCHITECTURE

OpenVision products are architected for the client/server environment to
enable centralized management of thousands of systems autonomously. The
OpenVision products that require a high degree of distribution and scalability
are developed using a distributed three-tiered client/server architecture that
is comprised of a Management Console, a Management Engine and Intelligent
Agents. The Management Console is used by an administrator to centrally define
and manage policies for each AXXiON application. The Management Engine contains
the main application logic and a central repository as well as the code that
manages the event-driven communication between the Management Consoles and
thousands of Intelligent Agents. The Intelligent Agents contain the
functionality required for the collection of data for the specific AXXiON
application as well as the ability to autonomously invoke management polices (as
defined in and communicated by the Management Engine) and automatically correct
problems for the system on which it is placed. Where significant distribution
and scalability is not required, OpenVision products employ a two-

37
<PAGE> 38

tiered client/server architecture in which the Management Console and Management
Engine functions are packaged together and called the "Management Interface."

[INSERT GRAPHIC]

Because a single Management Console can centrally administer management
policy for thousands of Intelligent Agents, as the customer's distributed
environment continues to grow in size both within a company (intranet) and with
other companies (internet), it is not necessary to increase the number of system
administrators proportionately. The need for administrators to interact with
each Intelligent Agent is minimized by distributing the management policies from
the Management Engines to each of the Intelligent Agents where the individual
policies are automatically locally enforced by the Intelligent Agent. Only when
a management event of significance occurs does the Intelligent Agent notify the
Management Console via the Management Engine. Using the Company's scalable
three-tiered client/server architecture, it is possible for a single system
administrator to centrally define policies and monitor thousands of Intelligent
Agents effectively.

PRODUCT INTEGRATION

The Company's strategy is to integrate its applications in a two-phased
approach. Phase one of the strategy is to integrate selected product pairs to
enhance systems management functionality for the user. The following integrated
solutions comprise phase one and are currently available.

Event Driven Storage. AXXiON-Event Manager and AXXiON-NetBackup are
combined to provide proactive detection of events that indicate a non-scheduled
backup, archive or recover may be desirable. For example, if a large transaction
was just completed against the database, that event can trigger a hot database
backup.

Highly Available Storage Servers. AXXiON-HA is integrated with
AXXiON-NetBackup and AXXiON-HSM to create highly available backup and HSM
servers. For example, if the AXXiON-NetBackup server that backs up a bank's
critical customer account information fails, the AXXiON-NetBackup server can
fail over to a secondary system and successfully complete the backup.

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<PAGE> 39

Highly Available Security Servers. AXXiON-Authenticate is integrated with
AXXiON-HA to ensure constant network security protection. For example, a
financial institution may use AXXiON-Authenticate for network security,
requiring all traders to login via the authentication server. Should the
security server go down, preventing any traders from logging in and conducting
transactions, the AXXiON-Authenticate server will failover to a secondary
system.

Secure Auditing. AXXiON-Authenticate and AXXiON-SecureMax have been
integrated to provide message integrity for systems requiring auditing. For
example, a security administrator from a bank's main office may conduct an audit
of a remote branch. With the integrated solution, the audit report, which
identifies all the branches' potential security breaches, is transmitted in an
encrypted fashion, preventing unauthorized access to the audit's contents.

Secure Event Management. The integration of AXXiON-Authenticate and
AXXiON-Event Manager creates a solution that authenticates administrators of
remote systems and encrypts the policies they set. For example, the integrated
solution prevents unauthorized access and also encrypts the transmission of
critical system problems from the client to the server.

In phase two of its integration strategy, the Company is seeking to
integrate certain products throughout its entire OpenVision product line through
the availability of a common set of services. The common services are intended
to provide applications with a common data repository that stores systems
management data collected by all the applications. Once that data is stored in a
central location, other applications can utilize it, allowing the user to create
a set of complex management policies. Other common services are designed to
include security and event management so that all OpenVision applications
themselves may be secure and event-driven operations. The Company does not
expect this integration to be complete until the second half of fiscal 1997, at
the earliest.

Most of the Company's products are available on a variety of operating
system platforms, including Sun Microsystems' Solaris, Hewlett-Packard's UX,
IBM's AIX, Digital Equipment's OSF/1 and OpenVMS and Intel-based platforms
running Microsoft's WindowsNT (all Win32 derivatives). In addition, intelligent
agents are provided for Sequent's PTX, Silicon Graphics Inc.'s IRIX, Santa Cruz
Operations' UNIX, Microsoft's Windows, UNIX vendors, Apple's MAC OS, DOS and
Novell's NetWare.

Certain OpenVision applications are designed to manage the following
relational databases: Oracle7, Sybase System10 and Informix database releases 6
and 7. Because most mission-critical applications today require one of these
relational databases for its storage of business data, the management of these
databases has become a leading requirement in the marketplace.

Certain OpenVision applications are integrated with the following network
management platforms: HP's OpenView, IBM's SystemView, Cabletron's Spectrum and
Sun Solstice. Network manager integration allows for the administration of
network and system management from a single centralized interface affording the
administrator with a complete view of their distributed environment.

SERVICES

The Company's customer service and support organization provides customers
with maintenance, technical support, consulting and training services. The
Company believes that providing a high level of customer service and technical
support is critical to customer satisfaction and the Company's success. Most of
the Company's customers currently have support agreements with the Company. The
OpenVision service group, which includes 42 employees, provides the following
services:

Maintenance and Technical Support. The Company offers 24-hour, 7
day-a-week telephone support as well as electronic mail and fax customer
support. Additional customer support is provided by some of the Company's VARs,
system integrators and OEMs. Initial product license fees

39
<PAGE> 40

do not cover maintenance. Customers are entitled to receive new software
releases, maintenance releases and support for an annual fee.

Consulting. OpenVision believes that most customers need assistance before
product selection and not just for the implementation of purchased products.
Therefore, the Company offers strategy and analysis consulting services for
planning the management and control of client/server computing in their specific
environment. In addition, the Company offers services to assist customers with
product implementation. As part of its broad range of services, the Company
believes it offers particular expertise in analyzing network security threats
and security policy integrity.

Training. The Company offers on-site training to its customers to help
them optimize their use of the Company's products in their specific environment
and to assist customers in developing a general expertise in systems management.

Warranty. OpenVision provides, for an additional fee, a 180-day warranty
for licensed software pursuant to which OpenVision is obligated to repair or
replace software found to be defective during the warranty period.

SALES AND MARKETING

The Company markets the AXXiON products and associated services through a
combination of direct sales and indirect channels (resellers, VARs, hardware
distributors, application software vendors and systems integrators).
OpenVision's North American sales, marketing and consulting force consists of 67
employees, including 17 pre-sales engineers that provide technical sales
assistance. To date, the majority of the Company's revenue has been derived from
direct sales. Internationally, OpenVision markets its products through a direct
sales force of nine persons located in Europe and the Americas and 17 resellers
located in Europe, Asia Pacific, South America, Mexico and the Middle East. The
Company currently has sales and service offices in Canada, England, Germany and
France. OpenVision uses direct mail campaigns, product seminars, trade shows,
public relations and joint partner marketing events to support marketing
activities.

International revenue (from sales outside the United States and Canada)
accounted for 0%, 9%, 29% and 27% in fiscal 1993, 1994, 1995 and the nine months
ended March 31, 1996, respectively. The Company believes that its success
depends upon continued expansion of its international operations. The Company
intends to continue to expand its global sales and marketing infrastructure and
expects to generate an increasing percentage of revenue through indirect sales.
See Note 9 of Notes to Consolidated Financial Statements for a summary of
operating information and certain year-end balance sheet information by
geographical regions.

CUSTOMERS

The Company's target customers include both public and private sector
organizations that have in development or have deployed client/server
business-critical applications in a large, distributed heterogeneous
environment. As of March 31, 1996, OpenVision has licensed its AXXiON systems
management applications to more than 800 customers.

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<PAGE> 41

The following table lists certain customers of the Company and end users of
the Company's products. Each of the entities has purchased at least $50,000 of
the Company's products and services in the fifteen months ended March 31, 1996
and has entered into a support agreement with the Company:

FINANCIAL SERVICES

Bank of America
Bankers Trust Company
The Chase Manhattan Bank, N.A.
Credit Lyonnais
Deutsche Genossenschafts Bank
London Stock Exchange
Mitsubishi Bank
NASD Production Services
Nomura International
John Nuveen & Co. Incorporated
State Street Bank and Trust Company
Wells Fargo Bank, N.A.

TRANSPORTATION

BMW
Boeing Information Support Services
Chrysler Corporation
Ford Motor Company
General Motors Corporation
Peugeot
Yellow Technology Services, Inc.

TECHNOLOGY

Adobe Systems, Inc.
Ascend Communications
Bay Networks
Linotype-Hell AG Germany
Mentor Graphics Corporation
Motorola, Inc.
Sun Microsystems, Inc.
Tandem Computers
CHEMICAL/ENERGY

Air Products and Chemicals, Inc.
British Gas
Energis
Koch Industries, Inc.
Leeson Electric Corporation

TELECOMMUNICATIONS

Ameritech Services, Inc.
AT&T Corporation
British Telecommunications
Ericsson
GE Information Services
LDDS/Worldcom Network Services
LCI International Telecom Corp.
MCI Telecommunications Corporation
NYNEX
TCI Communications, Inc.

DEFENSE

General Dynamics-Electric Boat Corporation
Loral Defense Systems-East
McDonnell Douglas Corporation
Northrop/Grumman Corporation

OTHER

European Space Operation Center
Kokusai Denshin Denwas Co., Ltd.
Linklaters & Paines
Morse Group PLC
Securicor SecurIT
United Healthcare Corporation

Representative examples of the manner in which the Company's products may
be used include the following:

Major Commercial Bank

Wells Fargo Bank, N.A., a large commercial bank with 900 branches is using
OpenVision products to deliver a higher level of customer service to its
clients. The centralized management features of OpenVision's products enable six
systems administrators to analyze, monitor and manage activity for all of the
900 dispersed locations from a centralized operations center, thus reducing the
number of bank staff that would otherwise be required to manage the branches.
Using AXXiON-Event Manager, AXXiON-Performance Manager and AXXiON-SecureMax
applications, the administrator is able to ensure that the system is operating
at full capacity and, simultaneously provide quick resolution to problems
detected in the system. This limits the amount of downtime the bank incurs in
providing service. With the OpenVision solution, the likelihood of major
interruptions in service and performance bottlenecks is significantly decreased
as a result of automated, event-driven software that allows for the critical
monitoring of system activity and error correction. To protect its valuable
account information and records, the bank uses OpenVision's AXXiON-NetBackup
product to protect and enable the recovery of financial records and client
correspondence that may be subject to hardware or application failures, business
interruptions and

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<PAGE> 42

natural disasters. The OpenVision highly scalable and integrated architecture
provides the bank with the opportunity to increase its capacity and make
additional software application purchases without scalability or compatibility
problems.

Leading Automobile Manufacturer

Automobile design-to-manufacturing cycles typically range from five to
seven years, creating a significant lag between the initial design stage and the
manufacturing stage. As part of a strategy to minimize design cycle time,
Chrysler Corporation completed a reorganization of its computing infrastructure
by implementing a client/server CAD/CAM environment to develop, design and
manufacture cars, trucks and vans. Before the reorganization, designers had to
contact an administrator in the operations department and request old computer
files. Today, designers save significant time by utilizing AXXiON-NetBackup to
retrieve files in approximately two minutes. Using AXXiON-NetBackup across its
2,400 development workstations to manage storage operations allows the company
to attach virtually any type of tape backup unit to a server. The implementation
of the client/server design application, combined with the AXXiON-NetBackup, has
allowed the auto manufacturer to improve productivity and reduce
design-to-manufacturing significantly.

International Law Firm

In order to improve customer service, Linklaters & Paines, a large,
international law firm, with approximately 2,500 nodes implemented a firm-wide
document management network system in its offices in North America, Europe,
Asia, India and Moscow that stores the firm's legal documents and allows all its
offices to share files, information and expertise. The firm recognized while
developing the network that an international network security and back-up
solution was essential. The customer retained OpenVision to conduct an analysis
of their security and back-up requirements. Based on OpenVision's
recommendations, the customer implemented AXXiON-Authenticate, OpenVision's
Kerberos-based network security product, and AXXiON-NetBackup to provide
centralized storage management. The law firm is able to administer back-up for
all of its offices from a single facility in London.

RESEARCH AND DEVELOPMENT

Since its inception, the Company has made substantial investments in
product development. In fiscal 1993, 1994 and 1995 and the nine months ended
March 31, 1996, the Company's total research and development expenses were
approximately $4.5 million, $14.8 million, $7.5 million and $4.4 million,
respectively. To date, the Company has not capitalized its software development
costs.

The Company anticipates that, in the future, it will continue to commit
substantial resources to research and development. The Company believes that its
future success will depend in large part on its ability to continue to enhance
existing products, respond to changing customer requirements and develop and
introduce in a timely manner new products that keep pace with technological
developments and emerging industry standards.

Customer requirements include, but are not limited to, operability across
distributed and changing heterogeneous hardware platforms, operating systems,
relational databases and networks. For example, as certain of the Company's
customers start to utilize WindowsNT or other emerging operating platforms, it
will be necessary for the Company to enhance its AXXiON products to operate on
such platforms in order to meet these customers' requirements. There can be no
assurance that the Company's products will achieve market acceptance or will
adequately address the changing needs of the marketplace or that the Company
will be successful in developing and marketing enhancements to its existing
products or new products incorporating new technology on a timely basis. If the
Company is unable to develop and introduce new products, or enhancements to
existing products, in a timely manner in response to changing market conditions
or customer requirements, the Company's business, operating results and
financial condition will be materially and adversely affected.

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<PAGE> 43

The Company has a number of ongoing development projects. During January
and February 1996, the Company released new versions of its AXXiON-NetBackup,
AXXiON-HA, AXXiON-HSM and AXXiON-SecureMax products that incorporate a
three-tiered client/server architecture. There can be no assurance that the
features incorporated in these products are the features required to achieve
market acceptance. In addition, the Company is conducting ongoing research and
development of new and improved software products. The Company believes that it
will need to devote significant time and resources to these efforts, and no
assurance can be given that such efforts will be successful. From time to time
the Company or its competitors may announce new products, capabilities or
technologies that have the potential to replace or shorten the life cycles of
the Company's existing products. There can be no assurance that announcements of
currently planned or other new products will not cause customers to defer
purchasing existing Company products. The Company has from time to time in the
past experienced delays of up to several months due to the complex nature of
software developed by the Company. While the Company cannot quantify the effect
of such delays, it believes that such delays may have resulted in lost or
delayed revenues and lost customers. There can be no assurance that the Company
will not experience delays in connection with its current product development or
future development activities. Delays similar or greater or difficulties
associated with new product introductions or product enhancements could have a
material adverse effect on the Company's business, operating results and
financial condition.

COMPETITION

The market for client/server systems management software is intensely
competitive, highly fragmented and characterized by rapid technological
developments, evolving standards and rapid changes in customer requirements. To
maintain and improve its position in this market, the Company must continue to
enhance current products, enhance the operability of its products with one
another and develop new products in a timely fashion. The Company competes
primarily with: (i) hardware and software vendors that offer a management
platform or framework to support vendor-created and third-party systems
management applications; (ii) vendors that provide systems management software
for the mainframe environment and are migrating their products to the
client/server environment; (iii) vendors that provide "point" products that
address specific problems and offer specific functionality, such as job
scheduling or security audit tools; and (iv) vendors that provide integrated and
interoperable solutions. The Company believes that its principal competitors
that offer products in all of its product areas -- storage, operations and
security -- are Computer Associates International, Inc., Hewlett-Packard
Company, IBM Corporation, Platinum technology, Inc. and several smaller private
companies. The Company believes that additional principal competitors with
respect to each of the Company's three product areas include Legato Systems,
Inc. and Spectra Logic for storage; Novadigm, Inc., Tivoli Systems Inc. (which
has been acquired by IBM Corporation), BMC Software, Inc., Compuware Corporation
and Sun Microsystems, Inc. for operations; and Axent Technologies and Cybersafe
Corporation for security. In competing with hardware vendors, the Company may be
at a competitive disadvantage because hardware vendors are able to package
combination, of hardware and software, thereby offering the customer a
single-vendor solution at a lower total cost.

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<PAGE> 44

recently purchased Tivoli Systems Inc., a competitor of the Company. In
addition, because there are relatively low barriers to entry for the software
market, the Company expects additional competition from other established and
emerging companies. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any of which could
materially and adversely affect the Company's business, operating results and
financial condition. Any material reduction in the price of the Company's
products would negatively affect gross margins and would require the Company to
increase software unit sales in order to maintain gross profits. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors, and the failure to do so would have a material adverse
effect upon the Company's business, operating results and financial condition.

The principal competitive factors affecting the market for the Company's
products are ease of use, functionality and features product quality, product
architecture, breadth of distribution, price, ability to export its products,
customer support and name recognition. Based on these factors, the Company
believes that it has competed effectively to date. In the future, the Company
will be required to respond promptly and effectively to the challenges of
technological change and its competitors' innovations. There can be no assurance
that the Company will be able to provide products that compare favorably with
the products of the Company's competitors or that competitive pressures will not
require the Company to reduce its prices.

PROPRIETARY RIGHTS

The Company relies on a combination of copyright, trademark and trade
secret laws, confidentiality procedures and licensing arrangements to establish
and protect its proprietary rights. The Company presently has no patents but
intends to file patent applications in the future. As part of its
confidentiality procedures, the Company generally enters into non-disclosure
agreements with its employees, distributors and corporate partners, and license
agreements with respect to its software, documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use the Company's products or technology without
authorization, or to develop similar technology independently. Policing
unauthorized use of the Company's products is difficult and although the Company
is unable to determine the extent to which piracy of its software products
exists, software piracy can be expected to be a persistent problem. In selling
its products, the Company relies on signed license agreements, but may in the
future rely on "shrink wrap" licenses that are not signed by licensees and,
therefore, may be unenforceable under the laws of certain jurisdictions. In
addition, effective protection of intellectual property rights is unavailable or
limited in certain foreign countries. There can be no assurance that the
Company's protection of its proprietary rights, including any patent that may be
issued, will be adequate or that the Company's competitors will not
independently develop similar technology, duplicate the Company's products or
design around any patents issued to the Company or other intellectual property
rights.

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LEGAL MATTERS

In connection with the acquisition by OpenVision of ten companies,
divisions of companies or products between October 1992 and July 1993, the
Company entered into agreements with certain sellers providing for the payment
of software royalties. From time to time disputes have arisen with the certain
of these sellers regarding the calculation of the royalties and the obligations
of the Company under these agreements. There is currently one dispute that is
unresolved, although no formal claims have been filed. The Company believes that
the allegations of this seller have no merit and plans to vigorously defend any
formal claims filed by this person. While the outcome of any formal claims
cannot be determined with certainty, the Company does not believe that the
resolution of these claims will have a material adverse effect on the Company's
business, operating results or financial condition. The Company is not a party
to any other litigation that would have a material adverse effect on the
Company's business, operating results or financial condition.

The Company's license agreements with customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. To the extent the Company may in the future rely on "shrink
wrap" licenses that are not signed by licensees and, therefore, may be
unenforceable under the laws of certain jurisdictions, the limitation of
liability provisions contained in such license agreements may not be effective.
The Company's products are generally used to manage data critical to
organizations, and, as a result, the sale and support of products by the Company
may entail the risk of product liability claims. Although the Company maintains
errors and omissions product liability insurance, a successful liability claim
brought against the Company could have a material adverse effect upon the
Company's business, operating results and financial condition.

EMPLOYEES

As of March 31, 1996, the Company had 206 full time employees, including 65
in research and development, 94 in sales, marketing and consulting, 16 in
technical support and 31 in general and administrative functions. The Company's
future performance depends to a significant degree upon the continued service of
its key members of management, as well as marketing, sales, consulting and
product development personnel, none of whom are bound by an employment contract,
and its ability to attract and retain highly skilled personnel in these areas.
Competition for such personnel is intense, and there can be no assurance that
the Company can retain its key employees or that it will be successful in
attracting, assimilating and retaining such personnel in the future. None of the
Company's employees are represented by a labor union. The Company has not
experienced any work stoppages and considers its relations with its employees to
be good.

FACILITIES

The Company headquarters are located in 16,406 square feet of leased office
in Pleasanton, California. The lease expires in March 1997 and includes one
three-year renewal option held by the Company. The Company leases 14 other
offices with a total of approximately 49,942 square feet in the United States,
Canada, France, Germany and the United Kingdom, with various expiration dates
through October 1998. This does not include leases on two facilities that either
are no longer being used or are being discontinued by the Company and on which
the associated remaining costs were accrued in November 1994. The Company
believes that its existing facilities are adequate and that sufficient
additional space will be available as needed in the cities where it is located.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information as of the date of this
Prospectus with respect to each person who is an executive officer or director
of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- -------------------------------------------------
<S> <C> <C>
Michael S. Fields.................. 50 Chairman of the Board
Geoffrey W. Squire................. 49 President, Chief Executive Officer and Director
Kenneth E. Lonchar................. 38 Chief Financial Officer and Senior Vice President
Paul A. Sallaberry................. 39 Senior Vice President, North American Operations
Jay A. Jones....................... 41 Vice President, General Counsel and Secretary
W. Richard Barker.................. 50 Senior Vice President, Product Division
Thomas J. Connors(1)(2)............ 66 Director
Stewart K.P. Gross (2)............. 36 Director
William H. Janeway (1)............. 52 Director
Jeanne Wohlers (1)(2).............. 51 Director
</TABLE>

- ---------------
(1) Compensation Committee member

(2) Audit Committee member

Michael S. Fields, Chairman of the Board, founded the Company in 1992. Mr.
Fields has served as Chairman of the Board since July 1992 and served as Chief
Executive Officer from January 1993 to June 1995. From 1990 to 1992, Mr. Fields
was President of Oracle Corporation USA ("Oracle USA"), a relational database
company, overseeing all aspects of U.S. sales and 1,500 employees. From 1989 to
1990, he was the Vice President of Western Operations for Oracle USA.

Geoffrey W. Squire has been a director of the Company since January 1994
and was appointed Chief Executive Officer of the Company in July 1995. From
January 1994 to November 1994, Mr. Squire was Executive Vice President and Chief
Executive Officer of International Operations. From November 1994 to June 1995,
Mr. Squire was President and Chief Operating Officer of the Company. From 1984
to 1987, Mr. Squire was Managing Director and Senior Vice President of Oracle
Corporation and, from 1987 to 1990, Chief Executive Officer of Oracle Europe. In
1990, he was promoted to Executive Vice President of Oracle Corporation and
President of Worldwide Operations. In July 1992, he was appointed to Oracle's
five-person Executive Committee with responsibility as Chief Executive,
International Operations. Mr. Squire has sat on the Council of the U.K.
Computing Services and Software Association since 1990. In 1995, Mr. Squire was
elected as the founding President of the European Information Services
Association.

Kenneth E. Lonchar joined the Company as Chief Financial Officer and Senior
Vice President in December 1995. From November 1988 until joining the Company,
Mr. Lonchar was Vice President, Finance and Administration and Chief Financial
Officer of Microtec Research, Inc., an embedded software company. Mr. Lonchar is
a certified public accountant.

Paul A. Sallaberry was the Company's Senior Vice President of Sales from
October 1992 until June 1994. Mr. Sallaberry rejoined the Company in February
1995 as Senior Vice President of North American Operations. Before joining the
Company, Mr. Sallaberry served as the Director of Public Sector Sales from 1989
to 1990 at Oracle Corporation, before being promoted to Vice President, Vertical
Division, where he was employed in that capacity until 1992. Prior to 1989, Mr.
Sallaberry held various sales positions at Applied Data Research and Software
Design Incorporated.

Jay A. Jones joined the Company as General Counsel in March 1993 and was
appointed Vice President, General Counsel and Secretary in July 1994. From
October 1991 to March 1993, Mr. Jones was Senior Corporate Counsel to Oracle
Corporation. From 1987 through 1990, Mr. Jones was Vice

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<PAGE> 47

President, Corporate Services, General Counsel and Secretary for Word Star
International Incorporated. Mr. Jones is a member of the California Bar
Association.

W. Richard Barker joined the Company as Senior Vice President of the
Consulting and Technical Services division of OpenVision International Limited
in March 1994. In April 1995, Mr. Barker was appointed Senior Vice President,
Product Division. From 1984 through 1994, Mr. Barker was Senior Vice President
for Oracle Europe responsible for worldwide development and marketing of
Oracle's Methodology and CASE product set.

Thomas J. Connors has served on the Company's Board of Directors since
December 1994 and has been a member of the Audit and Compensation Committees
since December 1995. Mr. Connors has been the owner of TJC Investments since
1978. Mr. Connors is a director of Zilog, Inc. and Level One Communications,
Inc.

Stewart K.P. Gross has served as a director of the Company since July 1992
and a member of the Audit Committee since January, 1994. Mr. Gross is a Managing
Director of E.M. Warburg, Pincus & Co., Inc. and has been employed by Warburg
since 1987. Prior to joining Warburg, Mr. Gross was employed at Morgan Stanley &
Co. Mr. Gross is a director of Vanstar Corporation and several privately-held
companies.

William H. Janeway has served as a director of the Company since July 1992
and a member of the Compensation Committee since January 1994. Mr. Janeway has
been a Managing Director of E.M. Warburg, Pincus & Co., Inc. since 1988. Prior
to joining Warburg, Mr. Janeway was the Vice President and Director of Corporate
Finance from 1979 to 1988 at F. Eberstadt & Co., Inc. Mr. Janeway is a director
of Vanstar Corporation, Maxis, Inc., Zilog, Inc. and several privately-held
companies.

Jeanne Wohlers has served as a director of the Company since August 1993
and a member of the Audit and Compensation Committees since January 1994. Ms.
Wohlers currently is an independent management consultant. From 1988 to 1992,
Ms. Wohlers served as Vice President, Chief Financial Officer of Sybase
Corporation. From 1978 to 1987, Ms. Wohlers served in various management
positions with Tandem Computers, including Vice President and Corporate
Controller. Ms. Wohlers is a director of a family of mutual funds managed by
20th Century/Benham Capital Management.

All directors hold office until the next annual meeting of stockholders or
until their successors have been elected and qualified.

Except for grants of stock options, directors of the Company generally do
not receive compensation for services provided as a director. The Company does
not pay additional amounts for committee participation or special assignment of
the Board of Directors, except for reimbursement of their expenses in attending
Board and committee meetings. Mr. Connors has entered into an agreement with the
Company to provide consulting services with respect to marketing and sales
issues pursuant to which the Company pays Mr. Connors a fee at a rate of $1,800
per day for consulting services rendered approximately two days per month.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Company's Board of Directors, formed in
January 1994, currently consists of Messrs. Connors and Janeway and Ms. Wohlers.
None of these individuals were at any time during fiscal 1995, or at any other
time, an officer or employee of the Company. No executive officer of the Company
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

The Company does not currently have any employment contracts in effect with
the Chief Executive Officer or any of the other Named Executive Officers (as
defined below).

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Under the 1992 Stock Plan, in the event of a merger of the Company with or
into another corporation or the sale of substantially all of the assets of the
Company, the exercisability and vesting of all outstanding options and stock
purchase rights shall be accelerated to the extent such options and stock
purchase rights are not assumed or substituted for by the successor corporation.

EXECUTIVE COMPENSATION

The following table sets forth a summary of the compensation paid by the
Company to its Chief Executive Officer and the four most highly compensated
other executive officers of the Company (collectively, the "Named Executive
Officers") for services rendered in all capacities to the Company during the
Company's fiscal year ended June 30, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
--------------------- ------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
COMPEN- OPTIONS/ COMPEN-
NAME AND PRINCIPAL POSITION SALARY($) SATION($) SARS(#) SATION($)
- -------------------------------------- --------- ------- ------------ ---------
<S> <C> <C> <C> <C>
Michael S. Fields(1).................. $ 202,500 -0- -0- -0-
Chairman of the Board
Geoffrey W. Squire(1)................. 184,320(2) $25,600(2)(3) -0- $ 9,216(2)(4)
President and Chief Executive
Officer
W. Richard Barker..................... 156,672(2) 23,020(2)(3) 37,500 7,833(2)(4)
Senior Vice President, Product
Division
Paul A. Sallaberry.................... 87,085 94,006(5) 93,125 -0-
Senior Vice President, North
American Operations
Jay A. Jones.......................... 112,462 -0- 12,250 -0-
Vice President, General Counsel &
Secretary
</TABLE>

- ---------------
(1) During substantially all of fiscal 1995, Mr. Fields was Chairman of the
Board and Chief Executive Officer and Mr. Squire was President and Chief
Operating Officer. In June 1995, Mr. Squire was appointed Chief Executive
Officer.

(2) Amount reflects U.K. pounds sterling converted into U.S. dollars at an
exchange rate of $1.536.

(3) Represents the amount of an automobile lease for the benefit of the officer.

(4) Represents the amount of contributions to a pension plan for the benefit of
the officer.

(5) Mr. Sallaberry left the Company in July 1994 and was re-hired in February
1995. Other compensation represents severance payments made to Mr.
Sallaberry.

48
<PAGE> 49

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to stock options
granted to the Named Executive Officers during fiscal year 1995 pursuant to the
1992 Stock Plan.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
--------------------------------------------------------- STOCK
NUMBER OF PERCENT OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS/SARS EXERCISE FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM ($)(3)
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) IN FISCAL YEAR(2) ($/SH) DATE 5% 10%
- --------------------- ------------- ----------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Fields.... -- -- -- -- -- --
Geoffrey W. Squire... -- -- -- -- -- --
W. Richard Barker.... 37,500 3.9% $ 0.50 3/19/02 $ 7,633 $ 17,788
Paul A. Sallaberry... 44,000 4.6 0.50 2/23/05 13,836 35,062
49,125 5.1 0.50 2/23/05 15,447 39,146
Jay A. Jones......... 7,500 0.8 0.50 8/17/04 2,358 5,977
4,750 0.5 0.50 3/21/05 1,494 3,785
</TABLE>

- ---------------
(1) Options granted under the 1992 Stock Plan generally become exercisable at a
rate of 1/4 of the shares subject to the option at the end of the first year
and 1/48 of the shares subject to the option at the end of each month
thereafter, so long as the individual is employed by the Company.

(2) The Company granted options to purchase 956,875 shares of Common Stock
during fiscal 1995.

(3) Potential realizable value is based on the assumption that the price of the
Common Stock appreciates at the annual rate shown, compounded annually, from
the date of grant until the end of the ten-year (seven-year, in the case of
Mr. Barker) option term. The values are calculated in accordance with rules
promulgated by the Securities and Exchange Commission (the "Commission") and
do not reflect the Company's estimate of future stock price appreciation.

Subsequent to the end of fiscal year 1995, the Company granted options to
purchase Common Stock to certain of the Named Executive Officers as follows: W.
Richard Barker, 25,000 shares at an exercise price of $0.50 per share and an
expiration date of November 16, 2005; and Jay A. Jones, 2,500 shares at an
exercise price of $0.50 per share and an expiration date of November 16, 2005
and 5,000 shares at an exercise price of $0.50 per share and an expiration date
of December 29, 2005.

The following table sets forth information with respect to each exercise of
stock options during fiscal year 1995, by each of the Named Executive Officers
and the number of options held at fiscal year end and the aggregate value of
in-the-money options held at fiscal year end.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
ACQUIRED ON OPTIONS/SARS AT OPTIONS/SARS AT
EXERCISE VALUE FISCAL YEAR-END (#) FISCAL YEAR-END($)
(#) REALIZED ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
----------- --------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Michael S. Fields........... -- -- --/-- --/--
Geoffrey W. Squire.......... -- -- --/-- --/--
W. Richard Barker........... -- -- --/37,500 --/--
Paul A. Sallaberry.......... 81,875 $32,750 13,023/80,102 --/--
Jay A. Jones................ -- -- 9,863/22,637 $2,708/$2,292
</TABLE>

- ---------------
(1) Based on the fair market value of the Company's Common Stock at the date of
exercise (as determined by the Company's Board of Directors), less the
exercise paid for such shares.

(2) Based on the fair market value of the Company's Common Stock at fiscal year
end, $0.50 per share (as determined by the Company's Board of Directors),
less the exercise price payable for such shares.

49
<PAGE> 50

1992 STOCK PLAN

As of March 31, 1996, the Company had reserved 4,750,000 shares for
issuance pursuant to its 1992 Stock Plan (the "Stock Plan"), which has been
approved by the Company's Board of Directors and stockholders. The Plan provides
for the granting to employees (including officers) of qualified "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and for the granting to employees (including officers),
consultants and directors of nonqualified stock options. The Plan also provides
for the granting of restricted stock. As of March 31, 1996, options to purchase
an aggregate of 1,093,919 shares were outstanding, and 1,953,555 shares remained
available for future grants. Also, as of March 31, 1996, options to purchase
687,838 shares had been exercised, and 1,014,688 shares had been issued pursuant
to restricted stock agreements.

The Plan is administered by the Board of Directors or a committee appointed
by the Board. Options granted generally become exercisable at a rate of 1/4 of
the shares subject to the option at the end of the first year and 1/48 of the
shares subject to the option at the end of each month thereafter and generally
expire ten years from the date of grant. The Company's right to repurchase
outstanding restricted stock at the price originally purchased generally lapses
at the rate of 1/4 of the shares at the end of the first year and 1/48 of the
shares at the end of each month thereafter.

In the event of a merger of the Company with or into another corporation or
the sale of substantially all of the assets of the Company, all outstanding
options shall be assumed or an equivalent option substituted by the successor
corporation. In the event a successor corporation refuses to assume or
substitute for the options, the exercisability of shares subject to options
under the Stock Plan shall be accelerated. In such event, the Company shall
notify the holders of outstanding options that such options are fully
exercisable, and all options not exercised will then terminate 15 days after the
date of such notice.

The exercise price of incentive stock options granted under the Plan must
be at least equal to the fair value of the Company's Common Stock on the date of
grant. The exercise price of options to an optionee who owns more than 10% of
the Company's outstanding voting securities must equal at least 110% of the fair
value of the Common Stock on the date of grant.

1996 EMPLOYEE STOCK PURCHASE PLAN

The Company has reserved an aggregate of 300,000 shares of Common Stock for
issuance under its 1996 Employee Stock Purchase Plan (the "ESPP"). The ESPP was
adopted by the Board of Directors in February 1996 and approved by the Company's
stockholders in March 1996. The ESPP is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"), and permits eligible
employees of the Company to purchase Common Stock through payroll deductions of
up to 10% (20% for the first six-month purchase period) of their compensation,
provided that no employee may purchase more than $25,000 worth of stock in any
calendar year. The ESPP will be implemented generally with four six-month
purchase periods in each 24-month offering period, although the first purchase
period and offering period will begin on the effective date of this offering and
will end on October 31, 1996 and April 30, 1998, respectively. The price of
Common Stock purchased under the ESPP will be 85% of the lower of the fair
market value of the Common Stock on the first day of the offering period and the
last day of the purchase period. The ESPP will expire in the year 2006.

1996 DIRECTOR OPTION PLAN

The Company has reserved an aggregate of 250,000 shares of Common Stock for
issuance under its 1996 Director Option Plan (the "Director Plan"). The Director
Plan was adopted by the Board of Directors in February 1996 and approved by the
Company's stockholders in March 1996, to be effective as of the effective date
of this offering. The Director Plan provides for the grant of options to
non-employee directors, 25% of the shares subject to an option granted under the
Director Plan will

50
<PAGE> 51

vest one year after their date of grant and an additional 6.25% will vest at the
end of each quarter thereafter, provided that the optionee continues to serve as
a director on such dates. The exercise prices of an option granted under the
Director Plan will be 100% of the fair market value per share of the Company's
Common Stock on the date of the grant of the option.

In the event of a merger of the Company with or into another corporation or
the sale of substantially all of the assets of the Company, all outstanding
options shall be assumed or an equivalent option substituted by the successor
corporation. In the event a successor corporation refuses to assume or
substitute for the options, the exercisability of shares subject to options
under the Director Plan shall be accelerated. In such event, the Company shall
notify the holders of outstanding options that such options are fully
exercisable, and all options not exercised will then terminate 30 days after the
date of such notice. In the event the options are assumed or substituted for by
the successor corporation, the exercisability of options held by a director
shall be accelerated at such time as the director is no longer a director of the
Company or the successor corporation.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law, and the Company's
Bylaws provide that the Company shall indemnify its directors and officers and
may indemnify its other employees and agents to the fullest extent permitted by
law. The Company has also entered into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Bylaws. The Company believes that these provisions and agreements are
necessary to attract and retain qualified directors and executive officers. At
present, there is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification will be required
or permitted. The Company is not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.

51
<PAGE> 52

CERTAIN TRANSACTIONS

At various times from November 1992 through July 1993, Warburg, Pincus
Investors, L.P. ("Warburg"), purchased shares of the Company's capital stock for
an aggregate purchase price of $29,999,900. In March 1994, such shares were
exchanged for 1,000,000 shares of Common Stock and 5,800,001 shares of Series A
Preferred Stock. In September 1994, the Company issued a promissory note to
Warburg in an aggregate principal amount of $5,000,000, which note was converted
into 434,783 shares of Series B Preferred Stock at a price of $11.50 per share
in March 1994 as part of a financing with other investors.

From October 1993 through May 1995, the Company issued promissory notes to
Warburg in an aggregate principal amount of $13,500,000 ("Notes"). Notes in an
aggregate principal amount of $8,500,000 were converted into Series C and Series
C-1 Preferred Stock in June 1995 as part of a financing with other investors,
and accrued interest on such Notes was repaid at that time. The remaining Note
bears interest at a rate equal to the prime rate plus 1% per annum and is due in
July 1997. As of December 31, 1995, the total amount outstanding under the
Notes, including accrued interest, was $5,957,943, and the Company intends to
repay the Notes with the proceeds of this offering.

In February 1993, Michael S. Fields, the Company's Chairman of the Board,
purchased 562,500 shares of Common Stock at an aggregate price of $56,250.
$1,125 of such purchase price was paid in cash and the balance of $55,125 was
paid by means of a promissory note. This note, together with promissory notes in
the principal amounts of $175,000, $50,000, and $125,000 issued in July 1992,
March 1994 and June 1994, respectively, were consolidated in July 1995, together
with accrued interest on these notes and a new loan in the amount of $67,500,
into one note with aggregate principal amount of $527,116. This note bears
interest at a rate of 6.28%, compounded annually, and is due in June 1999. As of
December 31, 1995, the total amount outstanding under this note, including
accrued interest, is $543,378.

In October 1994, Warburg exchanged 3,871,441 shares of the Company's Series
A Preferred Stock for 3,871,441 shares of a newly created Series A-1 Preferred
Stock.

In June 1995, Geoffrey Squire, the Company's President and Chief Executive
Officer purchased 50,000 shares of Series C Preferred Stock and Warburg
purchased 2,344,360 shares of Series C Preferred Stock and 953,932 shares of
Series C-1 Preferred Stock, at a price of $4.00 per share as part of a financing
with other investors. In addition, at such time, Warburg exchanged 1,678,560
shares of Series A Preferred Stock for 1,678,560 shares of Series A-1 Preferred
Stock.

In June 1995, the Company loaned Mr. Squire $187,500 in connection with a
restricted stock purchase of 375,000 shares of Common Stock at $0.50 per share.
The promissory note executed by Mr. Squire bears interest at a rate of 6.28%,
compounded annually, and is due June 1, 2000. As of December 31, 1995, the total
amount outstanding under this note, including accrued interest, is $194,236.

In July 1995, the Company entered into an arrangement with Warburg under
which the Company bills Warburg $25,000 per calendar quarter for the consulting
services of Michael S. Fields. As of December 31, 1995, the Company has billed
Warburg a total of $50,000 under this arrangement.

Certain holders of Common Stock, the holder of a warrant to purchase Common
Stock and the holders of shares of Common Stock issued upon conversion of the
Series A, Series B and Series C Preferred Stock are entitled to certain
registration rights. See "Description of Capital Stock -- Registration Rights."

The Company has granted options and stock purchase rights to certain of its
directors and executive officers. See "Management -- Option Grants in Last
Fiscal Year" and "Principal and Selling Stockholders."

All future transactions, including loans, between the Company and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors on the Board of Directors.

52
<PAGE> 53

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 1996 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby with
respect to (i) each person known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) each Selling Stockholder, (iii)
each of the Company's directors, (iv) each of the Named Executive Officers and
(v) all directors and executive officers as a group. Except as otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned. Unless otherwise indicated, the
address for each stockholder is c/o OpenVision Technologies, Inc., 7133 Koll
Center Parkway, Pleasanton, California 94566.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED NUMBER SHARES
PRIOR TO OFFERING(1)(2) OF BENEFICIALLY OWNED
SHARES AFTER OFFERING(1)(2)
------------------------- BEING -------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------- --------- ------------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
Warburg, Pincus Investors,
L.P.(1)(3)......................... 7,232,275 59.0% -- 7,232,275 49.0%
466 Lexington Avenue
New York, NY 10017
Geoffrey W. Squire (4)............... 803,750 6.6 -- 803,750 5.4
Michael S. Fields (5)................ 562,500 4.6 55,734 506,766 3.4
Stewart K.P. Gross (6)............... 7,232,275 59.0 -- 7,232,275 49.0
William H. Janeway (7)............... 7,232,275 59.0 -- 7,232,275 49.0
Thomas J. Connors (7)................ 45,000 * -- 45,000 *
Jeanne Wohlers (8)................... 30,000 * -- 30,000 *
W. Richard Barker (9)................ 47,656 * -- 47,656 *
Paul A. Sallaberry (10).............. 130,714 1.1 15,000 115,714 *
Jay A. Jones (11).................... 17,926 * -- 17,926 *
All directors and executive officers
as a group (10 people) (12)........ 8,944,821 72.6 70,734 8,874,087 59.8
OTHER SELLING STOCKHOLDERS:
Jeffrey B. Braun(13)................. 43,479 * 25,000 18,479 *
Clariden Asset Management (14)....... 96,935 * 48,511 48,424 *
S.A.C. Capital Management, L.P....... 21,740 * 21,740 0 *
Warren Schwerin...................... 43,479 * 40,000 3,479 *
Herb Sucherman....................... 25,490 * 10,000 15,490 *
U.S.A. Fund Limited Partnership...... 34,667 * 14,667 20,000 *
Von Graffenreid AG Private Bank...... 43,479 * 4,348 39,131 *
</TABLE>

- ---------------
* Less than one percent.

(1) Based on 12,259,745 of voting Common Stock outstanding prior to this
offering. Does not include 3,247,142 shares of nonvoting Class B Common
Stock owned by Warburg, which represents all outstanding Class B Common
Stock. See "Description of Capital Stock." Including such shares, Warburg
will hold 58.2% of the Company's outstanding stock after this offering.

(2) Beneficial ownership is determined in accordance with the rules of
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently exercisable or exercisable within 60 days of March 31,
1996 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of each
other person. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, the

53
<PAGE> 54

stockholder named in the table has sole voting and investment power with
respect to the shares set forth opposite such stockholder's name.

(3) The sole General Partner of Warburg, Pincus Investors, L.P. ("Warburg") is
Warburg, Pincus & Co., a New York general partnership ("WP"). Lionel I.
Pincus is the Managing Partner of WP and may be deemed to control WP. E.M.
Warburg, Pincus & Company, a New York general partnership ("E.M. Warburg")
that has the same general partners as WP, manages Warburg. WP has a 20%
interest in the profits of Warburg and, through its wholly owned subsidiary
E.M. Warburg, Pincus & Co., Inc., E.M. Warburg owns 1.13% of the limited
partnership interests in Warburg. Messrs. Janeway and Gross, directors of
the Company, are Managing Directors of E.M. Warburg, Pincus & Co., Inc. and
General Partners of WP and E.M. Warburg. As such, Messrs. Janeway and Gross
may be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in an indeterminate portion of the shares beneficially
owned by Warburg, E.M. Warburg and WP.

(4) Includes 329,767 shares subject to a repurchase option by the Company.

(5) Includes 23,438 shares subject to a repurchase option by the Company.

(6) All of the shares indicated as owned by Messrs. Janeway and Gross are owned
directly by Warburg and are included because of their affiliation with
Warburg. Messrs. Janeway and Gross disclaim "beneficial ownership" of these
shares within the meaning of Rule 13d-3 under the Exchange Act.

(7) Represents 45,000 shares held by The Thomas J. Connors and Barbara B.
Connors Revocable Trust as to which Mr. Connors shares voting and
dispositive power and of which 27,188 shares are subject to a repurchase
option by the Company.

(8) Includes 9,375 shares subject to a repurchase option by the Company.

(9) Includes options to purchase 10,156 shares of Common Stock exercisable
within 60 days of March 31, 1996 and 18,750 shares subject to a repurchase
option by the Company.

(10) Includes options to purchase 48,839 shares of Common Stock exercisable
within 60 days of March 31, 1996.

(11) Includes options to purchase 9,332 shares of Common Stock exercisable
within 60 days of March 31, 1996.

(12) Includes options to purchase 68,327 shares of Common Stock exercisable
within 60 days of March 31, 1996 and 483,518 shares subject to a repurchase
option by the Company.

(13) Shares held of record by a trust for the benefit of Mr. Braun.

(14) Shares held for the benefit of clients of Clariden Asset Management.
Clariden Asset Management has voting and dispositive power with respect to
such shares, but disclaims "beneficial ownership" of these shares within
the meaning of Rule 13d-3 under the Exchange Act.

54
<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

After giving effect to the filing of a Restated Certificate of
Incorporation upon the closing of this offering, the authorized capital stock of
the Company consists of 50,000,000 shares of Common Stock, $.001 par value,
3,400,000 of which are designated Class B Common Stock, and 5,000,000 shares of
Preferred Stock, $.01 par value.

The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Certificate of
Incorporation, which is included as an exhibit to the Registration Statement of
which this Prospectus is a part, and by the provisions of applicable law.

COMMON STOCK

As of March 31, 1996, there were 15,506,887 shares of Common Stock
outstanding held of record by approximately 250 stockholders. There will be
18,006,887 shares of Common Stock outstanding, including 3,247,142 shares of
Class B Common Stock, after giving effect to the sale of Common Stock offered
hereby.

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of Preferred Stock,
the 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
for the payment of dividends. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and liquidation preferences of any outstanding shares of Preferred
Stock. Holders of Common Stock have no preemptive rights or rights to convert
their Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable, and the shares of Common Stock to be
issued upon completion of this offering will be fully paid and non-assessable.

CLASS B COMMON STOCK

All 3,247,142 shares of Class B Common Stock will be issued upon conversion
of Preferred Stock at or prior to the closing of this offering, and will be held
by Warburg. The Class B Common Stock has the same rights, preferences,
privileges and restrictions as the Common Stock, except that the Class B Common
Stock is convertible into Common Stock, has very limited voting rights and does
not vote for the election of directors. The shares of Class B Common Stock will,
upon any transfer of such shares by Warburg, be automatically converted into a
like number of shares of Common Stock, subject to adjustment upon certain events
with respect to the Common Stock. The shares of Class B Common Stock are also
convertible at the option of Warburg into Common Stock, so long as such
conversion results in Warburg holding equal to or less than 49% of the Company's
outstanding voting securities.

PREFERRED STOCK

Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 5,000,000 shares of Preferred Stock in one or more series and to
determine or alter the designation, powers, preferences, privileges and relative
participating, optional or special rights and the qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which may
be greater than the rights of the Common Stock. The Board of Directors, without
stockholder approval, can issue Preferred Stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of the
holders of Common Stock. Preferred Stock could thus be issued quickly with terms
calculated to delay or prevent a change in

55
<PAGE> 56

control of the Company or make removal of management more difficult.
Additionally, the issuance of Preferred Stock may have the effect of decreasing
the market price of the Common Stock and may adversely affect the voting and
other rights of the holders of Common Stock. At present, there are no shares of
Preferred Stock outstanding, and the Company has no plans to issue any of the
Preferred Stock.

REGISTRATION RIGHTS

After this offering, the holders of 14,504,452 shares of Common Stock and
the holder of a warrant to purchase 21,739 shares of Common Stock will be
entitled to certain rights with respect to the registration of such shares under
the Securities Act. Under the terms of the agreement between the Company and the
holders of such registrable securities, if the Company proposes to register any
of its securities under the Securities Act, either for its own account or for
the account of other securityholders exercising registration rights, such
holders are entitled to notice of such registration and are entitled to include
shares of such Common Stock therein. Certain of such stockholders benefitting
from these rights may also require the Company to file a registration statement
under the Securities Act at the Company's expense with respect to their shares
of Common Stock, and the Company is required to use its diligent reasonable
efforts to effect such registration. Further, holders may require the Company to
file additional registration statements on Form S-3 at the Company's expense.
These rights are subject to certain conditions and limitations, among them the
right of the underwriters of an offering to limit the number of shares included
in such registration in certain circumstances.

ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW

The Company's Certificate of Incorporation and Bylaws, as applicable, among
other things, (i) permit vacancies on the Board of Directors that may occur
between annual meetings and any newly created seats to be filled only by the
Board of Directors and not by the stockholders, subject to any rights of holders
of the Preferred Stock that may be granted by the Board of Directors in the
future, (ii) limit the rights of stockholders to call special meetings of
stockholders and (iii) provide that the Board of Directors, without action by
the stockholders, may issue and fix the rights and preferences of shares of
Preferred Stock. These provisions may have the effect of delaying, deferring or
preventing a change of control of the Company without further action by the
stockholders, may discourage bids for the Common Stock at a premium over the
market price of the Common Stock, may adversely affect the market price of, and
the voting and other rights of, the holders of the Common Stock and could have
the effect of discouraging certain attempts to acquire the Company or remove
incumbent management, including incumbent members of the Company's Board of
Directors, even if some or a majority of the Company's stockholders deemed such
an attempt to be in their best interests.

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"). Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such date, the board of
directors of the corporation approves either the business combination of the
transaction that resulted in the stockholder becoming an interested stockholder,
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the outstanding voting stock, excluding certain shares held by employee
directors and employee stock plans, or (iii) on or after the consummation date
the business combination is approved by the board of directors and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder. For purposes of Section 203, a "business
combination" includes, among other things, a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder, and
an "interested

56
<PAGE> 57

stockholder" is generally a person who, together with affiliates and associates,
owns (or within three years, did own) 15% or more of the corporation's voting
stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Boston Equiserve
Limited Partnership.

LISTING

The Company's Common Stock has been approved for quotation and trading on
the Nasdaq National Market under the symbol OPVN.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common
Stock. No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Sales of substantial amounts of Common Stock of
the Company in the public market could adversely affect prevailing market
prices.

Upon completion of this offering, the Company will have outstanding
18,006,887 shares of Common Stock, 15,271,887 of which are "restricted shares"
within the meaning of Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The number of shares of Common Stock available for sale in
the public market is limited by restrictions under the Securities Act, and
lock-up agreements under which the holders of such shares have agreed not to
sell or otherwise dispose of any of their shares for a period of 180 days after
the effective date of this offering without the prior written consent of Alex.
Brown & Sons Incorporated. However, Alex. Brown & Sons Incorporated may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. As a result of these restrictions,
based on shares outstanding and options granted as of March 31, 1996, the
2,735,000 shares offered hereby will be eligible for sale on the date of this
Prospectus, 11,525,636 shares will be eligible for sale 180 days after the date
of this Prospectus and 3,746,251 shares will be eligible for sale pursuant to
Rule 144 upon the expiration of their respective two-year holding periods. In
addition, the Company intends to register on a registration statement on Form
S-8/S-3, 3,597,474 shares of Common Stock subject to outstanding options or
reserved for issuance under the Company's 1992 Stock Plan, the 1996 Director
Option Plan and 1996 Employee Stock Purchase Plan and 648,869 shares previously
issued pursuant to the 1992 Stock Plan, which shares will be eligible for sale
upon expiration of the lock-up agreements referred to above, subject to vesting
and exercisability restrictions. Furthermore, upon expiration of the lock-up
agreements referred to above, the holders of 14,504,452 shares of Common Stock
and the holder of a warrant to purchase 21,739 shares of Common Stock will be
entitled to certain registration rights with respect to such shares. If such
holders, by exercising their registration rights, cause a large number of shares
to be registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Company's Common Stock.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell any "restricted shares"
beneficially owned by him or her, provided that at least two years have elapsed
since such shares were acquired from the Company or an affiliate of the Company
and subject to certain volume limitations and requirements as to the manner of
sale, notice and the availability of current public information regarding the
Company. However, a person who has not been an "affiliate" of the Company at any
time within three months prior to the sale is entitled to sell his or her shares
without regard to the volume limitations or other requirements of Rule 144,
provided that at least three years have elapsed since such shares were acquired
from the Company or an affiliate of the Company. Pursuant to Rule 701, shares
purchased by an employee, officer or director of the Company pursuant to a
written compensatory plan or contract may be resold under Rule 144 without
complying with the holding period requirement, provided that the Company has
been subject to the reporting requirements of the Exchange Act for at least 90
days.

57
<PAGE> 58

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Lehman Brothers and SoundView Financial Group,
Inc., have severally agreed to purchase from the Company and the Selling
Stockholders the following respective numbers of shares of Common Stock at the
initial public offering price less the underwriting discounts and commissions
set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.................................................. 605,000
Lehman Brothers.................................................................. 605,000
SoundView Financial Group, Inc. ................................................. 605,000
Hambrecht & Quist LLC............................................................ 60,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated............................... 60,000
Montgomery Securities............................................................ 60,000
Morgan Stanley & Co. Incorporated................................................ 60,000
Oppenheimer & Co., Inc. ......................................................... 60,000
Prudential Securities Incorporated............................................... 60,000
Robertson, Stephens & Company LLC................................................ 60,000
UBS Securities LLC............................................................... 60,000
Cowen & Company.................................................................. 40,000
Dakin Securities Corporation..................................................... 40,000
Duff & Phelps Securities Co. .................................................... 40,000
Josephthal Lyon & Ross Incorporated.............................................. 40,000
Needham & Company, Inc. ......................................................... 40,000
Pennsylvania Merchant Group Ltd. ................................................ 40,000
Punk, Ziegel & Knoell............................................................ 40,000
Robert Van Securities, Inc. ..................................................... 40,000
Southcoast Capital Corp. ........................................................ 40,000
Van Kasper & Company............................................................. 40,000
Wessels, Arnold & Henderson...................................................... 40,000
---------
Total............................................................................ 2,735,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.

The Company have been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $0.56 per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers. After the
initial public offering, the offering price and other selling terms may be
changed by the Representatives of the Underwriters.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 410,250
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 2,735,000 and the Company will be
obligated, pursuant to the option, to sell such shares to the

58
<PAGE> 59

Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of Common Stock offered hereby.
If purchased, the Underwriters will offer such additional shares on the same
terms as those on which the 2,735,000 shares are being offered.

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

The Company and all stockholders of the Company have agreed not to offer,
sell or otherwise dispose of any shares of Common Stock for a period of 180 days
after the effective date of this offering without the prior written consent of
Alex. Brown & Sons Incorporated, except that the Company may issue, and grant
options to purchase, shares of Common Stock under its current stock option and
purchase plans and other currently outstanding options and warrants. In
addition, the Company may issue shares of Common Stock in connection with
corporate acquisitions. In addition to signing the above lock-up agreement, an
individual and an entity, both associated with Alex. Brown & Sons Incorporated,
have agreed not to offer, sell or otherwise dispose of any shares of Common
Stock for a period of 90 days following the effective date of this offering.

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

Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock was determined by negotiations between the Company, the Selling
Stockholders and the Representatives of the Underwriters. Among the factors
considered in such negotiations were prevailing market conditions, the results
of operations of the Company in recent periods, the market capitalizations, the
price-earnings ratios, the price-sales ratios, the market prices generally of
securities and stages of development of other companies that the Company and the
Representatives of the Underwriters believe to be comparable to the Company,
estimates of the business potential of the Company and its industry in general
and the present state of the Company's development.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and certain of the Selling Stockholders by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. A member of Wilson
Sonsini Goodrich & Rosati beneficially owns 5,000 shares of Common Stock.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP.

EXPERTS

The Consolidated Financial Statements and schedule of the Company at June
30, 1994 and 1995 and December 31, 1995 and for each of the three years in the
period ended June 30, 1995 and for the six-month period ended December 31, 1995
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon,
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1 under the Securities Act, including
amendments thereto, relating to the Common Stock offered hereby has been filed
by the Company with the Commission, Washington, D.C. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement and exhibits and schedules filed as a part thereof. A
copy of the Registration Statement may be inspected by anyone without charge at
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048

59
<PAGE> 60

and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of all or any portion of the Registration Statement may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of prescribed fees.

Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

60
<PAGE> 61

OPENVISION TECHNOLOGIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Stockholders' Equity (Deficit)............................. F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 62

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
OpenVision Technologies, Inc.

We have audited the accompanying consolidated balance sheets of OpenVision
Technologies, Inc. as of June 30, 1994 and 1995, and December 31, 1995, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the three years in the period ended June 30, 1995,
and for the six months 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
OpenVision Technologies, Inc. at June 30, 1994 and 1995, and December 31, 1995,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended June 30, 1995, and for the six months ended
December 31, 1995, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

San Jose, California
February 23, 1996

F-2
<PAGE> 63

OPENVISION TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY (DEFICIT)
JUNE 30, JUNE 30, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1995 1996 1996
-------- -------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents..................... $ 4,724 $ 4,083 $ 1,182 $ 1,697
Short-term investments........................ 4,051 -- --
Accounts receivable, less allowance
for doubtful accounts of $565 at June 30,
1994, $685 at June 30, 1995, $682 at
December 31, 1995, and $488 at March 31,
1996........................................ 5,321 4,936 7,959 8,206
Other current assets.......................... 524 465 455 674
-------- -------- -------- --------
Total current assets............................ 14,620 9,484 9,596 10,577
Property and equipment, net..................... 5,518 3,424 2,723 2,589
Notes receivable from officers.................. 480 350 418 418
Other assets.................................... 1,271 387 355 363
-------- -------- -------- --------
Total assets.................................... $ 21,889 $ 13,645 $ 13,092 $ 13,947
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Borrowings under bank line of credit.......... $ -- $ -- $ 2,061 2,504
Accounts payable.............................. 2,122 1,219 871 1,416
Accrued compensation and related expenses..... 1,345 1,042 917 949
Accrued interest.............................. 539 780 1,088 1,204
Other accrued liabilities..................... 2,887 2,389 2,182 1,759
Deferred revenue.............................. 5,635 5,575 5,684 6,172
Current portion of notes payable.............. 2,436 1,205 1,154 702
-------- -------- -------- --------
Total current liabilities....................... 14,964 12,210 13,957 14,706
Notes payable, less current portion............. 8,505 6,232 5,611 5,463
Commitments and contingencies
Stockholders' equity (deficit):
Convertible preferred stock, $.01 par value:
Authorized shares -- 40,000
Issued and outstanding shares -- 8,305 at
June 30, 1994, and 12,054 at June 30,
1995, December 31, 1995, and March 31,
1996 (liquidation preference of $73,730 at
March 31, 1996) (Pro forma -- no shares
outstanding).............................. 83 120 120 120 $ --
Common stock, $.001 par value:
Authorized shares -- 75,000
Issued and outstanding shares -- 2,250 at
June 30, 1994, 3,056 at June 30, 1995,
3,367 at December 31, 1995, and 3,452 at
March 31, 1996 (Pro forma -- 15,506 shares
issued and outstanding)................... 2 3 3 3 15
Additional paid-in capital.................... 57,539 72,755 72,982 73,002 73,110
Accumulated deficit........................... (59,151) (77,263) (79,044) (78,809) (78,809)
Notes receivable from stockholders............ (119) (284) (303) (302) (302)
Deferred compensation......................... -- -- (129) (121) (121)
Foreign currency translation adjustment....... 66 (128) (105) (115) (115)
-------- -------- -------- --------
Total stockholders' equity (deficit)............ (1,580) (4,797) (6,476) (6,222) $ (6,222)
-------- -------- -------- --------
Total liabilities and stockholders' equity
(deficit)..................................... $ 21,889 $ 13,645 $ 13,092 $ 13,947
======== ======== ======== ========
</TABLE>

See accompanying notes.

F-3
<PAGE> 64

OPENVISION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED NINE MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31, MARCH 31,
------------------------------ ---------------------- -------------------------
1993 1994 1995 1994 1995 1995 1996
-------- -------- -------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Net revenue:
License....................... $ 1,494 $ 11,520 $ 10,828 $ 3,705 $ 8,838 $ 6,690 $ 14,426
Service....................... 280 4,104 7,696 3,571 3,653 5,621 5,899
-------- -------- -------- -------- -------- -------- --------
Total net revenue............... 1,774 15,624 18,524 7,276 12,491 12,311 20,325
-------- -------- -------- -------- -------- -------- --------
Cost of revenue:
License....................... 2,160 10,598 1,787 1,127 624 1,520 979
Service....................... 546 4,931 4,563 2,838 1,111 3,746 1,669
-------- -------- -------- -------- -------- -------- --------
Total cost of revenue........... 2,706 15,529 6,350 3,965 1,735 5,266 2,648
-------- -------- -------- -------- -------- -------- --------
Gross profit (loss)............. (932) 95 12,174 3,311 10,756 7,045 17,677
Operating expenses:
Selling and marketing......... 1,785 14,245 15,538 8,047 7,057 11,591 11,164
Research and development...... 4,483 14,794 7,541 4,100 2,930 5,762 4,420
General and administrative.... 6,727 8,361 6,758 4,080 2,258 5,427 3,144
Acquired technologies......... 2,594 3,295 -- -- -- -- --
Restructuring................. -- 1,447 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total operating expenses........ 15,589 42,142 29,837 16,227 12,245 22,780 18,728
-------- -------- -------- -------- -------- -------- --------
Loss from operations............ (16,521) (42,047) (17,663) (12,916) (1,489) (15,735) (1,051)
Interest expense................ -- (963) (1,352) (567) (413) (873) (540)
Gain on disposal of product..... -- -- 1,100 1,100 -- 1,100 --
Other income (expense), net..... 97 283 (197) (7) 121 49 45
-------- -------- -------- -------- -------- -------- --------
Net loss........................ $(16,424) $(42,727) $(18,112) $ (12,390) $ (1,781) $ (15,459) $ (1,546)
======== ======== ======== ======== ======== ======== ========
Pro forma net loss per share.... $ (1.15) $ (0.11) $ (0.10)
======== ======== ========
Pro forma shares used in per
share calculations............ 15,751 15,773 15,775
======== ======== ========
</TABLE>

See accompanying notes.

F-4
<PAGE> 65

OPENVISION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------- ---------------- PAID-IN ACCUMULATED FROM DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDERS COMPENSATION
------ ------ ------- ------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992............. -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of preferred stock......... 4,834 48 -- -- 24,390 -- -- --
Issuance of common stock............ -- -- 6,450 6 639 -- (81) --
Net loss............................ -- -- -- -- -- (16,424) -- --
------ ---- ------- ---- ------- ----- -------- -----
Balance at June 30, 1993............. 4,834 48 6,450 6 25,029 (16,424) (81) --
Issuance of preferred stock......... 3,036 31 -- -- 27,355 -- -- --
Issuance of common stock............ -- -- 1,534 2 151 -- (38) --
Repurchase of common stock.......... -- -- (5,750) (6) 6 -- -- --
Conversion of notes payable to
preferred stock................... 435 4 -- -- 4,996 -- -- --
Exercise of stock options........... -- -- 16 -- 2 -- -- --
Foreign currency translation
adjustment........................ -- -- -- -- -- -- -- --
Net loss............................ -- -- -- -- -- (42,727) -- --
------ ---- ------- ---- ------- ----- -------- -----
Balance at June 30, 1994............. 8,305 83 2,250 2 57,539 (59,151) (119) --
Issuance of preferred stock......... 1,625 16 -- -- 6,466 -- -- --
Issuance of common stock............ -- -- 420 -- 210 -- (210) --
Repurchase of common stock.......... -- -- (27) -- (3) -- 3 --
Conversion of notes payable to
preferred stock................... 2,124 21 -- -- 8,479 -- -- --
Exercise of stock options........... -- -- 413 1 64 -- -- --
Payments received from stockholders
on notes receivable............... -- -- -- -- -- -- 42 --
Foreign currency translation
adjustment........................ -- -- -- -- -- -- -- --
Net loss............................ -- -- -- -- -- (18,112) -- --
------ ---- ------- ---- ------- ----- -------- -----
Balance at June 30, 1995............. 12,054 120 3,056 3 72,755 (77,263) (284) --
Issuance of common stock............ -- -- 138 -- 69 -- (37) --
Exercise of stock options........... -- -- 173 -- 29 -- -- --
Payments received from stockholders
on notes receivable............... -- -- -- -- -- -- 18 --
Deferred compensation resulting from
stock option grants............... -- -- -- -- 129 -- -- (129)
Foreign currency translation
adjustment........................ -- -- -- -- -- -- -- --
Net loss............................ -- -- -- -- -- (1,781) -- --
------ ---- ------- ---- ------- ----- -------- -----
Balance at December 31, 1995......... 12,054 120 3,367 3 72,982 (79,044) (303) (129)
Exercise of stock options
(unaudited)....................... -- -- 85 -- 20 -- -- --
Payments received from stockholders
on notes receivable (unaudited)... -- -- -- -- -- -- 1 --
Amortization of deferred
compensation (unaudited).......... -- -- -- -- -- -- -- 8
Foreign currency translation
adjustment (unaudited)............ -- -- -- -- -- -- -- --
Net income (unaudited).............. -- -- -- -- -- 235 -- --
------ ---- ------- ---- ------- ----- -------- -----
Balance at March 31, 1996
(unaudited)......................... 12,054 $120 3,452 $ 3 $ 73,002 $ (78,809) $ (302) $ (121)
====== ==== ======= ==== ======= ===== ======== =====

<CAPTION>
FOREIGN TOTAL
CURRENCY STOCKHOLDERS'
TRANSLATION EQUITY
ADJUSTMENTS (DEFICIT)
---------- ------------
<S> <<C> <C>
Balance at June 30, 1992............. $ -- $ --
Issuance of preferred stock......... -- 24,438
Issuance of common stock............ -- 564
Net loss............................ -- (16,424)
----- --------
Balance at June 30, 1993............. -- 8,578
Issuance of preferred stock......... -- 27,386
Issuance of common stock............ -- 115
Repurchase of common stock.......... -- --
Conversion of notes payable to
preferred stock................... -- 5,000
Exercise of stock options........... -- 2
Foreign currency translation
adjustment........................ 66 66
Net loss............................ -- (42,727)
----- --------
Balance at June 30, 1994............. 66 (1,580)
Issuance of preferred stock......... -- 6,482
Issuance of common stock............ -- --
Repurchase of common stock.......... -- --
Conversion of notes payable to
preferred stock................... -- 8,500
Exercise of stock options........... -- 65
Payments received from stockholders
on notes receivable............... -- 42
Foreign currency translation
adjustment........................ (194) (194)
Net loss............................ -- (18,112)
----- --------
Balance at June 30, 1995............. (128) (4,797)
Issuance of common stock............ -- 32
Exercise of stock options........... -- 29
Payments received from stockholders
on notes receivable............... -- 18
Deferred compensation resulting from
stock option grants............... -- --
Foreign currency translation
adjustment........................ 23 23
Net loss............................ -- (1,781)
----- --------
Balance at December 31, 1995......... (105) (6,476)
Exercise of stock options
(unaudited)....................... -- 20
Payments received from stockholders
on notes receivable (unaudited)... -- 1
Amortization of deferred
compensation (unaudited).......... -- 8
Foreign currency translation
adjustment (unaudited)............ (10) (10)
Net income (unaudited).............. -- 235
----- --------
Balance at March 31, 1996
(unaudited)......................... $ (115) $ (6,222)
===== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 66

OPENVISION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED NINE MONTHS
YEARS ENDED JUNE 30, DECEMBER 31, ENDED
------------------------------ ---------------------- MARCH 31,
1993 1994 1995 1995 -------------------------
-------- -------- -------- 1994 -------- 1995 1996
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................. $(16,424) $(42,727) $(18,112) $ (12,390) $ (1,781) $ (15,459) $ (1,546)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization...... 3,759 13,279 2,416 1,254 883 1,835 1,374
Write-off of acquired
technologies..................... 2,594 3,295 -- -- -- -- --
Loss on disposal of equipment and
improvements..................... -- 122 377 -- -- -- --
Changes in operating assets and
liabilities:
Accounts receivable.............. (1,508) (3,240) 385 1,033 (3,123) (79) (3,270)
Other assets..................... (204) (347) 941 920 42 867 (185)
Deferred revenue................. 474 4,453 (60) 558 109 573 597
Accounts payable................. 1,108 115 (903) (767) (348) (845) 197
Accrued compensation and
related expenses............... 565 188 (302) (153) (125) (10) (93)
Other accrued liabilities........ 990 2,360 (256) 414 201 (817) (206)
-------- -------- -------- -------- -------- -------- --------
Net cash used in operating
activities......................... (8,646) (22,502) (15,514) (9,131) (4,142) (13,935) (3,132)
INVESTING ACTIVITIES
Additions to equipment and
improvements....................... (2,686) (4,791) (699) (368) (182) (595) (531)
Notes receivable from officers....... (175) (305) 130 130 (68) 130 (68)
Purchase of businesses and software
products........................... (10,455) (791) -- -- -- -- --
Sale (purchase) of short-term
investments, net................... -- (4,051) 4,051 4,051 -- 4,051 --
-------- -------- -------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities............... (13,316) (9,938) 3,482 3,813 (250) 3,586 (599)
FINANCING ACTIVITIES
Net proceeds from borrowings under
bank line of credit................ -- -- -- 765 2,061 1,009 2,504
Proceeds from issuance of preferred
stock.............................. 24,438 27,386 6,482 -- -- -- --
Proceeds from issuance of common
stock.............................. 564 117 65 20 61 43 81
Payments of notes payable............ (750) (4,695) (3,504) (563) (672) (1,150) (1,272)
Proceeds from notes payable.......... -- 12,000 8,500 1,500 -- 6,500 --
Payments on notes receivable from
stockholders....................... -- -- 42 38 18 23 19
-------- -------- -------- -------- -------- -------- --------
Net cash provided by financing
activities......................... 24,252 34,808 11,585 1,760 1,468 6,425 1,332
Effect of exchange rate changes...... -- 66 (194) (174) 23 (146) 13
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents................... 2,290 2,434 (641) (3,732) (2,901) (4,070) (2,386)
Cash and cash equivalents at
beginning of period................ -- 2,290 4,724 4,724 4,083 4,724 4,083
-------- -------- -------- -------- -------- -------- --------
Cash and cash equivalents at end of
period............................. $ 2,290 $ 4,724 $ 4,083 $ 992 $ 1,182 $ 654 $ 1,697
======== ======== ======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest............... $ -- $ 262 $ 1,111 $ 203 $ 105 $ 800 $ 116
Conversion of notes payable to
preferred stock.................... $ -- $ 5,000 $ 8,500 $ -- $ -- $ -- $ --
Acquisitions of businesses and
products through the issuance of
notes payable...................... $ 7,640 $ 1,284 $ -- $ -- $ -- $ -- $ --
</TABLE>

See accompanying notes.

F-6
<PAGE> 67

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company markets its products internationally and has sales offices in
the United States, Canada, Germany, France, and the United Kingdom.

Basis of Presentation

The Company has sustained significant operating losses and at December 31,
1995 had a working capital deficiency of $4,361,000 and a deficit in
stockholders' equity of $6,476,000. The Company plans to raise additional funds
through public or private equity financing or from other sources.

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

The Company translates the accounts of its foreign subsidiaries using the
local currency as the functional currency. Consequently, assets and liabilities
of operations outside the United States are translated into U.S. dollars using
period-end exchange rates, and revenues and expenses are translated at the
weighted average monthly exchange rates. Gains or losses from this translation
process are credited or charged to the "foreign currency translation adjustment"
account included in stockholders equity (deficit). Foreign currency transaction
gains and losses have not been significant.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Interim Financial Information

The consolidated financial statements for the nine months ended March 31,
1996 and 1995, and the six months ended December 31, 1994 are unaudited but
include all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for a fair presentation of financial position
and results of operations. Operating results for the nine months ended March 31,
1996 are not necessarily indicative of the results that may be expected for any
future periods.

F-7
<PAGE> 68

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

Cash Equivalents and Short-Term Investments

Cash equivalents consist of short-term, highly liquid financial instruments
with maturities of three months or less from the date of purchase. Short-term
investments at June 30, 1994 consisted of U.S. Treasury bills and commercial
paper and were recorded at cost, which approximated fair value.

Effective July 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (FAS 115). Under FAS 115, investments in marketable equity
securities and debt securities are reported at fair value. Prior to the adoption
of FAS 115, the Company recorded investments in debt securities at historical
cost and recognized gains or losses only upon the sale of the debt securities.
There was no significant cumulative effect as of July 1, 1994 of adopting FAS
115. There were no gains or losses from sales of short-term investments during
the year ended June 30, 1995 and the six months ended December 31, 1995. The
Company had no such investments at June 30, 1995, December 31, 1995, and March
31, 1996.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the shorter of the estimated useful life of the
asset or the lease term. Useful lives of three to five years are used for
computers and related equipment, and furniture and fixtures. Leasehold
improvements are amortized over the shorter of their useful lives or the term of
the related lease.

Software Development Costs

The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards No. 86 "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed," under which certain
software development costs incurred subsequent to the establishment of
technological feasibility are capitalized and amortized over the estimated lives
of the related products. Technological feasibility is established upon
completion of a working model, which is typically demonstrated by initial beta
shipment. The period between the achievement of technological feasibility and
the general release of the Company's products has been of short duration. As of
December 31, 1995, such capitalizable software development costs were
insignificant and all software development costs have been charged to research
and development expenses in the accompanying consolidated statements of
operations.

Revenue Recognition

License revenue is generally recognized upon shipment of the software, if
no significant future obligations remain and collection of the resulting
receivable is probable. For those agreements with significant future
obligations, revenue is recognized when the obligations are satisfied. The cost
of insignificant future obligations, if any, is accrued at the time revenue is
recognized. Allowances for estimated future returns and warranty costs are
provided for at the time of shipment. Maintenance and technical support revenue,
which are included in service revenue, are deferred and recognized ratably over
the term of the agreement, typically twelve months. Revenue from consulting
services and training is recognized as the services are provided. The Company's
revenue recognition policy is in conformity with the provisions of the American
Institute of Certified Public Accountants' Statement of Position 91-1 "Software
Revenue Recognition."

F-8
<PAGE> 69

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

Credit Risk

The Company sells its products to various companies across several
industries and geographic locations. The Company maintains an allowance for
doubtful accounts to provide for management's estimates of potential credit
losses. Actual credit losses may differ from management's estimates. Such losses
to date have been within management's expectations. The Company generally does
not require collateral.

Stock-Based Compensation

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). The Company will be required to adopt SFAS 123 in
fiscal 1997. It is the Company's intention to continue to account for employee
stock options in accordance with Accounting Principles Board Opinion No. 25 and
to adopt the "disclosure only" alternative described in SFAS 123.

Income Taxes

The Company accounts for income taxes using the liability method in
accordance with Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes." Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.

Net Loss Per Share and Pro Forma Net Loss Per Share

Except at noted below, net loss per share is computed using the weighted
average number of shares of common stock outstanding. Common equivalent shares
from convertible preferred stock (using the as-if-converted method) and from
stock options and warrants (using the treasury stock method) have been excluded
from the computation because their inclusion would be antidilutive, except that
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued by the Company at prices below the
initial public offering price during the twelve-month period prior to the
initial public offering have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method). Per
share information calculated on this basis is as follows:

<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS
ENDED ENDED
YEARS ENDED JUNE 30, DECEMBER 31, MARCH 31,
------------------------- --------------- ---------------
1993 1994 1995 1994 1995 1995 1996
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss per share....... $ (1.43) $(4.56) $(2.43) $(1.68) $(0.24) $(2.09) $(0.21)
Shares used in computing
net loss per share
(in thousands)......... 11,458 9,366 7,446 7,355 7,468 7,393 7,470
</TABLE>

The pro forma calculation of net loss per share presented in the
consolidated statements of operations is computed as described above and also
gives effect to the assumed conversion of all outstanding shares of convertible
preferred stock into common stock upon the closing of the Company's initial
public offering using the as-if-converted method.

F-9
<PAGE> 70

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

Unaudited Pro Forma Stockholders' Equity (Deficit)

The Company's unaudited pro forma stockholders' equity (deficit) as of
March 31, 1996 gives effect to the conversion of all convertible preferred stock
outstanding to an aggregate of approximately 12,054,000 shares of common stock,
including approximately 3,330,000 shares of Class B Common Stock, effective upon
the closing of the Company's initial public offering.

2. NOTES RECEIVABLE FROM OFFICERS AND STOCKHOLDERS

The Company has an outstanding loan to an officer, who is also a
stockholder of the Company, in the amount of $418,000 at December 31, 1995. The
note bears interest at 6.28%, matures in 1999 and is collateralized by shares of
the Company's common stock owned by the officer. Notes receivable for the
purchase of common stock are included in stockholders' equity (deficit).

3. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
------------------- DECEMBER 31,
1994 1995 1995
------- ------- ------------
<S> <C> <C> <C>
Computer equipment and software................. $ 6,812 $ 5,149 $ 5,338
Furniture and equipment......................... 948 1,137 1,141
Leasehold improvements.......................... 185 226 215
------- ------- -------
7,945 6,512 6,694
Less accumulated depreciation and
amortization.................................. (2,427) (3,088) (3,971)
------- ------- -------
Net property and equipment...................... $ 5,518 $ 3,424 $ 2,723
======= ======= =======
</TABLE>

4. LINE OF CREDIT

The Company currently has a line of credit agreement with a bank providing
for borrowings up to $5,000,000, based on a percentage of eligible accounts
receivable, at LIBOR plus 5.125% (10.8% at December 31, 1995). The line of
credit agreement prohibits the payment of cash dividends without the bank's
consent. Borrowings are collateralized by accounts receivable, equipment and
other assets. The line of credit agreement expires October 12, 1996. At December
31, 1995, the Company had $2,061,000 in borrowings under this line of credit.

F-10
<PAGE> 71

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

5. NOTES PAYABLE

Notes payable consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
------------------ DECEMBER 31,
1994 1995 1995
------- ------ ------------
<S> <C> <C> <C>
Note payable to majority stockholder, subordinate
to borrowings under the bank line of credit,
interest at prime rate plus 1% (9.5% at
December 31, 1995), due July 31, 1997.......... $ 5,000 $5,000 $5,000
Acquisition agreement, interest at prime rate
plus 2% (10.5% at December 31, 1995)........... 3,500 1,200 600
Acquisition agreements, noninterest bearing, net
of 8% imputed interest......................... 2,405 1,231 1,165
Equipment purchases and other.................... 36 6 --
------- ------- -------
10,941 7,437 6,765
Less current portion............................. 2,436 1,205 1,154
------- ------- -------
Notes payable, less current portion.............. $ 8,505 $6,232 $5,611
======= ======= =======
</TABLE>

Maturities of notes payable are as follows at December 31, 1995 (in
thousands):

<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 30:
<S> <C>
1996........................................................... $ 600
1997........................................................... 853
1998........................................................... 5,312
------
$6,765
======
</TABLE>

6. STOCKHOLDERS' EQUITY

Convertible Preferred Stock

Convertible preferred stock at June 30, 1994 and 1995, December 31, 1995,
and March 31, 1996 is as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
SHARES ISSUED AND OUTSTANDING
-------------------------------------------
JUNE 30,
LIQUIDATION SHARES ---------------- DECEMBER 31, MARCH 31,
SERIES PREFERENCE AUTHORIZED 1994 1995 1995 1996
--------------------- ----------- ---------- ------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
A.................... $ 5.16 11,600 5,800 250 250 250
A-1.................. $ 5.16 11,100 -- 5,550 5,550 5,550
B.................... $ 11.50 5,052 2,505 2,505 2,505 2,505
C.................... $ 4.00 7,500 -- 2,795 2,795 2,795
C-1.................. $ 4.00 3,700 -- 954 954 954
Undesignated......... 1,048 -- -- -- --
------ ------- ------ ------
Total preferred
stock.............. 40,000 8,305 12,054 12,054 12,054
====== ======= ====== ======
</TABLE>

The Company is authorized to issue additional preferred stock with such
designations, rights, and preferences as may be determined from time to time by
the Board of Directors provided

F-11
<PAGE> 72

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

however, that any such preferred stock must be subordinate to or on a parity
with the Series B, C, and C-1 preferred stock.

During fiscal 1995, 5,550,000 shares of Series A preferred stock were
exchanged for 5,550,000 shares of Series A-1 preferred stock.

The holders of preferred stock are entitled to receive dividends in
preference to common stock at the rate of 5% per annum, when and if declared by
the Company's Board of Directors. Dividends on the preferred stock are not
cumulative. No dividends have been declared through December 31, 1995. The
Series C and C-1 preferred stock have a liquidation preference of $4.00 per
share on a pari passu basis to the $11.50 per share liquidation preference of
the Series B preferred stock and senior to the $5.16 per share liquidation
preference of the Series A and A-1 preferred stock. After the full liquidation
preferences of the Series C, C-1, B, A, and A-1 preferred stock have been paid,
all remaining assets will be distributed ratably among the holders of the
preferred stock and common stock until the holders of the preferred stock have
received two times their respective liquidation preferences. For purposes
hereof, a merger, dissolution, or sale of substantially all of the assets of the
corporation or similar event will be deemed to be a liquidation.

The preferred stock is convertible by the holder at any time into common
stock at the initial rate of one-for-one and is automatically convertible into
common stock in the event of (i) an initial public offering of the Company's
common stock with gross proceeds of at least $10,000,000 and a price per share
of at least $14.94, (ii) the election of holders of at least two-thirds of the
outstanding preferred stock series, or (iii) there being less than 20% of the
originally issued preferred stock series outstanding. The conversion price is
subject to adjustments for stock splits and stock dividends.

Except as otherwise required by law, each holder of preferred stock is
entitled to one vote for each share of common stock into which the shares of
preferred stock held by such holder are then convertible. However, Series A-1
and C-1 preferred stock are nonvoting.

Common Stock

The holders of common stock are entitled to receive such dividends, when
and if declared by the Board of Directors, provided that no dividend or
distribution may be declared or paid on any shares of common stock unless, at
the same time, all dividend preferences of the preferred stock have been
declared or paid. The holders of common stock are entitled to one vote for each
share held on all matters submitted to a vote of stockholders. The common stock
has no preemptive or other subscription rights, and there are no conversion
rights or redemption or sinking fund provisions applicable to the common stock.
All outstanding shares of common stock are fully paid and nonassessable.

A total of 14,800,000 shares of common stock (of which no shares are
outstanding at December 31, 1995) has been designated as Class B common stock.
The Class B common stock has the same rights, preferences, privileges and
restrictions as the common stock except that the Class B common stock has
limited voting rights and does not vote for the election of directors. The
shares of Class B common stock will, upon the transfer of such shares by the
holder, be automatically converted into a like number of shares of common stock,
subject to adjustment. The shares of Class B common stock are convertible at the
option of the holder into common stock so long as the conversion results in the
holder having equal to or less than 49% of the Company's voting securities.

F-12
<PAGE> 73

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

Reverse Stock Split

On February 22, 1996, the Board of Directors approved a one-for-two reverse
stock split of issued and outstanding common stock and preferred stock. All
shares in the accompanying consolidated financial statements have been
retroactively adjusted to reflect the reverse stock split.

Warrants

In fiscal 1994, the Company issued a warrant to purchase 21,739 shares of
Series B preferred stock at an initial exercise price of $11.50 per share. The
warrant expires August 14, 1996. Also in fiscal 1994, the Company issued a
warrant to purchase 12,500 shares of its common stock at an exercise price of
$.50 per share. The warrant will become exercisable in the event that a certain
defined change in control occurs prior to June 30, 1997.

Stock Plan

The 1992 Stock Plan (the "Plan"), as amended, provides for the issuance of
incentive stock options, nonstatutory stock options and restricted stock
purchase rights to employees, vendors, consultants and former stockholders of
acquired entities. Incentive stock options must be granted at 100% of the fair
value on the date of grant. Options granted under the Plan generally become
exercisable for common stock over a four-year period with 25% vesting one year
from the date of grant and 1/48 each month thereafter.

Shares purchased by employees under restricted stock purchase agreements
are subject to repurchase by the Company upon employee termination at the price
originally paid by the employee. Repurchase rights lapse at the rate of 25% one
year from the original date of issuance and 1/48 each month thereafter. At
December 31, 1995, there were 651,094 outstanding common shares subject to such
repurchase provisions at prices ranging from $.10 to $.50 per share.

F-13
<PAGE> 74

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

A summary of stock option activity under the Plan is as follows:

<TABLE>
<CAPTION>
OUTSTANDING PRICE
OPTIONS PER SHARE
----------- -------------
<S> <C> <C>
Balance at June 30, 1993............................... 1,122,500 $.10
Options granted...................................... 749,541 $.10 - $.50
Options canceled..................................... (125,774) $.10 - $.50
Options exercised.................................... (15,963) $.10 - $.50
---------
Balance at June 30, 1994............................... 1,730,304 $.10 - $.50
Options granted...................................... 956,875 $.50
Options canceled..................................... (982,644) $.10 - $.50
Options exercised.................................... (412,208) $.10 - $.50
---------
Balance at June 30, 1995............................... 1,292,327 $.10 - $.50
Options granted...................................... 240,325 $.50
Options canceled..................................... (225,675) $.10 - $.50
Options exercised.................................... (173,684) $.10 - $.50
---------
Balance at December 31, 1995........................... 1,133,293 $.10 - $.50
Options granted...................................... 72,600 $2.80 - $7.20
Options canceled..................................... (25,991) $.10 - $.50
Options exercised.................................... (85,983) $.10 - $.50
---------
Balance at March 31, 1996.............................. 1,093,919 $.10 - $7.20
=========
Options exercisable at March 31, 1996.................. 355,690
---------
</TABLE>

At March 31, 1996, 1,953,555 shares of common stock were available for
future grants under the Plan.

The Company has recognized deferred compensation of $129,000 for the
difference between the exercise price and deemed fair value of certain stock
options granted during the six months ended December 31, 1995. This amount is
being amortized by charges to operations over the four-year vesting periods of
the individual options.

Employee Stock Purchase Plan

On February 22, 1996, the Board of Directors approved an Employee Stock
Purchase Plan (the "ESPP") under which eligible employees may purchase common
stock at a price equal to 85% of the lower of the common stock at the beginning
or end of each offering period. Participation in the ESPP is limited to 10% (20%
for the first six-month purchase period) of an employee's compensation (not to
exceed amounts allowed under Section 423 of the Internal Revenue Code). The
Company has reserved an aggregate of 300,000 shares of common stock for issuance
under the ESPP. The ESPP will be implemented generally with four six-month
purchase periods in each 24-month offering period, although the first purchase
period and offering period will begin on the effective date of the initial
public offering and will end on October 31, 1996 and April 30, 1998,
respectively. The ESPP will expire in 2006.

F-14
<PAGE> 75

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

1996 Director Option Plan

On February 22, 1996, the Board of Directors approved the 1996 Director
Option Plan. The Company has reserved 250,000 shares of common stock for
issuance under the Plan.

7. RESTRUCTURING EXPENSES

In June 1994, the Company adopted a restructuring plan that involved a
reduction of overlapping positions within acquired businesses, consolidation of
development centers, and reorganization of the sales force. The plan resulted in
terminating employees and vacating noncancelable operating leases. The Company
recorded restructuring costs of $1,447,000 in the fourth quarter of fiscal 1994,
which included $772,000 for employee severance costs and $675,000 for rent
obligations on vacated buildings and other obligations. These amounts were paid
during fiscal 1995.

8. INCOME TAXES

As a result of operating losses, no provisions for income taxes have been
recorded.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets are as follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
--------------------- DECEMBER 31,
1994 1995 1995
-------- -------- ------------
<S> <C> <C> <C>
Net operating loss carryforwards.............. $ 13,200 $ 20,500 $ 21,500
Temporary Differences:
Intangible Assets........................... 6,600 5,400 4,700
Other....................................... 2,200 2,500 2,300
-------- -------- --------
Total deferred tax assets..................... 22,000 28,400 28,500
Valuation allowance for deferred tax assets... (22,000) (28,400) (28,500)
-------- -------- --------
Net deferred tax assets....................... $ -- $ -- $ --
======== ======== ========
</TABLE>

The Company believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability of
the deferred tax assets such that a full valuation allowance has been recorded.
These factors include the Company's history of net losses since its inception,
the Company's limited profitability in recent periods, the fact that the market
in which the Company competes is intensely competitive and characterized by
rapidly changing technology, and the uncertainty regarding market acceptance of
new versions of the Company's AXXiON products. The Company believes that, based
on the currently available evidence, it is more likely than not that the Company
will not generate taxable income and accordingly will not realize the Company's
deferred tax assets. The Company will continue to assess the realizability of
the deferred tax assets based on actual and forecasted operating results.

As of December 31, 1995, the Company had federal, state, and foreign net
operating loss carryforwards of approximately $59,000,000, $12,000,000, and
$2,000,000, respectively. The carryforwards will expire from 1998 through 2011.
Utilization of the net operating losses may be

F-15
<PAGE> 76

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

subject to annual limitations due to several factors, including the amount of
taxable income generated in future years and ownership change limitations. The
annual limitations may result in the expiration of net operating losses and
credits before utilization.

9. GEOGRAPHICAL INFORMATION AND SIGNIFICANT CUSTOMERS

The following table presents a summary of operating information and certain
year-end balance sheet information by geographical regions (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
JUNE 30, ENDED
------------------------- DECEMBER 31,
1994 1995 1995
----------- ----------- ------------
<S> <C> <C> <C>
Net revenues to unaffiliated customers:
United States and Canada....................... $ 14,150 $ 13,228 $ 8,966
United Kingdom................................. 1,203 3,452 1,850
Other European Countries....................... 271 1,844 1,675
------- ------- -------
Total.................................. $ 15,624 $ 18,524 $ 12,491
======= ======= =======
Transfers between geographic areas
(eliminated in consolidation): $ 325 $ 220 $ 7
======= ======= =======
Operating income (loss):
United States and Canada....................... $ (40,336) $ (15,054) $ (1,261)
United Kingdom................................. (286) 160 72
Other European Countries....................... (312) (1,467) 273
Corporate...................................... (1,113) (1,302) (573)
------- ------- -------
Total.................................. $ (42,047) $ (17,663) $ (1,489)
======= ======= =======
Identifiable assets:
United States and Canada....................... $ 21,134 $ 10,557 $ 9,959
United Kingdom................................. 469 2,103 1,502
Other European Countries....................... 286 985 1,631
------- ------- -------
Total.................................. $ 21,889 $ 13,645 $ 13,092
======= ======= =======
</TABLE>

U.S. revenue from export sales, principally to customers in Canada, were
$327,000, $559,000 and $523,000 during fiscal 1994, fiscal 1995 and the six
months ended December 31, 1995, respectively. There were no foreign operations
in fiscal 1993.

One customer accounted for 11% of net revenue in the six months ended
December 31, 1995.

10. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain equipment under noncancelable
operating leases that expire in various years through March 1999. Other assets
at December 31, 1995 include $207,000 in interest bearing security deposits for
certain facility and equipment leases.

F-16
<PAGE> 77

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

Future minimum payments under noncancelable operating leases with initial
terms of one year or more consists of the following at December 31, 1995 (in
thousands):

<TABLE>
<S> <C>
Fiscal year ending June 30:
1996................................................................ $ 612
1997................................................................ 783
1998................................................................ 412
1999................................................................ 178
2000................................................................ 63
--------
Total minimum lease payments........................................ $2,048
========
</TABLE>

Rental expenses were $382,000, $1,881,000 and $1,947,000 for fiscal 1993,
1994 and 1995 and $1,132,000 and $812,000 for the six months ended December 31,
1994 and 1995, respectively.

In connection with the acquisition by OpenVision of ten companies,
divisions of companies or products between October 1992 and July 1993, the
Company entered into agreements with certain sellers providing for the payment
of software royalties. From time to time disputes have arisen with certain of
these sellers regarding the calculation of the royalties and the obligations of
the Company under these agreements. One of these disputes was resolved in the
Company's favor in arbitration and two such disputes are currently unresolved,
though no formal claims have been filed. The Company believes that the
allegations of these sellers have no merit and plans to vigorously defend any
formal claims filed by these persons. While the outcome of any formal claims
cannot be determined with certainty, the Company does not believe that the
resolution of these claims will have a material adverse effect on the Company's
business, operating results or financial condition.

11. BUSINESS COMBINATIONS

During fiscal 1993 and 1994, the Company acquired several software
businesses and products in transactions which were accounted for as purchases.
As consideration for these acquisitions the Company paid cash amounting to
$10,455,000 and $791,000 and executed notes payable agreements totaling
$7,640,000 and $1,284,000 during fiscal 1993 and 1994, respectively. The Company
recorded intangible assets, including purchased software, of $16,576,000 and
$2,421,000 in fiscal 1993 and 1994 respectively, which were amortized over
periods of one to two years. In-process technology acquired in these business
acquisitions, which amounted to $2,594,000 in fiscal 1993 and $501,000 in fiscal
1994, was charged to acquired technologies in the accompanying statements of
operations. Technological feasibility had not been achieved for such in-process
technologies, which did not have alternative future uses, as of the respective
dates of acquisition. In fiscal 1994, the Company wrote off $2,794,000 of
purchased software costs related to certain products acquired in these
transactions which failed to generate adequate revenue. These amounts were also
charged to acquired technologies. Amortization of other purchased software costs
is included in cost of license revenue. The results of operations of these
entities prior to acquisition were not significant in relation to those of the
Company. Results of operations of these entities have been included in the
consolidated results of operations for the periods subsequent to the respective
acquisition dates.

In connection with these acquisitions, the Company is required to pay
royalties based on product revenue in excess of specified minimum levels. The
royalty rates are generally 3% to 8% of product revenue for periods of four or
five years from the dates of acquisition. Certain agreements require a higher
royalty rate for products sold through resellers, and certain of the agreements

F-17
<PAGE> 78

OPENVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1994 IS UNAUDITED)

provide for a renegotiation of royalties payable in the event that products are
bundled or utilized in derivative products. Royalty expense totalled $93,000,
$1,223,000 and $588,000 for fiscal 1993, 1994 and 1995, and $354,000 and
$430,000 for the six months ended December 31, 1994 and 1995, respectively. Such
amounts have been included in cost of license revenue.

12. PROPOSED PUBLIC OFFERING OF COMMON STOCK

On February 22, 1996, the Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock in an
initial public offering (the "IPO"). If the IPO is consummated as presently
anticipated, approximately 12,054,000 outstanding shares of preferred stock will
convert into shares of common stock on a one-for-one basis (including
approximately 3,250,000 shares of Class B common stock), based on shares of
convertible preferred stock outstanding at December 31, 1995. Unaudited pro
forma stockholders' equity, as adjusted for the assumed conversion of the
preferred stock, is disclosed in the accompanying consolidated balance sheet.

F-18
<PAGE> 79

(ARTWORK)
<PAGE> 80

- ---------------------------------------------------------
- ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 5
Use of Proceeds.......................... 14
Dividend Policy.......................... 14
Capitalization........................... 15
Dilution................................. 16
Selected Consolidated Financial Data..... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 18
Business................................. 30
Management............................... 46
Certain Transactions..................... 52
Principal and Selling Stockholders....... 53
Description of Capital Stock............. 55
Shares Eligible for Future Sale.......... 57
Underwriting............................. 58
Legal Matters............................ 59
Experts.................................. 59
Additional Information................... 59
Index to Consolidated Financial
Statements F-1
</TABLE>

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

UNTIL JUNE 1, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
2,735,000 SHARES

LOGO

COMMON STOCK
------------------------
PROSPECTUS
------------------------
ALEX. BROWN & SONS

INCORPORATED

LEHMAN BROTHERS
SOUNDVIEW FINANCIAL GROUP, INC.

May 7, 1996

- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 81
APPENDIX

Inside front cover

The graphic reads "OPENVISION" and "Client/Server Systems Management for the
Enterprise" across the top. In the center is a structure with four platforms
extending therefrom. In the center of the structure is a computer terminal with
the word "AXXiON" in the screen. At the base of the screen the words "Storage,"
"Security" and "Operations" appear. Under these words are the words "Highly
Scalable," "Event Driven," "Centrally Managed" and "Interoperable." The platform
extending from the top left is labeled "NETWORKS" and has numerous desktop
computers sitting atop. The platform extending from the lower left is labeled
"APPLICATIONS" and has a check, a satellite, a multi-racial group of eight
persons and a building sitting atop. The platform extending from the upper right
is labeled "PLATFORMS" and has six big computers sitting atop. The platform
extending from the lower right is labeled "DATABASES" and has a dollar sign, a
pound sign, a yen sign, a bar graph, file folders and a filing cabinet sitting
atop. The bottom of the graphic reads "Distributed Systems Management Software
and Services To Increase System Availability and System Administrator
Productivity."

Page 34

The graphic reads "Enterprise Storage Management" across the top. At the center
of the graphic is a computer with three arrows extending therefrom and labeled
"Centrally Managed." Beneath the central computer are the words
"AXXiON-NetBackup" with arrows extending from desktop computers beneath this
heading to larger computers on the left and on the right. The desktop computers
are labeled "Heterogeneous Clients" and the words "UNIX," "Mac," "WinNT" and
DOS" appear under the label. The larger computers on the left appear with the
words "Business Critical Application and Internet Servers" underneath them. The
larger computers on the right appear with the words "Storage Servers w/ Robotic
Devices" underneath them. Extending up from the larger computers on the right
are two-directional arrows pointing down and up towards cylinders labeled
"Mainframe HSM Devices." Between these arrows are the words "AXXiON- HSM."

Page 35

The graphic reads "Automated Operations Management" across the top. At the
center of the graphic is a computer with three arrows extending therefrom and
labeled "Centrally Managed." Beneath the central computer is a box with the
words "AXXiON-Event Manager," "AXXiON- Performance Manager," "AXXiON-Scheduler"
and "AXXiON-Xfer" with arrows extending from desktop computers beneath this
heading to larger computers on the left and on the right. The desktop computers
are labeled "Heterogeneous Clients" and the words "UNIX," and "WinNT" appear
under the label. The larger computers on the left appear with the words
"Business Critical Application and Internet Servers" underneath them. Extending
up from the larger computers on the left are two-directional arrows pointing
down and up towards large computers labeled "High Availability Servers." Between
these arrows are the words "AXXiON-HA." The larger computers on the right appear
with the words "Storage Servers w/ Robotic Devices" underneath them. Extending
up from the larger computers on the right are two-directional arrows pointing
<PAGE> 82
down and up towards cylinders labeled "Mainframe HSM Devices." Between these are
arrows are the words "AXXiON-Event Manager."

Page 36

The graphic reads "Network and Systems Security" across the top. At the center
of the graphic is a computer with three arrows extending therefrom and labeled
"Centrally Managed." Beneath the central computer is a box with the words
"AXXiON-SecureMax," "AXXiON-Authenticate," "AXXiON-Authorize" with arrows
extending from desktop computers beneath this heading to larger computers on the
left and on the right. The desktop computers are labeled "Heterogeneous Clients"
and the words "UNIX," and "WinNT" appear under the label. The larger computers
on the left appear with the words "Business Critical Application and Internet
Servers" underneath them. Extending up from the larger computers on the left are
two-directional arrows pointing down and up towards large computers labeled
"High Availability Servers." Between these arrows are the words
"AXXiON-Authenticate." The larger computers on the right appear with the words
"Storage Servers w/ Robotic Devices" underneath them. Extending up from the
larger computers on the right are two-directional arrows pointing down and up
towards cylinders labeled "Mainframe HSM Devices." Between these are arrows are
the words "AXXiON-Authenticate."

Page 38

The graphic reads "3 Tier Event Driven Architecture" across the top. Across the
bottom are three large arrows labeled "Tier 1 Central Console," "Tier 2 Server
Engine" and "Tier 3 Thousands of Intelligent Agents." In the left center of the
graphic is a box labeled "Management Interface" In the left of the box (above
the "Tier 1" arrow) is a desktop computer. At the right of the box (above the
"Tier 2" arrow) is a larger computer. Arrows connect the desktop computer and
the larger computer. In the right center of the graphic (above the "Tier 3"
arrow) are four horizontally aligned computers, with the words "Autonomous
Actions" appearing in a box to the right of each computer and an arrow pointing
towards the computer rising out of such box. In the center of the graphic are
the words "Considered Actions," "Notifications" and "Action Management"
surrounded on top and bottom by arrows pointing to the left and to the right.

Inside back cover

The graphic reads "OPENVISION" across the top with the OpenVision logo atop. In
the center is a picture of a globe of the earth with a computer in the middle
and beams extending from the computer across the globe hitting various land
masses. At the bottom are the words "AXXiON", "Distributed Systems Management
Solutions," "Scalable," "Centrally Managed," "Automated," "Adaptive,"
"Event-Driven" and "Client/Server Architected."