AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1996

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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AURUM SOFTWARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

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CALIFORNIA (PRIOR TO REINCORPORATION) 7372 77-0292260
DELAWARE (AFTER REINCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)

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

AURUM SOFTWARE, INC.
3385 SCOTT BOULEVARD
SANTA CLARA, CA 95054
(408) 986-8100
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND
PRINCIPAL PLACE OF BUSINESS)

---------------
MARY E. COLEMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AURUM SOFTWARE, INC.
3385 SCOTT BOULEVARD
SANTA CLARA, CA 95054
(408) 986-8100
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE OF PROCESS)
---------------
COPIES TO:
DOUGLAS H. COLLOM, ESQ. SCOTT T. SMITH, ESQ.
JESSICA L. ARMSTRONG, ESQ. MICHAEL J. SULLIVAN, ESQ.
ROBERT F. KORNEGAY, ESQ. DAVINA K. KAILE, ESQ.
MARK A. CLAWSON, ESQ. PILLSBURY MADISON & SUTRO LLP
WILSON SONSINI GOODRICH & ROSATI 2700 SAND HILL ROAD
PROFESSIONAL CORPORATION MENLO PARK, CA 94025
650 PAGE MILL ROAD (415) 233-4500
PALO ALTO, CA 94304
(415) 493-9300

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] ________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE

================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $.001 par value............... $33,200,000 $11,450
================================================================================

(1) Estimated solely for the purpose of computing the amount of the
registration fee. The estimate is made pursuant to Rule 457(o) of the
Securities Act of 1933, as amended.

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

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

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
SEPTEMBER 13, 1996

2,625,000 Shares

[LOGO]

Common Stock

--------

Of the 2,625,000 shares of Common Stock offered hereby, 2,500,000 are being
sold by Aurum Software, Inc. ("Aurum" or the "Company") and 125,000 shares are
being sold by a Selling Stockholder. See "Principal and Selling Stockholders."
The Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholder. Prior to this offering, there has been no public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $ and $ per share. See
"Underwriting" for the factors to be considered in determining the initial
public offering price. The Company has applied for quotation of its Common
Stock on the Nasdaq National Market under the symbol "AURM."

--------

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

--------

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

=============================================================================================
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
- ---------------------------------------------------------------------------------------------

Per Share....................... $ $ $ $
- ---------------------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
=============================================================================================

(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $1 million.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 393,750 additional shares of Common Stock solely to cover over-
allotments, if any. If the option is exercised in full, the Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholder will be $ , $ , $ , and $ ,
respectively. See "Underwriting."

--------

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

Alex. Brown & Sons
INCORPORATED
Cowen & Company

Wessels, Arnold & Henderson

THE DATE OF THIS PROSPECTUS IS , 1996

AURUM CUSTOMER ENTERPRISE

THE AURUM CUSTOMER ENTERPRISE IS AN INTEGRATED SUITE OF APPLICATIONS WHICH
HELPS AUTOMATE
THE FIELD SALES, TELEMARKETING, TELESALES AND CUSTOMER SUPPORT FUNCTIONS OF THE
BUSINESS.

FIELD SALES TELEMARKETING SUPPORT
SALESTRAK TELETRACK SUPPORTTRAK

BUSINESS INTELLIGENCE SYSTEM
(OLAP, REPORTING AND ANALYSIS)

SMART ENCYCLOPEDIA
(INTERNET/INTRANET MARKETING AND SALES INFORMATION)
CUSTOMER ENTERPRISE SERVER

.Pricing .Proposals .Quotes .Forecasts .Methodology
.Lists .Products .Campaigns .Partners .Competitors

DBSYNC WEBTRAK EVENTTRAK CTI TRAK
Patent Pending On-Line Sales Workflow Computer-
Mobile and Marketing Notification Telephone
Synchronization Lead Qualification and Escalation Integration
Internet, LAN/WAN Self-Service
Connectivity

OTHER ENTERPRISE
APPLICATIONS

AURUM
SOFTWARE
TURNS YOUR CUSTOMERS INTO GOLD

HTTP://WWW.AURUM.COM*

*INFORMATION CONTAINED IN THE COMPANY'S WEBSITE SHOULD NOT BE DEEMED TO BE PART
OF THIS PROSPECTUS.
[collage graphic/photos]

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

Improved Customer Retention and Repeat Sales

Shortened Sales Cycle and Reduced Training Costs

Improved Forecasting and Visibility

Faster and More Timely Access to Information

Improved Customer Interaction

SALES AND MARKETING
INFORMATION PROCESS

[Collage graphic/photo depicting enterprise server linked to internet and
intranet clients, superimposed over depiction of globe]

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Prospective investors should consider carefully the
information discussed under "Risk Factors."

THE COMPANY

Aurum Software, Inc. ("Aurum" or the "Company") is a leading provider of
enterprise-wide sales and marketing information software. The Company develops,
markets and supports the Aurum Customer Enterprise, an integrated suite of
applications which helps automate the field sales, telemarketing, telesales and
customer support functions of a business. The Company's products are based on
advanced client/server and Internet/Intranet technologies and provide
businesses with integrated, adaptable and mobile software solutions to meet
their competitive business goals. The Aurum Customer Enterprise is designed to
address the requirements of businesses ranging from medium-sized enterprises to
large multinational corporations and has been installed to date in deployments
consisting of as many as 3,400 users. The Company's products are designed to
enable customers to increase revenues, shorten sales cycles, increase repeat
sales, improve forecasting accuracy and visibility, decrease sales and
marketing costs, increase customer satisfaction, obtain timely market
intelligence and gain a strategic competitive advantage.

Many companies have effectively applied client/server technologies to
automate "back office" operations, including manufacturing, finance, order
entry and human resources, to streamline corporate operations and reduce
operating costs. The automation of these back office operations has not
addressed the competitive challenges of increasing revenue generation and
improving customer satisfaction through automation of the "front office" sales
and marketing functions. Companies are increasingly focusing on their front
office sales and marketing operations, often their largest operating expense
category, as the next major business function to be automated and are also
recognizing the importance of integrating them with their back office
applications. In a May 1996 research report, Aberdeen Group, Inc., an
independent market research firm, projected that the market for packaged sales
and marketing application software will grow at an average compounded rate of
50%, from $140 million in 1995 to $700 million in 1999.

The Company's objective is to become the market leader in sales and marketing
information systems. Aurum's products enable businesses to improve customer
acquisition and retention processes by integrating, automating and managing
sales and marketing operations among customers, headquarters, branch offices,
field-based employees and distribution partners. The Company's applications
permit companies to leverage the latest available technologies, including the
Internet, thereby providing immediate access to external sources of information
to generate and qualify leads and to obtain market intelligence about potential
customers and competitors. The Company's patent-pending database
synchronization technology, dbSync, provides real-time access to customer
information for all users. Aurum's object-oriented open architecture enables
integration with other enterprise applications and offers an interface that may
be adapted to company-specific sales and marketing models and changing business
requirements.

The Company markets its products through a direct sales force in North
America, and through indirect sales channels outside of North America. The
Company has developed a comprehensive methodology for rapid implementation of
its sales and marketing applications and provides an extensive array of
services to its customers including business consulting, requirements
definition, installation, consulting, training and customer support. Aurum's
system integration partners include Cambridge Technology Partners, Deloitte &
Touche LLP, IBM and KPMG Peat Marwick LLP and the Company's technology partners
include Business Objects, Centura, Informix, Microsoft, Netscape, Oracle,
Sybase, Trilogy and Xcellenet.

The Company has over 100 customers and has deployed its applications in a
diverse set of industries including financial services, chemicals, high
technology, health care, information services, manufacturing, publishing,
telecommunications and utilities. The Company's customers include A.C. Nielsen,
CUC International, Eastman Chemical, Fleet Bank, GE Capital, Hewlett Packard
Company, Hilti, Lanier Worldwide, MCI Telecommunications, Netscape, Sprint
Spectrum L.P. and Sun Microsystems.

The Company was incorporated in California in 1991 and will reincorporate in
Delaware in 1996. Unless the context otherwise requires, references in this
Prospectus to "Aurum" and the "Company" refer to Aurum Software, Inc., a
Delaware corporation, and its predecessor, Aurum Software, Inc., a California
corporation. The Company's principal executive offices are located at 3385
Scott Boulevard, Santa Clara, California 95054, and its telephone number is
(408) 986-8100.

THE OFFERING

Common Stock offered by the 2,500,000 shares
Company...........................
Common Stock offered by the Selling 125,000 shares
Stockholder.......................
Common Stock to be outstanding
after this offering............... 11,108,002 shares(1)
Use of proceeds.................... For working capital and other general
corporate purposes, including repayment of
debt. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol............................ AURM

SUMMARY FINANCIAL INFORMATION
(in thousands, except per share data)

SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------
1992 1993 1994 1995 1995 1996
--------- -------- --------- -------- --------- --------

STATEMENT OF OPERATIONS
DATA:
Total revenues......... $3,180 $ 4,901 $ 5,912 $10,475 $ 3,785 $10,938
Income (loss) from
operations............ (610) (4,258) (4,305) (4,358) (2,298) (569)
Net income (loss)...... (624) (4,262) (4,388) (4,452) (2,349) (607)
Pro forma net income
(loss) per share(2)... $ $
Pro forma shares used
in per share
calculation(2)........

QUARTERS ENDED
----------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------

Total revenues......... $1,866 $ 1,919 $ 2,922 $ 3,768 $ 4,883 $ 6,055
Income (loss) from
operations............ (881) (1,417) (872) (1,188) (650) 81
Net income (loss)...... (904) (1,445) (898) (1,205) (663) 56
Pro forma net income
(loss) per share(2)...
Pro forma shares used
in calculation(2).....

JUNE 30, 1996
----------------------------------
AS
ACTUAL PRO FORMA(2) ADJUSTED(3)
-------- ------------ -----------

BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 2,006 $2,006 $
Working capital............................ 2,150 2,150
Total assets............................... 12,762 12,762
Borrowings under line of credit............ 1,500 1,500
Mandatorily redeemable convertible
preferred stock........................... 29,592 --
Stockholders' equity (deficit)............. (25,449) 4,143

- --------
(1) Based on shares outstanding as of August 31, 1996. Excludes as of August
31, 1996 592,851 shares of Common Stock issuable upon exercise of options
outstanding under the Company's 1995 Stock Plan at a weighted average
exercise price of $3.01. See "Management--Stock Plans," "Certain
Transactions," "Description of Capital Stock" and Note 7 of Notes to
Financial Statements. Also excludes 33,455 shares available for issuance
under the 1995 Stock Plan as of August 31, 1996 and an additional 2,664,000
shares reserved after August 31, 1996 for issuance under the 1995 Stock
Plan, the 1996 Director Option Plan and the 1996 Employee Stock Purchase
Plan.
(2) Reflects the conversion of the Company's outstanding Preferred Stock into
4,958,853 shares of Common Stock upon completion of this offering. See Note
2 of Notes to Financial Statements for an explanation of shares used to
calculate pro forma net income per share and pro forma shares.
(3) Adjusted to give effect to the estimated net proceeds of this offering
based upon an assumed initial public offering price of $ per share. See
"Use of Proceeds" and "Capitalization."

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

Except as otherwise specified, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting." Except
as otherwise noted, all information in this Prospectus has been adjusted to
give effect to a one-for-four reverse split of the Company's Common Stock and
reincorporation of the Company in the State of Delaware to be effected prior to
the completion of this offering, and the automatic conversion of the Preferred
Stock into Common Stock and certain changes to the authorized capital stock of
the Company upon completion of this offering. See "Description of Capital
Stock" and Note 6 of Notes to Financial Statements.

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements and the Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of numerous factors, including those set forth in the following risk
factors and elsewhere in this Prospectus.

Limited Operating History. The Company was incorporated in October 1991 and
did not begin shipping its software products until January 1992. Although the
Company has experienced significant growth in revenues during the past two
years, the Company does not believe that prior growth rates are sustainable or
indicative of future operating results. The Company has incurred losses in
each year since inception and, as of June 30, 1996, had an accumulated deficit
of $25.2 million. The Company's limited operating history makes the prediction
of future operating results difficult, if not impossible. Although the Company
achieved limited profitability during the second quarter of 1996, there can be
no assurance that the Company will be able to sustain profitability on a
quarterly basis or achieve profitability on an annual basis. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Potential Fluctuations in Quarterly Results; Seasonality. The Company's
quarterly operating results have varied significantly in the past and may vary
significantly in the future depending upon a number of factors, many of which
are beyond the Company's control. These factors include, among others, the
ability of the Company to develop, introduce and market new and enhanced
versions of its software on a timely basis; the demand for the Company's
software; the size, timing and contractual terms of significant orders; the
timing and significance of software product enhancements and new software
product announcements by the Company or its competitors; changes in pricing
policies by the Company or its competitors; changes in the Company's business
strategies; budgeting cycles of its potential customers; customer order
deferrals in anticipation of enhancements or new software products; changes in
the mix of software products and services sold; changes in the mix of revenue
attributable to domestic and international sales; the impact of acquisitions
of competitors; seasonal trends; the cancellations of licenses or maintenance
agreements; product life cycles; software defects and other product quality
problems; personnel changes; the ability of the Company to identify, recruit
and retain qualified sales, consulting, technical, marketing and management
personnel; investments to develop sales distribution channels; changes in the
level of operating expenses; and general domestic and international economic
and political trends. In particular, the timing of revenue recognition can be
affected by many factors, including the timing of contract execution and
delivery, and customer acceptance, if applicable. From time to time, the
Company enters into contracts with its customers which include certain post-
delivery obligations of the Company relating to the installation and
deployment of its software. In such situations, the Company may be required to
defer revenue recognition until such installation is complete. The timing
between initial customer contact and fulfillment of criteria for revenue
recognition can be lengthy and unpredictable, and revenues in any given
quarter can be adversely affected as a result of such unpredictability. In
addition, the Company's customers may decide not to honor contractual
obligations for license fees for various reasons, including changes in
business levels or business plans or implementation difficulties. While the
Company provides reserves and allowances for such instances, there can be no
assurance that such reserves and allowances will be adequate. In the event one
or more customers failed to honor such contractual obligations and the
Company's reserves and allowances proved inadequate, such failure could have a
material adverse effect on the Company's business, operating results and
financial condition. Software revenues are also difficult to forecast because
the market for client/server and sales and marketing software products is
rapidly evolving, and the Company's sales cycle, from initial contact to
purchase and implementation, varies substantially from customer to customer.
In the event of any downturn in potential customers' businesses or the economy
in general, planned purchases of the Company's products may be deferred or
canceled, which could have a material adverse effect on the Company's
business, operating results and financial condition. See "--Lengthy Sales and
Implementation Cycles."

The Company has limited backlog. To achieve its quarterly revenue
objectives, the Company is dependent upon obtaining orders in any given
quarter for shipment in that quarter. Furthermore, the Company has often
recognized a substantial portion of its revenues in the last month or weeks of
a quarter. As a result, software revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. Due to the foregoing
factors, quarterly revenue and operating results are not predictable with any
significant degree of accuracy. The Company's expense levels are based, in
significant part, on the Company's expectations as to future revenues and are
therefore relatively fixed in the short term. If revenue levels are below
expectations, the Company's business, operating results, including net income,
and financial condition are likely to be materially adversely affected. As a
result, 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. There can be no assurance that the Company
will be able to sustain profitability on a quarterly basis or achieve
profitability on an annual basis in the future. Due to all the foregoing
factors, it is likely that in some future quarter the Company's total revenues
or operating results will be below the expectations of public market analysts
and investors. In such event, or in the event that adverse conditions prevail
or are perceived to prevail generally or with respect to the Company's
business, the price of the Company's Common Stock would likely be materially
and adversely affected.

The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer buying patterns. In recent
years, the Company has generally had stronger demand for its software during
the quarters ending in June and December and weaker demand in the quarters
ending in March and September. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Lengthy Sales and Implementation Cycles. The Company's business includes
large, complex installations of its software products. The license and
implementation of the Company's software generally involves a significant
commitment of resources by its prospective customers and often requires the
Company to provide a significant level of education to prospective customers
regarding the use and benefits of the Company's software. In addition, the
implementation of the Company's software may involve substantial reengineering
efforts which may be performed by the customer or third-party system
integrators. The cost to the customer of the Company's software is typically
only a portion of the overall hardware, software, development, training and
integration costs of implementing a large-scale sales and marketing
information system. For these and other reasons, the period between initial
contact and the implementation of the Company's software is often lengthy
(ranging to date from between three and twelve months) and is subject to a
number of significant delays over which the Company has little or no control.
Because of the complexity of the Company's software products, larger
implementations can take multiple quarters. Increases in the size and
complexity of the Company's license transactions and delays in its customers'
implementation of client/server computing environments could serve to further
lengthen the implementation cycles. Delays in the sale or implementation of a
limited number of license transactions could have a material adverse effect on
the Company's business, operating results and financial condition and cause
the Company's operating results to vary significantly from quarter to quarter.
Therefore, the Company believes that its quarterly operating results are
likely to vary significantly in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business--Sales
and Marketing" and "--Consulting Services, Training and Support."

Emerging Market for Sales and Marketing Information Systems; Market
Acceptance. The market for sales and marketing information systems is
relatively new and is characterized by ongoing technological developments,
frequent new product announcements and introductions, evolving industry
standards and changing customer requirements. The Company's future financial
performance will depend in large part on continued growth in the number of
organizations adopting sales and marketing software products on an enterprise-
wide basis and in the number of applications developed for use. There can be
no assurance that the sales and marketing information system market will
continue to grow. If the sales

and marketing information system market fails to grow or grows more slowly
than the Company currently anticipates, the Company's business, operating
results and financial condition would be materially and adversely affected. In
addition, the Company believes that market acceptance of sales and marketing
software depends on the ability to provide mobile sales representatives with
access to enterprise-wide information and the willingness of sales
professionals to utilize software-based solutions such as the Company's.
Certain of the Company's larger customers have adopted the Company's software
on an incremental basis. There can be no assurance that the Company's
customers will expand usage of the Company's software on an enterprise-wide
basis or implement new software products introduced by the Company. The
failure of the Company's software to perform according to customer
expectations or otherwise to be deployed on an enterprise-wide basis would
have a material adverse effect on the ability of the Company to increase
revenues from new as well as existing customers. In addition, the failure of
the Company's software to achieve market acceptance for any reason would have
a material adverse effect on the Company's business, operating results and
financial condition. See "Business--Industry Background" and "--Strategy."

Rapid Technological Change; New Versions and New Products. The software
market in which the Company competes is characterized by rapid technological
change, frequent introductions of new products, changes in customer demands
and evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. For example, the Company's customers have
adopted a wide variety of hardware, software, database and networking
platforms, and as a result, to gain broad market acceptance, the Company must
continue to support and maintain its products on a variety of such platforms.
The Company's future success will depend on its ability to address the
increasingly sophisticated needs of its customers by supporting existing and
emerging hardware, software, database and networking platforms and by
developing and introducing enhancements to its products and new products on a
timely basis that keep pace with technological developments, evolving industry
standards and changing customer requirements. The success of the Company's
products may also depend, in part, on the Company's ability to introduce
products which are compatible with the Internet and on the broad acceptance of
the Internet and World Wide Web as a viable commercial marketplace. It is
difficult to predict with any assurance whether the Internet will prove to be
a viable commercial marketplace or whether the demand for Internet-related
products and services will increase or decrease in the future. There can be no
assurance that the Company will be successful in developing and marketing
enhancements to its products that respond to technological developments,
evolving industry standards or changing customer requirements, or that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and sale of such enhancements or that
such enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products
or enhancements fail to achieve market acceptance when released, the Company's
business, operating results and financial condition could be materially and
adversely affected. In addition, the introduction or announcement of new
product offerings or enhancements by the Company or the Company's competitors
or major hardware, systems or software vendors may cause customers to defer or
forgo purchases of the Company's products, which could have a material adverse
effect on the Company's business, operating results and financial condition.
See "Business--Products," "--Research and Development," "--Strategy" and "--
Technology."

Management of Growth; Dependence on Key Personnel. The Company's business
has grown rapidly in recent periods, with revenues increasing from $5.9
million in 1994 to $10.5 million in 1995 and $10.9 million in the first six
months of 1996. At the same time, the Company has experienced significant
growth in the number of employees, in the geographic scope of its operations
as well as its target customers, and in the scope of the operating and
financial systems required to support a growing organization. The Company's
growth has challenged and in some instances strained the Company's personnel
resources. The Company's future results of operations will depend in part on
the ability of its

officers and other key employees to implement and expand operational, customer
support and financial control systems and to expand, train and manage its
employee base. The Company's future performance will also depend to a
significant extent on its ability to identify, attract, train and retain
highly skilled sales, consulting, technical, marketing and management
personnel. Competition for such personnel is intense, and the Company expects
that such competition will continue for the foreseeable future. The Company
has from time to time experienced difficulty in locating candidates with
appropriate qualifications. There can be no assurance that the Company will be
successful in identifying, attracting or retaining such personnel, and the
failure to identify, attract or retain such personnel could have a material
adverse effect on the Company's business, operating results or financial
condition. In order to manage future growth, if any, the Company will be
required to hire additional general and administrative personnel and to
augment or replace its existing financial and management systems. In this
regard, the Company's Chief Financial Officer joined the Company in July 1996.
There can be no assurance that the Company's existing management or any new
members of management will be able to augment or implement such systems
efficiently or on a timely basis or that they will otherwise be able to manage
any future growth or business expansion successfully. The failure to do so
could have a material adverse effect on the Company's business, operating
results or financial condition. In addition, the Company's future performance
will depend in significant part upon the continued service of its key
technical, sales and senior management personnel, none of whom is bound by an
employment agreement other than the Company's President and Chief Executive
Officer and its Chief Financial Officer, each of whose employment is
nonetheless at-will. The loss of the services of one or more of the Company's
executive officers could have a material adverse effect on the Company's
business, operating results or financial condition. See "Business--Sales and
Marketing" and "Management."

Competition. The market for the Company's client/server applications is
highly competitive, fragmented, and subject to rapid technological change and
frequent new product introductions and enhancements. The Company has a large
number of competitors which range from custom internal application development
efforts to packaged application vendors. The Company offers a suite of
applications which can be used as part of an integrated customer management
application suite or on a stand alone basis. The Company competes with
packaged application vendors that provide tactical departmental solutions in
specific market segments as well as with competitors that provide a broader
suite of integrated customer management applications. Many of these
competitors have longer operating histories, significantly greater financial,
technical, product development, marketing and other resources, greater name
recognition or a larger installed base of customers than the Company. As a
result, these competitors may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements or to devote
greater resources to the development, promotion and sale of their products
than can the Company.

financial, order entry and manufacturing applications. In addition, because
the barriers to entry in the software market are relatively low, additional
competitors may emerge as the sales and marketing software market continues to
develop and expand. It is also possible that acquisitions of competitors by
large software companies or alliances among competitors could occur. The
Company expects that significant consolidation in its industry will occur over
the next few years and increased competition from new entrants or through
strategic acquisitions or alliances could result in price erosion, reduced
gross margins or loss of market share, any of which could have a material
adverse effect on the Company's business, operating results or financial
condition. See "Business--Competition."

Product Concentration. Since the beginning of 1995, the majority of the
Company's revenues have been attributable to sales of SalesTrak, which is
typically the first of the Company's software products to be deployed within a
customer's organization, with the greatest number of users and which often
serves as a foundation for other applications. The Company currently expects
SalesTrak to account for a significant portion of the Company's future
revenues. As a result, factors adversely affecting the pricing of or demand
for the SalesTrak product, such as competition or technological change, could
have a material adverse effect on the Company's business, operating results
and financial condition. A decline in sales of SalesTrak could also have a
material adverse effect on sales of other Company products that may be sold to
SalesTrak customers. The Company's future financial performance will depend,
in significant part, on the successful development, introduction and customer
acceptance of new and enhanced versions of the Company's SalesTrak product and
other software products. There can be no assurance that the Company will
continue to be successful in marketing SalesTrak or any new or enhanced
software products. See "Business--Products" and "--Competition."

Expansion of Distribution Channels. To date, the Company has sold its
products primarily through its direct sales organization and has supported its
customers with its technical and customer support staff. The Company has a
relatively small direct sales staff, and the Company's ability to achieve
revenue growth in the future will depend in large part on its success in
recruiting and training sufficient direct sales, technical and customer
support personnel and establishing and maintaining relationships with its
strategic partners. The Company's ability to achieve revenue growth in the
future will also depend on the establishment of relationships with
distributors in Europe and the Pacific Rim. The competition for qualified
international distributors is intense, and there can be no assurance that the
Company can attract and retain qualified distributors. Although the Company is
currently investing, and plans to continue to invest, significant resources to
expand its domestic direct sales force and its technical and customer support
staff, and to develop international distribution relationships with strategic
partners, the Company has at times experienced and continues to experience
difficulty in recruiting qualified personnel and in establishing necessary
third-party relationships. There can be no assurance that the Company will be
able to expand successfully its direct sales force or other distribution
channels or that any such expansion will result in an increase in revenues.
The Company believes the complexity of its products and the large-scale
deployments anticipated by its customers will require a number of highly
trained consultants and customer support personnel. There can be no assurance
that the Company will successfully expand its technical and customer support
staff to meet customer demands. Any failure by the Company to expand its
direct sales force or other distribution channels, or to expand its technical
and customer support staff, could materially and adversely affect the
Company's business, operating results and financial condition. See "--
Management of Growth; Dependence upon Key Personnel," "--International
Operations," "Business--Strategy," "--Sales and Marketing," and "--Consulting
Services, Training and Support."

International Operations. International sales have been insignificant to
date. The Company believes that its continued growth and profitability will
require expansion of its international operations. Accordingly, the Company
intends to expand its international operations and enter additional
international markets, which will require significant management attention and
financial resources and which could adversely affect the Company's operating
margins and earnings, if any. The Company's international sales are currently
denominated in U.S. dollars. An increase in the value of the U.S. dollar
relative to foreign

currencies could make the Company's software products more expensive and,
therefore, potentially less competitive in those markets. Risks inherent in
the Company's international revenues generally include the impact of longer
payment cycles, greater difficulty in accounts receivable collection,
seasonality due to the slow-down in European business activity during the
Company's third fiscal quarter, cultural differences in the conduct of
business, tariffs and other trade barriers and other factors. There can be no
assurance that these factors will not have a material adverse effect on the
Company's business operating results or financial condition. To date, the
Company has marketed its products outside North America through distribution
arrangements with strategic partners. As of June 30, 1996, the Company had
distribution agreements in place with AurumFrance, Ensure Technologies (United
Kingdom) and IBM EMEA (Europe, Middle East and Africa). The Company has also
identified the Pacific Rim as an important international market for the
Company's products but has not yet identified suitable distribution partners.
Competition for qualified distributors is intense in many markets outside
North America, including Europe and Asia, and there can be no assurance that
the Company will be successful in attracting and retaining qualified
distributors. If the Company is unable to obtain such distributors or is
otherwise unable to penetrate strategically important international markets,
the Company's business, operating results and financial condition could be
materially and adversely affected. See "--Expansion of Distribution Channels"
and "Business--Sales and Marketing."

Reliance on Third-Party Vendors. The Company incorporates into its products
certain software and other technologies licensed to it by third-party
developers. Because the Company's products incorporate software developed and
maintained by third parties, the Company is to a certain extent dependent upon
such third parties' abilities to maintain or enhance their current products,
to develop new products on a timely and cost-effective basis and to respond to
emerging industry standards and other technological changes. In the event that
the products licensed from the third-party vendors should fail to address the
requirements of the Company's software products, the Company would be required
to find alternative software products or technologies of equal performance or
functionality. There can be no assurance that the Company would be able to
replace such functionality provided by the third-party software currently
offered in conjunction with the Company's products in the event that such
software becomes obsolete or incompatible with future versions of the
Company's products or is otherwise not adequately maintained or updated. The
absence of or any significant delay in the replacement of that functionality
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business--Software Products."

Limited Intellectual Property Protection. The Company relies primarily on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect its proprietary rights. The
Company seeks to protect its software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. The Company has submitted one patent application for its dbSync
technology. There can be no assurance that any patent covering the Company's
inventions will issue, or that any patent, if issued, will provide
sufficiently broad protection or will prove enforceable in actions against
alleged infringers. Despite precautions taken by the Company, it may be
possible for unauthorized third parties to copy aspects of its products or
future products or to obtain and use information that the Company regards as
proprietary. In particular, the Company provides its licensees with access to
its data model and other proprietary information underlying its licensed
applications. The Company makes source code available for certain of the
Company's products and occasionally enters into source code escrow agreements
with certain customers for the balance of the source code. 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 or superior technology or design around any patents owned by the
Company. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results or financial condition.

Policing unauthorized use of the Company's software 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 the same extent as do the laws of the United States. The
Company is not aware that any of its software product offerings infringe 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 product
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 on the Company's business,
operating results and financial condition. The Company also relies on certain
technology which it licenses from third parties, including software which is
integrated with internally developed software and used in the Company's
products to perform key business functions. There can be no assurance that
these third party technology licenses will continue to be available to the
Company on commercially reasonable terms. The loss or the inability of the
Company to maintain any of these technology licenses could result in delays or
reductions in product shipments until equivalent technology could be
identified, licensed and integrated. Any such delays or reductions in product
shipments could materially and adversely affect the Company's business,
operating results and financial condition. See "Business--Intellectual
Property and Other Proprietary Rights."

Risk of Product Defects; Failure to Meet Performance Criteria. The Company's
software is intended for use in enterprise-wide sales and marketing
applications that may be critical to a customer's business. As a result, the
Company's customers and potential customers typically have demanding
requirements for installation and deployment. Software products as complex as
those offered by the Company frequently contain errors or failures, especially
when first introduced or when new versions are released. Although the Company
conducts extensive product testing during product development, the Company has
at times been forced to delay commercial release of software until problems
were corrected and, in some cases, has provided enhancements to correct errors
in released software. The Company could, in the future, lose revenues as a
result of software errors or defects. There can be no assurance that, despite
testing by the Company and by current and potential customers, errors will not
be found in software or releases after commencement of commercial shipments,
resulting in loss or delay of revenue or delay in market acceptance, diversion
of development resources, damage to the Company's reputation, or increased
service and warranty costs, any of which could have a material adverse effect
upon the Company's business, operating results and financial condition. In
addition, the client/server software market is subject to rapid technological
change, changing customer needs and performance criteria and evolving industry
standards that may render existing products and services obsolete. The life
cycles of the Company's software products are difficult to estimate, and the
Company expects to continue to make substantial investments in product
development and testing. There can be no assurance that the Company will have
sufficient resources to make the necessary investments. There can be no
assurance that the Company will not experience difficulties that could delay
or prevent the successful development, introduction or marketing of new or
enhanced software products. If the Company is unable, for technological or
other reasons, to develop and introduce new and enhanced software products
that satisfy customer performance criteria, the Company's business, operating
results and financial condition could be materially and adversely affected.
See "Business--Software Products" and "--Research and Development."

Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the
limitation of liability provisions contained in the Company's license
agreements may not be effective under the laws of certain jurisdictions.
Although the Company has not experienced any

product liability claims to date, the sale and support of products by the
Company may entail the risk of such claims, and there can be no assurance that
the Company will not be subject to such claims in the future. A successful
product liability claim brought against the Company could have a material
adverse effect on the Company's business, operating results and financial
condition.

Effect of Certain Charter Provisions; Limitation of Liability of Directors;
Antitakeover Effects of Delaware Law. Effective upon completion of this
offering, the Company will be authorized to issue 5,000,000 shares of
undesignated Preferred Stock. The Board of Directors has the authority to
issue the Preferred Stock in one or more series and to fix the price, rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting a series or the designation of such series, without any further
vote or action by the Company's stockholders. The issuance of Preferred Stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and may adversely affect the marketing price of, and the voting
and other rights of, the holders of Common Stock. The issuance of Preferred
Stock with voting and conversion rights may adversely affect the voting power
of the holders of Common Stock, including the loss of voting control to
others. The Company has no current plans to issue any shares of Preferred
Stock.

Certain provisions of the Company's Certificate of Incorporation and Bylaws
eliminate the right of stockholders to act by written consent without a
meeting, eliminate the right of stockholders to vote cumulatively in the
election of directors (subject to compliance with California corporate law)
and specify certain procedures for nominating directors and submitting
proposals for consideration at stockholder meetings. Such provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage certain types of transactions which may
involve an actual or threatened change of control of the Company. Such
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal and, accordingly, could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. Such provisions are also intended to discourage certain tactics that
may be used in proxy fights but could, however, have the effect of
discouraging others from making tender offers for the Company's shares and,
consequently, may also inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
These provisions may also have the effect of preventing changes in the
management of the Company.

The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Antitakeover Law"), which regulates corporate acquisitions. The
Antitakeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market, from
engaging, under certain circumstances, in a "business combination" with any
"interested stockholder" for three years following the date that such
stockholder became an interested stockholder. For purposes of the Antitakeover
Law, a "business combination" includes, among other things, a merger or
consolidation involving the Company and the interested shareholder and the
sale of more than ten percent (10%) of the Company's assets. In general, the
Antitakeover Law defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the Company
and any entity or person affiliated with or controlling or controlled by such
entity or person. A Delaware corporation may "opt out" of the Antitakeover Law
with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or bylaws resulting from
amendments approved by the holders of at least a majority of the Company's
outstanding voting shares. The Company has not "opted out" of the provisions
of the Antitakeover Law. See "Description of Capital Stock."

Shares Eligible for Future Sale; Registration Rights. Sales of a substantial
number of shares of Common Stock in the public market following this offering
could adversely affect the market price for the Company's Common Stock. The
number of shares of Common Stock available for sale in the public

market is limited by restrictions under the Securities Act of 1933, as amended
(the "Securities Act"), and lockup agreements under which the holders of such
shares have agreed not to sell or otherwise dispose of any of their shares for
a period of 180 days after the date of this Prospectus without the prior
written consent of Alex. Brown & Sons Incorporated. However, Alex. Brown &
Sons Incorporated may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to lockup agreements. As
a result of these restrictions, based on shares outstanding and options
granted as of August 31, 1996, no shares other than the 2,625,000 shares
offered hereby will be eligible for sale on the date of this Prospectus, and
8,608,002 shares will be eligible for sale 180 days after the date of this
Prospectus pursuant to Rules 144, 144(k) and 701 under the Securities Act. In
addition, the Company intends to register on a registration statement on Form
S-8 a total of 6,346,604 shares of Common Stock issued or reserved for
issuance under the Company's 1993 Stock Option Plan, 1995 Stock Plan, 1996
Employee Stock Purchase Plan and 1996 Directors Option Plan, which shares will
be eligible for sale upon expiration of the lockup agreements referred to
above. Holders of approximately 3,600,113 shares of Common Stock will be
entitled to certain registration rights with respect to such shares. If such
holders, by exercising their registration rights, cause a large number of
shares to be registered and sold in the public market, the sale of such shares
could have a material adverse effect on the market price for the Company's
Common Stock. See "Shares Eligible for Future Sale."

Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the book value per share of Common Stock. Investors
purchasing Common Stock in this offering will, therefore, incur immediate
dilution of $ in net tangible book value per share of Common Stock (based
upon an assumed initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and offering
expenses) from the initial public offering price and will incur additional
dilution upon the exercise of outstanding stock options.

Control by Existing Stockholders. Upon completion of this offering, the
Company's officers, directors and affiliated entities together will
beneficially own approximately % of the outstanding shares of Common Stock
( % if the Underwriters' over-allotment option is exercised in full). In
particular, upon completion of this offering, the Company's venture capital
investors and executive officers, will own approximately % of the outstanding
shares of Common Stock ( % if the Underwriters' over-allotment option is
exercised in full). As a result, these stockholders, if acting together, would
be able to control most matters requiring stockholder approval, including the
election of directors, and the approval of mergers, consolidations and sales
of all or substantially all of the assets of the Company. This may prevent or
discourage tender offers for the Company's Common Stock unless the terms are
approved by such stockholders. See "Principal and Selling Stockholders."

No Prior Market; Possible Volatility of Stock Price. Prior to this offering
there has been no public market for the Common Stock of the Company. The
initial public offering price will be determined by negotiations between the
Company and the representatives of the Underwriters. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. There can be no assurance that an active public market will
develop or be sustained after this offering or that the market price of the
Common Stock will not decline below the initial public offering price. Future
announcements concerning the Company or its competitors, quarterly or annual
variations in results of operations, announcements of technological
innovations, the introduction of new products or changes in pricing policies
by the Company or its competitors, proprietary rights or other litigation,
changes in earnings estimates by analysts, the Company's failure to meet
analysts' estimates or other factors could cause the market price of the
Common Stock to fluctuate substantially. In addition, stock prices for many
technology companies fluctuate widely for reasons which may be unrelated to
results of operations. These fluctuations, as well as general economic, market
and political conditions such as recessions or military conflicts, may
materially and adversely affect the market price of the Company's Common
Stock.

Discretion as to Use of Proceeds. The primary purposes of this offering are
to create a public market for the Company's Common Stock, to facilitate future
access to public markets and to obtain additional working capital. As of the
date of this Prospectus, the Company has no specific plans to use

the net proceeds from this offering other than for working capital and general
corporate purposes, including repayment of bank debt. Accordingly, the
Company's management will retain broad discretion as to the allocation of the
net proceeds from this offering. Pending any such uses, the Company plans to
invest the net proceeds in investment grade, interest-bearing securities. See
"Use of Proceeds."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $ are estimated to be approximately $ ($ if the
Underwriters' over-allotment option is exercised in full), after deducting
estimated underwriting discounts and commissions and offering expenses.

The primary purposes of this offering are to create a public market for the
Common Stock, to facilitate future access to public markets and to obtain
additional working capital. The Company expects to use the net proceeds of
this offering for working capital and other general corporate purposes,
including the repayment of its outstanding bank debt, which was $1,500,000 at
June 30, 1996. A portion of the net proceeds may also be used for the
acquisition of businesses, products and technologies that are complementary to
those of the Company. The Company has no present plans, agreements or
commitments and is not currently engaged in any negotiations with respect to
any such transaction. Pending such uses, the net proceeds of this offering
will be invested in investment grade, interest-bearing securities.

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

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its capital stock.
The Company currently expects to retain future earnings, if any, for use in
the operation and expansion of its business and does not anticipate paying any
cash dividends in the foreseeable future. The Company's bank line of credit
agreement contains a restrictive covenant which limits the Company's ability
to pay cash dividends or make stock repurchases without the prior written
consent of the lender. See Note 4 of Notes to Financial Statements.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996 after giving effect to a one-for-four reverse stock split and
reincorporation in the State of Delaware to be effected prior to the
completion of this offering, the pro forma conversion of all outstanding
shares of Preferred Stock into Common Stock and certain changes to the
authorized capital stock of the Company upon completion of this offering, and
as adjusted to reflect the receipt of net proceeds from the sale of 2,500,000
shares of Common Stock pursuant to this offering at an assumed initial public
offering price of $ per share. The capitalization information set forth in
the table below is qualified by the more detailed Financial Statements and
Notes thereto appearing elsewhere in this Prospectus and should be read in
conjunction with such Financial Statements and Notes.

JUNE 30, 1996
-------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- --------- -----------
(IN THOUSANDS)

Borrowings under line of credit and current
portion of notes payable and capital lease
obligations(1)................................ $ 2,088 $2,088 $
========= ======= ====
Notes payable and capital lease obligations,
net of current portion(1)..................... $ 422 $ 422 $
--------- ------- ----
Mandatorily Redeemable Convertible Preferred
Stock, no par value, 24,000,000 shares
authorized; 21,905,398 shares issued and
outstanding, actual; no pro forma and as
adjusted shares............................... $ 29,592 --
--------- ------- ----
Stockholders' deficit:
Preferred Stock, $.001 par value; 5,000,000
shares authorized, no shares issued and
outstanding, pro forma and as adjusted...... --
Common Stock, $.001 par value; 10,000,000
shares authorized, 3,498,300 shares issued
and outstanding, actual; 8,457,153 shares
issued and outstanding, pro forma;
25,000,000 shares authorized, shares issued
and outstanding, as adjusted(2)............. -- 8
Additional paid-in capital................... -- 29,584
Notes receivable from stockholders........... (230) (230)
Accumulated deficit.......................... (25,219) (25,219)
--------- ------- ----
Total stockholders' equity (deficit)........ (25,449) 4,143
--------- ------- ----
Total capitalization....................... $ 4,565 $ 4,565 $
========= ======= ====

- --------
(1) See Note 4 of Notes to Financial Statements.
(2) Based on shares outstanding as of August 31, 1996. Excludes as of August
31, 1996 592,851 shares of Common Stock issuable upon exercise of options
outstanding under the Company's 1995 Stock Plan at a weighted average
exercise price of $3.01. See "Management--Stock Plans," "Certain
Transactions," "Description of Capital Stock" and Note 7 of Notes to
Financial Statements. Also excludes 33,455 shares available for issuance
under the 1995 Stock Plan as of August 31, 1996 and an additional
2,664,000 shares reserved after August 31, 1996 for issuance under the
1995 Stock Plan, the 1996 Director Option Plan and the 1996 Employee Stock
Purchase Plan.

DILUTION

The pro forma net tangible book value of the Company as of June 30, 1996 was
$4.1 million or $0.49 per share of Common Stock. Pro forma tangible book value
per share is determined by dividing the amount of total tangible assets of the
Company less total liabilities by the number of shares of Common Stock
outstanding at that date, assuming the conversion of all outstanding shares of
Preferred Stock. After giving effect to the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby (at an assumed initial public
offering price of $ per share and after deducting the underwriting
discounts and commissions and estimated offering expenses), the pro forma net
tangible book value of the Company as of June 30, 1996 would have been $
or $ per share. This represents an immediate increase in pro forma net
tangible book value of $ per share to existing stockholders and an immediate
dilution of $ per share to new investors purchasing shares at the assumed
initial public offering price. The following table illustrates the per share
dilution.

Assumed initial public offering price per share..................... $
Pro forma net tangible book value per share at June 30, 1996...... $0.49
Increase per share attributable to new investors..................
-----
Pro forma net tangible book value per share after the offering......
---
Pro forma net tangible book value dilution per share to new
investors.......................................................... $
===

The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
stockholders and by the new investors purchasing shares in this offering
(before deducting the underwriting discounts and commissions and estimated
offering expenses), based upon the assumed initial public offering price of
$ per share:

SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ---------- ---------- ---------

Existing stockholders(1).... 8,608,002 77.5% $ -- % $
New investors............... 2,500,000 22.5 -- -- $
---------- ----- ---------- --------
Total..................... 11,108,002 100.0% $ 100.0%
========== ===== ========== ========

- --------
(1) Sales by the Selling Stockholder in this offering will reduce the number
of shares of Common Stock held by existing stockholders to 8,483,002 or
approximately % ( shares, or approximately %, if the Underwriters'
over-allotment option is exercised in full) and will increase the number
of shares held by new investors to or approximately % ( shares, or
approximately %, if the Underwriters over-allotment option is exercised
in full) of the total number of shares of Common Stock outstanding after
this offering. See "Principal and Selling Stockholders."

The foregoing computations assume no exercise of stock options after August
31, 1996. As of August 31, 1996, there were outstanding options to purchase
592,851 shares of Common Stock under the Company's 1995 Stock Plan at a
weighted average exercise price of $3.01 per share and an additional 33,455
shares reserved for future option grant under the 1995 Stock Plan. After
August 31, 1996, an additional 2,664,000 shares of Common Stock were reserved
for issuance under the Company's 1995 Stock Plan, 1996 Director Option Plan
and 1996 Employee Stock Purchase Plan. To the extent that any shares are
issued upon exercise of options, warrants or rights that are presently
outstanding or granted in the future, or reserved for future issuance under
the Company's stock plans, there will be further dilution to new public
investors. See "Management--Stock Plans," "Description of Capital Stock" and
Note 7 to Notes to Financial Statements.

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Financial Statements and Notes thereto and other financial
information included elsewhere in this Prospectus. The unaudited statement of
operations data set forth below for the years ended December 31, 1993, 1994
and 1995 and the balance sheet data as of December 31, 1994 and 1995 have been
derived from and are qualified by reference to the audited Financial
Statements of the Company included elsewhere in this Prospectus. The statement
of operations data for the six months ended June 30, 1995 and 1996 have been
prepared on the same basis as the annual audited financial statements and, in
the opinion of management, contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the operating
results for such periods. The operating results for the six months ended June
30, 1996 are not necessarily indicative of the results to be expected for any
other interim period or any future fiscal year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------- ------------------
1992 1993 1994 1995 1995 1996
------ ------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses.............. $2,169 $ 3,475 $ 3,356 $ 5,928 $ 1,820 $ 6,217
Services.............. 1,011 1,426 2,556 4,547 1,965 4,721
------ ------- ------- -------- -------- --------
Total revenues...... 3,180 4,901 5,912 10,475 3,785 10,938
------ ------- ------- -------- -------- --------
Cost of Revenues:
Licenses.............. 461 331 365 979 567 623
Services.............. 623 1,609 2,586 3,919 1,528 4,256
------ ------- ------- -------- -------- --------
Total cost of
revenues........... 1,084 1,940 2,951 4,898 2,095 4,879
------ ------- ------- -------- -------- --------
Gross profit........... 2,096 2,961 2,961 5,577 1,690 6,059
------ ------- ------- -------- -------- --------
Operating expenses:
Sales and marketing... 1,021 3,107 3,240 6,626 2,326 4,527
Research and
development.......... 763 2,251 2,246 2,286 1,204 1,387
General and
administrative....... 922 1,861 1,780 1,023 458 714
------ ------- ------- -------- -------- --------
Total operating
expenses........... 2,706 7,219 7,266 9,935 3,988 6,628
------ ------- ------- -------- -------- --------
Loss from operations... (610) (4,258) (4,305) (4,358) (2,298) (569)
Other income (expense),
net................... -- 38 5 63 27 23
Interest expense....... (14) (42) (88) (157) (78) (61)
------ ------- ------- -------- -------- --------
Net loss............... $ (624) $(4,262) $(4,388) $ (4,452) $ (2,349) $ (607)
====== ======= ======= ======== ======== ========
Pro forma net loss per
share(1).............. $ $
======== ========
Pro forma shares used
in per share
calculation(1)........
======== ========

DECEMBER 31, JUNE 30,
---------------------------------- ------------------
1992 1993 1994 1995 1995 1996
------ ------- ------- -------- -------- --------
(IN THOUSANDS)

BALANCE SHEET DATA:
Working capital
(deficit)............ $ (900) $ 3,348 $ 1,034 $ 2,205 $ (1,321) $ 2,150
Total assets.......... 1,169 6,188 5,744 9,795 3,620 12,762
Notes payable and
capital lease
obligations less
current portion...... -- 341 370 237 338 422
Mandatorily redeemable
convertible preferred
stock................ -- 8,845 11,302 17,356 11,302 29,592
Accumulated deficit... (624) (4,886) (9,274) (13,726) (11,623) (25,219)
Stockholders'
deficit.............. (452) (4,706) (9,080) (13,528) (11,425) (25,449)

- --------
(1) Reflects the conversion of the Company's outstanding Preferred Stock into
4,958,853 shares of Common Stock upon completion of this offering. See
Note 2 of Notes to Financial Statements.

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

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Financial
Statements and related notes thereto included elsewhere in this prospectus.
The following discussion contains forward-looking statements and the Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors," "Business" and elsewhere in this Prospectus.

OVERVIEW

The Company, which commenced operations in 1991, develops application
software for automating enterprise-wide sales, marketing and customer support
functions. From its inception through 1991, the Company was engaged
principally in research and development and in developing custom software
products. The Company commenced commercial shipments of its TeleTrak and
SupportTrak software products in 1992 and delivered consulting services for
implementation of its products. The SalesTrak software product began
commercial shipment in September 1994. In recent years, the Company has
focused primarily on its sales and marketing software products and, as a
result of greater market acceptance of these products, the Company's revenues
have grown rapidly, increasing from $3.2 million in 1992 to $10.5 million in
1995 and $10.9 million for the first six months of 1996. Service revenues
totaled $1.4 million, $2.6 million, $4.5 million and $4.7 million in each of
1993, 1994, 1995 and the first six months of 1996, respectively. Service
revenues include revenues from consulting services, which the Company believes
facilitate more rapid implementation and successful deployment of the
Company's software products. The Company realized operating losses from 1992
through the first quarter of 1996, and the Company achieved limited
profitability in the second quarter of 1996. The losses from 1992 through 1994
primarily reflect the Company's investment in research and development, in
particular the transition of its products from an early character-based
technology to a Windows user interface-based technology. In addition, in 1993
and 1994, the Company made a substantial investment in the development of its
SalesTrak software product and database synchronization technology. The losses
in 1995 and the first quarter of 1996 primarily reflect the Company's
continued investment in research and development of its software and an
increased investment in sales and marketing to increase revenues and expand
market share.

Revenues consist of license revenues and service revenues. License revenues
for the Company's products consist of server fees for one or more servers and
software license fees based on the number of named users. The Company also
derives license revenues from sublicensing third party software products.
License revenues are recognized upon execution of a license agreement and
delivery of software if there are no significant post-delivery vendor
obligations and collection of the receivable is deemed probable. If
significant post-delivery obligations exist or if a product is subject to
customer acceptance, revenues are deferred until no significant obligations
remain or acceptance has occurred. Revenues from services consist primarily of
consulting services, including implementation and adaptation of licensed
software and training, maintenance and support. Consulting and training
revenues are generally recognized as services are performed, except for
revenues from certain fixed price contracts or milestone deliverables, which
are recognized on a percentage-of-completion basis or upon milestone delivery.
Post-contract support revenues are recognized ratably over the term of the
support period, which is typically one year. For all periods presented, the
Company has recognized revenue in accordance with the Statement of Position
91-1 on "Software Revenue Recognition" dated December 12, 1991, issued by the
American Institute of Certified Public Accountants.

The Company's software products may be sold individually or as an integrated
suite. Since the beginning of 1995, most of the Company's revenues have come
from SalesTrak. The Company anticipates that this trend will continue for the
foreseeable future.

The Company markets its products primarily through a direct sales force in
North America. The Company has also sold to large European and multinational
firms, resulting in international deployments of its software products. In
order to provide these large international customers with local country
support, the Company entered into agreements with distributors in the United
Kingdom in November 1995 and in France in February 1996. The Company also
entered into a reseller agreement with IBM EMEA (Europe, Middle East and
Africa) in April 1996 to distribute its products in these geographic areas.
The Company has also signed a reseller agreement with IBM in the U.S. Revenues
from these international and domestic distributors have been insignificant to
date. The Company plans to increase its international distribution in the
future.

Although the Company has experienced significant growth in revenues during
the past two years, the Company does not believe that prior growth rates are
sustainable or indicative of future operating results. In addition, the
Company expects increased competition and, as a result, intends to invest
significantly in its business. There can be no assurance that the Company will
be able to sustain profitability on a quarterly basis or achieve profitability
on an annual basis. The Company's limited operating history makes the
prediction of future results difficult, if not impossible. The Company's
future operating results will depend on many factors, including, among others,
the ability of the Company to develop, introduce and market new and enhanced
versions of its software on a timely basis; the demand for the Company's
software; the size, timing and contractual terms of significant orders; the
timing and significance of software product enhancements and new software
product announcements by the Company or its competitors; changes in pricing
policies by the Company or its competitors; changes in the Company's business
strategies; budgeting cycles of its potential customers; customer order
deferrals in anticipation of enhancements or new software products; changes in
the mix of software products and services sold; changes in the mix of revenue
attributable to domestic and international sales; the impact of acquisitions
of competitors; seasonal trends; the cancellations of licenses or maintenance
agreements; product life cycles; software defects and other product quality
problems; personnel changes; the ability of the Company to identify, recruit
and retain qualified sales, consulting, technical, marketing and management
personnel; investments to develop sales distribution channels; changes in the
level of operating expenses; and general domestic and international political
and economic trends.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1995 AND 1996

Revenues

The Company's revenues are derived primarily from fees for software licenses
and to a lesser extent from services. The Company's revenues were $3.8 million
and $10.9 million for the six months ended June 30, 1995 and 1996,
respectively.

Licenses. Software license revenues were $1.8 million and $6.2 million for
the six months ended June 30, 1995 and 1996, respectively, representing 48%
and 57% of total revenues in the respective periods. The increase in dollar
amount was primarily due to increased market acceptance of the Company's
products and the expansion of its direct sales force.

Services. Service revenues are primarily comprised of fees for consulting
services, training and maintenance. Service revenues were $2.0 million and
$4.7 million for the six months ended June 30, 1995 and 1996, respectively,
representing 52% and 43% of total revenues in the respective periods. The
increase in dollar amount was due primarily to the increase in consulting,
training, maintenance and maintenance renewals associated with increased sales
of the Company's applications. As the Company implements its strategy of
encouraging third party systems integrators to provide consulting, training
and implementation services for its products, consulting and training revenues
could decline as a percentage of total revenues in the future.

Cost of Revenues

Cost of Licenses. Cost of licenses consists primarily of license fees and
royalties paid to third party software providers and, to a lesser extent,
product media, product duplication and shipping. Cost of license fees was
$567,000 and $623,000 for the six months ended June 30, 1995 and 1996,
respectively, representing 31% and 10% of total license fees and 15% and 6% of
total revenues for each period, respectively. The increase in the dollar
amount of cost of licenses during the six months ended June 30, 1996 was due
primarily to the increased sales of the Company's products. Gross margins on
licenses improved in the first six months of 1996 due primarily to a reduction
in the sales of third party database applications as a percentage of total
sales.

Cost of Services. Cost of services consists primarily of personnel-related
costs incurred in providing consulting services, training and maintenance to
customers. Cost of services were $1.5 million and $4.3 million for the six
month periods ended June 30, 1995 and 1996, respectively, representing 78% and
90% of total service revenues and 40% and 39% of total revenues for each
period, respectively. The increase in costs as a percentage of related service
revenues in the first six months of 1996 over the same period in 1995 is
primarily the result of making a significant investment in the services
organization to handle an anticipated increase in the number of customers, to
develop a training service offering, and to develop a comprehensive consulting
methodology that will enable the Company to implement its products on a more
timely and consistent basis. During this period, the Company also made an
investment in creating a Consultant Development Program to train recent
computer science college graduates in the Company's products, which the
Company believes will help reduce its dependence on expensive outside
contractors and improve margins. The Company has also invested substantial
resources to develop, train and support its third party systems integrator
partners. The Company will continue to make investments in its services
organization on an as-needed basis to manage growth, improve customer service
and improve overall service margins.

Operating Expenses

Sales and Marketing. Sales and marketing expenses include salaries,
commissions, advertising, direct mail, seminars, public relations, trade
shows, travel and other related selling and marketing expenses. Sales and
marketing costs were $2.3 million and $4.5 million for the six months periods
ended June 30, 1995 and 1996, respectively, representing 61% and 41% of total
revenues for each period, respectively. The increase in absolute dollar amount
was attributed to expansion of the Company's direct sales force and an
increase in marketing activities. The decrease in sales and marketing expenses
as a percentage of total revenues was primarily due to the rapid growth of
revenues. The Company believes that such expenses will continue to increase in
absolute dollar amounts as the Company expands its sales and marketing staff.

Research and Development. Research and development expenses relate primarily
to engineering personnel. Costs related to research and development of
products are charged to research and development expenses as incurred.
Research and development costs were $1.2 million and $1.4 million for the six
months periods ended June 30, 1995 and 1996, respectively, representing 32%
and 13% of total revenues for each period, respectively. The increase in
dollar amount was attributed to an increase in personnel and related expenses.
The decrease in research and development expenses as a percentage of total
revenues was primarily due to the rapid growth of revenues. The Company
expects that research and development expenses will continue to increase in
absolute dollar amounts as the Company continues to commit substantial
resources to product development and engineering in future periods.

General and Administrative. General and administrative expenses include
personnel costs for administration, finance, human resources and general
management, along with legal and accounting expenses and other professional
services. General and administrative expenses were $458,000 and $714,000 for
the six months periods ended June 30, 1995 and 1996, respectively,
representing 12% and

7% of total revenues for each period, respectively. The increase in absolute
dollar amount was attributed to expansion of the Company's general and
administrative staff and associated expenses necessary to manage and support
the Company's growth. The decrease in general and administrative expenses as a
percentage of total revenues was primarily due to the rapid growth of
revenues. The Company believes that its general and administrative expenses
will continue to increase in absolute dollars in the future as the Company
expands its staffing and experiences higher costs associated with being a
public company.

Provision for Income Taxes. The Company experienced operating losses for the
six month periods ended June 30, 1995 and 1996 and paid no income taxes.

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

Revenues

Total revenues increased 21% from $4.9 million in 1993 to $5.9 million in
1994 and increased 77% to $10.5 million in 1995.

Licenses. License revenues decreased from $3.5 million in 1993 to $3.4
million in 1994 and increased to $5.9 million in 1995, representing 71%, 57%
and 57% of total revenues in the respective periods. The decrease in license
fees between 1993 and 1994 was due to a transition from the Company's original
character-oriented product technology to a newer Windows-based technology. The
increase in license fees from 1994 to 1995 was due to increased market
acceptance of the Company's Windows-based products, the introduction of
SalesTrak and the expansion of the Company's direct sales force.

Services. Service revenues increased from $1.4 million in 1993 to $2.6
million in 1994 to $4.5 million in 1995, representing 29%, 43% and 43% of
total revenues in the respective periods. The dollar increase in service
revenues is primarily the result of an increase in demand for consulting and
systems integration services and, to a lesser extent, from an increase in
maintenance revenues from a larger, installed base.

COST OF REVENUES

Cost of Licenses. Cost of licenses were $331,000, $365,000, and $979,000, in
1993, 1994 and 1995, respectively, representing 10%, 11% and 17% of the
related license revenues for each year, respectively. The increase in the
dollar amount of the cost of licenses in each successive year reflects the
higher volume of applications sold each year. Cost of licenses increased as a
percentage of related revenues from 1994 to 1995 due to increased third party
database sales which have a lower product margin than the Company's
applications.

Cost of Services. Cost of services were $1.6 million, $2.6 million and $3.9
million in 1993, 1994 and 1995, respectively, representing 113%, 101% and 86%
of the related services revenues for each year, respectively. The increase in
the dollar amount of cost of services in each successive year reflects the
higher volumes of services and maintenance provided each year. Cost of
services decreased as a percentage of related service revenues from 1993 to
1995 due to improved operational efficiency.

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses in 1993, 1994 and 1995
were $3.1 million, $3.2 million and $6.6 million, respectively, representing
63%, 55% and 63% of total revenues for each year, respectively. The increase
in sales and marketing expenses as a percentage of total revenues from 1994 to
1995 was principally due to a significant increase in the number of sales and
marketing personnel in 1995.

Research and Development. Research and development expenses were $2.3
million for 1993, $2.2 million for 1994 and $2.3 million for 1995 representing
46%, 38% and 22% of total revenues for each year,

respectively. The decrease in research and development expenses as a
percentage of total revenues is a result of increasing revenues over the
relevant periods.

General and Administrative. General and administrative expenses for 1993,
1994 and 1995 were $1.9 million, $1.8 million and $1.0 million, respectively,
representing 38%, 30% and 10% of total revenues for each year, respectively.
The decrease in general and administrative expenses in absolute dollars and as
a percentage of total revenues was primarily due to improved operational
efficiencies and increased economies of scale.

Provision for Income Taxes. The Company experienced operating losses for
1993, 1994 and 1995 and paid no income taxes. As of December 31, 1995, the
Company had for federal and state purposes net operating loss carry-forwards
of approximately $8.0 million. These federal and state carryforwards expire in
the years 2007 through 2010 and 1996 through 2000, respectively. Utilization
of the net operating losses and credits may be subject to a substantial annual
limitation due to ownership change limitations provided by the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of the net operating losses and credits before
utilization. See Note 9 of Notes to Financial Statements.

SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth statement of operations data for the six
quarters ended June 30, 1996, both in dollar amounts and as a percentage of
revenues. This information has been derived from the Company's unaudited
financial statements. The unaudited financial statements have been prepared on
the same basis as the audited financial statements contained elsewhere in this
Prospectus and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such information. Such information should be read in
conjunction with the Company's annual audited financial statements and notes
thereto appearing elsewhere in this Prospectus. The Company's quarterly
results are subject to fluctuations. The operating results for any quarter are
not necessarily indicative of results for any future period.

QUARTER ENDED
--------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues:
Licenses............... $ 783 $ 1,037 $1,735 $ 2,373 $2,871 $3,346
Services............... 1,083 882 1,187 1,395 2,012 2,709
------ ------- ------ ------- ------ ------
Total revenues......... 1,866 1,919 2,922 3,768 4,883 6,055
------ ------- ------ ------- ------ ------
Cost of revenues:
Licenses............... 198 369 155 257 407 216
Services............... 780 748 941 1,450 1,986 2,270
------ ------- ------ ------- ------ ------
Total cost of reve-
nues.................. 978 1,117 1,096 1,707 2,393 2,486
------ ------- ------ ------- ------ ------
Gross profit............ 888 802 1,826 2,061 2,490 3,569
------ ------- ------ ------- ------ ------
Operating expenses:
Sales and marketing.... 947 1,379 1,950 2,350 2,201 2,326
Research and develop-
ment.................. 611 593 508 574 626 761
General and administra-
tive.................. 211 247 240 325 314 400
------ ------- ------ ------- ------ ------
Total operating ex-
penses................ 1,769 2,219 2,698 3,249 3,141 3,487
------ ------- ------ ------- ------ ------
Income (loss) from oper-
ations................. (881) (1,417) (872) (1,188) (650) 81
Other income (expense),
net.................... 16 11 20 16 12 11
Interest expense........ (39) (39) (46) (33) (25) (36)
------ ------- ------ ------- ------ ------
Net income (loss)....... $ (904) $(1,445) $ (898) $(1,205) $ (663) $ 56
====== ======= ====== ======= ====== ======

QUARTER ENDED
----------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
AS A PERCENTAGE OF TOTAL REVENUES

Revenues:
Licenses............... 42.0% 54.0% 59.4% 63.0% 58.8% 55.3%
Services............... 58.0 46.0 40.6 37.0 41.2 44.7
----- ----- ----- ----- ----- -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Licenses............... 10.6 19.2 5.3 6.8 8.3 3.6
Services............... 41.8 39.0 32.2 38.5 40.7 37.5
----- ----- ----- ----- ----- -----
Total cost of reve-
nues.................. 52.4 58.2 37.5 45.3 49.0 41.1
----- ----- ----- ----- ----- -----

Gross profit............ 47.6 41.8 62.5 54.7 51.0 58.9
----- ----- ----- ----- ----- -----
Operating expenses:
Sales and marketing.... 50.8 71.8 66.7 62.4 45.1 38.4
Research and develop-
ment.................. 32.7 30.9 17.4 15.2 12.8 12.6
General and administra-
tive.................. 11.3 12.9 8.2 8.6 6.4 6.6
----- ----- ----- ----- ----- -----
Total operating
expenses.............. 94.8 115.6 92.3 86.2 64.3 57.6
----- ----- ----- ----- ----- -----
Income (loss) from oper-
ations................. (47.2) 73.8 (29.8) (31.5) (13.3) 1.3
Other income (expense),
net.................... 0.9 0.5 0.7 0.4 0.2 0.2
Interest expense........ (2.1) (2.0) (1.6) (0.9) (0.5) (0.6)
----- ----- ----- ----- ----- -----
Net income (loss)....... (48.4)% (75.3)% (30.7)% (31.9)% (13.6)% 0.9%
===== ===== ===== ===== ===== =====

Any decline in the demand for or market acceptance of the Company's software
products or services would have a material adverse effect on the Company's
business, financial condition and results of operations. Although the Company
has experienced significant growth in revenues in recent quarters, there can
be no assurance that the Company will sustain such growth in revenues. The
Company only became profitable in the quarter ended June 30, 1996, and there
can be no assurances that the Company will be able to sustain consistent
profitability on a quarterly basis or achieve profitability on an annual basis
in the future, if at all. The license of the Company's software generally
requires the Company to engage in a sales cycle of three to twelve months or
longer and to provide a significant level of education to prospective
customers regarding the use and benefits of the Company's software. For these
reasons, sales cycles are subject to a number of potentially significant
delays over which the Company has little or no control. Further, the Company
believes that the purchase of its software is relatively discretionary and
generally involves a substantial commitment of capital. Therefore, in the
event of any general downturn in the economy or in any potential customer's
business, these events could result in the deferral or cancellation of the
purchase of the Company's products. Accordingly, such deferrals could have a
material adverse effect on the Company's business, financial condition or
results of operations and cause the Company's operating results to vary
significantly from quarter to quarter.

The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer purchasing patterns. In recent
years, the Company has generally had stronger demand for its products during
the quarters ending in June and December and weaker demand in the quarters
ending in March and September.

Quarterly software license revenues are difficult to forecast because the
market for client/server applications is rapidly evolving, and the Company's
sales cycle, from initial trial to purchase and the provision of consulting
and support services, varies substantially from customer to customer. The
Company typically receives a substantial portion of its software license
orders in the last month or weeks of a quarter. In addition, quarterly
software license revenues are also heavily dependent on the timing of revenue
recognition, which can be affected by many factors, including the timing of
contract execution and delivery and customer acceptance, if applicable. The
Company has limited backlog in that it typically ships its software products
shortly after an order is received. Therefore, the Company has limited
visibility on software license revenues for future quarters. Despite the
uncertainties in its quarterly revenue patterns, the Company's operating
expenses are based upon anticipated revenue levels and are relatively fixed in
the short term. If revenue levels fall below expectations, the Company's
operating and net income

results would be adversely affected. Due to the foregoing factors, quarterly
revenue and operating results are not predictable with any significant degree
of accuracy. As a result, it is likely that in some future period the
Company's results of operations could fail to meet the expectations of public
market analysts or investors. In such event, or in the event that adverse
conditions prevail generally or with respect to the Company's business, the
price of the Company's Common Stock would likely be materially and adversely
affected.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations primarily through
equity financings in which it has raised approximately $17.5 million,
financing under its equipment lease lines and a revolving bank line of credit.
In 1993, 1994, 1995 and the six months ended June 30, 1996, approximately $3.5
million, $4.2 million, $4.1 million and $2.4 million, respectively, of cash
was used in operations. In 1995 and the six months ended June 30, 1996, the
Company experienced significant growth in accounts receivable accompanying the
Company's increased sales volume, which was partially offset by increases in
accounts payable and other current liabilities.

In 1993, 1994, 1995 and the six months ended June 30, 1996, the Company's
investing activities consisted primarily of purchases of property and
equipment. In these periods, the Company used approximately $228,000,
$427,000, $933,000 and $1.1 million, respectively, of cash to purchase
property and equipment, primarily for personal computers and for furniture and
other office equipment. The Company expects that the rate of purchases of
property and equipment will increase as the Company's employee base grows. As
of June 30, 1996, the Company's principal commitments consisted primarily of
lease lines of credit for equipment and software purchases and leases for
office facilities. See Notes 3 and 4 of Notes to Financial Statements.

At June 30, 1996, the Company had $2.0 million in cash and cash equivalents
and $2.1 million of working capital. The Company had available a revolving
bank line of credit agreement under which the Company had borrowed $1.5
million at June 30, 1996. Under the line of credit, the Company had the
ability to borrow 65% of eligible receivables or a maximum of $2 million of
which $400,000 was designated as an equipment term note. The line of credit
was renewed on July 15, 1996 increasing the ability to borrow to 75% of
eligible receivables or a maximum of $2 million. The line of credit is
collateralized by the assets of the Company and certain financial covenants
are required to be maintained. The line of credit also contains a restrictive
covenant that limits the Company's ability to pay cash dividends or make stock
repurchases in excess of $300,000 without the prior written consent of the
lender. The line of credit expires on July 15, 1997 and will automatically
increase to $4 million upon completion of this offering. On July 15, 1996 the
Company also obtained an equipment term note of $1.3 million from its bank.
The Company currently has no significant capital spending or purchase
commitments other than normal purchase agreements and commitments under
facilities, line of credit and capital leases. See Note 4 of Notes to
Financial Statements.

The Company believes that the net proceeds from the sale of Common Stock
offered hereby, together with its current cash balances and cash available
under its lines of credit, will be sufficient to meet its working capital and
capital expenditure requirements for at least the next 12 months. Although
operating activities may provide cash in certain periods, to the extent that
the Company experiences growth in the future, the Company anticipates that its
operating and investing activities may use cash. Consequently, any such growth
may require the Company to obtain additional equity or debt financing. There
can be no assurances that any necessary additional financing will be available
to the Company on commercially reasonable terms, if at all. In addition,
although there are no present understandings, commitments or agreements with
respect to any acquisition of businesses, products or technologies, the
Company, from time to time, evaluates potential acquisitions of other
businesses, products and technologies that are complementary to those of the
Company, and may in the future require additional equity or debt financings to
consummate such acquisitions.

BUSINESS

The following Business section contains forward-looking statements and the
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" and elsewhere in this Prospectus.

OVERVIEW

Aurum Software, Inc. is a leading provider of enterprise-wide sales and
marketing information software. The Company provides the Aurum Customer
Enterprise suite of applications which helps automate the field sales,
telemarketing, telesales and customer support functions of a business. The
Company's products are based on advanced client/server and Internet/Intranet
technologies and are designed to address the sales and marketing requirements
of businesses ranging from medium-sized enterprises to large multinational
corporations. The Aurum Customer Enterprise has been installed to date in
deployments consisting of as many as 3,400 users. The Company provides
businesses with integrated, adaptable and mobile software solutions to meet
their competitive business goals. The Company's products are designed to
enable customers to increase revenues, shorten sales cycles, increase repeat
sales, improve forecasting accuracy and visibility, decrease sales and
marketing costs, increase customer satisfaction, obtain timely market
intelligence and gain a strategic competitive advantage. The Company has
deployed its applications in a diverse set of industries including financial
services, chemicals, high technology, health care, information services,
manufacturing, publishing, telecommunications and utilities. The Company's
customers include A.C. Nielsen Company, CUC International, Eastman Chemical,
Fleet Bank, GE Capital, Hewlett Packard Company, Hilti, Lanier Worldwide, MCI
Telecommunications, Netscape Communications Corporation, Sprint Communications
and Sun Microsystems.

INDUSTRY BACKGROUND

The market dynamics of the current business environment are forcing
companies across a wide range of industries to find new ways to improve their
organizational efficiency, increase revenues and reduce costs. Many companies
have effectively applied client/server technologies to automate "back office"
operations, including manufacturing, finance, order entry and human resources,
to streamline corporate operations and reduce operating costs. The automation
of these back office operations has not, however, addressed the competitive
challenges of increasing revenue generation and improving customer
satisfaction through automation of the "front office" sales and marketing
functions. Automation solutions to these front office functions have been much
slower to develop due, in part, to the complex dynamics and highly
individualized nature of sales and marketing business processes within
organizations. Companies are, however, increasingly focusing on their front
office sales and marketing operations, often their largest operating expense
category, as the next major business function to be automated and are
recognizing the importance of integrating them with their back office
applications. In a May 1996 research report, Aberdeen Group, Inc., an
independent market research firm, projected that the market for packaged sales
and marketing application software will grow at an average annual compounded
rate of 50%, from $140 million in 1995 to $700 million in 1999.

The demands of the current market environment have resulted in fundamental
changes in the sales and marketing strategies traditionally used by
businesses. To improve the productivity of their direct sales forces,
companies must be able to implement team selling models comprising of separate
but integrated telemarketing, telesales and direct sales functions. Companies
must also be able to augment direct sales strategies with multi-tiered
distribution strategies that utilize OEMs, VARs, distributors and other
channel partners. Further, as businesses have expanded internationally, this
multi-tiered distribution strategy must be adapted to the different cultures
and business practices of geographically dispersed markets. The need to
improve sales productivity also requires companies to develop more effective
methodologies for customer lead generation and qualification, collection and
internal distribution of product and competitive information, determination of
customer requirements and market trends, improvement in visibility and

accuracy of product and revenue forecasts, and management and training of
sales and marketing personnel. In addition, companies must be able to
effectively manage and distribute relevant customer and market information on
a real-time basis between the marketing and back office operations of the home
office and the remote field sales force to ensure that the selling and
customer retention effort is fully coordinated and to formulate intelligent
and timely marketing strategies. Sales and marketing information solutions
that address these requirements must offer a combination of automation of
business processes, information collection and sharing, decision support and
management reporting.

The need to transform front office sales and marketing operations to meet
the challenges of an increasingly competitive marketplace is converging with
the availability of a new generation of enabling technologies. Distributed
client/server computing environments have become increasingly commonplace,
built upon a foundation of relational database platforms, object-oriented
technology, wide deployment of LAN/WAN solutions and high-speed modem
technology. In addition, new generation operating systems, a more powerful and
easier to use graphical Windows interface and powerful Pentium-based laptop
computers are available to support the information and computing requirements
of a growing population of mobile sales and marketing professionals. These
technologies have been further leveraged by the capabilities of the Internet
and corporate-based Intranets, which may fundamentally change the way
businesses deliver products and services to their customers. In addition, the
ability of companies to instantly access and distribute a broad range of up-
to-date information about their customers and competitors through the Internet
and corporate-based Intranets also offers significant new automation
opportunities to the sales and marketing function.

The Company believes that sales and marketing automation efforts developed
to date have been mostly inadequate because the sales and marketing process of
a company is highly individualized and requires applications that can be
readily adapted to the dynamics of rapidly changing business environments as
well as changes in the company's business processes. In response, companies
have often attempted custom, in-house software development but have been
frustrated by the time and expense required to provide complete functionality,
the difficulty of solving the complex database synchronization problem of
linking intermittently connected mobile sales representatives with a central
customer database and the difficulty encountered in supporting and upgrading
software in response to continually changing organizational and market
requirements. As an alternative to custom software development, many companies
have selected packaged applications offered by independent software vendors.
Although these packaged products effectively manage time-related activities
and customer contacts, they have largely been implemented for individual
contact management or departmental use, creating "islands" of automation that
fail to deliver a "closed-loop" method of acquiring, developing and retaining
customers across the enterprise. In addition, these products have generally
failed to address the needs of companies seeking automated solutions that can
be tailored to the process-specific requirements of the sales and marketing
operation. Specifically, sales force automation products generally have not
permitted front office and back office operations to share and integrate up-
to-date information and have not provided the robust and scalable database
synchronization necessary to link diverse and geographically dispersed sales
organizations on a real-time basis. The Company believes that the lack of
robust database synchronization is the single most important technical
impediment to the successful automation of sales and marketing operations.

As a result, many companies are looking for packaged application software
that has the flexibility and adaptability to map to their exact business
processes, support multi-tiered distribution channels, interface with back
office applications, adapt to emerging technologies such as the Internet and
provide powerful, scalable synchronization capabilities to coordinate customer
information among thousands of mobile users on a global basis. As sales and
marketing information products are developed that provide the integrated
solutions necessary to address these challenges, the Company believes that
companies that implement these sales and marketing systems will improve their
organizational efficiency, increase revenues and reduce costs. Today, leading-
edge companies are implementing sales and marketing information systems

to increase sales productivity and to obtain a competitive advantage. In the
future, the Company believes these sales and marketing information systems
will become a competitive necessity and companies that fail to improve their
customer acquisition and retention processes by implementing these systems
will be at a fundamental competitive disadvantage.

THE AURUM SOLUTION

The Company provides an integrated suite of client/server and Internet-based
applications designed to automate sales and marketing operations. Leveraging a
patent-pending database synchronization technology that provides real-time
access to customer information for all users, the Company's applications
enable businesses to implement improved customer acquisition and retention
processes by integrating, automating and managing sales and marketing
operations among customers, headquarters, branch offices, field-based
employees and distribution partners. Aurum's dbSync technology employs a real-
time scanning approach to provide database synchronization that is fast,
scalable, recoverable, extensible and configurable. The Company believes that
its dbSync technology is unique in the industry and has played a critical role
in winning large-scale sales force automation opportunities.

The Aurum Customer Enterprise can be implemented as an enterprise solution
for large organizations and has been installed to date in deployments
consisting of as many as 3,400 users. The Company's applications permit
companies to leverage the latest available technologies, including the
Internet, thereby providing immediate access to external sources of
information to generate and qualify leads and to obtain market intelligence
about potential customers and competitors. An object-oriented open
architecture enables integration with other enterprise applications and offers
an interface that may be configured to company-specific sales and marketing
models and that may be adapted over time to accommodate a company's changing
business requirements.

The Company believes that its software products provide the following
benefits to its customers:

Closed-Loop Sales and Marketing Process. The Company's software automates
the collection of customer and marketing information, permitting users to
evaluate the effectiveness of specific marketing programs, obtain timely and
accurate profiles of customer purchasing patterns and improve coordination
between internal sales and marketing and field sales personnel.

Faster and More Timely Access to Information. Leveraging the Company's
synchronization and Internet/Intranet technologies, the Company's software
links diverse functions and delivers critical information on a real-time basis
internally to marketing, finance and sales management personnel and externally
to remote sales teams.

Improved Customer Interaction. The Company's software provides rapid access
to information, allowing sales personnel to efficiently sort, qualify and
focus on prospective sales leads and spend more time selling to qualified
prospects.

Improved Forecasting and Visibility. The Company's software provides
marketing and finance staffs with real-time access to current and accurate
information about the sales pipeline.

Shortened Sales Cycle and Reduced Training Costs. By accumulating customer
and market information relevant to the business model of a company, the
Company's software products reduce training time for new sales representatives
and reduce the time required to source, qualify, and research prospective
customers and then close sales.

Improved Customer Retention and Repeat Sales. Access to historic customer
information permits a consistent sales interface, even where multiple sales
representatives or different departments or divisions are involved, enabling
better customer relationships and increased repeat sales.

STRATEGY

The Company's objective is to become the market leader in sales and
marketing information systems. To achieve this objective, the Company is
pursuing the following strategies:

Maintain and Expand Technology Leadership in Sales and Marketing
Applications. The Company's strategy is to continue to develop its advanced
technology and enhance the functionality of its software. The Company's sales
and marketing software provides a comprehensive selling platform designed to
integrate with back office applications and provide real-time access to large
data stores across wide and local area networks to thousands of connected and
intermittently connected mobile users. This platform includes a suite of
applications that support the range of sales and marketing functions, object-
oriented tools that enable customization of the application suite to a
company's process-specific business model and a user-friendly, Windows-based
interface. The Company believes that the functionality of its software, its
ability to integrate with other enterprise applications, its database
synchronization technology and its ability to scale to the growth requirements
of large multinational organizations will be key factors in the Company's
ability to achieve broad market acceptance for its products.

Focus on Rapid Deployment and Enable Large-Scale Implementations. The
Company believes that the successful deployment of its software in a diverse
set of industries and in a wide variety of customer environments ranging to
thousands of users is due, in part, to its ability to rapidly adapt its
applications to map to the specific sales and marketing processes of its
customers. To date, the Company has installed its software products in
deployments consisting of as many as 3,400 users, and the Company intends to
leverage this large-scale implementation experience to penetrate large
multinational organizations. The Company believes that the strength of its
back-end server and database synchronization technology provides the product
scalability necessary to accommodate the requirements of thousands of
connected and mobile users and represents a significant competitive advantage.
The Company also believes it has gained competitive advantage because of its
ability to implement and deploy its application solutions quickly through the
use of its internal consulting services organization and through partnering
with certified systems integrators.

Leverage Strategic Business and Technology Partnerships. The Company's
strategy is to work with consulting and technology companies to increase
market acceptance of its software. The Company has established a number of
strategic business and technology partnerships with industry leaders in
consulting and implementation, including Cambridge Technology Partners,
Deloitte & Touche LLP, Ernst & Young LLP, IBM and KPMG Peat Marwick LLP.
Through these partnerships, the Company seeks to effectively leverage its
resources in marketing its software to a broad range of businesses and
industries. The Company has also established strategic technology partnerships
with database/tools companies such as Business Objects, Centura, Informix,
Microsoft, Oracle and Sybase, and other technology companies including
MediaShare, Netscape, Trilogy and XcelleNet. The Company intends to continue
to work with consulting and technology companies to address new markets and
initiatives.

Expand Global Market Presence. The Company's strategy is to extend
distribution by increasing its sales force in North America and by adding
additional distributors in Europe, the Pacific Rim and other parts of the
world. The Company believes that there are significant international market
opportunities for its products and intends to pursue these opportunities by
leveraging the resources and market presence of international distributors.
The Company intends to enhance the appeal of its software in international
markets by localizing its sales and marketing applications for implementation
in several foreign languages and in multiple foreign currencies. As market
acceptance for the Company's software increases, the Company will also
consider the use of direct sales strategies and joint ventures to enhance its
pursuit of international markets.

Leverage Internet and Intranet Technologies. The Company believes that the
Internet and corporate-based Intranets offer significant opportunities to
automate sales and marketing operations and

has designed its products to exploit the potential of these technologies.
Through the implementation of WebTrak, its Internet integration software, the
Company's products enhance the ability of its customers to collect leads and
integrate those leads into their sales and marketing process. The Aurum Smart
Encyclopedia, an Intranet-based marketing encyclopedia system, employs
intelligent agents to browse the Internet to collect targeted competitor
information for integration into an organization's sales and marketing system
database. This information can then be immediately accessed by all users
across the enterprise. The Company believes that the informational power of
the Web will become a significant factor in the effectiveness of the Company's
software in enhancing sales productivity, and the Company intends to continue
to develop additional means by which the Company's applications can leverage
this power.

Extend Product Line into Related Customer Management Application Areas. The
Company has focused to date on establishing its presence in the market for
sales and marketing applications through the development and sale of its
integrated suite of sales and marketing software products. The Company intends
to leverage these products to achieve a more significant presence in other
customer management-related applications in the customer interaction market.

SOFTWARE PRODUCTS

Aurum Customer Enterprise is a suite of applications that addresses the
functional needs of sales, marketing and support organizations involved in the
management of customer relationships. These integrated client/server and
Internet-enabled applications manage information describing sales
opportunities, customer relationships, forecasts and quoting, sales
methodologies and sales cycles and customer support throughout global
organizations. These applications enable a complex, multi-tier team selling
model through the sharing of customer and prospect information, product
information, pricing, forecasting, competitive intelligence, sales metrics and
best selling practices. These applications can also provide better customer
support by providing current information on customer issues to all members of
the sales and support team. Aurum's software can be interfaced with customers'
other enterprise applications for financial, order entry or inventory
information vital to the sales and marketing process.

The Aurum Customer Enterprise application suite utilizes common
administrative modules and a central customer database that contains key
information about active and historical marketing campaigns, customer contacts
and relationships, account strategy, task and activity history, the account
sales team and the business accomplishments necessary to move each customer to
the next phase in the sales process. Customer support history is instantly
available and relevant financial, order history and shipment data can also be
supplied to the sales force when the sales and marketing applications are
linked to other enterprise applications.

The applications operate on a UNIX or NT based server with an Oracle,
Sybase, Informix or Microsoft SQL Server database accessed through Windows
3.1, Windows NT or Windows 95 clients. Further, mobile, detached users operate
on a laptop database and perform on-demand real-time database synchronization
to a corporate or local database server using Aurum's dbSync product through a
LAN/WAN, dial-up, RAS, XcelleNet, wireless or Internet connection. These
applications may be used individually or as part of an integrated customer
management solution.

List prices for each of Aurum's Customer Enterprise applications are based
on a license fee per server as well as license fees based on named users. The
list prices for the Aurum Customer Enterprise applications range from $15,000
to $30,000 per server and from $1,500 to $3,000 per user.

Business Applications

Aurum SalesTrak. SalesTrak is an enterprise-wide sales force automation
application designed to enable mobile and connected sales professionals to
manage leads, opportunities, customer relationships,

contact information, account activities, calendars, literature fulfillment,
price lists, quotes and forecasts. To support team selling, SalesTrak helps
the mobile sales professional manage all of the key milestone events and
assign team responsibilities throughout a sales cycle, including key contact
information, account information, account strategy, key influencers and team
tasks. SalesTrak can support different sales methodologies and can be used by
companies to reinforce defined sales processes. SalesTrak provides companies
with increased visibility and early intelligence about changes in the
composition and quality of leads in the sales funnel at a marketing level, at
a regional level and at an individual sales representative's level. It also
provides valuable metrics on the length of the sales cycle, success ratios,
win/loss data and other key business metrics which can help improve the sales
and marketing process.

Aurum TeleTrak. TeleTrak is a comprehensive telemarketing/telesales
application designed to improve call center performance and enhance
productivity in both inbound and outbound operations. Customer inquiries enter
the process through toll-free telephone calls, the Internet, targeted
marketing campaigns or seminars and may be followed up by the pre-assigned or
next available telemarketing representative who will "work" the contact
through a series of strictly or loosely defined accomplishments to the pre-
qualified phase. Activities can include lead generation, call scripting,
activity management, follow up contact, literature fulfillment, quotes, order
generation and forecasting. Each customer contact, response or note is
recorded in the system to enable an audit trail of campaign effectiveness, as
well as individual representative productivity. A complete set of reports
assists management in running the telemarketing/telesales call center.
TeleTrak can be integrated with the latest in computer telephony technology
including automatic call directors, dialers and FAX servers for maximum call
center productivity.

Aurum SupportTrak. SupportTrak is a call management application for customer
support call centers. SupportTrak handles customer support calls through the
Web, telephone call, e-mail or fax through call resolution. It also provides
call routing or dispatch capabilities, call management, activity tracking,
calendaring, information bulletin and literature fulfillment. SupportTrak is
designed to streamline and automate the sharing of customer support
information throughout the enterprise and is tightly integrated with the
Company's SalesTrak and TeleTrak applications. Customer support activity is
stored in the central database, providing sales professionals a complete
customer support activity profile.

Aurum Management Information System. The Management Information System
includes Aurum Explorer and Aurum Reporter and provides a comprehensive new
approach to utilizing Aurum's customer information system as a data warehouse.
It combines the latest On-Line Analytical Processing (OLAP) technology with
the Aurum Customer Enterprise and enables a variety of functions from ad-hoc
reporting to on-line analytical processing and drill down analysis of the
customer data. Built on the foundation of Business Objects, an industry-
leading enterprise level query tool, the Management Information System
includes an Aurum-specific customer object repository, a set of 35 predefined
analyses and templates and end-user tools for drill down and ad hoc analysis.
Templates include forecasting, funnel management by product/team/organization,
win/loss, competitive tracking, sales team performance and more. The
Management Information System is also open and extensible to incorporate
enterprise information from external third party sources and "back office"
customer information. This application gives managers and sales
representatives throughout the customer life cycle process the ability to do
ad hoc and comprehensive analysis in an easy to use, graphical form.

Enabling Technology

Aurum dbSync. Aurum's dbSync technology employs a patent-pending real-time
scanning approach to provide database synchronization that is fast, immediate,
scalable, recoverable, extensible and configurable. The Company believes that
its dbSync technology is unique in the industry and has played a critical role
in winning large sales force automation opportunities. dbSync is designed to
facilitate the timely exchange of information among sales team members with
fast and efficient updates because only net changes and additions are
exchanged. Its advanced design offers sophisticated collision detection and

error recovery capabilities and transport independence with support for
multiple communications links including dial-up, LAN, WAN, RAS, XcelleNet,
wireless and the Internet. dbSync is designed to support server-to-server
synchronization so that smaller regional SalesTrak servers can be placed in
foreign countries which can provide substantial savings in telecommunications
costs. dbSync also provides Electronic Software Distribution which can be used
to electronically distribute the latest release of SalesTrak or other Windows
applications to up to thousands of mobile users. The Electronic Software
Distribution feature also supports the transfer of marketing encyclopedia
files from the Company's Intranet-based marketing encyclopedia system. The use
of dbSync is illustrated below:

(DIAGRAM)

[Depiction of a mobile network computing environment comprised of an enterprised
server, regional server, networked clients and remote clients.]

EventTrak. EventTrak is an escalation and workflow engine designed to
facilitate the mapping of an individual company's business process by defining
key business rules for escalation and notification of events and issues. This
module enables a user to set up pre-defined events and business processes for
handling specific customer processes such as a type of service call, a
literature fulfillment request, or an information inquiry through
telemarketing.

Aurum CTITrak. CTITrak is a computer telephony interface that connects the
Company's applications with automatic call distributors ("ACD"), interactive
voice response ("IVR"), dialers and other telephony equipment. In connection
with an incoming customer call, CTITrak enables a company representative to
access and retrieve all data related to the calling customer from the sales
and marketing database and forward both the data and the call directly to the
call center representative.

Internet/Intranet Applications

Aurum WebTrak. WebTrak is an Internet-enabled application that provides an
interface to Aurum's sales and marketing applications from the Web. WebTrak
enables the easy publishing of Aurum database application forms on a Web
server HTML home page. These forms can be directly accessed by a prospect or
customer to indicate their interest in a specific product, to register for a
seminar or to place an order directly. Once the data is entered on the Web
server, WebTrak captures this information and transfers it to the sales and
marketing database where it can be acted upon further with the aid of
intelligent agents. An inquiry or customer request can be prequalified through
the Web and automatically entered into the

sales and marketing process, setting off a series of activities for direct
follow up. In addition, customer profile information is captured in the Aurum
customer database, enabling a company to understand and better market to
Internet visitors. WebTrak extends the reach of automated sales and marketing
solutions to include the power of the Internet by enabling Web lead generation
and one-to-one marketing through the generation of customized marketing and
sales profiling information through the Internet.

Aurum Smart Encyclopedia. The Smart Encyclopedia provides complete product,
competitive, industry and technical information and a set of monitoring agents
that can actively alert a representative to new information that affects the
sales cycle or existing customer relationships. This system enables marketing
and sales professionals to subscribe to product, company, technical and
competitive information from other Web sites on the Internet and from their
corporate Intranet server.

The Smart Encyclopedia contains intelligent agents which actively monitor
Internet Web sites and the Intranet marketing encyclopedia content for net
changes. Mobile representatives have the ability to periodically connect to
the corporate Intranet via the dbSync process to update the information stored
on their notebook computers and to download new information. The mobile sales
representatives can then use a Web browser off-line to look at the information
that was downloaded to their laptop. This approach ensures that sales
professionals are always working with the latest customer data, product and
pricing information, competitive intelligence and multimedia selling
presentations. It also minimizes the amount of time that sales professionals
need to spend searching for competitive intelligence.

PRODUCT ARCHITECTURE

The Company's software is developed using proven technologies such as 3-Tier
client/server component architecture, modern graphical user-interface designs,
object-oriented rapid application development tools, relationship modeling
tools, commercial relational databases and Web-centric development tools. In
addition, the Company's software products employ a unique patent-pending
database synchronization technology with a proven scalable architecture.

Aurum Customer Enterprise Server. The customer management database serves as
the foundation of all the Company's applications and contains information such
as leads, companies, contacts, tasks, sales cycle phases, price books, support
information, telemarketing scripts, campaign data and other related customer
information. The common database is a normalized schema that is optimized for
scalability based on the Company's experience in implementing large-scale
deployments. Data stored in the common database is distributed to mobile users
through the Company's database synchronization technology. The common database
schema is extensible and configurable to exactly model a company's business
requirements.

Adaptable and Configurable Development Environment. The Company uses an
object-oriented rapid application development environment so the software can
be easily configured to support changing field names, field labels and changes
in the user interface and layout forms. The class library objects contain key
components and business processes which can be easily adapted to match a
company's exact sales and marketing process--including the complete
application logic and flow of the application. This approach enables customers
to quickly prototype, model and implement their specific business processes
very rapidly, and it also gives them the ability to change their processes
quickly over time as business needs change.

3-Tier Client/Server Architecture. Aurum developed a 3-Tier client/server
adaptable architecture that conceptually consists of a visual layer, business
layer and transaction layer as illustrated below. The architecture employs
Microsoft technology for ease of use and industry compatibility and Aurum
technology for high performance and remote user support. The visual layer,
which is the sales user component, provides a Windows interface and permits
the user to prioritize information views. The business layer allows managers
to easily adapt and implement management decisions and business process

rules across the enterprise. The transaction layer serves as the repository of
customer data and access point to other enterprise databases, and is designed
to manage the connections between the client and server to optimize
performance and scalability to support large number of clients. Each layer is
designed to support rapid, easy upgrade of user defined content to newer
versions of Aurum products that preserves the user's existing investment.

[ART]

[Depiction of a three-tier enterprise server environment representing the
Aurum Adaptive Architecture.]

Database Synchronization. The Company's database synchronization provides
on-demand database synchronization, heterogeneous database synchronization,
complex data distribution model (team selling support and other application-
specific logic), customizable business objects (business rules reside in the
database), high performance extraction of net data changes, collision
handling, full extensibility and customization, support for electronic
software distribution, transport independence (works over WAN, LAN, Xcellenet,
dial-up and the Internet) and full recoverability if the communications
session fails.

Internet Technology. The Company's WebTrak product is based on a common
gateway interface. The Company intends to evolve this interface to JavaScript
and over time to provide full support for Microsoft Active X components so
that its applications or portions of its applications (applets) may be
distributed to remote users through the Internet or through a corporate
Intranet.

STRATEGIC PARTNERS

A key part of the Company's strategy is to extend its strategic partnerships
with industry leading firms to increase customer demand for the Aurum
solution, expand market penetration and provide complementary technology,
services and training. These partnerships are intended to provide complete
sales and marketing solutions for Aurum customers. The Company has established
strategic partnerships in three key areas: systems integration, technology and
sales methodology.

Systems Integration Partners. Projects which transform sales and marketing
operations are often large and complex, and include business process re-
engineering, large-scale implementations, roll out and training for up to
thousands of users. These implementations are often global in scope.
Established systems integration firms provide both domain expertise and
trained personnel to address these challenges. Having provided business
process re-engineering, total quality management and other solutions to meet
the back

office automation needs of Fortune 500 and other organizations, many
established systems integration firms have begun to focus on and create
dedicated front office sales and marketing solutions.

Aurum's strategy includes working closely with a selected number of
industry-leading firms with a history of delivering successful sales and
marketing information system implementations. Aurum and its systems
integration partners provide a complete solution for a customer's business
process, application implementation and roll out needs. The Company believes
that these relationships have enhanced its presence in both Fortune 500 firms
and in international markets. Aurum has established strategic system
integration partnerships with Cambridge Technology Partners, Deloitte & Touche
LLP, IBM and KPMG Peat Marwick LLP.

Technology Partners. The Company's technology strategy is to focus on core
product development areas and partner with industry leading technology vendors
to provide customers with a complete solution. The Company has worked with
leading database and tool vendors such as Business Objects, Centura, Informix,
Microsoft, Oracle and Sybase. The Company has also worked with key Internet
and communications technology vendors, including Dialogic (computer
telephony), First Floor Software (intelligent agent technology), Netscape and
XcelleNet (remote communications) as well as with complementary sales
automation vendors, including MediaShare (marketing encyclopedia), Sant &
Assoc. (proposal generator) and Trilogy (sales integrator). The Company
intends to continue working with these and other technology vendors.

Sales Methodology and Training Partners. The Company believes that an
increasing number of companies are implementing sales methodologies and
training as part of their sales and marketing automation efforts. In order to
meet these customer needs and deliver a complete solution, the Company has
established a strategic relationship with The Kappa Group, Inc., an industry-
leading consulting and sales methodology firm. The Company's SalesTrak product
incorporates, as part of this partnership, The Kappa Tools, a set of
territory, opportunity management and strategic planning tools designed to
increase the effectiveness of sales and marketing professionals. Aurum and The
Kappa Group have jointly conducted marketing and trade show activities in
order to promote their mutual solution to current and prospective customers.
The Company intends to establish similar arrangements with other sales
methodology consultants.

CUSTOMERS

As of June 30, 1996 the Company had licensed its products to over 100
customers. The following is a representative list of the Company's customers
that have purchased more than $100,000 in software and services and have
current maintenance contracts with the Company as of July 31, 1996. In 1995,
MCI Telecommunications accounted for approximately 11% of the Company's total
revenues. For the first six months of 1996, A.C. Nielsen Company accounted for
approximately 10% of the Company's total revenues.

TECHNOLOGY INFORMATION/PUBLISHING/OTHER SOFTWARE
---------- ---------------------------- --------

Catalink Direct, Inc. A.C. Nielsen Company, Inc. Business Objects S.A.
Dialogic Corporation Adia S.A. Macromedia, Inc.
Extended Systems CUC International Inc. Mercury Interactive Corporation
Fair, Isaac and Company, Inc. Kaiser Permanente Netscape Communications Corporation
Level One Communication National Data Corporation
Maxtor Corporation Neodata Services, Inc.
Parker Compumotion Division The Atlanta Journal-Constitution
Sun Microsystems, Inc. Reed Reference Publishing
Telogy Networks, Inc.
Tencor Instruments

MANUFACTURING FINANCIAL SERVICES TELECOMMUNICATIONS
------------- ------------------ ------------------

Armstrong World Export Development Corp. BBN Corporation
Industries, Inc. Fleet Bank MCI Telecommunications
Hilti, Inc. GE Capital Corporation
Lanier Worldwide, Inc. Hewlett Packard Company
Welch Allyn (Technology Finance Division)
Wisconsin Tissue

UTILITIES CHEMICAL
--------- --------

Entergy Corporation Eastman Chemical
Houston Lighting & Power Company
Minnesota Power & Light Company

Aurum applications have been selected by organizations in a wide variety of
industries for domestic and global implementation. The following are examples
of customer implementations of Aurum applications:

MCI Communications Corporation

Situation: MCI Communications Corporation ("MCI") identified a mission-
critical need to both capitalize upon new business opportunities offered by
de-regulation of the telecommunications industry and respond to the resulting
new level of competitive pressure. Specific goals included rapidly migrating
from a single line of long distance related products to a more diversified
line of information products, effectively training a 5,000 person sales force
and increasing the revenue generated by each sales representative while
reducing the overall cost of sales. After a lengthy evaluation process, MCI
chose Aurum's SalesTrak to meet its lead and opportunity management
requirements. SalesTrak was selected for its ability to scale to meet the
needs of thousands of users and provide the real-time access to product,
marketing and other enterprise data necessary to achieve identified goals.

Solution: MCI initiated a new "virtual workplace" selling paradigm designed
to increase the amount of time sales representatives spent in front of
customers and deployed a lap-top based virtual desktop solution centered on
SalesTrak. MCI sales representatives now have real-time access to new leads
and opportunities stored in a multi-gigabyte back-end database, as well as
integrated proposals, presentations and other multimedia selling tools
relating to new and existing products. Access to this wide array of corporate
data is provided on a real-time basis by Aurum's dbSync, which also implements
updates made

by sales representatives located throughout the country as they work with
customers and prospects. Aurum's SalesTrak and dbSync facilitate immediate
access to new leads, pricing information, multimedia presentations,
competitive analysis, new product information and complex proposals.

Using SalesTrak and dbSync, MCI was able to prepare and execute an
enterprise-wide solution within six months from date of initiation.

Netscape Communications Corporation

Situation: Netscape Communications Corporation ("Netscape") was faced with a
mission critical need to manage a large number of incoming business leads from
both existing and prospective customers, qualify and develop these
opportunities for multiple tiers of distribution and seamlessly integrate
Internet inquiries into this single sales and marketing process. Netscape
completed a lengthy and comprehensive evaluation of possible solutions. Aurum
was chosen in January 1996 to provide a technology and application solution
while Cambridge Technology Partners, working in conjunction with Aurum, was
selected to complete the implementation.

Solution: Aurum SalesTrak was implemented to service Netscape's Netsales
organization with lead capture for distribution to channel partners. SalesTrak
will be implemented in the field sales organization in the fall of 1996. All
incoming opportunities (e.g., telephone, fax, reference, Internet) are managed
using SalesTrak. Each opportunity is qualified and seamlessly forwarded to the
appropriate sales organization for further development and closure.

Working in conjunction with Aurum's consulting services team, Cambridge
Technology Partners defined the appropriate project and completed the
implementation. Netscape commenced roll out in July 1996.

Global Technology Provider

Situation: A global technology provider determined the need to reengineer
its selling process to increase revenue, shorten the sales cycle and implement
team selling. Necessary requirements included increasing the authority of
field sales personnel and productivity improvement. After evaluating a wide
range of potential solutions, Aurum was chosen to provide the technology
solution.

Solution: Aurum SalesTrak was launched for the customer in Europe in June
1996. The Aurum solution enables sales representatives to more effectively
qualify business opportunities, thereby significantly shortening the closing
process and reducing sales and administrative costs. The Company has been
advised by this customer that SalesTrak will be launched worldwide during 1996
for over 250 sales professionals in Europe, North America and Latin America,
and in Asia in 1997. In this implementation, the Company's SalesTrak product
delivers:

. An opportunity management system enabling sales professionals to better
qualify leads, manage the sales process and synchronize information
among sales teams and division management.

. A deal configuration system that allows sales professionals to design
and price standard and custom financial solutions, provides deal
profitability metrics, allows for the quick generation of high-quality
proposals and legal documents at the customer site and provides a
linkage to existing order management systems.

SALES AND MARKETING

In North America, the Company markets its software primarily through its
direct sales organization. To support its sales efforts, the Company conducts
an active set of marketing programs including public relations, advertising,
direct mail, seminars, trade shows, and ongoing customer communications
including a user group council. As of June 30, 1996, the Company's sales and
marketing organization consisted of 46 full time employees.

The Company's direct sales force employs a consultative sales process,
working closely with customers to understand and define their needs to
determine how they are best addressed by both the Company's product offerings
and complementary technology and services offered by partners. Because the
implementation of sales and marketing applications is typically mission
critical, the Company's sales and marketing efforts are generally directed to
the senior management of a prospective customer.

The direct sales force works closely with strategic systems integration,
technology and sales methodology partners to identify specific customer
opportunities and requirements. These partnerships have led to the Company's
introduction into strategic accounts, increased account penetration and
reduced sales cycle length. Joint marketing activities conducted with these
partners has increased market coverage and acceptance of the Company's
products. These activities include jointly conducted seminars, trade shows and
conferences. A key part of the Company's strategy is to expand and enhance
these marketing efforts with leading systems integration partners.

The Company markets its software outside North America through key
distribution organizations. As of June 30, 1996, distributor agreements were
in place with AurumFrance, Ensure Technologies (United Kingdom) and IBM EMEA
(Europe, Middle East and Africa). In addition to marketing and selling the
Company's software, these distributors provide technical support as well as
educational and consulting services.

The Company's strategy is to continue to grow its direct sales force in
North America and to expand distribution internationally. The Company intends
to increase the size of its sales force in 1996 and 1997 and to recruit
additional distribution partners. The competition for qualified sales
personnel is intense and there is no assurance that the Company can retain its
existing sales personnel and attract, assimilate and retain qualified
personnel in the future. There is also intense competition for qualified
distributors and there is no assurance that the Company can attract and retain
qualified distributors. If the Company is unable to hire such employees and
recruit such distributors on a timely basis, the Company's business, operating
results and financial condition could be materially and adversely affected.

RESEARCH AND DEVELOPMENT

The Company has made a substantial investment in product development during
the last several years. The Company's growth and future financial performance
will depend in part upon its ability to enhance existing applications, develop
and introduce new applications that keep pace with technological advances,
meet changing customer requirements, respond to competitive products and
achieve market acceptance. As of June 30, 1996, there were 30 full time
employees on the Company's product development staff. The Company's research
and development expenditures in 1995 and for the six months ended June 30,
1996 were $2.3 million and $1.4 million, respectively, and represented 22% and
13% of revenues in these periods, respectively. The Company expects that it
will continue to commit substantial resources to product development in the
future. To date, the Company's development efforts have not resulted in any
capitalized software development costs.

The Company works closely with its customers and prospects to determine
their requirements and to design enhancements and new products to meet their
needs. The Company's current development initiatives include feature and
function enhancement of existing products, the development of new
complementary products and the development of integrated packages of its
products tailored to the

requirements of certain market segments. The Company plans to enhance its
current product line, including new Internet/Intranet capabilities as well as
support for additional hardware and relational database platforms.

The client/server and Internet application software market is subject to
rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards that may render existing
products and services obsolete. As a result, the Company's position in its
existing markets or other markets that it may enter could be eroded rapidly by
product advancements. The life cycles of the Company's products are difficult
to estimate. The Company's product development efforts are expected to
require, from time to time, substantial investments by the Company in product
development and testing. There can be no assurance that the Company will have
sufficient resources to make the necessary investments. The Company has in the
past experienced development delays, and there can be no assurance that the
Company will not experience delays in the future. There can be no assurance
that the Company will be successful in developing and marketing enhancements
to its products that respond to technological developments, evolving industry
standards or changing customer requirements, or that the Company will not
experience difficulties that could delay or prevent the successful
development, introduction and sale of such enhancements or that such
enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products
or enhancements fail to achieve market acceptance when released, the Company's
business, operating results and financial condition could be materially and
adversely affected.

Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycle. The
Company has in the past discovered software errors in certain of its products
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 by current and potential customers, errors will not be found,
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.

CONSULTING SERVICES, TRAINING AND SUPPORT

The Company provides an extensive array of services to its customers,
including business consulting, requirements definition, installation,
consulting, training and customer support. The Company has developed a
comprehensive methodology for rapid implementation of its sales and marketing
applications. This methodology is used by its own consulting organization and
is also available for license by its systems integration partners. Systems
integration partners include Cambridge Technology Partners, Deloitte & Touche
LLP, IBM, KPMG Peat Marwick LLP and Technology Solutions Corporation. As of
June 30, 1996, the Company employed 50 full time employees in its consulting
services, training and customer support organization. The Company provides the
following services:

Consulting Services. The Company provides a comprehensive range of
professional services for its customers including business consulting, project
management, requirements definition, installation and implementation,
consulting, and roll out and deployment. The Company maintains a large
consulting services staff with extensive experience in the implementation and
deployment of complex client/server and Internet/Intranet applications.
Consulting services are based on a time and materials basis and are charged
separately from the software license and maintenance agreement.

The Company has an active certification program in place for training and
supporting large systems integration partners. The Company expects that over
time, the large systems integrators will perform more of the consulting
associated with the implementation of the Company's products as they complete
more engagements and increase the number of experienced consultants that have
been trained and certified on the Company's technology.

Support. The Company's customer service organization provides post-sales
support, including information and assistance on installation, operation and
administration of the Company's products. The Company offers telephone support
during business hours and 24 hour on-call support. Initial product license
fees do not cover software maintenance. Customers are entitled to receive
software updates, maintenance releases and technical support for an annual
license fee which is a percentage of the Company's list price for the software
licenses.

Training. The Company offers comprehensive end user and technical training
programs for its customers and partners. The Company also offers customized
training courses to meet the specific needs of its customers. Fees are based
on a per class basis, per student basis or on a train the trainer basis. The
Company offers training at customer sites as well as at its offices in Santa
Clara, California. In addition, customers may choose to receive training from
selected systems integration partners.

COMPETITION

The market for the Company's client/server applications is highly
competitive, fragmented and subject to rapid technological change and frequent
new product introductions and enhancements. The Company has a large number of
competitors which range from internally developed custom application
development efforts to packaged application vendors. The Company offers a
suite of applications which can be used as part of an integrated customer
management application suite or can be used on a stand- alone basis. As such,
the Company competes with packaged application vendors that provide tactical
departmental solutions in specific market segments as well as with competitors
that provide a broader suite of integrated customer management applications.
Many of these competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, greater name
recognition and a larger installed base of customers than the Company. As a
result, these competitors may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements or to devote
greater resources to the development, promotion and sale of their products
than can the Company.

The Company's principal competitors in the sales force automation market
include Brock Control Systems, Inc., Metropolis Software, Inc. (recently
acquired by Clarify Inc.), SalesBook, SalesKit Software Corporation,
SalesSoft, Saratoga Systems, Inc. and Siebel Systems, Inc. The Company also
depends for the marketing and implementation of its products upon a number of
third party systems integrators, including Cambridge Technology Partners,
Deloitte & Touche LLP, Ernst & Young LLP, IBM and KPMG Peat Marwick LLP. Many
of these firms also have established relationships with the Company's
competitors. There can be no assurance that these third parties, many of which
have significantly greater financial resources than the Company, will not in
the future compete directly with the Company or otherwise discontinue their
support of the Company's products. The Company also faces competition from the
customer support application vendors which are attempting to expand from their
customer support market into the sales automation area either through internal
product development or through acquisitions. These customer support
competitors include Astea International, Inc., Clarify Inc., Scopus
Technology, Inc. and The Vantive Corporation. Over time, the Company expects
large enterprise software vendors such as Oracle Corporation and SAP AG to
extend their enterprise application suites by offering sales force automation,
telemarketing and customer support, with the appropriate integration to
leading financial, order entry and manufacturing applications. In addition,
because the barriers to entry in the software market are relatively low,
additional competitors may emerge as the sales and marketing software market
continues to develop and expand. It is also possible that acquisitions of
competitors by large software companies or alliances among competitors could
occur. The Company expects that significant consolidation in its industry will
occur over the next few years and increased competition from new entrants or
through strategic acquisitions or alliances could result in price erosion,
reduced gross margins or loss of market share, any of which could have a
material adverse effect on the Company's business, operating results or
financial condition.

The Company believes that it competes favorably in its marketplace based
upon its breadth and depth of application functionality, its architecture and
database synchronization technology, the scalability of its technology to
handle thousands of users on a global basis, its Internet and Intranet
capabilities, the ease of adapting its applications with its object-oriented
rapid application development tools and its ability to get large customers
into production quickly through its own consulting services organization as
well as through its partnerships with large systems integrators. Although the
Company believes that it currently competes favorably with respect to such
factors, there can be no assurance that the Company will be able to compete
successfully against current and future competitors, especially those with
greater financial, marketing, service, support, technical and other resources
than the Company, or that competitive pressures will not materially and
adversely affect the Company's business, operating results and financial
condition.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright
laws, which afford only limited protection. The Company has submitted one
patent application for its dbSync technology. There can be no assurance that
any patent covering the Company's inventions will issue or that any patent, if
issued will provide sufficiently broad protection or will prove enforceable in
actions against alleged infringers. Despite precautions taken by the Company,
it may be possible for unauthorized third parties to copy aspects of its
products or future products or to obtain and use information that the Company
regards as proprietary. In particular, the Company provides its licensees with
access to its data model and other proprietary information underlying its
licensed applications. The Company makes source code available for certain of
the Company's products and occasionally enters into source code escrow
agreements with certain customers for the balance of the source code. 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 or superior technology or design around any
patents owned by the Company. Litigation may be necessary in the future to
enforce the Company's intellectual property rights, to protect the Company's
trade secrets or to determine the validity and scope of the proprietary rights
of others. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
operating results or financial condition.

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 the same extent as do the laws of the United States. The
Company is not aware that any of its product offerings infringe 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 product
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 on the Company's business,
operating results and financial condition.

The Company also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in the Company's products to perform key business functions.
There can be no assurance that these third party technology licenses will
continue to be available to the Company on commercially reasonable terms. The
loss or the inability of the Company to maintain any of these technology
licenses could result in delays or reductions in product

shipments until equivalent technology could be identified, licensed and
integrated. Any such delays or reductions in product shipments could
materially and adversely affect the Company's business, operating results and
financial condition.

EMPLOYEES

As of June 30, 1996, the Company had a total of 137 full time employees, all
of whom are based in the United States. Of the total, 46 were engaged in sales
and marketing, 50 in consulting services, training and support, 30 in
engineering and 11 in administration and finance. The Company's future
performance depends in significant part on its ability to identify, attract
and retain highly qualified technical, sales and management personnel.
Competition for such personnel is intense and there can be no assurance that
the Company will be able to identify, attract and retain such personnel in the
future. None of the Company's employees is represented by a labor union. The
Company has not experienced any work stoppages and considers its relations
with its employees to be good.

FACILITIES

The Company's principal administrative, sales, marketing, support and
research and development functions are located at its leased headquarters
facility in Santa Clara, California. The Company currently occupies 18,000
square feet of space in the Santa Clara facility and the lease extends through
March 1997, with an option to extend the lease through July 1997. The Company
anticipates that it will be necessary to obtain a larger facility upon the
termination of its headquarters lease but believes that suitable additional or
substitute facilities will be available in the future as needed on
commercially reasonable terms. The Company also leases domestic sales and
support offices in the metropolitan areas of Dallas, Chicago, Seattle and
Atlanta and in Salem, New Hampshire. The Company intends to add additional
sales offices as necessary.

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

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

NAME AGE POSITION
---- --- --------

Mary E. Coleman...................... 42 President, Chief Executive Officer and
Director
David D. Buchanan.................... 42 Executive Vice President and Director
Susan K. Buchanan.................... 44 Executive Vice President
Timothy E. Campbell.................. 35 Vice President, Client Services
Christopher L. Dier.................. 44 Chief Financial Officer and Secretary
Charles J. Donchess.................. 43 Vice President, Marketing
Tuoc V. Luong........................ 35 Vice President, Engineering
James W. Thanos...................... 48 Vice President, Worldwide Operations
Oliver D. Curme(2)................... 42 Director
Mark J. Leslie....................... 50 Director
Robert J. Loarie(2).................. 53 Director
Robert M. Obuch(1)................... 50 Director
Jeffrey T. Webber.................... 43 Director
Charles C. Wu(1)..................... 36 Director

- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee

Ms. Coleman has served as the Company's President and Chief Executive
Officer and as a Director since November 1994. From May 1993 to November 1994,
Ms. Coleman served as the Company's Vice President of Marketing and from
January 1994 to September 1994 as Vice President of Engineering. From March
1992 until April 1993, she served as Vice President of Marketing for Radius,
Inc., a manufacturer of peripherals for Apple Macintosh computers. From
October 1990 until March 1992, Ms. Coleman was Vice President of Marketing at
McData Corporation, a data center network switch supplier. Ms. Coleman studied
computer science at the University of Colorado.

Mr. Buchanan, a co-founder of the Company, is the chief architect of the
Company's products and the primary developer of the Company's current product
line. He has served as Executive Vice President and as a Director of the
Company since January 1993. From January 1992 until January 1993, Mr. Buchanan
served as Chairman of the Company's Board of Directors. From 1984 until
founding the Company in 1991, Mr. Buchanan served in various technical, sales
and management positions at Cincom Systems, Inc., a supplier of relational
database and Fourth Generation Language (4GL) technology. Mr. Buchanan holds a
B.A. in Math and Computer Science from Principia College and an M.B.A. and an
M.S. in Management Information Science from the University of Arizona. Mr.
Buchanan is married to Susan K. Buchanan, an Executive Vice President of the
Company.

Ms. Buchanan, a co-founder of the Company, has served as Executive Vice
President since January 1993. From January 1992 until January 1993, she served
as a director of the Company and from January 1992 until June 1992 as the
Company's Chief Financial Officer and Secretary. From October 1986 until
October 1991, she served as a district sales manager for Unify Corporation, a
supplier of application development products for client/server environments.
Prior to 1986, Ms. Buchanan served as a regional systems engineer at Data
General Corporation, a provider of servers, storage products and services for
information systems, and at the Hewlett-Packard Company, a diversified
electronics manufacturer. Ms. Buchanan holds a B.A. in speech therapy and an
M.S. in computer science from Kansas State University. Ms. Buchanan is married
to David D. Buchanan, an Executive Vice President and Director of the Company.

Mr. Campbell has served as the Company's Vice President of Client Services
since September 1995. From January 1988 to September 1995, Mr. Campbell served
in engineering, consulting and management roles at Electronic Data Systems
Corporation, a provider of information services. Mr. Campbell holds degrees in
Electrical Engineering from Conestoga College of Applied Arts and Technology.

Mr. Dier has served as the Company's Chief Financial Officer and Secretary
since July 1996. From 1990 to July 1996, Mr. Dier served as Chief Financial
Officer of Veritas Software Corporation, a storage management software
company. From 1982 to 1989, Mr. Dier served as Vice President of Finance and
Chief Financial Officer of Tolerant Systems, Inc., a fault tolerant computer
company. From 1974 to 1982, Mr. Dier held various financial positions at Intel
Corporation, a semiconductor company. Mr. Dier holds a B.S. in Humanities and
an M.B.A. from Santa Clara University.

Mr. Donchess has served as the Company's Vice President of Marketing and
Business Development since May 1995. From September 1989 to December 1994, Mr.
Donchess served in various capacities, including Vice President of Business
Development, at Sybase, Inc., a relational database software company. Mr.
Donchess holds a B.A. in English and American Literature from Brown
University.

Mr. Luong has served as the Company's Vice President of Engineering since
January 1996. From March 1992 to January 1996, Mr. Luong served as a Vice
President of Borland International Inc., a manufacturer of systems and
applications software products, where he was responsible for development of
Borland's Delphi client/server software product line. From February 1990 to
February 1992, Mr. Luong served as Director of Advanced Technology at Pyramid
Technology Corp., a manufacturer of open systems servers. From 1983 to 1990,
Mr. Luong served in several research and development management positions at
Informix Software, Inc. and Oracle Corporation. Mr. Luong holds a B.S. in
Computer Science from the University of California at Berkeley and an M.S. in
Engineering Management from Santa Clara University.

Mr. Thanos has served as the Company's Vice President of Worldwide
Operations since January 1995. From May 1995 to December 1995, Mr. Thanos
served as Vice President of Sales for Digital Tools, Inc., a provider of
project management software. From January 1993 to April 1994, Mr. Thanos
served as Vice President of Sales for Harvest Software, Inc., a facsimile
forms company. From December 1988 to January 1993, Mr. Thanos served as Vice
President of Worldwide Operations at Metaphor Computer Systems, Inc., a
provider of decision support software. Mr. Thanos holds a B.S. in
International Studies and behavioral sciences from The Johns Hopkins
University.

Mr. Curme has served as a Director of the Company since January 1993. Mr.
Curme has been a general partner with Battery Ventures, a venture capital
investment firm, since January 1988. Mr. Curme also serves as a director and
member of the compensation committees of HNC Software Inc. and Infoseek
Corporation. Mr. Curme holds a B.S. in Biochemistry from Brown University and
an M.B.A. from the Harvard University Graduate School of Business.

Mr. Leslie has served as a Director of the Company since April 1996. Mr.
Leslie has served as President and Chief Executive Officer of Veritas Software
Corporation, a storage management software company, since February 1990. Mr.
Leslie also serves as a director of Veritas Software Corporation and as a
director and member of the compensation committee of Worldtalk Communications
Corporation and as chairman and member of the compensation committee of
Versant Object Technology Corporation. Mr. Leslie holds a B.A. in Physics and
Mathematics from New York University and attended the Program for Management
Development at the Harvard University Graduate School of Business.

Mr. Loarie has served as a Director of the Company since March 1994. Since
August 1992, Mr. Loarie has been a Principal of Morgan Stanley & Co.
Incorporated, a diversified investment firm, and a general partner of Morgan
Stanley Venture Partners, L.P., and Morgan Stanley Venture Partners II, L.P.
venture capital investment partnerships. From 1981 until August 1992, Mr.
Loarie served as a general partner of several venture capital partnerships
affiliated with Weiss, Peck & Greer, an investment management firm.

Mr. Loarie also serves as a director of Adaptec, Inc., TelCom Semiconductor,
Inc., and of several privately held companies. Mr. Loarie holds a B.S. in
Electrical Engineering from the Illinois Institute of Technology and an M.B.A.
from the Harvard University Graduate School of Business.

Mr. Obuch has served as a Director of the Company since August 1995. Mr.
Obuch has been a Principal of BankAmerica Ventures, a venture capital
investment affiliate of BankAmerica Corporation, since August 1994. From April
1994 to August 1994, Mr. Obuch worked as an independent management consultant.
From May 1992 to April 1994, Mr. Obuch served as President and Chief Executive
Officer of Computerized Lodging Systems, Inc., a hotel reservation and
registration software company. From August 1990 to May 1992, Mr. Obuch worked
as an independent management consultant. Mr. Obuch holds a B.S. in Accounting
from Seton Hall University.

Mr. Webber has served as a Director of the Company since April 1996. Since
January 1991, Mr. Webber has served as President of R.B. Webber & Company,
Inc., a management consulting firm. Mr. Webber was a partner with the
management consulting firm Edgar, Dunn & Company from 1987 to 1991. Mr. Webber
also serves as a director of Sybase, Inc., a relational database software
company. Mr. Webber holds a B.A. in American Studies from Yale University.

Mr. Wu has served as a Director of the Company since January 1993. Mr. Wu
has been Vice President of Vertex Management, Inc., a venture capital
investment firm, since February 1991. Mr. Wu holds an S.B. in Computer Science
and Engineering from the Massachusetts Institute of Technology and an M.B.A.
from the Stanford University Graduate School of Business.

DIRECTOR COMPENSATION

The Company reimburses each member of the Company's Board of Directors for
out-of-pocket expenses incurred in connection with attending Board meetings.
No member of the Company's Board of Directors currently receives any
additional cash compensation. At the time Mr. Leslie and Mr. Webber became
members of the Board of Directors, the Company granted each of them an option
to acquire 18,750 shares of the Company's Common Stock, respectively, under
the Company's 1995 Stock Plan, subject to monthly vesting over four years. See
"Stock Plans--1995 Stock Plan." The Company's 1996 Director Option Plan (the
"Director Plan") provides that options will be granted to non-employee
directors of the Company pursuant to an automatic nondiscretionary grant
mechanism. Upon joining the Board of Directors, each new non-employee director
will automatically be granted an option to purchase 18,750 shares of Common
Stock. Each non-employee director will subsequently be granted an option to
purchase 18,750 shares of Common Stock at each annual meeting of stockholders
beginning with the 1997 Annual Meeting of Stockholders. Each such option will
be granted at the fair market value of the Common Stock on the date of grant.
Options granted to non-employee directors under the Director Plan will become
exercisable at a rate of 1/48th of the shares subject to such options on the
monthly anniversary of the date of grant. See "Stock Plans--1996 Director
Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company and administers various incentive compensation and
benefit plans. The Compensation Committee consists of directors Robert J.
Loarie and Oliver D. Curme. Mary E. Coleman, President, Chief Executive
Officer and director of the Company, participates in all discussions and
decisions regarding salaries and incentive compensation for all employees and
consultants of the Company, except that she is excluded from discussions
regarding her own salary and incentive compensation. 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.

EXECUTIVE COMPENSATION

The following table sets forth in summary form information concerning the
compensation awarded to, earned by, or paid for services rendered to the
Company in all capacities during the fiscal year ended December 31, 1995 by
(i) the Company's Chief Executive Officer and (ii) the Company's next five
most highly compensated executive officers whose salary and bonus for such
fiscal year exceeded $100,000 and who served as an executive officer of the
Company during such fiscal year (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
AWARDS
---------------------
ANNUAL COMPENSATION(1)
------------------------ SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS (#)
--------------------------- ----------- ----------- ---------------------

Mary E. Coleman........... $ 174,996 $ 47,665(2) 309,468
President and Chief
Executive Officer
Prabhat K. Andleigh(3).... 123,460 9,838 61,894
Vice President,
Engineering
Susan K. Buchanan......... 96,000 219,379(4) 174,091
Executive Vice President
Charles J. Donchess(5).... 94,052 24,973(6) 92,841
Vice President, Marketing
James W. Thanos........... 130,000 98,693(7) 123,788
Vice President, Worldwide
Operations
Brigitte U. Wilson(8)..... 89,426 20,385(9) 30,948
Director of Finance and
Administration

- --------
(1) Other than salary and bonus described herein, the Company did not pay the
persons named in the Summary Compensation Table any compensation in excess
of 10% of such executive officer's salary and bonus.
(2) Includes $10,625 of bonus compensation earned in 1995 but paid in 1996.
(3) Mr. Andleigh resigned from the Company effective September 1, 1995.
(4) Consists entirely of sales commissions of which $32,911 was earned in 1995
but paid in 1996.
(5) Reflects compensation for a partial year. Mr. Donchess joined the Company
effective May 22, 1995.
(6) Includes $15,859 of bonus compensation earned in 1995 but paid in 1996.
(7) Includes $22,500 of bonus compensation earned in 1995 but paid in 1996.
(8) Ms. Wilson served as the Company's Director of Finance and Administration
and Chief Financial Officer from April 1994 until July 1996. In July 1996,
Christopher L. Dier became Vice President of Finance and Chief Financial
Officer. Ms. Wilson continues to serve as the Company's Director of
Finance and Administration.
(9) Includes $4,309 of bonus compensation earned in 1995 but paid in 1996.

STOCK OPTION GRANTS

The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the fiscal year ended December
31, 1995. All such options were awarded under the Company's 1995 Stock Plan.

OPTION GRANTS IN FISCAL YEAR 1995

INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE VESTING PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE PER COMMENCE- FOR OPTIONS TERM(1)
OPTIONS EMPLOYEES IN SHARE EXPIRATION MENT ---------------------
NAME GRANTED FISCAL 1995 (2)(3) DATE(4) DATE(4) 5% 10%
---- ---------- ------------- --------- ---------- --------- ----------------------

Mary E. Coleman......... 45,462 3.66% $0.12 6/15/05 05/26/93 $ 3,431 $ 8,694
2,713 * $0.12 6/15/05 12/07/93 $ 205 $ 519
3,789 * $0.12 6/15/05 01/27/94 $ 286 $ 724
42,749 3.44% $0.12 6/15/05 02/22/94 $ 3,226 $ 8,176
68,750 5.63% $0.12 6/15/05 11/23/94(6) $ 5,188 $ 13,148
146,006 11.76% $0.12 6/15/05 11/23/94(6) $ 11,019 $ 27,923

Prabhat K. Andleigh(5).. 28,414 2.29% $0.12 6/15/05 08/29/94 $ 2,144 $ 5,434
33,480 2.69% $0.12 6/15/05 12/23/94(6) $ 2,527 $ 6,403

Susan K. Buchanan....... 174,091 14.01% $0.12 6/15/05 ** (6) $ 13,138 $ 33,295

Charles J. Donchess..... 92,841 7.47% $0.12 6/15/05 05/22/95(6) $ 7,006 $ 17,756

James W. Thanos......... 123,788 9.96% $0.12 6/15/05 01/16/95(6) $ 9,342 $ 23,674

Brigitte U. Wilson...... 16,740 1.35% $0.12 6/15/05 12/23/94(6) $ 1,263 $ 3,202
3,789 * $0.12 6/15/05 01/20/93 $ 286 $ 725
10,419 * $0.12 6/15/05 04/01/94 $ 786 $ 1,992

- --------
* Less than 1%.
** All shares were fully vested as of the date of grant.
(1) Potential realizable value is based on the assumption that the Common
Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of grant until the expiration of the ten year
option term. These numbers are calculated based on the requirements
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth.
(2) 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, on
the date of grant.
(3) Exercise price may be paid in cash, check, promissory note, by delivery of
already-owned shares of the Company's Common Stock subject to certain
conditions, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
(4) All options were granted on June 15, 1995. Except as otherwise indicated,
such options were issued in an option repricing and exchange program
whereby holders of outstanding options were offered an opportunity to
exchange outstanding options for new options under the Company's 1995
Stock Plan at an exercise price of $0.12 per share. All then-outstanding
options had exercise prices in excess of $0.12 per share, which the Board
of Directors of the Company had determined to be the fair market value of
the Company's Common Stock as of June 15, 1995. New options received under
the 1995 Stock Plan contained vesting provisions identical to the options
being exchanged such that each optionee was deemed vested in the new
option as of the date of grant to the same proportionate extent such
optionee was vested in the option being exchanged. Twenty-five percent
(25%) of the shares issuable upon exercise of options granted under the
Company's 1995 Stock Plan become vested on the first anniversary of the
date of grant (or, in the case of options granted in connection with such
option repricing, the first anniversary of the vesting commencement date
indicated) and

vest at the rate of 1/48th of such shares for each month thereafter. Options
may be exercised prior to full vesting, subject to the optionee's entering a
restricted stock purchase agreement with the Company with respect to any
unvested shares. Under such agreement, the optionee grants the Company an
option to repurchase any unvested shares at their original purchase price in
the event the optionee's employment or consulting relationship with the
Company should terminate.
(5) Mr. Andleigh resigned from the Company effective September 1, 1995. Under
the terms of his option agreements, Mr. Andleigh had three months from the
date of termination of employment to exercise his options with respect to
any vested shares. Mr. Andleigh exercised his options with respect to 5,683
vested shares on November 1, 1995. Outstanding options held by Mr. Andleigh
terminated with respect to all unvested shares on the effective date of Mr.
Andleigh's resignation.
(6) Option grant was a new grant and not part of the option exchange program
described in footnote 4.

AGGREGATE OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information regarding the exercise of
stock options by the Named Executive Officers during the fiscal year ended
December 31, 1995 and stock options held as of December 31, 1995 by the Named
Executive Officers.

NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1995(#)(2) DECEMBER 31, 1995(1)(2)
ON VALUE -------------------------- -------------------------
NAME EXERCISE (#) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------

Mary E. Coleman(3)...... 45,462 -- -- -- --
2,713 -- -- -- --
3,789 -- -- -- --
42,749 -- -- -- --
68,750 -- -- -- --
146,006 -- -- -- --

Prabhat K. Andleigh(4).. 5,683(4) -- -- -- --

Susan K. Buchanan....... -- -- 174,091(5) -- --

Charles J. Donchess..... -- -- 92,841(6) -- --

James W. Thanos......... -- -- 123,788(7) -- --

Brigitte U. Wilson...... -- -- 30,948(8) -- --

- --------
(1) Based upon an initial public offering price of $ , minus the exercise
price.
(2) Options granted under the Company's 1995 Stock Plan (as in effect prior to
the effectiveness of the registration statement covering this offering) may
be exercised immediately upon grant and prior to full vesting, subject to
the optionee's entering a restricted stock purchase agreement with the
Company with respect to any unvested shares. Under such agreement, the
optionee grants the Company an option to repurchase any unvested shares at
their original purchase price in the event the optionee's employment or
consulting relationship with the Company should terminate. The 1995 Stock
Plan will be amended in connection with this offering such that future
grants will not include an early exercise provision.
(3) As of December 31, 1995, Ms. Coleman held no outstanding options and had
acquired an aggregate of 309,469 shares upon exercise of previous option
grants, of which 199,177 shares remained subject to the Company's
repurchase option as described in footnote 2 above as of such date.
(4) Mr. Andleigh resigned from the Company effective September 1, 1995. Under
the term of his option agreements, Mr. Andleigh had three months from the
date of termination of employment to exercise vested options. Mr. Andleigh
exercised his options with respect to 5,683 vested shares on

November 30, 1995. Outstanding options held by Mr. Andleigh terminated with
respect to all unvested shares on the date of Mr. Andleigh's resignation.
(5) Ms. Buchanan's option was fully vested at the time of grant.
(6) As of December 31, 1995, 92,841 shares remained unvested.
(7) As of December 31, 1995, 123,788 shares remained unvested.
(8) As of December 31, 1995, 19,658 shares remained unvested.

STOCK PLANS

1995 Stock Plan. The Company's 1995 Stock Plan (the "1995 Plan") was adopted
by the Board of Directors and approved by the Company's stockholders in 1995.
A total of 2,105,695 shares of Common Stock has been reserved for issuance
under the 1995 Plan as of September 1996. The 1995 Plan provides for grants of
incentive stock options to employees (including officers and employee
directors) and nonstatutory stock options to employees (including officers and
employee directors) and consultants of the Company. The purpose of the 1995
Plan is to attract and retain the best available personnel to the Company and
to encourage stock ownership by employees, officers, and consultants of the
Company so as to give them a greater personal stake in the success of the
Company. The 1995 Plan is administered by the Board of Directors or by a
committee appointed by the Board which identifies optionees and determines the
terms of options granted, including the exercise price, number of shares
subject to the option and the exercisability thereof.

The terms of options granted under the 1995 Plan generally may not exceed
ten years. The term of all incentive stock options granted to an optionee who,
at the time of grant, owns stock representing more than 10% of the voting
power of all classes of stock of the Company or a parent or subsidiary of the
Company (a "Ten Percent Stockholder"), may not exceed five years, however.
Generally, options granted under the 1995 Plan vest and become exercisable
starting one year after the date of grant, with 25% of the shares subject to
the option becoming exercisable at that time and an additional 1/48th of such
shares becoming exercisable each month thereafter. The exercise price of
incentive stock options granted under the 1995 Plan must be at least equal to
the fair market value of the shares on the date of grant. The exercise price
of nonstatutory stock options granted under the 1995 Plan is determined by the
Board of Directors. The exercise price of any incentive stock option granted
to a Ten Percent Stockholder must equal at least 110% of the fair market value
of the Common Stock on the date of grant. The consideration for exercising any
incentive stock option or any nonstatutory stock option is determined by the
Board of Directors and may consist of cash, check, promissory note, delivery
of already-owned shares of the Company's Common Stock subject to certain
conditions, delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, a
reduction in the amount of any Company liability to an optionee, or any
combination of the foregoing methods of payment or such other consideration or
method of payment to the extent permitted under applicable law. To the extent
incentive stock options granted to a participant, when aggregated with all
other incentive stock options granted to such participant, have an aggregate
fair market value in excess of $100,000 first becoming exercisable in any
calendar year, such options would be treated as nonstatutory stock options.

No option granted under the 1995 Plan may be transferred by the optionee
other than by will or the laws of descent or distribution, and each option may
be exercised, during the lifetime of the optionee, only by such optionee. An
optionee whose relationship with the Company or any related corporation ceases
for any reason (other than death or permanent and total disability) may
exercise options in the three-month period following such cessation (unless
such options terminate or expire sooner by their terms) or in such longer
period as is determined by the Board of Directors. In the event of a proposed
sale of all or substantially all of the Company's assets or merger of the
Company with or into another corporation, all outstanding options may either
be assumed or an equivalent option may be substituted by the surviving entity.
If such options are not assumed or substituted, the Board of Directors has
discretion

either to permit each optionee to exercise options as to all of the shares
subject to the option agreement, including shares as to which such options
would not otherwise be exercisable or to cause the termination of all
exercisable options that have not been exercised prior to the completion of
such asset sale or merger.

As of June 30, 1996, 1,341,043 shares of Common Stock had been issued upon
exercise of options outstanding under the 1995 Plan, of which 627,050 shares
were fully vested. Options to purchase 541,756 shares of Common Stock at a
weighted average exercise price of $2.52 were also outstanding.

1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock Purchase
Plan (the "Purchase Plan") was adopted by the Board of Directors in September
1996. A total of 300,000 shares of Common Stock has been reserved for issuance
under the Purchase Plan. The Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended, is administered
by the Board of Directors or by a committee appointed by the Board. Employees
(including officers and employee directors of the Company but excluding 5% or
greater stockholders) are eligible to participate if they are customarily
employed for at least 20 hours per week and for more than five months in any
calendar year. The Purchase Plan permits eligible employees to purchase Common
Stock through payroll deductions, which may not exceed 15% of an employee's
compensation. The Purchase Plan will be implemented in a series of overlapping
twenty-four month offering periods. The initial offering period under the
Purchase Plan will begin on the effective date of this offering and subsequent
offering periods will begin on the first trading day on or after May 1 and
November 1 of each year. Each participant will be granted an option on the
first day of the offering period, and such option will be automatically
exercised on the last date of each purchase within the offering period. If the
fair market value of the Common Stock on any purchase date (other than the
final purchase date of the offering period) is lower than such fair market
value on the start date of that offering period, then all participants in that
offering period will be automatically withdrawn from such offering period and
re-enrolled in the immediately following offering period. The purchase price of
the Common Stock under the Purchase Plan will be equal to 85% of the lesser of
the fair market value per share of Common Stock on the start date of the
offering period or on the date on which the option is exercised. Employees may
end their participation in an offering period at any time during that period,
and participation ends automatically on termination of employment with the
Company. In the event of a proposed dissolution or liquidation of the Company,
the offering periods terminate immediately prior to the consummation of the
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the Company's assets or the merger
of the Company with or into another corporation, then the offering period in
progress will be shortened by setting a new exercise date that is before the
sale or merger and the offering period in progress shall end on the new
exercise date. Each participant shall be notified at least ten business days
prior to the new exercise date, and unless such participant ends his or her
participation, the option will be exercised automatically on the new exercise
date. The Purchase Plan will terminate in March 2006, unless sooner terminated
by the Board of Directors.

1996 Director Option Plan. The Company's 1996 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in September 1996. A
total of 150,000 shares of Common Stock has been reserved for issuance under
the Director Plan. The option grants under the Director Plan are automatic and
non-discretionary, and the exercise price of the options is 100% of the fair
market value of the Common Stock on the grant date. The Director Plan provides
for an automatic grant of options to purchase 18,750 shares of Common Stock to
each non-employee director of the Company (an "Outside Director") at the first
meeting of the Board of Directors following the annual meeting of stockholders
in each year beginning with the 1997 Annual Meeting of Stockholders, if on such
date, such Outside Director has served on the Board of Directors for at least
six months. The term of such options is ten years. Options granted to Outside
Directors under the Director Plan become exercisable at a rate of 1/48th of the
shares on the monthly anniversary of the date of grant, subject to the Outside
Director's continuous service on the Board of Directors. In the event of the
sale of all or substantially all the Company's assets or the merger

of the Company with or into another corporation, all outstanding options may
either be assumed or an equivalent option may be substituted by the surviving
entity or, if such options are not assumed or substituted, such options shall
become exercisable as to all of the shares subject to the options, including
shares as to which they would not otherwise be exercisable. In the event that
options become exercisable in lieu of assumption or substitution, the Board of
Directors shall notify optionees that all options shall be fully exercisable
for a period of 30 days, after which such options shall terminate. The
Director Plan will terminate in 2006 unless sooner terminated by the Board of
Directors.

401(k) Plan. The Company participates in a tax-qualified employee savings
and retirement plan (the "401(k) Plan") which covers all of the Company's
full-time employees who are at least 21 years of age. Pursuant to the 401(k)
Plan, employees may elect to reduce their current compensation by up to the
lower of 20% or the statutorily prescribed annual limit and have the amount of
such reduction contributed to the 401(k) Plan. The 401(k) Plan permits
additional discretionary matching contributions by the Company on behalf of
all participants in the 401(k) Plan in such a percentage amount as may be
determined annually by the Board of Directors. To date, the Company has made
no such matching contributions. The 401(k) Plan is intended to qualify under
Section 401 of the Internal Revenue Code of 1986, as amended, so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn
from the 401(k) Plan, and so that contributions by the Company, if any, will
be deductible by the Company when made. The trustee under the 401(k) Plan, at
the direction of each participant, invests the assets of the 401(k) Plan in
any of a number of investment options.

EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS

The Company does not currently have any employment contracts in effect with
any of the Named Executive Officers other than Mary E. Coleman, the Company's
President and Chief Executive Officer, and Christopher L. Dier, the Company's
Vice President of Finance and Chief Financial Officer.

The Company and Ms. Coleman are parties to a letter agreement dated December
22, 1994 governing her employment with the Company. The agreement sets forth
Ms. Coleman's compensation level and eligibility for salary increases,
bonuses, benefits and option grants under the 1995 Plan. Pursuant to the
agreement, Ms. Coleman is entitled to receive, in the event of the merger of
the Company into another corporation resulting in a change of control or the
sale of all or substantially all the Company's assets, an amount equal to five
percent of the total sales price paid to the Company or its shareholders as a
result of such merger or asset sale reduced by the value of any consideration
Ms. Coleman receives as a stockholder of the Company as a result of such
merger or asset sale. Ms. Coleman's right to receive such amount in the event
of a merger of the Company will terminate upon the closing of this offering.
The agreement also provides for accelerated vesting of any unvested stock
options or shares in the event of a merger or asset sale. Ms. Coleman's
employment under the letter agreement is voluntary and may be terminated by
the Company or Ms. Coleman at any time with one month's prior written notice,
provided that the Company may terminate Ms. Coleman's employment for cause on
three days' written notice.

The Company and Mr. Dier are parties to a letter agreement dated July 8,
1996 governing Mr. Dier's employment with the Company. The agreement sets
forth Mr. Dier's compensation level and eligibility for salary increases,
bonuses, benefits and option grants under the 1995 Plan. The agreement
provides for an initial grant of an option under the 1995 Plan to acquire
91,474 shares of Common Stock at an exercise price per share of $6.00 subject
to vesting over four years with the first 25% of such shares vesting on the
first anniversary of Mr. Dier's employment with the Company and the remaining
shares vesting ratably over the succeeding 36 months. In the event of a change
of control of the Company as a result of a merger or acquisition, the vesting
of initial option grant will be accelerated with respect to 24 months of
vesting if Mr. Dier is not offered a comparable position in the surviving
company. Mr. Dier's employment under the agreement may be terminated at any
time by either the Company or Mr. Dier, with or without cause.

The Compensation Committee as Plan Administrator of the 1995 Plan will have
the authority to provide for the accelerated vesting of shares of Common Stock
subject to outstanding options held by any of the Named Executive Officers or
the shares of Common Stock subject to direct issuances held by such individual
in connection with certain changes in control of the Company. See "Stock
Plans--1995 Stock Plan."

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

The Company has adopted provisions in its Certificate of Incorporation that
eliminate to the fullest extent permissible under Delaware law the liability
of its directors to the Company for monetary damages. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. The Company's Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
Delaware law, including in circumstances in which indemnification is otherwise
discretionary under Delaware law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which may
require the Company, among other things, to indemnify the 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), and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.

There is no currently pending litigation or proceeding involving a director,
officer, employee or other agent of the Company in which indemnification would
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.

CERTAIN TRANSACTIONS

Between January 1993 and March 1996, the Company sold and issued 23,265,529
shares of its Preferred Stock for an aggregate consideration of $18,994,001.
The Company sold the Preferred Stock in series as follows: (i) 4,411,765
shares of Series A Preferred Stock in January 1993 at a sale price of $0.85
per share; (ii) 4,782,408 shares of Series B Preferred Stock in December 1993
at a sale price of $1.08 per share; (iii) 5,000,000 shares of Series C
Preferred Stock in December 1994 at a sale price of $0.50 per share and
warrants to acquire 1,382,280 shares of Common Stock at a per share exercise
price of $0.00004; (iv) 7,607,719 shares of Series D Preferred Stock in August
1995 at a sale price of $0.79 per share; (v) 100,000 shares of Series D
Preferred Stock in November 1995 at a sale price of $0.79 per share; and (vi)
1,363,637 shares of Series E Preferred Stock in March 1996 at a sale price of
$1.10 per share.

The following table summarizes purchases, valued in excess of $60,000, of
shares of Preferred Stock (and in connection with the warrants issued with the
Series C Preferred Stock, of shares of Common Stock issued upon exercise of
such warrants) by directors, executive offers and 5% shareholders of the
Company:

SHARES
-----------------------------------------------------------
COMMON
SERIES A(1) SERIES B(2) SERIES C(3) WARRANTS(4) SERIES D(5)
----------- ----------- ----------- ----------- -----------

Morgan Stanley Venture
Partners, L.P.(6)...... -- 3,240,741 2,413,796 716,153 1,265,823
Vertex Management,
Inc.(7)................ 1,470,588 694,444 1,200,000 319,575 1,265,823
Battery Ventures II,
L.P.(8)................ 1,764,706 555,556 1,177,790 294,448 1,265,823
Bank America
Ventures(9)............ -- -- -- -- 3,797,469

- --------
(1) The Series A Preferred Stock converts into Common Stock at the rate of
0.229 share of Common Stock for each share of Series A Preferred Stock.
(2) The Series B Preferred Stock converts into Common Stock at the rate of
0.291 share of Common Stock for each share of Series B Preferred Stock.
(3) The Series C Preferred Stock converts into Common Stock at the rate of
0.125 share of Common Stock for each share of Series C Preferred Stock.
(4) The exercise price applicable to such warrants was $0.00004 per share of
Common Stock. All such warrants were exercised during 1995.
(5) The Series D Preferred Stock converts into Common Stock at the rate of
0.250 share of Common Stock for each share of Series D Preferred Stock.
(6) Includes shares purchased by Morgan Stanley Venture Capital Fund II, L.P.,
Morgan Stanley Venture Investors, L.P. and Morgan Stanley Venture Capital
Fund II, C.V., each of which is an investment partnership affiliated with
Morgan Stanley Venture Partners, L.P. Robert J. Loarie, a general partner
of Morgan Stanley Venture Partners, is a director of the Company.
(7) Includes shares held by Vertex Investments (II) Ltd. and Vertex
Investments Pte. Ltd. Charles C. Wu is a Vice President of Vertex
Management, Inc., a venture capital firm, and a director of the Company.
Vertex Investments (II) Ltd. and Vertex Investments Pte. Ltd. are
investment affiliates of Vertex Management, Inc.
(8) The general partner of Battery Ventures II, L.P., is ABF Partners, L.P.
Oliver D. Curme, a general partner of ABF Partners, is a director of the
Company.
(9) Includes shares purchased by BankAmerica Ventures and BA Venture Partners
I, an investment general partnership comprised of certain employees of
BankAmerica Ventures. Robert M. Obuch, a Principal of BankAmerica Ventures
and a general partner of BA Venture Partners I, is a director of the
Company.

The Company is a party to letter agreements with its President and Chief
Executive Officer and its Vice President of Finance and Chief Financial
Officer governing their employment with the Company. See "--Employment
Agreements and Change in Control Agreements."

In September 1995, February 1996 and July 1996, the Company loaned Mary E.
Coleman, the Company's President and Chief Executive Officer, an aggregate
amount of $368,690.97 in connection with

the purchase of Common Stock, evidenced by three promissory notes. The
principal amounts of the three notes are $37,136.17, $31,554.80 and $300,000,
respectively, which become due and payable in September 2000, February 2001
and July 2001, respectively. Each of the notes bears interest at the rate of
8% per annum. In the event that Ms. Coleman ceases to be employed by the
Company prior to maturity of the notes, such notes shall, at the option of the
Company, become immediately due and payable.

In July 1996 and August 1996, the Company loaned to Christopher L. Dier, the
Company's Vice President of Finance and Chief Financial Officer, an aggregate
amount of $157,500 in connection with the purchase of Common Stock, evidenced
by two promissory notes. The principal sum of the notes is $120,000 and
$37,500, respectively, and the notes become due and payable in July 2000 and
August 2000, respectively. Both notes bear interest at the rate of 8% per
annum. In the event that Mr. Dier ceases to be employed by the Company prior
to maturity of the notes, such notes shall, at the option of the Company,
become immediately due and payable at the option of the Company.

In February 1996 and July 1996, the Company loaned to Brigitte U. Wilson,
the Company's Director of Finance and Administration and, at the time of such
loan, the Company's Chief Financial Officer, an aggregate amount of $79,939.18
in connection with the purchase of Common Stock, evidenced by four promissory
notes. The aggregate principal sum of the three notes issued in February 1996
is $4,939.18, and each note becomes due and payable in February 2000. The
principal sum of the fourth note is $75,000 and becomes due and payable in
July 2000. Each of the notes bears interest at the rate of 8% per annum. In
the event that Ms. Wilson ceases to be employed by the Company prior to
maturity of the notes, such notes shall, at the option of the Company, become
immediately due and payable.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 31, 1996 and as adjusted
to reflect the sale of the shares of Common Stock offered hereby by (i) each
person or entity who is known by the Company to own beneficially 5% or more of
the Company's outstanding Common Stock; (ii) each director of the Company;
(iii) each of the Named Executive Officers; and (iv) all directors and
executive officers of the Company as a group.

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(2) NUMBER OF AFTER OFFERING(2)
----------------------- SHARES -----------------------
NAME AND ADDRESS(1) NUMBER PERCENT OFFERED NUMBER PERCENT
------------------- ------------ ---------- --------- ------------ ----------

Morgan Stanley Venture Partners(3)............. 2,275,593 26.4% -- 2,275,593 20.5%
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025

Vertex Management, Inc.(4)..................... 1,323,895 15.4% -- 1,323,895 11.9%
Three Lagoon Drive, Suite 220
Redwood City, CA 94065

Battery Ventures II, L.P....................... 1,322,884 15.4% -- 1,322,884 11.9%
200 Portland Street
Boston, MA 02114

BankAmerica Ventures(5)........................ 949,366 11.0% -- 949,366 8.5%
950 Tower Lane, Suite 700
Foster City, CA 94404

The Buchanan Family 1991 Trust................. 714,376 8.3% -- 714,376 6.4%

Prabhat K. Andleigh(6)......................... 5,683 * -- 5,683 *

David D. Buchanan(7)........................... 888,467 10.3% -- 888,467 8.0%

Susan K. Buchanan(8)........................... 888,467 10.3% 125,000 763,467 6.9%

Mary E. Coleman(9)............................. 458,047 5.3% -- 458,047 4.1%

Charles J. Donchess(10)........................ 150,001 1.7% -- 150,001 1.3%

James W. Thanos(11)............................ 154,735 1.8% -- 154,735 1.4%

Oliver D. Curme(12)............................ 1,322,884 15.4% -- 1,281,072 11.9%

Mark J. Leslie(13)............................. 29,431 * -- 29,431 *

Robert J. Loarie(14)........................... 2,275,593 26.4% -- 2,275,593 20.5%

Robert M. Obuch(15)............................ 949,366 11.0% -- 949,366 8.5%

Jeffrey T. Webber(16).......................... 20,813 * -- 20,813 *

Brigitte U. Wilson(17)......................... 51,185 * -- 51,185 *

Charles C. Wu(18).............................. 1,323,895 15.4% -- 1,323,895 11.9%

All executive officers
and directors as a
group (15 persons)(19)........................ 8,114,695 91.5% 125,000 7,989,695 70.3%

- --------
* Less than 1%.
(1) Unless otherwise indicated, the address for each listed stockholder is
c/o Aurum Software, Inc., 3385 Scott Boulevard, Santa Clara, California
95054. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock held by them.

(2) Applicable percentage ownership is based on 8,608,002 shares of Common
Stock outstanding as of August 31, 1996 and 11,108,002 shares immediately
following the completion of this offering (assuming no exercise of the
Underwriters' over-allotment option), together with applicable options
for such shareholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities, subject
to community property laws, where applicable. Shares of Common Stock
subject to options that are presently exercisable or exercisable within
60 days of August 31, 1996 are deemed to be beneficially owned by the
person holding such options for the purpose of computing the percentage
of ownership of such person but are not treated as outstanding for the
purpose of computing any other person.
(3) Includes 1,502,379 shares of Common Stock held by Morgan Stanley Venture
Capital Fund II, L.P. ("MSVC II LP"), 432,137 shares of Common Stock held
by Morgan Stanley Venture Investors, L.P. ("MSVI") and 341,077 shares of
Common Stock held by Morgan Stanley Venture Capital Fund II, C.V. ("MSVC
II CV"). Morgan Stanley Venture Capital II, Inc. ("MSVC II") is the
managing general partner of Morgan Stanley Venture Partners II, L.P.
("MSVP II"). MSVP II is the general partner of MSVC II LP and MSVI and
the investment general partner of MSVC II CV.
(4) Includes 316,455 shares of Common Stock held by Vertex Investments (II)
Ltd. ("Vertex II") and 1,007,440 shares of Common Stock held by Vertex
Investments Pte. Ltd. ("Vertex Pte.") Vertex II and Vertex Pte. are
investment affiliates of Vertex Management, Inc., a venture capital firm.
(5) Includes 854,430 shares of Common Stock held by BankAmerica Ventures, a
venture capital investment affiliate of BankAmerica Corporation ("BA
Ventures") and 94,936 shares of Common Stock held by BA Venture Partners
I, an investment general partnership comprised of certain employees of BA
Ventures ("BA Partners").
(6) Mr. Andleigh resigned from the Company effective September 1, 1995. Under
the terms of his option agreements, Mr. Andleigh had three months from
the date of termination of employment to exercise vested options. Mr.
Andleigh exercised his options with respect to 5,683 vested shares on
November 30, 1995. Outstanding options held by Mr. Andleigh terminated
with respect to all unvested shares on the date of Mr. Andleigh's
resignation.
(7) Includes 174,091 shares of Common Stock held by Mr. Buchanan individually
and 714,376 shares of Common Stock held by The Buchanan Family 1991
Trust, for which Mr. Buchanan serves as co-trustee. Excludes 174,091
shares held by Mr. Buchanan's wife as separate property and for which Mr.
Buchanan disclaims beneficial ownership.
(8) Includes 174,091 shares of Common Stock held by Ms. Buchanan individually
and 714,376 shares of Common Stock held by The Buchanan Family 1991 Trust
for which Ms. Buchanan serves as co-trustee. Excludes 174,091 shares held
by Ms. Buchanan's husband as separate property and for which Ms. Buchanan
disclaims beneficial ownership.
(9) Includes 296,178 unvested shares of Common Stock subject to the Company's
repurchase option as of August 31, 1996 in the event of a termination of
Ms. Coleman's employment with the Company.
(10) Includes 120,988 unvested shares of Common Stock which were not vested as
of August 31, 1996. Mr. Donchess' options may be exercised in full prior
to complete vesting subject to his entering a restricted stock purchase
agreement granting the Company an option to repurchase any unvested
shares at their original purchase price in the event of a termination of
Mr. Donchess' employment with the Company.
(11) Includes 105,736 unvested shares of Common Stock subject to the Company's
repurchase option as of August 31, 1996 in the event of a termination of
Mr. Thanos' employment with the Company.
(12) Represents shares of Common Stock held by Battery Ventures II, L.P. Mr.
Curme is a director of the Company and a general partner of ABF Partners
II, L.P., the general partner of Battery Ventures II, L.P. Mr. Curme
disclaims beneficial ownership of all such shares except to the extent of
his pecuniary interest therein.
(13) Includes 3,826 shares of Common Stock held by Mr. Leslie's children.
Includes 17,188 shares of Common Stock issuable upon exercise of options
which were not vested as of August 31, 1996. Mr. Leslie's option may be
exercised in full prior to complete vesting subject to his entering a

restricted stock purchase agreement granting the Company an option to
repurchase such shares at their original purchase price in the event of a
termination of Mr. Leslie's membership on the Company's Board of
Directors.
(14) Represents 1,502,379 shares of Common Stock held by MSVC II LP, 432,137
shares of Common Stock held by MSVI and 341,077 shares of Common Stock
held by MSVC II CV. Mr. Loarie is a director of the Company, a principal
of Morgan Stanley & Co. Incorporated, a general partner of MSVP II and a
Vice President of MSVC II. Mr. Loarie disclaims beneficial ownership of
all such shares except to the extent of his beneficial interest therein.
(15) Represents 854,430 shares of Common Stock held by BA Ventures and 94,936
shares of Common Stock held by BA Partners. Mr. Obuch is a Principal of BA
Ventures, a general partner of BA Partners, and a director of the Company.
Mr. Obuch disclaims beneficial ownership of all shares held by BA Ventures
and all shares held by BA Partners except to the extent of his
proportionate general partnership interest in BA Partners.
(16) Includes 17,188 shares of Common Stock issuable upon exercise of options
which were not vested as of August 31, 1996. Mr. Webber's option may be
exercised in full prior to complete vesting subject to his entering a
restricted stock purchase agreement granting the Company an option to
repurchase such shares at their original purchase price in the event of a
termination in Mr. Webber's status as a member of the Company's Board of
Directors.
(17) Includes 34,737 unvested shares of Common Stock subject to the Company's
repurchase option as of August 31, 1996 in the event of a termination of
Ms. Wilson's employment with the Company.
(18) Includes 316,455 shares of Common Stock held by Vertex II and 1,007,440
shares of Common Stock held by Vertex Pte. is an investment affiliate of
Vertex Management, Inc., a venture capital investment firm. Mr Wu is a
Vice President of Vertex Management, Inc. and a director of the Company.
Mr. Wu disclaims beneficial ownership of all such shares except to the
extent of his pecuniary interest therein.
(19) Includes 265,225 shares immediately issuable upon exercise of outstanding
options under the 1995 Plan. Includes 7,849,470 issued shares of Common
Stock, 471,027 of which were subject to a repurchase option in favor of
the Company as of August 31, 1996.

DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the completion of this offering, the Company will be authorized to
issue 25,000,000 shares of Common Stock, $0.001 par value, and 5,000,000
shares of undesignated Preferred Stock, $0.001 par value. Immediately after
the completion of this offering and assuming no exercise of the Underwriters'
over-allotment option, the Company estimates there will be an aggregate of
11,108,002 shares of Common Stock outstanding and no shares of Preferred Stock
will be issued and outstanding.

The following description of the Company's capital stock does not purport to
be complete and is subject to and qualified in its entirety by the Company's
Restated Certificate of Incorporation and Bylaws, which are included as
exhibits to the Registration Statement of which this Prospectus forms a part,
and by the provisions of applicable Delaware law.

The Restated Certificate of Incorporation and Bylaws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and which may have the
effect of delaying, deferring, or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved
by the Board of Directors.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Holders of Common Stock do not have
cumulative voting rights, and, therefore, holders of a majority of the shares
voting for the election of directors can elect all of the directors. In such
event, the holders of the remaining shares will not be able to elect any
directors.

Holders of the Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between the Company and its debtholders. The Company has never declared or
paid cash dividends on its capital stock, expects to retain future earnings,
if any, for use in the operation and expansion of its business, and does not
anticipate paying any cash dividends in the foreseeable future. In addition,
the Company's bank line of credit agreement contains a restrictive covenant
that limits the Company's ability to pay cash dividends or make stock
repurchases without the prior written consent of the lender. See "Dividend
Policy." In the event of the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets legally available for distribution after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding.

PREFERRED STOCK

Effective upon completion of this offering, the Company will be authorized
to issue 5,000,000 shares of undesignated Preferred Stock. The Board of
Directors has the authority to issue the Preferred Stock in one or more series
and to fix the price, rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and
the number of shares constituting a series or the designation of such series,
without any further vote or action by the Company's stockholders. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the market price
of, and the voting and other rights of, the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no current plans to issue any shares
of Preferred Stock.

ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS

The Company's Certificate of Incorporation provides that all stockholder
actions must be effected at a duly called annual or special meeting and may
not be effected by written consent. The Certificate of Incorporation also
provides that the right of the Company's stockholders to vote cumulatively in
the election of directors will be eliminated upon completion of the offering
(except to the extent that cumulative voting may be required by the California
corporate law). At such time as cumulative voting is eliminated, stockholders
entitled to vote in the election of directors will be able to cast one vote
per share, regardless of the number of directors to be elected. The Company's
Bylaws provide that, except as otherwise required by law, special meetings of
the stockholders can only be called pursuant to a resolution adopted by a
majority of the Board of Directors, by the chief executive officer of the
Company, or by stockholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at such meeting. In addition, the Company's
Bylaws establish an advance notice procedure for stockholder proposals to be
brought before an annual meeting of stockholders, including proposed
nominations of persons for election to the Board. Stockholders at an annual
meeting may only consider proposals or nominations specified in the notice of
meeting or brought before the meeting by or at the direction of the Board of
Directors or by a stockholder who was a stockholder of record on the record
date for the meeting, who is entitled to vote at the meeting and who has
delivered timely written notice in proper form to the Company's Secretary of
the stockholder's intention to bring such business before the meeting.

The foregoing provisions of the Company's Certificate of Incorporation and
Bylaws are intended to enhance the likelihood of continuity and stability in
the composition of the Board of Directors and in the policies formulated by
the Board of Directors and to discourage certain types of transactions which
may involve an actual or threatened change of control of the Company. Such
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal and, accordingly, could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. Such provisions are also intended to discourage certain tactics that
may be used in proxy fights but could, however, have the effect of
discouraging others from making tender offers for the Company's shares and,
consequently, may also inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
These provisions may also have the effect of preventing changes in the
management of the Company. See "Risk Factors--Effect of Certain Charter
Provisions; Limitation of Liability of Directors; Antitakeover Effects of
Delaware Law."

EFFECT OF DELAWARE ANTITAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Antitakeover Law"), which regulates corporate acquisitions. The
Antitakeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market, from
engaging, under certain circumstances, in a "business combination" with any
"interested stockholder" for three years following the date that such
stockholder became an interested stockholder. For purposes of the Antitakeover
Law, a "business combination" includes, among other things, a merger or
consolidation involving the Company and the interested shareholder and the
sale of more than ten percent (10%) of the Company's assets. In general, the
Antitakeover Law defines an "interested stockholder" as any entity or person
beneficially owning 15% or more the outstanding voting stock of the Company
and any entity or person affiliated with or controlling or controlled by such
entity or person. A Delaware corporation may "opt out" of the Antitakeover Law
with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or bylaws resulting from
amendments approved by the holders of at least a majority of the Company's
outstanding voting shares. The Company has not "opted out" of the provisions
of the Antitakeover Law. See "Risk Factors--Effect of Certain Charter
Provisions; Limitation of Liability of Directors; Antitakeover Effects of
Delaware Law."

REGISTRATION RIGHTS

After this offering, the holders of 3,600,113 shares of Common Stock will be
entitled upon expiration of lock-up agreements with the Underwriters to
certain rights with respect to the registration of such shares under the
Securities Act. Under the terms of the agreement between the Company and the
holders of such registrable securities, if the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account of other securities holders exercising registration rights,
such holders are entitled to notice of such registration and are entitled to
include shares of such Common Stock therein. Holders of registration rights
may also require the Company to file a registration statement under the
Securities Act at the Company's expense with respect to their shares of Common
Stock, and the Company is required to use its best efforts to effect such
registration. Further, holders may require the Company to file registration
statements on Form S-3 at the Company's expense when such form becomes
available for use to the Company. All such registration rights are subject to
certain conditions and limitations, including the right of the underwriters of
an offering to limit the number of shares to be included in such registration.

TRANSFER AGENT

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

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering there has been no public market for the Common Stock
of the Company, and no prediction can be made regarding the effect, if any,
that market sales of shares or the availability of shares for sale will have
on the market price prevailing from time to time. As described below, only a
limited number of shares are currently available for sale, or will be
available for sale shortly after this offering, due to certain contractual and
legal restrictions on resale. Nevertheless, sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price.

Upon completion of this offering, the Company will have outstanding
11,108,002 shares of Common Stock, based on the number of shares of Preferred
Stock and Common Stock outstanding as of August 31, 1996. Of these shares, all
of the 2,625,000 shares of Common Stock sold in this offering will be freely
tradable (unless such shares are held by an "affiliate" of the Company as such
term is defined in the Securities Act) without restriction or registration
under the Securities Act. The remaining 8,608,002 shares were issued and sold
by the Company in private transactions ("Restricted Shares") and are eligible
for public sale only if registered under the Securities Act or sold in
accordance with Rule 144 or Rule 701 thereunder, which rules are summarized
below. As a result of the contractual restrictions described below and the
provisions of Rule 144 or Rule 701: (i) no shares will be available for
immediate sale in the public market on the date of this Prospectus and (ii)
8,608,002 Restricted Shares will be eligible for sale upon expiration of lock-
up agreements (as described below) 180 days after the date of this Prospectus
subject to certain limitations of Rules 144, 144(k) and 701.

The Company's executive officers, directors and certain stockholders, who
own 8,435,842 Restricted Shares, have agreed, subject to certain exceptions,
that they will not, without the prior written consent of Alex. Brown & Sons
Incorporated, offer, sell, contract to sell, grant any option to purchase, or
otherwise dispose of any shares of Common Stock or securities convertible into
or exercisable or exchangeable for Common Stock of the Company for a period of
180 days from the date of this Prospectus (the "Lockup Period"). Alex. Brown &
Sons Incorporated, in its sole discretion at any time and without notice, may
release any or all shares from the lockup agreements and permit holders of the
shares to resell all or any portion of their shares at any time prior to the
expiration of the Lockup Period.

In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person (or persons whose shares are aggregated), who has
beneficially owned Restricted Shares for at least two years, including the
holding period of any securities that converted into Restricted Shares and
including the holding period of any prior owner except an affiliate, is
entitled to sell within any three-month period a number of shares that does
not exceed the greater of (i) 1% of the then outstanding shares of the
Company's Common Stock or (ii) the average weekly trading volume of the
Company's Common Stock in the over the counter market during the four calendar
weeks preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. Any person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days preceding a sale, and who owns shares
within the definition of "restricted securities" under Rule 144 that were
purchased from the Company (or any affiliate) at least three years previously,
will be entitled to sell such shares under Rule 144(k) without regard to the
volume limitations, manner of sale provisions, public information requirements
or notice requirements. The Company's transfer agent, however, may require an
opinion of counsel that a proposed sale of shares complies with Rule 144 of
the Securities Act prior to effecting a transfer of such shares. Rule 701
under the Securities Act provides that shares of Common Stock acquired on the
exercise of outstanding options may be resold by persons other than
Affiliates, beginning 90 days after the date of this Prospectus, subject only
to the manner of sale provisions of Rule 144, and by Affiliates, beginning

90 days after the date of this Prospectus, subject to all provisions of Rule
144 except its two-year minimum holding period.

Prior to this offering, there has been no public market for the Common Stock
of the Company and no predictions can be made of the effect, if any, that the
sale or availability for sale of shares of additional Common Stock will have
on the market price of the Common Stock. Nevertheless, sales of substantial
amounts of such shares in the public market, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.

OPTIONS

As of June 30, 1996, options to purchase a total of 541,756 shares of Common
Stock pursuant to the 1995 Stock Plan (the "1995 Plan") were outstanding and
exercisable. All of the shares subject to options are subject to Lock-up
Agreements. See "--Lock-up Agreements." An additional shares of Common Stock
were available as of June 30, 1996 for future option grants or direct
issuances under the 1995 Plan. Subsequent to June 30, 1996, the Company
granted options to purchase 190,474 shares of Common Stock, and the Board of
Directors and stockholders of the Company approved an increase to 4,319,695
shares in the number of shares reserved for issuance under the 1995 Plan. In
addition, in July 1995, the Company reserved 300,000 shares for issuance under
the Company's 1996 Employee Stock Purchase Plan and 150,000 shares for
issuance under the Company's 1996 Director Option Plan. See "Management--1995
Stock Plan," "--1996 Employee Stock Purchase Plan," "--1996 Director Option
Plan" and Note 7 of Notes to Financial Statements.

The Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 3,649,149 shares of Common Stock,
subject to outstanding stock options or issued or reserved for issuance
pursuant to the 1993 Plan and the 1995 Plan (assuming no exercise of
outstanding stock options after June 30, 1996), 300,000 shares of Common Stock
reserved for issuance under the 1996 Employee Stock Purchase Plan and 150,000
shares of Common Stock reserved for issuance under the 1996 Director Option
Plan. Such registration statement is expected to be filed simultaneously with
the effectiveness of the registration statement covering the shares of Common
Stock offered in this offering and will automatically become effective upon
filing. Accordingly, shares covered by such registration statement will
thereupon be eligible for sale in the public markets, subject to the lapse of
any repurchase rights the Company may have with respect to such shares and to
the Lock-up Agreements, if applicable.

LOCK-UP AGREEMENTS

All officers and directors and certain holders of Common Stock and options
to purchase Common Stock have agreed pursuant to certain "lock-up" agreements
that they will not offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible or
exercisable or exchangeable for Common Stock, or enter into any swap or
similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock for a period of 180 days after the transfer or
date of this Prospectus without the prior written consent of Alex. Brown &
Sons Incorporated. All other holders of Common Stock and options and warrants
to purchase Common Stock have agreed pursuant to existing agreements with the
Company not to sell or otherwise transfer or dispose of any Common Stock for a
period of 180 days after the effective date of this offering.

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Cowen & Company and Wessels, Arnold &
Henderson, L.L.C., have severally agreed to purchase from the Company and the
Selling Stockholder the following respective numbers of shares of Common Stock
at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:

NUMBER OF
UNDERWRITER SHARES
----------- ---------

Alex. Brown & Sons Incorporated....................................
Cowen & Company....................................................
Wessels, Arnold & Henderson, L.L.C. ...............................
---------
Total............................................................ 2,625,000
=========

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

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

The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 393,750
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the above table bears to 2,625,000, and the Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of Common Stock offered hereby. If
purchased, the Underwriters will offer such additional shares on the same
terms as those on which the 2,625,000 shares are being offered.

The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.

The Company and certain stockholders of the Company have agreed not to
offer, sell or otherwise dispose of any shares of Common Stock for a period of
180 days after the effective date of this offering without the prior written
consent of Alex. Brown & Sons Incorporated, except that the Company may issue,
and grant options to purchase, shares of Common Stock under its current stock
option and purchase plans and other currently outstanding options. In
addition, the Company may issue shares of Common Stock in connection with
corporate acquisitions. See "Shares Eligible for Future Sale."

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

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiations among the Company and the
Representatives of the Underwriters. Among the factors to be considered in
such negotiations are prevailing market conditions, the results of operations
of the Company in recent periods, the market capitalizations and stages of
development of other companies which the Company and the Representatives of
the Underwriters believed to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant. See "Risk Factors--No Prior
Market; Possible Volatility of Stock Price."

The Underwriters have reserved for sale, at the initial public offering
price, approximately 5% of the shares of Common Stock offered hereby for
certain employees, customers and vendors of the Company, and certain other
individuals and entities, who have expressed an interest in purchasing such
shares of Common Stock in the offering. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the Underwriters to the general public on the same basis as other shares
offered hereby.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Pillsbury Madison & Sutro LLP, Menlo Park, California, is
acting as counsel for the Underwriters in connection with certain legal
matters relating to the shares of Common Stock offered hereby. As of the date
of this Prospectus, a member of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, and investment partnerships of which members of such firm are
partners, beneficially own 10,384 shares of the Company's Common Stock.

EXPERTS

The balance sheets as of December 31, 1994 and 1995 and the statements of
operations, stockholders' deficit and cash flows for each of the three years
in the period ended December 31, 1995, included in this Prospectus and the
financial statement schedule for the aforementioned periods included in the
Registration Statement have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the Securities Act and the rules regulations promulgated
thereunder with respect to the 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, reference is made to the
Registration Statement and the exhibits and schedules filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete. In each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, and each such statement is qualified in all
respects by such reference. The Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the regional offices of the Commission located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a World Wide Web site that contains reports,
proxy and information 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 is not currently subject to the informational requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Common Stock, the Company will become
subject to the informational requirements of the Exchange Act. The Company
intends to furnish its stockholders with annual reports containing financial
statements audited by its independent accountants and quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
statements.

Aurum, Aurum SalesTrak, Aurum QualityTrak, Aurum SupportTrak and TeleTrak
are registered trademarks of the Company. Aurum EventTrak, Aurum Teletrak,
Aurum WebTrak, dbSync, Aurum Smart Encyclopedia, Aurum Management Information
System, Aurum Explorer, Aurum Reporter and Aurum CTITrak are also trademarks
of the Company. Trademarks of other companies are also referred to in this
Prospectus.

AURUM SOFTWARE, INC.

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Report of Coopers & Lybrand L.L.P., Independent Accountants................ F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Deficit........................................ F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
Aurum Software, Inc.

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

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

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

San Jose, California
March 5, 1996, except for Note 12,
as to which the date is
September 12, 1996

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

The accompanying financial statements give effect to a reverse stock split
on a one-for-four basis of the Company's Common Stock and a one-for-one basis
of the Company's Preferred Stock which will occur upon reincorporation of the
Company in Delaware. The above opinion is in the form which will be signed by
Coopers & Lybrand L.L.P. upon completion of such reverse stock split described
in Note 12 of notes to financial statements and assuming that from September
12, 1996 to the date of such completion, no other material events have
occurred that would affect the accompanying financial statements or required
disclosure therein.

Coopers & Lybrand L.L.P.

San Jose, California
September 12, 1996

F-2

AURUM SOFTWARE, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (NOTE 11)
----------------- JUNE 30, JUNE 30,
1994 1995 1996 1996
------- -------- -------- -------------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents......... $ 2,517 $ 2,795 $ 2,006
Accounts receivable, net of
allowance for doubtful accounts
of $318, $340 and $262 at
December 31, 1994 and 1995 and
June 30, 1996 (unaudited),
respectively .................... 1,374 4,702 7,726
Prepaid expenses and other current
assets........................... 295 438 615
------- -------- --------
Total current assets............. 4,186 7,935 10,347
Property and equipment, net......... 1,151 1,559 2,178
Other assets........................ 407 301 237
------- -------- --------
Total assets.................... $ 5,744 $ 9,795 $ 12,762
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable..................... $ 29 $ 217 $ 186
Current portion of capital lease
obligations...................... 276 304 402
Borrowings under line of credit... 600 1,500
Accounts payable.................. 499 1,191 1,640
Accrued compensation.............. 354 898 1,119
Other accrued liabilities......... 566 817 1,529
Deferred revenue.................. 828 2,303 1,821
------- -------- --------
Total current liabilities........ 3,152 5,730 8,197
Notes payable, less current
portion............................ 75 121 37
Capital lease obligations, less
current portion.................... 295 116 385
------- -------- --------
Total liabilities................ 3,522 5,967 8,619
------- -------- --------
Commitments and contingencies (Note
5).
Mandatorily redeemable convertible
preferred stock, no par value:
Authorized: 24,000,000 shares
Issued and outstanding:
14,194,173 shares in 1994,
21,901,892 shares in 1995 and
21,905,398 shares at June 30,
1996 (unaudited) (No pro forma
as preferred shares convert to
common stock)................... 11,302 17,356 29,592 $ --
------- -------- -------- --------
(Liquidation value: $17,504 in
1995 and $17,854 at June 30,
1996 (unaudited))
Stockholders' deficit:
Common stock, no par value; $0.001
pro forma:
Authorized: 10,000,000 shares;
Issued and outstanding: 831,138
shares in 1994, 2,526,159 shares
in 1995 and 3,498,300 shares at
June 30, 1996 (unaudited);
8,457,153 shares pro forma....... 195 236 8
Additional paid-in capital........ 29,584
Notes receivable from
stockholders...................... (1) (38) (230) (230)
Accumulated deficit................ (9,274) (13,726) (25,219) (25,219)
------- -------- -------- --------
Total stockholders' equity
(deficit)....................... (9,080) (13,528) (25,449) $ 4,143
------- -------- -------- ========
Total liabilities, convertible
redeemable preferred stock and
stockholders' deficit.......... $ 5,744 $ 9,795 $ 12,762
======= ======== ========

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

F-3

AURUM SOFTWARE, INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(UNAUDITED)

Revenues:
Licenses..................... $ 3,475 $ 3,356 $ 5,928 $ 1,820 $ 6,217
Services..................... 1,426 2,556 4,547 1,965 4,721
------- ------- ------- -------- --------
Total revenues............. 4,901 5,912 10,475 3,785 10,938
------- ------- ------- -------- --------
Cost of revenues:
Licenses..................... 331 365 979 567 623
Services..................... 1,609 2,586 3,919 1,528 4,256
------- ------- ------- -------- --------
Total cost of revenues..... 1,940 2,951 4,898 2,095 4,879
------- ------- ------- -------- --------
Gross profit................... 2,961 2,961 5,577 1,690 6,059
------- ------- ------- -------- --------
Operating expenses:
Sales and marketing.......... 3,107 3,240 6,626 2,326 4,527
Research and development..... 2,251 2,246 2,286 1,204 1,387
General and administrative... 1,861 1,780 1,023 458 714
------- ------- ------- -------- --------
Total operating expenses... 7,219 7,266 9,935 3,988 6,628
------- ------- ------- -------- --------
Loss from operations........... (4,258) (4,305) (4,358) (2,298) (569)
Other income (expense), net.... 38 5 63 27 23
Interest expense............... (42) (88) (157) (78) (61)
------- ------- ------- -------- --------
Net loss................... $(4,262) $(4,388) $(4,452) $ (2,349) $ (607)
======= ======= ======= ======== ========
Pro forma net loss per share... $ $
======= ========
Pro forma shares used in per
share calculation.............
======= ========

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

F-4

AURUM SOFTWARE, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE DATA)

COMMON NOTES
STOCK RECEIVABLE
----------------- FROM ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT STOCKHOLDERS DEFICIT DEFICIT
--------- ------ ------------ ----------- -------------

Balances, December 31,
1992.................... 972,410 $233 $ (61) $ (624) $ (452)
Issuance of common
stock under stock
purchase plan.......... 2,563 2 2
Repurchase of common
stock.................. (28,054) (7) 3 (4)
Payments on notes
receivable from
stockholders........... 10 10
Net loss............... (4,262) (4,262)
--------- ---- ----- -------- ---------
Balances, December 31,
1993.................... 946,919 $228 $ (48) $ (4,886) $ (4,706)
Issuance of common
stock under stock
purchase plan.......... 2,688 4 4
Issuance of common
stock under incentive
stock option plan...... 297
Repurchase of common
stock.................. (118,766) (37) (37)
Payments and
cancellation of notes
receivable from
stockholders........... 47 47
Net loss............... (4,388) (4,388)
--------- ---- ----- -------- ---------
Balances, December 31,
1994.................... 831,138 195 (1) (9,274) (9,080)
Exercise of warrants by
preferred investors.... 1,382,280 5 5
Issuance of common
stock under incentive
stock options plan for
cash and note
receivable............. 317,954 38 (37) 1
Repurchase of common
stock.................. (5,213) (2) (2)
Net loss............... (4,452) (4,452)
--------- ---- ----- -------- ---------
Balances, December 31,
1995.................... 2,526,159 236 (38) (13,726) (13,528)
Repurchase of common
stock.................. (50,948) (118) (118)
Issuance of common
stock under incentive
stock option plan for
cash, note receivable
and services........... 1,023,089 231 (192) 39
Accretion to redemption
value of preferred
stock.................. (349) (10,886) (11,235)
Net loss............... (607) (607)
--------- ---- ----- -------- ---------
Balances, June 30, 1996
(unaudited) 3,498,300 $-- $(230) $(25,219) $ (25,449)
========= ==== ===== ======== =========

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

F-5

AURUM SOFTWARE, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(UNAUDITED)

Cash flows from operating
activities:
Net loss....................... $(4,262) $(4,388) $(4,452) $(2,349) $ (607)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization.................. 263 518 589 282 478
Provision for doubtful
accounts...................... 183 87 125 47
Write-off of intangibles....... 220 41
Changes in current assets and
liabilities:
Accounts receivable........... 14 (1,050) (3,453) 464 (3,024)
Prepaid expenses and other
current assets............... (224) (52) (10) 115 (112)
Other assets.................. 5 (4) (130) (7) (22)
Accounts payable.............. 3 77 692 138 449
Accrued compensation and
other liabilities............ 360 236 795 85 940
Deferred revenue.............. 121 380 1,475 (9) (482)
------- ------- ------- -------- --------
Net cash used in operating
activities.................. (3,537) (4,196) (4,149) (1,193) (2,380)
------- ------- ------- -------- --------
Cash flows from investing
activities:
Purchase of short-term
investments................... (2,889)
Sales of short-term
investments................... 2,889
Acquisition of property and
equipment..................... (228) (427) (933) (323) (1,097)
Decrease (increase) in
restricted cash............... (239) (104) (44) (11) 29
------- ------- ------- -------- --------
Net cash provided by (used
in) investing activities.... (3,356) 2,358 (977) (334) (1,068)
------- ------- ------- -------- --------
Cash flows from financing
activities:
Proceeds from borrowings under
line of credit................ 950 1,500
Repayments of borrowings under
line of credit................ (350) (600) (100)
Repayment of notes payable to
stockholders.................. (113)
Proceeds from issuance of
mandatorily redeemable
convertible preferred stock,
net of issuance costs......... 8,345 2,456 5,975 1 1,487
Proceeds from issuance of
common stock.................. 2 6 6 24
Repurchase of mandatorily
redeemable convertible
preferred and common stock.... (4) (2) (2) (604)
Proceeds from repayment of
notes receivable from
stockholders.................. 10 10
Repayments of note payables and
capital lease obligations..... (79) (224) (431) (191) (357)
Proceeds from notes payable and
sales and leasebacks of
property
and equipment................. 150 456 240 609
------- ------- ------- -------- --------
Net cash provided by (used
in) financing activities.... 8,311 2,842 5,404 (46) 2,659
------- ------- ------- -------- --------
Net increase (decrease) in
cash........................... 1,418 1,004 278 (1,573) (789)
Cash and cash equivalents at
beginning of year.............. 95 1,513 2,517 2,517 2,795
------- ------- ------- -------- --------
Cash and cash equivalents at end
of year........................ 1,513 $ 2,517 $ 2,795 $ 944 2,006
======= ======= ======= ======== ========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash payments for:
Interest....................... $ 42 $ 88 $ 157 $ 78 $ 61
SUPPLEMENTAL DISCLOSURE OF
NONCASH TRANSACTIONS:
Issuance of stockholder note
receivable in exchange for
common stock.................. $ 37 $ 192
Cancellation of stockholder
note receivable............... $ 3 $ 37
Property and equipment acquired
under capital lease
obligations................... $ 434 $ 394 $ 58 $ 58
Property and equipment
purchased included in accounts
payable....................... $ 50 $ 15
Common stock issued in
consideration for services
performed..................... $4 $ 15
Issuance of mandatorily
redeemable convertible
preferred stock in exchange
for technology................ $ 79
Conversion of note payable to
mandatorily redeemable
convertible preferred stock... $ 500
Accretion to redemption value
of mandatorily redeemable
convertible preferred stock... $ 11,235

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

F-6

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

1. Business of the Company:

Aurum Software, Inc. (the "Company") is a provider of enterprise-wide
sales and marketing information software. The Company develops, markets and
supports the Aurum Customer Enterprise suite of applications which helps
automate the field sales, telemarketing, telesales and customer support
functions of a business. The Company's products are based on advanced
client/server and Internet/Intranet technologies and are designed to
address the sales and marketing requirements of businesses ranging from
medium-sized enterprises to large multinational corporations. The Company
sells its products in North America primarily through its direct sales
force and sells its products outside of North America primarily through key
distribution organizations. In addition, the Company provides an array of
services to its customers, including business consulting, requirements
definition, installation, consulting, training and customer support. The
Company is headquartered in Santa Clara, California, with sales offices
nationwide.

2. Summary of Significant Accounting Policies:

INTERIM FINANCIAL INFORMATION (UNAUDITED):

The unaudited interim financial statements and related notes for the six
months ended June 30, 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 of only normal recurring adjustments, necessary
for a fair presentation of the financial position and results of operations
in accordance with generally accepted accounting principles. Results for
the interim period are not necessarily indicative of results to be expected
for the full fiscal year.

USE OF ESTIMATES:

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

CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the time of purchase to be
cash equivalents.

REVENUE RECOGNITION:

Revenues consist of license revenues and service revenues. License
revenues are recognized upon execution of a license agreement and delivery
of software if there are no significant post-delivery vendor obligations
and if collection of the receivable is deemed probable. If significant
post-delivery obligations exist or if a product is subject to customer
acceptance, revenues are deferred until no significant obligations remain
or acceptance has occurred. Upon recognition of licence revenues, the
Company accrues for the cost of warranty and insignificant vendor
obligations. Revenues from services consist of fees from consulting
services, including implementation and customization of licensed software,
training and maintenance support. Consulting and training revenues are
generally recognized as services are performed, except for revenues from
certain fixed

F-7

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

2. Summary of Significant Accounting Policies, continued

price contracts or milestone deliverables, which are recognized on a
percentage-of-completion basis or upon milestone delivery. Maintenance
support revenues are recognized ratably over the term of the support
period, which is typically one year.

ENGINEERING AND SUPPORT:

Costs related to the conceptual formulation and design of software
products are charged to operations as incurred. Software development costs
are capitalized beginning when a product's technological feasibility has
been established and ending when a product is available for general release
to customers. The Company has not capitalized any software development
costs since such costs have not been significant.

PROPERTY AND EQUIPMENT:

Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is provided on a straight-line basis over
the estimated useful lives of the assets which is generally three years.
Amortization of equipment under capital leases is computed using the
straight-line method over the shorter of the remaining lease term or the
estimated useful life of the related asset.

COMPUTATION OF HISTORICAL NET LOSS PER SHARE AND PRO FORMA NET LOSS PER
SHARE:

Historical net loss per share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during
the period. Common equivalent shares are excluded from the computation of
net loss per share as their effect is antidilutive. For those periods prior
to the offering date, pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares issued at
prices below the public offering price during the 12 months immediately
preceding the offering date have been included in the calculation as if
they were outstanding for all periods prior to the offering date (using the
treasury stock method and the initial public offering price). Pro forma net
loss per share assumes the common shares issuable upon conversion of the
outstanding convertible preferred stock have been outstanding during such
period. Historical net loss per share is as follows:

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- --------

Net loss...................... $(4,262) $(4,388) $(4,452) $(2,349) $ (607)
Accretion to redemption value
of mandatorily redeemable
convertible preferred stock.. -- -- -- -- (11,235)
------- ------- ------- ------- --------
Net loss applicable to common
stockholders................. $(4,262) $(4,388) $(4,452) $(2,349) $(11,842)
======= ======= ======= ======= ========
Net loss per share............ $ $ $ $ $
======= ======= ======= ======= ========
Number of shares used in per
share calculation............
======= ======= ======= ======= ========

F-8

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

2. Summary of Significant Accounting Policies, continued

INCOME TAXES:

The Company accounts for income taxes under the liability method. Under
the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. The Company
is required to adjust its deferred tax liabilities in the period when tax
rates or the provisions of the income tax laws change. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.

BUSINESS RISKS AND CREDIT CONCENTRATION:

A majority of the Company's revenues have been attributed to SalesTrak,
which is typically the first of the Company's software products to be
deployed with the greatest number of users and which often serves as a
foundation for other applications. Any factor adversely affecting the
pricing of or demand for the SalesTrak product could have a material
adverse affect on the Company's business, financial condition or results of
operations.

The Company incorporates into its products certain software and other
technologies licensed to it by third-party developers. In the event that
products licensed from the third-party vendors should fail to address the
requirements of the Company's software products, the Company would be
required to find alternative software products or technologies of equal
performance or functionality. The absence of or any significant delay in
the replacement of that functionality could have a material adverse affect
on the Company's business, financial condition, or results of operations.

As of December 31, 1994 and 1995 and June 30, 1996, the Company's cash
and cash equivalents are deposited with principally one financial
institution in the form of demand deposit and money market accounts.

The Company markets and sells its products to a broad geographic and
demographic base of customers and generally does not require collateral. At
December 31, 1994, two customers accounted for 15.4% and 13.1% of accounts
receivable. At December 31, 1995, two customers accounted for 16.9% and
12.5% of accounts receivable. At June 30, 1996, three customers accounted
for 16.2%, 10.6% and 10.1% of accounts receivable.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying value of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable
and other accrued liabilities approximates fair value due to their short
maturities. Based on borrowing rates currently available to the Company for
loans with similar terms, the carrying value of its notes payable, capital
lease obligations and borrowings under line of credit approximates fair
value.

RECENT PRONOUNCEMENTS:

During March 1995, the Financial Accounting Standards Board issued
Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be

F-9

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

2. Summary of Significant Accounting Policies, continued

Disposed Of," which requires the Company to review for impairment of long-
lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset might not be recoverable. In certain
situations, an impairment loss would be recognized. SFAS 121 will become
effective for the Company's year ending December 31, 1996. The Company has
studied the implications of SFAS 121 and, based on its initial evaluation,
does not expect it to have a material impact on the Company's financial
condition or results of operations.

During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS 123) "Accounting for Stock-Based Compensation,"
which establishes a fair value based method of accounting for stock-based
compensation plans and requires additional disclosures for those companies
who elect not to adopt the new method of accounting. The Company intends to
account for employee stock options under APB Opinion No. 25, "Accounting
for Stock Issued to Employees." SFAS 123 disclosures will be effective for
fiscal years beginning after December 15, 1995.

3. Property and Equipment:

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

DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------ ------- --------

Computer equipment............................... $1,773 $ 2,750 $ 3,784
Furniture and fixtures........................... 184 219 282
Leasehold improvements........................... 54 32 32
------ ------- -------
2,011 3,001 4,098
Less accumulated depreciation and amortization... (860) (1,442) (1,920)
------ ------- -------
$1,151 $ 1,559 $ 2,178
====== ======= =======

At December 31, 1994 and 1995 and at June 30, 1996, computer equipment in
the amount of $903,000, $1,114,000 and $1,981,000, respectively, with
$318,000, $687,000 and $1,048,000, respectively, of accumulated
depreciation were capitalized under equipment lease arrangements. These
assets are pledged as collateral under the lease arrangements.

4. Notes Payable, Capital Lease Obligations and Line of Credit:

NOTES PAYABLE:

The Company has outstanding a note payable with a financial institution
which bears interest at 10%, expires on February 15, 1998 at which time the
remaining balance is due, and is collateralized by an irrevocable letter of
credit. At December 31, 1994 and 1995 and at June 30, 1996, $104,000,
$75,000 and $59,000, respectively, was outstanding under this note.

In addition, the Company has outstanding two notes payable which bear
interest at 15% and are due on December 15, 1996 and July 16, 1997,
respectively. At December 31, 1995 and June 30, 1996, $263,000 and
$164,000, respectively, was outstanding under these notes.

F-10

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

4. Line of Credit, Capital Lease Obligations and Notes Payable, continued

The following table summarizes the scheduled maturities of notes payable
(in thousands):

1996............................................................... $ 251
1997............................................................... 121
1998............................................................... 6
-----
378
Less amount representing interest.................................. (40)
-----
Present value of future minimum payments........................... 338
Less current portion............................................... (217)
-----
Long term portion of notes payable................................. $ 121
=====

CAPITAL LEASE OBLIGATIONS:

The Company leases equipment under capital lease agreements. Future
minimum lease payments on these capital lease obligations are as follows
(in thousands):

1996............................................................... $ 320
1997............................................................... 124
1998............................................................... 8
-----
Minimum lease payments............................................. 452
Less amount representing interest.................................. (32)
-----
Present value of minimum lease payments............................ 420
Less current portion............................................... (304)
-----
Long-term portion of capital leases................................ $ 116
=====

During fiscal year 1995, the Company sold certain equipment at cost less
accumulated depreciation of $132,000 and leased back such equipment. No gain
or loss was recognized on the sale.

LINE OF CREDIT:

At December 31, 1995, the Company had a line of credit agreement with a
bank which provided the Company the ability to borrow 65% of eligible
receivables or a maximum of $2,000,000 of which $400,000 of the line of credit
can be designated as an equipment term note. The line of credit is
collateralized by the assets of the Company and certain financial covenants
are required to be maintained such as specified levels of working capital, net
worth, quarterly profitability and financial ratios. The line of credit
agreement also contains a restrictive covenant which limits the Company's
ability to pay cash dividends or make stock repurchases without the bank's
consent. Borrowings under the line of credit bear interest at the prime rate
plus 2.5% (11% at December 31, 1995 and 10.75% at June 30, 1996). At December
31, 1995, the Company had no borrowings under the line of credit. As of June
30, 1996, the Company had outstanding borrowings of $1,500,000 under the line
of credit. The outstanding principal matures on July 15, 1996. The line of
credit was renewed for one year on July 15, 1996.

F-11

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

5. Commitments and Contingencies:

OPERATING LEASES:

The Company leases its facilities under noncancelable operating leases
and subleases which expire in 1996, 1997 and 1998.

Future annual minimum lease payments under the lease agreements are as
follows (in thousands):

1996................................................................. $164
1997................................................................. 61
1998................................................................. 38
----
$263
====

Rent expense for 1993, 1994 and 1995 and for the period ended June 30,
1996 amounted to $318,000, $315,.000, $237,000 and $132,000, respectively.

CONTINGENCIES:

The Company is engaged in certain legal and administrative proceedings
incidental to its normal business activities. While it is not possible to
determine the ultimate outcome of these actions at this time, management
believes that any liabilities resulting from such proceedings, or claims
which are pending or known to be threatened, will not have a material
adverse effect on the Company's financial position or results of
operations.

F-12

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

6. Mandatorily Redeemable Convertible Preferred Stock:

The mandatorily redeemable convertible preferred stock of the Company
comprises the series designated as follows:

NUMBER OF COMMON
NUMBER OF SHARES SHARES LIQUIDATION
SHARES ISSUED AND RESERVED FOR VALUE
AUTHORIZED OUTSTANDING CONVERSION (IN THOUSANDS)
---------- ----------- ------------ --------------

Series A.................. 4,411,765 3,235,294 739,565 $ 2,750
Series A-1................ 1,176,471 1,176,471 172,413 1,000
Series B.................. 5,092,563 4,504,630 1,308,355 4,865
Series B-1................ 277,778 277,778 51,724 300
Series C.................. 5,000,000 5,000,000 624,997 2,500
Series D.................. 7,707,719 7,707,719 1,926,925 6,089
-- -- --
---------- --------- -------
December 31, 1995 21,901,892 4,823,979 17,504
Series A-1--repurchase.... (882,353) (882,353) (129,310) (750)
Series B-1--repurchase.... (277,778) (277,778) (51,724) (300)
Series C--repurchase...... -- (200,000) (25,000) (100)
Series E.................. 1,363,637 1,363,637 340,908 1,500
-- -- --
---------- --------- -------
June 30, 1996............ 21,905,398 4,958,853 $17,854
========== ========= =======

In January 1996, the Company repurchased shares of Series A-1, Series B-
1, and Series C preferred stock held by one investor at prices of $.3459,
$.4394 and $.2950 per share, respectively.

In March 1996, the Company issued 1,363,637 shares of Series E preferred
stock at $1.10 per share.

The rights, preferences and privileges of the Series A, Series A-1,
Series B, Series C, Series D and Series E preferred stockholders are as
follows:

Redemption:

The Company shall not have the right to call or redeem at any time all or
any shares of preferred stock. At any time after August 2000 and upon the
written election of holders of shares of preferred stock constituting at
least 66 2/3% of the collective voting power of the then outstanding
preferred stock (the Redemption Date), the Company shall redeem, from
installments beginning on the Redemption Date and continuing thereafter on
the first and second anniversaries of the Redemption Date, the then
outstanding preferred stock. The Company shall effect such redemptions on
the applicable Redemption Dates by paying cash in exchange for the shares
of preferred stock to be redeemed, at a sum equal to the redemption price.
The redemption price shall be an amount per share equal to all declared and
unpaid dividends per share of preferred stock, as the case may be, being
redeemed plus the greater of $0.85 in the case of the Series A preferred
stock, $0.85 in the case of the Series A-1 preferred stock, $1.08 in the
case of the Series B preferred, $0.50 in the case of the Series C preferred
stock, $0.79 in the case of the Series D and $1.10 in the case of Series E
preferred stock or the fair market value per share of the preferred stock,
as the case may be, redeemed as of the specified Redemption Date.

F-13

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Dividends:

The holders of Series A, Series A-1, Series B, Series C, Series D and
Series E preferred stock are entitled to noncumulative dividends of $
0.085, $0.085, $0.108, $0.05, $0.079 and $0.11, respectively, per share per
annum, when and if declared by the Board of Directors. Such a dividend will
be declared or paid prior and in preference to any declaration or payment
of any dividend on the common stock, other than a common stock dividend
payable solely in shares of common stock.

Liquidation:

A consolidation or merger of the Company with or into any other
corporation is deemed a liquidation. Holders of Series A, Series A-1,
Series B, Series C, Series D and Series E preferred stock are entitled to
receive, prior and in preference to any distribution of any of the assets
or surplus funds of the Company to common stockholders, an amount of $0.85,
$0.85, $1.08, $ 0.50, $0.79 and $1.10, respectively, per share plus an
amount equal to any declared but unpaid dividends on such shares. If the
assets and funds distributed among the holders of the Series A, Series A-1,
Series B, Series C, Series D and Series E preferred stock are insufficient
to permit the payment to the holders of the full amount as calculated
above, then the entire assets and funds of the Company legally available
for distribution shall be distributed among the holders of the Series A,
Series A-1, Series B, Series C, Series D and Series E preferred stock in
proportion to the preferential amounts to which each holder of Series A,
Series A-1, Series B, Series C, Series D and Series E preferred stock would
otherwise be entitled. After giving effect to the above distribution,
remaining assets and funds are to be distributed among the holders of
preferred and common stock pro rata based on the number of shares of common
stock held by each (assuming conversion into common stock of all such
Series A, Series A-1, Series B, Series C, Series D and Series E preferred
stock).

Conversion and Registration:

The preferred stock is convertible at the option of the holder, at any
time, into common stock as is determined by dividing $0.85, $0.85, $1.08, $
0.50, $0.79 and $1.10 by the Series A, Series A-1, Series B, Series C,
Series D and Series E conversion prices, respectively. The Board of
Directors have authorized the Series A, Series A-1, Series B, Series C,
Series D and Series E conversion prices to be $3.7184, $5.8000, $3.7184,
$4.000, $3.1600 and $4.400, respectively, per share of common stock,
subject to the filing of the amended articles of incorporation. Conversion
is automatic upon the earlier of the closing date of a public offering of
the Company's common stock for which the aggregate proceeds equal or exceed
$10,000,000 and the per share offering price is not less than $8.00, or
upon consent of two-thirds of the preferred shareholders. At December 31,
1995 and June 30, 1996, the Company has reserved 4,823,979 and 4,958,533
shares, respectively, of common stock in the event of conversion.

Voting:

Each share of preferred stock is entitled to vote on an "as converted"
basis along with common shareholders.

F-14

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

7. Stockholders' Deficit

COMMON STOCK:

At December 31, 1995 and June 30, 1996, 12,293 and 633 shares of common
stock, respectively, were subject to repurchase by the Company under the
Company's 1992 Restricted Stock Purchase Plan. In March 1996, the Board of
Directors approved an amendment to the Company's Certificate of
incorporation to increase the authorized number of shares of common stock
to 10,000,000 shares. In May 1996, the Company's Board of Directors
authorized management of the Company to file a Registration Statement with
the Securities and Exchange Commission permitting the Company to sell its
shares of common stock to the public.

STOCK OPTION PLAN:

The Board of Directors has reserved 1,208,921 and 2,030,695 shares of
common stock as of December 31, 1995 and June 30, 1996, respectively, under
its 1995 Stock Option Plan (the "1995 Plan") for issuance to employees and
directors of the Company.

STOCK PLANS

The 1995 Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options
to employees (including officers and employee directors) and consultants of
the Company. The 1995 Plan is administered by the Board of Directors or by
a committee appointed by the Board which identifies optionees and
determines the terms of options granted, including the exercise price,
number of shares subject to the option and the exercisability thereof.

The terms of options granted under the 1995 Plan generally may not exceed
ten years. The term of all incentive stock options granted to an optionee
who, at the time of grant, owns stock representing more than 10% of the
voting power of all classes of stock of the Company or a parent or
subsidiary of the Company (a "Ten Percent Stockholder"), may not exceed
five years, however. Generally, options granted under the 1995 Plan vest
and become exercisable starting one year after the date of grant, with 25%
of the shares subject to the option becoming exercisable at that time and
an additional 1/48th of such shares becoming exercisable each month
thereafter. Holders of options granted under the 1995 Plan may exercise
their options prior to complete vesting of shares, subject to such holder's
entering a restricted stock purchase agreement granting the Company an
option to repurchase, in the event of a termination of the optionee's
employment or consulting relationship, any unvested shares at a price per
share equal to the original exercise price per share for the option. The
exercise price of incentive stock options granted under the 1995 Plan must
be at least equal to the fair market value of the shares on the date of
grant. The exercise price of nonstatutory stock options granted under the
1995 Plan is determined by the Board of Directors. The exercise price of
any incentive stock option granted to a Ten Percent Stockholder must equal
at least 110% of the fair market value of the Common Stock on the date of
grant. To the extent incentive stock options granted to a participant, when
aggregated with all other incentive stock options granted to such
participant, have an aggregate fair market value in excess of $100,000
first becoming exercisable in any calendar year, such options would be
treated as nonstatutory stock options.

F-15

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

7. Shareholders' Deficit, continued

Activity under the Plan is as follows:

OPTIONS OUTSTANDING
SHARES ----------------------------------
AVAILABLE NUMBER
FOR OF EXERCISE AGGREGATE
GRANT SHARES PRICE PRICE
---------- ---------- ----------- ----------

Shares authorized at
inception of 1995 Stock
Plan.................... 1,208,921
Options granted.......... (1,242,782) 1,242,782 $0.12-$0.32 $ 166,650
Options exercised........ (317,954) $0.12 (38,154)
Options canceled......... 97,441 (97,441) $0.12 (11,693)
---------- ---------- ----------
Balances, December 31,
1995...................... 63,580 827,387 116,803
Increase in shares
authorized.............. 821,775
Options granted.......... (759,164) 759,164 $0.32-$6.00 $1,730,130
Options exercised........ (1,023,089) $0.08-$6.00 (230,822)
Options canceled......... 21,706 (21,706) $0.08-$6.00 (7,324)
---------- ---------- ----------
Balances, June 30, 1996.... 147,897 541,756 $1,608,787
========== ========== ==========

As of December 31, 1995 and June 30, 1996, 421,173 and 50,843 outstanding
options, respectively, upon exercise would not be subject to the Company's
right of repurchase. In addition, as of December 31, 1995 and June 30,
1996, 199,177 and 713,993 shares exercised under the Plan are subject to
repurchase.

The Company has the right of first refusal in the event a stockholder
decides to sell or transfer any of the Company's common stock received upon
exercise of options under the Plan. This right of first refusal terminates
upon a public offering of this Company.

8. Employee Benefit Plan:

The Company has a 401(k) Profit Sharing Plan (the Plan), which covers
substantially all employees. Each eligible employee may elect to contribute
to the Plan, through payroll deductions up to 20% of their compensation,
subject to current statutory limits. The Company, at the discretion of the
Board of Directors, may make matching contributions to the Plan, but has
not done so during the years ended December 31, 1993, 1994 or 1995 or the
six months ended June 30, 1996.

9. Income Taxes:

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets are presented below (in thousands):

YEAR ENDED
DECEMBER 31,
----------------
1994 1995
------- -------

Depreciation and accrued liabilities.................... $ 409 $ 323
Capitalized research and development costs.............. 500 1,718
Net operating loss carryforward......................... 2,042 3,024
Research and development credit carryforward............ 309 366
Valuation allowance..................................... (3,260) (5,431)
------- -------
Net deferred tax asset.................................. $ -- $ --
======= =======

F-16

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

9. Income Taxes, continued

The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management evaluates on a quarterly basis the recoverability of the deferred
tax assets and the level of the valuation allowance. At such time as it is
determined that it is more likely than not that deferred tax assets are
realizable the valuation allowance will be reduced.

The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:

YEAR ENDED MAY 31,
--------------------------
1993 1994 1995
------ ------ ------

Income tax (benefit) provision at statutory
rate........................................ (34)% (34)% (34)%
Net operating loss not benefited............. 34 34 34
------ ------ ------
Effective tax rate........................... -- % -- % -- %
====== ====== ======

As of December 31 1995, the Company had approximately $8,000,000 of net
operating loss carryforwards for federal and state purposes to offset future
taxable income. These federal and state carryforwards expire in the years 2007
through 2010, and 1996 through 2000, respectively. The Company's ability to
recognize these carryforwards may be limited as a result of future changes in
ownership, as defined by tax law.

10. Major Customers:

No single customer accounted for 10% or more of the Company's revenues in
fiscal year 1993 and 1994 or the six months ended June 30, 1995. One customer
accounted for 11% of revenues for the year ended December 31, 1995 and one
customer accounted for 10% of revenues for the six months ended June 30, 1996.

11. Pro Forma Financial Statement Information:

Upon the closing of the Company's initial public offering, each outstanding
share of the Company's Series A, A-1, B, C, D and E mandatorily redeemable
convertible preferred stock will be converted automatically to common stock
based on conversion rates set forth in Note 6. The pro forma effect of the
conversion has been presented as a separate column in the Company's balance
sheet assuming the conversion had occurred as of June 30, 1996.

12. Subsequent Events:

In July 1996, the Company's Board of Directors approved, subject to
stockholder approval, the reincorporation of the Company from a California to
a Delaware corporation, which is expected to be effective before the
completion of the Company's initial public offering of its common stock. Upon
the effective date of the reincorporation, California Corporation's
outstanding common stock will be converted automatically into shares of common
stock of the Delaware Corporation on a four-for-one basis. In addition, the
California Corporation's outstanding mandatorily redeemable convertible
preferred stock will automatically convert into shares of mandatorily
redeemable convertible preferred stock of the Delaware Corporation on a one-
for-one basis. All references to number of shares and to per share information
in the financial statements have been adjusted to reflect the conversion on a
retroactive basis.

F-17

AURUM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

In July 1996, the Board of Directors authorized an increase in the number of
shares of common stock reserved for issuance under the 1995 Stock Option Plan
by 300,000 shares.

In September 1996, the Board of Directors adopted, subject to stockholder
approval, the 1996 Employee Stock Purchase Plan (the "Purchase Plan"). A total
of 300,000 shares are reserved for issuance under the Purchase Plan. No shares
have been issued under the Purchase Plan. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions, subject to
certain limitations. The price at which stock is purchased under the Purchase
Plan is equal to 85% of the fair market value of the common stock on the first
day of the applicable offering period or the last day of the applicable
offering period, whichever is lower.

In September, 1996, the Board of Directors adopted the 1996 Director Option
Plan (the "Director Plan"). A total of 150,000 shares of common stock has been
reserved for issuance under the Director Plan. The option grants under the
Director Plan are automatic and non-discretionary, and the exercise price of
the option is 100% of the fair market value of the common stock on the grant
date. The Director Plan provides for an initial grant of options to purchase
18,750 shares of common stock to each new non-employee director of the Company
(an "Outside Director") upon the effective date of this offering at a per-
share exercise price equal to the initial public offering price. In addition,
each Outside Director will automatically be granted subsequent options to
purchase 18,750 shares of common stock at the first meeting of the Board of
Directors following the annual meeting of stockholders in each year beginning
with the 1997 Annual Meeting of Stockholders, if on such date, such Outside
Director has served on the Board of Directors for at least six months. The
term of such options is ten years. The initial options granted to an Outside
Director vest at a rate of 25% on the first anniversary of the date of grant
and at a rate of 1/48th of the shares per month thereafter, and subsequent
options granted to Outside Directors become exercisable at a rate of 1/48th of
the shares subject to such additional options on the monthly anniversary of
the date of grant, subject to the Outside Director's continuous service on the
Board of Directors. The Director Plan will terminate in 2006 unless sooner
terminated by the Board of Directors.

F-18

CLOSED-LOOP

SALES AND MARKETING PROCESS

FIELD SALES

MANAGEMENT

TELEMARKETING

SUPPORT

[DEPICTION OF FOUR SOFTWARE GRAPHICAL INTERFACES REPRESENTING THE SOFTWARE
FUNCTION]

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

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

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

TABLE OF CONTENTS

PAGE
----

Prospectus Summary....................................................... 3
The Company.............................................................. 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 25
Management............................................................... 42
Certain Transactions..................................................... 52
Principal and Selling Stockholders....................................... 54
Description of Capital Stock............................................. 57
Shares Eligible for Future Sale.......................................... 60
Underwriting............................................................. 62
Legal Matters............................................................ 63
Experts.................................................................. 63
Additional Information................................................... 64
Index to Financial Statements............................................ F-1

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

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

[LOGO]

Common Stock

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

PROSPECTUS

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

Alex. Brown & Sons
INCORPORATED

Cowen & Company

Wessels, Arnold & Henderson

October , 1996

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION FOR DIRECTORS AND OFFICERS

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale
of the Common Shares being registered. All of the amounts shown are estimates
except for the SEC registration fee and the NASD filing fee.

AMOUNT
TO BE PAID
----------

SEC Registration Fee........................................... $ 11,450
NASD Filing Fee................................................ 3,821
The Nasdaq Stock Market Listing Fee............................ 45,270
Blue Sky Qualification Fees and Expenses....................... 15,000
Printing and Engraving Expenses................................ 115,000
Legal Fees and Expenses........................................ 250,000
Accounting Fees and Expenses................................... 200,000
Transfer Agent and Registrar Fees.............................. 15,000
Directors' and Officers' Insurance............................. 300,000
Miscellaneous.................................................. 44,459
----------
Total...................................................... $1,000,000
==========

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

Since the Registrant's inception in October 1991, the Registrant has issued
and sold (without payment of any selling commission to any person) the
following unregistered securities.

1. From March 27, 1992 to August 31, 1996, the Registrant issued and sold
3,649,149 shares of Common Stock to employees and consultants at prices
ranging from $0.12 to $6.00 per share, upon exercise of stock options and
stock purchase rights, pursuant to the Registrant's 1992 Restricted Stock
Purchase Plan, 1993 Stock Option Plan and 1995 Stock Plan.

2. On January 13, 1993, the Registrant issued and sold 4,411,765 shares
of Series A Preferred Stock to a total of four (4) investors for an
aggregate purchase price of $3,750,000.25.

II-1

3. On December 20, 1993, the Registrant issued and sold 4,782,408 shares
of Series B Preferred Stock to a total of seven (7) investors for an
aggregate purchase price of $5,165,000.64.

4. On December 23, 1994, the Registrant issued and sold 5,000,000 shares
of Series C Preferred Stock to a total of five (5) investors for an
aggregate purchase price of $2,500,000 and issued warrants to such
investors to acquire an aggregate 5,529,110 shares of Common stock at an
aggregate exercise price of $55.30.

5. On August 20, 1995, the Registrant issued and sold 7,607,719 shares of
Series D Preferred Stock to a total of eight (8) investors for an aggregate
purchase price of $6,010,097.93.

6. On November 17, 1995, the Registrant issued and sold 100,000 shares of
Series D Preferred Stock to one (1) investor in exchange for certain assets
the Company valued at an aggregate of $79,000.

7. On March 29, 1996, the Registrant issued and sold an aggregate of
1,363,637 shares of Series E Preferred Stock to two (2) investors for an
aggregate purchase price of $1,500,000.70.

8. On May 17, 1996, the Registrant issued and sold an aggregate of 6,250
shares of Common Stock to three (3) investors for an aggregate purchase
price of $37,500.

9. On August 20, 1996 to August 28, 1996, the Registrant issued and sold
an aggregate of 6,250 shares of Common Stock to six (6) investors for an
aggregate purchase price of $37,500.

The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section
3(b) of the Securities Act, as transactions by an issuer not involving a
public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each such transaction represented their intention
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and instruments issued in such transactions.
All recipients had adequate access, through their relationship with the
Company, to information about the Registrant.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

1.1* Form of Underwriting Agreement.
3.1 Form of Restated Certificate of Incorporation of the Registrant to be
filed prior to completion of the offering.
3.2 Bylaws of the Registrant.
4.1* Specimen Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement between the Registrant and each of its
directors and officers.
10.2 1995 Stock Plan and form of Stock Option Agreement thereunder.
10.3 1996 Director Option Plan and form of Director Stock Option Agreement
thereunder.
10.4 1996 Employee Stock Purchase Plan and forms of agreement thereunder.
10.5 Lease dated March 5, 1996 between the Registrant and Cooperage-Rose
Properties II.
10.6 Letter agreement dated December 22, 1994 between the Registrant and Mary
E. Coleman, as amended.

II-2

10.7 Letter Agreement dated July 8, 1996 between the Registrant and Christopher L. Dier.
10.8+ OEM Software License Agreement, amended as of April 3, 1996, between the Registrant and
Gupta Corporation.
10.9 Line of Credit Agreement dated July 15, 1996, modifying the Business Loan Agreement dated
July 13, 1993, between the Registrant and Silicon Valley Bank.
10.10 Promissory Note dated July 15, 1996 between the Registrant and Silicon Valley Bank.
11.1 Calculation of pro forma net loss per share.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.

- --------
* To be supplied by amendment.
+ Confidential treatment has been requested for portions of these agreements
pursuant to a request for confidential treatment filed with the Commission.
Omitted portions have filed separately with the Commission.

(b) Financial Statement Schedules:

Report of Independent Accountants

Schedule II--Valuation and Qualifying Accounts

All other Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

ITEM 28. UNDERTAKINGS

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

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

The Registrant hereby undertakes that:

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

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

II-3

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and authorized
this Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on the 13th the day of September, 1996.

Aurum Software, Inc.

/s/ Mary E. Coleman
By: _________________________________
MARY E. COLEMAN
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Mary E. Coleman and Christopher L. Dier
and each one of them, acting individually and without the other, as his or her
attorney-in-fact, each with full power of substitution, for him and her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or substitutes may
do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES STATED.

SIGNATURE TITLE DATE

/s/ Mary E. Coleman President and Chief September 13,
- ------------------------------------- Executive Officer 1996
(MARY E. COLEMAN) (Principal
Executive Officer)

/s/ Christopher L. Dier Chief Financial September 13,
- ------------------------------------- Officer and 1996
(CHRISTOPHER L. DIER) Secretary
(Principal
Financial and
Accounting Officer)

/s/ David D. Buchanan Director September 13,
- ------------------------------------- 1996
(DAVID D. BUCHANAN)

II-4

SIGNATURE TITLE DATE

/s/ Oliver D. Curme Director September 13,
- ------------------------------------- 1996
(OLIVER D. CURME)

/s/ Mark J. Leslie Director September 13,
- ------------------------------------- 1996
(MARK J. LESLIE)

/s/ Robert J. Loarie Director September 13,
- ------------------------------------- 1996
(ROBERT J. LOARIE)

/s/ Robert M. Obuch Director September 13,
- ------------------------------------- 1996
(ROBERT M. OBUCH)

/s/ Jeffrey T. Webber Director September 13,
- ------------------------------------- 1996
(JEFFREY T. WEBBER)

/s/ Charles C. Wu Director September 13,
- ------------------------------------- 1996
(CHARLES C. WU)

II-5

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Aurum Software, Inc.

In connection with our audits of the financial statements of Aurum Software,
Inc. as of December 31, 1994 and 1995, and for each of the three years in the
period ended December 31, 1995, which financial statements are included in
this Registration Statement, we have also audited the financial statement
schedule listed in Item 27(b) herein.

In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.

COOPERS & LYBRAND L.L.P.

San Jose, California
March 5, 1996

SCHEDULE II

AURUM SOFTWARE, INC.

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
----------- ---------- --------- ---------- ----------

Allowance for doubtful accounts
receivable:
Year ended December 31, 1993..... $ 67 $183 $ -- $250
==== ==== ====== ====
Year ended December 31, 1994..... $250 $ 87 $ (19) $318
==== ==== ====== ====
Year ended December 31, 1995..... $318 $125 $(103) $340
==== ==== ====== ====

- --------
(a)Uncollectible accounts written-off.