VISIGENIC SOFTWARE INC, 424B1, 1997-02-12

VISIGENIC SOFTWARE INC
424B1, 1997-02-12
PREPACKAGED SOFTWARE

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FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NUMBER 333-20583

PROSPECTUS

1,600,000 SHARES

[LOGO OF VISIGENIC SOFTWARE, INC. APPEARS HERE]

COMMON STOCK

Of the 1,600,000 shares of Common Stock offered hereby, 1,180,000 shares are
being sold by the Company and 420,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale
of the shares by the Selling Stockholders. See "Principal and Selling
Stockholders."

The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol VSGN. On February 11, 1997, the last reported sale price of the Common
Stock was $12.25 per share. See "Price Range of Common Stock."

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

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 5.

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

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

<TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............ $12.25 $0.70 $11.55 $11.55
- -------------------------------------------------------------------------------
Total (3)............ $19,600,000 $1,120,000 $13,629,000 $4,851,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 240,000 additional shares of Common Stock solely to cover over-
allotments, if any. If all such shares are purchased, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $22,540,000,
$1,288,000 and $16,401,000, respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about February 18, 1997, at the office of the agent of
Hambrecht & Quist LLC in New York, New York.

HAMBRECHT & QUIST ROBERTSON, STEPHENS & COMPANY

February 12, 1997
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[ART]

Visigenic, the Visigenic logo, VisiBroker, VisiODBC and VisiChannel are
trademarks of the Company. This Prospectus also includes trademarks of
companies other than the Company.

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

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

2
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. See "Risk Factors" for a discussion of
certain factors to be considered by prospective investors.

THE COMPANY

In today's increasingly complex computing environment, enterprises require
flexible access to data and applications, regardless of whether the data and
applications are located at the central office, a remote office or across the
Internet. Enterprise computing environments are increasingly using multiple
database management systems ("DBMSs"), operating systems, networks and hardware
platforms and relying on object-oriented technologies to develop and deploy
distributed business applications for these heterogeneous environments. The
rapid growth of the Internet and Intranets, both of which are heterogeneous
distributed computing environments, is accelerating the need for tools to
develop, deploy and manage distributed business applications.

Visigenic provides key software components that enable developers and
information technology ("IT") professionals to develop, deploy and manage
distributed business applications. The Company believes business applications
increasingly will be comprised of objects, Java applets and databases that are
distributed on networks. The Company's products enable the enterprise to adapt
its application architecture to meet changing business and computing
requirements by simplifying the development and deployment of distributed
database and object-oriented applications. Visigenic's products support
existing and emerging industry standards, making the Company's solutions open,
flexible and interoperable across multiple operating environments. The Company
believes that its products are especially well suited for large, distributed
computing environments such as the Internet and Intranets.

The Company's strategy is to become the premier provider of software tools
which enable developers and IT professionals to develop, deploy and manage
distributed business applications. Visigenic supports and contributes to the
enhancement of open industry standards through active participation in several
standards setting organizations. The Company intends to continue to develop
strategic relationships with leading technology companies to promote the
widespread acceptance and distribution of Visigenic products. Visigenic has
established strategic relationships with Cisco, Hitachi, Microsoft, Netscape,
Oracle and Platinum technology. Additionally, the Company intends to leverage
its products and expertise to continue to exploit the opportunities of the
Internet and Intranets.

The Company markets and sells its software through its direct sales and
telesales forces, independent software vendors ("ISVs"), value added resellers
("VARs"), international distributors and on-line Internet sales in North
America, Europe and Asia. The Company's customers include Borland, Cisco,
Compuware, Healtheon, Hewlett-Packard, Hitachi, Microsoft, Netscape, Oracle,
Platinum technology and Software AG.

The Company was incorporated in February 1993. The Company's principal
executive offices are located at 951 Mariner's Island Boulevard, Suite 120, San
Mateo, California, 94404. Its telephone number is (415) 286-1900. Its email
address is [email protected] and its Web site is located at www.visigenic.com.
Information contained on the Company's Web site shall not be deemed to be a
part of this Prospectus.

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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.................... 1,180,000 shares
Common Stock offered by the Selling Stockholders....... 420,000 shares
Common Stock to be outstanding after the offering...... 13,895,390 shares (1)
Use of proceeds........................................ General corporate purposes,
including working capital
Nasdaq National Market symbol.......................... VSGN
</TABLE>

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

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, NINE MONTHS ENDED DECEMBER 31,
--------------------------------------- -------------------------------------
1996 1996
--------------------- --------------------------
PRO FORMA PRO FORMA
1994 1995 ACTUAL COMBINED (2) 1995 ACTUAL COMBINED (2)
------- ------- ------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue................. $ -- $ 1,115 $ 5,575 $ 6,577 $ 3,305 $ 11,534 $ 11,666
Gross profit............ -- 820 4,564 5,303 2,567 9,705 9,761
Loss from operations.... (2,496) (4,723) (4,464) (6,422) (3,743) (18,461) (18,697)
Net loss................ $(2,454) $(4,629) $(4,379) $(6,337) $ (3,666) $ (18,271) $ (18,507)
Pro forma net loss per
share (3).............. -- -- $ (0.40) $ (0.57) $ (0.33) $ (1.51) $ (1.52)
Pro forma weighted
average common and
common equivalent
shares (3)............. -- -- 11,064 11,064 11,008 12,141 12,141
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED (4)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 9,064 $22,193
Working capital......................................... 11,286 24,415
Total assets............................................ 19,921 33,050
Stockholders' equity.................................... 15,296 28,425
</TABLE>
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(1) Excludes 3,351,736 shares of Common Stock reserved for issuance under the
Company's stock plans, of which 2,321,735 shares of Common Stock are
issuable upon exercise of options outstanding as of December 31, 1996 at a
weighted average exercise price of $5.69 per share. See "Capitalization,"
"Management--Stock Plans" and Note 6 of Notes to Consolidated Financial
Statements of Visigenic.
(2) The Pro Forma Combined Statement of Operations data gives effect to the May
1996 acquisition of PostModern Computing Technologies Inc. as if it had
occurred on April 1, 1995. The acquisition was accounted for as a purchase
and resulted in the write-off of approximately $12.0 million of in process
product development in the quarter ended June 30, 1996. The Pro Forma
Combined Statement of Operations data for the year ended March 31, 1996
does not give effect to this write-off. See Note 9 of Notes to Consolidated
Financial Statements of Visigenic and Pro Forma Condensed Combined
Financial Statements.
(3) See Note 2 of Notes to Consolidated Financial Statements of Visigenic for
an explanation of the method used to determine the number of shares used to
compute per share amounts.
(4) Adjusted to reflect the sale of 1,180,000 shares of Common Stock offered by
the Company hereby at the public offering price of $12.25 and the receipt
of the net proceeds therefrom. See "Use of Proceeds" and "Capitalization."

----------------
Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting."

4
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RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
Prospectus before purchasing the shares of Common Stock offered hereby.

Limited Operating History and History of Losses. The Company was
incorporated in 1993 and commenced shipment of its initial products in
November 1994. In May 1996, the Company acquired PostModern Computing
Technologies Inc. ("PostModern"), a developer of distributed object software.
PostModern was founded in 1991, commenced shipment of its initial products in
1992 and had very limited product sales prior to the acquisition. Accordingly,
the Company has only a limited operating history, particularly with respect to
its newly acquired distributed object business, upon which an evaluation of
the Company and its future operating results can be based.

Since inception, the Company has incurred significant losses and negative
cash flow. At December 31, 1996, the Company had cumulative operating losses
of $29.8 million, with net losses of $2.5 million, $4.6 million, $4.4 million
and $18.3 million for fiscal 1994, fiscal 1995, fiscal 1996 and the nine
months ended December 31, 1996, respectively. A substantial portion of the
accumulated deficit is due to the significant commitment of resources to the
Company's product development and sales and marketing activities and the
write-off of approximately $12.0 million of in process product development in
the quarter ended June 30, 1996 in connection with the acquisition of
PostModern. The Company expects to continue to devote substantial resources in
these areas and as a result will need to generate significant revenue in order
to achieve profitability. The Company currently anticipates that it will
operate at a loss through at least the end of 1997. The Company has
experienced substantial growth in revenue in fiscal 1996 and the first nine
months of fiscal 1997. The Company expects that prior growth rates of the
Company's software product revenue will not be sustainable in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Potential Fluctuations in Operating Results. The Company's revenue and
results of operations have varied on a quarterly basis in the past and are
expected to vary significantly in the future. Accordingly, the Company
believes that period to period comparisons of its results of operations are
not necessarily meaningful and should not be relied upon as indications of
future performance. The Company's revenue and results of operations are
difficult to forecast and could be adversely affected by many factors,
including, among others, the size, timing and terms of individual license
transactions; the relatively long sales and implementation cycles for the
Company's products; the delay or deferral of customer implementations; changes
in the Company's operating expenses; the ability of the Company to develop and
market new products and control costs; market acceptance of new products;
timing of introduction or enhancement of products by the Company or its
competitors; the level of product and price competition; the ability of the
Company to expand its direct sales and telesales forces, its indirect
distribution channels and its customer support capabilities; activities of and
acquisitions by competitors; changes in database access and distributed object
software, database technology and industry standards; changes in the mix of
products and services sold; changes in the mix of channels through which
products and services are sold; levels of international sales; personnel
changes and difficulties in attracting and retaining qualified sales,
marketing and technical personnel; changes in customers' budgeting cycles;
foreign currency exchange rates; quality control of products sold; and general
economic conditions. In particular, the ability of the Company to achieve
revenue growth in the future will depend on its success in adding a
substantial number of sales and sales support personnel in the next twelve
months. Competition for such personnel is intense and there can be no
assurance the Company will be able to attract and retain these personnel.

Licensing of the Company's software products historically has accounted for
the substantial majority of the Company's revenue, and the Company anticipates
that this trend will continue for the foreseeable future. The Company's
software products revenue is difficult to forecast for a number of reasons.
The Company typically does not have a material backlog of unfilled orders, and
revenue in any quarter is substantially dependent on

5
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contracts received in that quarter. A significant portion of the Company's
revenue in prior periods has been derived from relatively large sales to a
limited number of customers, and the Company currently anticipates that future
quarters will continue to reflect this trend. In fiscal 1996, approximately
78% of the Company's revenue was derived from ten customers and revenue from
one customer, Platinum technology, accounted for approximately 25% of the
Company's total revenue. For the nine months ended December 31, 1996,
approximately 55% of the Company's revenue was derived from ten customers, and
revenues from two customers, Platinum technology and Cisco, accounted for
approximately 14% and 13%, respectively, of the Company's total revenue. Sales
cycles for the Company's products typically range from six to twelve months,
and the terms and conditions of individual license transactions, including
prices and discounts, are often highly negotiated based on volumes and
commitments, and vary considerably from customer to customer. In addition, the
Company has generally recognized a substantial portion of its revenue in the
last month of each quarter, with this revenue concentrated in the last weeks
of the quarter. Accordingly, the cancellation or deferral of even a small
number of purchases of the Company's products has in the past and could in the
future have a material adverse effect on the Company's business, results of
operations and financial condition in any particular quarter. Cancellations or
deferrals of orders may be caused by any of a number of factors, including
delays in new or enhanced product shipments. To the extent that significant
sales occur earlier than expected, operating results for subsequent quarters
may be adversely affected. A significant portion of the Company's revenue has
been and is expected in the future to continue to be based upon sales to third
party vendors, who will incorporate the Company's products in their own
products. This revenue depends upon the success of third parties, and as a
result is difficult for the Company to predict and may be subject to extreme
fluctuation.

The Company's expense levels are based, in part, on its expectations as to
future revenue and to a large extent are fixed in the short term. The Company
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall of
revenue in relation to the Company's expectations would have an almost
immediate adverse effect on the Company's business, financial condition and
results of operations. Further, the Company intends to continue to expand its
development teams and its sales force. The timing of such expansion and the
rate at which new development and sales personnel become productive could
cause material fluctuations in quarterly results of operations.

As a result of the foregoing or other factors, it is likely that in some
future period the Company's results of operations will fail to meet the
expectations of public market analysts or investors, and the price of the
Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Dependence on Emerging Markets and Evolving Standards; Acceptance of the
Company's Products. The Company's future financial performance will depend on
the growth in demand for standards-based database access and distributed
object software products. These markets are new and emerging, are rapidly
evolving, are characterized by an increasing number of market entrants and
will be subject to frequent and continuing changes in customers' preferences
and technology. As is typical in new and evolving markets, demand and market
acceptance for products are subject to a high level of uncertainty.

The Company's database access products are based on the Open Database
Connectivity ("ODBC") standard, which was developed to enable applications to
access data from all ODBC-compliant data sources. While the ODBC standard is
supported by most of the major database and software vendors, it is a recent
standard that has not yet gained widespread acceptance and that currently co-
exists with proprietary database connectivity solutions from many of these
same database and software vendors.

With the acquisition of PostModern in May 1996, the Company began to offer
standards-based distributed object products. The Company's current distributed
object products are based on several standards, including the Common Object
Request Broker Architecture ("CORBA") and the Internet Inter-ORB Protocol
("IIOP"). These standards are intended to facilitate the management and
communication of applications created in object-oriented programming languages
such as C++ and Java. These standards are new, are just beginning to gain
widespread acceptance and compete with proprietary solutions such as
Microsoft's ActiveX and Distributed

6
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Component Object Model ("DCOM"). The distributed object software market is
relatively young and there are few proven products. Further, some of the
Company's distributed object products are designed specifically for use in
applications for the Internet and Intranets. Because critical issues
concerning the Internet and Intranets -- including security, reliability,
cost, ease of use and access and quality of service -- remain unresolved, the
growth of applications targeted at the Internet and Intranets is uncertain and
difficult to predict.

Because the markets for the Company's products are new and evolving, it is
difficult to assess or predict with any assurance the size or growth rate, if
any, of these markets. There can be no assurance that the markets for the
Company's products will develop, or that the Company's products will be
adopted. If these markets fail to develop, develop more slowly than expected
or attract new competitors, or if the Company's products do not achieve market
acceptance, the Company's business, results of operations and financial
condition could be materially adversely affected. Because the Company's
strategy is to develop standards-based products and these standards are
relatively new, not widely accepted and compete with other emerging standards,
to the extent that these standards are not commercially successful, this will
have a material adverse affect on the Company's business, results of
operations and financial condition. Competing or alternative technologies are
being or are likely in the future to be promoted by current and potential
competitors of the Company, some of which have well-established relationships
with the current and potential customers of the Company and have extensive
knowledge of the markets served by the Company, better name recognition and
more extensive development, sales and marketing resources than the Company.

While the Company has licensed its products to numerous customers, most of
these customers are currently developing applications that incorporate the
Company's products, and only a very limited number of them have deployed or
shipped such applications. To the extent these customers are unable to or
otherwise do not deploy or ship applications that incorporate the Company's
products, or if these applications are not successful, this will have a
material adverse effect on the Company's business, results of operations and
financial condition. See "--Intense Competition" and "Business--Industry
Background."

Reliance on VARs and ISVs. A significant element of the Company's strategy
is to embed its technology in products offered by the Company's VAR and ISV
customers, such as Borland, Cisco, Compuware, Healtheon, Hewlett-Packard,
Microsoft, Netscape, Oracle and Platinum technology. A relatively small number
of VAR and ISV customers have accounted for a significant percentage of the
Company's revenue. In fiscal 1996, ten VAR and ISV customers accounted for
approximately 78% of the Company's revenue, while in the nine months ended
December 31, 1996, ten VAR and ISV customers accounted for approximately 55%
of the Company's revenue. The Company intends to seek similar distribution
arrangements with other VARs and ISVs to embed the Company's technology in
their products and expects that these arrangements will account for a
significant portion of the Company's revenue in future periods. To date, the
terms and conditions, including prices and discounts, of the Company's
agreements with its VAR and ISV customers have been highly negotiated and vary
significantly between customers, however, all of these agreements are non-
exclusive and do not require the VAR or ISV to make minimum purchases. Many of
the markets for the VAR and ISV products in which the Company's technology are
being embedded are new and evolving and, therefore, subject to the same risks
faced by the Company in the markets for its own products. If the Company is
unsuccessful in securing license agreements with additional VARs and ISVs on
commercially reasonable terms or at all, or if the Company's VAR and ISV
customers are unsuccessful in selling their products, this would have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Product Concentration. Prior to the acquisition of PostModern in May 1996,
the Company derived substantially all of its revenue from the licensing of its
database access products, particularly its ODBC product line, and fees from
related services. Since the acquisition of PostModern, the Company has also
derived a significant portion of its revenue from its distributed object
products. The Company's database access and distributed object products and
services are each expected to continue to account for a significant portion of
the Company's revenue for the foreseeable future. As a result, a reduction in
demand or an increase in competition for these products, or a decline in sales
of such products, would have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business--
Products."

7
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Dependence on the Internet and Intranets. The Company believes that sales of
its products, particularly its distributed object products, will depend in
large part upon the adoption by businesses and end-users of the Internet and
Intranets for commerce and communications. The Internet and Intranets are new
and evolving, and there can be no assurance of their widespread adoption.
Critical issues concerning the Internet and Intranets, including security,
reliability, cost, ease of use and access and quality of service, remain
unresolved at this time, inhibiting adoption by many enterprises and end-
users. If the Internet and Intranets are not widely used by businesses and
end-users, this will have a material adverse effect on the Company's business,
results of operations and financial condition.

Dependence on Java; Risks Associated with Encryption Technology. Certain of
the Company's products are based on Java, an object-oriented programming
language developed by JavaSoft, a subsidiary of Sun Microsystems. Java was
developed primarily for Internet and Intranet applications. Java was only
recently introduced and does not yet have sufficient history to establish its
reliability, thereby inhibiting adoption of Java. To date, there have been
only a very limited number of commercially significant Java-based products,
and it is too early to determine whether Java will become a significant
technology. Alternatives to Java have been announced by several companies,
including Microsoft. To the extent that Java is not adopted or is adopted more
slowly than anticipated, this could have a material adverse effect on the
Company's business, results of operations and financial condition.

The Company plans to use encryption technology in certain of its future
products to provide the security required for the exchange of confidential
information. Encryption technologies have been breached in the past. There can
be no assurance that there will not be a compromise or breach of the security
technology used by the Company. If any such compromise or breach were to
occur, it could have a material adverse effect on the Company's business,
results of operations and financial condition.

Need to Develop New Software Products and Enhancements. The markets for the
Company's products are characterized by rapid technological developments,
evolving industry standards, swift changes in customer requirements, computer
operating environments and software applications, and frequent new product
introductions and enhancements. As a result, the Company's success depends
substantially upon its ability to anticipate changes and continue to enhance
its existing products, develop and introduce in a timely manner new products
incorporating technological advances, comply with emerging industry standards
and meet increasing customer expectations. The Company's products may be
rendered obsolete if the Company fails to anticipate or react to change. To
the extent one or more of the Company's competitors introduce products that
better address customer needs, the Company's business, results of operations
and financial condition could be materially adversely affected. There can be
no assurance that the Company will be successful in developing and marketing
new products or enhancements to its existing products on a timely basis or at
all or that any new or enhanced products will adequately address the changing
needs of the marketplace. The Company has in the past incurred product
development expenses and sales and marketing expenses in connection with
product development activities that did not result in commercially introduced
products. Some of the Company's products are based on technology from third
parties and the Company therefore has limited control over whether and when
these technologies are enhanced. For instance, the VisiODBC Software
Developers Kit ("SDK") products are based upon ODBC software licensed from
Microsoft. The failure or delay in enhancements of technology from third
parties used in the Company's products could have a material adverse effect on
the Company's ability to develop and enhance its own products. Also, negative
reviews of the Company's new products or product versions in industry
publications could have a material adverse effect on the Company's sales. The
Company has in the past experienced delays in the development of new products
and product versions. If the Company is unable to develop and introduce new
products or enhancements to existing products in a timely manner in response
to changing market conditions or customer requirements, the Company's
business, results of operations and financial condition would be materially
and adversely affected.

The Company has in the past engaged and expects that it will continue in the
future to engage in joint development projects with third parties. Currently,
the Company is engaged in joint development with Hitachi of

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distributed object software targeted at transaction processing applications.
Joint development creates several risks for the Company, including loss of
control over the development of aspects of the jointly developed product and
over the timing of product availability. There can be no assurance that joint
development activities will result in products, or that any products developed
will be commercially successful.

Dependence on Key Personnel; Need to Increase Technical and Sales
Personnel. The Company's future performance depends to a significant extent
upon the continued service of its key technical, development, sales and
marketing and management personnel. The loss of the services of any of these
individuals would have a material adverse effect on the Company. All employees
are employed at-will, and the Company has no fixed term employment agreements
with any of its employees. The Company's future success also depends on its
continuing ability to attract, train and retain highly qualified technical,
sales and marketing and managerial personnel. An increase in the sales staff
will be required to expand both the Company's direct and indirect sales
activities and achieve revenue growth. The Company intends to hire a number of
additional development and sales personnel in fiscal 1997 and beyond.
Competition for such personnel is intense, and there can be no assurance that
the Company can attract, assimilate or retain such personnel. Because of the
complexity of database access and distributed object products, the Company has
in the past experienced and expects to continue in the future to experience a
time lag between the date technical and sales personnel are hired and the date
such persons become fully productive. If the Company is unable to hire and
train such personnel on a timely basis in the future, the Company's business,
results of operations and financial condition could be materially adversely
affected.

Management of Growth. The Company's business has grown rapidly in recent
periods, with revenue increasing from $1.1 million in fiscal 1995 to $5.6
million in fiscal 1996 and to $11.5 million in the nine months ended December
31, 1996. In addition, the Company acquired PostModern in May 1996 as part of
its strategy of adding distributed object products to its product line. The
growth of the Company's business and the expansion of the Company's customer
base have placed a significant strain on the Company's management, operations
and financial systems. The Company's recent expansion has also resulted in
substantial growth in the number of its employees, the scope of its operating
and financial systems and the geographic area of its operations, resulting in
increased responsibility for management personnel. The Company's future
results of operations will depend in part on the ability of its officers and
other key employees to continue to implement its operational, customer support
and financial control systems and to expand, train and manage its employee
base. The Company hired a new Chief Financial Officer and a new Controller in
July 1996, a new Vice President, Marketing in September 1996, and a new Vice
President, Worldwide Sales in October 1996. There can be no assurance that the
Company will be able to manage any future expansion of its business, if any,
successfully, or that its management, personnel, procedures and systems will
be adequate to support the Company's operations. Any such inabilities or
inadequacies to do so would have a material adverse effect on the Company's
business, results of operations and financial condition.

Potential Acquisitions. If appropriate opportunities present themselves, the
Company intends to acquire businesses, products or technology that the Company
believes are strategic, although the Company currently has no understandings,
commitments or agreements with respect to any material acquisition and no
material acquisition is currently being pursued. There can be no assurance
that the Company will be able to successfully identify, negotiate or finance
such acquisitions, or to integrate such acquisitions with its current
business. The process of integrating an acquired business, product or
technology into the Company may result in unforeseen operating difficulties
and expenditures and may absorb significant management attention that would
otherwise be available for ongoing development of the Company's business.
Moreover, there can be no assurance that the anticipated benefits of any
acquisition will be realized. Acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, which could materially adversely affect the Company's business,
results of operations and financial condition. Any such future growth and any
acquisitions of other technologies, products or companies may require the
Company to obtain additional equity or debt financing, which may not be
available or may be dilutive.

9
<PAGE>

Intense Competition. The Company's products are targeted at the emerging
markets for standards-based database access software and standards-based
distributed object software. The markets for the Company's products are
intensely competitive, subject to rapid change and significantly affected by
new product introductions and other market activities of industry
participants. The Company believes that the principal competitive factors in
these markets are product quality, performance and price, vendor and product
reputation, product architecture and quality of support.

In the standards-based database access market, the Company competes
principally against Intersolv. The Company's database access products also
indirectly compete against proprietary database access solutions from database
vendors. In the standards-based distributed object market, the Company
competes principally against two private companies, Iona and Expersoft. The
Company's distributed object products also compete against existing or
proposed distributed object solutions from hardware vendors such as DEC,
Hewlett-Packard, IBM and Sun. In addition, because there are relatively low
barriers to entry in the software market and because the Company's products
are based on publicly available standards, the Company expects to experience
additional competition in the future from other established and emerging
companies if the market for database access and distributed object software
continues to develop and expand. In particular, relational database vendors
including Informix, Microsoft, Oracle and Sybase may offer standards-based
database access software to their customers, eliminating or reducing demand
for the Company's products. Similarly, operating system vendors such as DEC,
Hewlett-Packard, IBM, Microsoft and Sun may offer standards-based distributed
object products bundled with their operating systems. For instance, Microsoft
has introduced DCOM, which could reduce or eliminate the need for CORBA-
compliant ORBs, such as those offered by the Company, for Microsoft operating
systems. Many of these current and potential competitors have well-established
relationships with the current and potential customers of the Company, have
extensive knowledge of the markets serviced by the Company, better name
recognition and more extensive development, sales and marketing resources and
are capable of offering single vendor solutions. As a result, these current
and potential competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products,
than the Company. It is also possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. The
Company also expects that competition will increase as a result of software
industry consolidations.

The Company expects that it will face increasing pricing pressures from its
current competitors and new market entrants. Increased price competition may
result in price reductions, reduced gross margins and loss of market share,
any of which could materially adversely affect the Company's business,
financial condition or results of operations. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors or that competitive pressures will not materially and adversely
affect its business, results of operations and financial condition. See
"Business--Competition."

Risk of Product Defects. Software products as complex as those offered by
the Company frequently contain undetected errors or failures that may be
detected at any point in the product's life cycle. The Company has in the past
discovered software errors in certain of its new products and enhancements and
has experienced delays in shipment of products during the period required to
correct these errors. There can be no assurance that, despite testing by the
Company and potential customers, errors will not occur, resulting in loss of
or delay in market acceptance and sales, diversion of development resources,
injury to the Company's reputation or increased service and warranty costs,
any of which could have a material adverse effect on the Company's business,
results of operations and financial condition. This risk is amplified for the
Company because a significant portion of its future sales are expected to be
derived from arrangements under which third parties embed the Company's
products in their own products. Any significant errors in the Company's
products, or in the products of VARs or ISVs which embed the Company's
products, might discourage such third parties or other customers from
utilizing the Company's products, which would have a material adverse effect
on the Company's business, results of operations and financial condition.
Although the Company generally attempts to limit by contract its exposure to
incidental and consequential damages, and to cap the Company's liabilities to
its proceeds under a contract, if a court failed to enforce the liability
limiting provisions of the Company's

10
<PAGE>

contracts for any reason, or if liabilities arose which were not effectively
limited, the Company's business, results of operations and financial condition
could be materially and adversely affected. See "Business--Product
Development."

Dependence on Company and Third Party Proprietary Technology. The Company's
success is dependent in part upon its proprietary technology. While the
Company relies on a combination of copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights, the Company believes that factors such as the technical
and creative skills of its personnel, new product developments, frequent
product enhancements, name recognition and reliable products and product
support are more essential to establishing and maintaining a technology
leadership position, particularly because the Company is supplying standards-
based products. The Company seeks to protect its software, published data,
documentation and other written materials under trade secret and copyright
laws, which afford only limited protection. The Company has granted limited
access to its source code to third parties under confidentiality obligations.
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.

Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its
proprietary rights will be adequate or that the Company's competitors will not
independently develop similar technology. The Company distributes its products
electronically through the Internet. Distributing the Company's products
through the Internet makes the Company's software more susceptible than other
software to unauthorized copying and use. The Company has historically allowed
and currently intends to continue to allow, customers to electronically
download its client and server software. If as a result of changing legal
interpretations of liability for unauthorized use of the Company's software or
otherwise, users were to become less sensitive to avoiding copyright
infringement, the Company's business, results of operations and financial
condition could be materially adversely affected.

The Company is not aware that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third
parties will not claim infringement by the Company with respect to current or
future products. The Company expects that software developers will
increasingly be subject to infringement claims as the number of products and
competitors in the Company's industry segment grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to the Company or at all, which could
have a material adverse effect upon the Company's business, results of
operations and financial condition.

In addition, the Company relies on certain software that it licenses from
third parties, including software that is integrated with internally developed
software and used in the Company's products to perform key functions. The
Company licenses the base technology for the VisiODBC SDK products from
Microsoft, security technology it plans to use in several of its future
products from RSA Data Security, Inc. ("RSA") and Talarian SmartSockets from
Talarian for inclusion into a version of the Company's VisiChannel product
line. Microsoft has the right to terminate its license with the Company at any
time after delivery to the Company of the Microsoft SDK for ODBC 3.0, which
occurred in December 1996. In addition, in January 1997, Microsoft notified
the Company that Microsoft would convert its license to the Company from an
exclusive to a non-exclusive license. The Company's licenses with RSA and
Talarian may only be terminated for material breach. The Company has entered
into a joint technology agreement with JavaSoft, a subsidiary of Sun, that
grants the Company the right to sublicense JavaSoft's Java Database
Connectivity ("JDBC") test suites and ODBC bridge. There can be no assurances
that such firms will remain in business, that they will continue to support
their technology or that

11
<PAGE>

their technology will otherwise continue to be available to the Company on
commercially reasonable terms. The loss of or inability to maintain any of
these software licenses could result in delays or cancellations in product
shipments until equivalent software can be identified and licensed or
developed and integrated with the Company's products. Any such delay or
cancellation could materially adversely affect the Company's business, results
of operations and financial condition. See "Business--Intellectual Property
and Other Proprietary Rights."

International Sales. The Company's export sales accounted for approximately
10% and 12% of the Company's total revenue in fiscal 1996 and the nine months
ended December 31, 1996, respectively. The Company had no material export
sales in fiscal 1994 or 1995. The Company expects to increase its emphasis on
export sales. Revenue derived from export sales may account for a growing
percentage of the Company's revenue in future periods, although there can be
no assurance that the Company will achieve significant penetration in any
international market. The Company has only one international sales office,
which is located in Paris, France. The Company believes that its continued
growth will require expansion of its international operations and export
sales. To successfully expand export sales, the Company must establish
additional foreign sales offices, hire additional personnel and recruit
additional international resellers. To the extent the Company is unable to do
so in a timely manner, the Company's growth in export sales, if any, will be
limited, and the Company's business, results of operations and financial
condition could be materially adversely affected. The Company has granted
exclusive distribution rights in Japan for the Japanese versions of its ODBC
products to ASCII Something Good Corporation ("ASCII"), a Japanese software
distributor. The Company may not terminate these exclusive rights unless ASCII
fails to meet certain minimum annual sales objectives commencing in fiscal
year 1998 or otherwise breaches the agreement. There can be no assurance that
ASCII will be successful selling the Company's products.

There are a number of risks inherent in the Company's international business
activities, including unexpected changes in regulatory requirements, tariffs
and other trade barriers, costs and risks of localizing and internationalizing
products for foreign countries, longer accounts receivable payment cycles,
potentially adverse tax consequences, repatriation of earnings and the burdens
of complying with a wide variety of foreign laws. None of the Company's
products is currently a "double byte" product, which is required to localize
these products in certain non-English character set markets such as Asia. The
Company believes that it will be required to develop double byte versions of
its products and engage in other internationalization and localization
activities. There can be no assurance the Company will successfully complete
these activities in a timely manner. All of the Company's sales are currently
denominated in U.S. dollars and, therefore, increases in the value of the U.S.
dollar relative to foreign currencies could make the Company's products less
competitive in foreign markets. In addition, revenue of the Company earned in
various countries where the Company does business may be subject to taxation
by more than one jurisdiction, thereby adversely affecting the Company's
earnings. There can be no assurance that such factors will not have an adverse
effect on the revenue from the Company's future international sales and,
consequently, the Company's financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales and Marketing."

Concentration of Share Ownership and Voting Power; Anti-Takeover
Provisions. Upon completion of this offering (assuming no exercise of the
Underwriters' over-allotment option), officers, directors and affiliates of
the Company will beneficially own approximately 45.5% of the Company's
outstanding Common Stock. As a result, these stockholders as a group may be
able to control the management and affairs of the Company and all matters
requiring stockholder approval, including election of directors, any merger,
consolidation or sale of all or substantially all of the Company's assets and
any other significant corporate transactions. The concentration of ownership
could have the effect of delaying or preventing a change in control of the
Company, reducing the likelihood of any acquisition of the Company at a
premium price. See "Principal and Selling Stockholders."

The Company's Board of Directors ("Board of Directors" or "Board") has the
authority to issue up to 2,000,000 shares of Preferred Stock and to determine
the price, rights, preferences and privileges of those shares without any
further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject

12
<PAGE>

to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of shares of
Preferred Stock, while potentially providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. The Company has no present
intention to issue shares of Preferred Stock. In addition, certain provisions
of the Company's Restated Certificate of Incorporation may have the effect of
delaying or preventing a change of control of the Company, which could
adversely affect the market price of the Company's Common Stock. These
provisions provide, among other things, that the Board of Directors is divided
into three classes to serve for staggered three-year terms, that a director
may be removed from the Board of Directors only for cause and only upon the
vote of at least 66 2/3% of the voting power of all outstanding shares of the
Company's capital stock, that stockholders may not take action by written
consent, that the ability of stockholders to call special meetings of
stockholders and to raise matters at meetings of stockholders is restricted
and that certain amendments of the Company's Restated Certificate of
Incorporation, and all amendments by the stockholders of the Company's Amended
and Restated Bylaws, require the approval of holders of at least 66 2/3% of
the voting power of all outstanding shares. In addition, the Company is
subject to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law, which will prohibit the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. The application of Section 203 also could have the effect of delaying
or preventing a change of control of the Company. See "Description of Capital
Stock."

Broad Management Discretion over Use of Proceeds. The primary purpose of
this offering is to increase the Company's equity capital. The anticipated net
proceeds to the Company from this offering have not been designated for
specific uses. Accordingly, management of the Company will have broad
discretion with respect to the use of these funds. See "Use of Proceeds."

Possible Volatility of Stock Price. The market price of the Company's Common
Stock has been, and is likely to continue to be, volatile. Factors such as new
product announcements or changes in product pricing policies by the Company or
its competitors, quarterly fluctuations in the Company's operating results,
announcements of technical innovations, announcements relating to strategic
relationships or acquisitions, changes in earnings estimates by analysts and
general conditions in the software development tools market, among other
factors, may have a significant impact on the market price of the Company's
Common Stock. Should the Company fail to introduce products on the schedule
expected, the Company's stock price could be adversely affected. In addition,
in recent years the stock market in general, and the shares of technology
companies in particular, have experienced extreme price fluctuations. This
volatility has had a substantial effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
the specific companies. These broad market fluctuations may adversely affect
the market price of the Company's Common Stock. See"--Potential Fluctuations
in Operating Results."

Shares Eligible for Future Sale; Registration Rights. Sale of substantial
amounts of Common Stock in the public market following this offering could
have an adverse effect on the price of the Common Stock. Immediately upon the
effectiveness of this offering, 4,118,385 shares will be freely tradeable.
Commencing 90 days following the date of this offering and at various times
over a period of less than two years, 9,777,005 additional shares will become
freely tradeable upon the expiration of agreements not to sell such shares,
and subject to compliance with Rule 144 or 701 under the Securities Act, as
amended. Hambrecht & Quist LLC may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to such
agreements. See "Shares Eligible for Future Sale."

As of the effective date of the Registration Statement, the holders of
6,089,850 shares of the Company's Common Stock will be entitled to certain
registration rights with respect to such shares. If the Company were required
to register or include in a registration shares held by such holders pursuant
to the exercise of their registration rights, such sale might have an adverse
effect on the Company's ability to raise needed capital. See "Description of
Capital Stock."

13
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,180,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$13,129,000 (approximately $15,901,000 if the Underwriters' over-allotment
option is exercised in full). The principal purpose of the offering is to
increase the Company's equity capital. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders.

The Company expects the net proceeds to be used for general corporate
purposes, including working capital. A portion of the net proceeds may also be
used to acquire or invest in complementary businesses or products or to obtain
the right to use complementary technologies. While from time to time the
Company evaluates potential acquisitions of such businesses, products or
technologies, and anticipates continuing to make such evaluations, there are
no present understandings, commitments or agreements with respect to any
acquisition of other businesses, products or technologies. Pending such uses,
the proceeds will be invested in interest-bearing securities.

PRICE RANGE OF COMMON STOCK

The Company effected its initial public offering on August 8, 1996 at a
price to the public of $7.50 per share. Since that date, the Common Stock has
been traded on the Nasdaq National Market under the symbol VSGN. Prior to that
date, there was no public market for the Common Stock.

The following table sets forth, for the periods indicated, the high and low
sale prices per share for the Common Stock, all as reported by Nasdaq.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDING MARCH 31, 1997
Second Quarter (from August 8, 1996)..................... $13.250 $ 9.000
Third Quarter............................................ $17.750 $10.500
Fourth Quarter (through February 11, 1997)............... $16.250 $12.250
</TABLE>

On February 11, 1997 the last reported sale price of the Common Stock on the
Nasdaq National Market was $12.25 per share. As of February 11, 1997, there
were approximately 272 holders of record of the Common Stock.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on its capital
stock. It is the present policy of the Company to retain earnings to finance
the growth and development of the business and, therefore, the Company does
not anticipate paying cash dividends on its Common Stock in the foreseeable
future. In addition, the Company's bank credit facility contains covenants
that prohibit the Company from paying dividends without prior bank consent.

14
<PAGE>

CAPITALIZATION

The following table sets forth (i) the actual capitalization of the Company
at December 31, 1996, and (ii) the capitalization as adjusted to reflect the
sale of 1,180,000 shares of Common Stock offered by the Company hereby at the
public offering price offered hereby of $12.25 and the receipt of the
estimated net proceeds therefrom.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity (1):
Preferred stock, $0.001 par value, 2,000,000 shares
authorized, none issued and outstanding................. $ -- $ --
Common stock, $0.001 par value, 50,000,000 shares
authorized, 12,715,390 shares issued and outstanding
actual; 13,895,390 shares issued and outstanding
as adjusted............................................. 12 14
Additional paid in capital............................... 45,017 58,144
Accumulated deficit...................................... (29,733) (29,733)
-------- --------
Stockholders' equity .................................. 15,296 28,425
-------- --------
Total capitalization................................. $ 15,296 $ 28,425
======== ========
</TABLE>
- --------
(1) Excludes 3,351,736 shares of Common Stock reserved for future issuance
pursuant to the Company's stock plans. As of December 31, 1996, options to
purchase 2,321,735 shares at a weighted average exercise price of $5.69
per share were outstanding. See "Management--Stock Plans" and Note 6 of
Notes to Consolidated Financial Statements of Visigenic.

15
<PAGE>

DILUTION

The net tangible book value of the Company as of December 31, 1996 was $13.9
million or $1.09 per share of Common Stock. Net tangible book value per share
represents the amount of total tangible assets of the Company reduced by the
amount of its total liabilities and divided by the total number of shares of
Common Stock outstanding. Without taking into account any other change in such
net tangible book value after December 31, 1996, other than to give effect to
the sale by the Company of 1,180,000 shares offered hereby at the public
offering price of $12.25 per share and receipt of the net proceeds therefrom,
the pro forma net tangible book value of the Company as of December 31, 1996
would have been approximately $27.0 million, or $1.95 per share. This
represents an immediate increase in such net tangible book value of $0.86 per
share to existing stockholders and an immediate dilution of $10.30 per share
to new investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Public offering price per share.................................. $12.25
Net tangible book value per share as of December 31, 1996 be-
fore the offering............................................. $1.09
Increase per share attributable to new investors............... 0.86
-----
Pro forma net tangible book value per share after the offering... 1.95
------
Dilution per share to new investors.............................. $10.30
======
</TABLE>

The following table summarizes, on a pro forma basis as of December 31,
1996, the differences between the existing stockholders and the new investors
with respect to the number of shares of Common Stock purchased from the
Company, the total consideration paid to the Company and the average price per
share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)...... 12,715,390 91.5% $45,029,000 75.7% $ 3.54
New investors(1).............. 1,180,000 8.5 14,455,000 24.3 $12.25
---------- ----- ----------- -----
Total....................... 13,895,390 100.0% $59,484,000 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 12,295,390 or approximately 88.5%
of the total number of shares of Common Stock outstanding after this
offering and will increase the number of shares held by new investors to
1,600,000 or approximately 11.5% of the total number of shares of Common
Stock outstanding after the offering (1,840,000 or 13.0% if the
Underwriters' over-allotment option is exercised in full). See "Principal
and Selling Stockholders."

The above computations assume no exercise of options after December 31,
1996. As of December 31, 1996, there were outstanding options to purchase
2,321,735 shares of Common Stock at a weighted average exercise price of $5.69
per share. To the extent outstanding options are exercised, there will be
further dilution to new investors. See Note 6 of Notes to Consolidated
Financial Statements of Visigenic.

16
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data at March 31, 1995 and
1996 and for the years ended March 31, 1994, 1995, and 1996 have been derived
from the audited financial statements of the Company included elsewhere in
this Prospectus. The consolidated balance sheet data at March 31, 1994 are
derived from audited financial statements not included herein. The following
selected financial data at December 31, 1996 and for the nine months ended
December 31, 1995 and 1996 have been derived from unaudited financial
statements of the Company included elsewhere in this Prospectus and which
include all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for a fair presentation of its financial
position and results of operations for these periods. The following selected
pro forma combined statement of operations data for the year ended March 31,
1996 and the nine months ended December 31, 1996 has been derived from the
unaudited pro forma condensed combined financial statements of the Company and
PostModern included elsewhere in this Prospectus. The results of operations
for the nine months ended December 31, 1996 are not necessarily indicative of
the results that may be expected for the fiscal year ending March 31, 1997 or
any other period. The data set forth below is qualified by reference to, and
should be read in conjunction with, the financial statements and notes thereto
and the discussion thereof included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, NINE MONTHS ENDED DECEMBER 31,
---------------------------------------- ------------------------------
1996 1996
--------------------- --------------------------
PRO FORMA PRO FORMA
1994 (1) 1995 ACTUAL COMBINED (2) 1995 ACTUAL COMBINED (2)
-------- ------- ------- ------------ --------- ---------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenue:
Software products..... $ -- $ 892 $ 4,479 $ 4,783 $ 2,417 $ 9,895 $ 9,919
Service and other..... -- 223 1,096 1,794 888 1,639 1,747
------- ------- ------- ------- --------- ---------- ----------
Total revenue....... -- 1,115 5,575 6,577 3,305 11,534 11,666
------- ------- ------- ------- --------- ---------- ----------
Cost of revenue:
Software products..... -- 36 284 328 212 399 410
Service and other..... -- 259 727 946 526 1,430 1,495
------- ------- ------- ------- --------- ---------- ----------
Total cost of
revenue............ -- 295 1,011 1,274 738 1,829 1,905
------- ------- ------- ------- --------- ---------- ----------
Gross profit............ -- 820 4,564 5,303 2,567 9,705 9,761
------- ------- ------- ------- --------- ---------- ----------
Operating expenses:
Product development... 1,393 3,160 4,348 5,888 3,130 6,650 6,714
Sales and marketing... 503 1,511 3,215 3,638 2,138 6,977 7,045
General and
administrative....... 600 872 1,465 1,677 1,042 1,814 1,888
Purchased in process
product development.. -- -- -- -- -- 12,364 12,364
Amortization of excess
of purchase price
over net assets
acquired............. -- -- -- 522 -- 361 447
------- ------- ------- ------- --------- ---------- ----------
Total operating
expenses........... 2,496 5,543 9,028 11,725 6,310 28,166 28,458
------- ------- ------- ------- --------- ---------- ----------
Loss from
operations......... (2,496) (4,723) (4,464) (6,422) (3,743) (18,461) (18,697)
Interest and other
income, net............ 42 94 85 85 77 190 190
------- ------- ------- ------- --------- ---------- ----------
Net loss................ $(2,454) $(4,629) $(4,379) $(6,337) $ (3,666) $ (18,271) $ (18,507)
======= ======= ======= ======= ========= ========== ==========
Pro forma net loss per
share (3).............. $ (0.40) $ (0.57) $ (0.33) $ (1.51) $ (1.52)
======= ======= ========= ========== ==========
Pro forma weighted
average common and
common equivalent
shares (3)............. 11,064 11,064 11,008 12,141 12,141
======= ======= ========= ========== ==========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
-------------------- DECEMBER 31,
1994 1995 1996 1996
------ ------ ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents..................... $2,901 $ 553 $2,399 $ 9,064
Working capital............................... 2,722 488 816 11,286
Total assets.................................. 3,346 1,829 4,820 19,921
Stockholders' equity.......................... 3,132 1,117 2,220 15,296
</TABLE>
- -------
(1) The statement of operations data for the year ended March 31, 1994 is
presented for the period from inception (February 12, 1993) to March 31,
1994. See Note 1 of Notes to Consolidated Financial Statements of
Visigenic.
(2) The pro forma combined statement of operations data gives effect to the
May 1996 acquisition of PostModern as if it had occurred on April 1, 1995.
The acquisition was accounted for as a purchase and resulted in the write-
off of approximately $12.0 million of in process product development in
the quarter ended June 30, 1996. The pro forma combined statement of
operations data for the year ended March 31, 1996 does not give effect to
this write-off. See Note 9 of Notes to Consolidated Financial Statements
of Visigenic and Pro Forma Condensed Combined Financial Statements.
(3) See Note 2 of Notes to Consolidated Financial Statements of Visigenic for
an explanation of the method used to determine the number of shares used
to compute per share amounts.

17
<PAGE>

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

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
Except for the historical information contained herein, the discussion in this
Prospectus contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.

OVERVIEW

The Company commenced operations in February 1993 and was engaged
principally in product and market research and product development until the
launch of its initial products in November 1994. The Company first recognized
material revenue in the fourth quarter of fiscal 1995. The Company shipped
version 1.0 of the VisiODBC Software Development Kit ("SDK") and the VisiODBC
Drivers in November 1994, version 1.0 of its VisiChannel product in March 1996
and version 2.0 of its VisiODBC product line in June 1996. In May 1996, the
Company acquired PostModern, a supplier of distributed object technology, and
began selling VisiBroker for C++ and VisiBroker for Java, distributed object
products based on technology acquired from PostModern.

The Company's revenue is derived from license fees from licensing its
products, royalties from VARs, ISVs and distributors, and fees for services
related to its products, including software maintenance, development
contracts, consulting and training. License fees for the Company's products
vary according to the specific products licensed. Terms and conditions of
individual license transactions, including prices and discounts, are often
highly negotiated based on volumes and commitments and vary considerably from
customer to customer. Certain of the Company's license arrangements with VARs
and ISVs provide for sublicense fees payable to the Company based on a percent
of the VAR's or ISV's net revenue. Certain of the Company's license
arrangements with VARs and ISVs provide for fixed fees for the right to make
and distribute an unlimited number of copies of the Company's product for a
specified period of time. Service revenue is primarily attributable to lower
margin maintenance and other revenue, including training and consulting
revenue and engineering development fees. Prior to the acquisition of
PostModern, the Company's revenue was attributable to non-recurring license
fees for its database access products, particularly its VisiODBC product line,
and fees from related services. Since the acquisition of PostModern, the
Company's revenue has been attributable to non-recurring license fees for both
its database access and its distributed object products and fees from related
services. The Company expects that such products will account for
substantially all of its license revenue for the foreseeable future. Factors
adversely affecting the pricing of or demand for its products could have a
material adverse effect on the Company's business, results of operations and
financial condition.

The Company generally recognizes revenue from license and pre-paid royalty
fees upon delivery of software products if there are no significant post-
delivery obligations, if collection is probable and if the license agreement
requires payment within ninety days. If significant post-delivery obligations
exist or if a product is subject to customer acceptance, revenue is deferred
until no significant obligations remain or acceptance has occurred. Royalty
revenue (other than from pre-paid royalties) is recognized when it is reported
by VARs, ISVs and distributors. Maintenance revenue from ongoing customer
support and product upgrades is recognized ratably over the term of the
applicable maintenance period, which is typically twelve months. Consulting
and training revenue is generally recognized as services are performed over
the term of the agreement. If maintenance revenue is included in a license
agreement, such amount is unbundled from the license fee at its fair market
value. Revenue from engineering development work is generally recognized on a
percentage of completion basis. If a

18
<PAGE>

transaction includes both license and service elements, license fee revenue is
recognized upon shipment of the software, provided services do not include
significant customization or modification of the base product and payment
terms are not subject to acceptance criteria. In cases where license fee
payments are contingent upon the acceptance of services, revenues from both
the license and service elements are deferred until the acceptance criteria
are met. See Note 2 of Notes to Consolidated Financial Statements of
Visigenic.

The Company licenses its products to VARs and ISVs, who include the
Company's products in their own products, and to end users, who deploy the
Company's products in their own computing environments. A substantial portion
of the Company's license revenue to date is attributable to licenses to VARs
and ISVs. A relatively small number of VAR and ISV customers have accounted
for a significant percentage of the Company's license revenue. For fiscal
1996, licenses to the Company's ten largest customers accounted for
approximately 78% of the Company's total revenue and licenses to one customer,
Platinum technology, accounted for approximately 25% of the Company's total
revenue. For the first nine months of fiscal 1997, licenses to the Company's
ten largest customers accounted for approximately 55% of the Company's total
revenue and licenses to two customers, Platinum technology and Cisco,
accounted for approximately 14% and 13%, respectively, of the Company's total
revenue. The Company expects that licenses to a limited number of VAR and ISV
customers will continue to account for a large percentage of revenue for the
foreseeable future.

The sales cycles associated with the license of the Company's products are
often lengthy (typically ranging from six to twelve months) and are subject to
a number of significant delays over which the Company has little or no
control. In some cases, the license of the Company's software products is an
enterprise-wide decision by prospective end user customers or a product
strategy decision by VARs and ISVs. Generally, the Company must provide a
significant amount of information to prospective customers regarding the use
and benefits of the Company's products as part of its sales efforts. In
addition, the implementation of some of the Company's products involves a
significant commitment of resources by prospective customers and may require
substantial reengineering of customers' computing environments. The cost to
the customer of the Company's product is typically only a portion of the
related hardware, software, development, training and integration costs of
implementing a large scale system. Given these factors and the expected
continued dependence on a limited number of customers for a substantial part
of license revenue, the loss of a major customer or any reduction or delay in
sales to or implementations by such customers could have a material adverse
effect on the Company's business, results of operations, and financial
condition.

The Company markets its products in North America through its direct sales
and telesales organizations and through VARs and ISVs. Throughout the rest of
the world, the Company markets its products through distributors, VARs and
ISVs. International revenue accounted for approximately 10% of total revenue
in fiscal 1996 and approximately 12% of total revenue for the first nine
months of fiscal 1997. In February 1996, the Company opened a European sales
office in France. The Company intends to increase its international sales
force and focus on establishing additional international distributor, VAR and
ISV relationships. The Company expects that international revenue will account
for an increasing portion of total revenue in the future. As a result, failure
to manage international sales appropriately could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Risk Factors--International Sales."

With the exception of the third quarter of fiscal 1996, the Company's
revenue has increased in each of the last eight quarters primarily due to
growth in software license revenue. The Company's limited operating history,
however, makes the prediction of future operating results difficult. The
Company expects that prior growth rates of the Company's software products
revenue will not be sustainable in the future. The Company's future operating
results will depend on many factors, including the size, timing and terms and
conditions of individual license transactions; the relatively long sales and
implementation cycles for the Company's products; the delay or deferral of
customer implementations; changes in the Company's operating expenses; the
ability of the Company to develop and market new products and control costs;
market acceptance of new products; timing of introduction or enhancement of
products by the Company or its competitors; the level of product and price
competition; the ability of the Company to expand its direct sales and
telesales force, its indirect distribution

19
<PAGE>

channels and its customer support capabilities; activities of and acquisitions
by competitors; changes in database access and distributed object software,
database technology and industry standards; changes in the mix of products and
services sold; changes in the mix of channels through which products and
services are sold; levels of international sales; personnel changes and
difficulties in attracting and retaining qualified sales, marketing and
technical personnel; changes in customers' budgeting cycles; foreign currency
exchange rates; quality control of products sold; and general economic
conditions. The Company has not been profitable to date and the Company
currently anticipates that it will operate at a loss through at least the end
of 1997. There can be no assurance that any of the Company's business or
strategies will be successful or that the Company will be able to achieve or
sustain profitability on a quarterly or annual basis.

In fiscal 1995 and fiscal 1996, the Company's service and other revenue
consisted primarily of maintenance and consulting directly related to license
sales and development fees. In fiscal 1997, the Company began making a
significant investment in a professional services organization and a growing
portion of its service and other revenue consisted of consulting and training
revenues.

The Company's sales generally reflect a relatively high amount of revenue
per order. The loss or delay of individual orders, therefore, can have a
significant impact on the revenue and quarterly results of the Company.
Because the Company's operating expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could
cause significant variations in operating results from quarter to quarter and
could result in significant losses. To the extent such expenses precede, or
are not subsequently followed by, increased revenue, the Company's operating
results would be materially adversely affected. As a result of these and other
factors, revenue for any quarter is subject to significant variation, and the
Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. It is likely that in some future quarter
the Company's operating results will be below the expectations of market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected.

The Company acquired PostModern effective May 31, 1996 and CustomWare, Inc.
("CustomWare"), a professional services firm, effective December 3, 1996. The
acquisitions of PostModern and CustomWare were accounted for as a purchase in
the quarter ended June 30, 1996 and the quarter ended December 31, 1996,
respectively. See "--Purchased In Process Product Development and
Amortization." Except for certain condensed combined financial statements
included elsewhere in this Prospectus, PostModern's and CustomWare's financial
results prior to the effective date of their respective acquisitions are not
included in the Company's financial results presented herein.

20
<PAGE>

RESULTS OF OPERATIONS

The Company first recognized material revenue in the fourth quarter of
fiscal 1995 after the Company shipped version 1.0 of its VisiODBC product
line. As a result, the Company believes that period-to-period comparisons of
annual operating results are less meaningful than an analysis of recent
quarterly results. The following table sets forth for the periods indicated
the percentage of total revenue represented by certain line items from the
Company's Consolidated Statement of Operations. Amounts have not been
presented for fiscal 1994 as the Company did not record any revenue for that
period.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------- -------------------
1995 1996 1995 1996
---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Software products................ 80.0% 80.3% 73.1% 85.8%
Service and other................ 20.0 19.7 26.9 14.2
------ ----- -------- --------
Total revenue.................. 100.0 100.0 100.0 100.0
------ ----- -------- --------
Cost of revenue:
Software products................ 3.3 5.1 6.4 3.5
Service and other................ 23.2 13.0 15.9 12.4
------ ----- -------- --------
Total cost of revenue.......... 26.5 18.1 22.3 15.9
------ ----- -------- --------
Gross profit....................... 73.5 81.9 77.7 84.1
------ ----- -------- --------
Operating expenses:
Product development.............. 283.4 78.0 94.7 57.7
Sales and marketing.............. 135.5 57.7 64.7 60.5
General and administrative....... 78.2 26.3 31.6 15.7
Purchased in process product de-
velopment....................... -- -- -- 107.2
Amortization of excess of pur-
chase price over net assets ac-
quired.......................... -- -- -- 3.1
------ ----- -------- --------
Total operating expenses:...... 497.1 162.0 191.0 244.2
------ ----- -------- --------
Loss from operations............... (423.6) (80.1) (113.3) (160.1)
Interest and other income, net..... 8.4 1.6 2.4 1.7
------ ----- -------- --------
Net loss........................... (415.2)% (78.5)% (110.9)% (158.4)%
====== ===== ======== ========
</TABLE>

REVENUE

Software Products. Software products revenue increased by 402% from $892,000
in fiscal 1995 to $4.5 million in fiscal 1996 and increased by 309% from $2.4
million in the first nine months of fiscal 1996 to $9.9 million in the first
nine months of fiscal 1997. The Company had no software products revenue in
fiscal 1994. The revenue increase from fiscal 1995 to fiscal 1996 was
primarily due to an increased volume of licensing of the Company's database
access products, resulting from an increase in the number of products offered
and the expansion of the Company's direct sales and telesales organizations.
The revenue increase from the first nine months of fiscal 1996 to the first
nine months of fiscal 1997 was primarily due to the increased volume of
licensing of distributed object products resulting from the acquisition of
PostModern and the Company's database access products.

Service and Other. Service and other revenue, including maintenance revenue,
development fees and consulting and training revenue, increased by 391% from
$223,000 in fiscal 1995 to $1.1 million in fiscal 1996 and increased by 85%
from $888,000 in the first nine months of fiscal 1996 to $1.6 million in the
first nine months of fiscal 1997. The Company had no service and other revenue
in fiscal 1994. The revenue increases from fiscal 1995 to fiscal 1996 and from
the first nine months of fiscal 1996 to the first nine months of fiscal

21
<PAGE>

1997 were due to the greater licensing of products to customers under
agreements with a maintenance component and growth in training, consulting and
development activities.

COST OF REVENUE

Software Products. Cost of software products revenue includes product
packaging, documentation, production and shipping. Cost of software products
revenue increased from $36,000 in fiscal 1995 to $284,000 in fiscal 1996 and
increased from $212,000 in the first nine months of fiscal 1996 to $399,000 in
the first nine months of fiscal 1997. The increases resulted from increased
volume of licensing of the Company's products. The Company had no costs of
software products revenue in fiscal 1994.

Service and Other. Cost of service and other revenue consists primarily of
personnel and personnel related overhead allocation, facility and systems
costs incurred in providing consulting, training, customer support and
engineering development services. Cost of service and other revenue increased
from $259,000 in fiscal 1995 to $727,000 in fiscal 1996 and increased from
$526,000 in the first nine months of fiscal 1996 to $1.4 million in the first
nine months of fiscal 1997. This increase reflects the effect of fixed costs
resulting from the Company's investment during the first nine months of fiscal
1997 in a larger professional services organization. The Company had no costs
of service and other revenue in fiscal 1994. The Company intends to continue
investing resources in its professional services organization and anticipates
that the cost of service and other revenue may exceed service and other
revenue in future periods.

OPERATING EXPENSES

Product Development. Product development expenses include expenses
associated with the development of new products, enhancements of existing
products and quality assurance activities, and consist primarily of employee
salaries, personnel-related overhead allocation, benefits, consulting costs,
the cost of technology licensed from other software companies and the cost of
software development tools. Product development expenses increased by 38% from
$3.2 million in fiscal 1995 to $4.3 million in fiscal 1996 and by 127% from
$1.4 million in fiscal 1994 to $3.2 million in fiscal 1995. Product
development expenses increased by 112% from $3.1 million in the first nine
months of fiscal 1996 to $6.7 million in the first nine months of fiscal 1997.
The increases in the dollar amount of product development expenses were
primarily attributable to costs of additional personnel, including the
engineering personnel from PostModern beginning in June 1996, and full-time
contractors in the Company's product development operations and, to a lesser
extent, the licensing of existing technology from third parties which has been
or will be incorporated into the Company's products. The increase of product
development expenses in the third quarter of fiscal 1996 was the result of
increased consulting fees and licensing of third party technology which was
expensed because it was used exclusively in the development process. Of the
product development costs, approximately $1.3 million in fiscal 1994 and $1.2
million in fiscal 1995 consisted of expenses for the development of a product
the Company later chose not to introduce commercially. There can be no
assurance that the Company will not devote significant resources in the future
to develop and market other products that the Company may choose not to
introduce commercially. The Company anticipates that it will continue to
devote substantial resources to product development, including acquiring or
licensing technology from others, in order to introduce new products, enhance
existing products or accelerate its time to market.

In accordance with Statement of Financial Accounting Standards No. 86, the
Company has charged all software development costs to product development
expense as incurred because expenditures which were eligible for
capitalization in prior periods were insignificant.

Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel,
personnel related overhead allocation, field office rent and related expenses,
travel and entertainment, and advertising and promotional expenses. Sales and
marketing expenses increased by 113% from $1.5 million in fiscal 1995 to $3.2
million in fiscal 1996 and by 200% from $503,000 in fiscal 1994 to $1.5
million in fiscal 1995. Sales and marketing expenses increased by 226% from

22
<PAGE>

$2.1 million in the first nine months of fiscal 1996 to $7.0 million in the
first nine months of fiscal 1997. The increases in sales and marketing
expenditures reflect primarily the hiring of additional sales and marketing
personnel, costs associated with expanded advertising and promotional
activities, increased sales commissions and increased costs associated with
field sales offices. Of the sales and marketing costs, approximately $500,000
in fiscal 1994 and $900,000 in fiscal 1995 consisted of expenses relating to a
product the Company later chose not to introduce commercially, none of which
expenses was of a recurring nature. The Company plans to hire a substantial
number of sales and sales support personnel in 1997. The Company expects that
sales and marketing expenses will continue to increase in absolute dollar
amount as the Company continues to expand its sales and marketing efforts
domestically and internationally, establishes additional sales offices and
increases advertising and promotional activities.

General and Administrative. General and administrative expenses consist
primarily of salaries and occupancy costs for administrative, executive and
finance personnel and personnel related overhead allocation. These expenses
increased by 68% from $872,000 in fiscal 1995 to $1.5 million in fiscal 1996
and by 45% from $600,000 in fiscal 1994 to $872,000 in fiscal 1995. General
and administrative expenses increased by 74% from $1.0 million in the first
nine months of fiscal 1996 to $1.8 million in the first nine months of fiscal
1997. The increases in the absolute dollar amounts of general and
administrative expenses were primarily due to increased staffing and
associated expenses necessary to manage and support the Company's increased
scale of operations and expenses associated with being a public company. The
Company believes that the absolute dollar amount of its general and
administrative expenses will continue to increase as a result of the
anticipated expansion of the Company's administrative staff to support growing
operations.

PURCHASED IN PROCESS PRODUCT DEVELOPMENT AND AMORTIZATION

In May 1996, the Company completed the acquisition of PostModern which was
accounted for as a purchase in the quarter ended June 30, 1996. In December
1996, the Company completed the acquisition of CustomWare which was accounted
for as a purchase in the quarter ended December 31, 1996. In connection with
the acquisition of PostModern, the Company recorded a write-off in the quarter
ended June 30, 1996 of approximately $12.0 million of in process product
development. The remaining excess of purchase price over net assets acquired
of approximately $1.1 million will be amortized over two years. In connection
with the acquisition of CustomWare, the Company recorded a write-off in the
quarter ended December 31, 1996 of $350,000 of in process product development.
The remaining excess of purchase price over net assets acquired of
approximately $700,000 will be amortized over one year.

INTEREST AND OTHER INCOME, NET

Interest and other income, net, is comprised primarily of interest income
earned on the Company's cash and cash equivalents. Interest and other income,
net, decreased by 10% from $94,000 in fiscal 1995 to $85,000 in fiscal 1996
and increased by 124% from $42,000 in fiscal 1994 to $94,000 in fiscal 1995.
Interest and other income, net, increased from $77,000 in the first nine
months of fiscal 1996 to $190,000 in the first nine months of fiscal 1997,
primarily due to the cash received from the Company's initial public offering,
completed August 8, 1996.

PROVISION FOR INCOME TAXES

As of March 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $9.8 million and $2.0 million, respectively,
which expire at various dates through 2011. In addition, as of March 31, 1996,
the Company had general business credit carryforwards of approximately
$372,000, which expire at various dates through 2011. Utilization of the net
operating loss carryforwards and business credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986, as amended, and similar state
provisions. See Note 8 of Notes to Consolidated Financial Statements of
Visigenic.

23
<PAGE>

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables set forth statements of operations for each of the
eight quarters ended December 31, 1996, including such amounts expressed as a
percentage of total revenue. This quarterly information is unaudited, but has
been prepared on the same basis as the annual Consolidated Financial
Statements and, in the opinion of the Company's management, reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair representation of the information for the periods presented. Such
statements of operations should be read in conjunction with the Company's
audited Consolidated Financial Statements and Notes thereto included elsewhere
herein. Operating results for any quarter are not necessarily indicative of
results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software products...... $ 500 $ 544 $ 1,033 $ 840 $2,062 $ 2,505 $ 3,222 $ 4,168
Service and other...... 155 367 268 253 208 456 600 583
------- ------ ------- ------- ------ -------- ------- -------
Total revenue........ 655 911 1,301 1,093 2,270 2,961 3,822 4,751
------- ------ ------- ------- ------ -------- ------- -------
Cost of revenue:
Software products...... 34 43 62 107 72 138 130 131
Service and other...... 105 146 180 200 201 295 402 733
------- ------ ------- ------- ------ -------- ------- -------
Total cost of
revenue............. 139 189 242 307 273 433 532 864
------- ------ ------- ------- ------ -------- ------- -------
Gross profit............ 516 722 1,059 786 1,997 2,528 3,290 3,887
------- ------ ------- ------- ------ -------- ------- -------
Operating expenses:
Product development.... 660 729 972 1,429 1,218 1,657 2,481 2,512
Sales and marketing.... 543 636 770 732 1,077 2,006 2,397 2,574
General and
administrative........ 324 335 336 371 423 473 628 713
Purchased in process
product development... -- -- -- -- -- 12,014 -- 350
Amortization of excess
of purchase price
over net assets
acquired.............. -- -- -- -- -- 43 129 189
------- ------ ------- ------- ------ -------- ------- -------
Total operating
expenses............ 1,527 1,700 2,078 2,532 2,718 16,193 5,635 6,338
------- ------ ------- ------- ------ -------- ------- -------
Loss from
operations.......... (1,011) (978) (1,019) (1,746) (721) (13,665) (2,345) (2,451)
Interest and other
income, net............ 4 1 28 48 8 6 42 142
------- ------ ------- ------- ------ -------- ------- -------
Net loss................ $(1,007) $ (977) $ (991) $(1,698) $ (713) $(13,659) $(2,303) $(2,309)
======= ====== ======= ======= ====== ======== ======= =======
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUE
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software products...... 76.3% 59.7% 79.4% 76.9% 90.8% 84.6% 84.3% 87.7%
Service and other...... 23.7 40.3 20.6 23.1 9.2 15.4 15.7 12.3
------- ------ ------- ------- ------ -------- ------- -------
Total revenue........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------- ------ ------- ------- ------ -------- ------- -------
Cost of revenue:
Software products...... 5.2 4.7 4.8 9.8 3.2 4.6 3.4 2.8
Service and other...... 16.0 16.0 13.8 18.3 8.8 10.0 10.5 15.4
------- ------ ------- ------- ------ -------- ------- -------
Total cost of
revenue............. 21.2 20.7 18.6 28.1 12.0 14.6 13.9 18.2
------- ------ ------- ------- ------ -------- ------- -------
Gross profit............ 78.8 79.3 81.4 71.9 88.0 85.4 86.1 81.8
------- ------ ------- ------- ------ -------- ------- -------
Operating expenses:
Product development.... 100.8 80.1 74.7 130.7 53.7 56.0 64.9 52.9
Sales and marketing.... 82.9 69.8 59.2 67.0 47.4 67.7 62.7 54.2
General and
administrative........ 49.4 36.8 25.8 33.9 18.6 16.0 16.4 15.0
Purchased in process
product development... -- -- -- -- -- 405.7 -- 7.4
Amortization of excess
of purchase price
over net assets
acquired.............. -- -- -- -- -- 1.5 3.5 3.9
------- ------ ------- ------- ------ -------- ------- -------
Total operating
expenses............ 233.1 186.7 159.7 231.6 119.7 546.9 147.5 133.4
------- ------ ------- ------- ------ -------- ------- -------
Loss from
operations.......... (154.3) (107.4) (78.3) (159.7) (31.7) (461.5) (61.4) (51.6)
Interest and other
income, net............ 0.6 0.2 2.1 4.3 0.3 0.2 1.1 3.0
------- ------ ------- ------- ------ -------- ------- -------
Net loss................ (153.7)% (107.2)% (76.2)% (155.4)% (31.4)% (461.3)% (60.3)% (48.6)%
======= ====== ======= ======= ====== ======== ======= =======
</TABLE>

24
<PAGE>

With the exception of the third quarter of fiscal 1996, the Company's
revenue has increased in each of the eight quarters ending December 31, 1996.
The decline in revenue in the third quarter of fiscal 1996 resulted primarily
from the delay in completion of a large sale which closed in the fourth
quarter of fiscal 1996. The Company's cost of services and other revenue
increased in the quarter ended December 31, 1996 relative to the prior
quarters due to the addition of personnel and the inclusion of one month of
expenses related to CustomWare, which the Company acquired effective December
3, 1996. Similarly, primarily as a result of the acquisition of PostModern in
May 1996 and the hiring of additional personnel in connection with the
Company's distributed object business, the Company's product development
expenses increased significantly in the two quarters ended December 31, 1996.
The increase of product development expenses in the third quarter of fiscal
1996 was the result of increased consulting fees and licensing of third party
technology which was expensed because it was used exclusively in the
development process.

LIQUIDITY AND CAPITAL RESOURCES

In August 1996, the Company completed the initial public offering of its
common stock. The Company sold 2,015,000 shares of Common Stock for net
proceeds of approximately $13.2 million. Prior to its initial public offering,
the Company financed its operations and met its capital requirements primarily
from proceeds from the private sales of Preferred and Common Stock. At
December 31, 1996 the Company's principal sources of liquidity included cash
and cash equivalents of $9.1 million and a $3.0 million revolving line of
credit agreement which expires on July 15, 1997. Advances under the agreement,
which bear interest at the bank's prime lending rate plus 1.0%, are limited to
80% of the Company's eligible accounts receivable and are secured by
substantially all of the assets and contractual rights of the Company. The
line of credit agreement also contains certain financial restrictions and
covenants. As of December 31, 1996, the Company was in compliance with these
financial restrictions and covenants. See Note 3 of Notes to Consolidated
Financial Statements of Visigenic. There were no borrowings outstanding under
the agreement as of December 31, 1996.

The Company's operating activities used cash of $2.2 million in fiscal 1994,
$4.6 million in fiscal 1995, $2.6 million in fiscal 1996 and $9.3 million in
the first nine months of fiscal 1997. The increased use of cash in fiscal 1995
as compared with fiscal 1994 was primarily attributable to increased operating
costs and increased accounts receivable reduced by an increase in accounts
payable, accrued liabilities and deferred revenue. The decline in net cash
used in operations in fiscal 1996 as compared with fiscal 1995 was primarily
due to an increase in accounts payable, accrued liabilities and deferred
revenue. The increased use of cash in the first nine months of fiscal 1997 was
primarily due to an increase in accounts receivable.

The Company used $477,000, $378,000, $1.1 million and $3.5 million of net
cash during fiscal 1994, fiscal 1995, fiscal 1996 and the first nine months of
fiscal 1997, respectively, for investing activities, due primarily to
purchases of property and equipment. Financing activities provided $5.6
million, $2.6 million, $5.5 million and $19.4 million of net cash during
fiscal 1994, fiscal 1995, fiscal 1996 and the first nine months of fiscal
1997, respectively, due to the issuance of Preferred and Common Stock and
convertible notes and debt financing.

Deferred revenue consists primarily of the unrecognized portion of revenue
under maintenance and support contracts (which revenue is deferred and
recognized ratably over the term of such contracts) and advance payment of
software development fees and software license fees. Capital expenditures were
primarily for computers, furniture and equipment. The Company expects that its
capital expenditures will increase as the Company's employee base grows. As of
December 31, 1996, the Company did not have any material commitments for
capital expenditures.

The Company believes that the proceeds from the sale of the Common Stock
offered hereby, together with its existing sources of liquidity and cash
generated from operations, will satisfy the Company's projected working
capital and other cash requirements for at least the next twelve months.
Although operating activities may provide cash in certain periods, to the
extent the Company experiences growth in the future, the Company anticipates
that its operating and investing activities will use cash. Any such future
growth and any acquisitions of other technologies, products or companies may
require the Company to obtain additional equity or debt financing, which may
not be available or may be dilutive.

25
<PAGE>

BUSINESS

OVERVIEW

Visigenic Software, Inc. ("Visigenic" or the "Company") is a leading
independent provider of software tools for database access and distributed
object technologies for the Internet, Intranet and enterprise computing
environments. The Company's standards-based products facilitate the
development, deployment and management of distributed business applications by
providing database-independent access to leading databases and the
communication framework for distributed object applications. The Company
markets and sells its software through its direct sales and telesales forces,
independent software vendors ("ISVs"), value added resellers ("VARs"),
international distributors and on-line Internet sales in North America, Europe
and Asia. The Company's customers include Borland, Cisco, Compuware,
Healtheon, Hewlett-Packard, Hitachi, Microsoft, Netscape, Oracle, Platinum
technology and Software AG.

INDUSTRY BACKGROUND

. The increasing use of multiple database management systems ("DBMSs"),
requiring DBMS-independent client/server database access solutions.

. The increasing use of object technologies to provide distributed business
application solutions.

. The increasing use of Internet and Intranet technologies within
mainstream commercial markets, which is increasing the demand for
applications capable of operating in distributed computing environments.

Database Access

Client/server computing has given organizations the flexibility to develop
and deploy applications on a wide variety of computer platforms and DBMSs. The
computing infrastructure of the typical enterprise now consists of a
heterogeneous mix of operating systems, databases, networks and hardware. One
industry survey of Fortune 500 companies found that these companies use an
average of six different DBMSs. For example, an enterprise may support the
Windows, Windows NT, UNIX and MVS operating system platforms running Microsoft
SQL Server, Oracle and IBM DB2 DBMSs. To manage this heterogeneous, cross-
platform database environment, a common method of accessing, managing and
analyzing data from multiple databases was needed. The Open Database
Connectivity ("ODBC") standard was created to address this problem.

ODBC, originally developed by Microsoft, is an industry standard that is
based on a specification defined by the SQL Access Group, a consortium of
database, software and hardware vendors. ODBC provides a common database
access application programming interface ("API") for C and C++ developers
building DBMS-independent applications. With ODBC, a single application can
access multiple databases on multiple platforms, avoiding the need for
developers to write different versions of each application for each DBMS
vendor's proprietary data access API. The ODBC API is supported by most major
software vendors in their programming languages, application development tools
and report writing tools, including Microsoft Visual Basic and Visual C++,
PowerSoft PowerBuilder and the Oracle 2000 family, and Seagate Crystal
Reports.

As the popularity of the Java programming language has increased, the need
for a database-independent data access solution for Java applications has
grown. JavaSoft, a subsidiary of Sun Microsystems, developed the Java Database
Connectivity ("JDBC") API to meet this requirement and provide a common base
on which higher level tools and interfaces can be built. Similar to the ODBC
API, the JDBC API provides a DBMS-independent interface to SQL databases from
Java applications and applets. Most leading DBMS and tools vendors have
endorsed and are developing products using the JDBC API.

26
<PAGE>

The Company believes that organizations will require standards-based
database access solutions like ODBC and JDBC to provide an open, consistent
interface to the multiple DBMSs that they support. Further, the Company
believes that database access must be centralized on the server to facilitate
the development, deployment, and management of distributed business
applications for the Internet, Intranet and enterprise computing environments.

Distributed Object Connectivity

In today's rapidly evolving computing environments, enterprises require
improved software application architectures as well as improved database
access. Computing environments are becoming more distributed, with numerous
client and server machines networked together within a single enterprise as
well as across the Internet. The traditional method of building applications
as monolithic programs is not suited for a distributed environment. Instead,
applications must be more modular in nature, where the application is built as
a set of modules that can be distributed over a number of client and server
systems. Enterprises can improve computing performance by distributing
application logic over these computing networks so that the application logic
resides on the most appropriate system.

Object-oriented programming languages like C++ and Java have enabled
software developers to develop and deploy distributed applications more
easily. These languages are based on the concept of objects, which are
reusable software components that contain both data and the related procedures
that act upon them. Objects are modular in nature and can be arranged or
reused in many different combinations to form new applications. This modular,
self-contained characteristic makes objects ideal for distributed business
applications because they can now be created by linking a series of objects
that may be distributed over a number of different systems.

Significant challenges in distributed application development and deployment
include communication and interoperability between objects that are
distributed over a network. The Common Object Request Broker Architecture
("CORBA") specification, developed by the Object Management Group, a
consortium of software and hardware vendors and corporate end users, was
created to address these challenges. The CORBA specification defines an Object
Request Broker ("ORB") that manages and monitors the interactions of
distributed objects on a network. To enable interoperability among new and
legacy applications using ORBs, CORBA also specifies the Internet Inter-ORB
Protocol ("IIOP"), which defines a standard distributed messaging protocol for
communication between objects. IIOP is being adopted as a standard for
communication between and among distributed objects, and leading vendors, such
as Netscape and Oracle, have announced IIOP as a foundation technology for
future product offerings. CORBA-compliant objects are portable across
programming languages, development environments, computer platforms and
networks, which is an increasingly important attribute of applications in the
heterogeneous computing environments of the Internet, Intranets and
enterprises.

Before the CORBA specification, many enterprises had not undertaken the
development and deployment of distributed applications because of the lack of
software development tools that provide a distributed object communication
framework. This meant that building enterprise-wide distributed applications
entailed writing a new, proprietary communication framework--a task that was
difficult and time-consuming for many enterprises. The introduction of CORBA-
compliant ORBs has freed enterprises from having to write their own
communication framework and allows enterprises to focus their development
efforts on business logic. The Company believes that enterprises now need
commercially available ORBs from third party vendors that provide this
communication framework.

The Internet and Intranets Increase the Need for Distributed Applications

The Internet has become the most significant new medium for communication
between and among businesses, educational and government organizations and
individuals. The widespread use of the Internet by enterprises has resulted in
the emergence of Intranets, internal information systems based upon the
Internet infrastructure. The Internet and Intranets allow the enterprise to
distribute data and applications across geographically dispersed facilities as
well as enable customers, suppliers and other business partners to easily
access enterprise data and applications.

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<PAGE>

The Internet and distributed object technologies are accelerating the
importance of distributed business applications. The Internet provides an
effective platform for fostering the growth of distributed object applications
while new distributed object technology is improving the quality of these
applications. The Internet and distributed object technologies are driving a
change in how organizations design, develop, deploy, and maintain business
applications. The Company believes new applications will be built from sets of
objects that run on the Internet and Intranets, interact with each other
through an Object Request Broker and access data using standards-based
database access technology.

VISIGENIC SOLUTION

Visigenic provides key software components that enable developers and IT
professionals to develop, deploy and manage distributed business applications.
The Company provides software tools for database access and distributed
objects for the Internet, Intranet and enterprise computing environments. The
Company's cross-platform database access products, based on the ODBC and JDBC
APIs, are open, flexible and cost effective for developing, deploying and
maintaining DBMS-independent applications. The Company's distributed object
products, consisting of CORBA-compliant Object Request Brokers, provide a
communication framework and enable the development and deployment of reliable,
flexible and cost-effective distributed business applications.

The Company's solution provides the following benefits:

Application Architecture Flexibility. Visigenic's products are designed to
enable developers and IT professionals to build applications for a variety of
enterprise architectures which integrate legacy applications. The Company's
database access products provide application developers with the flexibility
to implement the database connection on the client, on the server or across
the Internet. The Company's distributed object products allow developers to
build applications that can be distributed over multiple client and server
machines and can interoperate with other CORBA-compliant and legacy
applications. This flexibility allows the enterprise to adapt its application
architecture to meet changing business and computing requirements.

Simplification of Distributed Application Development. Visigenic's products
simplify application development by reducing the time and expertise required
to develop applications. The Company's database access products allow
developers to access multiple DBMSs by writing to a single API rather than to
multiple proprietary APIs. The Company's distributed object products provide
the developer with the communication framework required for distributed object
applications, allowing the developer to focus on developing objects that
incorporate core business logic and facilitating the reuse of these objects in
multiple applications.

Simplification of Distributed Application Deployment. Visigenic's products
simplify the deployment of distributed applications. The VisiChannel product
line is based on Visigenic's server-centric ODBC and JDBC architecture that
shifts the database software components from clients to servers, thereby
simplifying deployment and centralizing administration. VisiBroker's agent-
based architecture reduces the deployment and administration effort for
distributed applications by dynamically tracking and documenting the existence
and location of all distributed objects on the network.

Support of Open Industry Standards. Visigenic's products for database access
and distributed objects support existing and emerging industry standards,
enabling developers and IT professionals to build solutions that are open,
flexible and interoperable across multiple operating environments. Visigenic's
products support key industry standards including database access standards
such as ODBC, X/Open SQL Access, and JDBC and distributed object standards
such as CORBA 2.0 and IIOP.

Technology Independence. Visigenic's products enable the development of
solutions for the heterogeneous computing environments confronting the
enterprise by supporting multiple operating systems, DBMSs, development
languages and hardware platforms.

Manageability. Visigenic's products provide monitoring tools that reduce the
time and resources required to manage distributed applications. VisiChannel
Manager lets administrators view and manage all VisiChannel-

28
<PAGE>

based data access activity and key information about each active connection.
VisiBroker enables the management of distributed object applications with its
facility for monitoring the location, status and usage of distributed objects.

VISIGENIC STRATEGY

Support and Enhance Open Industry Standards. The Company's products are
based on existing and emerging industry standards for heterogeneous database
access and distributed object technology. The Company actively participates in
standards-setting organizations including X/Open and the Object Management
Group. The Company intends to contribute to the expansion of existing
standards and the development of future standards created by these and other
standards-setting organizations. For example, the Company was instrumental in
accelerating ODBC's acceptance as a standard for heterogeneous database access
by licensing certain ODBC enabling technology from Microsoft and providing the
VisiODBC SDK on Macintosh, OS/2 and many UNIX platforms. In addition, the
Company has developed the first commercial implementation of IIOP in its ORB
products. The Company intends to continue promoting acceptance of IIOP as the
de facto standard for distributed object messaging for the Internet and
Intranets.

Leverage Strategic Partners. The Company intends to continue to establish
close relationships with leading technology companies through technology
licensing, joint development, strategic investments, and distribution and
marketing arrangements to promote the widespread acceptance and distribution
of Visigenic products. Key partnerships include the following:

. Cisco is a strategic investor in the Company and has entered into a
license agreement to incorporate the Company's database access products
in Cisco's network management product line.

. Hitachi has entered into a joint-development agreement with the Company
for the development of a transaction-enabled ORB based on the VisiBroker
for C++ and VisiBroker for Java products and is a worldwide distributor
of the VisiBroker product line.

. Microsoft has entered into a series of agreements to incorporate certain
of the Company's VisiODBC products with certain Microsoft products and
to license to the Company the Microsoft ODBC SDK and test suites for
non-Microsoft operating systems.

. Netscape is a strategic investor in the Company and has entered into a
license agreement to incorporate VisiBroker for Java into Netscape's
client products, Navigator 4.0 and Communicator, and VisiBroker for C++
into Netscape's server products, Enterprise 3.0 and FastTrack 3.0.

. Oracle has entered into a license agreement with the Company to
incorporate the Company's VisiODBC products with a number of Oracle's
Transparent Gateway products.

. Platinum technology is a strategic investor in the Company and has
entered into an agreement to incorporate the Company's VisiODBC,
VisiChannel and VisiBroker products with certain Platinum technology
products.

Provide a Broad Suite of Integrated Products. The Company offers a suite of
software tools for database access and distributed objects. The Company
intends to develop new products, enhance its current products and continue to
integrate its database access technology with its distributed object
technology to address the requirements of the development, deployment and
management of business applications.

Leverage Product Sales by Providing Professional Services. To address the
growing demand for expertise in IIOP, CORBA and the development of distributed
object applications, the Company employs a staff of

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<PAGE>

professional consultants and trainers who are experienced in database access
and distributed object technologies. The Company intends to continue to develop
and grow its professional service organization as a key differentiating
component of its sales strategy.

Maintain Technology Leadership. The Company is committed to maintaining its
technological leadership through internal product development efforts and, if
appropriate opportunities present themselves, through acquisitions of
technologies, products and companies to address the specific requirements of
distributed applications in the areas of database access, distributed objects
and the monitoring of distributed environments. The Company has invested and
will continue to invest in technology so that it can react and adapt to
changing technological trends and market needs.

Exploit and Develop Internet/Intranet Market Opportunities. The Company
believes that the emergence of the Internet and Intranets will significantly
increase the market for database access and distributed object connectivity
software. Visigenic intends to leverage its products and expertise in
heterogeneous database access and distributed objects to exploit the market
opportunity for distributed applications for the Internet and Intranets.

Expand Distribution Channels Worldwide. To achieve broad distribution of its
database access and distributed object software, the Company believes it must
continue to build multiple distribution channels worldwide. The Company is
expanding its direct sales and telesales forces as well as broadening its
indirect channels of distribution, including VARs, ISVs, systems integrators
("SIs"), Internet sales and international distributors. The Company's
international distribution strategy is to penetrate key international markets
by seeking additional VARs, ISVs and regional distributors and by further
developing its existing relationships with these customers.

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<PAGE>

PRODUCTS

The Company provides software tools for database access and distributed
object technologies for Internet, Intranet and enterprise computing
environments. The Company's products provide key software components that
enable developers and IT professionals to develop, deploy and manage
distributed business applications.

The following table identifies the Company's current products:

<TABLE>
<CAPTION>
MOST
ORIGINAL RECENT
PRODUCT RELEASE RELEASE SUPPORTED US SUGGESTED
NAMES DATE DATE PLATFORMS LIST PRICE (1)

<S> <C> <C> <C> <C>
DATABASE ACCESS

- -------------------------------------------------------------------------
VisiODBC Drivers 11/94 6/96 Windows 3.1 $95-$150/Driver
and DriverSet Windows 95 $295-$595/DriverSet
Windows NT
UNIX
Macintosh
OS/2
- -------------------------------------------------------------------------
VisiODBC SDK 11/94 6/96 UNIX $995/user
Macintosh
OS/2
- -------------------------------------------------------------------------
VisiChannel for ODBC 3/96 9/96 Windows 95 $500-$700/user
Windows NT
UNIX
- -------------------------------------------------------------------------

DISTRIBUTED OBJECT TECHNOLOGY

- -------------------------------------------------------------------------
VisiBroker for C++ 9/94 12/96 Windows 95 $3,000-$5,000/
Windows NT developer
UNIX $150-$250/runtime
- -------------------------------------------------------------------------
VisiBroker for Java 4/96 12/96 Windows 95 $3,000-$5,000/
Windows NT developer
UNIX $150-$250/runtime
- -------------------------------------------------------------------------
VisiBroker Naming 12/96 12/96 Windows 95 $995/developer
Service for C++ and Windows NT
Java UNIX
- -------------------------------------------------------------------------
VisiBroker Events 12/96 12/96 Windows 95 $1,495/developer
Service for C++ and Windows NT
Java UNIX
</TABLE>

(1) Actual price depends upon platform selected and quantity purchased, among
other factors. The terms and conditions, including prices and discounts
from list prices, of individual license transactions are often highly
negotiated based on volumes and commitments and vary considerably from
customer to customer.

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<PAGE>

Database Access Products

The Visigenic software tools for database access are based on the ODBC and
JDBC standards and enable database access independent of both the DBMS and
platform. The database access products include the VisiODBC Drivers and
DriverSets, VisiODBC SDKs, VisiChannel for ODBC and VisiChannel for JDBC.

VisiOdbc Drivers

LOGO

VisiODBC Drivers and DriverSets. The VisiODBC Drivers and DriverSets provide
cross-platform access to multiple SQL relational DBMSs--including Adabas, CA-
Ingres, IBM DB2, Informix, Microsoft SQL Server, Oracle and Sybase SQL Server
(DBLib and CTLib)--from any ODBC-enabled application. The VisiODBC Driver and
DriverSets are made up of two ODBC components: the Driver Manager and a set of
database drivers. The Driver Manager loads the ODBC drivers that an ODBC-
enabled application requests. The VisiODBC drivers provide the communication
link between the ODBC-enabled application and a specific DBMS; the drivers
process ODBC function calls from the application, translate them to DBMS-
specific calls and return the results of those calls to the application. For
example, to access an Oracle DBMS, an ODBC-enabled application, such as
Microsoft Excel, would send SQL calls through the VisiODBC Oracle driver.
Likewise, to access an Informix DBMS, Microsoft Excel would send the same SQL
calls through a VisiODBC Informix driver. The Company sells VisiODBC drivers
separately or as the VisiODBC DriverSet, which consists of the full set of
VisiODBC drivers available for each platform. VisiODBC Drivers are available
for Windows, Windows NT, HP-UX, IBM AIX, SGI Irix, SCO, Solaris, and Power
Macintosh and OS/2. The Company initially released VisiODBC Drivers and
DriverSets in November 1994.

VisiODBC SDKs. VisiODBC SDKs allow developers to develop vendor-independent
database applications and ODBC drivers. Using the VisiODBC SDKs, developers
write database-independent C and C++ applications that communicate
simultaneously with multiple databases from different vendors. Each VisiODBC
SDK comes with the Driver Manager, header files, programmer's reference and
graphical utilities.

Visigenic has ported the Microsoft ODBC 2.X SDK to ATT GIS, HP-UX, IBM AIX,
SGI Irix, SCO, Solaris, Sun OS, Macintosh, Power Macintosh and OS/2. Visigenic
currently has the right to license and port the Microsoft ODBC SDK versions
2.X and 3.0 for Windows to all non-Microsoft platforms. The Company released
its first VisiODBC SDK in November 1994.

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<PAGE>

VisiChannel Architecture

[DIGITIZED ARTWORK OF VISICHANNEL]

VisiChannel for ODBC. VisiChannel for ODBC provides an architecture that
simplifies database access in large distributed application environments such
as the Internet, Intranets and enterprise computing environment. VisiChannel
for ODBC's server-centric architecture shifts the administrative burden and
processing load for ODBC-enabled applications by relocating ODBC drivers and
network libraries away from each user's individual machine to a central
server, allowing easier administration and control. A "thin" database-
independent client driver connects to any database through the VisiChannel
Server for ODBC, where server-side ODBC drivers manage the actual database
connections. Since database connections are centralized, VisiChannel for ODBC
can reduce the time and resources spent on deploying and managing database
applications. In addition, the VisiChannel Manager is a monitoring tool that
allows IT professionals to monitor all VisiChannel connections and adjust
system configuration parameters from a single location.

VisiChannel for ODBC can be deployed for use with existing ODBC applications
without any changes to the client application. VisiChannel for ODBC is
optimized for large-scale ODBC traffic and runs over standard TCP/IP
transports, enabling it to be used for database access across the Internet.

The Company initially released VisiChannel for ODBC in March 1996. The
VisiChannel Server for ODBC is available for Windows NT, HP-UX and Sun
Solaris, and VisiChannel Clients are available for Windows, Windows NT, HP-UX,
and Sun Solaris. The Company expects to begin shipping VisiChannel Servers and
Clients for additional UNIX platforms in the first half of 1997.

VisiChannel for JDBC. VisiChannel for JDBC is a database access architecture
that enables Java applications or applets to access data through the Java
Database Connectivity, or JDBC, standard. As Internet, Intranet and Web-based
applications built in Java emerge, VisiChannel for JDBC will provide an
important solution for standards-based, high performance database access.
VisiChannel for JDBC is currently in beta test. The Company expects
VisiChannel for JDBC to be commercially available in the first half of 1997.

VisiChannel for JDBC is the first product to integrate Visigenic's database
access and CORBA/IIOP distributed object technologies. Its architecture
consists of a thin JDBC all-Java client side driver that communicates to a
VisiChannel for JDBC Server using the Internet standard, IIOP. The VisiChannel
for JDBC Server, using the ODBC database access standard, accesses data via
the appropriate ODBC database driver, either

33
<PAGE>

supplied with VisiChannel (Oracle, Sybase, Informix), or by third parties.
This allows enterprises to leverage their investment in their existing ODBC
database access infrastructure.

Distributed Object Products

Visigenic develops and markets two Object Request Broker products:
VisiBroker for C++ and VisiBroker for Java. Visigenic's ORBs, which are based
on the CORBA specification, provide an object-oriented solution for the
development and deployment of distributed applications. The VisiBroker product
line also includes two object services, Events and Naming, that are service
extensions to the CORBA specification. These services are extensions that
developers frequently need when implementing distributed object applications.
In addition, the Company has developed VisiBridge, a bridge from Microsoft
ActiveX and DCOM to CORBA-based applications.

VisiBroker for Java and VisiBroker for C++ (Object Request Brokers)

LOGO
[DIGITIZED ARTWORK OF VISIBROKER FOR JAVA]

VisiBroker for C++ and VisiBroker for Java share a common architecture. Both
products use IIOP as their internal communications protocol. IIOP is an
emerging Internet standard for distributed object messaging and is designed
for applications distributed across the Internet and Intranets. Each of the
Company's VisiBroker products is multi-threaded, facilitating scalability and
enhancing throughput. Applications developed using the Company's VisiBroker
products can support multiple concurrent threads to service both incoming and
outgoing object requests simultaneously, permitting objects within an
application to process a request without affecting the responsiveness of other
objects within the application. The Company's VisiBroker products have an
agent-based architecture and include one or more agents that communicate and
monitor the location of the ORB objects on the network. This agent-based
architecture is designed to adapt itself to changes in the objects and the
network, such as a heavy system load or the failure of objects. The
architecture minimizes the need for configuration files, making it easier to
deploy and administer applications, and enables automatic fail-over
capabilities, significantly reducing interruptions in any service provided as
part of or implemented using the ORB.

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<PAGE>

VisiBroker for C++. VisiBroker for C++ provides a communication framework
that enables the development, deployment and management of complex, distributed
C++ applications. VisiBroker for C++ consists of two main components: a
development component and a runtime component. The development component
includes a code generator that converts object interfaces specified in CORBA's
Interface Definition Language ("IDL") into C++. The developer adds application
logic and the runtime code to the generated code to create a distributed
application. The generated code is used by the objects' application logic to
interact with the VisiBroker runtime component which manages the communication
among the distributed objects.

VisiBroker for C++ operates on SunOS, Solaris, Digital UNIX, HP-UX, IBM AIX,
SGI Irix, Windows NT and Windows 95 platforms. VisiBroker for C++ was first
released in September 1994 and the Company is currently shipping version 2.1.

VisiBroker for Java. VisiBroker for Java is the industry's first client and
server Java ORB. VisiBroker for Java enables distributed computing on the
Internet and Intranets. Like VisiBroker for C++, VisiBroker for Java consists
of a development component and a runtime component. The VisiBroker for Java
development component converts IDL interfaces into client-side and server-side
Java code. The VisiBroker for Java runtime is written entirely in Java and can
run in any Java-enabled Web browser. Netscape has entered into an agreement to
incorporate VisiBroker for Java runtime in Navigator 4.0 and Communicator
products. On the Internet, a user can load a client-side VisiBroker for Java
applet into any Java-enabled browser, execute the applet and establish IIOP
connectivity with CORBA objects, whether the objects are written in Java or in
another language such as C++ or Smalltalk.

The VisiBroker for Java development environment is available on Windows NT,
Windows 95 and Solaris. Distributed applications developed with VisiBroker for
Java can be deployed on any platform supporting the Java environment.
VisiBroker for Java was first released in April 1996.

VisiBroker Naming Service for C++ and Java. The VisiBroker Naming Service
allows for the association of meaningful names with objects, and simplifies the
management of object names within an application. Client applications are no
longer bound to the specific objects they wish to use by having to specify an
interface name. To enable more rapid connections, names are organized in a
hierarchical fashion according to the frequency of object access. The
combination of the VisiBroker ORB and its agent-based architecture, coupled
with the VisiBroker Naming Service, provides a highly available, self-
recovering naming service.

VisiBroker Events Service for C++ and Java. The VisiBroker Events Service, a
full implementation of the Object Management Group's CORBA Events Service
standard, allows applications to be informed of events as they occur. The new
service decouples communication between objects, asynchronously distributing
data to multiple objects. One or more objects, called "suppliers," send data to
an "event channel." The event channel then asynchronously distributes that data
to one or more objects referred to as "consumers." This supplier-consumer
communication model allows an object to communicate an important state change,
such as a file server's disk running out of free space, to any number of other
objects that might be interested in such an event.

The VisiBroker Naming Service and the VisiBroker Events Service were first
released in December 1996 and are currently available for Windows NT, Solaris
and Java environments.

VisiBridge. VisiBridge is currently in beta test and the Company expects it
to be commercially available in the first half of 1997. VisiBridge is a
connectivity tool that enables ActiveX controls implemented in Web pages,
Visual Basic applications or OLE-enabled applications to interoperate with
CORBA objects. This technology provides customers the flexibility to operate in
familiar Microsoft applications and development environments, with the added
benefit of transparently accessing distributed objects based on CORBA
standards. Developers using ActiveX-enabled tools such as Microsoft Excel or
Microsoft Access, or ActiveX-enabled development environments such as
Microsoft's Visual Basic and Visual C++, Borland's Delphi and Powersoft's
PowerBuilder, can build applications that transparently and easily access CORBA
objects over the Internet or Intranets. Additionally, VisiBridge also serves to
bridge the Microsoft DCOM environment to the VisiBroker

35
<PAGE>

CORBA/IIOP environment. VisiBridge provides IT organizations that have a
strong commitment to Microsoft's standard for object development a way to
access environments where application functionality exists as CORBA objects.

CUSTOMERS

The Company's customers include the following:

FINANCIAL SERVICES NETWORK MANAGEMENT/SYSTEMS
MANAGEMENT

Global Trade Technologies
Merrill Lynch Bytex-A Division of Storage
Wells Fargo Bank Technology
Cisco
TELECOMMUNICATIONS Compuware
Embarcadero Technologies
Bell Northern Research ENlighten
British Telecom-North America Hewlett-Packard
DSC Communications Network General
MCI Telecommunications Platinum technology

INDEPENDENT SOFTWARE VENDORS AND VALUE ADDED RESELLERS

AimTech Corporation Oracle
Applix Premenos
AT&T Global Information Solutions Research Systems
Borland Software AG
Healtheon Starware
Hitachi UniSQL
Information Builders Vmark
Informix Software Wall Data
Investment Intelligence Systems Wang
Corporation XVT Software
Microsoft
Netscape

In fiscal 1996, one customer, Platinum technology, accounted for
approximately 25% of revenue and in the first nine months of fiscal 1997, two
customers, Platinum technology and Cisco, accounted for approximately 14% and
13%, respectively, of revenue. No other customer accounted for more than 10%
of revenue in either period. A relatively small number of VAR and ISV
customers have accounted for a significant percentage of the Company's
revenue, and the Company expects that sales to VAR and ISV customers will
continue to represent a significant portion of the Company's revenue in future
periods. In fiscal 1996, approximately 78% of the Company's revenue was
derived from ten customers. In the first nine months of fiscal 1997,
approximately 55% of the Company's revenue was derived from ten customers.

The Company's products can be used in many applications, including the
following examples:

Oracle Corporation. Oracle Corporation, a leading supplier of information
management software, wanted to provide their customers with access to
competitors' DBMSs. Their customers are increasingly operating in
heterogeneous environments and require a solution that allows them to develop
applications that access multiple DBMSs. Oracle integrated VisiODBC technology
in their Transparent Gateway, allowing them to support a single, standard
DBMS-independent API versus supporting multiple proprietary APIs of their
competitors. For the first time, Oracle provided their customers with direct
gateway access, providing distributed database capabilities, from the Oracle7
database to Sybase, Informix, and CA-Ingres.

Netscape. Netscape Communications Corporation, a leading provider of open
software for linking people and information over enterprise networks and the
Internet, has established IIOP and CORBA as the basis for the Netscape Open
Network Environment ("ONE") distributed object model. To provide this
distributed object model, Netscape has licensed the VisiBroker for Java
runtime to be included with every copy of Navigator 4.0 and Communicator and
the VisiBroker for C++ runtime in the Enterprise and FastTrack Server
products.

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<PAGE>

Platinum technology. Platinum technology, a leading provider of application
development, business intelligence, database administration, data warehousing,
and systems software solutions, was seeking a consistent database access
solution for their Platinum Open Enterprise Management System ("POEMS")
products. Platinum was supporting several proprietary database access methods.
Platinum integrated VisiODBC technology and VisiChannel into the POEMS
architecture, providing Platinum with a single database access architecture to
support and providing their customers with database connectivity across
multiple databases, operating systems and hardware platforms.

SALES AND MARKETING

The Company's sales and marketing objective is to achieve broad market
penetration by targeting multiple channels of distribution, including direct
sales and telesales, ISVs, VARs, SIs, international distributors and on-line
Internet sales. The Company is actively seeking to increase its base of VARs,
ISVs, SIs and international distributors.

Direct Sales/Telesales. The Company's direct sales and telesales forces
focus on medium to large-sized VARs, ISVs and corporate IT opportunities. To
date, the direct sales and telesales forces have been primarily targeting
strategic VARs and ISVs to leverage their sales and marketing expertise as
well as their position in the market. The Company has direct sales offices or
personnel in San Mateo, California; Denver, Colorado; Atlanta, Georgia;
Chicago, Illinois; Boston, Massachusetts; Dallas, Texas; Reston, Virginia and
Paris, France. The Company's telesales organization, based in San Mateo,
California, works jointly with the direct sales force to receive customer
orders as well as proactively identify, contact and qualify customer leads.

Independent Software Vendors. The Company has relationships with a number of
ISVs to leverage their sales and marketing channels through joint marketing
programs and product bundling agreements.

Value Added Resellers and System Integrators. VARs and SIs customize,
configure and install the Company's software products and bundle these
products with their software solutions and services.

International Distributors. The Company believes that it is important to
develop a strong international presence and intends to do business in markets
outside of North America principally through distributors. International sales
accounted for 10% and 12% of revenue in fiscal 1996 and the first nine months
of fiscal 1997, respectively. The Company is working with its distributors to
develop end user, ISV, VAR and SI relationships in their respective
territories. As of December 31, 1996, the Company had 22 international
distributors.

Internet Sales. Certain of the Company's products can be evaluated and
purchased electronically over the Internet. The Company believes that the
Internet can be an effective way to market its products to potential
customers.

The Company's marketing efforts are directed at building brand name
awareness while also highlighting the value of the Company's database access
and distributed object products. The Company's marketing efforts include
market research, product planning, creating collateral materials, managing
press coverage and other public relations, identifying potential customers,
advertising, attending tradeshows, speaking at industry conferences, direct
mail campaigns and establishing and maintaining close relationships with
recognized industry analysts. The Company also maintains a home page on the
Internet that is a source of sales leads.

As of December 31, 1996, the Company's sales organization included 40
employees and its marketing organization included 13 employees. An increase in
the sales staff will be required to expand both the Company's direct and
indirect sales activities and achieve revenue growth. Competition for such
personnel is intense, and there can be no assurance that the Company can
attract, assimilate or retain such personnel. Because of the complexity of
database access and distributed object software products, the Company has in
the past and expects to continue in the future to experience a time lag
between the date sales personnel are hired and the date such persons become
fully productive. If the Company is unable to hire and train such personnel on
a timely basis in

37
<PAGE>

the future, the Company's business, financial condition and results of
operations could be materially adversely affected. See "Risk Factors--Reliance
on VARs and ISVs" and "--International Sales."

PROFESSIONAL SERVICES

The Company believes that a high level of customer service and support is
critical to the Company's success. The Company's professional services
organization provides product training, specialized consulting, and product
support. These services are designed to promote the successful development and
deployment of distributed business applications built with Visigenic's
database access and distributed object products.

Consulting and Training. Visigenic's consulting services include application
design and development, strategy assessments, project mentoring and technology
transfer enabling the customer to choose the level of service that fits their
development needs. Visigenic's consultants are experienced in distributed
objects, database access, and application architecture. The Company
complements its consulting services with a training curriculum that includes
product training, and complementary technologies, such as Java, CORBA, ODBC
and JDBC.

Technical Support and Maintenance. The Company offers customer support
through telephone, electronic mail and fax. Visigenic provides new software
releases, maintenance releases and enhancements under annual support
agreements with customers. Maintenance and customer support license fees are
not included in software license fees but are purchased separately for an
annual fee.

PRODUCT DEVELOPMENT

The Company believes its future success will depend in large part on its
ability to expand the Visigenic product family by enhancing existing products,
integrating database access technology with distributed object technology and
developing new products to meet a broad range of customer needs. The Company's
product development organization is responsible for new product and technology
development, product testing and user interface development. This organization
is working to expand the availability of the Company's products on the leading
hardware platforms, operating systems, DBMSs, programming languages and
networking and communication protocols.

Since inception, the Company has made substantial investments in product
development and related activities. The Company's products have been developed
primarily by the Company's internal development staff and, in some instances,
with the assistance of external consultants. Certain technologies have been
acquired and integrated into the Company's products through licensing
arrangements. The Company expects that most of its new products will be
developed internally. However, the Company will evaluate on an ongoing basis
externally developed technologies and products for integration into its
product lines.

The Company expects that development activities with respect to its database
access products will include development of VisiODBC SDKs, VisiODBC drivers
compliant with the ODBC 3.0 specification as well as additional features for
its VisiChannel products, including high performance scalability, message and
queuing capabilities, a server-procedure architecture and Simple Network
Management Protocol ("SNMP") agents and other management and monitoring tools.

The Company expects to enhance its VisiBroker for C++ and VisiBroker for
Java products and expand its distributed object product line. The Company is
developing an object-oriented transaction processing system based on the
Object Transaction Service ("OTS") specified by the OMG that enables mission-
critical On-line Transaction Process ("OLTP") applications. This product is
being jointly developed with Hitachi and is a combination of the Company's
VisiBroker for C++ product, the OTS interface implementations and OpenTP1,
Hitachi's advanced transaction processing engine.

38
<PAGE>

The Company also intends to continue to leverage its technologies to provide
integrated database capabilities for its VisiBroker product line. VisiChannel
for JDBC is the first product that integrates the database access and
CORBA/IIOP technologies. VisiChannel for JDBC is expected to be commercially
available in the first half of 1997. The Company's VisiBroker products will
provide a more complete distributed object solution, addressing both the
distributed object and database access requirements of its customer base.

As of December 31, 1996, there were 61 employees on the Company's research
and development staff. The Company's product development expenditures in
fiscal 1995, fiscal 1996 and the first nine months of fiscal 1997 were $3.2
million, $4.3 million and $6.7 million, respectively. The Company expects that
it will continue to commit substantial resources to product development in the
future.

The markets for the Company's products are characterized by rapid
technological developments, evolving industry standards, swift changes in
customer requirements, computer operating environments and software
applications, and frequent new product introductions and enhancements. As a
result, the Company's success depends substantially upon its ability to
anticipate changes and continue to enhance its existing products, develop and
introduce in a timely manner new products incorporating technological
advances, comply with emerging industry standards and meet increasing customer
expectations. If the Company is unable to develop and introduce new products
or enhancements to existing products in a timely manner in response to
changing market conditions or customer requirements, the Company's business,
operating results and financial condition would be materially and adversely
affected. See "Risk Factors--Need to Develop New Software Products and
Enhancements" and "--Dependence on Java; Risks Associated with Encryption
Technology."

COMPETITION

The Company's products are targeted at the emerging markets for standards-
based database access software and standards-based distributed object
software. The markets for the Company's products are intensely competitive,
subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company believes that the principal competitive factors in these markets are
product quality, performance and price, vendor and product reputation, product
architecture and quality of support.

In the standards-based database access market, the Company competes
principally against Intersolv. The Company's database access products also
indirectly compete against proprietary database access solutions from database
vendors. In the standards-based distributed object market, the Company
competes principally against two private companies, Iona and Expersoft. The
Company's distributed object products also compete against existing or
proposed distributed object solutions from hardware vendors such as DEC,
Hewlett-Packard, IBM and Sun. In addition, because there are relatively low
barriers to entry in the software market and because the Company's products
are based on publicly available standards, the Company expects to experience
additional competition in the future from other established and emerging
companies if the market for database access and distributed object software
continues to develop and expand. In particular, relational database vendors
including Informix, Microsoft, Oracle and Sybase may offer standards-based
database access software to their customers, eliminating or reducing demand
for the Company's products. Similarly, operating system vendors such as DEC,
Hewlett-Packard, IBM, Microsoft and Sun may offer standards-based distributed
object products bundled with their operating systems. For instance, Microsoft
introduced DCOM, which could reduce or eliminate the need for CORBA-compliant
ORBs, such as those offered by the Company, for Microsoft operating systems.
Many of these current and potential competitors have well-established
relationships with the current and potential customers of the Company, have
extensive knowledge of the markets serviced by the Company, better name
recognition and more extensive development, sales and marketing resources and
are capable of offering single vendor solutions. As a result, these current
and potential competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products,
than the Company. It is also possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. The
Company also expects that competition will increase as a result of software
industry consolidations.

39
<PAGE>

The Company expects that it will face increasing pricing pressures from its
current competitors and new market entrants. Increased price competition may
result in price reductions, reduced gross margins and loss of market share,
any of which could materially adversely affect the Company's business,
financial condition or results of operations. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors or that competitive pressures will not materially and adversely
affect its business, financial condition or results of operations. See "Risk
Factors--Intense Competition."

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

The Company's success is dependent in part upon its proprietary technology.
While the Company relies on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights, the Company believes that factors such as the
technical and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and reliable products and
product support are more essential to establishing and maintaining a
technology leadership position, particularly because the Company is supplying
standards-based products. The Company seeks to protect its software, published
data, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. The Company has granted
limited access to its source code to third parties under confidentiality
obligations. 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.

Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its
proprietary rights will be adequate or that the Company's competitors will not
independently develop similar technology. The Company distributes its products
electronically through the Internet. Distributing the Company's products
through the Internet makes the Company's software more susceptible to
unauthorized copying and use. The Company has historically allowed and
currently intends to continue to allow customers to electronically download
its client and server software. If as a result of changing legal
interpretations of liability for unauthorized use of the Company's software or
otherwise, users were to become less sensitive to avoiding copyright
infringement, the Company's business, results of operations and financial
condition could be materially adversely affected.

40
<PAGE>

Talarian may only be terminated for material breach. The Company has entered
into a joint technology agreement with JavaSoft, a subsidiary of Sun, that
grants the Company the right to sublicense JavaSoft's JDBC test suites and
ODBC bridge. There can be no assurances that such firms will remain in
business, that they will continue to support their technology or that their
technology will otherwise continue to be available to the Company on
commercially reasonable terms. The loss of or inability to maintain any of
these software licenses could result in delays or cancellations in product
shipments until equivalent software can be identified and licensed or
developed and integrated with the Company's products. Any such delay or
cancellation could materially adversely affect the Company's business, results
of operations and financial condition. See "Risk Factors--Dependence on
Company and Third Party Proprietary Technology."

EMPLOYEES

As of December 31, 1996, the Company employed 161 full time personnel,
including 61 in product development, 25 in professional services, 53 in sales
and marketing and 22 in finance and administration. See "Risk Factors--
Dependence on Key Personnel; Need to Increase Technical and Sales Personnel."

FACILITIES

The Company's principal executive offices and research and development
facilities are located in San Mateo, California and consist of approximately
35,000 square feet under leases that will expire between November 2001 and
January 2002. The Company has sales offices in Atlanta, Boston, Chicago,
Dallas, Denver, and the Washington, D.C. area and in Paris, France. The
Company anticipates that it will require additional space in the near term and
that such space will be available on reasonable terms.

41
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Roger J. Sippl (1)...... 41 Chairman of the Board of Directors
and Chief Executive Officer
Mark D. Hanson.......... 36 President and Chief Operating Officer
Jens Christensen, 33 Vice President, Chief Technical Officer and Director
Ph.D...................
Kevin C. Eichler........ 37 Vice President, Finance, Chief Financial
Officer, Treasurer and Secretary
Scott Chalmers.......... 52 Vice President, Worldwide Sales
Robert Macdonald........ 40 Vice President, Marketing
Robert Perreault........ 39 Vice President, Professional Services
Gill Cogan (2).......... 44 Director
Cristina M. Morgan...... 44 Director
Michael Moritz.......... 42 Director
J. Sidney Webb (1)...... 77 Director
Eric Young (1).......... 40 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee

Roger J. Sippl is the founder of the Company and has served as a Director
and the Chief Executive Officer since February 1993. Mr. Sippl is a co-founder
of The Vantive Corporation, a customer interaction applications software
company ("Vantive") and serves as the Chairman of the Board. Mr. Sippl served
as a director of Vantive since December 1990 until his appointment as Chairman
in December 1996. Prior to his relationship with Vantive, Mr. Sippl founded
Informix Software, a database software company ("Informix"), in 1980 and
served as that company's President and Chief Executive Officer until 1989, and
its Chairman of the Board until December 1992.

Mark D. Hanson has served as President and Chief Operating Officer of the
Company since January 1995. Mr. Hanson served as Vice President, Worldwide
Sales from June 1994 when he joined the Company until his appointment as
President and Chief Operating Officer. From July 1992 to March 1994, Mr.
Hanson was Vice President of Channel Sales of Sybase, a database software
company, and Vice President, International Sales of Gain Technology ("Gain"),
a software company, before the acquisition of Gain by Sybase. From January
1991 to June 1992, Mr. Hanson served as Vice President, Worldwide Sales and
Support for Macromedia, a supplier of PC multimedia software and services.
Prior to that time, Mr. Hanson was employed as Vice President at Informix from
1984 to January 1991, most recently as Vice President, Americas Sales.

Jens Christensen has served as Vice President, Chief Technical Officer and a
Director of the Company since May 1996. From October 1991 to May 1996, Mr.
Christensen served as President and Chief Executive Officer of PostModern
Computing Technologies Inc., a software company he founded in 1991. From
October 1990 to September 1991, Mr. Christensen was employed as a software
engineer for Teknekron, a software company.

Kevin C. Eichler has served as Vice President, Finance, Chief Financial
Officer, Treasurer and Secretary of the Company since July 1996. From July
1995 to July 1996, Mr. Eichler served as Executive Vice President, Finance,
and Chief Financial Officer for National Insurance Group, a financial services
and related technology

42
<PAGE>

solution provider. From January 1991 to June 1995, Mr. Eichler served as
Executive Vice President, Finance and Chief Financial Officer for Mortgage
Quality Management, Inc., a national provider of quality control services and
technologies to residential mortgage lenders. From January 1990 to January
1991, Mr. Eichler served as Tax Manager, Corporate Finance for NeXT Software,
Inc., a software company. From May 1988 to January 1990, Mr. Eichler served as
Domestic Tax Manager for Microsoft Corporation, a software company.

Scott Chalmers has served as Vice President, Worldwide Sales of the Company
since October 1996. Prior to joining the Company, Mr. Chalmers was employed
for six years at Informix, where he held various positions, the most recent
being Vice President of U.S. Sales. Mr. Chalmers has had 25 years experience
in senior sales and management positions at such companies as Cullinet, AT&T
Information Systems and IBM.

Robert J. Macdonald has served as Vice President, Marketing of the Company
since September 1996. Prior to that, Mr. Macdonald was employed for over 10
years at Informix where he held various positions, the most recent being Vice
President, Corporate Marketing.

Robert Perreault has served as Vice President, Professional Services of the
Company since September 1996. Mr. Perreault served as Vice-President of
Research and Development from September 1995, when he joined the Company,
until his appointment as Vice-President, Professional Services. From May 1994
to September 1995, Mr. Perreault served as Vice President of Client/Server
Technology at Compuware Corporation, a software company. From September 1993
to May 1994, he served as Vice President of Database and Connectivity Products
at Uniface Corporation, a software company which merged with Compuware
Corporation in May 1994. In 1993, Mr. Perreault co-founded and served as
President of Data Accessibility Solutions, Inc., a consulting company which
merged with the Company in May 1996. Mr. Perreault co-founded and served as
Vice President of U.S. Operations for RIAL, Inc., a consulting company, from
September 1991 to August 1993.

Gill Cogan has served as a Director of the Company since January 1994. Since
October 1991, Mr. Cogan has been a partner at Weiss, Peck & Greer Venture
Partners. Mr. Cogan serves as a director for Electronics for Imaging, Inc.,
Harmonic Lightwaves, Inc., Integrated Packaging Assembly Corp., Number Nine
Visual Technology, and P-Com Inc.

Cristina M. Morgan has served as a Director of the Company since March 1993.
Ms. Morgan is a Managing Director of Hambrecht & Quist LLC, an investment
banking firm, where she has been employed since October 1982. Hambrecht &
Quist LLC is a managing underwriter of the offering made hereby.

Michael Moritz has served as a Director of the Company since March 1993. Mr.
Moritz has been a partner at Sequoia Capital, a venture capital company, since
1986. Mr. Moritz serves as a director for Yahoo!, Flextronics International
and Global Village Communications.

J. Sidney Webb has served as a Director of the Company since March 1993.
Since May 1984, Mr. Webb has served as director and Chairman of the Board of
The Titan Corporation, a consulting company. Mr. Webb also serves as a
director of Amdahl Corporation, EIP Microwave, Inc. and Plantronics, Inc. Mr.
Webb previously was Vice Chairman and a director of TRW.

Eric Young has served as a Director of the Company since July 1995. Mr.
Young is a general partner of Canaan Capital Partners, a venture capital
company, where he has been employed since October 1987. Mr. Young also serves
as a director for Spectrian Corporation and Integrated Packaging Assembly
Corporation.

The Company's Bylaws currently authorize eight directors, which number may
be changed from time-to-time by the Board of Directors. All directors hold
office until the next annual meeting of stockholders or until their successors
are duly elected and qualified. The Bylaws provide that, beginning with the
first annual meeting of stockholders following this offering, the Board of
Directors will be divided into three classes, with each class serving
staggered three-year terms. There are no family relationships among the
directors or executive officers of the Company.

43
<PAGE>

In April 1996, the Board of Directors established an Audit Committee and a
Compensation Committee. The Audit Committee oversees actions taken by the
Company's independent auditors, recommends the engagement of auditors and
reviews the Company's internal audits. The Compensation Committee approves the
compensation of executives of the Company and makes recommendations to the
Board of Directors with respect to standards for setting compensation levels.
The Compensation Committee also administers the Company's employee stock
option and stock purchase plans. See "--Stock Plans."

EXECUTIVE COMPENSATION

The following summary compensation table sets forth the compensation paid by
the Company during the fiscal year ended March 31, 1996 to the Company's Chief
Executive Officer and the four other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for services rendered in all capacities to the Company exceeded $100,000
during such fiscal year.

SUMMARY COMPENSATION TABLE FOR FISCAL 1996(/1/)

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------
ANNUAL
COMPENSATION AWARDS
------------ -----------------
NO. OF SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION SALARY (2) OPTIONS
- --------------------------- ------------ -----------------
<S> <C> <C>
Roger J. Sippl ................................. $ 90,001 --
Chairman of the Board and Chief Executive
Officer
Mark D. Hanson.................................. $140,000 62,500
President and Chief Operating Officer
Therese H. Langlais (3)......................... $106,667 27,500
Vice President, Marketing
David T. Shewmake (3)........................... $115,000 10,000
Vice President, Technical Services
Richard L. Gerould (3).......................... $115,000 15,000
Vice President, Corporate Development and
General Counsel
</TABLE>
- --------
(1) In fiscal 1997, the Company hired Jens Christensen as Vice President and
Chief Technical Officer, Kevin C. Eichler as Vice President, Finance,
Chief Financial Officer, Treasurer and Secretary, Scott Chalmers as Vice
President, Worldwide Sales and Robert Macdonald as Vice President,
Marketing. Based on their respective annual salaries, each of the above-
referenced officers would have earned in excess of $100,000 had they been
with the Company for all of fiscal 1997.
(2) Amounts shown are on a full year basis and include cash and noncash
compensation earned and received by executive officers.
(3) In January 1997, Ms. Langlais was transferred to the position of Vice
President of the Company, in October 1996, Mr. Shewmake began reporting to
Mr. Eichler as the Director of Information Technology and in October 1996,
Mr. Gerould began reporting to Mr. Chalmers as Vice President, Business
Development.

44
<PAGE>

The following table provides information concerning grants of options to
purchase the Company's Common Stock made during the fiscal year ended March
31, 1996 to each of the Named Executive Officers:

OPTION GRANTS IN FISCAL 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM (4)
OPTIONS IN FISCAL PRICE PER EXPIRATION -----------------------
NAME GRANTED (1) 1996 (2) SHARE (3) DATE 5% 10%
- ---- ----------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Roger J.
Sippl..... -- -- -- -- -- --
Mark D.
Hanson.... 25,000 3.0% $0.40 04/18/05 $ 488,849 $ 784,334
12,500 1.5 $0.40 07/27/05 244,424 392,167
12,500 1.5 $0.40 10/25/05 244,424 392,167
12,500 1.5 $0.40 03/31/06 244,424 392,167
Therese H.
Langlais.. 7,500 0.9 $0.40 04/18/05 146,655 235,300
10,000 1.2 $0.40 07/27/05 195,540 313,733
10,000 1.2 $0.40 03/15/06 195,540 313,733
David T.
Shewmake.. 2,500 0.3 $0.40 04/18/05 48,885 78,433
7,500 0.9 $0.40 03/15/06 146,655 235,300
Richard L.
Gerould... 5,000 0.6 $0.40 04/18/05 97,770 156,867
10,000 1.2 $0.40 03/15/06 195,540 313,733
</TABLE>
- --------
(1) Options granted in fiscal 1996 are immediately exercisable and generally
vest over five years, with 10% of the option shares becoming fully vested
six months from the initial vesting date and 1/60th of the option shares
vesting each successive month, with full vesting occurring on the fifth
anniversary of the initial vesting date. The Company has a repurchase
right for shares not vested. Under the terms of the Company's 1995 Stock
Option Plan (the "Option Plan"), the Board or a committee of the Board
retains discretion, subject to Option Plan limits, to modify the terms of
outstanding options and to reprice outstanding options. The options have
a term of ten years, subject to earlier termination in certain situations
related to termination of employment. See "--Stock Plans" for a
description of the material terms of the options.
(2) Based on a total of 820,750 options granted to all employees and
consultants during fiscal 1996.
(3) All options were granted at an exercise price equal to the fair market
value of the Company's Common Stock as determined by the Board of
Directors of the Company on the date of grant. The Company's Common Stock
was not publicly traded at the time of the option grants to the officers.
(4) Potential realizable values are calculated based on the assumption that
the fair market value of the Common Stock at the date of grant is the
public offering price of $12.25, and are net of exercise price, but
before taxes associated with exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at
the end of the option term. The assumed 5% and 10% annual rates of stock
price appreciation from the date of grant to the end of the option term
are provided in accordance with rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the future Common Stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Common Stock,
overall market conditions and the option holders' continued employment
through the vesting period. This table does not take into account any
actual appreciation in the price of the Common Stock from the date of
grant to the present.

45
<PAGE>

AGGREGATE OPTION EXERCISES AND FISCAL 1996 YEAR-END VALUES

The following table provides the specified information concerning
unexercised options held as of March 31, 1996 by each of the Named Executive
Officers:

AGGREGATE OPTION EXERCISES
AND FISCAL YEAR-END VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT 3/31/96
OPTIONS AT 3/31/96 (1) (2)
------------------------ ------------------------
NAME VESTED UNVESTED VESTED UNVESTED
- ---- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Roger J. Sippl................ -- -- -- --
Mark D. Hanson................ 7,500 55,000 -- --
Therese H. Langlais........... 4,750 22,750 -- --
David T. Shewmake............. 583 9,417 -- --
Richard L. Gerould............ 1,167 13,833 -- --
</TABLE>
- --------
(1) These options are immediately exercisable in full at the date of grant,
but shares purchased on exercise of unvested options are subject to a
repurchase right in favor of the Company which lapses ratably over five
years and entitles the Company to repurchase unvested shares at their
original issuance price.
(2) Calculated on the basis of the fair market value of the underlying
securities as of March 31, 1996 of $0.40 per share, as determined by the
Company's Board of Directors, minus the aggregate exercise price.

No options to purchase the Company's Common Stock were exercised during the
fiscal year ended March 31, 1996 by the Named Executive Officers. No
compensation intended to serve as incentive for performance to occur over a
period longer than one fiscal year was paid pursuant to a long-term incentive
plan during the last fiscal year to any Named Executive Officer. The Company
does not have any defined benefit or actuarial plan under which benefits are
determined primarily by final compensation (or average final compensation) and
years of service with any of the Named Executive Officers.

STOCK PLANS

1995 Stock Option Plan. The 1995 Stock Option Plan of the Company (the
"Option Plan") provides for the grant of stock options to employees (including
officers), directors and consultants of the Company and its subsidiaries.
Options may be incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") or nonstatutory
stock options, although incentive stock options may be granted only to
employees. All options granted under the Option Plan must be granted by April
18, 2005.

The Option Plan is administered by the Board of Directors or a committee
thereof. Subject to the provisions of the Option Plan, the Board or committee
has the authority to select the persons to whom options are granted and
determine the terms of each option, including (i) the number of shares of
Common Stock covered by the option, (ii) when the option becomes exercisable,
(iii) the option exercise price, which, in the case of incentive stock
options, must be at least 100% of the fair market value of a share of Common
Stock as of the date of grant, and, in the case of nonstatutory stock options
must be at least 85% of the fair market value of a share of Common Stock as of
the date of grant, and (iv) the duration of the option (which, in the case of
incentive stock options, may not exceed ten years). Generally, options granted
under the Option Plan are immediately exercisable but remain subject to
repurchase by the Company until vested under a schedule established by the
Board or committee. The Company's repurchase right will terminate upon certain
changes in control of the Company unless the outstanding options are assumed
or replaced by the acquiring corporation or if, following certain changes in
control of the Company, the option holder is terminated without cause or
resigns following "constructive termination" as defined in the Option Plan.
All incentive stock options are nontransferable other than by will or the laws
of descent and distribution. With the Company's consent, nonstatutory stock
options may be transferred to an optionee's immediate family, a trust for his
or her benefit or a partnership in which only the optionee and immediate
family members are partners.

Of the 2,500,000 shares of Common Stock reserved for issuance under the
Option Plan as of December 31, 1996, a total of 256,434 shares had been issued
upon the exercise of options, of which 124,906 remain subject to

46
<PAGE>

repurchase, options for the purchase of a total of 1,959,950 shares at a
weighted average exercise price of $6.69 per share were outstanding and
283,616 shares were available for future option grants.

1996 Outside Directors Stock Option Plan. A total of 200,000 shares of
Common Stock have been reserved for issuance under the Company's 1996 Outside
Directors Stock Option Plan (the "Directors Plan"), none of which have been
issued as of the effective date of this offering. The Directors Plan provides
for the grant of nonstatutory stock options to nonemployee directors of the
Company. The Directors Plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the Board of Directors. The Directors Plan provides that each
future nonemployee director of the Company will be granted an option to
purchase 15,000 shares of Common Stock on the date on which the optionee first
becomes a nonemployee director of the Company and each current nonemployee
director will be granted an option to purchase 15,000 shares of Common Stock
on the date following the first annual meeting of the stockholders of the
Company after this offering (the "Initial Grant"). Thereafter, on each
anniversary of a nonemployee director's Initial Grant, the director will be
granted an additional option to purchase 5,000 shares of Common Stock (an
"Annual Grant"). Subject to an optionee's continuous service with the Company,
1/8th of an Initial Grant will become exercisable six months after the date of
grant and 1/48th of the Initial Grant will become exercisable monthly
thereafter. Each Annual Grant will become exercisable in twelve monthly
installments beginning in the 37th month after the date of grant, subject to
the optionee's continuous service. The exercise price per share of all options
granted under the Directors Plan equals the fair market value of a share of
Common Stock on the date of grant. Options granted under the Directors Plan
have a term of ten years. In the event of certain changes in control of the
Company, options outstanding under the Directors Plan will become immediately
exercisable and vested in full. With the Company's consent, the options may be
transferred to an optionee's immediate family, a trust for their benefit or a
partnership in which only the optionee and immediate family members are
partners.

1996 Employee Stock Purchase Plan. A total of 450,000 shares of Common
Stock have been reserved for issuance under the Company's 1996 Employee Stock
Purchase Plan (the "Purchase Plan"), 60,782 of which have been issued as of
the date of this offering. The Purchase Plan, which is intended to qualify
under Section 423 of the Code, is administered by the Board of Directors or by
a committee thereof. Employees (including officers and employee directors) of
the Company or any subsidiary designated by the Board for participation in the
Purchase Plan are eligible to participate in the Purchase Plan if they are
customarily employed for more than 20 hours per week and more than five months
per year, and do not own 5% or more of the Company's Common Stock. The
Purchase Plan is implemented by sequential six-month offerings, the first of
which commenced on the effective date of the Company's initial public
offering. The initial offering period terminated on January 31, 1997.
Thereafter, offering periods will begin on February 1 and August 1 of each
year. The Board may change the dates or duration of one or more offerings, but
no offering may exceed 27 months. The Purchase Plan permits eligible employees
to purchase Common Stock through payroll deductions at a price no less than
85% of the lower of the fair market value of the Company's Common Stock on the
first day or the last day of each six-month offering period. Participants
generally may not purchase more than 1,500 shares in a six-month offering
period or stock having a value (measured at the beginning of the offering)
greater than $25,000 in any calendar year. In the event of certain changes in
control of the Company, the Board may accelerate the purchase of shares under
the Purchase Plan unless the acquiring corporation assumes or replaces the
purchase rights outstanding under the Purchase Plan.

Executive Performance Incentive Plan. Under the Company's Executive
Performance Incentive Plan (the "Incentive Plan"), the Compensation Committee
of the Board of Directors (the "Committee") may award performance units to
designated executives that will vest and become payable if one or more
preestablished performance goals are attained during a specified performance
period and the participant remains an employee. Performance goals may be
either absolute or relative (in comparison to a standard determined by the
Committee) measures of revenue, operating income, net income, earnings per
share, or departmental expenses. Performance units are dollar-denominated in
an amount specified by the Committee at the time of initial award and become
payable at a time determined by the Committee following its certification of
the attainment of the performance goals. Participants may elect to receive
payment of vested performance units either in cash or in shares of the

47
<PAGE>

Company's Common Stock having a fair market value on the date of payment equal
to the dollar value of the vested performance units. Immediately prior to
certain changes in control of the Company, Incentive Plan participants will be
paid the value of their performance units for the current performance period
that would have vested had the performance goals been attained at the target
level, prorated, however, for the portion of the performance period elapsed
prior to the change in control.

COMPENSATION OF DIRECTORS

Directors of the Company do not receive cash for services provided as a
director. Directors are reimbursed for all travel and related expenses
incurred in connection with attending board and committee meetings. Under the
Directors Plan, directors who are not employees of the Company receive yearly
grants of options to purchase Common Stock. See "--Stock Plans--1996 Outside
Directors Stock Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

The Compensation Committee was formed in April 1996, and is composed of
Roger J. Sippl, J. Sidney Webb and Eric Young. No interlocking relationship
exists between any member of the Company's Compensation Committee and any
member of any other company's board of directors or compensation committee.
During the fiscal year completed March 31, 1996, the Board of Directors of the
Company, of which Roger J. Sippl, Chief Executive Officer of the Company, was
and is a member, fulfilled all functions of the Compensation Committee with
regard to compensation of executive officers of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Pursuant to the provisions of the Delaware General Corporation Law, the
Company has adopted provisions in its Restated Certificate of Incorporation
which provide that directors of the Company shall not be personally liable for
monetary damages to the Company or its stockholders for a breach of fiduciary
duty as a director, except for liability as a result of: (i) a breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) an act related to the unlawful stock
repurchase or payment of a dividend under Section 174 of the Delaware General
Corporation Law; and (iv) transactions from which the director derived an
improper personal benefit. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.

The Company's Restated Certificate of Incorporation also authorizes the
Company to indemnify its officers, directors and other agents, by bylaws,
agreements or otherwise, to the full extent permitted under Delaware law. The
Company has entered into separate indemnification agreements with its
directors and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may
arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms. The Company believes that the
provisions and agreements are necessary to attract and retain qualified
directors and officers.

The Company's Bylaws provide that the Company shall indemnify its directors
and officers and may indemnify its employees to the fullest extent permitted
by law. The Company believes that indemnification under its Bylaws covers at
least negligence and gross negligence on the part of the indemnified party.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company
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.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.

48
<PAGE>

CERTAIN TRANSACTIONS

Since February 12, 1993 (the date of the Company's inception), there has not
been, nor is there currently proposed, any transaction or series of similar
transactions to which the Company was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer or
holder of more than 5% of any class of voting securities of the Company or
members of such person's immediate family had or will have a direct or
indirect material interest other than the transactions described below.

On March 3, 1993, the Company issued for cash 2,000,000 shares of Common
Stock at a price of $0.08 per share to Roger J. Sippl, the Company's founder,
Chairman of the Board and Chief Executive Officer.

On March 31, 1993, the Company sold 803,000 shares of Series A Preferred
Stock at a price of $2.40 per share. The following executive officers,
directors, beneficial holders of more than 5% of a class of the Company's
capital stock and immediate family members of such persons purchased Series A
Preferred Stock:

<TABLE>
<CAPTION>
SHARES OF
SERIES A
PURCHASER(1) PREFERRED STOCK
------------ ---------------
<S> <C>
Cristina M. Morgan (2)....................................... 10,000
J. Sidney Webb (2)........................................... 20,000
Mark D. Hanson (3)........................................... 5,000
Elizabeth G. Salmon (4)...................................... 197,500
Entities affiliated with Sequoia Capital (4)(5).............. 250,000
</TABLE>
- --------
(1) See notes to table of beneficial ownership in "Principal and Selling
Stockholders" for information relating to the beneficial ownership of such
shares.

(2) Director of the Company.

(3) Executive officer of the Company.

(4) A beneficial holder of more than 5% of a class of the Company's capital
stock.

(5) Represents 227,500 shares held by Sequoia Capital VI, 12,500 shares held
by Sequoia Technology Partners VI and 10,000 shares held by Sequoia XXIII.

Upon the consummation of the Company's initial public offering in August
1996, all outstanding shares of Series A Preferred Stock converted into shares
of Common Stock on a one-for-one basis.

In June 1993, the Company issued 12,500 shares of Common Stock at a price of
$0.20 per share to each of Cristina M. Morgan and J. Sidney Webb, outside
directors of the Company.

49
<PAGE>

Between December 17, 1993 and January 14, 1994, the Company sold an
aggregate of 871,625 shares of Series B Preferred Stock at a price of $4.00
per share. Between April 29, 1994 and August 2, 1994, the Company sold an
aggregate of 625,000 shares of Series B Preferred Stock at a price of $4.00
per share. Between May 26, 1995 and August 3, 1995, the Company sold an
aggregate of 1,375,000 shares of Series B Preferred Stock at a price of $4.00
per share. The following executive officers, directors, beneficial holders of
more than 5% of a class of the Company's capital stock and immediate family
members of such persons purchased Series B Preferred Stock:

<TABLE>
<CAPTION>
SHARES OF
SERIES B
PURCHASER (1) PREFERRED STOCK
------------- ---------------
<S> <C>
Roger J. Sippl (2)(3)(4)................................... 261,250
J. Sidney Webb (2)......................................... 37,500
Cristina M. Morgan (2)..................................... 2,500
Mark D. Hanson (3)......................................... 2,500
Elizabeth G. Salmon (4).................................... 216,500
Entities Affiliated with Sequoia Capital (4)(5)............ 490,500
Entities Affiliated with Weiss, Peck & Greer Venture
Partners (4)(6)........................................... 592,500
Entities Affiliated with Canaan Capital Partners (4)(7).... 550,000
</TABLE>
- --------
(1) See notes to table of beneficial ownership in "Principal and Selling
Stockholders" for information relating to the beneficial ownership of such
shares.

(2) Director of the Company.

(3) Executive officer of the Company.

(4) A beneficial holder of more than 5% of a class of the Company's capital
stock.

(5) Represents 446,355 shares held by Sequoia Capital VI, 24,525 shares held
by Sequoia Technology Partners VI, 8,820 shares held by Sequoia XXIII and
10,800 shares held by Sequoia XXIV.

(6) Represents 49,888 shares held by Weiss, Peck & Greer Venture Associates II
(Overseas), Ltd., 227,638 shares held by Weiss, Peck & Greer Venture
Associates II, L.P. and 314,973 shares held by WPG Enterprise Fund.

(7) Represents 446,500 shares held by Canaan Capital Offshore Limited
Partnership C.V., 53,500 shares held by Canaan Capital Limited Partnership
and 50,000 shares held by Quai Limited.

Upon the consummation of the Company's initial public offering in August
1996, all outstanding shares of Series B Preferred Stock converted into shares
of Common Stock on a one-for-one basis.

On May 24, 1996, the Company sold an aggregate of 444,444 shares of Series C
Preferred Stock at a price of $9.00 per share, and shortly thereafter issued
convertible notes in the aggregate principal amount of $2.0 million. Cisco
purchased 222,222 of these shares, and a note in the principal amount of $1.0
million. Upon the consummation of the Company's initial public offering in
August 1996, all outstanding shares of Series C Preferred Stock converted into
shares of Common Stock on a one-for-one basis, and the amount borrowed by the
Company pursuant to the convertible notes converted into shares of the
Company's Common Stock at a conversion price equal to $7.50 per share.

In connection with the merger of PostModern with and into the Company in May
1996, the Company issued an aggregate of 3,099,821 shares of its Common Stock
to the former shareholders of PostModern, including 844,486 shares to Jens
Christensen, 851,235 shares to Neguine Navab, 844,486 shares to Prasad
Mokkapati and 426,507 shares to Suresh Challa, and options to purchase an
aggregate of 361,785 shares of its Common Stock at exercise prices ranging
from $0.24 to $0.60 to the former holders of options to purchase Common Stock
of PostModern, including options to purchase 67,494 shares of the Company's
Common Stock issued to Neguine Navab. Also in connection with the merger, the
Company paid, subject to vesting, an aggregate of $1,500,000 to

50
<PAGE>

certain former employees of PostModern, including $400,000 to each of Messrs.
Christensen and Mokkapati and $400,000 to Ms. Navab, and $2,307,152 to certain
former shareholders of PostModern, including $750,655 to each of Messrs.
Christensen and Mokkapati, $183,000 to Mr. Challa, and $696,659 to Ms. Navab.
Upon the closing of the merger, Hambrecht & Quist LLC, of which Cristina M.
Morgan, a Director of the Company, is a Managing Director, received shares of
PostModern common stock for financial advisory services rendered to PostModern
in connection with the Company's acquisition of PostModern, which shares were
immediately converted into 84,374 shares of the Company's Common Stock. The
consideration issued by the Company in the merger was determined through
negotiations between the managements of the Company and PostModern.

In connection with the merger of Data Accessibility Solutions, Inc. ("Data
Accessibility") with and into the Company in May 1996, the Company issued an
aggregate of 12,500 shares of its Common Stock to the former shareholders of
Data Accessibility, including 6,250 shares to Robert Perreault, the Company's
Vice President, Research and Development.

Mr. Sippl, the Company's founder and the Chief Executive Officer and
Chairman of the Board of Directors of the Company, formed RogerLabs, Inc.
("RLI") in February 1996, in order to pursue technology research and
development projects of interest to him. Mr. Sippl is the sole owner, director
and officer of RLI. In June 1996, the Company acquired certain technology and
other assets being developed by RLI that the Company expects it may use in a
future product or products. The Company paid Mr. Sippl $40,000 to acquire
these assets. RLI's cost of development of the technology, consisting chiefly
of salaries of RLI employees and fees paid to consultants, exceeded the price
paid by the Company. In connection with the asset sale, five employees of RLI
became employees of Visigenic.

The Company has entered into non-compete agreements with certain employees
who joined the Company in connection with the PostModern merger. The Company
has entered into indemnification agreements with each of its directors and
executive officers. Such indemnification agreements require the Company to
indemnify such individuals to the fullest extent permitted by Delaware law.

Cristina Morgan, a director of the Company, is a Managing Director of
Hambrecht & Quist LLC, an investment banking firm. Hambrecht & Quist LLC is a
managing underwriter of this offering. See "Management--Directors and
Executive Officers," and "Principal and Selling Stockholders."

51
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1996, and as
adjusted to reflect the sale of the shares offered hereby, assuming no
exercise of the Underwriters' over-allotment option, (i) by each person who is
known by the Company to own beneficially more than 5% of the Company's Common
Stock, (ii) by each of the Named Executive Officers and by each of the
Company's directors, (iii) by all current executive officers and directors as
a group, and (iv) by each Selling Stockholder. Except pursuant to applicable
community property laws or as indicated in the footnotes to this table, each
stockholder identified in the table possesses sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by such
stockholder.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING (1) OFFERING (1)
----------------------- SHARES BEING -----------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND
DIRECTORS
Roger J. Sippl (2)...... 2,468,750 19.4% -- 2,468,750 17.7%
Mark D. Hanson (3)...... 285,000 2.2 -- 285,000 2.0
Jens Christensen (4).... 1,529,720 12.0 31,309 1,467,102 10.7
Therese H. Langlais
(5).................... 118,310 * -- 118,310 *
David T. Shewmake (6)... 45,435 * -- 45,435 *
Richard L. Gerould (7).. 90,125 * -- 90,125 *
Michael Moritz (8)...... 740,500 5.8 -- 684,963 4.9
Cristina M. Morgan (9).. 109,374 * -- 109,374 *
Gill Cogan (10)......... 592,500 4.7 -- 557,500 4.0
J. Sidney Webb (11)..... 70,000 * -- 70,000 *
Eric Young (12)......... 550,000 4.3 -- 450,000 3.2
All executive officers
and directors as a
group
(12 persons) (13)...... 6,846,938 51.5 31,809 6,593,283 45.5
5% STOCKHOLDERS
Elizabeth G. Salmon
(14)................... 2,468,750 19.4 -- 2,468,750 17.7
Neguine Navab (15)...... 1,529,720 12.0 31,309 1,467,102 10.7
Prasad Mokkapati (16)... 769,235 6.0 37,500 731,735 5.3
Funds affiliated with
Sequoia Capital (17)... 740,500 5.8 55,537 684,963 4.9
3000 Sand Hill Road
Menlo Park, California
94025
OTHER SELLING
STOCKHOLDERS
Blumenfield, Neil R. 65,000 * 1,000 64,000 *
(18)...................
Boich, Michael D........ 5,000 * 2,500 2,500 *
Canaan Capital Partners 550,000 4.3 100,000 450,000 3.2
(19)...................
Challa, Suresh (20)..... 346,507 2.7 15,000 331,507 2.4
Cisco Systems........... 357,574 2.8 35,757 321,817 2.3
The deBenedetti Family 20,750 * 2,500 18,250 *
Trust..................
Demour, Alain (21)...... 127,952 1.0 12,500 115,452 *
Ellard, Scott........... 109,059 * 12,500 96,550 *
Fiust, Cheryl (22)...... 10,000 * 1,167 8,833 *
Forrester, Richard 22,500 * 250 22,250 *
(23)...................
LaForce, Nathan......... 300 * 150 150 *
Lampson, Dale (24)...... 26,249 * 500 25,749 *
Mahler, Paul (25)....... 10,000 * 3,500 6,500 *
Missire, Marc A. (26)... 17,500 * 250 17,250 *
Moore, Kelly (27)....... 2,250 * 318 1,932 *
</TABLE>

52
<PAGE>

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING (1) OFFERING (1)
----------------------SHARES BEING ----------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------- ----------- ---------------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OTHER SELLING
STOCKHOLDERS
Netscape Communications 178,953 1.4 17,895 161,058 1.2
Corporation............
O'Neil, Tim (28)........ 3,000 * 354 2,646 *
Parfitt, Richard (29)... 15,000 * 750 14,250 *
Park, Thom (30)......... 25,000 * 1,000 24,000 *
Perreault, Robert (31).. 89,999 * 500 89,499 *
Platinum technology, 178,787 1.4 6,704 172,083 1.2
Inc. (32)..............
Quai Limited (33)....... 50,000 * 10,000 40,000 *
Sidebottom, Thomas 20,000 * 1,250 18,750 *
(34)...................
Smith, Sharlo (35)...... 11,250 * 500 10,750 *
Weedon, Jonathan (36)... 127,952 1.0 2,500 125,452 *
Weiss, Peck & Greer 592,500 4.7 35,000 557,500 4.0
Venture Partners (37)..
</TABLE>
- --------
* Represents less than 1%.

(1) Based on 12,715,390 shares of Common Stock outstanding prior to the
offering. A person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days upon the exercise of
options. Calculations of percentages of beneficial ownership assume the
exercise by only the respective named stockholder of all options for the
purchase of Common Stock held by such stockholder which are exercisable
within 60 days of December 31, 1996. Unless otherwise indicated, the
address of each 5% or greater stockholder is: c/o Visigenic Software,
Inc., 951 Mariner's Island Boulevard, Suite 120, San Mateo, California
94404.

(2) Includes 393,750 shares held by Elizabeth G. Salmon, Mr. Sippl's spouse,
as separate property and 20,000 shares held by Nelson D. Salmon and
Elizabeth G. Salmon, Trustees of the Nelson D. Salmon Trust dated October
14, 1994. Mr. Sippl disclaims beneficial ownership of all such shares.
See footnote 14.

(3) Includes 138,700 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 40,000 shares issuable upon
exercise of options.

(4) Includes 704,116 shares held by Neguine Navab, Mr. Christensen's spouse,
and 67,494 shares issuable upon exercise of options held by Ms. Navab.
Mr. Christensen acquired his shares in the Company in connection with the
Company's acquisition of PostModern. See footnote 15 below. See "Certain
Transactions."

(5) Includes 4,750 shares held by Ms. Langlais, as Co-Trustee of the Halloran
1990 Living Trust dated March 12, 1990. Also includes 32,167 shares
subject to a right of repurchase in favor of the Company which lapses
over time. Also includes 20,000 shares issuable upon exercise of options.

(6) Includes 12,250 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 10,000 shares issuable upon
exercise of options.

(7) Includes 36,209 shares subject to a right of repurchase in favor of the
Company which lapses over time.

(8) Represents all shares held by entities affiliated with Sequoia Capital.
See footnote 17 below. Mr. Moritz, as a general partner of Sequoia
Capital, may be deemed to beneficially own shares, but Mr. Moritz
disclaims beneficial ownership of all such shares except to the extent of
his proportional interest therein.

(9) Includes 3,334 shares subject to a right of repurchase in favor of the
Company which lapses over time. Also includes 84,374 shares issued to
Hambrecht & Quist LLC ("H&Q") for financial advisory services rendered to
PostModern in connection with the Company's acquisition of PostModern.
Ms. Morgan is a Managing Director of H&Q. Ms. Morgan disclaims beneficial
ownership of all such shares except to the extent of her proportional
interest therein.

53
<PAGE>

(10) Represents all shares held by entities affiliated with Weiss, Peck &
Greer Venture Partners. See footnote 37 below. Mr. Cogan, as a general
partner of Weiss, Peck & Greer Venture Partners, may be deemed to
beneficially own shares, but Mr. Cogan disclaims beneficial ownership of
all such shares except to the extent of his proportional interest
therein.

(11) Includes 3,334 shares subject to a right of repurchase in favor of the
Company which lapses over time.

(12) Represents all shares held by entities affiliated with Canaan Capital
Partners. See footnote 19 below. Mr. Young, as a general partner of
Canaan Capital Partners, may be deemed to beneficially own shares, but
Mr. Young disclaims beneficial ownership of all such shares except to the
extent of his proportional interest therein.

(13) See footnotes 2 through 12, footnote 15, footnote 17, footnote 19,
footnote 31 and footnote 37. Includes 2,935 shares held by and 95,000
shares issuable upon exercise of options by Kevin C. Eichler. Includes
165,000 shares issuable upon exercise of options by Robert Macdonald.
Includes 72,500 shares issuable upon exercise of options by Mr.
Perreault. Also includes 150,000 shares issuable upon exercise of options
by Scott Chalmers. Of the 31,809 shares sold by the executive officers
and directors of the Company, Mr. Christensen intends to sell 31,309
shares and Mr. Perreault intends to sell 1,000 shares.

(14) Includes 2,055,000 shares held by Roger J. Sippl, Ms. Salmon's spouse,
and 20,000 shares held by Nelson D. Salmon and Elizabeth G. Salmon,
Trustees of the Nelson D. Salmon Trust dated October 14, 1994. See
footnote 2 above.

(15) Includes 67,494 shares issuable upon exercise of options. Also includes
758,110 shares held by Mr. Christensen, Ms. Navab's spouse. Ms. Navab is
Director of Object Technologies for the Company. Ms. Navab acquired her
shares and options in the Company in connection with the Company's
acquisition of PostModern. See footnote 4 above. See "Certain
Transactions."

(16) Mr. Mokkapati is Senior Architect for Distributed Objects for the
Company. Mr. Mokkapati acquired his shares in connection with the
Company's acquisition of PostModern. See "Certain Transactions."

(17) Represents 673,855 shares held by Sequoia Capital VI, 37,025 shares held
by Sequoia Technology Partners VI, 18,820 shares held by Sequoia XXIII
and 10,800 shares held by Sequoia XXIV. Michael Moritz, a Director of the
Company, is a general partner of Sequoia Capital. Of the 55,537 shares to
be sold by entities affiliated with Sequoia Capital, 50,539 shares will
be sold by Sequoia Capital VI, 2,776 shares will be sold by Sequoia
Technology Partners VI, 1,412 shares will be sold by Sequoia XXIII and
the remaining 810 shares will be sold by Sequoia XXIV. See footnote 8
above.

(18) Includes 5,000 shares issuable upon exercise of options. Also includes
27,000 shares subject to a right of repurchase in favor of the Company.

(19) Represents 446,500 shares held by Canaan Capital Offshore Limited
Partnership C.V., ("Offshore") 53,500 shares held by Canaan Capital
Limited Partnership ("CCLP") and 50,000 shares held by Quai Limited
("Quai"). Eric Young is a Director of the Company and is a general
partner of Offshore and CCLP. Quai is a limited partner of Canaan
Partners. Eric Young holds no voting or dispositive control over shares
held by Quai, and he disclaims beneficial ownership of such shares. Of
the 100,000 shares to be sold by entities affiliated with Canaan Capital
Partners, 10,700 shares will be sold by CCLP and the remaining 89,300
shares will be sold by Offshore. See footnote 12 above.

(20) Includes 25,590 shares issuable upon exercise of options. Mr. Challa is
Director of Business Development for the Company. Mr. Challa acquired his
shares and options in the Company in connection with the Company's
acquisition of PostModern. See "Certain Transactions."

(21) Includes 89,967 shares issuable upon exercise of options.

(22) Includes 7,667 shares issuable upon exercise of options.

(23) Includes 2,500 shares issuable upon exercise of options. Also includes
5,334 shares subject to a right of repurchase in favor of the Company
which lapses over time.

(24) Includes 20,000 shares issuable upon exercise of options.

54
<PAGE>

(25) Includes 3,000 shares issuable upon exercise of options.

(26) Includes 7,500 shares issuable upon exercise of options. Also includes
2,334 shares subject to a right of repurchase in favor of the Company
which lapses over time.

(27) Includes 1,613 shares issuable upon exercise of options.

(28) Includes 2,292 shares issuable upon exercise of options.

(29) Includes 13,500 shares issuable upon exercise of options.

(30) Includes 23,000 shares issuable upon exercise of options.

(31) Includes 72,500 shares issuable upon exercise of options. Mr. Perreault
is Vice President, Professional Services for the Company.

(32) Represents 134,090 shares held by Platinum technology, Inc., 17,879
shares held by Platinum Venture Partners I, L.P. and 26,818 shares held
by Platinum Venture Partners II, L.P. All of the 6,704 shares being sold
by Platinum entities in the offering will be sold by Platinum technology,
Inc.

(33) See footnote 19 above.

(34) Includes 17,500 shares issuable upon exercise of options.

(35) Includes 10,250 shares issuable upon exercise of options.

(36) Includes 127,952 shares issuable upon exercise of options.

(37) Represents 49,888 shares held by Weiss, Peck & Greer Venture Associates
II (Overseas), Ltd., 227,638 shares held by Weiss, Peck & Greer Venture
Associates II, L.P. and 314,973 shares held by WPG Enterprise Fund. Gill
Cogan, a Director of the Company, is a general partner of Weiss, Peck &
Greer Venture Partners. Of the 35,000 shares being sold by these
affiliated Weiss, Peck & Greer entities, 2,947 shares will be sold by
Weiss, Peck & Greer Venture Associates II (Overseas), Ltd., 13,447 shares
will be sold by Weiss, Peck & Greer Venture Associates II, and the
remaining 18,606 shares will be sold by WPG Enterprise Fund. See footnote
10 above.

55
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock and 2,000,000 shares of Preferred Stock, par value $0.001 per
share. The following summary of certain provisions of the Common Stock and the
Preferred Stock of the Company does not purport to be complete and is subject
to, and qualified in its entirety by, the Restated Certificate of
Incorporation and Bylaws of the Company that are included as exhibits to the
Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law.

COMMON STOCK

As of December 31, 1996, there were approximately 12,715,390 shares of
Common Stock outstanding held of record by approximately 212 stockholders. The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the holders of Common Stock. Subject to
preferences applicable to any outstanding preferred stock, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any preferred stock. Holders of
Common Stock have no preemptive or subscription rights, and there are no
redemption or conversion rights with respect to such shares. All outstanding
shares of Common Stock are fully paid and non-assessable, and the shares of
Common Stock to be issued upon completion of the offering will be fully paid
and non-assessable.

PREFERRED STOCK

The Board of Directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the dividend rate, voting rights and other rights, preferences
and restrictions of each series any or all of which may be greater than the
rights of the Common Stock. It is not possible to state the actual effect of
the issuance of any shares of Preferred Stock upon the rights of holders of
the Common Stock until the Board of Directors determines the specific rights
of the holders of such preferred stock. However, the effects might include,
among other things, restricting dividends on the Common Stock, diluting the
voting power of the Common Stock, impairing the liquidation rights of the
Common Stock and delaying or preventing a change in control of the Company
without further action by the stockholders. The Company has no present plans
to issue any shares of Preferred Stock.

REGISTRATION RIGHTS

Following the sale of the shares of Common Stock offered hereby, the holders
of approximately 6,089,850 shares held by holders of Common Stock issued upon
conversion of Preferred Stock and convertible notes, the founder and certain
employees of the Company, and their transferees, will have certain rights to
register those shares under the Securities Act of 1933, as amended. These
rights are provided under the terms of agreements among the holders of such
shares and the Company. If the holders of such shares exercise their
registration rights, their shares will be included in the registration,
subject to the ability of the underwriters to limit the number of shares
included in the offering. All fees, costs and expenses of such registrations
(other than underwriting discounts and commissions) will be borne by the
Company.

DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

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 (3) 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 that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder,

56
<PAGE>

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 that is
not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (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 any 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 of Incorporation requires that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of the stockholders and
may not be effected by a consent in writing. In addition, special meetings of
the stockholders of the Company may be called only by the Board of Directors
or certain officers of the Company. The Restated Certificate of Incorporation
provides that, beginning with the first annual meeting of stockholders
following this offering, the Board of Directors will be divided into three
classes, with each class serving staggered three-year terms, that a director
may be removed from the Board of Directors only for cause and only upon the
vote of at least 66 2/3% of the voting power of all outstanding stock, and
that certain amendments of the Company's Restated Certificate of
Incorporation, and all amendments by the stockholders of the Company's Bylaws,
require the approval of holders of at least 66 2/3% of the voting power of all
outstanding shares. These provisions may have the effect of deferring hostile
takeovers or delaying changes in control or management of the Company.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston.

57
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock.

Upon completion of this offering, the Company will have outstanding an
aggregate of 13,895,390 shares of Common Stock, assuming (i) the issuance of
1,180,000 shares of Common Stock offered hereby, (ii) no exercise of the
Underwriters' over-allotment option and (iii) no exercise of options to
purchase Common Stock after December 31, 1996. Of these shares, on the date of
this Prospectus, the 1,600,000 shares sold in the offering and approximately
2,518,385 additional shares already outstanding will be freely tradeable
without restriction or further registration under the Securities Act of 1933,
as amended (the "Securities Act"), except for any shares purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act (whose sales would be subject to certain limitations and
restrictions described below).

The remaining 9,777,005 shares of Common Stock held by existing stockholders
were issued and sold by the Company in reliance on exemptions from the
registration requirements of the Securities Act. All such outstanding shares
will be subject to the "lock-up" agreements described below on the date of
this Prospectus. Upon expiration of lock-up agreements 90 days after the date
of this Prospectus and at various times over a period of less than two years,
such shares will become eligible for sale, subject in most cases to the
limitations of Rule 144 and Rule 701. In addition, holders of stock options
could exercise these options and sell certain of the shares issued upon
exercise as described below.

As of December 31, 1996, there were a total of 1,959,950 shares of Common
Stock subject to outstanding options under the Option Plan, all of which were
exercisable. However, these shares are subject to lock-up agreements. All
options held by officers and directors of the Company are subject to a 90 day
lock-up agreement described below, and all other options are subject to a 90
day lock-up agreement with the Company.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least
two years (including the holding period of any prior owner except an
affiliate) is entitled to sell in "broker's transactions" or to market makers,
within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the number of shares of Common Stock then
outstanding (approximately 139,000 shares immediately after this offering) or
(ii) generally, the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the required filing of a Form 144 with
respect to such sale. Sales under Rule 144 are generally subject to the
availability of current public information about the Company. Under
Rule 144(k), a person who is deemed not to have been an affiliate of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for a least three years, is
entitled to sell such shares without having to comply with the manner of sale,
public information, volume limitation or notice filing provisions of Rule 144.
Under Rule 701 under the Securities Act, persons who purchase shares upon
exercise of options granted prior to the effective date of the Company's
initial public offering are now entitled to sell such shares in reliance on
Rule 144, without having to comply with the holding period and notice filing
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice filing
provisions of Rule 144.

The Company has filed registration statements under the Securities Act to
register shares of Common Stock reserved for issuance under the Option Plan
and the Directors Plan, thus permitting the resale of such shares by non-
affiliates and by affiliates, subject to Rule 144 volume limitations
applicable thereto, in the public market without restriction under the
Securities Act.

As of December 31, 1996, the holders of approximately 6,089,850 shares are
entitled to certain registration rights with respect to such shares. If such
registration rights are exercised, the shares can be sold without any holding
period or sales volume limitation. If such holders, by exercising their
registration rights, cause a large number of shares to be registered and sold
in the public market, such sales could have an adverse effect on the

58
<PAGE>

market price for the Company's Common Stock. If the Company were required to
include in a Company initiated registration the shares held by such holders
pursuant to the exercise of their registration rights, such sales might have
an adverse effect on the Company's ability to raise needed capital. See
"Description of Capital Stock--Registration Rights."

Stockholders of the Company who will beneficially own in the aggregate
8,974,044 shares of Common Stock after the offering have agreed that they will
not, subject to certain limited exceptions, directly or indirectly, offer,
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for any such shares for a
period of 90 days after the effective date of the offering without the prior
written consent of Hambrecht & Quist LLC.

59
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, Hambrecht
& Quist LLC and Robertson, Stephens & Company LLC (the "Underwriters") have
severally agreed to purchase from the Company and the Selling Stockholders the
following respective numbers of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Hambrecht & Quist LLC.............................................. 800,000
Robertson, Stephens & Company LLC.................................. 800,000
---------
Total.......................................................... 1,600,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if
any of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $0.38 per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $0.10 per share to certain other
dealers. After the public offering of the shares, the offering price and other
selling terms may be changed by the Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 240,000
additional shares of Common Stock at the public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters
will have a firm commitment to purchase approximately the same percentage
thereof which the number of shares of Common Stock to be purchased by it shown
in the above table bears to the total number of shares of Common Stock offered
hereby. The Company will be obligated, pursuant to the option, to sell shares
to the Underwriters to the extent the option is exercised. The Underwriters
may exercise such option only to cover-allotments made in connection with the
sale of shares of Common Stock offered hereby.

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

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.

The Company and its executive officers and directors, the Selling
Stockholders and certain other stockholders of the Company who will own in the
aggregate 8,974,044 shares of Common Stock after this offering, have agreed
that they will not, without the prior written consent of Hambrecht & Quist
LLC, sell, offer, contract to sell, make any short sale, pledge, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of
any securities convertible into or exchangeable or exercisable for any other
rights to purchase or acquire shares of Common Stock owned by them during the
90-day period following the effective date of the Registration Statement for
this offering, except that the Company may issue shares upon the exercise of
options granted prior to the date hereof, may grant additional options under
its stock option plans, and may issue shares pursuant to the Company's
Employee Stock Purchase Plan.

60
<PAGE>

In general, the rules of the Commission will prohibit the Underwriters from
making a market in the Company's Common Stock during the "cooling off" period
immediately preceding the commencement of sales in the offering. The
Commission has, however, adopted exemptions from these rules that permit
passive market making under certain conditions. These rules permit an
underwriter to continue to make a market subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not
connected with the offering and that its net purchases on any one trading day
not exceed prescribed limits. Pursuant to these exemptions, certain
Underwriters, selling group members (if any) or their respective affiliates
intend to engage in passive market making in the Company's Common Stock during
the cooling off period.

Hambrecht & Quist LLC and Robertson, Stephens & Company LLC served as co-
managing underwriters of the Company's initial public offering in August 1996,
and received customary discounts and commissions in connection therewith.

LEGAL MATTERS

The validity of the securities offered hereby and general corporate legal
matters will be passed upon for the Company by Gray Cary Ware & Freidenrich, A
Professional Corporation ("GCWF"), Palo Alto, California. As of December 31,
1996, certain members and investment partnerships of GCWF beneficially owned
an aggregate of 37,000 shares of the Company's Common Stock. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Fenwick & West LLP, Palo Alto, California. Fenwick & West LLP
owns an aggregate of 18,979 shares of the Company's Common Stock.

EXPERTS

The consolidated financial statements of Visigenic Software, Inc. and
PostModern Computing Technologies Inc. included in this Prospectus and
elsewhere in the Registration Statement to the extent and for the periods
indicated in their reports have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

61
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. In
addition, the Commission maintains a World Wide Web site that contains
reports, proxy statements and other information regarding registrants that
file electronically with the Commission. The address of the Commission's Web
site is http://www.sec.gov. The Company's Common Stock is quoted for trading
on the Nasdaq National Market and reports, proxy statements and other
information concerning the Company may also be inspected at the offices of The
Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form S-1 under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to herein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office in Washington, D.C. 20549 or the Commission's Web site and
copies of all or any part of the Registration Statement may be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon the payment of the fees prescribed by the
Commission.

62
<PAGE>

VISIGENIC SOFTWARE, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VISIGENIC SOFTWARE, INC.:
Report of Independent Public Accountants............................... F-2
Consolidated Balance Sheets............................................ F-3
Consolidated Statements of Operations.................................. F-4
Consolidated Statements of Stockholders' Equity........................ F-5
Consolidated Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements............................. F-7

POSTMODERN COMPUTING TECHNOLOGIES INC.:
Report of Independent Public Accountants............................... F-15
Balance Sheets......................................................... F-16
Statements of Operations............................................... F-17
Statements of Shareholders' Equity..................................... F-18
Statements of Cash Flows............................................... F-19
Notes to Financial Statements.......................................... F-20

VISIGENIC SOFTWARE, INC. AND POSTMODERN COMPUTING TECHNOLOGIES INC.--
PRO FORMA:
Pro Forma Condensed Combined Financial Statements...................... P-1
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Visigenic Software, Inc.:

We have audited the accompanying consolidated balance sheets of Visigenic
Software, Inc. (a Delaware corporation) and subsidiary as of March 31, 1995
and 1996 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended March
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 Visigenic Software, Inc.
and subsidiary as of March 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1996 in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

San Jose, California
January 27, 1997

F-2
<PAGE>

VISIGENIC SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
----------------- DECEMBER 31,
1995 1996 1996
------- -------- ------------
ASSETS (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................... $ 553 $ 2,399 $ 9,064
Accounts receivable, net of allowance for
doubtful accounts of $0, $60 and $145....... 472 760 5,605
Prepaid compensation......................... -- -- 645
Other current assets......................... 175 257 597
------- -------- --------
Total current assets....................... 1,200 3,416 15,911
------- -------- --------
PROPERTY AND EQUIPMENT, net.................... 607 1,349 2,543
OTHER ASSETS, net:
Excess of purchase price over net assets
acquired.................................... -- -- 1,384
Other........................................ 22 55 83
------- -------- --------
$ 1,829 $ 4,820 $ 19,921
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable............................. $ 201 $ 811 $ 716
Accrued liabilities-
Payroll and related benefits................ 86 347 1,320
Other....................................... 122 301 916
Deferred revenue............................. 303 1,141 1,673
------- -------- --------
Total current liabilities.................. 712 2,600 4,625
------- -------- --------
COMMITMENTS (Note 4)
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.001 par value,
aggregate liquidation preference of $17,414
Authorized--10,000,000 shares at March 31,
1996; 2,000,000 at December 31, 1996.
Outstanding--Series A, 803,000 shares in
1995, 1996; Series B, 1,496,625 shares in
1995 and 2,871,625 shares in 1996......... 3 4 --
Common stock, $.001 par value,
Authorized--20,000,000 shares at March 31,
1996; 50,000,000 at December 31, 1996
Outstanding--2,782,877 shares in 1995,
2,835,905 shares in 1996 and 12,715,390
shares at December 31, 1996............... 3 3 12
Additional paid-in capital................... 8,194 13,675 45,017
Accumulated deficit.......................... (7,083) (11,462) (29,733)
------- -------- --------
Total stockholders' equity................. 1,117 2,220 15,296
------- -------- --------
$ 1,829 $ 4,820 $ 19,921
======= ======== ========
</TABLE>

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

F-3
<PAGE>

VISIGENIC SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------- -----------------
1994 1995 1996 1995 1996
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Software products............ $ -- $ 892 $ 4,479 $ 2,417 $ 9,895
Service and other............ -- 223 1,096 888 1,639
------- ------- ------- ------- --------
Total revenue.............. -- 1,115 5,575 3,305 11,534
------- ------- ------- ------- --------
COST OF REVENUE:
Software products............ -- 36 284 212 399
Service and other............ -- 259 727 526 1,430
------- ------- ------- ------- --------
Total cost of revenue...... -- 295 1,011 738 1,829
------- ------- ------- ------- --------
GROSS PROFIT................... -- 820 4,564 2,567 9,705
------- ------- ------- ------- --------
OPERATING EXPENSES:
Product development.......... 1,393 3,160 4,348 3,130 6,650
Sales and marketing.......... 503 1,511 3,215 2,138 6,977
General and administrative... 600 872 1,465 1,042 1,814
Purchased in process product
development................. -- -- -- -- 12,364
Amortization of excess of
purchase price over net
assets acquired............. -- -- -- -- 361
------- ------- ------- ------- --------
Total operating expenses... 2,496 5,543 9,028 6,310 28,166
------- ------- ------- ------- --------
Loss from operations....... (2,496) (4,723) (4,464) (3,743) (18,461)
INTEREST AND OTHER INCOME,
net........................... 42 94 85 77 190
------- ------- ------- ------- --------
NET LOSS....................... $(2,454) $(4,629) $(4,379) $(3,666) $(18,271)
======= ======= ======= ======= ========
PRO FORMA NET LOSS PER SHARE... $ (.40) $ (.33) $ (1.51)
======= ======= ========
PRO FORMA WEIGHTED AVERAGE
COMMON AND COMMON EQUIVALENT
SHARES........................ 11,064 11,008 12,141
======= ======= ========
</TABLE>

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

F-4
<PAGE>

VISIGENIC SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
------------------ ------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------ ---------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founder in
February 1993......... -- $ -- 2,000,000 $ 2 $ 158 $ -- $ 160
Issuance of common
stock................. -- -- 427,019 -- 81 -- 81
Issuance of Series A
convertible preferred
stock................. 803,000 1 -- -- 1,898 -- 1,899
Issuance of Series B
convertible preferred
stock................. 871,625 1 -- -- 3,445 -- 3,446
Net loss............... -- -- -- -- -- (2,454) (2,454)
---------- ----- ---------- ---- ------- -------- --------
BALANCE,
MARCH 31, 1994......... 1,674,625 2 2,427,019 2 5,582 (2,454) 3,132
Issuance of common
stock................. -- -- 459,575 1 183 -- 184
Repurchase of common
stock................. -- -- (103,717) -- (35) -- (35)
Issuance of Series B
convertible preferred
stock................. 625,000 1 -- -- 2,464 -- 2,465
Net loss............... -- -- -- -- -- (4,629) (4,629)
---------- ----- ---------- ---- ------- -------- --------
BALANCE,
MARCH 31, 1995......... 2,299,625 3 2,782,877 3 8,194 (7,083) 1,117
Issuance of Series B
convertible preferred
stock................. 1,375,000 1 -- -- 5,459 -- 5,460
Exercise of stock
options............... -- -- 54,068 -- 22 -- 22
Repurchase of common
stock, net of
issuances............. -- -- (1,040) -- -- -- --
Net loss............... -- -- -- -- -- (4,379) (4,379)
---------- ----- ---------- ---- ------- -------- --------
BALANCE,
MARCH 31, 1996......... 3,674,625 4 2,835,905 3 13,675 (11,462) 2,220
Issuance of Series C
convertible preferred
stock (unaudited)..... 444,444 -- -- -- 4,000 -- 4,000
Issuance of common
stock in connection
with the acquisition
of PostModern
Computing Technologies
Inc. (unaudited)...... -- -- 3,099,821 3 10,382 -- 10,385
Exercise of stock
options (unaudited)... -- -- 202,366 -- 91 -- 91
Issuance of common
stock in public
offering, net of
issuance costs of
$1,908 (unaudited).... -- -- 2,015,000 2 13,202 -- 13,204
Conversion of preferred
stock in public
offering
(unaudited)........... (4,119,069) (4) 4,119,069 4 -- -- --
Conversion of
convertible notes
(unaudited)........... -- -- 270,871 -- 2,031 -- 2,031
Issuance of common
stock in connection
with the acquisition
of CustomWare,
Inc. (unaudited)...... -- -- 125,000 -- 1,500 -- 1,500
Issuance of common
stock (unaudited)..... -- -- 47,358 -- 136 -- 136
Net loss (unaudited)... -- -- -- -- -- (18,271) (18,271)
---------- ----- ---------- ---- ------- -------- --------
BALANCE, DECEMBER 31,
1996 (unaudited)....... -- $ -- 12,715,390 $ 12 $45,017 $(29,733) $ 15,296
========== ===== ========== ==== ======= ======== ========
</TABLE>

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

F-5
<PAGE>

VISIGENIC SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
------------------------- -------------------
1994 1995 1996 1995 1996
------- ------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss..................... $(2,454) $(4,629) $(4,379) $(3,666) $(18,271)
Adjustments to reconcile net
loss to net cash used in
operating activities--
Depreciation and
amortization............... 67 158 310 199 795
Purchased in process product
development................ -- -- -- -- 12,364
Provision for allowance for
doubtful accounts.......... -- -- 60 45 85
Changes in net assets and
liabilities, net of
acquisition of PostModern
and CustomWare--
Increase in accounts
receivable................ -- (472) (348) (1,317) (4,584)
Increase in prepaid
expenses and other current
assets.................... (35) (139) (82) (56) (887)
Increase in accounts
payable................... 148 53 610 417 (186)
Increase in accrued
liabilities............... 66 142 440 170 1,075
Increase in deferred
revenue................... -- 303 838 655 349
------- ------- ------- ------- --------
Net cash used in operating
activities............... (2,208) (4,584) (2,551) (3,553) (9,260)
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payment for purchase of
PostModern and CustomWare,
net of cash acquired........ -- -- -- -- (1,919)
Purchases of property and
equipment................... (457) (373) (1,052) (778) (1,553)
Organization costs and other
assets...................... (20) (5) (33) (18) (34)
------- ------- ------- ------- --------
Net cash used in investing
activities............... (477) (378) (1,085) (796) (3,506)
------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
convertible notes........... -- -- -- -- 2,000
Net proceeds from issuance of
preferred stock............. 5,345 2,465 5,460 5,469 4,000
Net proceeds from issuance of
common stock................ 241 149 22 -- 13,431
------- ------- ------- ------- --------
Net cash provided by
financing activities..... 5,586 2,614 5,482 5,469 19,431
------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS.......... 2,901 (2,348) 1,846 1,120 6,665
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD........... -- 2,901 553 553 2,399
------- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, END
OF PERIOD..................... $ 2,901 $ 553 $ 2,399 $ 1,673 $ 9,064
======= ======= ======= ======= ========
</TABLE>

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

F-6
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS
UNAUDITED)

1. ORGANIZATION AND OPERATIONS OF THE COMPANY:

Visigenic Software, Inc. (the "Company") was incorporated on February 12,
1993. The Company operates in a single industry segment and is involved in the
design, development and marketing of database software products. Through March
31, 1995 the Company's principal efforts were focused on raising capital,
developing its products and applications, establishing marketing and sales
channels and recruiting key personnel. During fiscal 1996, the Company emerged
from the development stage, however, the Company continues to be subject to
the risks associated with companies in a comparable stage of development
including, but not limited to, dependence on key personnel; limited operating
history and a history of losses; and the need to develop new software products
and product enhancements.

Although the Company was incorporated on February 12, 1993, its activities
during the first two months involved limited cash expenditures and consisted
only of recruiting of key personnel and raising capital. Accordingly, the
accompanying consolidated statements of operations, stockholders' equity and
cash flows for the year ended March 31, 1994 are presented for the period from
inception (February 12, 1993) to March 31, 1994.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation and Functional Currency

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary after elimination of intercompany transactions
and balances. The functional currency of the Company's foreign subsidiary is
the U.S. dollar. Foreign exchange gains and losses resulting from the
remeasurement of the financial statements for the subsidiary, which are not
material, are included in other income in the accompanying consolidated
statements of operations.

Use of Estimates in Preparation of Financial Statements

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

Cash Equivalents and Short-Term Investments

The Company considers all highly liquid investments with an original
maturity of three months or less from the date of purchase to be cash
equivalents. The Company's short-term investments are accounted for pursuant
to the provisions of Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities." As of
March 31, 1995 and 1996, the Company's cash and cash equivalents were
deposited in checking and money market accounts, U.S. Government Treasury
Bills and certificates of deposits.

Software Development Costs

In accordance with SFAS No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed," the Company capitalizes
eligible computer software development costs upon the establishment of
technological feasibility, which it has defined as completion of a working
model. For the years ended March 31, 1994, 1995 and 1996, the amount of costs
eligible for capitalization, after consideration of factors such as realizable
value, were not material and, accordingly, all software development costs have
been charged to product development expense in the accompanying consolidated
statements of operations.

F-7
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets (or
over the lease term if it is shorter for leasehold improvements), which range
from three to five years. Property and equipment consists of the following (in
thousands):

<TABLE>
<CAPTION>
MARCH 31,
-------------- DECEMBER 31,
1995 1996 1996
----- ------- ------------
<S> <C> <C> <C>
Computer equipment............................ $ 453 $ 1,126 $ 2,215
Furniture and fixtures........................ 125 320 552
Purchased software............................ 239 401 654
Leasehold improvements........................ 12 34 80
----- ------- -------
829 1,881 3,501
Less--Accumulated depreciation and
amortization................................. (222) (532) (958)
----- ------- -------
Property and equipment, net................. $ 607 $ 1,349 $ 2,543
===== ======= =======
</TABLE>

Revenue Recognition and Deferred Revenue

The Company's revenue is derived from fixed license fees from licensing its
products, royalties from VARs, ISVs and distributors, and fees for services
related to its products, including software maintenance, development contracts
and consulting and training. Certain of the Company's license arrangements
with VARs and ISVs provide for sublicense fees payable to the Company based on
a percentage of the VAR's or ISV's net revenue. Other license arrangements
provide for fixed license fees for the right to make and distribute an
unlimited number of copies of the Company's product for a specified period of
time. Ongoing sublicense fee revenue, other than from guaranteed sublicense
fees, is recognized when it is reported by the VAR, ISV or distributor.
Service revenue is primarily attributable to lower margin maintenance and
other revenue, including training revenue and engineering development fees.

The Company generally recognizes revenue from fixed license and guaranteed
sublicense fees upon delivery of software products if there are no significant
post-delivery obligations, if collection is probable and if the license
agreement requires payment within 90 days. If significant post-delivery
obligations exist or if a product is subject to customer acceptance, revenue
is deferred until no significant obligations remain or acceptance has
occurred.

Maintenance revenue from ongoing customer support and product upgrades is
recognized ratably over the term of the applicable maintenance period, which
is typically 12 months. If maintenance is included in a license agreement,
such amounts are unbundled from the license fee at its fair market value.
Consulting and training revenue is generally recognized as services are
performed over the term of the agreement. Revenue from engineering development
work is generally recognized on a percentage of completion basis. If a
transaction includes both license and service elements, license fee revenue is
recognized upon shipment of the software, provided services do not include
significant customization or modification of the base product and payment
terms are not subject to acceptance criteria. In cases where license fee
payments are contingent upon the acceptance of services, revenues from both
the license and service elements are deferred until the acceptance criteria
are met.

F-8
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Significant Customers and Related Parties

A relatively small number of customers have accounted for a significant
percentage of the Company's total revenue. The following four customers
accounted for more than 10% of total revenue:

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
------------- NINE MONTHS ENDED
1995 1996 DECEMBER 31, 1996
----- ----- -----------------
<S> <C> <C> <C>
Customer A................................. 55% * *
Customer B................................. 20% * *
Customer C................................. * 25% 14%
Customer D................................. * * 13%
</TABLE>
- --------
*less than 10%

Customers C and D are related parties as they were purchasers of Series C
convertible preferred stock in May 1996 and were also holders of the
convertible notes payable to stockholders (see Note 5). Accounts receivable
from these related parties as of December 31, 1996 totalled approximately $1.8
million.

Export Sales

The Company markets its products in North America and in foreign countries
(primarily Europe and Japan) through its sales personnel, VARs, ISVs and
distributors. For fiscal 1996, export sales, which consist of domestic sales
to customers in foreign countries, were 10% of total revenue. For fiscal 1995
export sales were less than 10% of total revenue and for the nine months ended
December 31, 1996 export sales were 12% of total revenues.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable. As of
March 31, 1996, approximately 75% of accounts receivable were concentrated
with ten customers. The Company generally does not require collateral on
accounts receivable as the majority of the Company's customers are large, well
established companies. The Company provides reserves for credit losses, which
to date have been insignificant.

New Accounting Standard

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which will be effective for
the Company's 1997 fiscal year. SFAS No. 123 allows companies which have
stock-based compensation arrangements with employees to adopt a new fair-value
basis of accounting for stock options and other equity instruments or to
continue to apply the existing accounting rules under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," but
with additional financial statement disclosure. The Company expects to
continue to account for stock-based compensation arrangements under APB
Opinion No. 25 and, therefore, does not expect SFAS No. 123 to have a material
impact on its financial position, results of operations and cash flows.

Pro Forma Net Loss per Share

Pro forma net loss per share is computed using the pro forma weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares consist of convertible preferred stock (using
the if converted method) and stock options (using the treasury stock method).
Common stock options are excluded from the computation if their effect is
antidilutive. Convertible preferred stock

F-9
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

outstanding during the period is included (using the if converted method) in
the computation of common equivalent shares even though the effect is
antidilutive. Also, pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins and staff policy, such computations include all common
and common equivalent shares issued within the 12 months preceding the
Company's initial public offering as if they were outstanding for all periods
presented. Historical net loss per share amounts have not been presented since
such amounts are not deemed meaningful due to the significant change in the
Company's capital structure that occurred upon consummation of the Company's
initial public offering.

Unaudited Interim Financial Data

The unaudited interim financial statements as of December 31, 1996 and for
the nine months ended December 31, 1995 and 1996 have been prepared on the
same basis as the audited financial statements and, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial information set forth
therein, in accordance with generally accepted accounting principles. The data
disclosed in the notes to the consolidated financial statements for these
periods are unaudited. The results of operations for the nine months ended
December 31, 1996 are not necessarily indicative of the results to be expected
for any future period.

3. LINE OF CREDIT:

The Company has a $3.0 million revolving line of credit agreement (the
"Agreement") with a bank, which expires on July 15, 1997. Advances under the
Agreement bear interest at the bank's prime lending rate plus 1.25% (9.5% at
March 31, 1996), are limited to 80% of eligible accounts receivable and are
secured by substantially all of the assets and contractual rights of the
Company. The Agreement also contains certain financial restrictions and
covenants which require, among others, that the Company maintain a minimum
monthly tangible net worth, and a minimum monthly ratio of debt to equity. In
addition, the Agreement prohibits the Company from paying dividends without
prior bank consent. As of March 31 and December 31, 1996, the Company was in
compliance with the financial covenants. There were no borrowings outstanding
under the Agreement as of March 31, 1996 or December 31, 1996.

4. COMMITMENTS:

The Company leases its facilities under operating lease agreements expiring
through January 2002. Rent expense for all operating leases totaled
approximately $131,000, $192,000 and $304,000 for the years ended March 31,
1994, 1995 and 1996, respectively. Minimum future lease payments under all
noncancellable operating leases, including leases executed through December
31, 1996, were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
- -----------
<S> <C>
1997................................................................... $1,007
1998................................................................... 915
1999................................................................... 890
2000................................................................... 890
2001................................................................... 890
Thereafter............................................................. 720
------
$5,312
======
</TABLE>

5. CONVERTIBLE PREFERRED STOCK AND CONVERTIBLE NOTES:

In June 1996, the Company's Board of Directors approved a one-for-two
reverse split of its common and preferred stock. All common and preferred
share and per share amounts in the accompanying consolidated financial
statements have been adjusted retroactively to give effect to this reverse
stock split.

F-10
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company's certificate of incorporation, as amended in May 1996,
authorizes the issuance of up to 10,000,000 shares of convertible preferred
stock, of which the Company has designated 1,606,000 shares as Series A
preferred stock, 6,000,000 shares as Series B preferred stock and 1,000,000
shares as Series C preferred stock. In conjunction with the initial public
offering of the Company's common stock on August 8, 1996, all outstanding
shares of convertible preferred stock automatically converted into common
stock upon closing of the offering. The Company amended its certificate of
incorporation in August 1996 authorizing the issuance of up to 2,000,000
shares of preferred stock. No preferred shares have been issued as of December
31, 1996.

Issuance of Series C Convertible Preferred Stock and Convertible Notes

On May 24, 1996, the Company sold 444,444 shares of its Series C preferred
stock at a price of $9.00 per share to three investors, for aggregate proceeds
of $4.0 million. Between May 28 and June 7, 1996, the Company issued $2.0
million principal amount of convertible notes to the same three investors,
bearing interest at the rate of 8.25% per annum. Upon the closing of the
Company's initial public offering on August 8, 1996, the principal amount of
each note and all accrued interest automatically converted into shares of the
Company's common stock at $7.50 per share, the offering price per share to the
public, and the Series C preferred stock automatically converted into shares
of the Company's common stock. The Company used a portion of the proceeds from
the sale of the Series C preferred stock and the convertible notes to pay
amounts payable in connection with the acquisition of PostModern.

6. COMMON STOCK:

In August 1996, the Company completed the initial public offering of its
common stock. The Company sold 2,015,000 shares for net proceeds of $13.2
million. Concurrent with the closing of the initial public offering, 4,119,069
shares of convertible preferred stock were converted into an equivalent number
of shares of common stock and $2,000,000 of convertible notes plus accrued
interest of $31,526 converted into 270,871 shares of common stock. (see Note
5)

Prior to July 1993, the Company issued 232,575 shares of common stock to
certain employees and directors of the Company that are subject to certain
repurchase rights. These rights of repurchase lapse over a five-year period.
As of March 31, 1996, 64,228 shares of common stock are subject to repurchase
by the Company at prices ranging from $.08 to $.20 per share.

Stock Purchase Plans

In April 1993 and August 1994, the Company adopted Stock Purchase Plans (the
"Plans") and authorized the issuance of 952,500 shares thereunder to employees
and consultants. Stock purchased under these Plans generally vests ratably
over a five-year period. Unvested shares may be repurchased by the Company at
the original issuance price in the event of termination.

As of March 31, 1996, 526,287 shares were issued and outstanding under these
Plans at prices ranging from $.20 to $.40 per share, which was the fair market
value of the common stock, as determined by the Board of Directors, on the
date of grant, of which 289,522 were subject to repurchase. As of March 31,
1996, no further shares were available for issuance under the Plans.

F-11
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1995 Stock Option Plan

In fiscal 1996, the Company established the 1995 Stock Option Plan (the
"1995 Plan") and reserved 2,000,000 shares of common stock for issuance. Under
the 1995 Plan, the Board of Directors may grant incentive and nonqualified
stock options to employees, consultants and directors of the Company. The
exercise price per share for an incentive stock option cannot be less than the
fair market value, as determined by the Board of Directors, on the date of
grant. The exercise price per share for nonqualified stock options cannot be
less than 85% of the fair market value, as determined by the Board of
Directors, on the date of grant. Options generally expire ten years after the
date of grant and vest over a period of five years. Option activity under the
1995 Plan was as follows:

<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING
---------------------
OPTIONS PRICE PER
AVAILABLE SHARES SHARE
---------- --------- ----------
<S> <C> <C> <C>
Authorized............................... 2,000,000 -- --
Granted.................................. (820,750) 820,750 $ .40
Exercised................................ -- (54,068) $ .40
Canceled................................. 12,932 (12,932) $ .40
---------- --------- ----------
Balance at March 31, 1996................. 1,192,182 753,750 $ .40
Authorized............................... 500,000 -- --
Granted.................................. (1,456,750) 1,456,750 $.40-16.75
Exercised................................ -- (202,366) $ 4.00
Canceled................................. 48,184 (48,184) $.40-16.75
---------- --------- ----------
Balance at December 31, 1996.............. 283,616 1,959,950 $.40-16.75
========== ========= ==========
</TABLE>

At December 31, 1996, options outstanding for the purchase of 186,358 shares
were vested under the 1995 Plan at an exercise price of $.40 - 9.50 per share.

1996 Employee Stock Purchase Plan

The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board of Directors in June 1996. A total of 450,000
shares of common stock has been reserved for issuance under the Purchase Plan.
The Purchase Plan permits eligible employees to purchase common stock at 85%
of the lower of the fair market value of the Company's common stock on the
first day or the last day of each six-month offering period. No shares have
been issued under the Purchase Plan as of December 31, 1996.

1996 Outside Directors Stock Option Plan

The Company's 1996 Outside Directors Stock Option Plan (the "Directors
Plan") was adopted by the Company's Board of Directors in June 1996. A total
of 200,000 shares of common stock has been reserved for issuance under the
Directors Plan. The Directors Plan provides for the initial grant of
nonstatutory stock options to purchase 15,000 shares of common stock on the
earlier of the first annual meeting following the initial public offering of
the Company's common stock or the date on which the optionee first becomes a
nonemployee director of the Company, and an additional option to purchase
5,000 shares of common stock on the next anniversary to existing and future
nonemployee directors of the Company. The exercise price per share of all
options granted under the Directors Plan will equal the fair market value of a
share of the Company's common stock on the date of grant of the option. No
options have been issued under the Directors Plan as of December 31, 1996.

F-12
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Executive Performance Incentive Plan

The Company's Executive Performance Incentive Plan (the "Incentive Plan")
was adopted by the Company's Board of Directors in October 1996. A total of
100,000 shares of common stock has been reserved for issuance under the
Incentive Plan. Under the Incentive Plan, the Compensation Committee of the
Board of Directors may award performance units to designated executives, that
will vest and become payable if one or more pre-established performance goals
are attained during a specified performance period and the participant remains
an employee. As of December 31, 1996, 3,615 shares had been issued under the
Incentive Plan.

Common Stock Reserved for Future Issuance

As of December 31, 1996, the Company has reserved the following shares of
common stock for future issuance:

<TABLE>
<S> <C>
1995 Stock Option Plan and options assumed from PostModern......... 2,605,351
1996 Stock Plans................................................... 746,385
---------
3,351,736
=========
</TABLE>

7. EMPLOYEE BENEFIT PLAN:

In June 1995, the Company adopted the Visigenic Software, Inc. 401(k) Plan
(the "401(k) Plan"), as allowed under Section 401(k) of the Internal Revenue
Code, which provides for tax deferred salary deductions for eligible employees
of the Company. Employees who are 21 years of age or older are eligible to
participate immediately upon the date of hire and may make voluntary
contributions of their compensation to the 401(k) Plan. The 401(k) Plan does
not provide for Company contributions and the Company is the administrator.

8. INCOME TAXES:

The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns based upon
enacted tax laws and rates applicable to the periods in which taxes become
payable. A valuation allowance has been recorded for the entire deferred tax
asset as a result of uncertainties regarding realization of the asset
including the limited operating history of the Company, the lack of
profitability to date and the uncertainty over future operating profitability.
Components of the net deferred tax asset are as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Net operating loss carryforwards........................... $ 1,894 $ 3,398
Cumulative book to tax differences......................... 750 994
General business credit carryforwards...................... 311 372
------- -------
2,955 4,764
Valuation allowance........................................ (2,955) (4,764)
------- -------
Net deferred tax asset................................. $ -- $ --
======= =======
</TABLE>

As of March 31, 1996, the Company had Federal and state net operating loss
carryforwards of approximately $9.8 million and $2.0 million, respectively,
which expire at various dates through 2011. In addition, as of March 31, 1996,
the Company had general business credit carryforwards of approximately
$372,000 which expire at various dates through 2011.

F-13
<PAGE>

VISIGENIC SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Under current tax law, net operating loss and credit carryforwards available
in any given year may be limited upon the occurrence of certain events,
including significant changes in ownership interests.

9. FISCAL 1997 ACQUISITIONS:

Acquisition of PostModern Computing Technologies Inc.

In May 1996, the Company completed the acquisition of PostModern, a
developer of distributed object connectivity software. In the acquisition,
which was structured as a merger, the Company issued 3,099,821 shares of its
common stock, valued at $3.00 per share based on an independent appraisal of
the Company's common stock, and paid a total of $2.3 million in exchange for
all of PostModern's outstanding shares. The Company also incurred acquisition-
related costs of approximately $450,000, resulting in a total purchase price
of approximately $13.1 million. In addition, the Company made cash payments,
subject to one-year vesting and totaling $1.5 million, to certain PostModern
employees. The acquisition of PostModern was accounted for as a purchase in
the quarter ended June 30, 1996.

In connection with the purchase price allocation, the Company received an
appraisal of the intangible assets which indicated that approximately $12.0
million of the acquired intangible assets consisted of in process product
development. Because there can be no assurance that the Company will be able
to successfully complete the development and integration of the PostModern
products or that the acquired technology has any alternative future use, the
acquired in process product development was charged to expense by Visigenic in
its quarter ended June 30, 1996.

As a result of the purchase price allocation, the excess of the purchase
price over net assets acquired is $1.1 million, which is being amortized on a
straight-line basis over a period of two years. Management believes that the
unamortized balance is recoverable through future operating results.

In connection with the acquisition, the Company also assumed PostModern's
outstanding stock options and reserved 361,785 shares of the Company's common
stock for issuance upon exercise of such options at an exercise price of $0.24
to $0.60 per share under similar vesting terms.

See unaudited Pro Forma Condensed Combined Financial Statements included
elsewhere in this Prospectus.

Acquisition of CustomWare, Inc.

In December 1996, the Company completed the acquisition of CustomWare, Inc.,
a training and consulting organization that specializes in distributed object
technology. In the acquisition, which was structured as a merger, the Company
issued 125,000 shares of its common stock to the shareholders of CustomWare,
resulting in a total purchase price of approximately $1.5 million. The
acquisition of CustomWare was accounted for as a purchase in the quarter ended
December 31, 1996.

In connection with the purchase price allocation, the Company received an
appraisal of the intangible assets which indicated that approximately $350,000
of the acquired intangible assets consisted of in process product development.
Because there can be no assurance that the Company will be able to
successfully complete the development of the CustomWare products or that the
acquired technology has any alternative future use, the acquired in process
product development was charged to expense by Visigenic in its quarter ended
December 31, 1996.

As a result of the purchase price allocation, the excess of the purchase
price over net assets acquired is $700,000, which is being amortized on a
straight-line basis over a period of one year. Management believes that the
unamortized balance is recoverable through future operating results.

Comparative pro forma information reflecting the acquisition of CustomWare
has not been presented because the operations of CustomWare are not material
to the Company's consolidated financial statements.

F-14
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To PostModern Computing Technologies Inc.:

We have audited the accompanying balance sheets of PostModern Computing
Technologies Inc. (a California corporation) as of March 31, 1995 and 1996 and
the related statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 1996. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PostModern Computing
Technologies Inc. as of March 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1996 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

San Jose, California
May 31, 1996

F-15
<PAGE>

POSTMODERN COMPUTING TECHNOLOGIES INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,
------------------
1995 1996
-------- --------
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash..................................................... $ 38,342 $ 56,860
Accounts receivable...................................... 138,383 303,604
Prepaid expenses......................................... 6,200 33,714
-------- --------
Total current assets................................... 182,925 394,178
-------- --------
PROPERTY AND EQUIPMENT:
Computer equipment....................................... 53,719 85,596
Furniture and fixtures................................... 5,295 27,626
-------- --------
59,014 113,222
Less--Accumulated depreciation........................... (29,479) (47,680)
-------- --------
Net property and equipment............................. 29,535 65,542
-------- --------
OTHER ASSETS............................................... 6,457 14,051
-------- --------
$218,917 $473,771
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Note payable to shareholders............................. $ 22,500 $ --
Accounts payable......................................... 13,035 109,488
Accrued payroll and related benefits..................... 95,541 55,312
Deferred revenue......................................... 19,321 189,252
-------- --------
Total current liabilities.............................. 150,397 354,052
-------- --------
COMMITMENTS (Note 3)
SHAREHOLDERS' EQUITY:
Convertible preferred stock, no par value -- --
Authorized--5,000,000 shares
Outstanding--none
Common stock, no par value
Authorized--20,000,000 shares
Outstanding--6,600,000 and 6,920,000 shares in 1995 and
1996, respectively..................................... 18,775 50,775
Note receivable from shareholder......................... -- (32,000)
Retained earnings........................................ 49,745 100,944
-------- --------
Total shareholders' equity............................. 68,520 119,719
-------- --------
$218,917 $473,771
======== ========
</TABLE>

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

F-16
<PAGE>

POSTMODERN COMPUTING TECHNOLOGIES INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
-------- --------- ---------
<S> <C> <C> <C>
REVENUE:
Software products.............................. $324,874 $ 253,056 $ 304,161
Consulting, maintenance and other.............. 319,349 250,758 697,702
-------- --------- ---------
Total revenue................................ 644,223 503,814 1,001,863
-------- --------- ---------
COST OF REVENUE:
Software products.............................. 9,459 31,746 43,340
Consulting, maintenance and other.............. 74,613 140,622 219,228
-------- --------- ---------
Total cost of revenue........................ 84,072 172,368 262,568
-------- --------- ---------
GROSS PROFIT..................................... 560,151 331,446 739,295
-------- --------- ---------
OPERATING EXPENSES:
Research and development....................... 116,840 150,428 223,297
Sales and marketing............................ 87,681 183,264 240,383
General and administrative..................... 83,104 176,672 211,766
-------- --------- ---------
Total operating expenses..................... 287,625 510,364 675,446
-------- --------- ---------
Income (loss) before provision for income
taxes....................................... 272,526 (178,918) 63,849
PROVISION FOR INCOME TAXES....................... -- -- 5,000
-------- --------- ---------
NET INCOME (LOSS)................................ $272,526 $(178,918) $ 58,849
======== ========= =========
</TABLE>

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

F-17
<PAGE>

POSTMODERN COMPUTING TECHNOLOGIES INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------- NOTES RETAINED
SHARES AMOUNT RECEIVABLE EARNINGS TOTAL
---------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1993.... 10,000,000 $35,775 $ -- $ (3,863) $ 31,912
Declaration and payment
of dividend............. -- -- -- (40,000) (40,000)
Net income............... -- -- -- 272,526 272,526
---------- ------- -------- -------- --------
BALANCE, MARCH 31, 1994.... 10,000,000 35,775 -- 228,663 264,438
Issuance of common
stock .................. 500,000 25,000 -- -- 25,000
Repurchase of common
stock .................. (3,900,000) (42,000) -- -- (42,000)
Net loss................. -- -- -- (178,918) (178,918)
---------- ------- -------- -------- --------
BALANCE, MARCH 31, 1995.... 6,600,000 18,775 -- 49,745 68,520
Declaration and payment
of dividend............. -- -- -- (7,650) (7,650)
Issuance of common
stock .................. 320,000 32,000 (32,000) -- --
Net income............... -- -- -- 58,849 58,849
---------- ------- -------- -------- --------
BALANCE, MARCH 31, 1996.... 6,920,000 $50,775 $(32,000) $100,944 $119,719
========== ======= ======== ======== ========
</TABLE>

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

F-18
<PAGE>

POSTMODERN COMPUTING TECHNOLOGIES INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1994 1995 1996
-------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................. $272,526 $(178,918) $ 58,849
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities--
Depreciation and amortization................ 7,680 11,572 18,201
Changes in net assets and liabilities--
Decrease (increase) in accounts receivable.. (139,206) 37,532 (165,221)
Increase in prepaid expenses................ -- (6,200) (27,514)
Increase (decrease) in accounts payable..... 7,053 (2,715) 96,453
Increase (decrease) in accrued liabilities.. (6,000) 87,041 (40,229)
Increase in deferred revenue................ 8,344 10,977 169,931
-------- --------- --------
Net cash provided by (used in) operating
activities................................ 150,397 (40,711) 110,470
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........... (13,850) (20,995) (54,208)
Other assets.................................. (2,567) (2,703) (7,594)
-------- --------- --------
Net cash used in investing activities...... (16,417) (23,698) (61,802)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock........ -- 25,000 --
Repurchase of common stock.................... -- (42,000) --
Payment of cash dividends to shareholders..... (40,000) -- (7,650)
Borrowings from (repayments to) shareholders.. -- 22,500 (22,500)
-------- --------- --------
Net cash provided by (used in) financing
activities................................ (40,000) 5,500 (30,150)
-------- --------- --------
NET INCREASE (DECREASE) IN CASH................. 93,980 (58,909) 18,518
CASH, BEGINNING OF PERIOD....................... 3,271 97,251 38,342
-------- --------- --------
CASH, END OF PERIOD............................. $ 97,251 $ 38,342 $ 56,860
======== ========= ========
</TABLE>

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

F-19
<PAGE>

POSTMODERN COMPUTING TECHNOLOGIES INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1996

1. THE COMPANY:

PostModern Computing Technologies Inc. (the "Company") was incorporated in
October 1991 in California. The Company, which is closely held, operates in a
single industry segment and is involved in the design, marketing and support
of distributed object connectivity software.

In May 1996, the Company was acquired by Visigenic Software, Inc.
("Visigenic"), a Delaware corporation, according to the terms of an agreement
which provides that the Company be merged with and into Visigenic (the
"Acquisition"). In connection with the Acquisition, Visigenic issued 3,099,821
shares of its common stock and paid cash consideration of approximately $2.3
million in exchange for all of the outstanding shares of common stock of the
Company and assumed all issued and outstanding options to purchase common
stock of the Company. In addition, at the closing of the Acquisition,
Visigenic made cash payments to certain employees of the Company totaling $1.5
million, subject to one-year vesting. The Acquisition was structured as a tax-
free exchange according to Section 368(a)(II)(E) of the Internal Revenue Code.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Revenue Recognition

The Company generates revenue from licensing the rights to use its software
products, sales of post-contract support, development contracts, consulting
services and training services performed for customers who license its
products.

Revenue from software license agreements is recognized upon shipment of the
software if there are no significant post-delivery obligations and collection
is probable. If an acceptance period is required, revenue is recognized upon
the earlier of customer acceptance or the expiration of the acceptance period.
Revenue from post-contract support services is recognized ratably over the
term of the support period. Consulting revenue is primarily related to
development and customization services performed on a time and material basis
under separate service and consulting arrangements. Revenue from development
contracts and training services is recognized as the services are performed
over the term of the agreement. In cases where license fee payments are
contingent upon the acceptance of services, revenue from both the license and
the service elements is deferred until the acceptance criteria are met.

Significant Customers

For fiscal 1994, 1995 and 1996, the combined revenue from five customers
accounted collectively for 96%, 88% and 83% of total revenue, respectively.
The following customers accounted for more than 10% of total revenue:

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
----------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A....................................................... 74% * *
Customer B....................................................... * 44% 29%
Customer C....................................................... * 18% *
Customer D....................................................... * 11% 10%
Customer E....................................................... * * 25%
Customer F....................................................... * * 12%
</TABLE>
- --------
*less than 10%

F-20
<PAGE>

POSTMODERN COMPUTING TECHNOLOGIES INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Export Revenue

Export revenue for fiscal 1996, which consisted of sales to a customer in
Japan, was 12% of total revenue. Export revenue was less than 10% of total
revenue for fiscal 1994 and 1995.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of accounts receivable. As of
March 31, 1996, approximately 72% of accounts receivable were concentrated
with five customers. The Company believes that its credit and collection
procedures are adequate to monitor and evaluate risk among its customer base.
For fiscal 1994, 1995 and 1996 credit losses have been insignificant.

Software Development Costs

The Company capitalizes eligible software development costs upon the
establishment of technological feasibility, which the Company has defined as
completion of a working model. For fiscal 1994, 1995 and 1996, costs which
were eligible for capitalization, after consideration of factors such as
realizable value, were insignificant and, thus, the Company has charged all
software development costs to research and development expense in the
accompanying statements of operations.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the double declining balance method over the estimated useful lives of the
assets of five to seven years.

Use of Estimates in Preparation of Financial Statements

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

3. COMMITMENTS:

The Company leases its office space under a non-cancelable operating lease
which expires on March 31, 1998. Rent expense for all operating leases was
approximately $23,000, $38,000 and $38,000 for fiscal 1994, 1995 and 1996,
respectively. Future minimum lease payments under all non-cancelable operating
leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
-----------
<S> <C>
1997............................................................. $126,000
1998............................................................. 129,000
--------
$255,000
========
</TABLE>

4. LINE OF CREDIT:

In December 1995, the Company entered into a line of credit agreement (the
"Agreement") with a bank which allows for borrowings of up to $125,000 and
expires in December 1996. Advances under the Agreement, which are secured by
substantially all of the Company's assets and contractual rights of the
Company, bear interest at the bank's prime lending rate plus 1.0% (9.25% at
March 31, 1996). As of March 31, 1996, there were no borrowings outstanding
under the Agreement.

F-21
<PAGE>

POSTMODERN COMPUTING TECHNOLOGIES INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. STOCK OPTION PLAN:

In November 1995, the Company established the 1995 Stock Option Plan (the
"Plan") and reserved 1,980,000 shares of common stock for issuance thereunder.
Under the Plan, the Board of Directors may grant incentive stock options to
employees and directors at the fair market value of the shares, as determined
by the Board of Directors, on the date of grant. The exercise price per share
for nonqualified stock options cannot be less than 85% of fair market value of
the shares, as determined by the Board of Directors, on the date of grant.
Options generally expire ten years after the date of grant and vest over a
period of four years. Activity under the Plan is summarized as follows:

<TABLE>
<CAPTION>
OPTIONS
AVAILABLE OPTIONS PRICE
FOR ISSUANCE OUTSTANDING PER SHARE
------------ ----------- ------------
<S> <C> <C> <C>
Authorized for issuance............... 1,980,000 -- --
Granted............................... (1,644,500) 1,644,500 $0.10--$0.25
---------- --------- ------------
Balance, March 31, 1996............... 335,500 1,644,500 $0.10--$0.25
========== ========= ============
</TABLE>

As of March 31, 1996, options to purchase 826,250 shares of common stock at
prices ranging from $0.10 to $0.25 were fully vested and exercisable. In
connection with the Acquisition, Visigenic assumed all outstanding options of
the Company.

6. INCOME TAXES:

Through December 31, 1995, the Company was an S corporation. Effective
January 1, 1996, the Company changed to C corporation status. Federal and
state income tax regulations require that the income or loss of an S
corporation be included in the tax returns of the individual shareholders.
Accordingly, no provision for taxes is made in the accompanying financial
statements for fiscal 1994, 1995 and for the period from April 1, 1995 to
December 31, 1995.

The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 109 provides for an asset and liability approach
to accounting for income taxes under which deferred income taxes are provided
based upon enacted tax laws and rates applicable to the periods in which taxes
become payable. The provision for income taxes for the year ended March 31,
1996 was as follows:

<TABLE>
<S> <C>
Current provision:
Federal............................................................ $5,000
State.............................................................. 1,000
------
6,000
------
Deferred benefit:
Federal............................................................ (1,000)
State.............................................................. --
------
(1,000)
------
Total provision for income taxes..................................... $5,000
======
</TABLE>

As of March 31, 1996, the components of the net deferred income tax asset of
approximately $1,000 consisted of differences in book versus tax depreciation
and nondeductible reserves and accruals.

F-22
<PAGE>

VISIGENIC SOFTWARE, INC. AND POSTMODERN COMPUTING TECHNOLOGIES INC.

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

PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(UNAUDITED)

In May 1996, Visigenic Software, Inc. (the "Company" or "Visigenic")
completed the acquisition of PostModern Computing Technologies Inc., a
California corporation ("PostModern"). PostModern is a developer of
distributed object software. The acquisition of PostModern has been accounted
for as a purchase.

The accompanying pro forma condensed combined statement of operations for
the fiscal year ended March 31, 1996 and the nine months ended December 31,
1996 assumes that the acquisition took place as of the beginning of fiscal
1996, and combines Visigenic's and PostModern's statements of operations for
each Company's respective fiscal year ended March 31, 1996 and nine months
ended December 31, 1996. The historical financial statements of PostModern for
the nine months ended December 31, 1996 only include two months of operations
as it was merged into Visigenic effective May 31, 1996. The pro forma
condensed combined statement of operations for the fiscal year ended March 31,
1996 does not include the effect of any nonrecurring charges directly
attributable to the acquisition.

The accompanying pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements and related notes
thereto for both Visigenic and PostModern, which are included in this
Prospectus.

P-1
<PAGE>

VISIGENIC SOFTWARE, INC. AND
POSTMODERN COMPUTING TECHNOLOGIES INC.

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

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
-------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VISIGENIC POSTMODERN ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Software products.............. $ 4,479 $ 304 $ -- $ 4,783
Service and other.............. 1,096 698 -- 1,794
------- ------ -------
Total revenue................ 5,575 1,002 6,577
------- ------ -------
COST OF REVENUE:
Software products.............. 284 44 -- 328
Service and other.............. 727 219 -- 946
------- ------ -------
Total cost of revenue........ 1,011 263 1,274
------- ------ -------
GROSS PROFIT..................... 4,564 739 5,303
------- ------ -------
OPERATING EXPENSES:
Product development............ 4,348 223 1,317(a) 5,888
Sales and marketing............ 3,215 240 183(a) 3,638
General and administrative..... 1,465 212 -- 1,677
Amortization of excess of
purchase price over net assets
acquired...................... -- -- 522(a) 522
------- ------ -------
Total operating expenses..... 9,028 675 11,725
------- ------ -------
Operating income (loss)...... (4,464) 64 -- (6,422)
INTEREST AND OTHER INCOME, net... 85 -- -- 85
------- ------ -------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES................ (4,379) 64 -- (6,337)
PROVISION FOR INCOME TAXES....... -- 5 5(b) --
------- ------ -------
NET INCOME (LOSS)................ $(4,379) $ 59 $(6,337)
======= ====== =======
NET LOSS PER SHARE............... $ (.40) $ (.57)
======= =======
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES.... 11,064 11,064(c)
======= =======
</TABLE>

The accompanying notes are an integral part of this statement.

P-2
<PAGE>

VISIGENIC SOFTWARE, INC. AND
POSTMODERN COMPUTING TECHNOLOGIES INC.

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

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER, 1996
-------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VISIGENIC POSTMODERN ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Software products............. $ 9,895 $ 24 $ -- $ 9,919
Service and other............. 1,639 108 -- 1,747
-------- ----- --------
Total revenue............... 11,534 132 11,666
-------- ----- --------
COST OF REVENUE:
Software products............. 399 11 -- 410
Service and other............. 1,430 65 -- 1,495
-------- ----- --------
Total cost of revenue....... 1,829 76 1,905
-------- ----- --------
GROSS PROFIT.................... 9,705 56 9,761
-------- ----- --------
OPERATING EXPENSES:
Product development........... 6,650 64 -- 6,714
Sales and marketing........... 6,977 68 -- 7,045
General and administrative.... 1,814 74 -- 1,888
Purchased in process product
development.................. 12,364 -- -- 12,364
Amortization of excess of
purchase price over net
assets acquired.............. 361 -- 86(a) 447
-------- ----- --------
Total operating expenses.... 28,166 206 28,458
-------- ----- --------
Operating income (loss)..... (18,461) (150) -- (18,697)
INTEREST AND OTHER INCOME, net.. 190 -- -- 190
-------- ----- --------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES............... (18,271) (150) -- (18,507)
PROVISION FOR INCOME TAXES...... -- -- -- --
-------- ----- --------
NET INCOME (LOSS)............... $(18,271) $(150) $(18,507)
======== ===== ========
NET LOSS PER SHARE.............. $ (1.51) $ (1.52)
======== ========
PRO FORMA WEIGHTED AVERAGE
COMMON AND COMMON EQUIVALENT
SHARES......................... 12,141 12,141 (c)
======== ========
</TABLE>

The accompanying notes are an integral part of this statement.

P-3
<PAGE>

VISIGENIC SOFTWARE, INC. AND POSTMODERN COMPUTING TECHNOLOGIES INC.

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

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. PRO FORMA ADJUSTMENTS

Certain pro forma adjustments have been made to the accompanying pro forma
condensed combined statements of operations as described below:

(a) Reflects the amortization of the excess of the purchase price over net
assets acquired of approximately $1.1 million, which will be amortized
on a straight line basis over its estimated life of two years, and $1.5
million of cash payments made to certain PostModern employees subject
to one-year vesting.

(b) Reflects the elimination of the PostModern tax provision for fiscal
1996 due to the pro forma 1996 net loss.

(c) Pro forma weighted average common and common equivalent shares do not
include common stock equivalents as inclusion of these shares would be
anti-dilutive. The stand alone Visigenic and the pro forma combined
weighted average common and common equivalent shares are identical as
the Visigenic shares issued to PostModern shareholders are included in
the stand alone Visigenic weighted average share calculation pursuant
to the Securities and Exchange Commission Staff Accounting Bulletin No.
83.

NOTE 2. PURCHASE PRICE ALLOCATION

In connection with the acquisition, the Company exchanged 3,099,821 shares
of its common stock, valued at $3.00 per share based on an independent
appraisal of the Company's stock, and paid cash consideration of approximately
$2.3 million in exchange for all of the outstanding shares of common stock of
PostModern. The Company also incurred acquisition related costs of
approximately $450,000 resulting in a total purchase price of approximately
$13.1 million. In addition to the forgoing, at the closing of the acquisition,
the Company made cash payments to certain PostModern employees totaling $1.5
million. In the event that such employees leave the Company within the 12
months following the date of acquisition, the employees must refund back to
the Company a pro rata portion of the payment for the months they are no
longer employees.

P-4
<PAGE>

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION 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 BY THE COMPANY, ANY SELLING STOCK-
HOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 14
Price Range of Common Stock.............................................. 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 26
Management............................................................... 42
Certain Transactions..................................................... 49
Principal and Selling Stockholders....................................... 52
Description of Capital Stock............................................. 56
Shares Eligible for Future Sale.......................................... 58
Underwriting............................................................. 60
Legal Matters............................................................ 61
Experts.................................................................. 61
Available Information.................................................... 62
Index to Financial Statements............................................ F-1
</TABLE>

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

1,600,000 SHARES

[LOGO OF VISIGENIC SOFTWARE, INC. APPEARS HERE]

COMMON STOCK

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

HAMBRECHT & QUIST

ROBERTSON, STEPHENS & COMPANY

FEBRUARY 12, 1997

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