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                                               Filed pursuant to rule 424(b)(3) 
                                               Registration No. 333-47265

================================================================================
                                   PROSPECTUS
================================================================================


                          VERITAS SOFTWARE CORPORATION

                               U.S. $100,000,000
               5-1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004 AND
            SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF

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

This Prospectus relates to U.S. $100,000,000 aggregate principal amount 5-1/4%
Convertible Subordinated Notes due 2004 (the "Notes") of VERITAS Software
Corporation (the "Company") under the Securities Act of 1933, as amended (the
"Securities Act"), and the shares of Common Stock, $0.001 par value of the
Company, ("Common Stock") issuable upon the conversion of the Notes (the
"Conversion Shares").  The Notes registered hereby were issued and sold on
October 10, 1997 (the "Original Offering") pursuant to an Indenture dated
October 1, 1997 (the "Indenture") in transactions exempt from the registration
requirements of the Securities Act, by UBS Securities LLC, as the initial
purchaser (the "Initial Purchaser") of the Notes, to "qualified institutional
buyers" (as defined by Rule 144A under the Securities Act).  The Notes and the
Common Stock issuable upon conversion thereof may be offered and sold from time
to time by the holders named herein or by their transferees, pledgees, donees
or their successors (collectively, the "Selling Securityholders") pursuant to
this Prospectus.  The Registration Statement of which this Prospectus is a part
has been filed with the Securities and Exchange Commission pursuant to a
Registration Rights Agreement dated as of October 1, 1997 (the "Registration
Rights Agreement") between the Company and the Initial Purchaser, entered into
in connection with the Original Offering.

The Notes are convertible at the option of the holder into shares of Common
Stock of the Company at any time on or after October 10, 1997 and prior to
redemption or maturity, at a conversion rate of $64.50 principal amount of
Notes per share, in denominations of $1,000 or any multiple thereof, subject to
adjustment under certain circumstances.  Interest on the Notes is payable
semi-annually in arrears on May 1 and November 1 of each year, commencing on
May 1, 1998.  On June 11, 1998, the closing price of the Common Stock,
which is quoted on the Nasdaq National Market under the symbol "VRTS," was
$37.625 per share.

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

  THE NOTES AND THE COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
                    SEE "RISK FACTORS" COMMENCING ON PAGE 7.

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

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



================================================================================
                 THE DATE OF THIS PROSPECTUS IS JUNE 12, 1998.

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         The Notes are subordinated to all existing and future Senior
Indebtedness (as defined in the Indenture) and effectively subordinated to all
liabilities, including trade payables and lease obligations, if any, of the
Company's subsidiaries.  The issuer of the Notes is a holding company with no
significant operating assets, and its ability to make payments on the Notes is
dependent on distributions from its subsidiaries.  As of December 31, 1997, the
Company had no indebtedness outstanding that would have constituted Senior
Indebtedness and the Company's subsidiaries had approximately $37.7 million of
indebtedness and other liabilities outstanding (excluding liabilities of a type
not required to be reflected on a balance sheet in accordance with generally
accepted accounting principles and intercompany liabilities) to which the Notes
would have been effectively subordinated.  The Indenture does not limit the
amount of indebtedness, including Senior Indebtedness, that the Company may
incur or the amount of indebtedness or other liabilities that the Company's
subsidiaries may incur.

         The Notes will mature on November 1, 2004.  The Notes are not
redeemable by the Company prior to November 5, 2002.  On or after November 5,
2002, the Notes may be redeemed at the option of the Company in whole, or from
time to time in part, at the redemption prices set forth herein, plus accrued
interest.  In the event of a Fundamental Change (as defined in the Indenture)
each holder of Notes may require the Company to repurchase its Notes, in whole
or in part, for cash at a repurchase price of 101% of the principal amount
thereof, plus accrued interest.

         The Notes and the Conversion Shares may be offered by the Selling
Securityholders from time to time in transactions (which may include block
transactions in the case of the Conversion Shares) on any exchange or market on
which such securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices.
The Selling Securityholders may effect such transactions by selling the Notes
or Conversion Shares directly or to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Notes or Conversion Shares
for whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).  The Company will not receive any of
the proceeds from the sale of the Notes or Conversion Shares by the Selling
Securityholders.  The Company has agreed to pay all expenses incident to the
offer and sale of the Notes and Conversion Shares offered by the Selling
Securityholders hereby, except that the Selling Securityholders will pay all
underwriting discounts and selling commissions, if any.  See "Plan of
Distribution."

         The Notes have been designated for trading on The Portal Market.
Notes sold pursuant to this Prospectus are not eligible for trading on The
Portal Market.

         The Selling Securityholders will receive all of the net proceeds from
the sale of the Notes and the Common Stock issuable upon conversion of the
Notes and will pay all underwriting discounts and selling commissions, if any,
applicable to the sale of the Notes and the Common Stock issuable upon
conversion of the Notes.  The Company is responsible for payment of all other
expenses incident to the offer and sale of the Notes and the Common Stock
issuable upon conversion of the Notes.

                               TABLE OF CONTENTS



                                                                                                  
Available Information . . . . . . . . . . . . .  3          Description of Notes  . . . . . . . . . . . . . . . . . . . . 19
Documents Incorporated by Reference . . . . . .  4          Description of Capital Stock  . . . . . . . . . . . . . . . . 32
The Company . . . . . . . . . . . . . . . . . .  5          Certain United States Federal Income Tax Considerations . . . 34
The Offering  . . . . . . . . . . . . . . . . .  6          Selling Securityholders . . . . . . . . . . . . . . . . . . . 39
Risk Factors  . . . . . . . . . . . . . . . . .  7          Plan of Distribution  . . . . . . . . . . . . . . . . . . . . 42
Ratio of Earnings to Fixed Charges  . . . . . .  18         Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . 43
Use of Proceeds . . . . . . . . . . . . . . . .  18         Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Dividend Policy . . . . . . . . . . . . . . . .  18







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                             AVAILABLE INFORMATION

         The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements, and other information filed by
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C.  20549, as well as the regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and Seven World Trade Center, Suite 1300, New York, New York 10048.  Copies of
such material can be obtained from the Public Reference Section of the
Commission at 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 that are filed through
the Commission's Electronic Data Gathering, Analysis and Retrieval system.
This Web site can be accessed at http://www.sec.gov.  The Company's Common
Stock is quoted on the Nasdaq National Market and reports, proxy statements and
other information concerning the Company also may be inspected at the offices
of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.

         The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Notes and 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,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, or further information with respect to the Company, the
Notes and the Common Stock, reference is made to the Registration Statement and
the exhibits and schedules thereto.  Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete
and, in each instance, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.  Copies of the Registration
Statement, including all exhibits thereto, may be obtained from the
Commission's principal office in Washington, D.C.  upon payment of the fees
prescribed by the Commission, or may be examined without charge at the offices
of the Commission described above.

         The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus is delivered, upon written or oral request of
any such person, a copy of any and all of the information that has been or may
be incorporated by reference in this Prospectus, other than exhibits to such
documents.  Requests for such copies should be directed to Kenneth E. Lonchar,
VERITAS Software Corporation, 1600 Plymouth Street, Mountain View, CA  94043,
Phone:  (650) 335-8000.

         No person is authorized in connection with any offering made hereby to
give any information or to make any representation not contained or
incorporated by reference in this Prospectus, and any information or
representation not contained or incorporated herein must not be relied upon as
having been authorized by the Company or any Selling Securityholder.  This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy by any person in any jurisdiction in which it is unlawful for such
person to make such an offer or solicitation.  Neither the delivery of this
Prospectus at any time nor any sale made hereunder shall, under any
circumstances, imply that the information herein is correct as of any date
subsequent to the dates as of which information is given in this Prospectus.




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                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         The following documents previously filed with the Commission are
incorporated herein by reference into this Prospectus:

(1)      The Company's Annual Report on Form 10-K for the fiscal year ended
         December 31, 1997.

(2)      The Company's Quarterly Report on Form 10-Q for the fiscal quarter
         ended March 31, 1998.

(3)      The description of the Company's capital stock contained in the
         Company's Registration Statement on Form 8-B filed on May 12, 1997.

         All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act following the date of this Prospectus and
prior to the termination of the offering contemplated hereby shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents.

         Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus and the Registration Statement of which it
is a part to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement.  Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus and the Registration
Statement of which it is a part.








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                                    SUMMARY

         The following summary is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
included or incorporated by reference in this Prospectus.

                                  THE COMPANY

         VERITAS is the leading independent supplier of enterprise data storage
management solutions, providing advanced storage management software for open
system environments.  The Company's products provide performance improvement
and reliability enhancement features that are critical for many commercial
applications.  These products enable protection against data loss and file
corruption, rapid recovery after disk or system failure, the ability to process
large files efficiently and the ability to manage and back-up large networks of
systems without interrupting users.  In addition, the Company's products
provide an automated failover between computer systems organized in clusters
sharing disk resources.  The Company's highly scalable products can be used
independently, and certain products can be combined to provide interoperable
client/server storage management solutions.  The Company's products offer
centralized administration with a high degree of automation, enabling customers
to manage complex, distributed environments cost-effectively by increasing
system administrator productivity and system availability.  The Company also
provides a comprehensive range of services to assist customers in planning and
implementing storage management solutions.  The Company markets its products
and associated services to original equipment manufacturer ("OEM") and end-user
customers through a combination of direct and indirect sales channels
(resellers, value-added resellers ("VARs"), hardware distributors, application
software vendors and systems integrators).  The Company's OEM customers include
Digital Equipment Corporation ("DEC"), Hewlett-Packard Company ("HP"), Sun
Microsystems, Inc.  ("Sun Microsystems"), Microsoft Corporation ("Microsoft"),
Sequent Computer Systems, Inc.  and Tandem Computers, Inc.  The Company's
end-user customers include AT&T Corporation, Bank of America, BMW, Boeing
Company, British Telecommunications plc, Chrysler Corporation and Motorola,
Inc.

         In January 1997, VERITAS Software Corporation, a Delaware corporation
("VERITAS Delaware"), and VERITAS Software Corporation, a California
corporation ("VERITAS California"), entered into an Agreement and Plan of
Reorganization with OpenVision Technologies, Inc., a Delaware corporation
("OpenVision"), a publicly-held company that provided storage management
applications and services for client/server computing environments.  This
agreement provided for the merger (the "Merger") of a wholly-owned subsidiary
of VERITAS Delaware with and into OpenVision and the merger (the
"Reincorporation") of another wholly-owned subsidiary of VERITAS Delaware with
and into VERITAS California, thereby resulting in VERITAS California and
OpenVision becoming wholly-owned subsidiaries of VERITAS Delaware.  The Merger
and the Reincorporation became effective on April 25, 1997.  Approximately 9.8
million shares of Common Stock were issued in the Merger, and the Company has
reserved approximately 1.4 million shares of Common Stock for issuance pursuant
to the assumption of outstanding options, warrants and rights to purchase
OpenVision Common Stock.  As used in this Prospectus, unless otherwise
indicated, "VERITAS" and "the Company" refer to VERITAS Delaware together with
its subsidiaries.




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                                  THE OFFERING



                                                  
Securities Offered  . . . . . . . . . . . . . . .    $100,000,000 principal amount of 5-1/4% Convertible
                                                     Subordinated Notes due 2004 (the "Notes"), issued under an
                                                     indenture dated as of October 1, 1997 (the "Indenture")
                                                     between the Company and State Street Bank and Trust Company
                                                     of California, N.A. as trustee (the "Trustee") and Common
                                                     Stock issuable upon conversion thereof

Maturity Date . . . . . . . . . . . . . . . . . .    November 1, 2004

Interest Payment Dates  . . . . . . . . . . . . .    May 1 and November 1, commencing May 1, 1998

Conversion  . . . . . . . . . . . . . . . . . . .    The Notes are convertible into Common Stock at any time prior
                                                     to the close of business on the maturity date, unless
                                                     previously redeemed or repurchased, at a conversion price of
                                                     $64.50 per share, subject to adjustment in certain events.

Subordination . . . . . . . . . . . . . . . . . .    The Notes are subordinated to all existing and future Senior
                                                     Indebtedness (as defined in the Indenture) and effectively
                                                     subordinated to all liabilities, including trade payables and
                                                     lease obligations, if any, of the Company's subsidiaries.
                                                     The issuer of the Notes is a holding company with no
                                                     significant operating assets, and its ability to make
                                                     payments on the Notes is dependent on distributions from its
                                                     subsidiaries.  As of December 31, 1997, the Company had no
                                                     indebtedness outstanding that would have constituted Senior
                                                     Indebtedness and the Company's subsidiaries had approximately
                                                     $37.7 million of indebtedness and other liabilities
                                                     outstanding (excluding liabilities of a type not required to
                                                     be reflected on a balance sheet in accordance with generally
                                                     accepted accounting principles and intercompany liabilities)
                                                     to which the Notes would have been effectively subordinated.
                                                     The Indenture does not limit the amount of indebtedness,
                                                     including Senior Indebtedness, that the Company may incur or
                                                     the amount of indebtedness or other liabilities that the
                                                     Company's subsidiaries may incur.

Optional Redemption . . . . . . . . . . . . . . .    The Notes are not redeemable by the Company prior to November
                                                     5, 2002.  On or after November 5, 2002, the Notes may be
                                                     redeemed at the option of the Company in whole, or from time
                                                     to time in part, at the redemption prices set forth herein,
                                                     plus accrued interest.
Repurchase at Option of
Holders Upon a Fundamental Change . . . . . . . .    In the event of a Fundamental Change (as defined in the
                                                     Indenture) each holder of Notes may require the Company to
                                                     repurchase its Notes, in whole or in part, for cash at a
                                                     repurchase price of 101% of the principal amount thereof,
                                                     plus accrued interest.


Use of Proceeds . . . . . . . . . . . . . . . . .    The proceeds of the Notes will be used for general corporate
                                                     purposes, including working capital, possible facilities
                                                     expansion or acquisitions of businesses, products or
                                                     technologies that would complement the Company's business.
                                                     See "Use of Proceeds."

Registration Rights . . . . . . . . . . . . . . .    Upon any failure by the Company to comply with certain of its
                                                     obligations under the Registration Rights Agreement, certain
                                                     predetermined liquidated damages will be payable by the
                                                     Company to holders of the Notes.








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                                  RISK FACTORS

         This Prospectus contains or incorporates by reference forward-looking
statements that involve risks and uncertainties.  The statements contained or
incorporated by reference in this Prospectus that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future.  All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and all forward-looking statements in documents incorporated
by reference are based on information available to the Company as of the date
of such documents.  The Company assumes no obligation to update any such
forward-looking statements.  There are certain important factors that could
cause actual results to differ materially from those projected in the
forward-looking statements, including those set forth in the following risk
factors and elsewhere in this Prospectus.  In evaluating the Company's
business, prospective investors should consider carefully the following factors
in addition to the other information set forth in this Prospectus.

         Management of Growth; Dependence on Key Personnel.  The Company
increased significantly in size as a result of the Merger, has continued to
grow since that time and expects to continue to experience periods of
significant growth in the future.  The Company's agreements with key OEMs such
as Sun Microsystems, HP and Microsoft require the hiring of additional
engineering, sales and support personnel, and the commitment of significant
staffing to the performance of the Company's obligations under such agreements.
Such growth is likely to strain the Company's management control systems and
resources (including decision support, accounting, e-mail and management
information systems).  With future growth, the Company will be required to
continue to improve its financial and management controls, reporting systems
and procedures on a timely basis, to expand, train and manage its employee work
force and to secure additional facilities when and if needed.  There can be no
assurance that the Company will be able to manage such growth effectively.  Any
failure to do so could have a material adverse effect on its business,
operating results and financial condition.  Competition for qualified sales,
technical and other personnel is intense, and there can be no assurance that
the Company will be able to attract, assimilate or retain additional highly
qualified employees in the future.  If the Company is unable to hire and retain
such personnel, particularly those in key positions, its business, operating
results and financial condition would be materially and adversely affected.
The Company's future success also depends in significant part upon the
continued service of its key technical, sales and senior management personnel.
The loss of the services of one or more of these key employees could have a
material adverse effect on its business, operating results and financial
condition.  Additions of new personnel and departures of existing personnel,
particularly in key positions, can be disruptive and can result in departures
of other existing personnel, which could have a material adverse effect on the
Company's business, operating results and financial condition.

         New Distribution Channels.  A significant portion of the Company's net
revenues are derived from user license fees received from computer OEMs that
incorporate the Company's storage management software products into their
operating systems.  The Company has no control over the shipping dates or
volumes of systems shipped by its OEM customers, and there can be no assurance
that any OEMs will ship operating systems incorporating the Company's products
in the future.  Furthermore, the Company's license agreements with its OEM
customers generally do not require the OEMs to recommend or offer the Company's
products exclusively, have no minimum sales requirements and may be terminated
by the OEMs without cause.

         To enhance the worldwide marketing and distribution of its products,
the Company has established strategic relationships with hardware manufacturers
including Hewlett-Packard and Sun Microsystems, operating system vendors
including Microsoft, and disk and tape subsystem vendors including Exabyte.
The Company seeks to leverage its strategic relationships with these and other
OEM customers to seed the market with its products and to encourage OEMs and
other resellers to sell add-on VERITAS products to small and medium-sized
accounts and to departments within large organizations.  The Company's
strategic relationships with HP, Sun Microsystems and Microsoft reflect a
strategy for OEM product distribution involving the bundling by OEMs of certain
functional subsets or "lite" versions of the Company's products with OEM
computer systems, cooperative direct selling of full versions of such products
by the Company and the OEMs, and the direct sale by the Company of added value




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products to the OEM installed base of customers.  There can be no assurance
that the Company will be able to deliver its products to such OEMs in a timely
manner despite the dedication of significant engineering and other resources to
the development of such products.  Any such failure could result in the Company
having expended significant resources with little or no return on its
investment, which could have a material adverse effect on the Company's
business, operating results and financial condition.  There can further be no
assurance that this distribution strategy will achieve the desired propagation
of the Company's technology in the market place, or result in sufficient
revenues to the OEMs to induce OEMs to actively market the Company's products
to their customers, which could have a material adverse effect on the Company's
business, operating results and financial condition.  There can be no assurance
that the simultaneous sales efforts of such OEMs and the Company will not
create certain channel conflicts.  Furthermore, failure of the Company to
timely develop and achieve market acceptance of new products for sale to the
OEM installed customer base could lead to a significant loss of potential
revenue to the Company.

         In August 1996, the Company entered into a Development and License
Agreement with Microsoft pursuant to which the Company agreed to develop a
functional subset of the VERITAS Volume Manager product to be ported to and
embedded in the Windows NT operating system ("Windows NT").  In connection with
the Company's agreement with Microsoft, there can be no assurance that
Microsoft will use the Company's products in any future version of Windows NT,
nor that the Company will realize any expected benefits even if such products
are used in any future version of Windows NT.  If the Company's products are
not available in a timely fashion, if Microsoft does not use these products in
Windows NT, or if the Company does not receive any benefits for the use of its
products in Windows NT, the Company's business, operating results and financial
condition could be materially adversely affected.  If the release by Microsoft
of Windows NT 5.0 is significantly delayed, and/or the rate of adoption of
Windows NT 5.0 by users is slow, the Company will not be in a position to
market add-on products to the Windows NT installed customer base, thereby
resulting in possible delays in, or loss of, revenue to the Company.  Moreover,
the Company would have lost certain opportunities as a result of the diversion
of resources to this project.  Under this agreement, Microsoft is also
permitted to develop enhancements to and derivative products from the Company's
products that are embedded in certain Windows NT releases, and would retain
ownership of any such enhancements or derivative products.  There can be no
assurance that Microsoft will not develop any such enhancements or derivative
products and, as a result, compete with the Company in this area.  See " --
Uncertainty in Porting Products to New Operating Systems and Expansion into
Windows NT Market."

         In recent years, the Company has made significant investments in the
establishment of other distribution channels. Efforts by the Company in this
area include: (i) the introduction of shrink wrap packages of certain VERITAS
storage management software products for multiple platforms; (ii) the
distribution of end-user products for the Sun Microsystems' Solaris operating
system; (iii) the acquisition of Tidalwave Technologies, Inc. ("Tidalwave") in
April 1995, as a result of which the Company began distributing the VERITAS
FirstWatch end-user products; and (iv) the Merger with OpenVision which
provided an established and significant direct sales channel to the Company.

         As a result of the Merger, the Company's direct sales force is
marketing and selling the Company's products in competition with indirect
sellers of its products, such as OEMs and resellers, which could adversely
affect the Company's relations with such indirect sellers and result in such
sellers being less willing to market the Company's products aggressively. There
can be no assurance that such sales and marketing efforts by the Company's
direct sales force will not result in a decline in indirect sales as a result
of actual or potential competition between the Company's direct sales force and
such indirect sellers, or that such efforts will not have a material adverse
effect on the Company's business, operating results and financial condition.
In addition, any such decline in indirect sales may require the Company to
accelerate investments for expansion into alternative distribution channels,
and no assurance can be given that the Company will have sufficient resources
to devote to such other channels.

         Fluctuating Operating Results.  The Company's operating results have
fluctuated in the past, and may fluctuate significantly in the future depending
on a number of factors.  Factors that have resulted in fluctuations in
operating results include: (i) the timing and level of sales by the Company's
OEM licensees of computer systems incorporating the Company's storage
management products; (ii) a significant increase in dependence upon non-





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OEM distribution channels, which tend to be more unpredictable than OEM
channels; (iii) timing of lump sum payments for source code license fees; (iv)
achievement of porting milestones; and (v) financial expenses for investment in
new products and distribution channels, including the hiring of additional
sales and marketing personnel and outlay of promotional expenses.

         In addition to the factors described above, factors that may
contribute to future fluctuations in quarterly operating results include, but
are not limited to: (i) development and introduction of new operating systems
that require additional development efforts; (ii) introduction or enhancement
of products by the Company or its competitors; (iii) changes in pricing
policies of the Company or its competitors; (vi) increased competition; (v)
technological changes in computer systems and environments; (vi) the ability of
the Company to develop, introduce and market new products in a timely manner;
(vii) quality control of products sold; (viii) market readiness to deploy
storage management products for distributed computing environments; (ix) market
acceptance of new products and product enhancements; (x) customer order
deferrals in anticipation of new products and product enhancements; (xi) the
Company's success in expanding its sales and marketing programs; (xii)
personnel changes; (xiii) foreign currency exchange rates; (xiv) mix of
products sold; (xv) acquisition costs; (xvi) the size and timing of orders;
(xvii) seasonality of revenue; and (xviii) general economic conditions.

         The Company's operating results are highly sensitive to the timing of
larger orders.  Orders typically range from a few thousand dollars to several
hundred thousand dollars.  Revenue is difficult to forecast because the
client/server systems management software market is an emerging market that is
highly fragmented and subject to rapid change.  The sale of the Company's
products also typically involves a significant technical evaluation and
commitment of capital and other resources, with the delays frequently
associated with customers' internal procedures, including delays to approve
large capital expenditures, to engineer deployment of new technologies within
their networks, and to test and accept new technologies that affect key
operations.  For these and other reasons, the sales cycle associated with the
Company's products is typically lengthy, generally lasting three to nine
months, is subject to a number of significant risks, including customers'
budgetary constraints and internal acceptance reviews, that are beyond the
Company's control, and varies substantially from transaction to transaction.
Because of the lengthy sales cycle and the large size of certain transactions,
if orders forecasted for a specific transaction for a particular quarter are
not realized in that quarter, the Company's operating results for that quarter
could be materially adversely affected.

         The Company's future revenue will be difficult to predict, and the
Company has, in the past, failed to achieve its revenue expectations for
certain periods.  Because the Company generally ships software products within
a short period after receipt of an order, it typically does not have a material
backlog of unfilled orders, and revenue in any quarter is substantially
dependent on orders booked and shipped in that quarter.  In addition, the
Company typically recognizes a significant portion of its direct sales license
revenue in the last two weeks of a quarter.  The Company's expense levels are
based, in part, on its expectations as to future revenue and to a large extent
are fixed in the short term.  The Company will not be able to adjust expenses
in the short term to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall of revenue in relation to the Company's
expectations or any material delay of customer orders would have an immediate
adverse effect on its business, operating results and financial condition.  As
a result of all of the foregoing factors, the Company believes that
period-to-period comparisons of the Company's results of operations are not and
will not necessarily be meaningful and should not be relied upon as any
indication of future performance.  Furthermore, it is possible that in future
quarters the Company's operating results may not meet or exceed the
expectations of public market analysts and investors.  In such event, the price
of the Company's Common Stock and the Notes would be materially adversely
affected.

         Increasing Product Concentration; Dependence on Growth of Storage
Management Software Market.  A substantial majority of the Company's revenues
have been, and in future periods will be, derived from storage management
products.  Storage management products accounted for 89%, 79% and 74% of the
Company's license revenue in 1997, 1996 and 1995, respectively.  The Company
expects that storage management products will continue to account for a
substantial majority of the Company's revenues in future periods as a result of
its strategic decision to devote greater financial and other resources to
selling, servicing and supporting its storage management products.  The
allocation of greater levels of sales, service and support resources to such
products could adversely





                                       9
   10



affect the Company's ability to continue enhancing and supporting its other
product lines.  Any failure by the Company to enhance and support its other
product lines could result in adverse customer reactions and the loss of an
existing revenue base, and could have a material adverse effect on the
Company's business, operating results and financial condition.

         The Company's future financial performance will depend in large part
on continued growth in the number of companies adopting storage management
solutions for their client/server computing environments.  There can be no
assurance that the market for storage management software and services will
continue to grow.  If the storage management software and services market fails
to grow or grows more slowly than the Company currently anticipates, or in the
event of a decline in unit price or demand for the Company's storage management
products, as a result of competition, technological change or other factors,
the Company's business, operating results and financial condition would be
materially and adversely affected.  The Company's financial performance may, in
the future, experience substantial fluctuations as a consequence of such
industry patterns, general economic conditions affecting the timing of orders,
and other factors affecting capital spending.  There can be no assurance that
such factors will not have a material adverse effect on the Company's business,
operating results and financial condition.

         Inability to Integrate Current and Future Products and Technologies.
Following the Merger, the Company commenced integration of selected products
and technologies to enhance storage management functionality and the
integration of products throughout its entire product line through the
availability of common services.  The Company's success is dependent in
significant part on the Company's ability to integrate its products as planned
and the resultant products achieving market acceptance by end users, resellers
and OEMs.  No assurance can be given that the Company will successfully
integrate its products as planned.  If the Company is unable to develop and
introduce new integrated products and technologies, or enhancements to existing
products, in a timely manner, its business, operating results and financial
condition would be materially and adversely affected.

         Uncertainty in Porting Products to New Operating Systems and Expansion
into Windows NT Market.  Certain of the Company's products operate primarily on
certain versions of the UNIX operating system.  Product development activities
are being directed towards developing new products for the UNIX operating
system, developing enhancements to the Company's current products and porting
new products and enhancements to other versions of the UNIX operating system.
The Company has also made and intends to continue to make substantial
investments in porting its products to new operating systems, including Windows
NT, and the Company's future success will depend on its ability to successfully
accomplish such ports.  In addition, the Company's Windows NT product
development efforts may be dependent on product development funding received
from third parties.  If such funding is delayed or not ultimately received, the
Company's Windows NT development efforts could be delayed, which could
adversely affect the Company's business, operating results and financial
condition.

         The process of porting existing products and product enhancements to,
and developing new products for, new operating systems requires a substantial
capital investment, the devotion of substantial employee resources and the
cooperation of the owners of the operating systems to which the products are
being ported or developed.  For example, the added focus on porting and
development work for the Windows NT market has required, and will require, the
Company to hire additional personnel with expertise in the Windows NT
environment and to devote its engineering resources to these projects.  The
diversion of engineering personnel to this area may cause delays in other
product development efforts of the Company.  Furthermore, operating system
owners have no obligation to assist in these porting or development efforts,
and may instead choose to enter into agreements with other third-party software
developers or internally develop their own products.  In particular, the
failure to receive a source code license to certain portions of the operating
system, either from the operating system owner or a licensee thereof, would
prevent the Company from porting its products to or developing products for
such operating system.  There can be no assurance that the Company's current or
future porting efforts will be successful or, even if successful, that the
operating system to which the Company elects to port, or for which it elects to
develop products, will achieve or maintain market acceptance.  The failure of
the Company to port its products to new operating systems or to select those
operating systems that achieve and maintain market acceptance could have a
material adverse effect on the Company's business, operating results and
financial condition.





                                       10
   11

         The Company's agreement with Microsoft requires the Company to develop
a functional subset of the VERITAS Volume Manager product to be ported to and
embedded in Windows NT.  The agreement also requires the Company to develop a
disk management graphical user interface designed specifically for Windows NT.
Microsoft is obligated to fund a significant portion of the development
expenses for this product.  The Company is currently recognizing revenue under
the development contract with Microsoft on a percentage of completion basis
consistent with its policy for revenue recognition for other similar
agreements.  The payment terms in the Microsoft agreement do not directly
correlate to the timing of development efforts and therefore revenue of $2.2
million has been recognized in advance of payment as of December 31, 1997.  The
failure of the Company to complete the product in sufficient time for inclusion
in Windows NT 5.0 may result in a significant delay of the product being
embedded in Windows NT, and could ultimately result in Microsoft electing to
omit the Company's product from Windows NT altogether, which could have a
material adverse effect on the Company's business, operating results and
financial condition.  In addition, the Microsoft relationship will require the
Company's marketing and sales departments to deal in higher volume markets and
will require the Company to service the growing needs of the Windows NT channel
and customer base.  The Company's experience in these higher volume markets is
limited.  See " --  New Distribution Channels."

         Intense Competition.  The markets in which the Company competes are
intensely competitive and rapidly changing.  The Company's principal
competition in the storage management market consists of internal development
groups of current and prospective OEM customers, which have the resources and
capability to develop their own storage management solutions.  Among the OEMs
which have included storage management capabilities in their operating systems
are Sun Microsystems for its Solaris system, DEC for its Digital UNIX system,
HP for its HP-UX system and Microsoft for Windows NT.  The Company also
encounters competition from other third party software vendors and hardware
companies offering products that incorporate certain of the features provided
by the Company's products, and from disk controller and disk subsystem
manufacturers which have included or may include similar features.

         As a result of the Merger and the associated higher visibility of the
Company in certain markets, the Company faces new competitors and new
competitive factors.  In particular, the Company's new competitors include: (i)
hardware and software vendors that offer a management platform or framework to
support vendor-created and third-party systems management applications; (ii)
vendors that provide systems management software for the mainframe environment
who are migrating their products to the client/server environment; (iii)
vendors that provide "point" products that address specific problems and offer
specific functionality; and (iv) vendors that provide integrated and
interoperable solutions.  Specific companies that the Company has encountered
or expects to encounter as competitors include the Cheyenne division of
Computer Associates International, Inc. ("Computer Associates"), EMC
Corporation ("EMC"), the ADSTAR Distributed Storage Manager ("ADSM") division
of International Business Machines Corporation ("IBM") and Legato Systems, Inc.
("Legato").  Many such competitors have substantially greater financial,
technical, sales, marketing and other resources, as well as greater name
recognition and a larger installed customer base, than the Company.  The
Company expects that the market for storage management software, which
historically has been large and fragmented, will become more consolidated with
larger companies being better positioned to compete in such an environment in
the long term.  As the open systems management software market develops, a
number of companies with greater resources than the Company could attempt to
increase their presence in this market by acquiring or forming strategic
alliances with competitors or business partners of the Company.  For example,
in 1996, IBM purchased Tivoli Systems, Inc. ("Tivoli") and Computer Associates
purchased Cheyenne Software, Inc. ("Cheyenne"); both Tivoli and Cheyenne are
competitors of the Company.

         The Company's success will depend significantly on its ability to
adapt to these competing forces, to develop more advanced products more rapidly
and less expensively than its competitors, and to educate potential customers
as to the benefits of licensing the Company's products rather than developing
their own products.  The Company's future and existing competitors could
introduce products with superior features, scalability and functionality at
lower prices than the Company's products and could also bundle existing or new
products with other more established products in order to compete with the
Company.  In addition, because there are relatively low barriers to entry for
the software market, the Company expects additional competition from other
established and emerging companies.  Increased competition is likely to result
in price reductions, reduced gross margins and loss of





                                       11
   12



market share, any of which could materially and adversely affect the Company's
business, operating results and financial condition.  There can be no assurance
that the Company will be able to compete successfully against current and
future competitors, and the failure to do so would result in the Company's
business, operating results and financial condition being materially and
adversely affected.

         Rapid Technological Change and Requirement for Frequent Product
Transitions.  The market for the Company's products is intensely competitive,
highly fragmented and characterized by rapid technological developments,
evolving industry standards and rapid changes in customer requirements.  The
introduction of products embodying new technologies, the emergence of new
industry standards or changes in customer requirements could render the
Company's existing products obsolete and unmarketable.  As a result, the
Company's success depends upon its ability to continue to enhance existing
products, respond to changing customer requirements and develop and introduce
in a timely manner new products that achieve market acceptance and keep pace
with technological developments and emerging industry standards.  Customer
requirements include, but are not limited to, product operability and support
across distributed and changing heterogeneous hardware platforms, operating
systems, relational databases and networks.  For example, as the Company's
customers start to utilize Windows NT or other emerging operating platforms, it
will become necessary for the Company to enhance its products to operate on
such platforms in order to meet these customers' requirements.  There can be no
assurance that the Company's products will achieve market acceptance or will
adequately address the changing needs of the marketplace or that the Company
will be successful in developing and marketing enhancements to its existing
products, or new products incorporating new technology, on a timely basis.  The
Company has in the past experienced delays in product development, and there
can be no assurance that the Company will not experience further delays in
connection with its current product development or future development
activities.  There can be no assurance that the Company will have the resources
necessary to perform its obligations under its development agreements in a
timely and efficient manner or that its development efforts will be successful.
If the Company is unable to develop and introduce new products or enhancements
to existing products in a timely manner in response to changing market
conditions or customer requirements, the Company's business, operating results
and financial condition will be materially and adversely affected.  Because the
Company has limited resources, it must restrict its product development efforts
to a relatively small number of products and operating systems.  There can be
no assurance that these efforts will be successful or, even if successful, that
any resulting product or operating system will achieve market acceptance.

         Significant Leverage; Debt Service.  In connection with the sale of
the Notes, the Company incurred $100 million aggregate principal amount of
indebtedness which resulted in a ratio of long-term debt to total
capitalization at December 31, 1997 of approximately 49.2%.  As a result of
this additional indebtedness, the Company's principal and interest payment
obligations will increase substantially.  The degree to which the Company will
be leveraged could materially and adversely affect the Company's ability to
obtain financing for working capital, acquisitions or other purposes and could
make it more vulnerable to industry downturns and competitive pressures.  The
Company's ability to meet its debt service obligations will be dependent upon
the Company's future performance, which will be subject to financial, business
and other factors affecting the operations of the Company, many of which are
beyond its control.

         The Company will require substantial amounts of cash to fund scheduled
payments of principal and interest on its indebtedness, including the Notes,
future capital expenditures and any increased working capital requirements.  If
the Company is unable to meet its cash requirements out of cash flow from
operations, there can be no assurance that it will be able to obtain
alternative financing.  In the absence of such financing, the Company's ability
to respond to changing business and economic conditions, to make future
acquisitions, to absorb adverse operating results or to fund capital
expenditures or increased working capital requirements may be adversely
affected.  If the Company does not generate sufficient increases in cash flow
from operations to repay the Notes at maturity, it could attempt to refinance
the Notes; however, no assurance can be given that such a refinancing would be
available on terms acceptable to the Company, if at all.  Any failure by the
Company to satisfy its obligations with respect to the Notes at maturity (with
respect to payments of principal) or prior thereto (with respect to payments of
interest or required repurchases) would constitute a default under the
Indenture and could cause a default under agreements governing other
indebtedness, if any, of the Company.





                                       12
   13

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

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

         Year 2000 Compliance.  The Company is aware of the issues associated
with the programming code in existing computer systems as the millennium ("Year
2000") approaches.  The Year 2000 problem is pervasive and complex as virtually
every computer operation will be affected in some way by the rollover of the
two digit year value to 00.  Systems that do not properly recognize date
sensitive information when the year changes to 2000 could generate erroneous
data or cause a system to fail.  Significant uncertainty exists in the software
industry concerning the potential effects associated with such compliance.  The
Company believes that all of its existing products will be Year 2000 compliant
by the end of fiscal 1998 and new products are being designed to be Year 2000
complaint.  Although products have undergone, or will undergo, the Company's
normal quality testing procedures, there can, however, be no assurance that the
Company's products will contain all necessary date code changes.  Any failure
of the Company's products to perform, including system malfunctions due to the
onset of the calendar year 2000, could result in claims against the Company,
which could have a material adverse effect on the Company's business, financial
condition or results of operations.  Moreover, the Company's customers could
choose to convert to other calendar year 2000 compliant products or to develop
their own products in order to avoid such malfunctions, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

            The Company is also currently in the process of evaluating its
information technology infrastructure for Year 2000 compliance.  In the event
that any of the Company's significant suppliers or customers does not
successfully and timely achieve Year 2000 compliance, the Company's business or
operations could be adversely affected.  This could result in system failures
or generation of erroneous information and could cause significant disruption
to business activities.  The Company is reviewing what actions are required to
make all software systems used internally Year 2000 compliant as well as
actions needed to mitigate vulnerability to problems with suppliers and other
third parties' systems.  Such actions include a review of vendor contracts and
formal communication with suppliers to request certification that products are
Year 2000 compliant.  The Company is assessing the extent of the necessary
modifications to its computer software, and management does not anticipate that
the Company will incur significant operating expenses or be required to invest
heavily in computer system improvements to be Year 2000





                                       13
   14

compliant.  There can be no assurance that such measures will alleviate the
Year 2000 problems which could have a material adverse effect upon the
Company's business, operating results and financial condition.

         Risk of Software Defects; Product Liability.  Software products as
complex as those to be offered by the Company frequently contain errors or
defects, especially when first introduced or when new versions or enhancements
are released.  Despite product testing, the Company has in the past released
products with defects, discovered software errors in certain of its new
products after introduction and experienced delayed or lost revenue during the
period required to correct these errors.  The Company has regularly introduced,
and the Company intends to continue to introduce, new products and enhancements
to existing products.  Despite testing by the Company and by current and
potential customers, there can be no assurance that defects and errors will not
be found in existing products or in new products, versions or enhancements
after commencement of commercial shipments.  Any such defects and errors could
result in adverse customer reactions, negative publicity regarding the Company
and its products, harm to the Company's reputation, loss of or delay in market
acceptance or require expensive product changes, any of which could have a
material adverse effect upon the Company's business, operating results and
financial condition.  Further, the Company could be subject to liability claims
(for which it carries insurance, although such insurance may not be sufficient
to fully protect the Company against losses relating to such claims) that could
have a material adverse effect on the Company's business, operating results and
financial condition.

         The Company derives an increasing amount of revenue from products
licenses pursuant to "shrink wrap" licenses that are not signed by licensees
and, therefore, may be unenforceable under the laws of certain jurisdictions.
The Company's products will be generally used to manage data critical to
organizations, and, as a result, the sale and support of products by the
Company may entail the risk of product liability claims.  Although the Company
maintains errors and omissions product liability insurance, such insurance may
not adequately compensate the Company for losses relating to such claims and a
successful liability claim brought against the Company could have a material
adverse effect upon the Company's business, operating results and financial
condition.

         Risks Associated With International Operations.  International revenue
(from sales outside the United States and Canada) accounted for 19%, 28% and
23% of the Company's total revenues in 1997, 1996 and 1995, respectively.  The
Company believes that its future success depends upon continued expansion of
its international operations.  The Company currently has sales and service
offices in the United States, Canada, Japan, the United Kingdom, Germany,
France, Sweden and the Netherlands and has a product development group in
India.  The Company also has resellers in North America, Europe, Asia Pacific,
South America and the Middle East.  International expansion may require the
Company to establish additional foreign offices, hire additional personnel and
recruit additional international resellers.  This may require significant
management attention and financial resources and could adversely affect the
Company's operating margins.  To the extent the Company is unable to effect
these additions efficiently and in a timely manner, its growth, if any, in
international sales will be limited, and its business, operating results and
financial condition could be materially and adversely affected.  There can be
no assurance that the Company will be able to maintain or increase
international market demand for its products.

         As of December 31, 1997, the Company had 35 engineers employed by its
Indian subsidiary located in Pune, India, who perform certain product
development work.  These international operations subject the Company to a
number of risks inherent in developing products outside of the United States,
including the potential loss of developed technology, imposition of
governmental controls, export license requirements, restrictions on the export
of critical technology, political and economic instability, trade restrictions,
difficulties in managing international operations and lower levels of
intellectual property protection.  Furthermore, if the Company were required to
discontinue its product development efforts in India, it would incur
significantly higher operating expenses as a result of having to perform such
development work in the United States.

         From time to time, the Company may engage in exchange rate hedging
activities.  Such activities have been insignificant to date.  There can be no
assurance that any hedging techniques implemented by the Company will be
successful.

         The Company's international business also involves a number of
additional risks, including lack of acceptance of localized products, cultural
differences in the conduct of business, longer accounts receivable





                                       14
   15



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, unexpected changes in regulatory requirements
and royalty and withholding taxes that restrict the repatriation of earnings,
tariffs and other trade barriers, and the burden of complying with a wide
variety of foreign laws.  The Company's international sales are generated
primarily through its international sales subsidiaries and are denominated in
local currency, creating a risk of foreign currency translation gains and
losses.  To the extent profit is generated or losses are incurred in foreign
countries, the Company's effective income tax rate may be materially and
adversely affected.  In some markets, localization of the Company's products is
essential to achieve market penetration.  The Company may incur substantial
costs and experience delays in localizing its products, and there can be no
assurance that any localized product will ever generate significant revenue.
There can be no assurance that any of the factors described herein will not
have a material adverse effect on the Company's future international sales and
operations and, consequently, its business, operating results and financial
condition.

         Past and Future Acquisitions.  The Company has made several
acquisitions in the past, including the Merger with OpenVision.  Acquisitions
of companies, divisions of companies or products entail numerous risks,
including difficulty in successfully integrating and assimilating acquired
operations, diversion of management's attention and loss of key employees of
acquired companies.  Difficulties can arise with respect to the integration of
product offerings and employees of acquired companies, including conflicts that
may arise with respect to distribution strategies, coordination of
geographically separated organizations, differences in corporate culture and
integration of personnel with disparate business backgrounds.  The integration
and assimilation process can cause an interruption of, or a loss of momentum
in, the activities of the Company's business.  Failure to accomplish the
effective integration of the Company's operations with those of an acquired
company could adversely affect the revenues and operating results of the
Company.  In the past three years, the Company has made three acquisitions and
one divestiture of a product line; the Company may make additional acquisitions
or effect additional divestitures in the future.  Products acquired by the
Company in the past have required significant additional development, such as
restructuring software code to support larger scale environments, porting
products to additional operating system platforms, regression testing and
improving network and device support, before they could be marketed and some
failed to generate any revenue for the Company.  No assurance can be given that
the Company will not incur similar problems in future acquisitions.  Any such
problems could have a material adverse effect on the Company's business,
operating results and financial condition.  In addition, future acquisitions by
the Company may result in dilutive issuances of equity securities, the
incurrence of additional debt, large one-time write-offs and the creation of
goodwill or other intangible assets that could result in amortization expense.
These factors could have a material adverse effect on the Company's business,
operating results and financial condition.

         Subordination; Absence of Financial Covenants; Holding Company
Structure.  The Notes are unsecured and subordinated in right of payment in
full to all existing and future Senior Indebtedness (as defined) of the
Company.  As a result of such subordination, in the event of bankruptcy,
liquidation or reorganization of the Company or upon acceleration of the Notes
due to an Event of Default under the Indenture and in certain other events, the
assets of the Company will be available to pay obligations on the Notes only
after all Senior Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of the Notes then
outstanding.  The Indenture does not contain financial covenants and does not
prohibit or limit the incurrence of Senior Indebtedness or the incurrence of
other indebtedness and other liabilities by the Company, and the incurrence of
additional indebtedness and other liabilities by the Company could adversely
affect the Company's ability to pay its obligations on the Notes.  As of
December 31, 1997, the Company had no indebtedness outstanding that would have
constituted Senior Indebtedness.  The Company anticipates that from time to
time it will incur significant amounts of additional indebtedness, including
Senior Indebtedness.  See "Description of Notes -- Subordination."

         The issuer of the Notes is a holding company with no significant
operating assets.  Accordingly, the Company's ability to redeem, repurchase or
make interest and principal payments on the Notes is dependent upon the
earnings of its subsidiaries and the distribution of those earnings (through
dividends or otherwise) to the Company, or upon royalties, license fees, loans
or other payment of funds by those subsidiaries to the Company.  The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Notes or to
make any funds available therefor, whether by dividends, loans or other





                                       15
   16



payments.  In addition, the payment of dividends and the making of loans and
advances to the Company by its subsidiaries may be subject to statutory,
contractual or other restrictions and are dependent upon the earnings or
financial condition of those subsidiaries and subject to various business
considerations.  As a result, the Company may be unable to gain access to the
cash flow or assets of its subsidiaries in amounts sufficient to pay the
principal of or interest on the Notes when due or to repurchase Notes at the
option of the holders thereof after the occurrence of a Fundamental Change (as
defined).  See "Description of Notes -- Repurchase at Option of Holder Upon a
Fundamental Change."

         The Notes are effectively subordinated to the liabilities, including
trade payables and lease obligations, if any, of the subsidiaries of the
Company.  Any right of the Company to receive the assets of any of its
subsidiaries upon the liquidation or reorganization thereof (and the consequent
right of the holders of the Notes to participate in those assets) will be
effectively subordinated to the claims of that subsidiary's creditors
(including trade creditors), except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subordinate to any security interests in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company.  The Indenture does not prohibit or limit the incurrence of
indebtedness and other liabilities by any subsidiary of the Company, and the
incurrence of additional indebtedness and other liabilities by any subsidiary
of the Company could adversely affect the Company's ability to pay its
obligations on the Notes.  As of December 31, 1997, the Company's subsidiaries
had approximately $37.7 million of indebtedness and other liabilities
outstanding (excluding liabilities of a type not required to be reflected on a
balance sheet in accordance with generally accepted accounting principles and
intercompany liabilities) to which the Notes would have been effectively
subordinated.  The Company anticipates that from time to time its subsidiaries
will incur significant amounts of additional indebtedness and other
liabilities.  See "Description of Notes -- Subordination."

         Limitations on Repurchase Upon a Fundamental Change.  Upon a
Fundamental Change, each holder of the Notes will have certain rights, at the
holder's option, to require the Company to repurchase all or a portion of such
holder's Notes.  If a Fundamental Change were to occur, there can be no
assurance that the Company would have sufficient funds to pay the repurchase
price for all the Notes tendered by the holders thereof.  Any future credit
agreements or other agreements relating to other indebtedness (including Senior
Indebtedness) to which the Company becomes a party may prohibit the Company
from repurchasing or redeeming any Notes and may also provide that a
Fundamental Change would constitute an event of default thereunder.  If a
Fundamental Change were to occur at a time when the Company is prohibited from
repurchasing or redeeming the Notes, the Company could seek the consent of its
lenders to the repurchase of the Notes or could attempt to refinance the
borrowings that contain such prohibition.  If the Company does not obtain such
a consent or repay such borrowings, the Company would remain prohibited from
repurchasing or redeeming the Notes.  In such case, the Company's failure to
repurchase tendered Notes would constitute an Event of Default under the
Indenture, which may, in turn, constitute a default under the terms of other
indebtedness that the Company may enter into from time to time.  In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of Notes.  The term "Fundamental Change" is
limited to certain specified transactions and may not include other events that
might adversely affect the financial condition of the Company.  The requirement
that the Company repurchase the Notes upon a Fundamental Change may not afford
holders of the Notes protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving the Company.  See
"Description of Notes -- Repurchase of Option of Holder Upon a Fundamental
Change."

         Volatility of Notes and Common Stock Price.  The market price for the
Company's Common Stock is highly volatile.  The trading price of the Company's
Common Stock could be subject to wide fluctuations in response to quarterly
variations in operating and financial results, announcements of technological
innovations, new products, acquisitions or dispositions, new customer
relationships or new strategic relationships by the Company or its competitors,
changes in prices of the Company's or its competitors' products and services,
changes in product mix, or changes in revenue and revenue growth rates for the
Company.  Statements or changes in opinions, ratings, or earnings estimates
made by brokerage firms or industry analysts relating to the markets in which
the Company does business, or relating to the Company specifically, have
resulted, and could in the future result, in an immediate and adverse effect on
the market price of the Company's Common Stock, and, in turn, the market price
of the Notes.  In addition, the stock market has from time to time experienced
extreme price and volume fluctuations





                                       16
   17



which have particularly affected the market price for the securities of many
high-technology companies and that often have been unrelated or
disproportionate to the operating performance of these companies.  These
fluctuations, as well as general economic, market and political conditions such
as recessions or military conflicts, may adversely affect the market price of
the Company's Common Stock, and, in turn, the market price of the Notes.

         Absence of Public Market for the Notes and Restrictions on Transfer.
The Notes were issued in October 1997 to a small number of institutional
buyers.  The Notes have been designated for trading on the PORTAL System of the
National Association of Securities Dealers, Inc.  Notes sold pursuant to the
Registration Statement of which this Prospectus forms a part are not expected
to remain eligible for trading on the PORTAL System.  The Registration
Statement of which this Prospectus forms a part is filed pursuant to the
Registration Rights Agreement, which does not obligate the Company to keep the
Registration Statement effective after the date when all the Notes and the
Common Stock issuable on conversion thereof covered by the Registration
Statement have been sold pursuant to the Registration Statement or may be sold
without registration pursuant to Rule 144(k) under the Securities Act.  The
Company does not intend to apply for listing of the Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system.  The Initial Purchaser has advised the Company that it intends to make
a market in the Notes.  The Initial Purchaser is not obligated, however, to
make a market in the Notes and any such market making may be discontinued at
any time in the sold discretion of the Initial Purchaser without notice.
Accordingly, there can be no assurance as to the development of liquidity of
any market for the Notes.  See "Description of Notes -- Registration Rights of
the Noteholders" and "Plan of Distribution."











                                       17
   18
                       RATIO OF EARNINGS TO FIXED CHARGES



                                                                  Year Ended December 31,
                                              ---------------------------------------------------------------
                                                1993          1994          1995         1996          1997  
                                              --------      --------      --------     --------      --------
                                                                                     
Ratio of earnings to fixed charges               --            --           2.3x         10.1x        13.1x


The ratio of earnings to fixed charges is computed by dividing income (loss)
before taxes plus fixed charges by fixed charges.  Fixed charges consist of
combined interest expense (including interest expense from capital leases) and
the estimated portion of combined rental expense deemed by the Company to be
representative of the interest factor of rental payments under operating
leases.  Earnings were not sufficient to cover fixed charges for the years
ended December 31, 1994 and December 31, 1993 by approximately $15.1 million
and $41.6 million, respectively.



                                USE OF PROCEEDS

         The Company will not receive any proceeds from the sale of the Notes
or the Common Stock issuable upon conversion thereof by the Selling
Securityholders.



                                DIVIDEND POLICY

         The Company has never paid any cash dividends on its stock and
anticipates that, for the foreseeable future, it will continue to retain any
earnings for use in the operation of its business and does not intend to pay
dividends.





                                       18
   19
                              DESCRIPTION OF NOTES

         The Notes were issued under an indenture dated as of October 1, 1997
(the "Indenture"), between the Company and State Street Bank and Trust Company
of California, N.A., as trustee (the "Trustee").  A copy of the form of the
Indenture and the Registration Rights Agreement (as defined below) are
available from the Trustee upon request by a registered holder of the Notes.
The following summaries of certain provisions of the Notes, the Indenture and
the Registration Rights Agreement do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the provisions
of the Notes, the Indenture and the Registration Rights Agreement, including
the definitions therein of certain terms which are not otherwise defined in
this Prospectus.  Wherever particular provisions or defined terms of the
Indenture (or the form of Note which is a part thereof) or the Registration
Rights Agreement are referred to, such provisions or defined terms are
incorporated herein by reference.  References in this section to the "Company"
are solely to VERITAS Software Corporation, a Delaware corporation, and not its
subsidiaries.

GENERAL

         The Notes represent unsecured subordinated obligations of the Company,
subordinate in right of payment to certain other obligations of the Company as
described under "Subordination" and convertible into Common Stock as described
under "Conversion."  The Notes are limited to $100,000,000 aggregate principal
amount, were issued in denominations of $1,000 and multiples thereof and mature
on November 1, 2004 and are payable at a price of 100% of the principal amount
thereof.  The Notes bear interest at 5-1/4% per annum from October 14, 1997,
payable semiannually in arrears on May 1 and November 1 of each year,
commencing on May 1, 1998.

         The Notes are convertible into Common Stock initially at $64.50 per
share, subject to adjustment upon the occurrence of certain events described
under " -- Conversion," at any time prior to the close of business on the
maturity date, unless previously redeemed or repurchased.

         The Notes are redeemable at the option of the Company under the
circumstances and at the redemption prices set forth below under " -- Optional
Redemption," plus accrued interest to, but excluding, the Redemption Date.

         The Indenture does not contain any financial covenants or restrictions
on the payment of dividends by the Company, the incurrence of indebtedness,
including Senior Indebtedness (as defined), by the Company or the issuance or
repurchase of securities by the Company.  The Indenture contains no covenants
or other provisions to afford protection to holders of the Notes in the event
of a highly leveraged transaction or a change in control of the Company except
to the extent described below under " -- Repurchase at Option of Holders Upon a
Fundamental Change."

CONVERSION

         The holder of any Note has the right at the holder's option to convert
any Note (in denominations of $1,000 or any multiple thereof) into shares of
Common Stock at any time prior to the close of business on the maturity date,
unless previously redeemed or repurchased, at a conversion price of $64.50 per
share.  The conversion price is subject to adjustment from time to time as
described below.  The right to convert a Note called for redemption or
delivered for repurchase will terminate at the close of business on the
Business Day prior to the Redemption Date or the Repurchase Date (as defined)
for such Note, as the case may be.

         Beneficial owners of interests in a Global Note may exercise their
right of conversion by delivering to the Depository Trust Company ("DTC") the
appropriate instruction form for conversion pursuant to DTC's conversion
program and, in the case of conversions through the Euroclear System
("Euroclear") or Cedel, S.A.  ("Cedel"), in accordance with Euroclear's or
Cedel's normal operating procedures.  To convert a Note held in certificated
form into shares of Common Stock, a holder must (i) complete and manually sign
the conversion notice on the back of the Note (or complete and manually sign a
facsimile thereof) and deliver such notice to the Trustee at the office or
agency of the Trustee in New York, New York or the Corporate Trust Office of
the Trustee in Los Angeles,





                                       19
   20

California or any Conversion Agent, (ii) surrender the Note to the Trustee at
the office or agency of the Trustee in New York, New York or the Corporate
Trust Office of the Trustee in Los Angeles, California or to any Conversion
Agent, as the case may be, (iii) if required, furnish appropriate endorsements
and transfer documents, (iv) if required, pay all transfer or similar taxes,
and (v) if required, pay funds equal to interest payable on the next Interest
Payment Date.  Pursuant to the Indenture, the date on which all of the
foregoing requirements have been satisfied is the date of surrender for
conversion.  Such notice of conversion can be obtained from the Trustee at the
Corporate Trust Office or the office of any Conversion Agent.  As promptly as
practicable on or after the conversion date, the Company will issue and deliver
to the Trustee a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share in an amount determined as set forth below.  Such
certificate will be sent by the Trustee to the appropriate Conversion Agent for
delivery to the holder.  Such Common Stock issuable upon conversion of the
Notes will be fully paid and nonassessable.  Any Note surrendered for
conversion during the period from the close of business on any Regular Record
Date to the opening of business on the next succeeding Interest Payment Date
(except Notes called for redemption on a Redemption Date or to be repurchased
on a Repurchase Date during such period) must be accompanied by payment of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Notes being surrendered for conversion.  In the case of any
Note which has been converted after any Regular Record Date, but on or before
the next Interest Payment Date, interest the Stated Maturity of which is on
such Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion.  Such interest shall be paid to the holder of
such Note on such Regular Record Date.  As a result, a holder that surrenders
Notes for conversion on a date that is not an Interest Payment Date will not
receive any interest for the period from the Interest Payment Date next
preceding the date of conversion to the date of conversion or for any later
period, even if the Notes are surrendered after a notice of redemption (except
for the payment of interest on Notes called for redemption on a Redemption Date
or to be repurchased on a Repurchase Date between a Regular Record Date and the
Interest Payment Date to which it relates).  No other payment or adjustment for
interest, or for any dividends in respect of Common Stock, will be made upon
conversion.  Holders of Common Stock issued upon conversion will not be
entitled to receive any dividends payable to holders of Common Stock as of any
record time before the close of business on the conversion date.  No fractional
shares will be issued upon conversion but, in lieu thereof, an appropriate
amount will be paid in cash by the Company based on the market price of Common
Stock on the day of conversion.

         A holder delivering a Note for conversion will not be required to pay
any taxes or duties in respect of the issue or delivery of Common Stock on
conversion but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock
in a name other than that of the holder of the Note.  Certificates representing
Common Stock will not be issued or delivered unless all taxes and duties, if
any, payable by the holder have been paid.

         The initial conversion price of $64.50 per share of Common Stock is
subject to adjustment (under formulae set forth in the Indenture) in certain
events, including: (i) the issuance of Common Stock as a dividend or
distribution on Common Stock; (ii) certain subdivisions and combinations of the
Common Stock; (iii) the issuance to all holders of Common Stock of certain
rights or warrants to purchase Common Stock (provided that the conversion price
will be readjusted to the extent that such rights or warrants are not exercised
prior to the expiration thereof); (iv) the distribution to all holders of
Common Stock of shares of capital stock of the Company (other than Common
Stock) or evidences of indebtedness of the Company or assets (including
securities, but excluding those rights, warrants, dividends and distributions
referred to above or paid in cash); (v) distributions consisting of cash,
excluding any quarterly cash dividend on the Common Stock to the extent that
the aggregate cash dividend per share of Common Stock in any quarterly period
does not exceed the greater of (x) the amount per share of Common Stock of the
next preceding quarterly cash dividend on the Common Stock to the extent that
such preceding quarterly dividend did not require an adjustment of the
conversion price pursuant to this clause (v), and (y) 3.75% of the average of
the daily Closing Prices (as defined) of the Common Stock for the ten
consecutive Trading Days (as defined) immediately prior to the date of
declaration of such dividend, and excluding any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company; (vi)
payment in respect of a tender or exchange offer by the Company for the Common
Stock to the extent that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the Current Market Price (as
defined) per share of Common Stock on the Trading Day next succeeding the last
date on which tenders or





                                       20
   21

exchanges may be made pursuant to such tender or exchange offer; and (vii)
payment in respect of a tender offer or exchange offer by a person other than
the Company in which, as of the closing date of the offer, the Board of
Directors is not recommending rejection of the offer.  If an adjustment is
required to be made as set forth in clause (v) above as a result of a
distribution that is a quarterly dividend, such adjustment would be based upon
the amount by which such distribution exceeds the amount of quarterly cash
dividends permitted to be excluded pursuant to such clause (v).  In the event
of a distribution to substantially all holders of Common Stock of rights to
subscribe for additional shares of the Company's capital stock as provided in
clause (iii) above, the Company may, instead of making any adjustment in the
conversion price, make proper provision so that each holder of a Note who
converts such Note after the record date for such distribution and prior to the
expiration or redemption of such rights shall be entitled to receive upon such
conversion, in addition to shares of Common Stock, an appropriate number of
such rights.  If an adjustment is required to be made as set forth in clause
(v) above as a result of a distribution that is not a quarterly dividend, such
adjustment would be based upon the full amount of the distribution.  The
adjustment referred to in clause (vii) above will only be made if the tender
offer or exchange offer is for an amount which increases that person's
ownership of Common Stock to more than 25% of the total shares of Common Stock
outstanding and if the cash and value of any other consideration included in
such payment per share of Common Stock exceeds the Current Market Price per
share of Common Stock on the business day next succeeding the last date on
which tenders or exchanges may be made pursuant to such tender or exchange
offer.  The adjustment referred to in clause (vii) above will not be made,
however, if, as of the closing of the offer, the offering documents with
respect to such offer disclose a plan or an intention to cause the Company to
engage in a consolidation or merger of the Company or a sale of all or
substantially all of the Company's assets.

         In the case of (i) any reclassification of the Common Stock, or (ii) a
consolidation, merger or combination involving the Company or a sale or
conveyance to another person of the property and assets of the Company as an
entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Notes then outstanding will generally be
entitled thereafter to convert such Notes for the kind and amount of shares of
stock, other securities or other property or assets (including cash) which they
would have owned or been entitled to receive upon such reclassification,
consolidation, merger, combination, sale or conveyance had such Notes been
converted into Common Stock immediately prior to such reclassification,
consolidation, merger, combination, sale or conveyance assuming that a holder
of Notes would not have exercised any rights of election as to the stock, other
securities or other property or assets (including cash) receivable in
connection therewith.

         The Company from time to time may to the extent permitted by law
reduce the conversion price by any amount for any period of at least 20 days
(provided such reduction is irrevocable during the 20 day period), in which
case the Company shall give at least 15 days notice of such reduction, if the
Board of Directors of the Company has made a determination that such reduction
would be in the best interests of the Company which determination shall be
conclusive.  The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Board of
Directors of the Company deems advisable to avoid or diminish any income tax to
holders of Common Stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income tax
purposes.

         No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then
in effect; provided that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.  Except as stated above, the conversion price will not be adjusted
for the issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock or carrying the right to purchase any of the
foregoing.

SUBORDINATION

         The indebtedness evidenced by the Notes is subordinated to the extent
provided in the Indenture to the prior payment in full of all Senior
Indebtedness of the Company.  The Notes also are effectively subordinated to
all indebtedness and other liabilities, including trade payables and lease
obligations, if any, of the Company's subsidiaries.





                                       21
   22

         Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization, the payment of the principal of, or
premium, if any, and interest (including Liquidated Damages, if any) on the
Notes is to be subordinated to the extent provided in the Indenture in right of
payment to the prior payment in full in cash of all Senior Indebtedness.  In
the event of any acceleration of the Notes because of an Event of Default (as
defined in the Indenture), the holders of any Senior Indebtedness then
outstanding would be entitled to payment in full in cash of all obligations in
respect of such Senior Indebtedness before the holders of the Notes are
entitled to receive any payment or distribution in respect thereof.  The
Indenture will require that the Company promptly notify holders of Senior
Indebtedness if payment of the Notes is accelerated because of an Event of
Default.

         The Company also may not make any payment upon or in respect of the
Notes (including upon redemption) if (i) a default in the payment of the
principal, premium, if any, interest, rent or other obligations in respect of
Senior Indebtedness occurs and is continuing beyond any applicable period of
grace (a "Payment Default") or (ii) any other default occurs and is continuing
with respect to Designated Senior Indebtedness (as defined) that permits
holders of such Designated Senior Indebtedness to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the Company or other person permitted to give such notice under the
Indenture (a "Non-Payment Default").  Payments on the Notes may and shall be
resumed (a) in case of a Payment Default, upon the date on which such default
is cured or waived or ceases to exist and (b) in case of a Non-Payment Default,
the earlier of the date on which such Non-Payment Default is cured or waived or
ceases to exist or 179 days after the date on which the applicable Payment
Blockage Notice is received.  No new period of payment blockage may be
commenced pursuant to a Payment Blockage Notice unless and until (i) 365 days
have elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments of principal, premium, if any,
and interest (including Liquidated Damages, if any) on the Notes that have come
due have been paid in full in cash.  No Non-Payment Default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or shall be made, the basis for a subsequent Payment Blockage
Notice.

         In the event that, notwithstanding the foregoing, the Trustee or any
holder of the Notes receives any payment or distribution of assets of the
Company of any kind in contravention of any of the subordination provisions of
the Indenture, whether in cash, property or securities, including, without
limitation, by way of setoff or otherwise, in respect of the Notes before all
Senior Indebtedness is paid in full, then such payment or distribution will be
held by the recipient in trust for the benefit of holders of Senior
Indebtedness or their representatives to the extent necessary to make payment
in full of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the
holders of Senior Indebtedness.

         By reason of the subordination provisions described above, in the
event of the Company's bankruptcy, dissolution or reorganization, holders of
Senior Indebtedness may receive more, ratably, and holders of the Notes may
receive less, ratably, than the other creditors of the Company.  Such
subordination will not prevent the occurrence of any Event of Default under the
Indenture.

         The term "Senior Indebtedness" means the principal of, premium, if
any, interest (including all interest accruing subsequent to the commencement
of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding) and rent
payable on or in connection with, and all fees, costs, expenses and other
amounts accrued or due on or in connection with, Indebtedness (as defined) of
the Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the Company
(including all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing), unless in the case of any
particular Indebtedness the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes or expressly provides that such
Indebtedness is pari passu or junior to the Notes.  Notwithstanding the
foregoing, the term Senior Indebtedness shall not include Indebtedness of the
Company to any subsidiary of the Company, a majority of the voting stock of
which is owned, directly or indirectly, by the Company.





                                       22
   23
         The term "Indebtedness" means with respect to any Person (as defined)
and without duplication:

           (a) all indebtedness, obligations and other liabilities (contingent
   or otherwise) of such Person for borrowed money (including obligations of
   the Company in respect of overdrafts, foreign exchange contracts, currency
   exchange agreements, interest rate protection agreements, and any loans or
   advances from banks, whether or not evidenced by notes or similar
   instruments) or evidenced by bonds, debentures, notes or similar instruments
   (whether or not the recourse of the lender is to the whole of the assets of
   such Person or to only a portion thereof), or obligations in respect of
   deferred and unpaid purchase price of any assets or property;

           (b) all reimbursement obligations and other liabilities (contingent
   or otherwise) of such Person with respect to letters of credit, bank
   guarantees or bankers' acceptances;

           (c) all obligations and liabilities (contingent or otherwise) in
   respect of leases of such Person required, in conformity with generally
   accepted accounting principles, to be accounted for as capitalized lease
   obligations on the balance sheet of such Person and all obligations and
   other liabilities (contingent or otherwise) under any lease or related
   document (including a purchase agreement) in connection with the lease of
   real property which provides that such Person is contractually obligated to
   purchase or cause a third party to purchase the leased property and thereby
   guarantee a minimum residual value of the leased property to the lessor and
   the obligations of such Person under such lease or related document to
   purchase or to cause a third party to purchase such leased property;

           (d) all obligations of such Person (contingent or otherwise) with
   respect to an interest rate or other swap, cap or collar agreement or other
   similar instrument or agreement or foreign currency hedge, exchange,
   purchase or similar instrument or agreement;

           (e) all direct or indirect guaranties or similar agreements by such
   Person in respect of, and obligations or liabilities (contingent or
   otherwise) of such Person to purchase or otherwise acquire or otherwise
   assure a creditor against loss in respect of, indebtedness, obligations or
   liabilities of another Person of the kind described in clauses (a) through
   (d);

           (f) any indebtedness or other obligations described in clauses (a)
   through (d) secured by any mortgage, pledge, lien or other encumbrance
   existing on property which is owned or held by such Person, regardless of
   whether the indebtedness or other obligation secured thereby shall have been
   assumed by such Person; and

           (g) any and all deferrals, renewals, extensions and refundings of,
   or amendments, modifications or supplements to, any indebtedness, obligation
   or liability of the kind described in clauses (a) through (f).

         Notwithstanding anything to the contrary in the foregoing,
Indebtedness shall not include indebtedness of or amounts owed by any Person
for compensation to employees, or for goods, services or materials purchased in
the ordinary course of business.

         The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such Senior Indebtedness shall
be "Designated Senior Indebtedness" for purposes of the Indenture (provided
that such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).

         The Notes are effectively subordinated to all liabilities, including
trade payables and lease obligations, if any, of the Company's subsidiaries.
Any right of the Company to receive the assets of any of its subsidiaries upon
the liquidation or reorganization thereof (and the consequent right of the
holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the





                                       23
   24



Company would still be subordinate to any security interests in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company.

         The Company is a holding company with no significant operating assets.
The Company's ability to redeem, repurchase or make interest and principal
payments on the Notes is dependent upon the earnings of its subsidiaries and
the distribution of those earnings (through dividends or otherwise) to, or upon
royalties, license fees, loans or other payment of funds by those subsidiaries
to, the Company.  The subsidiaries are separate and distinct legal entities and
have no obligation, contingent or otherwise, to pay any amounts due pursuant to
the Notes or to make any funds available therefor, whether by dividends, loans
or other payments.  In addition, the payment of dividends and the making of
loans and advances to the Company by its subsidiaries may be subject to
statutory, contractual or other restrictions and are dependent upon the
earnings or financial condition of those subsidiaries and subject to various
business considerations.  As a result, the Company may be unable to gain access
to the cash flow or assets of its subsidiaries in amounts sufficient to pay the
principal of or interest on the Notes when due or to repurchase Notes at the
option of the holders thereof after the occurrence of a Fundamental Change.

         As of December 31, 1997, the Company had no indebtedness outstanding
that would have constituted Senior Indebtedness, and the Company's subsidiaries
had approximately $37.7 million of indebtedness and other liabilities
outstanding (other than liabilities of a type not required to be reflected in a
balance sheet in accordance with generally accepted accounting principles and
intercompany indebtedness) to which the Notes would have been effectively
subordinated.  The Indenture will not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company can create,
incur, assume or guarantee, nor will the Indenture limit the amount of
indebtedness or other liabilities that any subsidiary can create, incur, assume
or guarantee.

         The Company is obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against certain losses, liabilities or expenses
incurred by it in connection with its duties relating to the Notes.  The
Trustee's claims for such payments will generally be senior to those of the
holders of the Notes in respect of all funds collected or held by the Trustee.

OPTIONAL REDEMPTION

         At any time on or after November 5, 2002, the Notes will be redeemable
at the Company's option on at least 20 and not more than 60 days notice, in
whole, or from time to time, in part, at the following prices (expressed as
percentages of the principal amount), together with accrued interest to, but
excluding, the Redemption Date.

         If redeemed during the 12-month period beginning November 1 (beginning
November 5, 2002 and ending October 31, 2003, in the case of the first such
period):



                        YEAR                                          REDEMPTION PRICE
                        ----                                          ----------------
                                                                        
                     2002                                                   101.50%
                     2003                                                   100.75%

and 100% at November 1, 2004; provided that any semi-annual payment of interest
becoming due on the Redemption Date shall be payable to the holders of record
on the Regular Record Date of the Notes being redeemed.

         If fewer than all the Notes are to be redeemed, the Trustee will
select the Notes to be redeemed by lot.  If any Note is to be redeemed in part
only, a new Note or Notes in principal amount equal to the unredeemed principal
portion thereof will be issued at the office or agency of the Trustee in the
City of New York or the Corporate Trust Office of the Trustee in Los Angeles,
California.  If a portion of a holder's Notes is selected for partial
redemption





                                       24
   25
and such holder converts a portion of such Notes, such converted portion shall
be deemed to be taken from the portion selected for redemption.

         There is no sinking fund provided for in the Notes.

PAYMENT AND CONVERSION

         The principal of Notes will be payable in United States dollars,
against surrender thereof at the office or agency of the Trustee in the City of
New York or the Corporate Trust Office of the Trustee in Los Angeles,
California or, subject to any applicable laws and regulations, at the office of
any Paying Agent, by dollar check drawn on, or by transfer to a dollar account
(such transfer to be made only to holders of an aggregate principal amount of
Notes in excess of $2,000,000) maintained by the holder with, a bank in the
City of New York.  Payment of any installment of interest on Notes will be made
to the Person in whose name such Notes or any predecessor Note is registered at
the close of business on April 15 or October 15 (whether or not a Business Day)
immediately preceding the relevant Interest Payment Date (a "Regular Record
Date").  Payments of such interest will be made by a dollar check drawn on a
bank in the City of New York mailed to the holder at such holder's registered
address or, upon application by the holder thereof to the Trustee not later
than the applicable Regular Record Date, by transfer to a dollar account (such
transfer to be made only to holders of an aggregate principal amount of Notes
in excess of $2,000,000) maintained by the holder with a bank in the City of
New York.  No such transfer to a dollar account will be made unless the Trustee
has received written wire instructions not less than 15 days prior to the
relevant payment date.

         Any payment on the Notes due on any day which is not a Business Day
need not be made on such day, but may be made on the next succeeding Business
Day with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date.
"Business Day," when used with respect to any place of payment, place of
conversion or any other place, as the case may be, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in such place of payment, place of conversion or other place, as the case may
be, are authorized or obligated by law or executive order to close; provided,
however, that a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close shall not be a
Business Day for certain purposes.

         Notes may be surrendered for conversion, subject to any applicable
laws and regulations, at the office of any Conversion Agent or at the office or
agency of the Trustee in the City of New York or the Corporate Trust Office of
the Trustee in Los Angeles, California.  Notes surrendered for conversion must
be accompanied by appropriate notices and any payments in respect of interest
or taxes, as applicable, as described above under " -- Conversion."

         The Company has initially appointed as Paying Agent and Conversion
Agent the Trustee at its Corporate Trust Office in Los Angeles, California or
the office or agency of the Trustee in the City of New York.  The Company may
at any time terminate the appointment of any Paying Agent or Conversion Agent
and appoint additional or other Paying Agents and Conversion Agents, provided
that until the Notes have been delivered to the Trustee for cancellation, or
moneys sufficient to pay the principal of, premium, if any, and interest on the
Notes have been made available for payment and either paid or returned to the
Company as provided in the Indenture, it will maintain offices or agencies in
the City of New York for payments with respect to the Notes and for the
surrender of Notes for conversion.  Notice of any such termination or
appointment and of any change in the office through which any Paying Agent or
Conversion Agent will act will be given in accordance with "Notices" below.

         Interest payable on Notes on any Redemption Date or Repurchase Date
that is an Interest Payment Date will be paid to the holders of record as of
the immediately preceding Regular Record Date.

         All moneys deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of principal of, premium, if any,
or interest on any Notes which remain unclaimed at the end of the earlier of
the date on which such money escheats to the state or two years after such
payment has become due and payable





                                       25
   26



will be repaid to the Company, and the holder of such Note will thereafter look
only to the Company for payment thereof.

REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE

         If a Fundamental Change (as defined) occurs, each holder of Notes
shall have the right, at the holder's option, to require the Company to
repurchase all of such holder's Notes, or any portion of a Note that is $1,000
or an integral multiple of $1,000 in excess thereof, on the date (the
"Repurchase Date") that is 45 days after the date of the Company Notice (as
defined), at a price (the "Repurchase Price") (expressed as a percentage of the
principal amount) equal to a repurchase price of 101% of the principal amount
thereof, plus accrued interest on the redeemed Notes to, but excluding, the
Repurchase Date.  Any Notes repurchased by the Company shall be canceled.

         Within 30 days after the occurrence of a Fundamental Change, the
Company is obligated to give to all holders of the Notes notice, as provided in
the Indenture (the "Company Notice"), of the occurrence of such Fundamental
Change and of the repurchase right arising as a result thereof.  The Company
must also deliver a copy of the Company Notice to the Trustee.  To exercise the
repurchase right, a holder of Notes must deliver on or before the 30th day
after the date of the Company Notice irrevocable written notice to the Trustee
or any Paying Agent of the holder's exercise of such right, together with the
Notes with respect to which the right is being exercised.  Beneficial owners of
an interest in a Global Note (as defined) may exercise the repurchase right by
delivering the appropriate instruction form for repurchases at the election of
holders pursuant to the DTC book-entry repurchase program.

         The term "Fundamental Change" means the occurrence of any transaction
or event in connection with which all or substantially all of the Common Stock
shall be exchanged for, converted into, acquired for or constitute solely the
right to receive, consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) which is not all or
substantially all common stock or shares which are (or, upon consummation of or
immediately following such transaction or event, will be) listed on a United
States national securities exchange or approved for quotation on the Nasdaq
National Market or any similar United States system of automated dissemination
of quotations of securities prices.

         Rule 13e-4 under the Exchange Act requires the dissemination of
certain information to security holders in the event of an issuer tender offer
and may apply in the event that the repurchase option becomes available to
holders of the Notes.  The Company will comply with this rule and any other
securities laws to the extent applicable at that time.

         If a Fundamental Change were to occur, there can be no assurance that
the Company would have sufficient funds to pay the repurchase price for all the
Notes tendered by the holders thereof.  Any future credit agreements or other
agreements relating to other indebtedness (including other Senior Indebtedness)
to which the Company becomes a party may prohibit the Company from repurchasing
or redeeming any Notes and may also provide that a Fundamental Change would
constitute an event of default thereunder.  If a Fundamental Change were to
occur at a time when the Company is prohibited from repurchasing or redeeming
the Notes, the Company could seek the consent of its lenders to the repurchase
of the Notes or could attempt to refinance the borrowings that contain such
prohibition.  If the Company does not obtain such a consent or repay such
borrowings, the Company would remain prohibited from repurchasing or redeeming
the Notes.  In such case, the Company's failure to repurchase tendered Notes
would constitute an Event of Default under the Indenture, which may, in turn,
constitute a default under the terms of other indebtedness that the Company may
enter into from time to time.  In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Notes.

         The repurchase option upon a Fundamental Change feature of the Notes
may in certain circumstances make more difficult or discourage a takeover of
the Company and, thus, the removal of incumbent management.  The Fundamental
Change repurchase feature, however, is not the result of management's knowledge
of any specific effort to accumulate the Company's stock or to obtain control
of the Company by means of a merger, tender offer, solicitation or otherwise,
or part of a plan by management to adopt a series of anti-takeover provisions.
Instead, the Fundamental Change repurchase feature is a result of negotiations
between the Company and the Initial Purchaser.





                                       26
   27

Management has no present intention to engage in a transaction involving a
Fundamental Change, although it is possible that the Company could decide to do
so in the future.  Subject to the limitations on mergers, consolidations and
sale of assets described herein, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Fundamental Change under the
Indenture, but that could increase the amount of indebtedness (including Senior
Indebtedness) outstanding at such time or otherwise affect the Company's
capital structure or credit ratings.  The payment of the repurchase price in
the event of a Fundamental Change is subordinated to the prior payment of
Senior Indebtedness as described under " -- Subordination" above.

         The term "Fundamental Change" is limited to certain specified
transactions and may not include other events that might adversely affect the
financial condition of the Company nor would the requirement that the Company
offer to repurchase the Notes upon a Fundamental Change necessarily afford
holders of the Notes protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving the Company.

MERGERS AND SALES OF ASSETS BY THE COMPANY

         The Company may not consolidate with or merge into any other Person
(in a transaction in which the Company is not the surviving entity) or transfer
or lease its properties and assets substantially as an entirety to any Person
unless (i) the Person formed by such merger or into which the Company is merged
or the Person to which the properties and assets of the Company are so
transferred or leased shall expressly assume the payment of the principal of,
premium, if any, and interest on the Notes, (ii) no default and no Event of
Default shall have occurred and be continuing as a result of such
consolidation, merger, transfer or lease, and (iii) the performance of the
other covenants of the Company under the Indenture and certain other conditions
are met.

EVENTS OF DEFAULT

         The following will be Events of Default under the Indenture: (a)
failure to pay principal of or premium, if any, on any Note when due; (b)
failure to pay any interest on, or Liquidated Damages with respect to, any Note
when due, continuing for 30 days; (c) failure to perform any other covenant of
the Company in the Indenture, continuing for 60 days after written notice as
provided in the Indenture; and (d) certain events of bankruptcy, insolvency or
reorganization of the Company or any of its Significant Subsidiaries (as
defined).  Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the holders, unless
such holders shall have offered to the Trustee reasonable indemnity.  Subject
to such provisions providing for the indemnification of the Trustee, the
holders of a majority in aggregate principal amount of the Outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.

         If an Event of Default (other than as specified in clause (d) above)
shall occur and be continuing, either the Trustee or the holders of at least
25% in aggregate principal amount of the Outstanding Notes may accelerate the
maturity of all Notes; provided, however, that after such acceleration, but
before a judgment or decree based on acceleration, the holders of a majority in
aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal, have been cured or waived
as provided in the Indenture.  If an Event of Default as specified in clause
(d) above occurs and is continuing with respect to the Company, then the
principal of, and accrued interest on, all the Notes shall ipso facto become
immediately due and payable without any declaration or other act on the part of
the holders of the Notes or the Trustee.  For information as to waiver of
defaults, see " -- Meetings, Modification and Waiver."

         No holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder unless such holder
shall have previously given to the Trustee written notice of a continuing Event
of Default and the holders of at least 25% in aggregate principal amount of the
Outstanding Notes shall have





                                       27
   28



made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee, and the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the Outstanding
Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days.  However, such limitations do not
apply to a suit instituted by a holder of a Note for the enforcement of payment
of the principal of, premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note or of the right to convert such
Note in accordance with the Indenture.

         The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance.

MEETINGS, MODIFICATION AND WAIVER

         The Indenture contains provisions for convening meetings of the
holders of Notes to consider matters affecting their interests.

         Modifications and amendments of the Indenture may be made, and certain
past defaults by the Company may be waived, either (i) with the written consent
of the holders of not less than a majority in aggregate principal amount of the
Outstanding Notes or (ii) by the adoption of a resolution, at a meeting of
holders of the Notes at which a quorum is present, by the holders of at least
the lesser of a majority in aggregate principal amount of the Outstanding Notes
and 66 2/3% of the aggregate principal amount of the Notes represented and
entitled to vote at such meeting.  However, no such modification or amendment
may, without the consent of the holder of each Outstanding Note, (a) change the
Stated Maturity of the principal of, or any installment of interest on, any
Note, (b) reduce the principal amount of, or the premium, if any, or interest
on, any Note, (c) reduce the amount payable upon a redemption or repurchase,
(d) modify the provisions with respect to the repurchase right of the holders
in a manner adverse to the holders, (e) change the place or currency of payment
of principal of, or premium, if any, or interest on, any Note, (f) impair the
right to institute suit for the enforcement of any payment on or with respect
to any Note, (g) modify the obligation of the Company to maintain an office or
agency in the City of New York, (h) adversely affect the right to convert
Notes, (i) modify the subordination provisions in a manner adverse to the
holders of the Notes, (j) reduce the above-stated percentage of Outstanding
Notes necessary to modify or amend the Indenture, (k) reduce the percentage of
aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (l) reduce the percentage in aggregate principal amount of
Outstanding Notes required for the adoption of a resolution or the quorum
required at any meeting of holders of Notes at which a resolution is adopted,
or (m) modify the obligation of the Company to deliver information required
under Rule 144A to permit resales of Notes and Common Stock issuable upon
conversion thereof in the event the Company ceases to be subject to certain
reporting requirements under the United States securities laws in a manner
adverse to the holders.  The quorum at any meeting called to adopt a resolution
will be persons holding or representing a majority in aggregate principal
amount of the Outstanding Notes and, at any reconvened meeting adjourned for
lack of a quorum, 25% of such aggregate principal amount.

         The Indenture may also be modified or amended without the consent of
the holders: (i) to evidence the succession of another Person to the Company as
otherwise permitted by the Indenture; (ii) to add to the covenants of the
Company for the benefit of the holders of the Notes or to surrender any power
conferred upon the Company; (iii) to add any Events of Default; (iv) to permit
or facilitate the issuance of securities in uncertificated form; (v) to secure
the Notes; (vi) to provide for successor or additional trustees; (vii) to make
provision with respect to the conversion and repurchase rights of holders in
accordance with the provisions of the Indenture; (viii) to comply with the
requirements of the Trust Indenture Act; or (ix) to cure any ambiguity, to
correct or supplement any provision which may be inconsistent with any other
provision or to make any other provisions with respect to matters or questions
arising under the Indenture, provided such action shall not adversely affect
the interest of holders of Notes in any material respect.

         The holders of a majority in aggregate principal amount of the
Outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture by written consent.  The holders of a majority in
aggregate principal amount of the Outstanding Notes also may waive any past
default under the Indenture, except a default in the payment of principal,
premium, if any, or interest, by written consent.





                                       28
   29

BOOK ENTRY, DELIVERY AND FORM

         The Notes have been issued in fully registered form, without coupons,
in denominations of $1,000 principal amount and integral multiples thereof.

         Global Note, Book-Entry Form.  Notes held by "qualified institutional
buyers," as defined in Rule 144A under the Securities Act ("QIBs"), are
evidenced by a global Note (the "144A Global Note"), which has been deposited
with, or on behalf of, DTC, New York, New York, and registered in the name of
Cede & Co.  ("Cede") as DTC's nominee.

         QIBs may hold their interests in the 144A Global Note directly through
DTC or indirectly through organizations which are participants in DTC (the
"Participants").  Transfers between Participants will be effected in the
ordinary way in accordance with DTC rules and will be settled in clearing house
funds.  The laws of some states require that certain persons take physical
delivery of securities in definitive form.  Consequently, the ability to
transfer beneficial interests in the Global Note to such persons may be
limited.

         QIBs and Non-U.S. Persons who are not Participants may beneficially
own interests in the Global Note held by DTC only through Participants,
including Euroclear and Cedel, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").  So long as Cede, as the nominee of DTC, is the registered
owner of the Global Note, Cede for all purposes will be considered the sole
holder of the Global Note.  Except as provided below and except in certain
limited circumstances as provided in the Indenture, owners of beneficial
interests in the Global Note will not be entitled to have certificates
registered in their names, will not receive or be entitled to receive physical
delivery of certificates in definitive form, and will not be considered holders
thereof.

         Payment of interest on and the redemption price of the Global Note
will be made to Cede, the nominee for DTC, as the registered owner of the
Global Note, by wire transfer of immediately available funds on each interest
payment date.  Neither the Company, the Trustee, any Note Register nor any
Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.

         The Company has been informed by DTC that, with respect to any payment
of interest on, or the redemption price of, the Global Note, DTC's practice is
to credit Participants' accounts on the payment date therefor with payments in
amounts proportionate to their respective beneficial interests in the Notes
represented by the Global Note, as shown on the records of DTC (adjusted as
necessary so that such payments are made with respect to whole Notes only),
unless DTC has reason to believe that it will not receive payment on such
payment date.  Payments by Participants to owners of beneficial interests in
Notes represented by the Global Note held through such Participants will be the
responsibility of such Participants, as is now the case with securities held
for the accounts of customers registered in "street name."

         Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by the Global
Note to pledge such interest to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.

         Neither the Company nor the Trustee (or any Note Registrar, Paying
Agent or Conversion Agent under the Indenture) will have any responsibility for
the performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.  DTC has advised the Company that it will take any action permitted
to be taken by a holder of Notes (including, without limitation, the
presentation of Notes for exchange as described below) only at the direction of
one or more Participants to whose account with DTC interests in the Global Note
are credited and only in respect of the principal amount of the Notes
represented by the Global Note as to which such Participant or Participants has
or have given such direction.





                                       29
   30

         DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act.  DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates.  Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Initial Purchaser.  Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Participant, either directly or indirectly.

         Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among Participants, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time.  If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will cause the Notes to be issued in
definitive form in exchange for the Global Note.

REGISTRATION RIGHTS

         The Company has entered into a registration rights agreement with the
Initial Purchaser (the "Registration Rights Agreement") pursuant to which the
Company agreed, at the Company's expense for the benefit of the holders of the
Notes and the Common Stock issuable upon conversion thereof (together, the
"Registrable Securities"), (i) to file with the Commission within 120 days
after the date of original issuance of the Notes, a registration statement (the
"Shelf Registration Statement") covering resales of the Registrable Securities,
(ii) to use its reasonable efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act within 180 days after the date
of original issuance of the Notes and (iii) to use its reasonable efforts to
keep effective the Shelf Registration Statement until the second anniversary of
the last date of original issuance of Notes or such earlier date as all
Registrable Securities shall have been disposed of or on which all Registrable
Securities held by Persons that are not affiliates of the Company may be resold
without registration pursuant to Rule 144(k) under the Securities Act (the
"Effectiveness Period").  The Company will be permitted to suspend the use of
the prospectus which is part of the Shelf Registration Statement in connection
with the sales of the Registrable Securities during certain periods of time
under certain circumstances relating to pending corporate developments, public
filings with the Commission and other events.  The Company will provide to each
holder of Registrable Securities copies of the prospectus that is a part of the
Shelf Registration Statement, notify each holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit public resales of the Registrable Securities.  A holder of
Registrable Securities that sells such Registrable Securities pursuant to the
Shelf Registration Statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement, including certain
indemnification obligations.

         If (i) on or prior to 120 days following the date of original issuance
of the Notes a Shelf Registration Statement has not been filed with the
Commission or (ii) on or prior to the 180th day following the date of original
issuance of the Notes, such Shelf Registration Statement is not declared
effective (each, a "Registration Default"), additional interest ("Liquidated
Damages") will accrue on the Notes, from and including the day following such
Registration Default until such time as such Shelf Registration Statement is
filed or such Shelf Registration Statement is declared effective, as the case
may be.  Liquidated Damages will be paid semi-annually in arrears, with the
first semi-annual payment due on the first Interest Payment Date following the
date on which such Liquidated Damages begin to accrue, and will accrue at a
rate per annum equal to an additional one-quarter of one percent (0.25%) of the
principal amount, to and including the 90th day following such Registration
Default and one-half of one percent (0.50%) thereof from and after the 91st day
following such Registration Default.  In the event that during the
Effectiveness Period the Shelf Registration Statement ceases to be effective
for more than 90 days or the Company suspends the use of the prospectus which
is a part thereof for more than 90 days, whether or not consecutive, during any
12-month period, then the interest rate borne by Notes will increase by an
additional one-





                                       30
   31



half of one percent (0.50%) per annum from the 91st day of the applicable
12-month period such Shelf Registration Statement ceases to be effective or the
Company suspends the use of the Prospectus which is a part thereof, as the case
may be, until the earlier of such time as (i) the Shelf Registration Statement
again becomes effective, (ii) the use of the related prospectus ceases to be
suspended or (iii) the Effectiveness Period expires.  The Company agreed in the
Registration Rights Agreement to use its reasonable efforts to cause such
Common Stock issuable upon conversion of the Notes to be quoted on the Nasdaq
National Market, or, if the Common Stock is not then quoted on the Nasdaq
National Market, to be listed on such exchange or market in the United States
as the Common Stock is then listed, upon effectiveness of the Shelf
Registration Statement.

         This summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of the form of which will be made available to prospective
investors in the Notes upon request to the Company.

TRANSFER AND EXCHANGE

         At the option of the holder upon request confirmed in writing, Notes
will be exchangeable at any time into an equal aggregate principal amount of
Notes of different authorized denominations.  See "-- Book Entry, Delivery and
Form."

         Notes may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of the Note
Registrar, without service charge but, in the case of a transfer, upon payment
of any taxes and other governmental charges as described in the Indenture.  Any
registration of transfer or exchange will be effected upon the Note Registrar
being satisfied with the documents of title and identity of the Person making
the request, and subject to such reasonable regulations as the Company may from
time to time agree upon with the Note Registrar, all as described in the
Indenture.  Notes may be transferred in whole or in part in authorized
denominations at the office or agency of the Trustee in the City of New York or
the Corporate Trust Office of the Trustee in Los Angeles, California.

         The Company has initially appointed the Trustee as Note Registrar.
The Company reserves the right to vary or terminate the appointment of the Note
Registrar or to appoint additional or other Note Registrars or to approve any
change in the office through which any Note Registrar acts; provided that there
will at all times be a Note Registrar in the City of New York.

         In the event of a redemption of less than all of the Notes for any of
the reasons set forth above under "-- Optional Redemption," the Company will
not be required (a) to register the transfer or exchange of Notes for a period
of 15 days immediately preceding the date notice is given identifying the
serial numbers of the Notes called for such redemption or (b) to register the
transfer of or exchange any Note, or portion thereof, called for redemption.

TITLE

         The Company, the Trustee, any Paying Agent, any Conversion Agent and
any Note Registrar may treat the registered owner (as reflected in the Note
Register) of any Note as the absolute owner thereof (whether or not such Note
shall be overdue) for the purpose of making payment and for all other purposes.

NOTICES

         Notice to holders of Notes will be given by mail to the addresses of
such holders as they appear on the Note Register.  Such notices will be deemed
to have been given on the date of such mailing or on the date of the first such
publication, as the case may be.

         Notice of a redemption of Notes will be given at least once not less
than 20 nor more than 60 days prior to the Redemption Date (which notice shall
be published in accordance with the procedures described in the preceding
paragraph) and shall be irrevocable and will specify the Redemption Date.





                                       31
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REPLACEMENT OF NOTES

         Notes that become mutilated, destroyed, stolen or lost will be
replaced by the Company at the expense of the holder upon delivery to the
Trustee or to a Note Registrar of the mutilated Notes or evidence of the loss,
theft or destruction thereof satisfactory to the Company and the Trustee.  In
the case of a lost, stolen or destroyed Note, indemnity satisfactory to the
Trustee and the Company may be required at the expense of the holder of such
Note before a replacement Note will be issued.

PAYMENT OF STAMP AND OTHER TAXES

         The Company will pay all stamp and other duties, if any, which may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes or the
issuance of Common Stock upon any conversion of Notes.  Except as described
under "-- Payment of Additional Amounts," the Company will not be required to
make any payment with respect to any other tax, assessment or governmental
charge imposed by any government or any political subdivision thereof or taxing
authority thereof or therein.

GOVERNING LAW

         The Indenture, the Notes and the Registration Rights Agreement will be
governed by and construed in accordance with the laws of the State of New York,
United States of America.

INFORMATION CONCERNING THE TRUSTEE

         State Street Bank and Trust Company of California, N.A., is the
Trustee under the Indenture.  The Company may maintain deposit accounts and
conduct other banking transactions with the Trustee and its affiliates in the
normal course of business.

         In case an Event of Default shall occur (and shall not be cured or
waived in a timely manner), the Trustee will be required to use the degree of
care of a prudent person in the conduct of his own affairs in the exercise of
its powers.  Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of Notes, unless they shall have offered to the
Trustee reasonable security or indemnity.

                          DESCRIPTION OF CAPITAL STOCK

         The authorized capital stock of the Company consists of 75,000,000
shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of
Preferred Stock.

COMMON STOCK

         Subject to preferences that may apply to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board of Directors may from time to time
determine.  Each stockholder is entitled to one vote for each share of Common
Stock held on all matters submitted to a vote of stockholders.  Cumulative
voting for the election of directors is not provided for in the Certificate of
Incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election.  The Common Stock is
not entitled to preemptive rights and is not subject to conversion or
redemption.  Upon liquidation, dissolution or winding up of the Company, the
assets legally available for distribution to stockholders are distributable
ratably among the holders of the Common Stock and any participating Preferred
Stock outstanding at that time after payment of liquidation preferences, if
any, on any outstanding Preferred Stock and payment of other claims of
creditors.





                                       32
   33
PREFERRED STOCK

         The Board of Directors is authorized, subject to any limitations
prescribed by Delaware law, to provide for the issuance of additional shares of
Preferred Stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix the powers,
preferences and rights of the shares of each wholly unissued series and any
qualifications, limitations or restrictions thereon, and to increase or
decrease the number of shares of any such series (but not below the number of
shares of such series then outstanding), without any further vote or action by
the stockholders.  The Board of Directors may authorize the issuance of
Preferred Stock with voting or conversion rights that could adversely affect
the voting power of other rights of the holders of Common Stock.  Thus, the
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company.  The Company has no current plan
to issue any shares of Preferred Stock.

DELAWARE'S ANTI-TAKEOVER LAW

         The Company is subject to the provisions of Section 203 (the
"Anti-Takeover Law") of the Delaware General Corporation Law (the "DGCL") which
regulates corporate takeovers.  The Anti-Takeover Law prevents certain Delaware
corporations, including those whose securities are listed on Nasdaq, from
engaging, under certain circumstances, in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with
any "interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date that
such stockholder became an "interested stockholder." A Delaware corporation may
"opt out" of the Anti-Takeover Law with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or bylaws resulting from a stockholders' amendment approved by at
least a majority of the outstanding voting shares.  The Company has not "opted
out" of the provisions of the Anti-Takeover Law.

REGISTRATION RIGHTS

         Warburg, Pincus Investors, L.P.  ("Warburg") which beneficially owns
approximately 5,438,867 shares of Common Stock, or approximately 17.6% of the
total outstanding shares of Common Stock, has certain "demand" rights to cause
the Company to register under the Securities Act the sale of shares of the
Company's Common Stock received by Warburg in connection with the Merger having
an aggregate offering price (before deduction of underwriting discounts and
commissions) of at least $5.0 million.  The Company is required to effect up to
two such "demand" registrations.  The Company has the right to delay any such
registration for up to 60 days under certain circumstances.

         In addition, Warburg has certain "piggyback" registration rights.  If
the Company proposes to register any of its securities under the Securities
Act, other than a registration in connection with, among other things, the
offering of debt securities by the Company, the Company's employee benefit
plans or a merger or reorganization transaction, Warburg may require the
Company to include all or a portion of its shares in such registration, subject
to the right of the managing underwriter, if any, to limit the number of shares
to be included by Warburg in such registration to not less than 35% of the
total number of shares desired to be included in such registration.

         The registration rights of Warburg will expire at such time as all
shares of Common Stock received by Warburg in the Merger may be resold in a
three month period by Warburg pursuant to Rule 144 promulgated under the
Securities Act.

         All expenses incurred in connection with the above registrations
(other than the underwriters' and brokers' discounts and commissions and the
fees of counsel for Warburg) will be borne by the Company.

TRANSFER AGENT AND REGISTRAR

         The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.





                                       33
   34
LISTING

The Common Stock is quoted on the Nasdaq National Market under the trading
symbol "VRTS."



            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

         The following is a general discussion of certain U.S. federal income
tax considerations relevant to holders of the Notes and Common Stock into which
the Notes may be converted.  This discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue
Service ("IRS") rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations.  There can be no assurance that the IRS will not challenge one
or more of the tax consequences described herein, and the Company has not
obtained, nor does it intend to obtain, a ruling from the IRS with respect to
the U.S. federal income tax consequences of acquiring or holding Notes or
Common Stock.  This discussion does not purport to deal with all aspects of
U.S. federal income taxation that may be relevant to a particular holder in
light of the holder's circumstances (for example, persons subject to the
alternative minimum tax provisions of the Code).  Also, it is not intended to
be wholly applicable to all categories of investors, some of which (such as
dealers in securities, banks, insurance companies, tax-exempt organizations,
and persons holding Notes or Common Stock as part of a hedging or conversion
transaction or straddle or persons deemed to sell Notes or Common Stock under
the constructive sale provisions of the Code) may be subject to special rules.
The discussion also does not discuss any aspect of state, local or foreign law,
or U.S. federal estate and gift tax law as applicable to U.S. Holders (as
defined below).  In addition, this discussion is limited to original purchasers
of Notes who acquire the Notes at their original issue price within the meaning
of Section 1273 of the Code, and who will hold the Notes and Common Stock as
"capital assets" within the meaning of Section 1221 of the Code.

         ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE
COMMON STOCK.

U.S. HOLDERS

         As used herein, the term "U.S. Holder" means the beneficial holder of
a Note or Common Stock that for United States federal income tax purposes is
(i) a citizen or resident (as defined in Section 7701(b) of the Code) of the
United States, (ii) a corporation, partnership or other entity formed under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to U.S. federal income taxation regardless of
its source and (iv) in general, a trust subject to the primary supervision of a
court within the United States and the control of a United States person as
described in Section 7701(a)(30) of the Code.  A "Non-U.S. Holder" is any
holder other than a U.S. Holder.

Interest

         Stated interest on the Notes will generally be includable in a U.S.
Holder's gross income and taxable as ordinary income for U.S.  federal income
tax purposes at the time it is paid or accrued in accordance with the U.S.
Holder's regular method of accounting.  There are several circumstances under
which the Company could make a payment on a Note which would affect the yield
to maturity of a Note, including (as described under "Description of Notes")
the payment of Liquidated Damages, the redemption of a Note by the Company, or
the repurchase of a Note at the option of a holder in the event of a
Fundamental Change.  According to Treasury Regulations, the possibility of a
change in the interest rate will not affect the amount of interest income
recognized by a holder (or the timing of such recognition) if the likelihood of
the change, as of the date the debt obligations are issued, is remote.  The
Company believes that the likelihood of a change in the interest rate on the
Notes is remote and does not intend to treat the possibility of a change in the
interest rate as affecting the yield to maturity of any Note.





                                       34
   35

Conversion of Notes Into Common Stock

         A U.S. Holder generally will not recognize any income, gain or loss
upon conversion of a Note into Common Stock except to the extent the Common
Stock is considered attributable to accrued interest not previously included in
income (which is taxable as ordinary income) or with respect to cash received
in lieu of a fractional share of Common Stock.  The adjusted basis of shares of
Common Stock received on conversion will equal the adjusted basis of the Note
converted (reduced by the portion of adjusted basis allocated to any fractional
share of Common Stock exchanged for cash) and the holding period of the Common
Stock received on conversion will generally include the period during which the
converted Notes were held.  However, a U.S. Holder's tax basis in shares of
Common Stock considered attributable to accrued interest as described above
generally will equal the amount of such accrued interest included in income,
and the holding period for such shares shall begin as of the date of
conversion.

         The conversion price of the Notes is subject to adjustment under
certain circumstances.  Section 305 of the Code and the Treasury Regulations
issued thereunder may treat the holders of the Notes as having received a
constructive distribution, resulting in ordinary income (subject to a possible
dividends received deduction in the case of corporate holders) to the extent of
the Company's current and/or accumulated earnings and profits, if, and to the
extent that certain adjustments in the conversion price that may occur in
limited circumstances (particularly an adjustment to reflect a taxable dividend
to holders of Common Stock) increase the proportionate interest of a holder of
Notes in the fully diluted Common Stock, whether or not such holder ever
exercises its conversion privilege.  Moreover, if there is not a full
adjustment to the conversion ratio of the Notes to reflect a stock dividend or
other event increasing the proportionate interest of the holders of outstanding
Common Stock in the assets or earnings and profits of the Company, then such
increase in the proportionate interest of the holders of the Common Stock
generally will be treated as a distribution to such holders, taxable as
ordinary income (subject to a possible dividends received deduction in the case
of corporate holders) to the extent of the Company's current and/or accumulated
earnings and profits.

Sale, Exchange or Retirement of the Notes

         Each U.S. Holder generally will recognize gain or loss upon the sale,
exchange, redemption, retirement or other disposition of Notes measured by the
difference (if any) between (i) the amount of cash and the fair market value of
any property received (except to the extent that such cash or other property is
attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as ordinary income) and (ii) such holder's
adjusted tax basis in the Notes.  Any such gain or loss recognized on the sale,
exchange, redemption, retirement or other disposition of a Note should be
capital gain or loss and will generally be long-term capital gain or loss if
the Note has been held or deemed held for more than one year at the time of the
sale or exchange.  On August 5, 1997, legislation was enacted which, among
other things, reduces to 20% the maximum rate of tax on long-term capital gains
on most capital assets held by an individual for more than 18 months and under
which, gain on most capital assets held by an individual more than one year and
up to 18 months is subject to tax at a maximum rate of 28%.  A holder's initial
basis in a Note will be the amount paid therefor.

The Common Stock

         Distributions, if any, paid on the Common Stock after a conversion, to
the extent made from current and/or accumulated earnings and profits of the
Company, as determined for U.S. federal income tax purposes, will be included
in a U.S. Holder's income as ordinary income (subject to a possible dividends
received deduction in the case of corporate holders) as they are paid.  Gain or
loss realized on the sale or exchange of Common Stock will equal the difference
between the amount realized on such sale or exchange and the U.S. Holder's
adjusted tax basis in such Common Stock.  Such gain or loss will generally be
long-term capital gain or loss if the holder has held or is deemed to have held
the Common Stock for more than one year.  On August 5, 1997, legislation was
enacted which reduces to 20% the maximum rate of tax on long-term capital
gains on most capital assets held by an individual for more than 18 months and
under which gain on most capital assets held by an individual more than one
year and up to 18 months is subject to tax at a maximum rate of 28%.





                                       35
   36

Information Reporting and Backup Withholding

         A U.S. Holder of Notes or Common Stock may be subject to "backup
withholding" at a rate of 31% with respect to certain "reportable payments,"
including interest payments, dividend payments and, under certain
circumstances, principal payments on the Notes.  These backup withholding rules
apply if the holder, among other things, (i) fails to furnish a social security
number or other taxpayer identification number ("TIN") certified under
penalties of perjury within a reasonable time after the request therefor, (ii)
furnishes an incorrect TIN, (iii) fails to report properly interest or
dividends, or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN furnished is the
correct number and that such holder is not subject to backup withholding.  A
holder who does not provide the Company with its correct TIN also may be
subject to penalties imposed by the IRS.  Any amount withheld from a payment to
a holder under the backup withholding rules is creditable against the holder's
federal income tax liability, provided that the required information is
furnished to the IRS.  Backup withholding will not apply, however, with respect
to payments made to certain holders, including corporations, tax-exempt
organizations and certain foreign persons, provided their exemptions from
backup withholding are properly established.

         The Company will report to the U.S. Holders of Notes and Common Stock
and to the IRS the amount of any "reportable payments" for each calendar year
and the amount of tax withheld, if any, with respect to such payments.

NON-U.S. HOLDERS

         The following discussion is limited to the U.S. federal income tax
consequences relevant to a Non-U.S. Holder.

         For purposes of withholding tax on interest and dividends discussed
below, a Non-U.S. Holder (as defined above) includes a non-resident fiduciary
of an estate or trust.  For purposes of the following discussion, interest,
dividends and gain on the sale, exchange or other disposition of a Note or
Common Stock will be considered to be "U.S. trade or business income" if such
income or gain is (i) effectively connected with the conduct of a U.S. trade or
business or (ii) in the case of a treaty resident, attributable to a permanent
establishment (or, in the case of an individual, a fixed base) in the United
States.

Stated Interest

         Generally any interest paid to a Non-U.S. Holder of a Note that is not
U.S. trade or business income will not be subject to U.S. tax if the interest
qualifies as "portfolio interest." Generally interest on the Notes will qualify
as portfolio interest if (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting power of all voting stock of
the Company and is not a "controlled foreign corporation" with respect to which
the Company is a "related person" within the meaning of the Code, (ii) the
beneficial owner, under penalty of perjury, certifies that the beneficial owner
is not a U.S. person and such certificate provides the beneficial owner's name
and address, (iii) the Non-U.S. Holder is not a bank receiving interest on an
extension of credit made pursuant to a loan agreement made in the ordinary
course of its trade or business, and (iv) the Notes are in registered form.

         The gross amount of payments to a Non-U.S. Holder of interest that do
not qualify for the portfolio interest exemption and that are not U.S. trade or
business income will be subject to U.S. federal income tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding.
U.S. trade or business income will be taxed at regular U.S. rates rather than
the 30% gross rate.  In the case of a Non-U.S. Holder that is a corporation,
such U.S. trade or business income may also be subject to the branch profits
tax (which is generally imposed on a foreign corporation on the actual or
deemed repatriation from the United States of earnings and profits attributable
to U.S. trade or business income) at a 30% rate.  The branch profits tax may
not apply (or may apply at a reduced rate) if a recipient is a qualified
resident of certain countries with which the United States has an income tax
treaty.  To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is U.S. trade or business income, the Non-U.S.
Holder must provide a properly executed Form 1001 or 4224, as applicable, prior
to the payment of interest.  These forms must be periodically updated.  Under
recently issued Treasury Regulations,





                                       36
   37

Forms 1001 and 4224 are generally replaced by Forms W-8 and 8233, respectively,
with respect to payments made after December 31, 1998.  Also under the new
Treasury Regulations, among other requirements, Non-U.S. Holders may be
required to obtain a U.S. taxpayer identification number with respect to
payments made after December 31, 1998.

Dividends

         In general, dividends paid to a Non-U.S. Holder of Common Stock will
be subject to withholding of U.S. federal income tax at a 30% rate unless such
is reduced by an applicable income tax treaty.  Dividends that are connected
with such holder's conduct of a trade or business in the United States (U.S.
trade or business income) are generally subject to U.S. federal income tax at
regular rates, but are not generally subject to the 30% withholding tax if the
Non-U.S. Holder files the appropriate form with the payor, as discussed above.
Any U.S. trade or business income received by a Non-U.S. Holder that is a
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be applicable
under an income tax treaty.  Dividends paid to an address in a foreign country
generally are presumed (absent actual knowledge to the contrary) to be paid to
a resident of such country for purposes of the withholding discussed above and
for purposes of determining the applicability of a tax treaty rate.  Under
recently issued Treasury Regulations, Forms 1001 and 4224 are generally
replaced by Forms W-8 and 8233, respectively, with respect to payments made
after December 31, 1998.  Also under the new Treasury Regulations, among other
requirements, Non-U.S. Holders may be required to obtain a U.S. taxpayer
identification number with respect to payments made after December 31, 1998.

         A Non-U.S. Holder of Common Stock that is eligible for a reduced rate
of U.S. withholding tax pursuant to an income treaty may obtain a refund of any
amounts currently withheld by filing an appropriate claim for a refund with the
IRS.

Conversion

         A Non-U.S. Holder generally will not be subject to U.S. federal income
tax on the conversion of Notes into Common Stock, except with respect to cash
(if any) received in lieu of a fractional share or interest not previously
included in income.  Cash received in lieu of a fractional share may give rise
to gain that would be subject to the rules described below for the sale of
Notes.  Cash or Common Stock treated as issued for accrued interest would be
treated as interest under the rules described above.

Sale, Exchange or Redemption of Notes or Common Stock

         Except as described below and subject to the discussion concerning
backup withholding, any gain realized by a Non-U.S. Holder on the sale,
exchange or redemption of a Note or Common Stock generally will not be subject
to U.S. federal income tax, unless (i) such gain is U.S.  trade or business
income, (ii) the Non-U.S. Holder is subject to tax pursuant to the provisions
of U.S. tax law applicable to certain U.S.  expatriates (including certain
former citizens or residents of the United States), or (iii) in the case of the
disposition of Common Stock, the Company is a U.S. real property holding
corporation.  The Company does not believe that it is currently a "United
States real property holding corporation," or that it will become one in the
future.

Federal Estate Tax

         Notes held (or treated as held) by an individual who is not a citizen
or resident of the United States (for federal estate tax purposes) at the time
of his or her death will not be subject to U.S. federal estate tax provided
that the interest thereon qualifies as portfolio interest and was not U.S.
trade or business income.  Common Stock owned or treated as owned by an
individual who is not a citizen or resident of the United States (for federal
estate tax purposes) will be included in such individual's estate for U.S.
federal income tax purposes unless an applicable estate tax treaty otherwise
applies.





                                       37
   38
Information Reporting and Backup Withholding

         The Company must report annually to the IRS and to each Non-U.S.
Holder any interest or dividend that is subject to withholding, or that is
exempt from U.S. withholding tax pursuant to a tax treaty, or interest that is
exempt from U.S. tax under the portfolio interest exception.  Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-U.S. Holder resides.

         Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments of principal on the Notes by
the Company to a Non-U.S. Holder if the holder certifies as to its Non-U.S.
status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor its Paying Agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemption
are not, in fact, satisfied).

         The payment of the proceeds from the disposition of Notes or Common
Stock to or through the U.S. office of any broker, U.S. or foreign, will be
subject to information reporting and possible backup withholding unless the
owner certifies as to its Non-U.S. Holder status under penalty of perjury or
otherwise establishes an exemption, provided that the broker does not have
actual knowledge that the holder is a U.S.  person or that the conditions of
any other exemption are not, in fact, satisfied.  The payment of the proceeds
from the disposition of a Note or Common Stock to or through a non-U.S. office
of a non-U.S. broker that is not a U.S. related person will not be subject to
information reporting or backup withholding.  For this purpose, a "U.S. related
person" is (i) a "controlled foreign corporation" for U.S. federal income tax
purposes or (ii) a foreign person 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has been
in existence) is derived from activities that are effectively connected with
the conduct of a U.S. trade or business.

         In the case of the payment of proceeds from the disposition of Notes
or Common Stock to or through a non-U.S. office of a broker that is either a
U.S. person or a U.S. related person, information reporting is required on the
payment unless the broker has documentary evidence in the files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary.

         Any amounts withheld under the backup withholding rules from a payment
to a Non-U.S. Holder will be allowed as a refund or a credit against such
Non-U.S. Holder's U.S. federal income tax liability, provided that the
requisite procedures are followed.

         THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISER AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND
THE COMMON STOCK OF THE COMPANY, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE
LAWS.





                                       38
   39
                            SELLING SECURITYHOLDERS

         The Notes offered hereby were originally issued by the Company and
sold by the Initial Purchaser, in a transaction exempt from the registration
requirements of the Securities Act, to QIBs.  The Selling Securityholders
(which term includes their transferees, pledgees, donees or their successors)
may from time to time offer and sell pursuant to this Prospectus any or all of
the Notes and Common Stock issued upon conversion of the Notes.

         The following table sets forth information with respect to the Selling
Securityholders and the respective principal amounts of Notes beneficially
owned by each Selling Securityholder that may be offered pursuant to this
Prospectus.  Such information has been obtained from the Selling
Securityholders.  None of the Selling Securityholders has, or within the past
three years has had, any position, office or other material relationship with
the Company or any of its predecessors or affiliates.  Because the Selling
Securityholders may offer all or some portion of the Notes or the Common Stock
issuable upon conversion thereof pursuant to this Prospectus, no estimate can
be given as to the amount of the Notes or the Common Stock issuable upon
conversion thereof that will be held by the Selling Securityholders upon
termination of any such sales.  In addition, the Selling Securityholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their Notes since the date on which they provided the information
regarding their Notes in transactions exempt from the registration requirements
of the Securities Act.





                                                               Principal Amount of                           Number of
                                                                Notes Beneficially                         Conversion Shares
                                                                    Owned That         Percentage of         That May Be
Selling Securityholder                                             May Be Sold       Notes Outstanding       Sold (1)(2)
- ----------------------                                             -----------       -----------------       -----------
                                                                                                    
Advent Capital Management.............................             $    30,000                *                   4,651

Aim Charter Fund......................................              10,500,000             10.5%                162,790

Aim V.I. Growth & Income..............................               1,500,000              1.5                  23,255

Allstate Insurance Company ...........................               1,000,000              1.0                  15,503

Argent Classic Convertible Arbitrage 
Fund (Bermuda) L.P. ..................................               2,500,000              2.5                  38,759  

Baptist Health of South Florida ......................                 163,000                *                   2,527

BNY Hamilton Equity Income Fund ......................               2,500,000              2.5                  38,759

Boston Museum of Fine Arts ...........................                  69,000                *                   1,069

BS Debt Income Fund -- Class A .......................                  10,000                *                     155
 
Calamos Convertible Fund .............................                 500,000                *                   7,751

Calamos Growth & Income Fund .........................                 200,000                *                   3,100

Champion International Corporation
Master Retirement Trust ..............................                 550,000                *                   8,527

CIBC Oppenheimer Corp. ...............................               4,000,000              4.0                  62,015

The Common Fund FAO Absolute
Return Fund...........................................                 300,000                *                   4,651

The Dow Chemical Company
Employees' Retirement Plan............................                 925,000                *                  14,341

Delta Airlines Master Trust ..........................               1,250,000              1.3                  19,379

Deutsche Morgan Grenfell..............................               1,012,000              1.0                  15,689

Dunham & Associates Fund II ..........................                  44,000                *                     682

Dunham & Associates Fund III .........................                  19,000                *                     294

Engineers Joint Pension Fund .........................                 257,000                *                   3,984

The Fondren Foundation ...............................                  30,000                *                     465
Helix Convertible

Opportunities L.P. ...................................                 630,000                *                   9,767

Hamilton Global Investors Limited.....................              10,000,000             10.0                 155,038

Helix Convertible Opportunities
Fund Ltd. ............................................               1,500,000              1.5                  23,255






                                       39
   40



                                                               Principal Amount of                           Number of
                                                                Notes Beneficially                         Conversion Shares
                                                                    Owned That         Percentage of         That May Be
Selling Securityholder                                             May Be Sold       Notes Outstanding       Sold (1)(2)
- ----------------------                                             -----------       -----------------       -----------
                                                                                                    
Highbridge Capital Corporation .......................               5,000,000              5.0                  77,519

KD Offshore Fund, C.V ................................                 750,000                *                  11,627

Kellner, DiLeo & Co. .................................               3,865,000              3.9                  59,922

Kettering Medical Center Funded
Depreciation Account..................................                  35,000                *                     542

Merrill Lynch International LTD ......................               2,500,000              2.5                  38,759

Natwest Securities Limited ...........................               3,500,000              3.5                  54,263

Nicholas-Applegate Income & Growth
Fund..................................................               2,268,000              2.3                  35,162

Occidental Petroleum..................................                  50,000                *                     775

Port Authority of Allegheny County
Retirement and Disability
Allowance Plan for the Employees
Represented by Local 85 of the
Amalgamated Transit Union.............................                 675,000                *                  10,465

RJR Nabisco, Inc. Defined Benefit
Master Trust..........................................                 500,000                *                   7,751

San Diego City Retirement ............................                 510,000                *                   7,906

San Diego County Convertible .........................               2,146,000              2.1                  33,271

Shepherd Management Services .........................                  70,000                *                   1,085

Shepherd Investments
International Ltd. ...................................               2,500,000              2.5                  38,759

Smith Barney Inc. ....................................               1,000,000              1.0                  15,503

Societe Generale Secs. Cp. ...........................               7,000,000              7.0                 108,527

SPT ..................................................                 325,000                *                   5,038

Swiss Bank Corporation - London Branch ...............               2,000,000              2.0                  31,007

Unifi, Inc. Profit Sharing
Plan and Trust .......................................                  70,000                *                   1,085

United Food & Commercial Workers
Local 1262 and Employer Pension
Fund..................................................                 200,000                *                   3,100

Univar Corporation....................................                 130,000                *                   2,015

Wake Forest University ...............................                 397,000                *                   6,155

Any other holder of Notes or
future transferees from any such
holder (3)(4).........................................              24,750,000             24.8                 383,720
- ---------------------                                                                                             


*   Less than 1%.

(1) Includes shares of Common Stock issuable upon conversion of the Notes.

(2) Assumes a conversion price of $64.50 per share and a cash payment in lieu
    of any fractional share interest; such conversion price is subject to
    adjustment as described under "Description of Notes -- Conversion."
    Accordingly, the number of Shares of Common Stock issuable upon conversion
    of the Notes may increase or decrease from time to time.  Under the terms
    of the Indenture, fractional shares will not be issued upon conversion of
    the Notes; cash will be paid in lieu of fractional shares, if any.





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(3) Information concerning other Selling Securityholders will be set forth in
    Prospectus Supplements from time to time, if required.

(4) Assumes that any other holders of Notes or any future transferee from any
    such holder does not beneficially own any Common Stock other than the
    Common Stock issuable upon conversion of the Notes at the initial
    conversion rate.

         The Selling Securityholders identified above may have sold,
transferred or otherwise disposed of, in transactions exempt from the
registration requirements of the Securities Act, all or a portion of their
Notes since the date on which the information in the preceding table is
presented.  Information concerning the Selling Securityholders may change from
time to time and any such changed information will be set forth in supplements
to this Prospectus if and when necessary.  In addition, the per share
conversion price, and therefore the number of shares issuable upon conversion
of the Notes, is subject to adjustment under certain circumstances.
Accordingly, the aggregate principal amount of Notes and the number of shares
of Common Stock issuable upon conversion thereof offered hereby may increase or
decrease.  Because the Selling Securityholders may offer all or some of the
Notes that they hold and/or Conversion Shares pursuant to the offering
contemplated by this Prospectus, no estimate can be given as to the amount of
the Notes or Conversion Shares that will be held by the Selling Securityholders
upon the termination of this offering.  See "Plan of Distribution."
















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                              PLAN OF DISTRIBUTION

         The Company will not receive any of the proceeds of the sale of the
Securities offered hereby.  The Securities may be sold directly by the Selling
Securityholders from time to time.  Alternatively, the Selling Securityholders
may from time to time offer the Securities through brokers, dealers or agents
who may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders and/or the purchasers of the
Securities for whom they may act as agent.  The Selling Securityholders and any
such brokers, dealers or agents who participate in the distribution of the
Securities may be deemed to be "underwriters," and any profits on the sale of
the Securities by them and any discounts, commissions or concessions received
by any such brokers, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.  To the extent the Selling
Securityholders may be deemed to be underwriters, the Selling Securityholders
may be subject to certain statutory liabilities of, including, but not limited
to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the
Exchange Act.

         The Securities offered hereby may be sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The Securities may be sold by one or more of the following methods, without
limitation: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Securities as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of such exchange; (e) face-to-face
transactions between sellers and purchasers without a broker-dealer; (f)
through the writing of options; and (g) other.  At any time a particular offer
of the Securities is made, a revised Prospectus or Prospectus Supplement, if
required, will be distributed which will set forth the aggregate amount and
type of Securities being offered and the terms of the offering, including the
name or names of any underwriters, dealers or agents, any discounts,
commissions, concessions and other items constituting compensation from the
Selling Securityholders and any discounts, commissions or concessions allowed
or reallowed or paid to dealers.  Such Prospectus Supplement and, if necessary,
a post-effective amendment to the Registration Statement of which this
Prospectus is a part, will be filed with the Commission to reflect the
disclosure of additional information with respect to the distribution of the
Securities.  In addition, the Securities covered by this Prospectus may be sold
in private transactions or under Rule 144 rather than pursuant to this
Prospectus.

         To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Securities by
the Selling Securityholders.  There is no assurance that any Selling
Securityholder will sell any or all of the Securities offered by it hereunder
or that any such Selling Securityholder will not transfer, devise or gift such
Securities by other means not described herein.

         The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M which may limit the timing of purchases and sales of any of the Securities by
the Selling Securityholders and any other such person.  Furthermore, Regulation
M of the Exchange Act may restrict the ability of any person engaged in the
distribution of the Securities to engage in market-making activities with
respect to the particular Securities being distributed for a period of up to
five business days prior to the commencement of such distribution.  All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.

         Pursuant to the Registration Rights Agreement entered into in
connection with the offer and sale of the Notes by the Company, each of the
Company and the Selling Securityholders will be indemnified by the other
against certain liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.





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         The Company has agreed to pay substantially all of the expenses
incidental to the registration, offering and sale of the Securities to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.

                                 LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby will
be passed upon for the Company by Fenwick & West LLP, Two Palo Alto Square,
Suite 800, Palo Alto, California  94306.



                                    EXPERTS

         The consolidated financial statements and schedule of VERITAS Software
Corporation appearing in the Company's Annual Report (Form 10-K) for the year
ended December 31, 1997 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report included therein and incorporated herein
by reference.  Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.









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