BINDVIEW DEVELOPMENT CORP, S-1, 1998-05-15

BINDVIEW DEVELOPMENT CORP
S-1, 1998-05-15

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<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1998

REGISTRATION NUMBER 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BINDVIEW DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)

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<S> <C> <C>
TEXAS 7372 76-0306721
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

3355 WEST ALABAMA, SUITE 1200
HOUSTON, TEXAS 77098
713/843-1799
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

SCOTT R. PLANTOWSKY
CHIEF FINANCIAL OFFICER
BINDVIEW DEVELOPMENT CORPORATION
3355 WEST ALABAMA, SUITE 1200
HOUSTON, TEXAS 77098
713/843-1799
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:

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<S> <C>
ROBERT F. GRAY, JR. JAY K. HACHIGIAN
RICHARD H. GILDEN BRIAN K. BEARD
FULBRIGHT & JAWORSKI L.L.P. GUNDERSON DETTMER STOUGH
1301 MCKINNEY, SUITE 5100 VILLENEUVE FRANKLIN & HACHIGIAN, LLP
HOUSTON, TEXAS 77010 8911 CAPITAL OF TEXAS HIGHWAY, SUITE 4240
713/651-5151 AUSTIN, TEXAS 78759
512/342-2300
</TABLE>

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

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

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

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

CALCULATION OF REGISTRATION FEE
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<CAPTION>
====================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, no par value per share........................ $44,275,000 $13,062
====================================================================================================
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o).

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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2

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

SUBJECT TO COMPLETION, DATED MAY , 1998

BINDVIEW DEVELOPMENT CORPORATION

COMMON STOCK
------------------------------

Of the shares of Common Stock offered hereby, shares are being
sold by BindView Development Corporation ("BindView" or the "Company") and
shares are being sold by the Selling Shareholders. See "Principal and Selling
Shareholders." The Company will not receive any of the proceeds from the sale of
shares by the Selling Shareholders. Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial offering price will be between $ and $ per share. See
"Underwriting" for information relating to the method of determining the initial
public offering price. The Company has applied for quotation of the Common Stock
on the Nasdaq National Market System under the symbol "BVEW."
------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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<S> <C> <C> <C> <C>
============================================================================================================================
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS PROCEEDS TO TO SELLING
PUBLIC AND COMMISSIONS COMPANY(1) SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------
Per Share....................... $ $ $ $
- ----------------------------------------------------------------------------------------------------------------------------
Total(2)........................ $ $ $ $
============================================================================================================================
</TABLE>

(1) Before deducting expenses payable by the Company estimated at $ .

(2) The Company and certain selling Shareholders have granted to the
Underwriters a 30-day option to purchase up to an additional shares of
Common Stock solely to cover over-allotments, if any. See "Underwriting." If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to the Company and Proceeds to Selling
Shareholders will be $ , $ and $ , respectively.
------------------------------

The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1998.

BANCAMERICA ROBERTSON STEPHENS
BT ALEX. BROWN

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3

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

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4

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

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

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PAGE
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Summary..................................................... 4
Risk Factors................................................ 6
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Consolidated Financial Data........................ 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 29
Management.................................................. 41
Certain Transactions........................................ 50
Principal and Selling Shareholders.......................... 52
Description of Capital Stock................................ 54
Shares Eligible for Future Sale............................. 56
Underwriting................................................ 58
Legal Matters............................................... 59
Experts..................................................... 59
Additional Information...................................... 60
Index to Consolidated Financial Statements.................. F-1
</TABLE>

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

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

BindView EMS, NOSadmin and ActiveAdmin are trademarks of the Company and
BindView is a registered trademark of the Company. Trade names, service marks or
trademarks of other companies appearing in this Prospectus are the property of
their respective holders.

The Company was incorporated in Texas in May 1990. The Company's principal
executive offices are located at 3355 West Alabama, Suite 1200, Houston, Texas
77098, and its telephone number is (713) 843-1799. The Company's Web site is
located at www.bindview.com. Information contained in the Company's Web site
shall not be deemed to be a part of this Prospectus. Unless otherwise indicated,
all references in this Prospectus to "BindView" or the "Company" refer to
BindView Development Corporation and its subsidiaries.

Unless otherwise indicated, the information in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option, (ii) reflects a
2 1/2-to-1 split of the Company's common stock (the "Common Stock") that was
approved by the Company's Board of Directors on May 14, 1998, subject to
shareholder approval, and (iii) reflects, except in the Consolidated Financial
Statements, the conversion of all outstanding shares of Preferred Stock into
Common Stock and the exercise of outstanding warrants to purchase 749,999 shares
of Common Stock upon or prior to completion of this offering.

3
<PAGE> 5

SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus. This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors" and elsewhere in this
Prospectus.

THE COMPANY

BindView develops, markets and supports a suite of systems management
software products that manage the security and integrity of complex, distributed
client/server networks operating on Microsoft Windows NT and Novell NetWare
environments. The Company's primary product line, BindView EMS, provides
software solutions for systems administration, security management, enterprise
inventory of LAN assets and Year 2000 assessment of PC hardware and software.
BindView EMS can be used by network administrators, security auditors and other
IT personnel to proactively identify, diagnose and, in many cases, fix a wide
range of systems management problems allowing organizations to reduce the Total
Cost of Ownership of enterprise computing.

The use of distributed, client/server networks has grown tremendously in
the last ten years with the increase in PC-based LANs being one of the fastest
growing aspects of the client/server market. These LANs are largely dependent on
servers running network operating systems provided by Microsoft and Novell. As
these LANs have grown larger and technically more complex, the problems
associated with maintaining their security and integrity have increased and
become more difficult for IT departments to manage. As a result, network
security and integrity are increasingly at risk, and the Total Cost of Ownership
for client/server computing has often climbed far beyond management's
expectations. The market for systems management software to address these issues
is growing rapidly. IDC projects this market for the Windows and NetWare
platforms to grow to over $4.6 billion by the year 2000, with security
management software for Windows NT Server and NetWare accounting for $640
million of the total.

Historically, IT organizations have addressed LAN systems management
problems through a combination of manual processes, custom-built tools and
third-party software, but none of these alternatives have offered a completely
satisfactory solution. Third-party software solutions, in general, have been
more cost-effective, less time consuming and less prone to human error than
manual processes and custom-built tools. However, most of the traditional
third-party LAN suites in this market focus on management of the desktop and not
on the management of the network operating system. In addition, many of these
solutions were not built specifically to manage Windows NT and NetWare
environments, do not scale efficiently to manage networks as they grow to
enterprise-wide deployments and do not provide the diagnostic software to find
and fix the root cause of a problem. As an organization's dependence on its LAN
infrastructure increases, its IT department must be able to address these
shortcomings.

The Company's comprehensive suite of systems management software products
enable IT organizations to manage the increasingly complex issues associated
with managing the security and integrity of the LAN environment in a
cost-effective manner. BindView EMS has been built to be native to each of the
Windows NT and Novell NetWare platforms that it supports. BindView EMS has also
been designed to manage workgroup LANs as well as enterprise-wide networks of
tens of thousands of users. BindView's product offerings utilize a unique
query-based approach to systems management that allows users to perform
diagnostic and reporting tasks in a matter of minutes that previously took hours
or even days to complete. Finally, the Company's products are designed to be
both easy to install and use, with a typical enterprise-wide deployment taking
just days or weeks to install depending on the product.

The Company's products have been sold to more than 70% of the Fortune 100
companies. BindView markets and sells its products primarily through a direct
telesales organization of 75 people located in Houston, Texas and Frankfurt,
Germany, and, to a lesser extent, through VARs, distributors and systems
integrators. The Company has sold its software products through direct channels
to over 4,000 corporations, governmental agencies and other organizations
worldwide, and also to over 150 resellers and distributors. The Company's
customers currently include: 3Com, Blue Cross and Blue Shield, Chase, Ernst &
Young, Federal Reserve Bank, GE Capital, Hoechst, Kellogg, Michelin, PageNet,
Paramount Pictures, Proctor & Gamble, Sony, Sprint and Suntrust.

The Company's objective is to be the leading provider of systems management
software for enterprise networks. In order to meet this goal, the Company's
strategy is to enhance its leadership position in security assessment software,
enhance its systems administration capabilities, apply query-based management to
new applications, expand its direct telesales model, leverage its existing
customer base and strengthen its strategic relationships.

4
<PAGE> 6

THE OFFERING

Common Stock Offered by the Company....... shares

Common Stock Offered by the Selling
Shareholders.............................. shares

Common Stock to be Outstanding after the
Offering.................................. shares(1)(2)

Use of Proceeds........................... For working capital and general
corporate
purposes. See "Use of Proceeds."

Proposed Nasdaq National Market Symbol.... BVEW
- ---------------
(1) Based on the number of shares outstanding as of March 31, 1998. Excludes
4,988,003 shares subject to outstanding options as of March 31, 1998 at a
weighted average exercise price of $2.12 per share and 1,928,062 shares
reserved for issuance under the Company's stock option plans. See
"Management -- Stock Option Plans" and Note 7 of the Notes to Consolidated
Financial Statements.
(2) Reflects the conversion of outstanding Preferred Stock into Common Stock and
the exercise of outstanding warrants to purchase 749,999 shares of Common
Stock upon the completion of this offering.

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

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues.......................................... $3,031 $5,171 $7,333 $11,002 $ 20,838 $ 3,423 $ 5,840
Operating income (loss)........................... 396 509 783 1,982 (11,296) 725 390
Net income (loss)................................. 389 488 754 1,990 (8,028) 739 397
Pro forma net income (loss)(3).................... 253 317 490 1,293 (7,263) 480 --(9)
Diluted pro forma net income (loss) per
share(4)(5)..................................... $ 0.03 $ 0.04 $ 0.06 $ 0.12 $ (0.85) $ 0.03 $ 0.02
Shares used in computing diluted pro forma net
income (loss) per share(5)...................... 8,228 8,228 8,228 11,046 8,548 14,314 16,322
OTHER FINANCIAL DATA:
Operating income excluding stock compensation
expense(6)(7)................................... $ 396 $ 509 $ 783 $ 2,418 $ 3,966 $ 725 $ 390
Pro forma net income excluding stock compensation
expense(3)(6)(7)................................ 253 317 490 1,577 2,655 480 397
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------------------
PRO
ACTUAL FORMA(2) AS ADJUSTED(2)(8)
------- -------- --------------------
(UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................. $10,857 $13,857 $
Total assets................................................ 17,105 20,105
Long-term liabilities, net of current portion............... -- --
Total shareholders' equity.................................. 12,647 15,647
</TABLE>

- ------------
(1) Based on the number of shares outstanding as of March 31, 1998. Excludes
4,988,003 shares subject to outstanding options as of March 31, 1998 at a
weighted average exercise price of $2.12 per share and 1,928,062 shares
reserved for issuance under the Company's stock option plans. See
"Management -- Stock Option Plans" and Note 7 of the Notes to Consolidated
Financial Statements.
(2) Reflects the conversion of outstanding Preferred Stock into Common Stock and
the exercise of outstanding warrants to purchase 749,999 shares of Common
Stock upon the completion of this offering.
(3) Net income of the Company, adjusted for a pro forma charge in lieu of income
taxes as if the Company were a C Corporation for all periods.
(4) See Note 10 of the Notes to Consolidated Financial Statements for an
explanation of the method used to determine the number of shares used in
computing pro forma net income per share.
(5) The amounts for the three months ended March 31, 1998 represent actual
diluted net income per share rather than pro forma diluted net income per
share and the number of shares used to determine such amount.
(6) Excludes $436,000 and $14,712,000 of stock compensation expense recognized
by the Company in 1996 and 1997, respectively, in connection with the
Company's terminated Phantom Stock Plan and $550,000 recognized in
connection with the issuance to an officer of a warrant to purchase 437,500
shares of common stock. See "Management -- Phantom Stock Plan."
(7) The Company has presented operating income excluding stock compensation
expense and pro forma net income excluding stock compensation expense as it
believes potential investors may find such data useful. However, such data
is not prepared in accordance with generally accepted accounting principles
and investors should not utilize this data as a substitute for operating
income or pro forma net income.
(8) Adjusted to reflect the sale of shares of Common Stock by the Company at
the initial offering price of per share and the application of the
estimated net proceeds. See "Use of Proceeds" and "Capitalization."
(9) Not applicable as the Company was a C Corporation for the entire period.

5
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RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and elsewhere in this Prospectus.

OPERATING RESULTS SUBJECT TO SIGNIFICANT FLUCTUATIONS; SEASONALITY

The Company's quarterly revenues, expenses and operating results have in
the past varied and in the future will continue to vary significantly due to a
variety of factors, such as demand for the Company's products, the size and
timing of significant orders and their fulfillment, the length of the sales
cycle for larger orders, the number, timing and significance of product
enhancements and new product announcements by the Company and its competitors,
changes in pricing policies by the Company or its competitors, customer order
deferrals in anticipation of enhancements or new products offered by the Company
or its competitors or in anticipation of changes or delays in network operating
system ("NOS") platforms and technologies, the ability of the Company to
develop, introduce and market new and enhanced versions of its products on a
timely basis, changes in the Company's level of operating expenses, budgeting
cycles of its customers, product life cycles, undetected software errors and
other product quality problems, the Company's ability to attract and retain
qualified personnel, changes in the Company's sales incentive plans and staffing
of sales territories, changes in the mix of products and services sold, changes
in the mix of domestic and international revenues, the level of international
expansion, changes in the mix of channels through which the Company's products
are offered, the impact of industry consolidation, the Company's ability to
control costs and general domestic and international economic and political
conditions. The Company operates with virtually no order backlog because its
software products are shipped shortly after orders are received, which makes
product revenues in any quarter substantially dependent on orders booked
throughout that quarter. A disproportionate amount of the Company's sales are
booked in the last few weeks or days of each quarter as a result of customer
buying patterns. The Company believes this pattern will continue. Moreover, the
Company's expense levels are based to a significant extent on the Company's
expectations of future revenues and therefore are relatively fixed in the short
term. If revenue levels are below expectations, operating results are likely to
be adversely and disproportionately affected because only a small portion of the
Company's expenses vary with its revenues.

The Company's quarterly operating results are subject to certain seasonal
fluctuations, largely due to customer buying patterns. Historically, the
Company's revenues have tended to be strongest in the fourth quarter of the year
and to decrease in the first quarter of the following year. The Company believes
this seasonality is due to the calendar year budgeting cycles of many of its
customers and to compensation polices tending to compensate sales personnel for
achieving annual revenue quotas. In future periods, the Company expects these
seasonal trends may cause first quarter revenues to be significantly lower than
the level achieved in the preceding fourth quarter.

Prior to January 1, 1998, the Company provided telephone support free of
charge and sold product upgrades separately or through subscription contracts.
The Company now requires its customers to purchase a subscription policy in
order to receive product upgrades and technical support. Unlike software license
revenues that are generally recognized upon shipment of the product, the Company
recognizes revenues from the sale of subscription contracts ratably over the
life of the contract term. As a result, to the extent that the Company derives a
larger percentage of its revenues from the sale of subscription contracts, the
Company will experience an increase in deferred revenue that is likely to result
in decreases in operating margins that could have an adverse effect on the
Company's business operating results and financial condition.

Based upon all of the factors described above, the Company believes that
its quarterly revenues, expenses and operating results are likely to vary
significantly in the future, that period-to-period comparisons of its operating
results are not necessarily meaningful and that, in any event, such comparisons
should not be relied upon as indications of future performance. The Company has
limited ability to forecast future revenues, and it

6
<PAGE> 8

is likely that in some future quarter the Company's operating results will be
below the expectations of public market analysts and investors. In the event
operating results are below expectations, or in the event adverse conditions
prevail or are perceived to prevail generally or with respect to the Company's
business, the price of the Company's Common Stock would likely be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

LIMITED OPERATING HISTORY; FUTURE OPERATING RESULTS UNCERTAIN

Although the Company was founded in 1990 and began shipping its first
products in 1991, the Company has derived substantially all of its revenues
since 1995 from sales of its BindView NCS product released in 1993 and its
BindView EMS product, which replaced the BindView NCS product in 1996. The
Company therefore has a limited history of operating results based on its
primary products and, accordingly, the Company's prospects should be viewed in
light of the risks and uncertainties inherent to a software company in the early
stages of development, particularly in the highly competitive and rapidly
evolving systems management software market. To compete in this market, the
Company believes that it will be necessary to devote substantial resources to
expanding its sales and marketing organization and to continued product
development. As a result, the Company will need to recognize significant
quarterly revenues to maintain profitability. Although the Company's revenues
have increased in recent years, and revenues for recent quarters have exceeded
revenues for the same quarter for the prior year, there can be no assurance that
the Company's revenues will grow in future periods, that they will grow at past
rates or that the Company will remain profitable on a quarterly or annual basis
in the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

SIGNIFICANT COMPETITION

The market in which the Company competes is intensely competitive and
characterized by rapidly changing technology and evolving standards. Companies
offering competitive products vary in the scope and breadth of the products and
services offered and include: (i) providers of security analysis and audit
products, such as Axent Technologies, Inc. and Security Dynamics Technologies,
Inc.; (ii) providers of standalone inventory and asset management products such
as Tally Systems Corp.; (iii) providers of LAN desktop management suites, such
as Intel Corporation, Hewlett-Packard Company and Microsoft Corporation; and
(iv) providers of Year 2000 assessment products such as Network Associates, Inc.
In addition, the native tools provided by Novell, Inc. and third-party tools
provided by certain vendors, such as Computer Associates, Inc. and other
companies, may compete with certain management features of the Company's
products. The Company has experienced, and expects to continue to experience,
increased competition from current and potential competitors, many of whom have
significantly greater financial, technical, marketing and other resources than
the Company. Such competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than the
Company. Also, certain current and potential competitors, including such
enterprise management companies as IBM/Tivoli and Computer Associates, Inc., may
have greater name recognition or more extensive customer bases that could be
leveraged. The Company expects additional competition as other established and
emerging companies enter into the network management software market and new
products and technologies are introduced. Increased competition could result in
price reductions, fewer customer orders, reduced gross margins, longer sales
cycles and loss of market share, any of which would materially adversely affect
the Company's business, operating results and financial condition.

In addition, vendors of operating system software, particularly Microsoft
and Novell, may in the future enhance their products to include functionality
that is currently provided by the Company's products. The widespread inclusion
of the functionality of the Company's software as standard features of operating
system software could render the Company's products obsolete and unmarketable,
particularly if the quality of such functionality were comparable to that of the
Company's products. Even if the functionality provided as standard features by
operating system software is more limited than that of the Company's software,
there can be no assurance that a significant number of customers would not elect
to accept more limited functionality in lieu of purchasing additional software.

7
<PAGE> 9

Current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing their ability to address the needs of the Company's current
or prospective customers. Accordingly, it is possible that new competitors or
alliances among current and new competitors may emerge and rapidly gain
significant market share. Such competition could materially adversely affect the
Company's ability to obtain new licenses or to obtain maintenance and support
renewals for existing licenses on terms favorable to the Company. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors, and the failure to do so would materially
adversely affect the Company's business, operating results and financial
condition. See "Business -- Competition."

RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS

The market for the Company's products is characterized by rapid
technological change, frequent new product introductions and enhancements,
uncertain product life cycles, changes in customer demands and evolving industry
standards. The introduction of products embodying new technologies and the
emergence of new industry standards could render existing products obsolete and
unmarketable. The Company relies heavily on its relationships with Microsoft and
Novell and attempts to coordinate its product offerings with the future releases
of operating systems by such vendors. The Company may or may not be made aware
of such feature enhancements prior to their release and, therefore, may not be
able to introduce products on a timely basis that capitalize on such operating
system releases and feature enhancements. As a result of the complexities
inherent in client/server computing environments, the life cycles of the
Company's software products are difficult to estimate and new products and
product enhancements can require long development and testing periods and are
dependent on the Company's ability to hire and retain increasingly scarce and
technically competent personnel. As a result, significant delays in the general
availability of such new releases or significant problems in the installation or
implementation of such new releases could have a material adverse effect on the
Company's business, operating results and financial condition. The Company has,
on occasion, experienced delays in the scheduled introduction of new and
enhanced products and there can be no assurance that such delays will not be
experienced in the future. As a result, the Company's future success will
depend, in part, upon its ability to continue to enhance existing products and
develop and introduce in a timely manner new products to keep pace with
technological change and evolving industry standards, satisfy customer
requirements and achieve market acceptance. There can be no assurance that the
Company will successfully identify new product opportunities and develop and
bring new products to market in a timely and cost-effective manner, or that
products, capabilities or technologies developed by others will not render the
Company's products or technologies obsolete or noncompetitive or shorten the
life cycles of the Company's products. See "Business -- Product Development."

DEPENDENCE ON CONTINUED GROWTH OF THE MARKET FOR WINDOWS NT AND NOVELL NETWARE
OPERATING SYSTEMS

To date, all of the Company's revenues have been dependent upon Microsoft's
Windows NT and Novell's NetWare operating systems. Although demand for Windows
NT and Novell NetWare operating systems has grown in recent years with the
proliferation of distributed computing, this market is still emerging and there
can be no assurance that it will continue to grow or that, even if the market
does grow, organizations will continue to adopt the Company's products. The rate
of acceptance of the Company's products is dependent upon the increasing
complexity of Windows NT and NetWare operating systems and the lack of effective
tools to simplify system administration and security management for these
environments. There can be no assurance that the market for the Company's
products will continue to develop or that the Company's products will be widely
accepted. Additionally, there can be no assurance that the market for system
administration and security management software generally will continue to grow.
If the markets for the Company's products fail to develop or develop more slowly
than the Company currently anticipates, the Company's business, operating
results and financial condition would be materially adversely affected. The
percentages of the Company's revenues attributable to licenses of its software
operating on particular platforms are subject to change from time to time due to
a number of factors outside the Company's control, such as changing market
acceptance and penetration of the various operating system platforms supported
by the Company and the relative mix of development and installation by
value-added resellers ("VARs") of
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<PAGE> 10

application software operating on such platforms. See "Business -- Industry
Background," "-- Products and Technology" and "-- Sales and Marketing."

PRODUCT CONCENTRATION

Substantially all of the Company's revenues to date have been attributable
to the sale of its NOSadmin and NETinventory products, and these products are
currently expected to account for substantially all of the Company's revenues
for the foreseeable future. The Company's future operating results are dependent
upon continued market acceptance of its NOSadmin and NETinventory products and
enhancements to these products, as well as the continued development of
additional snap-in modules to its Enterprise Console product. Consequently, a
decline in the demand for, or market acceptance of, the Company's NOSadmin and
NETinventory products as a result of competition, technological change or other
factors, would have a material adverse effect on the Company's business,
operating results and financial condition. Although the Company currently has
plans to broaden its product line, there can be no assurance that such product
concentration will be reduced. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Products and
Technology."

RISKS ASSOCIATED WITH LENGTH OF SALES CYCLE

The Company has traditionally focused sales of its products to the
workgroups and divisions of a customer, resulting in a sales cycle ranging
between three and six months. Recently, the Company has focused more of its
selling effort on products for the customer's entire enterprise, since such
sales represent a larger revenue opportunity. However, the sales cycle for these
enterprise-wide sales typically ranges between six and twelve months, which can
be more than twice as long as the sales cycle for smaller scale implementations.
Because of the costs involved, customers of enterprise-wide sales generally
commit significant resources to an evaluation of available network management
software and require the Company to expend substantial time, effort and money
educating them about the value of the Company's products and services.
Enterprise-wide sales of the Company's software products require an extensive
sales effort throughout a customer's organization because decisions to license
and deploy such software generally involve the evaluation of the software by a
significant number of customer personnel in various functional and geographic
areas, each often having specific and conflicting requirements. A variety of
factors, including factors over which the Company has little or no control, may
cause potential customers to favor competing products or to delay or forego a
purchase. As a result of the length of the sales cycle for larger,
enterprise-wide sales of its products and services, the Company has a limited
ability to forecast the timing and amount of specific sales. The delay or
failure to complete one or more large, enterprise-wide sales in a particular
quarter or calendar year could have a materially adverse effect on the Company's
business, operating results and financial condition and could cause the
Company's operating results to vary significantly from quarter to quarter. See
"-- Operating Results Subject to Significant Fluctuations; Seasonality."

MANAGEMENT OF A RAPIDLY CHANGING BUSINESS

The Company has recently experienced a period of significant expansion that
has placed significant demands upon its management, systems and resources. In
particular, the Company had a total of 182 employees at March 31, 1998, as
compared to 85 at March 31, 1997. This expansion of the Company's business has
placed, and any future expansion is expected to continue to place, a significant
strain on the Company's management and operations, including its sales, customer
support, research and development, finance and administrative operations. The
Company is in the process of upgrading its internal financial, reporting and
sales contact management systems to enhance the Company's ability to obtain,
analyze and manage information and sales contacts derived from its domestic and
international operations. There can be no assurance, however, that the Company's
existing or future controls, systems or procedures will be adequate to support
the Company's operations. The Company is also considering moving to new
headquarters facilities in 1998, which can be a disruptive, time consuming and
expensive process. The Company's ability to manage its future growth, if any,
will require the Company to continually improve its financial and management
controls, reporting systems and procedures on a timely basis, implement new
systems as necessary, expand,

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<PAGE> 11

train and manage its employee workforce and recruit qualified management
personnel. There can be no assurance that the Company's controls, systems,
procedures or management will be adequate to support the Company's operations.
Further, the implementation of such controls, systems or procedures could entail
substantial expense and require the time and attention of key management
personnel, either of which could have a materially adverse effect on the
Company's business, operating results or financial condition. The rapid
expansion of the Company's business may result in the Company being subject to a
variety of local, state, federal and international taxes. Although the Company
believes it is currently in compliance with the rules and regulations of such
tax jurisdictions, due to the complexity inherent in such tax laws, any
discovered current or future tax liabilities could have a materially adverse
effect on the Company's business, operating results and financial condition. The
founders of the Company, including the Company's Chief Executive Officer, have
had no prior experience managing a large or public company, and have only
limited experience managing a rapidly growing business organization. The failure
of the Company's management to respond effectively to changing business
conditions would have a material adverse effect upon the Company's business,
operating results and financial condition.

DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL QUALIFIED PERSONNEL

The Company's success depends to a significant extent upon the efforts of
Eric J. Pulaski, the Company's President and Chief Executive Officer, who is not
bound by an employment contract, and other key management, sales and marketing,
technical support and research and development personnel. The loss of key
management or technical personnel could adversely affect the Company. The
Company does not maintain key man life insurance policies on any of its
executive officers. The Company believes that its future success will depend in
large part upon its continuing ability to attract and retain highly skilled
research and development, technical support and sales and marketing personnel.
Like other software companies, the Company faces intense competition for such
personnel and the Company has at times experienced and continues to experience
difficulty in recruiting qualified personnel. The Company anticipates that it
will need to continue to increase the size of its research and development,
direct telesales, services and support personnel in future periods. In
particular, the Company has experienced difficulties in hiring and retaining
qualified research and development personnel. In order to support sales growth,
if any, the Company will need to increase the size of its sales and marketing
staff, increase the staff's productivity and, in selected markets, develop
indirect distribution channels. There can be no assurance that the Company will
be able to successfully leverage its sales force or that the Company's sales and
marketing organization will successfully compete against the more extensive and
better funded sales and marketing organizations of many of the Company's current
and future competitors. There can be no assurance that the Company will be
successful in attracting, assimilating and retaining additional qualified
personnel in the future. The loss of the services of one or more of the
Company's key individuals or the failure to attract and retain additional
qualified personnel, could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business -- Employees"
and "Management."

RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS

During 1995, 1996 and 1997, and during the three months ended March 31,
1998, the Company derived approximately 16%, 10%, 13% and 10% of its revenues,
respectively, from sales outside North America. The Company only recently opened
its first direct telesales and service office outside the United States.
Historically, the Company has generated revenues outside North America through
indirect channels, including VARs and other distributors. The Company is in the
early stages of developing its indirect distribution channels in certain markets
outside the United States. There can be no assurance that the Company will be
able to attract third parties that will be able to market the Company's products
effectively and will be qualified to provide timely and cost-effective customer
support and service. The Company's arrangements with its resellers generally
provide that such resellers may carry competing product offerings. There can be
no assurance that any distributor or reseller will continue to represent the
Company's products. The inability to recruit, or the loss of, important sales
personnel, distributors or resellers could materially adversely affect the
Company's business, operating results and financial condition.

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<PAGE> 12

The Company anticipates that for the foreseeable future an increasing
percentage of its revenues may be derived from sources outside North America as
the Company seeks to expand its sales and support operations internationally. In
January 1998, the Company established its first international direct telesales
office and is still adapting the telesales model utilized by the Company in
North America to local conditions. In order to successfully expand international
sales, the Company must establish additional international direct telesales
offices, expand the management and support organizations for its international
sales channel, hire additional personnel, customize its products for local
markets, recruit additional international resellers where appropriate and expand
the use of its direct telesales model. There are currently only a limited number
of companies that have established a direct telesales model in countries outside
the United States. In the event the Company is unable to establish and generate
increased sales through a direct telesales model, it will incur higher personnel
costs without corresponding increases in revenue, resulting in lower operating
margins for its international operations. In addition, the differing employment
policies of countries outside the United States potentially reduce the Company's
flexibility in managing headcount and, in turn, managing personnel-related
expenses. To the extent that the Company is unable to address the risks
associated with these international sales in a timely and cost-effective manner,
the Company's sales growth internationally, if any, will be limited, operating
margins could be reduced by increases in personnel-related expenses without
corresponding increases in revenues, and the Company's business, operating
results and financial condition could be materially adversely affected. Even if
the Company is able to successfully expand its international operations, there
can be no assurance that the Company will be able to maintain or increase
international market demand for its products. See "Business -- Sales and
Marketing."

The Company's international operations are generally subject to a number of
risks, including costs of customizing products for foreign countries,
protectionist laws and business practices favoring local competition, dependence
on local vendors, compliance with multiple, conflicting and changing
governmental laws and regulations, longer sales cycles, greater difficulty or
delay in accounts receivable collection, import and export restrictions and
tariffs, difficulties in staffing and managing foreign operations, foreign
currency exchange rate fluctuations, multiple and conflicting tax laws and
regulations and political and economic instability. To date, substantially all
of the Company's revenues and costs have been denominated in U.S. dollars.
However, the Company believes that in the future, an increasing portion of the
Company's revenues and costs will be denominated in foreign currencies. There
can be no assurance that future fluctuations in the value of foreign currencies
will not have a material adverse effect on the Company's business, operating
results and financial condition. Management currently does not have an active
foreign exchange hedging program. As a result the Company's foreign operations
are subject to the risks of future foreign currency fluctuations, to the extent
that they are not hedged by obligations denominated in local currencies. See
"-- Operating Results Subject to Significant Fluctuations; Seasonality" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT

The Company relies primarily on a combination of copyright, trademark and
trade secret laws, confidentiality procedures and contractual provisions to
protect its proprietary rights. However, the Company believes that such measures
afford only limited protection. There can be no assurance that others will not
develop technologies that are similar or superior to the Company's technology or
design around the copyrights and trade secrets owned by the Company. The Company
licenses its software products primarily under "shrink wrap" licenses (i.e.,
licenses included as part of the product packaging). Shrink wrap licenses are
not negotiated with or signed by individual licensees and purport to take effect
upon the opening of the product package. In cases where the Company negotiates a
specific license with a customer, the license agreement contains provisions
purporting to protect the Company's proprietary rights. The Company believes,
however, that these measures afford only limited protection. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Policing unauthorized use
of the Company's products is difficult and the Company is unable to determine
the extent to which its products may be copied by unauthorized parties. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights as fully as do the laws of the United States. There can be no
assurance that the Company's means of
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<PAGE> 13

protecting its proprietary rights will be adequate or that competition will not
independently develop similar or superior technology.

The Company is not aware that it is infringing upon any proprietary rights
of third parties. There can be no assurance, however, that third parties will
not claim infringement by the Company of their intellectual property rights. The
Company expects that software product developers increasingly will be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management's attention
and resources, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company, if at all. In
the event of a successful claim of product infringement against the Company and
failure or inability of the Company to either license the infringed or similar
technology or develop alternative technology on a timely basis, the Company's
business, operating results and financial condition could be materially
adversely affected. See "Business -- Proprietary Rights."

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS

Historically, the Company has not engaged in a substantial number of
acquisitions. However, in order to remain competitive in the future, the Company
may find it necessary to acquire businesses, products and technologies that
could complement or expand the Company's business. In the event that the Company
identifies an appropriate acquisition candidate, there can be no assurance that
the Company would be able to successfully negotiate the terms of any such
acquisition, finance such acquisition or integrate such acquired business,
products or technologies into the Company's existing business and operations.
Furthermore, the negotiation of potential acquisitions as well as the
integration of an acquired business could cause diversions of management time
and resources. There can be no assurance that a given acquisition, whether or
not consummated, would not materially adversely affect the Company's business,
operating results and financial condition. If the Company proceeds with one or
more significant acquisitions in which the consideration consists of cash, the
Company may be required to use a substantial portion of the Company's available
cash (including proceeds of this offering) to consummate the acquisitions. If
the Company consummates one or more significant acquisitions in which the
consideration consists of stock, shareholders of the Company could suffer a
significant dilution of their interests in the Company. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

RISK OF UNDETECTED SOFTWARE ERRORS

Software products as complex as those offered by the Company may contain
certain undetected errors, particularly when first introduced or when new
versions or enhancements are released. The Company has in the past discovered
software errors in certain of its new products after their introduction. There
can be no assurance that, despite testing by the Company, such errors will not
be found in current versions, new versions or enhancements of its products after
commencement of commercial shipments, resulting in adverse publicity, loss of
revenues, delay in market acceptance or claims by customers brought against the
Company, all of which could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business -- Product
Development."

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products were not
built to cope with issues that will result from accepting and processing dates
beyond December 31, 1999. This problem stems from the fact that many software
products, computer systems, and other equipment with embedded hardware chips
that use dates, have stored the year component of such dates as a two-digit
number relative to the year 1900 rather than as a four-digit number (e.g.,
storing the year as "98" rather than "1998"). On January 1, 2000, systems using
only a two-digit year may interpret the year "00" as "1900" rather than "2000"
and continue to misinterpret subsequent years as well. In addition, the clocks
of many systems that automatically compute leap years may incorrectly compute
leap years beyond 1999. Many other associated problems could also occur,
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<PAGE> 14

including system failures or miscalculations causing disruption of operations.
As a result, in the next two years, computer systems and/or software used by
many companies may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry concerning
the potential effects associated with such compliance. Although the latest
versions of BindView EMS are designed to be Year 2000 compliant, releases of
BindView EMS before version 5.2a are not Year 2000 compliant or have not been
tested for Year 2000 compliance. There can be no assurance the Company's
software products designed to be Year 2000 compliant contain all necessary date
code changes.

The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase products and services such as those
offered by the Company. Potential customers may also choose to defer purchasing
Year 2000 compliant products until they believe it is absolutely necessary, thus
resulting in depressed market sales within the industry. Conversely, Year 2000
issues may cause other companies to accelerate purchases, thereby causing an
increase in short-term demand and a consequent decrease in long-term demand for
software products. Additionally, Year 2000 issues could cause a significant
number of companies, including current customers of the Company, to reevaluate
their current software needs and, as a result, switch to other systems or
suppliers. Any of the foregoing could result in a material adverse effect on the
Company's business, operating results and financial condition.

BindView currently uses third-party software applications some of which are
not Year 2000 compliant. The Company is in the process of upgrading these
systems to be able to handle the transition to the Year 2000 and beyond and
plans to have these upgrades completed within the next 12 months. In addition,
the Company is not yet certain as to the extent to which the computer software
and business systems of its suppliers are Year 2000 compliant. If systems of
third parties on which the Company relies are not converted on a timely basis,
the Year 2000 issue could have a material adverse effect on the Company's
business, financial conditions or results of operations.

PRODUCT LIABILITY

Although the Company's license agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential product
liability claims, it is possible that such limitation of liability provisions
may not be effective as a result of existing or future laws or unfavorable
judicial decisions. The Company has not experienced any material product
liability claims to date. However, the sale and support of the Company's
products may entail the risks of such claims, which may be substantial in light
of the use of the Company's products in business-critical applications. In
particular, because certain products of the Company are sold to customer's with
the intent of aiding them in their attempt to resolve security management,
inventory management and Year 2000 issues, it is possible that the Company could
be exposed to product liability claims in the event such products result in
additional problems for the customer or do not perform as the customer might
expect. A successful product liability claim brought against the Company could
have a material adverse effect on the Company's business, operating results and
financial condition. Moreover, defending such a suit, regardless of its merits,
could entail substantial expense and require the time and attention of key
management personnel, either of which could have a materially adverse effect on
the Company's business, operating results and financial condition. See
"Business -- Products and Technology" and "-- Product Development."

NO PRIOR TRADING MARKET FOR THE COMMON STOCK; POTENTIAL VOLATILITY OF STOCK
PRICE

Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that an active trading market will develop
or be sustained after this offering. The initial public offering price will be
determined by negotiation among the Company, the Selling Shareholders and the
representatives of the Underwriters and may not be indicative of the price that
will prevail in the open market. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.

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The market price of the Common Stock is likely to be highly volatile and
may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's revenue and operating results, announcements of
technological innovations, new or enhanced products by the Company or its
competitors, developments with respect to copyrights or proprietary rights,
conditions and trends in the software and other technology industries, adoption
of new accounting standards affecting the software industry, changes in
financial estimates by securities analysts, general market conditions and other
factors. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
market prices for the securities of technology companies. In the past, following
periods of volatility in the market price of a particular company's securities,
securities class action litigation has often been brought against the company.
There can be no assurance that such litigation will not occur in the future with
respect to the Company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which could have a material
adverse effect upon the Company's business, operating results and financial
condition. See "Underwriting."

CONTROL OF COMPANY BY OFFICERS, DIRECTORS AND FIVE PERCENT SHAREHOLDERS

Upon the consummation of this offering, the officers, directors, five
percent or greater shareholders and their affiliates in the aggregate will
beneficially own approximately % of the outstanding Common Stock ( % if
the Underwriters' over-allotment option is exercised in full). As a result,
these shareholders will be able to exercise control over all matters requiring
shareholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may have the
effect of delaying or preventing a change in control of the Company. See
"Principal and Selling Shareholders."

ANTI-TAKEOVER EFFECTS OF ARTICLES OF INCORPORATION, BYLAWS AND TEXAS LAW

The Company's Amended and Restated Articles of Incorporation (the "Revised
Articles of Incorporation") and Bylaws contain certain provisions that may have
the effect of discouraging, delaying or preventing a change in control of the
Company or unsolicited acquisition proposals that a shareholder might consider
favorable, including provisions (i) authorizing the issuance of "blank check"
preferred stock, (ii) establishing advance notice requirements for shareholder
nominations for elections to the Board of Directors or for proposing matters
that can be acted upon at shareholders' meetings, (iii) eliminating the ability
of shareholders to act by written consent and (iv) providing for a Board of
Directors with staggered, three-year terms. In addition, certain provisions of
Texas law and the Company's Omnibus Incentive Plan (the "Omnibus Plan") may also
have the effect of discouraging, delaying or preventing a change in control of
the Company or unsolicited acquisition proposals. The anti-takeover affect of
the documents mentioned above may also have an adverse effect on the public
trading price of the Company's Common Stock. See "Description of Capital Stock"
and "Management -- Stock Option Plans."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock after the offering
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of equity securities. Upon
completion of the offering, the Company will have outstanding shares of
Common Stock ( shares if the Underwriters' over-allotment option is
exercised in full), assuming no exercise of options after April 30, 1998. Of
these shares, the shares offered hereby ( shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), unless purchased by "affiliates" of the Company as that
term is defined in Rule 144 under the Securities Act ("Rule 144") described
below. The remaining shares of Common Stock outstanding upon completion of
the offering will be "restricted securities" as that term is defined in Rule
144.

Restricted shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144, 144(k) or 701
promulgated under the Securities Act. As a result of the contractual
restrictions described below and the provisions of Rules 144, 144(k) and 701,
additional shares will be available for sale in the public market as follows:
(i) shares will be eligible for immediate sale
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<PAGE> 16

on the date of this Prospectus; (ii) shares will be eligible for sale 90
days after the date of this Prospectus; (iii) shares will be eligible for
sale upon expiration of lock-up agreements between certain shareholders of the
Company and the representatives of the Underwriters 180 days after the date of
this Prospectus; and (iv) shares will be eligible for sale thereafter. In
addition to the foregoing, as of March 31, 1998, there were outstanding under
the Stock Option Plans options to purchase an aggregate of shares of Common
Stock. shares underlying such options will be eligible for sale upon
expiration of the lock-up agreements between certain option holders of the
Company and the representatives of the Underwriters beginning 180 days after the
date of this Prospectus, subject in certain cases to such shares underlying
outstanding options becoming eligible for sale more than 180 days after the date
of this Prospectus as such options vest. In addition, the Company intends to
register, following this offering, approximately shares of Common Stock
subject to outstanding options or reserved for issuance under the Company's
Stock Option Plans. shares of such shares will be eligible for sale
immediately upon the effectiveness of such registration. Further, certain
shareholders holding approximately 13,700,000 shares of Common Stock (assuming
the exercise of warrants to purchase 1,187,499 shares of Common Stock held by
holders of registration rights) are entitled to demand registration of their
shares of Common Stock. By exercising their demand registration rights, such
shareholders could cause a large number of securities to be registered and sold
in the public market, which could have an adverse effect on the market price of
the Common Stock. See "Description of Capital Stock" and "Shares Eligible for
Future Sale."

BROAD DISCRETION OVER USE OF PROCEEDS

The net proceeds to the Company from this offering will be used, as
determined by management in its sole discretion, for working capital and general
corporate purposes, as well as for the possible acquisition of additional
businesses and technologies or the establishment of joint ventures that are
complementary to the current or future business of the Company. The Company has
not determined the specific allocation of net proceeds among the various uses
described above. Accordingly, investors in this offering will rely upon the
judgment of the Company's management with respect to the use of proceeds, with
only limited information concerning management's specific intentions. See "Use
of Proceeds."

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price is substantially higher than the book
value per share of the outstanding Common Stock. As a result, investors
purchasing Common Stock in this offering will incur immediate and substantial
dilution of per share. In addition, the Company has issued options to
acquire Common Stock at prices significantly below the assumed initial public
offering price. To the extent such outstanding options are exercised, there will
be further dilution. See "Dilution" and "Shares Eligible for Future Sale."

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USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby will be approximately $ million ($
if the Underwriters' over-allotment option is exercised in full), after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Shareholders. The principal purposes of this offering are to increase the
Company's equity capital, to create a public market for the Common Stock, to
facilitate future access by the Company to public equity markets and to provide
increased visibility of the Company in a marketplace where many of its
competitors are publicly held companies.

The Company intends to use the net proceeds of this offering for working
capital and general corporate purposes. The Company may also use a portion of
the net proceeds for possible acquisition of businesses, products and
technologies that are complementary to those of the Company. Although the
Company has not identified any specific businesses, products or technologies
that it may acquire, nor are there any current agreements or negotiations with
respect to any such transactions, the Company from time to time evaluates such
opportunities. Pending such uses, the Company plans to invest the net proceeds
in short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

Prior to becoming a C Corporation in October 1997, the Company paid
distributions to its S Corporation shareholders in amounts generally consistent
with their tax liabilities arising from their allocable share of S Corporation
earnings. Since becoming a C Corporation, the Company has not declared or paid
any cash dividends on its capital stock and does not expect to do so in the
foreseeable future. The Company anticipates that all future earnings, if any,
generated from operations will be retained by the Company to develop and expand
its business. Any future determination with respect to the payment of dividends
will be at the discretion of the Board of Directors and will depend upon, among
other things, the Company's operating results, financial condition and capital
requirements, the terms of then-existing indebtedness, general business
conditions and such other factors as the Board of Directors deems relevant.

16
<PAGE> 18

CAPITALIZATION

The following table sets forth the unaudited total capitalization of the
Company as of March 31, 1998, (i) on an actual basis, (ii) on a pro forma basis
to reflect the filing of the Revised Articles of Incorporation and the
conversion of all outstanding shares of the Company's Preferred Stock into
Common Stock and the exercise of all outstanding Investor Warrants and (iii) on
such pro forma basis as adjusted to reflect the sale of the shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $ per share and the application of the estimated net proceeds therefrom.
See "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Shareholders' equity:
Convertible Preferred Stock: $.01 par value, 20,000,000
shares authorized, 2,528,090 issued and outstanding,
actual; 20,000,000 authorized, no shares issued and
outstanding, pro forma and as adjusted............... $ 25 $ $
Common Stock: no par value, 100,000,000 shares
authorized, 13,197,615 shares issued and outstanding,
actual; 100,000,000 shares authorized, 20,267,840
shares issued and outstanding, pro forma; 100,000,000
shares authorized, shares issued and
outstanding, as adjusted(1).......................... 1 1
Additional paid-in capital................................ 31,728 34,753
Common Stock warrant to purchase 437,500 shares........... 550 550
Accumulated deficit....................................... (5,640) (5,640)
Treasury stock, 4,921,958 shares actual and pro forma,
shares as adjusted............................ (14,017) (14,017)
-------- -------- --------
Total shareholders' equity...................... 12,647 15,647
-------- -------- --------
Total capitalization............................ $ 12,647 $ 15,647 $
======== ======== ========
</TABLE>

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

(1) Based on the number of shares outstanding as of March 31, 1998. Excludes
4,988,003 shares subject to options outstanding as of March 31, 1998 at a
weighted average exercise price of $2.12 per share and 1,928,062 shares
reserved for issuance under the Company's Stock Option Plan. See
"Management -- Stock Option Plans" and Note 7 of Notes to Consolidated
Financial Statements.

17
<PAGE> 19

DILUTION

The pro forma net tangible book value of the Company as of March 31, 1998,
giving effect to the conversion of all outstanding shares of Preferred Stock
into Common Stock and the exercise of all outstanding Investor Warrants upon or
prior to the closing of this offering, was $15,647,000, or approximately $1.02
per share. "Pro forma net tangible book value" per share represents the amount
of total tangible assets of the Company less total liabilities, divided by the
number of shares of Common Stock outstanding on an as-converted basis. The pro
forma net tangible book value of the Company as of March 31, 1998 would have
been $ , or $ per share after giving effect to the sale of
shares of Common Stock offered by the Company in this offering at an assumed
initial public offering price of $ per share and the application of the
estimated net proceeds therefrom. This represents an immediate increase in pro
forma net tangible book value of $ per share to existing shareholders and an
immediate dilution of $ per share to investors purchasing shares of Common
Stock in this offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price................................ $
Pro forma net tangible book value as of March 31,
1998(1)................................................ $ 1.02
-------
Increase attributable to new investors.................... $
Adjusted pro forma net tangible book value as of March 31, 1998(1)... $
--------
Dilution to new investors(1)......................................... $
========
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1998,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing shareholders and by the new shareholders after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company at the assumed initial public offering price of $ per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(2)............. 15,345,877 % $21,370,000 % $3.48
New shareholders(1)(2)...............
---------- --- ----------- ---
Totals..................... 100% $ 100%
========== === =========== ===
</TABLE>

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

(1) Excludes 4,988,003 shares subject to outstanding options as of March 31,
1998 at a weighted average exercise price of $2.12 per share and 1,928,062
shares reserved for issuance under the Company's Stock Option Plan. To the
extent outstanding options are exercised, there will be further dilution to
new investors. See "Management -- Stock Option Plans" and Note 7 of the
Notes to Consolidated Financial Statements.

(2) Sales by the Selling Shareholders in this offering will reduce the number of
shares held by existing shareholders to , or % ( , or
%, if the Underwriters' over-allotment option is exercised in full), and
will increase the number of shares held by new investors to , or
% ( , or %, if the Underwriters' over-allotment option is
exercised in full), of the total number of shares of Common Stock
outstanding after this offering. See "Principal and Selling Shareholders."

18
<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Prospectus. The consolidated
statements of operations data for the years ended December 31, 1995, 1996 and
1997, and the consolidated balance sheet data at December 31, 1996 and 1997, are
derived from audited consolidated financial statements included elsewhere in
this Prospectus. Statements presented for all previous periods are derived from
financial statements not included in this Prospectus. The consolidated
statements of operations data for the three months ended March 31, 1997 and 1998
are derived from the unaudited consolidated financial statements of the Company,
which are included elsewhere herein. The unaudited financial information
reflects all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for a fair statement of the financial data for
such period. The results of operations for the three months ended March 31,
1998, are not necessarily indicative of results to be expected for any future
period.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Licenses.................................................. $3,031 $5,171 $7,005 $ 9,720 $ 17,821 $ 2,950 $ 4,384
Services.................................................. -- -- 328 1,282 3,017 473 1,456
------ ------ ------ ------- -------- ------- -------
Total revenues...................................... 3,031 5,171 7,333 11,002 20,838 3,423 5,840
------ ------ ------ ------- -------- ------- -------
Cost of revenues:
Cost of licenses.......................................... 626 564 693 465 644 91 208
Cost of services.......................................... -- -- 139 362 624 105 215
------ ------ ------ ------- -------- ------- -------
Total cost of revenues.............................. 626 564 832 827 1,268 196 423
------ ------ ------ ------- -------- ------- -------
Gross profit................................................ 2,405 4,607 6,501 10,175 19,570 3,227 5,417
------ ------ ------ ------- -------- ------- -------
Costs and expenses:
Sales and marketing....................................... 983 2,256 3,234 4,197 9,088 1,369 2,708
Research and development.................................. 615 820 1,249 2,088 3,573 622 1,643
General and administrative................................ 411 1,022 1,235 1,472 2,943 511 676
Stock compensation expense................................ -- -- -- 436 15,262 -- --
------ ------ ------ ------- -------- ------- -------
Operating income (loss)..................................... 396 509 783 1,982 (11,296) 725 390
Other income (expense), net................................. (7) (21) (29) 8 118 14 129
------ ------ ------ ------- -------- ------- -------
Income (loss) before income tax provision................... 389 488 754 1,990 (11,178) 739 519
Provision (benefit) for income tax.......................... -- -- -- -- (3,150) -- 122
------ ------ ------ ------- -------- ------- -------
Net income (loss)........................................... 389 488 754 1,990 (8,028) 739 397
Pro forma charge (benefit) in lieu of income taxes.......... 136 171 264 697 (765) 259 --
------ ------ ------ ------- -------- ------- -------
Pro forma net income (loss)(1).............................. $ 253 $ 317 $ 490 $ 1,293 $ (7,263) $ 480 $ --
====== ====== ====== ======= ======== ======= =======
Diluted pro forma net income (loss) per share(2)(3)......... $ 0.03 $ 0.04 $ 0.06 $ 0.12 $ (0.85) $ 0.03 $ 0.02
====== ====== ====== ======= ======== ======= =======
Shares used in computing diluted pro forma net income (loss)
per share(2)(3)........................................... 8,228 8,228 8,228 11,046 8,548 14,314 16,222
------ ------ ------ ------- -------- ------- -------
OTHER FINANCIAL DATA:
Operating income excluding stock compensation
expense(4)(5)............................................. $ 396 $ 509 $ 783 $ 2,418 $ 3,966 $ 725 $ 390
------ ------ ------ ------- -------- ------- -------
Pro forma net income excluding stock compensation
expense(1)(4)(5).......................................... $ 253 $ 317 $ 490 $ 1,577 $ 2,655 $ 480 $ 397
------ ------ ------ ------- -------- ------- -------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
---- ------ ------ ------ ------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................. $(41) $ 197 $ 671 $1,750 $10,823 $10,857
Total assets................................................ 925 1,552 2,747 4,016 16,509 17,105
Long-term liabilities, net of current portion............... -- -- 68 -- -- --
Total shareholders' equity.................................. 287 707 1,214 2,647 12,250 12,647
</TABLE>

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

(1) Net income of the Company, adjusted for a pro forma charge in lieu of income
taxes as if the Company were a C Corporation for all periods.
(2) See Note 10 of the Notes to Consolidated Financial Statements for an
explanation of the method used to determine the number of shares used in
computing diluted pro forma net income (loss) per share.
(3) The amounts for the three months ended March 31, 1998 represent actual
diluted net income per share rather than pro forma diluted net income per
share and the number of shares used to determine such amount.
(4) Excludes $436,000 and $14,712,000 of stock compensation expense recognized
by the Company in 1996 and 1997, respectively, in connection with the
Company's terminated Phantom Stock Plan and $550,000 recognized in
connection with the issuance to an officer of a warrant to purchase 437,500
shares of common stock. See "Management -- Phantom Stock Plan."
(5) The Company has presented operating income excluding stock compensation
expenses and pro forma net income excluding stock compensation expense as it
believes potential investors may find such data useful. However, such data
is not prepared in accordance with generally accepted accounting principles
and investors should not utilize this data as a substitute for operating
income, pro forma net income or diluted pro forma net income per share.

19
<PAGE> 21

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

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ significantly
from the results discussed in the forward-looking statements as a result of
certain factors, including, but not limited to, those discussed in "Risk
Factors" and elsewhere in this Prospectus.

OVERVIEW

BindView was founded in 1990 and in 1991 introduced the first generation of
its customizable report generator for NetWare file servers. In 1993, the Company
added inventory and asset management capabilities and released the BindView
Network Control System ("BindView NCS"). In 1996, BindView NCS was supplanted by
the BindView Enterprise Management System ("BindView EMS"), a completely
redesigned product utilizing a Windows-based, object-oriented architecture. The
release of BindView EMS was also accompanied by the release of NOSadmin for
NetWare 3 and NOSadmin for NetWare 4. NOSadmin for Windows NT began shipping in
early 1997 and NETinventory was added to the product family in mid-1997.

The Company's revenues totaled $7.3 million, $11.0 million and $20.8
million in 1995, 1996 and 1997, respectively, substantially all of which have
been derived from the sale of BindView NCS and BindView EMS related products and
services. The Company has been profitable each year since 1991 and, since the
third quarter of 1995, has experienced 11 consecutive quarters of profitability
(before stock compensation expense charges related to the termination of the
Phantom Stock Plan in October 1997 effecting profitability in 1997 and the
fourth quarter of 1997). However, there can be no assurance the Company will
remain profitable on a quarterly or annual basis. See "Risk Factors -- Operating
Results Subject to Significant Fluctuations; Seasonality," " -- Limited
Operating History; Future Operating Results Uncertain."

Pricing of the Company's software product licenses is based on the number
of servers, workstations and/or users. The Company may provide discounts for
customers with large installations or when several BindView EMS products are
licensed concurrently. The annual subscription contract, which is generally
purchased in conjunction with the licensing of a product, is a separate
component that is offered for a fee generally equal to 21% of the retail price
of the perpetual license fee and is recognized ratably over the contract term.
Subscription contracts typically include telephone support and product updates,
when and if available. Prior to January 1, 1998, the Company provided telephone
support free of charge and sold product upgrades separately or through
subscription contracts. Subsequent to that date, the Company began requiring
customers to purchase a subscription contract in order to have access to such
support services and updates. Most customers with large implementations of
BindView EMS products have purchased subscription contracts and have renewed
such contracts on an annual basis.

The Company recognizes revenues in accordance with the American Institute
of Certified Public Accountants Statement of Position No. 97-2. The Company
sells its products under perpetual licenses and recognizes its license revenues
upon meeting each of the following criteria: (i) execution of a written purchase
order, license agreement or contract; (ii) delivery of software or, if the
customer has previously received evaluation software, delivery of the software
license code; and (iii) issuance of the related license, with no significant
vendor obligations or customer acceptance rights outstanding. Revenues from
perpetual licenses are
20
<PAGE> 22

recorded as license revenues in the Statements of Operations. Service revenues
include subscription contracts and professional services. Subscription contract
revenues are an incremental component of each contract and are recognized
ratably over the one year contract term. However, costs associated with selling
such contracts are recognized in the period in which they were incurred.
Professional service revenues are recognized as such services are performed and
have historically been immaterial.

The Company markets and sells its products through direct telesales, VARs,
distributors and systems integrators. The Company's direct telesales
organization generates the substantial majority of sales to North America
customers. Conversely, VARs, distributors and systems integrators generate the
substantial majority of sales to international customers. In 1998, the Company
launched its first international direct telesales effort by forming a wholly
owned German subsidiary, BindView Development GmbH. Historically, substantially
all sales have been invoiced and paid in U.S. dollars. However, the Company
anticipates international expansion will result in the Company transacting
business in foreign currencies. The Company may implement a foreign currency
forward-hedging program to mitigate the foreign currency transaction risk in the
future. See "Risk Factors -- Risks Associated with International Sales and
Operations."

At the time of its incorporation, the Company (then operating as The LAN
Support Group, Inc.) elected to be treated as an S Corporation under Subchapter
S of the Internal Revenue Code. As an S Corporation, the Company's shareholders
were liable for federal income tax liabilities resulting from the Company's
operations. On October 16, 1997, the Company's status as an S Corporation was
terminated and for periods thereafter the Company has been liable for federal
income taxes. The Company has recognized a pro forma charge in lieu of income
taxes in its Consolidated Statements of Operations for the periods prior to its
C Corporation status to reflect income tax charges as if the Company had been a
C Corporation for all periods presented. Prior to the termination of its S
Corporation status, the Company declared distributions as dividends to
shareholders payable in cash in an amount generally equal the tax consequence
created by the S Corporation's earnings up to the date of such termination. The
Company has no plans to pay any dividends or distributions in the foreseeable
future.

21
<PAGE> 23

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ---------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses..................................... 95.5% 88.3% 85.5% 86.2% 75.1%
Services..................................... 4.5 11.7 14.5 13.8 24.9
----- ----- ----- ----- -----
Total revenues....................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
Cost of licenses............................. 9.5 4.2 3.1 2.6 3.6
Cost of services............................. 1.8 3.3 3.0 3.1 3.6
----- ----- ----- ----- -----
Total cost of revenues............... 11.3 7.5 6.1 5.7 7.2
----- ----- ----- ----- -----
Gross margin................................... 88.7 92.5 93.9 94.3 92.8
----- ----- ----- ----- -----
Costs and expenses:
Sales and marketing.......................... 44.1 38.1 43.6 40.0 46.4
Research and development..................... 17.0 19.0 17.1 18.2 28.1
General and administrative................... 16.8 13.4 14.1 14.9 11.6
Stock compensation expense................... -- 4.0 73.2 -- --
----- ----- ----- ----- -----
Operating income (loss)........................ 10.8 18.0 (54.1) 21.2 6.7
Other income (expense), net.................... (0.4) 0.1 0.6 0.4 2.2
----- ----- ----- ----- -----
Income (loss) before income tax provision...... 10.4 18.1 (53.5) 21.6 8.9
Provision (benefit) for income tax............. -- -- (15.1) -- 2.1
----- ----- ----- ----- -----
Net income (loss).............................. 10.4 18.1 (38.4) 21.6 6.8
Pro forma charge (benefit) in lieu of income
taxes........................................ 3.6 6.3 (3.6) 7.6 --
----- ----- ----- ----- -----
Pro forma net income (loss).................... 6.8 11.8 (34.8) 14.0 --
===== ===== ===== ===== =====
Other Financial Data:
Operating income before stock compensation
expense...................................... 10.8 22.0 19.1 21.2 6.7
----- ----- ----- ----- -----
Pro forma net income before stock compensation
expense...................................... 6.8% 14.3% 12.8% 14.0% 6.8%
===== ===== ===== ===== =====
</TABLE>

Revenues

The Company's revenues are derived from the sale of software products and
related services including subscription contracts. The Company's revenues were
$7.3 million, $11.0 million and $20.8 million in 1995, 1996 and 1997,
respectively, representing increases of 50% from 1995 to 1996 and 89% from 1996
to 1997. The Company's revenues were $3.4 million and $5.8 million for the three
months ended March 31, 1997 and 1998, respectively, representing an increase in
the first quarter of 1998 of 71% over the comparable quarter of the prior year.
The Company had no customer that accounted for more than 10% of its revenues in
1996, 1997 or for the three months ended March 31, 1998. Revenues recognized
from sales to customers outside North America, primarily in the United Kingdom
and Europe, represented approximately 16%, 10%, 13% and 10% in 1995, 1996, 1997
and for the three months ended March 31, 1998, respectively.

The Company's license revenues were $7.0 million, $9.7 million and $17.8
million in 1995, 1996 and 1997, respectively, representing increases of 39% from
1995 to 1996 and 83% from 1996 to 1997. The Company's license revenues were $3.0
million and $4.4 million for the three months ended March 31, 1997 and 1998,
respectively, representing an increase in the first quarter of 1998 of 49% over
the comparable quarter

22
<PAGE> 24

of the prior year. The increase in the Company's license revenues over this time
period has resulted from new product introductions and enhancements, increases
in the average transaction size and increases in the size and productivity of
the Company's sales force. The increase in the Company's license revenues from
1995 to 1996 also resulted from the release of the Windows-based BindView EMS
product family, including NOSadmin for NetWare 3 and NOSadmin for NetWare 4. The
increase in the Company's license revenues from 1996 to 1997 also resulted from
continued market acceptance of BindView EMS, the release of NOSadmin for Windows
NT and the release of NETinventory. The increase in the Company's license
revenues from the three months ended March 31, 1997 to the three months ended
March 31, 1998, resulted from those reasons cited for the growth between 1996
and 1997, as well as product enhancements to NETinventory to include Year 2000
auditing capabilities for PC hardware and software.

The Company's service revenues were $328,000, $1.3 million and $3.0 million
in 1995, 1996 and 1997, respectively, representing increases of 291% from 1995
to 1996 and 135% from 1996 to 1997. The Company's subscription contract revenues
were $473,000 and $1.5 million for the three months ended March 31, 1997 and
1998, respectively, representing an increase in the first quarter of 1998 of
208% over the comparable quarter of the prior year. The increase in the
Company's service revenues from 1995 through the first quarter of 1998 resulted
primarily from increases in purchases of subscription contracts by the Company's
growing installed customer base and larger dollar value of subscription
agreements resulting from increases in the average size of customer licensing
agreements. In particular, the increase in the Company's service revenues from
the three months ended March 31, 1997 to the three months ended March 31, 1998
resulted primarily from increases in sales of subscription contracts to new and
existing customers as a result of a change in the Company's policies with
respect to technical support and product upgrades. Prior to January 1, 1998, the
Company provided telephone support free of charge and sold product upgrades
separately or through subscription contracts. Subsequent to that date, the
Company began requiring customers to purchase a subscription contract in order
to have access to such support services and updates. As subscription contracts
are recognized ratably over the one year contract term, an increase in such
revenues as a percentage of total revenues would result in greater deferred
revenue recognition. This would, in turn, impact the Company's operating
margins. See "Risk Factors -- Operating Results Subject to Significant
Fluctuations; Seasonality."

Cost of Revenues

Cost of licenses includes product manuals, packaging, distribution and
media costs for the Company's software products, as well as royalties paid to
third-party software providers. Cost of licenses were $693,000, $465,000 and
$644,000 in 1995, 1996 and 1997, respectively, and $91,000 and $208,000 for the
three months ended March 31, 1997 and 1998, respectively. In 1996, the Company
instituted a policy of qualifying potential customers before delivering
evaluation copies of the Company's software, resulting in a decrease in the
absolute cost of licenses. Since 1996, the cost of licenses has increased
primarily due to increases in product shipments. Cost of licenses as a
percentage of license revenues were 9.9%, 4.8% and 3.6% for 1995, 1996 and 1997,
respectively, and 3.1% and 4.7% for the three months ended March 31, 1997 and
1998, respectively. The Company believes these costs will remain relatively
consistent on a percentage basis in the future, although there will continue to
be quarterly fluctuations due to the timing of certain expenses, as was
exemplified in the first quarter of 1998 as compared to the comparable period in
1997.

Cost of services includes personnel and other costs related to technical
support and professional services. Cost of services were $139,000, $362,000 and
$624,000 in 1995, 1996 and 1997, respectively, and $105,000 and $215,000 for the
three months ended March 31, 1997 and 1998, respectively. The increase in the
Company's cost of services from 1995 through the first quarter of 1998 resulted
primarily from increases in the cost of technical support staff providing
support to the Company's growing customer base. Cost of services as a percentage
of service revenues were 42.4%, 28.2% and 20.7% for 1995, 1996 and 1997,
respectively, and 22.2% and 14.8% for the three months ended March 31, 1997 and
1998, respectively. These decreases in the Company's cost of services as a
percentage of service revenues from 1995 to the first quarter of 1998 resulted
primarily from service revenues outpacing technical support staffing levels. The
Company believes services gross margin as a percentage of service revenues in
the future will remain relatively consistent with services gross margins
realized in the first quarter of 1998. Professional service revenues generally
results in a lower

23
<PAGE> 25

gross margin than other types of revenues and in the event that professional
service revenues increase as a percentage of total revenues, the Company's gross
margin may be adversely affected.

Costs and Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel,
general office expenses, travel and entertainment and promotional expenses.
Sales and marketing expenses were $3.2 million, $4.2 million and $9.1 million in
1995, 1996 and 1997, respectively, and $1.4 million and $2.7 million for the
three months ended March 31, 1997 and 1998, respectively. The increase in the
Company's sales and marketing expenses from 1995 through the first quarter of
1998 resulted primarily from the hiring of sales management and additional sales
personnel, as well as higher commissions paid as a result of the Company's
revenue growth. The increase in the Company's sales and marketing expenses from
1996 to 1997 also resulted from increases in investment in marketing programs,
particularly a series of NT Security Seminars utilized to raise awareness of the
Company's security products. The increase in the Company's sales and marketing
expenses from the three months ended March 31, 1997 to the three months ended
March 31, 1998 also resulted from personnel and start-up costs associated with
the launch of a direct telesales organization in Germany during the first
quarter of 1998. Sales and marketing expenses as a percentage of total revenues
were 44.1%, 38.1% and 43.6% for 1995, 1996 and 1997, respectively, and 40.0% and
46.4% for the three months ended March 31, 1997 and 1998, respectively. As the
Company continues to devote resources to the expansion of the Company's sales
and marketing organization, the Company expects that sales and marketing
expenses as a percentage of total revenues will continue to be similar to the
percentage recorded in 1997 for the foreseeable future.

Research and Development. Research and development expenses consist
primarily of salaries and benefits of product development, product management
and quality assurance personnel, payments to contract programmers and expendable
equipment purchases. Research and development expenses were $1.2 million, $2.1
million and $3.6 million for 1995, 1996 and 1997, respectively, and $622,000 and
$1.6 million for the three months ended March 31, 1997 and 1998, respectively.
The increase in the Company's research and development expenses for each period
resulted primarily from an increase in the number of development and quality
assurance personnel to support the development of new products and enhancements
to existing products and an increase in compensation levels for such personnel.
In addition, in 1997 the Company formed a new product management group to
identify technical specifications and market opportunities for new and existing
products. Most of the new members of this group were hired in the fourth quarter
of 1997. Research and development expenses as a percentage of total revenues
represented 17.0%, 19.0% and 17.1% for 1995, 1996 and 1997, respectively, and
18.2% and 28.1% for the three months ended March 31, 1997 and 1998,
respectively. The increase in the Company's research and development expenses as
a percentage of total revenues from the three months ended March 31, 1997 to the
three months ended March 31, 1998 resulted primarily from hiring of new product
management personnel dedicated to identifying new market opportunities for its
products. The Company believes that a significant increase in its research and
development investment is essential for it to maintain market leadership and
continue to expand its product line. Accordingly, the Company anticipates it
will continue to devote substantial resources to product research and
development for the foreseeable future, and research and development expenses as
a percentage of total revenues are likely to increase in future periods. The
Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed." Research and development expenditures generally have been charged to
operations as incurred and any capitalizable amounts have been immaterial.

General and Administrative. General and administrative expenses consist
primarily of salaries, personnel and related costs for the Company's executive,
administrative, finance and information services staff. General and
administrative expenses were $1.2 million, $1.5 million and $2.9 million for
1995, 1996 and 1997, respectively, and $511,000 and $676,000 for the three
months ended March 31, 1997 and 1998, respectively. The increase in the
Company's general and administrative expenses from 1995 to 1996 resulted
primarily from additions to the Company's executive management team and finance
department. The increase in the Company's general and administrative expenses
from 1996 to 1997 resulted primarily from increases in

24
<PAGE> 26

compensation levels, including bonuses, resulting from the Company's operating
results exceeding budgeted levels, a nonrecurring provision made for the early
termination of the Company's operating facility lease, increases in provisions
for bad debt reserves related to the Company's 1997 fourth quarter revenue
growth and increases in legal and accounting fees due to the termination of the
Phantom Stock Plan and the related private placement and stock repurchase.
General and administrative expenses as a percentage of total revenues were
16.8%, 13.4% and 14.1% for 1995, 1996 and 1997, respectively, and 14.9% and
11.6% for the three months ended March 31, 1997 and 1998, respectively. The
Company expects that general and administrative expenses will decrease as a
percentage of total revenue in 1998, but will increase in absolute dollars as
the Company increases the number of administrative personnel and upgrades its
internal and financial reporting systems. Also, the Company anticipates
additional expenses due to a relocation of its office facilities and costs
related to being a public company, including, but not limited to, annual and
other public reporting costs, directors' and officers' liability insurance,
investor relations programs and professional services fees.

Stock Compensation Expense. Stock compensation expenses were $436,000 and
$15.3 million for 1996 and 1997, respectively. In 1996, such expenses resulted
from a lump sum cash payment to an employee in consideration of forfeiture of
certain phantom stock units under the Company's Phantom Stock Plan. In 1997,
$14.7 million of such expense resulted from the non-recurring issuance of
4,921,958 million shares of Common Stock in connection with the termination of
the Company's Phantom Stock Plan and $550,000 of such expense resulted from the
issuance of a warrant to purchase 437,500 shares of Common Stock to an officer
in exchange for the extinguishment of a bonus provision in his option agreement.
See "Certain Transactions -- Phantom Stock Plan."

Provision for Income Taxes. Prior to October 16, 1997, the Company was
treated as a Subchapter S Corporation for federal income tax purposes.
Accordingly, the Company recorded no federal income tax expense for 1995, 1996
and the period from January 1, 1997 to October 16, 1997. The taxable income
generated by the Company's operations during the period were reported in the
income tax returns of the individual shareholders. A pro forma charge in lieu of
income taxes has been recognized in the Company's Consolidated Statement of
Operations to reflect income taxes as if the Company had been a C Corporation
for all periods. At December 31, 1997, the Company had a federal net operating
loss carryforward of approximately $7.5 million, that may be utilized to reduce
future taxable income through the year 2012, subject to certain annual
limitations.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited consolidated statements of
operations data for the nine quarters ended March 31, 1998, as well as the
percentage of the Company's revenues represented by each item. This data has
been derived from unaudited interim consolidated financial statements prepared
on the same basis as the audited Consolidated Financial Statements contained
herein and, in the opinion of management, include all adjustments, consisting
only of normal recurring adjustments, that the Company considers necessary for a
fair presentation of such information when read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.

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<PAGE> 27

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997 1997 1997 1997 1998
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Sales and marketing........ 738 944 1,180 1,335 1,369 1,827 2,325 3,567 2,708
Research and development... 430 454 586 618 622 700 837 1,414 1,643
General and
administrative........... 266 386 338 482 511 483 550 1,399 676
Stock compensation
expense.................. -- -- -- 436 -- -- -- 15,262 --
------ ------ ------ ------ ------ ------ ------ -------- ------
Operating income (loss)...... 298 379 380 925 725 622 1,317 (13,960) 390
Other income (expense),
net........................ 1 2 5 14 15 22 67 129
------ ------ ------ ------ ------ ------ ------ -------- ------
Income (loss) before income
tax provision.............. 298 380 382 930 739 637 1,339 (13,893) 519
Provision (benefit) for
income tax................. -- -- -- -- -- -- -- (3,150) 122
------ ------ ------ ------ ------ ------ ------ -------- ------
Net income (loss)............ 298 380 382 930 739 637 1,339 (10,743) 397
Pro forma charge (benefit) in
lieu of income taxes....... 104 133 134 326 259 223 469 (1,716) --
------ ------ ------ ------ ------ ------ ------ -------- ------
Pro forma net income
(loss)..................... $ 194 $ 247 $ 248 $ 604 $ 480 $ 414 $ 870 $ (9,027) --
====== ====== ====== ====== ====== ====== ====== ======== ======
OTHER FINANCIAL DATA:
Operating income excluding
stock compensation
expense.................... 298 379 380 1,361 725 622 1,317 1,302 390
------ ------ ------ ------ ------ ------ ------ -------- ------
Pro forma net income
excluding stock
compensation expense....... $ 194 $ 247 $ 248 $ 888 $ 480 $ 414 $ 870 $ 891 $ 397
====== ====== ====== ====== ====== ====== ====== ======== ======
AS A PERCENTAGE OF TOTAL
REVENUES:
Revenues:
Licenses................... 84.2% 85.7% 92.1% 89.3% 86.2% 84.6% 85.1% 86.0% 75.1%
Services................... 15.8 14.3 7.9 10.7 13.8 15.4 14.9 14.0 24.9
------ ------ ------ ------ ------ ------ ------ -------- ------
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------ -------- ------
Cost of revenues:
Cost of licenses........... 4.0 4.1 4.3 4.3 2.6 3.6 2.8 3.2 3.6
Cost of services........... 4.7 4.1 2.7 2.6 3.1 3.6 2.6 2.9 3.6
------ ------ ------ ------ ------ ------ ------ -------- ------
Total cost of
revenues........... 8.7 8.2 7.0 6.9 5.7 7.2 5.4 6.1 7.2
------ ------ ------ ------ ------ ------ ------ -------- ------
Gross margin................. 91.3 91.8 93.0 93.1 94.3 92.8 94.6 93.9 92.8
------ ------ ------ ------ ------ ------ ------ -------- ------
Costs and expenses:
Sales and marketing........ 38.9 40.1 44.2 32.8 40.0 46.7 43.7 43.6 46.4
Research and development... 22.7 19.2 22.0 15.1 18.2 17.9 15.8 17.3 28.1
General and
administrative........... 14.0 16.4 12.6 11.8 14.9 12.3 10.3 17.1 11.6
Stock compensation
expense.................. -- -- -- 10.7 -- -- -- 186.5 --
------ ------ ------ ------ ------ ------ ------ -------- ------
Operating income (loss)...... 15.7 16.1 14.2 22.7 21.2 15.9 24.8 (170.6) 6.7
Other income (expense),
net........................ -- -- 0.1 0.1 0.4 0.4 0.4 0.8 2.2
------ ------ ------ ------ ------ ------ ------ -------- ------
Income (loss) before income
tax provision.............. 15.7 16.1 14.3 22.8 21.6 16.3 25.2 (169.8) 8.9
Provision (benefit) for
income tax................. -- -- -- -- -- -- -- (38.5) 2.1
------ ------ ------ ------ ------ ------ ------ -------- ------
Net income (loss)............ 15.7 16.1 14.3 22.8 21.6 16.3 25.2 (131.3) 6.8
Pro forma charge (benefit) in
lieu of income taxes....... 5.5 5.6 5.0 8.0 7.6 5.7 8.8 (21.0) --
------ ------ ------ ------ ------ ------ ------ -------- ------
Pro forma net income
(loss)..................... 10.2 10.5 9.3 14.8 14.0 10.6 16.4 (110.3) --
====== ====== ====== ====== ====== ====== ====== ======== ======
OTHER FINANCIAL DATA
Operating income excluding
stock compensation
expense.................... 15.7 16.1 14.2 33.4 21.2 15.9 24.8 15.9 6.7
------ ------ ------ ------ ------ ------ ------ -------- ------
Pro forma net income
excluding stock
compensation expense....... 10.2% 10.5% 9.3% 21.8% 14.0% 10.6% 16.4% 10.9% 6.8%
====== ====== ====== ====== ====== ====== ====== ======== ======
</TABLE>

The trends discussed in the annual comparisons of operating results from
1995 to 1997 and the first quarter of 1997 to first quarter of 1998 are
generally applicable to the comparison of quarters within the nine quarterly
periods ended March 31, 1998, adjusted for the seasonality the Company has
experienced as referred to below with the following exceptions of note. Given
the seasonal fluctuations of the Company's revenues, operating profitability
tends to be significantly higher in the fourth quarter over the preceding
quarters. However, the Company's general and administrative expenses in the
quarter ended December 31, 1997 exceeded levels the Company had historically
experienced due to incentive bonus payments, a nonrecurring provision for the
early termination of the Company's operating facility lease, an increase in the
Company's

26
<PAGE> 28

provision for bad debt reserves related to the Company's large fourth quarter
revenue growth and increases in legal accounting fees.

The Company's quarterly revenues, expenses and operating results are likely
to vary significantly due to a variety of factors, such as demand for the
Company's products, the size and timing of significant orders and their
fulfillment, the length of sales cycle to larger customers, the number, timing
and significance of product enhancements and new product announcements by the
Company and its competitors, changes in pricing policies by the Company or its
competitors, customer order deferrals in anticipation of enhancements or new
products offered by the Company or its competitors or in anticipation of changes
or delays in NOS technologies, the ability of the Company to develop, introduce
and market new and enhanced versions of its products on a timely basis, changes
in the Company's level of operating expenses, budgeting cycles of its customers,
product life cycles, undetected software errors and other product quality
problems, the Company's ability to attract and retain qualified personnel,
changes in the Company's sales incentive plans and staffing of sales
territories, changes in the mix of products and services sold, changes in the
mix of domestic and international revenues, the level of international
expansion, changes in the mix of channels through which the Company's products
are offered, the impact of acquisitions of competitors, the Company's ability to
control costs and general domestic and international economic and political
conditions. The Company operates with virtually no order backlog because its
software products are shipped shortly after orders are received, which makes
product revenues in any quarter substantially dependent on orders booked
throughout that quarter. A disproportionate amount of the Company's sales are
booked in the last few weeks or days of each quarter as a result of customer
buying patterns. The Company believes this pattern will continue. Moreover, the
Company's expense levels are based to a significant extent on the Company's
expectations of future revenues and therefore are relatively fixed in the short
term. If revenue levels are below expectations, operating results are likely to
be adversely and disproportionately affected because only a small portion of the
Company's expenses vary with its revenues.

The Company's quarterly operating results are subject to certain seasonal
fluctuations. Historically, the Company's revenues have tended to be strongest
in the fourth quarter of the year and to decrease in the first quarter of the
following year. The Company believes this seasonality is due to the calendar
year budgeting cycles of many of its customers and to compensation policies
tending to compensate sales personnel for achieving annual revenue quotas. In
future periods, the Company expects these seasonal trends may cause first
quarter revenues to decrease from, or remain consistent with, the level achieved
in the preceding quarter. Based upon all of the factors described above, the
Company believes that its quarterly revenues, expenses and operating results are
likely to vary significantly in the future, that period-to-period comparisons of
its operating results are not necessarily meaningful and that, in any event,
such comparisons should not be relied upon as indications of future performance.
See "Risk Factors -- Operating Results Subject to Significant Fluctuations;
Seasonality."

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has primarily been funded by cash flow
generated from its operations. Net cash provided by operating activities were
$1.1 million, $1.6 million and $5.1 million for 1995, 1996 and 1997,
respectively. Net cash provided by operating activities in 1997 was primarily
the result of operating profitability before the non-cash stock compensation
expense of $14.6 million related to the issuance of shares of the Company's
Common Stock to terminate the Phantom Stock Plan.

The Company's net cash used by financing activities was $151,000 and
$783,000 in 1995 and 1996 and related primarily to the payment of S Corporation
distributions. In the fourth quarter of 1997, the Company financed an
approximately $14.1 million Common Stock repurchase program in connection with
the termination of its Phantom Stock Plan through a private sale of $18.0
million of Preferred Stock. The Preferred Stock will automatically convert into
6,320,225 shares of Common Stock upon consummation of this offering. See
"Distribution of Capital Stock" and "Certain Transactions - Phantom Stock Plan."
The Company paid $1.3 million in S Corporation distributions in 1997.

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<PAGE> 29

Net cash used by the Company's investing activities was $519,000, $713,000
and $1.3 million in 1995, 1996 and 1997, respectively, and relates primarily to
the Company's capital expenditures. The Company does not expect to incur
significant costs to make its products or internal information systems Year 2000
complaint because it believes such products and information systems to be
installed are designed to properly function through and beyond the year 2000.
See "Risk Factors -- Year 2000 Compliance."

The Company has a $2 million revolving line of credit and a $500,000 line
of credit whereby any principal draws mature 30 months after the date of such
advances. These lines are collateralized by accounts receivable, property and
equipment. There were no new borrowings under these facilities in 1996, 1997 or
the first three months of 1998.

As of March 31, 1998, the Company had $9.1 million of cash and cash
equivalents. The Company believes that the net proceeds of this offering,
together with existing cash, cash equivalents, short-term investments and cash
flow from operations will be sufficient to meet its working capital requirements
for at least the next 12 months. Thereafter, the Company may require additional
funds to support its working capital requirements or for other purposes and may
seek to raise such additional funds through public or private equity financing
or from other sources. There can be no assurance that additional financing will
be available at all or that if available, such financing will be obtainable on
terms favorable to the Company or that any additional financing would not be
dilutive.

The Company currently intends to use the net proceeds of this offering for
working capital and general corporate purposes, including financing accounts
receivable and capital expenditures made in the ordinary course of business, as
well as for possible acquisitions of businesses, products and technologies that
are complementary to those of the Company. Although the Company has not
identified any specific businesses, products or technologies that it may
acquire, nor are there any current agreements or negotiations with respect to
any such transactions, the Company from time to time evaluates such
opportunities. Pending such uses, the net proceeds will be invested in
government securities and other short-term, investment-grade, interest-bearing
instruments.

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<PAGE> 30

BUSINESS

The following description of the Company's business should be read in
conjunction with the information included elsewhere in this Prospectus. This
description contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements as a result of certain of
the risk factors set forth below and elsewhere in this Prospectus.

OVERVIEW

INDUSTRY BACKGROUND

The use of distributed, client/server networks has grown tremendously in
the last ten years with the increase in PC-based Local Area Networks ("LANs")
being one of the fastest-growing aspects of the client/server market. These
LANs, largely dependent on servers running network operating systems provided by
Microsoft and Novell, are enabling a new generation of client/server
applications, including e-mail and group collaboration software such as
Microsoft Exchange and Lotus Notes. As a result, LANs, which were originally
intended to be used as relatively simple workgroup systems, have lost their
"local" characteristic and have developed into mission-critical platforms for
enterprise-scale applications. As LANs, and the network operating systems that
support them, have been used to operate mission-critical applications and
services, organizations have become increasingly dependent upon them. According
to a recent International Data Corporation ("IDC") study, shipments of Windows
NT server software are projected to grow from approximately 1.0 million in 1997
to 2.7 million in 2001 and shipments of NetWare server software are projected to
grow from approximately 1.1 million in 1997 to 1.2 million in 2001.
Additionally, the Company believes that the average number of users supported by
these LANs has been increasing.

As LANs have grown larger and technically more complex, the problems
associated with maintaining their security and integrity have increased and
become more difficult for Information Technology ("IT") departments to manage.
As a result, network security and integrity are increasingly at risk and the
Total Cost of Ownership (initial purchase price and the ongoing cost of
upgrades, maintenance and support) for client/server computing has often climbed
far beyond management's expectations when networks were initially installed.
Therefore, reducing the Total Cost of Ownership has become a strategic
initiative for many IT organizations, which have sought systems management
software to manage the complexity and costs of client/server computing. The
management challenges associated with maintaining the security and integrity of
LANs include:

Systems Administration. Systems administrators within IT departments need
to resolve a wide range of issues and problems on a daily basis, which include
managing the configuration of network servers, administering users and groups
and managing disk space on critical servers and workstations. Problems such as
these may not be solved quickly, placing the availability of the network at risk
and the use of mission-critical, client/server applications throughout an
enterprise in jeopardy. Additionally, the implementation of new or upgraded
network operating systems will result in increased strain on an organization's
IT resources. Both Microsoft and Novell are planning to ship major new releases
of their network operating systems in the next 12 months. Although both upgrades
promise new enhancements, the Company believes these upgrades will continue to
add levels of complexity to the network operating system ("NOS") environments,
particularly in the case of Windows NT.

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<PAGE> 31

Security. Computer security breaches are a pervasive and growing problem. A
survey published in March 1998, by the Computer Security Institute ("CSI")
reported that 64% of respondents had encountered computer security breaches
within the last 12 months. Although many IT organizations have installed
firewalls and implemented security management strategies focusing on preventing
"hacking in" from outside the organization, these efforts do not address the
most serious security-related losses which are the result of unauthorized access
by insiders. In fact, the CSI survey found that only 24% of respondents reported
penetration from outside the organization while 44% reported unauthorized access
by employees. The top 18 respondents reporting unauthorized access by insiders
averaged losses of over $2.8 million each.

Asset Management. Both IT and finance departments need to identify and
manage their organization's technology assets. These departments need to plan
for expansion, budget for software and hardware expenditures and trouble-shoot
problems with PC configurations, as well as track potential theft of expensive
components. Given the proliferation of diverse products, platforms and
technologies within the typical enterprise-wide IT infrastructure, taking an
accurate inventory of LAN assets has been a costly and time-consuming process.

Year 2000 Assessment. Although many organizations have focused upon the
mainframe issues of the Year 2000 exposure, the costs of bringing distributed
computing into compliance are now estimated by some sources at nearly half of
the total cost to fix mainframe systems. The Gartner Group recently estimated
the total cost to find and fix desktop-related Year 2000 compliance issues to be
between $10 billion and $42 billion. Year 2000 compliance issues on the LAN
include problems with PC hardware, firmware and applications.

IT departments are faced with conflicting pressures to both: (i) manage
increasing complexity and guarantee better service for users who are demanding
assurance of high productivity and availability and (ii) reduce the Total Cost
of Ownership for client/server computing. Adding to this challenge is a lack of
qualified IT personnel. In March 1998, the Information Technology Association of
America estimated that there were 346,000 IT-related job vacancies in the United
States. Pressure to reduce the Total Cost of Ownership and the increasing
difficulty and expense in locating qualified IT personnel has driven IT
management to establish processes and develop or purchase tools to manage their
organization's IT assets.

Manual processes, such as performing a security audit, an inventory of
network assets or a Year 2000 project assessment, are costly, time consuming and
prone to human error. Many IT organizations custom-build their own systems
management tools. However, these custom-built solutions (i) are generally
developed by costly and hard-to-find programmers, (ii) take time to develop and
thoroughly test, (iii) are frequently designed for a single purpose and cannot
be used for other tasks and (iv) often need to be rewritten with new versions of
the NOS.

Most organizations have purchased at least some third-party software
solutions to manage their networks and are budgeting to purchase more. IDC
projects the systems management software market for the Windows and NetWare
platforms to grow to over $4.6 billion by the year 2000, with security
management software for Windows NT Server and NetWare accounting for $640
million of the total. Many third-party tools, including traditional "LAN
Suites," focus on management of the desktop, but not on management of the NOS.
Most tools that have been designed for the LAN -- including point products for
security management, disk space management and other systems management
tasks -- were built for managing single servers or small workgroups, and do not
scale to efficiently manage networks as they grow enterprise-wide to thousands
or tens of thousands of users. In addition, vendors that have traditionally
developed UNIX-based systems management software have begun to port or redevelop
their products to PC-based LAN environments. These products often do not meet
the specific needs of the Windows NT and NetWare platforms. For example,
security products from vendors of UNIX-based products are not designed to
effectively deal with the configuration flexibility and complexity of Windows NT
and NetWare platforms. Finally, many third-party products can often alert the IT
staff that a problem has occurred but do not provide the diagnostic software to
30
<PAGE> 32

find the root cause of the problem or fix it. As an organization's dependence
upon its LAN infrastructure increases, its IT department must be able to both
proactively and reactively diagnose and repair its LAN-based computing
resources.

As Windows NT and NetWare networks have grown so have the challenges of
deploying, upgrading, managing and changing the configuration of these networks.
Organizations seek software solutions that (i) can quickly and proactively
diagnose and fix a wide range of problems, (ii) are comprehensive in scope and
can be used effectively by a wide range of the organization's existing IT
personnel, (iii) scale to manage large, complex networks, (iv) address the
unique aspects of each NOS they support and (v) can be easily deployed and
maintained.

THE BINDVIEW SOLUTION

BindView develops, markets and supports a suite of systems management
software products that manage the security and integrity of complex, distributed
client server networks while reducing the Total Cost of Ownership for enterprise
computing. The Company's primary product line, BindView EMS provides software
solutions for systems administration, security management, enterprise inventory
of LAN assets and Year 2000 assessment of PC hardware and software. BindView EMS
can be used proactively to diagnose, and in many cases fix, a wide range of
specific problems occurring in Windows NT and NetWare environments. In addition,
BindView EMS is built to scale with networks as they grow enterprise-wide.
BindView EMS provides customers with a product that is both easy to use and easy
to deploy enterprise-wide.

Proactive, Query-based Systems Management

BindView offers a query-based approach to systems management for Windows NT
and NetWare environments. The query-based approach provides systems
administrators, security auditors and other IT professionals with a simple,
graphical user interface ("GUI") for asking questions, or "queries," about the
configuration and security of the NOS environment. This approach provides a
framework for proactive management of the NOS environment. Rather than waiting
for an event or alarm to occur, the systems administrator can locate, and in
many cases fix, issues with the configuration and security of the network before
they turn into problems. For those IT organizations with existing event
management systems, BindView provides a diagnostic tool to help find the root
cause of a NOS-related problem when an alarm is triggered. The query-based
approach can perform diagnostic and reporting tasks in a matter of minutes that
previously took hours or even days to complete. In addition, the modular
architecture of this query-based technology facilitates the development of new
add-on products. The Company believes this provides BindView with a competitive
advantage in the development of future applications.

Comprehensive in Scope

BindView EMS covers a complete range of system administration and security
issues, including file server management, user and group administration, disk
space management and management of directory services. All of the critical
configuration parameters and security settings of Windows NT and NetWare network
operating systems are made available through the simple user interface of
BindView EMS. As a result, BindView EMS empowers a broader group of IT
personnel, rather than just a limited number of IT experts, to solve problems
quickly by providing a way to automate the labor-intensive tasks necessary to
ensure the integrity and security of enterprise servers, applications and users.

Architected to Scale

BindView EMS has been designed to manage both workgroup LANs as well as
enterprise-wide networks that are frequently geographically dispersed. Customers
often purchase BindView EMS to manage one or two workgroups and then over time
purchase more products to manage their LAN as it grows to an enterprise-wide,
distributed network. BindView EMS is used routinely to manage networks ranging
from tens to tens of thousands of users. A Fortune 25 consumer goods company,
for example, uses BindView EMS to manage over 70,000 users on its global
NetWare-based network.

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<PAGE> 33

Native to Each Environment

BindView's products for managing Windows NT and NetWare operating systems
each have a different agent architecture that works best for that particular
environment and can exploit the unique features of each platform. BindView's
object-oriented architecture separates the user interface from the back-end data
gathering modules. This approach allows BindView to build each of these modules
to be native to the specific platform it supports. BindView products are not
programmed with a "least common denominator" approach across heterogeneous
platforms. The Company believes this enables BindView to build "best-of-breed"
products for managing and exploiting each operating environment.

Easy to Deploy, Maintain and Use

BindView's products are built to be both easy to install and easy to use.
In addition to being easy to install on a single server or workstation, the
Company's products can be rapidly deployed enterprise-wide. BindView's systems
administration and security products can typically be deployed enterprise-wide
in a matter of days, and BindView's enterprise inventory and Year 2000
assessment products can typically be deployed enterprise-wide in a matter of
weeks. BindView's products are also designed to be easy to upgrade and maintain
on an ongoing basis following initial deployment. As a result, customers can
rapidly implement and utilize BindView's products with minimal training, thereby
reducing their Total Cost of Ownership without placing additional burdens on
customer's IT personnel.

STRATEGY

The Company's objective is to be the leading provider of systems management
software for enterprise networks. Key elements of the Company's strategy to
achieve these objectives include:

Enhance Leadership Position in Security Assessment Software. The Company
believes it is currently the leading vendor for Windows NT and NetWare-based
security assessment software, both in product sales and technology leadership.
BindView will continue its research and development efforts to maintain its
technology leadership in comprehensive security assessments of Windows NT and
NetWare networks.

Enhance Systems Administration Capabilities. The Company intends to add new
capabilities to its modules for managing Windows NT and NetWare-based networks.
These capabilities include new user interface components and analysis tools for
presenting information in more meaningful ways to BindView EMS users. The
Company also intends to continue to make enhancements allowing customers to
proactively fix more problems through the "ActiveAdmin" features of BindView
EMS. The Company currently plans to introduce ActiveAdmin for Windows NT in the
next 12 months.

Apply Query-based Management to New Applications. The Company intends to
apply its query-based management approach to high-growth opportunities and to
introduce high value-added modules for managing a wide variety of critical
applications and services. The Company is evaluating opportunities to develop
new BindView EMS modules, including those for managing e-mail systems (such as
Microsoft Exchange), other operating environments (such as UNIX application
servers) and other mission-critical, client/server applications (such as
electronic commerce servers).

Expand Direct Telesales Model. The Company believes its direct telesales
strategy enables it to maintain a low cost sales model and most effectively
track and meet the needs of its customers. The Company intends to continue to
expand its direct telesales force, both in the United States and
internationally. The Company also believes it can continue to increase its
success rate in achieving strategic, enterprise-level sales by selling to higher
levels of management at key accounts of major enterprises.

Leverage Existing Customer Base. BindView products have been sold to over
4,000 customers, including more than 70% of the Fortune 100 companies. Although
the Company has already sold BindView EMS into some of these companies for
deployment enterprise-wide, the majority of these organizations have used
BindView EMS only on some of their departmental LANs and have many additional
networks continuing to represent large sales opportunities. The Company believes
it can sell more deeply within these existing customer sites and sell more
products as BindView expands its product line.
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<PAGE> 34

Strengthen Strategic Relationships. The Company will continue to strengthen
existing relationships and pursue new relationships with key partners.
Technology partners (including Microsoft, Novell, Computer Associates and
IBM/Tivoli) provide the Company with product integration and marketing
opportunities. Service providers (including the Big Six accounting firms,
systems integrators and Year 2000 audit firms) provide the Company with
distribution opportunities, as well as implementation and project management
leverage.

PRODUCTS AND TECHNOLOGY

The Company's primary product line is BindView EMS. BindView EMS is
designed to provide a wide range of systems management capabilities to the
Company's customers for use with their heterogeneous, distributed networks.
BindView EMS employs a Windows-based console to provide scalable and
comprehensive systems management solutions. BindView EMS utilizes an
object-oriented architecture enabling the management of a wide variety of
network operating systems and managed objects to be supported through snap-in
modules. These snap-in modules are sold either separately or as a "suite." Each
snap-in module to the Enterprise Console increases the scope of BindView EMS to
cover a new set of management issues for a particular platform. Current snap-in
modules for BindView EMS include the NOSadmin series (for both Windows NT and
NetWare) and NETinventory. The Enterprise Console provides an effective set of
tools that work across all snap-in modules.

PRODUCT CHART

Central to the BindView EMS architecture is the Universal Data Processing
Engine ("UDPE") which enables the query-processing capabilities of BindView EMS
by utilizing an object-oriented design separating the common components of the
Enterprise Console from the specific features and platforms of the snap-in
modules. The UDPE provides a querying engine that gathers the necessary data
from across the network and presents the query results to the user through the
Enterprise Console. Query results may be displayed in a variety of meaningful
ways, including tabular spreadsheets, printed reports, graphs and charts, or may
be exported to over a dozen popular formats, including those viewable through
e-mail or a web browser. The user can create queries from scratch, or can select
a predefined query from an initial set of over one hundred sample

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<PAGE> 35

reports supplied "out-of-the-box" with BindView EMS. Once queries have been
created, they can be saved to build a suite of management reports monitoring the
deployment of "best practices" and IT-mandated policies across the network.

With this architecture, BindView EMS enables the management of
heterogeneous, distributed networks through a common GUI. Customers typically
purchase one Enterprise Console per administrator and one or more snap-in
modules to manage their particular network, often including both NOSadmin for
NetWare and NOSadmin for Windows NT.

Enterprise Console

The Enterprise Console is the central component and user interface of
BindView EMS. It provides a common tool-set used by security auditors and
network administrators for the analysis, reporting, policy management and
automated administration of enterprise resources and assets. The Enterprise
Console's query-based approach provides the ability to ask questions,
automatically collect the data necessary to answer those questions, present the
answers in meaningful ways and, in some instances (where ActiveAdmin features
are available), make necessary corrections while documenting any required
changes. The Company is working to add and expand ActiveAdmin capabilities to
future versions of all BindView EMS modules, increasing the user's ability to
both diagnose and fix problems from the Enterprise Console.

NOSadmin Series

The NOSadmin series of products provides comprehensive security assessment
and systems management across heterogeneous environments. The NOSadmin series
addresses a complete range of systems administration and security issues,
including file server management, user and group administration, disk space
management and management of directory services. All of the critical
configuration parameters and security settings of Windows NT and NetWare network
operating systems are made available through a simple user interface, without
requiring an agent to be placed on every managed server and workstation. As a
result, the NOSadmin series empowers a broader group of IT personnel, rather
than just a limited number of IT experts, to solve problems quickly by providing
them with a way to automate the labor-intensive tasks necessary to ensure the
integrity and security of enterprise servers, applications and users.

- NOSadmin for Windows NT enables IT professionals to view and analyze
multi-domain Windows NT networks enterprise-wide from a single
administrative console. The product includes the capability to pinpoint a
variety of potential security risks for Windows NT servers and
workstations. Within the next 12 months, the Company plans to release an
updated NOSadmin for Windows NT with "ActiveAdmin" capabilities, enabling
the user to make changes to the NOS configuration and fix problems
enterprise-wide directly from the Enterprise Console.

- NOSadmin for NetWare 3 and NOSadmin for NetWare 4 provide comprehensive
security and configuration management of NetWare servers enterprise-wide
from a single administrative console. These include the capability to
make changes to the NOS configuration and fix problems enterprise-wide
through a feature called "ActiveAdmin." In addition, NOSadmin for NetWare
4 enables management of Novell Directory Services ("NDS") for a variety
of platforms (including NetWare 4, Windows NT and UNIX servers).

NETinventory

NETinventory is a scalable, fast and accurate asset management and
inventory analysis tool for large multi-site networks. It extends the
capabilities of BindView EMS to include comprehensive network inventory and
asset tracking for an entire enterprise. As a result, the user can discover,
document and evaluate PC assets throughout the entire enterprise and make
better-informed strategic technology decisions . NETinventory also reduces help
desk costs and response times by providing immediate access to any end-user's
hardware and software configuration changes. NETinventory also provides powerful
Year 2000 auditing capabilities allowing the execution and automation of Year
2000 compliance testing and reporting for PC hardware and software in a fraction
of the time it would take to do manually.
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<PAGE> 36

The following table describes the BindView EMS product family.
- ---------------------------------

<TABLE>
<CAPTION>
BINDVIEW EMS
PRODUCT FEATURES/BENEFITS
- -
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise Console - The Desktop Manager allows for the delegation of tasks to
individuals filling special roles (for example, security
auditors or help desk personnel) by giving them customized
desktops focused on the tasks they perform
- A Query Builder to ask questions about the state of the
network through an easy-to-use GUI
- Spreadsheet and graphics/charting interfaces to view query
results
- A Report Writer to generate presentation-quality reports
- An export function to export data to over a dozen popular
file formats
- --------------------------------------------------------------------------------------------------
NOSadmin for Windows NT - Comprehensive security assessments
- Configuration analysis of both servers and workstations,
including services, sessions, shares and device drivers
- Network integrity analysis of domain infrastructure,
users, groups, policies and trust relationships between
domains
- A single report can span multiple Windows NT domains for
enterprise-wide analysis of all Windows NT servers and
workstations
- Documention and analysis of the values of any registry
keys across all servers and workstations enterprise-wide
- File system and disk space management
- --------------------------------------------------------------------------------------------------
NOSadmin for NetWare 4 - Comprehensive security assessments
- Management of file server configuration, NetWare Loadable
Modules and "Set" variables
- User and group administration
- File system and disk space management
- Documention of organizational policies throughout the
enterprise
- ActiveAdmin for making global changes to system
configuration
- Management of NDS and ActiveAdmin for making global
changes to NDS
- --------------------------------------------------------------------------------------------------
NOSadmin for NetWare 3 - See features/benefits for NOSadmin for NetWare 4 above,
except supports NetWare binding services instead of NDS
- ----------------------------------------------------------------------------------------------
NETinventory - Integrated Year 2000 compliance testing and reporting for
PC hardware and software
- Automated discovery and tracking of hardware assets
- Automated detection of over 4,000 software packages
- A three-tiered architecture providing central
administration and synchronization services, with
fault-tolerant collection and distribution of asset
management information
- Management of database integrity across all segments of
the distributed inventory database enterprise-wide
- Generation of complete reports for all PC hardware and
software assets across the enterprise
</TABLE>

CUSTOMERS

The Company's products have been sold to more than 70% of the Fortune 100
companies. The Company has sold software products through direct channels to
over 4,000 corporations, governmental agencies and

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<PAGE> 37

other organizations worldwide, and also to over 150 resellers and distributors.
The following table is a selected list of the Company's end-user customers that
accounted for more than $50,000 in total revenue (license and service) to
BindView since January 1, 1996:

<TABLE>
<S> <C> <C>
3Com GTE Mobile Communications Scudder, Stevens & Clark
American Stores Hoechst Sony
Baltimore Gas & Electric ITT Industries Sprint
Banc One Capital Kellogg USA Suntrust Banks
Blue Cross and Blue Shield Kimberley-Clark Tandy Corporation
California Federal Bank KPMG Peat Marwick Trans Union
Chase Manhattan Bank LCI International Union Pacific
CIBC Asia Limited Michelin U.S. Bank
Cigna Mellon Bank U.S. Customs Service
Citicorp Mobil U.S. Trust
CoreStates Bank Oxford Health Plans Wells Fargo
CSX Corporation PageNet
Deloitte & Touche Paramount Pictures
El Paso Energy Phillips Petroleum
Emory Clinic Procter & Gamble
Ernst & Young Providian Financial
Excel Telecommunications Quantum
Federal Reserve Bank Raytheon
First Chicago Sallie Mae
GE Capital San Diego Gas & Electric
</TABLE>

Although the Company has sold its software on an enterprise-wide basis, the
majority of the Company's existing customers continue to represent larger sales
opportunities. Customers typically buy for a single department or division and
then, based upon the initial success of the products in such department or
division, later expand their use of the Company's products into other parts of
the organization. The Company believes it can sell more deeply within these
existing customer sites and sell more products as the Company expands its
product line. In 1996, 1997, and for the three months ended March 31, 1998, no
customer comprised more than 10% of the Company's sales.

SALES AND MARKETING

The Company sells its products primarily through its direct telesales
force, and, to a lesser extent, through VARs, distributors and systems
integrators. In addition, the Company has strategic marketing relationships with
professional service organizations and software vendors that provide the Company
with increased visibility as well as sales leads.

Direct Telesales

The Company sells its products primarily through a direct telesales force.
The Company utilizes a direct telesales model that minimizes the number of
remote sales offices and customer site visits and focuses on effective use of
the telephone and Internet communications for product demonstrations and product
sales. When necessary, the Company's sales force will also travel to customer
locations. The Company believes its direct telesales approach allows it to
achieve control of the sales process and respond rapidly to customer needs,
while maintaining an efficient, low-cost sales model. Sales cycles typically
range between as little as three months for departmental sales and up to 12
months for enterprise-wide contracts.

As of March 31, 1998, the Company had 75 persons in its direct telesales
organization worldwide. The direct telesales force for North America is based in
Houston and accounts for a substantial majority of the Company's revenues. In
January 1998, the Company established its first international direct telesales
office in Frankfurt, Germany. The Company has increased the size of its direct
telesales organization from 32 to 75 individuals over the last year and expects
to continue hiring sales personnel, both domestically and internationally, over
the next 12 months.

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<PAGE> 38

VARs and Distributors

In addition to its direct telesales strategy, the Company has established
indirect distribution channels through VARs and distributors. Outside North
America, where the Company is in the process of developing its direct telesales
presence, the Company relies heavily on its reseller channel. The Company has
established a network of VARs and distributors in Europe, Latin America and the
Pacific Rim, with the concentration of such distributors being located in
European markets.

The Company's international VARs and distributors typically perform
marketing, sales and technical support functions in their country or region.
Each one may distribute direct to the customer, via other resellers or through a
mixture of both channels. The Company actively trains its international VARs and
distributors in both product and sales methodology.

Systems Integrators and Service Providers

In addition to more traditional resellers, the Company markets its products
through service organizations that help customers install, manage and secure
large Windows NT and NetWare networks. Such organizations include large systems
integrators, outsourcing companies, security auditing groups in the Big Six
accounting firms and service companies performing Year 2000 compliance work.
Some of these companies sell BindView's products directly to their end-users,
while others license the BindView products from the Company and include these
products in their standard toolkits used at their clients' sites.

Marketing Partnerships and Programs

To support its growing sales organization and channel, the Company in the
last year has devoted significant resources to building a series of marketing
partnerships and programs. The Company has developed a partnership with
IBM/Tivoli for marketing BindView EMS as a companion product to Tivoli TME 10,
as well as partnerships with other key vendors, including Microsoft, Novell and
Computer Associates. The Company is a Microsoft Solution Provider, and holds
"Microsoft Back Office" certification for its products. The Company also
partners with many of the Big Six accounting firms to increase awareness of
network security issues. Results of these partnerships in the past year include
a seminar series with Ernst & Young entitled "Issues in Windows NT Security"
given in over 25 cities in the United States and Europe, and a white paper
published by Coopers & Lybrand entitled "Evaluating Novell NetWare 4.X Security
Using BindView EMS."

In addition to the above partnerships, the Company's marketing efforts have
resulted in a number of programs, such as seminars, industry trade shows, vendor
executive briefings, analyst and press tours, advertising and public relations.

CUSTOMER SUPPORT AND PROFESSIONAL SERVICES

BindView believes that high quality customer support and professional
services are requirements for continued growth and increased sales of its
products. The Company has made a significant investment in increasing the size
of its support and services organization in the past and plans to continue to do
so in the future. As of March 31, 1998, the Company's customer support and
professional services organization consisted of 16 employees. Customer support
personnel provide technical support by telephone, e-mail and fax, and maintain
the Company's Web site and bulletin boards to complement these services.
Technical support for customers is provided at no charge for 30 days after the
product's sale and on a subscription basis thereafter. Future versions of the
Company's products are provided at no extra charge as part of the subscription
service. International offices and resellers extend this service for overseas
customers.

The Company's professional services group provides product training,
consulting and implementation services for a fee in order to assist customers in
maximizing the benefits of the Company's products. In addition, the Company
periodically offers training to its channel partners and employees.

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<PAGE> 39

PRODUCT DEVELOPMENT

BindView has been an innovator and leader in the development of systems
management tools for the LAN marketplace. The Company believes that a
technically skilled, quality oriented and highly productive software development
organization is the key to the continued success of new product offerings. The
software development staff is also responsible for enhancing the Company's
existing products and expanding its product line. The Company's product
development staff consisted of 18 employees as of March 31, 1997 and 33
employees as of March 31, 1998. The Company expects that it will continue to
invest substantial resources in product development expenditures.

BindView is currently developing enhancements to existing products as well
as working to develop new products for managing additional applications and
platforms not currently within the scope of BindView EMS. Potential future
applications include a product to manage e-mail applications such as Microsoft
Exchange. In addition, the Company plans to release ActiveAdmin for Windows NT
in the next 12 months, and is currently developing the next generation of the
BindView EMS product family. There can be no assurance that these development
efforts will be completed within the Company's anticipated schedules or that, if
completed, they will have the features necessary to make them successful in the
marketplace. Moreover, products as complex as the Company's may contain
undetected errors when first introduced or as new versions are released. Such
undetected errors in new products may be found after commencement of commercial
shipments, resulting in loss of or delay in market acceptance. Future delays in
the development or marketing of product enhancements or new products could
result in a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors -- Rapid Technological
Change and New Products."

COMPETITION

The market in which the Company competes is intensely competitive and
characterized by rapidly changing technology and evolving standards. Companies
offering competitive products vary in the scope and breadth of the products and
services offered and include: (i) providers of security analysis and audit
products, such as Axent Technologies, Inc. and Security Dynamics Technologies,
Inc.; (ii) providers of standalone inventory and asset management products such
as Tally Systems Corp.; (iii) providers of LAN desktop management suites, such
as Intel Corporation, Hewlett-Packard Company and Microsoft Corporation; and
(iv) providers of Year 2000 assessment products such as Network Associates, Inc.
In addition, the native tools provided by Novell, Inc. and third-party tools
provided by certain vendors, such as Computer Associates, Inc. and other
companies, may compete with certain management features of the Company's
products. The Company has experienced, and expects to continue to experience,
increased competition from current and potential competitors, many of whom have
greater name recognition, a larger installed customer base and significantly
greater financial, technical, marketing, and other resources than the Company.
Such competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources to
the development, promotion and sale of their products than the Company. The
Company expects additional competition as other established and emerging
companies enter into the systems management software market and new products and
technologies are introduced. Increased competition could result in price
reductions, fewer customer orders, reduced gross margins, longer sales cycles
and loss of market share, any of which would materially adversely affect the
Company's business, operating results and financial condition.

current or prospective customers. Accordingly, it is possible that new
competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Such competition could materially
adversely affect the Company's ability to obtain new licenses or to obtain
maintenance and support renewals for existing licenses on terms favorable to the
Company. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and the failure to do so
would materially adversely affect the Company's business, operating results and
financial condition.

The Company believes that significant competitive factors affecting the
markets described above are depth of product functionality, breadth of platform
support, product quality and performance, conformance to industry standards,
product price and customer support. In addition the ability to rapidly develop
and implement new products and features for these markets is critical. See "Risk
Factors -- Significant Competition."

PROPRIETARY RIGHTS

The Company relies primarily on a combination of copyright, trademark and
trade secret laws, confidentiality procedures and contractual provisions to
protect its proprietary rights. However, the Company believes that such measures
afford only limited protection. There can be no assurance that others will not
develop technologies that are similar or superior to the Company's technology or
design around the copyrights and trade secrets owned by the Company. The Company
licenses its software products primarily under "shrink wrap" licenses (i.e.,
licenses included as part of the product packaging). Shrink wrap licenses are
not negotiated with or signed by individual licensees, and purport to take
effect upon the opening of the product package. The Company believes, however,
that these measures afford only limited protection. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. Policing unauthorized use of the Company's
products is difficult and the Company is unable to determine the extent to which
piracy of its software products exists. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights as fully as do the
laws of the United States. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that competition will not
independently develop similar or superior technology.

The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim infringement by the Company of their intellectual property rights. The
Company expects that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management's attention
and resources, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company, if at all. In
the event of a successful claim of product infringement against the Company and
failure or inability of the Company to either license the infringed or similar
technology or develop alternative technology on a timely basis, the Company's
business, operating results and financial condition could be materially
adversely affected. See "Risk Factors - Limited Protection of Proprietary
Technology; Risks of Infringement."

EMPLOYEES

As of March 31, 1998, the Company employed 182 full-time employees,
including 81 in sales and marketing, 61 in research and development, 16 in
technical support and professional services and 24 in general and
administrative. The Company believes that its future success will depend in
large part upon its continuing ability to attract and retain highly skilled
managerial, sales, marketing, customer support and research and development
personnel. Like other software companies, the Company faces intense competition
for such personnel, and the Company has at times experienced and continues to
experience difficulty in recruiting qualified personnel. There can be no
assurance that the Company will be successful in attracting, assimilating and
retaining other qualified personnel in the future. The Company is not subject to
any collective bargaining agreement and it believes that its relationships with
its employees are good. See "Risk Factors - Dependence on Key Personnel; Need
for Additional Qualified Personnel."

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<PAGE> 41

FACILITIES

The Company's principal administrative, sales, marketing, support and
research and development facility is located in approximately 35,000 square feet
of space in Houston, Texas. Although the lease on this office space expires
October 2000, the Company notified its landlord in 1997 of its intention to
terminate its lease in order to secure more space in Houston, Texas. The Company
also currently has office space in Frankfurt, Germany. However, anticipated
expansions in international sales may result in the Company moving to new
facilities within the next 12 months. The Company believes suitable additional
or alternative space will be available in the future on commercially reasonable
terms as needed.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceeding.

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<PAGE> 42

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

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

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Executive Officers and Directors
Eric J. Pulaski................... 35 Chairman, President, Chief Executive Officer and Director
Christopher J. Sole............... 46 Vice President, Chief Operating Officer and Director
Scott R. Plantowsky............... 34 Vice President, Chief Financial Officer and Director
David E. Pulaski.................. 30 Vice President -- North and South American Sales
Nadeem Ghias...................... 37 Vice President -- Research & Development
Peter L. Bloom(1)(2).............. 40 Director
John J. Moores(1)(2).............. 53 Director
Richard A. Hosley II.............. 53 Director
Key Employees
Rudi Vanderbeeken................. 43 Managing Director -- Europe, Middle East and Africa
Mark Miller....................... 28 Director of Technical Services
Irl Nathan........................ 33 Vice President -- Product Marketing
</TABLE>

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

(1) Member Compensation Committee

(2) Member Audit Committee

Executive Officers and Directors

Eric J. Pulaski founded the Company in May 1990 and has served as the
Company's Chairman, President and Chief Executive Officer and as a Director
since its inception. Prior to founding the Company, Mr. Pulaski was employed as
Director of the Advanced Services Division of Network Resources, Inc., a
Houston-based systems integration firm. Mr. Pulaski holds a B.A. in Humanities
from the University of Texas at Austin.

Christopher J. Sole has served as the Company's Vice President and Chief
Operating Officer since May 1996. Mr. Sole has been a Director of the Company
since October 1997. From January 1995 to May 1996, Mr. Sole was a Business
Consultant, planning technology and business strategies for leading
inter-networking and Internet companies. From December 1993 to December 1994,
Mr. Sole was employed as Vice President of Product Marketing by Uniface B.V., a
Netherlands based developer of client/server application development systems.
From April 1989 to December 1993, Mr. Sole was employed by Bachman Information
Systems, Inc., a Massachusetts based developer and marketer of model-driven
application tools, where he served in various roles including Business Unit
Manager and Vice President of Product Management and Development. Mr. Sole holds
a B.Sc. in Mechanical Engineering from Birmingham University, U.K., and an
M.B.A. from the Stanford University Graduate School of Business.

Scott R. Plantowsky has served as the Company's Vice President and Chief
Financial Officer since September 1993. Mr. Plantowsky has been a Director of
the Company since October 1997. From January 1986 to August 1993, Mr. Plantowsky
was Vice President and General Manager for Plantowsky's Furniture, a Houston
retail furniture chain. Mr. Plantowsky is currently a General Partner in Century
Development's Student Furniture Partnerships and is a Director of SSP
Properties, a real estate holding company based in Corpus Christi, Texas. Mr.
Plantowsky holds a B.B.A. in Finance from the University of Texas at Austin.

David E. Pulaski has served as the Company's Vice President for North and
South American Sales since January 1998. From July 1995 to January 1998, Mr.
Pulaski was Director of Domestic Sales for the Company. From February 1993 to
July 1995, Mr. Pulaski served the Company as a sales representative and then as
sales

41
<PAGE> 43

manager. Prior to joining the Company in February 1993, Mr. Pulaski was a
licensed securities broker for Paine Webber and Lehman Brothers. Mr. Pulaski is
the brother of Eric J. Pulaski.

Nadeem Ghias has served as the Company's Vice President -- Research &
Development since May 1996. Prior to becoming Vice President of Product
Development, Mr. Ghias was a Product Architect and Senior Windows Developer for
the Company. From April 1989 to December 1993, Mr. Ghias was the founder and
Chief Executive Officer of Micronix, Inc. ("Micronix"), a. developer and
marketer of products for the xBASE after-market, which was purchased by the
Company in 1993. From August 1988 to April 1989, Mr. Ghias held senior
development positions at Vitesse Semiconductor, a manufacturer of high-speed
microchips, and General Motors Corporation. Mr. Ghias holds a B.S. degree in
Electrical Engineering from Marquette University.

Peter L. Bloom has served as a Director of the Company since October 1997.
Mr. Bloom is a Managing Member of General Atlantic Partners, LLC, a private
investment firm focused exclusively on strategic investments in software and
related services worldwide. Prior to joining General Atlantic Partners, LLC in
1996, Mr. Bloom spent 13 years at Salomon Brothers, an investment banking firm,
where he last was the Managing Director of Salomon's U.S. Technology Division.
Mr. Bloom is a member of the Board of Directors of SS&C Technologies, Inc., a
Special Advisor to the Board of Directors of E-TRADE Securities, Inc. and a
board member of a number of private companies. Mr. Bloom holds a B.A. in
Computer Studies and Economics from Northwestern University.

John J. Moores has served as a Director of the Company since October 1997.
In 1980, Mr. Moores founded BMC Software, Inc. ("BMC"), a vendor of system
software utilities for IBM mainframe computing environments. Mr. Moores served
as BMC's President and Chief Executive Officer from 1980 to 1986 and as Chairman
of the Board of Directors from 1980 to 1992. Prior to that, Mr. Moores was
employed by IBM and Shell Oil Corporation in various MIS positions. Since
December 1994, Mr. Moores has served as owner and Chairman of the Board of the
San Diego Padres Baseball Club, L.P. and since September 1991 as Chairman of the
Board of JMI Services, Inc., a private investment company. Mr. Moores also
serves as Chairman of the Board of Peregrine Systems, Inc., a publicly held
helpdesk software company, and numerous privately held companies. Mr. Moores
holds a B.S. in Economics and a J.D. from the University of Houston.

Richard A. Hosley II has served as a Director of the Company since January
1998. Since October 1990, Mr. Hosley has been a private investor. From 1980 to
1990, Mr. Hosley was employed by BMC, where he held a variety of positions
including Vice President of Sales and Marketing, President, Chief Executive
Officer and Vice Chairman. Prior to joining BMC , Mr. Hosley was employed by
IBM. Mr. Hosley serves as a director of Logic Works, Inc., a database design
software company, and Peregrine Systems, Inc. Mr. Hosley holds a B.A. in
Economics from Texas A&M University.

Key Employees

Rudi Vanderbeeken has served as the Company's Managing Director of sales to
Europe, the Middle East and Africa since August 1997. From January 1995 to June
1997, Mr. Vanderbeeken was a shareholder and Managing Director for Europe for
Triteal Corporation, a U.S. based developer of UNIX-based windowing software and
was responsible for building a direct and indirect sales channel in Europe. From
June 1992 to January 1995, Mr. Vanderbeeken was employed by Uniface
International, a Netherlands based developer of client /server application
development systems as Sales Director for Europe, Japan and Asia Pacific. Prior
to that Mr. Vanderbeeken was employed by Performance Software Ltd and
Computerland Europe.

Mark Miller has served as the Company's Director of Technical Services
since March 1997, and oversees the quality assurance, information systems,
technical support and professional services departments. From March 1996 until
March 1997, Mr. Miller was Technical Support Manager for the Company. From April
1995 to March 1996, Mr. Miller was a Technical Support Representative for the
Company. Prior to joining the Company, Mr. Miller served on active duty in the
United States Air Force from October 1989 to March 1995 where he held a variety
of positions, including Manager of an Air Base help desk, Data Base
Administrator, Systems Analyst and Manager and Main Frame operator.

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<PAGE> 44

Irl Nathan has served as the Company's Vice President of Product Marketing
since March 1997 and oversees the execution of the Company's product strategy.
From November 1990 to March 1997, Mr. Nathan managed the Company's marketing
department as well as managing the sales department from January 1991 to
February 1993. Prior to joining the Company, Mr. Nathan founded a consulting and
publishing firm specializing in network integration for the legal community. Mr.
Nathan holds a B.A. in Government from the University of Texas at Austin and a
J.D. with honors from St. Mary's University.

BOARD COMPOSITION

The Company's Revised Articles of Incorporation provide for a Board of
Directors consisting of not less than four members and shall consist of six
members initially unless and until increased by resolution of the Board of
Directors. The Company currently has six Directors. Each of the Company's
officers and directors, other than non-employee directors, devotes substantially
full time to the affairs of the Company. The Company's non-employee directors
devote such time to the affairs of the Company as is necessary to discharge
their duties. Each officer is elected and serves at the discretion of the Board
of Directors.

The terms of office of the Board of Directors are divided into three
classes of staggered terms. Class I, whose term will expire at the annual
meeting of shareholders to be held in 1999; Class II, whose term will expire at
the annual meeting of shareholders to be held in 2000; and Class III, whose term
will expire at the annual meeting of shareholders to be held in 2001. The Class
I directors are Christopher J. Sole and Richard A. Hosley II, the Class II
directors are John J. Moores and Scott R. Plantowsky and the Class III directors
are Eric J. Pulaski and Peter L. Bloom. At each annual meeting of shareholders
after the initial classification, the successors to directors whose term will
then expire will be elected to serve from the time of election and qualification
until the third annual meeting following election. This classification of the
Board of Directors may have the effect of delaying or preventing changes in
control or management of the Company. See "Risk Factors -- Anti-Takeover Effects
of Articles of Incorporation, Bylaws and Texas Law."

COMMITTEES OF THE BOARD

The Bylaws authorize the Board of Directors to designate one or more
committees. As of January 27, 1998, the Board of Directors had authorized an
Audit Committee and a Compensation Committee.

The Audit Committee reviews, acts on and reports to the Board of Directors
with respect to various auditing and accounting matters, including the selection
of the Company's independent accountants, the scope of the annual audits, fees
to be paid to the independent accountants, the performance of the Company's
independent accountants and the accounting practices of the Company. The Audit
Committee is comprised of John J. Moores as Chairman and Peter L. Bloom.

The Compensation Committee establishes salaries, incentives and other forms
of compensation for officers and other employees of the Company as well as
administering the incentive compensation and benefit plans of the Company. The
Compensation Committee is comprised of Peter L. Bloom as Chairman and John J.
Moores.

DIRECTOR COMPENSATION

The Company reimburses each member of the Company's Board of Directors for
out-of-pocket expenses incurred in connection with attending Board meetings.
Except for Richard A. Hosley II, no member of the Company's Board of Directors
currently receives any additional cash compensation. Mr. Hosley receives $1,000
per board meeting attended. The Company has granted each of John J. Moores,
Richard A. Hosley II and Peter L. Bloom options to acquire 50,000 shares of
Common Stock at an exercise price of $3.85 per share under the Company's 1998
Non-Employee Directors Stock Option Plan. See "-- 1998 Non-Employee Directors
Stock Option Plan." All such options vest in annual installments over five
years, except that they vest in full if the Company is subject to a change in
control (as defined in such Plan) and in the event of the optionee's death or
disability. Such options expire ten years from the date of grant or, if earlier,
90 days after the optionee ceases to be a director or 12 months after the
optionee's death. See "Principal and Selling Shareholders."
43
<PAGE> 45

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the four other most highly compensated officers
whose salary and bonus for 1997 were in excess of $100,000 (collectively, the
"Named Officers"), for services rendered in all capacities to the Company and
its subsidiaries for that fiscal year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
AWARDS
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
--------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATION($)(3)
--------------------------- --------- -------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Eric J. Pulaski(1)............ $141,000 $36,044 0 0 $ 9,500
President and Chief
Executive Officer
Christopher J. Sole........... 110,000 83,301 0 279,990 9,054
Chief Operating Officer
Scott R. Plantowsky........... 110,000 113,179 1,335,000(4) 1,500,000(5) 9,500
Chief Financial Officer
David E. Pulaski.............. 65,000 121,225 1,335,000(6) 187,500(7) 9,500
Vice President -- Sales,
North America
Nadeem Ghias(2)............... 114,950 83,455 231,400(8) 97,500(9) 9,500
Vice President -- Research &
Development
</TABLE>

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

(1) Does not include S Corporation dividends of $1,207,545 paid in 1997.

(2) Does not include S Corporation dividends of $28,910 paid in 1997.

(3) Includes contributions made by the Company to a 401(k) Plan.

(4) Issued in connection with the termination of the Phantom Stock Plan. At the
end of 1997, Mr. Plantowsky held 107,125 shares of restricted stock valued
at $412,217. Dividends will be paid on restricted stock to the same extent
that dividends are paid on unrestricted stock.

(5) Includes a warrant for 437,500 shares of Common Stock at $2.85 per share,
vested as of December 31, 1997 and expiring October 2007.

(6) Issued in connection with the termination of the Phantom Stock Plan. At end
of fiscal year 1997, Mr. Pulaski held 243,202 shares of restricted stock
valued at $935,841. Dividends will be paid on restricted stock to the same
extent that dividends are paid on unrestricted stock.

(7) Granted in connection with the termination of the Phantom Stock Plan all of
which became fully vested and exercisable in February 1998. In addition in
January 1998, Mr. Pulaski was granted options for 37,500 shares of Common
Stock at an exercise price of $3.85 per share.

(8) Issued in connection with the termination of the Phantom Stock Plan. At end
of fiscal year 1997, Mr. Ghias held no shares of restricted stock. Dividends
will be paid on restricted stock to the same extent that dividends are paid
on unrestricted stock.

(9) Granted in connection with the termination of the Phantom Stock Plan. In
addition, in March 1998, Mr. Ghias was granted options for 37,500 shares of
Common Stock at an exercise price of $4.48 per share.

44
<PAGE> 46

The following table contains information concerning the stock option grants
made to each of the Named Officers in the year ended December 31, 1997. No stock
appreciation rights were granted to these individuals during such year.
OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM(3)
UNDERLYING EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME OPTIONS GRANTED FISCAL YEAR(1) ($/SHARE)(2) DATE 5%($) 10%($)
---- --------------- -------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Eric J. Pulaski........ 0 -- -- -- -- --
Christopher J. Sole.... 279,990(4) 7.3 $2.85 10/2007 $501,488 $1,270,869
Scott R. Plantowsky.... 875,000(5) 22.9 1.34 4/2007 737,379 1,868,663
437,500(6) 11.4 2.85 10/2007 783,603 1,985,803
187,500(7) 4.9 2.85 10/2007 335,830 851,058
David E. Pulaski....... 187,500(8) 4.9 2.85 10/2007 335,830 851,058
Nadeem Ghias........... 97,500(9) 2.5 2.85 10/2007 174,631 442,550
</TABLE>

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

(1) Based on an aggregate of 3,828,885 shares subject to options and warrants
granted to employees of the Company under the Incentive Stock Option Plan,
Stock Option Plan and 1997 Incentive Plan during 1997.

(2) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date or pursuant to a cashless exercise
procedure.

(3) The potential realizable value is calculated based on the term of the option
at the time of grant (ten years). Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent the Company's prediction of its stock
price performance. The potential realizable values at 5% and 10%
appreciation are calculated by assuming that the exercise price on the date
of grant appreciates at the indicated rate for the entire term of the option
and that the option is exercised at the exercise price and sold on the last
day of its term at the appreciated price.

(4) Twenty-five percent (25%) of the option shares shall vest annually
commencing in May 1998.

(5) Includes options for 218,750 shares of Common Stock, vested as of December
31, 1997, with the remaining options vesting in the amount of 218,750 on
January 1, 1998 and 109,375 shares on each of the following dates: July 1,
1998, January 1, 1999, July 1, 1999 and January 1, 2000.

(6) All of these warrants are fully vested.

(7) All of the option shares shall vest in September 1998.

(8) All of the option shares vested in February 1998.

(9) Fifty percent (50%) of the option shares vested in December 1997 and fifty
percent (50%) of the option shares shall vest in December 1998.

The following table sets forth information concerning the shares acquired
and the value realized upon the exercise of stock options during 1997 and the
year-end number and value of unexercised options with respect to each of the
Named Officers. No stock appreciation rights were exercised by the Named
Officers in 1997 or were outstanding at the end of that year.

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

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, AT DECEMBER 31,
1997 1997(1)
----------------------- ------------------------
NAME VESTED UNVESTED VESTED UNVESTED
---- -------- --------- -------- ----------
<S> <C> <C> <C> <C>
Eric J. Pulaski........................... -- -- -- --
Christopher J. Sole....................... -- 927,315 -- $1,170,709
Scott R. Plantowsky....................... 656,250 843,750 $986,125 1,833,375
David E. Pulaski.......................... -- 187,500 -- 187,500
Nadeem Ghias.............................. 48,750 48,750 48,750 48,750
</TABLE>

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

(1) Based on the fair market value of Common Stock of $3.85 per share at the
year ending December 31, 1997, as determined by the Company's Board of
Directors, less the exercise price payable for such shares.

45
<PAGE> 47

BONUS PLAN

The Company has adopted a bonus program pursuant to which all employees may
be awarded cash bonuses based on individual performance and the performance and
profitability of the Company.

STOCK OPTION PLANS

Incentive Stock Option Plan.

The Company's Incentive Stock Option Plan, as amended (the "Incentive
Plan"), provides for the grant to certain key employees of options intended to
qualify as incentive stock options ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Incentive Plan was adopted by
the Board of Directors in January 1996 and approved by the Company's
stockholders in December 1996. Unless terminated sooner, the Incentive Plan will
terminate automatically in December 2004. A total of 1,875,000 shares of Common
Stock had been reserved for issuance under the Incentive Plan at March 31, 1998.
The Incentive Plan shall be administered by the Board of Directors. The Board
has the power to designate the employees or classes of employees eligible to
participate in the Incentive Plan, grant options provided for in the Incentive
Plan in the form and amounts as the Board shall determine and impose such
limitations, restrictions and conditions upon such options as the Board deems
appropriate. Options granted under the Incentive Plan are not generally
transferable by the optionee, and each option is generally exercisable during
the lifetime of the optionee only by such optionee. Options granted under the
Incentive Plan shall expire immediately on the date of termination of the
optionee's employment with the Company and will expire six months after such
optionee's death, but in no event will any option be exercisable later than ten
years from the date of grant of such option. The exercise price of all ISOs
granted under the Incentive Plan must be equal to the fair market value of the
Common Stock on the date of grant. No options may be granted to any participant
who owns stock possessing more than ten percent of the voting power of all
classes of the Company's outstanding capital stock. The aggregate fair market
value of options granted to an optionee may not exceed $100,000 in any calendar
year. The term of options granted under the Incentive Plan may not exceed ten
years. The Incentive Plan provides that in the event of a stock dividend,
merger, consolidation, exchange of shares or other similar event, the Board of
Directors may appropriately adjust the number of shares of Common Stock issuable
under and the option price of such options. As of March 31, 1998, 10,000 shares
of Common Stock had been issued upon exercise of options outstanding under the
Incentive Plan. The recipient of any option under the Incentive Plan has no
rights as a shareholder unless and until certificates for shares of Common Stock
have been issued to him. Options to purchase 1,484,395 shares of Common Stock at
a weighted average exercise price of $1.28 were outstanding under the Incentive
Plan. At March 31, 1998, 380,605 shares remained available for future issuance
under the Incentive Plan. After May 1998, all options outstanding under the
Incentive Plan are to be governed, for administration purposes only, by the
Omnibus Plan.

Stock Option Plan.

The Company's Stock Option Plan, as amended (the "Stock Plan"), provides
for the grant to certain employees of nonstatutory options and ISOs within the
meaning of Section 422 of the Code. The Stock Plan was adopted by the Board of
Directors in January 1996 and approved by the Company's stockholders in December
1996. Unless terminated sooner, the Stock Plan will terminate automatically in
December 2005. A total of 1,747,325 shares of Common Stock had been reserved for
issuance under the Stock Plan at March 31, 1998. The Stock Plan shall be
administered by the Board of Directors. The Board has the power to designate the
employees or classes of employees eligible to participate in the Stock Plan,
grant options provided for in the Stock Plan in the form and amounts as the
Board shall determine and impose such limitations, restrictions and conditions
upon such options as the Board deems appropriate. Options granted under the
Stock Plan are not generally transferable by the optionee, and each option is
generally exercisable during the lifetime of the optionee only by such optionee.
Options granted under the Stock Plan shall expire 24 months after the

46
<PAGE> 48

optionee's death or termination of employment with the Company, but in no event
will any option be exercisable later than ten years from the date of grant of
such option. The exercise price of options granted under the Stock Plan shall be
as determined by the Board of Directors. The term of options granted under the
Stock Plan may not exceed ten years. The Stock Plan provides that in the event
of a stock dividend, merger, consolidation, exchange of shares or other similar
event, the Board of Directors may appropriately adjust the number of shares of
Common Stock issuable under and the option price of such options. As of March
31, 1998, no shares of Common Stock had been issued upon exercise of options
outstanding under the Stock Plan. The recipient of any option under the Stock
Plan has no rights as a shareholder unless and until certificates for shares of
Common Stock have been issued to him. Options to purchase 1,747,325 shares of
Common Stock at a weighted average exercise price of $1.79 were outstanding
under the Stock Plan. At March 31, 1998, no shares remained available for future
issuance under the Stock Plan. After May 1998, all options outstanding under the
Stock Plan are to be governed, for administration purposes only, by the Omnibus
Plan.

1997 Incentive Plan.

The Company's 1997 Incentive Plan, as amended (the "1997 Plan"), provides
for the grant to certain key employees, executive officers, directors and
consultants of nonstatutory options and ISOs within the meaning of Section 422
of the Code. The 1997 Plan was adopted by the Board of Directors in September
1997 and approved by the Company's stockholders in October 1997. The 1997 Plan
shall continue in effect until terminated by the Board of Directors, but in no
event will incentive stock options be granted by the Board after September 2007.
A total of 1,303,740 shares of Common Stock had been reserved for issuance under
the 1997 Plan at March 31, 1998. The 1997 Plan shall be administered by the
Board of Directors or such other committee of the Board designated to administer
the 1997 Plan. The Board has the power to select persons to whom options may be
granted, to determine the number and type of options to be granted, to determine
in what manner the exercise price of an option may be paid and to adopt, amend,
suspend and rescind such rules and regulations as the Board may deem necessary
to administer the 1997 Plan. Options granted under the 1997 Plan are not
generally transferable by the optionee, and each option is generally exercisable
during the lifetime of the optionee only by such optionee. The term and
expiration of options granted under the 1997 Plan shall be determined by the
Board of Directors, but in no event shall the term of any incentive stock option
exceed a period of ten years from the date of its grant. The exercise price of
all options granted under the 1997 Plan shall be determined by the Board of
Directors, but in no event will the exercise price be less than the fair market
value of the Common Stock on the date of grant. The 1997 Plan provides that in
the event of a stock dividend, merger, consolidation, exchange of shares or
other similar event, the Board of Directors may appropriately adjust the number
of shares of Common Stock issuable under and the option price of such options.
Further, unless otherwise provided by the Board of Directors, all conditions and
restrictions with respect to the exercisability or settlement of options granted
under the 1997 Plan shall immediately lapse if any person acquires directly or
indirectly "beneficial ownership," as such term is defined in Section 13(d) of
the Exchange Act, of voting securities representing 50 percent or more of the
voting power of all of the then-outstanding voting securities of the Company. As
of March 31, 1998, 1,303,740 shares of Common Stock had been issued upon
exercise of options outstanding under the 1997 Plan. No option granted under the
1997 Plan shall confer on any optionee the rights of a shareholder unless and
until stock is duly issued or transferred, or if the option is duly exercised.
Options to purchase 1,303,740 shares of Common Stock at a weighted average
exercise price of $2.85 were outstanding under the 1997 Plan. At March 31, 1998,
no shares remained available for future issuance under the 1997 Plan. After May
1998, all options outstanding under the 1997 Plan are to be governed, for
administration purposes only, by the Omnibus Plan.

Omnibus Incentive Plan.

The Company's Board of Directors has adopted the Company's Omnibus
Incentive Plan (the "Omnibus Plan"). The Company expects the Omnibus Plan to be
approved by the Company's stockholders in May 1998.

Under the Omnibus Plan, 1,750,000 shares of Common Stock are reserved for
issuance pursuant to the direct award or sale of shares or the exercise of
options. If any options granted under the Omnibus Plan are forfeited or
terminate for any other reason without having been exercised in full, then the
unpurchased shares

47
<PAGE> 49

subject to those options will become available for additional grants under the
Omnibus Plan. If shares granted or purchased under the Omnibus Plan are
forfeited, then those shares will also become available for additional grants
under the Omnibus Plan.

Under the Omnibus Plan, all employees (including officers) of the Company
or any subsidiary are eligible to purchase shares of Common Stock, to receive
awards of shares or to receive nonstatutory options or ISOs within the meaning
of Section 422 of the Code. The Omnibus Plan is administered by the Board of
Directors, which selects the persons to whom shares will be sold or awarded or
options will be granted, determines the number of shares to be made subject to
each sale, award or grant, and prescribes the other terms and conditions of each
sale, award or grant, including the type of consideration to be paid to the
Company upon sale or exercise and the vesting schedule.

The exercise price under ISOs cannot be lower than 100% of the fair market
value of the Common Stock on the date of grant and, in the case of ISOs granted
to holders of more than 10% of the voting power of the Company, not less than
110% of such fair market value. There is no minimum exercise price for
nonstatutory options. Options granted under the Omnibus Plan generally are not
transferable, except that an optionee may transfer nonstatutory options to an
immediate family member or an entity controlled by the optionee or an immediate
family member.

The term of any option cannot exceed ten years, and the term of an ISO
granted to a holder of more than 10% of the voting power of the Company cannot
exceed five years. Options generally terminate three months after the optionee's
employment terminates for any reason other than retirement, disability or death.
In the event of the optionee's retirement, the optionee generally may exercise
the vested portion of the option within 12 months after retirement. In the event
of the optionee's disability, the option vests in full and the optionee
generally may exercise the option within 12 months after the optionee's
employment terminated. In the event of the optionee's death, the option also
vests in full and the optionee's successors generally may exercise the option
within 12 months after the optionee's death. Restricted stock awards likewise
vest in full in the event of the recipient's disability or death.

As of March 31, 1998, options to purchase an aggregate of 302,543 shares of
Common Stock were outstanding under the Omnibus Plan at a weighted average
exercise price of $4.14. A total of 1,447,457 shares of Common Stock are
available for future issuance under the Omnibus Plan.

1998 Non-Employee Director Stock Option Plan.

The Company's Board of Directors has adopted the Company's 1998
Non-Employee Director Stock Option Plan (the "Director Plan"). The Company
expects that the Director Plan will be approved by the Company's stockholders in
May, 1998.

Under the Director Plan, 250,000 shares of Common Stock are reserved for
issuance upon the exercise of options. If any options granted under the Director
Plan are forfeited or terminate for any other reason without having been
exercised in full, then the unpurchased shares subject to those options will
become available for additional grants under the Director Plan.

Under the Director Plan, each new director who is not an employee of the
Company or any affiliate is automatically granted, as of the date when he or she
is elected to the Company's Board of Directors, an option to purchase 50,000
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant. These options vest in equal annual
installments over the five-year period commencing on the date of grant, except
that they vest in full in the event of the optionee's death or disability or in
the event that the Company is subject to a change in control.

The term of the options is ten years. Options generally terminate 90 days
after the optionee's service as a director terminates for any reason other than
death. In the event of the optionee's death, the optionee's successors may
exercise the option within 12 months after the optionee's death. Options granted
under the Director Plan generally are not transferable, except that an optionee
may transfer the options to an immediate family member or an entity controlled
by the optionee or an immediate family member.

48
<PAGE> 50

As of March 31, 1998, options to purchase an aggregate of 150,000 shares of
Common Stock were outstanding under the Director Plan at a weighted average
exercise price of $3.85. A total of 100,000 shares of Common Stock are available
for future issuance under the Director Plan.

401(K) PLAN

The Company has adopted a 401(k) retirement savings plan referred to as the
BindView Development Corporation 401(k) Profit Sharing Plan. This plan is
available to all employees who have attained age 21 and have completed three
months of service. An employee may contribute, on a pre-tax basis, up to 15% of
the employee's wages from the Company, subject to limitations specified under
the Internal Revenue Code. Under the terms of the BindView Development
Corporation 401(k) Profit Sharing Plan, the Company shall match employee
contributions up to 50% of the first 6% contributed by the employee and may make
discretionary profit sharing contributions. Contributions are allocated to each
employee's individual account and are, at the employee's election, invested in
one, all or some combination of the investment funds available under such 401(k)
plan. Employee contributions are fully vested and non-forfeitable. Employees
will vest in any Company contributions at the rate of 20% for each year of
service commencing after the first year of service.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with Christopher J. Sole, Scott R.
Plantowsky, David E. Pulaski and Nadeem Ghias. Mr. Sole's employment agreement
remains in effect until such agreement is terminated by Mr. Sole upon two weeks
notice, subject to the Company's right to terminate the agreement immediately
for cause or Mr. Sole's death. The Company may also terminate Mr. Sole at any
time for any reason (or no reason), subject to the obligation of the Company to
pay Mr. Sole an amount equal to six months of base salary. Mr. Sole's annual
salary is currently $110,000, subject to review by the Compensation Committee.
Mr. Sole is also eligible to receive annual cash bonuses, stock option grants
and other awards under the Company's existing stock plans, by and at the
discretion of the Compensation Committee. Mr. Sole is prohibited from soliciting
customers of the Company for a period of up to 12 months after Mr. Sole's
termination.

Mr. Plantowsky's employment agreement remains in effect until January 1,
2000, or until such agreement is terminated by Mr. Plantowsky upon 60 days
notice, subject to the Company's right to terminate the agreement immediately
for cause or Mr. Plantowsky's death. In connection with Mr. Plantowsky's
employment, Mr. Plantowsky received, among other things, a nonstatutory stock
option to purchase 875,000 shares of the Company's Common Stock that vest over a
three year period from April 1997. Under this option, if Mr. Plantowsky is
terminated for any reason other than for cause, including a constructive
termination, the Company is obligated to either (i) pay Mr. Plantowsky $1
million and one-half of his then unvested shares shall immediately vest or (ii)
cause all of Mr. Plantowsky's shares to immediately vest. Mr. Plantowsky's
annual salary is currently $110,000, subject to review by the Compensation
Committee. Mr. Plantowsky is also eligible to receive annual cash bonuses, stock
option grants and other awards under the Company's existing stock plans, by and
at the discretion of the Compensation Committee. Mr. Plantowsky is prohibited
from (i) directly or indirectly engaging in the same or similar business
activities to those carried on by the Company and (ii) soliciting customers of
the Company for a period of two years after Mr. Plantowsky's termination.

Mr. Ghias' employment agreement remains in effect until such agreement is
terminated by Mr. Ghias upon two weeks notice, subject to the Company's right to
terminate the agreement immediately for cause or Mr. Ghias' death. Mr. Ghias'
annual salary is currently $114,950, subject to review by the Compensation
Committee. Mr. Ghias is also eligible to receive annual cash bonuses, stock
option grants and other awards under the Company's existing stock plans, by and
at the discretion of the Compensation Committee. Mr. Ghias is prohibited from
(i) directly or indirectly engaging in the same or similar business activities
to those carried on by the Company and (ii) soliciting customers of the Company
for a period of 12 months after Mr. Ghias' termination.

49
<PAGE> 51

David E. Pulaski's employment agreement remains in effect until such
agreement is terminated by Mr. Pulaski upon two weeks notice, subject to the
Company's right to terminate the agreement immediately for cause or Mr.
Pulaski's death. Mr. Pulaski's annual salary is currently $96,000, subject to
review by the Compensation Committee. Mr. Pulaski is also eligible to receive
annual cash bonuses, stock option grants and other awards under the Company's
existing stock plans, by and at the discretion of the Compensation Committee.
Mr. Pulaski is prohibited from (i) directly or indirectly engaging in the same
or similar business activities to those carried on by the Company and (ii)
soliciting customers of the Company for a period of 12 months at Mr. Pulaski's
termination.

The Company also maintains employment/confidentiality agreements with
substantially all of its employees. Such agreements are not for a specific term
and are generally terminable at will by the Company, subject to the obligation
of the Company to pay the employee an amount equal to accrued vacation time and
severance pay in the amount of at least one-half month's salary. These
agreements provide for annual base salaries, other benefits, such as vacation
and sick leave, and non-compete and confidentiality agreements. The employees
who are parties to these agreements are also entitled to bonuses based on
achieving targets to be set by the Company's Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Peter L. Bloom, a director of the Company, is a member of the Compensation
Committee of the Board of Directors. Mr. Bloom is also a general partner of both
General Atlantic Partners 44, L.P. and GAP Coinvestment Partners, L.P., owners
of approximately 24.0% and 4.9%, respectively, of the capital stock of the
Company.

CERTAIN TRANSACTIONS

TRANSACTIONS WITH DIRECTORS AND OFFICERS

On April 8, 1997, the Company delivered 487,500 shares of Common Stock to
Nadeem Ghias, the Company's Vice President -- Research & Development, to settle
its obligation pursuant to the sale of technology by Mr. Ghias to the Company in
1993. Under the terms of a related agreement (the "Agreement"), the Company has
the option to purchase the 19,500 shares of Common Stock subject to the
Agreement within 60 days of certain triggering events. The triggering events are
the death or disability of Mr. Ghias, the termination of his employment with the
Company or any disposition of the shares. The purchase price of the shares is
determined by the following formula: the Company is to be valued at an amount
equal to 1.56 times the net sales of the Company in the preceding 12 month
period, and the value of one share is determined by dividing the value of the
Company by the total number of outstanding shares of Common Stock. In the event
that Mr. Ghias' employment has been terminated with the Company for any reason
other than death or disability, or if the Company exercises its option due to an
involuntary disposition by Mr. Ghias, the purchase price of the shares will be
1.5 times the amount calculated in the preceding formula.

On October 16, 1997, the Company issued in a private placement an aggregate
of 6,320,224 shares of Class A Convertible Preferred Stock of the Company
("Class A Preferred Stock") and warrants (the "Investor Warrants") to purchase
an aggregate of 749,999 shares of Common Stock of the Company with an exercise
price of $4.00 per share. The Class A Preferred Stock and Investor Warrants were
purchased by General Atlantic Partners 44, L.P., GAP Coinvestment Partners, L.P.
and JMI Equity Fund III, L.P. (collectively, the "Purchasers") for an aggregate
consideration of $18 million. Pursuant to the agreements entered into in
connection with this offering and sale of the Class A Preferred Stock and
Investor Warrants, among other provisions, the Company agreed to nominate, and
Eric J. Pulaski, a significant shareholder, agreed to vote his shares to elect,
representatives of the Purchasers to the Board of Directors of the Company.

Immediately prior to the private placement and sale of the Class A
Preferred Stock and Investor Warrants, the Company terminated its Phantom Stock
Plan. In connection with the termination of the Phantom Stock Plan, the Company
issued shares of Common Stock and options to purchase shares of the Common Stock
of the Company to the participants in the plan as consideration for the
cancellation of their interests in the plan. The Company issued 1,757,188 shares
of Common Stock before terminating its S Corporation status, creating a loss in
the short S Corporation year. Subsequently, the shareholders elected to
50
<PAGE> 52

convert the Company into a C Corporation and issued 3,187,612 shares of Common
Stock creating a loss in the short C Corporation year. Upon issuance of the
Common Stock to the employee recipients, the Company incurred a one-time
aggregate compensation charge of approximately $14.7 million. Contemporaneously,
the Company initiated a stock repurchase, in aggregate, of 4,921,958 shares of
Common Stock for approximately $14 million, equal to approximately $2.85 per
share. The stock repurchase provided funds for personal income tax liabilities
for employees resulting from the receipt of Common Stock in consideration of
cancellation of their interest in the Phantom Stock Plan, to the extent vested,
and provided liquidity for certain selling shareholders. Options were granted to
purchase 1,303,740 shares of Common Stock at an exercise price of $2.85 in
consideration of cancellation of the participant's unvested interest in the
Phantom Stock Plan pursuant to the Company's 1997 Incentive Plan.

In November, 1997, the Company granted Scott R. Plantowsky, the Company's
Vice President, Chief Financial Officer and a member of its Board of Directors,
a warrant (the "Warrant") to purchase 437,500 shares of its Common Stock at an
exercise price of $2.85 per share in exchange for the extinguishment of a bonus
provision in his option agreement.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans between the
Company and its officers, directors, principal shareholders and their affiliates
will be approved by a majority of the Board of Directors, including a majority
of the independent and disinterested outside directors on the Board of
Directors, and will continue to be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.

PHANTOM STOCK PLAN

In 1996, the Company implemented a Phantom Stock Plan which granted phantom
stock units to certain employees. Each phantom stock unit provided the
participant with the right to receive shares of the Company's Common Stock upon
the occurrence of a change in control of the Company, an initial public offering
of the Company's Common Stock, liquidation of the Company or a sale of
substantially all of the Company's assets. The Company granted 6,598,250 phantom
stock units during 1996. No grants were made during 1997.

The Company terminated the Phantom Stock Plan in October 1997 and issued
1,757,188 shares of Common Stock on October 13, 1997 and 3,187,612 shares of
Common Stock on October 16, 1997 to retire the Phantom Stock Plan and recognized
a related stock compensation charge of $14.7 million in October 1997. On October
16, 1997, the Company issued options to purchase 1,303,740 shares of Common
Stock under the Company's 1997 Incentive Plan with an exercise price of $2.85
per share to former participants with unvested rights in the Phantom Stock Plan.

INDEMNIFICATION

The Revised Articles of Incorporation of the Company contain a provision
that limits the liability of the Company's directors as permitted under Texas
law. The provision eliminates the liability of a director to the Company or its
shareholders for monetary damages for acts or omissions in the director's
capacity as a director. The provision does not affect the liability of a
director (i) for breach of his duty of loyalty to the Company or to the
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of the law, (iii) for acts or
omissions for which the liability of a director is expressly provided by an
applicable statute or (iv) in respect of any transaction from which a director
received an improper personal benefit. Pursuant to the Revised Articles of
Incorporation, the liability of directors will be further limited or eliminated
without action by shareholders if Texas law is amended to further limit or
eliminate the personal liability of directors.

51
<PAGE> 53

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of its Common Stock as of March 31, 1998, and as
adjusted to reflect the sale of shares offered hereby, by (i) each person who is
known by the Company to own beneficially more than 5% of the Company's Common
Stock, (ii) each of the Named Officers, (iii) each of the Company's directors,
(iv) all current executive officers and directors as a group and (v) all Selling
Shareholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING(2)
-------------------------- SHARES BEING -------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT(3) OFFERED NUMBER PERCENT(3)
--------------------------------------- ----------- ----------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
General Atlantic Partners, LLC(4)............ 4,713,481 30.7% %
3 Pickwick Plaza
Greenwich, CT 06830
JMI Equity Fund III, L.P.(5)................. 2,356,742 15.4
12860 High Bluff Road, Suite 200
San Diego, CA 92130
Eric J. Pulaski.............................. 5,861,000 38.2
Peter L. Bloom(4)............................ 4,713,481 30.7
Scott R. Plantowsky(6)....................... 987,125 6.1
Christopher J. Sole(7)....................... 717,322 4.5
David E. Pulaski(8).......................... 555,702 3.6
Nadeem Ghias(9).............................. 292,500 1.9
John J. Moores............................... -- *
Richard A. Hosley II......................... -- *
All directors and officers as a group (8
persons)(10)............................... 13,127,130 76.4%
Other Selling Shareholders

</TABLE>

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

* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to securities. Unless otherwise indicated, the address for
each listed shareholder is c/o BindView Development Corporation, 3355 West
Alabama, Houston, Texas 77098. To the Company's knowledge, except as
indicated in the footnotes to this table and pursuant to applicable
community property laws, the persons named in the table have sole voting
and investment power with respect to the shares of Common Stock indicated.

(2) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."

(3) Percentage of beneficial ownership is based on 15,345,877 shares of Common
Stock outstanding as of March 31, 1998 (not including shares issuable
pursuant to outstanding options), and shares of Common Stock
outstanding after the completion of this offering (not including shares
issuable pursuant to outstanding options). The number of shares of Common
Stock beneficially owned includes the shares issuable pursuant to stock
options that are either exercisable within 60 days of March 31, 1998 or
exercisable upon the effective date of this offering. Shares issuable
pursuant to stock options are deemed outstanding for computing the
percentage of the person holding such options but are not outstanding for
computing the percentage of any other person. The number of shares of
Common Stock outstanding after this offering includes shares of Common
Stock being offered for sale by the Company in this offering.

(4) Consists of 3,495,820 shares of Common Stock and 414,837 shares of Common
Stock issuable upon exercise of Investor Warrants held by General Atlantic
Partners 44, L.P. ("GAP 44") and 717,662 shares of Common Stock and 85,162
shares of Common Stock issuable upon exercise of Investor

52
<PAGE> 54

Warrants held by GAP Coinvestment Partners, L.P. ("GAP Coinvestment"). The
general partner of GAP 44 is General Atlantic Partners, LLC ("GAP LLC").
The managing members of GAP LLC are also the general partners of GAP
Coinvestment. Peter L. Bloom is a managing member of GAP LLC. Mr. Bloom
disclaims beneficial ownership of such securities except to the extent of
his pecuniary interest therein.

(5) Includes 250,000 shares of Common Stock issuable upon exercise of
outstanding Investor Warrants.

(6) Includes 875,000 shares of Common Stock issuable upon exercise of
outstanding options and warrants which are presently exercisable or will
become exercisable within 60 days of March 31, 1998. Also includes 5,000
shares held by Scott Plantowsky, Custodian for Hannah Plantowsky. Mr.
Plantowsky has voting power over such shares, however Mr. Plantowsky
disclaims beneficial ownership of such shares.

(7) Includes 69,997 shares of Common Stock issuable upon exercise of
outstanding options which will become exercisable within 60 days of March
31, 1998 and 647,325 shares of Common Stock issuable upon exercise of
outstanding options which will become exercisable upon the effective date
of this offering.

(8) Includes 187,500 shares of Common Stock issuable upon exercise of
outstanding options, all of which are presently exercisable. Also includes
125,000 shares held by David E. Pulaski, Trustee of the Pulaski Family
Charitable Remainder Trust (the "Pulaski Family Trust"). Mr. Pulaski has
voting power over shares held by the Pulaski Family Trust and has a
pecuniary interest in a portion of the income from the Pulaski Family
Trust. Mr. Pulaski disclaims beneficial ownership of shares held by the
Pulaski Family Trust except to the extent of his pecuniary interest
therein.

(9) Includes 48,750 shares of Common Stock issuable upon exercise at
outstanding options which will become exercisable within 60 days of
March 31, 1998.

(10) Includes 1,828,572 shares of Common Stock issuable upon exercise of
outstanding options and warrants which are presently exercisable, will
become exercisable within 60 days of March 31, 1998 or will become
exercisable upon the effective date of this offering. Also includes 499,999
shares of Common Stock issuable upon exercise of Investor Warrants.

53
<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, the authorized capital stock of the
Company will consist of 100,000,000 shares of Common Stock, no par value.

COMMON STOCK

As of March 31, 1998, there were 15,345,877 shares of Common Stock
outstanding that were held of record by approximately 57 shareholders. There
will be shares of Common Stock outstanding (assuming no exercise of
the Underwriters' over-allotment option and assuming no exercise after March 31,
1998, of outstanding options) after giving effect to (i) a 2 1/2-for-1 exchange
of the Common Stock, (ii) the conversion of all outstanding shares of Preferred
Stock into Common Stock, (iii) the exercise of all outstanding Investor Warrants
and (iv) the sale of the shares of Common Stock to the public offered hereby.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of the liquidation, dissolution, or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority to issue the Preferred Stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the shareholders. The issuance
of Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the shareholders and
may adversely affect the voting and other rights of the holders of Common Stock.
The issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. At present, the Company has no plans to issue any of
the Preferred Stock.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND
TEXAS LAW

Articles of Incorporation and Bylaws

The Revised Articles of Incorporation provides that, upon the closing of
this offering, the Board of Directors will be divided into three classes of
directors, with each class serving a staggered three-year term. The
classification of the Board of Directors has the effect of generally requiring
at least two annual shareholder meetings, instead of one, to replace a majority
of the Board members. The Revised Articles of Incorporation also provide that,
effective upon the closing of this offering, all shareholder actions must be
effected at a duly called meeting and not by a consent in writing. Further,
provisions of the Bylaws and the Revised Articles of Incorporation provide that
the shareholders may amend the Bylaws or certain provisions of the Revised
Articles of Incorporation only with the affirmative vote of 80% of the Company's
capital stock. These provisions of the Revised Articles of Incorporation and
Bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
Board of Directors and in the policies formulated by the Board of Directors and
to discourage certain types of transactions that may involve an actual or
threatened change of control of the Company. These provisions are designed to
reduce the vulnerability of the Company to an unsolicited acquisition proposal.
The provisions also are intended to discourage certain tactics that may be used
in proxy fights. However, such provisions could have the effect of discouraging
others from making tender offers for the Company's shares and, as a consequence,
they also may inhibit fluctuations in the market price of the Company's shares
that could result from actual or rumored

54
<PAGE> 56

takeover attempts. Such provisions also may have the effect of preventing
changes in the management of the Company. See "Risk Factors -- Anti-Takeover
Effects of Articles of Incorporation, Bylaws and Texas Law."

Texas Takeover Statute

The Company is subject to Article 13.03 of the Texas Business Corporations
Act (the "TBCA"), which, subject to certain exceptions, prohibits a Texas
corporation from engaging in any business combination with any affiliated
shareholder, as defined under Article 13.01 of the TBCA, for a period of three
years following the date that such shareholder became an affiliated shareholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction that resulted in the
shareholder becoming an affiliated shareholder or (ii) the business combination
is approved and authorized by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned or controlled by the interested
shareholder, at a meeting of shareholders and not by written consent, duly
called for that purpose not less than six months after the date that the
affiliated shareholder first became an affiliated shareholder of the
corporation.

Article 13.02 of the TBCA ("Article 13.02") defines business combination to
include: (i) any merger or consolidation involving the corporation and the
affiliated shareholder, (ii) any sale, transfer, pledge or other disposition of
10% or more of the assets of the corporation involving the affiliated
shareholder, (iii) subject to certain exceptions, any transaction that results
in the issuance or transfer by the corporation of any stock of the corporation
to the interested shareholder, (iv) the adoption of a plan or proposal for the
liquidation or dissolution of the corporation pursuant to an agreement with an
affiliated shareholder, (v) any transaction involving the corporation that has
the effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested shareholder or
(vi) the receipt by the affiliated shareholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation. In general, Article 13.02 defines an affiliated shareholder as
any entity or person beneficially owning 20% or more of the outstanding voting
stock of the corporation and any entity or person affiliated with or controlling
or controlled by such entity or person.

WARRANTS

Following this offering, and assuming that the Underwriters' over-allotment
options are not exercised, the Company will have outstanding warrants to
purchase an aggregate of 437,500 shares of Common Stock at an average exercise
price of $2.85 per share. All outstanding warrants contain customary
anti-dilution provisions.

REGISTRATION RIGHTS

The holders of approximately 13,700,000 shares of Common Stock, including
shares of Common Stock issuable upon exercise of certain outstanding warrants,
are entitled to certain rights with respect to the registration of such shares
under the Securities Act. Under the terms of certain employment agreements
between the Company and holders of such registrable securities, if the Company
proposes to register any of its securities under the Securities Act, either for
its own account or for the account of other security holders exercising
registration rights, such holders are entitled to notice of such registration
and are entitled to include shares of such Common Stock therein. Additionally,
such holders are also entitled to certain demand registration rights pursuant to
which they may require the Company to file a registration statement under the
Securities Act at its expense with respect to their shares of Common Stock, and
the Company is required to use its best efforts to effect such registration.
Further, holders may require the Company to file additional registration
statements on Form S-3 at the Company's expense. All of these registration
rights are subject to certain conditions and limitations, including, without
limitation, the right of the underwriters of an offering to limit the number of
shares included in such registration and the right of the Company not to effect
a requested registration within six months following an offering of the
Company's securities, including the offering made hereby.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is ,
and its telephone number is .

55
<PAGE> 57

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have shares of
Common Stock outstanding. Of this amount, the shares offered hereby will be
available for immediate sale in the public market as of the date of this
Prospectus. Approximately additional shares will be available for sale in
the public market following the expiration of 180-day lockup agreements with the
Representatives of the Underwriters or the Company, subject in some cases to
compliance with the volume and other limitations of Rule 144.

<TABLE>
<CAPTION>
APPROXIMATE SHARES
DAYS AFTER DATE OF THIS PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT
- ---------------------------------- ------------------------ -------
<S> <C> <C>
Upon Effectiveness............. Freely tradeable shares sold in offering and shares
salable under Rule 144(k) that are not subject to
180-day lockup
180 days....................... Lockup released; shares salable under Rule 144,
144(k) or 701
Thereafter..................... Restricted securities held for one year or less
</TABLE>

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year is entitled to sell within any three-month period commencing 90 days after
the date of this Prospectus a number of shares that does not exceed the greater
of (i) 1% of the then outstanding shares of Common Stock (approximately
shares immediately after this offering) or (ii) the average weekly trading
volume during the four calendar weeks preceding such sale, subject to the filing
of a Form 144 with respect to such sale. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale who has beneficially
owned his or her shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
Persons deemed to be affiliates must always sell pursuant to Rule 144, even
after the applicable holding periods have been satisfied.

The Company is unable to estimate the number of shares that will be sold
under Rule 144, since this will depend on the market price for the Common Stock
of the Company, the personal circumstances of the sellers and other factors.
Prior to this offering, there has been no public market for the Common Stock,
and there can be no assurance that a significant public market for the Common
Stock will develop or be sustained after this offering. Any future sale of
substantial amounts of the Common Stock in the open market may adversely affect
the market price of the Common Stock offered hereby.

The Company, its directors, executive officers, shareholders with
registration rights and certain other shareholders have agreed pursuant to the
Underwriting Agreement and other agreements that they will not sell any Common
Stock without the prior consent of BancAmerica Robertson Stephens for a period
of 180 days from the date of this Prospectus (the "180-day Lockup Period"),
except that the Company may, without such consent, grant options and sell shares
pursuant to the Company's stock plans.

Any employee or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
Prospectus. As of the date of this Prospectus, the holders of options
exercisable into approximately shares of Common Stock will be eligible to
sell their shares upon the expiration of the 180-day Lockup Period, or subject
in certain cases to vesting of such options.

The Company intends to file a registration statement on Form S-8 under the
Securities Act to register shares of Common Stock issued or reserved for
issuance under the Company's stock plans within 180 days after the date of this
Prospectus, thus permitting the resale of such shares by nonaffiliates in the
public market

56
<PAGE> 58

without restriction under the Securities Act. The Company intends to register
these shares on Form S-8, along with options that have not been issued under the
Company's stock plans as of the date of this Prospectus.

In addition, after this offering, the holders of approximately 13,700,000
shares of Common Stock, including shares of Common Stock issuable upon exercise
of certain outstanding warrants, will be entitled to certain rights with respect
to registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately upon the effectiveness of
such registration. See "Description of Capital Stock -- Registration Rights."

57
<PAGE> 59

UNDERWRITING

The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, BT Alex. Brown Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation (the "Representatives"), have severally
agreed with the Company and the Selling Shareholders, subject to the terms and
conditions of the Underwriting Agreement, to purchase the number of shares of
Common Stock set forth opposite their respective names below. The Underwriters
are committed to purchase and pay for all such shares if any are purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
BancAmerica Robertson Stephens..............................
BT Alex. Brown Incorporated.................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
-------
Total.............................................
=======
</TABLE>

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not in excess of $ per share, of which
$ may be reallowed to other dealers. After the initial public offering, the
public offering price, concession, and reallowance to dealers may be reduced by
the Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.

The Company and certain Selling Shareholders have granted to the
Underwriters an option, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to additional shares of Common Stock at the
same price per share as the Company and Selling Shareholders will receive for
the shares that the Underwriters have agreed to purchase. To the extent
that the Underwriters exercise such option, each of the Underwriters will have a
firm commitment to purchase approximately the same percentage of such additional
shares that the number of shares of Common Stock to be purchased by it shown in
the above table represents as a percentage of the shares offered hereby. If
purchased, such additional shares will be sold by the Underwriters on the same
terms as those on which the shares are being sold.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.

Each officer and director who holds shares of the Company and holders
(including such officers and directors) of shares of Common Stock have
agreed, for the 180-day Lockup Period, subject to certain exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan or grant
any rights with respect to any shares of Common Stock, any options or warrants
to purchase any shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock owned as of the date of this Prospectus
directly by such holders or with respect to which they have the power of
disposition, without the prior written consent of BancAmerica Robertson
Stephens. However, BancAmerica Robertson Stephens may, in its sole discretion
and at any time without notice, release all or any portion of the securities
subject to lock-up agreements. There are no agreements between the
Representatives and any of the Company's shareholders providing consent by the
Representatives to the sale of shares prior to the expiration of the 180-day
Lockup Period. In addition, the Company has agreed that during the 180-day
Lockup Period, the Company will not, without the prior written consent of
BancAmerica Robertson Stephens, subject to certain exceptions, issue, sell,
contract to sell, or otherwise dispose of, any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock or any securities
convertible into, exercisable for or exchangeable for shares of Common Stock
other than the Company's sale of shares in this offering, the issuance of Common
Stock upon the exercise of outstanding options, and the Company's issuance of
options and shares under existing employee stock option and stock purchase
plans. See "Shares Eligible For Future Sale."

The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

58
<PAGE> 60

Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock offered hereby will be determined through negotiations among the
Company, the Selling Shareholders and the Representatives. Among the factors to
be considered in such negotiations are prevailing market conditions, certain
financial information of the Company, market valuations of other companies that
the Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with this offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with this offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefore not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and certain of the Selling Shareholders by Fulbright & Jaworski L.L.P.,
Houston, Texas. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Gunderson Dettmer Stough Villeneuve Franklin
& Hachigian, LLP, Austin, Texas.

EXPERTS

The consolidated financial statements as of December 31, 1996 and the years
ended December 31, 1995 and 1996, included in this Prospectus have been so
included in reliance on the report of Grant Thornton LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

The consolidated financial statements as of December 31, 1997 and for the
year then ended included in this Prospectus, except as they relate to the
unaudited three-month periods ended March 31, 1997 and 1998, have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

59
<PAGE> 61

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules to the Registration Statement. For
further information with respect to the Company and such Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed as a part of the Registration Statement. Statements contained in
this Prospectus concerning the contents of any contract or any other document
referred to are not necessarily complete; reference is made in each instance to
the copy of such contract or document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference to
such exhibit. The Registration Statement, including exhibits and schedules
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of fees prescribed by the Commission. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission at http://www.sec.gov.

60
<PAGE> 62

BINDVIEW DEVELOPMENT CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Price Waterhouse LLP.............................. F-2
Report of Grant Thornton LLP................................ F-3
Consolidated Balance Sheet at December 31, 1996 and 1997 and
March 31, 1998 (unaudited)................................ F-4
Consolidated Statement of Operations for each of the three
years in the period ended December 31, 1997 and for the
three months ended March 31, 1997 and 1998 (unaudited).... F-5
Consolidated Statement of Shareholders' Equity for each of
the three years in the period ended December 31, 1997 and
the three months ended March 31, 1998 (unaudited)......... F-6
Consolidated Statement of Cash Flows for each of the three
years in the period ended December 31, 1997 and for the
three months ended March 31, 1997 and 1998 (unaudited).... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>

F-1
<PAGE> 63

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF
BINDVIEW DEVELOPMENT CORPORATION

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of BindView
Development Corporation and its subsidiary at December 31, 1997, and the results
of their operations and their cash flows for the year in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
Houston, Texas

March 31, 1998, except
as to Note 11, which
is as of May 15, 1998

F-2
<PAGE> 64

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Bindview Development Corporation

We have audited the accompanying balance sheet of Bindview Development
Corporation as of December 31, 1996, and the related statements of operations,
shareholders' equity, and cash flows for the years ended December 31, 1996 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bindview Development
Corporation at December 31, 1996 and the results of its operations and its cash
flows for the years ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.

GRANT THORNTON LLP

Houston, Texas
February 4, 1997

F-3
<PAGE> 65

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 766 $ 7,203 $ 9,118
Accounts receivable, net.................................. 2,270 4,729 3,169
Other current assets...................................... 83 -- --
Deferred tax asset........................................ -- 3,150 3,028
------ ------- -------
Total current assets.............................. 3,119 15,082 15,315
Property and equipment, net................................. 805 1,370 1,746
Other assets................................................ 92 57 44
------ ------- -------
Total assets...................................... $4,016 $16,509 $17,105
====== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 273 $ 785 $ 766
Accrued liabilities....................................... 334 831 697
Accrued compensation...................................... 192 614 508
Deferred revenue.......................................... 570 2,029 2,487
------ ------- -------
Total current liabilities......................... 1,369 4,259 4,458
------ ------- -------
Commitments and contingencies (Note 8)...................... -- -- --
Shareholders' equity:
Convertible preferred stock, $0.01 par value, 20,000,000
shares authorized, 0, 2,528,090 and 2,528,090 shares
issued and outstanding, respectively, liquidation
preference of $18,002.................................. -- 25 25
Common stock, no par value, 100,000,000 shares authorized,
7,740,000, 13,197,615 and 13,197,615 shares issued and
outstanding, respectively.............................. 1 1 1
Additional paid-in capital................................ 14 31,728 31,728
Common Stock Warrant to purchase 437,500 shares........... -- 550 550
Retained earnings (accumulated deficit)................... 2,632 (6,037) (5,640)
Treasury stock, 4,921,958 shares.......................... -- (14,017) (14,017)
------ ------- -------
Total shareholders' equity........................ 2,647 12,250 12,647
------ ------- -------
Total liabilities and shareholders' equity... $4,016 $16,509 $17,105
====== ======= =======
</TABLE>

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

F-4
<PAGE> 66

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ---------------
1995 1996 1997 1997 1998
------ ------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses......................................... $7,005 $ 9,720 $ 17,821 $2,950 $4,384
Services......................................... 328 1,282 3,017 473 1,456
------ ------- -------- ------ ------
Total revenues........................... 7,333 11,002 20,838 3,423 5,840
------ ------- -------- ------ ------
Cost of revenues:
Cost of licenses................................. 693 465 644 91 208
Cost of services................................. 139 362 624 105 215
------ ------- -------- ------ ------
Total cost of revenues................... 832 827 1,268 196 423
------ ------- -------- ------ ------
Gross profit....................................... 6,501 10,175 19,570 3,227 5,417
------ ------- -------- ------ ------
Costs and expenses:
Sales and marketing.............................. 3,234 4,197 9,088 1,369 2,708
Research and development......................... 1,249 2,088 3,573 622 1,643
General and administrative....................... 1,235 1,472 2,943 511 676
Stock compensation expense....................... -- 436 15,262 -- --
------ ------- -------- ------ ------
Operating income (loss)............................ 783 1,982 (11,296) 725 390
Other income (expense), net........................ (29) 8 118 14 129
------ ------- -------- ------ ------
Income (loss) before income tax provision.......... 754 1,990 (11,178) 739 519
Provision (benefit) for income taxes............... -- -- (3,150) -- 122
------ ------- -------- ------ ------
Net income (loss).................................. $ 754 $ 1,990 $ (8,028) $ 739 $ 397
====== ======= ======== ====== ======
Basic earnings per share........................... $ 0.05
Diluted earnings per share......................... $ 0.02
Pro forma information:
Net income (loss) as reported.................... $ 754 $ 1,990 $ (8,028) $ 739
Pro forma charge (benefit) in lieu of income
taxes......................................... 264 697 (765) 259
------ ------- -------- ------
Pro forma net income (loss)........................ $ 490 $ 1,293 $ (7,263) $ 480
====== ======= ======== ======
Pro forma basic net income (loss) per share........ $ 0.06 $ 0.16 $ (0.85) $ 0.06
====== ======= ======== ======
Pro forma diluted net income (loss) per share...... $ 0.06 $ 0.12 $ (0.85) $ 0.03
====== ======= ======== ======
</TABLE>

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

F-5
<PAGE> 67

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL COMMON EARNINGS TOTAL
PREFERRED ------------------ PAID-IN STOCK (ACCUMULATED TREASURY SHAREHOLDERS'
STOCK SHARES AMOUNT CAPITAL WARRANT DEFICIT) STOCK EQUITY
--------- --------- ------ ---------- ------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995...................... $ -- 7,740,000 $ 1 $ 14 -- $ 693 $ -- $ 708
S Corporation
distributions.......... -- -- -- -- -- (248) -- (248)
Net income................ -- -- -- -- -- 754 -- 754
---- --------- ---- ------- ------- ------- -------- --------
Balance at December 31,
1995...................... -- 7,740,000 1 14 -- 1,199 -- 1,214
S Corporation
distributions.......... -- -- -- -- -- (557) -- (557)
Net income................ -- -- -- -- -- 1,990 -- 1,990
---- --------- ---- ------- ------- ------- -------- --------
Balance at December 31,
1996................... -- 7,740,000 1 14 -- 2,632 -- 2,647
S Corporation
distributions.......... -- -- -- -- -- (1,274) -- (1,274)
Issuance of common stock
to satisfy 1993
acquisition
liability.............. -- 502,850 -- 272 -- -- -- 272
Issuance of common stock
pursuant to termination
of Phantom Stock
Plan................... -- 4,944,800 -- 14,092 -- -- -- 14,092
Transfer of S Corporation
accumulated deficit
upon conversion to C
Corporation............ -- -- -- (633) -- 633 -- --
Issuance of convertible
preferred stock
(2,528,090 shares)..... 25 -- -- 17,977 -- -- -- 18,002
Issuance of warrant to
purchase common stock
(437,500 shares)....... -- -- -- -- 550 -- -- 550
Purchase of treasury stock
(4,921,958 shares)..... -- -- -- -- -- -- (14,017) (14,017)
Exercise of stock
options................ -- 9,965 -- 6 -- -- -- 6
Net loss.................. -- -- -- -- -- (8,028) -- (8,028)
---- --------- ---- ------- ------- ------- -------- --------
Balance at December 31,
1997...................... 25 13,197,615 1 31,728 550 (6,037) (14,017) 12,250
Net income for three
months ended March 31,
1998 (unaudited)....... -- -- -- -- -- 397 -- 397
---- --------- ---- ------- ------- ------- -------- --------
Balance at March 31, 1998
(unaudited)............... $ 25 13,197,615 $ 1 $31,728 550 $(5,640) $(14,017) $ 12,647
==== ========= ==== ======= ======= ======= ======== ========
</TABLE>

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

F-6
<PAGE> 68

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ---------------
1995 1996 1997 1997 1998
------- ------ -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities: --
Net income (loss)........................... $ 754 $1,990 $ (8,028) $ 739 $ 397
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization expense.... 431 427 815 131 198
Stock compensation expense............... -- -- 14,642 -- --
Increase in provision for bad debts...... -- -- 170 -- --
Deferred income taxes.................... -- -- (3,150) -- 122
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable.......................... (523) (902) (2,629) (337) 1,560
(Increase) decrease in other current
assets.............................. 7 (49) 83 59 --
Increase (decrease) in accounts
payable............................. 148 37 512 101 (19)
Increase (decrease) in accrued
liabilities......................... 26 51 1,191 17 (240)
Increase in deferred revenue........... 305 86 1,459 657 458
------- ------ -------- ------ ------
Net cash provided by operating
activities........................ 1,148 1,640 5,065 1,367 2,476
------- ------ -------- ------ ------
Cash flows from investing activities:
Purchase of property and equipment.......... (384) (583) (1,250) (248) (574)
Other....................................... (135) (130) (95) 26 13
------- ------ -------- ------ ------
Net cash used by investing
activities........................ (519) (713) (1,345) (222) (561)
------- ------ -------- ------ ------
Cash flows from financing activities:
S Corporation distributions................. (248) (557) (1,274) (125) --
Payments on notes payable and long-term
debt..................................... (2,755) (226) -- -- --
Proceeds from notes payable and long-term
debt..................................... 2,852 -- -- -- --
Proceeds from issuance of convertible
preferred stock and common stock
warrants................................. -- -- 18,002 -- --
Purchases of treasury stock................. -- -- (14,017) -- --
Exercise of stock options................... -- -- 6 -- --
------- ------ -------- ------ ------
Net cash provided (used) by
financing activities.............. (151) (783) 2,717 (125) --
------- ------ -------- ------ ------
Net increase in cash and cash equivalents..... 478 144 6,437 1,020 1,915
Cash and cash equivalents at beginning of
period...................................... 144 622 766 766 7,203
------- ------ -------- ------ ------
Cash and cash equivalents at end of period.... $ 622 $ 766 $ 7,203 $1,786 $9,118
======= ====== ======== ====== ======
Supplemental disclosures for cash flow
information:
Cash paid during the year for interest...... $ 27 $ 15 $ -- $ -- $ --
Noncash financing and investing activities:
Issuance of 502,850 shares of common stock
in 1997 to satisfy 1993 acquisition
liability
Issuance of warrant to purchase 437,500
shares of common stock in 1997 to satisfy
bonus obligation
</TABLE>

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

F-7
<PAGE> 69

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

BindView Development Corporation (the Company), a Texas corporation, was
incorporated in May 1990. Previous to 1995, the Company was known as The LAN
Support Group, Inc. Pursuant to the sale of convertible preferred stock, the
Company's Subchapter S election terminated on October 16, 1997.

The Company develops, markets and supports a suite of systems management
software products that manage the security and integrity of complex, distributed
client/server networks operating on Microsoft Windows NT and Novell NetWare
environments.

Principles of Consolidation

The consolidated financial statements include the accounts of BindView
Development Corporation and BindView GmbH, its wholly-owned German subsidiary.
All significant intercompany transactions have been eliminated.

Revenue Recognition

In October 1997 the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 97-2, "Software Revenue Recognition,"
which the Company adopted effective as of January 1, 1997. Such adoption had no
effect on the Company's method of recognizing revenue from its license and
subscription contract activities. Prior to 1997, the Company recognized revenue
in accordance with SOP No. 91-1, "Software Revenue Recognition." The Company
sells its products under perpetual licenses and recognizes its license revenue
upon meeting each of the following criteria: (i) execution of a written purchase
order, license agreement or contract; (ii) delivery of software or, if the
customer has previously received evaluation software, delivery of the software
license code; and (iii) issuance of the related license, with no significant
vendor obligations or customer acceptance rights outstanding. Revenues from
perpetual licenses are recorded as license revenue in the Statements of
Operations. Service revenues include subscription contracts and professional
services. Subscription contract revenues are an incremental component of each
contract and are recognized ratably over the one year contract term.

Postcontract Customer Support

Prior to January 1, 1998, the Company provided postcontract customer
support, consisting solely of telephone technical support, to its customers. The
costs of providing this support has been accrued and charged to expense at the
time the revenue is recognized. Accrued liabilities at December 31, 1996 and
1997 includes approximately $42 and $78, respectively, related to providing this
support.

Advertising Costs

Advertising costs are charged to operations when incurred.

Research and Development

Research and development costs are charged to operations when incurred. In
accordance with the provisions of Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed", the Company capitalizes costs incurred in the

F-8
<PAGE> 70
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

development of software once technological feasibility has been determined. The
Company currently considers technological feasibility to have been established
once a working model of a product has been produced and tested. To date, costs
incurred and capitalizable subsequent to the establishment of technological
feasibility have not been material and are included in the Other Assets in the
accompanying consolidated balance sheet.

Stock-Based Compensation

The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic method, as prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the fair market value of the Company's stock at the date of the grant
over the amount the employee must pay to acquire the stock, and is recognized
over the related vesting period.

The Company provides supplemental disclosure of the effect on net income
and earnings per share as if the minimum value-based method had been applied in
measuring compensation expense, as prescribed for nonpublic enterprises in
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (Note 7).

Income Taxes

Prior to October 16, 1997, the Company had elected to be treated as an S
Corporation for federal income tax purposes. Accordingly, all federal income tax
liability prior to that date was the responsibility of the shareholders.

The provision for income taxes is computed based on income earned from the
termination date of the Company's Subchapter S election on October 16, 1997
through December 31, 1997. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of the
assets and liabilities.

The pro forma results of operations of the Company reflect a pro forma
charge in lieu of income taxes prior to October 16, 1997.

Earnings Per Share

The Company's earnings per share data is presented in accordance with
Statement of Financial Accounting Standard No. 128, "Earnings Per Share". Basic
earnings per share is computed using the weighted average number of shares
outstanding. Diluted earnings per share is computed using the weighted average
number of shares outstanding adjusted for the incremental shares attributed to
outstanding securities with the ability to purchase or convert into common
stock.

Cash and Cash Equivalents

The Company considers investments with original maturity dates of three
months or less from the date of purchase to be cash equivalents.

Concentration of Credit Risk

Financial instruments which subject the Company to concentrations of credit
risk consist primarily of cash equivalents and accounts receivable. The Company
maintains its cash equivalent balance in a money market fund invested in U.S.
Treasury Certificates. The fund is not FDIC insured. The Company has not
experienced any losses in such fund and believes it is not exposed to any
significant credit risk on cash equivalents.

F-9
<PAGE> 71
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

Management believes that concentrations of credit risk with respect to
accounts receivable are limited due to the large number of customers comprising
the Company's customer base and their dispersion across many different
industries and geographic regions. The Company performs ongoing credit
evaluations of its customers to minimize credit risk. Approximately 16%, 10% and
13% of the Company's sales were made on an export basis, primarily to customers
in Europe and the United Kingdom in 1995, 1996 and 1997, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed by
applying the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter.

Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets, liabilities, sales and expenses and the disclosure of
contingent assets and liabilities. Actual results could differ from those
estimates. Management believes the estimates are reasonable.

Fair Value of Financial Instruments

The fair value of cash and cash equivalents, accounts receivable and
accounts payable reflected in the December 31, 1996 and 1997 Consolidated
Balance Sheet approximate their carrying value due to their short maturities.

Recent Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 130 "Reporting Comprehensive Income". This
standard is effective for fiscal years beginning after December 15, 1997. The
Company does not expect the implementation of this standard to have a material
impact on the Company's results of operations.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131 "Disclosures About Segments of an
Enterprise and Related Information". This standard is effective for fiscal years
beginning after December 15, 1997. The Company currently operates in a single
industry and geographic segment and does not expect this standard to have a
material impact on disclosures with respect to the Company's financial condition
or results of operations.

2. ACCOUNTS RECEIVABLE

Accounts receivable balances are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Trade accounts receivable................................ $2,293 $4,911 $3,352
Other accounts receivable................................ 2 13 12
------ ------ ------
2,295 4,924 3,364
Less -- allowance for doubtful accounts.................. (25) (195) (195)
------ ------ ------
$2,270 $4,729 $3,169
====== ====== ======
</TABLE>

F-10
<PAGE> 72
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

3. PROPERTY AND EQUIPMENT

Property and equipment balances are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED ---------------- MARCH 31,
USEFUL LIVES 1996 1997 1998
------------ ------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Computer equipment and software............ 3 years $1,317 $ 2,296 $ 2,853
Office furniture and other equipment....... 3-7 years 250 378 395
Leasehold improvements..................... lease terms 108 206 206
------ ------- -------
1,675 2,880 3,454
Less -- accumulated depreciation........... (870) (1,510) (1,708)
------ ------- -------
$ 805 $ 1,370 $ 1,746
====== ======= =======
</TABLE>

Depreciation expense totaled $251, $326 and $685 in 1995, 1996 and 1997,
respectively, and $103 (unaudited) and $198 (unaudited) in the three months
ended March 31, 1997 and 1998.

4. CREDIT AGREEMENTS AND FINANCING ARRANGEMENTS

On June 10, 1997, the Company secured a $2,000 line of credit and a $500
line of credit. Any principal draws on the line of credit mature on June 10,
1998. Any principal draws on the $500 line of credit mature 30 months after the
date of such advances. The line is collateralized by accounts receivable and
property and equipment. There have been no borrowings outstanding under these
facilities.

5. INCOME TAXES

Effective October 16, 1997, the Company elected to be treated as a C
Corporation for federal income tax purposes. Accordingly, no federal income tax
expense was recorded by the Company for the years ended December 31, 1995 and
1996, and from January 1, 1997 through October 16, 1997 because operating
results are reported in the individual income tax returns of the shareholders.

The Company's income tax provision (benefit) was comprised of the
following:

<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 16,
1997 TO
DECEMBER 31,
1997
------------
<S> <C>
Deferred:
Federal............................................... $(3,060)
State................................................. (90)
-------
Total......................................... $(3,150)
=======
</TABLE>

F-11
<PAGE> 73
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

A reconciliation of the federal statutory tax rate and the Company's
provision for income taxes is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
----- ----- -------
<S> <C> <C> <C>
Income taxes at the applicable federal statutory rates... $ 256 $ 677 $(2,317)
State income taxes, net of federal benefit............... 8 20 (68)
Research and development credit.......................... -- -- --
Tax obligation allocated to S Corporation shareholders... (264) (697) (765)
----- ----- -------
Provision (benefit) for income taxes..................... $ -- $ -- $(3,150)
===== ===== =======
</TABLE>

Deferred tax assets at December 31, 1997 are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Assets:
Net operating loss carryforward........................... $2,849 $2,729
Allowance for bad debts................................... 68 68
Accrued liabilities....................................... 172 171
Other..................................................... 61 60
------ ------
$3,150 $3,028
====== ======
</TABLE>

The Company's net operating loss carryforward is attributable to the stock
compensation expense realized during the C Corporation period related to the
termination of the Company's phantom stock plan (Note 6). The Company's net
operating loss carryforward at December 31, 1997 of approximately $7,500 for
federal income tax purposes expires in 2012. The Company's ability to utilize
the net operating loss carryforward may be limited if certain changes of
ownership occur. Based on the historical earnings generated by the Company,
management believes it is more likely than not that the tax benefits related to
the net operating loss carryforward will be realized and has, therefore,
provided no valuation allowance for the related deferred tax asset.

6. STOCK COMPENSATION EXPENSE

Phantom Stock Plan Termination

In 1996, the Company implemented a phantom stock plan which granted phantom
stock units to certain employees. Each phantom stock unit provided the
participant with the right to receive shares of Company common stock upon the
occurrence of a change in control of the Company, an initial public offering of
the Company's common stock, liquidation of the Company or a sale of
substantially all of the Company's assets. The Company granted 6,598,250 phantom
stock units during 1996. No grants were made during 1997.

The Company terminated the Phantom Stock Plan in October 1997 and issued
1,757,188 shares of common stock on October 13, 1997 and 3,187,612 shares of
common stock on October 16, 1997 to retire the Phantom Stock Plan. The Company
recognized a related stock compensation charge of $14,712 in October 1997.

On October 16, 1997, the Company issued 1,303,740 common stock options
under the Company's 1997 Employee Stock Option Plan with an exercise price of
$2.85 per share to former participants in the Phantom Stock Plan (Note 7). No
compensation expense has been recorded related to these options as the exercise
price is equal to the fair market value of the Company's common stock on the
date of grant.

F-12
<PAGE> 74
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

Stock compensation expense of $436 was recognized in 1996 in connection
with cash payments made for the extinguishment of certain rights to receive
Company common stock which were held by a terminated employee.

Officer Warrants

In November 1997 the Company issued a warrant to purchase 437,500 shares of
common stock at a price of $2.85 per share to an officer to terminate a
provision of the stock option agreement with that officer. The Company has
recognized compensation expense of $550 during the fourth quarter of 1997 based
upon the fair value of the warrant issued.

7. SHAREHOLDERS' EQUITY

Issuance of Convertible Preferred Stock and Warrants

In October 1997, the Company issued 2,528,090 shares of $0.01 par value
convertible preferred stock and warrants to purchase 749,999 shares of common
stock, at $4.00 per share in exchange for $18,002 of cash. The warrants are
immediately exercisable and expire April 16, 2000. In the event of a liquidation
of the Company, the Company's preferred stock has liquidation preference over
its common stock. The preferred stock has a liquidation value of $7.12 per
preferred share and is convertible at the option of the holder into common stock
on a 2.5-for-1 basis. In the event of an initial public offering, the Company's
preferred stock would automatically convert into common stock and any
unexercised warrants would automatically expire.

At December 31, 1997, there were 6,320,225 shares of common stock reserved
by the Board of Directors for issuance to the holders of the preferred stock and
749,999 shares of common stock reserved by the Board of Directors for issuance
to the holders of the warrants.

Treasury Stock Transactions

The Company repurchased 3,178,208 and 1,743,750 shares of common stock for
$2.85 per share in October and December 1997, respectively.

Issuance of Common Stock to Satisfy Acquisition Liability

In April 1997, the Company issued 502,850 shares to satisfy its 1993
obligation incurred related to the acquisition of certain technology rights.

Incentive Stock Option Plan

In 1996, the Company's Board of Directors adopted the Incentive Stock
Option Plan. At December 31, 1997, there were 1,875,000 shares of common stock
reserved by the Board of Directors for issuance under this plan. Options on
170,250 and 261,875 shares were exercisable at December 31, 1996 and 1997 with a
weighted average exercise price per share of $0.78 and $0.80, respectively.

Nonqualified Stock Option Plan

In 1996, the Company's Board of Directors adopted the Nonqualified Stock
Option Plan. At December 31, 1997, there were 1,747,325 shares of common stock
reserved by the Board of Directors for issuance under this plan. There were no
options exercisable at December 31, 1996. Options on 218,750 shares were
exercisable at December 31, 1997, with a weighted average exercise price per
share of $1.34.

F-13
<PAGE> 75
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

1997 Employee Stock Option Plan

In 1997, the Company's Board of Directors adopted the 1997 Employee Stock
Option Plan. At December 31, 1997, there were 1,303,740 shares of common stock
reserved by the Board of Directors for issuance under this plan. There were no
options exercisable at December 31, 1997.

Substantially all options reserved under the Company's Incentive Stock
Option Plan, the Nonqualified Stock Option Plan and the 1997 Employee Stock
Option Plan have been issued.

Options granted under the Incentive and Nonqualified Stock Option Plans
vest 20% per year over five years, except for 647,325 and 875,000 options
granted in 1996 and 1997, respectively, which vest as follows: 218,750 in 1997,
975,450 in 1998, 109,375 in 1999, 109,375 in 2000 and 109,375 in 2001. Options
granted under the 1997 Employee Stock Option Plan vest at varying rates through
the year 2001. Options must be exercised no later than ten years from the date
of grant.

Stock options have been granted at the fair market value of the Company's
stock at the date of grant as determined by the Company's Board of Directors. In
pricing the options issued prior to October 1997, the Board used a multiple of
revenues resulting from an independent valuation of the Company performed in
January 1996. In May 1996, the Company negotiated with a new executive officer
to grant 647,325 options to him with an exercise price of $2.47 per share. The
exercise price was substantially higher than the fair market value at that date
because the officer received a larger number of options than under the Company's
normal practices. Options issued in the fourth quarter of 1997 were issued at
the $2.85 price paid by third parties on October 16, 1997.

The following table summarizes combined activity under the stock option
plans for each of the three years ended December 31, 1997:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PRICE PER PRICE PER
OPTIONS SHARE SHARE
--------- ------------- ---------
<S> <C> <C> <C>
Options outstanding, December 31, 1995
Options granted................................. 1,528,575 $0.75 - $2.47 $1.50
Options lapsed or canceled...................... (132,500) $0.75 $0.75
Options exercised............................... -- -- --
---------
Options outstanding, December 31, 1996............ 1,396,075 $0.75 - $2.47 $1.57
Options granted................................. 3,391,385 $1.10 - $2.85 $2.01
Options lapsed or canceled...................... (213,250) $0.75 - $2.85 $0.97
Options exercised............................... (10,000) $0.75 - $0.76 $0.75
---------
Options outstanding, December 31, 1997............ 4,564,210 $0.75 - $2.85 $1.92
Options granted (unaudited)..................... 452,543 $3.85 - $4.48 $4.04
Options lapsed or canceled (unaudited).......... (28,750) $0.95 - $2.85 $1.34
Options exercised............................... -- -- --
---------
Options outstanding, March 31, 1998 (unaudited)... 4,988,003 $0.75 - $4.48 $2.12
---------
</TABLE>

F-14
<PAGE> 76
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

The following table summarizes significant ranges of outstanding and
exercisable options at December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES IN REMAINING EXERCISE SHARES IN EXERCISE
THOUSANDS LIFE IN YEARS PRICE THOUSANDS PRICE
--------- ------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
under $0.80....................... 495,500 7.0 $0.76 223,000 $0.75
$0.81 to $1.60.................... 1,933,750 9.3 $1.34 257,625 $1.30
$1.61 to $2.40.................... 22,500 9.7 $1.69 -- $ --
over $2.41........................ 2,112,460 9.4 $2.73 -- $ --
</TABLE>

Stock Based Compensation Disclosures

The minimum value of stock based compensation was calculated in accordance
with Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," using the Black-Scholes model with the following
weighted average assumptions (the minimum value method does not include
volatility):

<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Expected life (in years) 4 4
Interest rate.............................................. 6% 6%
Volatility................................................. N/A N/A
Dividend yield............................................. 0% 0%
</TABLE>

Stock based compensation costs would have reduced pretax income by $18 and
$164 in 1996 and 1997 ($12 and $107 after tax, respectively and $0.01 per share
in 1997) if the minimum values of such compensation in that year had been
recognized as compensation expense on a straight-line basis over the vesting
period of the grant.

8. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company conducts its operations in leased facilities under operating
leases expiring at various dates through 2001. The leases are cancelable upon
payment of six months rent and reimbursement of the unamortized balance of the
leasehold allowance. Total lease expense amounted to approximately $98, $279 and
$575 at December 31, 1995, 1996 and 1997, respectively.

The minimum rental commitments under operating leases at December 31, 1997
were: $420 in 1998, $401 in 1999, $305 in 2000 and $4 in 2001.

9. 401(K) PLAN

Effective January 1, 1995, the Company adopted a 401(k) plan which is
available to all full-time employees. Employees contribute to the plan through
payroll deductions. The Company matches 50% of the participant's contribution up
to a maximum of 6% of a participant's compensation. Additionally, the Company
may make a discretionary contribution as determined by the Board of Directors.
Total Company contributions were $130, $165 and $174 in 1995, 1996 and 1997,
respectively.

F-15
<PAGE> 77
BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

10. NET INCOME PER SHARE

As a result of the Company's change from an S Corporation to a C
Corporation in October 1997, presentation of pro forma net income per share is
necessary for the years ended December 31, 1995, 1996 and 1997. Shares issued as
a result of a 10-for-1 stock split in 1997, and 502,850 shares issued in 1997 to
satisfy a 1993 technology acquisition liability have been treated as if they had
been effective and outstanding as of January 1, 1995 and included in weighted
average shares outstanding.

The computation of basic and diluted net income per share and pro forma
basic and diluted net income (loss) per share follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- -------------------
1995 1996 1997 1997 1998
------ ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income............................ $ -- $ -- $ -- $ -- $ 397
=======
Pro forma net income (loss)........... $ 490 $ 1,293 $(7,263) $ 480 $ --
====== ======= ======= =======
Shares used in basic calculation (in
thousands):
Total basic shares.................. 8,228 8,228 8,548 8,228 8,275
Additional shares for diluted
computation:
Effect of stock options............. -- 70 593 286 1,569
Effect of warrants.................. -- -- -- -- 158
Effect of convertible preferred
stock............................ -- -- 1,318 -- 6,320
Effect of phantom stock............. -- 2,748 5,075 5,800 --
Exclusion of share equivalents that
are anti-dilutive because a loss
was incurred..................... -- -- (6,986) -- --
------ ------- ------- ------- -------
Total diluted shares........ 8,228 11,046 8,548 14,314 16,322
====== ======= ======= ======= =======
Basic net income per share............ $ 0.05
Diluted net income per share.......... $ 0.02
Pro forma basic net income (loss) per
share............................... $ 0.06 $ 0.16 $ (0.85) $ 0.06
Pro forma diluted net income (loss)
per share........................... $ 0.06 $ 0.12 $ (0.85) $ 0.03
</TABLE>

11. SUBSEQUENT EVENTS

Effective May 15, 1998, the Company's Board of Directors amended its
Articles of Incorporation to change the level of its authorized stock to 20
million shares of $0.01 par value Preferred Stock and 100 million shares of no
par Common Stock. The Board also approved the reservation of 1,750,000 shares of
Common Stock for the 1998 Omnibus Incentive Plan and 250,000 shares of Common
Stock for the Non-Employee Director Plan. The Board also declared a 2.5-for-1
stock split of the Common Stock of the Company for holders of shares immediately
prior to the effective date of the board resolution above. All share and per
share amounts contained herein have been retroactively adjusted to give effect
for this stock split.

F-16
<PAGE> 78

[LOGO]
<PAGE> 79

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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

<TABLE>
<S> <C>
SEC Registration fee........................................ $13,062.00
NASD fee.................................................... 4,927.50
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Transfer agent fees......................................... *
Miscellaneous fees and expenses............................. *
----------
Total............................................. $ *
==========
</TABLE>

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

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article 2.02-1 of the Texas Business Corporations Act (the "TBCA")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article IX of the Registrant's Bylaws
provides for mandatory indemnification of its directors and officers and
permissible indemnification of employees and other agents to the maximum extent
permitted by the TBCA.

The Registrant's Amended and Restated Articles of Incorporation (the
"Revised Articles of Incorporation") provide that, pursuant to Texas law, its
directors shall not be liable for monetary damages for breach of the directors'
fiduciary duty as directors to the Company and its shareholders. This provision
in the Articles of Incorporation does not eliminate the directors' fiduciary
duty, and in appropriate circumstances equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Texas law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Company for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Texas law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. The Registrant has entered into
Indemnification Agreements with its officers and directors, a form of which is
attached as Exhibit 10.15 hereto and incorporated herein by reference. The
Indemnification Agreements provide the Registrant's officers and directors with
further indemnification to the maximum extent permitted by the TBCA. The
Registrant maintains directors and officers liability insurance. Reference is
made to Section 8 of the Underwriting Agreement contained in Exhibit 1.1 hereto,
indemnifying officers and directors of the Registrant against certain
liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In October 1997, the Registrant issued 6,320,224 shares of its Class A
Preferred Stock for an aggregate price of approximately $18 million. In
connection with this transaction, the Registrant also issued warrants to
purchase an aggregate of 749,999 shares of the Registrant's Common Stock at an
exercise price of $2.85 per share. The issuance of the above securities were
deemed to be exempt from registration under the Securities

II-1
<PAGE> 80

Act in reliance on Section 4(2) thereof as transactions by an issuer not
involving any public offering. In addition, the recipients of securities in such
transactions represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. To the Registrant's knowledge, all
recipients had adequate access, through their relationships with the Registrant,
to information about the Registrant.

In October 1997, the Registrant also issued 4,944,800 shares of Common
Stock in connection with the termination of the Registrant's Phantom Stock Plan.
The issuance was deemed to be exempt from registration under the Securities Act
in reliance on Rule 701 and Section 4(2) of the Securities Act as issuances to
employees, directors and consultants under a compensatory plan or arrangement.
In addition, from time to time since May 1995 the Registrant has issued an
aggregate of 10,000 shares of Common Stock pursuant to the exercise of options
outstanding under the Registrant's Stock Option Plans. Such issuances were
deemed to be exempt under the Securities Act in reliance on Rule 701 and Section
4(2) of the Securities Act as issuances to employees, directors and consultants
under a compensatory plan or arrangement.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) Exhibits:

II-2
<PAGE> 81

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.10* -- Registration Rights Agreement dated November 7, 1997
among Bindview Development Corporation, General Atlantic
Partners 44 L.P., GAP Coinvestment Partners, L.P., JMI
Equity Fund III, L.P. and Scott R. Plantowsky
10.11* -- Employee Agreement dated May 13, 1996 between the
Registrant and Christopher J. Sole, including all
amendments thereto
10.12* -- Amended and Restated Employment Agreement dated April 15,
1997 between the Registrant and Scott R. Plantowsky
10.13* -- Employee Agreement dated September 26, 1996 between the
Registrant and David E. Pulaski
10.14* -- Employee Agreement dated December 20, 1993 between the
Registrant and Nadeem Ghias, including all amendments
thereto
10.15* -- Form of Indemnification Agreement
23.1 -- Consent of Price Waterhouse LLP, Independent Accountants
(see page II-5)
23.2 -- Consent of Grant Thornton LLP, Independent Accountants
(see page II-6)
23.3* -- Consent of Counsel. Reference is hereby made to Exhibit
5.1
24.1 -- Power of Attorney (see page II-4)
27.1 -- Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

ITEM 17. UNDERTAKINGS

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

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

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance 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, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 82

SIGNATURES

Pursuant to the requirements of the securities act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Houston,
State of Texas, on this 15th day of May, 1998.

BINDVIEW DEVELOPMENT CORPORATION

/s/ ERIC J. PULASKI
--------------------------------------
Eric J. Pulaski,
President and Chief
Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Eric J. Pulaski and Scott R. Plantowsky,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to sign any registration statement for the
same offering covered by this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, and all post-effective amendments thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

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

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ ERIC J. PULASKI Chairman of the Board, May 15, 1998
- ----------------------------------------------------- President and Chief
Eric J. Pulaski Executive Officer

/s/ CHRISTOPHER J. SOLE Director, Vice President May 15, 1998
- ----------------------------------------------------- and Chief Operating
Christopher J. Sole Officer

/s/ SCOTT R. PLANTOWSKY Director, Vice President May 15, 1998
- ----------------------------------------------------- and Chief Financial
Scott R. Plantowsky Officer

/s/ PETER L. BLOOM Director May 15, 1998
- -----------------------------------------------------
Peter L. Bloom

/s/ JOHN J. MOORES Director May 15, 1998
- -----------------------------------------------------
John J. Moores

/s/ RICHARD A. HOSLEY II Director May 15, 1998
- -----------------------------------------------------
Richard A. Hosley II
</TABLE>

II-4
<PAGE> 83

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 31, 1998, except as
to the stock split described in Note 11, which is as of May 15, 1998, relating
to the financial statements of BindView Development Corporation, which appears
in the Prospectus. We also consent to the references to us under the heading
"Experts" in such Prospectus. However, it should be noted that Price Waterhouse
LLP has not prepared or certified such "Selected Financial Data."

PRICE WATERHOUSE LLP

Houston, Texas
May 15, 1998

II-5
<PAGE> 84

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated February 4, 1997, accompanying the
financial statements of BindView Development Corporation contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts".

GRANT THORNTON LLP

Houston, Texas
May 15, 1998

II-6
<PAGE> 85
APPENDIX

TEXT FOR ARTWORK ON INSIDE FRONT COVER

Have you ever experienced a
security breach?

Is your PC LAN ready for the Year 2000?

Have you ever run out
of disk space?

Do you have an accurate inventory of your LAN assets?

BindView answers the questions you have about your network.

BindView gives organizations a way to manage the security and integrity of
complex, distributed client/server networks while reducing the Total Cost of
Ownership for enterprise computing.

BindView's primary product line, BindView EMS, provides software solutions for
systems administration, security management, enterprise inventory of LAN assets,
and year 2000 assessment of PC hardware and software. BindView EMS can be used
proactively to diagnose, and in many cases fix, a wide range of specific
problems occurring in Windows NT and NetWare environments. In addition, BindView
EMS is built to scale with networks as they grow enterprise-wide in scope.
BindView EMS provides customers with a product that is both easy to use and easy
to deploy enterprise-wide.

BindView EMS/NOSadmin for Windows NT

* Security assessment
* User and server administration
* Disk space management
* Enforce network standards
* System documentation

BindView EMS/NOSadmin for NetWare

* Security assessment
* User and server administration
* Disk space management
* Enforce network standards
* Make enterprise-wide changes to system configuration
* System documentation

BindView EMS/NETinventory

* Year 2000 assessment of PC hardware and software
* Perform ongoing audits
* Improve help desk response times
* Track software license compliance
* Make better-informed strategic technology decisions

[PHOTO SHOWING PC SCREEN AND BUILDING]

[PHOTO SHOWING PERSON ON TOP OF NETWORK BUILDING]

Scrutinize the network.
Secure the network.
Analyze the network.
Update the network.
Identify risks.
Diagnose the network.
Manage the network.
Analyze disk space usage.
Analyze network security.
Plan for network migration.
Track hardware & software.
Get detailed network information.
Prepare the PC LAN for Year 2000.
Automate network reports.
Track software compliance.
Make more efficient IT investments.
Flexible.
Intelligent.
Scalable.
Usable.
Easy to deploy.
Easy to use.

The BindView Solution.

BindView:
Enterprise capable, workgroup simple
network management.

TEXT FOR ARTWORK ON INSIDE BACK COVER

Remember Your Kids?

[PHOTO OF JASON L., SUZY Q. AND SAMUEL R.]

Jason L.
Wants you to see his soccer game on Tuesday, basketball game on wednesday, and
drama contest on Friday.

Suzy Q.
Presently starring as The Cowardly Lion in her elementary school's spring
musical.

Samuel R.
forgot about the school science project - and needs your help!

BindView EMS
NOSadmin

Everyone has priorities in life and sometimes it's difficult to keep them all
straight. One simple way to squeeze in a little more free time is with BindView
EMS. It scrutinizes your network, pinpoints risks to network integrity, helps
you quickly address daily operational issues, and then provides reports that are
easy to understand and distribute. BindView EMS also looks at hundreds of risks
that other security products ignore.

[PHOTO OF BINDVIEW SOFTWARE PACKAGE]

Windows NT and NetWare
<PAGE> 86

INDEX TO EXHIBITS

(A) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
1.1* -- Form of Underwriting Agreement
3.1 -- Amended and Restated Articles of Incorporation of the
Registrant
3.2 -- Bylaws of the Registrant
4.1 -- Reference is hereby made to Exhibits 3.1 and 3.2
4.2* -- Specimen Common Stock certificate
5.1* -- Opinion of Fulbright & Jaworski L.L.P.
10.1* -- Incentive Stock Option Plan
10.2* -- Stock Option Plan
10.3* -- 1997 Incentive Plan
10.4 -- Omnibus Incentive Plan
10.5 -- 1998 Non-Employee Director Stock Option Plan
10.6* -- Letter Loan Agreement dated June 10, 1996 between the
Registrant and Southwest Bank of Texas, N.A.
10.7* -- Lease Agreement dated June 20, 1995 between the
Registrant and School Employees Holding Corp., including
all amendments thereto
10.8* -- Stock Ownership Agreement dated April 8, 1997 between the
Registrant and Nadeem Ghias
10.9* -- Registration Rights Agreement dated October 16, 1997
among Bindview Development Corporation, General Atlantic
Partners 44 L.P., GAP Coinvestment Partners, L.P., JMI
Equity Fund III, L.P. and Eric J. Pulaski
10.10* -- Registration Rights Agreement dated November 7, 1997
among Bindview Development Corporation, General Atlantic
Partners 44 L.P., GAP Coinvestment Partners, L.P., JMI
Equity Fund III, L.P. and Scott R. Plantowsky
10.11* -- Employee Agreement dated May 13, 1996 between the
Registrant and Christopher J. Sole, including all
amendments thereto
10.12* -- Amended and Restated Employment Agreement dated April 15,
1997 between the Registrant and Scott R. Plantowsky
10.13* -- Employee Agreement dated September 26, 1996 between the
Registrant and David E. Pulaski
10.14* -- Employee Agreement dated December 20, 1993 between the
Registrant and Nadeem Ghias, including all amendments
thereto
10.15* -- Form of Indemnification Agreement
23.1 -- Consent of Price Waterhouse LLP, Independent Accountants
(see page II-5)
23.2 -- Consent of Grant Thornton LLP, Independent Accountants
(see page II-6)
23.3* -- Consent of Counsel. Reference is hereby made to Exhibit
5.1
24.1 -- Power of Attorney (see page II-4)
27.1 -- Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

<PAGE> 1
EXHIBIT 3.1

AMENDED AND RESTATED ARTICLES OF INCORPORATION

BINDVIEW DEVELOPMENT CORPORATION

The undersigned natural person of the age of eighteen years or
more, acting as incorporator of a corporation under the Texas Business
Corporation Act, hereby adopts the following Amended and Restated Articles of
Incorporation ("Articles of Incorporation") for such corporation:

ARTICLE I

The name of the Corporation is BindView Development Corporation.

ARTICLE II

The period of the Corporation's duration is perpetual.

ARTICLE III

The purpose or purposes for which the Corporation is organized
are to transact any or all lawful business for which corporations may be
organized under the Texas Business Corporation Act.

ARTICLE IV

The total number of shares of all classes of stock that the
Corporation shall be authorized to issue is one hundred and twenty million
(120,000,000) shares, divided into the following: (i) twenty million
(20,000,000) shares of Preferred Stock, of the par value of $0.01 per share
(hereinafter called "Preferred Stock"); and (ii) one hundred million
(100,000,000) shares of common stock, of no par value per share (hereinafter
called "Common Stock").

Effective as of the filing of these Amended and Restated
Articles of Incorporation, each share of Common Stock issued and outstanding
immediately prior to the effective time shall be automatically changed and
converted, without any action on the part of the holder

<PAGE> 2
thereof, into 2.5 shares of Common Stock, and each holder who upon the
effectiveness of these Articles of Incorporation would otherwise be entitled to
receive a fractional share of Common Stock shall be entitled to receive for
such fractional interest, and at the effective time of these Articles of
Incorporation any such fractional interest in shares of Common Stock of the
Corporation shall be converted into the right to receive, an amount in cash
equal to the initial public offering price of shares of Common Stock in the
Corporation's initial public offering times such fractional interest or if the
Corporation's initial public offering does not occur, an amount to be
determined by the board of directors times such fractional interest.

A description of the respective classes of stock and a statement
of the designations, preferences, limitations and relative rights of such
classes of stock and the limitations on or denial of the voting rights of the
shares of such classes of stock are as follows:

A. PREFERRED STOCK

1. Issuance in Series. The Preferred Stock may be divided
into and issued in one or more series. The board of directors is hereby vested
with authority from time to time to establish and designate such series, and
within the limitations prescribed by law or set forth herein, to fix and
determine the preferences, limitations and relative rights of the shares of any
series so established, but all shares of Preferred Stock shall be identical
except as to the following preferences, limitations and relative rights as to
which there may be variations between different series: (a) the rate of
dividend; (b) the price at and the terms and conditions on which shares may be
redeemed; (c) the amount payable upon shares in event of involuntary
liquidation; (d) the amount payable upon shares in event of voluntary
liquidation; (e) sinking fund provisions for the redemption or purchase of
shares; (f) the terms and conditions on which shares may be exchanged, if the
shares of any series are issued with an exchangeable privilege; (g) the terms
and conditions on which shares may be converted, if the shares of any series
are issued with a conversion privilege; and (h) voting rights. The board of
directors shall exercise such authority by the adoption of a resolution or
resolutions as prescribed by law.

2. Number of Shares in Series. Except where otherwise set
forth in the resolution or resolutions adopted by the board of directors
providing for the issue of any series of Preferred Stock, the number of shares
comprising such series may be increased (but not above the total number of
authorized shares of Preferred Stock) or decreased (but not below the number of
shares then outstanding) from time to time by like action of the board of
directors.

3. Dividends. The holders of each series of Preferred
Stock at the time outstanding shall be entitled to receive, when and as
declared to be payable by the board of directors, out of any funds legally
available for the payment thereof, dividends at the rate theretofore affixed by
the board of directors for such series of Preferred Stock that have theretofore
been established.

4. Status of Reacquired Shares. Shares of any series of
Preferred Stock that have been redeemed (whether through the operation of a
sinking fund or otherwise) or purchased by the Corporation, or that, if
convertible or exchangeable, have been converted into or exchanged for shares
of stock of any other class or classes shall have the status of authorized

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<PAGE> 3
and unissued shares of Preferred Stock and may be reissued as a part of the
series of which they were originally a part or may be reclassified and reissued
as part of a new series of Preferred Stock to be created by resolution or
resolutions of the board of directors or as part of any other series of
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth in the resolution or resolutions adopted by the board of directors
providing for the issue of any series of Preferred Stock and to any filing
required by law.

5. Voting Rights. Except as otherwise provided by law or
by the resolution or resolutions of the board of directors providing for the
issue of any series of the Preferred Stock, the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes, each holder of the Common Stock being entitled to one vote for each
share held.

6. Preferences on Liquidation. In the event of any
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, the holders of each series of the then outstanding Preferred Stock
shall be entitled to receive the amount fixed for such purpose in the
resolution or resolutions of the board of directors establishing the respective
series of Preferred Stock that might then be outstanding together with a sum
equal to the amount of all accumulated and unpaid dividends thereon at the
dividend rate fixed therefor in the aforesaid resolution or resolutions. After
such payment to such holders of Preferred Stock, the remaining assets and funds
of the Corporation shall be distributed pro rata among the holders of the
Common Stock. A consolidation, merger or reorganization of the Corporation
with any other corporation or corporations or a sale of all or substantially
all of the assets of the Corporation shall not be considered a dissolution,
liquidation or winding up of the Corporation within the meaning of these
provisions.

B. COMMON STOCK

1. Dividends. Subject to all the rights of the Preferred
Stock or any series thereof, and on the conditions set forth in Section A of
this Article IV or in any resolution of the board of directors providing for
the issuance of any series of Preferred Stock, the holders of the Common Stock
shall be entitled to receive, when, as and if declared by the board of
directors, out of funds legally available therefor, dividends payable in cash,
stock or otherwise.

2. Voting Rights. Each holder of Common Stock shall be
entitled to one vote for each share held.

C. PROVISIONS APPLICABLE TO ALL CLASSES

1. Cumulative Voting. No shareholder of the Corporation
shall have the right of cumulative voting at any election of directors or upon
any other matter.

2. Preemptive Rights. Ownership of shares of any class of
the capital stock of the Corporation shall not entitle the holders thereof to
any preemptive right to subscribe for or purchase or have offered to them for
subscription or purchase any additional shares of capital stock of any class of
the Corporation or any securities convertible into any class of capital stock
of the Corporation, however acquired, issued or sold by the Corporation, it
being the purpose and intent hereof that the board of directors shall have full
right, power and

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<PAGE> 4
authority to offer for subscription or to sell or to make any disposal of any
or all unissued shares of the capital stock of the Corporation or any
securities convertible into stock or any or all shares of stock or convertible
securities issued and thereafter acquired by the Corporation, for such
consideration, not less than the par value thereof in the case of unissued
shares, or, in the case of any unissued shares of a class of stock without par
value, the stated value thereof, in money, property or labor, as the board of
directors shall determine.

ARTICLE V

A quorum shall be present at a meeting of shareholders of the
Corporation if the holders of a majority of the shares entitled to vote are
represented at the meeting in person or by proxy.

ARTICLE VI

The Corporation will not commence business until it has received
for the issuance of its shares consideration of the value of not less than One
Thousand Dollars ($1,000), consisting of money, labor done or property actually
received.

ARTICLE VII

A. LIABILITY OF DIRECTORS

No director of the Corporation shall be liable to the
Corporation or any of its shareholders for monetary damages for an act or
omission in the director's capacity as a director, except that this Article VII
shall not authorize the elimination or limitation of liability of a director of
the Corporation to the extent the director is found liable for: (i) a breach of
such director's duty of loyalty to the Corporation or its shareholders; (ii) an
act or omission not in good faith that constitutes a breach of duty of such
director to the Corporation or an act or omission that involves intentional
misconduct or a knowing violation of the law; (iii) a transaction from which
such director received an improper benefit, whether or not the benefit resulted
from an action taken within the scope of the director's office; or (iv) an act
or omission for which the liability of a director is expressly provided by an
applicable statute.

B. FURTHER LIMITATION OF DIRECTOR LIABILITY

If the Texas Business Corporation Act, the Texas Miscellaneous
Corporation Laws Act or any other applicable Texas statute hereafter is amended
to authorize the further elimination or limitation of the liability of
directors of the Corporation, then the liability of a director of the
Corporation shall be limited to the fullest extent permitted by the Texas
Business Corporation Act, the Texas Miscellaneous Corporation Laws Act and such
other applicable Texas statute, as so amended, and such limitation of liability
shall be in addition to, and not in lieu of, the limitation on the liability of
a director of the Corporation provided by the foregoing provisions of this
Article VII.

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<PAGE> 5
C. VOTE REQUIRED TO AMEND ARTICLE VII

Any repeal of or amendment to this Article VII shall be
prospective only and shall not adversely affect any limitation on the liability
of a director of the Corporation existing at the time of such repeal or
amendment.

ARTICLE VIII

The post office address of the Corporation's initial registered
office is 3355 West Alabama, Suite 1200, Houston, Texas 77098, and the name of
its initial registered agent at such address is Eric J. Pulaski.

ARTICLE IX

A. NUMBER OF DIRECTORS

The number of directors of the Corporation shall be fixed from
time to time by resolution of the board of directors of the Corporation adopted
by the affirmative vote of not less than two-thirds of the number of directors
of the Corporation in office at that time; provided that;

1. the number of directors of the Corporation shall be not
less than four;

2. the number of directors of the Corporation shall be six
unless and until such number shall be increased by resolution of the board of
directors of the Corporation adopted by the affirmative vote of not less than
two-thirds of the number of directors of the Corporation then in office; and

3. the number of directors of the Corporation shall not be
decreased if the effect of that decrease would be to shorten the term of any
director of the Corporation at the time in office.

B. CLASSIFICATION OF BOARD OF DIRECTORS

The directors of the Corporation shall be divided into three
classes (Class I, Class II and Class III). Initially, Classes I, II and III
will be composed of two persons, and upon any change in the size of the board
of directors, each class will be as nearly equal in number as possible. The
number of directors constituting the initial board of directors is six, and the
names, addresses and classification of the persons who are to serve as
directors until the relevant annual meeting of the shareholders, as described
below, or until their successors are elected and qualify are:

Name Address Class
---- ------- -----

Christopher J. Sole 3355 West Alabama I
Suite 1200
Houston, Texas 77098

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<PAGE> 6

Richard A. Hosley II 1414 Southwest Freeway, I
Suite 6200
Sugarland, Texas 77478

John J. Moores 12860 High Bluff Road Drive II
Suite 200
San Diego, California 92130

Scott R. Plantowsky 3355 West Alabama II
Suite 1200
Houston, Texas 77098

Eric J. Pulaski 3355 West Alabama III
Suite 1200
Houston, Texas 77098

Peter L. Bloom 3355 West Alabama III
Suite 1200
Houston, Texas 77098

The initial term of office of directors of Class I shall expire
at the next annual meeting of shareholders of the Corporation following the
filing of these Articles of Incorporation; the initial term of office of
directors of Class II shall expire at the second annual meeting of shareholders
of the Corporation following the filing of these Articles of Incorporation; and
the initial term of office of directors of Class III shall expire at the third
annual meeting of shareholders of the Corporation following the filing of these
Articles of Incorporation.

At each annual meeting of shareholders of the Corporation, the
number of directors equal to the number of the class the term of which expires
at the time of such meeting shall be elected to hold office for a term expiring
on the third annual meeting of shareholders of the Corporation after their
election.

C. REMOVAL OF DIRECTORS

A director of the Corporation may not be removed from office
unless such removal is for cause and the holders of two-thirds of the shares of
the capital stock of the Corporation entitled to vote for the election of such
a director shall have voted in favor of such removal at a meeting of
shareholders of the Corporation expressly called for that purpose.

For purposes of this Article IX, cause for removal shall be
construed to exist only if the director whose removal is proposed (i) has been
willfully and persistently guilty of significant misconduct or neglect in the
discharge of his duties hereunder, provided that notice thereof has been given
to the director, (ii) has been convicted of any felony criminal offense or any
civil offense involving fraud or moral turpitude, other than an offense that in
the opinion of the other members of the board of directors does not affect such
director's position as a director, by a court of competent jurisdiction and
such conviction is no longer subject to direct appeal, (iii) has pled guilty or
nolo contendere to any felony criminal offense or any civil offense involving
fraud or moral turpitude, other than an offense that in the opinion of the
other members of the board of directors does not affect the director's position
as a director, (iv) has been adjudicated by a court of competent jurisdiction to
be liable for gross negligence, recklessness or misconduct in the performance of
his or her duty to the Corporation in a manner of substantial importance to the
Corporation and such adjudication is no longer subject to direct appeal or (v)
has been adjudicated by a court of competent jurisdiction to be mentally
incompetent, which mental incompetency directly affects his or her ability as a
director of the Corporation, and such adjudication is no longer subject to
direct appeal. Any action for removal must be brought within three months of
the date on which such conviction or adjudication is no longer subject to direct
appeal.

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<PAGE> 8
ARTICLE X

A. VOTE REQUIRED TO AMEND ARTICLES OF INCORPORATION

These Articles of Incorporation shall not be amended, other than
for the issuance of Preferred Stock pursuant to Article IV, unless, in addition
to any affirmative vote required by law, these Articles of Incorporation, the
bylaws of the Corporation or any agreement between the Corporation and any
national securities exchange, the holders of not less than two-thirds of the
shares of capital stock of the Corporation entitled to vote thereon shall have
voted in favor of the proposed amendment.

B. VOTE REQUIRED FOR DISSOLUTION

The Corporation shall not be dissolved unless, in addition to
any affirmative vote required by law, these Articles of Incorporation, the
bylaws of the Corporation or any agreement between the Corporation and any
national securities exchange, the holders of not less than two-thirds of the
shares of capital stock of the Corporation entitled to vote thereon shall have
voted in favor of the proposed dissolution.

ARTICLE XI

A. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS

The Corporation shall not be merged into or consolidated with
any other corporation, nor shall any other corporation be merged into the
Corporation, unless, in addition to any affirmative vote required by law, these
Articles of Incorporation, the bylaws of the Corporation or any agreement
between the Corporation and any national securities exchange, the holders of
not less than two-thirds of the shares of capital stock of the Corporation
entitled to vote thereon shall have voted in favor of the proposed merger or
consolidation. Notwithstanding the foregoing, the provisions of this Section A
shall not apply to the merger of any other corporation into the Corporation if
the Texas Business Corporation Act does not require a vote of the holders of
shares of capital stock of the Corporation as a condition to that merger.

B. HIGHER VOTE FOR CERTAIN OTHER BUSINESS COMBINATIONS.

1. Higher Vote Required. In addition to any affirmative vote
required by law, these Articles of Incorporation, the bylaws of the Corporation
or any agreement between the Corporation and any national securities exchange,
and except as otherwise expressly provided in Section B.3 of this Article XI:

a. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any Interested
Shareholder (as hereinafter defined) or (ii) any other corporation
(whether or not itself an Interested Shareholder) which is, or after
such merger or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Shareholder; or

b. any merger into this Corporation, or into a
Subsidiary, of an Interested Shareholder or an Affiliate of an
Interested Shareholder; or

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<PAGE> 9

<PAGE> 10
c. any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of transactions)
to or with any Interested Shareholder or any Affiliate of any
Interested Shareholder of any assets of the corporation or any
Subsidiary having an aggregate Fair Market Value (as hereinafter
defined) equal to or greater than the greater of $1,000,000 or 5% of
the Corporation's consolidated total assets (as shown on its certified
consolidated balance sheet as of the end of the most recent fiscal
year ended prior to the date the determination is being made); or

d. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to or with any
Interested Shareholder or any Affiliate of any Interested Shareholder
in exchange for cash, securities or other property (or a combination
thereof) having an aggregate Fair Market Value equal to or greater
than the greater of $1,000,000 or 5% of the Corporation's consolidated
total assets (as shown on its certified consolidated balance sheet as
of the end of the most recent fiscal year ended prior to the date the
determination is being made); or

e. the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf
of any Interested Shareholder or any Affiliate of any Interested
Shareholder; or

f. any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or into or
otherwise involving an Interested Shareholder) which has the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of Equity Security (as hereinafter
defined) of the Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Shareholder or any Affiliate or
Associate (as hereinafter defined) of any Interested Shareholder;

shall require the affirmative vote of (i) the holders of at least two-thirds of
the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors ("Voting
Stock"), voting together as a single class, and (ii) the holders of at least
two-thirds of the voting power of the then outstanding Voting Stock, exclusive
of any shares beneficially owed by the Interested Shareholder, voting together
as a single class (it being understood that for the purposes of this Article
XI, each share of the Voting Stock shall have the number of votes granted to it
pursuant to Article IV of these Articles of Incorporation). Such affirmative
vote shall be required notwithstanding the fact that no vote may be required,
or that a lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.

2. Definition of "Business Combination". The term "Business
Combination" as used in this Article XI shall mean any transaction which is
referred to in any one or more of clauses a. through f. of Section B.1.

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<PAGE> 11
3. When Higher Vote is Not Required. The provisions of Section B
of this Article XI shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote as is required by law, any other provision of these Articles of
Incorporation, or otherwise, if in the case of a Business Combination that does
not involve cash or other consideration being received by the shareholders of
the Corporation, solely in their capacities as shareholders, the condition
specified in the following paragraph a. is met, or if in the case of any other
Business Combination, the conditions specified in either paragraph a. or b.
below are met:

a. Approval by Disinterested Directors. The Business
Combination shall have been approved by a majority of the
Disinterested Directors (as hereinafter defined).

b. Price and Procedure Requirements. All of the
following conditions shall have been met:

i. The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the Business
Combination (the "Consummation Date") of consideration other than cash
to be received per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher of the following (it
being intended that the requirements of this paragraph b.i shall be
required to be met with respect to all shares of Common Stock
outstanding, whether or not the Interested Shareholder has previously
acquired any shares of the Common Stock):

(1) (if applicable) the highest per
share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested
Shareholder for any shares of Common Stock acquired by it (a)
within the five-year period immediately prior to the first
public announcement of the proposal of the Business
Combination (the "Announcement Date") or (b) in the
transaction in which it became an Interested Shareholder,
whichever is higher; and

(2) the Fair Market Value per share of
Common Stock on the Announcement Date or on the date on which
the Interested Shareholder became an Interested Shareholder
(such latter date is referred to in this Article XI as the
"Determination Date"), whichever is higher.

ii. The aggregate amount of the cash and the Fair
Market Value as of the Consummation Date of consideration other than
cash to be received per share by holders of shares of any class or
series of outstanding Voting Stock, other than the Common Stock, in
such Business Combination shall be an amount equal to at least the
highest of the following (it being intended that the requirements of
this paragraph b.ii shall be required to be met with respect to every
class of outstanding Voting Stock (other than the Common Stock),
whether or not the Interested Shareholder has previously acquired any
shares of a particular class of Voting Stock):

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<PAGE> 12

<PAGE> 13
(1) (if applicable) the highest per
share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested
Shareholder for any shares of such class of Voting Stock
acquired by it (1) within the five-year period immediately
prior to the Announcement Date or (2) in the transaction in
which it became an Interested Shareholder, whichever is
higher; and

(2) (if applicable) the highest
preferential amount per share to which the holders of shares
of such class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation; and

(3) the Fair Market Value per share of
such class of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher; and

iii. The consideration to be received by holders
of a particular class or series of outstanding Voting Stock (including
Common Stock) shall be in cash or in the same form as the Interested
Shareholder has previously paid for shares of such class of Voting
Stock previously acquired by it. If the Interested Shareholder has
paid for shares of any class or series of Voting Stock with varying
forms of consideration, the form of consideration for such class or
series of Voting Stock shall be either cash or the form used to
acquire the largest number of shares of such class or series of Voting
Stock previously acquired by it, whether or not part of the Business
Combination. The price determined in accordance with paragraphs b.i
and b.ii of this Section B.3 shall be subject to appropriate
adjustment in the event of any stock dividend, stock split,
combination of shares or similar event; and

iv. After such Interested Shareholder has become
an Interested Shareholder and prior to the consummation of such
Business Combination: (a) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding stock having preference
over the Common Stock as to dividends or upon liquidation; (b) there
shall have been (1) no reduction in the annual rate of dividends paid
on the Common Stock (except as necessary to reflect any subdivision of
the Common Stock), except as approved by a majority of the
Disinterested Directors, and (2) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to increase such
annual rate is approved by a majority of the Disinterested Directors;
and (c) such Interested Shareholder shall have not become the
beneficial owner of any additional shares of Voting Stock except as
part of the transaction which results in such Interested Shareholder
becoming

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<PAGE> 14
an Interested Shareholder and except in a transaction which, after
giving effect thereto, would not result in any increase in the
Interested Shareholder's percentage of beneficial ownership of any
class of Voting Stock; and

v. After such Interested Shareholder has become
an Interested Shareholder, such Interested Shareholder shall not have
received the benefit, directly or indirectly (except proportionately
as a stockholder), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise; and

vi. A proxy or information statement describing
the proposed Business Combination and complying with the requirements
of the Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public shareholders of the
Corporation, if any, at least 30 days prior to the consummation of
such Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions); and

vii. Such Interested Shareholder shall not have
made any major change in the Corporation's business or equity capital
structure without the approval of a majority of the Disinterested
Directors.

4. Certain Definitions. For the purpose of this Article IX:

a. A "person" shall mean any individual, firm,
corporation or other entity.

b. "Interested Shareholder" shall mean any person (other
than the Corporation or any Subsidiary) who or which:

i. is the beneficial owner, directly or
indirectly, of 5% or more of the voting power of the outstanding
Voting Stock; or

ii. is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of 5% or
more of the voting power of the then outstanding Voting Stock; or

iii. is an assignee of or otherwise has succeeded
to any shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question beneficially
owned by any Interested Shareholder, if such assignment or succession
shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.

c. A person shall be deemed a "beneficial owner" of any
Voting Stock:
i. which such person or any of its Affiliates or
Associates would be considered to beneficially own, directly or
indirectly, pursuant to the provisions of Rule 13d-3 under the
Securities Exchange Act of 1934, as in effect on January 1, 1998; or

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<PAGE> 15

<PAGE> 16
ii. which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) the right to vote pursuant to any agreement, arrangement or
understanding; or

iii. which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.

d. For the purpose of determining whether a person is an
Interested Shareholder pursuant to paragraph b. of this Section B.4, the number
of shares of Voting Stock deemed to be outstanding shall include shares deemed
owned through the application of paragraph c. of this Section B.4 but shall not
include any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.

e. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on January
1, 1995.

f. "Subsidiary" means any corporation of which a
majority of any class of Equity Security is owned, directly or indirectly, by
the Corporation, provided, however, that for the purposes of the definition of
Interested Shareholder set forth in paragraph b. of this Section B.4, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
Equity Security is owned, directly or indirectly, by the Corporation.

g. "Disinterested Director" means any member of the
board of directors of the Corporation who is unaffiliated with the Interested
Shareholder and was a member of the board of directors of the Corporation prior
to the time that the Interested Shareholder became an Interested Shareholder,
and any successor of a Disinterested Director who is unaffiliated with the
Interested Shareholder and is recommended to succeed a Disinterested Director
by a majority of Disinterested Directors then on the board of directors.

h. "Fair Market Value" means: (i) in the case of cash,
the aggregate amount of such cash; (ii) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape
for the New York Stock Exchange, or, if such stock is not listed on New York
Stock Exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System, the National Quotation Bureau
Incorporated or otherwise in the over-the-counter market, or if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by a majority of the Disinterested

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Directors in good faith; and (iii) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined by a majority of Disinterested Directors in good faith.

i. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received"
as used in paragraphs b.i and b.ii of Section B.3 of this Article XI shall
include the shares of Common Stock and the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.

j. "Equity Security" shall have the meaning ascribed to
such term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in
effect on January 1, 1995.

5. Powers of the Board of Directors. A majority of the Disinterested
Directors shall have the power and duty to determine for the purposes of this
Article XI, on the basis of information known to them after reasonable inquiry,
all facts necessary to determine compliance with this Article XI, including,
without limitation, (a) whether a person is an Interested Shareholder, (b) the
number of shares of Voting Stock beneficially owned by any person, (c) whether
a person is an Affiliate or Associate of another person, (d) whether the
requirements of paragraph b. of Section B.4 have been met with respect to any
Business Combination and (e) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value equal to or greater than
$1,000,000 or 5% of the Corporation's consolidated total assets (as shown on
its certified consolidated balance sheet as of the most recent fiscal year
ended prior to the date the determination is being made). A majority of the
Disinterested Directors shall have the further power to interpret all of the
terms and provisions of this Article XI and the good faith determination by
such majority of any matters relating to such interpretation shall be
conclusive and binding for all purposes of this Article XI.

6. No Effect on Fiduciary Obligations of Interested Shareholders.
Nothing contained in this Article XI shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.

7. Amendment, Repeal, etc. Notwithstanding any other provisions of
these Articles of Incorporation or the bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law,
these Articles of Incorporation or the bylaws), in addition to any affirmative
vote required by law, these Articles of Incorporation, the bylaws of the
Corporation or any agreement between the Corporation and any national
securities exchange, the affirmative vote of the holders of 80% or more of the
outstanding Voting Stock, voting together as a single class, shall be required
to amend or repeal, or adopt any provisions inconsistent with, this Article XI
or any provision hereof.

ARTICLE XII

A. AUTHORITY OF BOARD OF DIRECTORS

All of the powers of the Corporation, insofar as the same may be
lawfully vested by these Articles of Incorporation in the board of directors of
the Corporation, are hereby conferred upon the board of directors of the
Corporation.

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<PAGE> 18

<PAGE> 19
B. VOTE REQUIRED TO AMEND BYLAWS

In furtherance and not in limitation of the foregoing provisions of
this Article XII, and for the purpose of the orderly management of the business
and the conduct of the affairs of the Corporation, the board of directors of
the Corporation shall have the power to adopt, amend or repeal from time to
time bylaws of the Corporation, subject to the right of the shareholders of the
Corporation entitled to vote thereon to adopt, amend or repeal bylaws of the
Corporation; provided that bylaws of the Corporation shall not be adopted,
amended or repealed by the shareholders of the Corporation unless the holders
of not less than 80% of the shares of stock of the Corporation entitled to vote
thereon shall have voted in favor of such adoption, amendment or repeal at a
meeting of shareholders of the Corporation expressly called for that purpose.

C. SHAREHOLDER ACTION

No action required or permitted to be taken at any annual or special
meeting of shareholders of the Corporation may be taken without such a meeting;
and the right of shareholders of the Corporation to take any such action by a
consent in writing is denied.

D. VOTE REQUIRED TO AMEND ARTICLE XII

Notwithstanding any other provision of these Articles of Incorporation
or of the bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
bylaws of the Corporation), this Article XII shall not be amended, altered,
changed or repealed, directly or indirectly, unless, in addition to any
affirmative vote required by law, these Articles of Incorporation, the bylaws
of the Corporation or any agreement between the Corporation and any national
securities exchange, the holders of not less than 80% of the shares of capital
stock of the Corporation entitled to vote thereon shall have voted in favor of
such amendment, alteration, change or repeal.

ARTICLE XIII

The name and address of the incorporator are:

Name Address
---- -------

Robert F. Gray, Jr. 1301 McKinney, Suite 5100
Houston, Texas 77010

IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of
__________, 1998.

________________________________________
Robert F. Gray, Jr.

-14-

<PAGE> 1

EXHIBIT 3.2

BINDVIEW DEVELOPMENT CORPORATION

ADOPTED ON MAY 15,1998

- - - - - - -

BYLAWS

ARTICLE I

OFFICES

SECTION 1.01. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the corporation and the office of its transfer agent or registrar
may be located outside the State of Texas.

SECTION 1.02. OTHER OFFICES. The corporation may also have offices
at such other places both within and without the State of Texas as the board of
directors may from time to time determine or the business of the corporation
may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

SECTION 2.01. TIME AND PLACE OF MEETINGS. Meetings of shareholders
for any purpose may be held at such time and place within or without the State
of Texas as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.

SECTION 2.02. ANNUAL MEETING. The annual meeting of shareholders
shall be held annually at such date and time as shall be designated from time
to time by the board of directors and stated in the notice of meeting.

SECTION 2.03. SPECIAL MEETINGS. Special meetings of the
shareholders for any purpose or purposes may be called only by the board of
directors. The board of directors shall determine the date and time of each
special meeting of shareholders.

SECTION 2.04. NOTICE OF MEETING. Written notice stating the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered to each
shareholder entitled to vote at the meeting within the time prescribed by
statute.

SECTION 2.05. QUORUM. The holders of a majority of the shares
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a

<PAGE> 2
quorum at all meetings of the shareholders for the transaction of business
except as otherwise provided by statute or by the articles of incorporation.
If, however, a quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. After an adjournment, at any reconvened
meeting any business may be transacted that might have been transacted if the
meeting had been held in accordance with the original notice thereof, provided
a quorum shall be present or represented thereat.

SECTION 2.06. VOTE REQUIRED. With respect to any matter, other
than the election of directors, the affirmative vote of the holders of a
majority of the shares entitled to vote on that matter and represented in
person or by proxy at a meeting of shareholders at which a quorum is present,
shall decide such matter, unless the matter is one upon which a different vote
is required by express provision of the statues, the articles of incorporation
or of these bylaws, in which case such express provision shall govern and
control the decision of that matter. Unless otherwise required by law or by
the articles of incorporation, directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors at a meeting of shareholders at which a quorum is present.

SECTION 2.07. VOTING; PROXIES. Each outstanding share having
voting power shall be entitled to one vote on each matter submitted to a vote
at a meeting of shareholders. Any shareholder may vote either in person or by
proxy executed in writing by the shareholder. A telegram, telex, cablegram or
similar transmission by the shareholder, or a photographic, photostatic,
facsimile or similar reproduction of a writing executed by the shareholder
shall be treated as an execution in writing for purposes of this Section 2.07.

SECTION 2.08. ACTION WITHOUT MEETING. As provided in Article XII
of the articles of incorporation, the right of shareholders of the corporation
to take action by a consent in writing is denied.

ARTICLE III

DIRECTORS

SECTION 3.01. POWERS. The powers of the corporation shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of directors.

SECTION 3.02. NUMBER, ELECTION AND TERM. The number of directors shall
be fixed in the manner provided by, and the directors shall be divided into
classes in accordance with, Article IX of the articles of incorporation. The
number of directors so fixed shall constitute the total number of directors of
the corporation. Directors need not be residents of Texas or shareholders of
the corporation.

SECTION 3.03. VACANCIES. Any vacancy occurring in the board of
directors may be filled by a majority of the remaining directors though less
than a quorum of the board of directors. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.

<PAGE> 3
SECTION 3.04. REMOVAL. A director may not be removed except in
accordance with Article IX of the articles of incorporation.

SECTION 3.05. PLACE OF MEETINGS. Meetings of the board of
directors, regular or special, may be held either within or without the State
of Texas.

SECTION 3.06. REGULAR MEETINGS. The annual meeting of the board of
directors shall be held each year, without other notice than this bylaw, at the
place of, and immediately following, the annual meeting of shareholders.
However, if a majority of the whole board of directors shall so consent in
writing, such regular meeting may be held at such time and place as shall be
fixed by such consent, and the secretary shall give notice of such regular
meeting, stating such time and place in the manner required by these bylaws.

SECTION 3.07. NOTICE OF REGULAR MEETINGS. Regular meetings of the
board of directors may be held upon such notice, or without notice, and at such
time and at such place as shall from time to time be determined by the board.

SECTION 3.08. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by the chairman of the board of directors or by any two
directors. Except as provided in Section 3.07 of these bylaws, notice of each
special meeting of the board of directors shall be given to each director at
least seventy-two hours before the time of the meeting, by or at the direction
of the person or persons calling the meeting to each director. If the person
or persons calling the meeting shall instruct the secretary or any assistant
secretary to give such notice, then the secretary or such assistant secretary
shall promptly do so in the manner required by these bylaws.

SECTION 3.09. WAIVER AND REQUIREMENTS OF NOTICE. Attendance of a
director at any meeting shall constitute a waiver of notice of such meeting,
except where a director attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. Except as may be otherwise provided by law or by the
articles of incorporation or by these bylaws, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.

SECTION 3.10. QUORUM; VOTE REQUIRED. At all meetings of the board
of directors, a majority of the directors, determined in accordance with
Section 3.02 of these bylaws, shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, unless
otherwise specifically provided by law, the articles of incorporation or these
bylaws. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.

SECTION 3.11. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at a meeting of the board of directors or any committee
may be taken without a meeting if a consent in writing, setting forth the
action so taken, is signed by all the members of the board of directors or
committee, as the case may be.

<PAGE> 4
SECTION 3.12. COMPENSATION. The board of directors, irrespective
or any personal interest of any of its members, shall have the authority to fix
the compensation of all directors for services to the corporation as directors,
as members of one or more committees of the board of directors, as officers, or
otherwise.

ARTICLE IV

COMMITTEES OF DIRECTORS

SECTION 4.01. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole board of directors, designate one
or more committees, including, if they shall so determine, an Executive
Committee, each such committee to consist of one or more of the directors of
the corporation. The board of directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of such committee. In the absence or disqualification of
any member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member.

SECTION 4.02 MEETINGS OF AND ACTION BY COMMITTEES. Except as
otherwise provided in the resolution pursuant to which a particular committee
of the board of directors was designated, (i) meetings of such committee may be
held within or without the State of Texas and may be called by any member
thereof, (ii) notice of each meeting of such committee stating the time and
place of the meeting shall be given not less than forty-eight hours before the
time of the meeting, by or at the direction of the person or persons calling
the meeting, to each member of such committee, and if the person or persons
calling the meeting shall instruct the secretary or any assistant secretary to
give such notice, then the secretary or such assistant secretary shall promptly
do so in the manner required by these bylaws, (iii) attendance of a director at
any meeting of such committee shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened, (iv) neither the business to be transacted at,
nor the purpose of, any meeting of such committee need be specified in the
notice or waiver of notice of such meeting, (v) at all meetings of such
committee, a majority of the number of directors comprising such committee, as
fixed by such resolution, shall constitute a quorum for the transaction of
business, (vi) the vote of a majority of the members present at a meeting of
such committee at which there is a quorum shall be the act of such committee,
and (vii) if a quorum shall not be present at any meeting of such committee, a
majority of the members present at such meeting may adjourn such meeting from
time to time, without notice other than announcement at such meeting, until a
quorum shall be present. The board of directors, by resolution adopted by a
majority of the whole board of directors, may amend or repeal the resolution
pursuant to which any committee of the board of directors was designated, may
remove any member of any committee, and may fill any vacancy occurring on any
committee. Each committee of directors shall keep regular minutes of its
proceedings and report the same to the board of directors when requested to do
so.

<PAGE> 5
SECTION 4.03. ACTION BY CONSENT. Any action required or permitted
to be taken at any meeting of any committee of the board of directors may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all of the members of such committee.

ARTICLE V

NOTICES

SECTION 5.01. FORM OF NOTICE; DELIVERY. Any notice to directors,
members of any committee or shareholders shall be in writing and shall be
delivered personally or mailed to the directors, members of such committees or
shareholders at their respective addresses appearing on the books of the
corporation. Notice by mail shall be deemed to be given at the time when the
same shall be deposited in the United States mail, postage prepaid. Notice to
directors and members of any committee may also be given by telegram, telex,
cablegram, facsimile or other similar transmission.

SECTION 5.02. WAIVER. Whenever any notice is required to be given
under the provisions of the statutes or of the articles of incorporation or of
these bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.

ARTICLE VI

OFFICERS

SECTION 6.01. OFFICERS. The board of directors shall elect a
president and a secretary, and may elect a chairman of the board, a treasurer,
one or more vice presidents, a controller and one or more assistant secretaries
and assistant treasurers. The chairman of the board and the president shall be
directors of the corporation. Other officers need not be directors, but a vice
president who is not a director cannot succeed to or fill the office of
president. Any two of the above offices, except those of president and vice
president, may be held by the same person.

SECTION 6.02. COMPENSATION. The salaries of all officers and
agents of the corporation shall be fixed by the board of directors. The board
of directors shall have the power to enter into contracts for the employment
and compensation of officers for such terms as the board deems advisable. No
officer shall be prevented from receiving a salary by reason of his also being
a director.

SECTION 6.03. TERM; REMOVAL; VACANCIES. The officers of the
corporation shall hold office until their successors are elected or appointed
by the board of directors and qualify, or until their death or until their
resignation or removal from office. Any officer elected or appointed by the
board of directors may be removed at any time by the board without cause
whenever, it the board's sole judgment, the best interests of the corporation
shall be served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed. Election or appointment
of an officer or agent shall not of itself create contract rights. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise shall be filled by the board of directors.

<PAGE> 6
SECTION 6.04. CHAIRMAN OF THE BOARD. If the board of directors
shall elect a person to be chairman of the board and shall designate such
person to be chief executive officer of the corporation, the chairman of the
board shall have the duties set forth in this section. The chairman of the
board shall preside at all meetings of the shareholders and at all meetings of
the directors. In the absence of the chairman of the board, the president
shall so preside. The chairman of the board shall be the chief executive
officer of the company, supervising and directing the operations of the
business in accordance with the policies determined by the board of directors.

SECTION 6.05. PRESIDENT. Unless the board of directors shall have
elected a chairman of the board of directors and designated such person the
chief executive officer of the corporation, the president shall be the chief
executive officer of the company, supervising and directing the operations of
the business in accordance with the policies determined by the board of
directors. If the board of directors shall have elected a person as chairman
of the board and designated such person as the chief executive officer of the
corporation, the president shall be the chief operating officer of the company
and shall be responsible for the general supervision and control of the
business and the affairs of the company subject to the directions of the
chairman of the board and the board of directors. If the board of directors
shall have elected a person chairman of the board and shall designate such
person the chief executive officer of the company, the president, in the
absence or disability of the chairman of the board, shall perform the duties of
that office.

SECTION 6.06. VICE PRESIDENTS. The vice presidents in the order of
their seniority, unless otherwise determined by the board of directors, shall,
in the absence or disability of the president, perform the duties and have the
authority and exercise the powers of the president. They shall perform such
other duties and have such other authority and powers as the board of directors
may from time to time prescribe or as the president may from time to time
delegate.

SECTION 6.07. SECRETARY. The secretary shall attend all meetings
of the board of directors and all meetings of shareholders and record all of
the proceedings of the meetings of the board of directors and of the
shareholders in a minute book to be kept for that purpose and shall perform
like duties for the standing committees when required. He shall give, or cause
to be given, notice of all meetings of the shareholders and special meetings of
the board of directors, and shall perform such other duties as may be
prescribed by the board of directors or president, under whose supervision he
shall be. He shall keep in safe custody the seal of the corporation and, when
authorized by the board of directors, shall affix the same to any instrument
requiring it and, when so affixed, it shall be attested by his signature or by
the signature of an assistant secretary or of the treasurer. The secretary
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe or as the president may from time to
time delegate.

SECTION 6.08. ASSISTANT SECRETARIES. The assistant secretaries in
the order of their seniority, unless otherwise determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary. They shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe or as the president may from time to time delegate.

<PAGE> 7
SECTION 6.09. TREASURER. The treasurer, if one is elected, shall
have custody of the corporate funds and securities and shall keep full and
accurate accounts and records of receipts, disbursements and other transactions
in books belonging to the corporation, and shall deposit all moneys and other
valuable effects in the name and to the credit of the corporation in such
depositories as may be designated from time to time by the board of directors.
The treasurer shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and
shall render the president and the board of directors, when so directed, an
account of all his transactions as treasurer and of the financial condition of
the corporation. The treasurer shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe or as
the president may from time to time delegate. If required by the board of
directors, the treasurer shall give the corporation a bond of such type,
character and amount as the board of directors may require.

SECTION 6.10. ASSISTANT TREASURERS. The assistant treasurers in
the order of their seniority, unless otherwise determined by the board of
directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe or the president may from time to time delegate.

ARTICLE VII

CERTIFICATES REPRESENTING SHARES

SECTION 7.01. CERTIFICATES. The shares of the corporation shall be
represented by certificates signed by the chairman of the board, the president
or a vice president and the secretary or an assistant secretary of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof.

SECTION 7.02. FACSIMILE SIGNATURES. The signatures of the chairman
of the board, the president or a vice president and the secretary or an
assistant secretary upon a certificate may be facsimiles. In case any officer
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.

SECTION 7.03. LOST CERTIFICATES. The board of directors may direct
a new certificate to be issued in place of any certificate theretofore issued
by the corporation alleged to have been lost or destroyed. When authorizing
such issue of a new certificate, the board of directors, in its discretion and
as a condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient and may require such indemnities as it deems
adequate to protect the corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost or destroyed.

SECTION 7.04. TRANSFERS. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the person entitled
thereto and the old certificate canceled and the transaction recorded upon the
transfer records of the corporation.

<PAGE> 8
SECTION 7.05. RECORD DATES. The board of directors may fix in
advance a date as the record date for the purpose of determining shareholders
(i) entitled to notice of or to vote at any meeting of shareholders, or, after
an adjournment thereof, at any reconvened meeting, (ii) entitled to receive a
distribution (other than a distribution involving a purchase or redemption by
the corporation of any of its own shares) or a share dividend or (iii) for any
other proper purpose. Such date in any case shall be not more than sixty days
and, in the case of a meeting of shareholders, not less than ten days, prior to
the date on which the particular action requiring such determination of
shareholders is to be taken.

SECTION 7.06. REGISTERED SHAREHOLDERS. Except as otherwise
required by law, the corporation shall be entitled to regard the person in
whose name any shares are registered in the share transfer records at any
particular time as the owner of those shares at that time for purposes of
voting those shares, receiving distributions, share dividends or notices in
respect thereof, transferring those shares, exercising rights of dissent with
respect to those shares, exercising or waiving any preemptive right with
respect to those shares, entering into agreements with respect to those shares
or giving proxies with respect to those shares. Except as otherwise required
by law, neither the corporation nor any of its officers, directors, employees
or agents shall be liable for regarding that person as the owner of those
shares at that time for those purposes, regardless of whether that person does
not possess a certificate for those shares.

SECTION 7.07. LIST OF SHAREHOLDERS. The officer or agent having
charge of the transfer books for shares shall make, at least ten days before
each meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address of each
and the number of shares held by each, which list, for a period of ten days
prior to such meeting, shall be kept on file at the registered office or
principal place of business of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting. The original share ledger or transfer book, or a duplicate
thereof, shall be prima facie evidence as to who are the shareholders entitled
to examine such list or share ledger or transfer book or to vote at any meeting
of the shareholders.

ARTICLE VIII

GENERAL PROVISIONS

SECTION 8.01. DISTRIBUTIONS AND SHARE DIVIDENDS. Subject to the
provisions of the articles of incorporation relating thereto, if any,
distributions and share dividends may be declared by the board of directors, in
its discretion, at any regular or special meeting, pursuant to law. Subject to
any provisions of the articles of incorporation, distributions may be made by
the transfer of money or other property (except the corporation's own shares or
rights to acquire such shares) or by the issuance of indebtedness of the
corporation, and share dividends may be paid in the corporation's own
authorized but unissued shares or in treasury shares.

SECTION 8.02. RESERVE FUNDS. Before payment of any distribution or
share dividend, there may be set aside out of any funds of the corporation
available for distributions or share dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund for meeting contingencies, or for equalizing distributions or
share

<PAGE> 9
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest
of the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.

SECTION 8.03. CHECKS. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.

SECTION 8.04. FISCAL YEAR. The fiscal year of the corporation
shall begin on the first day of January and end on the thirty-first day of
December.

SECTION 8.05. SEAL. The corporate seal shall be in such form as
may be prescribed by the board of directors. The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.

SECTION 8.06. BOOKS AND RECORDS. The corporation shall keep books
and records of account and shall keep minutes of the proceedings of its
shareholders, its board of directors and each committee of its board of
directors. The corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a
record of the original issuance of shares issued by the corporation and a
record of each transfer of those shares that have been presented to the
corporation for registration of transfer. Such records shall contain the names
and addresses of all past and current shareholders of the corporation and the
number and class or series of shares issued by the corporation held by each of
them.

SECTION 8.07. INVALID PROVISIONS. If any provision of these bylaws
is held to be illegal, invalid, or unenforceable under present or future laws,
such provision shall be fully severable; these bylaws shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid, or unenforceable provision there shall be added
automatically as a part of these bylaws a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable.

SECTION 8.08. HEADINGS. The headings used in these bylaws are for
reference purposes only and do not affect in any way the meaning or
interpretation of these bylaws.

ARTICLE IX

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article 2.02-1 of the Texas Business Corporation Act (the "Article")
permits the corporation to indemnify its present and former directors and
officers to the extent and under the circumstances set forth therein. In
addition, in some instances, indemnification is required by the Article. The
corporation hereby elects to and does hereby indemnify all such persons to the
fullest extent permitted or required by the Article promptly upon request of
any such person making a request for indemnity hereunder. Such obligation to
so indemnify and to so make such determinations may be specifically enforced by
resort to any court of competent jurisdiction.

<PAGE> 10
Further, the corporation shall pay or reimburse the reasonable expenses of such
persons covered hereby in advance of the final disposition of any proceeding to
the fullest extent permitted by the Article and subject to the conditions
thereof.

ARTICLE X

AMENDMENTS

These bylaws may not be altered, amended, or repealed, and new bylaws
may not be adopted, otherwise than in accordance with Article X of the articles
of incorporation.

<PAGE> 1
EXHIBIT 10.4

BINDVIEW DEVELOPMENT CORPORATION

OMNIBUS INCENTIVE PLAN
<PAGE> 2
BINDVIEW DEVELOPMENT CORPORATION

OMNIBUS INCENTIVE PLAN

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section
-------
<S> <C>
ARTICLE I - PLAN

Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Effective Date of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2

ARTICLE II - DEFINITIONS

Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Board of Directors or Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Corporate Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Corporate Plan Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
Incentive Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10
1996 ISO Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.11
1996 ISO Plan Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
1997 Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
1997 Incentive Plan Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
1998 Incentive Plan Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.15
Nonqualified Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.17
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.18
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19
Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.20
Reload Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.21
Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.22
Restricted Stock Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.23
Restricted Stock Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.24
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.25
Stock Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.26
10% Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.27
</TABLE>

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<TABLE>
<S> <C>
ARTICLE III - ELIGIBILITY

ARTICLE IV - GENERAL PROVISIONS RELATING TO OPTIONS AND STOCK AWARDS

Authority to Grant Options and Stock Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Non-Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3
Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Changes in the Company's Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5
Election Under Section 83(b) of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6

ARTICLE V - OPTIONS

Type of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Amount Exercisable--Incentive Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5
Exercise on Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6
Exercise of Options Under the Corporate Plan,
the 1996 ISO Plan and the 1997 Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
Reload Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8
Substitution Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10

ARTICLE VI - STOCK AWARDS

Stock Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2
Stock Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3
Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
Lapse of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
Restriction Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6

ARTICLE VII - ADMINISTRATION

ARTICLE VIII - AMENDMENT OR TERMINATION OF PLAN

ARTICLE IX - MISCELLANEOUS

No Establishment of a Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1
No Employment Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2
Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3
Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4
</TABLE>

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<TABLE>
<S> <C>
Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5
Indemnification of the Board and the
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6
Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7
Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8
Other Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9
Other Options or Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.11
No Modification, Extension, or Renewal of Corporate
Plan Options, 1996 ISO Plan Options, and
1997 Incentive Plan Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.12
</TABLE>

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ARTICLE I

PLAN

1.1 PURPOSE. This Plan is a plan for key employees
(including officers and employee directors) of the Company and its Affiliates
and is intended to advance the best interests of the Company, its Affiliates,
and its stockholders by providing those persons who have substantial
responsibility for the management and growth of the Company and its Affiliates
with additional incentives and an opportunity to obtain or increase their
proprietary interest in the Company, thereby encouraging them to continue in
the employ of the Company or any of its Affiliates. For administrative
purposes, and subject to Section 9.12 hereof, this Plan incorporates the
BindView Development Corporation Stock Option Plan (the "Corporate Plan"), the
BindView Development Corporation Incentive Stock Option Plan (the "1996 ISO
Plan and the BindView Development Corporation 1997 Incentive Plan (the "1997
Incentive Plan").

1.2 EFFECTIVE DATE OF PLAN. The Plan is effective
January 1, 1998, if within one year of that date it shall have been approved by
at least a majority vote of stockholders voting in person or by proxy at a duly
held stockholders' meeting, or if the provisions of the corporate charter,
by-laws or applicable state law prescribes a greater degree of stockholder
approval for this action, the approval by the holders of that percentage, at a
duly held meeting of stockholders. No Incentive Option, Nonqualified Option,
Reload Option or Stock Award shall be granted pursuant to the Plan after
December 31, 2007.

ARTICLE II

DEFINITIONS

The words and phrases defined in this Article shall have the
meaning set out in these definitions throughout this Plan, unless the context
in which any such word or phrase appears reasonably requires a broader,
narrower, or different meaning.

2.1 "AFFILIATE" means any parent corporation and any
subsidiary corporation. The term "parent corporation" means any corporation
(other than the Company) in an unbroken chain of corporations ending with the
Company if, at the time of the action or transaction, each of the corporations
other than the Company owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain. The term "subsidiary corporation" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of the action or transaction, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or

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more of the total combined voting power of all classes of stock in one of the
other corporations in the chain.

2.2 "BOARD OF DIRECTORS" or "BOARD" means the board of
directors of the Company.

2.3 "CHANGE OF CONTROL", if used in an Option Agreement,
means (i) the acquisition by any entity or group of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act
of 1934) of fifty percent (50%) or more of the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors, (ii) the approval by the shareholders of the Company
of any reorganization, merger or consolidation pursuant to which the Company is
not the surviving entity, or the sale or other disposition of all or
substantially all of the assets of the Company, or (iii) the approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.

2.4 "CODE" means the Internal Revenue Code of 1986, as
amended.

2.5 "COMPANY" means BindView Development Corporation.

2.6 "CORPORATE PLAN" means the BindView Development
Corporation Stock Option Plan.

2.7 "CORPORATE PLAN OPTIONS" means options granted under
the Corporate Plan to purchase stock.

2.8 "EMPLOYEE" means a person employed by the Company or
any Affiliate to whom an Option or a Stock Award is granted.

2.9 "FAIR MARKET VALUE" of the Stock as of any date means
(a) the average of the high and low sale prices of the Stock on that date on
the principal securities exchange on which the Stock is listed; or (b) if the
Stock is not listed on a securities exchange, the average of the high and low
sale prices of the Stock on that date as reported on the NASDAQ National Market
System; or (c) if the Stock is not listed on the NASDAQ National Market System,
the average of the high and low bid quotations for the Stock on that date as
reported by the National Quotation Bureau Incorporated; or (d) if none of the
foregoing is applicable, an amount at the election of the Board equal to (x),
the average between the closing bid and ask prices per share of stock on the
last preceding date on which those prices were reported or (y) that amount as
determined by the Board.

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2.10 "INCENTIVE OPTION" means an option granted under this
Plan which is designated as an "Incentive Option" and satisfies the
requirements of Section 422 of the Code.

2.11 "1996 ISO PLAN" means the BindView Development
Corporation Incentive Stock Option Plan.

2.12 "1996 ISO PLAN OPTIONS" mean Options granted under
the 1996 ISO Plan.

2.13 "1997 INCENTIVE PLAN" means the BindView Development
Corporation 1997 Incentive Plan.

2.14 "1997 INCENTIVE PLAN OPTIONS" mean Options granted
under the 1997 Incentive Plan.

2.15 "1998 INCENTIVE PLAN OPTIONS" mean Options granted
pursuant to Section 4.2 of the Plan.

2.16 "NONQUALIFIED OPTION" means an option granted under
this Plan other than an Incentive Option.

2.17 "OPTION" means an Incentive Option, Nonqualified
Option and/or Reload Option granted under this Plan to purchase shares of
Stock. Option shall also include a reference to each Corporate Plan Option,
1996 ISO Plan Option, 1997 Incentive Plan Option and 1998 Plan Option, except
to the extent otherwise indicated or to the extent set forth in Section 9.12 of
the Plan.

2.18 "OPTION AGREEMENT" means the written agreement which
sets out the terms of an Option, as amended from time to time.

2.19 "PLAN" means the BindView Development Corporation
Omnibus Incentive Plan, as set out in this document and as it may be amended
from time to time.

2.20 "PLAN YEAR" means the Company's fiscal year.

2.21 "RELOAD OPTION" shall mean a 1998 Incentive Plan
Option or a 1997 Incentive Plan Option which the Board may, in its sole
discretion, grant in connection with the issuing of a 1998 Incentive Plan
Option or a 1997 Incentive Plan Option if the exercise price of the 1998
Incentive Plan Option or the 1997 Incentive Plan Option is paid in whole or in
part, by exchanging Stock owned by the Employee. A Reload Option shall be an
Incentive Option or Nonqualified Option depending on the type of 1998 Incentive
Plan Option or 1997 Incentive Plan Option exercised under the Option Agreement
containing the Reload Option feature. The Reload Options will be subject

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to the same restrictions and provisions of the Plan as the original 1998
Incentive Plan Option or 1997 Incentive Plan Option, except when specific
changes are set out in the Option Agreement.

2.22 "RESTRICTED STOCK" means Stock awarded or purchased
under a Restricted Stock Agreement entered into pursuant to this Plan, together
with (i) all rights, warranties or similar items attached or accruing thereto
or represented by the certificate representing the Stock and (ii) any stock or
securities into which or for which the Stock is thereafter converted or
exchanged. The terms and conditions of the Restricted Stock Agreement shall be
determined by the Board consistent with the terms of the Plan.

2.23 "RESTRICTED STOCK AGREEMENT" means an agreement
between the Company or any Affiliate and the Employee pursuant to which the
Employee receives a Stock Award subject to Article VI.

2.24 "RESTRICTED STOCK PURCHASE PRICE" means the purchase
price, if any, per share of Restricted Stock subject to an Award. The
Restricted Stock Purchase Price shall be determined by the Board. It may be
greater than or less than the Fair Market Value of the Stock on the date of the
Stock Award.

2.25 "STOCK" means the common stock of the Company, no par
value or, in the event that the outstanding shares of common stock are later
changed into or exchanged for a different class of stock or securities of the
Company or another corporation, that other stock or security.

2.26 "STOCK AWARD" means an award of Restricted Stock.

2.27 "10% STOCKHOLDER" means an individual who, at the
time the Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
Affiliate. An individual shall be considered as owning the stock owned,
directly or indirectly, by or for his brothers and sisters (whether by the
whole or half blood), spouse, ancestors, and lineal descendants; and stock
owned, directly or indirectly, by or for a corporation, partnership, estate, or
trust, shall be considered as being owned proportionately by or for its
stockholders, partners, or beneficiaries.

ARTICLE III

ELIGIBILITY

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<PAGE> 9
The individuals who shall be eligible to receive Incentive
Options, Nonqualified Options, and Stock Awards shall be those key employees of
the Company or any of its Affiliates as the Board shall determine from time to
time.

ARTICLE IV

GENERAL PROVISIONS RELATING TO OPTIONS AND STOCK AWARDS

4.1 AUTHORITY TO GRANT OPTIONS AND STOCK AWARDS. The
Board may grant to those key Employees of the Company or any of its Affiliates,
as it shall from time to time determine, Options or Stock Awards under the
terms and conditions of this Plan. Subject only to any applicable limitations
set out in this Plan, the number of shares of Stock to be covered by any Option
or Stock Award to be granted to an Employee shall be as determined by the
Board.

4.2 DEDICATED SHARES. The total number of shares of
Stock with respect to which 1998 Incentive Plan Options and Stock Awards may be
granted under the Plan shall be 700,000 shares. The shares may be treasury
shares or authorized but unissued shares. The number of shares stated in this
Section 4.2 shall be subject to adjustment in accordance with the provisions of
Section 4.5.

In the event that any outstanding Option or Stock Award shall
expire or terminate for any reason or any Option or Stock Award is surrendered,
the shares of Stock allocable to the unexercised portion of that Option or
Stock Award may again be subject to an Option or Stock Award under the Plan.
If Stock is used by the Employee pursuant to Section 5.6 of this Plan to pay
the exercise price of an Option, only the net number of shares of Stock issued
by the Company shall be considered utilized under this Plan. If shares of
Stock are withheld by the Company to pay tax withholding due from the Employee,
the number of such shares withheld shall not be considered utilized under this
Plan.

4.3 NON-TRANSFERABILITY. Options shall not be
transferable by the Employee otherwise than by will or under the laws of
descent and distribution, and shall be exercisable, during the Employee's
lifetime, only by him. Restricted Stock shall be purchased by and/or become
vested under a Restricted Stock Agreement during the Employee's lifetime, only
by him. Any attempt to transfer a Stock Award other than under the terms of
the Plan and the Restricted Stock Agreement shall terminate the Stock Award and
all rights of the Employee to that Restricted Stock. Notwithstanding any
provision in this Plan to the contrary, an Employee may transfer any
Nonqualified Option to an Immediate Family Member or an entity controlled by
the Employee or an Immediate Family Member, provided, however, no further
transfer shall be made except for a transfer back to such Employee or such
other transfer which may be approved by the President of the Company. For this
purpose "Immediate Family Member" means an

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<PAGE> 10
Employee's children, grandchildren or spouse, or a trust for the benefit of
such Immediate Family Members.

4.4 REQUIREMENTS OF LAW. The Company shall not be
required to sell or issue any Stock under any Option or Stock Award if issuing
that Stock would constitute or result in a violation by the Employee or the
Company of any provision of any law, statute, or regulation of any governmental
authority. Specifically, in connection with any applicable statute or
regulation relating to the registration of securities, upon exercise of any
Option or pursuant to any Stock Award, the Company shall not be required to
issue any Stock unless the Board has received evidence satisfactory to it to
the effect that the holder of that Option or Stock Award will not transfer the
Stock except in accordance with applicable law, including receipt of an opinion
of counsel satisfactory to the Company to the effect that any proposed transfer
complies with applicable law. The determination by the Board on this matter
shall be final, binding and conclusive. The Company may, but shall in no event
be obligated to, register any Stock covered by this Plan pursuant to applicable
securities laws of any country or any political subdivision. In the event the
Stock issuable on exercise of an Option or pursuant to a Stock Award is not
registered, the Company may imprint on the certificate evidencing the Stock any
legend that counsel for the Company considers necessary or advisable to comply
with applicable law. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option or vesting under
a Stock Award, or the issuance of shares under either of them, to comply with
any law or regulation of any governmental authority.

4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The
existence of outstanding Options or Stock Awards shall not affect in any way
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Stock or its rights, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

If the Company shall effect a subdivision or consolidation of
shares or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Employee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares
he would have received had he exercised his Option in full immediately prior to
the event requiring the adjustment; and (b) the number and class of shares of
Stock then reserved to be issued under the Plan shall be adjusted by
substituting for the total number and

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class of shares of Stock then reserved, that number and class of shares of
Stock that would have been received by the owner of an equal number of
outstanding shares of each class of Stock as the result of the event requiring
the adjustment.

If the Company is merged or consolidated with another
corporation, or after any other corporate transaction described in Section
424(a) of the Code, while unexercised Options remain outstanding under the
Plan, there shall be no acceleration of vesting of any outstanding Option
(except as may be provided for in an Option Agreement or except to the extent
the Board waives some or all of the limitations set out in or imposed under
this Plan or the individual Option Agreement) and after the effective date of
the merger or consolidation, or other transaction described in Section 424(a)
of the Code, as the case may be, each holder of an outstanding Option (both
vested and unvested) shall be entitled, at the option of the surviving
corporation, to (i) have his then existing Option assumed or have a new Option
substituted for the existing Option by the surviving corporation to the
transaction which is then employing him, or a parent or subsidiary of such
corporation, provided that (A) such assumption or substitution is on a basis
where the excess of the aggregate fair market value of the shares subject to
the Option immediately after the substitution or assumption over the aggregate
Option price of such shares is equal to the excess of the aggregate fair market
value of all shares subject to the Option immediately before such substitution
or assumption over the aggregate Option price of such shares, and (B) the
assumed right under such existing Option or the substituted rights under such
new Option as the case may be will have the same terms and conditions as the
rights under the existing Option assumed or substituted for, as the case may
be, or (ii) receive upon any exercise of his Option, in lieu of the number of
shares as to which the Option may be exercised as of the effective date of such
merger or consolidation, or other transaction described in Section 424(a) of
the Code, as the case may be, the securities, property and other assets,
including cash, to which the Optionee would have been entitled pursuant to the
merger or consolidation if at the effective time of such merger or
consolidation such optionee had been the holder of the number of shares of
Stock equal to the number of shares to which the Option may be exercised as of
the effective date of such merger or consolidation. In the alternative, the
Board may cancel all outstanding Options as of the effective date of any
merger, consolidation, liquidation, sale or other disposition, if (i) notice of
cancellation shall be given to each holder of an Option and (ii) each holder of
an Option shall have the right to exercise that Option in full (without regard
to any limitations set out in or imposed under this Plan or the Option
Agreement granting that Option) during a period set by the Board of Directors
preceding the effective date of the merger, consolidation, liquidation, sale or
other disposition.

After a merger of one or more corporations into the Company or
after a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Employee shall be entitled to
have his Restricted Stock appropriately adjusted based on the manner the Stock
was adjusted under the terms of the agreement of merger or consolidation.

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The issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options
or Stock Awards.

4.6 ELECTION UNDER SECTION 83(B) OF THE CODE. No
Employee shall exercise the election permitted under Section 83(b) of the Code
under this Plan without written approval of the Board.

ARTICLE V

OPTIONS

5.1 TYPE OF OPTION. The Board shall specify whether a
given option shall constitute an Incentive Option or a Nonqualified Option.
Options previously granted under the Corporate Plan, the 1996 ISO Plan and the
1997 Incentive Plan shall retain the designation as either an incentive stock
option that satisfies the requirements of Section 422 of the Code or as a
nonqualified stock option that does not satisfy the requirements of Section 422
of the Code.

5.2 OPTION PRICE. The price at which Stock may be
purchased under an Incentive Option shall not be less than the greater of: (a)
100% of the Fair Market Value of the shares of Stock on the date the Option is
granted or (b) the aggregate par value of the shares of Stock on the date the
Option is granted. The Board in its discretion may provide that the price at
which shares of Stock may be purchased under an Incentive Option shall be more
than 100% of Fair Market Value. In the case of any 10% Stockholder, the price
at which shares of Stock may be purchased under an Incentive Option shall not
be less than 110% of the Fair Market Value of the Stock on the date the
Incentive Option is granted.

The price at which shares of Stock may be purchased under a
Nonqualified Option may be less than the Fair Market Value of the shares of
Stock on the date the Option is granted. The Board in its discretion may
provide that the price at which shares of Stock may be purchased under a
Nonqualified Option shall be more than 100% of Fair Market Value.

5.3 DURATION OF OPTIONS. No Option shall be exercisable
after the expiration of 10 years from the date the Option is granted. A Reload
Option shall have a term which is no longer than the original term of the
underlying Option unless it is expressly provided otherwise in the Option
Agreement. In the case of a 10%

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<PAGE> 13
Stockholder, no Incentive Option shall be exercisable after the expiration of
five years from the date the Incentive Option is granted.

5.4 AMOUNT EXERCISABLE. Each Option is exercisable, in
whole or in part, in the manner and subject to the conditions the Board of
Directors, in its sole discretion, may provide in the Option Agreement, as long
as the Option is valid and outstanding.

To the extent that the aggregate Fair Market Value (determined
as of the time an Incentive Option is granted) of the Stock with respect to
which Incentive Options first become exercisable by the Employee during any
calendar year (under this Plan and any other incentive stock option plan(s) of
the Company or any Affiliate) exceeds $100,000, the Incentive Options shall be
treated as Nonqualified Options. In making this determination, Incentive
Options shall be taken into account in the order in which they were granted.
If an Incentive Option is not exercised within specified time limits prescribed
by the Code, it shall become a Nonqualified Option by operation of law.

Solely with respect to the 1997 Incentive Plan Options, unless
otherwise provided by the Board in a 1997 Incentive Plan Option Agreement, all
conditions and restrictions relating to a 1997 Incentive Plan Option, including
limitations on exercisability, risks of forfeiture and conditions and
restrictions requiring the continued performance of services or the achievement
of performance objectives with respect to the exercisability or settlement of
such 1997 Incentive Plan Option, shall immediately lapse upon a Change of
Control. Solely with respect to 1997 Incentive Plan Options, a Change of
Control shall be deemed to have occurred if any person, other than the Company
or an employee benefit plan of the Company, acquires directly or indirectly,
the beneficial ownership, as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended from time, of any voting security of the
Company and immediately after such acquisition, such person is directly or
directly the beneficial owner of voting securities representing 50% or more of
the total voting power of all of the then-outstanding voting securities of the
Company. In addition, all shares of Stock granted pursuant to the exercise of
the 1997 Incentive Plan Option shall be subject to the terms of any
shareholder's agreement entered into by the Company concurrent with, or prior
to the grant of any 1997 Incentive Plan Option. Furthermore, no fractional
shares of stock shall be issued or delivered pursuant to any 1997 Incentive
Plan Option. The Board shall determine whether cash or other Options or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional or any rights thereto shall be forfeited or otherwise
eliminated.

5.5 EXERCISE OF OPTIONS. Each Option shall be exercised
by the delivery of written notice to the Board setting forth the number of
shares of Stock with respect to which the Option is to be exercised, together
with: (a) cash, certified check, bank draft, or postal or express money order
payable to the order of the Company for an amount equal to the option price of
the shares, (b) Stock at its Fair Market Value on the

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<PAGE> 14
date of exercise, (c) an election to have shares of Stock, which otherwise
would be issued on exercise, withheld in payment of the exercise price and/or
to satisfy any income tax withholding obligation, (d) any combination of (a),
(b), or (c), and/or (e) any other form of payment which is acceptable to the
Board of Directors, and specifying the address to which the certificates for
the shares are to be mailed.

With respect to the exercise of Corporate Plan Options and
1996 ISO Plan Options, the Employee must pay the option price solely with cash.
With respect to 1997 Incentive Plan Options, the Board shall determine the time
or times at which a 1997 Incentive Plan Option may be exercised in whole or in
part, the methods by which such exercise price may be paid or deemed to be
paid, the form of such payment, including, without limitation, cash, Stock,
other options or awards granted under other Company plans or other property,
including notes or other contractual obligations of employees to make payment
on a deferred basis, such as through "cashless exercise" arrangements, to the
extent permitted by applicable law, and the methods by which Stock will be
delivered or deemed to be delivered to employees.

As promptly as practicable after receipt of written
notification and payment, the Company shall deliver to the Employee
certificates for the number of shares with respect to which the Option has been
exercised, issued in the Employee's name. If shares of Stock are used in
payment, the aggregate Fair Market Value of the shares of Stock tendered must
be equal to or less than the aggregate exercise price of the shares being
purchased upon exercise of the Option, and any difference must be paid by cash,
certified check, bank draft, or postal or express money order payable to the
order of the Company. Delivery of the shares shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the Employee, at the
address specified by the Employee.

Whenever an Option is exercised by exchanging shares of Stock
owned by the Employee, the Employee shall deliver to the Company certificates
registered in the name of the Employee representing a number of shares of Stock
legally and beneficially owned by the Employee, free of all liens, claims, and
encumbrances of every kind, accompanied by stock powers duly endorsed in blank
by the record holder of the shares represented by the certificates (with
signature guaranteed by a commercial bank or trust company or by a brokerage
firm having a membership on a registered national stock exchange). The
delivery of certificates upon the exercise of Options is subject to the
condition that the person exercising the Option provide the Company with the
information the Company might reasonably request pertaining to exercise, sale
or other disposition. The Board may provide that a legend or restriction be
printed on the certificate as the Board determines is necessary, in its
discretion, to comply with applicable laws.

5.6 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is
expressly provided otherwise in the Option Agreement, Options shall terminate
one day less than

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<PAGE> 15
three months after severance of employment of the Employee from the Company and
all Affiliates for any reason, with or without cause, other than death,
retirement under the then established rules of the Company, or severance for
disability. Whether authorized leave of absence or absence on military or
government service shall constitute severance of the employment of the Employee
shall be determined by the Board at that time.

In determining the employment relationship between the Company
and the Employee, employment by any Affiliate shall be considered employment by
the Company, as shall employment by a corporation issuing or assuming a stock
option in a transaction to which Section 424(a) of the Code applies, or by a
parent corporation or subsidiary corporation of the corporation issuing or
assuming a stock option (and for this purpose, the phrase "corporation issuing
or assuming a stock option" shall be substituted for the word "Company" in the
definitions of parent corporation and subsidiary corporation in Section 2.1,
and the parent-subsidiary relationship shall be determined at the time of the
corporate action described in Section 424(a) of the Code).

DEATH. If, before the expiration of an Option, the Employee,
whether in the employ of the Company or after he has retired or was severed for
disability, dies, the Option shall become fully vested and shall continue until
the earlier of the Option's expiration date or one year following the date of
his death, unless it is expressly provided otherwise in the Option Agreement.
After the death of the Employee, his executors, administrators or any persons
to whom his Option may be transferred by will or by the laws of descent and
distribution shall have the right, at any time prior to the Option's expiration
or termination, whichever is earlier, to exercise the Option in full unless it
is expressly provided otherwise in the Option Agreement.

RETIREMENT. Unless it is expressly provided otherwise in the
Option Agreement, before the expiration of an Incentive Option, the Employee
shall be retired in good standing from the employ of the Company under the then
established rules of the Company, the Incentive Option shall terminate on the
earlier of the Option's expiration date or one year after his retirement;
provided, if an Incentive Option is not exercised within specified time limits
prescribed by the Code, it shall become a Nonqualified Option by operation of
law.

Unless it is expressly provided otherwise in the Option
Agreement, if before the expiration of a Nonqualified Option, the Employee
shall be retired in good standing from the employ of the Company under the then
established rules of the Company, the Nonqualified Option shall terminate on
the earlier of the Nonqualified Option's expiration date or one year after his
retirement.

In the event of retirement, the Employee shall have the right
prior to the termination of the Option to exercise the Option, to the extent to
which he was entitled to exercise it immediately prior to his retirement,
unless it is expressly provided otherwise in the Option Agreement.

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<PAGE> 16
DISABILITY. If, before the expiration of an Option, the
Employee shall be severed from the employ of the Company for disability, the
Option shall terminate on the earlier of the Option's expiration date or one
year after the date he was severed because of disability, unless it is
expressly provided otherwise in the Option Agreement. In the event that the
Employee shall be severed from the employ of the Company for disability, the
Employee shall become fully vested in his Option and have the right prior to
the termination of the Option to exercise the Option in full unless it is
expressly provided otherwise in the Option Agreement. If an Incentive Option
is not exercised within specified time limits prescribed by the Code, it shall
become a Nonqualified Option by operation of law.

Notwithstanding the above, an Option may be amended by the
Board, with the consent of the Employee, to extend the termination date of the
Option, provided such extension shall not exceed a period of 10 years from the
date of the initial grant of the Option.

5.7 EXERCISE OF OPTIONS UNDER THE CORPORATE PLAN, THE
1996 ISO PLAN AND THE 1997 INCENTIVE PLAN.

(a) CORPORATE PLAN OPTION PROVISIONS. Notwithstanding
any other provision in this Plan, solely with respect to Corporate
Plan Options, upon the death of the optionee, while still employed by
Company, or upon the termination of the Optionee's employment with
Company, any Option exercisable on the date of death or termination
may be exercised by the Optionee or the Optionee's estate, as the case
may be, provided that such exercise occurs within both the remaining
option term of the Option and no later than 24 months after the date
of the Optionee's death, or the date of Optionee's termination of
employment with the Company, whichever occurs first.

(b) 1996 ISO PLAN. Solely with respect to Options
exercisable under the 1996 ISO Plan, upon the Employee's death while
still employed by the Company, any 1996 ISO Plan Option exercisable on
the date of death may be exercised by the Optionee's estate or by a
person who acquires the right to exercise such 1996 ISO by bequest or
inheritance by reason of the death of the Optionee, provided that such
exercise occurs within both the remaining option term of the 1996 ISO
Plan Option and six months after the Optionee's death. Except as
provided in the immediately preceding sentence, all 1996 ISO Plan
Options shall immediately terminate on the date of termination of the
Employee's employment with the Company.

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<PAGE> 17
5.8 RELOAD OPTIONS. From time to time, the Board may
grant Reload Options to Employees. The time of grant of a Reload Option shall
be the time the Employee surrenders the shares of Stock with respect to which
the Reload Option is granted. The Reload Option shall be for the number of
shares of Stock surrendered by the Employee as payment upon the exercise of the
previously granted Option. The Reload Option shall be subject to the following
restrictions: (a) the Reload Option shall be subject to the same restrictions
on exercise and other Plan rules that are imposed on the underlying Option
which contained the Reload Option feature; and (b) the Reload Option shall not
be exercisable until the expiration of any retention holding period imposed on
the disposition of any shares of Stock covered by the underlying Option which
contained the Reload Option Feature unless it is expressly provided otherwise
in the Option Agreement.

5.9 SUBSTITUTION OPTIONS. Options may be granted under
this Plan from time to time in substitution for stock options held by employees
of other corporations who are about to become employees of or affiliated with
the Company or any Affiliate as the result of a merger or consolidation of the
employing corporation with the Company or any Affiliate, or the acquisition by
the Company or any Affiliate of the assets of the employing corporation, or the
acquisition by the Company or any Affiliate of stock of the employing
corporation as the result of which it becomes an Affiliate of the Company. The
terms and conditions of the substitute Options granted may vary from the terms
and conditions set out in this Plan to the extent the Board, at the time of
grant, may deem appropriate to conform, in whole or in part, to the provisions
of the stock options in substitution for which they are granted.

5.10 NO RIGHTS AS STOCKHOLDER. No Employee shall have any
rights as a stockholder with respect to Stock covered by his Option until the
date a stock certificate is issued for the Stock.

ARTICLE VI

STOCK AWARDS

6.1 STOCK AWARDS. The Board may issue shares of
Restricted Stock to an eligible employee subject to the terms of a Restricted
Stock Agreement. The Restricted Stock may be issued for no payment by the
Employee or for a payment below the Fair Market Value on the date of grant.
Restricted Stock shall be subject to restrictions as to sale, transfer,
alienation, pledge or other encumbrance and generally will be subject to
vesting over a period of time specified in the Restricted Stock Agreement. The
Board shall determine the period of vesting, the number of shares, the price,
if any, of Stock included in a Stock Award, and the other terms and provisions
which are included in a Restricted Stock Agreement. In the discretion of the
Board, a

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<PAGE> 18
Restricted Stock Award may be made as a grant of Restricted Stock or as a right
to receive stock (or their cash equivalent or a combination of both) in the
future.

6.2 RESTRICTIONS. Restricted Stock shall be subject to
the terms and conditions as determined by the Board, including without
limitation any or all of the following:

(a) a prohibition against the sale, transfer, alienation,
pledge or other encumbrance of the shares of Restricted Stock, such
prohibition to lapse at such time or times as the Board shall
determine (whether in annual or more frequent installments, at the
time of the death, disability or retirement of the holder of such
shares, or otherwise);

(b) a requirement that the holder of shares of Restricted
Stock forfeit, or in the case of shares sold to an Employee, resell
back to the Company at his cost, all or a part of such shares in the
event of termination of the holder's employment during any period in
which the shares remain subject to restrictions;

(c) a prohibition against employment of the holder of
Restricted Stock by any competitor of the Company or its Affiliates,
or against such holder's dissemination of any secret or confidential
information belonging to the Company or an Affiliate;

(d) unless stated otherwise in the Restricted Stock
Agreement, (i) if restrictions remain at the time of severance of
employment with the Company and all Affiliates, other than for reason
of disability or death, the Restricted Stock shall be forfeited; and
(ii) if severance of employment is by reason of disability or death,
the restrictions on the shares shall lapse and the Employee or his
heirs or estate shall be 100% vested in the shares subject to the
Restricted Stock Agreement.

Notwithstanding (a) above, an Employee may transfer Restricted Stock
to an Immediate Family Member (as defined in Section 4.3) or an entity
controlled by the Employee or an Immediate Family Member provided, however, no
further transfer shall be made except for a transfer back to such Employee or
such other transfer which may be approved by the President of the Company. For
this purpose, "Immediate Family Member" means an Employee's children,
grandchildren or spouse, or a trust for the benefit of such Immediate Family
Member.

6.3 STOCK CERTIFICATE. Shares of Restricted Stock shall
be registered in the name of the Employee receiving the Stock Award and
deposited, together with a stock power endorsed in blank, with the Company.
Each such certificate shall bear a legend in substantially the following form:

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<PAGE> 19
The transferability of this certificate and the shares of Stock
represented by it is restricted by and subject to the terms and
conditions (including conditions of forfeiture) contained in the
BindView Development Corporation Omnibus Incentive Plan, and an
agreement entered into between the registered owner and the Company,
including any shareholders agreement. A copy of the Plan and
agreement is on file in the office of the Secretary of the Company.

6.4 RIGHTS AS STOCKHOLDER. Subject to the terms and
conditions of the Plan, each Employee receiving a certificate for Restricted
Stock shall have all the rights of a stockholder with respect to the shares of
Stock included in the Stock Award during any period in which such shares are
subject to forfeiture and restrictions on transfer, including without
limitation, the right to vote such shares. Dividends paid with respect to
shares of Restricted Stock in cash or property other than stock in the Company
or rights to acquire stock in the Company shall be paid to the Employee
currently. Dividends paid in stock in the Company or rights to acquire stock
in the Company shall be added to and become a part of the Restricted Stock.

6.5 LAPSE OF RESTRICTIONS. At the end of the time period
during which any shares of Restricted Stock are subject to forfeiture and
restrictions on sale, transfer, alienation, pledge, or other encumbrance, such
shares shall vest and will be delivered in a certificate, free of all
restrictions, to the Employee or to the Employee's legal representative,
beneficiary or heir; provided the certificate shall bear such legend, if any,
as the Board determines is reasonably required by applicable law. By accepting
a Stock Award and executing a Restricted Stock Agreement, the Employee agrees
to remit when due any federal and state income and employment taxes required to
be withheld.

6.6 RESTRICTION PERIOD. No Stock Award may provide for
restrictions continuing beyond 10 years from the date of the Stock Award.

ARTICLE VII

ADMINISTRATION

This Plan shall be administered by the Board. All questions
of interpretation and application of the Plan, Options or Stock Awards shall be
subject to the determination of the Board. A majority of the members of the
Board shall constitute a quorum. All determinations of the Board shall be made
by a majority of its members. Any decision or determination reduced to writing
and signed by a majority of the members shall be as effective as if it had been
made by a majority vote at a meeting properly called and held. This Plan shall
be administered in such a manner as to permit the Options granted under it
which are designated to be Incentive Options to qualify as Incentive Options.
In carrying out its authority under this Plan, the Board shall have

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<PAGE> 20
full and final authority and discretion, including but not limited to the
following rights, powers and authorities, to:

(a) determine the Employees to whom and the time or times
at which Options or Stock Awards will be made,

(b) determine the number of shares and the purchase price
of Stock covered in each Option or Stock Award, subject to the terms
of the Plan,

(d) accelerate the time at which any outstanding Option
may be exercised,

(e) define the effect, if any, on an Option or Stock
Award of the death, disability, retirement, or termination of
employment of the Employee,

(f) prescribe, amend and rescind rules and regulations
relating to administration of the Plan, and

(g) make all other determinations and take all other
actions deemed necessary, appropriate, or advisable for the proper
administration of this Plan.

The actions of the Board in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive
and binding on all parties.

ARTICLE VIII

AMENDMENT OR TERMINATION OF PLAN

The Board of Directors of the Company may amend, terminate or
suspend this Plan at any time, in its sole and absolute discretion; provided,
however, that to the extent required to qualify this Plan under Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act of 1934, as
amended, no amendment that would (a) materially increase the number of shares
of Stock that may be issued under this Plan, (b) materially modify the
requirements as to eligibility for participation in this Plan, or (c) otherwise
materially increase the benefits accruing to participants under this Plan,
shall be made without the approval of the Company's stockholders; provided
further,

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<PAGE> 21
however, that to the extent required to maintain the status of any Incentive
Option under the Code, no amendment that would (a) change the aggregate number
of shares of Stock which may be issued under Incentive Options, (b) change the
class of employees eligible to receive Incentive Options, or (c) decrease the
Option price for Incentive Options below the Fair Market Value of the Stock at
the time it is granted, shall be made without the approval of the Company's
stockholders. Subject to the preceding sentence, the Board shall have the
power to make any changes in the Plan and in the regulations and administrative
provisions under it or in any outstanding Incentive Option as in the opinion of
counsel for the Company may be necessary or appropriate from time to time to
enable any Incentive Option granted under this Plan to continue to qualify as
an incentive stock option or such other stock option as may be defined under
the Code so as to receive preferential federal income tax treatment.

ARTICLE IX

MISCELLANEOUS

9.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall
be set aside nor shall a trust fund of any kind be established to secure the
rights of any Employee under this Plan. All Employees shall at all times rely
solely upon the general credit of the Company for the payment of any benefit
which becomes payable under this Plan.

9.2 NO EMPLOYMENT OBLIGATION. The granting of any Option
or Stock Award shall not constitute an employment contract, express or implied,
nor impose upon the Company or any Affiliate any obligation to employ or
continue to employ any Employee. The right of the Company or any Affiliate to
terminate the employment of any person shall not be diminished or affected by
reason of the fact that an Option or Stock Award has been granted to him.

9.3 FORFEITURE. Notwithstanding any other provisions of
this Plan, if the Board finds by a majority vote after full consideration of
the facts that the Employee, before or after termination of his employment with
the Company or an Affiliate for any reason (a) committed or engaged in fraud,
embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the
Company or Affiliate, or disclosed trade secrets of the Company or an
Affiliate, or (b) participated, engaged in or had a material, financial or
other interest, whether as an employee, officer, director, consultant,
contractor, stockholder, owner, or otherwise, in any commercial endeavor which
is competitive with the business of the Company or an Affiliate without the
written consent of the Company or Affiliate, the Employee shall forfeit all
outstanding Options and all outstanding Restricted Stock, and including all
exercised Options and other situations pursuant to which the Company has not
yet delivered a stock certificate. Clause (b) shall not be

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<PAGE> 22
deemed to have been violated solely by reason of the Employee's ownership of
stock or securities of any publicly owned corporation, if that ownership does
not result in effective control of the corporation.

The decision of the Board as to the cause of the Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of
the Employee's competitive activity shall be final. No decision of the Board,
however, shall affect the finality of the discharge of the Employee by the
Company or an Affiliate in any manner.

9.4 TAX WITHHOLDING. The Company or any Affiliate shall
be entitled to deduct from other compensation payable to each Employee any sums
required by federal, state, or local tax law to be withheld with respect to the
grant or exercise of an Option or lapse of restrictions on Restricted Stock.
In the alternative, the Company may require the Employee (or other person
exercising the Option or receiving the Restricted Stock) to pay the sum
directly to the employer corporation. If the Employee (or other person
exercising the Option or receiving the Restricted Stock) is required to pay the
sum directly, payment in cash or by check of such sums for taxes shall be
delivered within 10 days after the date of exercise or lapse of restrictions.
The Company shall have no obligation upon exercise of any Option or lapse of
restrictions on Restricted Stock until payment has been received, unless
withholding (or offset against a cash payment) as of or prior to the date of
exercise or lapse of restrictions is sufficient to cover all sums due with
respect to that exercise. The Company and its Affiliates shall not be obligated
to advise an Employee of the existence of the tax or the amount which the
employer corporation will be required to withhold.

9.5 WRITTEN AGREEMENT. Each Option and Stock Award shall
be embodied in a written Option Agreement or Restricted Stock Agreement which
shall be subject to the terms and conditions of this Plan and shall be signed
by the Employee and by a member of the Board on behalf of the Board and the
Company or an executive officer of the Company other than the Employee on
behalf of the Company. The Option Agreement or Restricted Stock Agreement may
contain any other provisions that the Board in its discretion shall deem
advisable which are not inconsistent with the terms of this Plan. This Plan
and all shares of stock or stock equivalents granted pursuant hereto shall be
subject to the terms of any shareholders agreement entered into by the Company
concurrent, or prior to, the grant of any Option hereunder.

9.6 INDEMNIFICATION OF THE BOARD AND THE BOARD OF
DIRECTORS. With respect to administration of this Plan, the Company shall
indemnify each present and future member of the Board and the Board of
Directors against, and each member of the Board and the Board of Directors
shall be entitled without further act on his part to indemnity from the Company
for, all expenses (including attorney's fees, the amount of judgments and the
amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by him in connection with or arising out of any action, suit, or

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<PAGE> 23
proceeding in which he may be involved by reason of his being or having been a
member of the Board and/or the Board of Directors, whether or not he continues
to be a member of the Board and/or the Board of Directors at the time of
incurring the expenses -- including, without limitation, matters as to which he
shall be finally adjudged in any action, suit or proceeding to have been found
to have been negligent in the performance of his duty as a member of the Board
or the Board of Directors. However, this indemnity shall not include any
expenses incurred by any member of the Board and/or the Board of Directors in
respect of matters as to which he shall be finally adjudged in any action, suit
or proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his duty as a member of the Board and the Board of
Directors. In addition, no right of indemnification under this Plan shall be
available to or enforceable by any member of the Board and the Board of
Directors unless, within 60 days after institution of any action, suit or
proceeding, he shall have offered the Company, in writing, the opportunity to
handle and defend same at its own expense. This right of indemnification shall
inure to the benefit of the heirs, executors or administrators of each member
of the Board and the Board of Directors and shall be in addition to all other
rights to which a member of the Board and the Board of Directors may be
entitled as a matter of law, contract, or otherwise.

9.7 GENDER. If the context requires, words of one gender
when used in this Plan shall include the others and words used in the singular
or plural shall include the other.

9.8 HEADINGS. Headings of Articles and Sections are
included for convenience of reference only and do not constitute part of the
Plan and shall not be used in construing the terms of the Plan.

9.9 OTHER COMPENSATION PLANS. The adoption of this Plan
shall not affect any other stock option, incentive or other compensation or
benefit plans in effect for the Company or any Affiliate, nor shall the Plan
preclude the Company from establishing any other forms of incentive or other
compensation for employees of the Company or any Affiliate.

9.10 OTHER OPTIONS OR AWARDS. The grant of an Option or
Stock Award shall not confer upon the Employee the right to receive any future
or other Options or Stock Awards under this Plan, whether or not Options or
Stock Awards may be granted to similarly situated Employees, or the right to
receive future Options or Stock Awards upon the same terms or conditions as
previously granted.

9.11 GOVERNING LAW. The provisions of this Plan shall be
construed, administered, and governed under the laws of the State of Texas.

9.12 NO MODIFICATION, EXTENSION, OR RENEWAL OF CORPORATE
PLAN OPTIONS, 1996 ISO PLAN OPTIONS, AND 1997 INCENTIVE PLAN OPTIONS.

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<PAGE> 24
Notwithstanding any provision in this Plan to the contrary, no provision of
this Plan is intended to modify, extend or renew any Corporate Plan Option,
1996 ISO Plan Option and 1997 Incentive Plan Option. Any provision in this
Plan that is contrary to a provision in the Corporate Plan Option, 1996 ISO
Plan Option and 1997 Incentive Plan Option that would create a modification,
extension or renewal of such option is hereby incorporated into this Plan. All
terms, conditions and limitations, if any, that are set forth in any previously
granted option agreement shall remain in full force and effect under the terms
of the Plan pursuant to which it was issued.

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<PAGE> 1
EXHIBIT 10.5

BINDVIEW DEVELOPMENT CORPORATION

1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

<PAGE> 2

BINDVIEW DEVELOPMENT CORPORATION

1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
Page
----
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Effective Date of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
5. Grant of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
6. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
7. Option Grant Size and Grant Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
8. Option Price; Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
9. Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
10. Amount Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
11. Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
12. Non-Transferability of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
13. Termination of Directorship of Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
14. Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
15. No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
16. No Obligation to Retain Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
17. Changes in the Company's Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
18. Termination and Amendment of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
19. Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
20. Indemnification of Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
21. Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
22. Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
23. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
24. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

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<PAGE> 3
BINDVIEW DEVELOPMENT CORPORATION

1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

1. PURPOSE. The BindView Development Corporation 1998
Non-Employee Director Stock Option Plan (the "Plan") of BindView Development
Corporation (the "Company") is for the benefit of members of the Board of
Directors of the Company who, at the time of their service, are not employees
of the Company or any of its affiliates, by providing them an opportunity to
become owners of the Common Stock, no par value, of the Company (the "Stock"),
thereby advancing the best interests of the Company by increasing their
proprietary interest in the success of the Company and encouraging them to
continue in their present capacity.

2. EFFECTIVE DATE OF PLAN. The Plan is effective
________________, 1998, if within one year of that date it shall have been
approved by the holders of at least a majority of the outstanding shares of
voting stock of the Company voting in person or by proxy at a duly held
shareholders' meeting, or if the provisions of the corporate charter, bylaws or
applicable state law prescribes a greater degree of shareholder approval for
this action, the approval by the holders of that percentage, at a duly held
meeting of shareholders, or in either case by a consent in lieu of a meeting if
permitted by the corporate charter, bylaws and applicable law.

3. ADMINISTRATION. The Plan shall be administered by the Board
of Directors of the Company (the "Board"). Subject to the terms of the Plan,
the Board shall have the power to construe the provisions of the Plan, Options,
and Stock issued hereunder, to determine all questions arising hereunder, and
to adopt and amend such rules and regulations for administering the Plan as the
Board deems desirable.

4. DEDICATED SHARES. The total number of shares of Stock with
respect to which initial grants (collectively, the "Options") may be granted
under this Plan shall not exceed, in the aggregate, 100,000 shares; provided,
that the class and aggregate number of shares of Stock which may be granted
hereunder shall be subject to adjustment in accordance with the provisions of
Paragraph 17. The shares of Stock may be treasury shares or authorized but
unissued shares of Stock. In the event that any outstanding Option shall
expire or is terminated or canceled for any reason, the shares of Stock
allocable to the unexercised portion of that Option may again be subject to an
Option or Options under the Plan.

5. GRANT OF OPTIONS. All Options granted under the Plan shall be
Nonqualified Options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended. No options shall
be granted under the Plan subsequent to _____________, 200___.

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<PAGE> 4
6. ELIGIBILITY. The individuals who shall be eligible to receive
Options under the Plan shall be each member of the Board who is not an employee
of the Company or any affiliate of the Company ("Eligible Director").

7. OPTION GRANT SIZE AND GRANT DATES.

On the day the Eligible Director is first elected or appointed to be a
director (whichever is applicable), the Eligible Director shall be granted an
Option to purchase 20,000 shares of stock on the terms and conditions set forth
herein. Notwithstanding the provisions of Section 17, the number of shares
which may subsequently be awarded pursuant to this Section 7 shall not increase
but may be decreased if appropriate under Section 17. If service of an
Eligible Director who previously received an initial grant terminates and the
Director is subsequently elected or appointed to the Board, that Director shall
not be eligible to receive a second grant.

If the General Counsel of the Company determines, in his sole
discretion, that the Company is in possession of material, nonpublic
information about the Company or any of its subsidiaries, he may suspend
granting of the initial grant to each Eligible Director until the second
trading day after public dissemination of that information, and the
determination by the General Counsel that issuance of the Options is then
appropriate.

8. OPTION PRICE; FAIR MARKET VALUE. The price at which shares of
Stock may be purchased by each Eligible Director (the "Optionee") pursuant to
his initial grant, shall be 100% of the "Fair Market Value" of the shares of
Stock on the date of grant of the initial grant.

For all purposes of this Plan, the "Fair Market Value" of the Stock as
of any date means (a) the average of the high and low sale prices of the Stock
on that date on the principal securities exchange on which the Stock is listed;
or (b) if the Stock is not listed on a securities exchange, the average of the
high and low sale prices of the Stock on that date as reported on the NASDAQ
National Market System; or (c) if the Stock is not listed on the NASDAQ
National Market System, the average of the high and low bid quotations for the
Stock on that date as reported by the National Quotation Bureau Incorporated;
(d) for any Options issued prior to the initial public offering of the Stock,
the initial public offering price; or (e) if none of the foregoing is
applicable, the average between the closing bid and ask prices per share of
stock on the last preceding date on which those prices were reported or that
amount as determined by the Board.

9. DURATION OF OPTIONS. The term of each Option shall be ten
years from the date of grant. No Option shall be exercisable after the
expiration of ten years from the date the Option is granted.

10. AMOUNT EXERCISABLE. Each Option hereunder shall become
exercisable on a cumulative basis in 20% increments on and after each annual
anniversary of the

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<PAGE> 5
grant of the Option. However, upon a Change of Control, each Option shall
become immediately exercisable. For this purpose, a Change of Control means
(i) the acquisition by any entity or group of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of
fifty percent (50%) or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors, (ii) the approval by the shareholders of the Company of
any reorganization, merger or consolidation, or sale or other disposition of
all or substantially all of the assets of the Company, or (iii) the approval by
the shareholders of the Company of a complete liquidation or dissolution of the
Company.

11. EXERCISE OF OPTIONS. Options shall be exercised by the
delivery of written notice to the Company setting forth the number of shares
with respect to which the Option is to be exercised, together with: (a) cash,
certified check, bank draft, or postal or express money order payable to the
order of the Company for an amount equal to the option price of the shares, (b)
Stock at its Fair Market Value on the date of exercise, (c) an election to have
shares of Stock, which otherwise would be issued on exercise, withheld in
payment of the exercise price, (d) any combination of (a), (b), or (c), and/or
(e) any other form which is acceptable to the Board, and specifying the address
to which the certificates for the shares are to be mailed. As promptly as
practicable after receipt of written notification and payment, the Company
shall deliver to the Eligible Director certificates for the number of shares
with respect to which the Option has been exercised, issued in the Eligible
Director's name. If shares of Stock are used in payment, the Fair Market Value
of the shares of Stock tendered must be less than the option price of the
shares being purchased, and the difference must be paid by check. Delivery
shall be deemed effected for all purposes when a stock transfer agent of the
Company shall have deposited the certificates in the United States mail,
addressed to the Eligible Director, at the address specified by the Eligible
Director.

Whenever an Option is exercised by exchanging shares of Stock owned by
the Optionee, the Optionee shall deliver to the Company certificates registered
in the name of the Optionee representing a number of shares of Stock legally
and beneficially owned by the Optionee, free of all liens, claims, and
encumbrances of every kind, accompanied by stock powers duly endorsed in blank
by the record holder of the shares represented by the certificates, (with
signature guaranteed by a commercial bank or trust company or by a brokerage
firm having a membership on a registered national stock exchange). The
delivery of certificates upon the exercise of Options is subject to the
condition that the person exercising the Option provide the Company with the
information the Company might reasonably request pertaining to exercise, sale
or other disposition.

12. NON-TRANSFERABILITY OF OPTIONS. Options shall not be
transferable by the Optionee other than by will or under the laws of descent
and distribution, and shall be exercisable, during the Optionee's lifetime,
only by him. Notwithstanding any provision in this Plan to the contrary, an
Eligible Director may transfer an Option to an

-3-
<PAGE> 6
Immediate Family Member or an entity controlled by an Eligible Director or an
Immediate Family Member, provided, however, no further transfer shall be made
except by operation of law or a transfer back to such Eligible Director or such
other transfer which may be approved by the Board. For this purpose "Immediate
Family Member" means an Eligible Director's children, grandchildren or spouse,
or a trust for the benefit of such Immediate Family Members.

13. TERMINATION OF DIRECTORSHIP OF OPTIONEE. If, before the date
of expiration of the Option, the Optionee shall cease to be a director of the
Company, the Option shall terminate on the earlier of the date of expiration or
90 days after the date of ceasing to serve as a director. In this event, the
Optionee shall have the right, prior to the termination of the Option, to
exercise the Option if he was entitled to exercise immediately prior to ceasing
to serve as a director.

Upon the death or disability of the Optionee while serving as a
director, his options shall become fully vested and, in the case of death his
executors, administrators, or any person or persons to whom his Option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to the earlier of the date of expiration of the Option
or 12 months following the date of his death, to exercise the Option, in whole
or in part.

14. REQUIREMENTS OF LAW. The Company shall not be required to
sell or issue any Stock under any Option if issuing that Stock would constitute
or result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Company has received evidence
satisfactory to it to the effect that the holder of that Option will not
transfer the Stock except in accordance with applicable law, including receipt
of an opinion of counsel satisfactory to the Company to the effect that any
proposed transfer complies with applicable law. The determination by the
Company on this matter shall be final, binding and conclusive. The Company may,
but shall in no event be obligated to, register any Stock covered by this Plan
pursuant to applicable securities laws of any country or any political
subdivision. In the event the Stock issuable on exercise of an Option is not
registered, the Company may imprint on the certificate evidencing the Stock any
legend that counsel for the Company considers necessary or advisable to comply
with applicable law. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option, or the issuance
of shares under it, to comply with any law or regulation of any governmental
authority.

15. NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights
as a stockholder with respect to Stock covered by any Option until the date a
stock certificate is issued for the Stock, and, except as otherwise provided in
Paragraph 17 hereof, no

-4-
<PAGE> 7
adjustment for dividends, or otherwise, shall be made if the record date
thereof is prior to the date of issuance of such certificate.

16. NO OBLIGATION TO RETAIN OPTIONEE. The granting of any Option
shall not impose upon the Company or its stockholders any obligation to retain
or continue to retain any Optionee or nominate any Optionee for election to
continue in his capacity as a director of the Company. The right of the
Company, the Board of Directors, and the Stockholders to terminate the service
of any Optionee as a director shall not be diminished or affected by reason of
the fact that one or more Options have been or would be granted to him.

17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.

If the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares
he would have received had he exercised his Option in full immediately prior to
the event requiring the adjustment; and (b) the number and class of shares of
Stock with respect to which Options may be granted under the Plan shall be
adjusted by substituting for the total number and class of shares of Stock then
available for grant, that number and class of shares of Stock that would have
been received by the owner of an equal number of outstanding shares of each
class of Stock as the result of the event requiring the adjustment.

-5-
<PAGE> 8
(both vested and unvested) shall be entitled, at the option of the surviving
corporation, to (i) have his then existing Option assumed or have a new Option
substituted for the existing Option by the surviving corporation to the
transaction which is then employing him, or a parent or subsidiary of such
corporation, provided that (A) such assumption or substitution is on a basis
where the excess of the aggregate fair market value of the shares subject to
the Option immediately after the substitution or assumption over the aggregate
Option price of such shares is equal to the excess of the aggregate fair market
value of all shares subject to the Option immediately before such substitution
or assumption over the aggregate Option price of such shares, and (B) the
assumed right under such existing Option or the substituted rights under such
new Option as the case may be will have the same terms and conditions as the
rights under the existing Option assumed or substituted for, as the case may
be, or (ii) receive upon any exercise of his Option, in lieu of the number of
shares as to which the Option may be exercised as of the effective date of such
merger or consolidation, or other transaction described in Section 424(a) of
the Code, as the case may be, the securities, property and other assets,
including cash, to which the Optionee would have been entitled pursuant to the
merger or consolidation if at the effective time of such merger or
consolidation such optionee had been the holder of the number of shares of
Stock equal to the number of shares to which the Option may be exercised as of
the effective date of such merger or consolidation. In the alternative, the
Board may cancel all outstanding Options as of the effective date of any
merger, consolidation, liquidation, sale or other disposition, if (i) notice of
cancellation shall be given to each holder of an Option and (ii) each holder of
an Option shall have the right to exercise that Option in full (without regard
to any limitations set out in or imposed under this Plan or the Option
Agreement granting that Option) during a period set by the Board of Directors
preceding the effective date of the merger, consolidation, liquidation, sale or
other disposition.

The issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of it shall be made with respect to, the number,
class, or price of shares of Stock then subject to outstanding Options.

18. TERMINATION AND AMENDMENT OF PLAN. The Board of Directors of
the Company may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, to the extent required to qualify
the Plan under Rule 16b-3 promulgated under Section 16 of the Securities
Exchange Act of 1934, as amended, no amendment shall be made more than once
every six months that would change the amount, price or timing of the initial
grants, other than to comport with changes in the Internal Revenue Code of
1986, as amended, the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder; and provided, further, to the extent
required to qualify the Plan under Rule 16b-3, no amendment that would (a)
materially increase the number of shares of the Stock that may be issued

-6-
<PAGE> 9
under the Plan, (b) materially modify the requirements as to eligibility for
participation in the Plan, or (c) otherwise materially increase the benefits
accruing to participants under the Plan, shall be made without the approval of
the Company's stockholders.

19. WRITTEN AGREEMENT. Each Option granted hereunder shall be
embodied in a written agreement, which shall be subject to the terms and
conditions of this Plan and shall be signed by the Optionee and by the Chairman
of the Board, the Vice Chairman, the President or any Vice President of the
Company for and in the name and on behalf of the Company.

20. INDEMNIFICATION OF BOARD. With respect to administration of
the Plan, the Company shall indemnify each present and future member of the
Board of Directors against, and each member of the Board of Directors shall be
entitled without further act on his part to indemnity from the Company for, all
expenses (including the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Board of
Directors, whether or not he continues to be a member of the Board of Directors
at the time of incurring the expenses. However, this indemnity shall not
include any expenses incurred by any member of the Board of Directors (a) in
respect of matters as to which he shall be finally adjudged in any action, suit
or proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his duty as a member of the Board of Directors, or (b) in
respect of any matter in which any settlement is effected, to an amount in
excess of the amount approved by the Company on the advice of its legal
counsel. In addition, no right of indemnification under this Plan shall be
available to or enforceable by any member of the Board of Directors unless,
within 60 days after institution of any action, suit or proceeding, he shall
have offered the Company, in writing, the opportunity to handle and defend same
at its own expense. This right of indemnification shall inure to the benefit
of the heirs, executors or administrators of each member of the Board of
Directors and shall be in addition to all other rights to which a member of the
Board of Directors may be entitled as a matter of law, contract, or otherwise.

21. FORFEITURES. Notwithstanding any other provision of this
Plan, if, before or after termination of the Optionee's capacity as a director
of the Company, there is an adjudication by a court of competent jurisdiction
that the Optionee committed fraud, embezzlement, theft, commission of felony,
or proven dishonesty in the course of his advisory relationship to the Company
and its affiliates which conduct materially damaged the Company or its
affiliates, or disclosed trade secrets of the Company or its affiliates, then
any outstanding options which have not been exercised by Optionee shall be
forfeited. In order to provide the Company with an opportunity to enforce this
Section, an Option may not be exercised if a lawsuit alleging that an action
described in

-7-
<PAGE> 10
the preceding sentence has taken place until a final resolution of the lawsuit
favorable to the Optionee.

22. GENDER. If the context requires, words of one gender when
used in this Plan shall include the others and words used in the singular or
plural shall include the other.

23. HEADINGS. Headings are included for convenience of reference
only and do not constitute part of the Plan and shall not be used in construing
the terms of the Plan.

24. GOVERNING LAW. The provisions of this Plan shall be
construed, administered, and governed under the laws of the State of Texas.

-8-

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,203
<SECURITIES> 0
<RECEIVABLES> 4,911
<ALLOWANCES> (195)
<INVENTORY> 0
<CURRENT-ASSETS> 15,082
<PP&E> 2,880
<DEPRECIATION> 1,510
<TOTAL-ASSETS> 16,509
<CURRENT-LIABILITIES> 4,259
<BONDS> 0
0
25
<COMMON> 1
<OTHER-SE> 12,225
<TOTAL-LIABILITY-AND-EQUITY> 16,509
<SALES> 17,821
<TOTAL-REVENUES> 20,838
<CGS> 644
<TOTAL-COSTS> 1,268
<OTHER-EXPENSES> 31,490
<LOSS-PROVISION> 259
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,178)
<INCOME-TAX> (3,150)
<INCOME-CONTINUING> (8,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,028)
<EPS-PRIMARY> (.85)
<EPS-DILUTED> (.85)

</TABLE>