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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGEACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO __________
COMMISSION FILE NUMBER 000-24677
BINDVIEW DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0306721
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5151 SAN FELIPE, 22nd FLOOR, HOUSTON, TX 77056
(Address of principal executive offices) (Zip code)
(713) 561-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares of the registrant's Common Stock, no par value,
outstanding as of June 30, 1999, was 23,040,051
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BINDVIEW DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
1999 (UNAUDITED) 1998
---------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 43,078 $ 48,010
Short-term investments 13,755 10,187
Accounts receivable, net 7,594 5,711
Deferred tax asset 5,513 3,245
Other current assets 821 1,676
--------- ----------
Total current assets 70,761 68,829
Property and equipment, net 8,434 5,342
Purchased software and related assets, net 1,275 1,374
Long-term investments 4,818 --
Other assets 450 492
--------- ----------
Total assets $ 85,738 $ 76,037
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,782 $ 1,954
Accrued liabilities 2,302 1,903
Accrued compensation 983 984
Deferred revenue 6,735 4,994
--------- ----------
Total current liabilities 12,802 9,835
-------- ----------
Long-term liabilities:
Convertible debentures -- 7,572
Other long-term liabilities -- 94
--------- ----------
Total long-term liabilities -- 7,666
--------- ----------
Shareholders' equity:
Convertible preferred stock, $0.025 par
value, 520 shares authorized, 0 and 7 shares
issued and outstanding, respectively -- --
Common stock, no par value, 100,000 shares
authorized, 23,040 and 21,103 shares issued
and outstanding, respectively 1 1
Additional paid-in capital 83,150 65,675
Common stock to be issued, 175 shares -- 3,352
Accumulated deficit (10,171) (10,532)
Cumulative other comprehensive income (44) 40
---------- ----------
Total shareholders' equity 72,936 58,536
--------- ----------
Total liabilities and shareholders' equity $ 85,738 $ 76,037
========= ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
2
<PAGE> 3
BINDVIEW DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Licenses $ 10,775 $ 6,219 $ 19,090 $ 10,603
Services 4,244 1,774 7,814 3,230
--------- --------- --------- ---------
Total revenues 15,019 7,993 26,904 13,833
--------- --------- --------- ---------
Cost of revenues:
Cost of licenses 337 254 588 462
Cost of services 514 226 955 441
--------- --------- --------- ---------
Total cost of revenues 851 480 1,543 903
--------- --------- --------- ---------
Gross profit 14,168 7,513 25,361 12,930
--------- --------- --------- ---------
Costs and expenses:
Sales and Marketing 6,229 4,135 11,564 7,306
Research and Development 3,980 2,743 7,400 4,675
General and Administrative 1,487 926 2,763 1,835
Transaction and Restructuring 238 -- 2,524 --
--------- --------- --------- ---------
Operating income (loss) 2,234 (291) 1,110 (886)
Other income, net 728 81 1,345 128
--------- --------- --------- ---------
Income (loss) before income tax provision 2,962 (210) 2,455 (758)
Provision for income tax 1,037 332 2,094 454
--------- --------- --------- ---------
Net income (loss) 1,925 (542) 361 (1,212)
Other comprehensive income, net of tax:
Loss from foreign currency translation (8) -- (84) --
---------- --------- ---------- ---------
Comprehensive income (loss) $ 1,917 $ (542) $ 277 $ (1,212)
========= ========== ========= ==========
Earnings (loss) per common share:
Basic $ 0.08 $ (0.06) $ 0.02 $ (0.14)
Diluted $ 0.08 $ (0.06) $ 0.01 $ (0.14)
Shares used in computing earnings
per common share:
Basic 22,691 8,949 22,101 8,891
Diluted 25,021 8,949 24,704 8,891
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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BINDVIEW DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 361 $ (1,212)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization expense 1,338 446
Increase in provision for bad debts 170 --
Deferred income taxes 2,147 (100)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (2,053) 1,517
Decrease (increase) in other current assets 855 (236)
Increase in accounts payable 828 44
Increase in accrued liabilities 398 226
Increase in deferred revenues 1,741 1,608
---------- ---------
Net cash provided by operating activities 5,785 2,293
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment (4,349) (1,125)
Purchase of investments (21,138) --
Proceeds from investment maturities 12,752 --
Other 7 138
---------- ---------
Net cash used by investing activities (12,728) (987)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 494
Interest accrued on convertible debentures -- 127
Proceeds from exercise of stock options and warrants 2,050 2,184
---------- ---------
Net cash provided by financing activities 2,050 2,805
Effect of exchange rate changes on cash (39) --
----------- ---------
Net increase (decrease) in cash and cash equivalents (4,932) 4,111
Cash and cash equivalents at beginning of period 48,010 9,197
---------- ---------
Cash and cash equivalents at end of period $ 43,078 $ 13,308
========== =========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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BINDVIEW DEVELOPMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL COMMON OTHER TOTAL
COMMON STOCK PAID-IN STOCK ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
SHARES AMOUNT CAPITAL TO BE ISSUED DEFICIT INCOME (LOSS) EQUITY
--------- ------ --------- ------------ ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 21,103 $ 1 $ 65,675 $ 3,352 $ (10,532) $ 40 $ 58,536
Exercise of stock options 1,163 -- 2,050 -- -- -- 2,050
Tax benefit related to exercise
of employee stock options -- -- 4,415 -- -- -- 4,415
Issuance pursuant to business acquired 175 -- 3,352 (3,352) -- -- --
Conversion of convertible debentures and
preferred stock into common stock 599 -- 7,658 -- -- -- 7,658
Foreign currency translation adjustment -- -- -- -- -- (84) (84)
Net income for the six months ended
June 30, 1999 -- -- -- -- 361 -- 361
------- ---- --------- --------- ---------- ------ ---------
Balance at June 30, 1999 23,040 $ 1 $ 83,150 $ -- $ (10,171) $ (44) $ 72,936
======= ==== ========= ========= =========== ======= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements
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BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
BindView Development Corporation, a Texas corporation (the "Company" or
"BindView"), reflect all adjustments (consisting of normal recurring accruals)
which, in the opinion of management, are necessary for a fair presentation of
the results for the interim periods presented. These financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
These financial statements should be read in conjunction with Item 5 of this
report and the Company's annual audited financial statements and the
supplemental financial statements for the year ended December 31, 1998, which
are included in the Annual Report on Form 10-K and Amendment No. 1 to the
Company's Form 8-K.
Operating results for the three month period and six month period ended June
30, 1999 are not necessarily indicative of the results that may be expected for
the full year ending December 31, 1999 or for other periods.
NOTE 2 - DESCRIPTION OF BUSINESS
The Company was incorporated in May 1990. Prior to 1995, the Company was known
as The LAN Support Group, Inc. The Company develops, markets and supports a
suite of systems and security management software products that manage the
security and integrity of complex, distributed client/server networks operating
on Microsoft Windows NT and Novell NetWare environments.
NOTE 3 - EARNINGS PER SHARE
Basic earnings per common share is computed using the weighted average number
of shares outstanding. Diluted earnings per common share is computed using the
weighted average number of shares outstanding, adjusted for the incremental
shares attributed to outstanding shares of convertible preferred stock,
convertible debentures and outstanding stock options and warrants to purchase
common stock unless such inclusion would be anti-dilutive. For the quarter and
six months ended June 30, 1999, incremental shares of 2,330 and 2,603,
respectively, were used in the calculation of diluted earnings per common
share.
NOTE 4 - SHORT-TERM AND LONG-TERM INVESTMENTS
Short-term investments have original maturities of more than three months and a
remaining maturity of less than one year. Long-term investments have original
maturities of more than twelve months. These investments are stated at cost,
which approximates market, as it is the intent of the Company to hold these
securities until maturity.
NOTE 5 - RECENT ACQUISITIONS
In December of 1998, the Company committed to deliver 175 shares of its common
stock in exchange for all of the outstanding equity interests of Curasoft, Inc.
in a transaction accounted for as a purchase. In February of 1999, the Company
issued 175 shares of common stock to satisfy this obligation.
6
<PAGE> 7
On March 1, 1999, the Company merged with Netect, Ltd. ("Netect") in a
stock-for-stock transaction accounted for as a pooling of interests. Netect
develops and markets corporate security solutions for Internet/Intranet
networks. In connection with the merger, the Company issued 1,161 shares of
common stock, based upon an exchange ratio of 0.400022101 shares of BindView
common stock for each share of Netect common stock. As a result of this merger,
all of the outstanding convertible preferred stock and convertible debentures
of Netect were exchanged for the Company's common stock. Transaction costs of
$1,533 and restructuring cost of $991 were incurred as a result of this merger.
Accrued but unpaid transaction and restructuring expenses totaled $382 on June
30, 1999.
The detail of the transaction and restructuring expenses and the remaining
provision for these expenses as of June 30, 1999, were as follows:
<TABLE>
<CAPTION>
---------------------------- ----------------- ---------------------- --------------------------
(in thousands) Transaction Restructuring Accrued Expenses at
Expenses Expenses June 30, 1999
---------------------------- ----------------- ---------------------- --------------------------
<S> <C> <C> <C>
Investment banking $ 590 $ -- $ --
Accounting and legal 565 -- --
Transfer fees 138 -- --
Other transaction costs 240 -- --
Employee severance and -- 575 133
Related costs
Israeli office closing -- 357 190
Other restructuring costs -- 59 59
----------------- ---------------------- --------------------------
TOTAL $ 1,533 $ 991 $ 382
---------------------------- ----------------- ---------------------- --------------------------
</TABLE>
The historical financial data included herein has been restated to reflect the
merger with Netect by combining the historical results for the Company and
Netect for all periods presented. There were no material transactions between
BindView and Netect during the periods prior to the merger.
NOTE 6 - INCOME TAX
As of June 30, 1999, the Company's remaining net operating loss carryforwards
for tax purposes approximate 8,800 in Israel and 2,900 for other foreign
subsidiaries, which may be utilized to reduce future taxable income. These tax
loss carryforwards will generally expire between 2003 and 2014. The Company's
ability to utilize the net operating loss carryforwards related to its
acquisitions may be subject to certain limitations. The valuation allowance for
the related deferred tax asset approximates 3,800 and is primarily composed
of Netect pre-acquisition tax loss carryforwards which management has
determined are more likely than not to expire unused.
NOTE 7 - SEGMENT REPORTING
During 1999, the Company adopted Statement of Financial Accounting Standard
No. 131 "Disclosures About Segments of an Enterprise and Related Information".
The Company currently operates in one segment as defined by this standard. The
adoption of this standard did not have a material impact on disclosures with
respect to the Company's financial condition or results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include those discussed in the "Risk Factors" set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
and those discussed herein under the heading "Cautionary Statements". The
following discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and the accompanying notes.
In connection with the merger with Netect on March 1, 1999, accounted for as a
pooling of interests, the historical financial data included herein has been
restated to reflect this merger.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of selected items in the Condensed Consolidated Statement of Operations and
Comprehensive Income (Loss) to total revenues:
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- -----------------------
1999 1998 1999 1998
------ ------ ------ ------
(PERCENT OF TOTAL NET REVENUES)
<S> <C> <C> <C> <C>
Revenues:
Licenses 71.7 77.8 71.0 76.7
Services 28.3 22.2 29.0 23.3
------ ------ ------ ------
Total revenues 100.0 100.0 100.0 100.0
------ ------ ------ ------
Cost of revenues:
Cost of licenses 2.3 3.2 2.2 3.3
Cost of services 3.4 2.8 3.5 3.2
------ ------ ------ ------
Total cost of revenues 5.7 6.0 5.7 6.5
------ ------ ------ ------
Gross profit 94.3 94.0 94.3 93.5
------ ------ ------ ------
Costs and expenses:
Sales and Marketing 41.5 51.7 43.0 52.8
Research and Development 26.5 34.3 27.5 33.8
General and Administrative 9.9 11.6 10.3 13.3
Transaction and Restructuring (1) 1.5 -- 9.4 --
------ ------ ------ ------
Operating income (loss) 14.9 (3.6) 4.1 (6.4)
Other income, net 4.8 1.0 5.0 0.9
------ ------ ------ ------
Income (loss) before income tax provision 19.7 (2.6) 9.1 (5.5)
Provision for income tax 6.9 4.2 7.8 3.3
------ ------ ------ ------
Net income (loss) 12.8 (6.8) 1.3 (8.8)
====== ====== ====== ======
</TABLE>
Notes: (1) Represents $238 and $2,524 non-recurring, non-tax deductible charges
related to costs associated with the Netect merger and restructuring for the
quarter and six months ended June 30, 1999, respectively.
REVENUES
The Company's revenues are derived from the sale of software products and
related services including subscription contracts. The Company's revenues
increased $7.0 million or 88% in the second quarter of 1999 over the comparable
quarter of the prior year and $13.1 million or 94% over the comparable six
months of the prior year.
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The Company's license revenues increased $4.6 million or 73% in the second
quarter of 1999 over the comparable quarter of the prior year and $8.5 million
or 80% over the comparable six months of the prior year. The increase in the
Company's license revenues over these periods is a result of continued market
acceptance of the BindView EMS product family and revenues generated from new
product introductions. The results of the quarter may not be indicative of
results for the full year. No assurances can be made that revenues will
continue to increase at the rates reflected in quarter-to-quarter and
year-to-year comparisons.
The Company's service revenues increased $2.5 million or 139% in the second
quarter of 1999 over the comparable quarter of the prior year and $4.6 million
or 142% over the comparable six months of the prior year. The increase in the
Company's service revenues over these periods is a result of increase in
purchases and renewals of subscription contracts by the Company's growing
installed customer base. Because subscription contracts are recognized ratably
over the contract term, this increase in these revenues as a percentage of
total revenues results in greater deferred revenue recognition. Due to the
costs associated with these services, this may negatively impact the Company's
operating margins.
COST OF REVENUES
Cost of licenses includes product manuals, packaging, distribution and media
costs for the Company's software products. The Company's cost of licenses
increased $83,000 or 33% in the second quarter of 1999 over the comparable
quarter of the prior year and $126,000 or 27% over the comparable six months of
the prior year. The cost of licenses has increased primarily due to increases
in product shipments. The Company believes these costs will remain relatively
constant as a percentage of total revenue, although there will continue to be
quarterly fluctuations due to the timing of certain expenses.
Cost of services includes personnel and other costs related to technical
support and professional services. The Company's cost of services increased
$288,000 or 127% in the second quarter of 1999 over the comparable quarter of
the prior year and $514,000 or 117% over the comparable six months of the prior
year. The cost of services has increased primarily due to increases in the cost
of technical support staff providing support to the Company's growing customer
base and increases in the cost of professional services staff providing
customer training and implementation services.
COSTS AND EXPENSES
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. The Company's sales and
marketing expenses increased $2.1 million or 51% in the second quarter of 1999
over the comparable quarter of the prior year and $4.3 million or 58% over the
comparable six months of the prior year. The increase in the sales and
marketing expenses is related to the hiring of additional personnel in
connection with the building of the Company's sales force and the additional
facilities and computer systems required by these additional personnel. Sales
and marketing expenses decreased to 41.5% of revenues in the second quarter of
1999 compared to 51.7% of revenue in the corresponding period of 1998 and
decreased to 43.0% of revenues from 52.8% of revenues for the six months ended
June 30, 1999 and 1998, respectively. The decrease in sales and marketing
expenses as a percentage of revenues is related to the reduction of duplicative
marketing efforts associated with Netect over these periods, the start-up
costs incurred with the launch of the Company's direct telesales organization
in Germany and France during the first half of 1998 and the ongoing efforts of
the Company to manage operating expenses. Due to the seasonal nature of
revenues, the Company anticipates that for the remaining fiscal quarters of
1999, sales and marketing expenses will increase in absolute dollars as the
Company continues to invest in marketing campaigns to drive sales growth and
increase its expansion of domestic and international sales efforts.
Research and development expenses consist primarily of salaries and benefits
for product development, product management and quality assurance personnel,
payments to contract programmers and expendable equipment purchases. The
Company's research and development expenses increased $1.2 million or 45% in
the second quarter of 1999 over the comparable quarter of the prior year and
$2.7 million or 58% over the comparable six months of the prior year. The
increase in the research and development expenses is related to increased
personnel, additional facilities and an increase in the computer systems and
software development tools required by the additional personnel. Research and
development expenses decreased to 26.5% of revenues in the second quarter of
1999 compared to 34.3% in the corresponding period of 1998 and decreased to
27.5% of revenues from 33.8% of revenues for the six months ended June 30, 1999
and 1998, respectively. This decline in research and development expenses as a
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percentage of revenue is a result of certain product lines reaching a stage in
their product life cycle requiring less research and development effort
relative to the respective license revenue generated by these products and the
Company's ongoing efforts to manage operating expenses. However, the Company
believes that a significant research and development investment is essential
for it to maintain and grow it's market position 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 that research and development expenses will increase in absolute
dollars for the remaining fiscal quarters of 1999.
General and administrative expenses consist primarily of salaries, personnel
and related costs for the Company's executive, administrative, finance and
information services staff. The Company's general and administrative expenses
increased $561,000 or 61% in the second quarter of 1999 over the comparable
quarter of the prior year and $928,000 or 51% over the comparable six months of
the prior year. The increase in the general and administrative expenses is
related to the increase in the allowance for doubtful accounts over this period
and increased staffing, facilities costs and associated expenses necessary to
manage and support the Company's increased scale of operations. General and
administrative expenses declined to 9.9% of revenues in the second quarter of
1999 compared to 11.6% in the corresponding period of 1998 and declined to 10.3%
of revenues from 13.3% of revenues for the six months ended June 30, 1999 and
1998, respectively. This decline in general and administrative expenses as a
percentage of revenue is a result of the reduction of duplicative staff
associated with the Netect acquisition and the Company's ongoing efforts to
manage operating expenses. The Company expects that for the remainder of 1999
general and administrative expenses will decline as a percentage of total
revenue, but increase in absolute dollars.
TRANSACTION AND RESTRUCTURING EXPENSES
On March 1, 1999, the Company merged with Netect, Ltd. ("Netect") in a
stock-for-stock transaction accounted for as a pooling of interests. The
Company incurred $238,000 in restructuring expenses in the second quarter of
1999 and $2.5 million in transaction and restructuring expenses for the six
months ended June 30, 1999. Accrued but unpaid transaction and restructuring
expenses totaled $382,000 on June 30, 1999. Transaction expenses related to
this merger consist primarily of accounting, investment banking, legal and
transaction related transfer fees. The Company incurred $1.5 million in
transaction expenses. Restructuring expenses related to this merger consist
primarily of employee severance and costs associated with the closing of
Netect's Israeli operations. The Company incurred $1.0 million in restructuring
expenses. The Company expects that it will not incur a significant amount of
additional transaction or restructuring expenses related to this merger.
The detail of the transaction and restructuring expenses and the remaining
provision for these expenses as of June 30, 1999, were as follows:
<TABLE>
<CAPTION>
--------------------------- ----------------- ---------------------- --------------------------
(in thousands) Transaction Restructuring Accrued Expenses at
Expenses Expenses June 30, 1999
--------------------------- ----------------- ---------------------- --------------------------
<S> <C> <C> <C>
Investment banking $ 590 $ -- $ --
Accounting and legal 565 -- --
Transfer fees 138 -- --
Other transaction costs 240 -- --
Employee severance and -- 575 133
Related costs
Israeli office closing -- 357 190
Other restructuring costs -- 59 59
----------------- ---------------------- --------------------------
TOTAL $ 1,533 $ 991 $ 382
--------------------------- ----------------- ---------------------- --------------------------
</TABLE>
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<PAGE> 11
OTHER INCOME, NET
The Company had other income of $728,000 in the second quarter of 1999 compared
to $81,000 in the corresponding period of 1998. This increase is primarily due
to an increase in interest income related to higher cash, cash equivalents and
investment balances as a result of the proceeds from Company's initial public
offering in July 1998, secondary offering in December 1998 and positive cash
flow from operating activities.
PROVISION FOR INCOME TAXES
The Company is currently generating a research and development credit for
federal income tax purposes. As a result of this credit, the Company's
effective tax rate for the second quarter of 1999 is 35%. If the Company is
unable to receive this credit in subsequent quarters, the effective tax rate
could rise to 39%.
During the first quarter of 1999, the Company did not recognize a tax benefit
for certain losses generated by Netect due to limitations on the Company's
ability to realize such benefits given the former structure of Netect and the
Company's plans for Netect's future operations. These factors, and the
non-deductibility of the transaction expenses incurred in connection with the
company's merger with Netect have resulted in the Company's effective tax rate
exceeding 35% for the first quarter and the six months ended June 30, 1999. The
Company expects that its effective tax rate will stabilize near 35% for each of
the remaining fiscal quarters of 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased to $58.0 million at June 30, 1999 from
$58.9 million at December 31, 1998. The Company's cash, cash equivalent,
short-term and long-term investments balance increased to $61.7 million at June
30, 1999 from $58.2 million at December 31, 1998 due primarily to positive cash
flow operating activities and proceeds from the exercise of stock options
partially offset by the purchases of property and equipment.
The Company believes that the net proceeds of its initial and secondary
offerings, together with existing cash, cash equivalents, short-term
investments and cash flow from operations will be sufficient to meet its normal
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 its initial and
secondary public offerings 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. There can be no assurance that the Company will be able to identify
any acquisitions of businesses, products or technology that are complimentary
to those of the Company or are on terms that are acceptable to the Company.
Pending such uses, the net proceeds will continue to be invested in government
securities and other short-term, investment-grade, interest-bearing
instruments.
YEAR 2000 ISSUES
Background. Some computers, software and other equipment include programming
code in which calendar year data is abbreviated to only two digits. As a result
of this design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900 or some other
default condition, rather than 2000. These problems are widely expected to
increase in frequency and severity as the year 2000 approaches and are commonly
referred to as the "Millennium Bug" or "Year 2000 Problem".
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<PAGE> 12
Assessment. The Year 2000 Problem could affect computers, software and other
equipment that we and our customers and suppliers use. Accordingly, we have
reviewed our internal computer programs and systems to ensure that they will be
Year 2000 compliant. We presently believe that our computer systems will be
Year 2000 compliant in a timely manner. However, while the estimated cost of
these efforts is not expected to be material to our financial position or any
year's results of operations, there can be no assurance to this effect.
Customers. Although the latest versions of BindView EMS are designed to be Year
2000 compliant, releases of BindView EMS before version 5.2a have not been
tested for Year 2000 compliance and/or are not Year 2000 compliant. Customers of
BindView EMS before version 5.2a under subscription contracts have been provided
upgrades to versions of BindView EMS that are designed to be Year 2000
compliant. Customers that have not upgraded to Year 2000 compliant versions of
BindView EMS will have to either i) enter into a subscription agreement with the
Company and upgrade to a compliant version or ii) purchase the latest Year 2000
compliant version of BindView EMS. We believe that it is not possible to
determine with complete accuracy that all Year 2000 Problems affecting our
software products have been identified or corrected due to the complexity of our
products and the fact that these products interact with other third party vendor
products and operate on computer systems that are not under our control. Because
of the Year 2000 Problem, we have and may continue to encounter potential
customer sites that are unwilling to purchase any additional software for their
computing environments until after the millennium. If a significant amount of
our customers lock down their computing environments because of the Year 2000
Problem, this may have an adverse effect on the Company's revenues.
Internal Infrastructure. We believe that we have identified substantially all
of the major computers, software applications and related equipment used in
connection with our internal operations that must be modified, upgraded or
replaced to minimize the possibility of a material disruption to our business.
We commenced the process of modifying, upgrading and replacing the systems that
have been identified as potentially being adversely affected and completed this
process during the first quarter of 1999. The costs associated with upgrading
and replacing these systems did not exceed $1.0 million and substantially all
of these costs have been capitalized.
Systems Other Than Information Technology Systems. In addition to computers and
related systems, the operation of office and facilities equipment, such as fax
machines, photocopiers, telephone switches, security systems, elevators and
other common devices may be affected by the Year 2000 Problem. We have recently
replaced our primary telephone switch with equipment that provides additional
capacity to meet the Company's growth needs and is believed to be Year 2000
compliant. We believe non-information technology equipment failures that could
occur because of the Year 2000 Problem are not likely to have a material
adverse effect on our business.
We estimate that our total cost of completing any required modifications,
upgrades or replacements of these internal systems will not have a material
effect on our business, financial condition or results of operations.
Suppliers. We have been gathering information from vendor web sites and
available compliance statements and have initiated communications with
third-party suppliers of our major computers, software and other equipment
used, operated or maintained by us to identify and, to the extent possible,
resolve issues involving the Year 2000 Problem. However, we have limited or no
control over the actions of such third-party suppliers. Thus, while we expect
that we will be able to resolve any significant Year 2000 Problems with such
systems, there can be no assurance that our suppliers will resolve any or all
Year 2000 Problems with such systems before the occurrence of a material
disruption to our business or any of our suppliers. Any failure of these
third-parties to resolve Year 2000 problems with their systems in a timely
manner could have a material adverse effect on our business, financial
condition or results of operation.
Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all Year 2000 Problems that could materially adversely affect our
business, financial condition or results of operations. However, we believe
that it is not possible to determine with complete certainty that all Year 2000
Problems affecting us have been identified or corrected. The number of devices
that could be affected and the interactions among these devices are simply too
numerous. In addition, we cannot accurately predict how many failures related
to the Year 2000 Problem will occur or the severity, duration or financial
consequences of such failures. As a result, we expect that we could possibly
suffer the following consequences:
- - a significant number of operational inconveniences and inefficiencies for
us and our customers that may divert our time and attention and financial
and human resources from our ordinary business activities; and
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- - a lesser number of serious system failures that may require significant
efforts by us or our customers to prevent or alleviate material business
disruptions.
Should these possibilities actually occur, we could experience operating
expense levels higher then currently budgeted or reductions in our expected
growth rates.
Contingency Plans. We have developed contingency plans as part of our efforts
to identify and correct Year 2000 Problems affecting our internal systems.
These plans include (i) accelerated replacement of affected equipment or
software, (ii) short to medium-term use of backup equipment and software, (iii)
increased work hours for our personnel or use of contract personnel to correct
on an accelerated schedule any Year 2000 Problems which arise or to provide
manual workarounds for information systems (iv) divert attention from other
critical ongoing business initiatives and (v) and other similar approaches. If
we are required to implement any of these contingency plans, such plans could
have a material adverse effect on our business, financial condition or results
of operations. However, based on the activities described above, the Company
does not believe that the Year 2000 Problem will have a material adverse effect
on the Company's business, financial condition or results of operations.
The discussion of the Company's efforts and expectations relating to Year 2000
compliance are forward-looking statements. The Company's ability to achieve
Year 2000 compliance and the level of incremental costs associated therewith,
could be adversely impacted by, among other things, the availability and cost
of programming and testing resources, vendors' ability to modify proprietary
software and unanticipated problems identified in the Company's ongoing
compliance review.
The foregoing statements are intended to be and are hereby designated "Year
2000 Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Act.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Report, including
without limitation, statements regarding the Company's financial position,
business strategy, products, products under development, markets, budgets and
plans and objectives of management for future operations, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in statements set forth under "Cautionary Statements" and elsewhere
in this Report, including, without limitation, in conjunction with the
forward-looking statements included in this Report. All subsequent written and
oral forward-looking statements attributable to the Company, or persons on its
behalf, are expressly qualified in their entirety by the Cautionary Statements
and such other statements. For purposes of this Item 5, references to the
"Company", "BindView", "we", "us" and "our" refer to BindView Development
Corporation and its subsidiaries.
CAUTIONARY STATEMENTS
OUR QUARTERLY REVENUES, EXPENSES AND OPERATING RESULTS MAY FLUCTUATE
SIGNIFICANTLY. These fluctuations may be due to a number of factors, including:
- demand for our products;
- size and timing of significant orders and their fulfillment;
- our ability to develop and upgrade our technology;
- changes in our level of operating expenses;
- our ability to compete in a highly competitive market;
- undetected software errors and other product quality problems;
- changes in our sales incentive plans and staffing of sales territories;
and
- changes in the mix of domestic and international revenues and the level
of international expansion.
Generally, we do not operate with a backlog because we ship our products and
recognize revenue shortly after orders are received. At the time we ship our
products we have satisfied all of the criteria of Statement of Position No.
97-2 "Software Revenue Recognition," and therefore we recognize the related
license revenue. As a result, orders booked throughout a quarter substantially
impact product revenues in that quarter. Our sales also fluctuate throughout
the quarter as a result of customer buying patterns. We base our expenses to a
significant extent on our expectations of future revenues. Most of our expenses
are fixed in the short term and we may not be able to quickly reduce spending
if our revenues are lower than we had projected. If our revenue levels do not
meet our projections, we expect our operating results to be adversely and
disproportionately affected.
Our quarterly operating results also are subject to certain seasonal
fluctuations. Year-end customer buying patterns and compensation policies based
on annual revenue quotas have caused our revenues to be strongest in the fourth
quarter of the year and to decrease in the first quarter of the following year.
In future periods, we expect that 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, we provided telephone support free of charge and sold
product upgrades separately or through subscription contracts. We now require
our customers to purchase a subscription policy in order to receive product
upgrades and technical support. Unlike software license revenues that we
generally recognize upon shipment of the product, we recognize subscription
contract revenues ratably over the life of the contract term. As a result, if
we derive a larger percentage of our revenues from subscription contracts, we
will experience an increase in deferred revenue that is likely to decrease our
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operating margins. Decreased operating margins may materially adversely affect
our business, operating results and financial condition.
As a result, we believe quarter-to-quarter comparisons of our revenues,
expenses and results of operations are not necessarily meaningful. You should
not rely on our quarterly revenues, expenses and results of operations to
predict our future performance.
WE HAVE A LIMITED OPERATING HISTORY. Although BindView was founded in 1990, we
have derived substantially all of our revenues since 1995 from sales of
BindView NCS, replaced in 1996 by BindView EMS. We therefore have a limited
operating history based on our primary products. An investor in our Company
must consider the risks and uncertainties frequently encountered by software
companies in the early stages of development, particularly those faced by
companies in the highly competitive and rapidly evolving systems management
software market. To compete in this market, we believe that we must devote
substantial resources to expanding our sales and marketing organization and to
continue product development. As a result, we will need to recognize
significant quarterly revenues to remain profitable. Our revenues have
increased in recent years, and revenues for recent quarters have exceeded
revenues for the same quarter for the prior year. However, we cannot be certain
that we can sustain these growth rates or that we will remain profitable on a
quarterly or annual basis in the future.
OUR MARKETS ARE HIGHLY COMPETITIVE. We face competition from different sources.
Currently, our products compete with products from the following organizations:
- providers of security analysis and audit products, such as Axent
Technologies, Inc. Security Dynamics Technologies, Inc., ISS Group,
Inc. and Network Associates Inc.;
- providers of stand-alone inventory and asset management products, such
as Tally Systems Corp.;
- providers of LAN desktop management suites, such as Intel Corporation,
Hewlett-Packard Company and Microsoft Corporation;
- providers of Year 2000 assessment products, such as Greenwich Mean
Time--UTA, L.C.;
- providers of event notification and response technology, such as
Attention Software, Inc.; and
- providers of Windows NT management and migration tools, such as
Mission Critical Software, Entevo Corp. and FastLane Technologies Inc.
- In addition, certain management features included in our products
compete with the native tools from Novell, Inc. and third-party tools
from certain vendors, such as Computer Associates, Inc. and other
companies.
We expect competition in the network management software market to increase
significantly as new companies enter the market and current competitors expand
their product lines and services. Many of these potential competitors are
likely to enjoy substantial competitive advantages, including:
- greater resources that can be devoted to the development, promotion
and sale of their products;
- more established sales channels;
- greater software development experience; and
- greater name recognition.
We also believe that operating system software vendors, particularly Microsoft
and Novell, could enhance their products to include functionality that we
currently provide in our products. If these vendors include our software
functionality as standard features of their operating system software, our
products could become obsolete. Even if the functionality of the standard
software features of these vendors is more limited than ours, there is a
substantial risk that a significant number of customers would elect to keep
this limited functionality rather than purchase additional software.
To be competitive, we must respond promptly and effectively to the challenges
of technological change, evolving standards and our competitors' innovations by
continuing to enhance our products, services and sales channels. Any pricing
pressures, reduced margins or loss of market share resulting from our failure
to compete effectively could materially adversely affect our business.
OUR PRODUCTS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE. The market for our
products is characterized by rapid technological change, frequent new product
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introductions and enhancements, uncertain product life cycles, changes in
customer demands and evolving industry standards. Our products could be
rendered obsolete if new products based on new technologies are introduced or
new industry standards emerge. We rely heavily on our relationships with
Microsoft and Novell and attempt to coordinate our product offerings with the
future releases of their operating systems. These companies may not notify us
of feature enhancements prior to new releases of their operating systems in the
future. In that case, we may not be able to introduce products on a timely
basis that capitalize on new operating system releases and feature
enhancements.
CLIENT/SERVER COMPUTING ENVIRONMENTS ARE INHERENTLY COMPLEX. As a result, we
cannot accurately estimate our software product life cycles. New products and
product enhancements can require long development and testing periods, which
depend significantly on our ability to hire and retain increasingly scarce and
technically competent personnel. Significant delays in new product releases or
significant problems in installing or implementing new product releases could
seriously damage our business. We have, on occasion, experienced delays in the
scheduled introduction of new and enhanced products and cannot be certain that
such delays will not occur again.
Our future success will depend, in part, upon our ability to enhance existing
products, develop and introduce new products, satisfy customer requirements and
achieve market acceptance. We cannot be certain that we will successfully
identify new product opportunities and develop and bring new products to market
in a timely and cost-effective manner. Further, the products, capabilities or
technologies developed by others may render our products or technologies
obsolete or shorten their life cycles.
WE ARE DEPENDENT UPON CONTINUED GROWTH OF THE MARKET FOR WINDOWS NT AND NOVELL
NETWARE OPERATING SYSTEMS. We depend upon the success of Microsoft's Windows NT
and Novell's NetWare operating systems. In particular, market acceptance of our
products depends on the increasing complexity of these operating systems and
the lack of effective tools to simplify system administration and security
management for these environments. Although demand for Windows NT and NetWare
operating systems has grown in recent years, this market is still emerging and
we cannot be certain that it will continue to grow. If the market does continue
to grow, we cannot be certain that the market for our products will continue to
develop or that our products will be widely accepted. If the markets for our
products fail to develop or develop more slowly than we anticipate, our
business could be materially adversely affected.
The percentages of our revenues attributable to software licenses for
particular operating system platforms can change from time to time. A number of
factors outside our control can cause these changes, including changing market
acceptance and penetration of the various operating system platforms which we
support and the relative mix of development and installation by value-added
resellers ("VARs") of application software operating on such platforms.
PRODUCT CONCENTRATION. Substantially all of our revenues are from the sale of
our NOSadmin and NETinventory products. We anticipate that these products along
with products additions as a result of the Curasoft and Netect acquisitions
will account for majority all of our revenues for the foreseeable future. Our
future operating results will depend on continued market acceptance of NOSadmin
and NETinventory, introduction of new products from the Curasoft and Netect
acquisitions, enhancements to these products and the continued development of
additional snap-in modules for our Enterprise Console product. Competition,
technological change or other factors could reduce demand for, or market
acceptance of any or all of our products and could substantially damage our
business. Although we currently plan to broaden our product line, we cannot be
certain that we will be able to reduce our product concentration or that we
will be able to generate material revenues from products acquired as a result
of the Curasoft and Netect acquisitions.
RISKS ASSOCIATED WITH LENGTH OF SALES CYCLE. We have sold our products to
customer workgroups and corporate divisions. As a result, our sales cycle has
ranged from three to six months. Recently, we have focused more of our selling
effort on products for the customer's entire enterprise and have found that our
sales cycle to enterprises has ranged from six to twelve months. The sales
cycle to enterprises is typically longer for a number of reasons, including:
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- the significant resources committed to an evaluation of network
management software by an enterprise require us to expend substantial
time, effort and money educating them on the value of our products
and services; and
- decisions to license and deploy enterprise-wide software generally
involve an evaluation of our software by a significant number of
personnel of the enterprise in various functional and geographic
areas, each often having specific and conflicting requirements.
As a result, we cannot predict the timing and amount of specific sales. Our
inability to complete one or more enterprise-wide sales in a particular quarter
or calendar year could materially adversely affect our business and could cause
our operating results to vary significantly from quarter to quarter. For more
information, see "-- Our Quarterly Financial Results are Subject to Significant
Fluctuations".
NEED TO MANAGE CHANGING OPERATIONS. We have expanded our operations rapidly in
recent years. We intend to continue to expand in the foreseeable future to
pursue existing and potential market opportunities. This rapid growth places a
significant demand on management and operational resources. In order to manage
growth effectively, we must implement and improve our operational systems,
procedures and controls on a timely basis. If we fail to implement and improve
these systems, our business, operating results and financial condition will be
materially adversely affected.
DEPENDENCE ON KEY PERSONNEL. Our success depends largely on the efforts of our
executive officers, particularly Eric J. Pulaski, the President and Chief
Executive Officer of BindView. We do not have an employment contract requiring
Mr. Pulaski to continue his employment for any period of time. We do not
maintain key man life insurance policies on any of our executive officers.
We believe that our future success will depend in large part upon our ability
to attract and retain highly skilled research and development, technical
support and sales and marketing personnel. We face intense competition for
qualified personnel, and we cannot be certain that we will successfully attract
and retain additional qualified personnel in the future. The loss of the
services of one or more of our key individuals or the failure to attract and
retain additional qualified personnel could substantially damage our business.
RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS. During 1998, 1997 and
1996, we derived approximately 10%, 13% and 10% of our revenues, respectively,
from sales outside North America. We only recently opened direct telesales
offices outside the United States. We have historically generated revenues
outside North America through indirect channels, including VARs and other
distributors. We are in the early stages of developing our indirect
distribution channels in certain markets outside the United States. We cannot
be certain that we will be able to attract third parties that will be able to
market our products effectively or to provide timely and cost-effective
customer support and service. Our reseller arrangements generally provide that
resellers may carry competing product offerings. We cannot be certain that any
distributor or reseller will continue to represent our products. The inability
to recruit, or the loss of, important sales personnel, distributors or
resellers could materially and adversely affect our business.
As we expand our sales and support operations internationally, we anticipate
that international revenues will grow as a percentage of our total revenues.
To successfully expand international sales, we must:
- establish additional international direct telesales offices;
- expand the management and support organizations for our international
sales channel;
- hire additional personnel;
- customize our products for local markets;
- recruit additional international resellers where appropriate; and
- expand the use of our direct telesales model.
If we are unable to generate increased sales through a direct telesales model,
we will incur higher personnel costs without corresponding increases in
revenue, resulting in lower operating margins for our international operations.
In addition, employment policies vary among countries outside the United
States, which may reduce our flexibility in managing headcount and, in turn,
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managing personnel-related expenses. If we do not address the risks associated
with international sales in a cost-effective and timely manner, our
international sales growth will be limited, operating margins could be reduced
and our business could be materially adversely affected. However, even if we
are able to successfully expand our international operations, we cannot be
certain that we will be able to maintain or increase international market
demand for our products.
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT. Our
success depends to a significant degree upon our software and other proprietary
technology. The software industry has experienced widespread unauthorized
reproduction of software products. We rely on a combination of trademark, trade
secret, and copyright law and contractual restrictions to protect our
technology. These legal protections provide only limited protection. However,
as our products are more globally distributed, this associated with the
unauthorized reproduction of software products could increase. The steps we
have taken may deter competitors from misappropriating our proprietary
information. However, we may not be able to detect unauthorized use or take
appropriate steps to enforce our intellectual property rights. If we litigated
to enforce our rights, litigation would be expensive, would divert management
resources and may not be adequate to protect our business. We also could be
subject to claims alleging infringement of third-party intellectual property
rights. In addition, we may be required to indemnify our distribution partners
and end-users for similar claims made against them. Any claims against us could
require us to spend significant time and money in litigation, pay damages,
develop non-infringing intellectual property or acquire licenses to
intellectual property that is the subject of the infringement claims. As a
result, claims against us could materially adversely affect our business.
RISKS ASSOCIATED WITH COMPLETED AND POTENTIAL ACQUISITIONS. We have made and
may continue to make investments in complementary companies, technologies,
services or products if we find appropriate opportunities. If we buy a company,
we could have difficulty assimilating the personnel and operations of the
acquired company. If we make other types of acquisitions, assimilating the
technology, services or products into our operations could be difficult.
Acquisitions can disrupt our ongoing business, distract management and other
resources and make it difficult to maintain our standards, controls and
procedures. We may not succeed in overcoming these risks or in any other
problems we might encounter in connection with any future acquisitions. We may
be required to incur debt or issue equity securities to pay for any future
acquisitions. In addition, there can be no assurance that we will be able to
successfully integrate our recent acquisitions of Curasoft and Netect or we
will be able to integrate the products and technology we acquired into our
sales model or product offerings.
RISKS OF UNDETECTED SOFTWARE ERRORS. Our software products are complex and may
contain certain undetected errors, particularly when first introduced or when
new versions or enhancements are released. We have previously discovered
software errors in certain of our new products after their introduction. We
cannot be certain that, despite our testing, such errors will not be found in
current versions, new versions or enhancements of our products after
commencement of commercial shipments. Such undetected errors could result in
adverse publicity, loss of revenues, delay in market acceptance or claims
against us by customers, all of which could materially adversely affect our
business.
YEAR 2000 RISKS. Background. Some computers, software and other equipment
include programming code in which calendar year data is abbreviated to only two
digits. As a result of this design decision, some of these systems could fail
to operate or fail to produce correct results if "00" is interpreted to mean
1900 or some other default condition, rather than 2000. These problems are
widely expected to increase in frequency and severity as the year 2000
approaches and are commonly referred to as the "Millennium Bug" or "Year 2000
Problem". See Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RISK OF PRODUCT LIABILITY CLAIMS. Because our product design provides critical
network management services, we may receive significant liability claims. Our
agreements with customers typically contain provisions intended to limit our
exposure to liability claims. These limitations may not, however, preclude all
potential claims. Liability claims could require us to spend significant time
and money in litigation or to pay significant damages. As a result, any such
claims, whether or not successful, could seriously damage our reputation and
our business.
ANTI-TAKEOVER PROVISIONS. Incumbent management and our Board of Directors could
use certain provisions of our certificate of incorporation to make it more
difficult for a third party to acquire control of our company, even if the
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change in control might be beneficial to our stockholders. This could
discourage potential takeover attempts and could adversely affect the market
price of our common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following exhibits are filed with this Quarterly Report.
10.1 -- Employment Agreement between BindView Development and Marc
Caminetsky
10.2 -- Employment Agreement between BindView Development and Paul Cormier
11 -- Statement Regarding Computation of Loss Per Common Share
27 -- Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated March 1, 1999 and Form 8-K/A dated May
7, 1999 to report its merger with Netect Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BINDVIEW DEVELOPMENT CORPORATION
By: /s/ ERIC J. PULASKI
----------------------------------------
Eric J. Pulaski
President and Chief Executive Officer
July 28, 1999
By: /s/ SCOTT R. PLANTOWSKY
----------------------------------------
Scott R. Plantowsky
Vice-President and Chief
Financial Officer
July 28, 1999
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INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.1 -- Employment Agreement between BindView Development and Marc Caminetsky
10.2 -- Employment Agreement between BindView Development and Paul Cormier
11 -- Statement Regarding Computation of Earnings (Loss) Per Common Share
27 -- Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT BETWEEN BINDVIEW DEVELOPMENT
AND MARC CAMINETKSY
This Amended and Restated Employment Agreement, dated this 24th day of June,
1999 (this "Agreement"), is entered into by and between BindView Development
Corporation, a Texas corporation (the "Company"), Netect Inc., a Massachusetts
corporation and wholly-owned subsidiary of the Company ("Netect"), and Mr. Marc
R. Caminetsky (the "Employee").
RECITALS
WHEREAS, Netect and the Employee previously entered into an Employment
Agreement dated 1st July, 1997, as amended, which the Employee and the Company
and Netect wish to amend and restate in its entirety;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, and intending to be legally bound, the parties
hereto agree as follows:
1 Introduction
(a) The recitals to this Agreement constitute an integral and
indivisible part of this Agreement.
(b) This Agreement supersedes any previous agreement regarding
the Employee's employment, including any agreement with
Netect or Netect Ltd.
2 Position; Duties; Location
During the Term of Employment (as hereinafter defined), the Employee
will serve as the Vice President of Marketing of the Company, at the
discretion of the President and Chief Executive Officer of the
Company, and shall perform such duties consistent with such position
as are assigned to him from time to time by the President and Chief
Executive Officer of the Company (including being responsible for
the Company's world-wide marketing efforts). The Employee agrees to
devote all of his business time, skill, attention and best efforts
to the Company's business to discharge and fulfill the
responsibilities assigned to him in that capacity. The Employee
agrees not to render services to any other person or entity of any
kind for compensation other than as set forth on Schedule A hereto,
and in addition shall not engage in any activity that conflicts or
interferes with the performance of the duties and responsibilities
of the position.
The Employee and the Company expect that the Employee will spend
time in Houston, Texas as required. To facilitate this, during the
Term of Employment the Company will provide the Employee at the
Company's expense with a furnished temporary apartment in Houston
and will pay reasonable travel expenses incurred by the Employee to
and from Houston. With the approval of the President and Chief
Executive Officer of the Company, the Employee may also receive
reimbursement for the reasonable travel expenses of his immediate
family to and from Houston.
3 Compensation
(a) In consideration for the performance of his duties
hereunder, BindView shall continue your previously
existing base salary from Netect. As such, the Employee
shall be paid an annual base salary (the "Annual Base
Salary") of $175,000, which will be paid in 24 equal
payments or otherwise in accordance with standard payroll
procedures.
(b) Bonus. The Employee shall be eligible to receive a bonus
("Incentive Bonus Compensation"). All Incentive Bonus
Compensation shall be paid, if earned, in accordance with the
<PAGE> 2
Company's standard payment procedures for officer bonuses. The
Incentive Bonus Compensation for quarters following March 31,
1999 (the "Bonus Agreement") shall be based on (i) the
achievement of management based objectives to be agreed upon in
writing by the Company and the Employee and (ii) the
achievement of criteria relating to revenue and profitability
outlined in a bonus plan matrix to be agreed upon by the
Company and the Employee. The total Incentive Bonus
Compensation for a calendar year if both (i) and (ii) of the
Bonus Agreement are achieved shall be as set forth from time to
time on Schedule B hereto (the "On Target Bonus"). The
Incentive Bonus Compensation for a calendar year will be less
than the On Target Bonus if the criteria specified in the Bonus
Agreement are not achieved and will greater than the On Target
Bonus if the criteria specified in the Bonus Agreement are
exceeded.
The Incentive Bonus Compensation shall not constitute part
of the Employee's salary for the calculation of any
employment benefits.
4 Employment Benefits
During the Term of Employment, the Company will maintain at its
cost, health, dental, life and long-term disability insurance for
the benefit of the Employee as the Company generally provides to its
employees (including eligibility for and matching contributions to a
401(k) plan in accordance with the Company's policies).
During the Term of Employment, the Employee shall be entitled to
participate in or receive benefits under any other employee benefit
plan generally made available by the Company to its executive
officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements
for individuals at such level. It is however understood that the
determination of what is "generally made available by the Company"
will be at the good faith discretion of the Company.
4.1 Expenses.
The Company shall reimburse the Employee for all reasonable travel
and other business expenses incurred by the Employee in the
performance of his duties under this Agreement, upon the Employee's
submission of appropriately itemized documentation thereof in
accordance with the Company's reimbursement policy.
4.2 Disability
(a) If the Company determines in good faith, after considering
all relevant medical evidence, that the Employee has incurred a
Disability (as defined below) during the Term of Employment,
the Company may give the Employee written notice of termination
of the Employee's employment ("Disability Termination"). In
such event, the Employee's employment with the Company shall
terminate as of three business days following the issuing of
such notice by the Company. In the event of Disability
Termination the Company shall pay to the Employee, as soon as
practicable after the close of the Company's fiscal quarter in
which such Disability Termination occurs, any accrued and
unpaid Incentive Bonus Compensation for the quarter prior to
the quarter in which Disability Termination occurs plus a
prorated portion of any unpaid Incentive Bonus Compensation to
which he would have been entitled for the quarter in which the
Disability Termination occurs. This subsection shall not limit
the entitlement of the Employee to any disability or other
benefits then available to the Employee under any benefit plan
or policy which is maintained by the Company for the Employee's
benefit.
(b) For the purpose of this Section, "Disability" shall mean
the Employee's failure to perform his duties to the
Company (and Netect as applicable) on a full-time basis
for a total of at least three consecutive months during
any twelve-month period, as a result of incapacity due to
a mental or physical illness or injury, as confirmed by a
physician selected by the Board of Directors of the
Company.
2
<PAGE> 3
5 Vacation
The Employee shall be entitled to annual vacation leave in
accordance with the Company's vacation policy for executive officers
of the Company.
6 Term and Termination
(a) Term. The "Term of Employment", as used herein, shall mean
a period commencing on the date hereof and ending on a
date that is the earlier to occur of (A) the receipt by
the Employee of a written notice of termination by the
Company given to the Employee ("Termination Without
Cause") or (B) the occurrence of an event specified in
Section 4.2, 6(c) or 6(d); provided, however, that the
occurrence of any of the events set forth in Section 4.2
or this Section 6 shall result in the immediate
termination of the Term of Employment, but shall not
result in the termination of this Agreement.
(b) Termination Without Cause. The Company may terminate the Term
of Employment hereunder at its sole discretion at any time,
with or without cause; provided, however, that if the Company
terminates the Term of Employment (including by notice pursuant
to clause (a)) other than (y)"For Cause" (as hereinafter
defined) or (z) upon Disability of the Employee, the Company
shall (i) promptly pay to the Employee all accrued but unpaid
Annual Base Salary, (ii) pay to the Employee as soon as
practicable after the close of the Company's fiscal quarter in
which such termination occurs, any accrued and unpaid Incentive
Bonus Compensation for the quarter prior to the quarter in
which termination occurs plus a prorated portion of any unpaid
Incentive Bonus Compensation to which he would have been
entitled for that quarter, and (iii) subject to both the
execution by the Employee of a release in a form reasonably
satisfactory to the Company and the continued compliance with
the terms of this Agreement that are intended to remain
applicable after termination of the Term of Employment,
continue to pay to the Employee his Annual Base Salary, based
on the Annual Base Salary level in effect immediately prior to
the termination, in monthly payments, for a period of 12 months
(hereinafter the "Severance Period"). During the Severance
Period, (I) the Employee shall be entitled to retain his
medical and other health benefits (to the extent permitted
under the Company's benefit plans) and (II) the Employee's
options that were issued prior to the date hereof by Netect or
its affiliates that are now exercisable for shares of the
Company's common stock shall continue to vest through March 31,
2001 (this does not apply to any options to acquire the
Company's common stock issued to Employee on or after March 1,
1999).
(c) Death. The Employee's Term of Employment hereunder and this
Agreement shall automatically terminate upon Employee's death.
In the case of the Employee's death, the Company shall pay to
the Employee's beneficiaries or estate, as appropriate: (i)
promptly after the Employee's death, all earned but unpaid
Annual Base Salary to which he is entitled pursuant to
subsection 3(a), and (ii) as soon as practicable after the
close of the Company's fiscal quarter in which the Employee's
death occurs, any accrued and unpaid Incentive Bonus
Compensation for the quarter prior to the quarter in which
death occurs plus a prorated portion of any unpaid Incentive
Bonus Compensation to which he would have been entitled for
that quarter. This subsection 6(b) shall not limit the
entitlement of the Employee's estate or beneficiaries to any
death or other benefits then available to the Employee under
any benefit plan or policy which is maintained by the Company
for the Employee's benefit.
(d) For Cause. The Company may terminate Employee's Term of
Employment with the Company without any payment, other
than any accrued and unpaid portion of the Annual Base
Salary, or any benefits in any or all of the following
cases ("For Cause"):
3
(i) any actions taken by the Employee not in good faith
against the material interests of the Company or
Netect;
(ii) the conviction of the Employee in respect of an
offense involving dishonesty and/or a felony
with respect to his activities with the Company
or Netect; or
(iii) any other material breach by the Employee of
this Agreement, provided that the Company first
notifies the Employee of the specific breach
committed by him and the Employee is given sixty
(60) days to cure such material breach.
In cases (i) and (ii) above the Employee's Term of
Employment shall terminate immediately upon written notice
from the Company. In case (iii), the Employee's Term of
Employment shall terminate upon the expiration of the
period mentioned therein.
(e) For Good Reason. The Employee may terminate his Term of
Employment at any time for Good Reason (as defined below)
or otherwise.
(i) If the Employee terminates his Term of Employment for Good Reason,
he shall be entitled to receive the same compensation he would
otherwise have received had the Company terminated his Term of
Employment pursuant to clause 6(b) above other than (y) For Cause or
(z) upon Disability of the Employee.
(ii) If the Employee resigns or otherwise terminates his Term of
Employment other than for Good Reason , he shall not be entitled to
any payment, other than any accrued and unpaid portion of the Annual
Base Salary and any accrued and unpaid Incentive Bonus Compensation
for the quarter prior to the quarter in which the resignation or
termination occurs, or any benefits otherwise provided for pursuant
to this Agreement.
(iii) "Good Reason" shall mean
(A) the Company reduces the Employee's
Annual Base Salary or materially
reduces his responsibility or duties
with the Company, or
(B) the nonvoluntary relocation by the Company
of the Employee from the Boston area, or
(C) any material breach by the Company of
its obligations hereunder, which
breach is not cured within fifteen
(15) business days of the Employee's
notice thereof.
(f) Company Property. Upon termination of the Employee's Term
of Employment, the Employee shall transfer his position to
a replacement in an orderly and efficient manner and shall
return to the Company and Netect all documents,
literature, equipment, computer hardware and software and
other equipment belonging to or prepared for the Company
or Netect, in the same condition (ordinary wear and tear
excepted) as when delivered to him.
7 Pooling. Notwithstanding anything herein to the contrary,
Employee agrees not to take any action that in the opinion of
the Company's independent certified public accountants could
reasonably be expected to jeopardize the accounting treatment
of any transactions that are pending or completed during the
Term of Employment and for which the Company proposed to
account therefor as a "pooling of interests" transaction.
4
<PAGE> 4
8 Confidentiality
(a) Information. The Employee agrees that the Information (as
defined below) shall be kept confidential and shall not,
without the prior written consent of the Company, be disclosed
or furnished to any person, corporation or other business
organization. The Employee further agrees to use the
Information only in the course of the performance of his duties
to the Company. "Information" shall mean all information, both
oral and written, which is non-public, confidential or
proprietary in nature, including without limitation, software,
source codes, technical information, financial data, business
strategies, product development, product data, processes,
techniques, procedures, customer lists, marketing plans and
other proprietary information used by the Company or by Netect
Ltd. or by Netect or any of the Company's other subsidiaries or
pertaining to its/their business. Information shall not include
information which (i) is or becomes generally available to the
public other than as a result of disclosure by the Employee or
(ii) is required to be disclosed by law or applicable legal
process (in which case the Employee will consult with the
Company on an ongoing basis in order to legally minimize the
amount of Information disclosed).
(b) Inventions. All processes, technologies, inventions, discoveries,
applications, improvements, ideas, trade names and trademarks
(collectively, "Inventions"), which are conceived, originated,
developed or acquired by the Employee as a result of or in
connection with his engagement or affiliation with the Company
or any of its subsidiaries, alone or with others, during the
Employee's employment with the Company or any of its
subsidiaries, whether or not patentable and whether or not
conceived, originated or developed on the Company's or any of
its subsidiaries' time or with the use of the Company's or any
of its subsidiaries' facilities or materials, shall be the sole
and exclusive property of the Company and shall be promptly and
fully disclosed by the Employee to the Company. It is
understood that such Inventions are proprietary in nature and
shall (as between the Company and Employee) be for the
exclusive use and benefit of the Company.
(c) Survival. The provisions of this Section 8 shall survive the
termination of the Term of Employment and the termination of
this Agreement.
9 Non-Competition.
The Employee agrees that, during the Term of Employment with the
Company, and for a period of twelve (12) months thereafter, the
Employee shall not, directly or indirectly:
(a) anywhere in the world be employed by, engaged in, connected with,
or own, share in the earnings of, or invest in the securities
of any person, partnership, corporation or other business
organization that is engaged in a business which is in direct
competition to that in which the Company or any of its
subsidiaries is engaged or is actively contemplating engaging
during the Term of his Employment or at the time of termination
of the Term of Employment, provided, however, that (i) the
Employee may invest in the securities of any business
organization engaging in a similar business as that of the
Company's or any of its subsidiaries if such securities are
listed on any securities exchange and the Employee's investment
does not exceed 10% of the issued and outstanding securities of
such business organization, and Employee does not have any
participation in the control of such business organization,
and/or (ii) if the Employee wishes to be engaged by or
connected with any department in any business organization
which is in direct competition with the Company or any of its
subsidiaries, and such department is not in itself in direct
competition with the Company nor would the Employee's
engagement/connection with such department involve the use of
any Information (as defined in Section 8 above), then the
Employee may apply to the Company for the Company's consent to
such engagement/connection with such department, which consent
shall not be unreasonably withheld; or
5
<PAGE> 5
(b) hire, engage, employ or solicit, contact or communicate
with for the purpose of hiring, employing or engaging, any
person, firm, corporation or other business organization
who or which at any time during his employment with the
Company or any of its subsidiaries was an employee,
consultant, advisor, client, or in the habit of dealing
with the Company or any of its subsidiaries and, other
than with respect to employees of the Company or any of
its subsidiaries, which was engaged in or associated with
a business which is in direct competition with that of the
Company or any of its subsidiaries.
10 Remedies.
The Employee acknowledges that the provisions and limitations set
forth in Sections 8 and 9 of this Agreement are necessary for the
protection of the Company and are reasonable in light of the
activities and business of the Company. Employee further
acknowledges that (i) the Employee will be able to support himself
without violating such covenant and (ii) the Employee has been
advised by his legal counsel as to the meaning and consequences of
such covenant. The Employee acknowledges that the Company will have
no adequate remedy at law if the Employee breaches any of the
provisions of Sections 8 or 9 of this Agreement. In such event, the
Company shall have the right, in addition to any other rights it may
have, to obtain in any court of competent jurisdiction injunctive
relief to restrain any breach or threatened breach of or otherwise
to specifically enforce any of the provisions of said sections.
Further, if a court or arbitrator of competent jurisdiction finds
the scope, time or geographical restrictions in Sections 8 or 9 of
this Agreement to be unreasonable, it is the intention of the
parties that such restrictions shall be enforced to the fullest
extent to which such court or arbitrator deems reasonable, and such
provisions shall thereby be reformed.
11 Indemnification
The Company shall, subject to any legal impediment, indemnify the
Employee against all legal actions to the fullest extent permitted
under the Company's Certificate of Incorporation.
The provisions of this Section shall survive the Term of Employment
and the termination and expiration of this Agreement for any reason,
except for any matter which gave rise to Termination For Cause.
12. The Company will take commercially reasonable steps to assist the
Employee in obtaining a "green card" and shall bear all reasonable
and customary costs related thereto.
13 Reserved
14 General
14.1 Notice. All notices or other communications provided for by this
Agreement, will be given in writing, either by personal delivery;
registered mail, postage prepaid; overnight courier services; or by
facsimile transmission to the party at their last known address or
number. All notices or communications given by courier will be
deemed delivered on the third business day after the sending
thereof; those given by personal delivery or by facsimile
transmission will be deemed delivered on the next business day
following transmission or delivery; and those given by mail will be
deemed delivered on the fifth business day after posting.
14.2 Severability. The invalidity of all or part of any Section of this
Agreement shall not render invalid the remainder of this Agreement
or the remainder of such Section. If any provision of this Agreement
is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
14.3 Further Assurances. Each party will cooperate, take such further
reasonable action and execute and deliver such further documents as
may be reasonably requested by the other in order to effectuate the
intent and purposes of this Agreement.
6
<PAGE> 6
14.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns.
Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Employee. This Agreement shall
inure to the benefit of and be enforceable by the Employee's lawful
personal representative.
14.5 Waiver. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed
to in writing and signed by the Employee and the Company. No waiver
by either party at any time of any breach by the other party of, or
non-compliance with, any condition or provision of this Agreement
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
14.6 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas.
14.7 Arbitration. Any dispute between the parties relating to or arising
out of, the provisions of this Agreement (other than Sections 8 and
9, which disputes may be litigated in a court of competent
jurisdiction) will be referred exclusively to arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The parties shall appoint a single
arbitrator selected by mutual consent, and failing such consent
within twenty days from the date on which a party first requested
arbitration - the arbitrator will be appointed by the American
Arbitration Association. The arbitrator will be bound by Texas
substantive law but will not be bound by the rules of evidence or
civil procedure. The arbitrator will be required to provide the
grounds for his ruling in writing. Any arbitration proceedings shall
be held in Houston, Texas.
14.8 Entire Agreement. This Agreement constitutes the entire employment
agreement between the parties and supersedes all prior agreements,
understandings and arrangements, oral or written, between the
parties hereto with respect to the subject matter hereof.
14.9 Representation by the Company. The Company hereby represents and
warrants that (i) the person who has executed this Agreement on its
behalf is duly authorized to do so; (ii) the Company has full
corporate power and authority to enter into and perform its
obligations under this Agreement; and (iii) the execution by the
Company of this Agreement has been duly authorized and approved by
all necessary corporate action.
IN WITNESS WHEREOF, the Company and Netect have caused this Agreement to be
duly executed and the Employee has duly executed this Agreement as of the day
and year first written above.
Netect Inc.
By: /s/ Eric J. Pulaski /s/ Marc R. Caminetsky
------------------------- ------------------------
Name: Eric J. Pulaski Marc R. Caminetsky
-------------------------
Title: President
-------------------------
BindView Development Corporation
By: /s/ Eric J. Pulaski
-------------------------
Name: Eric J. Pulaski
-------------------------
Title: President
-------------------------
7
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT BETWEEN BINDVIEW DEVELOPMENT
AND PAUL CORMIER
This Amended and Restated Employment Agreement, dated this 24th day of June,
1999 (this "Agreement"), is entered into by and between BindView Development
Corporation, a Texas corporation (the "Company"), Netect Inc., a Massachusetts
corporation and wholly-owned subsidiary of the Company ("Netect"), and Mr. Paul
J. Cormier (the "Employee").
RECITALS
In consideration of the premises and the covenants and agreements contained
herein, and intending to be legally bound, the parties hereto agree as follows:
1 Introduction
(a) The recitals to this Agreement constitute an integral and
indivisible part of this Agreement.
(b) This Agreement supersedes any previous agreement regarding
the Employee's employment, including any agreement with
Netect or Netect Ltd.
2 Position; Duties; Location
During the Term of Employment (as hereinafter defined), the Employee
will serve as the Vice President of Research and Development of the
Company, at the discretion of the President and Chief Executive
Officer of the Company, and shall perform such duties consistent
with such position as are assigned to him from time to time by the
President and Chief Executive Officer of the Company. The Employee
agrees to devote all of his business time, skill, attention and best
efforts to the Company's business to discharge and fulfill the
responsibilities assigned to him in that capacity. The Employee
agrees not to render services to any other person or entity of any
kind for compensation other than as set forth on Schedule A hereto,
and in addition shall not engage in any activity that conflicts or
interferes with the performance of the duties and responsibilities
of the position.
The Employee and the Company expect that the Employee will spend
time in Houston, Texas as required. To facilitate this, during the
Term of Employment the Company will provide the Employee at the
Company's expense with a furnished temporary apartment in Houston
and will pay reasonable travel expenses incurred by the Employee to
and from Houston. With the approval of the President and Chief
Executive Officer of the Company, the Employee may also receive
reimbursement for the reasonable travel expenses of his immediate
family to and from Houston.
3 Compensation
(a) In consideration for the performance of his duties
hereunder, BindView shall continue your previously
existing base salary from Netect. As such, the Employee
shall be paid an annual base salary (the "Annual Base
Salary") of $175,000, which will be paid in 24 equal
payments or otherwise in accordance with standard payroll
procedures.
(b) Bonus. The Employee shall be eligible to receive a bonus
("Incentive Bonus Compensation"). All Incentive Bonus
Compensation shall be paid, if earned, in accordance with the
Company's standard payment procedures for officer bonuses. The
Incentive Bonus Compensation for quarters following March 31,
1999 (the "Bonus Agreement") shall be based on (i) the
achievement of management based objectives to be agreed upon in
<PAGE> 2
writing by the Company and the Employee and (ii) the
achievement of criteria relating to revenue and profitability
outlined in a bonus plan matrix to be agreed upon by the
Company and the Employee. The total Incentive Bonus
Compensation for a calendar year if both (i) and (ii) of the
Bonus Agreement are achieved shall be as set forth from time to
time on Schedule B hereto (the "On Target Bonus"). The
Incentive Bonus Compensation for a calendar year will be less
than the On Target Bonus if the criteria specified in the Bonus
Agreement are not achieved and will greater than the On Target
Bonus if the criteria specified in the Bonus Agreement are
exceeded.
The Incentive Bonus Compensation shall not constitute part
of the Employee's salary for the calculation of any
employment benefits.
4 Employment Benefits
During the Term of Employment, the Company will maintain at its
cost, health, dental, life and long-term disability insurance for
the benefit of the Employee as the Company generally provides to its
employees (including eligibility for and matching contributions to a
401(k) plan in accordance with the Company's policies).
During the Term of Employment, the Employee shall be entitled to
participate in or receive benefits under any other employee benefit
plan generally made available by the Company to its executive
officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements
for individuals at such level. It is however understood that the
determination of what is "generally made available by the Company"
will be at the good faith discretion of the Company.
4.1 Expenses.
The Company shall reimburse the Employee for all reasonable travel
and other business expenses incurred by the Employee in the
performance of his duties under this Agreement, upon the Employee's
submission of appropriately itemized documentation thereof in
accordance with the Company's reimbursement policy.
4.2 Disability
(a) If the Company determines in good faith, after considering all
relevant medical evidence, that the Employee has incurred a
Disability (as defined below) during the Term of Employment,
the Company may give the Employee written notice of termination
of the Employee's employment ("Disability Termination"). In
such event, the Employee's employment with the Company shall
terminate as of three business days following the issuing of
such notice by the Company. In the event of Disability
Termination the Company shall pay to the Employee, as soon as
practicable after the close of the Company's fiscal quarter in
which such Disability Termination occurs, any accrued and
unpaid Incentive Bonus Compensation for the quarter prior to
the quarter in which Disability Termination occurs plus a
prorated portion of any unpaid Incentive Bonus Compensation to
which he would have been entitled for the quarter in which the
Disability Termination occurs. This subsection shall not limit
the entitlement of the Employee to any disability or other
benefits then available to the Employee under any benefit plan
or policy which is maintained by the Company for the Employee's
benefit.
(b) For the purpose of this Section, "Disability" shall mean
the Employee's failure to perform his duties to the
Company (and Netect as applicable) on a full-time basis
for a total of at least three consecutive months during
any twelve-month period, as a result of incapacity due to
a mental or physical illness or injury, as confirmed by a
physician selected by the Board of Directors of the
Company.
2
<PAGE> 3
5 Vacation
The Employee shall be entitled to annual vacation leave in
accordance with the Company's vacation policy for executive officers
of the Company.
6 Term and Termination
(a) Term. The "Term of Employment", as used herein, shall mean
a period commencing on the date hereof and ending on a
date that is the earlier to occur of (A) the receipt by
the Employee of a written notice of termination by the
Company given to the Employee ("Termination Without
Cause") or (B) the occurrence of an event specified in
Section 4.2, 6(c) or 6(d); provided, however, that the
occurrence of any of the events set forth in Section 4.2
or this Section 6 shall result in the immediate
termination of the Term of Employment, but shall not
result in the termination of this Agreement.
(b) Termination Without Cause. The Company may terminate the Term
of Employment hereunder at its sole discretion at any time,
with or without cause; provided, however, that if the Company
terminates the Term of Employment (including by notice pursuant
to clause (a)) other than (y)"For Cause" (as hereinafter
defined) or (z) upon Disability of the Employee, the Company
shall (i) promptly pay to the Employee all accrued but unpaid
Annual Base Salary, (ii) pay to the Employee as soon as
practicable after the close of the Company's fiscal quarter in
which such termination occurs, any accrued and unpaid Incentive
Bonus Compensation for the quarter prior to the quarter in
which termination occurs plus a prorated portion of any unpaid
Incentive Bonus Compensation to which he would have been
entitled for that quarter, and (iii) subject to both the
execution by the Employee of a release in a form reasonably
satisfactory to the Company and the continued compliance with
the terms of this Agreement that are intended to remain
applicable after termination of the Term of Employment,
continue to pay to the Employee his Annual Base Salary, based
on the Annual Base Salary level in effect immediately prior to
the termination, in monthly payments, for a period of 12 months
(hereinafter the "Severance Period"). During the Severance
Period, the Employee shall be entitled to retain his medical
and other health benefits (to the extent permitted under the
Company's benefit plans).
(c) Death. The Employee's Term of Employment hereunder and this
Agreement shall automatically terminate upon Employee's death.
In the case of the Employee's death, the Company shall pay to
the Employee's beneficiaries or estate, as appropriate: (i)
promptly after the Employee's death, all earned but unpaid
Annual Base Salary to which he is entitled pursuant to
subsection 3(a), and (ii) as soon as practicable after the
close of the Company's fiscal quarter in which the Employee's
death occurs, any accrued and unpaid Incentive Bonus
Compensation for the quarter prior to the quarter in which
death occurs plus a prorated portion of any unpaid Incentive
Bonus Compensation to which he would have been entitled for
that quarter. This subsection 6(b) shall not limit the
entitlement of the Employee's estate or beneficiaries to any
death or other benefits then available to the Employee under
any benefit plan or policy which is maintained by the Company
for the Employee's benefit.
(d) For Cause. The Company may terminate Employee's Term of
Employment with the Company without any payment, other
than any accrued and unpaid portion of the Annual Base
Salary, or any benefits in any or all of the following
cases ("For Cause"):
(i) any actions taken by the Employee not in good faith
against the material interests of the Company or
Netect;
(ii) the conviction of the Employee in respect of an
offense involving dishonesty and/or a felony
with respect to his activities with the Company
or Netect; or
3
<PAGE> 4
(iii) any other material breach by the Employee of
this Agreement, provided that the Company first
notifies the Employee of the specific breach
committed by him and the Employee is given sixty
(60) days to cure such material breach.
In cases (i) and (ii) above the Employee's Term of
Employment shall terminate immediately upon written notice
from the Company. In case (iii), the Employee's Term of
Employment shall terminate upon the expiration of the
period mentioned therein.
(f) For Good Reason. The Employee may terminate his Term of
Employment at any time for Good Reason (as defined below) or
otherwise.
(iv) If the Employee terminates his Term of Employment for Good Reason,
he shall be entitled to receive the same compensation he would
otherwise have received had the Company terminated his Term of
Employment pursuant to clause 6(b) above other than (y) For Cause or
(z) upon Disability of the Employee.
(v) If the Employee resigns or otherwise terminates his Term of
Employment other than for Good Reason , he shall not be entitled to
any payment, other than any accrued and unpaid portion of the Annual
Base Salary and any accrued and unpaid Incentive Bonus Compensation
for the quarter prior to the quarter in which the resignation or
termination occurs, or any benefits otherwise provided for pursuant
to this Agreement.
(vi) "Good Reason" shall mean
(A) the Company reduces the Employee's
Annual Base Salary or materially
reduces his responsibility or duties
with the Company, or
(B) the nonvoluntary relocation by the Company
of the Employee from the Boston area, or
(C) any material breach by the Company of
its obligations hereunder, which
breach is not cured within fifteen
(15) business days of the Employee's
notice thereof.
(f) Company Property. Upon termination of the Employee's Term
of Employment, the Employee shall transfer his position to
a replacement in an orderly and efficient manner and shall
return to the Company and Netect all documents,
literature, equipment, computer hardware and software and
other equipment belonging to or prepared for the Company
or Netect, in the same condition (ordinary wear and tear
excepted) as when delivered to him.
7 Pooling. Notwithstanding anything herein to the contrary, Employee
agrees not to take any action that in the opinion of the
Company's independent certified public accountants could
reasonably be expected to jeopardize the accounting treatment
of any transactions that are pending or completed during the
Term of Employment and for which the Company proposed to
account therefor as a "pooling of interests" transaction.
8 Confidentiality
(b) Information. The Employee agrees that the Information (as
defined below) shall be kept confidential and shall not,
without the prior written consent of the Company, be disclosed
or furnished to any person, corporation or other business
organization. The Employee further agrees to use the
Information only in the course of the performance of his duties
to the Company. "Information" shall mean all information, both
oral and written, which is non-public, confidential or
proprietary in nature, including without limitation, software,
source codes, technical information, financial data, business
strategies, product development, product data, processes,
techniques, procedures, customer lists, marketing plans and
other proprietary information used by the Company or by Netect
4
<PAGE> 5
Ltd. or by Netect or any of the Company's other subsidiaries or
pertaining to its/their business. Information shall not include
information which (i) is or becomes generally available to the
public other than as a result of disclosure by the Employee or
(ii) is required to be disclosed by law or applicable legal
process (in which case the Employee will consult with the
Company on an ongoing basis in order to legally minimize the
amount of Information disclosed).
(c) Inventions. All processes, technologies, inventions, discoveries,
applications, improvements, ideas, trade names and trademarks
(collectively, "Inventions"), which are conceived, originated,
developed or acquired by the Employee as a result of or in
connection with his engagement or affiliation with the Company
or any of its subsidiaries, alone or with others, during the
Employee's employment with the Company or any of its
subsidiaries, whether or not patentable and whether or not
conceived, originated or developed on the Company's or any of
its subsidiaries' time or with the use of the Company's or any
of its subsidiaries' facilities or materials, shall be the sole
and exclusive property of the Company and shall be promptly and
fully disclosed by the Employee to the Company. It is
understood that such Inventions are proprietary in nature and
shall (as between the Company and Employee) be for the
exclusive use and benefit of the Company.
(c) Survival. The provisions of this Section 8 shall survive the
termination of the Term of Employment and the termination of
this Agreement.
9 Non-Competition.
The Employee agrees that, during the Term of Employment with the
Company, and for a period of twelve (12) months thereafter, the
Employee shall not, directly or indirectly:
(a) anywhere in the world be employed by, engaged in, connected
with, or own, share in the earnings of, or invest in the
securities of any person, partnership, corporation or other
business organization that is engaged in a business which is in
direct competition to that in which the Company or any of its
subsidiaries is engaged or is actively contemplating engaging
during the Term of his Employment or at the time of termination
of the Term of Employment, provided, however, that (i) the
Employee may invest in the securities of any business
organization engaging in a similar business as that of the
Company's or any of its subsidiaries if such securities are
listed on any securities exchange and the Employee's investment
does not exceed 10% of the issued and outstanding securities of
such business organization, and Employee does not have any
participation in the control of such business organization,
and/or (ii) if the Employee wishes to be engaged by or
connected with any department in any business organization
which is in direct competition with the Company or any of its
subsidiaries, and such department is not in itself in direct
competition with the Company nor would the Employee's
engagement/connection with such department involve the use of
any Information (as defined in Section 8 above), then the
Employee may apply to the Company for the Company's consent to
such engagement/connection with such department, which consent
shall not be unreasonably withheld; or
(b) hire, engage, employ or solicit, contact or communicate
with for the purpose of hiring, employing or engaging, any
person, firm, corporation or other business organization
who or which at any time during his employment with the
Company or any of its subsidiaries was an employee,
consultant, advisor, client, or in the habit of dealing
with the Company or any of its subsidiaries and, other
than with respect to employees of the Company or any of
its subsidiaries, which was engaged in or associated with
a business which is in direct competition with that of the
Company or any of its subsidiaries.
5
<PAGE> 6
10 Remedies.
The Employee acknowledges that the provisions and limitations set
forth in Sections 8 and 9 of this Agreement are necessary for the
protection of the Company and are reasonable in light of the
activities and business of the Company. Employee further
acknowledges that (i) the Employee will be able to support himself
without violating such covenant and (ii) the Employee has been
advised by his legal counsel as to the meaning and consequences of
such covenant. The Employee acknowledges that the Company will have
no adequate remedy at law if the Employee breaches any of the
provisions of Sections 8 or 9 of this Agreement. In such event, the
Company shall have the right, in addition to any other rights it may
have, to obtain in any court of competent jurisdiction injunctive
relief to restrain any breach or threatened breach of or otherwise
to specifically enforce any of the provisions of said sections.
Further, if a court or arbitrator of competent jurisdiction finds
the scope, time or geographical restrictions in Sections 8 or 9 of
this Agreement to be unreasonable, it is the intention of the
parties that such restrictions shall be enforced to the fullest
extent to which such court or arbitrator deems reasonable, and such
provisions shall thereby be reformed.
11 Indemnification
The Company shall, subject to any legal impediment, indemnify the
Employee against all legal actions to the fullest extent permitted
under the Company's Certificate of Incorporation.
The provisions of this Section shall survive the Term of Employment
and the termination and expiration of this Agreement for any reason,
except for any matter which gave rise to Termination For Cause.
12. The Company will take commercially reasonable steps to assist the
Employee in obtaining a "green card" and shall bear all reasonable
and customary costs related thereto.
13 Reserved
14 General
14.1 Notice. All notices or other communications provided for by this
Agreement, will be given in writing, either by personal delivery;
registered mail, postage prepaid; overnight courier services; or by
facsimile transmission to the party at their last known address or
number. All notices or communications given by courier will be
deemed delivered on the third business day after the sending
thereof; those given by personal delivery or by facsimile
transmission will be deemed delivered on the next business day
following transmission or delivery; and those given by mail will be
deemed delivered on the fifth business day after posting.
14.2 Severability. The invalidity of all or part of any Section of this
Agreement shall not render invalid the remainder of this Agreement
or the remainder of such Section. If any provision of this Agreement
is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
14.3 Further Assurances. Each party will cooperate, take such further
reasonable action and execute and deliver such further documents as
may be reasonably requested by the other in order to effectuate the
intent and purposes of this Agreement.
14.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns.
Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Employee. This Agreement shall
inure to the benefit of and be enforceable by the Employee's lawful
personal representative.
14.5 Waiver. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed
to in writing and signed by the Employee and the Company. No waiver
by either party at any time of any breach by the other party of, or
6
<PAGE> 7
non-compliance with, any condition or provision of this Agreement
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
14.6 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas.
14.8 Arbitration. Any dispute between the parties relating to or arising
out of, the provisions of this Agreement (other than Sections 8 and
9, which disputes may be litigated in a court of competent
jurisdiction) will be referred exclusively to arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The parties shall appoint a single
arbitrator selected by mutual consent, and failing such consent
within twenty days from the date on which a party first requested
arbitration - the arbitrator will be appointed by the American
Arbitration Association. The arbitrator will be bound by Texas
substantive law but will not be bound by the rules of evidence or
civil procedure. The arbitrator will be required to provide the
grounds for his ruling in writing. Any arbitration proceedings shall
be held in Houston, Texas.
14.8 Entire Agreement. This Agreement constitutes the entire employment
agreement between the parties and supersedes all prior agreements,
understandings and arrangements, oral or written, between the
parties hereto with respect to the subject matter hereof.
14.9 Representation by the Company. The Company hereby represents and
warrants that (i) the person who has executed this Agreement on its
behalf is duly authorized to do so; (ii) the Company has full
corporate power and authority to enter into and perform its
obligations under this Agreement; and (iii) the execution by the
Company of this Agreement has been duly authorized and approved by
all necessary corporate action.
IN WITNESS WHEREOF, the Company and Netect have caused this Agreement to be
duly executed and the Employee has duly executed this Agreement as of the day
and year first written above.
Netect Inc.
By: /s/ Eric J. Pulaski /s/ Paul J. Cormier
--------------------------- ----------------------------
Name: Eric J. Pulaski Paul J. Cormier
--------------------------
Title: President
--------------------------
BindView Development Corporation
By: /s/ Eric J. Pulaski
--------------------------
Name: Eric J. Pulaski
--------------------------
Title: President
--------------------------
7
<PAGE> 1
EXHIBIT 11
BINDVIEW DEVELOPMENT CORPORATION
STATEMENT REGARDING COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------- -------------------------
1999 1998 1999 1998
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ 1,925 $ (542) $ 361 $ (1,212)
========= ========== ========= ==========
Shares used in basis calculation
Total basic shares 22,691 8,949 22,101 8,891
Additional shares for diluted computation:
Effect of stock options 2,314 2,726 2,592 2,039
Effect of warrants 16 526 11 525
Effect of convertible preferred stock and debentures -- 6,544 -- 6,544
Exclusion of share equivalents that are anti-dilutive because
a loss was incurred -- (9,796) -- (9,108)
--------- ---------- --------- ----------
Total diluted shares 25,021 8,949 24,704 8,891
========= ========= ========= =========
Earnings (loss) per common share
Basic $ 0.08 $ (0.06) $ 0.02 $ (0.14)
Diluted $ 0.08 $ (0.06) $ 0.01 $ (0.14)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 43,078
<SECURITIES> 13,755
<RECEIVABLES> 7,968
<ALLOWANCES> 374
<INVENTORY> 0
<CURRENT-ASSETS> 70,761
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 85,738
<CURRENT-LIABILITIES> 12,802
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 72,935
<TOTAL-LIABILITY-AND-EQUITY> 85,738
<SALES> 15,019
<TOTAL-REVENUES> 15,019
<CGS> 851
<TOTAL-COSTS> 11,934
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,962
<INCOME-TAX> 1,037
<INCOME-CONTINUING> 1,925
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,925
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
