NOVADIGM INC, DEF 14A, 1999-07-26

NOVADIGM INC
DEF 14A, 1999-07-26
PREPACKAGED SOFTWARE

Previous: PENNSYLVANIA DAILY MUNICIPAL INCOME FUND INC, N-30D, 1999-07-26

Next: VANGUARD FLORIDA INSURED TAX FREE FUND, N-30D, 1999-07-26

<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or 240.14a-12
</TABLE>

NOVADIGM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

NOVADIGM, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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

(2) Form, Schedule or Registration Statement No.:

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

(3) Filing Party:

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

(4) Date Filed:

- --------------------------------------------------------------------------------
<PAGE> 2

NOVADIGM, INC.
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 17, 1999

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NOVADIGM,
INC. (the "Company"), a Delaware corporation, will be held on Friday, September
17, 1999 at 9:00 a.m., local time, at the Ritz-Carlton Hotel, 600 Stockton
Street, San Francisco, California 94108, for the following purposes:

1. To elect four (4) directors to serve for the ensuing year and until
their successors are duly elected and qualified.

2. To approve the amendment of the Company's 1992 Stock Option Plan to
provide for a maximum term for all options granted thereunder of 10
years.

3. To approve the amendment of the Company's 1995 Stock Option Plan for
French Employees to provide for a maximum term of all options granted
thereunder of 9 1/2 years.

4. To ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the fiscal year ending March 31, 2000.

5. To transact such other business as may properly come before the meeting
or any adjournment thereof.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.

Only stockholders of record at the close of business on July 20, 1999 are
entitled to notice of and to vote at the meeting.

All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.

Sincerely,

Albion J. Fitzgerald
Chairman of the Board and
Chief Executive Officer
Mahwah, New Jersey
July 26, 1999

YOUR VOTE IS IMPORTANT.

IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
<PAGE> 3

NOVADIGM, INC.
------------------------

PROXY STATEMENT
------------------------

1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 17, 1999
------------------------

INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

The enclosed proxy is solicited on behalf of NOVADIGM, INC. (the "Company")
for use at the Annual Meeting of Stockholders to be held Friday, September 17,
1999 at 9:00 a.m., local time (the "Annual Meeting"), or at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Ritz-Carlton Hotel, 600 Stockton Street, San Francisco, California 94108. The
Company's principal executive offices are located at One International
Boulevard, Suite 200, Mahwah, New Jersey 07495 and its telephone number at that
location is (201) 512-1000.

These proxy solicitation materials and the Annual Report to Stockholders
for the year ended March 31, 1999, including financial statements, will be first
mailed on or about July 26, 1999 to all stockholders entitled to vote at the
Annual Meeting.

PURPOSES OF THE ANNUAL MEETING

The purposes of the Annual Meeting are to (1) elect four directors to serve
for the ensuing year and until their successors are duly elected and qualified;
(2) to approve an amendment to the Company's 1992 Stock Option Plan to provide
for a maximum term for options granted thereunder of 10 years; (3) to approve an
amendment to the Company's 1995 Stock Option Plan for French Employees to
provide for a maximum term for options granted thereunder of 9 1/2 years; (4) to
ratify the appointment of Arthur Andersen LLP as independent auditors of the
Company for the fiscal year ending March 31, 2000; and (5) transact such other
business as may properly come before the meeting or any adjournment thereof.

RECORD DATE AND PRINCIPAL SHARE OWNERSHIP

Stockholders of record at the close of business on July 20, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting. The Company
has one authorized class of capital stock outstanding, designated Common Stock,
$.001 par value. At the Record Date, 17,959,964 shares of the Company's Common
Stock were issued and outstanding. For information regarding holders of more
than 5% of the outstanding Common Stock, see "Beneficial Security Ownership of
Management and Certain Beneficial Owners." The closing sale price of the
Company's Common Stock on the Nasdaq National Market on the Record Date was
$9.50 per share.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.

Each holder of Common Stock is entitled to one vote for each share held as
of the record date with respect to all matters that may be considered at the
Annual Meeting. The cost of soliciting votes will be borne by the Company.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees without additional compensation, personally or by mail,
telephone or telegram.
<PAGE> 4

QUORUM; ABSTENTIONS; BROKER NON-VOTES

The Company intends to include abstentions and broker non-votes as present
or represented for purpose of establishing a quorum for the transaction of
business, to include abstentions as shares entitled to vote and to exclude
broker non-votes from the calculation of shares entitled to vote with respect to
any proposal for which authorization to vote was withheld.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the Securities and Exchange Commission. Proposals of stockholders of the Company
that are intended to be presented by such stockholders at the Company's 2000
Annual Meeting of Stockholders must be received by the Company no later than
March 28, 2000, in order that they may be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. The attached proxy card
grants the proxy holders discretionary authority to vote on any matter properly
raised at the Annual Meeting. If a stockholder intends to submit a proposal at
the 2000 Annual Meeting, which is not eligible for inclusion in the proxy
statement and form of proxy relating to that meeting, the stockholder must do so
no later than June 11, 2000. If such stockholder fails to comply with the
foregoing notice provision, the proxy holders will be allowed to use their
discretionary voting authority when the proposal is raised at the 2000 Annual
Meeting.

ANNUAL REPORT ON FORM 10-K

A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999 thereto filed with the Securities and Exchange Commission
may be obtained without charge by sending a written request to Attn: Investor
Relations, Novadigm, Inc., One International Boulevard, Suite 200, Mahwah, New
Jersey 07495.

PROPOSAL ONE

ELECTION OF DIRECTORS

NOMINEES

A board of four directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's four nominees named below, who are all presently directors of
the Company. In the event that any nominee of the Company is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the present Board of Directors
to fill the vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director. The term of office of each person elected as a
director will continue until the next Annual Meeting of Stockholders or until a
successor has been elected and qualified.

THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE FOUR NOMINEES
LISTED BELOW.

The name of and certain information regarding each nominee is set forth
below, There are no family relationships among directors or executive officers
of the Company, except as set forth below.

<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY DIRECTOR SINCE
---- --- -------------------------- --------------
<S> <C> <C> <C>
Albion J. Fitzgerald............... 51 Chairman of the Board of Directors February 1992
and Chief Executive Officer
Robert B. Anderson................. 44 Executive Vice President, Europe June 1992
and Secretary
H. Kent Petzold.................... 52 Director August 1992
Deborah Doyle McWhinney............ 44 Director September 1997
</TABLE>

Albion J. Fitzgerald co-founded the Company in February 1992, serving as
Chairman since that time, and currently as Chief Executive Officer. Mr.
Fitzgerald has previously served as Chief Technology Officer and

2
<PAGE> 5

President. In May 1990, Mr. Fitzgerald founded Fitzgerald Associates, the
Company's predecessor, and served as the chief architect in the development of
desired-state management and fractional differencing technologies that are the
basis of the Company's products, EDM and Radia. Mr. Fitzgerald's brother-in-law
is Wallace D. Ruiz, the Company's Chief Financial Officer, and Mr. Fitzgerald's
brother is Joseph Fitzgerald, the Company's Vice President, Development.

Robert B. Anderson joined the Company in June 1992 as Vice President, Chief
Financial Officer, Secretary and as a director. He currently serves as Executive
Vice President, Secretary and as a director. From 1990 to 1992, Mr. Anderson
served as Senior Vice President at Stratagem, an investment banking firm
specializing in mergers, acquisitions and divestitures in the software industry.
Prior to Stratagem, Mr. Anderson was employed as Vice President in the Corporate
Finance Software Specialty Group at Sutro & Company, a financial services firm.

H. Kent Petzold has been a director of the Company since August 1992. From
August 1992 to May 1995, Mr. Petzold served as the President and Chief Executive
Officer of the Company. Mr. Petzold has been President and Chief Executive
Officer of Cyclone Software Corp. since April 1998 and was a consultant to the
software industry from June 1995 to April 1998. Mr. Petzold also serves as a
director of several privately held software companies.

Deborah Doyle McWhinney has been a director of the Company since September
1997. Since July 1999, Ms. McWhinney has been President of I/PRO, a subsidiary
of Engage Technologies, Inc., an internet advertising and management company.
From December 1995 to July 1999, Ms. McWhinney served as an Executive Vice
President of Visa International, Inc., a financial services company. Prior to
joining Visa, Ms. McWhinney was with Bank of America Corporation, where she held
several positions including, from 1986 to 1995, Senior Vice President, Bank of
America Consumer Electronic Banking and Delivery. Ms. McWhinney is also a
director of the First Bank of Idaho.

REQUIRED VOTE

The four nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but they have no legal effect under Delaware law.

BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company held a total of eight meetings during
the fiscal year ended March 31, 1999. No director, during the time he or she was
a member of the Board of Directors, attended fewer than 75% of the aggregate of
all meetings of the Board of Directors, or its committees on which he served
which occurred during fiscal 1999. The Board has an Audit Committee, a
Compensation Committee and a Stock Option Committee. It does not have a
nominating committee or a committee performing the functions of a nominating
committee.

The Audit Committee is responsible for (i) recommending engagement of the
Company's independent auditors, (ii) approving the services performed by such
auditors, (iii) consulting with such auditors and reviewing with them the
results of their examination, (iv) reviewing and approving any material
accounting policy changes affecting the Company's operating results, (v)
reviewing the Company's control procedures and personnel, and (vi) reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee held two meetings during fiscal 1999.
The Audit Committee currently consists of Deborah McWhinney and Kent Petzold.

The Compensation Committee is responsible for (i) reviewing and approving
the compensation and benefits for the Company's officers and other employees,
(ii) administering the Company's stock purchase and stock option plans, and
(iii) determining which eligible individuals (excluding nonemployee directors)
receive grants thereunder and the size of such grants. The Compensation
Committee held two meetings during fiscal 1999. The Compensation Committee
currently consists of Deborah McWhinney and Kent Petzold.

3
<PAGE> 6

The Stock Option Committee is responsible for reviewing and approving
grants of options to non-officer employees under the Company's 1992 Stock Option
Plan. The Stock Option Committee held one meeting during fiscal 1999. The Stock
Option Committee currently consists of Albion Fitzgerald, Robert Anderson and
Kent Petzold.

COMPENSATION OF DIRECTORS

Directors who are employees of the Company do not receive additional
compensation for their services as directors of the Company, but are reimbursed
for out-of-pocket expenses in connection with attendance at committee meetings.
Nonemployee members of the Board of Directors receive $500 for each Board
meeting attended and $500 for each meeting attended of a committee to the Board
on which such director serves, in addition to reimbursement of expenses.

PROPOSAL TWO

AMENDMENT TO 1992 STOCK OPTION PLAN

At the Annual Meeting, the stockholders are being asked to approve the
amendment of the Company's 1992 Stock Option Plan (the "1992 Plan") to provide
that the maximum term of options granted thereunder be 10 years. Prior to the
amendment, the maximum term for options under the 1992 Plan was 10 years for
grants to employees other than officers and directors and 5 years for grants to
officers and directors. The Board of Directors approved the amendment to the
1992 Plan in June 1999. As of June 30, 1999, options to purchase an aggregate of
3,143,605 shares of the Company's Common Stock were outstanding under the 1992
Plan with a weighted average exercise price of $4.48 per share, and 596,873
shares were available for future grant. The 1992 Plan authorizes the Board of
Directors to grant incentive and nonstatutory stock options to eligible
employees, directors and consultants of the Company.

The 1992 Plan is structured to allow the Board of Directors broad
discretion in creating equity incentives in order to assist the Company in
attracting, retaining and motivating the best available personnel for the
successful conduct of the Company's business. Since inception, the Company has
provided stock options as an incentive to its key employees and executives as a
means to promote increased stockholder value. Management believes stock options
are one of the prime methods of attracting and retaining key personnel
responsible for the continued development and growth of the Company's business.
In addition, stock options are considered a competitive necessity in the high
technology industry.

VOTE REQUIRED

The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the 1992 Plan. For this purpose, the "Votes Cast" are
defined to be the shares of the Company's Common Stock represented and voting at
the Annual Meeting. In addition, the affirmative votes must constitute at least
a majority of the required quorum, which quorum is a majority of the shares
outstanding at the Record Date. Votes that are cast against the proposal will be
counted for purposes of determining both (i) the presence or absence of a quorum
and (ii) the total number of Votes Cast with respect to the proposal.

Abstentions will be counted for purposes of determining both (i) the
presence or absence of a quorum and (ii) the total number of Votes Cast with
respect to the proposal. Accordingly, abstentions will have the same effect as a
vote against the proposal. Broker non-votes, if any, will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted for purposes of determining the number of
Votes Cast with respect to this proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE 1992 PLAN.

4
<PAGE> 7

The essential terms of the 1992 Plan are summarized as follows:

PURPOSE

The purposes of the 1992 Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants of the Company and to promote
the success of the Company's business.

ADMINISTRATION

The 1992 Plan provides for administration by the Board of Directors of the
Company or by a Committee of the Board. The Board or the committee appointed to
administer the 1992 Plan is referred to in this description as the
"Administrator."

The Administrator determines the terms and conditions of options granted,
including the exercise price, number of shares subject to the option and the
exercisability thereof. All questions of interpretation are determined by the
Administrator and its decisions are final and binding upon all participants.
Members of the Board receive no additional compensation for their services in
connection with the administration of the 1992 Plan.

ELIGIBILITY

The 1992 Plan provides that either incentive or nonstatutory stock options
may be granted to employees (including officers and employee directors) of the
Company or any of its designated subsidiaries. In addition, the 1992 Plan
provides that nonstatutory stock options may be granted to non-employee
directors and consultants of the Company or any of its designated subsidiaries.
The Administrator selects the optionees and determines the number of shares to
be subject to each option. In making such determination, the Administrator takes
into account the duties and responsibilities of the optionee, the value of the
optionee's services, the optionee's present and potential contribution to the
success of the Company and other relevant factors. The 1992 Plan provides a
limit of $100,000 on the aggregate fair market value of shares subject to all
incentive options that are exercisable for the first time in any one calendar
year. The 1992 Plan provides that a maximum of 500,000 shares may be granted to
any one employee during any fiscal year of the Company. The 1992 Plan does not
provide for a minimum number of option shares that may be granted to any one
employee.

TERMS OF OPTIONS

Each option is evidenced by a stock option agreement between the Company
and the optionee to whom such option is granted and is subject to the following
additional terms and conditions:

(1) Exercise of the Option: The Administrator determines when options
granted under the 1992 Plan may be exercised. An option is exercised by
giving written notice of exercise to the Company, specifying the number of
shares of Common Stock to be purchased and tendering payment to the Company
of the purchase price. Payment for shares issued upon exercise of an option
may consist of (i) cash, (ii) check, (iii) promissory note, (iv) subject to
certain conditions, delivery of already-owned shares of the Company's
Common Stock, (v) authorization for the Company to retain that number of
shares being exercised having a fair market value equal to the exercise
price, (vi) pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes,
(vii) delivery of an irrevocable subscription agreement to take and pay for
the shares not later than 12 months after the date of delivery of the
subscription agreement, or (viii) any combination of the foregoing methods
or (ix) such other consideration as determined by the Administrator and as
permitted by applicable laws. Options may be exercised at any time on or
following the date the options are first exercisable. An option may not be
exercised for a fraction of a share.

5
<PAGE> 8

(2) Option Price: The option price of all stock options under the 1992
Plan may not be less than the fair market value of the Common Stock on the
date the option is granted; provided, however, that in the case of a stock
option granted to an optionee who at the time of grant owns stock
representing more than 10% of the voting power of all classes of stock of
the Company, the option price must be not less than 110% of the fair market
value on the date of grant. For purposes of the 1992 Plan, fair market
value is defined as the closing sale price per share of the Common Stock on
the date of grant as reported on the Nasdaq National Market.

(3) Termination of Employment or Consulting Relationship: The 1992
Plan provides that if the optionee's employment or consulting relationship
with the Company is terminated for any reason, other than death, or
disability, the period of time during which an option may be exercised
following such termination is 30 days (or such other period as is
determined by the Board, with such determination in the case of an
incentive stock option being made at the time of grant and not exceeding 30
days). Options may be exercised only to the extent the options were
exercisable on the date of termination and in no event later than the
expiration of the term of the option.

(4) Death: If an optionee should die, options may be exercised at any
time within 12 months following the date of death (but in no event later
than the expiration date of the option) by the Optionee's estate or by a
person who acquired the right to exercise the option by bequest or
inheritance, but only to the extent the Optionee is entitled to exercise
the option on the date of death.

(5) Disability: If an optionee's employment or consulting is
terminated due to a disability, options may be exercised at any time within
six months from the date of such termination (but in no event later than
the expiration date of the option), but only to the extent that the options
were exercisable on the date of termination of employment.

(6) Term of Options: The term of each option shall be the term stated
in the option agreement or in an amendment thereto up to a maximum of 10
years from the date of grant; provided, however, that options granted to
officers and directors prior to September 17, 1999 shall have a term of 5
years.

(7) Nontransferability of Options: An option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than
by will or by the laws of descent and distribution, and may be exercised,
during the lifetime of the optionee, only by the optionee.

ADJUSTMENT UPON CHANGES IN CAPITALIZATION

In the event any change, such as a stock split, stock dividend,
reclassification or combination, is made in the Company's capitalization which
results in an increase or decrease in the number of outstanding shares of Common
Stock without receipt of consideration by the Company, an appropriate adjustment
shall be made in the option price and in the number of shares subject to each
option. In the event of a merger of the Company with or into another corporation
or the sale of substantially all of the assets of the Company, all outstanding
options may either be assumed or an equivalent option may be substituted by the
surviving entity or, if such options are not assumed or substituted, such
options shall terminate. In the event of a proposed dissolution or liquidation
of the Company, the Board shall notify optionees 15 days prior to such proposed
action. To the extent that an option has not been previously exercised it will
terminate immediately prior to the consummation of such proposed action.

AMENDMENT AND TERMINATION

The Board of Directors may amend the 1992 Plan at any time or from time to
time or may terminate it without approval of the stockholders. However, no
action by the Board of Directors or stockholders may alter or impair any option
previously granted under the 1992 Plan without the consent of the optionee. In
any event, the 1992 Plan will terminate in June 2002. In addition, to the extent
necessary and desirable to comply with federal securities laws or tax laws (or
any requirements of the National Association of Securities Dealers, Inc. or an
established stock exchange), the Company must obtain stockholder approval of any
1992 Plan amendment.

6
<PAGE> 9

TAX INFORMATION

Options granted under the 1992 Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory options.

An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% stockholder of the Company. Generally, the Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.

All other options that do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize ordinary income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.

Generally, the Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonstatutory option.

The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the 1992 Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.

PARTICIPATION IN THE 1992 PLAN

The grant of options under the 1992 Plan to executive officers, including
the officers named in the Summary Compensation Table below, is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the 1992 Plan. Accordingly, future awards are not determinable.

The section entitled "Executive Compensation and Other Matters -- Option
Grants in Last Fiscal Year" provides information with respect to the grant of
options under the 1992 Plan to the Named Executive Officers during fiscal 1999.
During fiscal 1999, all current executive officers as a group and all other
employees as a group were granted options to purchase 25,000 shares and
1,258,500 shares, respectively, under the 1992 Plan. Non-employee directors as a
group were granted options to purchase 100,000 shares under the 1992 Plan in
fiscal 1999.

PROPOSAL THREE

AMENDMENT TO 1995 STOCK OPTION PLAN FOR FRENCH EMPLOYEES

At the Annual Meeting, the stockholders are being asked to approve the
amendment of the Company's 1995 Stock Option Plan for French Employees (the
"1995 Plan") to provide that the maximum term of options granted thereunder be
9 1/2 years. Prior to the amendment, the maximum term for options under the 1995
Plan was 9 1/2 years for grants to employees other than officers and directors
and 4 1/2 years for grants to
7
<PAGE> 10

officers and directors. The Board of Directors approved the amendment to the
1995 Plan in June 1999. As of June 30, 1999, options to purchase an aggregate of
117,750 shares of the Company's Common Stock were outstanding under the 1995
Plan with a weighted average exercise price of $4.70 per share. Shares available
for grant under the 1995 Plan are a subset of those available for grant under
the 1992 Plan. The 1995 Plan authorizes the Board of Directors to grant
incentive and nonstatutory stock options to eligible employees, directors and
consultants of the Company.

The 1995 Plan is structured to allow the Board of Directors broad
discretion in creating equity incentives in order to assist the Company in
attracting, retaining and motivating the best available personnel for the
successful conduct of the Company's business. Options granted under the 1995
Plan are intended to qualify for preferential treatment under French tax laws.
Management believes stock options are one of the prime methods of attracting and
retaining key personnel responsible for the continued development and growth of
the Company's business. In addition, stock options are considered a competitive
necessity in the high technology industry.

VOTE REQUIRED

The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the 1995 Plan. For this purpose, the "Votes Cast" are
defined to be the shares of the Company's Common Stock represented and voting at
the Annual Meeting. In addition, the affirmative votes must constitute at least
a majority of the required quorum, which quorum is a majority of the shares
outstanding at the Record Date. Votes that are cast against the proposal will be
counted for purposes of determining both (i) the presence or absence of a quorum
and (ii) the total number of Votes Cast with respect to the proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE 1995 PLAN.

SUMMARY OF THE PLAN

The essential terms of the 1995 Plan are summarized as follows:

PURPOSE

The purposes of the 1995 Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants of the Company and to promote
the success of the Company's business and the business of the Company's French
subsidiary.

ADMINISTRATION

The 1995 Plan provides for administration by the Board of Directors of the
Company or by a Committee of the Board. The Board or the committee appointed to
administer the 1995 Plan are referred to in this description as the
"Administrator."

8
<PAGE> 11

ELIGIBILITY

The 1995 Plan provides that stock options may be granted to employees
(including officers and employee directors) of the Company or any subsidiary of
the Company located in France, who are French residents. The Administrator
selects the optionees and determines the number of shares to be subject to each
option. In making such determination, the Administrator takes into account the
duties and responsibilities of the optionee, the value of the optionee's
services, the optionee's present and potential contribution to the success of
the Company and other relevant factors.

TERMS OF OPTIONS

Each option is evidenced by a stock option agreement between the Company
and the optionee to whom such option is granted and is subject to the following
additional terms and conditions:

(1) Exercise of the Option: The Administrator determines when options
granted under the 1995 Plan may be exercised. An option is exercised by
giving written notice of exercise to the Company, specifying the number of
shares of Common Stock to be purchased, delivering a written subscription
notice to the Company's French subsidiary and tendering payment to the
Company of the purchase price. Payment for shares issued upon exercise of
an option may consist of (i) cash or check (denominated in U.S. dollars),
(ii) wire transfer (denominated in U.S. dollars), (iii) subject to certain
conditions, delivery of already-owned shares of the Company's Common Stock,
(iv) pursuant to a cashless exercise procedure under which the optionee
provides irrevocable instructions to a brokerage firm to sell the purchased
shares and to remit to the Company, out of the sale proceeds, an amount
equal to the exercise price plus all applicable withholding taxes or (v)
any combination of the foregoing methods. Options may be exercised at any
time on or following the date the options are first exercisable. An option
may not be exercised for a fraction of a share.

(2) Option Price: The option price of all stock options under the 1995
Plan may not be less than the fair market value of the Common Stock on the
date the option is granted. For purposes of the 1995 Plan, fair market
value is defined as the closing sale price per share of the Common Stock on
the date of grant as reported on the Nasdaq National Market.

(3) Termination of Employment Relationship: The 1995 Plan provides
that if the optionee's employment relationship with the Company is
terminated for any reason, other than death, or disability, the period of
time during which an option may be exercised following such termination is
30 days (or such other period as is determined by the Administrator, not
exceeding three months). Options may be exercised only to the extent the
options were exercisable on the date of termination and in no event later
than the expiration of the term of the option.

(4) Death: If an optionee should die, options may be exercised at any
time within six months following the date of death (but in no event later
than the expiration date of the option) by the Optionee's estate or by a
person who acquired the right to exercise the option by bequest or
inheritance, but only to the extent the Optionee is entitled to exercise
the option on the date of death.

(5) Disability: If an optionee's employment is terminated due to a
disability, options may be exercised at any time within six months from the
date of such termination (but in no event later than the expiration date of
the option), but only to the extent that the options were exercisable on
the date of termination of employment.

(6) Term of Options: The term of each option shall be the term stated
in the option agreement or in an amendment thereto up to a maximum of 9 1/2
years from the date of grant; provided, however, that options granted to
officers and directors prior to September 17, 1999 shall have a term of
4 1/2 years.

9
<PAGE> 12

ADJUSTMENT UPON CHANGES IN CAPITALIZATION

AMENDMENT AND TERMINATION

The Board of Directors may amend the 1995 Plan at any time or from time to
time or may terminate it without approval of the stockholders. However, no
action by the Board of Directors or stockholders may alter or impair any option
previously granted under the 1995 Plan without the consent of the optionee. In
any event, the 1995 Plan will terminate in June 2002. In addition, to the extent
necessary and desirable to comply with federal securities laws or tax laws,
French corporate, securities or tax laws or any requirements of the National
Association of Securities Dealers, Inc. or an established stock exchange, the
Company must obtain stockholder approval of any 1995 Plan amendment.

TAX INFORMATION

Options granted under the 1995 Plan are governed by French tax laws.

PARTICIPATION IN THE 1995 PLAN

The grant of options under the 1995 Plan to executive officers, including
the officers named in the Summary Compensation Table below, is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the 1995 Plan. Accordingly, future awards are not determinable.

During fiscal 1999, non-executive officer employees as a group were granted
options to purchase 48,000 under the 1995 Plan. No grants were made to directors
or executive officers of the Company under the 1995 Plan in fiscal 1999.

PROPOSAL FOUR

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has selected Arthur Andersen LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending March 31, 2000 and recommends that stockholders vote for
ratification of such appointment. Notwithstanding the selection, the Board, in
its discretion, may direct the appointment of new independent auditors at any
time during the year, if the Board feels that such a change would be in the best
interests of the Company and its stockholders. In the event of a negative vote
on ratification, the Board of Directors will reconsider its selection.

Arthur Andersen LLP has audited the Company's financial statements annually
since the Company's inception in 1992. Representatives of Arthur Andersen LLP
are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.

The Company's Board of Directors unanimously recommends a vote "FOR" the
ratification of the appointment of Arthur Andersen LLP as independent auditors.

10
<PAGE> 13

BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of July 20, 1999 for the following:
(i) each person or entity known by the Company to own beneficially more than 5%
of the outstanding shares of the Company's Common Stock, (ii) each director of
the Company, (iii) each of the Named Executive Officers (as defined below) and
(iv) all directors and executive officers as a group. Except as otherwise
indicated and pursuant to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to all shares of
Common Stock. Except as otherwise noted, the address for each person identified
in the table is c/o Novadigm, Inc., One International Boulevard, Suite 200,
Mahwah, New Jersey 07495. Beneficial ownership includes shares that could be
acquired upon exercise of options if such options are exercisable within 60 days
after July 20, 1999. Beneficial ownership percentage is based on 17,959,964
shares outstanding as of July 20, 1999.

<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
---------------- ------------------ ------------------
<S> <C> <C>
Albion J. Fitzgerald(1)..................................... 3,581,250 19.9%
Joseph J. Fitzgerald........................................ 1,424,717 7.9%
Robert B. Anderson.......................................... 623,037 3.5%
H. Kent Petzold(2).......................................... 373,501 2.1%
Wallace D. Ruiz(3).......................................... 168,685 *
Michael Carabetta(4)........................................ 160,037 *
Deborah Doyle McWhinney(5).................................. 51,042 *
All directors and executive officers as a group (7
persons)(6)............................................... 6,382,269 34.8%
</TABLE>

- ---------------
* Less than one percent.

(1) Excludes 870,000 shares held by Shannon L. Ruiz, Albion J. Fitzgerald's
spouse, as to which Mr. Fitzgerald disclaims beneficial ownership.

(2) Includes 16,667 shares of Common Stock that may be acquired upon exercise of
stock options that are presently exercisable or will become exercisable
within 60 days of July 20, 1999 under the Company's 1992 Stock Option Plan.

(3) Includes 155,520 shares of Common Stock that may be acquired upon exercise
of stock options that are presently exercisable or will become exercisable
within 60 days of July 20, 1999 under the Company's 1992 Stock Option Plan.

(4) Includes 158,337 shares of Common Stock that may be acquired upon exercise
of stock options that are presently exercisable or will become exercisable
within 60 days of July 20, 1999 under the Company's 1992 Stock Option Plan.

(5) Represents shares of Common Stock that may be acquired upon exercise of
stock options that are presently exercisable or will become exercisable
within 60 days of July 20, 1999 under the Company's 1992 Stock Option Plan.

(6) Includes options exercisable for 381,566 shares of Common Stock under the
Company's 1992 Stock Option Plan.

11
<PAGE> 14

EXECUTIVE COMPENSATION AND OTHER MATTERS

SUMMARY COMPENSATION TABLE

The following table shows, as to the Chief Executive Officer and each of
the other four most highly compensated executive officers who received in excess
of $100,000 during the fiscal year ended March 31, 1999 (the "Named Executive
Officers"), information concerning compensation awarded to, earned by or paid
for services to the Company in all capacities during the fiscal years ended
March 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL --------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS OPTIONS ($)(1)
--------------------------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Albion J. Fitzgerald............... 1999 $160,000 $ 75,000 -- --
Chief Executive Officer 1998 160,000 -- -- --
1997 160,000 -- -- --
Michael Carabetta(2)............... 1999 200,000 100,000 -- --
President and Chief Operating
Officer 1998 28,846 -- 400,000 --
Robert Anderson.................... 1999 180,000 150,000 -- --
Executive Vice President, Europe 1998 160,000 150,000 -- --
1997 160,000 100,000 -- --
Joseph J. Fitzgerald............... 1999 175,000 60,000 -- --
Vice President, Development 1998 160,000 -- -- --
1997 125,000 -- -- --
Wallace D. Ruiz.................... 1999 165,000 43,500 25,000 1,038
Vice President, Chief Financial 1998 165,000 16,000 -- 1,038
Officer and Treasurer 1997 165,000 -- 175,000(3) 1,038
</TABLE>

- ---------------
(1) Represents term life insurance premiums paid by the Company.

(2) Mr. Carabetta commenced employment with the Company on February 9, 1998.

(3) Includes options to purchase an aggregate of 140,000 shares of Common Stock
which were granted to Mr. Ruiz in connection with the Company's option
repricing program in exchange for options that had a higher exercise price.

OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the year ended March 31, 1999.
Except as otherwise noted, all such options were awarded under the Company's
1992 Stock Option Plan.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(2)(3) FISCAL 1999 PER SHARE(4) DATE 5% 10%
---- ------------- ------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Albion J. Fitzgerald......... -- -- -- -- --
Robert Anderson.............. -- -- -- -- --
Michael Carabetta............ -- -- -- -- --
Joseph J. Fitzgerald......... -- -- -- -- --
Wallace D. Ruiz.............. 25,000 1.75% $4.125 10/01/03 $28,492 $62,959
</TABLE>

- ---------------
(1) Potential gains are net of the exercise price but before taxes associated
with the exercise. The 5% and 10% assumed annual rates of compounded stock
appreciation based upon the exercise price per share are mandated by the
rules of the SEC and do not represent the Company's estimate or projection
of the

12
<PAGE> 15

future Common Stock price. Actual gains, if any, on stock option exercises
are dependent on the future financial gains, if any, on stock option
exercises are dependent on the future financial performance of the Company,
overall market conditions and the option holders' continued employment
through the vesting period. This table does not take into account any
appreciation in the fair market value of the Company's Common Stock from the
date of grant to the date of this Proxy Statement, other than the columns
reflecting assumed rates of appreciation of 5% and 10%.

(2) Options generally become exercisable as to 25% of the option shares on the
first anniversary of the date of grant and as to 1/4% of the option shares
each month thereafter, with full vesting occurring on the fourth anniversary
of the date of grant.

(3) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, as determined by the Board
of Directors of the Company. Exercise price may be paid in cash, check,
promissory note, delivery of already-owned shares of the Company's Common
Stock subject to certain conditions, authorization to the Company to retain
from the total number of shares for which the option is exercised that
number of shares having a fair market value on the date of exercise equal to
the exercise price for the total number of shares as to which the option is
exercised, delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, or any
combination of the foregoing methods of payment or. such other consideration
or method of payment to the extent permitted under applicable law.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

The following table shows stock options exercised by Named Executive
Officers during fiscal 1999, including the aggregate value of gains on the date
of the exercise. In addition, this table includes the number of shares covered
by both exercisable and non-exercisable stock options as of fiscal year-end.
Also reported are the values for "in-the-money" options that represent the
positive spread between the exercise price of any such existing stock options
and the year-end price of the Company's Common Stock.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT MARCH 31, 1999 AT MARCH 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albion J. Fitzgerald........... -- -- -- --
Robert Anderson................ -- -- -- --
Michael Carabetta.............. -- -- 108,338 291,662 281,029 756,571
Joseph J. Fitzgerald........... -- -- -- --
Wallace D. Ruiz................ -- -- 149,479 50,521 186,849 91,276
</TABLE>

- ---------------
(1) Based on the closing price of the Company's Common Stock on March 31, 1999
of $6.50 less the exercise price of the option.

EMPLOYMENT CONTRACTS AND CHANGE-OF-CONTROL ARRANGEMENTS

In February 1998, the Company entered into an offer letter with Michael
Carabetta, the Company's President and Chief Operating Officer, pursuant to
which, in the event the Company terminates Mr. Carabetta's employment without
cause, Mr. Carabetta will be entitled to receive an amount equal to 25% of the
bonus he would have earned had he been employed by the Company at the end of the
year for each completed quarter in which quarterly objectives were achieved. In
addition, if Mr. Carabetta's employment is terminated by the Company without
cause during the first three years of employment or Mr. Carabetta dies while
employed by the Company, Mr. Carabetta, or his survivors in the case of death,
will be entitled to exercise an option to purchase 100,000 shares plus up to
1/48 of the amount of the initial grant for each completed month of employment.
In addition in the event that Mr. Carabetta's employment is terminated as a
result of Involuntary or Constructive Termination other than for Cause at any
time during the period

13
<PAGE> 16

beginning 30 days before and ending 12 months after a change of control, the
vesting of Mr. Carabetta's stock options shall accelerate in full.

In addition, in April 1997, the Company entered into employment agreement
with Wallace D. Ruiz, Chief Financial Officer and Treasurer, pursuant to which
Mr. Ruiz is entitled to receive an annual base salary of $165,000, subject to
any increases as the Board of Directors shall authorize from time to time in
connection with an annual review, plus additional variable compensation under
the Company's executive compensation plan. Subject to certain limitations, Mr.
Ruiz's employment agreement provides that if he is terminated at any time during
the period beginning 90 days before and ending 12 months after a Change of
Control (the "Change of Control Period") then he shall be entitled to receive,
in the case of an Involuntary or Constructive Termination other than for cause
or as a result of his death or disability, severance pay in an amount equal to
50% of his base compensation plus a pro rata share of the bonus and commissions
that he would have earned had he been employed by the Company at the end of the
year in which termination occurred and, in the case of death or disability, such
other benefits, if any, as may then be established under the Company's then-
existing benefit plans. In addition, any unvested options held by him prior to
termination shall (i) in the case of Involuntary or Constructive Termination
other than for cause, accelerate and become exercisable in full or (ii) in the
case of death or disability, accelerate and become exercisable as to that number
of additional shares that would have vested if he had remained continuously
employed for a period of six months following such termination and shall remain
exercisable for the period prescribed in the stock option agreements. If Mr.
Ruiz voluntarily resigns from the Company or if the Company terminates Mr.
Ruiz's employment for cause, he shall not be entitled to receive severance or
other benefits except for those, if any, as may be established under the
Company's benefit plans as existing at the time of termination.

For the purposes of Mr. Ruiz's employment agreement and Mr. Carabetta's
offer letter, a Change of Control shall mean the occurrence of any of the
following: (i) any person becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 50% or more of the total voting power
represented by the Company's then outstanding voting securities; (ii) a merger
or consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent at least 50% of
the total voting power of the surviving entity immediately after such merger or
consolidation and, or (iii), in the case of Mr. Ruiz's agreement only, a change
in the composition of the Board of Directors occurring within a two-year period
as a result of which fewer than a majority of the directors are Incumbent
Directors (as defined in the employment agreement).

Involuntary or Constructive Termination is defined in Messrs. Carabetta's
and Ruiz's agreements to mean (i) without the executive's express written
consent, the assignment to the executive of any duties or the significant
reduction of the executive's duties, either of which is inconsistent with the
executive's position with the Company and responsibilities in effect immediately
prior to such assignment, or the removal of the executive from such position and
responsibilities; (ii) without the executive's express written consent, a
substantial reduction, without good business reasons, of the facilities and
perquisites available to the executive immediately prior to such reduction;
(iii) a reduction by the Company in the base compensation of the executive as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of employee benefits to which the executive is
entitled immediately prior to such reduction with the result that the
executive's overall benefits package is significantly reduced; (v) any purported
termination of the executive by the Company which is not effected for disability
or for cause, or any purported termination for which the grounds relied upon are
not valid; (vi) the failure of the Company to obtain the assumption of the
employment agreement by any successors; or (vii) without the executive's express
written consent, any relocation of his job or office more than 40 miles from the
then current job or office.

In August 1998, the Company and Robert B. Anderson, the Company's Executive
Vice President, Europe and a director, entered into a management retention
agreement pursuant to which in the event Mr. Anderson's employment is terminated
as a result of involuntary or constructive termination other than for cause (i)
the principal amount then outstanding on Mr. Anderson's loan from the Company
evidenced by a promissory note dated July 21, 1996 with a stated principal
amount of $226,450 will be forgiven in full, including any accrued interest,
(ii) the principal amount then outstanding on Mr. Anderson's loan from the
14
<PAGE> 17

Company from January 1997 of $38,000 will be forgiven in full, including any
accrued interest, and (iii) the Company will "gross-up" Mr. Anderson for any
income and social security taxes (but not for parachute excise taxes) arising
from such loan forgiveness. The definition of involuntary or constructive
termination in Mr. Anderson's management retention agreement is the same as
described above for Messrs. Carabetta's and Ruiz's agreement. "Cause" is defined
as (i) any act of personal dishonesty taken by the employee in connection with
his responsibilities as an employee and intended to result in personal
enrichment of the employee, (ii) employee's conviction of, or plea of nolo
contendere to, a felony, (iii) a willful act by the employee which constitutes
gross misconduct and which is injurious to the Company, or (iv) following
delivery to the employee of a written demand for performance from the Company
which describes the basis for the Company's belief that the employee has not
substantially performed his duties, continued violations by the employee of the
employee's obligations to the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In March 1997, the Company lent William Fitzgerald $94,717 evidenced by a
promissory note. Mr. Fitzgerald is an employee of the Company and the brother of
Albion Fitzgerald, the Chief Executive Officer of the Company. The promissory
note was due and is being repaid with scheduled payments and continues to bear
interest at a rate of 5.83%. The loan is secured by 35,000 shares of Common
Stock of the Company owned by Mr. Fitzgerald.

In July 1996, the Company loaned to Robert B. Anderson, the Company's
Executive Vice President and a director, the aggregate amount of $226,450. This
loan represented the outstanding balance of an original loan of $325,000 made by
the Company to Mr. Anderson on July 21, 1992 and due on July 21, 1996 for the
purchase of 500,000 shares of the Company's Common Stock. The promissory note
dated July 21, 1996 bears interest at the rate of 6.04% per annum, is secured by
shares of the Company's Common Stock and is due and payable July 21, 2000. In
addition, in January 1997, the Company loaned Mr. Anderson $38,000. This loan
was made by the Company to Mr. Anderson to pay income taxes on Mr. Anderson's
fiscal 1997 bonus of $100,000. Mr. Anderson has applied his bonus payments in
fiscal 1997 and 1998 to repay these notes. The note dated January 1997 bears
interest at a rate of 8.25% per annum and is due and payable July 21, 2000. At
June 30, 1999, the principal balance of the promissory note dated July 21, 1996
was $80,957 and the principal balance of the promissory note dated January 1997
was $31,681.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers, Inc. Such officers, directors and ten-percent stockholders
are also required by SEC rules to furnish the Company with copies of all such
forms that they file. Based solely on its review of the copies of such forms
received by the Company, or written representations from certain reporting
persons that no Forms 5 were required for such persons, the Company believes
that during fiscal 1999 all Section 16(a) filing requirements applicable to its
officers, directors and ten-percent stockholders were complied with.

REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

INTRODUCTION

Prior to the Company's initial public offering that was completed in July
1995, the Board of Directors was primarily responsible for establishing and
administering the Company's compensation policies. In this role, and consistent
with the Company's status as a privately held corporation, the Board determined
the Chief Executive Officer's salary directly and reviewed and approved
employment compensation matters for other

15
<PAGE> 18

management personnel. The Board of Directors, through a Stock Option Committee
consisting at that time of two directors who were also executive officers of the
Company, also administered the Company's 1992 Stock Option Plan.

The Compensation Committee of the Board of Directors (the "Committee") was
established in May 1995 and is composed only of outside directors. The
Compensation Committee currently consists of Kent Petzold and Deborah McWhinney.
In general, the Committee is responsible for reviewing and recommending for
approval by the Board of Directors the Company's compensation practices,
including executive salary levels and variable compensation programs. With
respect to the compensation of the Company's Chief Executive Officer, the
Committee reviews and submits to the Board for approval the various elements of
the Chief Executive Officer's compensation. With respect to other executive
officers, the Committee reviews the recommendations for such individuals
presented by the Chief Executive Officer and the basis therefor and approves or
modifies the compensation packages for such individuals. Base salary levels for
executive officers of the Company are generally established at or near the start
of each fiscal year, and final bonuses for executive officers are determined at
the end of each fiscal year based upon such individual's performance and, the
performance of the Company.

EXECUTIVE COMPENSATION

The Company has a compensation program that consists of two principal
components: cash-based compensation, both fixed and variable, and equity-based
compensation. These two principal components are intended to attract, retain,
motivate and reward executives who are expected to manage both the short-term
and long-term success of the Company.

Cash-based compensation.

Base salary -- The salaries of each of the executive officers (other than
the Chief Executive Officer) for the year ended March 31,
1999 were approved by the Compensation Committee, upon the
recommendation of the Chief Executive Officer.

Bonuses -- The Company has a discretionary bonus pool pursuant to which
members of senior management, including the Company's
executive officers, may receive annual cash bonuses. The
purpose of the bonuses is to motivate senior management to
perform to the best of their abilities in order to enhance
stockholder value through the achievement of corporate
objectives. For the fiscal year-ended March 31, 1999, the
allocation of the bonus pool was determined by the Chief
Executive Officer, with the exception of his own bonus, based
upon subjective factors.

Equity-based compensation.

Stock options are periodically granted to provide additional incentive to
executives and other key employees to maximize long-term total return to the
Company's stockholders. Options generally vest over a four-year period to
encourage option holders to continue in the employ of the Company. The exercise
price of options is the market price on the date of grant, ensuring that the
option will acquire value only to the extent that the price of the Company's
Common Stock increases relative to the market price at the date of grant.

Option grants to executive officers will be determined by the Compensation
Committee, in its discretion, or in some cases by the Stock Option Committee,
subject to the oversight of the Compensation Committee. In making its
determination, the Compensation Committee intends to consider the executive's
position at the Company, such executive's individual performance, the number of
options held (if any) and any other factors that the Compensation Committee may
deem relevant.

CHIEF EXECUTIVE OFFICER COMPENSATION

During the year ended March 31, 1999, Mr. Fitzgerald received a base salary
of $160,000 approved by the Board of Directors upon the recommendation of the
Compensation Committee. This represented no increase from the base salary
received by Mr. Fitzgerald for the prior fiscal year. The Compensation Committee
16
<PAGE> 19

recommended that a bonus up to $100,000, payable quarterly and based on
performance achievements of the Company, be awarded to the Chief Executive
Officer for the 1999 fiscal year. Mr. Fitzgerald was paid $75,000 of this amount
in fiscal 1999. The Board believed that Mr. Fitzgerald, as Chief Executive
Officer, significantly and directly influenced the Company's overall
performance.

TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION

Section 162 of the Code limits the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly-compensated executive officers. The Company may deduct
such compensation only to the extent that during any fiscal year the
compensation paid to such individual does not exceed $1 million or meet certain
specified conditions (including stockholder approval). Based on the Company's
current compensation plans and policies and proposed regulations interpreting
this provision of the Code, the Company and the Committee believe that, for the
near future, there is little risk that the Company will lose any significant tax
deduction for executive compensation.

SUMMARY

The Compensation Committee of the Board of Directors intends that its
compensation program shall be fair and motivating and shall be successful in
attracting and retaining qualified employees and in linking compensation
directly to the Company's success. The Compensation Committee intends to review
this program on an ongoing basis to evaluate its continued effectiveness.

THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS

Deborah McWhinney
H. Kent Petzold

17
<PAGE> 20

COMPANY STOCK PRICE PERFORMANCE GRAPH

The following graph compares the Company's cumulative total stockholder
return with those of the Nasdaq Stock Market -- U.S. Index and the Hambrecht &
Quist Technology Index. The graph assumes that $100 was invested on July 14,
1995 (the effective date of the Company's initial public offering) in (i) the
Company's Common Stock, (ii) the Nasdaq Stock Market (U.S.) Index, (iii) the
Nasdaq Computer and Data Processing Index and (iv) the Hambrecht & Quist
Technology Index, including reinvestment of dividends. Note that historic stock
price performance is not necessarily indicative of future stock price
performance.

COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG NOVADIGM, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE HAMBRECHT & QUIST TECHNOLOGY INDEX
AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX

<TABLE>
<CAPTION>
NASDAQ STOCK NASDAQ COMPUTER &
NOVADIGM, INC. MARKET (U.S.) H&Q TECHNOLOGY DATA PROCESSING
-------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
'7/14/95' 100 100 100 100
'3/31/96' 101 11 99 109
'3/31/97' 28 123 116 119
'3/31/98' 23 187 172 209
'3/31/99' 43 251 241 339
</TABLE>

The Company has determined that the NASDAQ Computer & Data Processing Index
more fully reflects the lines of business in which the Company competes and
includes more comparable companies than does the H&Q Technology Index. Pursuant
to the rules of the Securities and Exchange Commission, the Company is providing
both indices herein for the transition year.

18
<PAGE> 21

OTHER MATTERS

The information contained above under the captions "Report of the
Compensation Committee of the Board of Directors on Executive Compensation" and
"Performance Graph" shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates it by reference into such
filing.

The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.

THE BOARD OF DIRECTORS

Dated: July 26, 1999

19
<PAGE> 22
EXHIBIT A

NOVADIGM, INC.

1992 STOCK OPTION PLAN(1)

1. Purposes of the Plan. The purposes of this Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Outside Directors,
Consultants and Employees of the Company and its Subsidiaries and to promote the
success of the Company's business. Options granted under this Plan may be
incentive stock options (as defined under Section 422 of the Code) or
non-statutory stock options, as determined by the Administrator at the time of
grant of an option and subject to the applicable provisions of Section 422 of
the Code, as amended, and the regulations promulgated thereunder.

2. Definitions. As used herein, the following definitions shall
apply:

(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means the Committee appointed by the Board
of Directors in accordance with paragraph (a) of Section 4 of the Plan.

(e) "Company" means Novadigm, Inc., a Delaware corporation.

(f) "Consultant" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services; the term
Consultant shall not include directors.

(g) "Continuous Status as an Employee, Consultant or Outside
Director" means the absence of any interruption or termination of the employment
relationship or status as an Employee, Consultant or Outside Director,
Consultant by the Company or any Subsidiary. Continuous Status as an Employee,
Consultant or Outside Director shall not be considered interrupted in the case
of: (i) any leave of absence approved by the Board, including sick leave,
military leave, or any other

- --------
(1) As amended effective June 2, 1999.

<PAGE> 23
personal leave; provided, however, that for purposes of Incentive Stock Options,
such leave is for a period of not more than ninety (90) days, unless
reemployment, in the case of an Employee, upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (ii) in the case of transfers of an
Employee between locations of the Company or between the Company, its
Subsidiaries or its successor.

(h) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.

(i) "Exchange Act" means the United States Securities
Exchange Act of 1934, as amended.

(j) "Fair Market Value" means, as of any date, the value of
Stock determined as follows:

(i) If the Stock is listed on any established United
States stock exchange or a national market system including without limitation
the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange or the exchange with the greatest
volume of trading in Stock for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;

(ii) If the Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Stock;

(iii) If the Stock is listed on the Vancouver Stock
Exchange (but not on any established United States stock exchange or NASDAQ),
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported, as quoted on such system or exchange or
the exchange with the greatest volume of trading in Stock for the last market
trading day prior to the time of determination) as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;

(iv) In the absence of an established market for the
Stock, the Fair Market Value thereof shall be determined in

-2-
<PAGE> 24
good faith by the Administrator.

(k) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

(l) "Insider" means

(i) director or executive or senior officer of the
Company,

(ii) a director or executive or senior officer of a
Subsidiary,

(iii) a person that has (A) direct or indirect
beneficial ownership of, (B) control or direction over, or (C) a combination of
(A) and (B) over securities of the Company carrying more than 10% of the voting
rights attached to all the issuer's outstanding voting securities, excluding,
for the purpose of the calculation of the percentage held, any securities held
by the person as underwriter in the course of a distribution, or

(iv) the Company itself where it has purchased,
redeemed or otherwise acquired any securities of its own issue, for so long as
it continues to hold those securities.

(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.

(n) "Officer" means an individual designated as an officer
pursuant to the Company's by-laws or is otherwise designated an officer by the
Company.

(o) "Option" means a stock option granted pursuant to the
Plan.

(p) "Optioned Stock" means the Stock subject to an Option.

(q) "Optionee" means an Outside Director or Employee who
receives an Option.

(r) "Outside Director" means a member of the Board of
Directors of the Company who is not an employee of the Company or a Subsidiary.

(s) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

-3-
<PAGE> 25
(t) "Plan" means this 1992 Stock Option Plan.

(u) "Share" means a share of the Stock, as adjusted in
accordance with Section 12 of the Plan.

(v) "Stock" means the Common Stock of the Company.

(w) "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section
12 of the Plan, the maximum aggregate number of shares of Stock which may be
optioned and sold under the Plan is 5,200,000. The shares may be authorized, but
unissued, or reacquired Stock.

If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.

4. Administration of the Plan.

(a) Administration With Respect to Directors and Officers.
With respect to grants of Options to Outside Directors and Employees who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or (B)
a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.

(b) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.

-4-
<PAGE> 26
(c) Administration With Respect to Other Employees. With
respect to grants of Options to Consultants or Employees who are neither
directors nor officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the applicable legal requirements
relating to the administration of incentive stock option plans, if any, of
Delaware corporate and securities laws, the securities laws of British Columbia,
and of the Code (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws.

(d) Powers of the Administrator. Subject to the provisions
of the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

(i) to determine the Fair Market Value of the Stock,
in accordance with Section 2(i) of the Plan;

(ii) to select the Outside Directors, Consultants and
Employees to whom Options may from time to time be granted hereunder;

(iii) to determine whether and to what extent Options
are granted hereunder;

(iv) to determine the number of shares of Stock to be
covered by each such award granted hereunder;

(v) to approve forms of agreement for use under the
Plan;

(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the exercise price, any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or limitation regarding
any Option or other award and/or the shares of Stock relating thereto, based in
each case on such factors as the Administrator shall determine, in its sole
discretion);

(vii) to determine whether and under what
circumstances an Option may be bought-out for cash under subsection 9(e);

-5-
<PAGE> 27
(viii) to determine whether, to what extent and under
what circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period); and

(ix) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Stock covered
by such Option shall have declined since the date the Option was granted,
provided that if and for so long as the Stock is listed on the Vancouver Stock
Exchange, such reductions shall be approved in accordance with applicable
policies of the Vancouver Stock Exchange.

(e) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

5. Eligibility.

(a) Nonstatutory Stock Options may be granted to Outside
Directors, Consultants and Employees. Incentive Stock Options may be granted
only to Employees.

(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.

(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.

(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of Optionee's status as an Outside Director or
Consultant or of his employment relationship with the Company, as the case may
be, nor shall it interfere in any way with his right or the Company's right to
terminate his status as an Outside Director or Consultant or of his employment
relationship at any time, with or without cause.

-6-
<PAGE> 28
(e) The following limitations shall apply to grants of
Options to Employees:

(i) No Employee shall be granted, in any fiscal year
of the Company, Options to purchase more than 500,000 Shares.

(ii) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12(a).

(iii) If an Option is cancelled (other than in
connection with a transaction described in Section 12), the cancelled Option
will be counted against the limit set forth in Section 5(e)(i). For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.

6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect until June 9, 2002 unless sooner terminated under Section 14
of the Plan.

7. Term of Option. The term of each Option shall be the term stated
in the Option Agreement up to a maximum of ten (10) years from the date of grant
(even with respect to Options granted to non-Officer employees prior to June 4,
1998 that are amended in writing); provided, however, that with respect to all
Options granted to Officers and Directors prior to September 17, 1999 (or such
other date as the stockholders of Company approve the amendment to the Plan
adopted by the Board of Directors on June 2, 1999), the Option term shall be no
more than five (5) years from the date of grant thereof or such shorter term as
may be provided in the Option Agreement.

8. Option Exercise Price and Consideration.

(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) If granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.

(B) If granted to any other Employee, the
per

-7-
<PAGE> 29
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option

(A) granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.

(B) granted to any person, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory notes, (4) other shares of the Company's capital stock
which (x) in the case of shares of the Company's capital stock acquired upon
exercise of an Option either have been owned by the Optionee for more than six
months on the date of surrender or were not acquired, directly or indirectly,
from the Company, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, (5) authorization from the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws.

9. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the

-8-
<PAGE> 30
Plan. An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised, and the
Optionee deemed to be a shareholder of the shares being purchased upon exercise,
when written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan.

Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.

(b) Termination of Relationship. In the event of termination
of an Optionee's Continuous Status as an Employee, Consultant or Outside
Director with the Company for any reason, such Optionee may, but only within
thirty (30) days (or such other period of time as is determined by the Board,
with such determination in the case of an Incentive Stock Option being made at
the time of grant of the Option and not exceeding thirty (30) days) after the
date of such termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise his Option
to the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.

(c) Disability of Optionee. In the event of termination of
an Optionee's Continuous Status as an Employee, Consultant or Outside Director
as a result of his or her disability, Optionee may, but only within six (6)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination. To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by

-9-
<PAGE> 31
such Option shall revert to the Plan.

(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of death, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.

(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

(f) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.

10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

11. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale. Subject to any required action by the shareholders of the
Company, the number of Shares covered by each outstanding Option, and the number
of Shares which have been authorized for issuance under the Plan but as to which
no Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of Stock
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Stock resulting from
a stock split, reverse stock split, stock dividend, combination or
reclassification of the Stock, or any other increase or decrease in the number
of issued shares of Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by

-10-
<PAGE> 32
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Stock subject to
an Option.

In the event of the proposed dissolution or liquidation
of the Company, the Board shall notify the Optionee at least fifteen (15) days
prior to such proposed action. To the extent that an Option has not been
previously exercised, it will terminate immediately prior to the consummation of
such proposed action.

In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent Option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Option shall terminate.

12. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Outside Director or Employee to whom
an Option is so granted within a reasonable time after the date of such grant.

13. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.

(b) Effect of Amendment or Termination. Any such amendment
or termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

-11-
<PAGE> 33
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, the Securities Act of British Columbia and the regulations
promulgated thereunder (if applicable), and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.

15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

16. Agreements. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.

17. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the degree and manner required under applicable state and federal
law.

-12-
<PAGE> 34

1995 Stock
Option
Plan

<PAGE> 35
EXHIBIT A

NOVADIGM, INC.

1995 STOCK OPTION PLAN FOR FRENCH EMPLOYEES

1. Purposes of the Plan. The purposes of this 1995 Stock Option Plan for
French Employees are:

- to attract and retain the best available personnel for positions of
substantial responsibility,

- to provide additional incentive to French Employees, and

- to promote the success of the Company's business and the business of
its French subsidiary.

This Plan is a sub-plan created under and pursuant to the Novadigm, Inc.
1992 Stock Option Plan, which has been approved by the shareholders of Novadigm,
Inc., and which provides that French employees may benefit under this Plan.
Options shall be granted under the Plan at the discretion of the Administrator
and as reflected in terms of written option agreements, and are intended to
qualify for preferred treatment under French tax laws. Unless otherwise defined
herein, the terms defined in the 1992 Stock Option Plan shall have the same
defined meanings in this Plan.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under French corporate, securities, and tax
laws.

(b) "Disability" means total and permanent disability, as defined
under Applicable Laws.

(c) "Employee" means any person employed by Subsidiary in a salaried
position, who does not own more than 10% of the voting power of all classes of
stock of the Company, or any Parent or Subsidiary, and who is a resident of the
Republic of France.

(d) "Fair Market Value" means, as of any date, the dollar value of
Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the Nasdaq

-1-
<PAGE> 36
Stock Market, its Fair Market Value shall be the average quotation price for the
last 20 days preceding the date of determination for such stock (or the average
closing bid for such 20 day period, if no sales were reported) as quoted on such
exchange or system and reported in The Wall Street Journal or such other source
as the Administrator deems reliable;

(ii) If the Common Stock is quoted on the Nasdaq Stock Market
(but not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock for the last 20 days preceding the date of determination; or

(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

(e) "Option" means a stock option granted pursuant to the Plan which
is intended to qualify for preferred tax treatment under applicable French tax
laws.

(f) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.

(g) "Option Price" means the per share price for exercising an
Option, determined in accordance with subsection 9(a) of the Plan.

(h) "Optioned Stock" means the Common Stock subject to an Option.

(i) "Optionee" means a person eligible to participate in the Plan
pursuant to Section 5 and who holds an outstanding Option.

(j) "Plan" means this Novadigm, Inc. 1995 Stock Option Plan for
French Employees.

(k) "Subsidiary" means any participating subsidiary of the Company
located in the Republic of France.

(l) "U.S. Plan" means the Novadigm, Inc. 1992 Stock Option Plan, as
amended.

3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 2,200,000 Shares of Common Stock. However, at no time shall
the total number of Options outstanding which may be exercised for newly issued
Shares of Common Stock exceed that number equal to one-third of the Company's
voting stock, whether preferred stock of the Company or Common Stock. The Shares
may be authorized, but unissued, or reacquired Common Stock. If any Optioned
Stock is to

-2-
<PAGE> 37
consist of reacquired Shares, such Optioned Stock must be purchased by the
Company prior to the date of grant of the corresponding Option and must be
reserved and set aside for such purpose.

If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant under the Plan (unless the Plan has
terminated).

4. Administration of the Plan.

(a) Procedure. The Plan shall be administered by the Board or a
committee appointed by the Board.

(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Employees to whom Options may be granted
hereunder;

(iii) to determine whether and to what extent Options are
granted hereunder;

(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;

(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions may include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

(vii) to construe and interpret the terms of the Plan;

(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;

(ix) to modify or amend each Option (subject to Section 14(c)
of the Plan);

-3-
<PAGE> 38
(x) to authorize any person to execute on behalf of the
Company or Subsidiary any instrument required to effect the grant of an Option
previously granted by the Administrator;

(xi) to determine the terms and restrictions applicable to
Options; and

(xii) to make all other determinations deemed necessary or
advisable for administering the Plan.

(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

(d) Reporting to the Shareholders' Meeting. In its annual proxy
statement to the shareholders, the Board shall inform the shareholders as to the
number and price of the Options granted hereunder, and as to the Shares
subscribed upon exercise of such Options.

5. Eligibility. Options may be granted only to Employees; provided,
however, that directors who are also Employees of a participating Subsidiary may
be granted Options. An individual who has been granted an Option may, if
otherwise eligible, be granted additional Options.

6. Limitations. Neither the Plan nor any Option shall confer upon any
Optionee any right with respect to continuing the Optionee's employment
relationship with the Company.

7. Term of Plan. The Plan shall become effective as of the date of its
adoption by the Board. It shall continue in effect until the termination of the
U.S. Plan or the date five years from the date of its adoption, whichever is
sooner, unless terminated earlier under Section 14 of the Plan.

8. Term of Option. The term of each Option shall be as stated in the
Option Agreement; provided, however, that subject to Section 10(d) hereof, the
maximum term of an Option shall not exceed nine and one-half (9 1/2) years from
the date of grant of the Option.

9. Option Exercise Price and Consideration.

(a) Option Price. The Option Price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Administrator upon
the date of grant of the Option and stated in the Option Agreement, but in no
event shall be lower than one hundred percent (100%) of the Fair Market Value on
the date the Option is granted. This Option Price cannot be modified while the
Option is outstanding.

(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine

-4-
<PAGE> 39
any conditions which must be satisfied before the Option may be exercised. In so
doing, the Administrator may specify that an Option may not be exercised until
the completion of a service period.

(c) Restriction on Sale. The Shares subject to this Option may not
be transferred, assigned or hypothecated in any manner otherwise than by will
or by the laws of descent or distribution before the date three years after the
Initial Exercise Date.

(d) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist of:

(i) cash or check (denominated in U.S. Dollars);

(ii) wire transfer (denominated in U.S. Dollars);

(iii) other Shares which (x) in the case of Shares acquired
upon exercise of an Option, have been owned by the Optionee for more than six
months on the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such
Option shall be exercised;

(iv) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and a broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
an amount of the sale or loan proceeds required to pay the exercise price; or

(v) any combination of the foregoing methods of payment.

10. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed exercised when:

(i) the Company receives written notice of exercise (in
accordance with the Option Agreement and in the form attached hereto as Exhibit
A) from the person entitled to exercise the Option, and full payment for the
Shares with respect to which the Option is exercised;

-5-
<PAGE> 40
(ii) the Subsidiary receives a written subscription agreement
to the Shares (in accordance with the Option Agreement and in the form attached
hereto as Exhibit B) from the person entitled to exercise the Option.

Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Option Agreement
and the Plan, and shall be deemed to be definitively made upon receipt of the
payment by the Subsidiary. Shares issued upon exercise of an Option shall be
issued in the name of the Optionee or, if requested by the Optionee, in the name
of the Optionee and his or her spouse.

Until the stock certificate evidencing such Shares is issued
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue to
the Optionee (or cause to be issued) a stock certificate evidencing such Shares
promptly after the Option is exercised and after full payment, as indicated
above, is received by the Company. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.

Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Employment Relationship. In the event that an
Optionee's status as an Employee terminates (other than upon the Optionee's
death or Disability), the Optionee may exercise his or her Option, but only
within thirty (30) days (or such other period of time not exceeding three (3)
months as is determined by the Administrator), and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.

(c) Disability of Optionee. In the event that an Optionee's status
as an Employee terminates as a result of the Optionee's Disability, the Optionee
may exercise his or her Option at any time within six (6) months from the date
of such termination, but only to the extent that the Optionee was entitled to
exercise it at the date of such termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his

-6-
<PAGE> 41
or her Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee. In the event of the death of an Optionee
while an Employee, the Option may be exercised at any time within six (6) months
following the date of death by the Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent that the Optionee was entitled to exercise the Option at the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall revert to the Plan. If, after death, the Optionee's estate or a
person who acquired the right to exercise the Option by bequest or inheritance
does not exercise the Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall immediately revert to the
Plan.

11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

12. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares covered
by each outstanding Option, and the number of shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Stock, or any
other increase or decrease in the number of issued shares of Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Stock subject to an
Option.

In the event of the proposed dissolution or liquidation of the
Company, the Administrator shall notify the Optionee at least fifteen (15) days
prior to such proposed action. To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action. In the event of a merger of the Company with or into
another corporation, the Option shall be assumed or an equivalent option shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the Option
shall terminate.

-7-
<PAGE> 42

13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

14. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Administrator may at any time
amend, alter, suspend or terminate the Plan.

(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws. Such shareholder approval, if required, shall be obtained
in such a manner and to such a degree as is required by the Applicable Laws.

(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and a
representative of the Administrator.

15. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws, including, without
limitation, the requirements of any stock exchange or quotation system upon
which the Shares may then be listed or quoted, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required under Applicable Laws.

16. Liability of Company.

(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

-8-
<PAGE> 43
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered
by an Option exceeds, as of the date of grant, the number of Shares which may be
issued under the Plan without additional shareholder approval, such Option shall
be void with respect to such excess Optioned Stock, unless shareholder approval
of an amendment sufficiently increasing the number of Shares subject to the Plan
is timely obtained in accordance with Section 14(b) of the Plan. In the event
more than one Option is granted which exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
shareholder approval, such Options shall be void as set forth in the preceding
sentence on a pro rata basis.

17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

-9-
<PAGE> 44
NOVADIGM, INC.

1995 STOCK OPTION PLAN FOR FRENCH EMPLOYEES

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the 1995 Stock
Option Plan for French Employees shall have the same defined meanings in this
Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

Optionee's Name and Address:
---------------------------------------------

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

You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Stock Option Agreement,
as follows:

Date of Grant
----------------------------------------

Vesting Commencement Date
----------------------------------------

Exercise Price per Share $
----------------------------------------

Total Number of Shares Granted
----------------------------------------

Total Exercise Price $
----------------------------------------

Term/Expiration Date:
----------------------------------------

Vesting Schedule:

This Option may be exercised, in whole or in part, in accordance with the
following schedule: Fifty percent (50%) of the Shares subject to this Option
shall vest twenty-four months after the Vesting Commencement Date (the Initial
Exercise Date) and 1/24 of the remaining Shares subject to the Option shall vest
each month thereafter, subject to Optionee's Continuing Status as an Employee on
such dates.

-1-
<PAGE> 45
Termination Period:

This Option may be exercised for thirty (30) days after termination of the
Optionee's employment relationship, or for six (6) months in the case of a
termination of the Optionee's employment relationship as a result of the death
or Disability.

Restriction on Sale:

The Shares subject to this Option may not be transferred, assigned or
hypothecated in any manner otherwise than by will or by the laws of descent or
distribution before the date three years after the Initial Exercise Date.

II. AGREEMENT

1. Grant of Option. The Board of the Company hereby grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee"), an option (the "Option") to purchase a number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 14(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.

2. Exercise of Option.

(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment
relationship, the exercisability of the Option is governed by the applicable
provisions of the Plan and this Option Agreement.

(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice to the Company, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), by delivery of a subscription agreement to the Subsidiary, in the form
attached as Exhibit B (the "Subscription Agreement") and such other
representations and agreements as may be required by the Company or the
Subsidiary pursuant to the provisions of the Plan. Until the stock certificate
evidencing such Shares is issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company), no
right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue to the Optionee (or cause to be issued) such
stock certificate promptly after the Option is exercised. No

-2-
<PAGE> 46
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan. The Exercise Notice and Subscription Agreement shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Subsidiary. The Exercise Notice and Subscription Agreement
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Subsidiary of such fully executed Exercise Notice and Subscription Agreement
accompanied by such aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares are then
listed. Assuming such compliance, for income tax purposes the Exercised Shares
shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.

3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:

(a) cash or check (denominated in U.S. Dollars);

(b) wire transfer (denominated in U.S. Dollars);

(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and a broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of an
amount of the sale or loan proceeds required to pay the exercise price.

4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

OPTIONEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE
COMPANY'S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL
CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT BY THE
COMPANY OR THE SUBSIDIARY.

-3-
<PAGE> 47
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement.

OPTIONEE: NOVADIGM, INC.

By:
- ---------------------------------- ---------------------------------
Signature

Title:
- ---------------------------------- ---------------------------------
Print Name

-4-
<PAGE> 48
EXHIBIT A

NOVADIGM, INC.

1995 STOCK OPTION PLAN FOR FRENCH EMPLOYEES

EXERCISE NOTICE

[__________________]

Attention: General Secretary

1. Exercise of Option. Effective as of today, ___________, 199__, the
undersigned ("Optionee") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of Novadigm, Inc. (the "Company") under and
pursuant to the 1995 Stock Option Plan for French Employees (the "Plan") and the
Stock Option Agreement dated ___________ (the "Option Agreement"). The purchase
price for the Shares shall be $__________, as required by the Option Agreement.

2. Delivery of Payment. Optionee herewith delivers to the Company the full
purchase price for the Shares.

3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

4. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.

5. Tax Consultation. Optionee represents that Optionee has consulted with
any tax consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

<PAGE> 49

6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and such agreement is governed by the laws
of California and the United States of America except for that body of laws
pertaining to conflict of laws.

Submitted by: Accepted by:

OPTIONEE: NOVADIGM, INC.

By:
- ------------------------------------ -----------------------------------
Signature
Its:
- ------------------------------------ -----------------------------------
Print Name

Address:
--------------------------

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

-2-
<PAGE> 50
EXHIBIT B

NOVADIGM, INC.

1995 STOCK OPTION PLAN FOR FRENCH EMPLOYEES

SUBSCRIPTION AGREEMENT

[___________]
[address]
Attention: General Secretary

1. Amount and Terms of the Subscription

In conformity with the Stock Option Plan reserved to the French
employees (the "Plan"), Options to subscribe to Shares of Common Stock (the
"Shares") of Novadigm, Inc. (the "Company") were granted according to the Stock
Option Agreement dated _________________ (the "Option Agreement").

_______ Shares shall be issued to the benefit of the undersigned
(the "Subscriber") by an increase in capital in accordance with the applicable
laws of the United States of America and the State of California.

The increase in capital shall take place within the limits of the
authorized capital of the Company.

The Shares subscribed to may be paid up by:

(a) cash or check (denominated in U.S. Dollars);

(b) wire transfer (denominated in U.S. Dollars);

2. Transfer of the funds

The funds coming from the subscription of Shares under the Plan
shall be paid over to the Subsidiary by the participating Employees. Full
payment shall be deemed to be definitively made upon the date of receipt of the
payment in the bank accounts in France of the Subsidiary.

<PAGE> 51
3. Subscription Agreement

I, the undersigned, Last name
--------------------------------------
First name
--------------------------------------
Residence
--------------------------------------

subscribe to ________ Shares.

Supporting my subscription I shall pay the total amount of the Purchase
Price of the Shares following one or more of the methods described in I.
hereabove.

The Subscriber NOVADIGM, INC.

Signature By
--------------------------- ---------------------------------
Name Title
--------------------------- ---------------------------------

Address:
--------------------------

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

-2-
<PAGE> 52
NOVADIGM, INC.

PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of NOVADIGM, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated July 26, 1999, and hereby appoints Albion J.
Fitzgerald and Wallace D. Ruiz and each of them proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1999 Annual Meeting of
Stockholders of NOVADIGM, INC., to be held on Friday, September 17, 1999 at 9:00
a.m., local time, at the Ritz Carlton Hotel, 600 Stockton Street, San Francisco,
California, and any adjournment(s) thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side.

1. Election of directors:

Nominees: Albion J. Fitzgerald, Robert B. Anderson, H. Kent Petzold,
Deborah Doyle McWhinney

[_] FOR all nominees listed (except as marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all nominees listed

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

INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee(s) name(s) on the line above.

2. Proposal to approve the amendment of the Company's 1992 Stock Option
Plan to provide for a maximum term for options granted thereunder of 10
years.

3. Proposal to approve the amendment of the Company's 1995 Stock Option
Plan for French Employees to provide for a maximum term for options
granted thereunder of 9 1/2 years.

4. Proposal to ratify the appointment of Arthur Andersen LLP as independent
auditors for the fiscal year ending March 31, 2000.

[_] FOR [_] AGAINST [_] ABSTAIN

In their discretion, the proxies are authorized to vote upon such other
matter(s) that may properly come before the meeting and at any adjournment(s)
thereof.

MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [_]

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF DIRECTORS, FOR THE AMENDMENT OF
THE 1992 STOCK OPTION PLAN, FOR THE AMENDMENT OF THE 1995 STOCK OPTION PLAN FOR
FRENCH EMPLOYEES AND FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN
LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2000.

<PAGE> 53
Both of such attorneys or substitutes (if both are present and acting at said
meeting or any adjournment(s) thereof, or, if only one shall be present and
acting, then that one) shall have and may exercise all of the powers of said
attorneys-in-fact hereunder.

Dated:___________________________________________

_________________________________________________
Signature

(This Proxy should be marked, dated, signed by the stockholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)