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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1999

REGISTRATION NO. 333-65047
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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AUTODESK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-2819853
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION ORGANIZATION) IDENTIFICATION NUMBER)

111 MCINNIS PARKWAY, SAN RAFAEL, CA 94903
(415) 507-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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CAROL A. BARTZ
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AUTODESK, INC.
111 MCINNIS PARKWAY, SAN RAFAEL, CALIFORNIA 94903
(415) 507-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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MARK A. BERTELSEN, ESQ. JOHN L. SAVVA, ESQ.
WILSON SONSINI GOODRICH & ROSATI SULLIVAN & CROMWELL
PROFESSIONAL CORPORATION 1888 CENTURY PARK EAST, SUITE 2100
650 PAGE MILL ROAD, PALO ALTO, CALIFORNIA LOS ANGELES, CALIFORNIA 90067
94304-1050

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]

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

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

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

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

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

SUBJECT TO COMPLETION, DATED MARCH 5, 1999

3,000,000 SHARES

[LOGO OF AUTODESK(R) APPEARS HERE]

COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

The last reported sale price of the Common Stock, which is quoted under the
symbol "ADSK" on the Nasdaq National Market on February 25, 1999 was $41.063
per share. See "Market Price and Dividend Information."

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SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.

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

INITIAL
PUBLIC
OFFERING UNDERWRITING PROCEEDS TO
PRICE DISCOUNT(1) COMPANY(2)
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Per Share.................................. $ $ $
Total(3)................................... $ $ $

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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 450,000 shares at the initial public price per share,
less the underwriting discount, solely to cover over-allotments. If such
option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting".

Payment for and delivery of the shares offered hereby will occur immediately
before the amalgamation of Discreet Logic Inc. ("Discreet") with two indirect
Autodesk, Inc. ("Autodesk" or the "Company") subsidiaries, 9066-9771 Quebec
Inc. and 9066-9854 Quebec Inc., and certain related, subsequent transactions
pursuant to the Second Amended and Restated Agreement and Plan of Acquisition
and Amalgamation dated as of November 18, 1998, as amended (the "Acquisition
Agreement"), which will cause the entity resulting from such amalgamation to
become an indirect subsidiary of Autodesk (collectively, the "Transactions").
The Transactions will be voted upon by the stockholders of Discreet and of the
Company at meetings scheduled for March 10, 1999. The Common Stock offered
hereby will not be issued unless and until all conditions to the consummation
of the Transactions have been satisfied or waived. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about March 16, 1999 against payment therefor in immediately available
funds.

GOLDMAN, SACHS & CO.
U.S. BANCORP PIPER JAFFRAY INC.
BANCBOSTON ROBERTSON STEPHENS

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The date of this Prospectus is March , 1999.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

AVAILABLE INFORMATION

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 (unless such exhibits are specifically incorporated by reference
into such documents). Requests for such copies should be directed to Autodesk,
Inc., 111 McInnis Parkway, San Rafael, CA 94903, Attention: Investor
Relations, telephone (415) 507-5000.

The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information may be inspected and copied at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Website that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the Web site is http://www.sec.gov. The Common
Stock is quoted on the Nasdaq National Market. Reports, proxy and information
statements and other information concerning the Company may be inspected at
The Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.
Information, as of particular dates, concerning directors and officers of the
Company, their remuneration, options granted to them, and the principal
holders of securities of the Company has been disclosed in the proxy
statements distributed to shareholders of the Company and filed with the
Commission.

ADDITIONAL INFORMATION

This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is hereby made to the Registration Statement. Statements
contained herein concerning the provisions of any document are not necessarily
complete, and each such statement is qualified in its entirety by reference to
the copy of such document filed with the Commission.

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Any
statements contained herein (including without limitation statements to the
effect that Autodesk or its management "believes," "expects," "anticipates,"
"plans" and similar expressions) that are not statements of historical fact
should be considered forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result
of certain factors, including those set forth in the "Risk Factors" section
below. Reference is also made to the particular discussions set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the more
detailed information appearing elsewhere in, or incorporated into, this
Prospectus. Unless otherwise indicated, all information in this Prospectus
assumes no exercise of the Underwriters' overallotment option. References to
"dollars" or "$" shall be to US dollars unless otherwise specified herein. This
Prospectus contains forward-looking statements which reflect the current view
of Autodesk with respect to future events that are expected to have an effect
on their future individual or combined operations and financial performance,
including, but not limited to, forward-looking statements regarding the
expected benefits and synergies of the Transactions and regarding the reasons
for the Transactions. These forward-looking statements are subject to various
risks and uncertainties, including those set forth under "Risk Factors" and
elsewhere herein, that could cause actual results to differ materially from
historical results or those currently anticipated. Readers are cautioned not to
place undue reliance on these forward-looking statements.

AUTODESK

Autodesk develops, markets and supports personal computer software for design
drafting, visualization and multimedia content creation. Autodesk has
structured its internal marketing and development organizations around five key
market groups that most closely match Autodesk's customer base: Architecture,
Engineering and Construction ("AEC"), Mechanical Computer-Aided Design
("MCAD"), Geographic Information Systems ("GIS"), Personal Solutions Group
("PSG") and Multimedia ("Kinetix"). Autodesk's AEC Market Group provides
mechanical engineers, designers and drafters with advanced, value-based
solutions designed to solve their professional design challenges. The MCAD
Market Group provides advanced 2D/3D CAD software for mechanical designers.
Autodesk's GIS products provide easy-to-use mapping and GIS technology to help
businesses and governments manage their assets and infrastructure. Autodesk's
PSG Market Group develops easy-to- use, affordable tools for professionals,
occasional users and consumers who design, draft, and diagram. The Kinetix
division of Autodesk is devoted to bringing powerful 3D content-creation
software to computer-industry professionals focused on two markets:
entertainment (film, broadcast video and interactive games) and design
conceptualization and visualization. Kinetix provides two core platform
products--3D Studio MAX and 3D Studio VIZ--that specifically focus on these
markets.

Autodesk is a corporation organized under the laws of the State of Delaware.
Its principal executive offices are located at 111 McInnis Parkway, San Rafael,
California 94903, and its telephone number is (415) 507-5000.

DISCREET

Beatles; and commercials for clients such as Nike, Pepsi, AT&T and McDonald's.
Discreet has recently been recognized by the Academy of Motion Picture Arts and
Sciences with a Scientific and Engineering Award for flame* and inferno*.
Discreet believes that creative professionals and designers require tools that
simplify their work, enabling them to devote more time to creative activities
and less time to technical tasks.

Discreet offers high-end turnkey systems and software focused towards three
markets: special effects, editing and broadcast production. Discreet's systems
include its inferno* and flame* systems (special effects), its fire* and smoke*
systems (editing) and its frost* system (broadcast production). Discreet's
flame* system is an uncompressed, on-line, resolution independent, non-linear
digital system and is used to create, edit and composite special visual effects
in an on-line, real-time environment, providing instant feedback to the
creative professional. In the broadcast production market, Discreet offers its
frost* system, a computer-based set of modeling, animation and rendering tools
for the creation and manipulation of 3D graphics, including virtual sets for
broadcast companies. Discreet's new media software products include its effect*
and paint* products, and its edit* and light* products. Discreet sells its
systems and software through a direct sales force as well as through
distributors and resellers.

Discreet is a company organized under the laws of the province of Quebec. Its
principal executive offices are located at 10 Duke Street, Montreal, Quebec H3C
2L7, and its telephone number is (514) 393-1616.

THE TRANSACTIONS

The business combination between Autodesk and Discreet will be effected
pursuant to the Acquisition Agreement entered into among the Company, Discreet,
Autodesk Development B.V. ("Dutchco"), 9066-9771 Quebec Inc. ("Amalgamation
Sub"), Autodesk Canada Inc. and 9066-9854 Quebec Inc. ("Autodesk Quebec").
Pursuant to the Acquisition Agreement, Dutchco, a wholly-owned subsidiary of
the Company, will acquire Discreet by way of an Amalgamation under Quebec law
and certain related transactions. Discreet will be amalgamated with Autodesk
Quebec and Amalgamation Sub to form "New Discreet," which will carry on the
existing business of Discreet as an indirect subsidiary of Autodesk. Each
holder of Discreet Common Shares will receive in the Transactions either 0.33
shares of Autodesk Common Stock or 0.33 exchangeable non-voting shares of New
Discreet. The exchangeable shares of New Discreet issued in the Transactions
will be exchangeable at any time at the option of the holder, and will
automatically be exchanged on the eleventh anniversary of the closing of the
Transactions (or earlier upon the occurrence of certain events, including the
liquidation, dissolution or winding-up of Autodesk or New Discreet), for Common
Stock of Autodesk on a one-for-one basis. Based on the capitalizations of
Autodesk and Discreet as of December 31, 1998, Autodesk expects to issue
approximately 9.9 million shares of Common Stock to the shareholders of
Discreet in the Transactions, which shares will represent approximately 16.5%
of the Common Stock outstanding after the Transactions, assuming the issuance
of the 3 million shares offered hereby. The Transactions will be voted on by
the stockholders of the Company and by the shareholders of Discreet at meetings
scheduled to be held on March 10, 1999.

If the Transactions are approved by the stockholders of both the Company and
Discreet, and all other conditions to the Transactions are satisfied or waived,
the Transactions are anticipated to close on March 16, 1999, immediately
following the closing of the issuance and sale of the Common Stock offered
hereby.

The primary motivation for this offering is to qualify the Transactions for
pooling of interests accounting treatment. To do so, the Company must issue
prior to the closing of the Transactions

approximately 3 million shares of Common Stock, due to its prior repurchase of
shares of Common Stock in various transactions. The Common Stock offered hereby
will not be issued unless and until all conditions to the Transactions have
been satisfied or waived, including approval of the Transactions by the
stockholders of the Company and Discreet.

RECENT DEVELOPMENTS

For the fourth quarter of fiscal 1999, Autodesk reported net revenues of
$189.1 million versus $181.1 million for the same quarter in the prior fiscal
year. Net revenue for fiscal 1999 totaled $740.2 million, an increase of 20
percent over net revenue in the prior fiscal year. For the fourth quarter of
fiscal 1999, net income was $25.1 million, or $0.50 per share on a diluted
basis, compared to net income of $27.5 million, or $0.56 per share on a diluted
basis, in the fourth quarter of the prior fiscal year. Net income for fiscal
1999 was $90.6 million, and resulted in earnings per share of $1.85 on a
diluted basis, including nonrecurring charges as well as incremental
amortization of goodwill and intangible assets from prior acquisitions. Net
income for fiscal 1998 was $45.2 million, and resulted in earnings per share
$0.91 on a diluted basis, including nonrecurring charges as well as incremental
authorization of goodwill and intangible assets from prior acquisitions.

THE OFFERING

Common Stock offered by the
Company(1)...................... 3,000,000 shares
Common Stock to be outstanding
after the offering and the
Transactions(2)................. 60,193,000 shares
Nasdaq symbol for the Common
Stock........................... ADSK
Use of proceeds.................. For general corporate purposes, including working
capital. See "Use of Proceeds."

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(1) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an additional 450,000 shares of Common Stock from the Company. See
"Underwriting."
(2) Based upon 47,342,000 shares outstanding at January 31, 1999 and assuming
the issuance of 3,000,000 shares offered hereby and the issuance of
approximately 9,851,000 shares in the Transactions.

RISK FACTORS

Certain factors should be considered in connection with an investment in the
Common Stock. See "Risk Factors."

SELECTED HISTORICAL AND UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA

The following selected historical financial information of Autodesk and
Discreet has been derived from their respective audited and unaudited
historical consolidated financial statements, and should be read in conjunction
with such audited and unaudited consolidated financial statements and the notes
thereto. The unaudited selected pro forma financial information of Autodesk and
Discreet are derived from the unaudited pro forma condensed combined financial
statements, which give effect to the Transactions as a pooling-of-interests,
and should be read in conjunction with such unaudited pro forma statements and
notes thereto, which are incorporated by reference into this Prospectus.

For Autodesk and Discreet pro forma purposes, Autodesk's historical condensed
consolidated statements of income for the three fiscal years ended January 31,
1996, 1997 and 1998, and Autodesk's unaudited condensed consolidated statement
of income for the nine months ended October 31, 1998 have been combined with
the unaudited condensed consolidated statements of operations of Discreet for
the fiscal year ended July 31, 1996, the eleven months ended June 30, 1997, the
twelve months ended December 31, 1997, and the unaudited condensed consolidated
statement of operations of Discreet for the nine months ended September 30,
1998, respectively. The unaudited pro forma combined condensed balance sheet
assumes the Transactions took place on October 31, 1998 and combines Autodesk's
unaudited condensed consolidated balance sheet at that date with Discreet's
historical condensed consolidated balance sheet at September 30, 1998. The
unaudited selected pro forma combined financial data should be read in
conjunction with the unaudited pro forma financial statements incorporated by
reference into this Prospectus.

Autodesk paid quarterly dividends of $0.06 per share with respect to fiscal
1996, 1997 and 1998, and in each of the first three quarters of fiscal 1999,
and currently intends to continue paying such cash dividends on a quarterly
basis. Discreet has not paid any cash dividends on its Common Shares. Discreet
currently intends to retain any earnings for future growth and therefore does
not anticipate paying any cash dividends on its Common Shares in the
foreseeable future.

The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Transactions had been consummated at the times
indicated, nor is it necessarily indicative of future operating results or
financial position.

UNAUDITED SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

NINE MONTHS ENDED
TWELVE MONTHS ENDED JANUARY 31, OCTOBER 31,
-------------------------------- -----------------
1996 1997 1998 1997 1998
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PRO FORMA CONDENSED
COMBINED STATEMENT OF
OPERATIONS DATA:
Net revenues............. $ 618,164 $ 598,617 $ 754,627 $535,508 $654,338
Income from operations... 84,113 65,992 86,237 38,694 108,770
Net income .............. 43,647 42,247 46,608 16,113 73,887
Basic net income per
share................... $ 0.78 $ 0.77 $ 0.83 $ 0.29 $ 1.31
Diluted net income per
share................... $ 0.74 $ 0.74 $ 0.78 $ 0.27 $ 1.25
Shares used in computing
basic net income per
share................... 55,946 54,763 56,041 56,371 56,226
Shares used in computing
diluted net income per
share................... 59,331 56,725 59,664 60,172 58,974
Dividends paid per
share................... $ 0.24 $ 0.24 $ 0.24 $ 0.18 $ 0.18

UNAUDITED SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

OCTOBER 31, 1998
--------------------------------------
AUTODESK DISCREET ADJUSTMENTS COMBINED
-------- -------- ----------- --------

PRO FORMA CONDENSED COMBINED BALANCE
SHEET DATA:
Working capital...................... $251,553 $45,590 $(15,000) $282,143
Total assets......................... 662,545 133,471 -- 796,016
Long term liabilities................ 2,619 4,677 -- 7,296
Stockholders' equity................. 432,399 78,315 (15,000) 495,714

AUTODESK SELECTED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

NINE MONTHS
FISCAL YEAR ENDED JANUARY 31, ENDED OCTOBER 31,
----------------------------------------------- -----------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- -------- ----------- -------- --------
RESTATED(3) RESTATED(3)

HISTORICAL CONSOLIDATED
STATEMENT OF OPERATIONS
DATA:
Net revenues............ $405,596 $454,612 $534,167 $496,693 $617,126 $435,275 $551,022
Income from operations
(1)(2)................. 89,703 81,911 129,027 59,817 75,162 33,434 97,494
Net income (1)(2)....... 62,166 56,606 87,788 41,571 45,171 17,681 65,506
Basic net income
per share.............. $ 1.30 $ 1.20 $ 1.86 $ 0.91 $ 0.97 $ 0.38 $ 1.41
Diluted net income
per share.............. $ 1.25 $ 1.14 $ 1.76 $ 0.88 $ 0.91 $ 0.35 $ 1.34
Shares used in computing
basic net income
per share.............. 47,770 47,320 47,090 45,540 46,760 47,050 46,510
Shares used in computing
diluted net income
per share.............. 49,740 49,840 49,800 47,190 49,860 50,350 48,760
Dividends paid per
share.................. $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.18 $ 0.18

AS OF JANUARY 31, AS OF
----------------------------------------------- OCTOBER 31,
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- ----------- -----------
RESTATED(3) RESTATED(3)

HISTORICAL CONSOLIDATED
BALANCE SHEET DATA:
Working capital......... $177,241 $205,735 $190,718 $147,500 $108,215 $251,553
Total assets............ 404,874 482,076 517,929 492,233 563,490 662,545
Long term liabilities... 5,679 3,602 31,306 33,948 31,064 2,619
Put warrants............ -- -- -- 64,500 -- --
Total stockholders'
equity................. 296,879 323,484 342,328 243,614 332,939 432,399

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(1) Includes the effect of nonrecurring charges of $25.5 million, $4.7 million,
$22.2 million and $22.0 million recorded in fiscal 1995, 1997, 1998 and for
the nine months ended October 31, 1998, respectively. The fiscal 1995
amount represents a federal district court judgment against Autodesk in a
trade secret lawsuit. The charges for fiscal 1997 and 1998 consist of
charges relating to the write off of purchased in-process research and
development that had not reached technological feasibility and had no
alternate future use. Nonrecurring charges for the nine months ended
October 31, 1998 consist primarily of a charge relating to the write off of
purchased in-process research and development that had not reached
technological feasibility and had no alternate future use ($13.1 million),
restructuring charges for the consolidation of certain development centers
($1.5 million), the write-off of purchased technologies associated with
these operations ($2.2 million), staff reductions in the Asia Pacific
region ($1.7 million), costs in relation to potential legal settlements
($2.5 million) and the write-down to fair market value of older computer
equipment which Autodesk plans to dispose of ($1.0 million). The
restructurings noted above are expected to be completed during the last
half of Autodesk's fiscal year ended January 31, 1999.
(2) Income from operations for the nine months ended October 31, 1998 includes
a reversal of a portion of the litigation reserve in the amount of $18.2
million as a result of a favorable decision on appeal of the trade secret
lawsuit (see footnote 1, above). In addition to the $18.2 million, $2.7
million of interest associated with the litigation reserve was reversed and
is reflected in net income for the nine months ended October 31, 1998.
(3) Subsequent to the Securities and Exchange Commission's letter to the AICPA
dated September 9, 1998, regarding its views on in-process research and
development ("IPR&D"), the Company has re-evaluated its IPR&D charges on
the Softdesk, Inc. and Genius CAD Software GmbH acquisitions, revised the
purchase price allocations and restated its financial statements. Amounts
for fiscal 1998 and the nine months ended October 31, 1998 and 1997 have
been restated to adjust the allocation of the purchase price of these
business combinations occurring in fiscal 1998 and the nine months ended
October 31, 1998. The adjustments had the effect of increasing net income
(diluted net income per share) by $29.8 million, ($0.60), $8 million,
($0.16) and $31.6 million ($0.65) for the fiscal year ended January 31,
1998 and the nine months ended October 31, 1998 and 1997, respectively.

SEE AUTODESK FINANCIAL STATEMENTS AND THE NOTES THERETO FOR THE YEAR ENDED
JANUARY 31, 1998 AND THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE NINE-
MONTH PERIOD ENDED OCTOBER 31, 1998,
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.

DISCREET SELECTED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

ELEVEN
MONTHS FISCAL YEAR SIX MONTHS
FISCAL YEAR ENDED JULY 31, ENDED ENDED ENDED DECEMBER 31,
--------------------------- JUNE 30, JUNE 30, -----------------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- --------- ----------- ----------- ----------- -----------
RESTATED(2) RESTATED(2) RESTATED(2) RESTATED(2)

HISTORICAL CONSOLIDATED
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 15,392 $ 64,549 $ 83,997 $101,924 $151,558 $75,673 $55,827
Operating income
(loss)(1).............. 944 13,460 (44,914) 6,175 19,832 7,122 (3,660)
Net income (loss)(1).... 483 7,785 (44,141) 676 11,044 (1,913) (2,638)
Basic net income (loss)
per share.............. $ 0.02 $ 0.34 $ (1.64) $ 0.02 $ 0.38 $ 0.07 $ (0.09)
Diluted net income
(loss) per share....... $ 0.02 $ 0.31 $ (1.64) $ 0.02 $ 0.36 $ 0.06 $ (0.09)
Shares used in computing
basic net income (loss)
per share.............. 22,954 23,017 26,837 27,948 29,029 28,746 29,789
Shares used in computing
diluted net income
(loss) per share....... 23,094 24,886 26,837 28,894 30,793 30,608 29,789
Dividends paid per
share.................. $ -- $ -- $ -- $ -- $ -- $ -- $ --

AS OF JULY 31, AS OF JUNE 30, AS OF DECEMBER 31,
----------------------- --------------------------- ------------------
1994 1995 1996 1997 1998 1998
------ ------- ------- ------------- ------------- ------------------
(RESTATED)(2) (RESTATED)(2) (RESTATED)(2)

HISTORICAL CONSOLIDATED
BALANCE SHEET DATA:
Working capital
(deficit).............. $ (382) $41,847 $24,030 $ 18,536 $ 40,409 $ 46,411
Total assets............ 9,431 76,858 80,148 103,377 136,411 129,383
Long term liabilities... 317 1,261 1,442 713 2,229 4,783
Total shareholders'
equity................. 934 50,124 42,343 44,381 78,654 77,085

- --------
(1) Operating income includes the effect of nonrecurring charges of $1.4
million, $28.5 million, $8.8 million, $4.2 million and $6.9 million
recorded in fiscal 1994, 1996, 1997 and 1998, and the six months ended
December 31, 1997, respectively. The fiscal 1994 amount represents a legal
settlement by Discreet and related fees. The fiscal 1996 charges consist of
the write-off of purchased in-process research and development ($8.5
million) related to the COSS/IMP Acquisition, restructuring charges ($15.0
million), the write down of an investment ($2.5 million), and costs
relating to litigation ($2.5 million). Fiscal 1997 charges consist of the
write-off of amounts relating to purchased in-process research and
development ($2.3 million) related to the Denim Acquisitions and a class
action legal settlement ($6.5 million). The fiscal 1998 charge consists of
amounts for the write-off of purchased in-process research and development
($6.9 million) related to the D-Vision and Lightscape Acquisitions, costs
related to a terminated merger agreement ($1.7 million), a gain on the sale
of an investment ($2.5 million), and the reversal of provisions for
restructuring charges ($1.5 million) and legal accruals no longer required
($0.4 million). The six months ended December 31, 1997 charge consists of
the write-off of purchased in-process research and development related to
the D-Vision and Lightscape acquisitions.

(2) Amounts for fiscal 1998 and 1997 and the six months ended December 31, 1997
have been restated to adjust the allocation of the purchase price for
certain acquisitions occurring in fiscal 1998 and 1997 and the six months
ended December 31, 1997. The adjustments had the effect of increasing net
income by $7.4 million, $11.7 million and $16.2 million for fiscal 1998,
1997 and the six months ended December 31, 1997, respectively or $0.26,
$0.38, and $0.56 per share on a diluted basis.

SEE DISCREET FINANCIAL STATEMENTS AND NOTES THERETO FOR THE YEAR ENDED JUNE 30,
1998 AND THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD
ENDED DECEMBER 31, 1998, INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.

RISK FACTORS

The Common Stock offered hereby involves a high degree of risk. The
following risk factors should be considered by prospective investors in
evaluating whether to purchase the Common Stock. These factors should be
considered in conjunction with the other information included in this
Prospectus. This Prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. Actual results could differ materially from those projected in
these forward-looking statements as a result of a variety of factors,
including those set forth below and elsewhere in this Prospectus. Some of
these factors relate directly to the Transactions, while others are present
independent of the Transactions in the general business environment of each of
Autodesk, Discreet and the combined company following the Transactions (the
"Combined Company"). The risks highlighted herein should not be assumed to be
the only factors that could affect the future performance of Autodesk,
Discreet and the Combined Company.

RISKS RELATING TO THE TRANSACTIONS

Failure to Achieve Beneficial Synergies. Autodesk and Discreet have entered
into the Acquisition Agreement with the expectation that the Transactions will
result in beneficial synergies. These include mutual benefits from
complementary strengths in the 3D modeling and animation tools markets, the
competitive advantages resulting from offering a comprehensive suite of
integrated product offerings, combined industry experience and market
knowledge and shared distribution channels. Achieving these anticipated
synergies will depend on a number of factors including, without limitation,
the successful integration of Autodesk's and Discreet's operations and general
and industry-specific economic factors. Even if Autodesk and Discreet are able
to integrate their operations and economic conditions remain unchanged, there
can be no assurance that the anticipated synergies will be achieved. The
failure to achieve such synergies could have a material adverse effect on the
business, results of operations and financial condition of the Combined
Company.

Integration of Operations and Technologies. Achieving the anticipated
benefits of the Transactions will depend in part upon whether the integration
of the two companies' businesses is accomplished in an efficient and effective
manner, and there can be no assurance as to the extent to which this will
occur, if at all. The combination of the two companies will require, among
other things, integration of the companies' respective operations, products,
technologies, management information systems, distribution channels and key
personnel and the coordination of their sales, marketing and research and
development efforts. In particular, the Combined Company will be required to
integrate Autodesk's sales channel, which consists principally of independent
resellers, with Discreet's sales force, which typically sells product directly
to customers. As a result of these and other factors, the integration may not
be accomplished smoothly or successfully, if at all. If significant
difficulties are encountered in the integration of the existing operations,
products or technologies or the development of new products and technologies,
resources could be diverted from new product development, and delays in new
product introductions could occur. Compared to Autodesk's products, Discreet's
products have traditionally experienced longer, more complex sales cycles.
There can be no assurance that the Combined Company will be able to take full
advantage of the combined sales efforts. In addition, the difficulties of
integrating Autodesk and Discreet may be increased by the necessity of
coordinating organizations with distinct corporate cultures and widely
dispersed operations in two different countries. See "--Integration of
Operations of a non-US Company." The consummation of the Transactions and the
integration of operations and technologies following the consummation of the
Transactions will constitute a significant challenge to Autodesk's, Discreet's
and the Combined Company's managements and will require substantial effort and
dedication of management and other personnel, which may distract their
attention from the day-to-day business of these entities, the development or
acquisition of new technologies, and the pursuit of other business
opportunities. In addition, certain Discreet systems currently include
computer hardware, which may present business issues as to which Autodesk
management has limited experience. See "--Risks Relating to the

Combined Company--Dependence on Single Workstation Vendor" and "--Reliance on
Sole Source Suppliers." Failure to successfully accomplish the integration of
the two companies' operations, technologies and personnel would likely have a
material adverse effect on the Combined Company's business, financial
condition and results of operations. In addition, during the pre-acquisition
and integration phases, aggressive competitors may undertake initiatives to
attract customers or employees through various incentives, which could have a
material adverse effect on the business, results of operations and financial
conditions of Autodesk, Discreet and/or the Combined Company.

Customers. The present and potential customers of Discreet and Autodesk may
not continue their current buying patterns in light of the Transactions.
Certain customers may defer purchasing decisions as they evaluate the proposed
Transactions, other recent acquisitions and product announcements in the
multimedia and design software industries, the Combined Company's future
product strategy, current and anticipated product offerings of competitors,
and any other outside forces which may affect customer buying patterns.
Customers may ultimately decide to purchase competitors' products in lieu of
the Combined Company's products. Historically, Discreet and Autodesk have had
significantly different types of customers. These different customer types may
evaluate the Combined Company differently. Discreet believes that its results
of operations for the three-month period ended September 30, 1998 were
negatively impacted by what Discreet believed to be temporary customer
concerns regarding the Transactions, including the deferral or alteration of
customer purchasing decisions. While Discreet believes that the negative
effects resulting from customer concerns regarding uncertainty surrounding the
acquisition did not have a significant impact on its results of operations for
the three month period ended December 31, 1998, a significant amount of time
has elapsed since the original announcement of the Transactions on August 20,
1998, and there can be no assurance that certain customers will not choose
again to delay or alter purchasing decisions or that this prolonged period
will not influence customers to delay or alter purchasing decisions (for
example, in favor of one of Discreet's competitors), both of which would have
an adverse effect on Discreet's future operating results. In addition, there
can be no assurances that consummation of the Transactions and the conduct of
the Combined Company's business thereafter will adequately address such
concerns. See "--Integration of Operations and Technologies." Further, the
decision of customers to defer their purchasing decisions or to purchase
products elsewhere would have a material adverse effect on the business,
results of operations and financial condition of the Combined Company.

Dependence on Retention and Integration of Key Employees. The success of the
Combined Company is dependent on the retention and integration of the key
management, sales, marketing, engineering and other technical employees of
Autodesk and Discreet. Competition for qualified personnel in the multimedia
and design software industries is very intense, and competitors often use
aggressive tactics to recruit key employees during the period leading up to an
acquisition and during the integration phase following an acquisition.
Discreet has experienced recent changes in its sales organization leadership
which negatively affected its sales efforts and its results of operations for
the three-month periods ended September 30, 1998 and December 31, 1998.
Discreet has recently hired a new Vice President, Advanced Systems Sales and
Marketing. However, Discreet still has several field vacancies and, further,
the integration of key employees is a time consuming process and there can be
no assurance that this recent addition and Discreet's other efforts will
alleviate in a timely manner the disruptive or negative effect resulting from
the changes in Discreet's sales organization leadership and the lack of
certain key sales employees during the periods. See "--Integration of
Operations and Technologies; Dependence on Retention and Integration of Key
Employers." Stock options, which generally become exercisable only over a
period of several years of employment, serve as an important incentive for
retaining key employees. In accordance with their original terms, certain
stock options held by several key Discreet employees will be fully exercisable
or the vesting thereof will accelerate upon the consummation of the
Transactions, thus potentially reducing the retention incentive provided by
these options. While the Combined Company will endeavor to retain key Discreet

employees, there can be no assurance that key employees will remain with the
Combined Company. The loss of services of any of the key employees of the
Combined Company could materially and adversely affect the Combined Company's
business, financial condition and results of operation.

Integration of Operations of a non-US Company. Cross-border acquisitions
entail certain special risks in addition to those normally encountered in a
domestic acquisition. These include the difficulty of integrating employees
from a different corporate culture into the acquiring organization; the need
to understand different incentives that motivate employees in a non-US
company; the greater difficulty of transplanting the acquiring company's
corporate culture to an organization that is physically distant; and the
difficulty and expense of relocating employees from one country to another in
the event of an internal group restructuring following an acquisition. These
factors can reduce the likelihood of the long-term success of a cross-border
acquisition. Although Autodesk derives the majority of its revenues from non-
US sales and has significant operations outside the United States, it has
limited experience integrating the management, sales, product development and
marketing organizations of a significant non-US business with its existing
operations. Although Discreet has sales and marketing operations in the United
States and derives a significant portion of its revenue from US sales, its
management and product development personnel are predominantly based in
Canada. There can be no assurance that Autodesk will be able to successfully
integrate the personnel and operations of Discreet into the existing Autodesk
organization.

Potential Dilutive Effect to Stockholders. Although Autodesk and Discreet
believe that beneficial synergies will result from the Transactions, combining
the two companies' businesses, even if the combination is achieved in an
efficient, effective and timely manner, may not result in combined results of
operations and financial condition superior to what would have been achieved
by each company independently, and may in any event require a longer period
than management of Autodesk or Discreet anticipates. In addition, based on the
capitalization of each of Autodesk and Discreet as of December 31, 1998,
Autodesk will issue approximately 9.9 million new shares of Common Stock.
Autodesk will also issue 3 million shares of Common Stock in this offering.
The issuance of new shares of Common Stock in connection with the Transactions
and this offering will have the initial effect of reducing Autodesk's net
income per share and could reduce the market price of the Common Stock unless
and until revenue growth, cost savings or other business synergies sufficient
to offset the effect of such issuance can be achieved. There can be no
assurance that Autodesk stockholders and Discreet shareholders would not
achieve greater returns on investment if Autodesk and Discreet were to remain
independent of each other.

Volatility Of Stock Prices. The market for the Common Stock is highly
volatile. The trading price of the Common Stock has in the past been and could
in the future be subject to wide fluctuations in response to quarterly
variations in operating results, announcements following the development or
acquisition of technological innovations or new products by Autodesk or
Discreet or their competitors, changes in prices of Autodesk's or Discreet's
or their competitors' products and services, changes in product mix, changes
in revenue and revenue growth rates for Autodesk or Discreet as a whole or for
geographic areas or business units, and other events or factors. Statements or
changes in opinions, ratings or earnings estimates made by brokerage firms or
industry analysts relating to the markets in which Autodesk does business or
relating to Autodesk or Discreet specifically have resulted, and could in the
future result, in an immediate and adverse effect on the market price of the
Common Stock. Statements by financial or industry analysts regarding the
impact on Autodesk's net income per share resulting from the Transactions and
the extent to which such analysts expect potential business synergies to
affect reported results in future periods can be expected to contribute to
volatility in the market price of the Common Stock. Moreover, the issuance of
significant numbers of additional shares by Autodesk, including the issuance
of the shares offered hereby, may have the effect of reducing the market price
of the Common Stock. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations which have particularly
affected the market price for the

securities of many high-technology companies and which often have been
unrelated to the operating performance of these companies. These broad market
fluctuations may adversely affect the market price of the Autodesk Common
Stock.

Substantial Expenses Resulting from the Transactions. Autodesk, Dutchco and
Discreet estimate they will incur direct transaction costs, relating primarily
to regulatory filing costs, and the fees of financial advisors, attorneys,
accountants, financial printers and proxy solicitors, of approximately $13
million associated with the Transactions, which will be charged to operations
upon consummation of the Transactions. Autodesk and Discreet expect the
Combined Company to incur an additional significant charge to operations,
currently estimated at $6-8 million, to reflect costs associated with
integrating the two companies which will be expensed as incurred. The Combined
Company may also incur additional material charges in subsequent quarters to
reflect additional costs associated with the Transactions.

RISKS RELATING TO THE COMBINED COMPANY

As is true for technology companies generally, Autodesk, Dutchco and
Discreet currently operate, and, following consummation of the Transactions,
the Combined Company will operate, in a rapidly changing environment that
involves a number of risks, some of which are beyond their control.

Competition. The software industry has limited barriers to entry, and the
availability of desktop computers with continually expanding capabilities at
progressively lower prices contributes to the ease of market entry. Because of
these and other factors, competitive conditions in the industry are likely to
intensify in the future. Increased competition could result in price
reductions, reduced revenues and profit margins, and loss of market share, any
of which could adversely affect Autodesk's business, consolidated results of
operations, and financial condition. The design software market, in
particular, is characterized by vigorous competition in each of the vertical
markets in which Autodesk competes. This competition includes the entry of
competitors with innovative technologies and the consolidation of companies
with complementary products and technologies. Autodesk believes that the
principal factors affecting competition in its markets are product
reliability, performance, ease of use, range of useful features, continuing
product enhancements, reputation, price, and training. In addition, the
availability of third-party application software is a competitive factor
within the multimedia and design software markets. Autodesk believes that it
competes favorably in these areas and that its competitive position will
depend, in part, upon its continued ability to enhance existing products, and
to develop and market new products.

The digital imaging software market in which Discreet competes is extremely
competitive and characterized by frequent and rapid changes in technology and
customer preferences. Discreet competes with other software vendors for access
to distribution channels and customers. Competition is generally based on
product features and functionality, ease of use, quality of customer support,
timeliness of product upgrades and price, among other factors. As the market
for the software products of Discreet continues to develop and other software
vendors expand their product lines to include products that compete with those
of Discreet, competition may intensify. A number of Discreet's competitors and
potential competitors possess significantly greater financial, technical,
marketing and sales and other resources than Discreet or the Combined Company.
In addition, as desktop computers become more powerful and less expensive, a
broader group of software developers may be able to introduce products for
personal computers that would be competitive with Discreet's products in terms
of price and performance. Accordingly, there can be no assurance that the
future products produced by the Combined Company will be successful or gain
market acceptance.

The ability of the Combined Company to compete will depend on factors both
within and outside its control, including the success and timing of new
product development and product introductions by

the Combined Company and its competitors, product performance and price,
distribution and customer support. There can be no assurance that the Combined
Company will be able to compete successfully with respect to these factors.
Although Autodesk and Discreet believe that the Combined Company will have
certain technological and other advantages over its competitors, maintaining
such advantages will require continued investment by the Combined Company in
research and development, sales and marketing and customer service and
support. There can be no assurance that the Combined Company will have
sufficient resources to make such investment or that the Combined Company will
be able to make the technological advances necessary to maintain such
competitive advantages.

The future financial performance of Autodesk's Discreet business unit as
part of the Combined Company will depend in part on the successful
development, introduction and customer acceptance of existing and new or
enhanced products. In addition, in order for the unit to achieve sustained
growth as part of the Combined Company, the market for its systems and
software must continue to develop and the Combined Company must expand this
market to include additional applications within the film and video industries
and develop or acquire new products for use in related markets. There can be
no assurance that the Combined Company will be successful in marketing its
existing or new or enhanced products. In addition, as the Combined Company
enters new markets, distribution channels, technical requirements and levels
and bases of competition may be different from those in Discreet's current
markets; there can be no assurance that the Combined Company will be able to
compete favorably.

In April 1998, Autodesk received notice that the FTC had undertaken a
nonpublic investigation to determine whether Autodesk or others have engaged
in or are engaging in unfair methods of competition. The FTC has not made any
claims or allegations regarding Autodesk's current business practices or
policies, nor have any charges been filed. Autodesk intends to cooperate fully
with the FTC in its inquiry. Autodesk does not believe that the investigation
will have a material adverse effect on its business or consolidated results of
operations.

Fluctuations in Quarterly Operating Results. From time to time, Autodesk
experiences fluctuations in its quarterly operations as a result of periodic
release cycles, competitive factors and general economic conditions, among
other things. For example, Autodesk's net revenues in the first quarter of
fiscal year 1998 were $119 million as compared to $182 million in the fourth
quarter of fiscal year 1998, with the increase attributable in part to the
introduction of AutoCAD Release 14 in the second fiscal quarter as well as
increased revenues from Autodesk's geographic information systems and AEC
product offerings. In the past, Autodesk has experienced declines in sales of
AutoCAD and AutoCAD updates in quarters prior to the introduction of a new
release of AutoCAD as customers delay purchasing in anticipation of the new
version. In addition, Autodesk has experienced fluctuations in operating
results in interim periods in certain geographic regions due to seasonality.
In particular, Autodesk's operating results in Europe during its third fiscal
quarter are usually impacted by a slow summer period while the Asia/Pacific
region typically experiences seasonal slowing in Autodesk's third and fourth
fiscal quarters.

Autodesk receives and fulfills a majority of its orders within a particular
quarter, with the majority of the sales to distributors and dealers (value-
added resellers or "VARs"). These resellers typically carry inventory of
Autodesk's products and place volume orders equivalent to a few days or a few
weeks of sales. The timing of these orders could have a material impact on
quarterly operating results. Additionally, Autodesk's operating expenses are
based in part on its expectations of future revenues and are relatively fixed
in the short term. Accordingly, any revenue shortfall below expectations could
have an immediate and significant adverse effect on the Combined Company's
consolidated results of operations and financial condition.

Similarly, shortfalls in Autodesk's and Discreet's revenues or earnings from
levels expected by securities analysts have in the past had an immediate and
significant adverse effect on the trading price of each company's common
stock, and any such shortfalls can be expected to have a similar

effect on Autodesk's stock price following consummation of the Transactions.
Moreover, each of Autodesk's and Discreet's stock price is, and Autodesk's
stock price will be, subject to the volatility generally associated with
technology stocks and may also be affected by broader market trends unrelated
to performance in future periods.

A variety of factors have caused period-to-period fluctuations in Discreet
and Autodesk's operating results, including the integration of operations
resulting from acquisitions of companies, products or technologies, revenues
and expenses related to the introduction of new products or new versions of
existing products, changes in selling prices, delays in customer purchases in
anticipation of upgrades to existing products, or introduction of new products
(including products of third parties), currency fluctuations, dealer and
distributor order patterns or general economic trends. In addition, in the
future, the Combined Company is more likely to recognize a disproportionate
amount of its revenue for a given fiscal quarter or fiscal year at the end of
such fiscal quarter or fiscal year.

Autodesk and Discreet believe that the operating results of Autodesk's
Discreet business unit could vary significantly from quarter to quarter. A
limited number of system sales may account for a substantial percentage of
Discreet's quarterly revenue because of the high average sales price of such
systems and the timing of purchase orders. Historically, Discreet has
generally experienced greater revenues during the period following the
completion of the National Association of Broadcasters trade show, which
typically is held in April. In addition, the timing of revenue is influenced
by a number of other factors, including the timing of individual orders and
shipments, other industry trade shows, competition, seasonal customer buying
patterns, changes in customer buying patterns in response to platform changes
and changes in product development, and sales and marketing expenditures.
Because Discreet's operating expenses are based on anticipated revenue levels
and a high percentage of Discreet's expenses are relatively fixed in the short
term, variations in the timing of recognition of revenue could cause
significant fluctuations in operating results from quarter to quarter and may
result in unanticipated quarterly earnings shortfalls or losses. In addition,
Discreet has recently experienced fluctuation in its operating results for the
three month period ended September 30, 1998 which Discreet believes to be
primarily due to seasonally slower than expected sales in Europe, general
market anxiety in North America causing delays in capital spending, customers
deferring purchase decisions due to confusion over HDTV timing and standards,
what Discreet believes to be temporary concerns in the Advanced Systems
customer base regarding the Transactions which may have led to purchasing
delays, and recent changes in Discreet's sales organization leadership.
Discreet has further experienced fluctuation in its operating results for the
three month period ended December 31, 1998, reporting revenues of $24.8
million and operating loss of $2.2 million, as compared to revenues of $37.3
million and operating income of $5.8 million for the three month period ending
December 31, 1997. Discreet believes this fluctuation was primarily due to
continued effects from the lack of a sales and marketing senior executive
during the quarter combined with several field vacancies; continued slower
than expected sales in Europe and slower than expected sales in Asia due in
part to Discreet's sales personnel issues noted above in these geographic
areas as well as market conditions in these regions which have affected
customer capital expenditures; and a greater number of turnkey systems sales
through the indirect channel which caused a negative effect on margins. There
can be no assurance that customer purchasing decision deferrals resulting from
market anxiety and a reduction of capital expenditures; confusion over Digital
Television ("DTV") timing and standards and continued effects from the lack of
a sales and marketing senior executive combined with several field vacancies;
continued slower than expected sales in Europe and Asia; and the mix of
systems sales through Discreet's indirect channel and its related effect on
margins will not continue into the future and have an adverse effect on
Discreet's or the Combined Company's results of operations and financial
conditions. While Discreet believes that the negative effects resulting from
customer concerns regarding uncertainty surrounding the acquisition did not
have a significant impact on its results of operations for the three month
period ended December 31, 1998, a significant amount of time has elapsed since
the original announcement of the Transactions on August 20, 1998, and

there can be no assurance that certain customers will not choose again to
delay or alter purchasing decisions (for example, in favor of one of
Discreet's competitors), both of which could have an adverse effect on
Discreet's future operating results. See "--Customers," "--Dependence on
Retention and Integration of Key Employees" and "--Rapidly Changing Industry."

Product Concentration. Autodesk derives, and after consummation of the
Transactions is expected to continue to derive, a substantial portion of its
revenues from sales of AutoCAD software, AutoCAD upgrades, and adjacent
products which are interoperable with AutoCAD. As such, any factor adversely
affecting sales of AutoCAD and AutoCAD upgrades, including such factors as
product life cycle, market acceptance, product performance and reliability,
reputation, price competition, the availability of third-party applications or
the introduction of products which substitute for AutoCAD, could have a
material adverse effect on the Combined Company's business and consolidated
results of operations.

Rapidly Changing Industry. The multimedia and design software industries are
characterized by rapid growth and technological change and changes in customer
requirements. The success of the Combined Company in this industry will depend
on many factors, including the continued acceptance of Discreet's current
products, its ability to enhance and support those products, its ability to
create an effective, integrated organization to develop and introduce new
products that address changing customer needs and technological advances by
competitors on a timely basis, and its ability to establish and maintain
effective distribution channels for its products. The Combined Company may not
be successful in these efforts. The future growth of the Combined Company's
revenues for its new media products also depends in part on sustained growth
in the demand for interactive media applications, which in turn depends on a
number of factors including product acceptance, price-point sensitivities,
consumer demand for film and video content and the proliferation of high
definition television. The demand for these applications may not develop at
the pace or in the direction anticipated by the Combined Company.

Discreet believes that market uncertainty and anxiety have negatively
affected Discreet's recent results of operations. Discreet believes that there
is current uncertainty regarding DTV timing and standards which may have led
to customer purchasing decision deferrals. Further, Discreet believes that
general market anxiety in North America has affected capital expenditures. For
example, Discreet believes reduced advertising expenditures had a negative
impact on capital expenditures by post-production companies, broadcast
companies and professional consumers ("prosumers"), all of which are important
customers for Discreet's products. Further, while confusion regarding DTV
standards exists, Discreet believes that customers may choose to defer
purchasing decisions until such time as details surrounding DTV timing and
standards become more certain. There can be no assurance that the uncertainty
surrounding DTV and the general market anxiety in North America will not
continue to have an adverse effect on Discreet's results of operations.

Product Development and Introduction. The multimedia and design software
industries are characterized by rapid technological change as well as changes
in customer requirements and preferences. The software products offered by
Autodesk and Discreet are complex and, despite extensive testing and quality
control, may contain errors or defects ("bugs"), especially when first
introduced. For example, in fiscal year 1996, Autodesk experienced quality and
performance issues associated with the release of AutoCAD Release 13 which
were satisfactorily addressed, but did result in a high rate of product
returns in fiscal year 1996. There can be no assurance that defects or errors
will not occur in future releases of AutoCAD, Discreet's products, or other
software products offered by the Combined Company. Such defects or errors
could result in corrective releases to the Combined Company's software
products, damage to the Combined Company's reputation, loss of revenues, an
increase in product returns, or lack of market acceptance of its products, any
of which could have a material and adverse effect on the Combined Company's
business and consolidated results of operations.

Autodesk and Discreet believe that the Combined Company's future results
will depend largely upon its ability to offer products that compete favorably
with respect to reliability, performance, range of useful features, continuing
product enhancements, reputation, price and training. The discovery of product
defects could result in the delay or cancellation of planned development
projects and could have a material adverse effect on the Combined Company's
business and consolidated results of operations. Further, increased
competition in design, mapping or multimedia software products could also have
a negative impact on the Combined Company's business and consolidated results
of operations. More specifically, gross margins may be adversely affected if
customers purchase low-end CAD products, which historically have had lower
margins, instead of the Combined Company's higher-margin products.

Certain of Autodesk's historical product development activities have been
performed by independent firms and contractors, while other technologies are
licensed from third parties. Autodesk generally either owns or licenses the
software developed by third parties. Because talented development personnel
are in high demand, there can be no assurance that independent developers,
including those who have developed products for Autodesk in the past, will be
able to provide development support to the Combined Company in the future.
Similarly, there can be no assurance that the Combined Company will be able to
obtain and renew license agreements on favorable terms, if at all, and any
failure to do so could have a material adverse effect on the Combined
Company's business and consolidated results of operations.

The success of Autodesk's Discreet business unit will depend in part upon
the Combined Company's ability to enhance Discreet's existing systems and
software and to develop and introduce new products and features which meet
changing customer requirements and emerging industry standards on a timely
basis. In addition, in connection with Discreet's recent acquisitions, the
Combined Company must fully integrate the edit*, effect*, paint* and light*
products into its product line and operations. Discreet and Autodesk have from
time to time experienced delays in introducing new products and product
enhancements and there can be no assurance that the Combined Company will not
experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products or product
enhancements. In addition, there can be no assurance that such new products or
product enhancements will meet the requirements of the marketplace and achieve
market acceptance. Any such failure could have a material adverse effect on
the Combined Company's business and consolidated results of operations. For
example, during fiscal 1996, Discreet experienced delays in introducing new
products aimed at new market segments and such delay contributed to revenue
shortfall experienced by Discreet during such period. From time to time the
Combined Company or others may announce products, features or technologies
which have the potential to shorten the life cycle of or replace the Combined
Company's then existing products. Such announcements could cause customers to
defer the decision to buy or determine not to buy the Combined Company's
products or cause the Combined Company's distributors to seek to return
products to the Combined Company, any of which could have material adverse
effect on the Combined Company's business and consolidated results of
operations. In addition, product announcements by Silicon Graphics, Inc.
("SGI") and others in the past have caused customers to defer their decision
to buy or determine not to buy Discreet's products. In addition, there can be
no assurance that products or technologies developed by others will not render
the Combined Company's products or technology noncompetitive or obsolete.

Single Market for Discreet's Systems; Risks Associated with Expansion into
New Markets. To date, Discreet's products have been purchased primarily by
creative professionals for use in production and post-production in the film
and video industries. In order for Autodesk's Discreet business unit to
achieve sustained growth, the market for Discreet's systems and software must
continue to develop and the Combined Company must expand this market to
include additional applications within the entertainment and creative design
industries and develop new products for use in related markets.

Discreet recently announced its multi-platform software initiative to develop
and market software across Apple Macintosh, Microsoft Windows NT and UNIX
operating systems, in addition to its existing real time turnkey systems
solutions, targeted at two new market segments: institutional customers and
prosumers. While Autodesk and Discreet believe that the market recognition
which Discreet has achieved through sales of flame*, smoke*, effect*, inferno*
and fire* systems to creative professionals will facilitate the Combined
Company's marketing efforts in new markets, there can be no assurance that
Autodesk's Discreet business unit will be able to successfully develop and
market systems and software for other markets, or, if it does so, that such
systems and software will be accepted at a rate, and in levels, sufficient to
maintain growth. Further, the distribution channels, technical requirements
and levels and bases of competition in other markets are different than those
in Discreet's current market and there can be no assurance that the Combined
Company will be able to compete favorably in those markets.

International Operations. Revenue from international operations currently
accounts for a significant portion of the consolidated revenues of Autodesk
and Discreet, and such revenue is expected to continue to account for a
significant portion of the Combined Company's consolidated revenues. Risks
inherent in Autodesk's and Discreet's international operations include the
following: unexpected changes in regulatory practices and tariffs;
difficulties in staffing and managing foreign operations; longer collection
cycles; potential changes in tax laws; greater difficulty in protecting
intellectual property; and the impact of fluctuating exchange rates between
the US dollar and foreign currencies in the markets where Autodesk and
Discreet conduct business. In particular, during the first nine months of
Autodesk's fiscal 1999, changes in exchange rates from the same period of the
prior fiscal year adversely impacted Autodesk's revenues by approximately $8.2
million when compared to the same period in the prior year, principally due to
changes in the rate of exchange between the US dollar and the Japanese yen and
the Australian dollar.

Autodesk's international results have been recently impacted by unfavorable
economic and political conditions in the Asian markets, and Autodesk believes
such conditions will continue over the forseeable period to negatively impact
its business. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." There can be no assurance that the economic crisis
and currency issues currently being experienced in the Asian markets will not
have a material adverse effect on the Combined Company's future international
sales and, consequently, on the Combined Company's business and consolidated
results of operations.

Dependence on Distribution Channels. Autodesk sells its software products
primarily to VARs. Autodesk's ability to effectively distribute products
depends in part upon the financial and business condition of its VAR network.
Although Autodesk has not currently experienced any material problems with its
VAR network, computer software dealers and distributors are typically not
highly capitalized and have experienced difficulties during times of economic
contraction and may do so in the future. The loss of or a significant
reduction in business with any one of Autodesk's major international
distributors or large US resellers could have a material adverse effect on the
Combined Company's business and consolidated results of operations in future
periods. Autodesk's largest international distributor is Computer 2000 AG in
Germany. Autodesk's largest resellers and distributors in the United States
are Ingram Micro, Inc., Avatech Solutions, Inc., and DLT Solutions
Incorporated.

Product Returns. With the exception of certain European distributors,
agreements with Autodesk's VARs do not contain specific product-return
privileges. However, Autodesk permits its VARs to return product in certain
instances, generally during periods of product transition and during update
cycles. Although product returns, comparing the first quarter of fiscal 1999
to the same period in the prior year, decreased as a percentage of
consolidated revenues, management anticipates that product returns in future
periods will continue to be impacted by the timing of new product releases, as
well as the quality and market acceptance of new products.

Autodesk establishes reserves, including reserves for stock balancing and
product rotation, based on estimated future returns of product and after
taking into account channel inventory levels, the timing of new product
introductions, and other factors. While Autodesk maintains strict measures to
monitor channel inventories and to provide appropriate reserves, actual
product returns may differ from Autodesk's reserve estimates, and such
differences could be material to the Combined Company's consolidated financial
statements.

Intellectual Property. Each of Autodesk's and Discreet's success is
dependent on its proprietary technology. Autodesk and Discreet rely on a
combination of patent, copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its
proprietary rights. Despite such efforts to protect proprietary rights,
unauthorized parties may attempt to copy aspects of the Combined Company's
software products or to obtain and use information that the Combined Company
regards as proprietary. Policing unauthorized use of Autodesk's and Discreet's
software products is time-consuming and costly. Although neither company is
able to measure accurately the extent to which piracy of its software products
exists, software piracy can be expected to be a persistent problem. There can
be no assurance that the Combined Company's means of protecting its
proprietary rights will be adequate or that its competitors will not
independently develop similar technology.

Autodesk and Discreet expect that software product developers will be
increasingly subject to infringement claims as the number of products and
competitors in its market grows and the functionality of products in different
market segments overlap. From time to time, infringement claims have been
asserted against Autodesk and Discreet, and there can be no assurance that
infringement or invalidity claims (or claims for indemnification resulting
from infringement claims) will not be asserted against the Combined Company in
the future or that any such assertions will not have a material adverse effect
on the Combined Company's business and consolidated results of operations. Any
such claims, whether with or without merit, could be time-consuming, result in
costly litigation and diversion of resources, cause product shipment delays,
or require the Combined Company to enter into royalty or licensing agreements.
Such royalty or license agreements, if required, may not be available on
acceptable terms, if at all, which could have a material adverse effect on the
Combined Company's business and consolidated results of operations. If
infringement is alleged by any third party, the Combined Company may be
required to discontinue the use of certain software codes or processes, to
cease the manufacture, use and sale of infringing products, to incur
significant litigation costs and expenses and to develop non-infringing
technology or to obtain licenses to use the allegedly infringed technology.
There can be no assurance that the Combined Company would be able to develop
alternative technologies or to obtain such licenses or, if a license were
obtainable, that the terms would be commercially reasonable or acceptable to
the Combined Company.

In addition, Autodesk, and in some cases Discreet, also relies on certain
software that is licensed from third parties, including software that is
integrated with internally developed software and used in its products to
perform key functions. There can be no assurance that these third-party
software licenses will continue to be available on commercially reasonable
terms, or that the software will be appropriately supported, maintained, or
enhanced by the licensors. The loss of licenses, or inability to support,
maintain, and enhance any such software, could result in increased costs, or
in delays or reductions in product shipments until equivalent software could
be developed, identified, licensed, and integrated, which could have a
material adverse effect on the Combined Company's business and consolidated
results of operations.

Discreet generally seeks to enter into confidentiality agreements with its
employees and license agreements with its distributors and to limit access to
and distribution of its systems, software, documentation and other proprietary
information. Until fiscal 1996, substantially all of Discreet's systems were
sold without written license agreements. There can be no assurance that the
Combined Company will not be involved in litigation with respect thereto or
that the outcome of any such litigation

might not be more unfavorable to the Combined Company as a result of such
omissions. Discreet uses both software and hardware keys with respect to its
systems and software but otherwise does not copy-protect its systems and
software. It may be possible for unauthorized third parties to copy Discreet's
products or to reverse engineer or obtain and use information that Discreet
regards as proprietary. There can be no assurance that the Combined Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to Discreet's technologies.

Risks Associated with Recent Acquisitions and Investments; Restatement of
Financial Statements. Each of Autodesk and Discreet periodically acquires or
invests in businesses, software products and technologies which are
complementary to its business through acquisitions, strategic alliances, debt
and equity investments, joint ventures and the like. For example, on March 31,
1997, Autodesk acquired Softdesk, Inc. ("Softdesk"), a leading supplier of
AutoCAD-based software for the architecture, engineering and construction
market, and on May 4, 1998, acquired the mechanical applications business of
Genius CAD Software GmbH ("Genius"), a German limited liability company. In
addition, Discreet in fiscal 1997 and 1998 completed three acquisitions: the
assets of Denim Software L.L.C., D-Vision Systems, Inc. and Lightscape
Technologies, Inc. The risks associated with these and other potential
acquisitions or investments include, among others, the difficulty of
integrating the operations and personnel of the companies, the failure to
realize anticipated synergies and the diversion of management's time and
attention. In addition, such investments and acquisitions may involve
significant transaction-related costs. There can be no assurance that Autodesk
or Discreet will be successful in overcoming such risks or that such
investments and acquisitions will not have a material adverse impact upon the
Combined Company's business, financial condition or consolidated results of
operations. In addition, such investments and acquisitions may contribute to
potential fluctuations in quarterly results of operations due to acquisition-
related costs and charges associated with eliminating redundant expenses or
write-offs of impaired assets recorded in connection with acquisitions, any of
which could negatively impact results of operations for a given period or
cause lack of consistency from quarter to quarter in the Combined Company's
operating results or financial condition.

Both the Softdesk and Genius acquisitions were accounted for by Autodesk as
business combinations using the purchase method of accounting. In accordance
with Accounting Principles Board Opinion No. 16, "Accounting for Business
Combinations," the costs of these acquisitions were allocated to the assets
acquired and the liabilities assumed (including in-process research and
development ("IPR&D")) based on their estimated fair values using valuation
methods believed to be appropriate at the time. The amounts allocated to in-
process research and development of $55.1 and $28.8 million for Softdesk and
Genius, respectively, were expensed in the periods in which the acquisitions
were consummated in accordance with FASB Interpretation No. 4, "Applicability
of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase
Method." Subsequent to the Securities and Exchange Commission's letter to the
AICPA dated September 9, 1998, regarding its views on in-process research and
development, the Company has re-evaluated its IPR&D charges on the Softdesk
and Genius acquisitions, revised the purchase price allocations and restated
its financial statements. As a result, Autodesk made adjustments to decrease
the amounts previously expensed as IPR&D and increase the amounts capitalized
as goodwill and other intangibles relating to the Softdesk and Genius
acquisitions by $35.9 and $15.7 million, respectively. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Attraction and Retention of Employees. The continued growth and success of
the Combined Company depends significantly on the continued service of highly
skilled employees. In particular, Discreet's success to date has depended to a
significant extent upon a number of key management and technical employees,
the loss of any of whom could have a material adverse effect on Discreet's
business and results of operations. Competition for these employees in today's
marketplace, especially in the technology industries, is intense. The Combined
Company's ability to attract and retain

employees is dependent on a number of factors including its continued ability
to grant stock incentive awards. There can be no assurance that the Combined
Company will be successful in continuing to recruit new personnel and to
retain existing personnel. The loss of one or more key employees or the
Combined Company's inability to maintain existing employees or recruit new
employees could have a material adverse impact on the Combined Company. In
addition, the Combined Company may experience increased compensation costs to
attract and retain skilled personnel.

Impact of Year 2000. Some of the computer programs used by Autodesk and
Discreet in their internal operations rely on time-sensitive software that was
written using two digits rather than four to identify the applicable year.
These programs may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process including, among other transactions, send invoices, or
engage in similar normal business activities. Autodesk is currently in the
remediation or fourth phase of a six-phase year 2000 compliance program
related to information technology ("IT") systems and expects to complete this
phase by the end of fiscal year 1999. The remaining two phases are expected to
be virtually complete by the end of Autodesk's fiscal year 1999 with minor
testing and risk mitigation activities being performed through the end of
calendar year 1999. As of October 31, 1998, Autodesk had spent approximately
$4 million on the IT year 2000 project, of which approximately $300,000 had
been capitalized. Autodesk expects to spend an additional $2 million to $3
million to complete this project. All expenditures to date have been captured
either in prior year or current year budgets. Autodesk believes that the key
components of the IT year 2000 project have either been replaced or
remediated. Further, Autodesk estimates that if any component of the current
systems fail due to year 2000 related issues, Autodesk would be able to divert
people and systems traffic, causing delays of between one to three days in
service interruptions and processing Autodesk information. Autodesk has a
contingency plan in place in order to prevent the loss of critical data which
includes the back up of all critical data processing interactions and a
disaster recovery plan. There can be no assurance, however, that there will
not be a delay in the completion of these procedures or that the cost of such
procedures will not exceed original estimates, either of which could have a
material adverse effect on future results of operations.

In addition to correcting the business and operating systems used by
Autodesk in the ordinary course of business as described above, Autodesk has
also reviewed its non-IT systems to determine year 2000 compliance of these
systems. Autodesk is in a monitoring program that continually checks the
status of all non-IT systems and does not anticipate an adverse impact on
service and business capabilities with regard to these non-IT systems.
Expenditures related to these monitoring procedures have been minimal and are
not expected to be significant in future periods.

Autodesk has also tested and continues to test all products it currently
produces internally for sale to third parties to determine year 2000
compliance. As of October 31, 1998, Autodesk has spent approximately $300,000
on the first two phases of a three-phase year 2000 compliance testing program
related to its products and expects to spend an additional $1.2 to $1.7
million to complete this project. Products currently sold by Autodesk either
have been found to be substantially compliant or are currently being tested
for compliance. However, many Autodesk products run on operating systems or
hardware produced and sold by third-party vendors. There can be no assurance
that these operating systems or hardware will be converted in a timely manner,
or at all, and any failure in this regard may cause Autodesk products not to
function as designed. Autodesk will continue to evaluate each product in the
currently supported inventory.

Discreet has made preliminary assessments of its products and information
systems and has determined that they are year 2000 compliant, or that only a
limited effort will be required to achieve compliance. Discreet is currently
proceeding with detailed reviews of every application used. It is expected
that some will have to be upgraded to year 2000 compliant applications. It is
expected that some customers may experience some difficulties related to non-
Discreet products, which may affect

the performance of Discreet products and, therefore, lead to an unusually high
number of calls to the Discreet technical support department. Any future costs
associated with ensuring that Autodesk's products or the products of
Autodesk's Discreet business unit are compliant with the year 2000 are not
expected to have a material impact on the Combined Company's results of
operations or financial position. Commentators have stated that a significant
amount of litigation may arise out of year 2000 compliance issues, and
Autodesk and Discreet are aware of a growing number of lawsuits against other
software vendors. Because of the unprecedented nature of such litigation, it
is uncertain whether and to what extent Autodesk and Discreet may be affected
by it.

Single European Currency. Autodesk and Discreet are in the process of
addressing the issues raised by the introduction of the single European
currency ("Euro") as of January 1, 1999 and during the transition period
ending January 1, 2002. Autodesk and Discreet will continue to modify the
internal systems that will be affected by this conversion during fiscal year
2000, and do not expect the costs of further system modifications to be
material. There can be no assurance, however, that Autodesk and Discreet will
be able to complete such modifications to comply with Euro requirements, which
could have a material adverse effect on Autodesk's and Discreet's operating
results. Autodesk is currently evaluating the impact of the introduction of
the Euro on its foreign exchange and hedging activities, functional currency
designations, and pricing strategies in the new economic environment. In
addition, Autodesk and Discreet face risks to the extent that banks and
vendors upon whom they rely and their suppliers are unable to make appropriate
modifications to support Autodesk's and Discreet's operations with respect to
Euro transactions. While Autodesk and Discreet will continue to evaluate the
impact of the Euro, management does not believe its introduction will have a
material adverse effect upon Autodesk's and Discreet's results of operations
or financial condition.

Dependence on Single Workstation Vendor. Discreet's flame*, effect*,
inferno*, fire*, smoke* and frost* systems currently include workstations
manufactured by Silicon Graphics, Inc. ("SGI"). There are significant risks
associated with this reliance on SGI, and the Combined Company may be impacted
by the timing of the development and release of products by SGI, as was the
case during fiscal 1996 when the announcement by SGI of a new Onyx workstation
caused Discreet to offer substantial discounts and other favorable terms
regarding its then current inventory of SGI workstations. In addition, there
may be unforeseen difficulties associated with adapting Discreet's products to
future SGI products. Discreet is an authorized master VAR of workstations
manufactured by SGI. Discreet's agreement with SGI is subject to annual
renewal in May of each year and termination by SGI for cause. The agreement
with SGI has been extended through December 31, 1998 and Discreet has no
reason to believe that SGI will not renew such agreement. In addition,
although Discreet has no reason to believe that it will be unable to obtain
sufficient quantities of SGI workstations on a timely basis or that its status
as a master VAR will be changed, there can be no assurance that the Combined
Company will continue to be able to procure such workstations in sufficient
quantities or on a timely basis or that SGI will continue to recognize the
Combined Company as a master VAR. The success of Autodesk's Discreet business
unit also depends, in part, on the continued market acceptance of SGI
workstations by consumers in general, and by the professional film and video
industries, in particular. Although the Combined Company intends to continue
to evaluate new hardware platforms and may adapt its products as technological
advances and market demands dictate, Discreet and Autodesk believe that
Autodesk's Discreet business unit will continue to derive a substantial
portion of its revenue for the foreseeable future from the sale and
maintenance of systems designed to include SGI workstations. As a result,
financial, market and other developments adversely affecting SGI or the sales
of workstations, the introduction or acquisition by SGI of products which are
competitive with those of Discreet, or the unanticipated timing or pricing of
SGI products that could cause customers to defer the decision to buy or
determine not to buy the Autodesk Discreet business unit's then available
products or systems, could have an adverse effect upon the Combined Company's
business and results of operations, as was the case with respect to Discreet
for the three month period ended January 31, 1996. As a master VAR, Discreet
also obtains certain advance access to SGI technology

in order to develop compatible systems and to modify and improve existing
products. If the Combined Company were unable to obtain such advance access,
it could have an adverse impact on the Combined Company's business and results
of operations.

Reliance on Sole Source Suppliers. Discreet is dependent on SGI as
Discreet's sole source for video input/output cards used in Discreet's
systems. Discreet is also dependent on a single workstation vendor. See "--
Dependence on Single Workstation Vendor." Discreet also purchases electronic
tablets manufactured by Wacom Technology Corporation and believes that while
alternative suppliers are available, there can be no assurance that
alternative electronic tablets would be functionally equivalent or be
available on a timely basis or on similar terms. Discreet generally purchases
sole source or other components pursuant to purchase orders placed from time
to time in the ordinary course of business and has no written agreements or
guaranteed supply arrangements with its sole source suppliers. Discreet has
experienced quality control problems and supply shortages for sole source
components in the past and there can be no assurance that the Combined Company
will not experience significant quality control problems or supply shortages
for these components in the future. Discreet does not maintain an extensive
inventory of these components, and an interruption in supply could have a
material adverse effect on Discreet's business and results of operations.
Because of Discreet's reliance on these suppliers, Discreet may also be
subject to increases in component costs which could adversely affect the
Combined Company's business and results of operations.

USE OF PROCEEDS

The net proceeds from this offering, after deducting the estimated expenses
of the offering, are estimated to be approximately $115.8 million (or $133.2
million if the Underwriters exercise the overallotment option in full),
assuming that all 3,000,000 shares (or 3,450,000 shares if the Underwriters
exercise the overallotment option in full) covered by this Prospectus are sold
at a price of $40.375 per share, which was the reported last sale price of the
Common Stock on the Nasdaq National Market on March 4, 1999. The Company
expects such proceeds to be used for general corporate purposes, including
working capital.

The primary motivation for the timing of the offering is to qualify the
Transactions for pooling of interests accounting treatment. The Company
previously repurchased certain shares of its Common Stock pursuant to an
existing repurchase program. In order to qualify the Transactions for pooling
of interests treatment, the Company is required to issue approximately
3,000,000 shares of Common Stock before the closing of the Transactions. The
Common Stock offered hereby will not be issued unless and until all conditions
to the Transactions have been satisfied or waived.

In addition to the reasons described above, the Company believes that the
availability of substantial financial resources is an important competitive
factor in the software industry, where many of the Company's competitors have
significantly greater resources. The offering will strengthen the Company's
financial position and provide the Company with additional financial
flexibility to take advantage of business opportunities as they may arise.
Such opportunities could include the acquisition of complementary businesses,
products or technologies, although there are currently no agreements or
understandings with respect to any material acquisition other than the
Transactions.

The Company plans to invest the net proceeds in income producing obligations
pending their use.

CAPITALIZATION

The following table sets forth (i) the capitalization of the Company as of
October 31, 1998, (ii) the pro forma capitalization giving effect to the
Transactions, and (iii) the pro forma capitalization as adjusted to reflect
the issuance and sale by the Company of 3,000,000 shares of Common Stock at an
assumed public offering price of $40.375 per share, which was the reported
last sale price of the Common Stock on the Nasdaq National Market on March 4,
1999.

OCTOBER 31, 1998
----------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED
-------- ------------ -----------
(IN THOUSANDS)

Stockholders' equity:
Preferred stock, $0.01 par value:
2,000,000 shares authorized; none issued
and outstanding, actual; one share
outstanding, pro forma and pro forma as
adjusted................................. $ -- $ -- $ --
Common stock, $0.01 par value: 250,000,000
shares authorized; 46,774,000 shares
outstanding, actual; 56,625,000 shares
outstanding, pro forma; 59,625,000 shares
outstanding, pro forma as adjusted(2).... 345,735 454,597 570,404
Retained earnings (deficit)............... 87,266 47,352 47,352
Deferred compensation..................... -- (699) (699)
Accumulated translation adjustment........ (602) 5,536 5,536
-------- -------- -------
Total stockholders' equity.............. 432,399 495,714 622,593
-------- -------- -------
Total capitalization.................... $432,399 $495,714 622,593
======== ======== =======

- --------
(1) See "Pro Forma Combined Condensed Financial Information" and the
accompanying notes thereto.

(2) Excludes shares reserved for issuance pursuant to the Company's stock
option plans, under which 13,111,000 shares were outstanding as of October
31, 1998. Also excludes 1,680,000 shares reserved for future issuance
under the Company's employee stock purchase plan.

MARKET PRICE AND DIVIDEND INFORMATION

The Common Stock has been traded on the Nasdaq National Market under the
symbol "ADSK" since May 1996, and was traded on the Nasdaq National Market
under the symbol "ACAD" from Autodesk's initial public offering in 1985 until
that time. The following table sets forth, for the periods indicated, the high
and low closing sale prices as reported on the Nasdaq National Market for the
Common Stock for the fiscal periods indicated.

HIGH LOW
-------- --------

FISCAL YEAR ENDED JANUARY 31, 1997
First Quarter.............................................. $43 1/4 $29 3/4
Second Quarter............................................. 42 21
Third Quarter.............................................. 27 19 5/8
Fourth Quarter............................................. 34 1/8 21 3/8
FISCAL YEAR ENDED JANUARY 31, 1998
First Quarter.............................................. 36 1/8 28 3/4
Second Quarter............................................. 42 7/16 35
Third Quarter.............................................. 50 32 3/4
Fourth Quarter............................................. 41 1/4 32 1/2
FISCAL YEAR ENDED JANUARY 31, 1999
First Quarter.............................................. 49 7/8 39 3/16
Second Quarter............................................. 48 7/8 31 1/8
Third Quarter.............................................. 35 23 3/16
Fourth Quarter............................................. 48 1/2 29
FISCAL YEAR ENDED JANUARY 31, 2000
First Quarter (through February 25, 1999).................. 40 1/4 43 7/8

The closing price for a share of Common Stock as reported on the Nasdaq
National Market on February 25, 1999, the last practicable trading day for
which information was available before the printing of this Prospectus, was
$41.063.

Autodesk paid quarterly cash dividends of $0.06 per share with respect to
fiscal 1997 and 1998 and the first three quarters of fiscal 1999, and
currently intends to continue paying such cash dividends on a quarterly basis.

THE TRANSACTIONS

The business combination between Autodesk and Discreet will be effected
pursuant to the Acquisition Agreement entered into among the Company,
Discreet, Autodesk Development B.V. ("Dutchco"), 9066-9771 Quebec Inc.
("Amalgamation Sub"), Autodesk Canada Inc. and 9066-9854 Quebec Inc.
("Autodesk Quebec"). Pursuant to the Acquisition Agreement, Dutchco, a wholly-
owned subsidiary of the Company, will acquire Discreet by way of an
Amalgamation under Quebec law and certain related transactions. Discreet will
be amalgamated with Autodesk Quebec and Amalgamation Sub to form "New
Discreet," which will carry on the existing business of Discreet as an
indirect subsidiary of Autodesk. Each holder of Discreet Common Shares will
receive in the Transactions either 0.33 shares of Autodesk Common Stock or
0.33 exchangeable non-voting shares of New Discreet. The exchangeable shares
of New Discreet issued in the Transactions will be exchangeable at any time at
the option of the holder, and will automatically be exchanged on the eleventh
anniversary of the closing of the Transactions (or earlier upon the occurrence
of certain events, including the liquidation, dissolution or winding-up of
Autodesk or New Discreet), for Common Stock of Autodesk on a one-for-one
basis. Based on the capitalizations of Autodesk and Discreet as of December
31, 1998, Autodesk expects to issue approximately 9.9 million shares of Common
Stock of to the shareholders of Discreet in the Transactions, which shares
will represent approximately 16.5% of the Common Stock outstanding after the
Transactions, assuming the issuance of the 3 million shares offered hereby.
The Transactions will be voted on by the stockholders of the Company and by
the shareholders of Discreet at meetings scheduled to be held on March 10,
1999.

If the Transactions are approved by the stockholders of both the Company and
Discreet, and all other conditions to the Transactions are satisfied or
waived, the Transactions are anticipated to close on March 16, 1999,
immediately following the closing of the issuance and sale of the Common Stock
offered hereby.

REASONS FOR THE TRANSACTIONS

The parties believe that the Acquisition will result in certain benefits
that should contribute to the success of the combined enterprise, including
positioning it to create the premier total solutions provider of digital
content design, creation and manipulation tools for the creation of moving
images.

Following the Transactions, Autodesk plans to combine the businesses of
Discreet and its Kinetix division. The new organization, the Discreet business
unit of Autodesk, will be headquartered in Montreal, Quebec. Autodesk's
Discreet business unit will focus on developing and marketing tools for the
creation of digital content in the entertainment and creative design
industries. The combined organization will continue to develop and deliver the
existing Discreet and Kinetix product lines to a wide range of creative
professionals including those in the entertainment, design and visualization
industries.

The engineering organizations of Discreet and Kinetix will be combined in
Autodesk's Discreet business unit, and certain general and administrative
functions will be integrated with similar functions at Autodesk. Discreet's
advanced editing and effects system will continue to be sold by Discreet's
existing direct sales force. These products will be marketed and supported by
the Combined Company's Discreet Advanced Systems division. Discreet's new
media software products and Kinetix products will be sold through Autodesk's
distribution channel and will be marketed and supported by the Combined
Company's New Media division.

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

The discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Actual results could differ
materially from those set forth in the forward-looking statements as a result
of the factors set forth elsewhere herein, including "--Certain Risk Factors
Which May Impact Future Operating Results" and "Risk Factors."

RESTATEMENT OF FINANCIAL STATEMENTS

On March 31, 1997, Autodesk acquired Softdesk, Inc. ("Softdesk"), a leading
supplier of AutoCAD-based applications software for the architecture,
engineering, and construction market, and on May 4, 1998, acquired from Genius
CAD Software GmbH ("Genius") various mechanical computer-aided-design software
and technologies. Both of these acquisitions were accounted for as business
combinations using the purchase method of accounting. In accordance with
Accounting Principles Board Opinion No. 16, "Accounting for Business
Combinations," the costs of these acquisitions were allocated to the assets
acquired and the liabilities assumed (including in-process research and
development ("IPR&D")) based on their estimated fair values using valuation
methods believed to be appropriate at the time. The amounts allocated to in-
process research and development of $55.1 and $28.8 million for Softdesk and
Genius, respectively, were expensed in the periods in which the acquisitions
were consummated in accordance with FASB Interpretation No. 4, "Applicability
of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase
Method." Subsequent to the Securities and Exchange Commission's letter to the
AICPA dated September 9, 1998, regarding its views on IPR&D, the Company has
re-evaluated its IPR&D charges on the Softdesk and Genius acquisitions,
revised the purchase price allocations and restated its financial statements.
As a result, Autodesk made adjustments to decrease the amounts previously
expensed as IPR&D and increase the amounts capitalized as goodwill and other
intangibles relating to the Softdesk and Genius acquisitions by $35.9 and
$15.7 million, respectively.

The effect of these adjustments on the previously reported consolidated
financial statements as of and for the year ended January 31, 1998 and the
nine months ended October 31, 1998 and 1997 are as follows (in thousands):

YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, 1998 OCTOBER 31, 1998 OCTOBER 31, 1997
-------------------- -------------------- --------------------
AS REPORTED RESTATED AS REPORTED RESTATED AS REPORTED RESTATED
----------- -------- ----------- -------- ----------- --------

Nonrecurring charges.... $58,087 $22,187 $37,692 $21,985 $ 58,087 $22,187
General and
administrative......... $83,287 $88,900 $84,306 $90,718 $ 60,455 $64,384
Cost of revenues........ $70,858 $71,338 $56,129 $56,648 $ 52,278 $52,614
Income from operations.. $45,355 $75,162 $88,718 $97,494 $ 1,799 $33,434
Provision for income
taxes.................. $39,635 $39,635 $42,251 $42,974 $ 23,144 $23,144
Net income (loss)....... $15,364 $45,171 $57,453 $65,506 $(13,954) $17,681
Basic net income (loss)
per share.............. $ 0.33 $ 0.97 $ 1.24 $ 1.41 $ (0.30) $ 0.38
Diluted net income
(loss) per share....... $ 0.31 $ 0.91 $ 1.18 $ 1.34 $ (0.30) $ 0.35

AS OF JANUARY 31, AS OF OCTOBER 31, AS OF OCTOBER 31,
1998 1998 1997
-------------------- -------------------- --------------------
AS REPORTED RESTATED AS REPORTED RESTATED AS REPORTED RESTATED
----------- -------- ----------- -------- ----------- --------

Purchased technologies
and capitalized
software, net.......... $31,553 $33,373 $33,949 $34,640 $ 33,998 $35,962
Goodwill, net........... $16,995 $44,982 $35,054 $72,946 $ 18,545 $48,216
Deferred income taxes
(non-current asset).... $13,782 $13,782 $14,786 $14,063 $ -- $ --
Retained earnings....... $19,895 $49,702 $49,406 $87,266 $ 42,598 $74,233

RESULTS OF OPERATIONS

The following table sets forth, as a percentage of net revenues,
consolidated statement of income data for the periods indicated. These
operating results are not necessarily indicative of results for any future
periods.

FISCAL YEAR NINE MONTHS
ENDED ENDED
JANUARY 31, OCTOBER 31,
----------------- -------------
1998 1997 1996 1998 1997
---- ---- ---- ----- -----

Net revenues................................ 100% 100 % 100% 100% 100 %
Costs and expenses:
Costs of revenues......................... 12 13 13 10 12
Marketing and sales....................... 38 40 34 35 39
Research and development.................. 20 19 15 20 21
General and administrative................ 14 15 14 16 15
Nonrecurring charges...................... 4 1 -- 4 5
Litigation accrual reversal............... -- -- -- (3) --
--- --- --- ----- -----
Total costs and expenses................ 88 88 76 82 92
--- --- --- ----- -----
Income (loss) from operations............... 12 12 24 18 8
Interest and other income, net.............. 1 1 2 2 1
--- --- --- ----- -----
Income (loss) before income taxes........... 13 13 26 20 9
Provision for income taxes.................. 6 5 9 8 5
--- --- --- ----- -----
Net income (loss)....................... 7% 8% 17% 12% 4%
=== === === ===== =====

NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997

Net revenues. Autodesk's net revenues for the nine months ended October 31,
1998 were $551.0 million, which represented a 27 percent increase from the
third quarter of the prior fiscal year. Autodesk achieved significant net
revenue growth in the Americas and Europe when compared to the same period in
the prior fiscal year, while net revenues decreased in Asia Pacific. This net
revenue growth was the result of strong demand for products offered by
Autodesk's Design Solutions and Personal Solutions operating segments,
including software products such as AutoCAD Mechanical Desktop 3.0, AutoCAD
LT98, Architectural Desktop, and incremental software revenues associated with
the May 1998 acquisition of Genius (see Note 2 to the Autodesk condensed
consolidated interim financial statements, incorporated by reference herein).
Sales of AutoCAD and AutoCAD upgrades accounted for approximately 64 percent
and 72 percent of Autodesk's consolidated net revenues for the nine months
ended October 31, 1998 and 1997, respectively. The value of the US dollar,
relative to certain international currencies, negatively impacted revenues in
the first nine months of the fiscal year compared to the same period in the
prior fiscal year, principally due to changes in the rate of exchange between
the US dollar and the Japanese yen and the Australian dollar. International
sales, including exports from the U.S., accounted for approximately 58 percent
of Autodesk's revenues in the first nine months of fiscal year 1999 as
compared to 60 percent in the same period of the prior fiscal year.

Autodesk experienced a decline in Asia Pacific net revenues during the first
nine months of fiscal year 1999 compared to the corresponding period of the
prior year due to weak economic conditions in the region. Autodesk expects
that these adverse conditions in Asia Pacific will continue in the short term,
and that they may continue to adversely affect Autodesk's revenue and
earnings.

Autodesk derives a substantial portion of its revenues from sales of AutoCAD
software, AutoCAD upgrades, and adjacent products which are interoperable with
AutoCAD, and expects this trend to continue. As such, any factor adversely
affecting sales of AutoCAD and AutoCAD upgrades, including

such factors as product life cycle, market acceptance, product performance and
reliability, reputation, price competition, and the availability of third-
party applications, could have a material adverse effect on Autodesk's
business and consolidated results of operations. Additionally, slowdowns in
any of Autodesk's geographical markets could also have a material adverse
impact on Autodesk's business and consolidated results of operations.

Product returns, consisting principally of stock rotation, are recorded as a
reduction of revenues and represented approximately 4 percent and 6 percent of
consolidated revenues in the first nine months of fiscal years 1999 and 1998,
respectively. The decrease in product returns as a percentage of revenues is
primarily due to Autodesk's continued focus on channel inventory management,
sell- through sales activities and programs, and the absence of performance or
quality issues with Autodesk's software products. Although product returns
decreased as a percentage of consolidated revenues, comparing the first nine
months of fiscal year 1999 to the same period in the prior year, management
anticipates that the level of product returns in future periods will continue
to be impacted by the timing of new product releases, as well as the quality
and market acceptance of new products.

Cost of revenues. Cost of revenues as a percentage of net revenues for the
nine months ended October 31, 1998 was 10 percent, compared to 12 percent in
the same period in the prior fiscal year. This reduction is largely due to
efficiencies in production and distribution activities and lower royalties
paid by the Company as a result of the Company's having acquired the rights to
certain multimedia products during the third quarter of fiscal year 1998. Cost
of revenues as a percentage of net revenues has been and may continue to be
impacted by the mix of product sales, software amortization, royalty rates for
licensed technology embedded in Autodesk's products, and the geographic
distribution of sales.

Marketing and sales. As a percentage of net revenues, marketing and sales
expenses decreased to 35 percent of net revenues in the nine months ended
October 31, 1998 from 39 percent in the nine months ended October 31, 1997.
Actual spending for this period increased 13 percent as a result of higher
employee costs and increased marketing costs associated with new and enhanced
product offerings.

Research and development. Research and development expenses as a percentage
of net revenues for the nine months ended October 31, 1998 decreased to 20
percent from 21 percent for the same period in the prior fiscal year. Actual
research and development spending (including capitalized software costs of
$2.2 million recorded during the first half of fiscal year 1998) increased 16
percent as compared to the same period in the prior fiscal year. The absolute
dollar increase is due primarily to the addition of software engineers,
expenses associated with the development and translation of new products, and
incremental research and development personnel expenses associated with the
acquisition of Genius during May, 1998.

General and administrative. General and administrative expenses were 16
percent of net revenues for the nine months ended October 31, 1998, and 15
percent of net revenues in the same period of the prior fiscal year. In
absolute dollar terms, general and administrative expenses increased 41
percent for the nine months ended October 31, 1998 from the same period of the
prior fiscal year, primarily because of increased employee-related expenses
($8 million increase), amortization of intangibles recorded in connection with
the acquisition of Genius and the Softdesk merger ($5.1 million increase),
other depreciation and amortization expenses ($2 million increase), costs
incurred to ensure that Autodesk's infrastructure is year 2000 compliant ($3
million), and costs incurred in the ongoing nonpublic FTC investigation ($1.1
million).

Nonrecurring charges--Genius acquisition. On May 4, 1998, Autodesk entered
into an agreement with Genius, a German limited liability company to purchase
various mechanical CAD software applications and technologies (the
"acquisition"). In consideration for this acquisition,

Autodesk paid Genius approximately $69 million in cash. The acquisition has
been accounted for using the purchase method of accounting. In connection with
the acquisition, Autodesk recorded a charge for in-process research and
development of $13.1 million, all of which was recorded during the three
months ended July 31, 1998.

IN-PROCESS TECHNOLOGIES OVERVIEW

The nature of the efforts required to develop the acquired in-process
technology into commercially viable products principally relate to the
completion of all planning, designing and testing activities that are
necessary to establish that the product or service can be produced to meet its
design requirements, including functions, features and technical performance
requirements.

As of the acquisition date, Genius had initiated the research and
development effort related to the product features and functionality that will
reside in the next versions of the (i) Genius AutoCAD, (ii) Genius Desktop,
(iii) Genius Vario, and (iv) Genius Modules product families.

With respect to the acquired in-process technologies, the calculations of
value were adjusted to reflect the value creation efforts of Genius prior to
the close of the acquisition. Following are the estimated completion
percentages, estimated technology lives and projected introduction dates:

PERCENT TECHNOLOGY INTRODUCTION
GENIUS IN-PROCESS TECHNOLOGIES COMPLETED LIFE DATES
- ------------------------------ --------- ---------- -------------

Genius AutoCAD Version R15................... 45% 6 years mid/late 1999
Genius Desktop Version 3.0................... 40% 4 years Sept. 1998
Genius AutoCAD LT 1998....................... 20% 5 years mid/late 1999
Genius Vario Version R15..................... 20% 3 years mid/late 1999
Genius Modules Version R15................... 20% 3 years mid/late 1999

A brief description of the acquired in-process projects is set forth below:

GENIUS AUTOCAD AND GENIUS DESKTOP

The substantial technological improvements under development at the time of
the acquisition included modernizing the code and significantly improving the
ease of use of the products.

Modernizing the code. Modernization of the code for Genius Desktop and
Genius AutoCAD included a complete replacement of the existing LISP based code
with modern ARX/object oriented code. Autodesk determined through technical
due diligence that a substantial portion of the source code in both Genius
Desktop and Genius AutoCAD was based on LISP, with remaining code based on
ADS. Replacing the LISP and ADS code was anticipated to significantly improve
the flexibility (e.g., to add additional features) and performance of the
products.

It was uncertain, however, whether all of the existing features could be
easily converted to ObjectARX oriented code and what impact this conversion
would have on any new features currently being developed. Autodesk estimates
that this conversion may take several releases in order to be fully complete.
Partially completed conversions for the interim product releases are expected
to rely on a combination of source code from LISP and ObjectARX code.

Ease of use. Working through an application programming interface ("API")
for the Autodesk products, a significant issue under continual development is
the level of functionality and ease of use of the features which require
access to the Autodesk product code. As a result of the acquisition, Autodesk
anticipates that a significant level of effort would be required to either
expand or remove these API's to increase the functionality and usability of
features, and to improve the interoperability of the products with Autodesk's
offerings.

A significant risk factor associated with this development effort is the
impact that removal of the API may have on the functionality of a given
feature, and the additional development effort required to restore a feature
to its current functionality (before any improvements in this functionality
can be made). Similar to the development effort associated with modernizing
the code, Autodesk expects that it may take several releases of both of these
products to fully achieve this technological milestone. Autodesk estimated,
for purposes of its valuation, that at the date of the Genius acquisition,
development projects associated with the next release of Genius AutoCAD and
Genius Desktop were approximately 45 percent and 40 percent completed,
respectively. Estimated costs to be incurred to reach technological
feasibility as of the date of acquisition were less than $800,000 for Genius
AutoCAD and less than $500,000 for Genius Desktop.

GENIUS AUTOCAD LT

The most significant technological challenge for the Genius AutoCAD LT
product offering was the fact that API's to AutoCAD LT (the Autodesk product
on which Genius LT runs) did not exist. To develop features for Genius AutoCAD
LT, workarounds through the Windows interface are required. Genius had
reverse-engineered the AutoCAD LT product to build the Genius AutoCAD LT
software product. This resulted in a product which was extremely fragile and
vulnerable to change in AutoCAD LT and Microsoft Windows. Therefore, the
product is dependent on both the AutoCAD LT releases and the Microsoft Windows
releases. Expanding and improving the features given Genius' limited access to
the platform product, AutoCAD LT, was expected to result in a substantial
development effort pre-acquisition. In addition, improving the
interoperability of the Genius LT product and AutoCAD LT also posed a
significant technological challenge to Autodesk post-acquisition. Autodesk
estimated that the next release of Genius AutoCAD LT, for purposes of its
valuation, was approximately 20 percent complete at the date of the
acquisition. Estimated costs to be incurred to reach technological feasibility
as of the date of acquisition were less than $200,000.

GENIUS VARIO AND MODULES

Genius Vario, which runs on top of AutoCAD, currently ships in a two-
dimensional version. At the date of acquisition, a three-dimensional version
was under development. The three-dimensional version is a significant shift in
technology, from handling two-dimensional drawings to three-dimensional
models, and the increasing complexity which results. Developing three-
dimensional Vario involved developing parametric modeling in three
dimensions--an area which has significant new development challenges and is
far more speculative than two-dimensional parametric modeling. In addition,
the three-dimensional Vario product is intended to provide much more Internet
functionality than is currently available. The Company estimated that the next
release of Genius Vario and Modules were approximately 20 percent complete at
the date of the acquisition. Estimated costs to be incurred to reach
technological feasibility for the Genius Vario and Modules projects as of the
date of acquisition were less than $25,000.

VALUATION ANALYSIS

REVENUE

The revised value of the acquired in-process technology was computed using a
discounted cash flow analysis on the anticipated income stream of the related
product sales. The discounted cash flow analysis was based on management's
forecast of future revenues, cost of revenues and operating expenses related
to the products and technologies purchased from Genius which represent the
process and expertise employed to develop mechanical design application
software designed to work in conjunction with Autodesk's mechanical CAD
products. Future revenue estimates were generated from the following product
families: (i) Genius AutoCAD, (ii) Genius Desktop, (iii) Genius AutoCAD LT,

(iv) Genius Vario, and (v) Genius Modules. Aggregate revenue for Genius
products was estimated to be less than $20 million for the period from May 4,
1998 to January 31, 1999. Thereafter, revenue was estimated to increase at
rates ranging from 25 to 33 percent for fiscal years 2000 through 2004,
stabilizing at 20 percent growth for the remainder of the estimation period.
Year-to-year revenue growth estimates were developed based on an expanding
market for CAD software products and the ability of Autodesk to maintain its
position in the market. The growth rates contained in the first five years of
the projections are greater than those historically experienced by Autodesk
and are largely a result of the expansion of the Genius products into
Autodesk's existing worldwide sales channels, particularly in North America
and Asia Pacific, which historically have not contributed significant revenues
to Genius.

As stated previously, revenues for developed technology were estimated by
management for the remainder of fiscal year 1999 through fiscal year 2004.
Management's estimates reflect a gradual decline in revenues from developed
technologies after considering historical product life cycles and anticipated
product release dates. While revenues derived from both developed and in-
process technologies are estimated to decline over the next several fiscal
years, overall revenues attributable to the Genius products and technologies
are anticipated to grow in absolute dollars and as a percentage of aggregate
revenue to reflect the growth of future (yet-to-be-developed) technologies.

Management's analysis also considered anticipated product release dates for
Autodesk's mechanical CAD products, as well as release dates for the various
acquired Genius products and technologies which are interoperable with
Autodesk's mechanical CAD products. The overall technology life was estimated
to be approximately three to four years for the Genius Desktop and Genius
Vario and Modules products, and approximately five to six years for all other
Genius products and technologies purchased by Autodesk.

OPERATING EXPENSES

Operating expenses used in the valuation analysis of Genius included (i)
cost of revenues, (ii) general and administrative expense, (iii) marketing and
sales expense, and (iv) research and development expense. In developing future
expense estimates, it was estimated that the Genius operations would be merged
into Autodesk's operating structure. Selected operating expense assumptions
were based on an evaluation of Autodesk's overall business model, specific
product results, including both historical and expected direct expense levels
(as appropriate), and an assessment of general industry metrics.

COST OF REVENUES. Cost of revenues, expressed as a percentage of revenue,
for the developed and in-process technologies identified in the valuation was
estimated to be 11 percent throughout the estimation period. The Company's
cost of revenues was 13 percent for fiscal 1996 and fiscal 1997, and 12
percent for fiscal 1998.

GENERAL AND ADMINISTRATIVE. General and administrative expense, expressed as
a percentage of revenue, for the developed and in-process technologies
identified in the valuation ranged from 9 percent in fiscal year 1999 to 6
percent in fiscal year 2002. Thereafter, general and administrative expenses,
expressed as a percentage of revenue for the developed and in-process
technologies identified in the valuation were estimated to stabilize at 5
percent of revenue. For the fiscal year ended January 31, 1998, Autodesk's
general and administrative expense, excluding depreciation and amortization,
was approximately 9 percent.

MARKETING AND SALES. Marketing and sales expense, expressed as a percentage
of revenue, for the developed and in-process technologies identified in the
valuation, was estimated to be 25 percent throughout the estimation period,
based on the Company's historical experience with similar products.

RESEARCH AND DEVELOPMENT. Research and development ("R&D") expenses consist
of the costs associated with activities undertaken to correct errors or keep
products updated with current information (also referred to as "maintenance"
R&D). Maintenance R&D includes all activities undertaken after a product is
available for general release to customers to correct errors or keep the
product updated with current information. These activities include routine
changes and additions. The maintenance R&D expense was estimated to be 3
percent of revenue for the developed and in-process technologies throughout
the estimation period.

EFFECTIVE INCOME TAX RATE

The effective income tax rate utilized in the analysis of in-process
technology was 34 percent in fiscal year 1999 and in the mid 30-percent range
thereafter, which reflects Autodesk's current combined federal and state
statutory income tax rate, exclusive of nonrecurring charges and its estimated
income tax rate in future years.

DISCOUNT RATE

The discount rates selected for developed and in-process technology were 15
percent and 20 percent, respectively. In the selection of the appropriate
discount rates, consideration was given to (i) the Weighted Average Cost of
Capital ("WACC") (15.0 percent) and (ii) the Weighted Average Return on Assets
(15.7 percent). The discount rate utilized for the in-process technology was
determined to be higher than Autodesk's WACC due to the fact that the
technology had not yet reached technological feasibility as of the date of
valuation. In utilizing a discount rate greater than Autodesk's WACC,
management has reflected the risk premium associated with achieving the
forecasted cash flows associated with these projects.

ALLOCATION OF VALUE

The fair values of the assets acquired from Genius were allocated between
Europe and the rest of the world ("ROW"), which consisted of the U.S. and
Asia. The allocation of assets among Europe and ROW was based on revenue
expected to be generated on Genius products. Based on management's revenue
forecast for fiscal years 1998 through 2003, it was determined that 60 percent
of Genius' products total sales are expected to be generated in Europe, while
the remaining 40 percent of sales are expected to be generated in ROW.
Accordingly, the identified intangible assets were allocated 60 percent to
Europe and 40 percent to ROW. The results of the allocation of values between
Europe and ROW based assets are as follows:

GEOGRAPHIC ALLOCATION
---------------------
IDENTIFIED INTANGIBLE ASSET EUROPE ROW
--------------------------- ---------- ----------

Developed Technology..................................... $7,620,000 $5,080,000
In-Process Technology.................................... 7,860,000 5,240,000
Trademark, trade name and other intangible assets........ 660,000 440,000

COMPARISON TO ACTUAL RESULTS

To date, revenues and operating expenses attributable to in-process
technologies associated with the Genius acquisition are consistent with
management's projections. Based upon factors currently known, management
believes the revenues and operating expenses associated with these in-process
technologies will favorably impact Autodesk's consolidated results of
operations and financial position. Failure to complete the development of
these projects in their entirety, or in a timely manner, could have an adverse
impact on Autodesk's operating results, financial condition and results of
operations. Additionally, the value of other intangible assets acquired from
Genius may become impaired.

NONRECURRING CHARGES--OTHER. During the second fiscal quarter, Autodesk
recorded charges of approximately $8.9 million relating primarily to
restructuring charges associated with the consolidation of certain development
centers ($1.5 million); the write-off of purchased technologies associated
with these operations ($2.2 million); staff reduction in Asia Pacific in
response to current economic conditions in the region ($1.7 million); costs in
relation to potential legal settlements ($2.5 million); and the write-down to
fair market value of older computer equipment that the Company planned to
dispose of ($1.0 million). These charges reduced income after tax by
approximately $5.9 million ($0.12 per share on a diluted basis). The
restructurings noted above are expected to be completed by the end of
Autodesk's fiscal year ending January 31, 1999. See Note 8 to the Autodesk
Unaudited Condensed Consolidated Financial Statements, incorporated herein by
reference, for further explanation.

NONRECURRING CHARGES--PRIOR YEAR TRANSACTIONS. On March 31, 1997, Autodesk
exchanged 2.9 million shares of its common stock for all of the outstanding
stock of Softdesk, Inc. Based on the value of Autodesk stock and options
exchanged, the transaction, including transaction costs, was valued at
approximately $94 million. This transaction was accounted for using the
purchase method of accounting with the purchase price being principally
allocated to capitalized software, purchased technologies, and intangible
assets. Approximately $19.2 million of the total purchase price represented
the value of in-process research and development that had not yet reached
technological feasibility and had no alternative future use. Approximately
$3.0 million of technology acquired from 3D/Eye during the first quarter of
fiscal year 1998 also represented the value of in-process research and
development that had not yet reached technological feasibility and had no
alternative future use. The $19.2 million and the $3.0 million were charged to
operations in the first quarter of fiscal year 1998. These charges reduced net
income for the period by approximately $21.1 million ($0.46 per share on a
diluted basis) and reflect the fact the one-time charge for acquired in-
process research and development recorded in connection with the Softdesk
transaction was not deductible for income tax purposes.

LITIGATION ACCRUAL REVERSAL. Autodesk recorded a $25.5 million nonrecurring
charge during fiscal year 1995 on a claim of trade-secret misappropriation
brought by Vermont Microsystems, Inc. ("VMI"). As of the end of the first
quarter of fiscal year 1999, the total amount accrued related to the initial
judgment plus accrued interest was approximately $29.3 million. Autodesk
appealed this decision, and in May 1998, final judgment was entered in the VMI
litigation and a corresponding final payment of approximately $8.4 million was
made to VMI. During the second quarter of fiscal year 1999, Autodesk
recognized $18.2 million and $2.7 million to operating income and interest
income, respectively, to reflect the remaining unutilized litigation and
related interest accruals.

INTEREST AND OTHER INCOME. Interest and other income for the nine months
ended October 31, 1998 was $11.0 million as compared to $7.4 million for the
same period in the prior fiscal year. Interest income was $7.8 million for the
first nine months of the current fiscal year as compared with $5.0 million in
the prior fiscal year. The fiscal year 1999 amount included $2.7 million
representing the interest portion of the VMI settlement (see Note 3 to the
Autodesk condensed consolidated interim financial statements, incorporated by
reference herein). Also contributing to the year-over-year increase was a $1.3
million gain realized upon the sale of technical programs and related
documentation, certain tangible fixed assets, copyrights, tradenames, and
other intangible assets associated with Autodesk's Picture This Home(R)
software programs and series of consumer titles. Autodesk did not transfer any
liabilities as part of this sale.

PROVISION FOR INCOME TAXES. Autodesk's effective income tax rate, excluding
the impact of nonrecurring charges, was 36 percent for the first nine months
of fiscal year 1999 as compared to 38.5 percent for the same period in the
prior fiscal year. The decrease in the effective income tax rate was due to
incremental tax benefits associated with Autodesk's foreign sales corporation
and foreign earnings that are taxed at rates different than the U.S. statutory
rate. The $.70 million benefit from the

$13.1 million charge in the second quarter of fiscal year 1999 for in-process
research and development associated with the acquisition of Genius is less
than the U.S. statutory rate as a portion of it will not be deductible for
U.S. tax purposes. Additionally, a valuation allowance has been established
for a portion of the deferred tax asset which is deductible for U.S. tax
purposes over an extended period of time.

Autodesk's United States income tax returns for fiscal years ended January
31, 1992 through 1996, are under examination by the Internal Revenue Service
("IRS"). On August 27, 1997, the IRS issued a Notice of Deficiency proposing
increases to the amount of the Company's federal income taxes for fiscal years
1992 and 1993. On November 25, 1997, Autodesk filed a petition with the United
States Tax Court to contest these alleged tax deficiencies. Resolution of
these alleged tax deficiencies and any adjustments that may ultimately result
from these examinations are not expected to have a material adverse impact on
Autodesk's consolidated results of operations or its financial position.

For the fourth quarter of fiscal 1999, Autodesk reported net revenues of
$189.1 million versus $181.1 million for the same quarter in the prior fiscal
year. Net revenue for fiscal 1999 totaled $740.2 million, an increase of 20
percent over net revenue in the prior fiscal year. For the fourth quarter of
fiscal 1999, net income was $25.1 million, or $0.50 per share on a diluted
basis, compared to net income of $27.5 million, or $0.56 per share on a
diluted basis, in the fourth quarter of the prior fiscal year. Net income for
fiscal 1999 was $90.6 million, and resulted in earnings per share of $1.85 on
a diluted basis, including nonrecurring charges as well as incremental
amortization of goodwill and intangible assets from prior acquisitions. Net
income for fiscal 1998 was $45.2 million, and resulted in earnings per share
$0.91 on a diluted basis, including nonrecurring charges as well as
incremental authorization of goodwill and intangible assets from prior
acquisitions.

FISCAL YEARS ENDED JANUARY 31, 1998, 1997 AND 1996

NET REVENUES. Autodesk's consolidated net revenues in fiscal year 1998 were
$617.1 million, which represented a 24.2 percent increase from fiscal year
1997 net revenues of $496.7 million. Revenues in the Americas and Europe
increased $101.0 million or 54 percent and $19.3 million or 10 percent,
respectively, from the prior fiscal year, while remaining flat in Asia
Pacific. These increases were due largely to higher sales of AutoCAD software,
Autodesk's flagship product, and significant growth in Autodesk's market group
revenues. The most recent release of AutoCAD software, AutoCAD Release 14
("AutoCAD R14"), was released in the United States in May 1997 and in most
other regions shortly thereafter. Also contributing to the increased revenues
in fiscal year 1998 were revenues contributed by Softdesk, Inc., which was
acquired by Autodesk in March 1997. Net revenues in fiscal year 1997 decreased
7 percent from the $534.2 million posted in fiscal year 1996, reflecting
primarily slowdowns in the US dealer channel, Germany, Switzerland, and
France. The lower fiscal 1997 revenues reflected slowing sales of AutoCAD and
AutoCAD update software as the then most recent version of the product,
Release 13, entered the end of its product life cycle.

AutoCAD and AutoCAD updates represented approximately 70 percent, 70
percent, and 80 percent of total consolidated revenues in fiscal years 1998,
1997, and 1996, respectively. During fiscal year 1998, approximately 244,000
new AutoCAD licenses were added worldwide, compared to 207,000 and 233,000
licenses added during fiscal years 1997 and 1996, respectively. AutoCAD
upgrade revenues were $108 million, $45 million, and $49 million in fiscal
years 1998, 1997, and 1996, respectively.

Foreign revenues, including exports from the United States, accounted for
approximately 58 percent, 65 percent, and 64 percent of consolidated revenues
in fiscal years 1998, 1997, and 1996, respectively. The stronger value of the
US dollar, relative to international currencies, primarily the Japanese yen
and German mark, negatively affected international revenues by approximately
$30 million in fiscal year 1998 compared to fiscal year 1997 and $17 million
in fiscal year 1997 compared

to fiscal year 1996. Fluctuations in foreign exchange rates positively
impacted international operating expenses by $11 million in fiscal year 1998,
and did not materially impact operating expenses in fiscal years 1997 and
1996. A summary of revenues by geographic area is presented in Note 9 to the
Autodesk Consolidated Financial Statements, incorporated by reference herein.

Autodesk records product returns as a reduction of revenues. In fiscal years
1998, 1997, and 1996, product returns, consisting principally of stock
rotation, totaled $35.4 million, $44.3 million, and $51.2 million (or
6 percent, 9 percent, and 9 percent of total consolidated revenues,
respectively). Total product returns decreased $8.9 million from fiscal year
1997 to fiscal year 1998 due largely to continued management focus on the
level of inventories with Autodesk's resellers, sell-through sales activities
and programs in Autodesk's distribution channel, and fewer returns associated
with AutoCAD R14 compared to the prior version. Returns of AutoCAD products
accounted for 40 percent, 61 percent, and 79 percent of total product returns
in fiscal years 1998, 1997, and 1996, respectively. The lower level of product
returns in fiscal year 1998 compared to fiscal years 1997 and 1996 reflected a
lower level of product rotation that had previously been associated with
performance issues relating to AutoCAD Release 13 and customers' perception
issues associated with this product.

The nature and technical complexity of Autodesk's software is such that
defect corrections have occurred in the past and may occur in future releases
of AutoCAD and other products offered by Autodesk. As is the case with most
complex software, Autodesk has experienced performance issues with previous
releases of its AutoCAD software, and performance issues could occur in future
releases of AutoCAD and other products offered by Autodesk.

Delays in the introduction of planned future product releases, or failure to
achieve significant customer acceptance of these new products, may have a
material adverse effect on Autodesk's revenues and consolidated results of
operations in future periods. Additionally, slowdowns in any of Autodesk's
geographical markets, including the recent economic instability in certain
countries of the Asia Pacific region, could also have a material adverse
effect on Autodesk's business and consolidated results of operations.

COST OF REVENUES. Cost of revenues includes the purchase of disks and
compact disks (CD-ROMs), costs associated with transferring Autodesk's
software to electronic media, printing of user manuals and packaging
materials, freight, royalties, amortization of purchased technology and
capitalized software, and, in certain foreign markets, software protection
locks. When expressed as a percentage of net revenues, cost of revenues
decreased approximately 1 percent in fiscal year 1998 as compared to the prior
fiscal year. Gross margins in fiscal year 1998 were positively impacted by
continued operational efficiencies, lower royalties for licensed technology
embedded in Autodesk's products, and the geographic distribution of sales. The
0.5 percent decrease in gross margins between fiscal year 1996 and 1997 was
largely due to the mix of product sales, particularly the fact that a smaller
portion of revenues was contributed by AutoCAD and a larger portion was
contributed by AutoCAD LT, and, to a lesser extent, the impact of increased
fixed costs on a lower net revenue base. In the future, cost of revenues as a
percentage of net revenues may be impacted by the mix of product sales,
royalty rates for licensed technology embedded in Autodesk's products, and the
geographic distribution of sales.

MARKETING AND SALES. Marketing and sales expenses include salaries, sales
commissions, travel, and facility costs for Autodesk's marketing, sales,
dealer training, and support personnel. These expenses also include programs
aimed at increasing revenues, such as advertising, trade shows, and
expositions, as well as various sales and promotional programs designed for
specific sales channels and end users. When expressed as a percentage of net
revenues, marketing and sales expenses decreased from 40 percent in fiscal
year 1997 to 38 percent in fiscal year 1998. Actual fiscal year 1998 marketing
and sales expenses of $237.1 million increased by 19 percent from the $199.9
million of expense incurred in the prior fiscal year. The increase in spending
was largely due to higher employee

costs and increases in advertising and promotional costs associated with the
launch of AutoCAD Release 14 during the second quarter and other new and
enhanced products released throughout the year. Fiscal year 1997 marketing and
sales expenses of $199.9 million increased 9 percent over fiscal year 1996
expenses of $183.6 million due to higher employee costs as well as marketing
and sales costs associated with the launch of certain new products introduced
by Autodesk's market groups during fiscal year 1997. Autodesk expects to
continue to invest in marketing and sales of its products, to develop market
opportunities, and to promote Autodesk's competitive position. Accordingly,
Autodesk expects marketing and sales expenses to continue to be significant,
both in absolute dollars and as a percentage of net revenues.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and benefits for software engineers, contract
development fees, expenses associated with product translations, costs of
computer equipment used in software development, and facilities expenses.
During fiscal years 1998, 1997, and 1996, Autodesk incurred $122.4 million,
$93.7 million, and $78.7 million, respectively, of research and development
expenses (excluding capitalized software development costs of $2.2 million
during fiscal year 1998; no software development costs were capitalized during
fiscal years 1997 and 1996). Research and development expenses increased both
in absolute dollars and as a percentage of net revenues in fiscal year 1998
due to the addition of software engineers, expenses associated with the
development of new and enhanced products, and incremental research and
development personnel expenses associated with the March 1997 business
combination with Softdesk. The increase in research and development expenses
between fiscal years 1996 and 1997 was due to the addition of software
engineers and fiscal year 1997 business combinations. Autodesk anticipates
that research and development expenses will increase in fiscal year 1999 as a
result of product development efforts by Autodesk's market groups and
incremental personnel costs. Additionally, Autodesk intends to continue
recruiting and hiring experienced software developers and to consider the
licensing and acquisition of complementary software technologies and
businesses.

GENERAL AND ADMINISTRATIVE. General and administrative expenses include
Autodesk's information systems, finance, human resources, legal, purchasing,
and other administrative operations. Fiscal year 1998 general and
administrative expenses of $88.9 million increased 20 percent from the $74.3
million recorded in the prior fiscal year, primarily due to higher employee-
related costs and amortization expense associated with intangible assets
recorded in connection with the acquisition of Softdesk, Inc. Fiscal year 1997
general and administrative expenses decreased 2 percent from fiscal year 1996
spending of $76.1 million reflecting lower professional fees, partially offset
by increased expenses to maintain and expand Autodesk's worldwide information
systems. Autodesk currently expects that general and administrative expenses
in the coming year will increase to support spending on infrastructure,
including continued investment in Autodesk's worldwide information systems and
making any additional corrections to Autodesk's hardware, software, and
products for compliance in the year 2000.

NONRECURRING CHARGES. On March 31, 1997, Autodesk issued approximately 2.9
million shares of its common stock for all outstanding shares of Softdesk.
Based upon the value of Autodesk stock and options exchanged, the transaction,
including transaction costs, was valued at approximately $94 million. In
connection with the acquisition, the Company recorded a charge for in-process
research and development of $19.2 million, all of which was recorded as a
nonrecurring charge in the fiscal quarter ended April 30, 1997.

IN-PROCESS TECHNOLOGIES OVERVIEW

As of the acquisition date, Softdesk had spent a significant amount of
research and development effort related to the re-programming of all its
existing products to a new ARX technology (AutoCAD Runtime Extension) code
base. The new ARX technology is expected to provide significant improvement in
the orientation of objects in CAD products. As of the acquisition date,
Softdesk had completed improvements of ARX technology in various development
projects associated within the following technology categories: (i) AutoCAD-
Architectural/Structural, (ii) AutoCAD-Civil, (iii) AutoCAD-Imaging, (iv)
AutoCAD-Maintenance, (v) AutoCAD-Productivity, and (vi) AutoCAD-Retail.

In accordance with SFAS 86, paragraph 38 ("Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed"), "the cost of
software purchased to be integrated with another product or process will be
capitalized only if technological feasibility was established for the software
component and if all research and development activities for the other
components of the product or process were completed at the time of the
purchase." Although Autodesk purchased a set of professional products from
Softdesk, as described above, these products were built on top of AutoCAD
Release 13 and AutoCAD Release 12 software; they did not utilize AutoCAD's
ObjectARX programming system in any significant way. With this new technology,
AutoCAD developers and users could transform ordinary drawing geometry such as
lines, arcs, circles, and other entities into "intelligent" custom drawing
objects. Commercially shipped Softdesk products, as of the valuation date,
were limited to working with the native AutoCAD drafting entities and command
set--an environment in which real-world objects were represented by geometric
entities that could seldom respond directly to user commands. Higher level
entities that represented building elements could be built as groups or
collections of geometric entities but these collections were very rigid and
did not exhibit intelligent behavior.

With the relational database and the ObjectARX API in AutoCAD Release 13
software, objects could "know" their form and function. For example, an
ObjectARX-based custom door positioned in a wall will not let itself be placed
where it cannot open. In other applications, clicking on a fastener or flange,
or a land parcel or topographical feature, can access additional design data
in that custom object and trigger operations ranging from a simple on-screen
notice to the preparation of a comprehensive spreadsheet. ObjectARX was a
significant departure from previous AutoCAD development environments.
Programming ObjectARX required a high level of skill in object-oriented
programming. Furthermore, development was being done on a new object oriented
development platform which did not have significant prior development built on
top.

The first two AEC applications acquired from Softdesk were developed in this
new environment. Architectural Desktop and the Land Development desktop, both
released in the last half of fiscal year 1999, were developed on top of the
Object/ARX environment. The ObjectARX environment provided general mechanisms,
but the Softdesk development teams had to adapt these mechanisms specifically
for architectural and civil use. A significant amount of effort was undertaken
to develop these products in this new environment. They had to draw upon their
experience to arrive at object definitions which would function appropriately
in their specific markets. In addition, these object definitions had to be
general enough that they could be localized to meet the unique needs of the
design and construction practices in a variety of international markets. These
two products both attempted to move functionality from a "drafting-based" to
"model-based" approach. Although some model-based design systems have been
attempted in the past, none had been developed on top of a leading design and
drafting platform such as AutoCAD. Finally, none had been developed with a
tight linkage to the design and drafting functions inherent in a broad
platform such as AutoCAD.

Although the functionality of these products is somewhat similar to previous
Softdesk products, there was significant technological risk in developing
products in a new, unproven development environment. While such development
had been conducted within Autodesk--in the mechanical CAD division (Mechanical
Desktop), it had not been successfully done by other companies.

With respect to the acquired in-process technologies, as previously
discussed, the calculations of value were adjusted to reflect the value
creation efforts of Softdesk prior to the close of the acquisition. Following
are the estimated completion percentages, estimated technology lives and
projected introduction dates:

PERCENT TECHNOLOGY INTRODUCTION
SOFTDESK IN-PROCESS TECHNOLOGIES COMPLETED LIFE DATES
- -------------------------------- --------- ---------- --------------

AutoCAD Architectural/Structural Modules... 65% 7 years Sept 98/Jun 97
AutoCAD Civil Modules...................... 90% 7 years May/Jun 97
AutoCAD Imaging Modules.................... 75% 5 years May/Jun 97
AutoCAD Maintenance Modules................ 65% 7 years May/Jun 97
AutoCAD Productivity Modules............... 65% 7 years May/Jun 97
AutoCAD Retail Modules..................... 70% 7 years July 97

Estimated costs to be incurred to reach technological feasibility as of the
date of acquisition for all of the Softdesk in-process technologies totaled
approximately $1.8 million with the AutoCAD Architectural/Structural Modules
comprising approximately $1.2 million of the total. The remaining in-process
projects each had estimated costs to complete of less than $200,000.

VALUATION ANALYSIS

REVENUE

Future revenue estimates were generated from the following product families:
(i) AutoCAD-Architectural/Structural, (ii) AutoCAD-Civil, (iii) AutoCAD-
Imaging, (iv) AutoCAD-Maintenance, (v) AutoCAD-Productivity, and (vi) AutoCAD-
Retail. Aggregate revenue for Softdesk products was estimated to be less than
$30 million for the 10 months ended January 31, 1998. Revenues, including
revenues associated with yet-to-be-developed products utilizing the acquired
technologies, as well as most of the in-process projects identified in the
valuation analysis, were estimated to increase on an annualized basis by more
than 250 percent in fiscal year 1999. Thereafter, revenue was estimated to
increase at rates ranging from 11 to 17 percent for fiscal years 2000 through
2002, and stabilize at 10 percent for the remainder of the estimation period.
Revenue estimates were based on (i) aggregate revenue growth rates for the
business as a whole, (ii) individual product revenues, (iii) growth rates for
the CAD software market, (iv) the aggregate size of the CAD software market,
(v) anticipated product development and introduction schedules, (vi) product
sales cycles, and (vii) the estimated life of a product's underlying
technology. The estimated product development cycle for the new modules ranged
from 6 to 24 months (averaging 12 months).

OPERATING EXPENSES

Operating expenses used in the valuation analysis of Softdesk included (i)
cost of goods sold, (ii) general and administrative expense, (iii) marketing
and sales expense, and (iv) research and development expense. In developing
future expense estimates, it was assumed that the Softdesk operations would be
merged into Autodesk's operating structure. Selected operating expense
assumptions were based on an evaluation of Autodesk's overall business model,
specific product results, including both historical and expected direct
expense levels (as appropriate), and an assessment of general industry
metrics.

COST OF REVENUES. Cost of revenues, expressed as a percentage of revenue,
for the developed technology identified in the valuation analysis ranged from
approximately 19 percent in fiscal 1998 to approximately 14 percent in fiscal
2002. Cost of revenues, expressed as a percentage of revenue, for the in-
process technology ranged from approximately 17 percent in fiscal 1998 to
approximately 15 percent in fiscal 2004. Autodesk's cost of revenues was 13
percent for fiscal 1996 and fiscal 1997, and 12 percent for fiscal 1998.

GENERAL AND ADMINISTRATIVE. General and administrative expense, expressed as
a percentage of revenue, for the developed technology identified in the
valuation analysis, ranged from approximately 6 percent in fiscal 1998 to
approximately 7 percent in fiscal 2002. General and administrative expense,
expressed as a percentage of revenue, for the in-process technology ranged
from approximately 8 percent in fiscal 1998 to approximately 7 percent in
fiscal 2002.

MARKETING AND SALES. Marketing and sales expense, expressed as a percentage
of revenue, for the developed technology identified in the valuation ranged
from approximately 31 percent in fiscal 1998 to approximately 28 percent in
fiscal 2002. Marketing and sales expense, expressed as a percentage of
revenue, for the in-process technology ranged from approximately 32 percent in
fiscal 1998 to approximately 29 percent in fiscal 2002.

RESEARCH AND DEVELOPMENT. Research and development expenses consists of the
costs associated with activities undertaken to correct errors or keep products
updated with current information. Maintenance R&D includes all activities
undertaken after a product is available for general release to customers to
correct errors or keep the product updated with current information. These
activities include routine changes and additions. The maintenance R&D expense
was estimated to be 2.5 percent of revenue for the developed and in-process
technologies throughout the estimation period.

EFFECTIVE INCOME TAX RATE

The effective income tax rate utilized in the analysis of in-process
technology was 36 percent in fiscal year 1998, 34 percent in fiscal year 1999
and in the mid 30 percentage-range thereafter, which reflects Autodesk's
combined federal and state statutory income tax rate, exclusive of
nonrecurring charges at the time of the acquisition and estimated for future
years.

DISCOUNT RATE

The discount rates selected for developed and in-process technology were
15.0 percent and 20.0 percent, respectively. In the selection of the
appropriate discount rates, consideration was given to (i) the Weighted
Average Cost of Capital (14.0 percent) and (ii) the Weighted Average Return on
Assets (20.0 percent). The discount rate utilized for the in-process
technology was determined to be higher than Autodesk's WACC due to the fact
that the technology had not yet reached technological feasibility as of the
date of valuation. In utilizing a discount rate greater than Autodesk's WACC,
management has reflected the risk premium associated with achieving the
forecasted cash flows associated with these projects.

COMPARISON TO ACTUAL RESULTS

To date, the assumptions used in the projections of revenues from in-process
technologies and the estimated costs and completion dates for those
technologies were reasonable based on factors known at the acquisition date.
Actual revenues from in-process technologies have been less than amounts
projected in connection with the analysis of the Softdesk acquisition. This
shortfall reflects competitive factors related to price, difficulties in
developing robust commercial applications in the new ObjectARX environment,
functionality and performance in the architecture, the engineering and
construction software industry, particularly in regard to localized building
services applications. Partially offsetting the variance from management's
original revenue projections is a favorable variance in spending such that
Autodesk's return on its investment in such technologies, as well as its
current and future results of operations and financial position have not been
and are not expected to be adversely impacted. However, if the in-process
projects contemplated in management's forecast are not successfully developed,
future revenue and profitability of Autodesk may be adversely affected.
Additionally, the value of other intangible assets acquired from Softdesk may
become impaired.

Nonrecurring charges in fiscal year 1998 also included charges for purchased
in-process research and development associated with Autodesk's licensing of
3D/Eye technology ($3.0 million) in fiscal year 1998 and Autodesk's
acquisitions of Teleos Research ($3.2 million) and Argus Technologies, Inc.
($1.5 million) in fiscal year 1997. For additional information, see "Business
Combinations" in Note 1 of the Autodesk Consolidated Financial Statements,
incorporated by reference herein.

A $25.5 million judgment was entered against Autodesk in fiscal year 1995 on
a claim of trade secret misappropriation brought by VMI. Autodesk recorded
this nonrecurring charge in the fourth quarter of fiscal year 1995. Autodesk
appealed and a reduced judgment was entered against Autodesk in February 1998
in the amount of $7.8 million. In May 1998, final judgment was entered in the
VMI litigation. See Notes to the Autodesk Interim Unaudited Financial
Statements as of July 31, 1998, incorporated by reference herein.

INTEREST AND OTHER INCOME. Interest income was $9.8 million, $8.8 million,
and $10.6 million for fiscal years 1998, 1997, and 1996, respectively. The
increase in fiscal year 1998 interest income over fiscal year 1997 interest
income was largely due to an increase in average cash, cash equivalents, and
marketable securities balances. The decrease in fiscal year 1997 interest
income from the prior fiscal year resulted from a lower average balance of
cash, cash equivalents, and marketable securities, partially offset by higher
interest rates on Autodesk's international investment portfolio when compared
to the same period in the prior fiscal year. Interest and other income for
fiscal years 1998, 1997, and 1996 was net of interest expense of $0.2 million,
$1.8 million, and $1.8 million, respectively.

Autodesk has a hedging program to minimize foreign exchange gains or losses,
where possible, from recorded foreign-denominated assets and liabilities. This
program involves the use of forward foreign exchange contracts in the primary
European and Asian currencies. Autodesk does not hedge anticipated foreign-
denominated revenues and expenses not yet incurred. Gains (losses) resulting
from foreign currency transactions primarily in Europe and Asia Pacific, which
are included in interest and other income, were ($68,000), ($197,000), and
$554,000 in fiscal years 1998, 1997, and 1996, respectively.

PROVISION FOR INCOME TAXES. Autodesk's effective income tax rate, excluding
one-time charges for acquired in-process research and development associated
with the March 1997 acquisition of Softdesk, Inc. and fiscal year 1997
acquisitions, was 38.0 percent in fiscal year 1998 compared to 35.5 percent
and 36.5 percent in fiscal years 1997 and 1996, respectively. The increase in
the effective income tax rate in fiscal year 1998 compared to fiscal year 1997
was principally due to the amortization of certain intangible assets not
deductible for tax purposes and foreign earnings which are taxed at rates
different from the US statutory rate. The decrease in the tax rate between
fiscal years 1997 and 1996 was due largely to a decrease in Autodesk's
effective state income tax rate. See Note 3 to the Autodesk Consolidated
Financial Statements, incorporated by reference herein, for an analysis of the
differences between the US statutory and the effective income tax rates.

Autodesk's United States income tax returns for fiscal years ended January
31, 1992 through 1996 are under examination by the Internal Revenue Service.
On August 27, 1997, the Internal Revenue Service issued a Notice of Deficiency
proposing increases to the amount of Autodesk's United States income taxes for
fiscal years 1992 and 1993. On November 25, 1997, Autodesk filed a petition
with the United States Tax Court to contest these alleged tax deficiencies.
Management believes that adequate amounts have been provided for any
adjustments that may ultimately result from these examinations.

COMPREHENSIVE INCOME. As of February 1, 1998, the Company adopted Financial
Accounting Standards Board Statement No. 130, "Reporting Comprehensive
Income," which establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net income or stockholders' equity.

Statement 130 requires unrealized gains or losses on the Company's available-
for-sale securities and the foreign currency translation adjustments, which
prior to adoption were reported separately in stockholders' equity, to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of Statement 130. For further
discussion, see Note 1 to the Autodesk Consolidated Financial Statements,
incorporated by reference herein.

RECENTLY ISSUED ACCOUNTING STANDARDS. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), which establishes standards for the way public business enterprises
report information in annual statements and interim financial reports
regarding operating segments, products and services, geographic areas, and
major customers. SFAS 131 will first be reflected in Autodesk's fiscal year
1999 Annual Report and will apply to both annual and interim financial
reporting subsequent to this date. Autodesk is currently evaluating the impact
of SFAS 131 on its financial disclosures.

In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities. The
Statement requires Autodesk to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives are either offset against the
change in fair value of assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in
fair value will be immediately recognized in earnings. SFAS 133 is effective
as of the beginning of Autodesk's fiscal year 2001. Autodesk is currently
evaluating the impact of SFAS 133 on its financial statements and related
disclosures.

In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-2, "Software Revenue Recognition"
("SOP 97-2"), which supersedes SOP 91-1. SOP 97-2 will be effective beginning
in fiscal year 1999. In March 1998, the AICPA issued Statement of Position 98-
4 ("SOP 98-4"), which amends certain provisions of SOP 97-2. Autodesk believes
it is in compliance with the provisions of SOP 97-2 as amended by SOP 98-4.
However, detailed implementation guidelines for this standard have not been
issued. Once issued, such guidance could lead to unanticipated changes in
Autodesk's current revenue recognition practices and such changes could be
material to Autodesk's results of operations. In December 1998, the AICPA
issued Statement of Position 98-9, which amends certain provisions of SOP 97-2
and extends the deferral of the application of certain passages of SOP 97-2
provided by SOP 98-4 until the beginning of Autodesk's fiscal year 2000.
Autodesk is currently evaluating the impact of SOP 98-9 on its financial
statements and related disclosures.

In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." This standard requires companies to
capitalize qualifying computer software costs which are incurred during the
application development stage and amortize them over the software's estimated
useful life. Autodesk is required to adopt this standard in fiscal year 2000
and is currently evaluating the impact that its adoption will have on the
consolidated financial position and results of operations of Autodesk.

CERTAIN RISK FACTORS WHICH MAY IMPACT FUTURE OPERATING RESULTS

The Common Stock offered hereby involves a high degree of risk. Autodesk
operates in a rapidly changing environment that involves a number of risks,
some of which are beyond Autodesk's control. The following discussion
highlights some of these risks and the possible impact of these factors on
future results of operations. These factors should be considered in
conjunction with the other

information included in this Prospectus. This Prospectus contains forward-
looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act. Actual results could differ
materially from those projected in these forward-looking statements as a
result of a variety of factors, including those set forth below and elsewhere
in this Prospectus. Some of these factors relate directly to the Transactions,
while others are present independent of the Transactions in the general
business environment of each of Autodesk, Discreet and the Combined Company
following the Transactions. The risks highlighted herein should not be assumed
to be the only factors that could affect the future performance of Autodesk,
Discreet and the Combined Company.

COMPETITION. The software industry has limited barriers to entry, and the
availability of desktop computers with continually expanding capabilities at
progressively lower prices contributes to the ease of market entry. Because of
these and other factors, competitive conditions in the industry are likely to
intensify in the future. Increased competition could result in price
reductions, reduced revenues and profit margins, and loss of market share, any
of which could adversely affect Autodesk's business, consolidated results of
operations, and financial condition. The design software market in particular
is characterized by vigorous competition in each of the vertical markets in
which Autodesk competes, both by entry of competitors with innovative
technologies and by consolidation of companies with complementary products and
technologies.

The AEC family of products competes directly with software offered by
companies such as Bentley Systems, Inc.; Computervision Corporation (a
subsidiary of Parametric Technologies, Inc.); CADAM Systems Company, Inc.;
Diehl Graphsoft, Inc.; EaglePoint Software; International Microcomputer
Software, Inc. ("IMSI"); Intergraph Corporation; Ketiv Technologies;
Nemetschek Systems, Inc.; and Visio Corporation ("Visio"). Autodesk's MCAD
products compete with products offered by Bentley; Visionary Design Systems;
Hewlett-Packard Corporation; Parametric Technologies, Inc.; Structural
Dynamics Research Corporation; Unigraphics; Computervision; Dassault Systemes
("Dassault"); Solidworks Corporation (a subsidiary of Dassault); and Baystate
Technologies, Inc. Autodesk's GIS Market Group faces competition from Bentley;
Intergraph; MapInfo Corporation; Earth Sciences Research Institute; and MCI
Systemhouse. Kinetix product offerings compete with products offered by other
multimedia companies such as Adobe Systems Inc.; Macromedia, Inc.; and Silicon
Graphics, Inc. The Personal Solutions Group family of products competes with
IMSI; The Learning Company; Visio; Micrografx Inc. and others. Certain of the
competitors of Autodesk have greater financial, technical, sales and
marketing, and other resources than Autodesk.

Autodesk believes that the principal factors affecting competition in its
markets are product reliability, performance, ease of use, range of useful
features, continuing product enhancements, reputation, price and training. In
addition, the availability of third-party application software is a
competitive factor within the CAD market. Autodesk believes that it competes
favorably in these areas and that its competitive position will depend, in
part, upon its continued ability to enhance existing products, and to develop
and market new products.

In April 1998, Autodesk received notice that the FTC has undertaken a
nonpublic investigation to determine whether Autodesk or others have engaged
in or are engaging in unfair methods of competition. The FTC has not made any
claims or allegations regarding Autodesk's current business practices or
policies, nor have any charges been filed. Autodesk intends to cooperate fully
with the FTC in its inquiry. Autodesk does not believe that the investigation
will have a material impact on its business or consolidated results of
operations.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. Autodesk has experienced
fluctuations in operating results in interim periods in certain geographic
regions due to seasonality. Autodesk's

operating results in Europe during the third fiscal quarter are usually
impacted by a slow summer period while the Asia Pacific operations typically
experience seasonal slowing in the third and fourth fiscal quarters.

The technology industry is particularly susceptible to fluctuations in
operating results within a quarter. While Autodesk experienced more linear
operating results within fiscal year 1998 compared to prior years,
historically the majority of Autodesk's orders within a fiscal quarter have
frequently been concentrated within the last weeks or days of that quarter.
These fluctuations are caused by a number of factors, including the relatively
long sales cycle of some of Autodesk's products, the timing of the
introduction of new products by Autodesk or its competitors, and other
economic factors experienced by Autodesk's customers and the geographic
regions in which Autodesk does business. Additionally, Autodesk's operating
expenses are based in part on its expectations for future revenues and are
relatively fixed in the short term. Accordingly, any revenue shortfall below
expectations could have an immediate and significant adverse effect on
Autodesk's consolidated results of operations and financial condition.

Similarly, shortfalls in Autodesk's revenues or earnings from levels
expected by securities analysts could have an immediate and significant
adverse effect on the trading price of Autodesk's common stock. Moreover,
Autodesk's stock price is subject to the volatility generally associated with
technology stocks and may also be affected by broader market trends unrelated
to performance.

PRODUCT CONCENTRATION. Autodesk derives a substantial portion of its
revenues from sales of AutoCAD software, AutoCAD updates, and adjacent
products which are interoperable with AutoCAD. As such, any factor adversely
affecting sales of AutoCAD and AutoCAD updates, including such factors as
product life cycle, market acceptance, product performance and reliability,
reputation, price competition, and the availability of third-party
applications, could have a material adverse effect on Autodesk's business and
consolidated results of operations.

PRODUCT DEVELOPMENT AND INTRODUCTION. The software industry is characterized
by rapid technological change as well as changes in customer requirements and
preferences. The software products offered by Autodesk are internally complex
and, despite extensive testing and quality control, may contain bugs,
especially when first introduced. In fiscal year 1996, Autodesk experienced
quality and performance issues associated with AutoCAD Release 13, including
issues related to compatibility with certain hardware platforms and peripheral
equipment, interoperability problems with products designed to work in
conjunction with AutoCAD Release 13, and other issues associated with the
software's object-oriented design. These factors resulted in a high rate of
product returns in fiscal year 1996. There can be no assurance that defects or
errors will not occur in future releases of AutoCAD or other software products
offered by Autodesk. Such defects or errors could result in corrective
releases to Autodesk's software products, damage to Autodesk's reputation,
loss of revenues, an increase in product returns, or lack of market acceptance
of its products, any of which could have a material and adverse effect on
Autodesk's business and consolidated results of operations.

Autodesk believes that its future results will depend largely upon its
ability to offer products that compete favorably with respect to reliability,
performance, ease of use, range of useful features, continuing product
enhancements, reputation, price and training. Delays or difficulties may
result in the delay or cancellation of planned development projects, and could
have a material and adverse effect

on Autodesk's business and consolidated results of operations. Further,
increased competition in the market for design, mapping, or multimedia
software products could also have a negative impact on Autodesk's business and
consolidated results of operations. More specifically, gross margins may be
adversely affected if sales of low-end CAD products, which historically have
had lower margins, grow at a faster rate than Autodesk's higher-margin
products.

Certain of Autodesk's historical product development activities have been
performed by independent firms and contractors, while other technologies are
licensed from third parties. Autodesk generally either owns or licenses the
software developed by third parties. Because talented development personnel
are in high demand, there can be no assurance that independent developers,
including those who have developed products for Autodesk in the past, will be
able to provide development support to Autodesk in the future. Similarly,
there can be no assurance that Autodesk will be able to obtain and renew
license agreements on favorable terms, if at all, and any failure to do so
could have a material adverse effect on Autodesk's business and consolidated
results of operations.

Autodesk's business strategy has historically depended in large part on its
relationships with third-party developers, who provide products that expand
the functionality of Autodesk's design software. There can be no assurance
that certain developers will not elect to support other products or otherwise
experience disruption in product development and delivery cycles. Such
disruption in particular markets could negatively impact these third-party
developers and end users, which could have a material adverse effect on
Autodesk's business and consolidated results of operations. Further, increased
merger and acquisition activity currently experienced in the technology
industry could affect relationships with other third-party developers, and
thus adversely affect operating results.

INTERNATIONAL OPERATIONS. Autodesk anticipates that international operations
will continue to account for a significant portion of its consolidated
revenues. Risks inherent in Autodesk's international operations include the
following: unexpected changes in regulatory practices and tariffs;
difficulties in staffing and managing foreign operations; longer collection
cycles; potential changes in tax laws; greater difficulty in protecting
intellectual property; and the impact of fluctuating exchange rates between
the US dollar and foreign currencies in markets where Autodesk does business.
During fiscal year 1998, changes in exchange rates from the same period of the
prior fiscal year adversely impacted revenues, principally due to changes in
the Japanese yen and the German mark. As more fully described in Note 2 to the
Autodesk Consolidated Financial Statements, incorporated by reference herein,
Autodesk's risk management strategy uses derivative financial instruments in
the form of forward foreign exchange contracts for the purpose of hedging
foreign currency market exposures of underlying assets, liabilities, and other
obligations which exist as a part of its ongoing business operations. Autodesk
does not enter into derivative contracts for the purpose of trading or
speculative transactions. Autodesk's international results may also be
impacted by general economic and political conditions in these foreign
markets. Autodesk's international results have been impacted by recent
unfavorable economic and political conditions in the Asian markets. There can
be no assurance that the economic crisis and currency issues currently being
experienced will not have a material adverse effect on Autodesk's future
international operations and, consequently, on Autodesk's business and
consolidated results of operations.

DEPENDENCE ON DISTRIBUTION CHANNELS. Autodesk sells its software products
primarily to distributors and VARs. Autodesk's ability to effectively
distribute products depends in part upon the financial and business condition
of its VAR network. Although Autodesk has not to date experienced any material
problems with its VAR network, computer software dealers and distributors are
typically not highly capitalized and have experienced difficulties during
times of economic contraction and may do so in the future. While no single
customer accounted for more than 10 percent of Autodesk's consolidated
revenues in fiscal years 1998, 1997, or 1996, the loss of or a significant
reduction in business with any one of Autodesk's major international
distributors or large US resellers could have a

material adverse effect on Autodesk's business and consolidated results of
operations in future periods. Autodesk's largest international distributor is
Computer 2000 AG in Germany. Autodesk's largest resellers in the United States
are Avatech, Advanced Enterprise Solutions and Integrated Systems
Technologies.

PRODUCT RETURNS. With the exception of certain European distributors,
agreements with Autodesk's VARs do not contain specific product-return
privileges. However, Autodesk permits its VARs to return product in certain
instances, generally during periods of product transition and during update
cycles. While Autodesk experienced a decrease in the overall level of product
returns in fiscal year 1998 compared to fiscal years 1997 and 1996, management
anticipates that product returns in future periods will continue to be
impacted by product update cycles, new product releases, and software quality.

INTELLECTUAL PROPERTY. Autodesk relies on a combination of patent, copyright
and trademark laws, trade secrets, confidentiality procedures, and contractual
provisions to protect its proprietary rights. Despite such efforts to protect
Autodesk's proprietary rights, unauthorized parties may attempt to copy
aspects of Autodesk's software products or to obtain and use information that
Autodesk regards as proprietary. Policing unauthorized use of Autodesk's
software products is time-consuming and costly. Although Autodesk is unable to
measure the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. There can be no assurance
that Autodesk's means of protecting its proprietary rights will be adequate or
that its competitors will not independently develop similar technology.
Autodesk expects that software product developers will be increasingly subject
to infringement claims as the number of products and competitors in its
industry segments grows and the functionality of products in different
industry segments overlaps. There can be no assurance that infringement or
invalidity claims (or claims for indemnification resulting from infringement
claims) will not be asserted against Autodesk or that any such assertions will
not have a material adverse effect on its business. Any such claims, whether
with or without merit, could be time-consuming, result in costly litigation
and diversion of resources, cause product shipment delays, or require Autodesk
to enter into royalty or licensing agreements. In addition, such royalty or
license agreements, if required, may not be available on acceptable terms, if
at all, which could have a material adverse effect on Autodesk's business and
consolidated results of operations.

Autodesk also relies on certain software that it licenses from third
parties, including software that is integrated with internally developed
software and used in its products to perform key functions. There can be no
assurance that these third-party software licenses will continue to be
available on commercially reasonable terms, or that the software will be
appropriately supported, maintained, or enhanced by the licensors. The loss of
licenses to, or inability to support, maintain, and enhance any such software,
could result in increased costs, or in delays or reductions in product
shipments until equivalent software could be developed, identified, licensed,
and integrated, which could have a material adverse effect on Autodesk's
business and consolidated results of operations.

RISKS ASSOCIATED WITH ACQUISITIONS AND INVESTMENTS. Autodesk periodically
acquires or invests in businesses, software products, and technologies which
are complementary to Autodesk's business through strategic alliances, debt and
equity investments, joint ventures, and the like. The risks associated with
such acquisitions or investments include, among others, the difficulty of
assimilating the operations and personnel of the companies, the failure to
realize anticipated synergies,

and the diversion of management's time and attention. In addition, such
investments and acquisitions may involve significant transaction-related
costs. There can be no assurance that Autodesk will be successful in
overcoming such risks or that such investments and acquisitions will not have
a material adverse impact on Autodesk's business, financial condition, or
results of operations. In addition, such investments and acquisitions may
contribute to potential fluctuations in quarterly results of operations due to
merger-related costs and charges associated with eliminating redundant
expenses or write-offs of impaired assets recorded in connection with
acquisitions, any of which could negatively impact results of operations for a
given period or cause lack of consistency from quarter to quarter in
Autodesk's operating results or financial condition.

During the first quarter of fiscal year 1998, Autodesk completed its
acquisition of all of the outstanding stock of Softdesk, Inc. Autodesk
continues to integrate the operations acquired in the Softdesk merger with its
own. There can be no assurance that the anticipated benefits of the Softdesk
merger and any future mergers or acquisitions will be realized.

ATTRACTION AND RETENTION OF EMPLOYEES. The continued growth and success of
Autodesk depends significantly on the continued service of highly skilled
employees. Competition for these employees in today's marketplace, especially
in the technology industries, is intense. Autodesk's ability to attract and
retain employees is dependent on a number of factors including its continued
ability to grant stock incentive awards, which are described in more detail in
Note 6 to the Autodesk consolidated financial statements, incorporated by
reference herein. There can be no assurance that Autodesk will be successful
in continuing to recruit new personnel and to retain existing personnel. The
loss of one or more key employees or Autodesk's inability to maintain existing
employees or recruit new employees could have a material adverse impact on
Autodesk. In addition, Autodesk may experience increased compensation costs to
attract and retain skilled personnel.

IMPACT OF YEAR 2000. Some of the computer programs used by Autodesk in its
internal operations rely on time-sensitive software that was written using two
digits rather than four to identify the applicable year. These programs may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
including, among other transactions, send invoices, or engage in similar
normal business activities. Autodesk is currently in the remediation or fourth
phase of a six-phase year 2000 compliance program related to information
technology ("IT") systems and expects to complete this phase by the end of
fiscal year 1999. The remaining two phases are expected to be virtually
complete by the end of Autodesk's fiscal year 1999 with minor testing and risk
mitigation activities being performed through the end of calendar year 1999.
As of October 31, 1998, Autodesk had spent approximately $4 million on the IT
year 2000 project, of which approximately $300,000 had been capitalized.
Autodesk expects to spend an additional $2 million to $3 million to complete
this project. All expenditures to date have been captured either in prior year
or current year budgets. Autodesk believes that the key components of the IT
year 2000 project have either been replaced or remediated. Further, Autodesk
estimates that if any component of the current systems fail due to year 2000
related issues, Autodesk would be able to divert people and systems traffic,
causing delays of between one to three days in service interruptions and
processing Autodesk information. Autodesk has a contingency plan in place in
order to prevent the loss of critical data which includes the back up of all
critical data processing interactions and a disaster recovery plan. There can
be no assurance, however, that there will not be a delay in the completion of
these procedures or that the cost of such procedures will not exceed original
estimates, either of which could have a material adverse effect on future
results of operations.

the status of all non-IT systems and does not anticipate an adverse impact on
service and business capabilities with regard to these non-IT systems.
Expenditures related to these monitoring procedures have been minimal and are
not expected to be significant in future periods.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents, and marketable securities, which consist primarily
of high-quality municipal bonds, tax-advantaged money market instruments, and
US treasury bills, totaled $301.3 million at January 31, 1998, compared to
$286.3 million at January 31, 1997. The $15.0 million increase in cash, cash
equivalents, and marketable securities was due primarily to cash generated
from operations ($158.6 million) and cash proceeds from the issuance of shares
through employee stock option and stock purchase programs ($80.1 million).
This increase was primarily offset by cash used to repurchase shares of
Autodesk's common stock ($174.9 million), to acquire complementary software
technologies and businesses ($19.8 million), to purchase computer equipment,
furniture, and leasehold improvements ($15.0 million), and to pay dividends on
Autodesk's common stock ($11.3 million).

During fiscal years 1998, 1997, and 1996, Autodesk repurchased and retired a
total of 2,332,500, 1,659,500, and 2,671,000 shares of its common stock at
average repurchase prices of $38.39, $32.44, and $40.43, respectively,
pursuant to an ongoing and systematic repurchase plan ("Systematic Plan")
approved by Autodesk's Board of Directors to reduce the dilutive effect of
common shares to be issued under Autodesk's employee stock plans. In December
1997, the Board of Directors authorized the purchase of an additional
4 million shares under the Systematic Plan.

In August 1996, Autodesk announced another stock repurchase program under
which Autodesk may purchase up to 5 million shares of common stock in open
market transactions as market and business conditions warrant--the
"Supplemental Plan." In December 1997, the Board authorized the purchase of an
additional 5 million shares under the Supplemental Plan. Autodesk may also
utilize equity options as part of the Supplemental Plan.

In connection with the Supplemental Plan, Autodesk sold put warrants to an
independent third party in September 1996 and purchased call options from the
same independent third party. The premiums received with respect to the equity
options equaled the premiums paid. Consequently, there was no exchange of
cash. Autodesk exercised the call options, repurchasing 2,000,000 shares of
its common stock during the third quarter of fiscal year 1998 for $51 million.
The put warrants expired unexercised in September 1997 and were reclassified
from put warrants to stockholders' equity during the third quarter of fiscal
year 1998. For additional information, see Note 7 to the Autodesk Consolidated
Financial Statements, incorporated herein by reference. In addition to the
exercise of the call options in fiscal year 1998, Autodesk repurchased an
additional 1,000,000 shares in the open market at an average per share
repurchase price of $34.37. During fiscal year 1997, Autodesk repurchased
557,500 shares at an average per share repurchase price of $24.09 subject to
the Supplemental Plan.

In December 1997, Autodesk sold put warrants to an independent third party
that entitle the holder of the warrants to sell 1.5 million shares of common
stock to Autodesk at $38.12 per share. Additionally, Autodesk purchased call
options from the same independent third party that entitle Autodesk to buy 1
million shares at $39.88 per share. The premiums received with respect to the
equity options totaled $4.5 million and equaled the premiums paid.
Consequently, there was no exchange of cash. The outstanding put warrants at
January 31, 1998, permitted a net share settlement at Autodesk's option. As a
result, the transaction did not result in a put warrant liability on the
consolidated balance sheet.

In August 1998, the Autodesk Board rescinded its authorization of the
Systematic Plan and the Supplemental Plan, both of which have been terminated.

Autodesk has an unsecured $40 million bank line of credit, of which $20
million is guaranteed, that may be used from time to time to facilitate short-
term cash flow. At January 31, 1998, there were no borrowings outstanding
under this credit agreement, which expires in January 1999.

Autodesk's principal commitments at January 31, 1998, consisted of
obligations under operating leases for facilities. For additional information,
see Note 5 to the Autodesk Consolidated Financial Statements, incorporated by
reference herein. Autodesk believes that its existing cash, cash equivalents,
marketable securities, available line of credit, cash generated from
operations and the net proceeds of this offering will be sufficient to satisfy
its currently anticipated cash requirements for fiscal year 1999.

Longer-term cash requirements, other than normal operating expenses, are
anticipated for development of new software products and enhancement of
existing products; financing anticipated growth; dividend payments;
repurchases of Autodesk Common Stock; and the acquisition of businesses,
software products or technologies complementary to Autodesk's business.
Autodesk believes its existing cash, cash equivalents, marketable securities,
available line of credit and cash generated from operations will be sufficient
to satisfy its currently anticipated longer-term cash requirements.

AUTODESK

BUSINESS

Autodesk was incorporated in California in April 1982 and was reincorporated
in Delaware in May 1994. Its principal executive offices are located at 111
McInnis Parkway, San Rafael, California 94903 and its telephone number is
(415) 507-5000. Autodesk's two-dimensional ("2D") and three-dimensional ("3D")
products are used across industries and in the home for architectural design,
mechanical design, spatial data management and mapping, animation, and
visualization applications. Autodesk's flagship product, AutoCAD, is one of
the world's leading computer-aided design ("CAD") tools, with an installed
base of more than 2 million units worldwide. Autodesk's software products are
sold worldwide, primarily through a network of dealers and distributors.

In February 1995, Autodesk realigned its internal marketing and development
organizations around key market groups that most closely match Autodesk's
customer base. During fiscal year 1998, Autodesk defined a new market group,
the Personal Solutions Group, whose products are targeted to individual users
as well as professionals. Each market group incorporates product development,
quality assurance, technical publications, and product industry marketing.
Autodesk's market groups are discussed below.

Architecture, Engineering, and Construction ("AEC"). The architecture,
engineering, construction, and facilities management industries utilize
software from Autodesk and third-party developers to manage every phase of a
building's life cycle--from conceptual design through construction,
maintenance, and renovation. During fiscal year 1998, Autodesk expanded its
product offerings for the AEC Market Group by acquiring Softdesk, Inc. in
March 1997. AEC products include AutoCAD + S8 Architectural Suite, Softdesk 8
AEC Tools, and AEC Professional Suite.

Mechanical Computer-Aided Design ("MCAD"). Autodesk's Mechanical CAD Market
Group is dedicated to providing mechanical engineers, designers and drafters
with advanced, value-based software solutions that are designed to solve their
professional design challenges. Autodesk's premier MCAD product is Mechanical
Desktop. In May 1998, Autodesk expanded its mechanical CAD products through
the purchase of various software technologies and applications from Genius CAD
Software GmbH, a German limited liability company.

Geographic Information Systems ("GIS"). Autodesk's GIS Market Group strategy
is to provide easy-to-use mapping and GIS technology to help businesses and
governments manage their assets and infrastructure. The GIS Market Group is
assisting automated mapping/facilities managers, as well as GIS and CAD users,
to share mapping, GIS, and associated information in a corporate environment.
Autodesk's current GIS products include AutoCAD Map, Autodesk MapGuide, and
Autodesk World.

Personal Solutions Group ("PSG"). The PSG Market Group develops easy-to-use,
affordable tools for professionals, occasional users, or consumers who design,
draft, and diagram, thus expanding Autodesk's traditional customer base of
architects and engineers. PSG products include AutoCAD LT and AutoSketch.

Kinetix. The Kinetix division of Autodesk is devoted to bringing powerful 3D
content-creation software to computer-industry professionals focused on two
markets: entertainment (film, broadcast video, and interactive games) and
design conceptualization and visualization. Kinetix provides two core platform
products--3D Studio MAX and 3D Studio VIZ, that specifically focus on these
markets.

PRODUCTS

Autodesk has aligned its market groups into three segments: the Design
Solutions segment (which includes the AEC, MCAD, and GIS market groups, as
well as AutoCAD products), the Personal

Solutions segment, and Kinetix (the multimedia segment). Autodesk's Design
Solutions segment includes the following products:

AUTOCAD

AutoCAD software is a general-purpose CAD tool used independently and in
conjunction with specific applications designed to work with AutoCAD in fields
ranging from architecture and mechanical design to plant design and mapping.
Professionals utilize AutoCAD for design, modeling, drafting, mapping,
rendering, and management tasks. AutoCAD runs on Windows 95, Windows 98, and
Windows 3.1. Because AutoCAD software's DWG files are portable across many
platforms and operating systems, it is a viable solution for customers with
multiple computer systems who need to exchange drawing files in such an
environment.

The most current version, AutoCAD Release 14, was introduced in May 1997.
Built for speed and efficiency, AutoCAD Release 14 includes enhancements in
areas that most influence productivity, including: precision drawing tools
such as AutoSnap, data-sharing features like raster image and reference file
clipping, photorealistic rendering, solid fills, and TrueType fonts.

AutoCAD software's open-system architecture allows users to adapt AutoCAD to
unique professional requirements with any of more than 5,000 independently
developed add-on applications. Many of these applications are based on
ObjectARX technology, a new generation of C++-based APIs. ObjectARX-based
applications utilize AutoCAD software's object-oriented capabilities.

Sales of AutoCAD and AutoCAD upgrades accounted for approximately 70 percent
of Autodesk's revenues in fiscal years 1998 and 1997 as compared to
approximately 80 percent in fiscal year 1996. During fiscal year 1998,
approximately 244,000 new AutoCAD licenses were added worldwide, compared to
207,000 licenses and 233,000 licenses added during fiscal years 1997 and 1996,
respectively.

AUTOCAD OEM

AutoCAD OEM ("Original Equipment Manufacturer") for Windows-based operating
systems is a selectively licensed CAD engine offering a complete application-
development environment for creating and delivering targeted or niche
solutions with scaled feature sets. It is for developers, system integrators,
and commercial software developers who require an embeddable CAD system which
gives them the ability to scale and control the application feature set.
AutoCAD OEM provides developers with a complete toolkit of AutoCAD features
and APIs including ObjectARX capabilities, a full suite of drawing and editing
functions as well as AutoLISP, a LISP API, and the AutoCAD Development System,
a C programming interface. These capabilities enable development of new
products for new markets untapped by traditional CAD products and solutions.

MECHANICAL DESKTOP

Mechanical Desktop software is an integrated software application that
unites advanced 2D and 3D mechanical design capabilities for PCs. The
Mechanical Desktop contains integrated modules for fully parametric feature-
based solid modeling, surface modeling, and assembly modeling; 2D
design/drafting and bidirectional associative drafting; as well as a built-in
Autodesk IGES Translator, which enables users to accurately exchange IGES
(Initial Graphics Exchange Specification) data with other systems. Mechanical
Desktop Release 2.0, which was released in December 1997, includes an Express
User Interface, Edit-in-Place assembly functionality, and improved integration
with Autodesk's AutoCAD Release 14 for mechanical drafting, and 3D Studio MAX
for 3D photorealistic rendering and animation. Advanced ordinate dimensioning,
editing and display of crosshatch patterns, surface scaling, section view, and
associative bill-of-materials generation are among the features included in
the latest release of Mechanical Desktop software.

AUTOCAD MAP

AutoCAD Map software is the first AutoCAD-based automated-mapping product
for professional planners, utility managers, and technicians who create and
maintain their own maps and use their data for engineering- based analysis and
planning. Built with AutoCAD software, AutoCAD Map focuses on five key areas:
digital map creation, analysis, maintenance of up-to-date maps, data exchange,
and publishing. The API in AutoCAD Map lets developers build vertical
applications for industries such as telecommunications, utilities, oil and
gas, state and local government, and natural resource and environmental
engineering. AutoCAD Map also contains ObjectARX capabilities.

AUTODESK MAPGUIDE

MapGuide is a Web-based GIS technology that is designed to allow corporate
customers and developers to use the Internet and business intranets to rapidly
deploy decision support systems with a geographic component. Suited for a wide
range of users--from GIS professionals to the casual computer user--MapGuide
software enables users to access and query digital maps and permits users to
display and analyze geographic data for applications that include tracking
customers, allocating resources, and managing facilities infrastructure.

AUTODESK WORLD

Autodesk World allows for the management of geographic-based data. It offers
capture, edit, analysis, integration, and presentation functionality for
spatial data, including raster, vector (CAD and GIS), and attributes. It also
includes Object Linking and Embedding ("OLE"), which allows users to link
drawings to other Windows applications such as Microsoft Word or Excel,
application programming interfaces, and an integrated Visual Basic for
Applications 5.0 scripting environment for easy customization and application
development.

AUTOCAD LAND DEVELOPMENT DESKTOP

AutoCAD Land Development Desktop, introduced in December, 1998, assists
professionals involved with analyzing and designing land-related projects.
Equipped with mapping capabilities, AutoCAD Land Development has features
including terrain model creation, point manipulation, base geometry creation
and labeling, and manipulation of parcels and roadway plan alignments, as well
as editing and visualization contouring, and volume calculations--all in a
collaborative and customizable environment. All project data is stored and
managed in a centralized database, providing users with easy access and the
ability to share one another's data. With Land Development Desktop, users can
also manipulate real-world objects, such as points and contours, in real time
using Object ARX technology.

AUTOCAD ARCHITECTURAL DESKTOP

Introduced in October 1998, AutoCAD Architectural Desktop is the first
architectural solution that integrates model-based design with a powerful
AutoCAD-based production drafting solution. AutoCAD Architectural Desktop
delivers the power of ObjectARX; building objects to Autodesk building design
customers. Intelligent AEC blocks and objects such as doors, walls, windows
and spaces allow the user to easily and accurately create, edit, organize and
modify 3D conceptual designs. In addition to AutoCAD Architectural Desktop's
intelligent technology, its ease of use through intuitive and familiar
commands will increase the building designer's productivity and efficiency in
the 3D modeling process.

Autodesk's Personal Solutions segment includes the following products:

AUTOCAD LT

AutoCAD LT 97 is a low-cost 2D CAD application intended for CAD managers,
designers, and engineers who need a powerful, stand-alone CAD tool, but who do
not require the advanced feature

set in AutoCAD. AutoCAD LT 97 software contains an extensive 2D drafting
toolset as well as 3D lines and polylines with quick shading and hidden-line
removal. Other features include a Start-Up dialog box and Drawing Set-Up
wizards to help the user create or open a drawing quickly; real-time pan and
zoom; a Drag-and-Drop Content Explorer featuring hundreds of industry-standard
symbols; and Integrated Internet Tools to open or save drawings directly to
the Internet. AutoCAD LT operates in the Windows environment with pull-down
menus, customizable toolbar, toolbox, menus, and scripts, as well as dialog
boxes and icons. It supports the Windows Clipboard, as well as OLE. AutoCAD LT
97 is fully compatible with Windows 95 and Windows NT 4.0 and has built-in
Microsoft Office 97 compatibility.

AUTOSKETCH

AutoSketch Release 95 is a precision drawing program that can be used for
creating technical diagrams, architectural layouts, electrical drawings,
mechanical plans, information graphics, and presentations. The Application
Wizards customize their interfaces based on the type of drawing to allow for
the creation of drawings, diagrams, and sketches.

The principal product offerings from the Kinetix segment are discussed
below:

3D STUDIO MAX

3D Studio MAX R2 software, which began shipping in the third quarter of
fiscal year 1998, is a 3D modeling and animation software package specifically
written to take advantage of advanced features offered by the Windows NT
operating system. With a real-time interface, multiple-processor support, and
3D graphics acceleration capabilities, 3D Studio MAX delivers workstation-
class performance and functionality to PCs.

The intuitive interface eliminates many of the commonly accepted boundaries
between modeling, rendering, and animation, and offers instant feedback; users
can see the results of their actions in real time, as they are applied. Shaded
views with real-time feedback allows users to visualize natural, real-world
environments in which they can directly manipulate objects, regardless of
scene complexity. Because 3D Studio MAX software maintains a data history of
geometry creation and modification, users can return to and change any step,
at any time, without having to redo prior work. 3D Studio MAX is also the only
environment that can run Character Studio, a powerful character-animation and
skinning plug-in software product offered by Kinetix.

3D STUDIO VIZ

3D Studio VIZ, introduced in May 1997, is a design tool that enables users
to express ideas on-screen, in full 3D. Architectural models, engineering
samples, and construction-site previews all become a quick reality with this
new Kinetix software tool. Real-world feedback can be incorporated into the
design, and users can explore more options with their customers more cost-
effectively. 3D Studio VIZ and AutoCAD files are easily exchanged and allow
for the development of advanced engineering or architectural visualizations.
3D Studio VIZ animates, so clients can take a simulated walkthrough of a site,
understand a structure, or view a part as it will operate in the final
assembly. The VIZ user interface employs CAD-like creation tools including
fillets, trims, and chamfers.

PRODUCT DEVELOPMENT AND ENHANCEMENT

The computer industry is characterized by rapid technological change in
computer hardware, operating systems, and software. To keep pace with this
change, Autodesk maintains an aggressive program of new product development.
Autodesk dedicates considerable resources to research and development to
further enhance its existing products and to create new products and
technologies.

During fiscal years 1998, 1997, and 1996, Autodesk incurred $122,432,000,
$93,702,000, and $78,678,000, respectively, for software design, development,
product localization, and project-management activities (excluding capitalized
software development costs of approximately $2,200,000 in fiscal year 1998; no
software development costs were capitalized during fiscal years 1997 and
1996).

The majority of Autodesk's basic research and product development has been
performed in the United States, while translation and localization of foreign-
market versions are generally performed by development teams or contractors in
the local markets. Autodesk's product-related functions in Europe, including
software development, localization, quality assurance, and technical
publications, are centralized in Neuchatel, Switzerland. Production in Europe
is centralized in Ireland, and production in Asia Pacific is centralized in
Singapore.

Autodesk intends to continue recruiting and hiring experienced software
developers and to consider the licensing and acquisition of complementary
software technologies and businesses. In addition, Autodesk will continue to
actively collaborate with and support independent software developers who
offer products that enhance and complement AutoCAD software and other products
offered by Autodesk.

The software products offered by Autodesk are internally complex. Despite
extensive testing and quality control, these products may contain bugs,
especially when first introduced. In fiscal year 1996, Autodesk experienced
quality and performance issues associated with AutoCAD Release 13, including
issues related to compatibility with certain hardware platforms and peripheral
equipment, interoperability problems with products designed to work in
conjunction with AutoCAD Release 13, and other issues associated with the
software's object-oriented design. These factors resulted in a high rate of
product returns in fiscal year 1996. There can be no assurance that defects or
errors will not occur in future releases of AutoCAD or other software products
offered by Autodesk. Such defects or errors could result in corrective
releases to Autodesk's software products, damage to Autodesk's reputation,
loss of revenues, an increase in product returns, or lack of market acceptance
of its products, any of which could have a material and adverse effect on
Autodesk's business and consolidated results of operations.

Autodesk believes that its future results will depend largely upon its
ability to offer products that compete favorably with respect to price,
reliability, performance, range of useful features, continuing product
enhancements, reputation, and training. Delays or difficulties may result in
the delay or cancellation of planned development projects, and could have a
material and adverse effect on Autodesk's business and consolidated results of
operations. Further, increased competition in the market for design, mapping,
or multimedia software products could also have a negative impact on
Autodesk's business and consolidated results of operations. More specifically,
gross margins may be adversely affected if sales of low-end CAD products,
which historically have had lower margins, grow at a faster rate than
Autodesk's higher-margin products.

Certain of Autodesk's historical product development activities have been
performed by independent firms and contractors, while other technologies are
licensed from third parties. Autodesk generally either owns or licenses the
software developed by third parties. Because talented development personnel
are in high demand, there can be no assurance that independent developers,
including those who have developed products for Autodesk in the past, will be
able to provide development support to Autodesk in the future. Similarly,
there can be no assurance that Autodesk will be able to obtain and renew
existing license agreements on favorable terms, if at all, which could have a
material and adverse effect on Autodesk's business and consolidated results of
operations.

There can be no assurance that certain developers will not elect to support
other products or otherwise experience disruption in product development and
delivery cycles. Such disruption in particular markets could negatively impact
these third-party developers and end users, which could have a material
adverse effect on Autodesk's business and consolidated results of operations.
Further, increased merger and acquisition activity currently experienced in
the technology industry could affect relationships with other third-party
developers, and thus adversely affect operating results.

Additionally, there can be no assurance that Autodesk's development efforts
will result in the timely introduction of new products or that such new
products will be commercially successful. Failure to successfully develop new
products, delays in the introduction of these new products, or lower-than-
anticipated demand for these products could have a material and adverse effect
on Autodesk's business and consolidated results of operations.

MARKETING AND SALES

Autodesk's customer-related operations are divided into three geographic
regions: the Americas, Europe, and Asia Pacific. Autodesk's products are
marketed worldwide through a network of domestic and foreign offices. Autodesk
sells its software products primarily through distributors and VARs who
distribute Autodesk's products to end-users in more than 150 countries. VARs,
including both independent owners and computer store franchisees, are
supported by Autodesk and its subsidiaries through technical training,
periodic publications, and Autodesk's Home Page on the Internet.

In addition, Autodesk works directly with dealer and distributor sales
organizations, computer manufacturers, other software developers, and
peripherals manufacturers through cooperative advertising, promotions, and
trade-show presentations. Autodesk also holds annual "Expos" throughout the
world. These dedicated trade shows, incorporated within major industry trade
shows, highlight Autodesk's products, as well as a number of third-party
products. Autodesk also employs mass-marketing techniques such as direct
mailings and advertising in business and trade journals. Further, Autodesk
supports user groups dedicated to the exchange of information related to the
use of Autodesk's products.

Domestically, Autodesk distributes its products primarily through its
authorized dealer network. Other domestic sales are made principally to large
corporations, governmental agencies, educational institutions, and, for
certain low-end CAD products, to end users. Substantially all of Autodesk's
international sales are made to dealers and distributors, which are supported
by Autodesk's foreign subsidiaries and international sales organizations.
Certain international sales result from direct exports from the United States.
Fluctuations in foreign exchange rates, specifically the stronger value of the
dollar, relative to certain international currencies, negatively impacted
foreign revenues during fiscal year 1998. These foreign currency fluctuations,
as well as any slowdowns in any of Autodesk's geographical markets, including
the recent economic instability experienced in certain Asia Pacific countries,
could have a material adverse effect on Autodesk's business and future
consolidated results of operations.

Autodesk's ability to effectively distribute its products depends in part
upon the financial and business condition of its VAR network. Although
Autodesk has not to date experienced any material problems with its VAR
network, computer software dealers and distributors are typically not highly
capitalized, have tended to experience difficulties during times of economic
contraction and during periods of technology-market price pressure, and may do
so in the future. While no single customer accounted for more than 10 percent
of Autodesk's consolidated revenues in fiscal years 1998, 1997, or 1996, the
loss of, or a significant reduction in, business with any one of Autodesk's
major international distributors or large U.S. resellers could have a material
adverse effect on Autodesk's business and consolidated results of operations.

Autodesk intends to continue to make its products available in foreign
languages and expects that foreign sales will continue to contribute a
significant portion of its consolidated revenues. Foreign revenues, including
export sales from the United States to foreign customers, accounted for
approximately 58 percent, 65 percent, and 64 percent of revenues in fiscal
years 1998, 1997, and 1996, respectively.

CUSTOMER AND DEALER SUPPORT

During fiscal year 1998, Autodesk realigned its customer and dealer support
network around its market groups to better provide services related to
specific industry segments. Autodesk requires each authorized dealer and
distributor to provide a professional level of technical support to customers
by employing full-time, trained, technical-support personnel. Autodesk
supports its dealers and distributors through technical product training,
sales training classes, and direct telephone support. During fiscal year 1998,
Autodesk began to offer more end- user support in addition to services which
had historically been offered such as the online support available through the
Autodesk Home Page on the Internet. These new support services include the
Web-Based Learning program, a fee-based distance learning program that
provides lessons and tutorials that highlight critical components of
Autodesk's products, and the Multimedia Learning Assistance program, which
provides lessons related to design projects through an interactive multimedia
tool.

Autodesk offers phone support through authorized Autodesk dealers under two
programs: the Autodesk Premier Support Program ("APSP") and the Autodesk
Systems Center Program ("ASCP"). Under the APSP, participating dealers act as
dedicated account managers to Autodesk customers that have technical questions
related to a specific vertical industry. The ASCP requires dealers to provide
superior industry-specific application training to end users of Autodesk's
products. In addition, Autodesk provides direct phone support to end users
under the new Safety Net Program ("SNP"). Under the SNP, Autodesk support
staff provide technical support for customers with questions about AutoCAD and
products offered by Autodesk's market groups.

As of January 31, 1998, Autodesk had authorized more than 900 independent
Autodesk Training Centers ("ATCs") throughout the world. These accredited
training centers offer in-depth education and training in computer-aided
design skills on AutoCAD and other Autodesk products, as well as on related,
independently developed software.

Customers have formed Autodesk user groups as forums for education and to
suggest product enhancements and development of new products. The Autodesk
User Group International ("AUGI"), officially recognized by Autodesk, sponsors
an annual meeting held concurrently with the Autodesk University user show;
publishes a quarterly newsletter; independently evaluates Autodesk products;
compiles user feature and functionality requirements; and offers telecourses
taught by its membership on CompuServe. In addition, there are local user
groups in Europe, Asia Pacific, and the Americas focused on expanding the use
of Autodesk products.

DEVELOPER PROGRAMS

One of Autodesk's key strategies is to maintain an open-architecture design
of its software products to facilitate third-party development of peripheral
and complementary products which enhance sales of Autodesk products. This
approach enables customers and third parties to customize Autodesk's products
for a wide variety of highly specific uses. The Autodesk Developer Network
program offers several programs that provide marketing, sales, and technical
support and programming tools to nearly 3,000 participating developers
worldwide, who have, to date, developed more than 5,000 commercially available
add-on applications for Autodesk products. Although Autodesk derives no direct
revenue from these application developers, Autodesk believes that the
availability and use of their add-on products enhance sales opportunities for
Autodesk's core products.

Under the Autodesk Developer Channel, Autodesk offers three programs to
third-party developers that are interested in licensing Autodesk software and
technology. The Unique Application Reseller program ("UAR") allows software
developer partners the ability to sell and support Autodesk software when
bundled with specifically defined vertical applications. The OEM program
provides the technology for qualified developers to create and deliver suites
of scalable products that focus on solving customer needs in specialized
markets. The Solution Integrator ("SI") allows solution provider partners the
ability to sell and support Autodesk software when bundled with specifically
defined vertical solutions.

To support the growth of third-party developers, whose applications extend
and enhance the functionality of Autodesk's products worldwide, Autodesk
established the Virtual Corporation Partner Program ("VCPP") during fiscal
year 1995. The VCPP is a business network comprised of dealers, independent
application developers, Autodesk Training Centers, and customers. This program
provides sales, marketing, technical, product, management, and financial
support to Autodesk Strategic Developers and dealers.

During fiscal year 1998, Autodesk continued to expand the Mechanical
Applications Initiative ("MAI") by adding new partners. This program, which
was introduced in fiscal year 1996, is aimed at the development and marketing
of products which can be integrated with Autodesk's MCAD products. MAI
partners participate with Autodesk in product marketing and development
activities.

BACKLOG

Autodesk typically ships products within one to two weeks after receipt of
an order, which is common in the computer software industry. Accordingly,
Autodesk does not maintain significant backlog, and backlog as of any
particular date gives no indication of actual sales for any succeeding period.

COMPETITION

The software industry has limited barriers to entry, and the availability of
desktop computers with continually expanding capabilities at progressively
lower prices contributes to the ease of market entry. Because of these and
other factors, competitive conditions in the industry are likely to intensify
in the future. Increased competition could result in price reductions, reduced
revenues and profit margins, and loss of market share, any of which could
adversely affect Autodesk's business, consolidated results of operations and
financial condition. The design software market in particular is characterized
by vigorous competition in each of the vertical markets in which Autodesk
competes, both by entry of competitors with innovative technologies and by
consolidation of companies with complementary products and technologies.

The AEC family of products competes directly with software offered by
companies such as Bentley Systems, Inc.; Computervision Corporation (a
subsidiary of Parametric Technologies, Inc.); CADAM Systems Company, Inc.;
Diehl Graphsoft, Inc.; EaglePoint Software; International Microcomputer
Software, Inc. ("IMSI"); Intergraph Corporation; Ketiv Technologies;
Nemetschek Systems, Inc.; and Visio Corporation ("Visio"). Autodesk's MCAD
products compete with products offered by a number of competitors, including
Bentley; Visionary Design Systems; Hewlett-Packard Corporation; Parametric
Technologies, Inc.; Structural Dynamics Research Corporation; Unigraphics;
Computervision Corporation (a subsidiary of Parametric Technologies); Dassault
Systemes; SolidWorks Corporation (a subsidiary of Dassault); and Baystate
Technologies, Inc. Autodesk's GIS Market Group faces competition from
companies such as Bentley; Intergraph Corporation; MapInfo Corporation; Earth
Sciences Research Institute; and MCI Systemhouse. Kinetix product offerings
compete with products offered by other multimedia companies such as Adobe
Systems Inc.; Macromedia, Inc.; and Silicon Graphics, Inc. The Personal
Solutions Group family of products competes with IMSI; The Learning

Company; Visio; Micrografx Inc. and others. Certain of the competitors of
Autodesk have greater financial, technical, sales and marketing, and other
resources than Autodesk.

In April 1998, Autodesk received notice that the FTC has undertaken a
nonpublic investigation of its business practices. The FTC had not made any
claims or allegations regarding Autodesk's current business practices or
policies, nor have any charges been filed. Autodesk intends to cooperate fully
with the FTC in its inquiry. Autodesk does not believe that the investigation
will have a material impact on its business or consolidated results of
operations.

INTELLECTUAL PROPERTY AND LICENSES

Autodesk protects its intellectual property through copyright, trade secret,
patent, and trademark laws. For substantially all AutoCAD sales outside of
North America, Autodesk uses software protection locks to inhibit unauthorized
copying. Nonetheless, there can be no assurance that Autodesk's intellectual
property rights can be successfully asserted in the future or will not be
invalidated, circumvented, or challenged. In addition, the laws of certain
foreign countries where Autodesk's products are distributed do not protect
Autodesk's intellectual property rights to the same extent as U.S. laws. The
inability of Autodesk to protect its proprietary information could have a
material adverse effect on Autodesk's business and consolidated results of
operations.

From time to time, Autodesk receives claims alleging infringement of a third
party's intellectual property rights, including patents. Any disputes
involving Autodesk's intellectual property rights or those of another party
could lead to costly litigation which could have a material adverse effect on
Autodesk's business and consolidated results of operations.

Autodesk retains ownership of software it develops. All software is licensed
to users and provided in object code pursuant to either shrink-wrap, embedded
or on-line licenses, or executed license agreements. These agreements contain
restrictions on duplication, disclosure, and transfer.

Autodesk believes that because of the limitations of laws protecting its
intellectual property and the rapid, ongoing technological changes in both the
computer hardware and software industries, it must rely principally upon
software engineering and marketing skills to maintain and enhance its
competitive market position.

Autodesk has an in-house antipiracy program focused on pursuing companies
and individuals who illegally duplicate, sell, or install Autodesk's software
products. Software piracy is in some cases a felony under U.S. federal law,
which allows copyright and patent holders to protect and enforce their rights
as owners of intellectual property. Additionally, Autodesk is a member and co-
founder of the Business Software Alliance ("BSA"), an organization comprised
of member software companies whose purpose is to advance favorable public
policy for the technology industry and promote the importance of honoring
software copyrights.

PRODUCTION

Production of Autodesk's software products involves duplication of the
software media and the printing of user manuals. The purchase of media and the
transfer of the software programs onto media

for distribution to customers are performed by Autodesk and by licensed
subcontractors. Media for Autodesk's products include CD-ROMs and disks which
are available from multiple sources. User manuals for Autodesk's products and
packaging materials are produced to Autodesk specifications by outside
sources. Domestic production is performed in leased facilities operated by
Autodesk. Certain product assembly is also performed by independent third-
party contractors. International production is performed by independent third-
party contractors in Ireland and Singapore. To date, Autodesk has not
experienced any material difficulties or delays in the production of its
software and documentation.

EMPLOYEES

As of January 31, 1999, Autodesk had 2,712 full-time employees, of which
2,071 were based in the Americas, 439 in Europe, and 202 in Asia Pacific. The
continued growth and success of Autodesk depends significantly on the
continued service of highly skilled employees. Competition for these employees
in today's marketplace, especially in the technology industries, is intense.
Autodesk's ability to attract and retain employees is dependent on a number of
factors, including its continued ability to grant stock incentive awards.
There can be no assurance that Autodesk will be successful in continuing to
recruit new personnel and to retain existing personnel. The loss of one or
more key employees or Autodesk's inability to maintain existing employees or
recruit new employees could have a material adverse impact on Autodesk. None
of Autodesk's employees in the United States is subject to a collective
bargaining agreement, and Autodesk has never experienced a work stoppage.
Management believes that its relations with its employees are good.

PROPERTIES

Autodesk's executive offices and those related to product development,
domestic marketing and sales, and production are located in leased office
space in northern California. Autodesk also leases office space in various
locations throughout the United States for local sales, development, and
technical support personnel. Autodesk's foreign subsidiaries lease office
space for their operations. Autodesk owns substantially all equipment used in
its facilities.

LEGAL PROCEEDINGS

In May 1997, Autodesk settled a lawsuit filed by Tektronix, Inc. alleging a
patent infringement, pursuant to which all of Tektronix's claims have been
dismissed.

In December 1994, Autodesk recorded a $25.5 million litigation charge as a
result of a judgment against Autodesk on a claim of a trade secret
misappropriation brought by VMI. Autodesk appealed that judgment and, upon
remand to the Federal District Court, a reduced judgment was entered against
Autodesk in the amount of $14.2 million plus interest. On February 23, 1998,
the U.S. Court of Appeals for the Second Circuit reduced the judgment to $7.8
million.

In May 1998, final judgment was entered in the VMI trade secret litigation
in the amount of $7.8 million plus accrued interest. Final payment of
approximately $8.4 million was made to VMI and charged against a previously
recorded litigation accrual. During the quarter ended July 31, 1998, Autodesk
credited $18.2 million and $2.7 million to operating income and interest
income, respectively, to record the gain on the litigation settlement and
remaining unutilized interest accruals.

Autodesk is a party to various legal proceedings arising from the normal
course of business activities. While the outcome of these matters cannot be
predicted with certainty, in management's opinion, resolution of these matters
is not expected to have a material adverse impact on Autodesk's consolidated
results of operations or its financial position. However, depending on the
amount and timing, an unfavorable resolution of a matter could materially
affect Autodesk's future results of operations or cash flows in a particular
period.

DISCREET

In this section, "Discreet" refers to, depending on the context, Discreet,
its subsidiaries and its ventures collectively, or Discreet and its
subsidiaries.

BUSINESS

Discreet develops, assembles, markets and supports non-linear, on-line
digital systems and software for creating, editing and compositing imagery and
special effects for film, video, HDTV, broadcast and the Web. Discreet's
systems and software are utilized by creative professionals for a variety of
applications, including feature films, television programs, commercials, music
and corporate videos, interactive game production, live broadcasting, as well
as Web design. Discreet's systems have played key roles in the creation of
special visual effects for films such as Armageddon, Titanic, Forrest Gump,
Independence Day, The Fifth Element, Batman & Robin, Contact and Air Force
One; television programs and special events such as ABC's on-air broadcast of
the 1998 U.S. Congressional elections; Fox's Sunday Night Football Show as
well as their Super Bowl XXXIII broadcast; ABC's "World News Tonight with
Peter Jennings"; music videos by artists including U2, REM, Rolling Stones and
The Beatles; and commercials for clients such as Nike, Pepsi, AT&T and
McDonald's. Discreet has recently been recognized by the Academy of Motion
Picture Arts and Sciences with a Scientific and Engineering Award for flame*
and inferno*. Discreet believes that creative professionals and designers
require tools that simplify their work, enabling them to devote more time to
creative activities and less time to technical tasks.

Discreet offers turnkey systems for high end post production and broadcast
facilities focused towards three markets: special effects, editing and
broadcast production (its "Advanced Systems"). Discreet's Advanced Systems are
comprised of proprietary software utilizing workstations manufactured by SGI,
scalable disk arrays and other peripherals. These can be networked together to
enable users to manage data more efficiently and collaborate in an integrated
production environment. Discreet's systems include its inferno* and flame*
systems (special effects), its fire* and smoke* systems (editing), and its
frost* system (broadcast production). Discreet's special effects and editing
Advanced Systems are used to manipulate digital media in an on-line, real-time
environment, providing instant feedback to the creative professional. These
systems are currently or are currently being designed to be resolution
independent and to allow users to work on uncompressed images from a variety
of media sources in the full range of resolutions necessary for film, video
and HDTV. In the broadcast production market, Discreet offers its frost*
system, a set of modeling, animation and rendering tools for the creation and
manipulation of 3D environments, including virtual sets, for broadcast
companies. Discreet sells its Advanced Systems worldwide through a direct
sales force as well as through high-end, sophisticated distributors.

During the last 18 months, Discreet has entered the new media marketplace
through a series of acquisitions and now offers editing and special effects
software which runs on the Microsoft Windows NT, the Apple Macintosh and/or
the Unix operating systems. The new media market is characterized by
institutional and educational customers, designers and prosumers. Discreet's
desktop or new media software (its "New Media Software") products include its
edit* software (formerly D-Vision OnLine) (video editing), its effect*
software (formerly Flint and Illuminaire Composition) (special effects), its
paint* software (formerly Illuminaire Paint) (special effects), and its light*
software (formerly Lightscape) (radiosity). Discreet's New Media Software is
primarily used to create, manipulate, and finish computer graphics images,
interactive and on-line content. effect* provides 3D video composition, clip
animation, and visual effects enabling artists to combine, enhance and modify
video frames or sequences of frames with a very high level of efficiency and
interactivity. paint* is a vector-based, object-oriented painting and
animation system for the manipulation and enhancement of both multi-frame
clips and single-frame graphic images. edit* is a real-time non-linear,
compressed editing software solution which performs compositing, keying and
visual effects on the desktop. light* is a 3D rendering solution

that uses advanced radiosity techniques to significantly enhance realism and
lighting accuracy in 3D environments created for virtual sets, film and video
effects, interactive games and architectural design projects.

Discreet's goal is to become a leading supplier of digital tools used to
manipulate still and moving pictures to the high-end professional, post-
production and broadcast markets, the new media segment of the desktop market
and the consumer markets. To achieve this goal, Discreet plans to further
expand and leverage its technology base, customer relationships and existing
reputation, extend its product line to include other aspects of the content
creation process, and expand its worldwide sales and distribution
organization.

Discreet is a company incorporated by articles of incorporation on September
10, 1991 under Part IA of the Quebec Act whose head office is located at 10
Duke Street, Montreal, Quebec, Canada H3C 2L7. Discreet has sales offices in
the United States in New York, Chicago, Los Angeles; Rio de Janeiro, Brazil;
London, England; Paris, France; Munich, Germany; Singapore; Bombay, India;
Hong Kong, China; Madrid, Spain; and Tokyo, Japan. As of December 31, 1998,
Discreet had 414 employees.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements
give effect to the combination of Autodesk and Discreet on a pooling of
interests basis. The unaudited pro forma condensed combined balance sheet
assumes the Transactions took place on October 31, 1998 and combines
Autodesk's unaudited condensed consolidated balance sheet at that date with
Discreet's historical condensed consolidated balance sheet at September 30,
1998. The unaudited pro forma condensed combined statements of operations
assume that the Transactions took place as of the beginning of each of the
periods presented and combine Autodesk's unaudited condensed statements of
operations for the nine months ended October 31, 1998 and 1997 and the
historical consolidated statements of income for the three fiscal years ended
January 31, 1998, 1997 and 1996 and Discreet's unaudited condensed statements
of operations for the nine months ended September 30, 1998 and 1997 and the
twelve months ended December 31, 1997 and the historical condensed statements
of operations for the eleven months ended June 30, 1997, and the fiscal year
ended July 31, 1996, respectively. Autodesk has not yet determined which
period will be combined for inclusion in its audited consolidated statement of
income after consummation of the Transactions.

The unaudited pro forma condensed combined statements of operations are not
necessarily indicative of operating results which would have been achieved had
the Transactions been consummated as of the beginning of such periods and
should not be construed as representative of future operations.

Autodesk paid quarterly dividends of $0.06 per share with respect to fiscal
years 1996, 1997 and 1998, and in each of the first three quarters of fiscal
year 1999, and currently intends to continue paying such cash dividends on a
quarterly basis. Discreet has never paid any cash dividends on its Common
Shares. Discreet currently intends to retain any earnings for future growth
and therefore does not anticipate paying any cash dividends on its Common
Shares in the foreseeable future.

These unaudited pro forma condensed combined financial statements should be
read in conjunction with the respective audited historical consolidated
financial statements, the unaudited interim financial statements and the notes
thereto of Autodesk and Discreet which are incorporated by reference into this
Prospectus.

Following the Transactions, the Combined Company will have cash, cash
equivalents, and marketable securities, consisting primarily of high-quality
municipal bonds, tax-advantaged money market instruments, and US treasury
bills, totaling $384.5 million, based on the pro forma combined balance sheets
of Autodesk and Discreet as at October 31, 1998. Autodesk believes that
existing cash and cash from operations will be sufficient to meet present and
anticipated working capital requirements and other cash needs of the Combined
Company for the next twelve months.

AUTODESK, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

OCTOBER 31, 1998
(IN THOUSANDS)

ASSETS

AUTODESK DISCREET PRO FORMA PRO FORMA
OCTOBER 31, 1998 SEPTEMBER 30, 1998 ADJUSTMENTS COMBINED
---------------- ------------------ ----------- ---------

RESTATED RESTATED
Current assets:
Cash and cash
equivalents.......... $ 76,640 $ 46,838 $ -- $123,478
Marketable
securities........... 261,032 -- -- 261,032
Accounts receivable,
net.................. 89,603 27,346 -- 116,949
Inventories........... 6,667 15,474 -- 22,141
Deferred income
taxes................ 25,296 -- -- 25,296
Prepaid expenses and
other current
assets............... 19,842 6,411 -- 26,253
-------- -------- -------- --------
Total current
assets............. 479,080 96,069 -- 575,149
Computer equipment,
furniture, and
leasehold improvements,
net.................... 39,160 8,970 -- 48,130
Purchased technologies
and capitalized
software, net.......... 34,640 4,669 -- 39,309
Goodwill, net........... 72,946 17,599 -- 90,545
Deferred income taxes... 14,063 752 -- 14,815
Other assets............ 22,656 5,412 -- 28,068
-------- -------- -------- --------
$662,545 $133,471 $ -- $796,016
======== ======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line
of credit............ $ -- $ 2,803 $ -- $ 2,803
Accounts payable...... 29,660 28,332 -- 57,992
Accrued compensation.. 37,940 4,936 -- 42,876
Accrued income taxes.. 92,685 7,338 -- 100,023
Deferred revenues..... 16,735 6,593 -- 23,328
Other accrued
liabilities.......... 50,507 477 15,000 65,984
-------- -------- -------- --------
Total current
liabilities........ 227,527 50,479 15,000 293,006
Government loan......... -- 1,834 -- 1,834
Deferred income taxes... 499 2,843 -- 3,342
Other liabilities....... 2,120 -- -- 2,120
Stockholders' equity:
Common stock.......... 345,735 108,862 -- 454,597
Retained earnings
(deficit)............ 87,266 (24,914) (15,000) 47,352
Deferred
compensation......... -- (699) -- (699)
Foreign currency
translation
adjustment........... (602) (4,934) -- (5,536)
-------- -------- -------- --------
Total stockholders'
equity............. 432,399 78,315 (15,000) 495,714
-------- -------- -------- --------
$662,545 $133,471 $ -- $796,016
======== ======== ======== ========

See accompanying notes to unaudited pro forma condensed combined financial
statements.

AUTODESK, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

DISCREET
AUTODESK TWELVE MONTHS
FISCAL YEAR ENDED ENDED PRO FORMA PRO FORMA
JANUARY 31, 1998 DECEMBER 31, 1997 ADJUSTMENTS COMBINED
----------------- ----------------- ----------- ---------
RESTATED RESTATED

Net revenues............ $617,126 $137,501 $ -- $754,627
Costs and expenses:
Cost of revenues...... 71,338 58,109 -- 129,447
Marketing and sales... 237,107 28,419 -- 265,526
Research and
development.......... 122,432 12,868 -- 135,300
General and
administrative....... 88,900 11,352 -- 100,252
Nonrecurring charges,
net.................. 22,187 15,678 -- 37,865
-------- -------- ----- --------
Total costs and
expenses........... 541,964 126,426 -- 668,390
-------- -------- ----- --------
Income from operations.. 75,162 11,075 -- 86,237
Interest and other
income, net............ 9,644 761 -- 10,405
-------- -------- ----- --------
Income before income
taxes.................. 84,806 11,836 -- 96,642
Provision for income
taxes.................. 39,635 10,399 -- 50,034
-------- -------- ----- --------
Net income.............. $ 45,171 $ 1,437 $ -- $ 46,608
======== ======== ===== ========
Basic net income per
share.................. $ 0.97 $ 0.05 $ -- $ 0.83
======== ======== ===== ========
Diluted net income per
share.................. $ 0.91 $ 0.05 $ -- $ 0.78
======== ======== ===== ========
Shares used in computing
basic net income per
share.................. 46,760 28,125 56,041
======== ======== ========
Shares used in computing
diluted net income per
share.................. 49,860 29,709 59,664
======== ======== ========

See accompanying notes to unaudited pro forma condensed combined financial
statements.

AUTODESK, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

DISCREET
AUTODESK ELEVEN MONTHS
FISCAL YEAR ENDED ENDED PRO FORMA PRO FORMA
JANUARY 31, 1997 JUNE 30, 1997 ADJUSTMENTS COMBINED
----------------- ------------- ----------- ---------
RESTATED

Net revenues............ $496,693 $101,924 $ -- $598,617
Costs and expenses:
Cost of revenues...... 64,217 47,571 -- 111,788
Marketing and sales... 199,939 23,206 -- 223,145
Research and
development.......... 93,702 9,708 -- 103,410
General and
administrative....... 74,280 6,501 -- 80,781
Nonrecurring charges.. 4,738 8,763 -- 13,501
-------- -------- ----- --------
Total costs and
expenses........... 436,876 95,749 -- 532,625
-------- -------- ----- --------
Income from operations.. 59,817 6,175 -- 65,992
Interest and other
income, net............ 6,695 990 -- 7,685
-------- -------- ----- --------
Income before income
taxes.................. 66,512 7,165 -- 73,677
Provision for income
taxes.................. 24,941 6,489 -- 31,430
-------- -------- ----- --------
Net income.............. $ 41,571 $ 676 $ -- $ 42,247
======== ======== ===== ========
Basic net income per
share.................. $ 0.91 $ 0.02 $ -- $ 0.77
======== ======== ===== ========
Diluted net income per
share.................. $ 0.88 $ 0.02 $ -- $ 0.74
======== ======== ===== ========
Shares used in computing
basic net income
per share.............. 45,540 27,948 54,763
======== ======== ========
Shares used in computing
diluted net income
per share.............. 47,190 28,894 56,725
======== ======== ========

See accompanying notes to unaudited pro forma condensed combined financial
statements.

AUTODESK, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

AUTODESK DISCREET PRO
FISCAL YEAR ENDED FISCAL YEAR ENDED PRO FORMA FORMA
JANUARY 31, 1996 JULY 31, 1996 ADJUSTMENTS COMBINED
----------------- ----------------- ----------- --------

Net revenues............ $534,167 $ 83,997 $ -- $618,164
Costs and expenses:
Cost of revenues....... 66,812 49,333 -- 116,145
Marketing and sales.... 183,550 26,088 -- 209,638
Research and
development........... 78,678 14,402 -- 93,080
General and
administrative........ 76,100 10,582 -- 86,682
Nonrecurring charges... -- 28,506 -- 28,506
-------- -------- ----- --------
Total costs and
expenses............. 405,140 128,911 -- 534,051
-------- -------- ----- --------
Income (loss) from
operations............. 129,027 (44,914) -- 84,113
Interest and other
income, net............ 9,253 2,208 -- 11,461
-------- -------- ----- --------
Income (loss) before
income taxes........... 138,280 (42,706) -- 95,574
Provision for income
taxes.................. 50,492 1,435 -- 51,927
-------- -------- ----- --------
Net income (loss)....... $ 87,788 $(44,141) $ -- $ 43,647
======== ======== ===== ========
Basic net income (loss)
per share.............. $ 1.86 $ (1.64) $ -- $ 0.78
======== ======== ===== ========
Diluted net income
(loss) per share....... $ 1.76 $ (1.64) $ -- $ 0.74
======== ======== ===== ========
Shares used in computing
basic net income (loss)
per share.............. 47,090 26,837 55,946
======== ======== ========
Shares used in computing
diluted net income
(loss) per share....... 49,800 26,837 59,331
======== ======== ========

See accompanying notes to unaudited pro forma condensed combined financial
statements.

AUTODESK, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

AUTODESK DISCREET
NINE MONTHS ENDED NINE MONTHS ENDED PRO FORMA PRO FORMA
OCTOBER 31, 1998 SEPTEMBER 30, 1998 ADJUSTMENTS COMBINED
----------------- ------------------- ----------- ---------
RESTATED RESTATED

Net revenues............ $551,022 $103,316 $ -- $654,338
Costs and expenses:
Cost of revenues...... 56,648 43,965 -- 100,613
Marketing and sales... 194,608 26,394 -- 221,002
Research and
development.......... 107,769 11,184 -- 118,953
General and
administrative....... 90,718 13,193 -- 103,911
Nonrecurring charges.. 21,985 (2,696) -- 19,289
Litigation accrual
reversal............. (18,200) -- -- (18,200)
-------- -------- ----- --------
Total costs and
expenses........... 453,528 92,040 -- 545,568
-------- -------- ----- --------
Income from operations.. 97,494 11,276 -- 108,770
Interest and other
income, net............ 10,986 2,950 -- 13,936
-------- -------- ----- --------
Income before income
taxes.................. 108,480 14,226 -- 122,706
Provision for income
taxes.................. 42,974 5,845 -- 48,819
-------- -------- ----- --------
Net income.............. $ 65,506 $ 8,381 $ -- $ 73,887
======== ======== ===== ========
Basic net income per
share.................. $ 1.41 $ 0.28 $ -- $ 1.31
======== ======== ===== ========
Diluted net income per
share.................. $ 1.34 $ 0.27 $ -- $ 1.25
======== ======== ===== ========
Shares used in computing
basic net income per
share.................. 46,510 29,442 56,226
======== ======== ========
Shares used in computing
diluted net income per
share.................. 48,760 30,952 58,974
======== ======== ========

See accompanying notes to unaudited pro forma condensed combined financial
statements.

AUTODESK, INC.

UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

AUTODESK DISCREET
NINE MONTHS ENDED NINE MONTHS ENDED PRO FORMA PRO FORMA
OCTOBER 31, 1997 SEPTEMBER 30, 1997 ADJUSTMENTS COMBINED
----------------- ------------------ ----------- ---------
RESTATED RESTATED

Net revenues............ $435,275 $100,233 $ -- $535,508
Costs and expenses:
Cost of revenues...... 52,614 44,561 -- 97,175
Marketing and sales... 171,571 20,012 -- 191,583
Research and
development.......... 91,085 8,967 -- 100,052
General and
administrative....... 64,384 7,401 -- 71,785
Nonrecurring charges.. 22,187 14,032 -- 36,219
-------- -------- ----- --------
Total costs and
expenses........... 401,841 94,973 -- 496,814
-------- -------- ----- --------
Income from operations.. 33,434 5,260 -- 38,694
Interest and other
income, net............ 7,391 474 -- 7,865
-------- -------- ----- --------
Income before income
taxes.................. 40,825 5,734 -- 46,559
Provision for income
taxes.................. 23,144 7,302 -- 30,446
-------- -------- ----- --------
Net income (loss)....... $ 17,681 $ (1,568) $ -- $ 16,113
======== ======== ===== ========
Basic net income (loss)
per share.............. $ 0.38 $ (0.06) $ -- $ 0.29
======== ======== ===== ========
Diluted net income
(loss) per share....... $ 0.35 $ (0.06) $ -- $ 0.27
======== ======== ===== ========
Shares used in computing
basic net income (loss)
per share.............. 47,050 28,244 56,371
======== ======== ========
Shares used in computing
diluted net income
(loss) per share....... 50,350 28,244 60,172
======== ======== ========

See accompanying notes to unaudited pro forma condensed combined financial
statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(1)PERIODS COMBINED

The Autodesk condensed consolidated statements of income for the three years
ended January 31, 1998 have been combined with the Discreet condensed
consolidated statements of operations for the fiscal year ended July 31, 1996,
the eleven months ended June 30, 1997, as restated and the unaudited, as
restated twelve months ended December 31, 1997, as restated, respectively.
Additionally, the Autodesk unaudited condensed consolidated statements of
operations for the nine months ended October 31, 1998 and 1997 have been
combined with the Discreet unaudited condensed consolidated statements of
operations for the nine months ended September 30, 1998 and 1997, as restated.

Autodesk's October 31, 1998 unaudited condensed consolidated balance sheet
has been combined with Discreet's September 30, 1998 condensed consolidated
balance sheet.

Operating results for the period from January 1, 1997 to June 30, 1997 for
Discreet are duplicated in the pro forma condensed consolidated statement of
income of the Combined Company for the years ended January 31, 1998 and 1997.
Net revenues, net loss and basic and diluted net loss per share for the six
month period January 1, 1997 through June 30, 1997 for Discreet were $61.8
million, $.5 million and $0.02, respectively.

(2)PRO FORMA BASIS OF PRESENTATION

These unaudited pro forma condensed combined financial statements reflect
the issuance of 9,851,000 shares of Autodesk Common Stock in exchange for an
aggregate of 29,852,000 of Discreet Common Shares (outstanding as of September
30, 1998) in connection with the Transactions, assuming an Exchange Ratio of
0.33 as set forth in the following table (in thousands, except Exchange
Ratio):

Discreet Common Shares outstanding as of September 30, 1998......... 29,852
Exchange Ratio...................................................... 0.33
------
Number of shares of Autodesk Common Stock exchanged................. 9,851
Number of shares of Autodesk Common Stock outstanding as of October
31, 1998........................................................... 46,774
------
Number of shares of Autodesk Common Stock outstanding upon
consummation of the Transactions................................... 56,625
======

The actual number of shares of Autodesk Common Stock to be issued (including
shares issuable upon exchange of New Discreet Exchangeable Shares) will be
determined at the Effective Time by multiplying the Exchange Ratio (0.33) by
the number of Discreet Common Shares outstanding on that date.

(3)TRANSACTION COSTS AND RELATED EXPENSES

Autodesk and Discreet estimate they will incur direct transaction costs of
approximately $7-$9 million and $6-$8 million, respectively, associated with
the Transactions consisting of transaction fees for investment bankers,
attorneys, accountants, financial printing and other related charges. These
nonrecurring transaction costs will be charged to operations in the quarter in
which they are incurred.

It is expected that following consummation of the Transactions, the Combined
Company will incur an additional charge to operations, currently estimated at
$8-$10 million, to reflect costs associated with integrating the two
companies, which will be expensed as incurred. There can be no assurance

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS--(CONTINUED)

that the Combined Company will not incur additional charges to reflect costs
associated with the Transactions, or that management will be successful in its
efforts to integrate the two companies.

The unaudited pro forma condensed combined balance sheet gives effect to
estimated direct transaction costs totaling $15 million, as if such costs and
expenses had been incurred as of October 31, 1998. These costs and expenses
are not reflected in the unaudited pro forma condensed combined statement of
income.

(4) CONFORMING ADJUSTMENTS

No adjustments have been made to conform the accounting policies of the
combined companies. The nature and extent of such adjustments, if any, will be
based upon further study and analysis and are not expected to be significant.

(5) NONRECURRING TRANSACTIONS

(a) Nonrecurring Transactions of Autodesk

Included in Net Income for Autodesk are nonrecurring charges of $4.7
million, $22.2 million and $22.0 million recorded in fiscal years 1997 and
1998 and for the nine months ended October 31, 1998, respectively. The charges
for fiscal 1997 and 1998 consist of charges relating to the write off of
purchased in-process research and development that had not reached
technological feasibility and had no alternate future use. Nonrecurring
charges for the nine months ended October 31, 1998 consist primarily of a
charge relating to the write off of purchased in-process research and
development that had not reached technological feasibility and had no
alternate future use ($13.1 million), restructuring charges for the
consolidation of certain development centers ($1.5 million), the write-off of
purchased technologies associated with these operations ($2.2 million), staff
reductions in the Asia Pacific region ($1.7 million), costs in relation to
potential legal settlements ($2.5 million) and the write-down to fair market
value of older computer equipment which Autodesk plans to dispose of ($1.0
million). The restructurings noted above are expected to be completed during
the last half of Autodesk's fiscal year ended January 31, 1999.

(b) Nonrecurring Transactions of Discreet

Included in net income for Discreet are nonrecurring charges of $15.7
million, $8.8 million, $28.5 million, and $14.0 million recorded for the
twelve month period ended December 31, 1997, eleven month period ended June
30, 1997, fiscal year ended July 31, 1996, and the nine months ended September
30, 1997, respectively. Included in net income for Discreet is a nonrecurring
credit of $2.7 million recorded for the nine months ended September 30, 1998.
Nonrecurring charges for the twelve month period ended December 31, 1997
consist of the write-off of amounts related to purchased in-process research
and development related to the Denim acquisition ($2.3 million), the
Lightscape acquisition ($1.6 million), the D-Vision acquisition ($5.3
million), and a class action legal settlement ($6.5 million). Fiscal 1997
charges consist of the write-off of amounts relating to purchased in-process
research and development related to the Denim acquisition ($2.3 million) and a
class action legal settlement ($6.5 million). Fiscal 1996 charges consist of
the write-off of purchased in-process research and development ($8.5 million)
related to the COSS/IMP acquisition, restructuring charges ($15.0 million),
the write down of an investment ($2.5 million), and costs relating to
litigation ($2.5 million). Nonrecurring charges for the nine month period
ended September 30, 1997 consist of the write-off amounts related to purchased
in-process research and development related to the Denim acquisition ($2.3
million) and the D-Vision acquisition ($5.3 million), and a class action legal
settlement ($6.5 million). The nonrecurring credit for the nine months ended
September 30, 1998 consists of amounts related to a terminated merger
agreement ($1.7 million), a gain on the sale of an investment ($2.5 million),
and the reversal of provisions for restructuring charges ($1.5 million) and
legal accruals no longer required ($0.4 million).

(6) RESTATED HISTORICAL AUTODESK FINANCIAL STATEMENTS

Subsequent to the Securities and Exchange Commission's letter to the AICPA
dated September 9, 1998, regarding its views on in-process research and
development ("IPR&D"), the Company has re-evaluated its IPR&D charges on the
Softdesk and Genius acquisitions, revised the purchase price allocations and
restated its financial statements. Specifically, amounts for fiscal 1998 and
the nine months ended October 31, 1998 and 1997 have been restated to adjust
the allocation of the purchase price of these business combinations occurring
in fiscal 1998 and the nine months ended October 31, 1998. The adjustments had
the effect of increasing net income (diluted net income per share) by $29.8
million, ($0.60), $8 million, ($0.16) and $31.6 million, ($0.65) for the
fiscal year ended January 31, 1998 and the nine months ended October 31, 1998
and 1997, respectively.

(7) RESTATED HISTORICAL DISCREET FINANCIAL STATEMENTS

Amounts for fiscal 1998 and 1997 and the six months ended December 31, 1997
have been restated to adjust the allocation of the purchase price for certain
acquisitions occurring in fiscal 1998 and 1997 and the six months ended
December 31, 1997. The adjustments had the effect of increasing net income by
$7.4 million, $11.7 million and $16.2 million for fiscal 1997, 1998, and the
six months ended December 31, 1997, respectively, or $0.26, $0.38, and $0.56
per share on a diluted basis.

VALIDITY OF COMMON STOCK

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Mark A. Bertelsen, a director of the
Company, is a member of Wilson, Sonsini, Goodrich & Rosati. The validity of
the shares of Common Stock offered hereby will be passed upon for the
Underwriters by Sullivan & Cromwell, Los Angeles, California.

EXPERTS

The consolidated financial statements of Autodesk, Inc. incorporated by
reference in Autodesk, Inc.'s Annual Report (Form 10-K/A) for the years ended
January 31, 1998 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon incorporated by reference therein and
incorporated by reference herein. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Discreet as of June 30, 1997 and
1998, and for the year ended July 31, 1996, the eleven-month period ended June
30, 1997, and the year ended June 30, 1998, incorporated by reference in this
Prospectus, which are referred to herein and made a part of the Registration
Statement of which this Prospectus is a part, have been audited by Arthur
Andersen & Cie, independent chartered accountants, as indicated in their
report with respect thereto also incorporated by reference herein, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:

1. Annual Report on Form 10-K/A for the fiscal year ended January 31, 1998,
filed pursuant to Section 13 of the Exchange Act.

2. Quarterly Reports on Form 10-Q/A for the fiscal quarters ended April 30,
1998, and July 31, 1998 and October 31, 1998 filed pursuant to Section 13 of
the Exchange Act.

3. Current Reports on Form 8-K filed May 18, 1998, November 19, 1998,
January 22, 1999 and March 1, 1999.

4. The definitive proxy statement dated May 22, 1998 for the 1998 Annual
Meeting of Stockholders and the definitive proxy statement dated February 27,
1998 for a Special Meeting of Stockholders.

5. The definitive Joint Proxy Statement/Prospectus of the Company, Discreet
9066-9771 Quebec Inc. and 9066-9854 Quebec Inc. dated February 5, 1999
included in the Company's Registration Statement on Form S-4 (file 333-65075).

6. The description of the Company's capital stock contained in the Company's
Registration Statement on Form 8-A filed March 18, 1986, pursuant to Section
12(g) of the Exchange Act.

7. The description of the Company's preferred share purchase rights
contained in the Company's Registration Statement on Form 8-A filed January 5,
1996, pursuant to Section 12(g) of the Exchange Act, as amended on January 8,
1996 and January 15, 1998.

In addition, all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of the filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
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. The Company will provide
without charge to each person to whom this Prospectus is delivered, on the
request of any such person, a copy of any or all of the foregoing documents
incorporated by reference herein (other than exhibits to such documents).
Written or telephone requests should be directed to the Company's principal
executive offices: Autodesk, Inc., 111 McInnis Parkway, San Rafael, CA 94903,
Attention: Investor Relations.

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters has severally agreed to purchase from the Company, the
respective number of shares of Common Stock set forth opposite its name below:

NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------

Goldman, Sachs & Co................................................
U.S. Bancorp Piper Jaffray Inc.....................................
BancBoston Robertson Stephens Inc..................................
---------
Total........................................................... 3,000,000
=========

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the Underwriters.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 450,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 3,000,000 shares of Common
Stock offered.

The Company has agreed that, during the period beginning from the date of
this Prospectus and continuing to and including the date 90 days after the
date of the Prospectus, it will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee
stock option plans existing, or on the conversion or exchange of convertible
or exchangeable securities outstanding, on the date of this Prospectus, or in
connection with mergers, consolidations or other business combinations in
which the Company may be involved) which are substantially similar to the
shares of Common Stock or which are convertible into or exchangeable for
securities which are substantially similar to the shares of Common Stock,
without the prior written consent of the Underwriters, except for the shares
of Common Stock offered in connection with the offering.

In connection with the offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock
than they are required to purchase from the Company in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the
securities sold in the offering for their account may be reclaimed by the
syndicate if such shares of Common Stock are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the Nasdaq National Market, in the over-the-counter market
or otherwise.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

U.S. Bancorp Piper Jaffray Inc. has provided Autodesk with certain
investment banking services relating to the Transactions, has received a fee
for such services, and will receive an additional fee in the event the
Transactions are consummated.

U-1

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURI-
TIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

PAGE
----

Available Information.................................................... 2
Additional Information................................................... 2
Forward-Looking Statements............................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 24
Capitalization........................................................... 25
Market Price and Dividend Information.................................... 26
The Transactions......................................................... 27
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 28
Autodesk................................................................. 51
Discreet................................................................. 61
Unaudited Pro Forma Condensed Combined Financial Information............. 63
Validity of Common Stock................................................. 73
Experts.................................................................. 73
Incorporation of Certain Documents By Reference.......................... 74
Underwriting............................................................. U-1

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

3,000,000 SHARES

AUTODESK, INC.

COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

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

[LOGO OF AUTODESK APPEARS HERE]

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

GOLDMAN, SACHS & CO.

U.S. BANCORP PIPER
JAFFRAY INC.

BANCBOSTON ROBERTSON STEPHENS

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM
NUMBER

ITEM 14 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth costs and expenses of the sale and
distribution of the securities being registered. All amounts except Securities
and Exchange Commission and Nasdaq National Market Listing fees are estimates.

Registration Fee--Securities and Exchange Commission............... $ 28,381
Nasdaq National Market Listing Fee................................. $ 17,500
Accounting fees.................................................... $ 50,000
Legal fees......................................................... $ 70,000
Miscellaneous...................................................... $ 4,119
--------
Total.............................................................. $170,000

ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation, as amended, includes a provision
that eliminates the personal liability of its directors for monetary damages
for breach or alleged breach of their duty of care. In addition, as permitted
by Section 145 of the Delaware General Corporation Law, the Bylaws of the
Registrant provide that: (i) the Registrant is required to indemnify its
directors and officers and persons serving in such capacities in other
business enterprises (including, for example, subsidiaries of the Registrant)
at the Registrant's request, to the fullest extent permitted by Delaware law;
(ii) the Registrant may, in its discretion, indemnify employees and agents in
those circumstances where indemnification is not required by law; (iii) the
Registrant is required to advance expenses, as incurred, to its directors and
officers in connection with defending a proceeding, provided that payment of
expenses incurred by a director or officer of the corporation in advance of
the final disposition of such proceeding shall be made only on receipt of an
undertaking by the officer or director to repay all amounts advanced if it
should ultimately be determined that the officer or director is not entitled
to be indemnified; (iv) the rights conferred in the Bylaws are not exclusive,
and the Registrant is authorized to enter into indemnification agreements with
its directors, officers and employees; and (v) the Registrant may not
retroactively amend the Bylaw provisions in a way that is adverse to such
directors, officers and employees.

The Registrant's policy is to enter into indemnification agreements with
each of its directors and officers that provide the maximum indemnity allowed
to directors and officers by Section 145 of the Delaware General Corporation
Law and the Bylaws, as well as certain additional procedural protections. In
addition, the indemnification agreements provide that directors and officers
will be indemnified to the fullest possible extent permitted by law against
all expenses (including attorney's fees) and settlement amounts paid or
incurred by them in an action or proceeding, including any action by or in the
right of the Registrant, arising out of such person's services as a director
or officer of the Registrant, any subsidiary of the Registrant or any other
company or enterprise to which such person provides services at the request of
the Registrant. The Registrant will not be obligated pursuant to the
indemnification agreements to indemnify or advance expenses to an indemnified
party with respect to proceedings or claims initiated by the indemnified party
and not by way of defense, except with respect to proceedings specifically
authorized by the Board of Directors or brought to enforce a right to
indemnification under the indemnification agreement, the Registrant's Bylaws
or any statute or law.

II-1

Under the agreements, the Registrant is not obligated to indemnify the
indemnified party (i) for any expenses incurred by the indemnified party with
respect to any proceeding instituted by the indemnified party to enforce or
interpret the agreement, if a court of competent jurisdiction determines that
each of the material assertions made by the indemnified party in such
proceeding was not made in good faith or was frivolous; (ii) for any amounts
paid in settlement of a proceeding unless the Registrant consents to such
settlement; (iii) on account of any suit in which judgment is rendered against
the indemnified party for an accounting of profits made from the purchase or
sale by the indemnified party of securities of the Registrant pursuant to the
provisions of Section 16(b) of the Exchange Act and related laws; or (iv) if a
final decision by a court having jurisdiction in the matter shall determine
that such indemnification is not lawful.

The indemnification provisions in the Bylaws and the indemnification
agreements entered into between the Registrant and its directors and officers
may be sufficiently broad to permit indemnification of the Registrant's
directors and officers for liabilities arising under the Securities Act.

From and after the Effective Time, (i) New Discreet and the Registrant will
fulfill and honor in all respects the obligations of Discreet and its
subsidiaries pursuant to the indemnification provisions in the Discreet
Articles and the Discreet By-laws existing as in effect on the date of the
Acquisition Agreement with respect to Discreet's directors and officers
(including without limitation advancement of legal and other expenses to the
extent provided for in the Discreet Articles and Discreet By-Laws), and (ii)
in the event any of Discreet's directors or officers is or becomes involved in
any capacity in any action, proceeding or investigation in connection with any
matter relating to the Acquisition Agreement or the transactions contemplated
thereby occurring on or prior to the Effective Time, the Registrant will, or
will cause New Discreet to, pay as incurred such reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, subject to an undertaking to repay such amounts as
required by applicable law.

The Registrant and New Discreet will indemnify each present director,
officer, employee, fiduciary and agent of Discreet or any of its subsidiaries
(collectively, the "Indemnified Parties"), to the fullest extent permitted
under applicable law or under the Registrant's or New Discreet's, as the case
may be, Bylaws, against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by the Acquisition Agreement), and to pay as incurred such legal
and other expenses (including the costs of any investigation and preparation)
incurred in connection therewith, subject to an undertaking to repay such
amounts as required by applicable law.

For a period of five years after the Effective Time, the Registrant and
Dutchco will, or will cause New Discreet to, provide officers' and directors'
liability insurance in respect of acts or omissions occurring on or prior to
the Effective Time covering each person covered by Discreet's officers' and
directors' liability insurance policy prior to the Effective Time on terms
substantially similar to those of the policy in effect as of the date of the
Acquisition Agreement.

II-2

ITEM 16 EXHIBITS.

EXHIBIT
NUMBER
-------

1.1 Form of Underwriting Agreement
2.1 Second Amended and Restated Agreement and Plan of Acquisition and
Amalgamation by and among Autodesk, Inc., Autodesk Development B.V.,
9066-9771 Quebec Inc., Autodesk Canada Inc., 9066-9854 Quebec Inc. and
Discreet Logic Inc., dated as of November 18, 1998, as amended on
December 18, 1998 and January 18, 1999 (incorporated by reference to
the exhibit filed with Registrants's Registration Statement on Form S-
4 (file no. 333-65075).
2.2 Second Amended and Restated Amalgamation Agreement by and among
Discreet Logic Inc., 9066-9854 Quebec Inc., 9066-9771 Quebec Inc. and
Autodesk, Inc. dated as of January 18, 1999 (incorporated by reference
to the exhibit filed with Registrant's Registration Statement on Form
S-4 (file no. 333-65075).
4.1 Preferred Shares Rights Agreement dated December 14, 1995
(incorporated by reference to the Registrant's Report on Form 8-A
filed on January 5, 1996, as amended on January 8, 1996 and January
15, 1998).
4.2 Amendment No. 1 to Preferred Shares Rights Agreement (incorporated by
reference to the Registrant's Report on Form 8-A filed on January 5,
1996, as amended on January 8, 1996 and January 15, 1998).
5.1 Opinion and Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Arthur Andersen & Cie.
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
+24.1 Power of Attorney.

- --------

+Previously filed.

ITEM 17 UNDERTAKINGS.

The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities as that time shall be deemed to be the initial
bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless

II-3

in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1993, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1993, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Rafael, State of
California, on this 26th day of February, 1999.

AUTODESK, INC.

/s/ Marcia K. Sterling
By: __________________________________
Marcia K. Sterling
Vice President, Business
Development,
General Counsel and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated on the 26th day of
February, 1999.

SIGNATURE TITLE DATE
--------- ----- ----

* Chairman of the Board and February 26, 1999
____________________________________ Chief Executive Officer
Carol A. Bartz (Principal Executive
Officer)

* Vice President, Chief February 26, 1999
____________________________________ Financial Officer
Steve Cakebread (Principal Financial and
Accounting Officer)

* Director February 26, 1999
____________________________________
Mark A. Bertelsen

* Director February 26, 1999
____________________________________
Crawford W. Beveridge

* Director February 26, 1999
____________________________________
J. Hallam Dawson

* Director February 26, 1999
____________________________________
Paul S. Otellini

II-5

SIGNATURE TITLE DATE
--------- ----- ----

* Director February 26, 1999
____________________________________
Mary Alice Taylor

* Director February 26, 1999
____________________________________
Morton Topfer

/s/ Marcia K. Sterling
*By: _______________________________
Attorney-in-fact

II-6



                                                                     EXHIBIT 1.1
 


                                Autodesk, Inc.
                         Common Stock, par value $0.01

                                ______________

                            Underwriting Agreement
                            ----------------------

                                                                 March ___, 1999


Goldman, Sachs & Co.,
Piper Jaffray Inc.,
BancBoston Robertson Stephens Inc.,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.

Ladies and Gentlemen:

     Autodesk, Inc. a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of 3,000,000 shares
(the "Firm Shares") and, at the election of the Underwriters, up to 450,000
additional shares (the "Optional Shares") of common stock, par value $0.01 per
share ("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").

     The Company has entered into the Second Amended and Restated Agreement and
Plan of Acquisition and Amalgamation dated as of November 18, 1998 (the
"Amalgamation Agreement") by and among the Company, 9066-9771 Quebec Inc.
("Amalgamation Sub"), 9066-9854 Quebec Inc. ("Autodesk Quebec"), Autodesk Canada
Inc. ("ACI"), Autodesk Development B.V., a wholly-owned subsidiary of the
Company ("Dutchco", and together with Amalgamation Sub, Autodesk Quebec and ACI,
the "Autodesk Entities") and Discreet Logic Inc. ("Discreet"), which provides
for an amalgamation under the laws of the Canadian province of Quebec of
Discreet with Autodesk Quebec and Amalgamation Sub (the "Amalgamation") to form
a new corporation which will be a subsidiary of Dutchco.  The Company has
advised the Underwriters that the primary purpose of the sale of the Shares is
to facilitate the treatment of the Amalgamation as a pooling of interests. In
connection with the Amalgamation, the Company has filed a Registration Statement
on Form S-4 (No. 333-65075), including the Joint Proxy Statement/Prospectus
contained therein (the "Amalgamation Registration Statement"), which is
incorporated by reference in the Registration Statement and Prospectus relating
to the Shares.



     1.   The Company represents and warrants to, and agrees with, each of the
Underwriters that:

 
                        (a)    A registration statement on Form S-3 (File No.
                            333-....) (the "Initial Registration Statement") and
                            Amendment No. 1 in respect of the Shares have been
                            filed with the Securities and Exchange Commission
                            (the "Commission"); the Initial Registration
                            Statement and any post-effective amendment thereto,
                            each in the form heretofore delivered to you, and,
                            excluding exhibits thereto but including all
                            documents incorporated by reference in the
                            prospectus contained therein, to you for each of the
                            other Underwriters, have been declared effective by
                            the Commission in such form; other than a
                            registration statement, if any, increasing the size
                            of the offering (a "Rule 462(b) Registration
                            Statement"), filed pursuant to Rule 462(b) under the
                            Securities Act of 1933, as amended (the "Act"),
                            which became effective upon filing, no other
                            document with respect to the Initial Registration
                            Statement or document incorporated by reference
                            therein has heretofore been filed with the
                            Commission; and no stop order suspending the
                            effectiveness of the Initial Registration Statement,
                            any post-effective amendment thereto or the Rule
                            462(b) Registration Statement, if any, has been
                            issued and no proceeding for that purpose has been
                            initiated or threatened by the Commission (any
                            preliminary prospectus included in the Initial
                            Registration Statement or filed with the Commission
                            pursuant to Rule 424(a) of the rules and regulations
                            of the Commission under the Act is hereinafter
                            called a "Preliminary Prospectus"; the various parts
                            of the Initial Registration Statement and the Rule
                            462(b) Registration Statement, if any, including all
                            exhibits thereto and including (i) the information
                            contained in the form of final prospectus filed with
                            the Commission pursuant to Rule 424(b) under the Act
                            in accordance with Section 5(a) hereof and deemed by
                            virtue of Rule 430A under the Act to be part of the
                            Initial Registration Statement at the time it was
                            declared effective and (ii) the documents
                            incorporated by reference in the prospectus
                            contained in the Initial Registration Statement at
                            the time such part of the Initial Registration
                            Statement became effective, each as amended at the
                            time such part of the Initial Registration Statement
                            became effective or such part of the Rule 462(b)
                            Registration Statement, if any, became or hereafter
                            becomes effective, are hereinafter collectively
                            called the "Registration Statement"; such final
                            prospectus, in the form first filed pursuant to Rule
                            424(b) under the Act, is hereinafter called the
                            "Prospectus"; any reference herein to any
                            Preliminary Prospectus or the Prospectus shall be
                            deemed to refer to and include the documents
                            incorporated by reference therein pursuant to Item
                            12 of Form S-3 under the Act, as of the date of such
                            Preliminary Prospectus or Prospectus, as the case
                            may be; and any reference to any amendment or
                            supplement to any Preliminary Prospectus or the
                            Prospectus shall be deemed to refer to and include
                            any documents filed after the date of
                                       2

 
                            such Preliminary Prospectus or Prospectus, as the
                            case may be, under the Securities Exchange Act of
                            1934, as amended (the "Exchange Act"), and
                            incorporated by reference in such Preliminary
                            Prospectus or Prospectus, as the case may be; and
                            any reference to any amendment to the Registration
                            Statement shall be deemed to refer to and include
                            any annual report of the Company filed pursuant to
                            Section 13(a) or 15(d) of the Exchange Act after the
                            effective date of the Initial Registration Statement
                            that is incorporated by reference in the
                            Registration Statement);

                        (b)     No order preventing or suspending the use of any
                            Preliminary Prospectus has been issued by the
                            Commission, and each Preliminary Prospectus, at the
                            time of filing thereof, conformed in all material
                            respects to the requirements of the Act and the
                            rules and regulations of the Commission thereunder,
                            and did not contain an untrue statement of a
                            material fact or omit to state a material fact
                            required to be stated therein or necessary to make
                            the statements therein, in the light of the
                            circumstances under which they were made, not
                            misleading; provided, however, that this
                            representation and warranty shall not apply to any
                            statements or omissions made in reliance upon and in
                            conformity with information furnished in writing to
                            the Company by an Underwriter through Goldman, Sachs
                            & Co. expressly for use therein;

                        (c)     The documents incorporated by reference in the
                            Prospectus, when they became effective or were filed
                            with the Commission, as the case may be, conformed
                            in all material respects to the requirements of the
                            Act or the Exchange Act, as applicable, and the
                            rules and regulations of the Commission thereunder,
                            and none of such documents contained an untrue
                            statement of a material fact or omitted to state a
                            material fact required to be stated therein or
                            necessary to make the statements therein not
                            misleading; and any further documents so filed and
                            incorporated by reference in the Prospectus or any
                            further amendment or supplement thereto, when such
                            documents become effective or are filed with the
                            Commission, as the case may be, will conform in all
                            material respects to the requirements of the Act or
                            the Exchange Act, as applicable, and the rules and
                            regulations of the Commission thereunder and will
                            not contain an untrue statement of a material fact
                            or omit to state a material fact required to be
                            stated therein or necessary to make the statements
                            therein not misleading; provided, however, that this
                            representation and warranty shall not apply to any
                            statements or omissions made in reliance upon and in
                            conformity with information furnished in writing to
                            the Company by an Underwriter through Goldman, Sachs
                            & Co. expressly for use therein;

                                       3

 
                        (d)     The Registration Statement conforms, and the
                            Prospectus and any further amendments or supplements
                            to the Registration Statement or the Prospectus will
                            conform, in all material respects to the
                            requirements of the Act and the rules and
                            regulations of the Commission thereunder and do not
                            and will not, as of the applicable effective date as
                            to the Registration Statement and any amendment
                            thereto, and as of the applicable filing date as to
                            the Prospectus and any amendment or supplement
                            thereto, contain an untrue statement of a material
                            fact or omit to state a material fact required to be
                            stated therein or necessary to make the statements
                            therein not misleading; provided, however, that this
                            representation and warranty shall not apply to any
                            statements or omissions made in reliance upon and in
                            conformity with information furnished in writing to
                            the Company by an Underwriter through Goldman, Sachs
                            & Co. expressly for use therein;

                        (e)     Neither the Company nor any of its subsidiaries
                            has sustained since the date of the latest audited
                            financial statements included or incorporated by
                            reference in the Prospectus any material loss or
                            interference with its business from fire, explosion,
                            flood or other calamity, whether or not covered by
                            insurance, or from any labor dispute or court or
                            governmental action, order or decree, otherwise than
                            as set forth or contemplated in the Prospectus; and,
                            since the respective dates as of which information
                            is given in the Registration Statement and the
                            Prospectus, there has not been any change in the
                            capital stock or long-term debt of the Company or
                            any of its subsidiaries or any material adverse
                            change, or any development involving a prospective
                            material adverse change, in or affecting the general
                            affairs, management, financial position,
                            stockholders' equity or results of operations of the
                            Company and its subsidiaries, otherwise than as set
                            forth or contemplated in the Prospectus;

                        (f)     The Company and its subsidiaries have good and
                            marketable title in fee simple to all real property
                            and good and marketable title to all personal
                            property owned by them, in each case free and clear
                            of all liens, encumbrances and defects except such
                            as are described in the Prospectus or such as do not
                            materially affect the value of such property and do
                            not interfere with the use made and proposed to be
                            made of such property by the Company and its
                            subsidiaries; and any real property and buildings
                            held under lease by the Company and its subsidiaries
                            are held by them under valid, subsisting and
                            enforceable leases with such exceptions as are not
                            material and do not interfere with the use made and
                            proposed to be made of such property and buildings
                            by the Company and its subsidiaries;

                                       4

 
                        (g)     The Company has been duly incorporated and is
                            validly existing as a corporation in good standing
                            under the laws of Delaware, with power and authority
                            (corporate and other) to own its properties and
                            conduct its business as described in the Prospectus,
                            and has been duly qualified as a foreign corporation
                            for the transaction of business and is in good
                            standing under the laws of each other jurisdiction
                            in which it owns or leases properties or conducts
                            any business so as to require such qualification, or
                            is subject to no material liability or disability by
                            reason of the failure to be so qualified in any such
                            jurisdiction; and each subsidiary of the Company has
                            been duly incorporated and is validly existing as a
                            corporation in good standing under the laws of its
                            jurisdiction of incorporation;

                        (h)     The Company has an authorized capitalization as
                            set forth in the Prospectus, and all of the issued
                            shares of capital stock of the Company have been
                            duly and validly authorized and issued, are fully
                            paid and non-assessable and conform to the
                            description of the Stock incorporated by reference
                            in the Prospectus; and all of the issued shares of
                            capital stock of each subsidiary of the Company have
                            been duly and validly authorized and issued, are
                            fully paid and non-assessable and (except for
                            directors' qualifying shares) are owned directly or
                            indirectly by the Company, free and clear of all
                            liens, encumbrances, equities or claims;

                        (i)     The unissued Shares to be issued and sold by the
                            Company to the Underwriters hereunder have been duly
                            and validly authorized and, when issued and
                            delivered against payment therefor as provided
                            herein, will be duly and validly issued and fully
                            paid and non-assessable and will conform to the
                            description of the Stock incorporated by reference
                            in the Prospectus;

                        (j)     The issue and sale of the Shares by the Company
                            and the compliance by the Company with all of the
                            provisions of this Agreement and the consummation of
                            the transactions herein contemplated will not
                            conflict with or result in a breach or violation of
                            any of the terms or provisions of, or constitute a
                            default under, any indenture, mortgage, deed of
                            trust, loan agreement or other agreement or
                            instrument to which the Company or any of its
                            subsidiaries is a party or by which the Company or
                            any of its subsidiaries is bound or to which any of
                            the property or assets of the Company or any of its
                            subsidiaries is subject, nor will such action result
                            in any violation of the provisions of the
                            Certificate of Incorporation or By-laws of the
                            Company or any statute or any order, rule or
                            regulation of any court or governmental agency or
                            body having jurisdiction over the Company or any of
                            its subsidiaries or any of their properties; and no
                            consent,
                                       5

 
                            approval, authorization, order, registration or
                            qualification of or with any such court or
                            governmental agency or body is required for the
                            issue and sale of the Shares or the consummation by
                            the Company of the transactions contemplated by this
                            Agreement, except the registration under the Act of
                            the Shares and such consents, approvals,
                            authorizations, registrations or qualifications as
                            may be required under state securities or Blue Sky
                            laws in connection with the purchase and
                            distribution of the Shares by the Underwriters;

                        (k)     Neither the Company nor any of its subsidiaries
                            is in violation of its Certificate of Incorporation
                            or By-laws or in default in the performance or
                            observance of any material obligation, agreement,
                            covenant or condition contained in any indenture,
                            mortgage, deed of trust, loan agreement, lease or
                            other agreement or instrument to which it is a party
                            or by which it or any of its properties may be
                            bound;

                        (l)     The statements incorporated by reference into
                            the Prospectus from the Company's Registration
                            Statement on Form 8-A under the caption "Description
                            of Capital Stock", insofar as they purport to
                            constitute a summary of the terms of the Stock, and
                            under the caption "Underwriting", insofar as they
                            purport to describe the provisions of the laws and
                            documents referred to therein, are accurate,
                            complete and fair;

                        (m)     Other than as set forth in the Prospectus, there
                            are no legal or governmental proceedings pending to
                            which the Company or any of its subsidiaries is a
                            party or of which any property of the Company or any
                            of its subsidiaries is the subject which, if
                            determined adversely to the Company or any of its
                            subsidiaries, would individually or in the aggregate
                            have a material adverse effect on the current or
                            future consolidated financial position,
                            stockholders' equity or results of operations of the
                            Company and its subsidiaries; and, to the best of
                            the Company's knowledge, no such proceedings are
                            threatened or contemplated by governmental
                            authorities or threatened by others;

                        (n)     The Company is not and, after giving effect to
                            the offering and sale of the Shares, will not be an
                            "investment company", as such term is defined in the
                            Investment Company Act of 1940, as amended (the
                            "Investment Company Act");

                        (o)     Neither the Company nor any of its affiliates
                            does business with the government of Cuba or with
                            any person or affiliate located in Cuba within the
                            meaning of Section 517.075, Florida Statutes;

                                       6

 
                         (p)     Ernst & Young LLP, who have certified certain
                             financial statements of the Company and its
                             subsidiaries, and Arthur Andersen & Cle, who have
                             certified certain financial statements of Discreet,
                             are each independent public accountants as required
                             by the Act and the rules and regulations of the
                             Commission thereunder;

                         (q)     The Company has reviewed its operations and
                             that of its subsidiaries and any third parties with
                             which the Company or any of its subsidiaries has a
                             material relationship to evaluate the extent to
                             which the business or operations of the Company or
                             any of its subsidiaries will be affected by the
                             Year 2000 Problem. As a result of such review, the
                             Company has no reason to believe, and does not
                             believe, that the Year 2000 Problem will have a
                             material adverse effect on the general affairs,
                             management, the current or future consolidated
                             financial position, business prospects,
                             stockholders' equity or results of operations of
                             the Company and its subsidiaries or result in any
                             material loss or interference with the Company's
                             business or operations. The "Year 2000 Problem" as
                             used herein means any significant risk that
                             computer hardware or software used in the receipt,
                             transmission, processing, manipulation, storage,
                             retrieval, retransmission or other utilization of
                             data or in the operation of mechanical or
                             electrical systems of any kind will not, in the
                             case of dates or time periods occurring after
                             December 31, 1999, function at least as effectively
                             as in the case of dates or time periods occurring
                             prior to January 1, 2000;

                         (r)     Except as disclosed in the Prospectus, as
                             amended, the Company and its subsidiaries own, or
                             are licensed or otherwise possess legally
                             enforceable rights to use, sell and license,
                             without any conflict the rights of others, all
                             trademarks, tradenames, service marks, copyrights
                             and any applications therefor necessary to, used in
                             or required for their respective businesses as
                             currently conducted, the absence of which would be
                             reasonably likely to have a material adverse effect
                             on the Company;

    (s)  The Amalgamation Agreement has been duly authorized, executed and
delivered by the Company and the Autodesk Entities, and constitutes a valid and
binding agreement of each of them; the Company and the Autodesk Entities have no
current intent (and have no knowledge of any current intent on the part of
Discreet) to terminate the Amalgamation Agreement or otherwise not to consummate
the transactions contemplated thereby; and the Company, the Autodesk Entities
and to the best knowledge of the Company, Discreet, are not in breach or
violation in any material respect of any of their respective representations,
warranties or any covenants or agreement on each of their parts to be performed
under the Amalgamation Agreement; and

    (t)  The Amalgamation Agreement has been duly authorized by all necessary
corporate action of the Company and the Autodesk Entities and, when all of the
conditions to the Amalgamation contained in the Amalgamation Agreement have been
fulfilled or waived (where 

                                       7

 
permissible) and the Articles of Amalgamation are filed pursuant to Section
123.118 of the Companies Act (Quebec), the Amalgamation will be effective in
accordance with the laws of the state of Delaware and the laws of the Canadian
province of Quebec.

2.            Subject to the terms and conditions herein set forth, (a) the
         Company agrees to issue and sell to each of the Underwriters, and each
         of the Underwriters agrees, severally and not jointly, to purchase from
         the Company, at a purchase price per share of $................, the
         number of Firm Shares set forth opposite the name of such Underwriter
         in Schedule I hereto and (b) in the event and to the extent that the
         Underwriters shall exercise the election to purchase Optional Shares as
         provided below, the Company agrees to issue and sell to each of the
         Underwriters, and each of the Underwriters agrees, severally and not
         jointly, to purchase from the Company, at the purchase price per share
         set forth in clause (a) of this Section 2, that portion of the number
         of Optional Shares as to which such election shall have been exercised
         (to be adjusted by you so as to eliminate fractional shares) determined
         by multiplying such number of Optional Shares by a fraction, the
         numerator of which is the maximum number of Optional Shares which such
         Underwriter is entitled to purchase as set forth opposite the name of
         such Underwriter in Schedule I hereto and the denominator of which is
         the maximum number of Optional Shares that all of the Underwriters are
         entitled to purchase hereunder.

The Company hereby grants to the Underwriters the right to purchase at their
election up to 450,000 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares.  Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.

3.            Upon the authorization by you of the release of the Firm Shares,
         the several Underwriters propose to offer the Firm Shares for sale upon
         the terms and conditions set forth in the Prospectus.

4.            The Shares to be purchased by each Underwriter hereunder, in
         definitive form, and in such authorized denominations and registered in
         such names as Goldman, Sachs & Co. may request upon at least forty-
         eight hours' prior notice to the Company shall be delivered by or on
         behalf of the Company to Goldman, Sachs & Co., through the facilities
         of the Depository Trust Company ("DTC"), for the account of such
         Underwriter, against payment by or on behalf of such Underwriter of the
         purchase price therefor by wire transfer of Federal (same-day) funds to
         the account specified by the Company to Goldman, Sachs & Co. at least
         forty-eight hours in advance. The Company will cause the certificates
         representing the Shares to be made available for checking and packaging
         at least twenty-four hours prior to the Time of Delivery (as defined
         below) with respect thereto at the office of DTC or its designated
         custodian (the "Designated Office"). The time and date of such delivery
         and payment shall be, with respect to the Firm Shares, 7:00 a.m., Palo
         Alto time, on March ___, 1999 or such other time and date as Goldman,
         Sachs & Co. and the Company may agree upon in writing, and, with
         respect to the Optional Shares, 9:30 a.m., New York time, on the date
         specified by Goldman, Sachs & Co. in the written notice given by
         Goldman, Sachs & Co. of the Underwriters' election to purchase such
         Optional Shares, or such other time and date as Goldman, Sachs & Co.
         and the Company may agree upon in writing. Such time and date 

                                       8

 
         for delivery of the Firm Shares is herein called the "First Time of
         Delivery", such time and date for delivery of the Optional Shares, if
         not the First Time of Delivery, is herein called the "Second Time of
         Delivery", and each such time and date for delivery is herein called a
         "Time of Delivery".

                        (a)     The documents to be delivered at each Time of
                            Delivery by or on behalf of the parties hereto
                            pursuant to Section 7 hereof, including the cross
                            receipt for the Shares and any additional documents
                            requested by the Underwriters pursuant to Section
                            7(j) hereof, will be delivered at the offices of
                            Wilson Sonsini Goodrich & Rosati, 650 Page Mill
                            Road, Palo Alto, California 94304-1050 (the "Closing
                            Location"), and the Shares will be delivered at the
                            Designated Office, all at such Time of Delivery. A
                            meeting will be held at the Closing Location at 3:00
                            p.m., Palo Alto time, on the New York Business Day
                            next preceding such Time of Delivery, at which
                            meeting the final drafts of the documents to be
                            delivered pursuant to the preceding sentence will be
                            available for review by the parties hereto. For the
                            purposes of this Section 4, "New York Business Day"
                            shall mean each Monday, Tuesday, Wednesday, Thursday
                            and Friday which is not a day on which banking
                            institutions in New York are generally authorized or
                            obligated by law or executive order to close.

5.            The Company agrees with each of the Underwriters:

                        (a)     To prepare the Prospectus in a form approved by
                            you and to file such Prospectus pursuant to Rule
                            424(b) under the Act not later than the Commission's
                            close of business on the second business day
                            following the execution and delivery of this
                            Agreement, or, if applicable, such earlier time as
                            may be required by Rule 430A(a)(3) under the Act; to
                            make no further amendment or any supplement to the
                            Registration Statement or Prospectus prior to the
                            last Time of Delivery which shall be disapproved by
                            you promptly after reasonable notice thereof; to
                            advise you, promptly after it receives notice
                            thereof, of the time when any amendment to the
                            Registration Statement has been filed or becomes
                            effective or any supplement to the Prospectus or any
                            amended Prospectus has been filed and to furnish you
                            with copies thereof; to file promptly all reports
                            and any definitive proxy or information statements

                                       9

 
                            required to be filed by the Company with the
                            Commission pursuant to Section 13(a), 13(c), 14 or
                            15(d) of the Exchange Act subsequent to the date of
                            the Prospectus and for so long as the delivery of a
                            prospectus is required in connection with the
                            offering or sale of the Shares; to advise you,
                            promptly after it receives notice thereof, of the
                            issuance by the Commission of any stop order or of
                            any order preventing or suspending the use of any
                            Preliminary Prospectus or prospectus, of the
                            suspension of the qualification of the Shares for
                            offering or sale in any jurisdiction, of the
                            initiation or threatening of any proceeding for any
                            such purpose, or of any request by the Commission
                            for the amending or supplementing of the
                            Registration Statement or Prospectus or for
                            additional information; and, in the event of the
                            issuance of any stop order or of any order
                            preventing or suspending the use of any Preliminary
                            Prospectus or prospectus or suspending any such
                            qualification, promptly to use its best efforts to
                            obtain the withdrawal of such order;

                        (b) Promptly from time to time to take such action as
                            you may reasonably request to qualify the Shares for
                            offering and sale under the securities laws of such
                            jurisdictions as you may request and to comply with
                            such laws so as to permit the continuance of sales
                            and dealings therein in such jurisdictions for as
                            long as may be necessary to complete the
                            distribution of the Shares, provided that in
                            connection therewith the Company shall not be
                            required to qualify as a foreign corporation or to
                            file a general consent to service of process in any
                            jurisdiction;

                        (c) Prior to 10:00 A.M., New York City time, on the New
                            York Business Day next succeeding the date of this
                            Agreement and from time to time, to furnish the
                            Underwriters with copies of the Prospectus in New
                            York City in such quantities as you may reasonably
                            request, and, if the delivery of a prospectus is
                            required at any time prior to the expiration of nine
                            months after the time of issue of the Prospectus in
                            connection with the offering or sale of the Shares
                            and if at such time any event shall have occurred as
                            a result of which the Prospectus as then amended or
                            supplemented would 

                                       10

 
                            include an untrue statement of a material fact or
                            omit to state any material fact necessary in order
                            to make the statements therein, in the light of the
                            circumstances under which they were made when such
                            Prospectus is delivered, not misleading, or, if for
                            any other reason it shall be necessary during such
                            period to amend or supplement the Prospectus or to
                            file under the Exchange Act any document
                            incorporated by reference in the Prospectus in order
                            to comply with the Act or the Exchange Act, to
                            notify you and upon your request to file such
                            document and to prepare and furnish without charge
                            to each Underwriter and to any dealer in securities
                            as many copies as you may from time to time
                            reasonably request of an amended Prospectus or a
                            supplement to the Prospectus which will correct such
                            statement or omission or effect such compliance, and
                            in case any Underwriter is required to deliver a
                            prospectus in connection with sales of any of the
                            Shares at any time nine months or more after the
                            time of issue of the Prospectus, upon your request
                            but at the expense of such Underwriter, to prepare
                            and deliver to such Underwriter as many copies as
                            you may request of an amended or supplemented
                            Prospectus complying with Section 10(a)(3) of the
                            Act;

                        (d)     To make generally available to its
                            securityholders as soon as practicable, but in any
                            event not later than eighteen months after the
                            effective date of the Registration Statement (as
                            defined in Rule 158(c) under the Act), an earnings
                            statement of the Company and its subsidiaries (which
                            need not be audited) complying with Section 11(a) of
                            the Act and the rules and regulations thereunder
                            (including, at the option of the Company, Rule 158);

                        (e)     During the period beginning from the date hereof
                            and continuing to and including the date 90 days
                            after the date of the Prospectus, not to offer,
                            sell, contract to sell or otherwise dispose of,
                            except as provided hereunder any securities of the
                            Company that are substantially similar to the
                            Shares, including but not limited to any securities
                            that are convertible into or exchangeable for, or
                            that represent the right to receive, Stock or any
                            such substantially similar securities (other than
                            pursuant to employee stock option plans existing on,
                            or upon the conversion or exchange of convertible or
                            exchangeable securities outstanding as of, the date
                            of this Agreement, or in connection with mergers,
                            consolidations or other business combinations in
                            which the Company may be involved), without your
                            prior written consent;

                        (f)     To furnish to its stockholders as soon as
                            practicable after the end of each fiscal year an
                            annual report (including a balance sheet and
                            statements of income, stockholders' equity and cash
                            flows of the Company and its consolidated

                                       11

 
                            subsidiaries certified by independent public
                            accountants) and, as soon as practicable after the
                            end of each of the first three quarters of each
                            fiscal year (beginning with the fiscal quarter
                            ending after the effective date of the Registration
                            Statement), to make available to its stockholders
                            consolidated summary financial information of the
                            Company and its subsidiaries for such quarter in
                            reasonable detail; 

                        (g)     During a period of five years from the effective
                            date of the Registration Statement, to furnish to
                            you copies of all reports or other communications
                            (financial or other) furnished to stockholders, and
                            to deliver to you (i) as soon as they are available,
                            copies of any reports and financial statements
                            furnished to or filed with the Commission or any
                            national securities exchange on which any class of
                            securities of the Company is listed; and (ii) such
                            additional information concerning the business and
                            financial condition of the Company as you may from
                            time to time reasonably request (such financial
                            statements to be on a consolidated basis to the
                            extent the accounts of the Company and its
                            subsidiaries are consolidated in reports furnished
                            to its stockholders generally or to the Commission);

                        (h)     To use the net proceeds received by it from the
                            sale of the Shares pursuant to this Agreement in the
                            manner specified in the Prospectus under the caption
                            "Use of Proceeds";

                        (i)     To use its best efforts to list for quotation
                            the Shares on the National Association of Securities
                            Dealers Automated Quotations National Market System
                            ("NASDAQ");

                        (j)     If the Company elects to rely upon Rule 462(b),
                            the Company shall file a Rule 462(b) Registration
                            Statement with the Commission in compliance with
                            Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
                            the date of this Agreement, and the Company shall at
                            the time of filing either pay to the Commission the
                            filing fee for the Rule 462(b) Registration
                            Statement or give irrevocable instructions for the
                            payment of such fee pursuant to Rule 111(b) under
                            the Act; and

              (k)   To refrain from, and refrain any of its subsidiaries from,
knowingly and after consultation with Ernst & Young LLP, taking any action which
would prevent the Amalgamation from qualifying, or omit to take any action
necessary to qualify the Amalgamation, as a pooling of interests transaction or
that would otherwise prevent Ernst & Young LLP from issuing the letter described
in Section 5.15(b) of the Amalgamation Agreement; and if the Amalgamation is
consummated and qualifies as a pooling of interests, the Company will account
for the Amalgamation as a pooling of interests.

6.            The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the

                                       12

 
Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey (iv) all fees and expenses in connection with listing the Shares
on the NASDAQ; (v) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriters in connection with, securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.

7.            The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:

                        (a)     The Prospectus shall have been filed with the
                            Commission pursuant to Rule 424(b) within the
                            applicable time period prescribed for such filing by
                            the rules and regulations under the Act and in
                            accordance with Section 5(a) hereof; if the Company
                            has elected to rely upon Rule 462(b), the Rule
                            462(b) Registration Statement shall have become
                            effective by 10:00 P.M., Washington, D.C. time, on
                            the date of this Agreement; no stop order suspending
                            the effectiveness of the Registration Statement or
                            any part thereof shall have been issued and no
                            proceeding for that purpose shall have been
                            initiated or threatened by the Commission; and all
                            requests for additional information on the part of
                            the Commission shall have been complied with to your
                            reasonable satisfaction;

                        (b)     Sullivan & Cromwell, counsel for the
                            Underwriters, shall have furnished to you such
                            written opinion or opinions (a draft of each such
                            opinion is attached as Annex II(a) hereto), dated
                            such Time of Delivery, with respect to the matters
                            covered in paragraphs (i), (ii), (vii), (xi) and
                            (xiv) of subsection (c) below as well as such other
                            related matters as you may reasonably request, and
                            such counsel shall have

                                       13

 
                            received such papers and information as they may
                            reasonably request to enable them to pass upon such
                            matters;

                        (c)     Wilson Sonsini Goodrich & Rosati, counsel for
                            the Company, shall have furnished to you their
                            written opinion (a draft of such opinion is attached
                            as Annex II(b) hereto), dated such Time of Delivery,
                            in form and substance satisfactory to you, to the
                            effect that:

                            (i)        The Company has been duly incorporated
                                 and is validly existing as a corporation in
                                 good standing under the laws of Delaware, with
                                 power and authority (corporate and other) to
                                 own its properties and conduct its business as
                                 described in the Prospectus;

                            (ii)       The Company has an authorized
                                 capitalization as set forth in the Prospectus,
                                 and all of the issued shares of capital stock
                                 of the Company (including the Shares being
                                 delivered at such Time of Delivery) have been
                                 duly and validly authorized and issued and are
                                 fully paid and non-assessable; and the Shares
                                 conform to the description of the Stock
                                 incorporated by reference in the Prospectus;

                            (iii)      The Company has been duly qualified as a
                                 foreign corporation for the transaction of
                                 business and is in good standing under the laws
                                 of each other jurisdiction in which it owns or
                                 leases properties or conducts any business so
                                 as to require such qualification or is subject
                                 to no material liability or disability by
                                 reason of failure to be so qualified in any
                                 such jurisdiction (such counsel being entitled
                                 to rely in respect of the opinion in this
                                 clause upon opinions of local counsel and in
                                 respect of matters of fact upon certificates of
                                 officers of the Company, provided that such
                                 counsel shall state that they believe that both
                                 you and they are justified in relying upon such
                                 opinions and certificates);

                            (iv)       Each subsidiary of the Company has been
                                 duly incorporated and is validly existing as a
                                 corporation in good standing under the laws of
                                 its jurisdiction of incorporation; and all of
                                 the issued shares of capital stock of each such
                                 subsidiary have been duly and validly
                                 authorized and issued, are fully paid and non-
                                 assessable, and (except for directors'
                                 qualifying shares) are owned directly or
                                 indirectly by the Company, free and clear of
                                 all liens, encumbrances, equities or claims
                                 (such counsel being entitled to rely in respect
                                 of the opinion in this 

                                       14

 
                                 clause upon opinions of local counsel and in
                                 respect to matters of fact upon certificates of
                                 officers of the Company or its subsidiaries,
                                 provided that such counsel shall state that
                                 they believe that both you and they are
                                 justified in relying upon such opinions and
                                 certificates);

                            (v)        The Company and its subsidiaries have
                                 good and marketable title in fee simple to all
                                 real property owned by them, in each case free
                                 and clear of all liens, encumbrances and
                                 defects except such as are described in the
                                 Prospectus or such as do not materially affect
                                 the value of such property and do not interfere
                                 with the use made and proposed to be made of
                                 such property by the Company and its
                                 subsidiaries; and any real property and
                                 buildings held under lease by the Company and
                                 its subsidiaries are held by them under valid,
                                 subsisting and enforceable leases with such
                                 exceptions as are not material and do not
                                 interfere with the use made and proposed to be
                                 made of such property and buildings by the
                                 Company and its subsidiaries (in giving the
                                 opinion in this clause, such counsel may state
                                 that no examination of record titles for the
                                 purpose of such opinion has been made, and that
                                 they are relying upon a general review of the
                                 titles of the Company and its subsidiaries,
                                 upon opinions of local counsel and abstracts,
                                 reports and policies of title companies
                                 rendered or issued at or subsequent to the time
                                 of acquisition of such property by the Company
                                 or its subsidiaries, upon opinions of counsel
                                 to the lessors of such property and, in respect
                                 to matters of fact, upon certificates of
                                 officers of the Company or its subsidiaries,
                                 provided that such counsel shall state that
                                 they believe that both you and they are
                                 justified in relying upon such opinions,
                                 abstracts, reports, policies and certificates);

                            (vi)       To the best of such counsel's knowledge
                                 and other than as set forth in the Prospectus,
                                 there are no legal or governmental proceedings
                                 pending to which the Company or any of its
                                 subsidiaries is a party or of which any
                                 property of the Company or any of its
                                 subsidiaries is the subject which, if
                                 determined adversely to the Company or any of
                                 its subsidiaries, would individually or in the
                                 aggregate have a material adverse effect on the
                                 current or future consolidated financial
                                 position, stockholders' equity or results of
                                 operations of the Company and its subsidiaries;
                                 and, to the best of such counsel's knowledge,
                                 no such proceedings are threatened or
                                 contemplated by governmental authorities or
                                 threatened by others;

                                       15

 
                            (vii)      This Agreement has been duly authorized,
                                 executed and delivered by the Company;

                            (viii)     The issue and sale of the Shares being
                                 delivered at such Time of Delivery by the
                                 Company and the compliance by the Company with
                                 all of the provisions of this Agreement and the
                                 consummation of the transactions herein
                                 contemplated will not conflict with or result
                                 in a breach or violation of any of the terms or
                                 provisions of, or constitute a default under,
                                 any indenture, mortgage, deed of trust, loan
                                 agreement or other agreement or instrument
                                 known to such counsel to which the Company or
                                 any of its subsidiaries is a party or by which
                                 the Company or any of its subsidiaries is bound
                                 or to which any of the property or assets of
                                 the Company or any of its subsidiaries is
                                 subject, nor will such action result in any
                                 violation of the provisions of the Certificate
                                 of Incorporation or By-laws of the Company or
                                 any statute or any order, rule or regulation
                                 known to such counsel of any court or
                                 governmental agency or body having jurisdiction
                                 over the Company or any of its subsidiaries or
                                 any of their properties;

                            (ix)       No consent, approval, authorization,
                                 order, registration or qualification of or with
                                 any such court or governmental agency or body
                                 is required for the issue and sale of the
                                 Shares or the consummation by the Company of
                                 the transactions contemplated by this
                                 Agreement, except the registration under the
                                 Act of the Shares, and such consents,
                                 approvals, authorizations, registrations or
                                 qualifications as may be required under state
                                 securities or Blue Sky laws in connection with
                                 the purchase and distribution of the Shares by
                                 the Underwriters;

                            (x)        Neither the Company nor any of its
                                 subsidiaries is in violation of its Certificate
                                 of Incorporation or By-laws or in default in
                                 the performance or observance of any material
                                 obligation, agreement, covenant or condition
                                 contained in any indenture, mortgage, deed of
                                 trust, loan agreement, lease or other agreement
                                 or instrument to which it is a party or by
                                 which it or any of its properties may be bound;

                            (xi)       The statements incorporated by reference
                                 into the Prospectus from the Company's
                                 Registration Statement on Form 8-A under the
                                 caption "Description of Capital Stock", insofar
                                 as they purport to constitute a summary of the
                                 terms of the Stock,

                                       16

 
                                 and under the caption "Underwriting", insofar
                                 as they purport to describe the provisions of
                                 the laws and documents referred to therein, are
                                 accurate, complete and fair;

                            (xii)      The Company is not an "investment
                                 company", as such term is defined in the
                                 Investment Company Act;

                            (xiii)     The documents incorporated by reference
                                 in the Prospectus or any further amendment or
                                 supplement thereto made by the Company prior to
                                 such Time of Delivery (other than the financial
                                 statements and related schedules therein, as to
                                 which such counsel need express no opinion),
                                 when they became effective or were filed with
                                 the Commission, as the case may be, complied as
                                 to form in all material respects with the
                                 requirements of the Act or the Exchange Act, as
                                 applicable, and the rules and regulations of
                                 the Commission thereunder; and they have no
                                 reason to believe that any of such documents,
                                 when such documents became effective or were so
                                 filed, as the case may be, contained, in the
                                 case of a registration statement which became
                                 effective under the Act, an untrue statement of
                                 a material fact or omitted to state a material
                                 fact required to be stated therein or necessary
                                 to make the statements therein not misleading,
                                 or, in the case of other documents which were
                                 filed under the Exchange Act with the
                                 Commission, an untrue statement of a material
                                 fact or omitted to state a material fact
                                 necessary in order to make the statements
                                 therein, in the light of the circumstances
                                 under which they were made when such documents
                                 were so filed, not misleading;

                            (xiv)      The Registration Statement and the
                                 Prospectus and any further amendments and
                                 supplements thereto made by the Company prior
                                 to such Time of Delivery (other than the
                                 financial statements and related schedules
                                 therein, as to which such counsel need express
                                 no opinion) comply as to form in all material
                                 respects with the requirements of the Act and
                                 the rules and regulations thereunder; although
                                 they do not assume any responsibility for the
                                 accuracy, completeness or fairness of the
                                 statements contained in the Registration
                                 Statement or the Prospectus, except for those
                                 referred to in the opinion in subsection (xi)
                                 of this section 7(c), they have no reason to
                                 believe that, as of its effective date, the
                                 Registration Statement or any further amendment

                                       17

 
                                 thereto made by the Company prior to such Time
                                 of Delivery (other than the financial
                                 statements and related schedules therein, as to
                                 which such counsel need express no opinion)
                                 contained an untrue statement of a material
                                 fact or omitted to state a material fact
                                 required to be stated therein or necessary to
                                 make the statements therein not misleading or
                                 that, as of its date, the Prospectus or any
                                 further amendment or supplement thereto made by
                                 the Company prior to such Time of Delivery
                                 (other than the financial statements and
                                 related schedules therein, as to which such
                                 counsel need express no opinion) contained an
                                 untrue statement of a material fact or omitted
                                 to state a material fact necessary to make the
                                 statements therein, in the light of the
                                 circumstances under which they were made, not
                                 misleading or that, as of such Time of
                                 Delivery, either the Registration Statement or
                                 the Prospectus or any further amendment or
                                 supplement thereto made by the Company prior to
                                 such Time of Delivery (other than the financial
                                 statements and related schedules therein, as to
                                 which such counsel need express no opinion)
                                 contains an untrue statement of a material fact
                                 or omits to state a material fact necessary to
                                 make the statements therein, in the light of
                                 the circumstances under which they were made,
                                 not misleading; and they do not know of any
                                 amendment to the Registration Statement
                                 required to be filed or of any contracts or
                                 other documents of a character required to be
                                 filed as an exhibit to the Registration
                                 Statement or required to be incorporated by
                                 reference into the Prospectus or required to be
                                 described in the Registration Statement or the
                                 Prospectus which are not filed or incorporated
                                 by reference or described as required;

               (xv) The Amalgamation Agreement has been duly authorized,
          executed and delivered by the Company, and constitutes a valid and
          binding agreement of the Company; and

               (xvi)  The Amalgamation has been duly authorized by all necessary
          corporate action of the Company;

                     (d)        On the date of the Prospectus at a time prior to
                           the execution of this Agreement, at 9:30 a.m., New
                           York City time, on the effective date of any post-
                           effective amendment to the Registration Statement
                           filed subsequent to the date of this Agreement and
                           also at each Time of Delivery, Ernst & Young LLP and
                           Arthur Anderson & Cle shall each have furnished to
                           you a letter or letters, dated the respective dates
                           of delivery thereof, in form and substance
                           satisfactory to you, 

                                       18

 
                           to the effect set forth in Annex I hereto (the
                           executed copy of the letter delivered prior to the
                           execution of this Agreement is attached as Annex I(a)
                           hereto and a draft of the form of letter to be
                           delivered on the effective date of any post-effective
                           amendment to the Registration Statement and as of
                           each Time of Delivery is attached as Annex I(b)
                           hereto);

                    (e)         (i) Neither the Company nor any of its
                           subsidiaries shall have sustained since the date of
                           the latest audited financial statements included or
                           incorporated by reference in the Prospectus any loss
                           or interference with its business from fire,
                           explosion, flood or other calamity, whether or not
                           covered by insurance, or from any labor dispute or
                           court or governmental action, order or decree,
                           otherwise than as set forth or contemplated in the
                           Prospectus, and (ii) since the respective dates as of
                           which information is given in the Prospectus there
                           shall not have been any change in the capital stock
                           or long-term debt of the Company or any of its
                           subsidiaries or any change, or any development
                           involving a prospective change, in or affecting the
                           general affairs, management, financial position,
                           stockholders' equity or results of operations of the
                           Company and its subsidiaries, otherwise than as set
                           forth or contemplated in the Prospectus, the effect
                           of which, in any such case described in Clause (i) or
                           (ii), is in the judgment of the Underwriters so
                           material and adverse as to make it impracticable or
                           inadvisable to proceed with the public offering or
                           the delivery of the Shares being delivered at such
                           Time of Delivery on the terms and in the manner
                           contemplated in the Prospectus;

                    (f)         On or after the date hereof (i) no downgrading
                           shall have occurred in the rating accorded the
                           Company's debt securities by any "nationally
                           recognized statistical rating organization", as that
                           term is defined by the Commission for purposes of
                           Rule 436(g)(2) under the Act, and (ii) no such
                           organization shall have publicly announced that it
                           has under surveillance or review, with possible
                           negative implications, its rating of any of the
                           Company's debt securities;

                    (g)         On or after the date hereof there shall not have
                           occurred any of the following: (i) a suspension or
                           material limitation in trading in securities
                           generally on the New York Stock Exchange or on
                           NASDAQ; (ii) a suspension or material limitation in
                           trading in the Company's securities on NASDAQ; (iii)
                           a general moratorium on commercial banking activities
                           declared by either Federal or New York or California
                           State authorities; or (iv) the outbreak or escalation
                           of hostilities involving the United States or the
                           declaration by the United States of a national
                           emergency or war, if the effect of any such event
                           specified in this Clause (iv) in the judgment of the
                           Underwriters makes it impracticable or inadvisable to
                           proceed 

                                       19

 
                           with the public offering or the delivery of the
                           Shares being delivered at such Time of Delivery on
                           the terms and in the manner contemplated in the
                           Prospectus;

                    (h)         The Shares to be sold at such Time of Delivery
                           shall have been duly listed for quotation on NASDAQ;

                    (i)         The Company shall have complied with the
                           provisions of Section 5(c) hereof with respect to the
                           furnishing of prospectuses on the New York Business
                           Day next succeeding the date of this Agreement;

                    (j)         The Company shall have furnished or caused to be
                           furnished to you at such Time of Delivery
                           certificates of officers of the Company satisfactory
                           to you as to the accuracy of the representations and
                           warranties of the Company herein at and as of such
                           Time of Delivery, as to the performance by the
                           Company of all of its obligations hereunder to be
                           performed at or prior to such Time of Delivery, as to
                           the matters set forth in subsections (a) and (e) of
                           this Section and as to such other matters as you may
                           reasonably request;

          (k) Prior to the issuance and sale by the Company and the purchase by
     the Underwriters of the Shares, the Amalgamation Agreement and the
     Amalgamation shall have been approved and adopted by the affirmative
     requisite vote of the shareholders of Discreet, and the Parent Stock
     Issuance (as defined in the Amalgamation Agreement) shall have been
     approved and adopted by the affirmative requisite vote of the stockholders
     of the Company; no termination of the Amalgamation Agreement or failure of
     any condition to the consummation of the Amalgamation shall have occurred
     or, to the knowledge of the Company and Discreet, is expected to occur; and
     no event shall have occurred or, to the knowledge of the Company and
     Discreet, has occurred or is expected to occur that would permit
     termination of the Amalgamation Agreement and abandonment of the
     Amalgamation pursuant to Section 7.1 thereof; and

          (l) No stop order suspending the effectiveness of the Amalgamation
     Registration Statement or any part thereof shall have been issued and no
     proceeding for that purpose shall have been threatened or initiated by the
     Commission.

8.    The Company will indemnify and hold harmless each Underwriter against any
    losses, claims, damages or liabilities, joint or several, to which such
    Underwriter may become subject, under the Act or otherwise, insofar as such
    losses, claims, damages or liabilities (or actions in respect thereof) arise
    out of or are based upon an untrue statement or alleged untrue statement of
    a material fact contained in any Preliminary Prospectus, the Registration
    Statement or the Prospectus, or any amendment or supplement thereto, or
    arise out of or are based upon the omission or alleged omission to state
    therein a material fact required to be stated therein or necessary to make
    the statements therein not misleading, and will reimburse each Underwriter
    for any legal or other expenses reasonably incurred by such Underwriter in
    connection with investigating or defending any such action or claim as such
    expenses are incurred; provided, however, that the Company shall not be
    liable in any such case to the extent that any such loss, claim, damage or
    liability arises out of or is based upon an untrue statement or alleged
    untrue statement or omission or alleged omission made 

                                       20

 
    in any Preliminary Prospectus, the Registration Statement or the Prospectus
    or any such amendment or supplement in reliance upon and in conformity with
    written information furnished to the Company by any Underwriter through
    Goldman, Sachs & Co. expressly for use therein.

The Company further agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Securities Act of 1933, as
amended or otherwise, insofar as such losses, claims damages or liabilities (or
actions in respect thereof) arise out of or are based upon the failure of any
person which is a stockholder of the Company or Discreet and to whom any
communication is made in connection with the offering of the Shares, which
communication may be deemed a "solicitation" of a "proxy" (each as defined in
Regulation 14A under the Securities Exchange Act of 1934, as amended), to have
first been supplied with a proxy statement meeting the requirements of Schedule
14A, as required by the applicable rules and regulations of the Securities and
Exchange Commission.

                            (a)        Each Underwriter will indemnify and hold
                                 harmless the Company against any losses,
                                 claims, damages or liabilities to which the
                                 Company may become subject, under the Act or
                                 otherwise, insofar as such losses, claims,
                                 damages or liabilities (or actions in respect
                                 thereof) arise out of or are based upon an
                                 untrue statement or alleged untrue statement of
                                 a material fact contained in any Preliminary
                                 Prospectus, the Registration Statement or the
                                 Prospectus, or any amendment or supplement
                                 thereto, or arise out of or are based upon the
                                 omission or alleged omission to state therein a
                                 material fact required to be stated therein or
                                 necessary to make the statements therein not
                                 misleading, in each case to the extent, but
                                 only to the extent, that such untrue statement
                                 or alleged untrue statement or omission or
                                 alleged omission was made in any Preliminary
                                 Prospectus, the Registration Statement or the
                                 Prospectus or any such amendment or supplement
                                 in reliance upon and in conformity with written
                                 information furnished to the Company by such
                                 Underwriter through Goldman, Sachs & Co.
                                 expressly for use therein; and will reimburse
                                 the Company for any legal or other expenses
                                 reasonably incurred by the Company in
                                 connection with investigating or defending any
                                 such action or claim as such expenses are
                                 incurred.

                            (b)        Promptly after receipt by an indemnified
                                 party under subsection (a) or (b) above of
                                 notice of the commencement of any action, such
                                 indemnified party shall, if a claim in respect
                                 thereof is to be made against the indemnifying
                                 party under such subsection, notify the
                                 indemnifying party in writing of the
                                 commencement thereof; but the omission so to
                                 notify the indemnifying party shall not relieve
                                 it from any liability which it may have to any
                                 indemnified party otherwise than under such
                                 subsection. In case any such action shall be
                                 brought against any indemnified party and it
                                 shall notify the indemnifying party of the
                                 commencement thereof, the 

                                       21

 
                                 indemnifying party shall be entitled to
                                 participate therein and, to the extent that it
                                 shall wish, jointly with any other indemnifying
                                 party similarly notified, to assume the defense
                                 thereof, with counsel satisfactory to such
                                 indemnified party (who shall not, except with
                                 the consent of the indemnified party, be
                                 counsel to the indemnifying party), and, after
                                 notice from the indemnifying party to such
                                 indemnified party of its election so to assume
                                 the defense thereof, the indemnifying party
                                 shall not be liable to such indemnified party
                                 under such subsection for any legal expenses of
                                 other counsel or any other expenses, in each
                                 case subsequently incurred by such indemnified
                                 party, in connection with the defense thereof
                                 other than reasonable costs of investigation.
                                 No indemnifying party shall, without the
                                 written consent of the indemnified party,
                                 effect the settlement or compromise of, or
                                 consent to the entry of any judgment with
                                 respect to, any pending or threatened action or
                                 claim in respect of which indemnification or
                                 contribution may be sought hereunder (whether
                                 or not the indemnified party is an actual or
                                 potential party to such action or claim) unless
                                 such settlement, compromise or judgment (i)
                                 includes an unconditional release of the
                                 indemnified party from all liability arising
                                 out of such action or claim and (ii) does not
                                 include a statement as to or an admission of
                                 fault, culpability or a failure to act, by or
                                 on behalf of any indemnified party.

                            (c)        If the indemnification provided for in
                                 this Section 8 is unavailable to or
                                 insufficient to hold harmless an indemnified
                                 party under subsection (a) or (b) above in
                                 respect of any losses, claims, damages or
                                 liabilities (or actions in respect thereof)
                                 referred to therein, then each indemnifying
                                 party shall contribute to the amount paid or
                                 payable by such indemnified party as a result
                                 of such losses, claims, damages or liabilities
                                 (or actions in respect thereof) in such
                                 proportion as is appropriate to reflect the
                                 relative benefits received by the Company on
                                 the one hand and the Underwriters on the other
                                 from the offering of the Shares. If, however,
                                 the allocation provided by the immediately
                                 preceding sentence is not permitted by
                                 applicable law or if the indemnified party
                                 failed to give the notice required under
                                 subsection (c) above, then each indemnifying
                                 party shall contribute to such amount paid or
                                 payable by such indemnified party in such
                                 proportion as is appropriate to reflect not
                                 only such relative benefits but also the
                                 relative fault of the Company on the one hand
                                 and the Underwriters on the other in connection
                                 with the statements or omissions which resulted
                                 in such losses, claims, damages or liabilities
                                 (or actions in respect thereof), as well as any
                                 other relevant equitable considerations. The
                                 relative benefits received by the Company on
                                 the one hand and the Underwriters on the other
                                 shall be deemed to be in the same proportion as
                                 the total net proceeds from the offering
                                 (before 

                                       22

 
                                 deducting expenses) received by the Company
                                 bear to the total underwriting discounts and
                                 commissions received by the Underwriters, in
                                 each case as set forth in the table on the
                                 cover page of the Prospectus. The relative
                                 fault shall be determined by reference to,
                                 among other things, whether the untrue or
                                 alleged untrue statement of a material fact or
                                 the omission or alleged omission to state a
                                 material fact relates to information supplied
                                 by the Company on the one hand or the
                                 Underwriters on the other and the parties'
                                 relative intent, knowledge, access to
                                 information and opportunity to correct or
                                 prevent such statement or omission. The Company
                                 and the Underwriters agree that it would not be
                                 just and equitable if contributions pursuant to
                                 this subsection (d) were determined by pro rata
                                 allocation (even if the Underwriters were
                                 treated as one entity for such purpose) or by
                                 any other method of allocation which does not
                                 take account of the equitable considerations
                                 referred to above in this subsection (d). The
                                 amount paid or payable by an indemnified party
                                 as a result of the losses, claims, damages or
                                 liabilities (or actions in respect thereof)
                                 referred to above in this subsection (d) shall
                                 be deemed to include any legal or other
                                 expenses reasonably incurred by such
                                 indemnified party in connection with
                                 investigating or defending any such action or
                                 claim. Notwithstanding the provisions of this
                                 subsection (d), no Underwriter shall be
                                 required to contribute any amount in excess of
                                 the amount by which the total price at which
                                 the Shares underwritten by it and distributed
                                 to the public were offered to the public
                                 exceeds the amount of any damages which such
                                 Underwriter has otherwise been required to pay
                                 by reason of such untrue or alleged untrue
                                 statement or omission or alleged omission. No
                                 person guilty of fraudulent misrepresentation
                                 (within the meaning of Section 11(f) of the
                                 Act) shall be entitled to contribution from any
                                 person who was not guilty of such fraudulent
                                 misrepresentation. The Underwriters'
                                 obligations in this subsection (d) to
                                 contribute are several in proportion to their
                                 respective underwriting obligations and not
                                 joint.

                            (d)        The obligations of the Company under this
                                 Section 8 shall be in addition to any liability
                                 which the Company may otherwise have and shall
                                 extend, upon the same terms and conditions, to
                                 each person, if any, who controls any
                                 Underwriter within the meaning of the Act; and
                                 the obligations of the Underwriters under this
                                 Section 8 shall be in addition to any liability
                                 which the respective Underwriters may otherwise
                                 have and shall extend, upon the same terms and
                                 conditions, to each officer and director of the
                                 Company (including any person who, with his or
                                 her consent, is named in the Registration
                                 Statement as about to become a director of the
                                 Company) and to each person, if any, who
                                 controls the Company within the meaning of the
                                 Act.

                                       23

 
9.     If any Underwriter shall default in its obligation to purchase the Shares
    which it has agreed to purchase hereunder at a Time of Delivery, you may in
    your discretion arrange for you or another party or other parties to
    purchase such Shares on the terms contained herein. If within thirty-six
    hours after such default by any Underwriter you do not arrange for the
    purchase of such Shares, then the Company shall be entitled to a further
    period of thirty-six hours within which to procure another party or other
    parties satisfactory to you to purchase such Shares on such terms. In the
    event that, within the respective prescribed periods, you notify the Company
    that you have so arranged for the purchase of such Shares, or the Company
    notifies you that it has so arranged for the purchase of such Shares, you or
    the Company shall have the right to postpone such Time of Delivery for a
    period of not more than seven days, in order to effect whatever changes may
    thereby be made necessary in the Registration Statement or the Prospectus,
    or in any other documents or arrangements, and the Company agrees to file
    promptly any amendments to the Registration Statement or the Prospectus
    which in your opinion may thereby be made necessary. The term "Underwriter"
    as used in this Agreement shall include any person substituted under this
    Section with like effect as if such person had originally been a party to
    this Agreement with respect to such Shares.

                            (a)        If, after giving effect to any
                                 arrangements for the purchase of the Shares of
                                 a defaulting Underwriter or Underwriters by you
                                 and the Company as provided in subsection (a)
                                 above, the aggregate number of such Shares
                                 which remains unpurchased does not exceed one-
                                 eleventh of the aggregate number of all the
                                 Shares to be purchased at such Time of
                                 Delivery, then the Company shall have the right
                                 to require each non-defaulting Underwriter to
                                 purchase the number of shares which such
                                 Underwriter agreed to purchase hereunder at
                                 such Time of Delivery and, in addition, to
                                 require each non-defaulting Underwriter to
                                 purchase its pro rata share (based on the
                                 number of Shares which such Underwriter agreed
                                 to purchase hereunder) of the Shares of such
                                 defaulting Underwriter or Underwriters for
                                 which such arrangements have not been made; but
                                 nothing herein shall relieve a defaulting
                                 Underwriter from liability for its default.

                            (b)        If, after giving effect to any
                                 arrangements for the purchase of the Shares of
                                 a defaulting Underwriter or Underwriters by you
                                 and the Company as provided in subsection (a)
                                 above, the aggregate number of such Shares
                                 which remains unpurchased exceeds one-eleventh
                                 of the aggregate number of all the Shares to be
                                 purchased at such Time of Delivery, or if the
                                 Company shall not exercise the right described
                                 in subsection (b) above to require non-
                                 defaulting Underwriters to purchase Shares of a
                                 defaulting Underwriter or Underwriters, then
                                 this Agreement (or, with respect to the Second
                                 Time of Delivery, the obligations of the
                                 Underwriters to purchase and of the Company to
                                 sell the Optional Shares) shall thereupon
                                 terminate, without liability on the part of any
                                 non-defaulting Underwriter or the Company,
                                 except for the expenses to be borne by the
                                 Company and the Underwriters as provided in

                                       24

 
     10.  The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.

     11.  If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.(9)

     12.  In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on your behalf.

     All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you in care of Goldman, Sachs & Co., 32 Old Slip, 9th
Floor, New York, New York  10005, Attention: Registration Department; and if to
the Company shall be delivered or sent by mail to the address of the Company set
forth in the Registration Statement, Attention: Secretary; provided, however,
that any notice to an Underwriter pursuant to Section 8(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such Underwriter
at its address set forth in its Underwriters' Questionnaire, or telex
constituting such Questionnaire, which address will be supplied to the Company
by you upon request.  Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.

     13.  This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.

     14.  Time shall be of the essence of this Agreement.  As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C.  is open for business.

     15.  This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

     16.  This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.

                                       25

 
     If the foregoing is in accordance with your understanding, please sign and
return to us 6 counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.

                                    Very truly yours,

                                    Autodesk, Inc.

                                    By:
                                       ------------------------
                                       Name:
                                       Title:

Accepted as of the date hereof:

Goldman, Sachs & Co.
Piper Jaffray Inc.
BancBoston Robertson Stephens Inc.

By: ___________________________________
        (Goldman, Sachs & Co.)

On behalf of each of the Underwriters

                                       26

 
                                   SCHEDULE I




                                                         Number of Optional
                                                            Shares to be
                                      Total  Number of      Purchased if
                                        Firm Shares        Maximum Option
Underwriter                           to be Purchased      Exercised
- -----------                           ----------------   ------------------
                                                   
Goldman, Sachs & Co ................
Piper Jaffray Inc...................
BancBoston Robertson Stephens Inc...
                                             ---------              -------
      Total.........................         3,000,000              450,000
                                             =========              =======


 
                                                                         ANNEX I
                 FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
               FOR REGISTRATION STATEMENTS ON FORMS S-2 AND S-3

     Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:

          (i) They are independent certified public accountants with respect to
     the Company and its subsidiaries within the meaning of the Act and the
     applicable published rules and regulations thereunder;

          (ii) In their opinion, the financial statements and any supplementary
     financial information and schedules (and, if applicable, financial
     forecasts and/or pro forma financial information) examined by them and
     included or incorporated by reference in the Registration Statement or the
     Prospectus comply as to form in all material respects with the applicable
     accounting requirements of the Act or the Exchange Act, as applicable, and
     the related published rules and regulations thereunder; and, if applicable,
     they have made a review in accordance with standards established by the
     American Institute of Certified Public Accountants of the consolidated
     interim financial statements, selected financial data, pro forma financial
     information, financial forecasts and/or condensed financial statements
     derived from audited financial statements of the Company for the periods
     specified in such letter, as indicated in their reports thereon, copies of
     which have been [separately] furnished to the representatives of the
     Underwriters (the "Representatives") [and are attached hereto];

          (iii)  They have made a review in accordance with standards
     established by the American Institute of Certified Public Accountants of
     the unaudited condensed consolidated statements of income, consolidated
     balance sheets and consolidated statements of cash flows included in the
     Prospectus and/or included in the Company's quarterly report on Form 10-Q
     incorporated by reference into the Prospectus as indicated in their reports
     thereon copies of which [have been separately furnished to the
     Representatives][are attached hereto]; and on the basis of specified
     procedures including inquiries of officials of the Company who have
     responsibility for financial and accounting matters regarding whether the
     unaudited condensed consolidated financial statements referred to in
     paragraph (vi)(A)(i) below comply as to form in the related in all material
     respects with the applicable accounting requirements of the [Act and the
     Exchange] Act and the related published rules and regulations, nothing came
     to their attention that caused them to believe that the unaudited condensed
     consolidated financial statements do not comply as to form in all material
     respects with the applicable accounting requirements of the [Act and the
     Exchange] Act and the related published rules and regulations;

          (iv) The unaudited selected financial information with respect to the
     consolidated results of operations and financial position of the Company
     for the five most recent fiscal years included in the Prospectus and
     included or incorporated by reference in Item 6 of the Company's Annual
     Report on Form 10-K for the most recent fiscal year agrees with the
     corresponding amounts (after restatement where applicable) in the audited
     consolidated 

 
     financial statements for such five fiscal years which were included or
     incorporated by reference in the Company's Annual Reports on Form 10-K for
     such fiscal years;

          (v) They have compared the information in the Prospectus under
     selected captions with the disclosure requirements of Regulation S-K and on
     the basis of limited procedures specified in such letter nothing came to
     their attention as a result of the foregoing procedures that caused them to
     believe that this information does not conform in all material respects
     with the disclosure requirements of Items 301, 302, 402 and 503(d),
     respectively, of Regulation S-K;

          (vi) On the basis of limited procedures, not constituting an
     examination in accordance with generally accepted auditing standards,
     consisting of a reading of the unaudited financial statements and other
     information referred to below, a reading of the latest available interim
     financial statements of the Company and its subsidiaries, inspection of the
     minute books of the Company and its subsidiaries since the date of the
     latest audited financial statements included or incorporated by reference
     in the Prospectus, inquiries of officials of the Company and its
     subsidiaries responsible for financial and accounting matters and such
     other inquiries and procedures as may be specified in such letter, nothing
     came to their attention that caused them to believe that:

               (A) (i) the unaudited condensed consolidated statements of
          income, consolidated balance sheets and consolidated statements of
          cash flows included in the Prospectus and/or included or incorporated
          by reference in the Company's Quarterly Reports on Form 10-Q
          incorporated by reference in the Prospectus do not comply as to form
          in all material respects with the applicable accounting requirements
          of the Exchange Act and the related published rules and regulations,
          or (ii) any material modifications should be made to the unaudited
          condensed consolidated statements of income, consolidated balance
          sheets and consolidated statements of cash flows included in the
          Prospectus or included in the Company's Quarterly Reports on Form 10-Q
          incorporated by reference in the Prospectus, for them to be in
          conformity with generally accepted accounting principles;

               (B) any other unaudited income statement data and balance sheet
          items included in the Prospectus do not agree with the corresponding
          items in the unaudited consolidated financial statements from which
          such data and items were derived, and any such unaudited data and
          items were not determined on a basis substantially consistent with the
          basis for the corresponding amounts in the audited consolidated
          financial statements included or incorporated by reference in the
          Company's Annual Report on Form 10-K for the most recent fiscal year;

               (C) the unaudited financial statements which were not included in
          the Prospectus but from which were derived the unaudited condensed
          financial statements referred to in Clause (A) and any unaudited
          income statement data and balance sheet items included in the
          Prospectus and referred to in Clause (B) were not determined on a
          basis substantially consistent with the basis for the audited
          financial statements included or incorporated by reference in the
          Company's Annual Report on Form 10-K for the most recent fiscal year;

                                       2

 
               (D) any unaudited pro forma consolidated condensed financial
          statements included or incorporated by reference in the Prospectus do
          not comply as to form in all material respects with the applicable
          accounting requirements of the Act and the published rules and
          regulations thereunder or the pro forma adjustments have not been
          properly applied to the historical amounts in the compilation of those
          statements;

               (E) as of a specified date not more than five days prior to the
          date of such letter, there have been any changes in the consolidated
          capital stock (other than issuances of capital stock upon exercise of
          options and stock appreciation rights, upon earn-outs of performance
          shares and upon conversions of convertible securities, in each case
          which were outstanding on the date of the latest balance sheet
          included or incorporated by reference in the Prospectus) or any
          increase in the consolidated long-term debt of the Company and its
          subsidiaries, or any decreases in consolidated net current assets or
          stockholders' equity or other items specified by the Representatives,
          or any increases in any items specified by the Representatives, in
          each case as compared with amounts shown in the latest balance sheet
          included or incorporated by reference in the Prospectus, except in
          each case for changes, increases or decreases which the Prospectus
          discloses have occurred or may occur or which are described in such
          letter; and

               (F) for the period from the date of the latest financial
          statements included or incorporated by reference in the Prospectus to
          the specified date referred to in Clause (E) there were any decreases
          in consolidated net revenues or operating profit or the total or per
          share amounts of consolidated net income or other items specified by
          the Representatives, or any increases in any items specified by the
          Representatives, in each case as compared with the comparable period
          of the preceding year and with any other period of corresponding
          length specified by the Representatives, except in each case for
          increases or decreases which the Prospectus discloses have occurred or
          may occur or which are described in such letter; and

          (vii)  In addition to the examination referred to in their report(s)
     included or incorporated by reference in the Prospectus and the limited
     procedures, inspection of minute books, inquiries and other procedures
     referred to in paragraphs (iii) and (vi) above, they have carried out
     certain specified procedures, not constituting an examination in accordance
     with generally accepted auditing standards, with respect to certain
     amounts, percentages and financial information specified by the
     Representatives which are derived from the general accounting records of
     the Company and its subsidiaries, which appear in the Prospectus (excluding
     documents incorporated by reference) or in Part II of, or in exhibits and
     schedules to, the Registration Statement specified by the Representatives
     or in documents incorporated by reference in the Prospectus specified by
     the Representatives, and have compared certain of such amounts, percentages
     and financial information with the accounting records of the Company and
     its subsidiaries and have found them to be in agreement.

                                       3


 
                                                                     EXHIBIT 5.1

                                 March 5, 1999


Autodesk, Inc.
111 McInnis Parkway
San Rafael, CA 94903

     Re:  Registration Statement on Form S-3
          ----------------------------------

Ladies and Gentlemen:

     We have examined the Registration Statement on Form S-3 filed by you with
the Securities and Exchange Commission on September 30, 1998, as amended by
Amendment No. 1 filed on February 26, 1999 and Amendment No. 2 filed on March 5,
1999 (the "Registration Statement") in connection with the registration under
the Securities Act of 1933, as amended, of 3,450,000 shares (including an over-
allotment option granted to the underwriters to purchase 450,000 shares) of
Common Stock, $0.01 par value of Autodesk, Inc. (the "Shares").  The Shares are
to be sold to the underwriters for resale to the public as described in the
Registration Statement and pursuant to the Underwriting Agreement being filed as
an exhibit thereto.  As your counsel, we have examined the proceedings proposed
to be taken in connection with said sale and issuance of the Shares.

     It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states, where required, the Shares, when issued and sold in the
manner referred to in the Registration Statement, will be legally and validly
issued, fully paid and nonassessable.

     We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.


                                    Sincerely,

                                    WILSON SONSINI GOODRICH & ROSATI
                                    Professional Corporation

                                    /s/ WILSON SONSINI GOODRICH & ROSATI


 
                                                                  Exhibit 23.1



             CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Experts" in
Amendement No. 2 to the Registration Statement (Form S-3) and related
Prospectus of Autodesk, Inc. for the registration of 3,450,000 shares of its
common stock and to the incorporation by reference therein of our report dated
February 24, 1998, (except for the second paragraph of Note 1, as to which the
date is January 25, 1999) with respect to the consolidated financial
statements of Autodesk, Inc. incorporated by reference in its Annual Report
(Form 10-K/A) for the year ended January 31, 1998 and the related financial
statement schedule included therein, filed with the Securities and Exchange
Commission.


                                        /s/ Ernst & Young LLP

San Jose, California
February 26, 1999


 
                                                                    EXHIBIT 23.2

================================================================================
                 CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
================================================================================


As independent chartered accountants, we hereby consent to the incorporation by
reference in this Amendment No.1 to the Registration Statement on Form S-3 of
our report dated July 31, 1998 (except with respect to the matters discussed
in Note 22, as to which the date is January 18, 1999 and to Note 2(a) as to
which the date is February 3, 1999) related to Discreet Logic Inc.'s
Consolidated Financial Statements as of June 30, 1997 and 1998 and for the
periods ended July 31, 1996, June 30, 1997 and June 30, 1998 and to all
references to our Firm, included in or made a part of Registration Statement
on Form S-3.


                                    /s/ Arthur Andersen & Cie
Montreal, Quebec                        Chartered Accountants
February 26, 1999                       General Partnership