SQL FINANCIALS INTERNATIONAL INC /DE, S-1/A, 1998-05-01

SQL FINANCIALS INTERNATIONAL INC /DE
S-1/A, 1998-05-01
PREPACKAGED SOFTWARE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998

REGISTRATION NO. 333-46685
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SQL FINANCIALS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 58-1972600
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION)
OF INCORPORATION OR
ORGANIZATION) ---------------
SQL FINANCIALS INTERNATIONAL, INC.
3950 JOHNS CREEK COURT, SUITE 100
SUWANEE, GEORGIA 30024
(770) 291-3900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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THE CORPORATION TRUST COMPANY
CORPORATION TRUST CENTER
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302) 658-7581
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
G. DONALD JOHNSON, ESQ. OBY T. BREWER III, ESQ.
SHARON L. MCBRAYER, ESQ. JOHN FRANKLIN SMITH, ESQ.
ELIZABETH O. DERRICK, ESQ. LAUREN Z. BURNHAM, ESQ.
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC MORRIS, MANNING & MARTIN, L.L.P.
1275 PEACHTREE STREET, N.E., SUITE 700 1600 ATLANTA FINANCIAL CENTER
ATLANTA, GEORGIA 30309 3343 PEACHTREE ROAD, N.E.
(404) 872-7000 ATLANTA, GEORGIA 30326
(404) 233-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be used
in connection with the Company's underwritten public offering of 2,500,000
shares of its Common Stock (the "Prospectus") and the other to be used in
connection with a resale of up to 629,625 shares of Common Stock offered from
time to time by certain stockholders of the Company (the "Resale Prospectus").

The Sections in the Prospectus entitled "Prospectus Summary--The Company,"
"--Summary Consolidated Financial Data Schedule," "--Forward-Looking
Statements," "Risk Factors," "Dividend Policy," "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business," "Management," "Certain Transactions,"
"Description of Capital Stock," "Shares Eligible For Future Sale," "Experts,"
"Additional Information," and "Financial Statements" are identical to the such
sections in the Resale Prospectus. The remaining Sections in the Resale
Prospectus are provided following the Prospectus.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION DATED MAY 1, 1998

2,500,000 SHARES

LOGO

COMMON STOCK

All of the 2,500,000 shares of Common Stock offered hereby are being sold by
SQL Financials International, Inc. (the "Company"). Concurrent with the
effective date of this offering (the "Offering"), certain stockholders of the
Company (the "Selling Stockholders") will offer up to 629,625 shares of Common
Stock under a separate prospectus. The Company will not receive any proceeds
from the sale of shares of Common Stock by the Selling Stockholders.

Prior to this Offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price of the Common Stock will be between $10.00 and $12.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company has applied for quotation of the
Common Stock on the Nasdaq National Market under the symbol "SQLF."

SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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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.

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<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
</TABLE>
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $1,400,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 375,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
total Price to Public, Underwriting Discount, and Proceeds to Company will
be $ , $ , and $ , respectively. See "Underwriting."

The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any orders in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of NationsBanc Montgomery Securities LLC on or about , 1998.

-----------

NationsBanc Montgomery Securities LLC

Piper Jaffray Inc.
UBS Securities

, 1998
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[Inside Front Cover]

The inside front cover graphic depicts a transparent sphere made out of
hexagonal shapes. The sphere is blue in color, and the hexagonal shapes are
outlined in yellow. A cube, which is divided into smaller cubes, is inside the
sphere with its top and two sides exposed. The top and each side consist of
nine smaller cubes. Most of the smaller cubes are light red, while several are
a darker shade. A column to the left side of the sphere contains the text,
"SQL Financials(R) offers a complete suite of integrated applications: General
Ledger, Fixed Assets, Accounts Payable, Purchasing Control, Accounts
Receivable, Revenue Accounting, Personnel, Benefits, Payroll." Underneath the
sphere is the text "A client/server software company providing world class
Financial and Human Resource applications with a difference. . . . A
BREAKTHROUGH IN TIME."

The next graphic is titled Active Architecture. In this graphic, the same
sphere is shown bursting through the face of a clock. A line points to the
cube inside of the sphere from the text, "At the center are the Core
Components." Another line points to one of the hexagonal shapes making up the
sphere from the text, "Surrounding the Core is the Graphical Architects
layer." A third line points from the frame of the hexagonal shapes to the
text, "Supporting the Core Components and Graphical Architects is the Systems
Manager." Beneath the graphic is the following text:

"World Class Applications" means functionality that users can tailor to
their specific requirements. A "Breakthrough in Time" is achieved when
applications can be implemented, changed, and upgraded in a fraction of the
time demanded by other vendors' packages.

The SQL Financials solution is fundamentally different. Applications based
on the SQL Financials Active Architecture technology are designed to enable
organizations to adapt quickly to their specific requirements and to respond
just as quickly to changes in these requirements.

Active Architecture delivers a dynamic solution to business customization.
Active Architecture is comprised of flexible technology layered around core
business components. This agile and adaptable technology allows users to
tailor the system to their specific needs without programming. Simply stated,
Active Architecture is a world-class solution that was built from the ground
up to address rapid implementations, modifications, and upgrades.

The final graphic is titled Graphical Architects and contains the text, "The
key to the Active Architecture technology is the visual manner in which users
specify their requirements through the Graphical Architects(TM) modules,
without the need for programmer assistance and without changing the source
code. These modules are designed to save time and reduce the cost of
ownership." The graphic consists of twelve blue hexagonal shapes arranged in
an "S" shape with each shape overlapping the next, increasing in size. The
first shape is labeled "Data Exchange," and from that text, a line points to
an image of a computer screen. The image is captioned, "Users can now control
data integration and conversion." The next hexagon is labeled "Workload." The
next hexagon is labeled "Solution," and a line points to another computer
screen, which is captioned, "Extend functionality by integrating with
customer's imaging system to view invoices online." The next hexagon is titled
"Business Controls" and a line points to a third computer screen image which
is captioned, "Users can click and drag a mouse to tailor unique business
rules such as reporting organization charts." The next two hexagons are
labeled "Internet" and "Workflow," and the last hexagon contains the label
"Analysis" and a line points to a fourth computer screen which is captioned,
"Quick Graphs provide information analysis at the users' fingertips."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO
COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
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PROSPECTUS SUMMARY

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

THE COMPANY

SQL Financials International, Inc. ("SQL Financials" or the "Company")
develops, markets and supports client/server financial software applications
that reduce the total cost of ownership by minimizing the time, costs and risks
associated with implementing, changing and upgrading applications. The
Company's products are based on a flexible, open architecture called Active
Architecture(TM) which allows for seamless, rapid changes and upgrades without
modifying the source code. The Company's software provides organizations with
the broad functionality of custom-designed applications without the high total
cost of ownership traditionally associated with such applications. By providing
broad functionality, a flexible open architecture, and minimized implementation
and modification time, the Company addresses the needs of a wide range of
organizations while giving end users more control of their work environment.

Widespread adoption of client/server environments has provided end users with
greater access to information and more flexibility, resulting in increased
productivity and greater control. Client/server-based financial applications
have become the key integration point with other enterprise-level applications,
enabling users to automate and streamline core business processes, improve
tracking, analysis and reporting, and make faster, more informed decisions.
According to International Data Corporation, the market for enterprise-level
accounting, human resource and payroll client/server applications exceeded $3.0
billion in 1996, and is projected to grow at a compound annual growth rate of
30% through the year 2001 to over $12.0 billion.

Traditionally, organizations have had two alternatives when deploying
enterprise financial applications: either a highly complex custom-designed
application to meet the organization's specific requirements; or an off-the-
shelf application often lacking the functionality of custom-designed
applications. The limitations of both the custom-designed and traditional off-
the-shelf applications result in high total cost of ownership to the
organization. The largest components of such cost are the necessary labor and
programming resources. According to the Gartner Group, labor-related services,
including implementation and post-implementation services, comprise
approximately 71% of the five-year total cost of ownership for client/server
applications, with the acquisition cost of software comprising only 17% of the
total cost of ownership, and hardware and networking costs comprising the
balance.

The Company's product family includes a full suite of financial and human
resource applications. These applications cover the full range of financial and
accounting functions, including general accounting, expense accounting, revenue
accounting and human resources. The Company licenses a series of modules, its
Graphical Architects(TM), that are designed to extend, enhance, integrate and
change the look-and-feel of the Company's core applications. Through a visual
point-and-click interface, the Graphical Architects modules allow users to
personalize and configure the Company's applications without any source code
programming. In addition, the Company provides dedicated implementation
services as an integral part of its solution, and believes that these services
result in a high level of customer satisfaction, strong customer references and
long relationships. The Company provides ongoing support services to assist
customers in maintaining and updating their systems, training their employees
and adding functionality as the customers' business grows and their
requirements change.

The Company's objective is to become the leading provider of financial
applications to non-industrial organizations. The key elements of the Company's
strategy are: (i) to extend its technology leadership; (ii) to leverage its
expertise in financial applications; (iii) to capitalize on middle market
opportunities; (iv) to leverage its installed customer base; and (v) to expand
sales and marketing channels.

The Company licenses its products and services primarily through a direct
sales force in the United States and Canada. The Company focuses its sales and
marketing efforts on value buyers in mid-sized non-industrial organizations,
including divisions of larger companies, which represent the fastest growing
segment of the financial applications market. At March 31, 1998, the Company
had more than 200 customers, including leading organizations such as National
Railroad Passenger Corporation ("Amtrak"), Blue Cross and Blue Shield of
Alabama, Chartwell Re Holdings Corporation, First Data Corporation, Land's End,
Inc., T. Rowe Price Associates, Inc., Shaw Industries, Inc., and Toronto-
Dominion Bank.

The Company was incorporated in Delaware in 1991. Unless the context
otherwise requires, references in this Prospectus to the "Company" refer to SQL
Financials International, Inc. and its consolidated subsidiaries, SQL
Financials Services, L.L.C. (the "Services Subsidiary") and SQL Financials
Europe, Inc. The Company's principal executive offices are located at 3950
Johns Creek Court, Suite 100, Suwanee, Georgia 30024. The Company's telephone
number at that address is (770) 291-3900.

3
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THE OFFERING

Common Stock offered by the Company .... 2,500,000 shares

Common Stock to be outstanding after
the Offering............................ 9,059,425 shares(1)

Use of Proceeds ........................ For general corporate purposes and
working capital, which may include
future acquisitions. See "Use of
Proceeds."

Proposed Nasdaq National Market symbol SQLF
........................................
- --------

(1) Includes (i) 4,787,594 shares of Common Stock to be issued upon conversion
of all outstanding shares of the Company's Preferred Stock (the
"Conversion"); and (ii) 131,250 shares of Common Stock to be issued upon
conversion of the Preferred Stock acquired upon the exercise of a warrant
held by Technology Ventures, LLC ("Tech Ventures") (the "Warrant
Exercise"). The Conversion and Warrant Exercise will be effected
concurrently with the effective date of this Offering. Excludes: (i)
1,652,700 shares of Common Stock reserved for issuance under the Company's
1992 Stock Option Plan for which options to acquire 1,588,773 shares of
Common Stock are outstanding as of the date of this Prospectus at exercise
prices ranging from $0.67 to $8.00 per share and a weighted average
exercise price of $2.67 per share; (ii) 1,000,000 shares of Common Stock
reserved for issuance under the Company's 1998 Stock Incentive Plan for
which options to acquire 119,250 shares have been granted as of March 31,
1998 at a weighted average exercise price of $8.00 per share; (iii) 300,000
shares of Common Stock issuable upon the exercise of an outstanding warrant
at an exercise price of $3.67 per share issued in connection with the
purchase from Tech Ventures of its 20% interest in the Services Subsidiary
(the "Acquisition"); and (iv) 95,610 shares of Common Stock issuable at a
weighted average price of $6.22 per share, upon conversion of shares of
Preferred Stock issuable upon the exercise of outstanding warrants. See
"Capitalization," "Management--Employee Benefit Plans," "Certain
Transactions" and Note 11 of Notes to the Consolidated Financial
Statements.

4
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------------
PRO PRO FORMA
ACTUAL FORMA(4) AS ADJUSTED(5)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 5,180 $ 5,180 $29,967
Working capital (deficit)..................... (3,777) (3,777) 21,010
Total assets.................................. 17,160 17,160 41,947
Long-term debt, net of current portion........ 437 437 437
Redeemable convertible preferred stock........ 25,262 -- --
Total stockholders' equity (deficit).......... (24,945) 317 25,104
</TABLE>
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(1) Pro forma to reflect: (i) the Acquisition and (ii) the Conversion. See
Unaudited Pro Forma Financial Statements and Notes thereto included
elsewhere in this Prospectus.

(2) See Note 1 of Notes to Consolidated Financial Statements for a description
of the computation of weighted average shares outstanding.

(3) Pro forma to effect the Conversion and the Acquisition. See "Certain
Transactions" and Unaudited Pro Forma Financial Statements and Notes
thereto included elsewhere in this Prospectus.

(4) Pro forma balance sheet data gives effect to the Conversion as if such
transaction occurred as of the date presented. See Unaudited Pro Forma
Financial Statements and Notes thereto included elsewhere in this
Prospectus.

(5) Adjusted to give effect to (i) the sale of the 2,500,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering
price of $11.00 per share (the midpoint of the valuation range), after
deducting the estimated underwriting discount and offering expenses payable
by the Company, and the application of the estimated net proceeds
therefrom; and (ii) the Warrant Exercise, resulting in net proceeds to the
Company of $612,500. See "Use of Proceeds" and "Capitalization."

5
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FORWARD-LOOKING STATEMENTS

Information contained in this Prospectus includes "forward-looking
statements" that are based largely on the Company's current expectations and
are subject to a number of risks and uncertainties. The Company faces many
risks and uncertainties, including those described in this Prospectus under the
caption "Risk Factors." Because of these many risks and uncertainties, the
Company's actual results may differ materially from any results presented in or
implied by the forward-looking statements included in this Prospectus.

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Except as otherwise indicated, all information in this Prospectus: (i)
assumes no exercise of the Underwriters' over-allotment option; and (ii)
reflects a three-for-two split of the Company's Common Stock, effected in the
form of a stock dividend, upon the effective date of this Offering, whereby
each share of the Company's outstanding Common Stock will be converted into 1.5
shares of Common Stock.

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SQL Financials is a registered trademark of the Company and World Class
Applications . . . Breakthrough in Time(TM), Active Architecture(TM), Graphical
Architects(TM), Data Exchange/Graphical Architect(TM), Solution/Graphical
Architect(TM), Workload/Graphical Architect(TM), Workflow/Graphical
Architect(TM), Business Controls/Graphical Architect(TM), Internet/Graphical
Architect(TM) and Analysis/Graphical Architect(TM) are trademarks of the
Company. All other trademarks and registered trademarks used in this Prospectus
are the property of their respective owners.

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RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should consider carefully the following risk factors in evaluating
the Company and its business before purchasing the shares of Common Stock
offered hereby.

HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE OPERATING RESULTS

The Company has incurred significant net losses in each year since its
formation. As of March 31, 1998, the Company had an accumulated deficit of
approximately $28.3 million. These losses have occurred, in part, because of
the substantial costs incurred by the Company to develop its products, expand
its product research and hire and train its direct sales force. Although the
Company has achieved recent revenue growth and profitability for the quarters
ended September 30, 1997 and December 31, 1997, there can be no assurance that
the Company will be able to generate the substantial additional growth in
revenues that will be necessary to sustain profitability. The Company plans to
continue to increase its operating expenses in order to fund higher levels of
research and development, increase its sales and marketing efforts, broaden
its customer support capabilities and expand its administrative resources in
anticipation of future growth. To the extent that increases in such expenses
precede or are not offset by increased revenues, the Company's business,
results of operations and financial condition would be materially adversely
affected. The Company's financial prospects must be considered in light of the
risks, costs and difficulties frequently encountered by emerging companies,
particularly companies in the competitive financial and human resource
software industry. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The loss of any large sale, or the deferral of a large sale to a subsequent
quarter, could have a material adverse effect on current quarter operating
results and could cause significant fluctuations in revenues and earnings from
quarter-to-quarter. Additionally, because the Company derives a smaller
percentage of its revenues from maintenance contracts than many financial and
human resource software companies with a longer history of operations, the
Company does not have a significant ongoing revenue stream that may tend to
mitigate quarterly fluctuations in operating results.

The Company also has experienced, and is expected to continue to experience,
a high degree of seasonality, and in recent years has recognized a
proportionately greater percentage of its total revenues in the fourth quarter
than in any other quarter during such year. Fourth quarter revenues in 1995,
1996 and 1997 were 39.1%, 33.6% and 32.5%, respectively, of total revenues for
those years. As a result of this seasonality, the Company may experience
reduced net income, or even net losses, in the first, second or third fiscal
quarters in any year.

Consistent with software industry practice, the Company typically ships its
software promptly following receipt of a firm order. Accordingly, the Company
expects to continue to operate with minimal backlog. As a

7
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result, quarterly sales and operating results depend generally on the volume
and timing of orders within the quarter, the tendency of sales to occur late
in fiscal quarters and the ability of the Company to fill orders received
within the quarter, all of which are difficult to forecast and manage. The
Company's expense levels are based in part on its expectations of future
orders and sales. A substantial portion of the Company's operating expenses
are related to personnel, facilities and sales and marketing programs. This
level of spending for such expenses cannot be adjusted quickly and is,
therefore, relatively fixed in the near term. Accordingly, any significant
shortfall in demand for the Company's products in relation to the Company's
expectations would have an immediate and material adverse financial effect on
the Company.

Due to all of the foregoing factors, the Company believes that its quarterly
operating results are likely to vary significantly in the future. Therefore,
in some future quarter the Company's results of operations may fall below the
expectations of securities analysts and investors. In such event, or in the
event that such result is perceived by market analysts to have occurred, the
trading price of the Company's Common Stock would likely be materially
adversely affected.

DEPENDENCE ON DIRECT SALES MODEL

To date, the Company has sold its products exclusively through its direct
sales force. The Company intends to continue to differentiate itself from many
of its competitors by relying principally on its direct sales model. As a
consequence of this strategy, the Company's ability to achieve significant
revenue growth in the future will depend in large part on its success in
recruiting, training and retaining additional direct sales and consulting
personnel and on the continuing success of the direct sales force. The
Company's financial success will depend in large part on the ability of the
Company's direct sales force to increase sales to levels necessary to sustain
profitability. In order to increase sales, the Company must hire, train and
deploy a continually increasing staff of competent sales personnel. The
Company believes that there is a shortage of, and significant competition for,
direct sales personnel with the advanced sales skills and technological
knowledge necessary to sell the Company's products. The Company's inability to
hire, or failure to retain, competent sales persons would have a material
adverse affect on the Company's business, results of operations and financial
condition.

In addition, by relying primarily on a direct sales force model, the Company
may fail to leverage the additional sales capabilities that might be available
through other sales distribution channels, which may place the Company at a
disadvantage with respect to its competition. In the future, the Company
intends to develop indirect distribution channels through third-party
distribution arrangements. There can be no assurance that the Company will be
successful in establishing third-party distribution arrangements, or that any
such expansion of the Company's indirect distribution channels will result in
increased revenues. See "Business--Sales and Marketing" and "--Competition."

COMPETITION

The market for financial and human resource applications is intensely
competitive. The Company's applications are designed for use in a
client/server environment utilizing Windows NT and Unix servers. Principal
competitors that offer products that run on Windows NT or Unix servers in a
client/server environment include PeopleSoft, Inc. ("PeopleSoft"), Oracle
Corporation ("Oracle"), and Lawson Software, Inc. ("Lawson"). In 1997, J.D.
Edwards & Company introduced financial applications for use on Windows NT or
Unix servers in competition with the Company. The Company also faces indirect
competition from companies that sell financial software applications for use
mainly on proprietary mid-range computing systems, from suppliers of custom-
developed financial applications software systems, from the consulting groups
of major accounting firms and from the IT departments of potential customers
that choose to develop systems internally.

The majority of the Company's principal current and potential competitors
have significantly greater financial, technical and marketing resources and
name recognition than the Company. In addition, because of relatively low
barriers to entry and relatively high availability of capital in today's
markets, the Company believes that new competitors will emerge in the
Company's markets. The Company anticipates that it may face

8
<PAGE>

pricing pressures and that one or more companies in its markets may face
financial failure. In the past, a number of software markets have become
dominated by one or a small number of suppliers, and a small number of
suppliers or even a single supplier may dominate the Company's market. If the
Company does not offer products that continue to achieve success in its market
in the short term, the Company could suffer a loss in market share and brand
name acceptance. Moreover, any material reduction in the price of the
Company's products would negatively affect the Company's margins as a
percentage of net revenues and would require the Company to increase sales or
reduce costs to maintain or increase net income. The occurrence of any of the
foregoing would result in a material adverse effect on the Company's business,
results of operations and financial condition. There can be no assurance that
the Company will be able to compete effectively with current and future
competitors. See "Business--Competition."

RAPID TECHNOLOGICAL CHANGE; RISKS ASSOCIATED WITH NEW PRODUCTS AND PRODUCT
ENHANCEMENTS

The market for financial and human resource applications is characterized by
rapid technological change, frequent introductions of new and enhanced
products, changes in customer demands and evolving industry and financial
accounting standards and practices. The introduction of products embodying new
technologies and functionality can render existing products obsolete and
unmarketable. As a result, the Company's future success will depend, in part,
upon its ability to continue to enhance its existing products and develop and
introduce new products that keep pace with technological developments, satisfy
customer requirements and achieve market acceptance. There can be no assurance
that the Company will successfully identify new product opportunities and
develop and bring new products to the market in a timely and cost-effective
manner, or that products, capabilities or technologies developed by others
will not render the Company's products or technologies obsolete or
noncompetitive or shorten life cycles of the Company's products. The Company
has addressed and will continue to address product development and enhancement
initiatives primarily through the Company's internal research and development
staff, as well as through the licensing of third-party technologies.

Because of these potentially rapid changes in the financial and human
resource applications market, the life cycle of versions of the Company's
products is difficult to estimate. The Company's future success will depend
upon its ability to address the increasingly sophisticated needs of its
customers by developing and introducing enhancements to its products on a
timely basis that keep pace with technological developments, emerging industry
standards and customer requirements. The Company has recently released 32-bit
versions of its financial applications products. The Company believes that
these products offer the advanced functionality and technological capabilities
necessary to compete with generally available competitive products. There can
be no assurance, however, that the Company will be successful in developing
and marketing enhancements to existing products or in developing new products
that respond to technological changes, evolving industry or accounting
standards or practices or customer requirements. Any failure by the Company to
successfully develop and bring new or enhanced products to market that offer
advanced technology and functionality adequate to compete with other available
products could have a material adverse effect on the business, results of
operations and financial condition of the Company. See "Business--Industry
Background," "--Products," "--Technology" and "--Research and Development."

MANAGEMENT OF GROWTH

The Company recently has experienced significant growth in its sales and
operations and in the complexity of its products and product distribution
channels. The Company increased its sales by approximately 217% from
approximately $8.2 million in 1995 to approximately $26.0 million in 1997. The
Company increased the number of its employees from 105 at December 31, 1995 to
244 persons at March 31, 1998, and intends to further increase the size of its
sales force and development staff to address anticipated growth in sales. The
Company's growth, coupled with the rapid evolution of the Company's markets,
has placed, and is likely to continue to place, significant strains on the
Company's administrative, operational and financial resources and increase
demands on its internal systems, procedures and controls. If the Company is
unable to manage future growth effectively, the Company's business, results of
operations and financial condition could be materially adversely affected. See
"Business--Sales and Marketing," "--Employees," and "Management."

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<PAGE>

DEPENDENCE ON KEY PERSONNEL; ABILITY TO HIRE AND RETAIN PERSONNEL

The Company's performance is substantially dependent on the performance of
its key management, sales, support and technical personnel, all of whom are
employed at will and are not bound by an employment agreement to continue in
the employ of the Company. The loss of the services of any of such personnel
could have a material adverse effect on the business, results of operations
and financial condition of the Company. The Company does not maintain key
person life insurance policies on any of its employees or consultants other
than Joseph S. McCall which will terminate on the effectiveness of the
Offering.

The Company's success also is highly dependent on its continuing ability to
identify, hire, train, motivate and retain highly qualified management,
technical, and sales and marketing personnel. Competition for such personnel
is intense, and the Company believes that there is a shortage of qualified
personnel with the skills required to manage, develop, sell and market
financial and human resource applications and enhancements in today's highly
competitive environment. Accordingly, there can be no assurance that the
Company will be able to attract, assimilate or retain highly qualified
personnel in the future. The inability to attract and retain the necessary
personnel would have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business--Employees" and
"Management."

PLANNED INTERNATIONAL EXPANSION

To date, the Company has had limited experience selling or marketing its
products to customers outside of the United States and Canada. In 1994, the
Company investigated opportunities to market its products in the United
Kingdom and ultimately determined that expansion in that market was not
advantageous at that time. At the same time, the Company formed SQL Financials
Europe, Inc. ("SQL Europe"). SQL Europe currently does not conduct any
operations; however, the Company may use this entity in connection with its
planned international expansion. Notwithstanding that determination, the
Company believes that a potential market exists for its current applications
in countries other than the United States and Canada. Therefore, the Company
currently intends to expand its operations outside of the United States and
Canada and believes that an increasing percentage of its future sales will be
derived from international sales. However, because of the Company's limited
experience in international sales and marketing, no assurance can be given
that the Company will be able to successfully sell its products to customers
outside the United States and Canada. There are certain difficulties and risks
inherent in doing business internationally, including, but not limited to: (i)
costs of customizing products and services for international markets; (ii)
dependence on independent resellers; (iii) multiple and conflicting
regulations; (iv) exchange controls; (v) longer payment cycles; (vi)
unexpected changes in regulatory requirements; (vii) import and export
restrictions and tariffs; (viii) difficulties in staffing and managing
international operations; (ix) greater difficulty or delay in accounts
receivable collection; (x) potentially adverse tax consequences; (xi) the
burden of complying with a variety of laws outside the United States; (xii)
the impact of possible recessionary environments in economies outside the
United States; and (xiii) political and economic instability. The Company's
ability to expand its business in certain countries will require modification
of its products, including modifications to support foreign languages and
accounting principals and practices. Furthermore, the Company expects that its
export sales will be denominated predominantly in United States dollars. An
increase in the value of the United States dollar relative to other currencies
could make the Company's products and services more expensive and, therefore,
potentially less competitive in international markets. If the Company
successfully increases its international sales, its total revenues may also be
affected to a greater extent by seasonal fluctuations resulting from lower
sales that typically occur during the summer months in Europe and other parts
of the world. See "Business--Industry Background," "--Strategy" and "--Sales
and Marketing."

PRODUCT CONCENTRATION; MARKET ACCEPTANCE

The Company expects that revenues from its financial applications products
will continue to account for substantially all of the Company's product
revenues for the foreseeable future. During 1997, the Company released 32-bit
versions of its financial applications with enhanced functionality. Increased
market acceptance of this enhanced product family is critical to the Company's
ability to increase sales and therefore to sustain profitability. Any factor
adversely affecting sales or pricing levels of these applications will have a
material adverse effect on the Company's business, results of operations and
financial condition. Factors that may affect

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<PAGE>

market acceptance include the availability and price of competing products and
technologies and the success of the sales efforts of the Company. Moreover,
the Company anticipates that its competitors will introduce additional
competitive products, particularly if demand for financial applications
increases, which may reduce future market acceptance of the Company's
products. The Company's future performance will also depend in part on the
successful development, introduction and market acceptance of new and enhanced
products. There can be no assurance that any such new or enhanced products
will be successfully developed, introduced or marketed, and failure to do so
would have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business--Products," "--Technology,"
and "--Competition."

LENGTHY SALES CYCLES

A customer's decision to license and implement the Company's financial and
human resource applications presents significant enterprise-wide implications
and involves a substantial commitment of the customer's management attention
and resources. The Company believes that the period between initial customer
contact and the customer's purchase commitment typically ranges from four to
seven months for its applications. Currently, the demand for solutions to the
Year 2000 problem generally has resulted in a temporary reduction in the sales
cycle for many companies that have chosen to implement client/server based
financial applications to resolve impending systems failure caused by the Year
2000. However, as more companies achieve Year 2000 compliance in their
financial applications, and as a result of the increased complexity of the
Company's products and an increase in the number and sophistication of
competing products, sales cycles are likely to increase in the future.
Accordingly, the Company's future sales cycle could extend beyond seven months
as a result of lengthy evaluation and approval processes that typically
accompany major initiatives or capital expenditures, including delays over
which the Company has little or no control. The loss of individual orders due
to increased sales and evaluation cycles, or delays in the sale of even a
limited number of systems, could have a material adverse effect on the
Company's business, results of operations and financial condition and, in
particular, could contribute to significant fluctuations in operating results
on a quarterly basis. See "Business--Sales and Marketing."

PROPRIETARY RIGHTS AND LICENSING

The Company's success depends significantly upon its internally developed
proprietary intellectual property and intellectual property licensed from
others. The Company relies on a combination of copyright, trademark and trade
secret laws as well as on confidentiality procedures and licensing
arrangements, to establish and protect its proprietary rights in its products.
The Company has no patents or patent applications pending, and existing trade
secret and copyright laws provide only limited protection of the Company's
proprietary rights. The Company has registered or applied for registration for
certain copyrights and trademarks and will continue to evaluate the
registration of additional copyrights and trademarks as appropriate. Despite
the Company's efforts to protect its proprietary rights, unauthorized parties
may attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Third parties may also
independently develop products similar to the Company's products. In addition,
the laws of some foreign countries do not protect proprietary rights to the
same extent as the laws of the United States.

The Company enters into license agreements with each of its customers. The
Company's license agreements provide for the customer's non-exclusive right to
use the object code version of the Company's products. The Company's license
agreements prohibit the customer from disclosing to third parties or reverse
engineering the Company's products and disclosing the Company's other
confidential information. In certain rare circumstances, typically for the
earliest releases of the Company's products, the Company has granted its
customers a source code license, solely for the customer's internal use.

The Company has in the past licensed and may in the future license on a non-
exclusive basis third-party software for use and distribution with the
Company's financial and human resource applications. Additionally, the
Company's human resource applications are based on software acquired under a
non-exclusive object code and source code license from Personnel Data Systems,
Inc. ("PDS"). On March 1, 1996, the Company entered into a private label and
license agreement with PDS, which provides for the purchase by the Company of
the licensed human resource application. The purchase price is paid by the
Company through ongoing royalties on the licensing of such products, with a
final lump sum payment being due after PDS has met certain delivery
obligations. PDS is required to support and maintain this software until the
private label and license agreement

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<PAGE>

terminates when the full purchase price is paid. Because these third-party
software licenses are non-exclusive, no assurance can be given that these
licensors will not grant similar licenses to the Company's competitors.
Expiration or termination of the Company's third-party licenses or the
inability of Company's licensors to adequately maintain or update software
would adversely affect the Company's ability to ship certain products. While
it may be necessary or desirable in the future to obtain third-party software
licenses from alternative sources, there can be no assurance that the Company
will be able to do so on commercially reasonable terms, if at all. See
"Business--Proprietary Rights and Licensing."

Although the Company does not believe that it is infringing the intellectual
property rights of others, claims of infringement are becoming increasingly
common as the software industry matures and expanded legal protections are
applied to software products. Third parties may assert infringement claims
against the Company with respect to the Company's proprietary technology and
intellectual property licensed from others. Generally, the Company's third-
party software licensors indemnify the Company from claims of infringement.
However, in the event the Company receives a claim of infringement relating to
third-party software distributed by the Company there can be no assurance that
the Company's licensors will be able to fully indemnify the Company for such
claim, if at all. Infringement claims against the Company can cause product
release delays, require the Company to redesign its products or require the
Company to enter into royalty or license agreements, which agreements may not
be available on terms acceptable to the Company or at all. Furthermore,
litigation, regardless of the outcome, could result in substantial cost to the
Company, divert management attention and delay customer purchasing decisions.
Any infringement claim against the Company could have a material adverse
effect on the Company's business, results of operations and financial
condition.

RISK OF PRODUCT DEFECTS; PRODUCT LIABILITY

As a result of their complexity, software products may contain undetected
errors or failures when first introduced or as new versions are released.
There can be no assurance that, despite testing by the Company and testing and
use by current and potential customers, errors will not be found in new
financial applications after commencement of commercial shipments or, if
discovered, that the Company will be able to successfully correct such errors
in a timely manner or at all. The occurrence of errors and failures in the
Company's products could result in the loss of or delay in market acceptance
of the Company's financial applications, and alleviating such errors and
failures could require significant expenditure of capital and other resources
by the Company. The consequences of such errors and failures could have a
material adverse effect on the Company's business, results of operations and
financial condition.

Since the Company's financial applications are used by its customers for
financial reporting and analysis and payroll processing, and design defects,
software errors, misuse of the Company's products, incorrect data from network
elements or other potential problems within or out of the Company's control
that may arise from the use of the Company's products could result in
financial or other damages to the Company's customers. Although the Company's
license agreements with its customers typically contain provisions designed to
limit the Company's exposure to potential claims as well as any liabilities
arising from such claims, such provisions may not effectively protect the
Company against such claims and the liability and costs associated therewith.
The Company does not maintain product liability insurance. Accordingly, any
such claim could have a material adverse effect upon the Company's business,
results of operations and financial condition. The Company provides warranties
for its products after the software is purchased for the period in which the
customer maintains the Company's support of the product. The Company generally
supports only current releases and the immediately prior releases of its
products. The Company's license agreements generally do not permit product
returns by the customer, and product returns and warranty expense for 1995,
1996 and 1997 represented less than 8.3%, 4.9% and 1.2% of total revenues
during each respective period. The Company had no returns in the quarter ended
March 31, 1998. However, no assurance can be given that product returns will
not increase as a percentage of total revenues in future periods. See
"Business--Products," "--Technology," and "--Customers."

RELIANCE ON THIRD-PARTY SOFTWARE

The Company maintains nonexclusive license agreements with Microsoft
Corporation, Oracle Corporation and Sybase, Inc. which allow the Company to
integrate its products with relational database management systems provided by
these companies. If the Company's customers experience significant problems
with these database

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<PAGE>

management systems and such problems are not corrected by the database system
provider, there can be no assurance that Company's customers will be able to
continue to use the Company's products. Additionally, the Company's inability
to maintain upward compatibility with a new database management system release
could impact the ability of the Company's customers to use the Company's
products. The customer's inability to use the Company's products would affect
customer's renewal of software maintenance for such products, which would have
a material adverse effect on the Company's business, results of operations and
financial condition.

The Company relies on non-exclusive license agreements with Arbor Software
Corporation, Centura Corporation, FRx Software Corporation, PDS and others for
third-party software that is distributed by the Company. The loss of, or
inability to maintain, any of these software licenses would result in delays
or reductions in product shipments until equivalent software could be
identified, licensed or developed. Any such delays could have a material
adverse effect on the Company's business, operating results and financial
condition. Further, in some instances the Company only receives object code
from its licensors, causing the Company to be reliant on software support
services from third parties. If these third parties fail to satisfy their
maintenance obligations to the Company, then the Company would likely fail to
satisfy its software support obligations to its customers. Any such failure
would have a material adverse effect on the Company's business, results of
operations and financial condition.

The termination of any such licenses or the failure of any of these third-
party licensors to adequately maintain or update their products could delay
the shipment of certain of the Company's products while it seeks to implement
software offered by alternative sources, and any required replacement licenses
could prove costly. While it may be necessary or desirable in the future to
obtain other licenses relating to one or more of the Company's products or
relating to current or future technologies, there can be no assurance that the
Company will be able to do so on commercially reasonable terms or at all.

The Company's financial applications are designed to be Year 2000 compliant.
However, the Company is in the process of determining the extent to which
third-party licensed software distributed by the Company is Year 2000
compliant, as well as the impact of any non-compliance on the Company and its
customers. Additionally, in the event relational database management systems
used with the Company's software are not Year 2000 compliant, there can be no
assurance that Company's customers will be able to continue to use the
Company's products. The Company does not currently believe that the effects of
any Year 2000 non-compliance in the Company's installed base of software will
result in a material adverse impact on the Company's business or financial
condition. However, the Company's investigation with respect to third-party
software is in its preliminary stages, and no assurance can be given that the
Company will not be exposed to potential claims resulting from system problems
associated with the century change.

BENEFITS OF OFFERING TO CURRENT STOCKHOLDERS

The Offering will provide substantial benefits to current stockholders of
the Company, including directors and executive officers of the Company.
Consummation of the Offering is expected to (i) create a public market for the
Company's Common Stock; (ii) provide an opportunity for certain selling
stockholders to register their shares of Common Stock; and (iii) allow current
stockholders to realize the appreciation in the value of the equity securities
held by such stockholders. Stockholders as of March 31, 1998 (including the
Company's directors, executive officers and selling stockholders), the
Company's directors and executive officers and the selling stockholders paid
an aggregate of approximately $28.2 million, $8.7 million and $1.1 million,
respectively, for an aggregate of approximately 6,428,175 shares, 2,743,156
shares and 629,625 shares, respectively, of capital stock, assuming the
Conversion. The Offering will result in gross unrealized gain to such
stockholders (including directors, executive officers and selling
stockholders), directors and executive officers and selling stockholders in
the aggregate of approximately $42.5 million, $21.5 million and $5.8 million,
respectively. See "Shares Eligible For Future Sale."

RELIANCE ON MICROSOFT TECHNOLOGIES

The Company has entered into partnership and marketing arrangements with
Microsoft. The Company's products operate with Microsoft's proprietary
products, such as: Windows NT, Visual C++, Foundation Classes, Active X,
OLE/COM and SQL Server. The Company has designed its products and technology
to be compatible with new developments in Microsoft technology. Although the
Company believes that Microsoft technologies are currently widely utilized by
businesses of all sizes, there can be no assurance that businesses will
continue to

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<PAGE>

adopt such technologies as anticipated, will migrate from older Microsoft
technologies to newer Microsoft technologies or will not adopt alternative
technologies that the Company does not support.

CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS

Upon completion of this Offering, the Company's executive officers and
directors, and their affiliates, as a group, will beneficially own
approximately 37.7% of the Company's outstanding Common Stock. As a result,
these stockholders will be able to influence matters requiring approval by the
stockholders of the Company, including the election of directors and approval
of significant corporate transactions.

BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS

The Company intends to use the net proceeds of this Offering for general
corporate purposes, including product development and working capital. The
Company may use a portion of the net proceeds of the Offering to acquire or
invest in businesses, technologies or products complementary to the Company's
business. The Company has no other specific plans to use the net proceeds of
this Offering. Accordingly, the Company will retain broad discretion to
allocate a substantial portion of the net proceeds of this Offering. Pending
any such uses, the Company plans to invest the net proceeds in investment-
grade, interest-bearing securities. See "Use of Proceeds."

RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS

The Company may in the future engage in selective acquisitions of businesses
that are complementary to the business conducted by the Company. While the
Company has from time to time in the past considered acquisition
opportunities, it has never acquired a significant business and has no
existing agreements or commitments to effect any acquisition. Accordingly,
there can be no assurance that the Company will be able to identify suitable
acquisition candidates available for sale at reasonable prices, consummate any
acquisition or successfully integrate any acquired business into the Company's
operations. Such integration risk includes, among other things, the difficulty
in assimilating the operations and personnel of an acquired company; potential
disruption of the Company's ongoing business; inability to successfully
integrate acquired systems into the Company's operations, maintenance of
uniform standards, controls and procedures; and possible impairment of
relationships with employees of an acquired business as a result of changes in
management. Further, acquisitions may involve a number of additional risks,
including diversion of management's attention, failure to retain key acquired
personnel, unanticipated events or circumstances and legal liabilities, some
or all of which could have a material adverse effect on the Company's
business, results of operations and financial condition. Problems with an
acquired business could have a material adverse impact on the performance of
the Company as a whole. The Company expects to finance any future acquisitions
with the proceeds of this Offering as well as with possible debt financing,
the issuance of equity securities (common or preferred stock) or a combination
of the foregoing. There can be no assurance that the Company will be able to
arrange adequate financing on acceptable terms. If the Company were to proceed
with one or more significant future acquisitions in which the consideration
consisted of cash, a substantial portion of the Company's available cash
(possibly including a portion of the proceeds of this Offering) could be used
to consummate the acquisitions. If the Company were to consummate one or more
significant acquisitions in which the consideration consisted of stock,
stockholders of the Company could suffer significant dilution of their
interests in the Company. Many business acquisitions must be accounted for as
a purchase. Most of the businesses that might become attractive acquisition
candidates for the Company are likely to have significant intangible assets,
and acquisition of those businesses, if accounted for as a purchase, would
typically result in substantial goodwill amortization charges to the Company,
reducing future earnings. In addition, such acquisitions could involve non-
recurring acquisition-related charges, such as the write-off or write-down of
software development costs or other intangible items.

ESTIMATED $900,000 NONCASH CHARGE TO INCOME FROM VESTING OF STOCK OPTIONS

In the second quarter of 1998, the Company accelerated the vesting of
certain employee stock options issued in the first quarter of 1998 for 283,343
shares of Common Stock, at an exercise price of between $3.67 per share and
$8.00 per share. As a result of this accelerated vesting, the Company
recognized a noncash, nonrecurring charge of approximately $900,000
representing the remaining unamortized deferred compensation previously
recorded on these options. Although this noncash charge will have no net
effect on the Company's total stockholders' equity, the charge is expected to
cause the Company to report a loss for the second quarter of fiscal 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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<PAGE>

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering, there has been no public market for the shares of
Common Stock of the Company, and there can be no assurance that an active
public market for the shares of Common Stock of the Company will develop or be
sustained after the Offering. The initial public offering price will be
determined by negotiation between the Company and the Underwriters based upon
several factors. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The market price
of the shares of Common Stock may be highly volatile and could be subject to
wide fluctuations in response to variations in results of operations,
announcements of technological innovations or new products by the Company or
its competitors, changes in financial estimates by securities analysts or
other events or factors. In addition, the financial markets have experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many high technology companies and that
often have been unrelated to the operating performance of such companies or
have resulted from the failure of the operating results of such companies to
meet market expectations in a particular quarter. Broad market fluctuations or
any failure of the Company's operating results in a particular quarter to meet
market expectations may adversely affect the market price of the shares of
Common Stock. In the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against such a company. Such litigation could result in substantial
costs and a diversion of management's attention and resources, which would
have a material adverse effect on the Company's business, results of
operations and financial condition.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of the Company's Common Stock in the
public market after this Offering, or the perception that such sales could
occur, could adversely affect the market price of the shares of the Common
Stock. Of the 9,059,425 shares of Common Stock to be outstanding upon
completion of this Offering, the 2,500,000 shares that are being registered in
the Registration Statement covering this Prospectus will be freely tradeable
without restriction. In addition, concurrently with this Offering, the Company
has registered 629,625 issued and outstanding shares of Common Stock. All of
the remaining 5,929,800 shares of Common Stock are restricted securities as
that term is defined in Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"). All officers and directors and
substantially all of the stockholders of the Company, have entered into lockup
agreements that will expire (and 5,927,460 shares will become eligible for
sale upon expiration of the lock-up agreements) 180 days after the date of
this Prospectus, subject to the provisions of Rules 144 and 701 of the
Securities Act. One such stockholder has entered into a Lock-up Agreement with
respect to 117,188 shares, which will expire one year from the effective date
of this Offering. In addition, the holders of the stock options granted during
the period of January 1, 1998 through April 1, 1998 whose options have been
fully vested have entered into Lock-up Agreements restricting the sale or
transfer of such shares for a four year period following the date hereof, with
25% of such shares being released from such restriction on each anniversary of
the date of this Prospectus. The Company intends to file a Registration
Statement on Form S-8 after the completion of the Offering, after which time
an additional 309,420 shares issuable upon the exercise of vested stock
options will become eligible for sale. Of the 309,420 shares, 283,343 shares
will be subject to the four year lock-up described above. The holders of
5,929,800 shares of Common Stock to be outstanding upon the completion of this
Offering are entitled to certain rights with respect to registration of such
shares for sale to the public beginning 180 days after the completion of this
Offering. See "Management--Executive Compensation," "Description of Capital
Stock," "Shares Eligible for Future Sale" and "Underwriting."

POTENTIAL ISSUANCE OF PREFERRED STOCK; ANTITAKEOVER PROVISIONS

The Company's Certificate of Incorporation permits the issuance of up to
5,000,000 shares of Preferred Stock and permits the Board of Directors to fix
the rights, preferences, privileges and restrictions of such shares without
any further vote or action by the Company's stockholders. As of the date of
this Prospectus, the Company had 3,191,743 shares of Preferred Stock
outstanding, all of which will convert to 4,787,594 shares of Common Stock
upon the effectiveness of this Offering. Although the Company has no current
plans to issue new shares of Preferred Stock, the potential issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company, may discourage bids for the Common Stock at
a premium over the market price of the Common Stock and may adversely affect
the market price of, and the voting and other rights of the holders of, Common
Stock. At the effective time of this Offering, the Company's Board of
Directors will be divided into three classes, each of which serves for a
staggered three-year term. Such staggered board may make it

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<PAGE>

more difficult for a third party to gain control of the Company's Board of
Directors. In addition, certain provisions of the Company's corporate charter
and by-laws and of Delaware law may be deemed to have an anti-takeover effect
and may discourage takeover attempts not first approved by the Board of
Directors including takeovers which certain stockholders may deem to be in
their best interest. See "Description of Capital Stock."

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Prospectus contains certain forward-looking statements, including, among
others, (i) the ability of the Company to fund higher levels of research and
development, increase its sales and marketing efforts, broaden its customer
support capabilities and expand its administrative resources in anticipation of
future growth; (ii) the ability of the Company to continue to rely principally
on a direct sales model; (iii) the Company's plans to develop indirect
distribution channels through third-party arrangements; (iv) the ability of the
Company to increase the size of its sales force and development staff; and (v)
the expansion of the Company's operations outside of the United States and
Canada. These forward-looking statements are based largely on the Company's
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from these forward-looking statements.
In addition to the other risks described elsewhere in this "Risk Factors"
discussion, important factors to consider in evaluating such forward-looking
statements include: (i) changes in external competitive market factors or in
the Company's internal budgeting process which might impact trends in the
Company's results of operations; (ii) unanticipated working capital or other
cash requirements; and (iii) various competitive factors that may prevent the
Company from competing successfully in the marketplace. In light of these risks
and uncertainties, many of which are described in greater detail elsewhere in
this "Risk Factors" discussion, there can be no assurance that the forward-
looking statements contained in this Prospectus will in fact transpire.

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price per share of Common Stock is substantially
higher than the book value per share of the outstanding Common Stock. As a
result, purchasers of Common Stock in this Offering will experience an
immediate dilution of $8.89 per share in the pro forma net tangible book value
of their Common Stock from the assumed initial public offering price of $11.00
per share. Additional dilution is likely to occur upon the exercise of
outstanding stock options, which entitle the option holders to purchase shares
of Common Stock at prices significantly below the initial public offering
price. To the extent such options are exercised, there will be further
dilution. See "Dilution."

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<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered hereby are estimated to be approximately $24.2 million
($28.0 million if the Underwriters' over-allotment option is exercised in
full), assuming an initial public offering price of $11.00 per share and after
deducting the estimated underwriting discounts and estimated expenses payable
by the Company in connection with the Offering.

The Company expects to use the net proceeds of this Offering for working
capital and other general corporate purposes. These purposes may include
increased expenditures on research and product development, expansion of the
Company's sales and marketing staff, the development of new distribution and
sales channels, including channels for international sales, and the expansion
of the Company's capabilities to provide implementation, training and upgrade
services, and customer support and maintenance.

From time to time in the ordinary course of business, the Company evaluates
the acquisition of businesses and technologies that complement the Company's
business, for which a portion of the net proceeds may be used. Currently,
however, the Company does not have any understandings, commitments or
agreements with respect to any such acquisitions. Pending application of the
net proceeds for the purposes described above, the Company intends to invest
the net proceeds in investment-grade, interest-bearing securities.

DIVIDEND POLICY

The Company currently anticipates that it will retain all future earnings for
use in its business and does not anticipate that it will pay any cash dividends
in the foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among
other things, the Company's results of operations, capital requirements,
general business conditions, contractual restrictions on payment of dividends,
if any, legal and regulatory restrictions on payment of dividends, and other
factors the Company's Board of Directors deems relevant. In addition, the
Company's line of credit prohibits the payment of dividends without prior
lender approval.

17
<PAGE>

CAPITALIZATION

The following table sets forth the long-term indebtedness and capitalization
of the Company at March 31, 1998 on an actual, pro forma and pro forma as
adjusted basis. The table should be read in conjunction with the Company's
Unaudited Consolidated Financial Statements and Unaudited Pro Forma Financial
Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA(1) ADJUSTED(2)
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, net of current portion ........ $ 437 $ 437 $ 437
Redeemable convertible preferred stock:
3,500,000 shares Preferred Stock, par value
$1.00 per share authorized; 262,500 shares
of Series A Preferred Stock issued and
outstanding; 454,888 shares of Series B
Preferred Stock issued and outstanding;
428,572 shares of Series C Preferred Stock
issued and outstanding; 719,299 shares of
Series D Preferred Stock issued and
outstanding; 697,675 shares of Series E
Preferred Stock issued and outstanding;
628,809 shares of Series F Preferred Stock
issued and outstanding, actual; no shares
outstanding pro forma or pro forma as
adjusted.................................... 25,262 -- --
Stockholders' equity (deficit):
Preferred stock, $1 par value, 3,500,000
shares authorized, 3,191,743 shares of
redeemable convertible preferred stock
issued, actual; no shares issued and
outstanding pro forma or pro forma as
adjusted.................................... -- -- --
Common stock, $.0001 par value, 9,000,000
shares authorized and 1,715,581 shares
issued, actual; 6,503,175 shares issued, pro
forma; and 9,134,425 shares issued, pro
forma as adjusted(3)(4)..................... -- 1 1
Additional paid-in capital..................... 3,567 28,828 53,615
Accumulated deficit............................ (28,320) (28,320) (28,320)
Warrants....................................... 2,052 2,052 1,440
Treasury stock, at cost........................ (2) (2) (2)
Note from stockholder.......................... (612) (612) --
Deferred compensation.......................... (1,630) (1,630) (1,630)
-------- -------- --------
Total stockholders' equity (deficit)......... (24,945) 317 25,104
-------- -------- --------
Total capitalization....................... $ 754 $ 754 $ 25,541
======== ======== ========
</TABLE>
- --------

(1) Pro forma capitalization data gives effect to the Conversion. See "Certain
Transactions" and Unaudited Pro Forma Financial Statements and notes
thereto included elsewhere in this Prospectus.

(2) Adjusted to give effect to the sale by the Company of 2,500,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$11.00 per share and the receipt of the estimated net proceeds therefrom
and the Warrant Exercise. See "Use of Proceeds."

(3) Includes 75,000 shares of Common Stock held in treasury. Excludes: (i)
1,659,315 shares of Common Stock reserved for issuance under the Company's
1992 Stock Option Plan for which options to acquire 1,588,773 shares of
Common Stock are outstanding as of March 31, 1998 at exercise prices
ranging from $0.67 to $8.00 per share and a weighted average exercise
price equal to $2.67 per share; (ii) 1,000,000 shares of Common Stock
reserved for issuance under the Company's 1998 Stock Incentive Plan for
which options to acquire 119,250 shares have been granted as of March 31,
1998 at a weighted average exercise price of $8.00 per share; (iii)
300,000 shares of Common Stock issuable upon the exercise of an
outstanding warrant at an exercise price of $3.67 per share issued in
connection with the Acquisition and (iv) 95,610 shares of Common Stock
issuable at a weighted average price of $6.22 per share upon exercise and
conversion of shares of Preferred Stock issuable upon the exercise of
outstanding warrants. See "Capitalization," "Management--Employee Benefit
Plans," "--Director Compensation."
(4) The Company will file an amendment to its Certificate of Incorporation
concurrent with the effective date of this Offering to increase its
authorized capital stock to 30,000,000 shares.

18
<PAGE>

DILUTION

As of March 31, 1998, the net tangible book deficit of the Company was
approximately $(30.9 million) or $(18.86) per share. The pro forma net
tangible book deficit of the Company, assuming completion of the Conversion,
was $(5.7 million) or $(0.89) per share. Pro forma net tangible book deficit
per share is equal to the Company's total pro forma tangible assets, less
total liabilities, divided by the number of shares of Common Stock outstanding
on a pro forma basis at that date.

After giving effect to the sale by the Company of the 2,500,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$11.00 per share, and the receipt of the estimated net proceeds therefrom and
the Warrant Exercise, the pro forma net tangible book value of the Company as
of March 31, 1998 would have been approximately $19.1 million, or $2.11 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.00 per share to existing stockholders and an immediate dilution of
$8.89 per share to new investors. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $11.00
Net tangible book deficit per share as of March 31, 1998...... $(18.86)
Increase per share attributable to pro forma adjustments...... $ 17.97
-------
Pro forma net tangible book deficit per share as of March 31,
1998......................................................... $ (0.89)
Increase per share attributable to new investors.............. $ 3.00
-------
Pro forma net tangible book value per share as of March 31,
1998 after the Offering...................................... $ 2.11
------
Dilution per share to new investors........................... $ 8.89
======
</TABLE>

The following table sets forth, as of March 31, 1998, on a pro forma basis
after giving effect to the issuance of 4,787,594 shares of Common Stock in
connection with Conversion; 131,250 shares of Common Stock in connection with
the Warrant Exercise, 2,500,000 shares of Common Stock offered hereby and the
total consideration, and the average price per share paid by the existing
stockholders and new investors, at an assumed initial public offering price of
$11.00 per share, and before deducting the underwriting discount and estimated
offering expenses:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 6,559,425 72.4% $28,829,000 51.2% $ 4.40
New investors................... 2,500,000 27.6 27,500,000 48.8 $11.00
--------- ----- ----------- -----
Total......................... 9,059,425 100.0% $56,329,000 100.0%
========= ===== =========== =====
</TABLE>

Following completion of this Offering, the Company will have outstanding
options to acquire a total of 1,790,439 shares of Common Stock at exercise
prices ranging from $0.67 to $11.00 per share and a weighted average exercise
price of $5.14 per share, 300,000 shares of Common Stock issuable upon the
exercise of an outstanding warrant at an exercise price of $3.67 per share
issued in connection with the Acquisition, and warrants to acquire Preferred
Stock convertible into an aggregate of 95,610 shares of Common Stock at a
weighted average price of $6.22 per share of Common Stock. The exercise of a
material number of these options or warrants would have the effect of
increasing the pro forma net tangible book value dilution per share to new
investors in this Offering. See "Capitalization," "Management--Employee
Benefit Plans," "Description of Capital Stock."

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data of the Company set forth below
should be read in conjunction with the Consolidated Financial Statements of
the Company, including the Notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The statement of
operations data for the years ended December 31, 1993, 1994, 1995, 1996 and
1997 and the balance sheet data as of December 31, 1993, 1994, 1995, 1996 and
1997 have been derived from, and are qualified by reference to, the Company's
financial statements audited by Arthur Andersen LLP, independent public
accountants. The statement of operations data for the quarters ended March 31,
1997 and 1998 and the balance sheet data as of March 31, 1998 have been
derived from the unaudited financial statements of the Company, but include
all adjustments (consisting only of normal recurring adjustments) which the
Company considers necessary for a fair presentation of the results of
operations and financial position for the periods presented. The results of
operations for the quarter ended March 31, 1998 may not be indicative of the
operating results that may be expected for the Company's fiscal year ended
December 31, 1998. The unaudited pro forma consolidated financial statement
data are provided for informational purposes only and do not purport to be
indicative of the results that would have actually been obtained had the
transactions been completed on the dates indicated or that may be expected to
occur in the future.

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR ENDED QUARTER ENDED QUARTER ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
------------------------------------------- ------------ --------------- -------------
1993 1994 1995 1996 1997 1997(1) 1997 1998 1998(1)
------- ------- ------- ------- ------- ------------ ------- ------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
License fees........... $ 715 $ 2,568 $ 5,232 $ 6,425 $13,506 $13,506 $ 1,938 $3,630 $3,630
Services fees.......... 245 836 1,737 3,984 7,786 7,786 1,611 3,052 3,052
Maintenance fees....... 94 417 1,221 2,647 4,696 4,696 897 1,599 1,599
------- ------- ------- ------- ------- ------- ------- ------ ------
Total revenues......... 1,054 3,821 8,190 13,056 25,988 25,988 4,446 8,281 8,281
Cost of revenues:
License fees........... 12 98 291 416 1,205 1,205 178 260 260
Services fees.......... 225 860 1,421 2,904 5,402 5,402 1,142 2,182 2,182
Maintenance fees....... 189 277 655 1,350 1,973 1,973 428 681 681
------- ------- ------- ------- ------- ------- ------- ------ ------
Total cost of
revenues.............. 426 1,235 2,367 4,670 8,580 8,580 1,748 3,123 3,123
Operating expenses:
Research and
development........... 1,364 2,130 3,882 5,777 7,190 7,190 1,927 1,268 1,268
Sales and marketing.... 541 2,718 6,636 7,191 9,515 9,515 2,243 2,493 2,493
General and
administrative........ 879 2,895 3,292 3,076 4,061 4,338 864 1,632 1,655
------- ------- ------- ------- ------- ------- ------- ------ ------
Total operating
expenses.............. 2,784 7,743 13,810 16,044 20,766 21,043 5,034 5,393 5,416
------- ------- ------- ------- ------- ------- ------- ------ ------
Operating loss.......... (2,156) (5,157) (7,987) (7,658) (3,358) (3,635) (2,336) (235) (258)
Interest expense
(income), net.......... 14 (17) 2 6 274 358 0 30 37
Minority interest....... 0 0 (60) (215) (478) -- (98) (36) --
------- ------- ------- ------- ------- ------- ------- ------ ------
Net loss................ $(2,170) $(5,140) $(8,049) $(7,879) $(4,110) $(3,993) $(2,434) $ (301) $ (295)
======= ======= ======= ======= ======= ======= ======= ====== ======
Basic and diluted net
loss per share......... $ (2.23) $ (5.65) $ (6.19) $ (5.74) $ (2.97) $ (1.77) $(0.20)
======= ======= ======= ======= ======= ======= ======
Weighted average common
shares outstanding(2).. 975 910 1,300 1,373 1,386 1,376 1,539
======= ======= ======= ======= ======= ======= ======
Pro forma basic and
diluted net loss per
share.................. $ (0.62) $(0.05)
======= ======
Pro forma weighted
average common shares
outstanding(3)......... 6,399 6,417
======= ======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1998
----------------------------------------- ---------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(4)
------ ------ ------- ------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $1,488 $ 492 $ 3,333 $ 3,279 $ 7,213 $ 5,180 $5,180
Working capital
(deficit).............. 1,178 (1,424) (2,555) (3,422) (453) (3,777) (3,777)
Total assets............ 1,981 1,506 5,865 8,525 14,681 17,160 17,160
Long-term debt, net of
current portion........ 190 143 93 1,093 497 437 437
Redeemable convertible
preferred stock........ 4,075 7,688 13,075 19,075 25,112 25,262 --
Total stockholders'
deficit................ (2,961) (8,732) (15,927) (23,837) (27,910) (24,945) 317
</TABLE>

20
<PAGE>

- --------

(1) Pro forma to reflect: (i) the Acquisition and (ii) the Conversion. See
Unaudited Pro Forma Financial Statements and Notes thereto included
elsewhere in this Prospectus.

(2) See Note 1 of Notes to Consolidated Financial Statements for a description
of the computation of weighted average common shares outstanding.

(3) See Unaudited Pro Forma Financial Statements and Notes thereto included
elsewhere in this Prospectus for a description of the computation of pro
forma weighted average common shares outstanding.

(4) Pro forma balance sheet data gives effect to the Conversion as if it
occurred as of the date presented. See "Certain Transactions" and
Unaudited Pro Forma Financial Statements and Notes thereto included
elsewhere in this Prospectus.

21
<PAGE>

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

OVERVIEW

The Company was formed in November 1991 to develop, market, license and
support financial applications. In 1997, the Company introduced a series of
additional modules and product enhancements. Specifically, in the first quarter
of 1997, the Company introduced its human resource applications, which included
the Personnel, Benefits and Payroll modules. In 1997, the Company introduced
its Financial Statement Accelerator module, a distributed management reporting
solution, and a 32-bit version of its financial applications (the "Denver
Release"), which included two new modules, Purchasing Control and
Solution/Graphical Architect. Total license revenues from these new products in
1997 were $5.7 million. The Company intends to release a 32-bit version of its
human resources applications toward the end of 1998. The Company currently
markets its products in the United States and Canada through its direct sales
force and has licensed its client/server applications to more than 200
customers in a variety of industry segments, including insurance, financial
services, communications, retail, printing and publishing, transportation and
manufacturing. The Company also offers fee-based implementation, training and
upgrade services and on-going maintenance and support of its products for a 12-
month renewable term.

Through 1997 the Company recognized revenue in compliance with Statement of
Position ("SOP") 91-1 "Software Revenue Recognition." Effective January 1,
1998, the Company adopted SOP 97-2 "Software Revenue Recognition." The adoption
of this SOP is not expected to have a significant impact on the Company's
consolidated financial statements. Revenues from software licenses have been
recognized upon delivery of the product if there are no significant obligations
on the part of the Company following delivery and collection of the related
receivable is deemed probable by management. Revenues from service fees relate
to implementation, training and upgrade services performed by the Company and
have been recognized as the services are performed. Maintenance fees relate to
customer maintenance and support and have been recognized ratably over the term
of the software support agreement, which is typically 12 months. A majority of
the Company's customers renew the maintenance and support agreements after the
initial term. To date, all of the Company's customers have utilized the
Company's implementation, training or upgrade services, and approximately 92%
of the Company's current customers are under maintenance and support
agreements. Revenues that have been prepaid or invoiced, but that do not yet
qualify for recognition under the Company's policies are reflected as deferred
revenues.

Cost of license fees include royalties and software duplication and
distribution costs. These costs are recognized by the Company as the
applications are shipped. Cost of services fees include personnel and related
costs incurred to provide implementation, training and upgrade services to
customers. These services were provided by the Services Subsidiary beginning in
March 1995 and prior to that time by third-party contractors. These costs are
recognized as the services are performed. Cost of maintenance fees include
personnel and related costs incurred to provide the ongoing support and
maintenance of the Company's products. These costs are recognized as incurred.

Research and development expenses consist primarily of personnel costs and
subcontractor fees and amortization of acquired software. The Company accounts
for software development costs under Statement of Financial Accounting
Standards ("SFAS") No. 86 "Accounting For the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed." Research and development expenses are
charged to expense as incurred until technological feasibility is established,
after which remaining costs are capitalized. The Company defines technological
feasibility as the point in time at which the Company has a working model of
the related product. Historically, the costs incurred during the period between
the achievement of technological feasibility and the point at which the product
is available for general release to customers have not been material.
Therefore, the Company has charged all internal software development costs to
expense as incurred.

Sales and marketing expenses consist primarily of salaries, commissions and
benefits to sales and marketing personnel, travel, tradeshow participation,
public relations and other promotional expenses. General and

22
<PAGE>

administrative expenses consist primarily of salaries for financial,
administrative and management personnel and related travel expenses, as well as
occupancy, equipment and other administrative costs.

The Company has net operating loss carryforwards ("NOLs") of approximately
$26.7 million at March 31, 1998, which begin expiring in 2007. The Company
established a valuation allowance equal to the NOLs and all other deferred tax
assets. The benefits from these deferred tax assets will be recorded when
realized which will reduce the Company's effective tax rate for future taxable
income, if any. Due to changes in the Company's ownership structure, the
Company's use of its NOLs as of February 16, 1996 of $15.8 million will be
limited to approximately $1.6 million in any given year to offset future taxes.
If the Company does not realize taxable income in excess of the limitation in
future years, certain NOLs will be unrealizable. NOLs generated from February
16, 1996 through December 31, 1996 of $6.5 million and from January 1, 1997
through March 31, 1998 of $300,000 may be further limited as a result of the
Offering.

AFFILIATE RELATIONSHIPS

In March 1995, the Company and Tech Ventures, which is controlled by Joseph
S. McCall, formed the Services Subsidiary to provide implementation, training
and upgrade services exclusively for the Company's customers. On February 5,
1998, Tech Ventures sold its 20.0% interest in the Services Subsidiary to the
Company in exchange for 225,000 shares of the Company's Common Stock, a warrant
to purchase an additional 300,000 shares of Common Stock at a price of $3.67
per share, and a non-interest bearing promissory note in the principal amount
of $1.1 million. The purchase of the remaining 20.0% of the Services Subsidiary
was accounted for as a purchase and will result in goodwill in the amount of
$4.2 million that is being amortized over 15 years. The Company assigned a 15-
year amortization period to the goodwill acquired in the purchase of the 20%
interest in the Services Subsidiary due to the improvements in the operations
of the Services Subsidiary from the time of the original acquisition of 80% in
1995. The Company assigned a five year amortization period to the goodwill
acquired in the acquisition of the 80% interest in the Services Subsidiary in
1995. The Services Subsidiary was established in 1995 with seven employees and
was derived from a business that generated $800,000 during 1994 from these
services. Since that time, the revenue of the Services Subsidiary has at least
doubled in each year. In 1997, the Services Subsidiary had revenues which were
10 times its 1994 revenues and staffing that was 10 times its original staffing
in 1995. The Services Subsidiary was designed to provide implementation,
consulting and training for the Company's products. The training and
installation services provided by the Services Subsidiary were developed after
its inception in 1995. The consolidated financial information included herein
includes the accounts of the Company and the Services Subsidiary. See "Certain
Transactions."

In the second quarter of 1998, the Company accelerated the vesting of certain
employee stock options issued in the first quarter of 1998, for 283,343 shares
of Common Stock, at an exercise price of between $3.67 per share and $8.00 per
share. As a result of this accelerated vesting, the Company recognized a
noncash, nonrecurring charge of approximately $900,000 representing the
remaining unamortized deferred compensation previously recorded on these
options. Although this noncash charge will have no net effect on the Company's
total stockholders' equity, the charge is expected to cause the Company to
report a loss for the second quarter of fiscal 1998.

23
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ ---------------
1994 1995 1996 1997 1997 1998
------ ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License fees............. 67.2% 63.9% 49.2% 52.0% 43.6% 43.8%
Services fees............ 21.9 21.2 30.5 30.0 36.2 36.9
Maintenance fees......... 10.9 14.9 20.3 18.0 20.2 19.3
------ ----- ----- ----- ------ ------
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0
------ ----- ----- ----- ------ ------
Cost of revenues:
License fees............. 2.6 3.6 3.2 4.6 4.0 3.1
Services fees............ 22.5 17.3 22.3 20.8 25.7 26.4
Maintenance fees......... 7.2 8.0 10.3 7.6 9.6 8.2
------ ----- ----- ----- ------ ------
Total cost of
revenues.............. 32.3 28.9 35.8 33.0 39.3 37.7
------ ----- ----- ----- ------ ------
Operating expenses:
Research and
development............. 55.7 47.4 44.2 27.7 43.3 15.3
Sales and marketing...... 71.1 81.0 55.1 36.6 50.5 30.1
General and
administrative.......... 75.8 40.2 23.6 15.6 19.4 19.7
------ ----- ----- ----- ------ ------
Total operating
expenses.............. 202.6 168.6 122.9 79.9 113.2 65.1
------ ----- ----- ----- ------ ------
Operating loss............. (134.9) (97.5) (58.7) (12.9) (52.5) (2.8)
Interest (income) expense.. (0.4) 0.0 0.0 1.1 0.0 0.4
Minority interest.......... 0.0 (0.8) (1.6) (1.8) (2.2) (0.4)
------ ----- ----- ----- ------ ------
Net loss................... (134.5)% (98.3)% (60.3)% (15.8)% (54.7)% (3.6)%
====== ===== ===== ===== ====== ======
Gross margin on license
fees...................... 96.2% 94.4% 93.5% 91.1% 90.8% 92.8%
Gross margin on services
fees...................... (2.9) 18.2 27.1 30.6 29.1 28.5
Gross margin on maintenance
fees...................... 33.6 46.4 49.0 58.0 52.3 57.4
</TABLE>

QUARTER ENDED MARCH 31, 1998 COMPARED TO QUARTER ENDED MARCH 31, 1997

REVENUES

Total Revenues. For the quarter ended March 31, 1998 total revenues increased
86.3% to $8.3 million from $4.4 million in the comparable period in 1997. This
increase was attributable to substantial increases in license fees, services
fees and maintenance fees.

License Fees. License fees increased 87.3% to $3.6 million, or 43.8% of total
revenues, in the quarter ended March 31, 1998 from $1.9 million, or 43.6% of
total revenues, in the comparable period in 1997. These increases in license
fees resulted primarily from an increase in the number of licenses sold,
reflecting a continuing increase in the demand for the Company's existing and
new applications, and to a lesser extent, to an increase in the average
customer transaction size.

Services Fees. Services fees increased 89.4% to $3.1 million, or 36.9% of
total revenues, in the quarter ended March 31, 1998 from $1.6 million, or 36.2%
of total revenues, in the comparable period in 1997. The increase in services
fees was primarily due to increased demand for professional services associated
with the increase in the number of licenses sold.

Maintenance Fees. Maintenance fees increased 78.3% to $1.6 million, or 19.3%
of total revenues in the quarter ended March 31, 1998 from $897,000 or 20.2% of
total revenues in the comparable period in 1997. The increase in maintenance
fees was primarily due to the signing of license agreements with new customers
and the renewal of maintenance with existing customers.

<PAGE>

COST OF REVENUES

Total Cost of Revenues. Cost of revenues increased 78.7% to $3.1 million, or
37.7% of total revenues, in the quarter ended March 31, 1998 from $1.7 million,
or 39.3% of total revenues, in the comparable period in 1997. The increase in
the cost of revenues was primarily due to an increase in personnel and related
expenses and increased royalty expenses. The decrease as a percentage of total
revenues primarily reflects increased utilization of personnel.

Cost of License Fees. Cost of license fees increased to $260,000, or 7.2% of
total license fees, in the quarter ended March 31, 1998 compared to $178,000,
or 9.2% of total license fees, in the comparable period in 1997. The decrease
as a percentage of total license fees is primarily attributable to the
expiration of certain obligations under royalty agreements for third party
software.

Cost of Services Fees. Cost of services fees increased 91.1% to $2.2 million,
or 71.5% of total services fees, in the quarter ended March 31, 1998 compared
to $1.1 million, or 70.9% of total services fees, in the comparable period in
1997. The increase in the cost of services fees was primarily attributable to
an increase in the personnel and related costs to provide implementation,
training and upgrade services. Cost of services fees as a percentage of total
services fees increased staffing due to decreased utilization of personnel.

Cost of Maintenance Fees. Cost of maintenance fees increased 59.1% to
$681,000, or 42.6% of total maintenance fees, in the quarter ended March 31,
1998 compared to $428,000, or 47.7% of total maintenance fees, in the
comparable period in 1997. The increase in the cost of maintenance fees was
primarily due to an increase in personnel and related costs required to provide
support and maintenance. Cost of maintenance fees as a percentage of total
maintenance fees decreased primarily due to more productive use of personnel to
support the maintenance customer base.

RESEARCH AND DEVELOPMENT

Research and development expenses decreased 34.2% to $1.3 million, or 15.3%
of total revenues, in the quarter ended March 31, 1998 from $1.9 million, or
43.3% of total revenues, in the comparable period in 1997. Research and
development expenses decreased primarily due to decreased personnel and
contractor fees related to the effort required in 1997 to develop the Denver
Release, which was substantially completed by September 1997. The Company has
continued to reduce third-party consultant costs and its development personnel
costs have reduced subsequent to the completion of the Denver Release. The
decrease in research and development as a percentage of revenue for the quarter
ended March 31, 1997, compared to the quarter ended March 31, 1998, is
primarily due to the completion of the Denver Release, coupled with the
economies of scale realized through the growth in the Company's revenue. The
Company intends to continue to devote substantial resources toward research and
development efforts.

SALES AND MARKETING

Sales and marketing expenses increased 11.2% to $2.5 million in the quarter
ended March 31, 1998 from $2.2 million in the comparable period in 1997. As a
percentage of total revenues, sales and marketing expenses decreased to 30.1%
in the quarter ended March 31, 1998 from 50.5% in the comparable period in
1997. The increase in expenses was primarily attributable to the costs
associated with additional sales and marketing personnel and promotional
activities. The decrease in sales and marketing as a percentage of revenues for
the quarter ended March 31, 1997 compared to the quarter ended March 31, 1998
reflects the higher productivity of the Company's sales force.

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased 88.9% to $1.6 million in the
quarter ended March 31, 1998 from $864,000 in the comparable period in 1997. As
a percentage of total revenues, general and administrative

25
<PAGE>

expenses increased to 19.7% in the quarter ended March 31, 1998 from 19.4% in
the comparable period in 1997. The increase in general and administrative
expenses was primarily attributable to increases in personnel and related
costs. The Company believes that its general and administrative expenses will
continue to increase in future periods to accommodate anticipated growth and
expenses associated with its responsibilities as a public company.

INCOME TAXES

As a result of the operating losses incurred since the Company's inception,
the Company has not recorded any provision or benefit for income taxes in the
quarters ended March 31, 1998 and 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

REVENUES

Total Revenues. Total revenues increased 99.1% to $26.0 million in 1997 from
$13.1 million in 1996. This increase was attributable to substantial increases
in license fees, services fees and maintenance fees.
License Fees. License fees increased 110.2% to $13.5 million, or 52.0% of
total revenues, in 1997 from $6.4 million, or 49.2% of total revenues, in 1996.
These increases in license fees resulted primarily from an increase in the
number of licenses sold, reflecting a continuing increase in the demand for the
Company's existing and new applications, and to a lesser extent, to the
increase in the average customer transaction size.

Services Fees. Services fees increased 95.4% to $7.8 million, or 30.0% of
total revenues, in 1997 from $4.0 million, or 30.5% of total revenues, in 1996.
The increase in services fees was primarily due to increased demand for
professional services associated with an increase in the number of licenses
sold.

Maintenance Fees. Maintenance fees increased 77.4% to $4.7 million, or 18.0%
of total revenues in 1997 from $2.7 million or 20.3% of total revenues in 1996.
The increase in maintenance fees was primarily due to the signing of license
agreements with new customers and the renewal of maintenance with existing
customers.
COST OF REVENUES

Total Cost of Revenues. Cost of revenues increased 83.7% to $8.6 million, or
33.0% of total revenues, in 1997 from $4.7 million, or 35.8% of total revenues,
in 1996. The increase in the cost of revenues was primarily due to an increase
in personnel and related expenses and increased royalty expenses. The decrease
as a percentage of total revenues primarily reflects increased utilization of
personnel.
Cost of License Fees. Cost of license fees increased to $1.2 million, or 8.9%
of total license fees, in 1997 compared to $416,000, or 6.5% of total license
fees, in 1996. The increase as a percentage of total license fees is primarily
attributable to increases in royalty expense on new products introduced in
1997, components of which are licensed from third parties.

Cost of Services Fees. Cost of services fees increased 86.0% to $5.4 million,
or 69.4% of total services fees, in 1997 compared to $2.9 million, or 72.9% of
total services fees, in 1996. The increase in the cost of services fees was
primarily attributable to an increase in the personnel and related costs to
provide implementation, training and upgrade services. Cost of services fees as
a percentage of total services fees decreased due to increased utilization of
personnel.

Cost of Maintenance Fees. Cost of maintenance fees increased 46.1% to $2.0
million, or 42.0% of total maintenance fees, in 1997 compared to $1.4 million,
or 51.0% of total maintenance fees, in 1996. The increase in the cost of
maintenance fees was primarily due to an increase in personnel and related
costs required to provide support and maintenance. Cost of maintenance fees as
a percentage of total maintenance fees decreased primarily due to more
productive use of personnel to support the maintenance customer base.
RESEARCH AND DEVELOPMENT

Research and development expenses increased 24.5% to $7.2 million, or 27.7%
of total revenues, in 1997 from $5.8 million, or 44.2% of total revenues, in
1996. Research and development expenses increased primarily due to increased
personnel and contractor fees related to the effort required to develop the
Denver Release, which was released in September 1997. During the first half of
1997, the Company began to reduce development personnel and third-party
consultant costs as this project approached completion. The decrease in
research and

26
<PAGE>

development as a percentage of revenue from 1996 compared to 1997 is primarily
due to the completion of the Denver Release, coupled with the economies of
scale realized through the growth in the Company's revenue. The Company intends
to continue to devote substantial resources toward research and development
efforts.
SALES AND MARKETING

Sales and marketing expenses increased 32.3% to $9.5 million in 1997 from
$7.2 million in 1996. As a percentage of total revenues, sales and marketing
expenses decreased to 36.6% in 1997 from 55.1% in 1996. The increase in
expenses was primarily attributable to the costs associated with additional
sales and marketing personnel and promotional activities. In January 1997, the
Company divided its U.S. and Canadian sales territory into east and west
regions and hired a second vice president of sales. In addition, the Company
hired two regional sales managers and several additional sales representatives
in early 1997. During 1997, the Company also incurred substantial marketing
expenditures to design and implement a promotional campaign, including
marketing collateral, trade shows and seminar presentations intended to promote
the Company's new market positioning. The decrease in sales and marketing as a
percentage of revenues from 1996 compared to 1997 reflects the higher
productivity of the Company's sales force.

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased 32.0% to $4.1 million in 1997
from $3.1 million in 1996. As a percentage of total revenues, general and
administrative expenses decreased to 15.6% in 1997 from 23.6% in 1996. The
increase in general and administrative expenses was primarily attributable to
increases in personnel and related costs. Also, the Company incurred increased
rent and equipment expense associated with the relocation of its headquarters
in August 1997. In 1997, the Company recorded $58,000 in compensation expense
related to stock options granted. The Company believes that its general and
administrative expenses will continue to increase in future periods to
accommodate anticipated growth and expenses associated with its
responsibilities as a public company.

INCOME TAXES

As a result of the operating losses incurred since the Company's inception,
the Company has not recorded any provision or benefit for income taxes in 1997
and in 1996. See Notes to Consolidated Financial Statements.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

REVENUES

Total Revenues. Total revenues increased 59.4% to $13.1 million in 1996 from
$8.2 million in 1995. This increase was attributable to substantial increases
in license fees, services fees and maintenance fees.

License Fees. License fees increased 22.8% to approximately $6.4 million in
1996, from $5.2 million in 1995. The increase reflected an increase in the
number of product licenses sold during the period. As a percentage of total
revenues, license fees decreased to 49.2% in 1996 from 63.9% in 1995. This
decrease was primarily attributable to the deferral of revenues on contracts
signed in 1996 related to the Denver Release to 1997.

Services Fees. Services fees increased 129.4% to $4.0 million, or 30.5% of
total revenues, in 1996 from $1.7 million, or 21.2% of total revenues, in 1995.
These increases were attributable to increasing demand for services associated
with the Company's increasing customer base coupled with the growth of the
Services Subsidiary that was created in March of 1995.

Maintenance Fees. Maintenance fees increased 116.8% to $2.7 million, or 20.3%
of total revenues, in 1996 from $1.2 million, or 14.9% of total revenues, in
1995. These increases resulted primarily from the signing of license agreements
with new customers and the renewal of maintenance with existing customers.

COST OF REVENUES

Total Cost of Revenues. Cost of revenues increased 97.3% to $4.7 million, or
35.8% of total revenues, in 1996 from $2.4 million, or 28.9% of total revenues,
in 1995. These increases were primarily due to an increase in personnel and
related expenses.

27
<PAGE>

Cost of License Fees. Cost of license fees increased 43.0% to $416,000 in
1996 from $291,000 in 1995. The increase was primarily attributable to an
increase in royalty expense. As a percentage of total license fees, cost of
license fees increased to 6.5% in 1996 from 5.6% in 1995.

Cost of Services Fees. Cost of services fees increased 104.4% to $2.9
million, or 72.9% of total services fees, in 1996 from $1.4 million, or 81.8%
of total services fees, in 1995. The increase in absolute dollars was primarily
attributable to an increase in personnel and related costs required to provide
implementation, training and upgrade services. The cost of services fees as a
percentage of total services fees decreased due to increased utilization of
personnel coupled with the Company's Services Subsidiary being operational for
all of 1996.

Cost of Maintenance Fees. Cost of maintenance fees increased 106.1% to $1.4
million, or 51.0% of total maintenance fees, in 1996 from $655,000, or 53.6% of
total maintenance fees, for 1995. The increase in absolute dollars was
primarily attributable to an increase in personnel and related costs to provide
support and maintenance services to the Company's growing customer base. Cost
of maintenance fees as a percentage of total maintenance fees decreased
primarily due to more productive use of personnel supporting the Company's
maintenance customer base.

RESEARCH AND DEVELOPMENT

Research and development expenses increased 48.8% to $5.8 million in 1996
from $3.9 million in 1995. This increase reflects increased personnel and
related expenses and third-party contractor fees as the Company increased
product development personnel to develop new products, including the Denver
Release and the prior releases of the Company's financial applications. As a
percentage of total revenues, research and development expenses decreased to
44.2% in 1996 from 47.4% in 1995. This decrease was attributable to the
economies of scale realized through substantial increases in total revenues.

SALES AND MARKETING

Sales and marketing expenses increased by 8.4% to $7.2 million in 1996 from
$6.6 million in 1995. Sales and marketing expenses increased primarily as a
result of increased sales and marketing personnel and related costs. As a
percentage of total revenues, sales and marketing expenses decreased to 55.1%
in 1996 from 81.0% in 1995. This decrease primarily reflects the higher
productivity of the Company's sales force.

GENERAL AND ADMINISTRATIVE

General and administrative expenses decreased 6.6% to $3.1 million, or 23.6%
of total revenues, in 1996 from $3.3 million, or 40.2% of total revenues, in
1995. The decrease reflects lower general and administrative costs associated
with the closing of the United Kingdom office and allocations of costs to the
Services Subsidiary for administrative services performed on its behalf.

INCOME TAXES

As a result of the operating losses incurred since the Company's inception,
the Company has not recorded any provision or benefit for income taxes in 1996
or 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

REVENUES

Total Revenues. Total revenues increased 114.3% to $8.2 million in 1995 from
$3.8 million in 1994. This increase was attributable to substantial increases
in license fees and maintenance fees related to in large part to the Company's
expanded marketing efforts.

License Fees. License fees increased 103.7% to $5.2 million in 1995 from $2.6
million in 1994. The increase was due to an increase in the number and
productivity of the direct sales force. The number of customers to which the
Company licensed its products doubled from 1994 to 1995. As a percentage of
total revenues, license fees decreased to 63.9% in 1995 from 67.2% in 1994.
This decrease reflects the fact that maintenance fees increased at a faster
rate than license fees during these periods.

<PAGE>

Services Fees. Services fees increased 107.8% to $1.7 million in 1995 from
$836,000 in 1994. The dollar amount increase in services fees reflected the
increasing demand for implementation, training and upgrade services associated
with the growth in the Company's customer base and the formation of the
Services Subsidiary in March of 1995. As a percentage of total revenues,
services fees decreased to 21.2% in 1995 from 21.9% in 1994.
Maintenance Fees. Maintenance fees increased 192.8% to $1.2 million, or 14.9%
of total revenues, in 1995 from $417,000, or 10.9% of total revenues, in 1994.
These increases were primarily due to the signing of license agreements
associated with the increase in sales of the Company's applications and
renewals of maintenance with existing customers.

COST OF REVENUES

Total Cost of Revenues. Cost of revenues increased 91.7% to $2.4 million, or
28.9% of total revenues, in 1995, from $1.2 million, or 32.3% of total
revenues, in 1994. The increase was primarily attributable to an increase in
personnel and related expenses. The decrease as a percentage of total revenues
reflects increased utilization of personnel.

Cost of License Fees. Cost of license fees increased 196.9% to $291,000, or
5.6% of total license fees, in 1995 from $98,000, or 3.8% of total license
fees, in 1994. These increases were primarily attributable to an increase in
licenses on which the Company pays a royalty fee.
Cost of Services Fees. Cost of services fees increased 65.2% to $1.4 million
in 1995 from $860,000 in 1994. This increase was primarily attributable to an
increase in personnel and related expenses required to provide implementation,
training and upgrade services. As a percentage of total services fees revenues,
cost of services fees decreased to 81.8% in 1995 from 102.9% in 1994. This
decrease reflected the increased productivity of the services personnel in
connection with the formation of the Services Subsidiary in March of 1995. In
1994, the Company used third-party contractors to perform implementation,
training and upgrade services which resulted in increased services cost.

Cost of Maintenance Fees. Cost of maintenance fees increased 136.5% to
$655,000, or 53.6% of total maintenance fees, in 1995 from $277,000, or 66.4%
of total maintenance fees, in 1994. The increase in absolute dollars was
attributable to an increase in personnel and related costs required to provide
customer support and maintenance services. As a percentage of total maintenance
fees, cost of maintenance fees decreased primarily due to more productive use
of personnel supporting the Company's maintenance customer base.
RESEARCH AND DEVELOPMENT

Total research and development expenses increased 82.3% to $3.9 million in
1995 from $2.1 million in 1994. The increase resulted from increased personnel
and related costs required in the development of the Company's products. As a
percentage of total revenues, research and development expenses decreased to
47.4% in 1995 from 55.7% in 1994. This decrease was primarily attributable to
the economies of scale realized through a significant increase in revenues for
the period.
SALES AND MARKETING

Sales and marketing expenses increased 144.2% to $6.6 million, or 81.0% of
total revenues, in 1995 from $2.7 million, or 71.1% of total revenues, in 1994.
These increases resulted from the costs associated with investigating market
opportunities in the United Kingdom, expanded marketing efforts and an increase
in the direct sales force.
GENERAL AND ADMINISTRATIVE

General and administrative expenses increased by 13.7% to $3.3 million in
1995 from $2.9 million in 1994. The increase in general and administrative
expenses was primarily attributable to increased personnel, rent and equipment
expenses. As a percentage of total revenues, general and administrative
expenses decreased to 40.2% in 1995 from 75.8% in 1994. This decrease was
primarily attributable to the economies of scale realized through a significant
increase in revenues.
INCOME TAXES

As a result of the operating losses incurred since the Company's inception,
the Company has not recorded any provision or benefit for income taxes in 1995
or 1994. See Notes to Consolidated Financial Statements.

29
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited quarterly statement of
operations data for each of the eight quarters of fiscal 1996 and 1997 and the
first quarter of 1998. The information for each of these quarters is derived
from unaudited consolidated financial statements and, in the opinion of
management, includes all adjustments consisting of only normal and recurring
adjustments necessary for a fair presentation of that information. The results
of operations for any quarter and any quarter-to-quarter trends are not
necessarily indicative of the results to be expected for any future period.

<TABLE>
<CAPTION>
1996 1997 1998
-------------------------------------- ------------------------------------ -------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
------- ------- -------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License fees.......... $ 288 $2,341 $ 1,568 $ 2,228 $ 1,938 $ 2,790 $4,298 $4,480 $3,630
Services fees......... 759 927 1,056 1,242 1,611 1,665 2,064 2,446 3,052
Maintenance fees...... 518 579 631 919 897 1,020 1,251 1,528 1,599
------- ------ ------- ------- ------- ------- ------ ------ ------
Total revenues...... 1,565 3,847 3,255 4,389 4,446 5,475 7,613 8,454 8,281
------- ------ ------- ------- ------- ------- ------ ------ ------
Cost of revenues:
License fees.......... 25 114 105 172 178 200 478 349 260
Services fees......... 597 612 745 950 1,142 1,211 1,382 1,667 2,182
Maintenance fees...... 285 282 314 469 428 422 510 613 681
------- ------ ------- ------- ------- ------- ------ ------ ------
Total cost of
revenues........... 907 1,008 1,164 1,591 1,748 1,833 2,370 2,629 3,123
------- ------ ------- ------- ------- ------- ------ ------ ------
Operating expenses:
Research and
development.......... 1,231 1,344 1,413 1,789 1,927 2,147 1,606 1,510 1,268
Sales and marketing... 1,482 1,667 1,633 2,409 2,243 2,362 2,354 2,556 2,493
General and
administrative....... 569 684 821 1,002 864 924 978 1,295 1,632
------- ------ ------- ------- ------- ------- ------ ------ ------
Total operating
expenses........... 3,282 3,695 3,867 5,200 5,034 5,433 4,938 5,361 5,393
------- ------ ------- ------- ------- ------- ------ ------ ------
Operating (loss)
income................. (2,624) (856) (1,776) (2,402) (2,336) (1,791) 305 464 (235)
Interest expense
(income)............... (2) (9) 7 10 0 91 132 51 30
Minority interest....... (32) (63) (62) (58) (98) (91) (133) (156) (36)
------- ------ ------- ------- ------- ------- ------ ------ ------
Net (loss) income....... $(2,654) $ (910) $(1,845) $(2,470) $(2,434) $(1,973) $ 40 $ 257 $ (301)
======= ====== ======= ======= ======= ======= ====== ====== ======
<CAPTION>
1996 1997 1998
-------------------------------------- ------------------------------------ -------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
------- ------- -------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License fees.......... 18.4% 60.9% 48.2% 50.8% 43.6% 51.0% 56.5% 53.0% 43.8%
Services fees......... 48.5 24.0 32.4 28.3 36.2 30.4 27.1 28.9 36.9
Maintenance fees...... 33.1 15.1 19.4 20.9 20.2 18.6 16.4 18.1 19.3
------- ------ ------- ------- ------- ------- ------ ------ ------
Total revenues...... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------- ------ ------- ------- ------- ------- ------ ------ ------
Cost of revenues:
License fees.......... 1.6 3.0 3.2 3.9 4.0 3.7 6.3 4.1 3.1
Services fees......... 38.2 15.9 22.9 21.6 25.7 22.1 18.1 19.7 26.4
Maintenance fees...... 18.2 7.3 9.7 10.7 9.6 7.7 6.7 7.3 8.2
------- ------ ------- ------- ------- ------- ------ ------ ------
Total cost of
revenues........... 58.0 26.2 35.8 36.2 39.3 33.5 31.1 31.1 37.7
------- ------ ------- ------- ------- ------- ------ ------ ------
Operating expenses:
Research and
development.......... 78.6 34.9 43.4 40.8 43.3 39.2 21.1 17.9 15.3
Sales and marketing... 94.7 43.4 50.2 54.9 50.5 43.1 30.9 30.2 30.1
General and
administrative....... 36.4 17.8 25.2 22.8 19.4 16.9 12.8 15.3 19.7
------- ------ ------- ------- ------- ------- ------ ------ ------
Total operating
expenses........... 209.7 96.1 118.8 118.5 113.2 99.2 64.8 63.4 65.1
------- ------ ------- ------- ------- ------- ------ ------ ------
Operating (loss)
income............... (167.7) (22.3) (54.6) (54.7) (52.5) (32.7) 4.1 5.5 (2.8)
Interest expense
(income)............. (0.1) (0.2) 0.2 0.2 0.0 1.7 1.7 0.6 0.4
Minority interest..... (2.0) (1.6) (1.9) (1.4) (2.2) (1.6) (1.8) (1.9) (0.4)
------- ------ ------- ------- ------- ------- ------ ------ ------
Net (loss) income... (169.6)% (23.7)% (56.7)% (56.3)% (54.7)% (36.0)% 0.6% 3.0% (3.6)%
======= ====== ======= ======= ======= ======= ====== ====== ======
</TABLE>

30
<PAGE>

The Company has experienced, and is expected to continue to experience,
significant fluctuations in quarterly operating results caused by many factors,
including, but not limited to: (i) changes in the demand for the Company's
products; (ii) the timing, composition and size of orders from the Company's
customers, including the tendency for significant bookings to occur in the
fourth quarter; (iii) lengthy sales cycles; (iv) spending patterns and
budgetary resources of its customers; (v) the success of the Company in
generating new customers; (vi) introductions or enhancements of products, or
delays in the introductions or enhancements of products, by the Company or its
competitors; (vii) changes in the Company's pricing policies or those of its
competitors; (viii) the Company's ability to anticipate and effectively adapt
to developing markets and rapidly changing technologies; (ix) the Company's
ability to attract, retain and motivate qualified personnel; (x) changes in the
mix of products sold; (xi) the publication of opinions about the Company and
its products, or its competitors and their products, by industry analysts or
others; and (xii) changes in general economic conditions. These factors make
the estimation and forecast of revenues difficult on a quarterly basis and
increase the potential margin for error in performance forecasts derived from
such estimates. For example, the Company realized lower than expected revenues
in the first quarter of 1996 as a result of the signing of an unusually high
number of contracts that contained contingencies requiring deferral of revenue
until the second quarter. The Company plans to continue increasing the dollar
amount of its product development and sales expenses on a quarterly basis in an
effort to increase its market share. These increases will be based in part on
the estimation and forecasting of future revenues. As a result, the estimation
of quarterly results of operations is difficult and should not be relied upon
as any indication of future performance. See "Risk Factors--Fluctuations in
Quarterly Operating Results."

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations primarily through the private sale of
equity securities, credit facilities and a credit line for equipment purchases.
The Company had a working capital deficit of $3.8 million at March 31, 1998
primarily attributable to the current portion of deferred revenue of $5.4
million at March 31, 1998. As of March 31, 1998, the Company's cash balance was
$5.2 million.

Cash used in operating activities was approximately $1.1 million, $11,000,
$2.8 million, and $4.7 million during the first quarter of 1998, and for 1997,
1996, and 1995, respectively. Cash used by operations during each of these
periods was primarily attributable to net losses and an increase in accounts
receivables, partially offset in each period by increases in deferred revenues
and accounts payable, and noncash charges such as depreciation and
amortization.

Cash used in investing activities was approximately $727,000, $1.2 million,
$3.0 million, and $914,000 during the first quarter of 1998, and for 1997,
1996, and 1995, respectively. Cash used in 1996 included $2.0 million to
purchase a nonexclusive software license for the Company's human resource
applications. The balance of cash used in 1996 as well as in the other periods
was used to acquire property and equipment.

Cash (used in) provided by financing activities was approximately ($197,000),
$5.2 million, $5.7 million, and $8.5 million during the first quarter of 1998,
and for 1997, 1996, and 1995, respectively. During 1997, 1996, and 1995, the
Company received $6.0 million, $6.0 million, and $5.9 million, respectively, of
net proceeds from the sale of Preferred Stock.

In March 1997, the Company entered into a loan agreement and a master leasing
agreement for an equipment line of credit in the amount of $1.0 million (the
"Equipment Line") with a leasing company. The Equipment Line bears interest at
rates negotiated with each loan or lease schedule (generally 22.0% to 22.5%)
and is collateralized by all of the equipment purchased with the proceeds
thereof. As of March 31, 1998, the principal balance on the Equipment Line
payable was $611,000.

The Company has a revolving working capital line of credit and equipment
facility with Silicon Valley Bank. Borrowings outstanding under the line are
limited to the lesser of $3.0 million or 80% of accounts receivable. Interest
on the revolving credit facility is at prime rate and on the equipment facility
at prime plus 0.5% and is collateralized by all of the assets of the Company.
The line of credit and equipment term facility

31
<PAGE>

with Silicon Valley Bank will expire on April 29, 1999. As of March 31, 1998,
the Company had no outstanding balance and had $2.0 million available for
future borrowings under this agreement.

In both June and August 1997, the Company received $1.0 million in bridge
loans from existing investors. In September 1997, the $2.0 million in bridge
loans discussed above were converted into 212,141 shares of Series F Preferred
Stock. In September 1997, the Company received $4.0 million of net proceeds
from the issuance of 416,668 shares of Series F Preferred Stock to certain
investors for $9.60 per share. The proceeds of this sale have been applied by
the Company to general working capital requirements and the payment of loans
outstanding.

The Company had available NOLs of approximately $26.7 million as of March 31,
1998 to reduce future income tax liabilities. These NOLs expire from 2007
through 2012 and are subject to review and possible adjustment by the
appropriate taxing authorities. Pursuant to the Tax Reform Act of 1986, the
utilization of NOLs for tax purposes may be subject to an annual limitation if
a cumulative change of ownership of more than 50% occurs over a three-year
period. As a result of this limitation, the Company will be limited to the use
of its NOLs in any given year. The Company had net deferred tax assets of
approximately $10.7 million at March 31, 1998 comprised primarily of net
operating loss carryforwards. The Company has fully reserved for these deferred
tax assets by recording a valuation allowance of $10.7 million.

The Company believes that the net proceeds from this Offering, together with
its current cash balances, cash provided by future operations and available
borrowings under its lines of credit, will be sufficient to meet its working
capital and anticipated capital expenditure requirements for at least the next
12 months. Although operating activities may provide cash in certain periods,
to the extent the Company experiences growth in the future its operating and
investing activities may require significant cash. Consequently, any such
future growth may require the Company to obtain additional equity or debt
financing.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 requires companies to display,
with the same prominence as other financial statements, the components of other
comprehensive income. SFAS No. 130 requires that an enterprise classify items
of other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
balance sheet. SFAS No. 130 is effective for the Company's fiscal year ending
December 31, 1998. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company does not expect that
SFAS No. 130 will require significant revisions of prior disclosures.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. SFAS No.
131 requires that an enterprise disclose certain information about operating
segments. SFAS No. 131 is effective for financial statements for the Company's
fiscal year ending December 31, 1998. The Company will evaluate the need for
such disclosures at that time.

The American Institute of Certified Public Accountants has issued Statement
of Position 97-2, "Software Revenue Recognition." SOP 97-2 supersedes SOP 91-1
and is effective for the Company for transactions entered into after December
31, 1997. The Company adopted SOP 97-2 in the first quarter of 1998. The
adoption of SOP 97-2 is not expected to have a significant impact on the
Company's consolidated financial statements.

32
<PAGE>

BUSINESS

INTRODUCTION

The Company's products are based on a flexible, open architecture called
Active Architecture(TM) which allows for seamless, rapid changes and upgrades
without modifying the source code. The Company's software provides
organizations with the broad functionality of custom-designed applications
without the high total cost of ownership traditionally associated with such
applications. By providing broad functionality, a flexible open architecture,
and minimized implementation and modification time, the Company addresses the
needs of a wide range of organizations while giving end users more control of
their work environment.

The Company licenses its products and services primarily through a direct
sales force in North America. At March 31, 1998, the Company had more than 200
customers including leading organizations such as Amtrak, Blue Cross and Blue
Shield of Alabama, Chartwell Re Holdings Corporation, First Data Corporation,
Land's End, Inc., T. Rowe Price Associates, Inc., Shaw Industries, Inc., and
Toronto-Dominion Bank.

The Company's software license revenues accounted for 43.8%, 52.0%, 49.2% and
63.9% of gross revenues for the quarter ended March 1998, and for 1997, 1996
and 1995, respectively. Services revenues accounted for 36.9%, 30.0%, 30.5% and
21.2% of gross revenues for the quarter ended March 1998, and for 1997, 1996
and 1995, respectively. Maintenance revenues accounted for 19.3%, 18.1%, 20.3%
and 14.9% of gross revenues for the quarter ended March 1998, and for 1997,
1996 and 1995, respectively.

INDUSTRY BACKGROUND

Increasing global competition has driven organizations of all sizes to
improve operating efficiencies, reduce costs, speed time to market and improve
customer satisfaction. To achieve these objectives, organizations have utilized
information technology ("IT") systems to automate repetitive processes, to
facilitate communications throughout various departments and to process
increasingly sophisticated and detailed information. Organizations therefore
face the challenge of providing this critical information to a broad group of
end users to give them better control of their work environment and to increase
productivity and performance.

Recent advances in computing and communications, including the wide-spread
adoption of distributed computing, and the proliferation of third-party
enterprise software applications, have enabled organizations to provide
relevant information directly to the desktop. Organizations have deployed
enterprise client/server applications addressing the full range of functions
across the enterprise, including "front office" related functions such as sales
force automation, call center management and customer support and help desk
activities, and "back office" operations such as distribution, manufacturing,
production and supply chain planning and execution activities. At the core of
the enterprise software system are the organization's financial applications
that serve as a critical point of integration for all enterprise applications
and enable users to improve core business processes, monitor, analyze and
report business results, and make more informed decisions faster. According to
International Data Corporation, the market for enterprise-level accounting,
human resource and payroll client/server applications exceeded $3.0 billion in
1996, and is projected to grow at a compound annual growth rate of 30% through
the year 2001 to over $12.0 billion.

Traditionally, organizations have had two alternatives when deploying
enterprise financial applications: either a highly complex custom-designed
application to meet the organization's specific requirements, typically
developed in a "legacy" environment; or an off-the-shelf application designed
to be implemented more rapidly in a distributed computing environment, at a
perceived lower cost of ownership, although often lacking the depth of
functionality of the custom-designed application.

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While custom-designed applications have provided the desired degree of
functionality, their size and complexity generally require very lengthy design,
development and implementation efforts. Maintaining, updating and upgrading
these applications requires substantial internal resources and generally
requires the use of outside consultants. In addition, these applications have
limited flexibility to support diverse and changing operations or to respond
effectively to evolving business demands and technologies. The high total cost
of ownership and complexity associated with developing and maintaining custom-
designed applications have limited their utilization to organizations with
significant resources.

In recent years, organizations have increasingly deployed off-the-shelf
client/server financial applications to leverage their investment in
client/server technologies and provide end users with information that gives
them greater control over their work environment. However, traditional off-the-
shelf applications often require organizations to re-engineer established
business practices to accommodate application constraints or to customize the
applications with labor-intensive reprogramming to fit their needs. These
requirements significantly challenge resource-constrained organizations and
fail to provide the desired lower total cost of ownership.

Limitations of both custom-designed and off-the-shelf applications result in
higher total cost of ownership to the organization. The largest components of
such cost are the necessary labor and programming resources associated with
implementation and maintenance. According to the Gartner Group, labor-related
services, including implementation and post-implementation services, comprise
approximately 71% of the five-year total cost of ownership for client/server
applications, with the acquisition cost of software compromising only 17% of
the total cost of ownership and hardware and networking costs comprising the
balance.

Today, organizations acquiring or replacing their financial applications seek
broader functionality, better integration with existing systems and
applications, greater flexibility to change and upgrade, and a lower total cost
of ownership. Key to meeting these expectations are solutions that are
flexible, easy to implement, change and upgrade, provide information on demand
and, most importantly, put users in control.

THE SQL FINANCIALS SOLUTION

The Company offers a highly integrated suite of applications that matches the
functionality of custom-designed applications without the high total cost of
ownership traditionally associated with such applications. By providing broad
functionality, a flexible open architecture, minimized implementation,
modification and ongoing support time, and enhanced user control, the Company
addresses the needs of a broad range of organizations. The Company's
applications offer the following key benefits:

Broad Functionality. The Company's highly integrated suite of financial
applications covers the full range of financial and accounting functions,
including general accounting, expense accounting, revenue accounting and human
resources. The Company's applications are particularly suited to address the
financial, accounting and reporting needs of non-industrial firms. Through its
Graphical Architects modules, the Company provides additional capabilities,
including enhanced interaction with external software systems, user
personalization, job scheduling, analysis capabilities and Internet
connectivity.

Flexible, Open Architecture. The Company's applications are based on a
flexible, open architecture to fit in with the components of an organization's
existing IT infrastructure. These applications work with the popular Microsoft,
Oracle and Sybase databases and run on any operating system and hardware
platforms compatible with these databases, enabling customers to easily migrate
to alternative computing technologies. The flexibility of the Company's
applications, together with the ability to modify the functionality without
changing the source code, results in seamless, rapid changes or upgrades. The
openness of the architecture allows easy integration with third-party
technologies, including Microsoft BackOffice and Arbor Essbase, as well as
products from third-party financial reporting software companies.

Minimized Implementation, Modification and Ongoing Support Time. The
implementation of the Company's software can typically be achieved in less than
six months, depending on the number of modules

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<PAGE>

being implemented, and modifications can be made directly by the end user at
the time of, or subsequent to, implementation. In addition, the time, costs and
risks associated with changing and upgrading applications are minimized because
implementation of the Company's applications is done without any modification
to the underlying source code. The Company believes that this results in
implementation and post-implementation services costs well below the industry
average.

Enhanced End User Control. The Company's applications are designed to put
users in control by: (i) providing the flexibility to quickly set up
applications and personalize user interfaces; (ii) providing end users the
ability to directly tailor and change applications during or subsequent to
implementation; (iii) allowing users to upgrade in a minimal amount of time
without software development tools or significant IT personnel involvement;
(iv) allowing integration with other native or external applications in the
users' work environment; and (v) delivering information on demand and in the
form desired.

STRATEGY

The Company's objective is to become the leading provider of financial
applications to non-industrial organizations. The key elements of the Company's
strategy are as follows:

Extend Technology Leadership. The Company believes that extending technology
leadership, rapidly creating additional features and incorporating new
technologies are important competitive advantages in its marketplace. The
Company believes its Active Architecture technology is a key differentiator
that provides a significant advantage over competing products. In addition, the
Company believes it was one of the first software developers to utilize object
wrappers in financial applications to facilitate tailoring and integration with
other applications. The Company intends to continue to identify and develop new
and emerging technologies for its applications.

Leverage Expertise in Financial Applications. The Company intends to leverage
its expertise in financial applications to design, develop and offer other
financial and financially-related applications focused on meeting the needs of
non-industrial customers. For example, the Company recently introduced several
new applications, including Purchasing Control, Personnel, Payroll and
Benefits, as well as two new reporting solutions. In addition, the Company
intends to release additional applications, such as Project Accounting, Order
Entry, Inventory and Treasury.

Capitalize on Middle Market Opportunities. The Company focuses its sales and
marketing efforts on value buyers in mid-sized non-industrial organizations,
including divisions of larger companies, which represent the fastest growing
segment of the financial applications market. In its targeted industries,
financial and human resource applications typically represent the
organization's most critical systems. The Company believes that its flexible
user-controlled applications are well suited for rapidly growing mid-sized
organizations and value buyers that demand highly functional and scalable
financial applications without the high total cost of ownership traditionally
associated with financial applications.

Leverage Installed Customer Base. The Company believes that its installed
customer base represents a significant potential market for future sales of its
products. The Company continually uses its customer relationships: (i) to sell
new products and cross-sell products to multiple offices, divisions and
departments of a customer's organization; (ii) as a reference to gain new
customers; and (iii) to focus its efforts on selected vertical markets as a
means of expanding its market share.

Expand Sales and Marketing Channels. The Company intends to expand its direct
sales force by hiring additional experienced sales personnel. The Company also
intends to establish indirect distribution channels and relationships with
product vendors and consulting companies, as well as increase its international
market penetration by establishing relationships with strategic partners with
an international presence. The Company believes that expanding its marketing
relationships will provide increased access to various geographic markets and
potential customers.

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<PAGE>

Continue to Provide High Quality Customer Service. By providing superior
implementation, support and training services directly to its customers, rather
than through third-party resellers and system integrators, the Company can
achieve a high level of customer satisfaction, strong customer references and
long-term relationships. Direct customer service also allows for immediate
feedback which facilitates software improvements. The Company intends to
continue to expand its customer service and maintenance staff and to make
additional investments in its support infrastructure.

TECHNOLOGY

The Company's applications are based on an extensible, object-oriented,
proprietary architecture called "Active Architecture." The Active Architecture
technology is designed to achieve the following benefits: (i) flexible, high-
end functionality; (ii) the ability to modify the functionality without
changing the source code; (iii) the ability to easily integrate applications
into a customer's IT infrastructure; (iv) the ability to rapidly implement
changes and upgrade applications; (v) reduced total cost of ownership; and (vi)
users in control. Active Architecture is comprised of three elements: the Core
Components, the Graphical Architects modules and the System Manager module.

Core Components. The core functionality for the Company's applications is
defined through a set of Core Components, the building blocks of the financial
and human resource applications. The Core Components perform financial and
accounting functions in the context of legal and regulatory requirements and
generally accepted accounting principles. Examples of these Core Components
include general ledger posting, accounts payable vouching, account structure
management and payroll processing. The Company's fundamental premise is that
users should not need to reprogram the Core Components. Contained within the
overall architectural framework is the ability to modify and seamlessly upgrade
the Company's applications while continuing to maintain the process and data
security, integrity and reliability of the Core Components. End users can
accommodate their business-specific requirements and technology changes, such
as integrating external software systems, user personalization, job scheduling,
analysis capabilities, Internet connectivity and application management through
the Graphical Architect modules which require no source code programming.

Graphical Architects. The Company has developed Graphical Architects modules
that allow organizations to quickly and easily adapt to business-specific
requirements and changes in technology. The Company provides the Business
Controls/Graphical Architect as a standard component with all of its
applications and licenses other Graphical Architects modules with additional
functionality. Through Business Controls an organization can centrally
administer its business rules and policies and apply them across all financial
applications. This central control allows for consistency of management
policies and reduced set-up time in each of the application areas. Business
Controls also allows organizations to define and manage their chart of
accounts, analysis codes, default account segments and overrides, accounting
periods, inter-company transactions, tax management, accounting calendar,
cross-validation rules and multiple currencies.

System Manager. System Manager supports the Active Architecture technology by
integrating, synchronizing and managing all components of the application.
System Manager offers a visual point-and-click interface and is designed to
reduce systems and database administration efforts and the time required to
update external applications, as well as upgrades to the Company's application
itself. Through System Manager, the user orchestrates software installation,
database initialization, and software and database upgrades. These tasks are
simplified by System Manager's automated process which does not require scripts
or other programming. In addition, System Manager provides a single point of
control for security across all of the Company's applications. Security
information is automatically maintained and updated during the upgrades.

The Company's applications incorporate a multi-tiered, client/server
architecture that supports Microsoft Windows 95 and/or NT clients, including
Netscape and Microsoft Internet Explorer, and most popular UNIX (AIX, HP-UX,
Solaris, VMS, etc.) and Windows NT servers running Microsoft SQL Server,
Oracle, and Sybase database management systems over a variety of network
topologies. For the year ended December 31, 1997, the Company derived 79.2% and
20.8%, respectively, of its license fees from sales of its products to
customers who

36
<PAGE>

use Windows NT based-services and UNIX servers. Integration of the Company's
applications with these databases is achieved with a single version of the
source code, allowing users to replace or upgrade their hardware and database
systems with minimal impact to the customer's application. The Company
currently offers both 16-bit and 32-bit versions of its financial applications
and 16-bit versions of its human resource applications for the Windows 3.1,
Windows 95, and Windows NT platforms. The Company expects to offer 32-bit
versions of its human resource applications during 1998. The various
technologies upon which the Active Architecture has been built include
Microsoft Visual C++ and the Microsoft Foundation Classes, ActiveX, OLE/COM and
Centura.

PRODUCTS

The Company's product family includes a full suite of financial and human
resource applications designed to meet the needs of a broad range of
organizations.

APPLICATIONS

General Ledger, the Company's flagship application, delivers a comprehensive
solution including ledger accounting, consolidation and allocations, multi-
level segment accounts, automatic entry balancing, multiple financial calendars
within a single organization, recurring entries, average daily balances and
budgeting and profit sharing.

Accounts Payable controls vendor information, invoicing procedures and
payment activities, while providing for an unlimited number of bank accounts,
processing foreign currency gains and losses, and automatically reconciling and
balancing inter-company accounts and multiple payment methods.

Purchasing Control streamlines purchasing processes with end-user
requisitioning, quick access to contracts and price lists, automation of
receiving and matching processes and vendor management.

Accounts Receivable streamlines payment applications, provides management and
reporting of receivables activities, manages customer information and inter-
relationships, tracks the collection process, processes foreign currency gains
and losses and provides historical information.

Revenue Accounting combines invoice entry and billing applications, provides
user-defined rules for revenue recognition, automatically creates multi-line
tax distributions for multiple taxing authorities, calculates shipping charges
for specific lines of an invoice, supports a multi-catalog pricing structure as
well as user-defined pricing contracts and tracks customer deposits and down
payments.

Fixed Assets tracks and maintains asset investments and facilitates
compliance with tax and accounting regulations through user-defined
depreciation scheduling, which can be segmented by organization, asset or book.

Personnel manages employment, compensation, career/succession planning,
position control, health and safety, applicant management, recruiting,
training, government compliance and business event notification.

Benefits manages benefit and accrual planning and enables control of auto
enrollment, flexible benefits, flexible spending accounts, cafeteria, defined
contributions, beneficiaries, eligibility, COBRA administration and leave
accrual processing.

Payroll manages control of payment and tax processing functions, streamlines
payroll processing, manages on-demand checks, direct deposit and earnings and
deductions.

GRAPHICAL ARCHITECTS

The Company licenses a series of modules, its Graphical Architects, that are
designed to extend, enhance, integrate and change the look-and-feel of the
Company's core applications. Through a visual point-and-click

<PAGE>

interface, the Graphical Architects modules allow users to personalize and
configure the Company's applications without any source code programming. In
addition to Business Controls, which is a standard component of all
applications, Graphical Architects modules include the following:

Data Exchange/Graphical Architect defines sources of data for import and
export purposes through a metadata interface for logical mapping of data
between the Company's applications and the customer's other internal systems
which simplifies implementation and streamlines changes to external data
sources.

Workload/Graphical Architect enables users to manage and schedule tasks
effectively with job scheduling, resource allocation, process and report
distribution, and e-mail notification. Users can schedule tasks to run on
separate application servers at the most efficient processing time.

Solution/Graphical Architect allows users to personalize the look-and-feel
and the functions of their applications and facilitates the integration of the
Company's applications with other applications without changing the source
code.

Analysis/Graphical Architect provides a suite of applications that address an
organization's need for information on demand. Analysis/Graphical Architect
provides users with the following functions:

<TABLE>
<S> <C>
Quick Find Online access with extensive selection criteria to quickly
locate information.
- -----------------------------------------------------------------------------------
Quick Reports Report printing of online query results.
- -----------------------------------------------------------------------------------
Quick Graphs Graphical representations of online query results.
- -----------------------------------------------------------------------------------
Standard Reports Templates to simplify users' report definitions based upon
the organization's requirements.
- -----------------------------------------------------------------------------------
Financial Statement Flexible financial reporting system enabling sophisticated
Generator financial statements without any programming.
- -----------------------------------------------------------------------------------
Drill Down Analysis Intra-application, inter-application, and open drill down
into all supporting detail and information sources,
including information originated in third-party
applications.
- -----------------------------------------------------------------------------------
Financial Statement Integration of Financial Statement Generator with Arbor
Accelerator Software's Essbase for high performance reporting.
- -----------------------------------------------------------------------------------
FRx for Windows Flexible distributed management reporting solution,
utilizing FRx from FRx Software Corporation, which delivers
full drill down analysis without being connected to the
network.
- -----------------------------------------------------------------------------------
Document Manager Centralized report repository to store reports and make them
available to other users in the organization eliminating
redundancy and improving resource efficiency.
</TABLE>

Workflow/Graphical Architect allows users to define procedures and policies
(events) that trigger responses from the system. Workflow/Graphical Architect
allows users to extend the applications to conform to an organization's
business processes and policies, such as an accounting application
automatically generating approval requests for purchases over a certain dollar
amount.

Internet/Graphical Architect allows organizations to quickly deploy their
entire suite of financial and human resource applications to the World Wide Web
and tailor it specifically to the unique needs of each Web user.
Internet/Graphical Architect provides native Internet implementation of
information access-oriented applications such as invoice or payment status,
drill down inquiries, report viewing, and account balances.

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<PAGE>

CUSTOMERS

The Company sells its products to organizations seeking financial and human
resource applications that provide high levels of functionality and
flexibility, with minimal implementation time. As of March 31, 1998, the
Company's products were licensed to more than 200 customers in the United
States and Canada, representing a cross-section of industries, including
insurance, business and financial services, communications, retail, printing
and publishing, transportation and manufacturing. The Company's products are
generally licensed to end users under nonexclusive, nontransferable licenses
for the customer's internal operations. The following table sets forth a
representative list of customers that have licensed the Company's products and
services since January 1, 1996:

FINANCIAL SERVICES INSURANCE MANUFACTURING

Blue Cross and Blue North American
Cantor Fitzgerald, L.P. Shield of Alabama Royalties, Inc.

Shaw Industries, Inc.
Chartwell Re Holdings
Development Corporation Corporation
for Israel Tapemark Company
Fidelity and Guaranty
Life Insurance Company

Farm Credit Services of
the Midlands, FLCA OTHER

ADESA Corporation

Federal Home Loan Highlands Insurance Alternative Living
Mortgage Corporation Company Services

Markel Corporation American Psychiatric
Association
First Data Corporation

RETAIL Amtrak
HD Vest, Inc.
Aaron Rents, Inc. Covenant Health
J. & W. Seligman & Co.,
Incorporated Fazoli's Management, Lanter Company
Inc.
Labor Ready Company
Northwest Farm Credit Land's End, Inc.
Services, ACA McDermott Incorporated
Richman Gordman 1/2
NOVA Information Price Stores, Inc.
Systems, Inc.
The Container Store
Pulte Mortgage
Corporation U.S.A. Floral Products,
Inc.
T. Rowe Price
Associates, Inc.

Toronto-Dominion Bank

Travelers Express
Company, Inc.

CUSTOMER CASE STUDIES

While each customer engagement differs, the following examples illustrate the
types of business needs the Company has addressed:

FIRST DATA CORPORATION. First Data Corporation ("FDC") is a global leader in
payment systems, electronic commerce and information management products and
services. FDC and its principal operating units process the information that
allows millions of consumers to pay for goods and services by credit, debit or
smart card at the point of sale or over the Internet; by check or wire money.
In 1996, FDC processed approximately six billion transactions. FDC employs
40,000 people worldwide and serves clients throughout the United States, the
United Kingdom, Australia, Mexico, Germany, Asia Pacific and Spain through its
agent network to more than 120 countries around the world. FDC made a strategic
decision to phase out the mainframe and to standardize its financial
applications throughout the organization. Because the FDC companies were using
numerous disparate systems, the time and cost of implementation as well as
overall functionality were key requirements. FDC selected SQL Financials'
General Ledger, Accounts Payable, Accounts Receivable and Revenue Accounting
applications as its new corporate standard. FDC completed the implementation of
seven companies in only 15 months. The SQL Financials' Data Exchange/Graphical
Architect dramatically improved FDC's ability to manage the conversion efforts
from the various legacy systems as well as provided a quick way to build the
many interfaces necessary to integrate the new financial systems. Data Exchange
also enabled FDC to enhance its EDI capabilities and integrate with its new
laser check software. The new systems have enabled FDC to streamline its
processes and enable users to control the reporting and information analysis.
FDC has also licensed and plans to implement the SQL Financials' Financial
Statement Accelerator and Solution/Graphical Architect products.

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<PAGE>

SHAW INDUSTRIES. Shaw Industries, Inc. ("Shaw") is the largest tufted carpet
manufacturer in the world, with approximately $3.5 billion in sales per year.
The need for immediate access to information drove Shaw's decision to replace
its legacy financial applications. Shaw also placed a high priority on the
ability to quickly implement and upgrade its applications. After conducting a
detailed evaluation of client/server vendors, Shaw selected SQL Financials'
General Ledger. Shaw reported minimized implementation time despite a
simultaneous year end closing. The new financial application enabled Shaw to
utilize the existing chart of accounts, to provide online immediate analysis of
its financial data, and put users in control of the new accounting system. Shaw
produces more than 1000 reports each monthly financial closing. One of the
primary benefits of the new system is the ability to easily accommodate
reporting reorganizations--a time consuming task that was accomplished manually
with the previous system. Shaw is currently implementing Fixed Assets and
Financial Statement Accelerator.

TORONTO-DOMINION BANK. Toronto-Dominion Bank ("TD Bank") is the 12th largest
bank in North America with assets of Canadian $163 billion at October 31, 1997
and worldwide corporate lending and investment banking activities. In the
United States, TD Bank provides corporate lending and investment banking
services from New York, and discount brokerage services through its wholly
owned subsidiary, Waterhouse Investor Services. With the objective of achieving
high productivity while carefully managing costs, TD Bank's Corporate &
Investment Banking Group decided on a single global client/server general
ledger. Its new General Ledger system required the following key functional
requirements: robust and flexible financial and management reporting,
sophisticated allocations, strong consolidations and multi-currency features,
an intuitive user interface and a flexible multi-segmented chart of accounts.
After an extensive evaluation, the Company's General Ledger was selected as the
standard general ledger solution. The Company's products will enable TD Bank to
implement a standard chart of accounts worldwide and simplify the consolidation
process, which should offer TD Bank a reduction in training across offices. The
Company's General Ledger has also reduced the steps and time required to
consolidate global information for management. To address high volume reporting
needs, TD Bank plans to implement Financial Statement Accelerator, which should
reduce the time required to run reports from hours to minutes.

SALES AND MARKETING

The Company sells its software and services primarily through its direct
sales force. As of March 31, 1998, the Company's direct sales force consisted
of 38 sales professionals and 10 marketing personnel, located in 12 domestic
offices and one office located in Canada. The Company expects to increasingly
develop indirect channels in order to enhance its market penetration and
implementation capabilities. International revenues were approximately 3.0% of
total revenues for the year ended December 31, 1997, and the Company expects
that revenues from international customers will account for a growing portion
of the Company's total revenues. The sales cycle for the Company's software
averages between four to seven months.

The Company's marketing strategy is to position the Company as the leading
provider of applications to non-industrial organizations by providing
applications with a high level of functionality and flexibility with minimal
implementation time. In support of this strategy, the Company engages in a full
range of marketing programs focused on creating awareness and generating
qualified leads. These programs include developing and maintaining business
partners and participating in joint marketing programs, such as participating
in the Microsoft Solution Provider Program, as well as public relations,
telemarketing, developing databases of targeted customers, and conducting
advertising and direct mail campaigns. In addition, the Company participates in
trade shows and seminars and maintains a World Wide Web home page which is
integrated with the Company's sales, marketing, recruiting and fulfillment
operations.

IMPLEMENTATION SERVICES

The Company provides dedicated implementation services for the Company's
customers. The Company believes that the provision of superior implementation
services in conjunction with ease of implementation is integral to its success
in achieving a high level of customer satisfaction. By providing these
implementation

40
<PAGE>

services, the Company is able to minimize implementation time by helping
customers to implement an application module in an average of four months,
generally at a cost equal to or below the cost of the licensed software. As of
March 31, 1998, the Company employed 77 personnel providing implementation
services, which are typically offered to the Company's customers on a time and
materials basis.

The Company is also developing marketing relationships with companies sharing
a commitment to client/server implementations that deliver high functionality
and flexibility, while minimizing the time required to implement, change and
upgrade them. These companies include: Deloitte & Touche Management Services
and Solutions, The Client Server Factory and Grant Thornton LLP.

CUSTOMER SERVICE AND MAINTENANCE

The Company believes that superior customer service and support, including
product support and maintenance, training, and consulting services, are
critical to achieve and maintain customer satisfaction. The Company's customer
service and support functions include the Company's call center, distribution
services, production support and account management, all of which are
integrated in a single group. The Company's customer service organization
provides a single point of contact for customers from execution of the license
agreements through post-implementation. Each of the Company's customers has
entered into an annual maintenance contract for the first year of use,
renewable on an annual basis. Of the 135 customers who entered into license
agreements with the Company before March 31, 1997, 126 customers or 93.3% have
renewed their maintenance contracts. As of March 31, 1998, the Company employed
41 technical post-sales support personnel providing software maintenance and
support, and hotline access. In addition to telephone support, the Company also
offers support by electronic mail, electronic bulletin board and facsimile. The
Company intends to continue to expand its customer service and maintenance
staff and to make additional investments in its support infrastructure.

RESEARCH AND DEVELOPMENT

The Company's success is in part dependent on its ability to continue to meet
customer and market requirements with respect to functionality, performance,
technology and reliability. The Company invests, and intends to continue to
invest, substantially in its research and development efforts. As of March 31,
1998, the Company's research and development operation included 51 full-time
employees, primarily located in Atlanta. In addition, the Company has from
time-to-time supplemented, and plans to continue to supplement, its core
resource pool through outside contractors and consultants when necessary.

The Company's research effort is currently focused on identifying new and
emerging technologies and engineering processes, as well as possible technology
alliances. The primary area of focus within the research effort involves
distributed component computing and associated technologies and architectures,
especially with respect to both Internet and intranet transaction processing.

The Company's development effort is focused primarily on the product delivery
cycle and its associated technologies and software life-cycle processes. The
development operation consists of various functional and technological teams
who are responsible for bringing the various products that the Company delivers
to market. These teams consist of software engineering, documentation, and
quality assurance personnel. The specific responsibilities of the development
operation include: (i) enhancing the functionality and performance within the
currently available product line; (ii) developing new products and/or
integrating with strategic third-party products to strengthen the product line;
(iii) porting the product line to remain current and compatible with new
operating systems, databases, and tools; (iv) enhancing the adaptability and
extensibility of the product line through the release of new and enhanced
Graphical Architects; and (v) managing and continuously improving the overall
software development process. The Company continually utilizes customer
feedback in the product design process in order to meet changing business
requirements and is committed to developing technologies which provide highly
functional, integrated solutions in a rapid and efficient manner.

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<PAGE>

Research and development expenditures were approximately $3.9 million, $5.8
million, $7.2 million and $1.3 million for 1995, 1996, 1997 and the quarter
ended March 31, 1998, respectively. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Results of Operations."

COMPETITION

The market for the Company's products is highly competitive and subject to
rapid technological change. Although the Company has experienced limited
competition to date from products with comparable capabilities, the Company
expects competition to increase in the future. The Company currently competes
principally based on ease of use and reduced time of implementation, which are
a result of: (i) the breadth of its products' features; (ii) the automated,
scalable and cost-effective nature of its products; and (iii) the Company's
knowledge, expertise and service ability gained from close interaction with
customers. While the Company believes that it currently competes favorably
overall with respect to these factors, there can be no assurance that the
Company will be able to continue to do so.

The Company competes directly or indirectly with a number of competitors that
have significantly greater financial, selling, marketing, technical and other
resources than the Company, including the following companies: PeopleSoft,
Lawson and Oracle. In 1997, J.D. Edwards & Company introduced financial
applications for use on Windows NT or Unix servers, and additional competitors
may enter this market, thereby further intensifying competition. These
competitors may be able to devote greater resources to the development,
promotion, sale and support of their products than the Company. Moreover, these
companies may introduce additional products that are competitive with or better
than those of the Company or may enter into strategic relationships to offer
better products than those currently offered by the Company. There can be no
assurance that the Company's products would effectively compete with such new
products.

To remain competitive, the Company must continue to invest in research and
development, selling and marketing, and customer service and support. In
addition, as the Company enters new markets and utilizes different distribution
channels, the technical requirements and levels and bases of competition may be
different than those experienced in the Company's current market. There can be
no assurance that the Company will be able to successfully compete against
either current or potential competitors in the future. See "Risk Factors--
Competition."

PROPRIETARY RIGHTS AND LICENSING

The Company's success depends significantly on its internally developed
intellectual property and intellectual property licensed from others. The
Company relies primarily on a combination of copyright, trademark and trade
secret laws, as well as confidentiality procedures and license arrangements to
establish and protect its proprietary rights in its software products.

The Company has no patents, and existing trade secret and copyright laws
afford only limited protection of the Company's proprietary rights. The Company
has registered or applied for registration for certain copyrights and
trademarks, and will continue to evaluate the registration of additional
copyrights and trademarks as appropriate. The Company believes that, because of
the rapid pace of technological change in the software industry, the
intellectual property protection of its products is a less significant factor
in the Company's success than the knowledge, abilities and experience of the
Company's employees, the frequency of its product enhancements, the
effectiveness of its marketing activities and the timeliness and quality of its
support services. See "Risk Factors--Proprietary Rights and Licensing."

42
<PAGE>

typically for the earliest releases of the Company's products, the Company has
granted its customers a source code license, solely for the customer's internal
use.

The Company has in the past licensed and may in the future license on a non-
exclusive basis third-party software from third parties for use and
distribution with the Company's financial and human resource applications.
Additionally, the Company's human resource applications are based on software
acquired under a non-exclusive object code and source code license from a third
party. The Company has entered into agreements with its third party licensors
with customary warranty, software maintenance and infringement indemnification
terms.

EMPLOYEES

As of March 31, 1998, the Company had a total of 244 full-time employees, all
except seven of whom were based in the United States. Of the total, 77 were
employed in implementation services, 51 were in research and development, 38
were in sales, 41 were in customer support, 27 were in finance, administration
and operations, and 10 were in marketing. The Company believes its future
performance depends in significant part upon the continued service of its key
engineering, technical support and sales personnel and on its ability to
attract or retain qualified employees. Competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting or retaining such personnel in the future. None of the Company's
employees are represented by a labor union or are subject to a collective
bargaining agreement. The Company has not experienced any work stoppages and
considers its relations with its employees to be good. See "Risk Factors--
Management of Growth;" "--Dependence Upon Key Personnel; Ability to Hire and
Retain Personnel."

FACILITIES

The Company's corporate office and principal facility is located in Suwanee,
Georgia, where the Company leases approximately 41,000 square feet of space.
The lease commenced on June 15, 1997 and expires on July 15, 2004. The lease
requires annual payments of $386,000 for the first 12-month period with an
increase of 3% in each 12-month period after the first year. This facility
accommodates research and development, sales, finance, administration and
operations, customer support and marketing. The Company also leases 11
facilities, primarily for regional sales offices, elsewhere in the United
States and Canada, providing for aggregate annual lease payments of
approximately $218,000. Expiration dates on sales office leases range from May
1998 to March 1999. The Company anticipates leasing additional space during the
next 12 months to meet its needs as a result of significant growth in
personnel.

LEGAL PROCEEDINGS

The Company is not currently a party to any legal proceedings.

43
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

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

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Stephen P. Jeffery...... 42 Chairman, Chief Executive Officer, President and
Director
William M. Curran, Jr... 36 Vice President, Sales--East
William A. Fielder, 39 Chief Financial Officer and Treasurer
III....................
Sally M. Foster......... 44 Vice President, Customer Support
Robert C. Holler........ 34 Vice President, Research and Development
Steven M. Hornyak....... 32 Vice President, Marketing
Alain Livernoche........ 38 Vice President, Sales--West
Arthur G. Walsh, Jr..... 50 Vice President, Human Resources and Secretary
Joseph S. McCall........ 48 Director
Tench Coxe(1)(2)........ 40 Director
William S. 42 Director
Kaiser(1)(2)...........
Donald L. House......... 56 Director
Said Mohammadioun....... 50 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

STEPHEN P. JEFFERY joined the Company in November 1994 as Vice President of
Marketing and was elected Vice President of Sales and Marketing in June 1995.
He was elected President of the Company in October 1995, a member of the Board
of Directors in October 1997, Chairman of the Board in December 1997 and Chief
Executive Officer of the Company in February 1998. Prior to joining the
Company, Mr. Jeffery was employed by Hewlett-Packard Company, where he served
as the manager of Hewlett-Packard's client/server solutions and partner
programs as well as in a variety of sales and marketing management positions in
the U.S. and Europe for 15 years. Mr. Jeffery also served in sales with IBM
prior to joining Hewlett-Packard.

WILLIAM M. CURRAN, JR. joined the Company in February 1996 as Regional Sales
Manager for the Southern Region. In August 1997, Mr. Curran was elected Vice
President of Sales for the Eastern region. Prior to joining the Company, Mr.
Curran was employed by Geac Computer Corp. Ltd (formerly Dun & Bradstreet
Software) ("Geac") from November 1989 until February 1996 as a Senior Account
Executive where he was the top sales performer for the past 6 years. From June
1984 until November 1989, Mr. Curran served in a variety of sales positions
with Unisys Corporation.

WILLIAM A. FIELDER, III. joined the Company in March 1998 as Chief Financial
Officer and Treasurer. Prior to joining the Company, Mr. Fielder served as Vice
President and Chief Financial Officer of Gray Communications Systems, Inc. from
July 1993 to March 1998. From April 1991 to July 1993, Mr. Fielder served as
Controller of Gray Communications Systems, Inc. which was the chief financial
officer position of that company.

SALLY M. FOSTER joined the Company in March 1997 as Vice President of
Customer Service. Prior to joining the Company, Ms. Foster served in several
positions at Geac, from August 1988 until March 1997, most recently as Vice
President/Director of Global Business Operations. From August 1985 until August
1988, Ms. Foster served as the Division Operations Manager for the General
Motors Corporation, Electronic Data Systems Ltd. based in London, England.

44
<PAGE>

ROBERT C. HOLLER joined the Company in June 1993 as the group leader for all
technology development. In January 1995, Mr. Holler was elected Vice President
of Development and in May 1996, he was elected Vice President of Research. In
April 1998, Mr. Holler was elected Vice President of Research and Development.
Before joining the Company, he served from 1989 to 1993 as a consultant with
McCall Consulting Group, where he managed the initial implementations of the
Company's products. Earlier, he was employed with Andersen Consulting as a
consultant.

STEVEN M. HORNYAK joined the Company in December 1994 as an Account Executive
and was promoted to Regional Sales Manager for the Northeast region. In August
1997, Mr. Hornyak was elected Vice President of Marketing. Prior to joining the
Company, Mr. Hornyak served in a variety of sales and consulting roles for
Oracle Corporation from June 1992 until December 1994. Prior to that, he was
employed by Price Waterhouse in its management consulting services group.

ALAIN LIVERNOCHE joined the Company in January 1997 as Vice President of
Sales for the Western region. Prior to joining the Company, Mr. Livernoche was
employed by Geac from June 1985 until January 1997, where he served in several
sales roles, most recently as Regional Vice President and General Manager for
the Central United States and Canada. From May 1981 until June 1985,
Mr. Livernoche was employed by Andersen Consulting in Canada and Europe with
primary focus on evaluations and implementations of financial and human
resource software.

ARTHUR G. WALSH, JR. joined the Company in November 1992 as Chief Operating
Officer and Secretary. In October 1995, Mr. Walsh was elected Vice President of
Customer Service and Treasurer. Currently, Mr. Walsh serves as Vice President
of Human Resources and Secretary. From September 1989 until November 1992, he
was Chief Operating Officer for Wilson & McIlvaine, a general business Chicago
law firm, where he was responsible for overall management of the firm's
business operations. Before that, Mr. Walsh was employed with Andersen
Consulting, from July 1974 until September 1989, where he served in a variety
of roles in Atlanta and Chicago, lastly as Director of Finance and
Administration for the Technical Services Organization in Chicago world
headquarters.

JOSEPH S. MCCALL co-founded the Company in November 1991 and has previously
served as its Chairman, President, and Chief Executive Officer and has been a
member of the Board of Directors since 1991. Mr. McCall currently serves as a
Director and consultant to the Company. Prior to founding the Company, Mr.
McCall founded McCall Consulting Group, Inc. in 1986, and he currently serves
as its President. Mr. McCall also formed Technology Ventures, LLC in 1994 and
currently serves as its sole manager. From 1975 to 1986, Mr. McCall managed
major systems integration and development projects and application software
evaluations and implementation engagements for Andersen Consulting.

TENCH COXE has served as a member of the Board of Directors of the Company
since September 1993. Mr. Coxe has served as a general partner of Sutter Hill
Ventures, a venture capital company located in Palo Alto, California, since
1989. From 1984 to 1987, Mr. Coxe served as Director of Marketing and in other
management positions with Digital Communications Associates. Mr. Coxe is
currently on the Board of Directors of Avant! Corporation and Edify
Corporation.

WILLIAM S. KAISER has served on the Board of Directors of the Company since
November 1992. Mr. Kaiser joined Greylock Management Corporation, a venture
capital company located in Boston, in 1986 and became a general partner in
1988. From 1983 to 1986, Mr. Kaiser served in a variety of marketing management
positions with Apollo Computer, primarily working with Apollo's third-party
suppliers. Mr. Kaiser is also on the Board of Directors of Avid Technology,
Inc. and Open Market, Inc.

45
<PAGE>

DONALD L. HOUSE served as Chairman of the Board of Directors of the Company
from January 1994 through December 1997, and as President from January 1993
through December 1993. From September 1991 until December 1992, Mr. House
served as President of Prentice Hall Professional Software, Inc., a subsidiary
of Simon and Schuster, Inc. From 1968 through 1987, Mr. House served in a
number of senior executive positions with Management Science America, Inc. Mr.
House is a director of Melita International Corporation, where he serves as
Chairman of the Audit Committee and a member of the Compensation Committee and
is a director of XcelleNet, Inc., where he serves as Chairman of its Audit and
Nominating Committees. Mr. House also serves as a member of the Board of
Directors of BT Squared Technologies, Inc., Intellimedia Commerce, Inc.,
Systems Techniques, Inc. and Telinet Technologies, LLC which are privately held
companies.

SAID MOHAMMADIOUN has served as a member of the Board of Directors of the
Company since March 1998. Mr. Mohammadioun has served as Chairman and Chief
Executive Officer of Synchrologic, Inc. since October 1996. From March 1995 to
September 1996, he was a private investor in small technology companies. Mr.
Mohammadioun was Vice President of Lotus Development Corp. from December 1990
to February 1995. Mr. Mohammadioun also serves on the Board of Directors of IQ
Software Corporation and FirstWave Technologies, Inc.

Executive officers of the Company are elected by the Board of Directors and
serve until their successors are duly elected and qualified. There are no
family relationships among any of the executive officers or directors of the
Company.

Concurrent with the effective date of this Offering, the Company's Board of
Directors will be divided into three classes, with the members of each class of
directors serving for staggered three-year terms. Messrs. McCall and Kaiser
will serve in the class the term of which expires in 1999; Messrs. Coxe and
House will serve in the class the term of which expires in 2000; and Messrs.
Jeffery and Mohammadioun will serve in the class the term of which expires in
2001. Upon the expiration of the term of each class of directors, directors
comprising such class of directors will be elected for a three-year term at the
next succeeding annual meeting of stockholders. The Company's classified Board
of Directors could have the effect of increasing the length of time necessary
to change the composition of a majority of the Board of Directors. In general,
at least two annual meetings of stockholders will be necessary for stockholders
to effect a change in a majority of the members of the Board of Directors. See
"Description of Capital Stock--Delaware Law and Certain Provisions of the
Company's Restated Certificate and By-laws."

COMMITTEES OF THE BOARD OF DIRECTORS

The Audit Committee consists of Messrs. Coxe and Kaiser. The Audit Committee
reviews, with the Company's independent auditors, the scope and timing of their
audit services and any other services they are asked to perform, the auditor's
report on the Company's financial statements following completion of their
audit and the Company's policies and procedures with respect to internal
accounting and financial controls. In addition, the Audit Committee will make
annual recommendations to the Board of Directors for the appointment of
independent auditors for the ensuing year.

The Compensation Committee consists of Messrs. Coxe and Kaiser. The
Compensation Committee will review and evaluate the compensation and benefits
of all officers of the Company, review general policy matters relating to
compensation and benefits of employees of the Company and make recommendations
concerning these matters to the Board of Directors. The Compensation Committee
also will administer the Company's stock option plans.

DIRECTOR COMPENSATION

Directors who are not employees of the Company (also referred to as "Outside
Directors") currently include Messrs. McCall (as of the closing date of the
Offering), Coxe, House, Kaiser and Mohammadioun, and do not receive an annual
retainer or any fees for attending regular meetings of the Board of Directors.
Directors

46
<PAGE>

are not reimbursed for out-of-pocket expenses incurred in attending such
meetings. Outside Directors may participate in the Company's 1998 Stock
Incentive Plan. On March 9, 1998, the Company granted to Mr. Mohammadioun an
option to acquire 11,250 shares of Common Stock at an exercise price of $11.00
per share.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
earned by Joseph S. McCall, the Company's Chief Executive Officer at December
31, 1997 and the Company's four other most highly compensated executive
officers who were serving as executive officers at the end of 1997
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company in 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
-------------------------- ------------
NUMBER OF
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(2) COMPENSATION
- --------------------------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Joseph S. McCall........ $ 151,350 $ 150,000 -- -- --
Chief Executive
Officer(3)
William M. Curran, $ 111,748 $ 197,910 -- 45,000 --
Jr. ...................
Vice President, Sales
Steven M. Hornyak....... $ 111,760 $ 130,822 -- 51,000 $53,394(4)
Vice President,
Marketing
Stephen P. Jeffery...... $ 175,000(6) $ 92,621 -- 75,000 --
President(5)
Alain Livernoche........ $ 136,752 $ 91,599 -- 60,000 --
Vice President, Sales
</TABLE>
- --------
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation set forth in the table does not include medical, group life
insurance or other benefits which are available to all salaried employees
of the Company, and certain perquisites and other benefits, securities or
property that do not exceed the lesser of $50,000 or 10% of the person's
salary and bonus shown in the table.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive payments during fiscal
1997 to its executive officers. Options granted to the Named Executive
Officers were granted at fair market value on the date of grant as
determined by the Board of Directors.
(3) Mr. McCall resigned as the Company's Chief Executive Officer on February 5,
1998.
(4) One time payment for relocation expenses.

(5) Mr. Jeffery was elected as the Company's Chief Executive Officer effective
as of February 5, 1998.
(6) Includes $14,583 in deferred compensation earned in 1997.

47
<PAGE>

The following table sets forth all individual grants of stock options during
fiscal year 1997, to each of the Named Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM(2)
OPTIONS TO EMPLOYEES IN EXERCISE OR BASE -----------------
NAME GRANTED(1) FISCAL YEAR PRICE PER SHARE EXPIRATION DATE 5% 10%
---- ---------- ---------------- ---------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. McCall........ -- -- -- -- -- --
Stephen P. Jeffery...... 75,000 9.3% $3.67 11/10/04 $112,054 $261,134
William M. Curran, Jr... 15,000 1.9 2.00 07/24/04 12,213 28,462
30,000 3.7 3.67 11/10/04 44,822 104,454
Alain Livernoche........ 15,000 1.9 1.00 04/13/04 6,107 14,231
15,000 1.9 2.00 07/24/04 12,213 28,462
30,000 3.7 3.67 11/10/04 44,822 104,454
Steven M. Hornyak....... 6,000 .7 1.00 01/01/04 6,107 14,231
15,000 1.9 1.00 05/23/04 12,213 28,462
30,000 3.7 3.67 11/10/04 44,822 104,454
</TABLE>
- --------
(1) All options were incentive stock options and were granted pursuant to the
Company's 1992 Stock Option Plan at an exercise price not less than fair
market value on the date of grant as determined by the Board of Directors
of the Company. Options vest in installments over a period of four years
with 20% of the options vested 12 months from the date of grant, 40% vested
24 months after the date of grant, 70% vested 36 months after the date of
grant and 100% vested 48 months after the date of grant. The options expire
seven years after the date of grant.
(2) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming that the stock price on the date of grant
appreciates at the specified annual rates of appreciation, compounded
annually over the term of the option. These numbers are calculated based on
rules promulgated by the Securities and Exchange Commission. The actual
realizable value of the options based on the price to the public in this
Offering will substantially exceed the potential realizable value shown in
the table.

48
<PAGE>

The following table provides information regarding exercisable and
unexercisable stock options held as of December 31, 1997 by each of the Named
Executive Officers. There were no options exercised by the Named Executive
Officers in 1997.

YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR-END OPTIONS AT YEAR-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Joseph S. McCall........... 61,762 -- $267,429 $ --
Stephen P. Jeffery......... 37,500 225,000 159,900 714,600
William M. Curran, Jr...... 3,000 57,000 12,396 134,484
Alain Livernoche........... -- 60,000 -- 144,900
Steven M. Hornyak.......... 2,340 57,660 9,914 151,867
</TABLE>
- --------

(1) There was no public trading market for the Common Stock as of December 31,
1997. Accordingly, these values have been calculated by determining the
difference between the estimated fair market value of the Company's Common
Stock underlying the option as of December 31, 1997 ($5.00 per share) and
the exercise price per share payable upon exercise of such options. In
determining the fair market value of the Company's Common Stock, the Board
of Directors considered various factors, including the Company's financial
condition and business prospects, its operating results, the absence of a
market for its Common Stock and the risks normally associated with
technology companies.

EMPLOYEE BENEFIT PLANS

1992 Stock Option Plan. The Company adopted its 1992 Stock Option Plan (the
"1992 Stock Option Plan") on November 22, 1992. The aggregate number of shares
reserved for issuance under the 1992 Stock Option Plan is 1,659,315 shares. As
of March 31, 1998, options to purchase 1,588,733 shares of Common Stock were
outstanding under the 1992 Stock Option Plan at exercise prices ranging from
$0.67 to $8.00 per share and a weighted average exercise price of $2.67 per
share. Options granted under the 1992 Stock Option Plan generally vest in
installments over a period of four years with 20% of the options vested 12
months from the date of grant, 40% vested 24 months from the date of grant, 70%
vested 36 months from the date of grant and 100% vested 48 months after the
date of grant. The Company has accelerated the vesting of options granted from
January through March 1998 under the 1992 Stock Option Plan. As of March 31,
1998, 50,581 shares of Common Stock have been issued pursuant to the exercise
of options granted under the 1992 Stock Option Plan. The purpose of the 1992
Stock Option Plan is to provide incentives for key employees, officers,
consultants and directors to promote the success of the Company, and to enhance
the Company's ability to attract and retain the services of such persons. The
majority of all options granted under the 1992 Stock Option Plan are intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1985 as amended (the "Code").

The 1992 Stock Option Plan is administered by the Compensation Committee of
the Board of Directors. The Compensation Committee has the authority to
determine exercise prices applicable to the options, the eligible officers,
directors, consultants or employees to whom options may be granted, the number
of shares of the Company's Common Stock subject to each option and the extent
to which options may be exercisable.

1998 Stock Incentive Plan. In February 1998, the Board of Directors adopted
and the stockholders approved the SQL 1998 Stock Incentive Plan (the "1998
Stock Plan"). Under the 1998 Stock Plan, the Board of Directors, or the
Compensation Committee of the Board of Directors, has the flexibility to
determine the type

49
<PAGE>

and amount of awards to be granted to eligible participants. The 1998 Stock
Plan is intended to secure for the Company and its stockholders the benefits
arising from ownership of the Company's Common Stock by individuals employed or
retained by the Company who will be responsible for the future growth of the
enterprise. The 1998 Stock Plan is designed to help attract and retain superior
personnel for positions of substantial responsibility with the Company
(including advisory relationships where appropriate), and to provide
individuals with an additional incentive to contribute to the Company's
success.

The Board or the Compensation Committee may make the following types of
grants under the 1998 Stock Plan, each of which will be an "Award": (i)
incentive stock options ("ISOs"); (ii) nonqualified stock options ("NSOs");
(iii) restricted stock awards ("Restricted Stock Awards"); (iv) stock
appreciation rights ("SARs"); and (v) restricted units ("Restricted Units").
Officers, key employees, employee directors, consultants and other independent
contractors or agents of the Company or its subsidiaries who are responsible
for or contribute to the management growth or profitability of the Company's
business will be eligible for selection by the Board of Directors or the
Compensation Committee to participate in the 1998 Stock Plan, provided,
however, that ISOs may be granted only to a person who is an employee of the
Company or its subsidiaries.

The Company has authorized and reserved for issuance an aggregate of 200,000
shares of its Common Stock under the 1998 Stock Plan, to be automatically
increased to 1,000,000 shares of Common Stock upon the completion of this
Offering. As of March 31, 1998, options to purchase 119,250 of Common Stock
were outstanding under the 1998 Stock Plan at a weighted average exercise price
of $8.00 per share. The Company has accelerated the vesting of certain options
granted during March 1998 under the 1998 Stock Plan. The aggregate number of
shares of Common Stock that may be granted through Awards under the 1998 Stock
Plan to any employee in any calendar year may not exceed 200,000 shares. The
shares of Common Stock issuable under the 1998 Stock Plan will be authorized
but unissued shares. If any of the Awards granted under the 1998 Stock Plan
expire, terminate or are forfeited for any reason before they have been
exercised, vested or issued in full, the unused shares subject to those
expired, terminated or forfeited Awards will again be available for purposes of
the 1998 Stock Plan. The 1998 Stock Plan will continue in effect until February
2008 unless sooner terminated under the general provisions of the 1998 Stock
Plan.

The 1998 Stock Plan is administered by the Board of Directors or upon its
delegation to the Compensation Committee of the Board of Directors, by the
Compensation Committee, consisting of not less than two directors of the
Company who are "non-employee directors" (within the meaning of SEC Rule 16b-3
promulgated pursuant to the Securities Exchange Act of 1934, as amended), so
long as non-employee director administration is required under Rule 16b-3, and
who are "outside directors" (as defined in Section 162(m) of the Code), so long
as outside directors are required by the Code. Subject to the foregoing
limitations, as applicable, the Board of Directors may from time to time remove
members from the Compensation Committee, fill all vacancies on the Compensation
Committee, however caused, and may select one of the members of the
Compensation Committee as its chairman. The Compensation Committee may hold
meetings at such times and places as they may determine, will keep minutes of
their meetings, and may adopt, amend and revoke rules and procedures in
accordance with the terms of the 1998 Stock Plan.

401(k) Retirement Savings Plan. The Company maintains a Section 401(k)
Retirement Savings Plan (the "401(k) Plan"). The 401(k) Plan is intended to be
a tax-qualified defined contribution plan under Section 401(k) of the Code. In
general, Company employees who have completed six consecutive months of service
with the Company and are over 21 years of age may elect to participate in the
401(k) Plan. Under the 401(k) Plan, participants may elect to defer a portion
of their compensation, subject to certain Code limitations. In addition, at the
discretion of the Board of Directors and subject to certain Code limitations,
the Company may make profit sharing contributions into the 401(k) Plan. The
Company currently does not match contributions. A separate account is
maintained for each participant in the 401(k) Plan, which account is 100%
vested. Distributions from the 401(k) Plan may be in the form of a lump-sum
payment in cash or property or in the form of an annuity.

50
<PAGE>

AGREEMENTS WITH EMPLOYEES

In February 1998, the Company entered into an agreement with Joseph S. McCall
whereby Mr. McCall resigned as the Company's Chief Executive Officer and as
Chairman, Chief Executive Officer and Manager of the Services Subsidiary. Mr.
McCall agreed to remain an employee of the Company at his current salary,
including incentive compensation, until the completion of this Offering, at
which time he will become as consultant to the Company for a period of one year
pursuant to the terms of an Independent Contractor Agreement. For his
consulting services, the Company will pay Mr. McCall the sum of $125,000 over
the one year period, with the ability to earn an additional $100,000 in
incentive compensation if certain revenue targets are met by the Company. Mr.
McCall has agreed to continue to serve on the Company's Board of Directors for
at least six months following the termination of his employment. In recognition
of his past services, Mr. McCall's agreement to allow the termination of the
common stock voting trust agreement, and his resignation as CEO, the Company
agreed to pay Mr. McCall a lump sum of $225,000 on or before June 30, 1998 and
will pay Mr. McCall as severance an additional $75,000 payable in semi-monthly
installments over a one year period beginning on the effective date of the
termination of his employment with the Company.

The Company generally enters into confidentiality and nondisclosure
agreements with its employees. Pursuant to the terms of these agreements,
employees agree to confidentiality restrictions, employee and customer
nonsolicitation covenants and assignment of inventions.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee reviews and approves compensation and
benefits for the Company's key executive officers, administers the Company's
stock option plans and makes recommendations to the Board regarding such
matters. No member of the Compensation Committee 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 or Compensation
Committee.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Restated By-Laws of the Company (the "Restated By-Laws") and the Amended
and Restated Certificate of Incorporation of the Company (the "Restated
Certificate") provide that the directors and officers of the Company shall be
indemnified by the Company to the fullest extent authorized by Delaware law, as
it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
the Company. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Company pursuant to the
Restated By-Laws, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. The Company has obtained insurance which
insures the directors and officers of the Company against certain losses and
which insures the Company against certain of its obligations to indemnify such
directors and officers. In addition, the Restated Certificate provides that the
directors of the Company will not be personally liable for monetary damages to
the Company for breaches of their fiduciary duty as directors, unless they
violated their duty of loyalty to the Company or its stockholders, acted in bad
faith, knowingly or intentionally violated the law, authorized illegal
dividends or redemptions or derived an improper personal benefit from their
action as directors. Such limitations of personal liability under the Delaware
Business Corporation Law do not apply to liabilities arising out of certain
violations of the federal securities laws. While non-monetary relief such as
injunctive relief, specific performance and other equitable remedies may be
available to the Company, such relief may be difficult to obtain or, if
obtained, may not adequately compensate the Company for its damages.

There is no pending litigation or proceeding involving any director, officer,
employee or agent of the Company where indemnification by the Company 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>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1998, and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by: (i) each
person known by the Company to be the beneficial owner of more than 5% of the
Company's Common Stock; (ii) each of the Company's directors; (iii) each Named
Executive Officer who is a beneficial owner of the Company's Common Stock (see
"Management--Executive Compensation"); and (iv) all executive officers and
directors as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF COMMON
STOCK OUTSTANDING(2)
NUMBER OF SHARES ------------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ------------------------ ---------------- ---------- ----------
<S> <C> <C> <C>
Joseph S. McCall(3).............. 2,133,593 30.8% 13.3%
William S. Kaiser(4)............. 1,003,122 13.5 11.1
Greylock Limited Partner-
ship(4)(5)...................... 1,003,122 13.5 11.1
HarbourVest Partners IV--Direct
Fund L.P.(6).................... 870,155 12.1 9.6
Tench Coxe(7).................... 741,805 10.4 8.2
Sutter Hill Ventures, a Califor-
nia Limited Partnership(7)...... 741,805 10.4 8.2
Highland Capital Partners II Lim-
ited Partnership(8)............. 594,684 8.5 6.6
Technology Crossover Management,
L.L.C.(9)....................... 576,465 8.3 6.4
Chase Venture Capital Associates,
L.P.(10)........................ 312,501 4.6 3.5
Spitfire Capital Partners,
L.P.(11)........................ 312,501 4.6 3.5
Stephen P. Jeffery(12)........... 156,300 2.4 1.7
Donald L. House.................. 76,249 1.2 *
Steven M. Hornyak(13)............ 11,385 * *
William M. Curran, Jr.(14)....... 6,300 * *
Alain Livernoche(15)............. 4,500 * *
Said Mohammadioun(16)............ 11,250 * *
All executive officers and direc-
tors as a group (14 per-
sons)(17)....................... 4,349,434 61.9% 37.7%
</TABLE>

- --------
* Indicates less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the
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 issuable by the Company pursuant to options
held by the respective person or group which may be exercised within 60
days after March 31, 1998 ("Presently Exercisable Options"). Except as
otherwise indicated, each stockholder named in the table has sole voting
and investment power with respect to the shares set forth opposite such
stockholder's name.

(2) For purposes of calculating the percentage beneficially owned, the number
of shares deemed outstanding before the Offering includes: (i) 1,640,581
shares of Common Stock outstanding as of March 31, 1998; and (ii)
4,787,594 shares of Common Stock issuable upon the Conversion. The number
of shares deemed outstanding after the Offering includes an additional:
(i) 131,250 shares of Common Stock issuable upon the Warrant Exercise; and
(ii) 2,500,000 shares being offered hereby. Presently Exercisable Options
are deemed to be outstanding and to be beneficially owned by the person or
group holding such options for the purpose of computing the percentage
ownership of such person or group but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person or
group.

(3) Shares beneficially owned before the Offering includes: (i) 1,640,581
shares of Common Stock (all of the outstanding Common Stock of the
Company) which are subject to a Voting Trust Agreement pursuant to which
Mr.McCall, a director of the Company, serves as sole trustee and exercises
sole voting control; (ii) 300,000 shares of Common Stock issuable to Tech
Ventures upon conversion of shares of Preferred Stock subject to a
warrant; (iii) 131,250 shares of Common Stock issuable to Tech Ventures
upon the Warrant Exercise; and (iv) 61,762 shares issuable upon the
exercise of Presently Exercisable Options.

(4) Includes (i) 986,382 shares of Common Stock issuable upon conversion of
shares of Preferred Stock owned by Greylock Limited Partnership; and (ii)
16,740 shares of Common Stock issuable upon conversion of shares of
Preferred Stock subject to warrants held by Greylock Limited Partnership.
Mr. Kaiser, a director of the Company, has voting control over the
securities of the Company held by Greylock Limited Partnership.

52
<PAGE>

(5) The general partners of Greylock Limited Partnership are Howard E. Cox,
Roger Evans, William Helman, Robert Henderson, William Kaiser, Henry
McCance and Dave Strohm. Greylock Limited Partnership's address is One
Federal Street, Boston, Massachusetts 02110.

(6) Includes (i) 812,853 shares of Common Stock issuable upon conversion of
shares of Preferred Stock owned by HarbourVest Partners IV--Direct Fund
L.P. ("HarbourVest"); (ii) 13,795 shares of Common Stock issuable upon the
conversion of shares of Preferred Stock subject to a warrant held by
HarbourVest; (iii) 42,781 shares of Common Stock issuable upon conversion
of shares of Preferred Stock owned by Falcon Ventures II, L.P. ("Falcon");
and (iv) 726 shares of Common Stock issuable upon conversion of shares of
Preferred Stock subject to outstanding warrants owned by Falcon. Falcon is
an affiliate of HarbourVest. Both Falcon and HarbourVest are beneficially
owned by Edward W. Kane, D. Brooks Zug, George R. Anson, Kevin Delbridge,
William A. Johnston, Frederick C. Maynard, Ofer Nemirovsky and Robert M.
Wadsworth. HarbourVest's address is One Financial Center, Boston,
Massachusetts 02111.

(7) Includes (i) 483,476 shares of Common Stock issuable upon conversion of
shares of Preferred Stock held by Sutter Hill Ventures, a California
Limited Partnership ("Sutter Hill"); (ii) 20,128 shares of Common Stock
issuable upon conversion of shares of Preferred Stock held by Mr. Coxe;
(iii) 225,822 shares of Common Stock held of record for 14 other
individuals or entities associated with Sutter Hill (the "Sutter Hill
Affiliates"); (iv) 8,217 shares of Common Stock issuable upon conversion
of shares of Preferred Stock subject to warrants held by Sutter Hill; and
(v) 4,162 shares of Common Stock issuable upon conversion of shares of
Preferred Stock subject to warrants held by the Sutter Hill Affiliates.
Mr. Coxe, a director of the Company, is a Managing Director of the General
Partner of Sutter Hill and shares voting and investment power with respect
to the shares of Common Stock held by Sutter Hill. Mr. Coxe disclaims
beneficial ownership of the shares held by Sutter Hill and Sutter Hill
Affiliates, except as to the shares held of record in his name and as to
his partnership interest in Sutter Hill. Sutter Hill's address is 755 Page
Mill Road, Suite A-200, Palo Alto, California 94304-1005.

(8) Includes (i) 584,760 shares of Common Stock issuable upon conversion of
shares of Preferred Stock and (ii) 9,924 shares of Common Stock issuable
upon the conversion of shares of Preferred Stock subject to outstanding
warrants owned by Highland Capital Partners II Limited Partnership
("Highland Capital"). The general partner of Highland Capital is Highland
Management Partners II. The general partners of Highland Management
Partners II are Robert F. Higgins, Paul A. Maeder, Daniel J. Nova and
Wycliff K. Grousbeck. Highland Capital's address is One International
Place, Boston, Massachusetts 02110.

(9) Includes (i) 525,249 shares of Common Stock issuable upon conversion of
shares of Preferred Stock owned by Technology Crossover Ventures L.P.
("TCVLP"); (ii) 8,914 shares of Common stock issuable upon conversion of
shares of Preferred Stock subject to warrants held by TCVLP; (iii) 41,596
shares of Common Stock held by Technology Crossover Ventures, C.V.
("TCVCV"); and (iv) 706 shares of Common Stock issuable upon conversion of
shares of Preferred Stock subject to warrants held by TCVCV. Technology
Crossover Management, L.L.C. is the sole general partner of TCVLP and the
sole investment general partner of TCVCV. The managing members of
Technology Crossover Management, L.L.C. are Jay C. Hoag and Richard H.
Kimball. Technology Crossover Ventures' address is 575 High Street, Suite
400, Palo Alto, California 94301.

(10) Includes 312,501 shares of Common Stock issuable upon conversion of shares
of Preferred Stock. Chase Venture Capital Associates, L.P.'s address is
380 Madison Avenue, 12th Floor, New York, New York 10017. The managing
general partner of Chase Venture Capital Associates, L.P. is Jeffrey C.
Walker.

(11) Includes 312,501 shares of Common Stock issuable upon conversion of shares
of Preferred Stock. The general partner of Spitfire Capital Partners, L.P.
is MS Spitfire LLC. Investment decisions are made on behalf of Spitfire
Capital Partners, L.P. by a committee consisting of David K. Crossen, J.
Richard Fredericks, Jack G. Levin, Karl L. Matthics and Thomas A.Thornhill
III, all of whom are members of MS Spitfire LLC. Spitfire Capital
Partners, L.P.'s address is 600 Montgomery Street, San Francisco,
California 94111.

(12) Includes 154,500 shares of Common Stock issuable upon the exercise of
Presently Exercisable Options.

(13) Includes 11,385 shares of Common Stock issuable upon the exercise of
Presently Exercisable Options.

(14) Includes 6,300 shares of Common Stock issuable upon the exercise of
Presently Exercisable Options.

(15) Includes 4,500 shares of Common Stock issuable upon the exercise of
Presently Exercisable Options.

(16) Includes 11,250 shares of Common Stock issuable upon the exercise of
Presently Exercisable Options.

(17) Includes 124,800 shares of Common Stock and 3,532 shares of Common Stock
issuable upon the exercise of Presently Exercisable Options held by a
person who was an executive officer of the Company on March 31, 1998 but
who resigned from the Company effective April 17, 1998.

53
<PAGE>

CERTAIN TRANSACTIONS

In March 1995, the Company issued 450,000 shares of Common Stock to Tech
Ventures, an entity controlled by Joseph S. McCall, the Company's Chief
Executive Officer at that time and a member of the Company's Board of
Directors, in exchange for certain intellectual property rights, intangible
assets and $10,000 cash. Following the acquisition, the Company and Tech
Ventures formed the Services Subsidiary. The Company contributed the acquired
intellectual property rights, intangible assets and $10,000 cash to the
Services Subsidiary in exchange for an 80% interest in the Services Subsidiary.
Tech Ventures acquired the remaining 20% interest in the Services Subsidiary in
exchange for a $75,000 promissory note bearing interest at 7.74%, payable
annually, with the principal due in a lump sum payment in March 2000 (the "Tech
Ventures Note").

During 1996 and 1997, McCall Consulting Group, Inc. ("MCG"), an entity owned
by Tech Ventures, provided to the Company: (i) temporary services by
administrative employees; (ii) third-party consulting services in connection
with several product development projects; (iii) the lease of office equipment
and office space in the Company's prior headquarters facility; and (iv)
services in connection with the Company's sales process. The Company paid MCG
approximately $1.6 million and $1.4 million, respectively, during 1997 and 1996
for these services. In February 1998, the Company entered into an Independent
Contractor Agreement with MCG providing for the performance of services by MCG
for the Company and the assignment to the Company of the intellectual property
rights associated with the performance of such services. The Company currently
uses, and intends to continue to use, personnel from MCG to provide these, and
possibly other, services. In addition, in February 1998, the Company granted to
Tech Ventures and MCG a royalty-free license to use its current products as
well as certain of the Company's future products to be designated by the
Company, and agreed to provide to MCG without charge ongoing support services
as long as Tech Ventures owns at least 100,000 shares of the Common Stock of
the Company and has not modified the software. This license agreement may be
terminated by the Company if a competitor of the Company acquires any interest
in either MCG or Tech Ventures.

On February 5, 1998, Tech Ventures sold its 20% interest in the Services
Subsidiary to the Company in exchange for 225,000 shares of the Company's
Common Stock, a warrant to purchase an additional 300,000 shares of Common
Stock, at an exercise price of $3.67 per share and a non-interest bearing two-
year promissory note in the principal amount of $1.1 million, giving the
Company 100% ownership of the Services Subsidiary. The Company granted Tech
Ventures certain registration rights and agreed to register in this Offering
the 497,700 shares of Common Stock owned by Tech Ventures (comprised of 272,700
of the 450,000 shares originally issued to Tech Ventures in March 1995 and
225,000 shares issued on February 5, 1998) and to maintain the effectiveness of
such registration for a period of two years. Tech Ventures has agreed not to
sell any of its shares for a period of 180 days after the effective date of
this Offering. In addition, immediately prior to the purchase and sale, the
Services Subsidiary distributed approximately $241,000 to Tech Ventures as the
accumulated unpaid profits earned by the Services Subsidiary prior to February
5, 1998. The Company also agreed to pay Tech Ventures a monthly sum equal to
20% of the net profits of the Services Subsidiary until the earlier of (i) the
completion of this Offering, or (ii) a sale of the Company. All of the material
terms of the purchase were agreed upon by Tech Ventures and the Company in
January 1998, including the number of shares to be issued to Tech Ventures. The
transaction was approved by the Company's Board of Directors and consummated on
February 5, 1998. In February 1998, the Services Subsidiary also paid Tech
Ventures approximately $33,000 as consideration for the termination of the
Management Services Agreement entered into between the parties in March 1995,
and Tech Ventures paid in full to the Services Subsidiary the remaining
principal balance and accrued interest of approximately $33,000 due under the
Tech Ventures Note.

In February 1998, the Company entered into certain severance and related
agreements with Joseph S. McCall in connection with his resignation as the
Company's Chief Executive Officer. In connection therewith, the Company agreed
to pay Mr. McCall $225,000 before June 30, 1998, severance in the amount of
$75,000 payable over a one year period beginning upon the consummation of this
Offering, and entered into an Independent Contractor Agreement whereby Mr.
McCall will serve as a consultant to the Company for one year

54
<PAGE>

for $125,000 in compensation, with the ability to earn an additional $100,000
in incentive compensation. See "Management--Agreements with Employees."

Tech Ventures provided recruiting services to the Company from January 1996
through January 1997 in the amount of $339,302. In addition, pursuant to a
Management Services Agreement, Tech Ventures received $25,000 for certain
administrative services rendered to the Services Subsidiary during each of 1997
and 1996.

On October 26, 1995, Tech Ventures received a warrant to purchase 87,500
shares of the Company's Series C Preferred Stock resulting from the conversion
and simultaneous cancellation of 87,500 shares of Series C Preferred Stock held
by Tech Ventures and the simultaneous amendment of a promissory note payable by
Tech Ventures to the Company which had been made by Tech Ventures as payment
for its original shares of Series C Preferred Stock. Upon the consummation of
this Offering, this warrant will expire. Tech Ventures has informed the Company
that it intends to exercise this warrant concurrent with the closing of this
Offering, which will result in the issuance of 131,250 shares of Common Stock
after conversion.

The Company believes that all transactions set forth above were made on terms
no less favorable to the Company than would have been obtained from
unaffiliated third parties.

55
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Effective upon the closing of the Offering and the filing of the Company's
Restated Certificate of Incorporation, the authorized capital stock of the
Company will consist of 25,000,000 shares of Common Stock, $.0001 par value per
share, and 5,000,000 shares of preferred stock, $.0001 par value per share (the
"Preferred Stock").

COMMON STOCK

As of March 31, 1998, there were 1,640,581 shares of Common Stock issued and
outstanding and held of record by 50 stockholders. Following completion of this
Offering, the Company will have 9,059,425 shares of Common Stock issued and
outstanding, comprised of: (i) 1,640,581 shares issued and outstanding prior to
this Offering; (ii) 2,500,000 shares issued by the Company in connection with
this Offering; (iii) 4,787,594 shares issued to holders of the Company's
Preferred Stock which automatically converts into Common Stock upon the
effective date of this Offering; and (iv) 131,250 shares of Common Stock issued
to Tech Ventures in connection with the Warrant Exercise.

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

PREFERRED STOCK

Upon the effective date of this Offering, all outstanding shares of Preferred
Stock will be converted into shares of Common Stock. Thereafter, the Board of
Directors will be authorized, subject to certain limitations prescribed by law,
without further stockholder approval, to issue from time to time up to an
aggregate of 5,000,000 shares of Preferred Stock in one or more series and to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof,
including the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any series or designations of such series. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change of control of the
Company. The Company has no present plans to issue any shares of Preferred
Stock.

The Company believes that the Preferred Stock will provide the Company with
increased flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs that might arise. Having
such authorized shares available for issuance will allow the Company to issue
shares of Preferred Stock without the expense and delay of holding a special
stockholders' meeting. The authorized shares of Preferred Stock, as well as
shares of Common Stock, will be available for issuance without further action
by stockholders of the Company, unless such action is required by applicable
law or the rules of any stock exchange or quotation system on which the
Company's securities may be listed or quoted.

56
<PAGE>

DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE AND
BY-LAWS

The Company is subject to Section 203 of the Delaware General Corporation Law
("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder's becoming an
interested stockholder; (ii) upon consummation of the transaction which
resulted in the stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (x)
by persons who are directors and also officers and (y) by employee stock plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder.

Section 203 defines business combinations to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation; (iii) subject to
certain exceptions, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested stockholder;
(iv) any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation. In general, Section 203 defines an interested stockholder as an
entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation and any entity or person affiliated with or
controlling or controlled by such entity or person.

The Company's Restated Certificate provides that, upon the effective date of
this Offering, the Company's Board of Directors will be classified into three
classes of directors. See "Management--Executive Officers and Directors."

These and other provisions could have the effect of making it more difficult
to acquire the Company by means of a tender offer, proxy contest or otherwise
or to remove the incumbent officers and directors of the Company. These
provisions may discourage certain types of coercive takeover practices and
encourage persons seeking to acquire control of the Company to first negotiate
with the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is First Union National
Bank of North Carolina, N.A.

LISTING

Application has been made to have the Common Stock approved for listing on
the Nasdaq National Market under the symbol "SQLF."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 9,059,425 shares of
Common Stock outstanding (assuming no exercise of outstanding stock options).
Of these shares, the 2,500,000 shares sold in this Offering will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by "affiliates" of the Company, as that term
is defined in Rule 144 ("Rule 144") under the Securities Act ("Affiliates"),
may generally only be sold in compliance with the limitations of Rule 144
described below.

57
<PAGE>

LOCK-UP AGREEMENTS

All officers and directors of the Company and substantially all of the
stockholders of the Company, who in the aggregate hold 6,425,835 of the
6,428,175 outstanding shares of Common Stock following the Conversion, have
agreed, pursuant to the Lock-up Agreements, that they will not, without the
prior written consent of NationsBanc Montgomery Securities LLC, offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any shares of
Common Stock beneficially owned by them for a period of 180 days after the date
of this Prospectus. One such stockholder has entered into a Lock-up Agreement
with respect to 117,188 shares, which will expire one year from the effective
date of this Offering. In addition, the holders of stock options granted during
the period of January 1, 1998 through April 1, 1998 whose options have been
fully vested have entered into Lock-up Agreements restricting the sale or
transfer of 283,343 shares for a four year period following the date hereof,
with 25% of such shares being released from such restriction on each
anniversary of the date of this Prospectus.

SALES OF RESTRICTED SHARES

Concurrently with this Offering, the Company has registered 629,625 issued
and outstanding shares of its Common Stock. Such shares will be freely
tradeable upon the effectiveness of this Offering, subject only to provisions
of the Lock-up Agreements. The remaining 5,929,800 shares of issued and
outstanding Common Stock are deemed "Restricted Shares" under Rule 144
promulgated under the Securities Act. Of the Restricted Shares, 2,340 shares
will be available for sale immediately after the date of this Prospectus in
accordance with Rule 144(k) under the Securities Act and are not subject to the
provisions of the Lock-up Agreements. An additional 5,927,460 shares will be
available for sale beginning 180 days after the date of this Prospectus subject
to any holding period or volume limitation under Rule 144 or Rule 701 under the
Securities Act and upon expiration of certain of the Lock-up Agreements.
Certain security holders have the right to have their Restricted Shares
registered by the Company under the Securities Act as described below.

In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated with those of others), including an Affiliate, who has
beneficially owned Restricted Shares for at least one year is entitled to sell,
within any three-month period, a number of such shares that does not exceed the
greater of (i) one percent of the then outstanding shares of Common Stock
(approximately 90,594 shares immediately after this Offering) or (ii) the
average weekly trading volume in the Common Stock on the Nasdaq National Market
during the four calendar weeks preceding the date on which notice of such sale
is filed. Sales under Rule 144 are also subject to certain limitations on
manner of sale, notice requirements, and availability of current public
information about the Company. In addition, under Rule 144(k), a person who is
not an Affiliate and has not been an Affiliate for at least three months prior
to the sale and who has beneficially owned Restricted Shares for at least two
years may resell such shares without compliance with the foregoing
requirements. In meeting the one and two year holding periods described above,
a holder of Restricted Shares can include the holding periods of a prior owner
who was not an Affiliate.

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

STOCK OPTIONS

As of March 31, 1998, options to purchase a total of 1,708,023 shares of
Common Stock were outstanding and 1,471,788 of the shares issuable pursuant to
such options are not yet exercisable. An additional 19,960 shares of Common
Stock are available for future grants under the Company's 1992 Stock Option
Plan and 880,750 shares of Common Stock will be available for future grants
under the Company's 1998 Stock Plan upon closing of this Offering. See
"Management--Stock Option Plans and Warrants."

58
<PAGE>

The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock issuable
pursuant to the Company's stock option plans including the 309,420 shares
subject to outstanding stock options as of May 31, 1998. The Company expects to
file these registration statements approximately 60 days following the closing
of this Offering, and such registration statements are expected to become
effective upon filing. Shares covered by these registration statements will
thereupon be eligible for sale in the public markets, subject to the Lock-up
Agreements.

REGISTRATION RIGHTS

After the consummation of this Offering, the holders of approximately
5,800,000 shares of Common Stock (the "Registrable Securities") or their
transferees (the "Holders"), will be entitled to certain demand and/or piggy-
back registration rights with respect to the Registrable Securities. These
rights are provided under agreements between the Company and the holders of the
Registrable Securities. Such agreements provide that certain of the Holders are
entitled, upon the request of the Holders of 50% of the Registrable Securities,
commencing on the date which is six months after the date of this Prospectus,
to require the Company to use its best efforts to register their Registrable
Securities, under the Securities Act (the "Demand Registration Rights"). In
addition, all of the Holders are entitled, subject to certain limitations, to
require the Company to use its best efforts to include their shares of Common
Stock in future registration statements filed by the Company under the
Securities Act (the "Piggyback Registration Rights"). Except for the 629,625
shares being registered concurrently with this Offering, the Holders of the
Piggy-back Registration Rights have waived their rights to register their
shares under the Registration Statement containing this Prospectus. Certain of
the Holders of Registrable Securities are also entitled, to require the Company
to use its best efforts to register their shares of Common Stock on Form S-3
(the "S-3 Registration Rights"). The Company is not required to effect more
than two registrations under the Demand Registration Rights. Registration of
shares pursuant to the exercise of Demand Registration Rights, S-3 Registration
rights or Piggy-back Registration Rights under the Securities Act would result
in such shares becoming freely tradeable without restriction under the
Securities Act immediately upon the effectiveness of such registration
statement.

59
<PAGE>

UNDERWRITING

The Underwriters named below (the "Underwriters"), represented by NationsBanc
Montgomery Securities LLC, Piper Jaffray Inc. and UBS Securities LLC (the
"Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from the Company the
number of shares of Common Stock indicated below opposite their respective
names at the initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriting Agreement provides
that the obligations of the Underwriters are subject to certain conditions
precedent and that the Underwriters are committed to purchase all of the
shares, if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
NationsBanc Montgomery Securities LLC...........................
Piper Jaffray Inc...............................................
UBS Securities LLC..............................................
---------
Total....................................................... 2,500,000
=========
</TABLE>

The Representatives have advised the Company that the Underwriters initially
propose to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow to
selected dealers a concession of not more than $ per share, and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. After the initial public offering,
the offering price and other selling terms may be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during the
30-day period after the date of this Prospectus, to purchase up to a maximum of
375,000 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial 2,500,000 shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, each of
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this Offering.

Each director and executive officer and certain other stockholders of the
Company have agreed, subject to certain limited exceptions, that they will not,
without the prior written consent of NationsBanc Montgomery Securities LLC
(which consent may be withheld in its sole discretion), directly or indirectly,
sell, offer, contract or grant any option to sell (including without limitation
any short sale), pledge, transfer, establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock, or securities exchangeable or exercisable for or convertible into
shares of Common Stock, currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under the Exchange Act) by such party,
or publicly announce such party's intention to do any of the foregoing, for a
period of 180 days after the date of this Prospectus. In addition, the Company
has agreed in the Underwriting Agreement that, during the period of 180 days
after the date of this Prospectus, without the prior written consent of
NationsBanc Montgomery Securities LLC (which consent may be withheld in its
sole discretion), it will not, directly or indirectly, sell, offer, contract or
grant any option to sell, pledge, transfer or establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Exchange Act, or
otherwise dispose of or transfer, or announce the offering of, or file any
Registration Statement under the Securities Act in respect of, any shares of
the Company's Common Stock, options or warrants to acquire shares of the Common
Stock or securities exchangeable or exercisable for or convertible into shares
of Common Stock other than pursuant to the Company's 1992 Stock Option Plan or
1998 Stock Plan. NationsBanc Montgomery Securities LLC may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to these Lock-up Agreements. See "Shares Eligible for Future
Sale."

60
<PAGE>

The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their employees and controlling persons against certain
liabilities, including civil liabilities under the Securities Act, or will
contribute to payments the Underwriters may be required to make in respect
thereof.

In connection with this Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock,
including over-allotment, stabilizing transactions, syndicate covering
transactions and penalty bids. In an over-allotment, the Underwriters would
allot more shares of Common Stock to their customers in the aggregate than are
available for purchase by the Underwriters under the Underwriting Agreement. A
stabilizing transaction means the placing of any bid, or effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of a
security. In a syndicate covering transaction, the Underwriters would place a
bid or effect a purchase to reduce a short position created in connection with
this Offering. Pursuant to a penalty bid, NationsBanc Montgomery Securities
LLC, on behalf of the Underwriters would be able to reclaim a selling
concession from shares of Common Stock sold by such Underwriter are purchased
in syndicate covering transactions. These transactions may result in price of
the Common Stock originally being higher than the price that might otherwise
prevail in the open market. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise and, if commenced,
may be discontinued at any time.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Common Stock offered by this Prospectus to accounts
over which they exercise discretionary authority in excess of 5% of the number
of shares of Common Stock offered hereby.

Spitfire Capital Partners, L.P. ("Spitfire"), an affiliate of NationsBanc
Montgomery Securities LLC, holds 208,334 shares of the Company's Series F
Preferred Stock, which shares of Preferred Stock will automatically convert
into 312,501 shares of Common Stock concurrent with the effective date of this
Offering. The NASD has determined that of the 312,501 shares of Common Stock
issuable to Spitfire upon the effective date of this Offering, the 117,188
shares attributable to Spitfire's general partner (based upon the general
partner's 37.5% ownership of Spitfire) will be deemed to be compensation to the
Underwriters. Spitfire and its general partner have agreed that they will not
offer, sell or otherwise dispose of the 117,188 shares deemed to be
compensation to the Underwriters for a period of one year after the effective
date of the Offering, in accordance with NASD rules.

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 will be determined by negotiations between the Company and the
Representatives. Among the factors expected to be considered in such
negotiations are the history of, and prospects for, the Company and the
industry in which it competes, an assessment of the Company's management, its
past and present operations and financial performance, its past and present
earnings and the trend of such earnings, the prospects for future earnings of
the Company, the present state of the Company's development, the prevailing
market conditions at the time of the Offering, market valuations of publicly
traded companies that the Company and the Representatives believe to be
comparable to the Company, and other factors deemed relevant.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Womble Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia.
Certain legal matters in connection with this Offering will be passed upon for
the Underwriters by Morris, Manning & Martin, L.L.P., Atlanta, Georgia.

EXPERTS

The consolidated financial statements included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

61
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement (which
term shall include all amendments, exhibits, schedules and supplements thereto)
on Form S-1 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus omits certain information contained in the Registration
Statement, and reference is made to the Registration Statement and the exhibits
and schedules thereto for further information with respect to the Company and
the Common Stock offered hereby. Statements contained in this Prospectus
regarding the contents of any contract, agreement or other document filed as an
exhibit to the Registration Statement are not necessarily complete, and in each
instance reference is made to the copy of such contract, agreement or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement,
and the exhibits and schedules thereto, may be inspected without charge at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and at its
regional offices in New York (Seven World Trade Center, Suite 1300, New York,
New York 10048) and in Chicago (Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661). Copies of all or any part thereof may be
obtained from the Commission at prescribed rates. In addition, the Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants (including the Company) that file
electronically with the Commission which can be accessed at http://www.sec.gov.

The Company intends to furnish to its stockholders annual reports containing
consolidated financial statements audited by its independent accounts and
quarterly reports containing unaudited summary financial statements for each of
the first three quarters of each fiscal year.

62
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SQL FINANCIALS INTERNATIONAL, INC. FINANCIAL STATEMENTS:
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997............. F-4
Consolidated Statements of Operations for the years ended December 31,
1995, 1996 and 1997..................................................... F-6
Consolidated Statements of Stockholders' Deficit for the years ended
December 31, 1995, 1996 and 1997........................................ F-7
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997..................................................... F-8
Notes to Consolidated Financial Statements for the years ended December
31, 1995, 1996 and 1997................................................. F-9
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS:
Unaudited Consolidated Balance Sheet as of March 31, 1998................ F-27
Unaudited Consolidated Statements of Operations for the Quarters Ended
March 31, 1997 and 1998................................................. F-29
Unaudited Consolidated Statements of Cash Flow for the Quarters Ended
March 31, 1997 and 1998................................................. F-30
Notes to Unaudited Interim Consolidated Financial Statements............. F-31
UNAUDITED PRO FORMA FINANCIAL STATEMENTS:
Unaudited Pro Forma Balance Sheet as of March 31, 1998................... F-33
Unaudited Pro Forma Statement of Operations for the Quarter Ended March
31, 1998................................................................ F-35
Unaudited Pro Forma Statement of Operations for the Year Ended December
31, 1997................................................................ F-36
Notes to Unaudited Pro Forma Financial Statements........................ F-37
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SQL Financials International, Inc.
and Subsidiaries:

We have audited the accompanying consolidated balance sheets of SQL
FINANCIALS INTERNATIONAL, INC. (a Delaware corporation) AND SUBSIDIARIES as of
December 31, 1996 and 1997 and the related consolidated statements of
operations, stockholders' deficit, and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SQL Financials
International, Inc. and subsidiaries as of December 31, 1996 and 1997 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997 in conformity with generally accepted
accounting principles.

Arthur Andersen LLP

Atlanta, Georgia

February 19, 1998 (except with respect to the matter discussed in Note 12 to
which the date is March 31, 1998)

F-2
<PAGE>

[This Page Intentionally Left Blank]

F-3
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash....................................................... $ 3,279 $ 7,213
Accounts receivable, less allowance for doubtful accounts
and returns of $634 and $338 in 1996 and 1997,
respectively.............................................. 1,971 4,050
Accounts receivable--related party......................... 19 2
Prepaids and other current assets.......................... 90 492
------- -------
Total current assets..................................... 5,359 11,757
------- -------
PROPERTY AND EQUIPMENT:
Furniture and equipment.................................... 2,176 3,094
Leasehold improvements..................................... 215 280
------- -------
Total property and equipment............................. 2,391 3,374
Less accumulated depreciation.............................. (1,181) (1,867)
------- -------
Property and equipment, net.............................. 1,210 1,507
------- -------
OTHER ASSETS:
Intangible assets, net of accumulated amortization of $561
and $1,127 in 1996 and 1997, respectively................. 1,783 1,267
Deposits and other long-term assets........................ 173 150
------- -------
Total other assets....................................... 1,956 1,417
------- -------
Total assets............................................. $ 8,525 $14,681
======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-4
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS--(CONTINUED)

DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities................. $ 2,003 $ 4,598
Accounts payable--related party.......................... 279 54
Short-term debt.......................................... 958 0
Deferred revenue......................................... 4,686 5,717
Current maturities of long-term debt..................... 855 1,841
-------- --------
Total current liabilities.............................. 8,781 12,210
NONCURRENT LIABILITIES:
Deferred revenue......................................... 3,333 4,480
Long-term debt, net of current maturities,............... 1,093 497
Other noncurrent liabilities............................. 63 49
-------- --------
Total liabilities...................................... 13,270 17,236
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 10)
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY............... 17 243
-------- --------
REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series A, 262,500 shares issued and outstanding in 1996
and 1997,............................................... 1,050 1,050
Series B, 454,888 shares issued and outstanding in 1996
and 1997,............................................... 3,025 3,025
Series C, 428,572 shares issued and outstanding in 1996
and 1997,............................................... 3,000 3,000
Series D, 701,755 shares issued and outstanding in 1996
and 1997,............................................... 6,000 6,000
Series E, 697,675 shares issued and outstanding in 1996
and 1997,............................................... 6,000 6,000
Series F, 0 and 628,809 shares issued and outstanding in
1996 and 1997,.......................................... 0 6,037
-------- --------
Total redeemable convertible preferred stock........... 19,075 25,112
-------- --------
STOCKHOLDERS' DEFICIT:
Preferred stock, $1 par value; 3,000,000 and 3,500,000
shares authorized in 1996 and 1997, respectively;
2,545,390 and 3,174,199 shares of redeemable convertible
preferred stock issued and outstanding in 1996 and 1997,
respectively............................................ 0 0
Common stock, $.0001 par value; 6,750,000 and 9,000,000
shares authorized in 1996 and 1997, respectively;
2,185,348 and 1,467,160 shares issued in 1996 and 1997,
respectively ........................................... 0 0
Additional paid in capital............................... 472 489
Accumulated deficit...................................... (23,859) (28,019)
Warrants................................................. 612 652
Less treasury stock, at cost............................. (302) (2)
Note from stockholder.................................... (612) (612)
Deferred compensation.................................... (148) (418)
-------- --------
Total stockholders' deficit............................ (23,837) (27,910)
-------- --------
Total liabilities and stockholders' deficit............ $ 8,525 $ 14,681
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-5
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES:
License fees...................................... $ 5,232 $ 6,425 $13,506
Services fees..................................... 1,737 3,984 7,786
Maintenance fees.................................. 1,221 2,647 4,696
------- ------- -------
Total revenues.................................. 8,190 13,056 25,988
------- ------- -------
COST OF REVENUES:
License fees...................................... 291 416 1,205
Services fees..................................... 1,421 2,904 5,402
Maintenance fees.................................. 655 1,350 1,973
------- ------- -------
Total cost of revenues.......................... 2,367 4,670 8,580
------- ------- -------
OPERATING EXPENSES:
Research and development.......................... 3,882 5,777 7,190
Sales and marketing............................... 6,636 7,191 9,515
General and administrative........................ 3,292 3,076 4,061
------- ------- -------
Total operating expenses........................ 13,810 16,044 20,766
------- ------- -------
OPERATING LOSS...................................... (7,987) (7,658) (3,358)
INTEREST EXPENSE, net............................... 2 6 274
MINORITY INTEREST................................... (60) (215) (478)
------- ------- -------
NET LOSS............................................ $(8,049) $(7,879) $(4,110)
======= ======= =======
BASIC AND DILUTED NET LOSS PER SHARE................ $ (6.19) $ (5.74) $ (2.97)
======= ======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.......... 1,300 1,373 1,386
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-6
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED TREASURY NOTE FROM DEFERRED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT WARRANTS STOCK AMOUNT STOCKHOLDER COMPENSATION DEFICIT
------ ------ ---------- ----------- -------- -------- ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December
31, 1994......... 1,710 $ 0 $ 7 $ (7,825) $ 0 (810) $(302) $(612) $ 0 $ (8,732)
Issuance costs,
redeemable
convertible
preferred stock,
Series D........ 0 0 0 (72) 0 0 0 0 0 (72)
Issuance of
common stock.... 465 0 310 0 0 0 0 0 0 310
Exercise of stock
options......... 6 0 4 0 0 0 0 0 0 4
Conversion of
redeemable
convertible
preferred stock
into warrants... 0 0 0 0 612 0 0 0 0 612
Net loss......... 0 0 0 (8,049) 0 0 0 0 0 (8,049)
----- --- ---- -------- ---- ---- ----- ----- ----- --------
BALANCE, December
31, 1995......... 2,181 0 321 (15,946) 612 (810) (302) (612) 0 (15,927)
Issuance costs,
redeemable
convertible
preferred stock,
Series E........ 0 0 0 (34) 0 0 0 0 0 (34)
Issuance of stock
options......... 0 0 148 0 0 0 0 0 (148) 0
Exercise of stock
options......... 4 0 3 0 0 0 0 0 0 3
Net loss......... 0 0 0 (7,879) 0 0 0 0 0 (7,879)
----- --- ---- -------- ---- ---- ----- ----- ----- --------
BALANCE, December
31, 1996......... 2,185 0 472 (23,859) 612 (810) (302) (612) (148) (23,837)
Issuance costs,
redeemable
convertible
preferred stock,
Series F........ 0 0 0 (50) 0 0 0 0 0 (50)
Issuance of
warrants........ 0 0 0 0 40 0 0 0 0 40
Unamortized debt
discount........ 0 0 (22) 0 0 0 0 0 0 (22)
Issuance of stock
options......... 0 0 328 0 0 0 0 0 (328) 0
Amortization of
deferred
compensation.... 0 0 0 0 0 0 0 0 58 58
Retirement of
treasury stock.. (735) 0 (300) 0 0 735 300 0 0 0
Exercise of stock
options......... 17 0 11 0 0 0 0 0 0 11
Net loss......... 0 0 0 (4,110) 0 0 0 0 0 (4,110)
----- --- ---- -------- ---- ---- ----- ----- ----- --------
BALANCE, December
31, 1997......... 1,467 $ 0 $489 $(28,019) $652 (75) $ (2) $(612) $(418) $(27,910)
===== === ==== ======== ==== ==== ===== ===== ===== ========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-7
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.......................................... $(8,049) $(7,879) $(4,110)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 428 1,125 1,406
Minority interest............................... 60 216 478
Amortization of debt discount................... 0 0 18
Deferred compensation........................... 0 0 58
Loss on sale of property and equipment.......... 0 0 46
Changes in operating assets and liabilities:
Accounts receivable........................... (1,510) (352) (2,062)
Prepaids and other current assets............. 107 (31) (402)
Deposits and other long-term assets........... (106) (22) 23
Accounts payable and accrued liabilities...... 1,676 3 2,370
Deferred revenue.............................. 2,644 4,180 2,178
Other noncurrent liabilities.................. 8 (53) (14)
------- ------- -------
Total adjustments........................... 3,307 5,066 4,099
------- ------- -------
Net cash used in operating activities....... (4,742) (2,813) (11)
------- ------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment............... (598) (958) (1,193)
Proceeds from sale of property and equipment...... 0 0 10
Purchases of intangible assets.................... (316) (2,000) (50)
------- ------- -------
Net cash used in investing activities....... (914) (2,958) (1,233)
------- ------- -------
FINANCING ACTIVITIES:
Proceeds from issuance of redeemable convertible
preferred stock.................................. 5,927 5,966 5,987
Proceeds from issuance of common stock............ 314 3 11
Proceeds from notes payable and short-term
borrowings, net.................................. 556 2,472 859
Repayments of notes payable and short-term
borrowings....................................... (275) (490) (1,427)
Proceeds from preferred stock bridge financing.... 2,750 0 2,000
Repayment of preferred stock bridge financing..... (750) (2,000) (2,000)
Repayment of note receivable from holder of
minority interest................................ 0 0 38
Dividends paid to holder of minority interest..... (25) (234) (290)
------- ------- -------
Net cash provided by financing activities... 8,497 5,717 5,178
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... 2,841 (54) 3,934
CASH AND CASH EQUIVALENTS, beginning of year........ 492 3,333 3,279
------- ------- -------
CASH AND CASH EQUIVALENTS, end of year.............. $ 3,333 $ 3,279 $ 7,213
======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest............................ $ 126 $ 153 $ 330
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-8
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995, 1996, AND 1997

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

SQL Financials International, Inc. (the "Company") was incorporated in the
state of Delaware on November 20, 1991. The Company develops, markets, and
supports client/server financial software applications and markets its
products under the trade name SQL Financials throughout the United States and
Canada. The Company provides installation and implementation services through
its majority-owned subsidiary, SQL Financial Services, LLC (the "Services
Subsidiary") and is the sole owner of SQL Financials Europe, Inc.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The financial statements include the accounts of the Company and its
majority-owned subsidiaries. All intercompany transactions and balances have
been eliminated.

Minority Interest

Minority interest represents the 20% ownership interest in the Services
Subsidiary (Note 3).

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. Estimates also affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

History of Operating Losses

The Company has incurred significant net losses in each year since its
formation. As of December 31, 1997, the Company had an accumulated deficit of
approximately $28.0 million. These losses have occurred, in part, because of
the substantial costs incurred by the Company to develop its products, expand
its product research, and hire and train its direct sales force. Although the
Company has achieved recent revenue growth and profitability for the quarters
ended September 30, 1997 and December 31, 1997, there can be no assurance that
the Company will be able to generate the substantial additional growth in
revenues that will be necessary to sustain profitability. The Company plans to
continue to increase its operating expenses in order to fund higher levels of
research and development, increase its sales and marketing efforts, broaden
its customer support capabilities and expand its administrative resources in
anticipation of future growth. To the extent that increases in such expenses
precede or are not offset by increased revenues, the Company's business,
results of operations and financial condition would be materially adversely
affected. The Company's financial prospects must be considered in light of the
risks, costs and difficulties frequently encountered by emerging companies,
particularly companies in the competitive financial software industry.

Reclassification

Certain prior year amounts have been reclassified to conform with the
current year presentation.

F-9
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Fair Value of Financial Instruments

The book values of cash, trade accounts receivable, trade accounts payable,
and other financial instruments approximate their fair values principally
because of the short-term maturities of these instruments. The fair value of
the Company's long-term debt is estimated based on current rates offered to
the Company for debt with similar terms and maturities. Under this method, the
Company's fair value of financial instruments was not materially different
from the stated value at December 31, 1996 and 1997.

Credit and Concentrations of Product Risk

The Company's accounts receivable potentially subject the Company to credit
risk, as collateral is generally not required. The credit risk is mitigated by
the large number of customers comprising the customer base.

Substantially all of the Company's product revenues are derived from sales
of its financial applications. Increased market acceptance of the Company's
product family is critical to the Company's ability to increase sales and
thereby sustain profitability. Any factor adversely affecting sales or pricing
levels of these applications will have a material adverse effect on the
Company's business, results of operations, and financial condition.

Revenue Recognition

Revenues from license fees are recognized upon delivery of the product if
there are no significant post-delivery obligations. Revenues from services
fees are recognized as the services are performed. Maintenance fees relate to
customer maintenance and support and are recognized ratably over the term of
the software support services agreement, which is typically 12 months.

Revenues that have been prepaid or invoiced but that do not yet qualify for
recognition under the Company's policies are reflected as deferred revenues.

Deferred Revenues

Deferred revenues at December 31, 1996 and 1997 were as follows (in
thousands):

<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Deferred revenues:
Deferred license fees...................................... $1,662 $ 1,027
Deferred services fees..................................... 336 127
Deferred maintenance fees.................................. 6,021 9,043
------ -------
Total deferred revenues.................................. 8,019 10,197
Less current portion......................................... 4,686 5,717
------ -------
Noncurrent deferred revenues................................. $3,333 $ 4,480
====== =======
</TABLE>

The Company has in the past, and is expected in the future, to introduce
additional modules and product enhancements. As a result, deferred revenues
resulting from contracts executed in a prior period are recognized in the
quarter in which delivery of the new product occurs. This practice has, and
will in the future continue to cause fluctuations in revenues and operating
results from period to period.

F-10
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property and Equipment

Property and equipment consist of furniture, computers, other office
equipment, purchased software, and leasehold improvements. These assets are
depreciated on a straight-line basis over a two-, three-, or five-year life.
Improvements are amortized over the term of the lease. Depreciation expense
for the years ended December 31, 1995, 1996, and 1997 was $370,000, $640,000,
and $840,000, respectively.

Product Returns and Warranties

The Company provides warranties for its products after the software is
purchased for the period in which the customer maintains the Company's support
of the product. The Company generally supports only current releases and the
immediately prior releases of its products. The Company's license agreements
generally do not permit product returns by its customers. The Company provides
for the costs of product returns and warranties at the time of sale. The
Company recorded a provision for the cost of product returns in the allowance
for doubtful accounts in the accompanying balance sheets at December 31, 1997
and 1996. The Company has not experienced significant warranty claims to date,
and has therefore provided no reserve for warranty costs at December 31, 1997
and 1996.

Intangible Assets

Intangible assets include goodwill, and purchased software licensing rights.
Goodwill in the amount of approximately $290,000, resulting from the excess of
the purchase price over the value of the assets acquired and liabilities
assumed in the purchase of the 80% interest in the Services Subsidiary (Note
3) in 1995, is being amortized on a straight-line basis over a period of 60
months.

In 1996, the Company entered into a license and private label agreement to
purchase a nonexclusive and perpetual license for human resource, payroll, and
benefits software. The agreement allows the Company to modify and enhance the
software and to license these software products to its customers. The purchase
price of $2,000,000 is included in intangible assets and is being amortized on
a straight-line basis over the estimated useful life of 48 months.
Amortization expense related to the agreement for the years ended December 31,
1995, 1996, and 1997 was approximately $0, $417,000, and $500,000,
respectively. The amortization expense related to the agreement is included in
research and development expense in the accompanying consolidated statements
of operations.

Total amortization expense relating to all intangibles was $58,000,
$485,000, and $566,000 for the years ended December 31, 1995, 1996, and 1997,
respectively.

Capitalized Software Development Costs

Internal research and development expenses are charged to expense as
incurred. Computer software development costs are charged to research and
development expense until technological feasibility is established; after
which, remaining software production costs are capitalized in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." The
Company has defined technological feasibility as the point in time at which
the Company has a working model of the related product. Historically, the
internal development costs incurred during the period between the achievement
of technological feasibility and the point at which the product is available
for general release to customers have not been material. Accordingly, the
Company has concluded that the amount of internal development costs
capitalizable under the provisions of SFAS No. 86 was not material to the
financial statements for the years ended December 31, 1995, 1996, and 1997.
Therefore, the Company has charged all internal software development costs to
expense as incurred for the years ended December 31, 1995, 1996, and 1997.

The Company has in the past and may in the future purchase or license
software that may be modified and integrated with its products. If at the time
of purchase or license technological feasibility is met, the cost of the
software is capitalized and amortized over a period not to exceed its useful
life.

F-11
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Impairment of Long-Lived and Intangible Assets

The Company periodically reviews the values assigned to long-lived assets,
including property and other assets, to determine whether any impairments are
other than temporary. Management believes that the long-lived assets in the
accompanying balance sheets are appropriately valued.

The Company periodically reviews the value assigned to goodwill and
intangible assets to determine whether events and circumstances have occurred
which indicate that the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. The Company uses an estimate of undiscounted cash flows over the
remaining life of the goodwill and other intangible assets in measuring
whether the goodwill and other intangible assets are recoverable.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities include the following as of
December 31, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Accounts payable.............................................. $ 261 $ 973
Accrued taxes, other than income taxes........................ 204 396
Accrued compensation, benefits, and commissions............... 865 1,636
Accrued other................................................. 673 1,593
------ ------
$2,003 $4,598
====== ======
</TABLE>

Historical Net Loss Per Share

Historical basic and diluted net loss per share was computed in accordance
with SFAS No. 128, "Earnings per Share," using the weighted average number of
common shares outstanding. Historical basic and diluted net loss per share
does not include the impact of common stock equivalents, including redeemable
convertible preferred stock, as their effect would be antidilutive.

Net loss for basic and diluted earnings per share are the same for basic and
diluted earnings per share; therefore, no reconciliation of the numerator is
presented.

Stock Based Compensation Plan

The Company accounts for its stock-based compensation plan under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Effective in fiscal year 1996, the Company adopted the disclosure
option of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No.
123 requires that companies which do not choose to account for stock-based
compensation as prescribed by the statement shall disclose the pro forma
effects on earnings and earnings per share as if SFAS No. 123 had been
adopted.

New Accounting Pronouncements

The American Institute of Certified Public Accountants has issued a
Statement of Position ("SOP") 97-2, "Software Revenue Recognition." SOP 97-2
supersedes SOP 91-1 "Software Revenue Recognition," and is effective for the
Company for transactions entered into after December 31, 1997. The Company
will adopt SOP 97-2 in the first quarter of 1998. The adoption of the
standards in the statement is not expected to have a significant impact on the
Company's consolidated financial statements.

F-12
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 is designed to improve the
reporting of changes in equity from period to period. SFAS No. 130 is
effective for the Company's fiscal year ending December 31, 1998. The Company
will adopt SFAS No. 130 for fiscal 1998. Management does not expect SFAS No.
130 to have a significant impact on the Company's financial statements.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS
No. 131 requires that an enterprise disclose certain information about
operating segments. SFAS No. 131 is effective for financial statements for the
Company's fiscal year ending December 31, 1998. The Company does not expect
that SFAS No. 131 will require revision of prior disclosures.

2. RELATED PARTY TRANSACTIONS

During the years ended December 31, 1995, 1996, and 1997, the Company
engaged in a number of transactions with McCall Consulting Group, Inc.
("McCall Consulting Group") and Technology Ventures LLC ("Technology
Ventures"), entities controlled by Joseph S. McCall, an officer and director
of the Company (the "Officer"). In the opinion of management, the rates, terms
and considerations of the transactions with related parties approximate those
with nonrelated entities.

During the years ended December 31, 1995, 1996 and 1997, McCall Consulting
Group provided the following for the Company: temporary help by administrative
employees and third-party contract labor services, the lease of office
equipment and office space and services in connection with the Company's sales
process.

During the years ended December 31, 1996 and 1997, Technology Ventures
provided recruiting and administrative services to the Company.

Expenses relating to services provided by McCall Consulting Group were as
follows for the years ended December 31, 1995, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Contract labor expense:
Implementation expense............................... $ 150 $ 0 $ 0
Research and development............................. 386 1,250 1,450
Commissions expense.................................... 495 0 0
Administrative services................................ 25 22 38
Office rental expense.................................. 0 96 71
Training............................................... 70 37 19
Software and equipment purchases and rental expense.... 0 24 33
------ ------ ------
Total.............................................. $1,126 $1,429 $1,611
====== ====== ======
</TABLE>

Amounts owed related to services provided by McCall Consulting Group were as
follows as of December 31, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Accounts payable and accrued liabilities........................... $234 $52
==== ===
Accounts receivable................................................ $ 19 $ 2
==== ===
</TABLE>

F-13
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Expenses relating to services provided by Technology Ventures were as
follows for the years ended December 31, 1995, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Recruiting services........................................... $ 0 $339 $ 0
Administrative services....................................... 19 23 23
--- ---- ---
Total....................................................... $19 $362 $23
=== ==== ===
</TABLE>

Amounts owed related to services provided by Technology Ventures were as
follows as of December 31, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Accounts payable and accrued liabilities........................... $45 $ 2
=== ===
</TABLE>

3. SQL FINANCIAL SERVICES, LLC

On March 9, 1995, the Company issued 450,000 shares of common stock to
acquire certain intellectual property rights and tangible assets valued at
$300,000 from Technology Ventures, a related party controlled by the Officer.
Subsequent to the acquisition, the Company and Technology Ventures formed a
subsidiary, the Services Subsidiary, which is 80%-owned by the Company. The
Company contributed the acquired intellectual property rights and tangible
assets to the Services Subsidiary. Technology Ventures acquired the remaining
20% interest in the Services Subsidiary in exchange for a $75,000 note bearing
interest at 7.74%, payable annually, with the principal due in a lump sum
payment in March 2000. As of December 31, 1996 and 1997, the note was
reflected as a reduction of minority interest in consolidated subsidiary. The
Services Subsidiary provides implementation services for the Company's
software applications. The Services Subsidiary had income of approximately
$299,000, $1,080,000 and $2,390,000 for the years ended December 31, 1995,
1996 and 1997, respectively. The Services Subsidiary distributed dividends of
approximately $125,000, $1,169,000 and $1,448,000 during the years ended
December 31, 1995, 1996 and 1997, respectively, to the Company and the
related-party minority interest holder. Subsequent to December 31, 1997, the
minority interest in the Services Subsidiary was purchased by the Company. See
Note 11.

F-14
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. INCOME TAXES

The Company files a consolidated tax return with its majority owned
subsidiaries. The components of the income tax provision (benefit) for the
years ended December 31, 1995, 1996 and 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal......................................... $ 0 $ 0 $ 0
State........................................... 0 0 0
------- ------- -------
0 0 0
------- ------- -------
Deferred:
Federal......................................... (2,542) (2,494) (1,287)
State........................................... (477) (468) (241)
------- ------- -------
(3,019) (2,962) (1,528)
------- ------- -------
Valuation allowance............................... 3,019 2,962 1,528
------- ------- -------
Total......................................... $ 0 $ 0 $ 0
======= ======= =======
</TABLE>

The following is a summary of the items which caused recorded income taxes
to differ from taxes computed using the statutory federal income tax rate for
the years ended December 31, 1995, 1996, and 1997:

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Tax benefit at statutory rate........................ (34.0)% (34.0)% (34.0)%
Effect of:
State income tax, net.............................. (4.0) (4.0) (4.0)
Other.............................................. 0.5 0.4 1.1
Valuation allowance................................ 37.5 37.6 36.9
------ ------ ------
Provision (benefit) for income taxes................. 0.0 % 0.0 % 0.0%
====== ====== ======
</TABLE>

F-15
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Deferred tax assets and liabilities are determined based on the difference
between the financial accounting and tax bases of assets and liabilities.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1996 and 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 8,306 $ 10,047
Allowance for doubtful accounts......................... 241 128
Deferred revenue........................................ 151 0
Depreciation and amortization........................... 167 326
Accrued liabilities..................................... 38 110
Other................................................... 5 3
------- --------
8,908 10,614
------- --------
Deferred tax liabilities:
Services Subsidiary..................................... (3) (181)
Amortization of purchased software...................... (5) (5)
------- --------
(8) (186)
------- --------
Net deferred tax assets before valuation allowance........ 8,900 10,428
Valuation allowance....................................... (8,900) (10,428)
------- --------
Net deferred tax assets................................... $ 0 $ 0
======= ========
</TABLE>

A valuation allowance is provided when it is determined that some portion or
all of the deferred tax assets may not be realized. Accordingly, since it
currently is more likely than not that the net deferred tax assets resulting
from the net operating loss carryforwards ("NOLs") and other deferred tax
items will not be realized, a valuation allowance has been provided in the
accompanying consolidated financial statements as of December 31, 1996 and
1997. The Company established the valuation allowance for the entire amount of
the deferred tax assets attributable to the NOL carryforwards, as well as for
the net deferred tax assets created as a result of temporary differences
between book and tax. The Company will recognize such income tax benefits when
realized. The NOLs at December 31, 1997 were approximately $26,439,000 and
expire at various dates through 2012.

The Company's ability to benefit from certain NOL carryforwards is limited
under Section 382 of the Internal Revenue Code when ownership of the Company
changed by more than 50%, as defined. The Company is limited to using the NOL
carryforwards of $15,800,000 generated prior to February 16, 1996. The
limitation does not permit the Company to use in excess of $1,600,000 of
certain NOL carryforwards per year. If the Company does not realize taxable
income in excess of the limitation in future years, certain NOLs will be
unrealizable. NOLs generated from February 16, 1996 through December 31, 1996
of $6,500,000 and NOLs generated from January 1, 1997 through December 31,
1997 of $4,139,000 may also be further limited as a result of the proposed
initial public offering.

F-16
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. DEBT

The Company's short- and long-term debt consists of the following as of
December 31, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ -----
<S> <C> <C>
Notes payable to a bank, due in installments through December
31, 1997, secured by certain equipment, bearing interest at a
rate of prime plus 1.75% to 2%................................ $ 323 $ 0
Working capital line of credit with a bank expiring April 7,
1997, payable on demand, repaid with proceeds from the new
line-of-credit agreement, secured by all company assets,
bearing interest at a rate of prime plus 1%................... 635 0
Payable for purchased software licensing rights, payable in
installments over a two-year period through March 1998 at the
rate at which the Company licenses human resource, payroll and
benefits software to its customers............................ 1,855 1,632
Equipment notes payable to a leasing company, payable in
monthly installments of $27,000, with final principal
installments of $169,000 due March 2000 and August 2000,
secured by certain company assets, bearing interest at a
weighted average rate of 22.1%................................ 0 655
Note payable to a financing company, payable in monthly
installments of $1,500 through November 2000, secured by
certain company assets, bearing interest at 8%................ 0 51
Note payable to a former shareholder, secured by treasury
shares of common stock, bearing interest at 8%................ 93 0
------ -----
2,906 2,338
Less short-term debt........................................... 958 0
Less current portion of long-term debt......................... 855 1,841
------ -----
$1,093 $ 497
====== =====
</TABLE>

During 1997, the Company entered into a new line-of-credit agreement with a
bank bearing interest at prime (8.5% at December 31, 1997) plus 2.75% or 3%,
depending on certain terms, as defined. The new line-of-credit agreement with
the bank provides for maximum borrowings not to exceed the lesser of
$3,000,000 or 80% of eligible license and implementation services revenue
accounts receivable plus 65% of eligible maintenance revenue accounts
receivable and is collateralized by substantially all the Company's assets.
The Company had $0 outstanding under the line of credit and availability of
approximately $1,950,000 under the line of credit at December 31, 1997.

Under the provisions of the line-of-credit agreement, the Company must
comply with certain restrictive covenants. These covenants, among other
things, require the Company to maintain specified levels of profitability.

During 1997, the Company entered into debt and lease agreements with a
leasing company. The debt and lease agreements provide total borrowing
capability of up to $1,000,000 for equipment purchases. As of December 31,
1997, the Company had approximately $655,000 outstanding under these
agreements and $345,000 available for future equipment purchases.

During 1997, the Company paid all amounts outstanding under the note payable
to a former shareholder. In accordance with the agreement, the Company retired
the treasury shares provided as collateral for the note.

F-17
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The aggregate maturities of long-term debt at December 31, 1997 are as
follows (in thousands):

<TABLE>
<S> <C>
December 31:
1998................................................................ $1,841
1999................................................................ 256
2000................................................................ 241
------
$2,338
======
</TABLE>

6. ROYALTY AGREEMENTS

The Company is a party to royalty and other equipment manufacturer
agreements for certain of its applications. The Company incurred a total of
$227,000, $355,000 and $1,109,000 in royalty fees for the years ended December
31, 1995, 1996 and 1997, respectively, pursuant to these agreements. The
royalties and fees paid are included in cost of revenues--license fees in the
accompanying statements of operations.

During 1992, the Company entered into a royalty agreement with a former
stockholder. This agreement grants a 3.75% royalty on certain revenues of the
Company, less certain discounts or commissions, collected from any transfer,
sale, or licensing of specific modules of the software. The Company incurred
royalties of $135,000, $177,000 and $295,000 for the years ended December 31,
1995, 1996 and 1997, respectively, pursuant to this royalty agreement.

7. EMPLOYEE BENEFIT PLANS

The Company sponsors the SQL Financials 401(k) Plan (the "Plan"), a defined
contribution plan covering substantially all employees of the Company. Under
the Plan's deferred compensation arrangement, eligible employees who elect to
participate in the Plan may contribute between 2% and 20% of eligible
compensation, as defined, to the Plan. The Company, at its discretion, may
elect to provide for either a matching contribution or discretionary profit
sharing contribution or both. During the years ended December 31, 1995, 1996,
and 1997, the Company did not make matching or discretionary profit sharing
contributions to the Plan.

8. STOCK OPTION PLAN

The Company has a stock option plan for employees, consultants, and other
individual contributors to the Company which enables the Company to grant up
to 1,652,700 qualified and nonqualified incentive stock options (the "1992
Plan"). The qualified options are to be granted at an exercise price not less
than the fair market value at the date of grant. The nonqualified options are
to be granted at an exercise price of not less than 85% of the fair market
value at the date of grant. Fair market values are to be determined by the
board of directors. The stock option committee determines the period within
which options may be exercised, but no option may be exercised more than ten
years from the date of grant. The stock option committee also determines the
period over which the options vest. Options are generally exercisable for
seven years from the grant date and generally vest over a period of four years
at a rate of 20% for years one and two and 30% for years three and four. At
December 31, 1997, the Company had options outstanding to acquire 1,368,744
shares of common stock under the stock option plan and 256,794 shares
available for grant.

The stock option plan also provides for stock purchase authorizations and
stock bonus awards. As of December 31, 1997, no such awards have been granted
under the plan.

F-18
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company adopted the 1998 Stock Incentive Plan (the "1998 Plan") in the
first quarter of 1998. Under the 1998 Plan, the board of directors have the
flexibility to determine the type and amount of awards to be granted to
eligible participants, who must be employees of the Company or its
subsidiaries. The 1998 Plan provides for grants of incentive stock options,
nonqualified stock options, restricted stock awards, stock appreciation rights
and restricted units. The Company has authorized and reserved for issuance an
aggregate of 200,000 shares of common stock under the 1998 Plan, to be
automatically increased to 1,000,000 shares of common stock upon completion of
the offering. See Note 11. The aggregate number of shares of common stock that
may be granted through awards under the 1998 Plan to any employee in any
calendar year may not exceed 200,000 shares. No options have been granted
under the 1998 Plan. The 1998 Plan will continue in effect until February 2008
unless sooner terminated.

The Company applies the principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," in accounting for its plan. Accordingly, the
Company recognizes deferred compensation when the exercise price of the
options granted is less than the fair market value of the stock at the date of
grant, as determined by the board of directors. The deferred compensation is
presented as a component of equity in the accompanying balance sheets and is
amortized over the periods expected to be benefited, generally the vesting
period of the options.

During 1996 and 1997, the Company granted options with exercise prices below
the fair market value at the date of grant. These fair values are as follows:

<TABLE>
<CAPTION>
FAIR
PERIOD VALUE
------ -----
<S> <C>
August 28, 1996 through December 4, 1996.............................. $1.23
December 5, 1996 through July 23, 1997................................ 1.43
July 24, 1997 through November 9, 1997................................ 2.00
November 10, 1997..................................................... 4.10
December 10, 1997 through December 31, 1997........................... 5.00
</TABLE>

Accordingly, the Company recorded deferred compensation of $148,000 and
$328,000 for options granted during the years ended December 31, 1996 and
1997, respectively. The Company amortizes deferred compensation over four
years, the vesting period of the options. The Company recognized $58,000 of
compensation expense related to option grants for the year ended December 31,
1997.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123

For SFAS No. 123 purposes, the fair value of each option grant has been
estimated as of the date of grant using the Black Scholes option pricing model
with the following assumptions:

<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Dividend yield......................... 0% 0% 0%
Expected volatility.................... 70 70 65
Risk free interest rate at the date of
grant................................. 5.39%-7.60% 5.27%-6.69% 5.78%-6.82%
Expected life.......................... Five years Five years Four years
</TABLE>

Using these assumptions, the fair values of the stock options granted during
the years ended December 31, 1995, 1996, and 1997 are $76,000, $355,000, and
$699,000, respectively, which would be amortized over the vesting period of
the options. Had compensation cost been determined consistent with the
provisions of SFAS

F-19
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

No. 123, the Company's pro forma net loss and net loss per share in accordance
with SFAS No. 123 for the years ended December 31, 1995, 1996, and 1997 would
have been as follows (in thousands except per share amounts):

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Net loss:
As reported.................................... $(8,049) $(7,879) $(4,110)
Pro forma in accordance with SFAS No. 123...... (8,059) (7,911) (4,269)
Basic and diluted net loss per share:
As reported.................................... (6.19) (5.74) (2.97)
Pro forma in accordance with SFAS No. 123...... (6.20) (5.76) (3.08)
</TABLE>

Because SFAS No. 123 has not been applied to options granted prior to
January 1, 1995, the resulting pro forma compensation cost may not be
representative of that expected in future years.

A summary of changes in outstanding options during the years ended December
31, 1995, 1996, and 1997 is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PRICE EXERCISE PRICE
--------- ----------- --------------
<S> <C> <C> <C>
December 31, 1994.................... 220,326 $0.67 $0.67
Granted............................ 220,875 $0.67 $0.67
Canceled........................... (140,661) $0.67 $0.67
Exercised.......................... (6,000) $0.67 $0.67
---------
December 31, 1995.................... 294,540 $0.67 $0.67
Granted............................ 559,830 $0.67-$1.00 $0.87
Canceled........................... (63,579) $0.67 $0.67
Exercised.......................... (4,350) $0.67 $0.67
---------
December 31, 1996.................... 786,441 $0.67-$1.00 $0.81
Granted............................ 802,845 $1.00-$3.67 $2.96
Canceled........................... (203,730) $0.67-$3.67 $0.95
Exercised.......................... (16,812) $0.67-$1.00 $0.68
---------
December 31, 1997.................... 1,368,744 $0.67-$3.67 $2.05
=========
Vested and exercisable at December
31, 1997............................ 264,369 $0.67-$1.00 $0.73
=========
</TABLE>

F-20

<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table summarizes the exercise price range, weighted average
exercise price and remaining contractual lives by year of grant for the number
of options outstanding as of December 31, 1997:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE WEIGHTED REMAINING
NUMBER PRICE AVERAGE CONTRACTUAL
YEAR OF GRANT OF SHARES RANGE PRICE LIFE (YEARS)
------------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C>
1995 and prior:
Options granted at fair
value........................ 222,765 $ 0.67 $0.67 4.01
1996:
Options granted at fair
value........................ 134,895 0.67 0.67 5.42
Options granted at less than
fair value................... 249,489 1.00 1.00 5.93
1997:
Options granted at less than
fair value................... 761,595 1.00-3.67 3.06 6.73
---------
Total....................... 1,368,744 0.67-3.67 2.05 6.01
=========
</TABLE>

The weighted average grant date fair value of options granted during the
years ended December 31, 1996 and 1997 was $1.14 and $3.04, respectively.

Subsequent to December 31, 1997, the Company granted options to acquire
182,250 shares of common stock under the 1992 Plan to certain employees at an
average exercise price equal to $4.45.

9. STOCKHOLDERS' EQUITY

STOCKHOLDERS' AGREEMENT

All owners of the Company's common stock are parties to the Company's
stockholders' agreement. This agreement provides, among other things, for a
right of first refusal to the Company and then to all other stockholders of
the Company to purchase any selling stockholders' shares at a price equal to
that agreed to by a third party. The stockholders' agreement terminates upon
an initial public offering, with the exception of the registration rights of
the shares covered by the agreement.

All the holders of common stock are party to a stockholders' voting
agreement dated September 1, 1995 whereby the Officer is named voting trustee
and votes all common shares. As of December 31, 1997, the Officer controlled
the right to vote 22.6% of the Company's outstanding voting stock, after
dilution from the preferred stockholders. The stockholders' agreement naming
the Officer as voting trustee terminates upon the consummation of an initial
public offering (Note 11).

PREFERRED STOCK

The Company is authorized to issue 3,500,000 shares of preferred stock. Of
this authorized amount, the Company has issued and outstanding 262,500 of
Series A Preferred Stock ("Series A"), 454,888 of Series B Preferred Stock
("Series B"), 428,572 of Series C Preferred Stock ("Series C"), 701,755 of
Series D Preferred Stock ("Series D"), 697,675 of Series E Preferred Stock
("Series E"), and 628,809 of Series F Preferred Stock ("Series F") at December
31, 1997.

Preferred stockholders are entitled to participate in any dividends paid to
common stockholders and have the voting rights and powers of the common
stockholders, as defined. Preferred stockholders receive preferential

F-21
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

distributions in the event of liquidation of the Company for $4 per share of
Series A, $6.65 per share of Series B, $7 per share of Series C, $8.55 per
share of Series D, $8.60 per share of Series E, and $9.60 per share of Series
F, plus any unpaid declared dividends.

Each share of preferred stock is convertible at the option of the holder at
any time into the number of common shares which results from the effective
conversion rate, as defined. The conversion values at December 31, 1997 are $4
for Series A, $6.65 for Series B, $7 for Series C, $8.55 for Series D, $8.60
for Series E, and $9.60 for Series F. The conversion prices at December 31,
1997 are $2.67 for Series A, $4.43 for Series B, $4.67 for Series C, $5.70 for
Series D, $5.73 for Series E, $6.40 for Series F. Further, in accordance with
the Company's certificate of incorporation, the preferred stock will
automatically convert at the defined conversion rate if the Company
consummates an initial public offering with a price per share and gross
proceeds in excess of defined thresholds. The Company is in the process of
obtaining waivers in regards to these thresholds and redemption rights. See
Note 12.

Certain quantities of all series of preferred shares may be put to the
Company by the preferred stockholders within 30 days following the preferred
redemption dates for an amount per share equal to the conversion value of the
preferred stock plus any declared but unpaid dividends. The preferred
redemption dates and the applicable quantities of shares eligible for
redemption, as defined in the certificate of incorporation, are as follows
(dollars in thousands):

<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING VALUE OF
REDEEMABLE STOCK
CONVERTIBLE ELIGIBLE FOR
PREFERRED STOCK REDEMPTION
--------------- ------------
<S> <C> <C>
Preferred redemption dates:
September 30, 1998.......................... 33.3% $ 8,371
September 30, 1999.......................... 50.0 12,556
September 30, 2000.......................... 100.0 25,112
Date of termination of employment of the
Officer, as defined.......................... 100.0 25,112
</TABLE>

SERIES A

On November 24, 1992, pursuant to a stock purchase agreement, the Company
sold 250,000 shares of Series A to Greylock Limited Partnership ("Greylock")
for an aggregate sum of $1,000,000. Stock issuance costs of $62,000 were
incurred in connection with the sale of the preferred shares, resulting in net
proceeds of $938,000. Additionally, on June 30, 1993, pursuant to a stock
purchase agreement, the Company sold 12,500 shares of Series A for an
aggregate sum of $50,000.

SERIES B

On September 21, 1993, pursuant to a stock purchase agreement, the Company
sold a total of 454,888 shares of Series B at a price of $6.65 per share to
Greylock and additional third party investors. The aggregate proceeds from the
sale of this stock totaled $3,025,000. Stock issuance costs of $30,000 were
incurred in connection with the sale of the preferred shares, resulting in net
proceeds of $2,995,000.

SERIES C

On April 1, 1994, pursuant to a stock purchase agreement, the Company sold a
total of 428,572 shares of Series C at a price of $7 per share to certain
existing stockholders and additional third-party investors, resulting in
aggregate proceeds of $3,000,000. Stock issuance costs of $16,000 were
incurred, resulting in net proceeds of $2,984,000.

F-22
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

On August 1, 1994, the Company sold 87,500 shares of Series C Preferred
Stock to Tech Ventures for a purchase price of $7.00 per share, the same price
per share as sold to the Series C investors in April 1994. Tech Ventures paid
the purchase price through the delivery of a secured promissory note. The note
was guaranteed by an officer of the Company who controlled Tech Ventures and
is secured by the assets of an entity controlled by such officer. As of
December 31, 1996 and 1997, the note was reflected as a reduction of
stockholders' equity in the accompanying balance sheets. The Company was
almost entirely dependent at the time on the implementation services of McCall
Consulting Group, a wholly owned subsidiary of Tech Ventures who was
performing substantially all of the implementation services for the Company's
software. In July of 1995 at the request of and as a financial accommodation
to Tech Ventures, the Company converted the 87,500 shares of Series C
Preferred Stock into a warrant to purchase such shares on the same terms and
conditions as set forth in the promissory note. Based on its dependency on
McCall Consulting Group, the Company believed it in its best interest to
maintain Tech Ventures' long-term interest in the success of the Company
through a continuing equity interest. The note was amended effective July 31,
1995 so that the principal amount is due and payable only upon the exercise of
the warrant. The warrant has been reflected in the statement of stockholders'
deficit, with the corresponding note as a reduction of stockholders' deficit.
The warrant expires on the earlier of August 1, 1999 or an initial public
offering.

SERIES D

On January 24, 1995, the Company received an advance on a pending equity
financing arrangement. The Company issued promissory notes to certain existing
preferred stockholders totaling $750,000 at an interest rate of 6%. In
addition, the Company issued warrants to the above parties to purchase 17,544
shares of Series D at a price of $8.55 per share.

On February 21, 1995, the Company issued 701,755 shares of Series D for
$8.55 per share to certain existing preferred stockholders and additional
third party investors. Of the proceeds, $750,000 was used to repay the advance
on financing discussed above. Gross proceeds before stock issuance costs were
$6,000,000. Stock issuance costs of $73,000 were incurred, resulting in net
proceeds of $5,927,000.

On January 5, 1996, the Company entered into an agreement with its bank to
extend its old working capital line of credit. As part of the agreement, the
Company granted the bank a warrant to purchase 8,201 shares of Series D
convertible preferred stock at $8.55 per share. The warrant expires on January
4, 1999.

SERIES E

On February 15, 1996, the Company issued 697,675 shares of Series E for
$8.60 per share to certain existing preferred stockholders and additional
third party investors. Of the proceeds, $2,000,000 was used to repay an
advance on the financing received in 1995. Proceeds from the sale of this
stock, before stock issuance costs, were $6,000,000. Stock issuance costs of
$34,000 were incurred, resulting in net proceeds of $5,966,000.

On March 28, 1997, the Company entered into an agreement with its bank to
amend its working capital line of credit. As part of the agreement, the
Company granted the bank a warrant to purchase 8,721 shares of Series E
convertible preferred stock at $8.60 per share. The warrant expires on March
28, 2000.

SERIES F

On June 5, 1997 and August 5, 1997, the Company received advances on a
pending equity financing arrangement. The Company issued convertible
promissory notes to certain existing preferred stockholders totaling
approximately $2,000,000 and bearing interest at a rate of 8.5%. The notes
were convertible upon the consummation of a private equity offering providing
gross proceeds in excess of defined thresholds. In connection with the
issuance of the notes, the Company issued warrants to the above parties to
purchase 46,821 shares of Series F at a price of $9.60 per share. The value of
the warrants of $40,000 was recorded as a debt discount and was amortized over
the period in which the convertible notes were outstanding. For the year ended
December 31, 1997, the Company amortized $18,000 of the discount to interest
expense.

F-23
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

On September 27, 1997, the Company issued 416,668 shares of Series F to
third party investors for $9.60 per share. Upon issuance of Series F to the
third party investors, the aforementioned convertible notes and accrued
interest were converted to 212,141 shares of Series F at $9.60 per share.
Gross proceeds before stock issuance costs were $6,037,000. Stock issuance
costs of $50,000 were incurred, resulting in net proceeds of $5,987,000.

10. COMMITMENTS AND CONTINGENCIES

LEASES

On March 20, 1997, the Company entered into an 85 month lease for office
space beginning on June 15, 1997. The lease requires annual payments of
$386,000 beginning July 1, 1997 for the first 12 month period with an increase
of 3% in each 12 month period after the first year. The Company is also
receiving the first month's rent free. The 3% escalation and the first month's
free rent are recognized on a straight line basis over the life of the lease.

Lease expenses relate to the lease of office space, telephone, and computer
equipment. Rents charged to expense were approximately $576,000, $749,000, and
$772,000 for the years ended December 31, 1995, 1996, and 1997, respectively.
Aggregate future minimum lease payments under noncancelable operating leases
as of December 31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
December 31:
1998................................................................ $ 616
1999................................................................ 501
2000................................................................ 513
2001................................................................ 526
2002................................................................ 491
Thereafter............................................................ 841
------
$3,488
======
</TABLE>

LETTERS OF CREDIT

At December 31, 1997, standby letters of credit of approximately $290,000
and $210,000 had been issued in accordance with provisions under certain of
the Company's lease and financing agreements. The letters of credit of
$290,000 and $210,000 expire in July 1998 and August 1998, respectively.

PRODUCT LIABILITY

As a result of their complexity, software products may contain undetected
errors or failures when first introduced or as new versions are released.
There can be no assurance that, despite testing by the Company and testing and
use by current and potential customers, errors will not be found in new
financial applications after commencement of commercial shipments or, if
discovered, that the Company will be able to successfully correct such errors
in a timely manner or at all. The occurrence of errors and failures in the
Company's products could result in loss of or delay in the market acceptance
of the Company's financial applications, and alleviating such errors and
failures could require significant expenditure of capital and other resources
by the Company. The consequences of such errors and failures could have a
material adverse effect on the Company's business, results of operations and
financial condition.

F-24
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

LITIGATION

The Company is subject to litigation related to matters arising in the
normal course of business, including product liability. As of December 31,
1997, management is not aware of any unasserted, asserted, or pending material
litigation or claims against the Company.

11. SUBSEQUENT EVENTS

INITIAL PUBLIC OFFERING

The Company is planning an initial public offering (the "Offering") of its
common stock which is targeted for completion in the second quarter of 1998.
There can be no assurance that the Offering will be completed.

TRANSACTIONS WITH OFFICER

In February 1998, the Company entered into an agreement with the Officer
whereby the Officer resigned as the Company's chief executive officer and as
chairman, chief executive officer and manager of the Services Subsidiary. The
Officer agreed to remain an employee of the Company at his current salary,
including incentive compensation, until the completion of the Offering, at
which time he will become a consultant to the Company for a period of one year
pursuant to the terms of an independent contractor agreement. For his
consulting services, the Company will pay the Officer the sum of $125,000 over
the one year period, with the ability to earn an additional $100,000 in
incentive compensation if certain revenue targets are met by the Company. The
Officer has agreed to continue to serve on the Company's board of directors
for at least six months following the termination of his employment. In
recognition of past services to the Company, the termination of the voting
trust discussed in Note 9, and resignations of certain positions noted above,
the Company agreed to pay the Officer a lump sum of $225,000 on or before June
30, 1998 and will pay the Officer as severance an additional $75,000, payable
in semi monthly installments over a one year period beginning on the effective
date of the termination of his employment with the Company.

CONVERSION OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

In accordance with the Company's certificate of incorporation, all
redeemable convertible preferred shares will convert to common shares on the
closing date of the initial public offering if the initial public offering
meets certain defined thresholds. See Note 12.

STOCK SPLIT

On February 19, 1998, the Company's board of directors approved a three-for-
two stock split on the Company's common stock to be affected in the form of a
stock dividend. All share and per share data in the accompanying financial
statements have been adjusted to reflect the split. The effect of the split is
presented retroactively within stockholders' deficit at December 31, 1994 by
transferring the par value for the additional shares issued from the
additional paid-in capital account to the common and preferred stock accounts.

ACQUISITION OF MINORITY INTEREST IN THE SERVICES SUBSIDIARY

On February 5, 1998, the Company purchased Technology Ventures' 20%
ownership in the Services Subsidiary for a purchase price of $4,196,000. In
exchange for the 20% interest in the Services Subsidiary, the

F-25
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Company issued 225,000 shares of common stock to Technology Ventures and
granted Technology Ventures a warrant to purchase an additional 300,000 shares
of common stock at a purchase price of $3.67 per share. The warrant expires on
February 5, 2000. In addition, the Company agreed to pay Technology Ventures
the sum of $1,100,000 February 5, 2000 pursuant to a nonnegotiable,
noninterest-bearing subordinated promissory note (the "Note"). Technology
Ventures has agreed not to sell any of its shares for a period of 180 days
after the effective date of the Offering. In addition, prior to the purchase
and sale, the Services Subsidiary distributed approximately $241,000 to
Technology Ventures as the accumulated unpaid profits earned by the Services
Subsidiary prior to February 5, 1998. The Company also agreed to pay
Technology Ventures a monthly sum equal to 20% of the net profits of the
Services Subsidiary until the earlier of (i) the completion of the Offering or
(ii) a sale of the Company. Any payments made to Technology Ventures for this
20% of net profits of the Services Subsidiary will be recorded by the Company
as additional purchase price at the time of payment. All of the material terms
of the purchase and sale were agreed to by Technology Ventures and the Company
in January 1998, and the purchase and sale have been accounted for in the
first quarter of 1998 based on the value of the common stock issued in such
transaction at $8.00 per share at such time. In February 1998, the Services
Subsidiary also paid Technology Ventures approximately $33,000 as
consideration for the termination of a management services agreement entered
into between the parties in March 1995, and Technology Ventures paid in full
to the Services Subsidiary the remaining principal balance and all accrued
interest due under its $75,000 promissory note (the "Tech Ventures Note").

The purchase price of $4,196,000 was determined by including the following:
(i) 225,000 shares of common stock at $8.00 per share or $1,800,000, (ii) a
note payable of $1,100,000 discounted for no interest at 9.0% for two years
resulting in a net note payable of $934,000, (iii) cash paid of $62,000, and
(iv) a warrant valued at $1,400,000, determined using the Black Scholes Model
using expected volatility of 65%, an expected term of two years, and a risk
free rate of 5.5% to determine a value per share of $4.67 or a total value of
$1,400,000. The Company has accounted for the transaction using the purchase
method of accounting. The purchase price has been allocated to assets acquired
and liabilities assumed based on the fair market value at the date of
acquisition. Goodwill resulting from the transaction in the amount of
$4,159,000 will be amortized over 15 years. The Company will impute interest
on the note payable and recognize the interest over the term of the note, two
years.

12. PREFERRED STOCK CONVERSION WAIVERS

Subsequent to December 31, 1997, the Company obtained waivers from the
preferred stockholders eliminating the requirement that the initial public
offering price and the gross proceeds from an initial public offering be at a
defined threshold in order for the conversion of the preferred stock to be
effected immediately upon an initial public offering. See Note 9.

F-26
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................. $ 5,180
Accounts receivable, less allowance for doubtful accounts of $498.... 3,902
Accounts receivable--related party................................... 5
Prepaids and other current assets.................................... 71
-------
Total current assets............................................... 9,158
-------
PROPERTY AND EQUIPMENT:
Furniture and equipment.............................................. 3,533
Leasehold improvements............................................... 116
-------
Total property and equipment....................................... 3,649
Less accumulated depreciation........................................ (1,830)
-------
Property and equipment, net........................................ 1,819
-------
OTHER ASSETS:
Intangible assets, net of accumulated amortization of $1,302......... 6,003
Deposits and other long-term assets.................................. 180
-------
Total other assets................................................. 6,183
-------
Total assets....................................................... $17,160
=======
</TABLE>

The accompanying notes are an integral part of this unaudited consolidated
balance sheet.

F-27
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET--(CONTINUED)

MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Note payable, net of discount of $160............................... $ 940
Accounts payable and accrued liabilities............................ 4,792
Deferred revenue.................................................... 5,421
Current maturities of long-term debt................................ 1,782
-------
Total current liabilities......................................... 12,935
NONCURRENT LIABILITIES:
Deferred revenue.................................................... 3,471
Long-term debt, net of current maturities........................... 437
-------
Total liabilities................................................. 16,843
-------
REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series A, 262,500 shares issued and outstanding..................... 1,050
Series B, 454,888 shares issued and outstanding..................... 3,025
Series C, 428,572 shares issued and outstanding..................... 3,000
Series D, 719,299 shares issued and outstanding..................... 6,150
Series E, 697,675 shares issued and outstanding..................... 6,000
Series F, 628,809 shares issued and outstanding..................... 6,037
-------
Total redeemable convertible preferred stock...................... 25,262
-------
STOCKHOLDERS' DEFICIT:
Preferred stock, $1 par value; 3,500,000 shares authorized;
3,191,743 shares of redeemable convertible preferred stock issued
and outstanding.................................................... 0
Common stock, $.0001 par value; 9,000,000 shares authorized;
1,715,581 shares issued ........................................... 0
Additional paid in capital.......................................... 3,567
Accumulated deficit................................................. (28,320)
Warrants............................................................ 2,052
Less treasury stock, at cost........................................ (2)
Note from stockholder............................................... (612)
Deferred compensation............................................... (1,630)
-------
Total stockholders' deficit....................................... (24,945)
-------
Total liabilities and stockholders' deficit....................... $17,160
=======
</TABLE>

The accompanying notes are an integral part of this unaudited consolidated
balance sheet.

F-28
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

<TABLE>
<CAPTION>
QUARTERS ENDED
MARCH 31,
---------------
1997 1998
------- ------
(UNAUDITED)
<S> <C> <C>
REVENUES:
License fees................................................ $ 1,938 $3,630
Services fees............................................... 1,611 3,052
Maintenance fees............................................ 897 1,599
------- ------
Total revenues............................................ 4,446 8,281
------- ------
COST OF REVENUES:
License fees................................................ 178 260
Services fees............................................... 1,142 2,182
Maintenance fees............................................ 428 681
------- ------
Total cost of revenues.................................... 1,748 3,123
------- ------
OPERATING EXPENSES:
Research and development.................................... 1,927 1,268
Sales and marketing......................................... 2,243 2,493
General and administrative.................................. 864 1,632
------- ------
Total operating expenses.................................. 5,034 5,393
------- ------
OPERATING LOSS................................................ (2,336) (235)
INTEREST EXPENSE, net......................................... 0 30
MINORITY INTEREST............................................. (98) (36)
------- ------
NET LOSS...................................................... $(2,434) $ (301)
======= ======
BASIC AND DILUTED NET LOSS PER SHARE.......................... $ (1.77) $(0.20)
======= ======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................... 1,376 1,539
======= ======
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
statements.

F-29
<PAGE>

SQL FINANCIALS INTERNATIONAL, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

<TABLE>
<CAPTION>
QUARTERS ENDED
MARCH 31,
---------------
1997 1998
------- ------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(2,434) $ (301)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 357 390
Minority interest......................................... 98 36
Amortization of debt discount............................. 0 14
Deferred compensation..................................... 10 53
Changes in operating assets and liabilities:
Accounts receivable..................................... (862) 643
Prepaids and other current assets....................... (28) (201)
Deposits and other long term assets..................... (100) (28)
Accounts payable and accrued liabilities................ 393 (361)
Deferred revenue........................................ 551 (1,362)
Other noncurrent liabilities............................ (24) 8
------- ------
Total adjustments..................................... 395 (808)
Net cash used in operating activities................. (2,039) (1,109)
INVESTING ACTIVITIES:
Purchases of property and equipment......................... (145) (515)
Purchases of minority interest in subsidiary................ 0 (62)
Purchases of intangible assets.............................. 0 (150)
------- ------
Net cash used in investing activities................. (145) (727)
FINANCING ACTIVITIES:
Proceeds from issuance of redeemable convertible preferred
stock...................................................... 0 150
Proceeds from issuance of common stock...................... 1 12
Proceeds from notes payable and short term borrowings, net.. 1,146 0
Repayments of long-term debt................................ 0 (118)
Dividends paid to holder of minority interest............... (45) (241)
------- ------
Net cash provided by (used) in financing activities... 1,102 (197)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. (1,082) (2,033)
CASH AND CASH EQUIVALENTS, beginning of period................ 3,279 7,213
------- ------
CASH AND CASH EQUIVALENTS, end of period...................... $ 2,197 $5,180
======= ======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest...................................... $ 24 $ 60
======= ======
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
statements.

F-30
<PAGE>

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited balance sheet as of March 31, 1998, and the
unaudited statements of operations and cash flows for the quarters ended March
31, 1997 and 1998, have been prepared in accordance with generally accepted
accounting principles for interim financial information and instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information in notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the unaudited financial statements for this interim period
have been included. The results of the interim periods are not necessarily
indicative of the results to be obtained for the year ended December 31, 1998.
These interim financial statements should be read in conjunction with the
audited financial statements and notes thereto included elsewhere herein.

2. EARNINGS PER SHARE

Basic and diluted net loss per share was computed in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
using the weighted average number of common shares outstanding. Historical
basic and diluted net loss per share does not include the impact of common
stock equivalents, including redeemable convertible preferred stock, as their
effect would be antidilutive.

3. ACQUISITION OF MINORITY INTEREST IN THE SERVICES SUBSIDIARY

On February 5, 1998, the Company purchased the 20% interest in SQL Financial
Services, LLC (the "Services Subsidiary") from Technology Ventures, LLC
("Technology Ventures") a related party controlled by Joseph S. McCall, a
director of the Company. In exchange for the 20% interest in the Services
Subsidiary, the Company issued 225,000 shares of common stock to Technology
Ventures and granted Technology Ventures a warrant to purchase an additional
300,000 shares of common stock at a purchase price of $3.67 per share. The
warrant expires on February 5, 2000. In addition, the Company agreed to pay
Technology Ventures the sum of $1,100,000 due February 5, 2000, pursuant to a
non-negotiable, non-interest-bearing subordinated promissory note. Technology
Ventures has agreed not to sell any of its shares for a period of 180 days
after the effective date of the offering. The Company also agreed to pay
Technology Ventures a monthly sum equal to 20% of the net profits of the
Services Subsidiary until the earlier of (i) the completion of the Offering or
(ii) a sale of the Company. Any payments made to Technology Ventures for this
20% of net profits of the Services Subsidiary will be recorded by the Company
as additional purchase price at the time of payment.

F-31
<PAGE>

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following Unaudited Pro Forma Balance Sheet as of March 31, 1998 was
prepared as if the conversion of the redeemable convertible preferred stock
into 4,787,594 shares of common stock had occurred on such date (the
"Conversion").

The following Unaudited Pro Forma Statements of Operations for the quarter
ended March 31, 1998 and the year ended December 31, 1997 was prepared as if
the purchase of the 20% interest in SQL Financial Services, LLC (the "Services
Subsidiary") from Technology Ventures, LLC ("Technology Ventures"), a related
party controlled by Joseph S. McCall, a director of the Company, was completed
on January 1, 1997 (the "Acquisition"). The Acquisition included the issuance
of 225,000 shares of common stock to Technology Ventures, a warrant to
purchase an additional 300,000 shares of common stock at a purchase price of
$3.67 per share, and a note payable of $1,100,000.

The Unaudited Pro Forma Financial Statements are derived from the historical
financial statements of the Company and the assumptions and adjustments
described in the accompanying notes. In the opinion of management, all
adjustments necessary to present fairly such unaudited financial information
have been made. These Unaudited Pro Forma Financial Statements are provided
for information purposes only and do not purport to represent what the
Company's results will be for any future period. The pro forma information
does not give effect to the proceeds of the Offering.

F-32
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
MARCH 31, 1998 ADJUSTMENTS MARCH 31, 1998
-------------- ----------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................... $ 5,180 $ 5,180
Accounts receivable................ 3,902 3,902
Accounts receivable--related
party............................. 5 5
Prepaids and other current assets.. 71 71
------- -------
Total current assets............. 9,158 9,158
------- -------
PROPERTY AND EQUIPMENT:
Furniture and equipment............ 3,533 3,533
Leasehold improvements............. 116 116
------- -------
Total property and equipment..... 3,649 3,469
Less accumulated deprecation....... (1,830) (1,830)
------- -------
Property and equipment, net...... 1,819 1,819
------- -------
OTHER ASSETS:
Intangible assets.................. 6,003 6,003
Deposits and other long-term
assets............................ 180 180
------- -------
Total other assets............... 6,183 6,183
------- -------
Total assets..................... $17,160 $17,160
======= =======
</TABLE>

See notes to unaudited pro forma financial statements

F-33
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
MARCH 31, 1998 ADJUSTMENTS MARCH 31, 1998
-------------- ----------- --------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
DEFICIT
CURRENT LIABILITIES:
Note payable..................... $ 940 $ 940
Accounts payable and accrued
liabilities..................... 4,792 4,792
Deferred revenue................. 5,421 5,421
Current maturities of long-term
debt............................ 1,782 1,782
------- -------
Total current liabilities...... 12,935 12,935
NONCURRENT LIABILITIES:
Deferred revenue................. 3,471 3,471
Long-term debt, net of current
maturities...................... 437 437
------- -------
Total liabilities.............. 16,843 16,843
------- -------
REDEEMABLE CONVERTIBLE PREFERRED
STOCK
Series A, 262,500 shares issued
and outstanding................. 1,050 (1,050)(a) 0
Series B, 454,888 shares issued
and outstanding................. 3,025 (3,025)(a) 0
Series C, 428,572 shares issued
and outstanding................. 3,000 (3,000)(a) 0
Series D, 719,299 shares issued
and outstanding................. 6,150 (6,150)(a) 0
Series E, 697,675 shares issued
and outstanding................. 6,000 (6,000)(a) 0
Series F, 628,809 shares issued
and outstanding................. 6,037 (6,037)(a) 0
------- ------- -------
Total redeemable convertible
preferred stock............... 25,262 (25,262) 0
------- ------- -------
STOCKHOLDERS' DEFICIT:
Preferred stock, $1 par value,
3,191,743 issued and outstanding
at March 31, 1998, no shares
issued and outstanding pro
forma........................... 0 0
Common stock, $.0001 par value;
1,715,581 shares issued and
outstanding at March 31, 1998,
6,503,175 shares issued and
outstanding pro forma........... 0 1(a) 1
Additional paid in capital....... 3,567 25,261(a) 28,828
Accumulated deficit.............. (28,320) (28,320)
Warrants......................... 2,052 2,052
Less treasury stock, at cost..... (2) (2)
Note from shareholder............ (612) (612)
Deferred compensation............ (1,630) (1,630)
------- -------
Total stockholders' deficit.... (24,945) 317
------- -------
Total liabilities and
stockholders' deficit......... $17,160 $17,160
======= =======
</TABLE>

See notes to unaudited pro forma financial statements

F-34
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE QUARTER ENDED MARCH 31, 1998

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
FOR THE QUARTER FOR THE QUARTER
ENDED PRO FORMA ENDED
MARCH 31, 1998 ADJUSTMENTS MARCH 31, 1998
--------------- ----------- ---------------
<S> <C> <C> <C>
REVENUES:
License fees................... $3,630 $3,630
Services fees.................. 3,052 3,052
Maintenance fees............... 1,599 1,599
------ ------
Total revenues............... 8,281 8,281
------ ------
COST OF REVENUES:
License fees................... 260 260
Services fees.................. 2,182 2,182
Maintenance fees............... 681 681
------ ------
Total cost of revenues....... 3,123 3,123
------ ------
OPERATING EXPENSES:
Research and development....... 1,268 1,268
Sales and marketing............ 2,493 2,493
General and administrative..... 1,632 23(b) 1,655
------ ------
Total operating expenses..... 5,393 5,416
------ ------
OPERATING LOSS................... (235) (258)
INTEREST EXPENSE, net............ 30 7(c) 37
MINORITY INTEREST................ (36) 36(d) --
------ ------
NET LOSS......................... $ (301) $ (295)
====== ======
BASIS AND DILUTED NET LOSS PER
SHARE........................... $(0.20) $(0.05)
====== ======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING..................... 1,539 6,417
====== ======
</TABLE>

See notes to unaudited pro forma financial statements

F-35
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
FOR THE YEAR FOR THE YEAR
ENDED PRO FORMA ENDED
DECEMBER 31, 1997 ADJUSTMENTS DECEMBER 31, 1997
----------------- ----------- -----------------
<S> <C> <C> <C>
REVENUES:
License fees................ $13,506 $13,506
Services fees............... 7,786 7,786
Maintenance fees............ 4,696 4,696
------- -------
Total revenues............ 25,988 25,988
------- -------
COST OF REVENUES:
License fees................ 1,205 1,205
Services fees............... 5,402 5,402
Maintenance fees............ 1,973 1,973
------- -------
Total cost of revenues.... 8,580 8,580
------- -------
OPERATING EXPENSES:
Research and development.... 7,190 7,190
Sales and marketing......... 9,515 9,515
General and administrative.. 4,061 277(b) 4,338
------- -------
Total operating expenses.. 20,766 21,043
------- -------
OPERATING LOSS................ (3,358) (3,635)
INTEREST EXPENSE, net......... 274 84(c) 358
MINORITY INTEREST............. (478) 478(d) --
------- -------
NET LOSS...................... $(4,110) $(3,993)
======= =======
BASIC AND DILUTED NET LOSS PER
SHARE........................ $ (2.97) $ (0.62)
======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING.................. 1,386 6,399
======= =======
</TABLE>

See notes to unaudited pro forma financial statements

F-36
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma balance sheet as of March 31, 1998 reflects the
following as if it occurred on March 31, 1998:

(a) the conversion of the redeemable convertible preferred stock into
4,787,594 shares of common stock on the effective date of the Offering as
if the conversion had occurred on such date by transferring the value of
the redeemable convertible preferred stock to additional paid in capital
and common stock.

The unaudited pro forma statement of operations for the quarter ended March
31, 1998 and the year ended December 31, 1997 reflects the Acquisition as if
they occurred on January 1, 1997 and is based on the historical statements of
operations, adjusted to reflect the following:

(b) The additional amortization of goodwill, to be recognized upon the
Acquisition, of $23,000 for the quarter ended March 31, 1998 and $277,000
for the year ended December 31, 1997. The purchase price of $4,196,000 was
determined by including the following (i) 225,000 shares of common stock
valued at $8.00 per share or $1,800,000; (ii) a note payable of $1,100,000
discounted for no interest at 9.0% for two years, resulting in a net note
payable of $934,000; (iii) cash paid of $62,000, and (iv) a warrant valued
at $1,400,000, determined using the Black Scholes Model using an expected
volatility of 65%, and expected term of two years and a risk free rate of
return of 5.5%. Goodwill in the amount of $4,159,000 will be amortized over
15 years.

(c) the additional interest expense on the note payable of $7,000 for the
quarter ended March 31, 1998 and $84,000 for the year ended December 31,
1997.

(d) the elimination of the minority interest in the Services Subsidiary
of $36,000 for the quarter ended March 31, 1998 and $478,000 for the year
ended December 31, 1997.

(e) The basic and diluted earnings per share is effected by the including
the weighted average shares and the shares of common stock to be issued
upon the conversion of the preferred stock upon the effective date of the
Offering and the full effect of the shares issued in the Acquisition as
follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
Weighted shares....................................... 1,539 1,386
Conversion of Preferred Stock......................... 4,788 4,788
Effect of shares issued in Acquisition................ 90 225
----- -----
6,417 6,399
===== =====
</TABLE>

F-37
<PAGE>

SCHEDULE II

SQL FINANCIALS INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURNS

<TABLE>
<CAPTION>
BALANCE CHARGED BALANCE
AT TO COSTS CHARGED TO AT END
BEGINNING AND OTHER OF
OF PERIOD EXPENSES ACCOUNTS (A) DEDUCTIONS PERIOD
--------- -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
1995.................. $ -- $100,000 $ -- $100,000 $ --
1996.................. -- 387,000 -- 99,000 288,000
1997.................. 288,000 125,000 -- 129,000 284,000
Reserve for returns:
1995.................. $ -- $476,000 $ -- $ -- $476,000
1996.................. 476,000 -- 376,000 506,000 346,000
1997.................. 346,000 166,000 83,000 541,000 54,000
Total:
1995.................. $ -- $576,000 $ -- $100,000 $476,000
1996.................. 476,000 387,000 376,000 605,000 634,000
1997.................. 634,000 291,000 83,000 670,000 338,000
</TABLE>
- --------

(a) Amounts were reclassified from deferred revenue.

S-1
<PAGE>

LOGO

<PAGE>

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

No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
Offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company or the Underwriters. This Prospectus does not consti-
tute an offer to sell or a solicitation of an offer to buy any securities
other than the shares of Common Stock to which it relates or an offer to, or a
solicitation of, any person in any jurisdiction in which such an offer or so-
licitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company or that the infor-
mation contained herein is correct as of any time subsequent to the date here-
of.

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

TABLE OF CONTENTS

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

<TABLE>
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Selected Consolidated Financial Data...................................... 20
Management's Discussion and Analysis of Financial Conditions and Results
of Operations............................................................ 22
Business.................................................................. 33
Management................................................................ 44
Principal Stockholders.................................................... 52
Certain Transactions...................................................... 54
Description of Capital Stock.............................................. 56
Shares Eligible for Future Sale........................................... 57
Underwriting.............................................................. 60
Legal Matters............................................................. 61
Experts................................................................... 61
Additional Information.................................................... 62
Index to Combined Financial Statements.................................... F-1
</TABLE>

Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock, whether or not participating in
this distribution, may be required to deliver a Prospectus. This is in addi-
tion to the obligation of dealers to deliver a Prospectus when acting as Un-
derwriters and with respect to their unsold allotments or subscriptions.

2,500,000 SHARES

LOGO

COMMON STOCK

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

PROSPECTUS

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

NationsBanc Montgomery Securities LLC

Piper Jaffray Inc.

UBS Securities

, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PROSPECTUS

629,625 SHARES

[LOGO]

COMMON STOCK
(PAR VALUE $.0001 PER SHARE)

This Prospectus relates to 629,625 shares (the "Shares") of Common Stock,
$.0001 par value per share (the "Common Stock"), of SQL Financials
International, Inc., a Delaware corporation (the "Company"), that may be
offered and sold from time to time by the selling stockholders named herein
(the "Selling Stockholders"). On the effective date of this offering under a
separate prospectus the Company is also offering in a firmly underwritten
public offering 2,500,000 shares of its Common Stock. In connection with this
firmly underwritten public offering, the Company has also granted to the
underwriters a 30-day option to purchase up to 375,000 additional shares of
Common Stock solely to cover over-allotment, if any. The proceeds from the
firmly underwritten public offering will be used by the Company for general
corporate purposes and working capital, which may include future acquisitions.

The Company will not receive any proceeds from the sale of the Shares by the
Selling Stockholders.

Pursuant to the Prospectus, the Shares may be sold by the Selling
Stockholders, from time to time while the Registration Statement to which this
Prospectus relates is effective, on the Nasdaq National Market or otherwise at
prices and terms prevailing at the time of sale, at prices and terms related
to such prevailing prices and terms, in negotiated transactions or at fixed
prices that may be higher or lower than prevailing prices at the time of sale.
Although the Selling Stockholders have advised the Company of the manner in
which they currently intend to sell the Shares pursuant to this Registration
Statement, the Selling Stockholders may choose to sell all or a portion of
such Shares from time to time in any manner described herein. The methods by
which the Shares may be sold by the Selling Stockholder include, without
limitation: (i) ordinary brokerage transactions, which may include long or
short sales, (ii) transactions which involve crosses or block trades or any
other transactions permitted by the Nasdaq National Market or such other
market on which the Common Stock is then quoted, (iii) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus, (iv) "at the market" to or through market makers
or into an existing market for the Common Stock, (v) in other ways not
involving market makers or established trading markets, including direct sales
to purchasers or sales effected through agents, (vi) through transactions in
the settlement options or swaps or other derivatives (whether exchange-listed
or otherwise), or (vii) any combination of any such methods of sale. In
effecting sales, brokers and dealers engaged by any of the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers
or dealers may receive commissions or discounts from the Selling Stockholders
to sell a specified number of Shares at a stipulated price per share, and, to
the extent such a broker or dealer is unable to do so acting as agent for the
Selling Stockholder, may purchase as principal any unsold shares at the price
required to fulfill such broker or dealer commitment to the Selling
Stockholder. Brokers or dealers who acquire shares as principals may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other brokers or dealers, including transactions of the nature
described above) in the over-the-counter market, in negotiated transactions or
otherwise, at market prices and terms prevailing at the time of sale, at
prices and terms related to such prevailing prices and terms, in negotiated
transactions or at fixed prices and in connection with the methods as
described above. The Shares may be sold directly by any of the Selling
Stockholders or by pledgees, donees, transferees or other successors in
interest. The Selling Stockholders and brokers and dealers through whom sales
of Shares may be effected may be deemed to be "underwriters," as defined under
the Securities Act of 1933, as amended (the "Securities Act"), and any profits
realized by them in connection with the sale of the Shares may be considered
to be underwriting compensation.

The agreements between the Company and the Selling Stockholders referenced
herein provides that the Company will indemnify the Selling Stockholders
against certain liabilities, including civil liabilities under the Securities
Act, or, if such indemnification is held by a court to be unavailable, will
contribute to the amount of such liabilities and expenses. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling the Company pursuant
to the foregoing provisions, its certificate of incorporation or bylaws, the
Company has been informed that in the opinion the Commission such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "SQLF." On , 1998, the reported closing sales price of
the Common Stock on the Nasdaq National Market was $ per share.

The Company will bear all expenses (other than underwriting discounts and
selling commissions, state and local transfer taxes, and fees and expenses of
counsel or other advisors to the Selling Stockholders) in connection with the
registration of the Shares, which are estimated to be $ .

All dealers effecting transactions in the securities offered hereby may be
required to deliver a copy of this Prospectus. The names of any agent or
dealer and applicable commissions or discounts and other information with
respect to a particular offer may be required to be set forth in an
accompanying Prospectus Supplement.

Neither delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED.

SEE "RISK FACTORS" COMMENCING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.

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.

The Date of this Prospectus is , 1998

<PAGE>

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of the shares of
Common Stock offered hereby.

SELLING STOCKHOLDERS

The following table sets forth, as of the date of this Prospectus, certain
information regarding the beneficial ownership of the Company's Common Stock
by each Selling Stockholder as of the date of this Prospectus.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS (1) AFTER OFFERINGS (1)
------------------------- -------------------------
NUMBER OF NUMBER OF
SHARES OF PERCENT OF SHARES TO SHARES OF PERCENT OF
NAME AND ADDRESS COMMON STOCK COMMON STOCK BE SOLD COMMON STOCK COMMON STOCK
- ---------------- ------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Roy Armitage............ 1,005 * 1,005 -- --
1377 Lake James Drive
Virginia Beach, VA
23464
Judith Bassoul.......... 600 * 600 -- --
5265 Linnadine Way
Norcross, GA 30092
M. Alan Bond............ 6,000 * 6,000 -- --
980 Walther Blvd.
Apt. #1317
Lawrenceville, GA 30043
Scott J. Brady.......... 104,350 -- 89,100 15,250 *
6154 Poplar Bluff
Circle
Norcross, GA 30092
Michael P. Caffyn....... 1,005 * 1,005 -- --
2201 Bierce Drive
Virginia Beach, VA
23454
Gerald E. Cassidy....... 1,740 * 1,740 -- --
4940 Evergreen Valley
Way
Alpharetta, GA 30202
Gregory M. Corley....... 390 * 390 -- --
83 Waddell St., N.E.
Atlanta, GA 30307
Mary B. Flock........... 75 * 75 -- --
1511 S.W. Park Avenue,
#1303
Portland, OR 97201
Jeffrey A. Fourman...... 1,680 * 1,680 -- --
1212 N. Grove
Oak Park, IL 60302
Robert J. Fousch, Jr.... 45 * 45 -- --
4617 Howell Farms Drive
Acworth, GA 30101
Wesley C. Hewatt........ 45 * 45 -- --
5694 Kilrush Court
Mableton, GA 30126
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP
PRIOR TO AFTER
OFFERINGS (1) OFFERINGS (1)
-------------- --------------
NUMBER NUMBER
OF OF
SHARES PERCENT SHARES PERCENT
OF OF SHARES OF OF
COMMON COMMON TO BE COMMON COMMON
NAME AND ADDRESS STOCK STOCK SOLD STOCK STOCK
- ---------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Laurie Maceyko Hood....................... 150 * 150 -- --
110 Huntington Road, N.E.
Atlanta, GA 30309
Tracey D. Jackson......................... 900 * 900 -- --
510 Shale Court
Alpharetta, GA 30202
Jeffrey M. Kirby.......................... 600 * 600 -- --
21 Beacon Street
Apt. 5-S
Boston, MA 02108
John M. McCall............................ 7,500 * 7,500 -- --
3019 Blandwood Drive
Valdosta, GA 31601
Rudolph Russell McCall ................... 7,500 * 7,500 -- --
3019 Blandwood Drive
Valdosta, GA 31601
James Patrick McVey....................... 300 * 300 -- --
4037 Dream Catcher Drive
Woodstock, GA 30189
Denise L. Miles........................... 615 * 615 -- --
3346 Muscadine Trail
Kennasaw, GA 30144
Nader Oteifa.............................. 1,230 * 1,230 -- --
1789 Chestwood Drive
Virginia Beach, VA 23456
Ronnie D. Philpot......................... 342 * 342 -- --
212 Melrah Hill
Peachtree City, GA 30269
Gary J. Rogers............................ 8,400 * 8,400 -- --
17534 Charity Lane
Germantown, MD 20874
Janet V. Smith............................ 390 * 390 -- --
7315 Chattahoochee Bluff Drive
Atlanta, GA 30350
Noreen M. Snellman........................ 1,800 * 1,800 -- --
1100 Oakhavern Drive
Roswell, GA 30075
Nancy W. Swager........................... 33 * 33 -- --
5345 Myras Court
Cumming, GA 30040
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS (1) AFTER OFFERINGS (1)
------------------------- -------------------------
NUMBER OF SHARES NUMBER OF
SHARES OF PERCENT OF TO BE SHARES OF PERCENT OF
NAME AND ADDRESS COMMON STOCK COMMON STOCK SOLD COMMON STOCK COMMON STOCK
- ---------------- ------------ ------------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Technology Ventures,
L.L.C. (2)............ 928,950 14% 497,700 431,250 5%
Two Ravinia Drive,
Suite 1090
Atlanta, Georgia 30346
Attn: Joseph S. McCall
Charlyn Thompson....... 240 * 240 -- --
9975 Barston Court
Alpharetta, GA 30202
Michael P. Tuttle...... 240 * 240 -- --
1072 High Point Drive
Atlanta, GA 30306
</TABLE>
- --------
*Represents less than 1% of the outstanding Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
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 that are or may become
exercisable within 60 days of March 31, 1998 are deemed outstanding. Such
shares, however, are not deemed outstanding for the purposes of computing
the percentage ownership of any other person. Each Selling Stockholder
named in the table has sole voting and investment power with respect to
the shares set forth opposite such Selling Stockholder's name.
(2) Consists of warrants to purchase 431,250 shares of Common Stock, and
497,700 shares of Common Stock owned by Technology Ventures, L.L.C.

Technology Ventures, L.L.C. is controlled by Joseph S. McCall, a member of
the Company's board of directors. The Common Stock was issued to Tech Ventures
on February 5, 1998 in connection with the Company's purchase of Tech
Ventures' 20% ownership interest in SQL Financials Services L.L.C. Mr. McCall
founded the Company in November 1991 and has previously served as its
Chairman, President, and Chief Executive Officer and has been a member of the
Board of Directors since 1991. Mr. McCall currently serves as a Director and
consultant to the Company. Prior to founding the Company, Mr. McCall founded
McCall Consulting Group, Inc. in 1986 and he currently serves as its
President.

Alan Bond served as Vice President of Finance from May 1996 to December
1997. Gary Rogers served as Vice President of Sales from February, 1996 to
October, 1997.

All of Shares of Common Stock beneficially owned by the Selling Stockholders
may be offered and sold pursuant to this Prospectus.

PLAN OF DISTRIBUTION

4
<PAGE>

market" to or through market makers or into an existing market for the Common
Stock, (v) in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through
agents, (vi) through transactions in options or swaps or other derivatives
(whether exchange-listed or otherwise), or (vii) any combination of any such
methods of sale. In effecting sales, brokers and dealers engaged by any of the
Selling Stockholders may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from the Selling
Stockholders to sell a specified number of shares at a stipulated price per
share, and, to the extent such a broker or dealer is unable to do so acting as
agent for the Selling Stockholders, may purchase as principal any unsold
Shares at the price required to fulfill such broker or dealer commitment to
the Selling Stockholders. Brokers or dealers who acquire Shares as principals
may thereafter resell such Shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other brokers or dealers, including transactions of the nature
described above) in the over-the-counter market, in negotiated transactions or
otherwise, at market prices and terms prevailing at the time of sale, at
prices and terms related to such prevailing prices and terms, in negotiated
transactions or at fixed prices and in connection with the methods as
described above. The Shares may be sold directly by the Selling Stockholders
or by pledgees, donees, transferees or other successors in interest.

The Company will maintain the effectiveness of the registration of the
Shares offered hereby until , 2000, two years from the effective date of
the Company's initial public offering or (ii) the date on which the Shares
offered hereby, in the opinion of counsel, may be sold by the Selling
Stockholders pursuant to Rule 144 of the Securities Act (without regard to
volume limitations). Any Shares which qualify for sale pursuant to Rule 144
under the Securities Act may be sold under that Rule rather than pursuant to
this Prospectus. There can be no assurance that the Selling Stockholders will
sell any or all of the Shares offered hereby.

The Company is bearing all of the costs relating to the registration of the
Shares including fees of counsel for the Company. Any commissions, discounts
or other fees payable to a broker, dealer, underwriter, agent or market maker
in connection with the sale of any of the Shares will be borne by the Selling
Stockholders.

Pursuant to the terms of the Acquisition Agreement dated February 5, 1998,
the Company has agreed to indemnify the Tech Ventures, a Selling Stockholder,
any person who controls Tech Ventures, and any underwriters for the Tech
Ventures, against certain liabilities and expenses arising out of or based
upon the information set forth in this Prospectus, and the Registration
Statement of which this Prospectus is a part, including liabilities under the
Securities Act, and if such indemnification is held by a court to be
unavailable, to contribute to the amount of such liabilities and expenses.

The Selling Stockholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of Section 2(11) of the
Securities Act. Any commissions paid or any discounts or concessions allowed
to any broker, dealer, underwriter, agent or market maker and, if any such
broker, dealer, underwriter, agent or market maker purchases any of the Shares
as principal, any profits received on the resale of such Shares, may be deemed
to be underwriting commissions or discounts under the Securities Act.

Because the Selling Stockholders may be deemed to be underwriters, the
Selling Stockholders will be subject to prospectus delivery requirements under
the Securities Act. Furthermore, in the event the Selling Stockholders are
deemed underwriters and a sale of shares is deemed to be a "distribution" or
part of a distribution of the Shares, such Selling Stockholders, any selling
broker or dealer and any "affiliated purchasers" may be subject to Regulation
M under the Exchange Act, which prohibits, with certain exceptions, any such
person from bidding for or purchasing any security which is the subject of
such distribution until his participation in that distribution is completed.
In addition, Regulation M prohibits, with certain exceptions, any "stabilizing
bid" or "stabilizing purchase" for the purpose of pegging, fixing or
stabilizing the price of Common Stock in connection with this Offering.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Womble Carlyle Sandridge & Rice, PLLC, Atlanta,
Georgia.

5
<PAGE>

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

No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this Of-
fering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any securities other than the shares of
Common Stock to which it relates or an offer to, or a solicitation of, any per-
son in any jurisdiction in which such an offer or solicitation would be unlaw-
ful. Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Company or that the information contained herein is cor-
rect as of any time subsequent to the date hereof.

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

TABLE OF CONTENTS

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

<TABLE>
<S> <C>
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 9
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Dilution.................................................................. 20
Selected Consolidated Financial Data...................................... 21
Management's Discussion and Analysis of Financial Conditions and Results
of Operations............................................................ 22
Business.................................................................. 32
Management................................................................ 43
Selling Stockholders......................................................
Certain Transactions...................................................... 53
Description of Capital Stock.............................................. 54
Shares Eligible for Future Sale........................................... 56
Plan of Distribution......................................................
Legal Matters............................................................. 59
Experts................................................................... 59
Additional Information.................................................... 59
Index to Combined Financial Statements.................................... F-1
</TABLE>

629,625 SHARES

LOGO

COMMON STOCK

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

PROSPECTUS

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

, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 13,440
National Association of Securities Dealers, Inc. fee.............. 5,275
Nasdaq National Market listing fee................................ 75,625
Accountants' fees and expenses.................................... 375,000
Legal fees and expenses........................................... 350,000
Blue Sky fees and expenses........................................ 10,000
Transfer Agent's fees and expenses................................ 10,000
Printing and engraving expenses................................... 150,000
Miscellaneous..................................................... 410,660
---------
Total Expenses.................................................. 1,400,000
=========
</TABLE>
- --------
* To be completed by amendment. All fees other than the SEC registration fee,
the NASD fee and the Nasdaq listing fee are estimated.

None of the expenses of issuance and distribution will be borne by the
Selling Stockholders.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Restated By-Laws of the Company (the "Restated By-Laws") and the
Restated Certificate of Incorporation (the "Restated Certificate") of the
Company provide that the directors and officers of the Company shall be
indemnified by the Company to the fullest extent authorized by Delaware law,
as it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
the Company. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Company pursuant to the
Restated By-Laws, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. The Company intends to obtain insurance
which insures the directors and officers of the Company against certain losses
and which insures the Company against certain of its obligations to indemnify
such directors and officers. In addition, the Restated Certificate of the
Company provides that the directors of the Company will not be personally
liable for monetary damages to the Company for breaches of their fiduciary
duty as directors, unless they violated their duty of loyalty to the Company
or its stockholders, acted in bad faith, knowingly or intentionally violated
the law, authorized illegal dividends or redemptions or derived an improper
personal benefit from their action as directors. Such limitations of personal
liability under the Delaware Business Corporation Law do not apply to
liabilities arising out of certain violations of the federal securities laws.
While non-monetary relief such as injunctive relief, specific performance and
other equitable remedies may be available to the Company, such relief may be
difficult to obtain or, if obtained, may not adequately compensate the Company
for its damages.

There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification by the Company
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.

Section 8 of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
Underwriters named therein.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, the Company has issued the securities set forth
below which were not registered under the Securities Act:

(i) On April 1, 1994, the Company issued 428,572 shares of Series C
Preferred Stock for $7.00 per share. Of the 428,572 shares of Series C
Preferred Stock, 87,500 shares were issued to Tech Ventures in exchange for
a promissory note payable by Tech Ventures in the amount of $612,500.

II-1
<PAGE>

(ii) On October 25, 1995, the Company issued a Warrant to Tech Ventures
to purchase 87,500 shares of Series C Preferred Stock at an exercise price
of $7.00 per share in exchange for the 87,500 shares of Series C Preferred
Stock held by Tech Ventures and amendment of the $612,500 promissory note
to the Company payable by Tech Ventures.

(iii) On February 21, 1995, the Registrant issued 15,000 shares of its
Common Stock to the Company's then-current common stockholders for $0.67
per share and 701,755 shares of its Series D Preferred Stock for $8.55 per
share. In addition, the Company issued warrants to purchase a total of
17,544 shares of its Series D Preferred Stock at an exercise price of $8.55
per share.

(iv) On January 5, 1996, the Registrant issued a warrant to purchase
5,848 shares of Series D Preferred Stock at an exercise price of $8.55 per
share. The warrant was issued to a lender in exchange for the lender's
agreement to extend the Company's working capital line of credit.

(v) On February 15, 1996, the Registrant issued 697,675 shares of its
Series E Preferred Stock for $8.60 per share. In addition, the Company
issued warrants to its lender to purchase 8,721 shares of its Series E
Preferred Stock at an exercise price of $8.60 per share.

(vi) On September 26, 1997, the Registrant issued 628,809 shares of
Series F Preferred Stock for $9.60 per share. Of the 628,809 shares of
Series F Preferred Stock, Spitfire Capital Partners, L.P., an affiliate of
NationsBanc Montgomery Securities LLC, acquired 208,334 shares of Series F
Preferred Stock for $9.60 per share.

(vii) On September 26, 1997, the Registrant issued warrants to purchase
46,821 shares of Series F Preferred Stock for $9.60 per share to certain
stockholders in connection with loans made to the Company.

(viii) On February 5, 1998, the Registrant issued 225,000 shares of
Common Stock and a warrant to purchase 300,000 shares of Common Stock at an
exercise price of $3.69 per share, to Technology Ventures LLC in exchange
for its 20% interest in SQL Financials Services, LLC.

(ix) On February 9, 15, 17, 18 and 19, 1998, the Company issued 17,544
shares of Series D Preferred Stock to certain existing stockholders upon
the exercise of existing warrants, at a price of $8.55 per share.

(x) Since March 31, 1995, the Registrant has issued stock options to
purchase an aggregate of 1,478,689 shares of its Common Stock under the
1992 Stock Option Plan at a weighted average exercise price of $3.81 per
share.

Except as described above, no underwriters were engaged in connection with
any of the foregoing issuances of securities. The sale and issuance of shares
listed above were exempt from registration under the Securities Act by virtue
of Sections 3(a), 3(b) and 4(a) of the Securities Act and in reliance on Rule
701 and Regulation D promulgated thereunder.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits. The following is a list of exhibits filed as part of the
Registration Statement.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement.
2.1* --Acquisition Agreement between the Registrant and Technology
Ventures, LLC dated February 5, 1998.
2.2* --Non-Negotiable Subordinated Promissory Note to Technology
Ventures, LLC dated February 5, 1998.
2.3* --Warrant for purchase of 200,000 shares issued to Technology
Ventures, LLC dated February 5, 1998.
3.1* --Amended and Restated Certificate of Incorporation of the
Registrant dated September 26, 1997.
3.2* --Bylaws of the Registrant.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.3* --Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be effective upon the effectiveness of this
Offering.
3.4* --Form of Amended and Restated Bylaws of the Registrant, to be
effective upon the effectiveness of this Offering.
4.1* --See Exhibits 3.3 and 3.4 for provisions of the Amended and
Restated Certificate of Incorporation and Amended and Restated
Bylaws of the Registrant defining rights of the holders of Common
Stock of the Registrant.
4.2** --Specimen Stock Certificate.
5.1 --Opinion of Womble Carlyle Sandridge & Rice, PLLC, as to the
legality of the shares being registered.
--Amended and Restated Shareholders' Voting Agreement dated
10.1* September 1, 1995.
--Restated Shareholders Agreement dated September 1, 1995, as
10.2* amended.
10.3* --Stock Purchase Agreement dated February 15, 1996 (Series E).
10.4* --Stock Purchase Agreement dated September 26, 1997 (Series F).
10.5* --SQL 1992 Stock Option Plan, effective November 22, 1992.
--1998 Stock Incentive Plan, effective February 5, 1998 (with form
10.6* option agreement).
10.7* --Lease Agreement between the Registrant and Technology
Park/Atlanta, Inc. dated March 20, 1997.
10.8* --License and Private Label Agreement between the Registrant and
Personnel Data Systems, Inc. dated March 1, 1996 (with addendum).
--Loan and Security Agreement with Silicon Valley Bank dated March
10.9* 28, 1997.
--Leasing Technologies International, Inc. Master Lease Agreement
10.10* dated March 13, 1997.
10.11* --Leasing Technologies International, Inc. Master Note and
Security Agreement dated March 20, 1997.
10.12* --Software License and Support Agreement between the Registrant
and McCall Consulting Group dated February 5, 1998.
--Agreement between the Registrant and Joseph S. McCall dated
10.13* February 5, 1998.
10.14* --Independent Contractor Agreement between the Registrant and
McCall Consulting Group, Inc. dated February 5, 1998.
10.15* --Independent Contractor Agreement between Registrant and Joseph
S. McCall dated February 5, 1998.
10.16* --Letter Agreement regarding Joseph McCall 1998 Compensation Plan
dated February 5, 1998.
11.1* --Statement re: Computation of Per Share Earnings.
21.1* --List of Subsidiaries.
23.1 --Consent of Arthur Andersen LLP.
--Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
23.2 Exhibit 5.1).
23.3 --Consent of Willamette Management Associates.
24.1 --Powers of Attorney (included on signature page).
27.1 --Financial Data Schedule. (For SEC use only)
--Report of Independent Public Accountants on Financial Statement
99.1* Schedule.
</TABLE>
- --------
(b) Schedule II--Valuation and Qualifying Accounts
* Previously filed.
** To be filed by Amendment.

II-3
<PAGE>

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

(ii) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(d) The Registrant hereby further undertakes:

(i) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.

(ii) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SUWANEE,
STATE OF GEORGIA ON THE 30TH DAY OF APRIL, 1998.

SQL Financials International, Inc.

By: /s/ Stephen P. Jeffery
---------------------------
STEPHEN P. JEFFERY
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND PRESIDENT

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.

SIGNATURE TITLE DATE

Chairman, Chief
Executive Officer April 30, 1998
/s/ Stephen P. Jeffery (Principal
- ------------------------------------- Executive Officer);
STEPHEN P. JEFFERY President and
Director

Chief Financial
Officer (Principal April 30, 1998
/s/ William A. Fielder III Financial and
- ------------------------------------- Accounting Officer)
WILLIAM A. FIELDER III

* Director
- ------------------------------------- April 30, 1998
JOSEPH S. MCCALL

* Director
- ------------------------------------- April 30, 1998
WILLIAM S. KAISER

* Director
- ------------------------------------- April 30, 1998
DONALD L. HOUSE

* Director
- ------------------------------------- April 30, 1998
TENCH COXE

Director
* April 30, 1998
- -------------------------------------
SAID MOHAMMADIOUN

/s/ Stephen P. Jeffery
- -------------------------------------
* By Stephen P. Jeffery, attorney-in-fact

II-5

<PAGE>

Exhibit 1.1

[Draft of April 22, 1998]

2,500,000 Shares

SQL Financials International, Inc.

Common Stock

Underwriting Agreement

dated [___], 1998

<PAGE>

UNDERWRITING AGREEMENT

___________, 1998

NATIONSBANC MONTGOMERY SECURITIES LLC
PIPER JAFFRAY INC.
UBS SECURITIES LLC
As Representatives of the several Underwriters
600 Montgomery Street
San Francisco, California 94111

Ladies and Gentlemen:

Introductory. SQL Financials International, Inc., a Delaware
corporation (the "Company"), proposes to issue and sell to the several
underwriters named in Schedule A (the "Underwriters") an aggregate of 2,500,000
shares (the "Firm Common Shares") of its Common Stock, par value $0.0001 per
share (the "Common Stock"). In addition, the Company has granted to the
Underwriters an option to purchase up to an additional 375,000 shares (the
"Optional Common Shares") of Common Stock, as provided in Section 2. The Firm
Common Shares and, if and to the extent such option is exercised, the Optional
Common Shares are collectively called the "Common Shares." NationsBanc
Montgomery Securities LLC, Piper Jaffray Inc. and UBS Securities LLC have agreed
to act as representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Common
Shares.

The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-46685), which contains a form of prospectus to be used in connection with
the public offering and sale of the Common Shares and a form of prospectus to be
used in connection with the resale of up to 629,625 shares of Common Stock (the
"Resale Shares") offered from time by certain stockholders of the Company. Such
registration statement, as amended, including the financial statements, exhibits
and schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A or Rule 434 under the Securities Act, is called the "Registration
Statement." Any registration statement filed by the Company pursuant to Rule
462(b) under the Securities Act is called the "Rule 462(b) Registration
Statement," and from and after the date and time of filing of the Rule 462(b)
Registration Statement the term "Registration Statement" shall include the Rule
462(b) Registration Statement. Such prospectus, in the form first used by the
Underwriters to confirm sales of the Common Shares, is called the "Prospectus."
The Prospectus in the form used at any time in connection with the offer and
sale of the Resale Shares is called the "Resale Prospectus." All references in
this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus or the Prospectus, or any amendments or
supplements to any of the foregoing, shall include any copy thereof filed with
the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR").

The Company hereby confirms its agreements with the Underwriters as
follows:

<PAGE>

Section 1. Representations and Warranties of the Company.

The Company hereby represents, warrants and covenants to each
Underwriter as follows:

(a) Compliance with Registration Requirements.

The Registration Statement and any Rule 462(b) Registration Statement
have been declared effective by the Commission under the Securities Act. The
Company has complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.

Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical in all substantive respects to the copy
thereof delivered to the Underwriters for use in connection with the offer and
sale of the Common Shares. Each of the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendment thereto, at the time it
became effective and during the period ending on such date, as in the opinion of
counsel for the Underwriters, the Prospectus is no longer required by law to be
delivered in connection with sales by an Underwriter or dealer (the "Prospectus
Delivery Period"), complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus, as
amended or supplemented, as of its date and at all subsequent times, did not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives expressly
for use therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.

(b) Offering Materials Furnished to Underwriters.

The Company has delivered to the Representatives one complete manually
signed copy of the Registration Statement and of each consent and certificate of
experts filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives has reasonably requested for each of the Underwriters.

The Company has not distributed and will not distribute, prior to the
later of the Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Common Shares, any offering material in
connection with the offering and sale of the Common Shares other than a
preliminary prospectus, the Prospectus or the Registration Statement and any
other material permitted under the Securities Act.
<PAGE>

(d) The Underwriting Agreement.

This Agreement has been duly authorized, executed and delivered by, and
is a valid and binding agreement of, the Company, enforceable in accordance with
its terms, except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.

(e) Authorization of the Common Shares.

The Common Shares to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale pursuant to this Agreement and,
when issued and delivered by the Company pursuant to this Agreement [and upon
receipt by the Company of the purchase price therefor], will be validly issued,
fully paid and nonassessable.

(f) No Applicable Registration or Other Similar Rights.

There are no persons with registration or other similar rights to have
any equity or debt securities registered for sale under the Registration
Statement or included in the offering contemplated by this Agreement, except for
such rights as have been duly waived.

(g) No Material Adverse Change.

Except as otherwise disclosed in the Prospectus, subsequent to the
respective dates as of which information is given in the Prospectus: (i) there
has been no material adverse change, or any development that could reasonably be
expected to result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether or not
arising from transactions in the ordinary course of business of the Company and
its subsidiaries, considered as one entity (any such change is called a
"Material Adverse Change"); (ii) the Company and its subsidiaries, considered as
one entity, have not incurred any material liability or obligation, indirect,
direct or contingent, not in the ordinary course of business nor entered into
any material transaction or agreement not in the ordinary course of business;
and (iii) there has been no dividend or distribution of any kind declared, paid
or made by the Company or, except for dividends paid to the Company or their
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock.

(h) Independent Accountants.

Arthur Andersen LLP, which has expressed its opinion with respect to
the financial statements (which term as used in this Agreement includes the
related notes thereto) and supporting schedules filed with the Commission as a
part of the Registration Statement and included in the Prospectus, are
independent public or certified public accountants as required by the Securities
Act.

(i) Preparation of the Financial Statements.

The financial statements filed with the Commission as a part of the
Registration Statement and included in the Prospectus present fairly the
consolidated financial position of the Company and its subsidiaries as of and at
the dates indicated and the results of their operations and cash flows for the
periods specified. The supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. Such
financial statements and supporting schedules have been
<PAGE>

prepared in conformity with generally accepted accounting principles applied on
a consistent basis throughout the periods involved, except as may be expressly
stated in the related notes thereto. No other financial statements or supporting
schedules are required to be included in the Registration Statement. The
financial data set forth in the Prospectus under the captions "Prospectus
Summary--Summary Selected Financial Data," "Selected Financial Data" and
"Capitalization" fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.

(j) Incorporation and Good Standing of the Company and its
Subsidiaries.

Each of the Company and its subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation and has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus and, in the case of the Company, to enter into and perform its
obligations under this Agreement. The Company and each subsidiary is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except for
such jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change. All of the issued and outstanding capital stock of each subsidiary has
been duly authorized and validly issued, is fully paid and nonassessable and is
owned by the Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or claim. The Company
does not own or control, directly or indirectly, any corporation, association or
other entity other than the subsidiaries listed in Exhibit 21.1 to the
Registration Statement.

(k) Capitalization and Other Capital Stock Matters.

The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" (other than
for subsequent issuances, if any, pursuant to employee benefit plans described
in the Prospectus or upon exercise of outstanding options or warrants described
in the Prospectus). The Common Stock (including the Common Shares) conforms in
all material respects to the description thereof contained in the Prospectus.
All of the issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable and have been
issued in compliance with federal and state securities laws. None of the
outstanding shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its subsidiaries
other than those accurately described in the Prospectus. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth in the Prospectus
accurately and fairly presents in all material respects the information required
to be shown with respect to such plans, arrangements, options and rights.

(l) Stock Exchange Listing.

The Common Shares have been approved for inclusion on the Nasdaq
National Market, subject only to official notice of issuance.

(m) Non-Contravention of Existing Instruments; No
Further Authorizations or Approvals Required.
<PAGE>

Neither the Company nor any of its subsidiaries is in violation of its
charter or by-laws or is in default (or, with the giving of notice or lapse of
time, would be in default) ("Default") under any indenture, mortgage, loan or
credit agreement, note, contract, franchise, lease or other instrument to which
the Company or any of its subsidiaries is a party or by which it or any of them
may be bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject (each, an "Existing Instrument"), except for such
Defaults as would not, individually or in the aggregate, result in a Material
Adverse Change. The Company's execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby and by the
Prospectus (i) have been duly authorized by all necessary corporate action and
will not result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, (ii) will not conflict with or constitute a
breach of, or Default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, or require the consent of any other part to, any
Existing Instrument, except for such conflicts, breaches, Defaults, liens,
charges or encumbrances as would not, individually or in the aggregate, result
in a Material Adverse Change and (iii) will not result in any violation of any
law, administrative regulation or administrative or court decree applicable to
the Company or any subsidiary. No consent, approval, authorization or other
order of, or registration or filing with, any court or other governmental or
regulatory authority or agency, is required for the Company's execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus, except such as have been obtained or
made by the Company and are in full force and effect under the Securities Act,
and such as may be required under applicable state securities or blue sky laws
and from the National Association of Securities Dealers, Inc. (the "NASD").

(n) No Material Actions or Proceedings.

There are no legal or governmental actions, suits or proceedings
pending or, to the best of the Company's knowledge, threatened (i) against or
affecting the Company or any of its subsidiaries, (ii) which has as the subject
thereof any officer or director of, or property owned or leased by, the Company
or any of its subsidiaries or (iii) relating to environmental or discrimination
matters, where in any such case (A) there is a reasonable possibility that such
action, suit or proceeding might be determined adversely to the Company or such
subsidiary and (B) any such action, suit or proceeding, if so determined
adversely, would reasonably be expected to result in a Material Adverse Change
or adversely affect the consummation of the transactions contemplated by this
Agreement. No material labor dispute with the employees of the Company or any of
its subsidiaries exists or, to the best of the Company's knowledge, is
threatened or imminent.

(o) Intellectual Property Rights.

The Company and its subsidiaries own or possess sufficient trademarks,
trade names, patent rights, copyrights, licenses, approvals, trade secrets and
other similar rights (collectively, "Intellectual Property Rights") reasonably
necessary to conduct their businesses as now conducted; and the expected
expiration of any of such Intellectual Property Rights would not result in a
Material Adverse Change. Neither the Company nor any of its subsidiaries has
received any notice of infringement or conflict with asserted Intellectual
Property Rights of others, which infringement or conflict, if the subject of an
unfavorable decision, would result in a Material Adverse Change.
<PAGE>

(p) All Necessary Permits, etc.

The Company and each subsidiary possess such valid and current
certificates, authorizations or permits issued by the appropriate state, federal
or foreign regulatory agencies or bodies necessary to conduct their respective
businesses, and neither the Company nor any subsidiary has received any notice
of proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.

(q) Title to Properties.

The Company and each of its subsidiaries have good and marketable title
to all the properties and assets reflected as owned in the financial statements
referred to in Section 1(i) above, in each case free and clear of any security
interests, mortgages, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of such
property by the Company or such subsidiary. The real property, improvements,
equipment and personal property held under lease by the Company or any
subsidiary are held under valid and enforceable leases, with such exceptions as
are not material and do not materially interfere with the use made or proposed
to be made of such real property, improvements, equipment or personal property
by the Company or such subsidiary.

(r) Tax Law Compliance.

The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes
required to be paid by them and, if due and payable, any related or similar
assessment, fine or penalty levied against them. The Company has made adequate
charges, accruals and reserves in the applicable financial statements referred
to in Section 1(i) above in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company has
not been finally determined.

(s) Company Not an "Investment Company."

The Company has been advised of the rules and requirements under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
Company is not, and after receipt of payment for the Common Shares will not be,
an "investment company" within the meaning of Investment Company Act and will
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

(t) Insurance.

The Company and its subsidiaries are insured by recognized, financially
sound and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for their businesses including, but not limited to, policies covering
real and personal property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and earthquakes. The
Company has no reason to believe that it or any subsidiary will not be able
(i) to renew their existing insurance coverage as and when such policies expire
or (ii) to obtain comparable coverage from similar institutions as may be
necessary or appropriate to conduct their business as now conducted and at a
cost that would not result in a Material Adverse Change.
<PAGE>

Neither the Company nor any subsidiaries has been denied any insurance coverage
which it has sought or for which it has applied.

(u) No Price Stabilization or Manipulation.

The Company has not taken and will not take, directly or indirectly,
any action designed to or that might be reasonably expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Common Shares.

(v) Related Party Transactions.

There are no business relationships or related-party transactions
involving the Company or any subsidiaries or any other person required to be
described in the Prospectus which have not been described as required.

(w) No Unlawful Contributions or Other Payments.

Neither the Company nor any subsidiaries nor, to the best of the
Company's knowledge, any employee or agent of the Company or any subsidiaries,
has made any contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law or of the character
required to be disclosed in the Prospectus.

(x) Company's Accounting System.

The Company maintains a system of accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

(y) Compliance with Environmental Laws.

Except as would not, individually or in the aggregate, result in a
Material Adverse Change (i) neither the Company nor any subsidiaries is in
violation of any federal, state, local or foreign law or regulation relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products (collectively, "Materials of Environmental
Concern"), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environment Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of the
Company or any of its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or any
of its subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges that
the Company or any of its subsidiaries is in violation of any Environmental Law;
(ii) there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the Company or
any of its subsidiaries has received written notice, and
<PAGE>

no written notice by any person or entity alleging potential liability for
investigatory costs, cleanup costs, governmental responses costs, natural
resources damages, property damages, personal injuries, attorneys' fees or
penalties arising out of, based on or resulting from the presence, or release
into the environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or in
the past (collectively, "Environmental Claims"), pending or, to the best of the
Company's knowledge, threatened against the Company or any of its subsidiaries
or any person or entity whose liability for any Environmental Claim the Company
or any of its subsidiaries has retained or assumed either contractually or by
operation of law; and (iii) to the best of the Company's knowledge, there are no
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Material of Environmental Concern, that reasonably
could result in a violation of any Environmental Law or form the basis of a
potential Environmental Claim against the Company or any of its subsidiaries
against any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries has retained or assumed either contractually
or by operation of law.

(z) ERISA Compliance.

The Company and its subsidiaries and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company, its subsidiaries or their
"ERISA Affiliates" (as defined below) are in compliance in all material respects
with ERISA. "ERISA Affiliate" means, with respect to the Company, any member of
any group of organizations described in Sections 414(b),(c),(m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company or any of its ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the Company, its
subsidiaries nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections
412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established
or maintained by the Company, its subsidiaries or any of their ERISA Affiliates
that is intended to be qualified under Section 401(a) of the Code is so
qualified and nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualification.

Any certificate signed by an officer of the Company in his official
capacity and delivered to the Representatives or to counsel for the Underwriters
shall be deemed to be a representation and warranty by the Company to each
Underwriter as to the matters set forth therein.

Section 2. Purchase, Sale and Delivery of the Common Shares.

The Firm Common Shares.

The Company agrees to issue and sell to the several Underwriters the
Firm Common Shares upon the terms herein set forth. On the basis of the
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Common Shares set forth opposite their names on Schedule A. The purchase
price per Firm Common Share to be paid by the several Underwriters to the
Company shall be [$_____] per share.
<PAGE>

The First Closing Date.

Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters and payment therefor shall be made at the offices of
NationsBanc Montgomery Securities, Inc., 600 Montgomery Street, San Francisco,
California (or such other place as may be agreed to by the Company and the
Representatives) at 6:00 a.m. San Francisco time, on [___], or such other time
and date not later than 10:30 a.m. San Francisco time, on [___] as the
Representatives shall designate by notice to the Company (the time and date of
such closing are called the "First Closing Date"). The Company hereby
acknowledges that circumstances under which the Representatives may provide
notice to postpone the First Closing Date as originally scheduled include, but
are in no way limited to, any determination by the Company or the
Representatives to recirculate to the public copies of an amended or
supplemented Prospectus or a delay as contemplated by the provisions of
Section 10.

The Optional Common Shares; the Second Closing Date.

In addition, on the basis of the representations, warranties and
agreements herein contained, and upon the terms but subject to the conditions
herein set forth, the Company hereby grants an option to the several
Underwriters to purchase, severally and not jointly, up to an aggregate of
375,000 Optional Common Shares from the Company at the purchase price per share
to be paid by the Underwriters for the Firm Common Shares. The option granted
hereunder is for use by the Underwriters solely in covering any over-allotments
in connection with the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time (but not more than once)
upon notice by the Representatives to the Company, which notice may be given at
any time within 30 days from the date of this Agreement. Such notice shall set
forth (i) the aggregate number of Optional Common Shares as to which the
Underwriters are exercising the option, (ii) the names and denominations in
which the certificates for the Optional Common Shares are to be registered and
(iii) the time, date and place at which such certificates will be delivered
(which time and date may be simultaneous with, but not earlier than, the First
Closing Date; and in such case the term "First Closing Date" shall refer to the
time and date of delivery of certificates for the Firm Common Shares and the
Optional Common Shares). Such time and date of delivery, if subsequent to the
First Closing Date, is called the "Second Closing Date" and shall be determined
by the Representatives and shall not be earlier than three nor later than five
full business days after delivery of such notice of exercise. If any Optional
Common Shares are to be purchased, each Underwriter agrees, severally and not
jointly, to purchase the number of Optional Common Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may determine)
that bears the same proportion to the total number of Optional Common Shares to
be purchased as the number of Firm Common Shares set forth on Schedule A
----------
opposite the name of such Underwriter bears to the total number of Firm Common
Shares. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.

Public Offering of the Common Shares.

The Representatives hereby advise the Company that the Underwriters
intend to offer for sale to the public, as described in the Prospectus, their
respective portions of the Common Shares as soon after this Agreement has been
executed and the Registration Statement has been declared effective as the
Representatives, in its sole judgment, has determined is advisable and
practicable.
<PAGE>

Payment for the Common Shares.

Payment for the Common Shares shall be made at the First Closing Date
(and, if applicable, at the Second Closing Date) by wire transfer of immediately
available funds to the order of the Company.

It is understood that the Representatives has been authorized, for its
own account and the accounts of the several Underwriters, to accept delivery of
and receipt for, and make payment of the purchase price for, the Firm Common
Shares and any Optional Common Shares the Underwriters have agreed to purchase.
NationsBanc Montgomery Securities LLC, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by the Representatives by the First Closing Date or
the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any of
its obligations under this Agreement.

Delivery of the Common Shares.

The Company shall deliver, or cause to be delivered, to the
Representatives for the accounts of the several Underwriters certificates for
the Firm Common Shares at the First Closing Date, against the irrevocable
release of a wire transfer of immediately available funds, in accordance with
the Company's written wire transfer instructions, for the amount of the purchase
price therefor. The Company shall also deliver, or cause to be delivered, to the
Representatives for the accounts of the several Underwriters, certificates for
the Optional Common Shares the Underwriters have agreed to purchase at the First
Closing Date or the Second Closing Date, as the case may be, against the
irrevocable release of a wire transfer of immediately available funds, in
accordance with the Company's written wire transfer instructions, for the amount
of the purchase price therefor. The certificates for the Common Shares shall be
in definitive form and registered in such names and denominations as the
Representatives shall have requested at least two full business days prior to
the First Closing Date (or the Second Closing Date, as the case may be) and
shall be made available for inspection on the business day preceding the First
Closing Date (or the Second Closing Date, as the case may be) at a location in
New York City as the Representatives may designate. Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriters.

Delivery of Prospectus to the Underwriters.

Not later than 12:00 p.m. on the second business day following the date
the Common Shares of released by the Underwriters for sale to the public, the
Company shall delivery or cause to be delivered copies of the Prospectus in such
quantities and at such places as the Representatives shall request.

Section 3. Additional Covenants of the Company.

The Company further covenants and agrees with each Underwriter as
follows:

(a) Representatives' Review of Proposed Amendments and
Supplements.

During such period beginning on the date hereof and ending on the later
of the First Closing Date or the last day of the Prospectus Delivery Period,
prior to amending or supplementing the Registration Statement (including any
registration statement filed under Rule 462(b) under the Securities Act) or the
Prospectus, the Company shall furnish to the Representatives for review a copy
of each such proposed amendment or supplement, and the Company shall not file
any such proposed amendment or supplement to which the Representatives
reasonably objects.
<PAGE>

(b) Securities Act Compliance.

After the date of this Agreement, the Company shall promptly advise the
Representatives in writing (i) of the receipt of any comments of, or requests
for additional or supplemental information from, the Commission, (ii) of the
time and date of any filing of any post-effective amendment to the Registration
Statement or any amendment or supplement to any preliminary prospectus, or the
Prospectus or the Resale Prospectus, (iii) of the time and date that any post-
effective amendment the Registration Statement becomes effective and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of any order
preventing or suspending the use of any preliminary prospectus, the Prospectus
or the Resale Prospectus, or of any proceedings to remove, suspend or terminate
from listing or quotation the Common Stock from any securities exchange upon
which the it is listed for trading or included or designated for quotation, or
of the threatening or initiation of any proceedings for any of such purposes. If
the Commission shall enter any such stop order at any time, the Company will use
its best efforts to obtain the lifting of such order at the earliest possible
moment. Additionally, the Company agrees that it shall comply with the
provisions of Rules 424(b), 430A and 434, as applicable, under the Securities
Act and will use its reasonable efforts to confirm that any filings made by the
Company under such Rule 424(b) were received in a timely manner by the
Commission.

If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the opinion of the Representatives or counsel for the Underwriters it
is otherwise necessary to amend or supplement the Prospectus to comply with law,
the Company agrees to promptly prepare (subject to Section 3(a) hereof), file
with the Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the statements in
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.

(d) Copies of any Amendments and Supplements to the
Prospectus.

The Company agrees to furnish the Representatives, without charge,
during the Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may reasonably
request.

(e) Blue Sky Compliance.

The Company shall cooperate with the Representatives and counsel for
the Underwriters to qualify or register the Common Shares for sale under (or
obtain exemptions from the application of) the state securities or blue sky laws
or Canadian provincial securities laws of those jurisdictions designated by the
Representatives, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required for
the distribution of the Common Shares. The Company shall not be required to
qualify as a foreign corporation or to take any action that would subject it to
general service of process in any such jurisdiction where it is not presently
qualified or where it would be subject to taxation as a foreign corporation. The
Company will advise the Representatives promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the Common
Shares for offering, sale or trading in any jurisdiction or any initiation or
threat of any proceeding for any such
<PAGE>

purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible moment.

(f) Use of Proceeds.

The Company shall apply the net proceeds from the sale of the Common
Shares sold by it in all material respects the manner described under the
caption "Use of Proceeds" in the Prospectus.

(g) Transfer Agent.

The Company shall engage and maintain, at its expense, a registrar and
transfer agent for the Common Stock.

(h) Earnings Statement.

As soon as practicable, the Company will make generally available to
its security holders and to the Representatives an earnings statement (which
need not be audited) covering the twelve-month period beginning after the
effective date of the Registration Statement that satisfies the provisions of
Section 11(a) of the Securities Act.

(i) Periodic Reporting Obligations.

During the Prospectus Delivery Period the Company shall file, on a
timely basis, with the Commission and the Nasdaq National Market all reports and
documents required to be filed under the Exchange Act.

(j) Agreement Not To Offer or Sell Additional Securities.

During the period of 180 days following the date of the Prospectus, the
Company will not, without the prior written consent of NationsBanc Montgomery
Securities LLC (which consent may be withheld at the sole discretion of
NationsBanc Montgomery Securities LLC), directly or indirectly, sell, offer,
contract or grant any option to sell, pledge, transfer or establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act,
or otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any shares of
Common Stock, options or warrants to acquire shares of the Common Stock or
securities exchangeable or exercisable for or convertible into shares of Common
Stock (other than as contemplated by this Agreement with respect to the Common
Shares); provided, however, that the Company may issue shares of its Common
Stock or options to purchase its Common Stock, or Common Stock upon exercise of
options, pursuant to any stock option, stock bonus or other stock plan or
arrangement described in the Prospectus (collectively "Stock Plans"), and file
registration statements under the Securities Act but only with respect to shares
issued with respect to such Stock Plans and make announcements with respect
thereto, but only if the holders of such shares, options, or shares issued upon
exercise of such options, agree in writing not to sell, offer, dispose of or
otherwise transfer any such shares or options during such 180 day period without
the prior written consent of NationsBanc Montgomery Securities LLC (which
consent may be withheld at the sole discretion of the NationsBanc Montgomery
Securities LLC).
<PAGE>

(k) Future Reports to the Representatives.

During the period of five years hereafter the Company will furnish to
the Representatives at Two International Place, Boston, MA 02110; Attention: Mr.
Benjamin Howe (i) as soon as practicable after the end of each fiscal year,
copies of the Annual Report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public or certified public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of any
report or communication of the Company mailed generally to holders of its
capital stock.

NationsBanc Montgomery Securities LLC, on behalf of the several
Underwriters, may, in its sole discretion, waive in writing the performance by
the Company of any one or more of the foregoing covenants or extend the time for
their performance.

Section 4. Payment of Expenses.

The Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (i) all
expenses incident to the issuance and delivery of the Common Shares (including
all printing and engraving costs), (ii) all fees and expenses of the registrar
and transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common Shares
to the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each preliminary prospectus, the Prospectus, the Resale Prospectus
and all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the state securities or blue sky laws or the provincial
securities laws of Canada, and, if requested by the Representatives, preparing
and printing a "Blue Sky Survey" or memorandum, and any supplements thereto,
advising the Underwriters of such qualifications, registrations and exemptions,
(vii) the filing fees incident to, and the reasonable fees and expenses of
counsel for the Underwriters in connection with, the NASD's review and approval
of the Underwriters' participation in the offering and distribution of the
Common Shares, (viii) all fees and expenses associated with filing to list and
listing the Common Stock on the Nasdaq National Market, and (ix) all other fees,
costs and expenses referred to in Item 13 of Part II of the Registration
Statement. Except as provided in this Section 4, Section 6, Section 8 and
Section 9 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.

Section 5. Conditions of the Obligations of the Underwriters.

The obligations of the several Underwriters to purchase and pay for the
Common Shares as provided herein on the First Closing Date and, with respect to
the Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company set
forth in Section 1 hereof as of the date hereof and as of the First Closing Date
as though then

<PAGE>

made, to the timely performance by the Company of its covenants and other
obligations hereunder, and to each of the following additional conditions:

(a) Accountants' Comfort Letter.

On the date hereof, the Representatives shall have received from Arthur
Andersen LLP, independent public or certified public accountants for the
Company, a letter dated the date hereof addressed to the Underwriters, in form
and substance satisfactory to the Representatives, containing statements and
information of the type ordinarily included in accountant's "comfort letters" to
underwriters, delivered according to Statement of Auditing Standards No. 72 (or
any successor bulletin), with respect to the audited and unaudited financial
statements and certain financial information contained in the Registration
Statement and the Prospectus (and the Representatives shall have received
additional conformed copies of such accountants' letter for each of the several
Underwriters).

(b) Compliance with Registration Requirements; No Stop
Order; No Objection from NASD.

For the period from and after effectiveness of this Agreement and prior
to the First Closing Date and, with respect to the Optional Common Shares, the
Second Closing Date:

(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective
amendment shall have become effective;

(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in
effect and no proceedings for such purpose shall have been instituted
or threatened by the Commission; and

(iii) the NASD shall have raised no objection to the fairness
and reasonableness of the underwriting terms and arrangements.

For the period from and after the date of this Agreement and prior to
the First Closing Date and, with respect to the Optional Common Shares, the
Second Closing Date, in the judgment of the Representatives there shall not have
occurred any Material Adverse Change.

(d) Opinion of Counsel for the Company.

On each of the First Closing Date and the Second Closing Date the
Representatives shall have received the favorable opinion of Womble Carlyle
Sandridge & Rice, PLLC, counsel for the Company, dated as of such Closing Date,
the form of which is attached as Exhibit A (and the Representatives shall have
received additional conformed copies of such counsel's legal opinion for each of
the several Underwriters).

(e) Opinion of Counsel for the Underwriters.
<PAGE>

On each of the First Closing Date and the Second Closing Date the
Representatives shall have received the favorable opinion of Morris, Manning &
Martin, L.L.P., counsel for the Underwriters, dated as of such Closing Date,
with respect to the matters set forth in paragraphs (i), (v), (vi), (vii), (ix),
(x) and the next-to-last paragraph of Exhibit A (and the Representatives shall
have received additional conformed copies of such counsel's legal opinion for
each of the several Underwriters).

(f) Officers' Certificate.

On each of the First Closing Date and the Second Closing Date the
Representatives shall have received a written certificate executed by the
Chairman of the Board, Chief Executive Officer or President of the Company and
the Chief Financial Officer or Chief Accounting Officer of the Company, dated as
of such Closing Date, to the effect set forth in subsections (b)(ii) and (c) of
this Section 5, and further to the effect that:

(i) for the period from and after the date of this Agreement
and prior to such Closing Date, there has not occurred any Material
Adverse Change;

(ii) the representations, warranties and covenants of the
Company set forth in Section 1 of this Agreement are true and correct
with the same force and effect as though expressly made on and as of
such Closing Date; and

(iii) the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to such Closing Date.

(g) Bring-down Comfort Letter.

On each of the First Closing Date and the Second Closing Date the
Representatives shall have received from Arthur Andersen LLP, independent public
or certified public accountants for the Company, a letter dated such date, in
form and substance satisfactory to the Representatives, to the effect that they
reaffirm the statements made in the letter furnished by them pursuant to
subsection (a) of this Section 5, except that the specified date referred to
therein for the carrying out of procedures shall be no more than three business
days prior to the First Closing Date or Second Closing Date, as the case may be
(and the Representatives shall have received additional conformed copies of such
accountants' letter for each of the several Underwriters).

(h) Lock-Up Agreement from Certain Stockholders of the
Company.

On the date hereof, the Company shall have furnished to the
Representatives an agreement in the form of Exhibit B hereto from each director,
officer and each beneficial owner of Common Stock (as defined and determined
according to Rule 13d-3 under the Exchange Act, except that a one hundred eighty
day period shall be used rather than the sixty day period set forth therein),
and such agreement shall be in full force and effect on each of the First
Closing Date and the Second Closing Date.

(i) Additional Documents.

On or before each of the First Closing Date and the Second Closing
Date, the Representatives and counsel for the Underwriters shall have received
such information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the Common
Shares as contemplated herein, or in order to evidence the accuracy of any of
the representations and warranties, or the satisfaction of any of the conditions
or agreements, herein contained.
<PAGE>

If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Common Shares, at any time prior
to the Second Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 4, Section 6, Section
8 and Section 9 shall at all times be effective and shall survive such
termination.

Section 6. Reimbursement of Underwriters' Expenses.

If this Agreement is terminated by the Representatives pursuant to
Section 5, Section 7, Section 10 or Section 11, or if the sale to the
Underwriters of the Common Shares on the First Closing Date is not consummated
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or to comply with any provision hereof, the Company
agrees to reimburse the Representatives and the other Underwriters (or such
Underwriters as have terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Representatives and the Underwriters in connection
with the proposed purchase and the offering and sale of the Common Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges.

Section 7. Effectiveness of this Agreement.

This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.

Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company to any Underwriter,
except that the Company shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of
any Underwriter to the Company, or (c) of any party hereto to any other party
except that the provisions of Section 8 and Section 9 shall at all times be
effective and shall survive such termination.

Section 8. Indemnification.

(a) Indemnification of the Underwriters.

The Company agrees to indemnify and hold harmless each Underwriter, its
officers and employees, and each person, if any, who controls any Underwriter
within the meaning of the Securities Act and the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of the Company), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (ii) upon
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, the Prospectus or the Resale Prospectus (or any
amendment or supplement thereto), or the omission or alleged

<PAGE>

omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv) in whole
or in part upon any failure of the Company to perform its obligations hereunder
or under law; or (v) any act or failure to act or any alleged act or failure to
act by any Underwriter in connection with, or relating in any manner to, the
Common Stock or the offering contemplated hereby, and which is included as part
of or referred to in any loss, claim, damage, liability or action arising out of
or based upon any matter covered by clause (i) or (ii) above, provided that the
Company shall not be liable under this clause (v) to the extent that a court of
competent jurisdiction shall have determined by a final judgment that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its bad faith or willful misconduct; and to reimburse each Underwriter and each
such controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by NationsBanc Montgomery Securities LLC) as
such expenses are reasonably incurred by such Underwriter or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to the extent,
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by the Representatives expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further, that
with respect to any preliminary prospectus, the foregoing indemnity agreement
shall not inure to the benefit of any Underwriter from whom the person asserting
any loss, claim, damage, liability or expense purchased Common Shares, or any
person controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 2 and a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Common Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or expense. The
indemnity agreement set forth in this Section 8(a) shall be in addition to any
liabilities that the Company may otherwise have.

(b) Indemnification of the Company, its Directors and
Officers.

Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, against
any loss, claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer or controlling person may become subject,
under the Securities Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by the Representatives expressly for use therein; and
to reimburse the Company, or any such director, officer or
<PAGE>

controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The Company hereby acknowledges that the
only information that the Underwriters have furnished to the Company expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) are the statements set forth
(A) as the last paragraph on the inside front cover page of the Prospectus
concerning stabilization by the Underwriters and (B) in the table in the first
paragraph and as the second and second to last paragraphs under the caption
"Underwriting" in the Prospectus; and the Underwriters confirm that such
statements are correct. The indemnity agreement set forth in this Section 8(b)
shall be in addition to any liabilities that each Underwriter may otherwise
have.

Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof,
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section 8 or to
the extent it is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it shall elect, jointly with all other indemnifying parties similarly notified,
by written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (NationsBanc Montgomery Securities
LLC in the case of Section 8(b) and Section 9), representing the indemnified
parties who are parties to such action) or (ii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.

(d) Settlements.

The indemnifying party under this Section 8 shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party against any loss,
claim, damage,
<PAGE>

liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding.

Section 9. Contribution.

If the indemnification provided for in Section 8 is for any reason held
to be unavailable to or otherwise insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount paid or payable by such indemnified party, as incurred, as a
result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, from the offering of the Common Shares pursuant to this Agreement or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriters, on the other hand, in connection with the offering of the
Common Shares pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the Common
Shares pursuant to this Agreement (before deducting expenses) received by the
Company, and the total underwriting discount received by the Underwriters, in
each case as set forth on the front cover page of the Prospectus bear to the
aggregate initial public offering price of the Common Shares as set forth on
such cover. The relative fault of the Company, on the one hand, and the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact or any such
inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company, on the one hand, or the Underwriters, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
<PAGE>

The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.

Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule A. For purposes of this Section 9, each officer and employee of an
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.

Section 10. Default of One or More of the Several Underwriters.

If, on the First Closing Date or the Second Closing Date, as the case
may be, any one or more of the several Underwriters shall fail or refuse to
purchase Common Shares that it or they have agreed to purchase hereunder on such
date, and the aggregate number of Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase does not
exceed 10% of the aggregate number of the Common Shares to be purchased on such
date, the other Underwriters shall be obligated, severally, in the proportions
that the number of Firm Common Shares set forth opposite their respective names
on Schedule A bears to the aggregate number of Firm Common Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as may be specified by the Representatives with the consent of the
non-defaulting Underwriters, to purchase the Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Common
Shares and the aggregate number of Common Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Common Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Common Shares are not made within 48 hours
after such default, this Agreement shall terminate without liability of any
party to any other party except that the provisions of Section 4, Section 6,
Section 8 and Section 9 shall at all times be effective and shall survive such
termination. In any such case either the Representatives or the Company shall
have the right to postpone the First Closing Date or the Second Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Registration Statement and the Prospectus or
any other documents or arrangements may be effected.

As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
<PAGE>

Section 11. Termination of this Agreement.

Prior to the First Closing Date this Agreement maybe terminated by the
Representatives by notice given to the Company if at any time (i) trading or
quotation in any of the Company's securities shall have been suspended or
limited by the Commission or by the Nasdaq Stock Market, or trading in
securities generally on either the Nasdaq Stock Market or the New York Stock
Exchange shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the NASD; (ii) a general banking moratorium shall have been
declared by any of federal, New York or California authorities; (iii) there
shall have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective substantial change in United States' or international
political, financial or economic conditions, as in the judgment of the
Representatives is material and adverse and makes it impracticable to market the
Common Shares in the manner and on the terms described in the Prospectus or to
enforce contracts for the sale of securities; (iv) in the judgment of the
Representatives there shall have occurred any Material Adverse Change; or (v)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 11 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representatives and the
Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the
Company, or (c) of any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive such termination.

Section 12. Representations and Indemnities to Survive Delivery.

The respective indemnities, agreements, representations, warranties and
other statements of the Company, of its officers and of the several Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Common Shares sold hereunder and any termination of this Agreement.

Section 13. Notices.

All communications hereunder shall be in writing and shall be mailed,
hand delivered or telecopied and confirmed to the parties hereto as follows:

If to the Representatives:

NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-249-5704
Attention: Mr. William Bunting
<PAGE>

with a copy to:

NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5553
Attention: David A. Baylor, Esq.

If to the Company:

SQL Financials International, Inc.
Two Ravinia Drive
Suite 1000
Atlanta, Georgia 30346
Facsimile: (770) 390-2899
Attention: Mr. Stephen P. Jeffery

with a copy to:

Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E.
Suite 700
Atlanta, Georgia 30309
Facsimile: (404) 888-7490
Attention: G. Donald Johnson, Esq.

Any party hereto may change the address for receipt of communications by giving
written notice to the others.

Section 14. Successors.

This Agreement will inure to the benefit of and be binding upon the
parties hereto, including any substitute Underwriters pursuant to Section 10
hereof, and to the benefit of the employees, officers and directors and
controlling persons referred to in Section 8 and Section 9, and in each case
their respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.
<PAGE>

Section 15. Partial Unenforceability.

The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.

Section 16. Governing Law Provisions.

(a) Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN SUCH STATE.

(b) Consent to Jurisdiction.

Any legal suit, action or proceeding arising out of or based upon this
Agreement or the transactions contemplated hereby ("Related Proceedings") may be
instituted in the federal courts of the United States of America located in the
City and County of San Francisco or the courts of the State of California in
each case located in the City and County of San Francisco (collectively, the
"Specified Courts"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the enforcement of
a judgment of any such court (a "Related Judgment"), as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum.

With respect to any Related Proceeding, each party irrevocably waives,
to the fullest extent permitted by applicable law, all immunity (whether on the
basis of sovereignty or otherwise) from jurisdiction, service of process,
attachment (both before and after judgment) and execution to which it might
otherwise be entitled in the Specified Courts, and with respect to any Related
Judgment, each party waives any such immunity in the Specified Courts or any
other court of competent jurisdiction, and will not raise or claim or cause to
be pleaded any such immunity at or in respect of any such Related Proceeding or
Related Judgment, including, without limitation, any immunity pursuant to the
United States Foreign Sovereign Immunities Act of 1976, as amended.

Section 17. General Provisions.

This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed in two or more counterparts, each one of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement may not be amended or
modified unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party
<PAGE>

whom the condition is meant to benefit. The Table of Contents and the Section
headings herein are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.

Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.

If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.

Very truly yours,

SQL FINANCIALS INTERNATIONAL, INC.

By:
---------------------------------------
Stephen P. Jeffery, Chairman,
Chief Executive Officer and President

The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives in San Francisco, California as of the date first above
written.

NATIONSBANC MONTGOMERY SECURITIES LLC

Acting as Representatives of the
several Underwriters named in
the attached Schedule A.

By: NATIONSBANC MONTGOMERY SECURITIES LLC

By:
----------------------------------------
Richard A. Smith, Authorized Signatory
<PAGE>

SCHEDULE A

UNDERWRITERS

Number of Firm Common
Name of Underwriter Shares to be Purchased

NationsBanc Montgomery Securities LLC ................. [___]
Piper Jaffray Inc. .................................... [___]
UBS Securities LLC..................................... [___]
[___] ................................................. [___]
[___] ................................................. [___]

Total......................................... 2,500,000

<PAGE>

EXHIBIT A

OPINION OF COUNSEL FOR THE COMPANY

The final opinion in draft form should be attached as Exhibit A at the time this
Agreement is executed.

Opinion of counsel for the Company to be delivered pursuant to Section
5(e) of the Underwriting Agreement.

References to the Prospectus in this Exhibit A include any supplements
thereto at the Closing Date.

(i) The Company has been duly incorporated and is validly existing
as a corporation under the laws of the State of Delaware.

(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under the Underwriting Agreement.

(iii) Each significant subsidiary (as defined in Rule 405 under the
Securities Act) has been duly incorporated and is validly
existing as a corporation under the laws of the jurisdiction
of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its
business as described in the Prospectus.

(iv) All of the issued and outstanding capital stock of each such
significant subsidiary has been duly authorized and validly
issued, is fully paid and nonassessable and is owned by the
Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance or,
to the best knowledge of such counsel, any pending or
threatened claim.

(v) Subject to the assumptions set forth in the Prospectus, the
authorized, issued and outstanding capital stock of the
Company (including the Common Stock) conform to the
descriptions thereof set forth in the Prospectus. All of the
outstanding shares of Common Stock have been duly authorized
and validly issued, are fully paid and nonassessable and, to
the best of such counsel's knowledge, have been issued in
compliance with the registration and qualification
requirements of federal and state securities laws. The form of
certificate used to evidence the Common Stock is in due and
proper form and complies with all applicable requirements of
the charter and by-laws of the Company and the General
Corporation Law of the State of Delaware. The description of
the Company's stock option, stock bonus and other stock plans
or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately
and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
<PAGE>

(vi) No stockholder of the Company or any other person has any
preemptive right, right of first refusal or other similar
right to subscribe for or purchase securities of the Company
arising (i) by operation of the charter or by-laws of the
Company or the General Corporation Law of the State of
Delaware or (ii) to the best knowledge of such counsel,
otherwise.

(vii) The Underwriting Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by
applicable law and except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles.

(viii) The Common Shares to be purchased by the Underwriters from the
Company have been duly authorized for issuance and sale
pursuant to the Underwriting Agreement and, when issued and
delivered by the Company pursuant to the Underwriting
Agreement against payment and receipt by the Company of the
consideration set forth therein, will be validly issued, fully
paid and nonassessable.

(ix) The Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the
Commission under the Securities Act. To the best knowledge of
such counsel, no stop order suspending the effectiveness of
either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the
Securities Act and no proceedings for such purpose have been
instituted or are pending or are contemplated or threatened by
the Commission. Any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time
period required by such Rule 424(b).

(x) The Registration Statement, including any 424(b) Registration
Statement, the Prospectus and each amendment or supplement to
the Registration Statement and the Prospectus, as of their
respective effective or issue dates (other than the financial
statements and supporting schedules included therein or in
exhibits to or excluded from the Registration Statement, as to
which no opinion need be rendered) comply as to form in all
material respects with the applicable requirements of the
Securities Act.

(xi) The Common Shares have been approved for listing on the Nasdaq
National Market.

(xii) The statements (i) in the Prospectus under the captions "Risk
Factors--Shares Eligible for Future Sale," "Risk
Factors--Certain Anti-Takeover Provisions,"
"Management--Limitation of Liability and Indemnification of
Officers and Directors," "Description of Capital Stock,"
"Shares Eligible for Future Sale," and "Underwriting" and (ii)
in Item 14 and Item 15 of the Registration Statement, insofar
as such statements constitute matters of law, summaries of
legal matters, the Company's charter or by-law provisions,
documents or legal proceedings, or
<PAGE>

legal conclusions, has been reviewed by such counsel and
fairly present and summarize, in all material respects, the
matters referred to therein.

(xiii) To the knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or
threatened which are required to be disclosed in the
Registration Statement, other than those disclosed therein.

(xiv) To the knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto; and the
descriptions thereof and references thereto are correct in all
material respects.

(xv) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental
authority or agency, is required for the Company's execution,
delivery and performance of the Underwriting Agreement and
consummation of the transactions contemplated thereby and by
the Prospectus, except as required under the Securities Act,
applicable state securities or blue sky laws and from the
NASD.

(xvi) The execution and delivery of the Underwriting Agreement by
the Company and the performance by the Company of its
obligations thereunder (other than performance by the Company
of its obligations under the indemnification section of the
Underwriting Agreement, as to which no opinion need be
rendered) (i) have been duly authorized by all necessary
corporate action on the part of the Company; (ii) will not
result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary; (iii) will not
constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to any material
Existing Instrument; or (iv) to the best knowledge of such
counsel, will not result in any violation of any law,
administrative regulation or administrative or court decree
applicable to the Company or any subsidiary.

(xvii) The Company is not, and after receipt of payment for the
Common Shares will not be, an "investment company" within the
meaning of Investment Company Act.

(xviii) To the knowledge of such counsel, there are no persons with
registration or other similar rights to have any equity or
debt securities registered for sale under the Registration
Statement or included in the offering contemplated by the
Underwriting Agreement, except for such rights as have been
duly waived.

(xiv) To the knowledge of such counsel, based upon a certificate of
an appropriate officer of the Company as to matters of fact,
neither the Company nor any subsidiary is in violation of its
charter or by-laws or any law, administrative regulation or
administrative or court decree applicable to the Company or is
in Default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material
Existing Instrument, except in each such
<PAGE>

case for such violations or Defaults as would not,
individually or in the aggregate, result in a Material Adverse
Change.

In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments thereto, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the basis of the foregoing, nothing
has come to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the Registration
Statement or such amendments became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the First Closing Date or the Second Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial or statistical data
derived therefrom, included in the Registration Statement or the Prospectus or
any amendments or supplements thereto).

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware or the federal law of the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or the Second Closing Date,
as the case may be, shall be satisfactory in form and substance to the
Underwriters, shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them and shall be furnished to the
Representatives) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters; provided,
however, that such counsel shall further state that they believe that they and
the Underwriters are justified in relying upon such opinion of other counsel,
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials. Such counsel also
may assume that, for the purpose of the opinion in paragraph (vii), the laws of
the State of New York are identical to the laws of the State of Georgia.
<PAGE>

EXHIBIT B

LOCK UP AGREEMENT

[Date]

NationsBanc Montgomery Securities LLC
Piper Jaffray Inc.
UBS Securities LLC
As Representatives of the Several Underwriters
600 Montgomery Street
San Francisco, California 94111

RE: SQL Financials International, Inc. (the "Company")

Ladies & Gentlemen:

The undersigned is an owner of record or beneficially of certain shares
of Common Stock of the Company ("Common Stock") or securities convertible into
or exchangeable or exercisable for Common Stock. The Company proposes to carry
out a public offering of Common Stock (the "Offering") for which you will act as
the Representatives of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company by,
among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.

In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not, without the prior written consent of NationsBanc
Montgomery Securities, Inc. (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock, or securities exchangeable or exercisable for or
convertible into shares of Common Stock currently or hereafter owned either of
record or beneficially (as defined in Rule 13d-3 under Exchange Act) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 180 days after the date of the Prospectus. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock held by the undersigned except in compliance with the foregoing
restrictions.

With respect to the Offering only, the undersigned waives any
registration rights relating to registration under the Securities Act of any
Common Stock owned either of record or beneficially by the undersigned,
including any rights to receive notice of the Offering.
<PAGE>

This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned.

- ------------------------------
Printed Name of Holder

By:
---------------------------
Signature

- ------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)

<PAGE>

EXHIBIT 5.1

[WOMBLE CARLYLE SANDRIDGE & RICE, PLLC LETTERHEAD]

May 1, 1998

SQL Financials International, Inc.
3950 Johns Creek Court
Suwanee, Georgia 30024

Re: Registration Statement on Form S-1

Ladies and Gentlemen:

We have served as counsel for SQL Financials International, Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended, pursuant to the Company's Registration
Statement on Form S-1 (No. 333-46685) (the "Registration Statement"), of a
proposed public offering by the Company of 3,504,625 shares (the "Shares") of
the Company's authorized common stock, $.0001 par value (the "Common Stock"),
2,500,000 of which are to be sold by the Company and 629,625 of which are to be
registered for sale by certain stockholders of the Company. In addition, the
Company has granted to the underwriters an option to purchase 375,000 shares of
Common Stock to cover over-allotments, if any (the "Over-Allotment Shares").

We have examined and are familiar with originals or copies (certified
or otherwise identified to our satisfaction) of such documents, corporate
records and other instruments relating to the incorporation of the Company and
to the authorization and issuance of the outstanding shares of Common Stock, the
Shares and the Over-Allotment Shares to be sold by the Company and certain
stockholders, as appropriate, as we have deemed necessary and advisable.

Based upon the foregoing and having regard for such legal
considerations that we have deemed relevant, it is our opinion that:

1. The 2,500,000 Shares to be issued and sold by the Company will be,
upon issuance, sale and delivery as contemplated in the Registration Statement,
legally and validly issued, fully paid and nonassessable.
<PAGE>

SQL Financials International, Inc.
April 21, 1998
Page 2

2. The 629,625 Shares to be registered for and sold by certain
stockholders were legally and validly issued, fully paid and nonassessable.

3. The Over-Allotment Shares to be sold by the Company, upon the
exercise of the over-allotment option by the underwriters, will be legally and
validly issued, fully paid and nonassessable.

We do hereby consent to the reference to our firm under the heading
"Legal Matters" in the Prospectus contained in the Registration Statement and to
the filing of this Opinion as Exhibit 5.1 thereto.

Respectfully,

WOMBLE CARLYLE SANDRIDGE & RICE, PLLC

/s/ Womble Carlyle Sandridge & Rice, PLLC

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountant, we hereby consent to the use of our reports
(and to all references to our firm) included in or made part of this
Registration Statement.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
May 1, 1998

<PAGE>

EXHIBIT 23.3

CONSENT OF
WILLAMETTE MANAGEMENT ASSOCIATES, INC.

We hereby consent to the inclusion of our valuation conclusions reported
to SQL Financials International, Inc. ("SQL") and to the reference to our name
in SQL's Registration Statement on Form S-1.

By: /s/ Curtis R. Kimball
----------------------------------------
Curtis R. Kimball, CFA
Principal
Willamette Management Associates, Inc.

Atlanta, Georgia
May 1, 1998

<PAGE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,213
<SECURITIES> 0
<RECEIVABLES> 4,684
<ALLOWANCES> 634
<INVENTORY> 0
<CURRENT-ASSETS> 12,095
<PP&E> 3,374
<DEPRECIATION> (1,867)
<TOTAL-ASSETS> 14,681
<CURRENT-LIABILITIES> 12,210
<BONDS> 0
25,112
0
<COMMON> 0
<OTHER-SE> (27,910)
<TOTAL-LIABILITY-AND-EQUITY> 14,681
<SALES> 0
<TOTAL-REVENUES> 25,988
<CGS> 0
<TOTAL-COSTS> 8,580
<OTHER-EXPENSES> 20,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 274
<INCOME-PRETAX> (4,110)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,110)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,110)
<EPS-PRIMARY> (2.97)
<EPS-DILUTED> (2.97)

</TABLE>