BINDVIEW DEVELOPMENT CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

COMMISSION FILE NUMBER 000-24677

BINDVIEW DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)

TEXAS 76-0306721
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

5151 SAN FELIPE, 25TH FLOOR, HOUSTON, TX 77056
(Address of principal executive offices) (Zip code)

(713) 561-4000
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

The aggregate market value of the common stock held by non-affiliates of
the registrant on March 24, 2003 (assuming all officers and directors are
affiliates and based on the last sale price on the NASDAQ Stock Exchange as of
such date) was approximately $44 million.

The number of shares of the registrant's common stock, no par value per
share, outstanding as of March 24, 2003 was 46,574,500.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the definitive Proxy Statement for the Registrant's
2003 Annual Meeting of Stockholders, to be filed not later than 120 days after
the end of the fiscal year covered by this Report on Form 10-K ("Report"), are
incorporated by reference into Part III hereof.
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BINDVIEW DEVELOPMENT CORPORATION

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical facts
included in this Report, including, without limitation, statements regarding the
Company's future financial position, business strategy, planned products,
products under development, markets, budgets and plans and objectives of
management for future operations, are forward-looking statements. Although we
believe that the expectations reflected in these forward-looking statements are
reasonable, we cannot assure you those expectations will prove to have been
correct. Important factors that could cause actual results to differ materially
from the Company's expectations are disclosed in statements set forth under
"Cautionary Statements" and elsewhere in this Report, including, without
limitation, in conjunction with the forward-looking statements included in this
Report. All subsequent written and oral forward-looking statements attributable
to us, or persons acting on our behalf, are expressly qualified in their
entirety by the Cautionary Statements and such other statements. References to
the "Company," "BindView," "we," "us," and "our" refer to BindView Development
Corporation and its subsidiaries.

GENERAL

BindView Development Corporation ("BindView" or the "Company") delivers
proactive network security-management software and services to help secure,
automate and lower the costs of managing information technology infrastructures.
Our software helps safeguard our customers' computer networks from the inside
out, working to protect those networks from both internal and external threats,
while also helping to lower our customers' overall cost of ownership through
automation of numerous administrative tasks and security reporting requirements.
Since our founding in 1990, more than 20 million licenses of our software have
been shipped worldwide to approximately 5,000 companies, including more than 80
of the Fortune 100 and 24 of the largest 25 U.S. banks.

BindView was founded in May 1990 as a Texas corporation. Before 1995 we
were known as The LAN Support Group, Inc. Our initial public offering was
completed in July 1998 and a follow-on offering in December 1998. On December
18, 1998, we acquired CuraSoft, Inc. ("CuraSoft"), a provider of automated event
management software. On March 1, 1999, we acquired Netect, Ltd. ("Netect"), a
provider of corporate security software for Internet/Intranet networks. On
February 9, 2000, we acquired Entevo Corporation ("Entevo"), a provider of
directory management and migration software for Windows NT and Windows 2000
environments.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Our global business is principally in a single industry segment, as
described above under the heading "General". For a discussion of our financial
information in this segment, see Note 14 of our Consolidated Financial
Statements included elsewhere in this Report.

NARRATIVE DESCRIPTION OF BUSINESS

PRODUCTS AND TECHNOLOGY

BindView currently has three main product lines to help secure, automate
and lower the costs of managing IT infrastructures: bv-Control(R), bv-Admin(R)
and the BindView Policy Center.

Our bv-Control(R) Software

Many traditional security management solutions (such as firewalls,
anti-virus scanners, and intrusion detection systems) typically take action only
when an intrusion across the security perimeter is detected. In contrast,
BindView's proactive solutions work to find and fix security holes and thus help
customers eliminate

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security vulnerabilities before they are exploited. Our software can help
protect our customers' networks from internal as well as external threats. This
can be important to customers because internal security threats may pose a
greater business risk and potential for financial loss than external threats.

Our bv-Control product line provides vulnerability assessment,
configuration management, general reporting, and disaster recovery documentation
capabilities. Our core bv-Control software products use a centralized management
console called the BindView RMS Console and Information Server software, or
simply, the "RMS Console" software. The RMS Console software uses an
object-oriented architecture that enables a variety of network operating systems
and managed objects to be supported through snap-in modules. The RMS Console
software supplies a set of common core services to such modules. This
architecture provides a development environment that enables our customers to
deploy new products more quickly.

Our bv-Control software products provide customers with a flexible querying
capability. Our query engine gathers large amounts of data about the network and
presents query results to the user. The user can quickly create custom queries,
or can select a query from the many sample reports that are provided
"out-of-the-box" with our software. The bv-Control software thus helps to detect
vulnerabilities within the network and to alert administrators of critical
issues so administrators can begin taking corrective action before users
experience system downtime or performance problems.

Our various bv-Control software products help to manage daily configuration
and operational issues, including password policies, effective-rights analysis,
and user accounts. Our products deliver robust reporting and analysis
capabilities, and thereby help to reduce downtime from improperly configured
servers and access rights and from security holes. Our bv-Control products help
improve service levels by identifying and proactively correcting problems
quickly and easily; they also help reduce the likelihood of unknown security
breaches.

We offer bv-Control software for a variety of operating systems and
applications, including but not limited to the following:

- bv-Control for Windows(R) 2000

- bv-Control for NetWare(R)

- bv-Control for NDS(R) eDirectory

- bv-Control for UNIX(R)

- bv-Control for Microsoft(R) Exchange

- bv-Control for Active Directory(R)

- bv-Control for Internet Security

- bv-Control for SAP(R) Systems

- bv-Control for SQL Server

- bv-Control for Desktops

- bv-Control for OS/400

- bv-Control for Web services

Our bv-Admin(R) Software

Our bv-Admin software provides a directory and systems administration
solution for security and migration, including roles-based access control for
network administrators and help-desk staffs; provisioning of users and machine
accounts; and automation of many day-to-day tasks. The bv-Admin software helps
network administrators to focus more effectively on the planning and
implementation issues that surround technologies such as Windows 2000, Active
Directory and Exchange 2000. Our bv-Admin migration software products also

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help organizations to manage proactively the transition from Windows NT,
Exchange 5.5, and Novell environments to Windows 2000, Active Directory, and
Exchange 2000 environments.

Our bv-Admin software utilizes a standards-based, non-intrusive
architecture (ADSI, LDAP, XML, COM, and HTTP). It supports large, distributed
environments through its scalable infrastructure. The bv-Admin software provides
role-based administration, reducing the cost and complexity of directory
management, while improving service levels at the same time. It consolidates
multiple directories and domains into a single management console, and provides
a powerful Find-and-Fix query facility to help locate and correct directory
information. It offers secure remote administration via a Web browser, and
automates a variety of complex and repetitive tasks with a powerful,
non-proprietary scripting facility.

We offer bv-Admin software for a variety of operating systems and
applications, including but not limited to the following:

- bv-Admin for Windows(R) 2000

- bv-Admin for Windows(R) 2000 Migration

- bv-Admin for Novell NDS(R)

- bv-Admin for Novell(R) Migration

- bv-Admin for Microsoft(R) Exchange

- bv-Admin for Microsoft(R) Exchange Migration

- bv-Admin for .Net Web Services

- bv-Admin for Group Policy Objects

The BindView Policy Center

In July 2002 we announced the launch of a new product line, the BindView
Policy Center, and released the first product in that line, the BindView Policy
Operations Center. The BindView Policy Operations Center, which is hosted for us
by META Security Group, is a Web-based system that helps policy officers and
system administrators to develop, implement, and manage security policies. Major
features of the BindView Policy Operations Center include:

- Security Policy Creation and Development: Organizations can easily
document and distribute proprietary security policies throughout the
enterprise, helping to ensure that all employees have access to and are
aware of relevant security policies -- an important component of meeting
basic requirements for protecting information assets. Additionally,
existing policies can be easily imported and integrated with the new best
practices information.

- Education and Awareness: Organizations can measure user awareness of
internal security policies and then document when each user has read and
accepted those policies, providing important information for legal and
regulatory audits.

- Disaster Recovery and Business Continuity: The Web-based delivery method
provides organizations with 24x7 access to their security policies and
documentation, regardless of physical location.

- No Internal Installation or Support Costs: Organizations need only to
provide the browser and Web access -- BindView Policy Operations Center
does not require lengthy or complex installations, thereby reducing
implementation delays and ongoing support concerns.

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BACKLOG

We normally do not operate with a backlog because we ship our products
shortly after orders are received.

COMPETITION

Currently, our products compete with products from a variety of
organizations including but not necessarily limited to the following:

- providers of security analysis and audit products;

- providers of Windows NT management and migration tools;

- providers of network security scanning technology;

- providers of security-policy products and services;

- providers of shareware/freeware software products that perform some of
the same functions as our software;

- providers of enterprise resource planning application add-ons for SAP
security administration and vulnerability assessment;

- providers of LAN desktop management suites; and

- providers of stand-alone inventory and asset management products.

Some examples of specific companies with whom we compete in particular
markets or submarkets are: Aelita Corporation; ConfigureSoft, Inc.; CSI
International; Ecora Corporation; Hewlett-Packard Company; Intel Corporation;
Intrusion.Com; ISS Group, Inc.; BearingPoint; Microsoft Corporation; NetIQ
Corporation; Network Associates Inc.; PentaSafe, Inc. (recently acquired by
NetIQ Corporation); PoliVec, Inc.; Quest Software; Symantec Inc.; and Tally
Systems Corporation.

In addition, companies such as Novell and Microsoft also offer native tools
with their products that provide a basic set of management tools. While the
native tools currently offered by these companies provide assistance in certain
administrative tasks for their own respective platforms, we believe that they do
not help IT administrators or security professionals cope, to the same extent
that our products do, with the day-to-day management tasks with which they are
challenged. Our software solutions provide an easy-to-use interface and can be
scaled to the largest of the heterogeneous environments. We believe we are in a
unique position to help address the growing demand for cross-platform security
and administration solutions in these installations.

SALES AND MARKETING

We sell our products through direct sales and telesales forces, and, to a
lesser extent, through value-added resellers ("VARs"), distributors, and
original equipment manufacturers ("OEMs"). In addition, we have strategic
marketing relationships with certain professional service organizations and
software vendors that provide us with increased visibility, as well as sales
leads. Sales cycles typically range from three months for departmental sales and
up to twelve months or more for large, enterprise-wide deployments.

SALES FORCE

Direct Sales Force. Our direct sales force focuses on enterprise and
large-market customers, generally Fortune 500 companies. Direct sales
representatives are in communication with our largest opportunities, using our
staff of software engineers to help customers with the technical aspects of our
software. Most of our direct sales force is based at our Houston headquarters.
We also have direct sales representatives in Frankfurt, Germany; Mexico City,
Mexico; Berkshire, England; and Sao Paolo, Brazil.

Telesales Force. Our telesales organization, which is based in Houston,
concentrates on emerging and middle-market customers by utilizing our staff of
software engineers, as well as the telephone and Internet

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communications for product demonstrations and product sales. When necessary,
members of our telesales force also travel to customer locations.

VARS AND DISTRIBUTORS

We have established indirect distribution channels through relationships
with VARs and distributors in the United States, Europe, Latin America, and the
Pacific Rim, with the highest concentration of such relationships being located
in European markets.

Our international VARs and distributors typically perform selected
marketing, sales, and technical support functions in their country or region.
Each one might distribute directly to the customer, via other resellers, or
through a mixture of both channels.

SYSTEMS INTEGRATORS AND SERVICE PROVIDERS

We also market our products through certain service organizations that help
customers install, manage, and secure large Windows NT and NetWare networks.
Such organizations include certain large systems integrators, outsourcing
companies, and certain security auditing groups within accounting firms. Some of
these companies sell our products directly to their end-users, while others
license the products from us and include these products in their standard
toolkits used at their clients' sites.

CHANNEL ALLIANCES AND PROGRAMS

To support our sales organization and channel partners, we have devoted
significant resources to building a series of channel alliances and marketing
programs. Currently, we have developed relationships with certain companies
including Microsoft Corporation; Novell, Inc.; Hewlett-Packard Company; and IBM
Corporation. We are a Microsoft Solution Provider and hold Windows 2000
Certified and Microsoft Gold Partner status for several of our products. We also
collaborate with certain accounting firms to increase awareness of network
security issues.

In addition, our marketing efforts have resulted in our participation in a
number of programs such as seminars, industry trade shows, vendor executive
briefings, analyst and press tours, advertising and public relations efforts.

CUSTOMER SUPPORT AND PROFESSIONAL SERVICES

We believe high-quality customer support and professional services are
requirements for continued growth and increased sales of our products. We have
made a significant investment in increasing the size of our support and services
organization in the past and plan to continue to do so in the future. Customer
support personnel provide technical support by telephone, e-mail and fax, and
maintain our Web site and bulletin boards to complement these services. Product
upgrades and enhancements are provided at no extra charge to our maintenance
customers as part of their maintenance subscriptions.

Our professional services group provides fee-based product training,
consulting, and implementation services to help customers maximize the benefits
of our products. In addition, we periodically offer training to our channel
partners and employees.

COMPANY-SPONSORED RESEARCH & DEVELOPMENT ACTIVITIES

We have been and continue to be an innovator and leader in the development
of IT administration and security management solutions. We believe a technically
skilled, quality oriented and highly productive software development
organization is key to the continued success of new product offerings. Our
software development staff is also responsible for enhancing our existing
products and expanding our product line. We expect we will continue to invest
substantial resources in product development expenditures. Tables showing
financial data, including our expenditures on research and development
activities are set forth in Item 6, "Selected Financial Data," and in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Operating Costs and Expenses."
6

EMPLOYEES

As of December 31, 2002, we employed approximately 525 full-time employees
worldwide. We are not subject to any collective bargaining agreement.

PATENTS, TRADEMARKS, AND COPYRIGHTS

We protect our software and other intellectual-property assets under
copyright law, trademark law, trade-secret law, and patent law, as applicable.
We have obtained U.S. federal trademark registrations for certain trademarks and
U.S. copyright registrations for certain works of authorship. For additional
details, see the discussion of Proprietary Rights in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Cautionary Statements," contained elsewhere in this Report.

SEASONALITY

See the discussion of Seasonality in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Seasonal
Fluctuations," contained elsewhere in this Report.

FUTURE INTENTIONS

We intend to continue focusing on proactive security management software
and services to help customers secure, automate, and lower costs of managing
their IT infrastructures. We anticipate that our future product directions will
focus on the "security-policy life cycle," i.e., on improving our customers'
ability to develop, implement, and manage security policy. This likely will
include expanding the number of platforms supported by our bv-Control and
bv-Admin products; selectively expanding the features and functionality of those
products; increasing the scope and capabilities of our new BindView Policy
Center offering; and possibly developing or acquiring other products relating to
security management. We will focus especially on developing and/or acquiring
products we believe we can sell to our existing markets, and/or that we believe
will leverage our existing technologies and core competencies.

AVAILABLE INFORMATION

BindView's internet address is http://www.bindview.com. BindView's filings
with the Securities and Exchange Commission ("SEC"), including its annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports, filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act, are accessible free of charge at
http://www.bindview.com as soon as reasonably practicable after the company
electronically files such material with, or furnishes it to the SEC.

ITEM 2. PROPERTIES

All offices we occupy are leased. Our corporate headquarters, which house
our principal administrative, sales and marketing, support, and research and
development operations, are located in Houston, Texas. Our international
subsidiaries currently have office space for sales personnel in Frankfurt,
Germany; Berkshire, England; Sao Paolo, Brazil; and Mexico City, Mexico. We also
have additional research and development offices in Pune, India. We believe
suitable additional or alternative space will be available on commercially
reasonable terms, if needed.

ITEM 3. LEGAL PROCEEDINGS

From time to time we are a plaintiff or defendant in various lawsuits and
claims arising in the normal course of business. There are no pending (or, to
our knowledge, threatened) lawsuits or claims whose outcomes, individually or in
the aggregate, are likely to have a material adverse effect on our operations or
results.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK

Our common stock is traded on The Nasdaq National Market under the symbol
"BVEW".

As of March 24, 2003, the last sales price per share of the Company's
common stock, as reported by The Nasdaq National Market, was $1.19.

The following table presents the quarterly range of high and low closing
prices for our common stock from January 1, 2001 through December 31, 2002, as
reported by The Nasdaq National Market.

HOLDERS

On March 24, 2003, there were 46,574,500 outstanding shares of our common
stock held by approximately 341 holders of record. This does not include
individual owners whose shares are held by a clearing agency, such as a broker
or bank.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock in the
two most recent fiscal years and do not expect to do so in the foreseeable
future. We anticipate all future earnings generated from operations will be
retained to develop and expand our business. Any future decision to pay cash
dividends will depend upon our growth, profitability, financial condition and
other factors the Board of Directors may deem relevant.

8

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes as of December 31, 2002, certain information
regarding equity compensation to our employees, officers, and directors under
our equity compensation plans:

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(1) 1998 Omnibus Plan

(2) Incentive Stock Option Plan, Nonqualified Stock Option Plan, 1997 Employee
Stock Option Plan, Non-Employee Director Plan, 2000 Indian Stock Option
Plan, 2000 Employee Incentive Plan, International Employee Stock Option
Plan, 1997 Entevo Stock Plan, and 1998 Indian Stock Option Plan.

See Note 9 to Financial Statements included in Item 15 of this Annual
Report on Form 10-K for a description of each of these plans.

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ITEM 6. SELECTED FINANCIAL DATA

The selected historical consolidated financial data was derived from the
Company's Consolidated Financial Statements, which have been audited by
PricewaterhouseCoopers LLP, independent accountants. The information set forth
below is not necessarily indicative of the results of future operations and
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Company's Consolidated
Financial Statements and Notes thereto included elsewhere herein. In 1999 and
2000, BindView completed mergers with Netect, Ltd. ("Netect") and Entevo
Corporation ("Entevo") that were accounted for as pooling of interests, and
accordingly, the selected financial data of BindView has been restated to
include the accounts of Netect and Entevo for all periods prior to the mergers.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto included
elsewhere herein. Special Note: Certain statements set forth below constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
See "Business -- Special Note Regarding Forward-Looking Statements" contained
elsewhere herein.

OVERVIEW

See the discussion above under Item 1, "General", for an overview of our
business.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in our Consolidated Financial
Statements and Notes thereto. Actual results could differ from those estimates
and assumptions. We believe the following critical accounting policies affect
our more significant estimates and assumptions used in the preparation of our
Consolidated Financial Statements and Notes thereto.

REVENUE RECOGNITION

Most of our revenues are from sales of licenses of our software and
maintenance service agreements (typically a one-year term with the license
purchase). We also generate revenue from sales of consulting and training
services. Our service revenue has increased in recent periods as the size of our
installed base has grown.

We sell our products principally through both our direct sales force, which
includes our direct sales and telesales personnel, as well as through indirect
channels, such as distributors, VARs and OEMs.

We follow American Institute of Certified Public Accountants ("AICPA")
Statement of Position 97-2, "Software Revenue Recognition" ("SOP 97-2") and
Statement of Position 98-9, "Modification of SOP 97-2, Software Revenue
Recognition With Respect to Certain Transactions" ("SOP 98-9"), in accounting
for revenues. We primarily license our software products under perpetual
licenses. Revenues are recognized under these arrangements once the following
criteria are met: (i) a written purchase order, license agreement or contract
has been executed; (ii) software, or software license authorization code in
situations where the customer previously received evaluation software, has been
delivered to the customer; (iii) license agreements with no significant vendor
obligations or customer acceptance rights outstanding have been issued to the
customer; (iv) the license fee is fixed and determinable and collection of the
fee is probable; and (v) vendor-specific objective evidence exists to allocate
the total fee. Vendor-specific objective evidence is based on the price
generally charged when an element is sold separately or the renewal rate for
maintenance agreements in subsequent years. In situations where vendor-specific
objective evidence does not exist, and all other revenue recognition criteria
have been met, revenue is recognized ratably over the life of the agreement. If
installation is essential to the functionality of the software, revenue is
deferred until completion of the installation. Certain of these items may
require the application of judgment when evaluating specific business
arrangements in a changing environment against our normal business practices.

Revenues from maintenance contracts and other related services are reported
as service revenue. Customers generally purchase a one-year maintenance
agreement in conjunction with their licensing of the Company's software products
and may elect to purchase multiple years of maintenance. Maintenance revenues
are recognized ratably over the contract term. The portion of maintenance
contract revenues not yet recognized as revenues is reported as deferred revenue
in the accompanying Consolidated Balance Sheets. Deferred maintenance revenue
does not include any amounts that have not been collected from customers. In
addition to deferred maintenance, deferred revenues include consulting and
training services which have been billed but not performed and license contracts
which did not meet the aforementioned revenue recognition criteria.

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Sales made through distributors, VARs, and OEMs are recognized upon
execution of a written purchase order, license agreement or contract with either
the reseller or end user and after all revenue recognition criteria previously
noted have been met. We perform ongoing credit evaluations and assessments of
the financial viability of our customers, including distributors, VARs and OEMs,
in determining whether or not collection of the fee is probable.

STOCK OPTIONS

We follow Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, in accounting for our employee stock options, which
generally provides that no compensation expense is recognized when options are
granted with an exercise price equal to fair market value on the date of the
grant.

INCOME TAXES

We follow the liability method of accounting for income taxes. Under this
method, deferred income tax assets and liabilities are determined based on
differences between the financial statement and income tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances may also be provided
based upon subjective evaluations of facts, circumstances and expectations,
which may change over the course of time and may result in significant changes
in our tax provision.

ACCOUNTS RECEIVABLE AND PROVISION FOR DOUBTFUL ACCOUNTS

We provide an allowance for doubtful accounts when collection is considered
doubtful. We perform ongoing credit evaluations of our customers, review our
collection efforts and analyze our payment experience with specific customers in
order to determine whether or not collection is doubtful. There may be a
significant fluctuation in our provision for doubtful accounts to the extent our
subjective evaluation of the facts, circumstances and expectations change.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2001

Revenues. Revenues for 2002 were $67.0 million compared with $70.9 million
in 2001. The year-over-year decline primarily related to the decrease in license
sales of our products for Novell platforms, partially offset by increased
license sales of our products for Microsoft platforms and higher services
revenues. License revenues for 2002 were $37.2 million, or 56 percent of total
revenues, down from $42.5 million in 2001. Services revenues for 2002 were $29.7
million, or 44 percent of total revenues, up from $28.4 million in 2001.

During 2002, revenues from our products for Microsoft-based platforms
totaled $44.3 million, an increase of 6 percent over 2001. Revenues from these
products accounted for approximately 66 percent of total revenues in 2002, up
from 59 percent of total revenues for 2001. We expect revenues from our software
products on Microsoft-based platforms will continue to grow as a percentage of
total revenues.

Revenues from our products for Novell-based platforms for the current year
were $14.7 million, or 22 percent of total revenues, compared with 21.6 million
in 2001, or 30 percent of total revenues. Revenues from these products have been
declining over the past year, reflecting both the maturity and our penetration
of the Novell market. While we expect our Novell revenues will continue to
decline in the future, we expect that the rate of decline will be modest over
the next few quarters and that the decline will be offset by revenue growth from
our other product platforms.

Sales of our security focused bv-Control product line accounted for
approximately 83 percent of our license revenue in 2002 compared with 90 percent
in 2001. Sales of our system administration focused bv-Admin product line
accounted for approximately 17 percent of our license revenue in 2002 compared
with 10 percent in 2001.

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No customer accounted for more than 10 percent of our revenues in 2002 and
2001. Revenues recognized from sales to customers outside North America,
primarily in Europe, accounted for approximately 11 percent of total revenues in
2002 compared with 13 percent in 2001.

Gross Profit. Gross profit for 2002 was $60.7 million, compared with $63.4
million for 2001. The decline in gross profit reflected the decrease in license
revenues, partially offset by a slight improvement in gross margin. The
expansion in gross margin reflected the improvement in operating leverage of the
Company's technical support and professional services units. Gross margin for
2002 was 90.6 percent, up from 89.5 percent in 2001.

Operating Costs and Expenses. Operating costs and expenses for 2002
totaled $67.7 million, down from $94.9 million for 2001. These costs include
restructuring and asset impairment charges of $3.3 million in 2002 and $8.6
million in 2001. These charges related to restructuring plans to improve
operating efficiency, improve sales and marketing effectiveness and accelerate
our return to profitability. Excluding these charges, our operating costs and
expenses were $22.0 million lower in 2002 than the preceding year.

Sales and marketing expenses for 2002 decreased 24.1 percent to $37.2
million, from $49.1 million for 2001, primarily related to actions taken to
improve sales efficiency and marketing effectiveness. These actions included a
rationalization of our sales force and marketing programs relative to the market
opportunity. As a result, we closed or downsized a number of our foreign sales
offices and reduced the size of our enterprise sales force, which were focused
exclusively on large enterprise transactions. We also redirected our marketing
efforts on enhancing our product marketing capabilities and improving our sales
opportunity generation capabilities. We expect sales and marketing expenses as a
percentage of revenues to be lower in 2003 as a result of our initiatives to
date to improve operating leverage and sales and marketing effectiveness and
anticipated revenue growth.

Research and development expenses for 2002 were $19.2 million, down from
$22.7 million in 2001. This decrease primarily related to the closing or
downsizing of our development offices in Boston, Massachusetts and Arlington,
Virginia and transferring those activities to our lower-cost development centers
in Houston, Texas and Pune, India. We also transferred development
responsibilities for certain of our legacy products from Houston, Texas to Pune,
India and expect to continue leveraging that development center in the future.
As a result of these initiatives and anticipated revenue growth, we expect
future research and development expenses to decrease as a percentage of
revenues.

General and administrative expenses for 2002 were $7.9 million, down from
$14.6 million for 2001. This decrease primarily related to the reduction in
administrative expenses related to our restructuring initiatives and higher
provisions for consulting fees, sales tax accruals and bad debts in 2001. We
expect future general and administrative expenses to decrease as a percentage of
revenues as a result of our restructuring initiatives to date to improve
operating efficiencies, as well as anticipated revenue growth.

Restructuring costs were $3.0 million in 2002 and $6.6 million in 2001. The
restructuring charge in 2002 included an upward adjustment of $1.1 million in
our accrual for leaseholds that were abandoned in 2001 primarily related to the
deteriorating sublease commercial real estate market in Houston, Texas.

In July 2002 we approved a restructuring plan to improve operating
efficiency and improve sales and marketing productivity. The original estimate
for the cost of this plan totaled approximately $1.6 million and consisted
primarily of (i) involuntary employee separation for approximately 30 employees
(a reduction in workforce of approximately 5 percent), (ii) closing the
Company's Boston development center and certain European sales offices, (iii)
reserves for leasehold abandonment, and (iv) various non-personnel related cuts.
The costs of the plan were based on our best estimate utilizing information
available at the time. Subsequent to recording the charge in September 2002, we
increased the amount of the charge by $0.3 million due to lower expected
sublease rental rates related to deterioration in the commercial real estate
market in Houston, Texas, offset by lower costs associated with employee
severance. These changes are reflected below in the Adjustments column and were
included in the transaction and restructuring line in the accompanying
Consolidated Statements of Operations and Comprehensive Loss.

13

The 2002 restructuring expenses and amounts charged against the provision
as of December 31, 2002 were as follows (in thousands):

In connection with the 2002 restructuring plan, we also determined that
certain leasehold improvements related to the downsized or closed offices were
impaired and recognized an asset impairment of $0.3 million.

In 2001, we completed a corporate reorganization and implemented a number
of cost-cutting measures to improve operating efficiency and to accelerate our
return to profitability. The cost of this plan totaled approximately $6.6
million and consisted primarily of: (i) involuntary employee separation expenses
for approximately 160 employees (a reduction in workforce of approximately 21
percent), (ii) downsizing or closing of our Boston and Arlington development
centers and certain of our European sales offices, (iii) reserves for leasehold
abandonment, and (iv) various non-personnel related costs. The restructuring
costs included a $1.2 million charge related to asset impairments of leasehold
improvements, equipment and other assets of the closed or downsized offices.

The costs of the plan were based on our best estimate utilizing information
available at that time. Due to the economic downturn experienced in the
commercial real estate market in Houston, Texas during 2002, our estimates for
sublease rentals were decreased. This change is reflected in the Adjustments
column below and was recorded in the transaction and restructuring line in the
accompanying Consolidated Statements of Operations and Comprehensive Loss.

The accrued restructuring expenses and amounts charged against the
provision as of December 31, 2002 were as follows (in thousands):

Separate from the restructuring charge, we also recognized in 2001 an asset
impairment charge of $2.0 million, relating to a $1.5 million write-off of
software and computer equipment and a $0.5 million impairment of certain
intangible assets. The majority of the software and computer equipment write-off
related to an enterprise-wide asset management system acquired in 2000 that will
not be installed or utilized in the future. The intangible assets consisted
primarily of customer lists and non-compete agreements acquired in 2000 that
were deemed to have no future value.

Other Income (Expense). Other income (expense) totaled $2.1 million in
2002 and $(2.9) million in 2001. In 2002, other income (expense) was primarily
comprised of (i) the receipt of a $1.3 million insurance settlement of a
business interruption business claim made in 2001 and (ii) interest income of
$0.7 million. In 2001, other income (expense) was primarily comprised of (i) a
write-off of a $5.0 million equity investment in a UK-based software
distribution and consulting firm and (ii) interest income of $2.1 million. The
write-off of the $5.0 million equity investment was based on an independent
appraisal of the current fair value of the investment and management's
assessment of the value that would be derived from a future sale. This software

14

distribution and consulting firm has filed for bankruptcy in the UK in 2002. The
year-over-year decrease in interest income was due to lower interest rates and
lower investment balances in 2002.

Provision (Benefit) for Income Taxes. In 2002, we provided a full
valuation allowance against our deferred tax assets of $19.6 million in
accordance with Financial Accounting Standard No. 109, "Accounting for Income
Taxes". As in its prior assessments, we considered current and previous
performance and other relevant factors in determining the sufficiency of our
valuation allowance. Objective factors, such as current and previous operating
losses, were given substantially more weight than our outlook for future
profitability. We remain optimistic about the future prospects of our business
and the industry and continue to believe that over time, as the market improves,
we should generate sufficient taxable income to utilize a substantial portion of
our net operating loss carryforwards. Until such time as a consistent pattern of
sufficient profitability is established, no tax benefit will be recognized
associated with our pre-tax accounting losses and a full income tax provision
will not be provided on any future pre-tax accounting income.

Net Loss. Due to the factors described above, net loss for 2002 was $24.4
million compared with $24.1 million for 2001.

Outlook for 2003. Our outlook for 2003 attempts to take into account the
current uncertainty in market and economic conditions that may result from the
risks and uncertainties set forth in the cautionary statements below as well as
changes and investments in our sales and marketing strategies recently
implemented. We are investing in sales territories that have historically
underperformed and which we expect to provide reasonable opportunities for
growth in 2003, specifically Europe, Latin America and Federal Government.
Complementing these investments, we have restructured our go-to-market
strategies to include a tiered sales focus on enterprise, named, and emerging
accounts, and a consolidated business-line approach to our bv-Admin, bv-Control
and BindView Policy Center solutions including accountability for product-line
profitability, marketing and R&D investments. For 2003, we expect revenues to
equal or exceed $70 million and have sized the organization to achieve
profitability and positive cash flow at $70 million in revenues. Our ability to
achieve or exceed these estimates will depend on the level of IT security
spending for 2003, as well as on our ability to execute our business plan; there
can be no assurance that we will be able to do so successfully.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2000

Revenues. Revenues for 2001 were $70.9 million compared with $86.1 million
in 2000. This year-over-year decline was primarily due to the global decline in
IT spending in 2001, which adversely affected sales to large enterprise and
European customers. License revenues for 2001 were $42.5 million, or 60 percent
of total revenues, down from $58.9 million for 2000. Service revenues in 2001
were $28.4 million, or 40 percent of total revenues, up from $27.1 million in
2000, reflecting an increase in our installed customer base and a higher focus
on consulting services.

Sales of our security focused bv-Control product line accounted for
approximately 90 percent of our license revenue in both 2001 and 2000. In 2001,
sales of this product line on Microsoft platforms accounted for over 50 percent
of total revenues, up from 49 percent in 2000.

No customer accounted for more than 10 percent of our revenues in 2001 and
2000. Revenues recognized from sales to customers outside North America,
primarily in Europe, accounted for approximately 13 percent of total revenues in
2001 compared with 11 percent in 2000.

Gross Profit. Gross profit for 2001 was $63.4 million, compared with $79.9
million for 2000. Virtually all of the decline was due to the decrease in
license revenues in 2001. Gross margin for 2001 was 89.5 percent, down from 92.8
percent in 2000, reflecting a shift in business mix toward services revenues,
which have a lower gross margin than license revenues. Additionally, the cost of
services has increased as a result of increases in the cost of technical support
staff servicing our growing customer base and increases in the cost of
professional services and training staff.

Operating Costs and Expenses. Operating costs and expenses for 2001
totaled $94.9 million, up from $89.0 million for 2000. These costs include
merger, restructuring and asset impairment charges of $8.6 million in 2001 and
$7.9 million in 2000. The charges for 2001 related to our corporate
reorganization and
15

restructuring to lower operating costs, improve operating leverage and
accelerate our return to profitability. The charges for 2000 were primarily
merger and transaction costs related to the merger with Entevo Corporation and
to a lesser extent costs associated with the closing of one of our product
development offices. Excluding these charges, our operating costs and expenses
were up $5.3 million in 2001 primarily as a result of higher sales and marketing
expenses related to infrastructure investments made in the second half of 2000
and carried through the first half of 2001, as well as higher administrative
expenses mainly related to an increase in our bad debt reserve.

Sales and marketing expenses for 2001 increased 9.7 percent to $49.1
million, from $44.8 million for 2000 primarily related to: (i) building and
maintaining an enterprise sales force focused exclusively on increasing sales to
large enterprise customers and (ii) expanding our European sales offices. These
and other investments in sales and marketing added over $3.0 million in
quarterly sales expense in the fourth quarter of 2000 and the first two quarters
of 2001. Because of the difficult operating environment, these investments did
not generate sufficient revenues to justify their cost and were significantly
reduced as part of our restructuring that took place in mid-2001. As a result of
this restructuring, we reduced our quarterly sales and marketing expenses to
pre-build up levels.

Research and development expenses for 2001 were $22.7 million, down from
$26.5 million in 2000. This decrease primarily related to the closing or
downsizing of our development offices in Boston, Massachusetts and Arlington,
Virginia and consolidating most of their development activities into existing
development centers in Houston, Texas and Pune, India.

General and administrative expenses for 2001 were $14.6 million, up from
$9.8 million for 2000. This increase primarily related to: (i) $2.8 million in
bad debt expense incurred during the second quarter of 2001 in connection with a
review of our collections efforts and experience with specific customers as well
as our overall customer base in light of the weaker economy and our decision to
reposition the Company in its market and to reposition various sales force
deployments and (ii) an increased investment in administrative staff made during
the first half of 2001.

In 2001, we completed a corporate reorganization and implemented a number
of cost-cutting measures to improve operating efficiency and to accelerate our
return to profitability. The cost of this plan totaled approximately $6.6
million and consisted primarily of: (i) involuntary employee separation expenses
for approximately 160 employees (a reduction in workforce of approximately 21
percent), (ii) downsizing or closing of our Boston and Arlington development
centers and certain of our European sales offices, (iii) reserves for leasehold
abandonment, and (iv) various non-personnel related costs. The restructuring
costs included a $1.2 million charge related to asset impairments of leasehold
improvements, equipment and other assets of the closed or downsized offices.

The costs of the plan were based on our best estimate utilizing information
available at that time. Due to the economic downturn experienced in the
commercial real estate market in 2002, our estimates for sublease rentals were
decreased. This change is reflected in the Adjustments column below and was
recorded in the transaction and restructuring line in the accompanying
Consolidated Statements of Operations and Comprehensive Loss.

16

The accrued restructuring expenses and amounts charged against the
provision as of December 31, 2002 were as follows (in thousands):

Separate from the restructuring charge, we also recognized in 2001 an asset
impairment charge of $2.0 million, relating to a $1.5 million write-off of
software and computer equipment and a $0.5 million impairment of certain
intangible assets. The majority of the software and computer equipment write-off
related to an enterprise-wide asset management system acquired in 2000 that will
not be installed or utilized in the future. The intangible assets consisted
primarily of customer lists and non-compete agreements acquired in 2000 that
were deemed to have no future value.

During 2000, we merged with Entevo Corporation in a stock-for-stock
transaction accounted for as a pooling of interests. Transaction costs of $3.8
million and restructuring costs of $1.8 million were incurred in connection with
the merger. The transaction costs consisted of investment banking fees of $2.5
million and professional fees and other miscellaneous expenses of $1.3 million.
At the time of the merger, management approved restructuring plans to eliminate
duplicate positions and integrate Entevo's and our operations. These
restructuring costs consisted of employee severance and relocation costs of $1.5
million and other miscellaneous integration and restructuring costs of $0.3
million. As of December 31, 2000, there were no actions remaining under the
plan.

In December 2000, we realigned our product offerings and strategic plans
for product development. In connection with this realignment, we determined
certain capitalized software costs, prepaid royalties and equipment were
impaired and recognized an asset impairment charge, which was included in
operating costs and expenses, totaling $1.6 million. In connection with this
corporate product realignment, we approved restructuring plans to eliminate
certain positions and to close our operations in Fremont, California. These
restructuring costs consisted of employee severance costs of $0.7 million and
other miscellaneous integration and restructuring costs of $0.1 million. As of
December 31, 2001, there were no actions remaining under the plan.

Other Income (Expense). Other income (expense) totaled $(2.9) million in
2001 and $4.4 million in 2000. The decline in other income was the result of:
(i) a write-off of a $5.0 million equity investment in a UK-based software
distribution and consulting firm and (ii) lower investment income due to lower
interest rates and lower investment balances during the period. The write-off of
the $5.0 million equity investment was based on an independent appraisal of the
current fair value of the investment and management's assessment of the value
that would be derived from a future sale.

Provision (Benefit) for Income Taxes. The benefit for income taxes for
2001 was $10.2 million (an effective tax rate of 29.7 percent), compared with
$0.8 million (an effective tax rate of 16.9 percent) for 2000. Our effective tax
rate includes the effects of state and foreign income taxes and certain foreign
losses for which no tax benefits have been provided, as well as the portion of
Entevo transaction costs incurred in 2000 which are not deductible for tax
purposes. This rate reflected management's expectation that the current year net
operating losses ("NOL") would be realized by the Company in its future federal
income tax returns as a reduction of the future income tax payable prior to the
expiration of the carryforward period. As previously noted above, we
subsequently provided for a full valuation allowance against our deferred tax
assets during 2002.

17

Net Loss. Due to the factors described above, net loss for 2001 was $24.1
million compared with $3.8 million for 2000.

RECENT PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires that all business combinations be
accounted for by the purchase method of accounting and changes the criteria for
recognition of intangible assets acquired in a business combination. The
provisions of SFAS No. 141 apply to all business combinations initiated after
June 30, 2001. We do not expect the adoption of SFAS No. 141 to have a material
impact on our financial position and results of operations. SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized; however, these assets must be reviewed at least annually
for impairment. Intangible assets with finite useful lives will continue to be
amortized over their respective useful lives. The standard also establishes
specific guidance for testing for impairment of goodwill and intangible assets
with indefinite useful lives. We do not expect the adoption of SFAS No. 142 will
have a material impact on our financial position and results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 amends existing
accounting guidance on asset impairment and provides a single accounting model
for long-lived assets to be disposed of. Among other provisions, the new rules
change the criteria for classifying an asset as held-for-sale. The standard also
broadens the scope of businesses to be disposed of that qualify for reporting as
discontinued operations, and changes the timing of recognizing losses on such
operations. We do not expect the adoption of SFAS No. 144 will have a material
impact on our financial position and results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 provides guidance
related to accounting for costs associated with disposal activities covered by
SFAS No. 144 or with exit or restructuring activities previously covered by
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS No. 146 supercedes
EITF Issue No. 94-3 in its entirety. SFAS No. 146 requires that costs related to
exiting an activity or to a restructuring not be recognized until the liability
is incurred. SFAS No. 146 will be applied prospectively to exit or disposal
activities that are initiated after December 31, 2002.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a rollforward of the entity's product warranty liabilities.
The adoption of FIN 45 is not expected to have a material impact on our
financial position and results of operations. The disclosure provisions of FIN
45 are effective for financial statements for the year ended December 31, 2002.
Our warranty liabilities are considered immaterial for disclosure in 2002.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS No. 148 also requires
that disclosures of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the
pro forma effect in interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for our fiscal year 2003.
The interim disclosure requirements are effective for the second quarter of our
fiscal year 2003. We do not expect SFAS No. 148 will have a material effect on
our results of operations or financial condition.

18

LIQUIDITY AND CAPITAL RESOURCES

The Company's capital requirements have principally related to working
capital needs and capital expenditures. These requirements have been met through
a combination of issuances of securities and internally generated funds.

The Company had cash, cash equivalents and short-term investments of $37.8
million at December 31, 2002 compared with $43.0 million at December 31, 2001.
The major reasons for the decrease were the purchase of 5.7 million shares of
the Company's common stock for $5.4 million and capital expenditures of $3.1
million. This decrease was partially offset by cash flows from operating
activities of $1.6 million and $0.6 million in proceeds primarily from the sale
of common stock under the Company's Employee Stock Purchase Plan.

Cash flows provided by (used in) operating activities were $1.6 million in
2002 and $(3.7) million in 2001. The increase in operating cash flows from
operating activities reflected improvements in operating leverage and
improvements in working capital management.

Cash flows provided by investing activities were $0.2 million in 2002 and
$4.0 million in 2001. The decrease in cash generated from investing activities
related to a decrease in proceeds generated from the maturity of investments.

Cash flows used in financing activities were $4.8 million in 2002 and $9.9
million in 2001. The major use of cash in financing activities in 2002 was for
the repurchase of 5.7 million shares of its common stock for $5.4 million. This
use was partially offset by proceeds of $0.6 million primarily from the sale of
common stock under the Company's Employee Stock Purchase Plan.

We conduct operations in leased facilities under operating leases expiring
at various dates through 2011. The remaining contractual obligations under these
lease commitments were comprised of the following as of December 31, 2002:

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

* We have sub-leased portions of these facilities under operating leases.
Anticipated cash receipts from these executed sub-lease arrangements have been
taken into account when deriving expected cash outflow on operating lease
commitments in the preceding table.

Our expected principal cash requirements for 2003 are: (i) capital
expenditures between $1.5 million and $2.0 million, primarily for computer and
software equipment, (ii) to fund our working capital requirements, and (iii)
payment of accrued restructuring expenses of approximately $1.0 million and $2.0
million. We believe that there is sufficient cash on hand to meet these cash
requirements, as well as our cash requirements for the foreseeable future.

PROPRIETARY RIGHTS

See the discussion below under the headings "Cautionary Statements -- Other
Companies Might Try to Misappropriate Our Technology" and "Cautionary
Statements -- We Might Be Accused of Misappropriating a Third Party's
Technology."

CAUTIONARY STATEMENTS

In addition to the other information in this Report, the following factors
in particular (which are not listed in any particular order of importance)
should be carefully considered when you evaluate BindView and its business.
There may be other risks and uncertainties not presently known to us, or that we
currently deem

19

immaterial, which could also impair our business operations. As discussed in
more detail below, if one or more of the following risks actually occur, it is
possible our business, financial condition and operating results could be
materially adversely affected.

- Demand for our products may be weak in the current economy.

- Our product sales are significantly concentrated.

- We may face future competition from established companies entering our
market, and/or from consolidated companies.

- Our products could be rendered obsolete by operating-system and
application-program software vendors.

- Our product sales usually require long lead times.

- Our quarterly sales are significantly back-end loaded, which can lead to
uncertainty about meeting expectations and to lower sales prices.

- Our sales are somewhat seasonal.

- Our products may not be able to prevail in comparative evaluations
against our competitors' products.

- Recent refinements to our sales compensation structure have yet to be
proved successful.

- Ongoing refinements to our sales organization may result in transitional
inefficiencies.

- We do not maintain a significant backlog.

- Our international sales are subject to certain additional risks.

- We may be subject to foreign currency risks.

- We are dependent upon continued growth of the market for Windows system
software.

- We are likely to continue to be confronted by rapidly-changing markets.

- Our R&D efforts may not be sufficient to keep up with changing markets.

- Our software could contain errors that are hard to detect and costly to
fix.

- We could be subject to liability claims if our software has errors.

- We rely on certain third-party relationships, and our business could be
hurt if those relationships were to be impaired.

- We license certain third-party software for inclusion in our product, and
such software may not always be available for our use.

- Our revenue bases may change with the market.

- We are affected by the migration rate to Windows 2000.

- Other companies might try to misappropriate our technology.

- We might be accused of misappropriating a third party's technology.

- Our cost structure is fixed to a certain extent, which may limit our
ability to reduce costs if sales decrease.

- We may be required to defer increasing amounts of revenue in the future.

- Our stock price has a history of volatility.

- The loss of one or more of our key individuals could hurt our business.

20

- We have recently experienced significant changes in our senior management
team and board of directors.

- Our corporate governance structure includes certain anti-takeover
provisions.

- Our network and Web site may be targeted for intentional disruption.

- Natural disasters and other infrastructure problems may hurt our ability
to operate.

- Acquisitions may pose additional risks.

Demand for our products may be weak in the current economy. In 2001 the
U.S. economy was widely viewed as having entered a recession, which was
exacerbated by the terrorist attacks of September 11. In 2002, a recovery was
believed by some to have commenced, but the recovery may be delayed by the war
recently begun in Iraq. In such a general economic downturn, our customers are
apt to curtail IT expenses. This can result in lower sales, lower sales revenues
and a lengthening of sales cycles during these periods. The economy may go into
a so-called double-dip recession. Even if the recession is ending, our
customers' IT spending still may not increase immediately.

Our product sales are significantly concentrated. A majority of our
revenues are derived from the sale of licenses and maintenance for our
bv-Control software products. We anticipate these products will account for a
majority of our revenues for the foreseeable future. If our bv-Control products
become uncompetitive for any reason, our business could be substantially
damaged. Although we currently plan to broaden our product line, we cannot be
certain we will be able to reduce our product concentration.

We may face future competition from established companies entering our
market, and/or from consolidated companies. We expect competition in our market
to increase significantly as current competitors expand their product lines and
services and as new companies enter the market. Many of these existing and
potential competitors are likely to enjoy substantial competitive advantages,
including greater resources that can be devoted to the development, promotion
and sale of their products; more established sales channels; greater software
development experience; and greater name recognition. In addition, we have noted
what appears to be a recent trend of consolidation in our market through mergers
and acquisitions. For example, Symantec Corporation acquired Axent Technologies
and thereby began competing with us in one area of our market. Other examples
from recent years include Quest Software's acquisition of FastLane Technologies
Inc. and NetIQ Corporation's mergers with Mission Critical Software and
PentaSafe, Inc. This could result in the creation of new competitors and/or
enhancement of the competitive capabilities of existing competitors. If these
present and future competitors are successful, we are likely to lose market
share and our revenue would likely decline.

Our products could be rendered obsolete by operating-system and
application-program software vendors. We believe vendors of operating-system and
application-program software we support, particularly Microsoft and Novell,
could enhance their software to include functionality we provide in our own
software. Microsoft has a well-established track record of successfully entering
and competing in markets in which it becomes interested; in recent years,
Microsoft has publicly announced it intends to focus more intensely on computer-
and Internet-related security issues. If such other vendors were to offer
greater functionality than they currently do, then even if our software were
clearly better, there would still be a substantial risk many customers would
elect to use "good enough" functionality in the operating-system or
application-program software instead of buying and/or continuing to pay
maintenance fees for our software. If this risk were to come to pass, our
license and maintenance revenues could be seriously affected.

Our product sales usually require long lead times. The sales cycles for
our products are typically long. The extended sales cycles are due to a variety
of reasons, including but not necessarily limited to the following. Our
customers must complete their own internal evaluation and budget-approval
procedures. Because our software is used in network management, customers often
require that several people evaluate the software. Sometimes such people are in
different functional and geographic areas and may have different and perhaps
conflicting requirements; this can increase the time needed for customer
evaluation. In addition, we have

21

recently expanded our product offerings and have been working to sell more
enterprise-wide licenses involving multiple BindView products; this likewise can
increase time required for customer review. Some customers intentionally delay
purchases for reasons such as budgetary constraints, concerns about the general
economy, or a desire to wait until new products are announced, either by us, by
our competitors, or by underlying infrastructure vendors such as Microsoft or
Novell. Moreover, in recent quarters we have experienced longer budget and
purchasing review cycles from some of our customers as a result of the U.S.
economic slowdown.

Our quarterly sales are significantly back-end loaded, which can lead to
uncertainty about meeting expectations and to lower sales prices. We generally
record a significant portion of our revenues near the end of each fiscal
quarter, due in part to customer buying patterns. Many companies negotiate large
purchase agreements near the end of the quarter. We believe these companies
expect that by doing so, they can negotiate lower prices and better terms at a
time when publicly-traded vendors are conscious of the need to "make their
numbers" for the quarter. In any given quarter, such customer behavior can make
it difficult for us to forecast our ability to meet the expectations of
investors and analysts. We may make some end-of-quarter sales at lower prices
than originally offered, which could have an adverse impact on our business.

Our sales are somewhat seasonal. Our customers sometimes make significant
license and maintenance purchases at the end of the year, possibly because they
have budget dollars left and wish to spend those dollars rather than lose them.
In addition, some of our sales compensation policies are based on achievement of
certain annual revenue goals. As a result, our fourth quarter has historically
tended to be the strongest in sales, which in turn has meant the following first
quarter is often weaker in sales. (Our first-quarter sales in any given fiscal
year do not necessarily indicate we will achieve higher sales in any subsequent
quarter.)

Our products may not be able to prevail in comparative evaluations against
our competitors' products. Our customers often conduct "beauty contests" in
which they evaluate not only our products but those of our competitors. We
believe our products usually fare very well in such head-to-head contests, but
the possibility always exists that we may lose any given such contest for one or
more reasons, some of which may be beyond our control. For example, if our
product does not have a certain functionality that is particularly important to
a customer, and if a competitor's product does have such functionality, then we
may not be able to win that customer's business.

Recent refinements to our sales compensation structure have yet to be
proved successful. We recently made changes to our sales compensation structure
based on the recommendation of a consulting firm that studied our sales
operations. We expect these changes will result in more closely aligning the
personal financial interests of our sales force with the financial interests of
the Company, but if not, our business could be adversely affected.

Ongoing refinements to our sales organization may result in transitional
inefficiencies. We are currently refining our sales organization to increase
our ability to support enterprise-wide sales. Some of these refinements may
require additional training for some of our sales personnel whose job duties are
changed, which can result in temporary inefficiencies as these personnel learn
their new duties.

We do not maintain a significant backlog. We normally do not operate with
a backlog because we ship our products shortly after orders are received.
Consequently, if new orders dry up, we will not be able to cushion the resulting
lack of sales with backlog sales.

Our international sales are subject to certain additional risks. During
2002, 2001, and 2000, we derived approximately 11 percent, 13 percent, and 11
percent of our revenues, respectively, from sales outside North America, both
with our own international sales force (who generally are employed by our
foreign subsidiaries) and by resellers and distributors. We cannot be certain we
will be able to attract third parties that will be able to market our products
effectively or to provide timely and cost-effective customer support and
service. Our reseller arrangements generally provide that resellers may carry
competing product offerings. We cannot be certain any distributor or reseller
will continue to represent our products. If we are unable to recruit or retain
sales personnel, distributors, or resellers, that inability could materially and
adversely affect our business. If we are unable to generate increased sales
using our international sales force, our costs will be higher without
corresponding increases in revenue, resulting in lower operating margins for our
international operations. In

22

addition, employment law and policies vary among countries outside the United
States, which may reduce our flexibility in managing headcount and, in turn,
managing personnel-related expenses. If we do not address the risks associated
with international sales in a cost-effective and timely manner, our
international sales growth will be limited, operating margins could be reduced
and our business could be materially adversely affected. Even if we are able to
successfully expand our international operations, we cannot be certain that we
will be able to maintain or increase international market demand for our
products.

We may be subject to foreign currency risks. To an increasing extent, our
international business likely will be conducted in foreign currencies,
especially the Euro. The exchange ratio of foreign currencies for U.S. dollars
has fluctuated in the past and is likely to do so in the future, but we cannot
predict the extent to which this will happen. Such fluctuations may lead to our
experiencing currency losses. We have not adopted a formal hedging program to
protect us from risks associated with foreign currency fluctuations.

We are dependent upon continued growth of the market for Windows system
software. We depend upon the success of Microsoft's Windows NT and Windows 2000
operating systems, and to a lesser extent on the success of Novell's NetWare
operating system and of Microsoft's Exchange software. In particular, market
acceptance of our products depends on the increasing complexity of these
software products and the advantages that our own software provides in managing
those products. There may be times when the growth of one or more of these
software products flattens out or even declines, especially if IT spending
becomes, or stays, generally flat. To a certain extent, the growth in the
Windows system software products comes at the expense of the corresponding
Novell products, meaning that even if we gain customers on the Windows side, we
may lose customers on the Novell side.

We are likely to continue to be confronted by rapidly-changing
markets. The markets in which we do business can often be subject to rapid
technological change, frequent new product introductions and enhancements,
uncertain product life cycles, changes in customer demands, and evolving
industry standards. Our products could be rendered obsolete if new products
based on new technologies are introduced or new industry standards emerge. Our
future success will depend in part on our ability to react to, and ideally to
anticipate, these changes.

Our R&D efforts may not be sufficient to keep up with changing markets. To
deal successfully with market changes, we must periodically enhance our existing
products, develop and introduce new products, and sometimes discontinue an
existing product. Our products are inherently complex; as a result, our new
products and product enhancements can require long development and testing
periods. When we undertake a project along these lines, we must make resource
investments that often are significant in scope. We may experience various
delays and other difficulties in any given project; if that happens, it
increases the chances that a competitor might beat us to the market and thereby
achieve a potential first-to-market advantage; this in turn could hinder our
efforts to persuade customers to buy our products, which could damage our
business. We have, on occasion, experienced delays in our planned introduction
of new or enhanced products and cannot be sure such delays will not occur again.
In short, we cannot be certain, as our market evolves, we will be able to
introduce new and/or updated products customers will want to buy or continue to
use, or if we do, that we will earn enough money to recoup or realize a return
on our investments.

Our software could contain errors that are hard to detect and costly to
fix. Our software products are complex and usually are installed and used in
large computer networks having a wide variety of equipment and networking
configurations. We try to test our new products and product enhancements
thoroughly and to work with customers through our customer support services
organization to identify and correct errors ("bugs"). Even so, we might first
become aware of a particular error in a product or product enhancement only
after we had released it for general licensing availability. Depending on
severity, such errors could cost us substantial time and money to fix, possibly
delaying our work on other new products or product enhancements. In addition,
such errors could damage our reputation, possibly hurting our ability to sell
not only the product or product enhancement in question but perhaps other
products as well. Moreover, the operating-system or applicable-program software
with which our products operate could itself have bugs; this could result in
problems being incorrectly blamed on our software, which in turn could result in
our having to spend time and money addressing the problems even though they
ultimately proved not to have been of our making.

23

We could be subject to liability claims if our software has
errors. Conceivably, errors in our software could lead to warranty claims
and/or to product-liability claims. Such claims could require us to spend
significant time and money in litigation or to pay significant damages. Most of
our license agreements with customers contain provisions designed to limit our
exposure to potential claims, but it is possible that these provisions may not
prove 100% effective in limiting our liability. Any such claims, whether or not
ultimately successful, could damage our reputation and our business.

We rely on certain third-party relationships, and our business could be
hurt if those relationships were to be impaired. We rely to a considerable
extent on our relationships with Microsoft and Novell; for example, we attempt
to coordinate our product offerings with the future releases of their operating
systems. These companies may not notify us of feature enhancements prior to new
releases of their operating systems in the future. If that were to happen, we
might not be able to introduce new products and product enhancements on a timely
basis to capitalize on other companies' new releases and feature enhancements.
This could lead to one or more competitors, having better relationships with
these companies, pulling ahead of us in the marketplace.

We license certain third-party software for inclusion in our product, and
such software may not always be available for our use. We license certain
third-party software to perform certain functions in certain of our own software
products. So far we have been able to renew the required licenses on terms we
regard as satisfactory. It is possible that in the future we may not be able to
renew one or more of those licenses on acceptable terms. If that were to occur,
we might be forced to stop shipping the affected product(s) until we could find
or build a replacement for the third-party software; this could materially and
adversely affect our operating results.

Our revenue bases may change with the market. The percentages of our
revenues attributable to software licenses for particular operating-system or
application-software platforms can change from time to time. A number of factors
outside our control can cause these changes, including changing market
acceptance and penetration of the various operating-system and
application-software platforms we support and the relative mix of development
and installation by VARs of application software operating on such platforms.

We are affected by the migration rate to Windows 2000. Our ability to sell
licenses for some of our bv-Admin migration products depends in part on the rate
at which customers elect to migrate their networks to Microsoft's Windows 2000
operating system. Some observers have noted this migration rate has been slower
than expected. If the migration rate continues to remain comparatively slow, it
could materially and adversely affect our revenues from such migration products.

Other companies might try to misappropriate our technology. We attempt to
protect our technology with a combination of copyright, trademark and trade
secret laws, confidentiality procedures and contractual provisions. We license
our software products primarily under "click-wrap" licenses agreements. We
believe, however, these measures afford only limited protection. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information we regard as
proprietary. We have found historically that a few customers use our software
for more than they have paid for, representing a loss of revenue for us.
Policing unauthorized use of our products is difficult and we are unable to
determine the extent to which piracy of our software products exists. In
addition, the laws of some foreign countries do not protect our proprietary
rights as fully as do the laws of the United States, and we may be subject to
unauthorized use of our products in those countries. Any legal action that we
may bring to

24

protect proprietary information could be expensive and may distract management
from day-to-day operations. Our means of protecting our proprietary rights may
not be adequate to protect our products and technology from unauthorized
copying. In addition, competitors may be able to independently develop similar
or superior technology.

We might be accused of misappropriating a third party's
technology. Litigation regarding intellectual property rights is not uncommon
in the software industry. We expect software product developers will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. We are not aware that we are infringing
any proprietary rights of third parties. From time to time, however, third
parties may claim we have infringed on their intellectual property rights. Any
such claims, with or without merit, could be time consuming to defend, could
result in costly litigation, could divert management's attention and resources,
could cause product shipment delays, or could require us to enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to us, if at all. If a third party alleges
we have infringed its intellectual property rights, we may choose to litigate
the claim and/or seek an appropriate license from the third party. The mere fact
a third party makes such an allegation could damage our reputation and hurt our
ability to sell our products, and we might have little or no practical recourse
even if the allegation is baseless. If someone were successfully to make a claim
of infringement against us, and if we could not or did not obtain a license or
develop alternative technology on a timely basis, our business could be
materially adversely affected.

Our cost structure is fixed to a certain extent, which may limit our
ability to reduce costs if sales decrease. We base our expenses to a significant
extent on our estimates of future sales revenues. As a result, many of our
expenses are fixed in the short term. If our future sales do not match our
estimates, we might embark on certain cost cutting measures (which could include
but are not limited to employee reductions, office closings and product
consolidations), but we might not be able to cut costs quickly and effectively
enough to prevent our business from being adversely affected.

We may be required to defer increasing amounts of revenue in the
future. As our sales transactions and product mix becomes more complex,
revenue-recognition principles stated in SOP 97-2 or SOP 98-9 could require us
to defer a significant portion of our transaction revenues and to recognize the
deferred revenue in future periods, rather than in the period in which the sales
transactions occurred.

Our stock price has a history of volatility. There have been times when
the market price of our common stock has been highly volatile (like that of many
other technology companies). We expect our stock price will continue to
fluctuate in the future. These fluctuations may be due to factors specific to
our Company, to changes in analysts' earnings estimates, to the relatively low
volume of trading in our common stock in recent months, or to factors affecting
the computer industry or the securities markets in general. We believe that
quarter-to-quarter and year-to-year financial comparisons are not necessarily
meaningful indicators of our future operating results and should not be relied
on as an indication of future performance; nevertheless, if our quarterly and
annual operating results should fail to meet market expectations, the trading
price of our common stock could be negatively impacted. Our quarterly and annual
operating results have varied substantially in the past and may vary
substantially in the future due to a number of factors described elsewhere in
this Report, which could lead to significant changes in our stock price.

The loss of one or more of our key individuals could hurt our business. If
a senior executive or other key employee leaves the Company, dies, or becomes
disabled, that could hurt our business, especially if he or she joins a
competitor or otherwise competes with us. We have employment agreements and/or
change-of-control agreements with most of our senior executives. These
agreements establish an at-will employment relationship; they do not require the
executives to work for us for any particular period of time. These agreements
include provisions restricting the use of our confidential information and, in
most cases, requiring the senior executive not to compete with us for specified
periods of time, but enforcement of such agreements is generally time-consuming,
expensive, and uncertain in result (especially so in the case of covenants not
to compete). We do not maintain key man life insurance policies on any of our
personnel.

25

We have recently experienced significant changes in our senior management
team and board of directors. Several of our senior executives and members of our
board of directors are comparatively new with the Company. Our future success
will depend to a significant extent on our ability to assimilate these changes
in our leadership team.

Our corporate governance structure includes certain anti-takeover
provisions. Certain aspects of our corporate governance structure, like that of
many other technology companies, are typically regarded as anti-takeover
provisions. Such provisions likely would make it more difficult for a third
party to acquire control of our company, even if the change in control might be
beneficial to our stockholders. This could discourage potential takeover
attempts and could hurt the market price of our common stock.

Our network and Web site may be targeted for intentional disruption. As a
leading provider of security-related software, we anticipate that, from time to
time, our corporate computer network and our Web site may be targeted for
intentional disruption by "black-hat" hackers. We believe we have taken
sufficient precautions to prevent such disruption, but we cannot be certain we
will succeed in preventing all such disruption. If such disruption is
successful, it could hurt our business activities; if successful disruption
becomes publicly known, it could also damage our reputation and that of our
products and services.

Natural disasters and other infrastructure problems may hurt our ability to
operate. In June 2001, Tropical Storm Alison caused massive flooding throughout
the Houston area. While our Houston offices were not significantly damaged, the
infrastructure of the building in which our offices were located was severely
damaged by the flooding. As a result, we were unable to occupy our offices for
several weeks and were required to operate from temporary offices with temporary
phone systems, computer network facilities, etc. These events highlighted our
reliance on our telephone system, computer network, and data center
infrastructure for internal communications, communications with customers and
partners, direct sales of our software products, sales lead generation, and
direct provision of fee-based services. Those systems may be vulnerable to
damage from human error, physical or electronic security breaches, power loss
and other facility failures, fire, flood, telecommunications failure, sabotage,
terrorist attacks, vandalism and similar events. Despite precautions, a natural
disaster or other unanticipated problems could result in interruptions in our
service or significant damage. In addition, failure of any of our
telecommunications providers to provide consistent data communications capacity
could result in interruptions in our services and thus in our ability to provide
service to our customers.

Acquisitions may pose additional risks. In the past we have made, and we
may continue to make, investments in complementary companies, technologies,
services or products if we find appropriate opportunities. If we were to buy a
company, we could have difficulty assimilating the personnel and operations of
the acquired company. If we were to make other types of acquisitions,
assimilating the technology, services or products into our operations could be
difficult. Acquisitions could disrupt our ongoing business, distract management
and other resources and make it difficult to maintain our standards, controls
and procedures. We might not succeed in overcoming these risks or in any other
problems we might encounter in connection with any future acquisitions. We
cannot be certain we would be able to successfully integrate acquired products
and technology into our sales model or product offerings.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to a variety of risks associated with foreign
currency exchange rate fluctuations and changes in the market value of its
investments. Special Note: Certain statements set forth below constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
See "Business -- Special Note Regarding Forward-Looking Statements" contained
elsewhere herein.

FOREIGN CURRENCY EXCHANGE RATES

We operate globally and the functional currency for most of our non-U.S.
enterprises is the local currency. For the years ended December 31, 2002, 2001
and 2000, approximately 11 percent, 13 percent and 11 percent of our
consolidated revenues, respectively, were generated from customers outside of
North
26

America, substantially all of which were billed and collected in foreign
currencies. Similarly, substantially all of the expenses of operating our
foreign subsidiaries are incurred in foreign currencies. As a result, our U.S.
dollar earnings and net cash flows from international operations may be
adversely affected by changes in foreign currency exchange rates. Based on our
foreign currency exchange instruments outstanding at December 31, 2002, we
estimate a near-term change in foreign currency rates would not materially
affect our financial position, results of operations or net cash flows for the
year ended December 31, 2003. We used a value-at-risk ("VAR") model to measure
potential fair value losses due to foreign currency exchange rate fluctuations.
The VAR model estimates were made assuming normal market conditions and a 95
percent confidence level. The VAR model is a risk estimation tool, and as such,
is not intended to represent actual losses in fair value that we will incur.

INTEREST RATE RISK

We adhere to a conservative investment policy, whereby our principal
concern is the preservation of liquid funds while maximizing our yield on liquid
assets. Cash, cash equivalents, short-term investments and long-term investments
(including restricted cash) approximated $42.3 million and $47.5 million at
December 31, 2002 and 2001, respectively. Such amounts were invested in
different types of investment-grade securities with the intent of holding these
securities to maturity. Although our portfolio is subject to fluctuations in
interest rates and market conditions, no gain or loss on any security would
actually be recognized in earnings unless the instrument was sold. We estimate
that a near-term change in interest rates would not materially affect our
financial position, results of operations or net cash flows for the year ended
December 31, 2003. We used a VAR model to measure potential market risk on our
marketable securities due to interest rate fluctuations. The VAR model estimates
were made assuming normal market conditions and a 95 percent confidence level.
The VAR model is a risk estimation tool, and as such, is not intended to
represent actual losses in fair value that we will incur.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary financial information required
to be filed under this Item are presented in Item 15 of this Annual Report on
Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

For information concerning this Item, see text under the captions "Election
of Directors," "Executive Officers and Compensation" and "Compliance With
Section 16(a) of the Securities Exchange Act of 1934" in the proxy statement
relating to our 2003 annual meeting of shareholders (the "Proxy Statement") to
be filed subsequent to the filing of this Annual Report on Form 10-K, which
information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

For information concerning this Item, see text under the captions
"Executive Officers and Compensation" in the Proxy Statement, which information
is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

For information concerning this Item, see text under the captions "Security
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement,
which information is incorporated herein by reference.

27

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For information concerning this Item, see text under the caption "Certain
Relationships and Transactions" in the Proxy Statement, which information is
incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The management of the Company, including the Chief Executive Officer and
the Chief Financial Officer, have conducted an evaluation of the effectiveness
of the Company's disclosure controls and procedures pursuant to Rule 13a-14
under the Securities Exchange Act of 1934 as of a date (the "Evaluation Date")
within 90 days prior to the filing date of this Annual Report on Form 10-K.
Based on that evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that, as of the Evaluation Date, the Company's disclosure
controls and procedures were effective in ensuring that all material information
relating to the Company, including our consolidated subsidiaries, required to be
filed in this Annual Report on Form 10-K has been made known to them in a timely
manner.

(b) Changes in Internal Controls

There have been no significant changes made in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to the Evaluation Date.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents included in this Annual Report on Form 10-K:

Other financial schedules under the Act have been omitted because they are
either not required or are not material.

(b) Reports of Form 8-K:

In a Report on Form 8-K dated December 9, 2002, the Company reported that
it received notification from the NASDAQ Listing Qualifications Panel confirming
BindView has regained compliance with NASDAQ's continued listing maintenance
requirements.

In a Report on Form 8-K dated November 20, 2002, the Company reported that
it had announced to its employees that its board of directors had approved a
voluntary stock-option exchange program for employees other than executive
management.

In a Report on Form 8-K dated November 6, 2002, the Company reported it had
issued a press release announcing (i) recent management personnel changes,
including the appointment of a new senior vice president of worldwide marketing,
the appointment of a new vice president of international sales, and the
resignation of the Company's vice president of worldwide sales and the Company's
initiation of a search for a replacement; and (ii) results of the Company's
stock repurchase program.

28

In a Report on Form 8-K dated October 28, 2002, the Company issued a press
release announcing, among other things, financial results for the quarter and
nine months ended September 30, 2002.

(c) Exhibits:

Reference is made to the Exhibit Index at the end of this Annual Report on
Form 10-K.

29

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of BindView Development Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a) on page 28 present fairly, in all material respects,
the financial position of BindView Development Corporation and its subsidiaries
at December 31, 2002 and 2001, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 15(a) on page 28 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
the financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas
January 30, 2003

30

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.
31

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS

See notes to consolidated financial statements.
32

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

See notes to consolidated financial statements.
33

BINDVIEW DEVELOPMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to consolidated financial statements.
34

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OPERATIONS

BindView Development Corporation ("BindView" or the "Company"), a Texas
corporation, was incorporated in May 1990. The Company delivers security
management software solutions to help safeguard computer systems and networks
from security breaches and helps protect business systems from both internal and
external threats. The Company's suite of cross-platform software and associated
services help secure, automate and reduce the costs of managing information
technology infrastructures.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
BindView and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

In 2000, BindView completed a merger with Entevo Corporation ("Entevo") in
a transaction that was accounted for as a pooling of interests. These
consolidated financial statements combine the historical results of the Company
with Entevo for all periods presented.

REVENUE RECOGNITION

The Company follows American Institute of Certified Public Accountants
("AICPA") Statement of Position 97-2, "Software Revenue Recognition" ("SOP
97-2") and Statement of Position 98-9, "Modification of SOP 97-2, Software
Revenue Recognition With Respect to Certain Transactions" ("SOP 98-9"), as
applicable, to account for revenue recognition. The Company primarily licenses
its software products under perpetual licenses. Revenues are recognized under
these arrangements once the following criteria are met: (i) a written purchase
order, license agreement or contract has been executed; (ii) software, or
software license authorization code in situations where the customer previously
received evaluation software, has been delivered to the customer; (iii) license
agreements with no significant vendor obligations or customer acceptance rights
outstanding have been issued to the customer; (iv) the license fee is fixed and
determinable and collection of the fee is probable; and (v) vendor-specific
objective evidence exists to allocate the total fee in accordance with SOP 97-2
or SOP 98-9. Vendor-specific objective evidence is based on the price generally
charged when an element is sold separately or at the renewal rate for
maintenance agreements in subsequent years. In situations where vendor-specific
objective evidence does not exist, and all other revenue recognition criteria
have been met, revenue is recognized ratably over the life of the agreement. If
installation is essential to the functionality of the software, revenue is
deferred until completion of the installation. Certain of these items may
require the application of judgment when evaluating specific business
arrangements in a changing environment against our normal business practices.

Revenues from maintenance contracts and other related services are reported
as service revenue. Customers generally elect to purchase a one to three year
maintenance agreement in conjunction with their licensing of the Company's
products, which is renewable, at the customer's discretion, upon expiration of
the original maintenance contract. Maintenance revenues are recognized ratably
over the contract term. Deferred revenue is comprised primarily of maintenance
revenue and revenue from training and consulting services. The portion of
maintenance contract revenues that have not yet been recognized as revenues are
reported as deferred revenue in the accompanying consolidated balance sheet.
Deferred maintenance revenue which has not been collected is not recognized.

Sales made through distributors, value-added resellers ("VARs"), and
original equipment manufacturers ("OEMs") are recognized upon execution of a
written purchase order, license agreement or contract with either the reseller
or end user and after all revenue recognition criteria previously noted have
been met. The Company performs ongoing credit evaluations and assessments of the
financial viability of its customers, including distributors, VARs and OEMs, in
determining whether or not revenue recognition is appropriate.
35

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RESEARCH AND DEVELOPMENT

The Company follows SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, in accounting for research
and development costs. These costs are charged to operations as they are
incurred until technological feasibility has been determined. The Company
currently considers technological feasibility to have been established once a
working model of a product has been produced and tested. The judgment regarding
when an adequate working model has been satisfactorily tested is subjective and
the degree of proximity of that date to product release influences how much cost
is capitalized. To date, costs incurred by the Company's development staff
subsequent to the establishment of technological feasibility have not been
material.

SOFTWARE DEVELOPED FOR INTERNAL USE

The Company follows Statement of Position 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1") in
accounting for certain costs related to the development or purchase of
internal-use software. SOP 98-1 requires that certain costs be capitalized and
amortized over the estimated useful life of the software. Additionally, costs
related to the preliminary project stage and the post-implementation/operations
stage of an internal-use computer software development project are expensed as
incurred. In 2002 and 2001, the Company capitalized approximately $0.8 million
and $0.3 million, respectively in costs associated with the development of
internal-use software. Such costs are included in property and equipment in the
accompanying consolidated balance sheet.

STOCK OPTIONS

The Company accounts for all stock-based employee compensation plans under
the recognition and measurement provisions of APB Opinion 25, "Accounting for
Stock Issued to Employees," (APB 25) and related interpretations. Under APB 25,
no stock-based employee costs are reflected in net income as all options granted
under those plans had an exercise price equal to or in excess of the market
value of the underlying common stock on the date of grant. The following table
illustrates the effect on net loss and loss per share as if the Company had
applied the fair value recognition provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), to stock-based employee compensation:

36

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The above pro forma amounts were based on a Black-Scholes option-pricing
model, which included the following information and assumptions:

INCOME TAXES

The Company follows the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are determined
based on differences between the financial statement and income tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Valuation allowances may also be
provided based upon subjective evaluations of facts, circumstances and
expectations, which may change over the course of time (see Note 6).

CASH AND CASH EQUIVALENTS

All short-term investments with an original maturity of 90 days or less are
considered cash equivalents.

ACCOUNTS RECEIVABLE AND PROVISION FOR DOUBTFUL ACCOUNTS

The Company provides an allowance for doubtful accounts when collection is
considered doubtful. The Company performs ongoing credit evaluations of its
customers, reviews its collection efforts and analyzes its payment experience
with specific customers in order to determine whether or not collection is
doubtful. There may be a significant fluctuation in the provision for doubtful
accounts to the extent the Company's subjective evaluation of the economy,
facts, circumstances and expectations change.

INVESTMENTS

The Company's short-term investments include commercial paper, corporate
bonds or certificates of deposit that have original maturities of more than
three months and less than one year. The Company's long-term investments, which
have an original maturity of more than twelve months, are intended to be held
until maturity.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets. Leasehold
improvements are amortized over the shorter of the lives of the respective
leases or the service lives of the improvements. Repairs and maintenance are
charged to expense as incurred.

ADVERTISING COSTS

Advertising costs are expensed when incurred and totaled $0.8 million in
2002, $1.4 million in 2001, and $1.3 million in 2000.

37

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LONG-LIVED ASSETS

In the event that facts and circumstances indicate that long-lived assets
may be impaired, the Company evaluates the recoverability of such assets. The
estimated future undiscounted cash flows associated with the asset are compared
to the asset's carrying amount to determine if a write-down to market value or
discounted cash flow value is necessary. The Company believes all long-lived
assets are fully realizable as of December 31, 2002.

FOREIGN CURRENCY TRANSLATION

The Company's foreign subsidiaries use the local currency as their
functional currency. Financial statements of these subsidiaries are translated
into U.S. dollars using the exchange rate at each balance sheet date for assets
and liabilities and a weighted average exchange rate for each period for
revenues, expenses, gains and losses and cash flows. The impact of currency
fluctuations is recorded as a separate component of comprehensive income (loss)
in the accompanying consolidated statement of operations and comprehensive loss.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management considers many factors in selecting appropriate
operational and financial accounting policies and controls, and in developing
the estimates and assumptions that are used in the preparation of these
financial statements. Management must apply significant judgment in this
process. Among the factors, but not fully inclusive of all factors that may be
considered by management, in these procedures are: the range of accounting
policies permitted by U.S. generally accepted accounting principles;
management's understanding of the Company's business-both historical results and
expected future results; the extent to which operational controls exist that
provide high degrees of assurance that all desired information to assist in the
estimation is available and reliable or whether there is a greater uncertainty
in the information that is available upon which to base the estimate; expected
rates of change, sensitivity and volatility associated with the assumptions used
in developing estimates; and whether historical trends are expected to be
representative of future trends. The estimation process often times may yield a
range of potentially reasonable estimates of the ultimate future outcomes and
management must select an amount that lies within that range of reasonable
estimates-which may result in the selection of estimates which could be viewed
as conservative or aggressive by others-based upon the quantity, quality and
risks associated with the variability that might be expected from the future
outcome and the factors considered in developing the estimate. Actual results
could differ from those estimates.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior years' consolidated
financial statements to conform with the current year presentation.

RECENT PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires that all business combinations be
accounted for by the purchase method of accounting and changes the criteria for
recognition of intangible assets acquired in a business combination. The
provisions of SFAS No. 141 apply to all business combinations initiated after
June 30, 2001. The adoption of SFAS No. 141 is not expected to have a material
impact on the financial position and results of operations of the Company. SFAS
No. 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized; however, these assets
38

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

must be reviewed at least annually for impairment. Intangible assets with finite
useful lives will continue to be amortized over their respective useful lives.
The standard also establishes specific guidance for testing for impairment of
goodwill and intangible assets with indefinite useful lives. The adoption of
SFAS No. 142 is not expected to have a material impact on the financial position
and results of operations of the Company.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 amends existing
accounting guidance on asset impairment and provides a single accounting model
for long-lived assets to be disposed of. Among other provisions, the new rules
change the criteria for classifying an asset as held-for-sale. The standard also
broadens the scope of businesses to be disposed of that qualify for reporting as
discontinued operations, and changes the timing of recognizing losses on such
operations. The adoption of SFAS No. 144 is not expected to have a material
impact on the financial position and results of operations of the Company.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 provides guidance
related to accounting for costs associated with disposal activities covered by
SFAS No. 144 or with exit or restructuring activities previously covered by
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS No. 146 supercedes
EITF Issue No. 94-3 in its entirety. SFAS No. 146 requires that costs related to
exiting an activity or to a restructuring not be recognized until the liability
is incurred. SFAS No. 146 will be applied prospectively to exit or disposal
activities that are initiated after December 31, 2002.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a rollforward of the entity's product warranty liabilities.
The adoption of FIN 45 is not expected to have a material impact on the
financial position and results of operations for the Company. The disclosure
provisions of FIN 45 are effective for financial statements for the year ended
December 31, 2002. The Company's warranty liabilities are considered immaterial
for disclosure in 2002.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS No. 148 also requires
that disclosures of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the
pro forma effect in interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for the Company's fiscal
year 2003. The interim disclosure requirements are effective for the second
quarter of the Company's fiscal year 2003. The Company does not expect SFAS No.
148 to have a material effect on its results of operations or financial
condition.

2. ACQUISITION OF ENTEVO CORPORATION

In February 2000, the Company merged with Entevo in a stock-for-stock
transaction accounted for as a pooling of interests with retroactive restatement
of all periods combining the historical results of the Company and Entevo.
Entevo provided directory management solutions that help organizations deploy,
integrate, administer and maintain enterprise directory services in Windows NT
and Windows 2000 environments. In connection with the merger, the Company issued
4.2 million shares of common stock based upon an exchange ratio of 0.1205909
shares of the Company's common stock for each share of Entevo common stock and
0.17210298 shares of the Company's common stock for each share of Entevo Series
C Preferred Stock. The

39

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Entevo Series A and Series B Preferred Stock and all outstanding Entevo stock
warrants and options were converted to Company common stock on the date of the
merger. As a result of this merger, all of the outstanding convertible preferred
stock of Entevo was exchanged for the Company's common stock. The Company
incurred transaction costs in 2000 of $3.8 million and restructuring costs of
$1.8 million as a result of this merger. There were no material transactions
between BindView and Entevo prior to the merger.

3. RESTRUCTURING EXPENSES AND ASSET IMPAIRMENTS

Restructuring costs were $3.0 million in 2002 and $6.6 million in 2001. The
restructuring charge in 2002 included an upward adjustment of $1.1 million in
the Company's accrual for leaseholds that were abandoned in 2001 primarily
related to the deteriorating sub-lease commercial real estate market in Houston,
Texas.

In July 2002, the Company approved a restructuring plan to improve
operating efficiency and improve sales and marketing productivity. The original
estimate for the cost of this plan totaled approximately $1.6 million and
consisted primarily of (i) involuntary employee separation for approximately 30
employees (a reduction in workforce of approximately 5 percent), (ii) closing
the Company's Boston development center and certain European sales offices,
(iii) reserves for leasehold abandonment, and (iv) various non-personnel related
cuts. The costs of the plan were based on management's best estimate utilizing
information available at the time. Subsequent to recording the charge in
September 2002, the Company increased the amount of the charge by $0.3 million
due to lower expected sublease rental rates related to the deterioration in the
commercial real estate market in Houston, Texas, offset by lower costs
associated with employee severance. These changes are reflected below in the
Adjustments column and were included in the transaction and restructuring line
in the accompanying consolidated statements of operations and comprehensive
loss.

The 2002 restructuring expenses and amounts charged against the provision
as of December 31, 2002 were as follows (in thousands):

In connection with the 2002 restructuring plan, the Company also determined
that certain leasehold improvements related to the downsized or closed offices
were impaired and recognized an asset impairment of $0.3 million.

In 2001, the Company completed a corporate reorganization and implemented a
number of cost-cutting measures to improve operating efficiency and to
accelerate our return to profitability. The cost of this plan totaled
approximately $6.6 million and consisted primarily of: (i) involuntary employee
separation expenses for approximately 160 employees (a reduction in workforce of
approximately 21 percent), (ii) downsizing or closing of our Boston and
Arlington development centers and certain of our European sales offices, (iii)
reserves for leasehold abandonment, and (iv) various non-personnel related
costs. The restructuring costs included a $1.2 million charge related to asset
impairments of leasehold improvements, equipment and other assets of the closed
or downsized offices.

The costs of the plan were based on management's best estimate utilizing
information available at that time. Due to the economic downturn experienced in
the commercial real estate market in 2002, our estimates for sublease rentals
were decreased. This change is reflected in the Adjustments column below and was

40

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recorded in the transaction and restructuring line in the accompanying
consolidated statements of operations and comprehensive loss.

The accrued restructuring expenses and amounts charged against the
provision as of December 31, 2002 were as follows (in thousands):

The Company also recorded asset impairment charges totaling $7.0 million
during 2001 consisting of: (i) a write off of a $5.0 million equity investment
in a UK-based software distribution and consulting firm and (ii) an asset
impairment charge of $2.0 million consisting of $1.5 million for software and
computer equipment and a $0.5 million impairment of certain intangible assets.
The investment in the UK-based software firm was originally made during the
second quarter of 2000 and consisted of $5.0 million of redeemable preferred
stock in the firm and $1.0 million of intangible assets, primarily consisting of
customer lists and non-compete agreements which were being amortized over their
useful lives ranging from one to three years. The write-off of the $5.0 million
equity investment, which is included in other income (expense) in the Company's
consolidated statement of operations and comprehensive loss, was based on an
independent appraisal of the current fair value of the investment and
management's assessment of the value that would be derived from the investment.
The intangible assets had a net book value of $0.5 million at the date of the
impairment after the Company incurred $0.2 million and $0.3 million in
amortization expense for the years ending December 31, 2001 and 2000,
respectively. The majority of the $1.5 million in software and computer
equipment impairment related to the acquisition of an enterprise-wide asset
management system that management had determined would not be installed or
utilized in the future.

In December 2000, the Company realigned its product offerings and strategic
plans for product development. In connection with this realignment, the Company
determined that certain capitalized software costs, prepaid royalties and
equipment were impaired and recognized an asset impairment totaling $1.6
million. In connection with this corporate product realignment, the Company
approved restructuring plans to eliminate certain positions and to close its
operations in Fremont, California. These restructuring costs consisted of
employee severance costs of $0.7 million and other miscellaneous integration and
restructuring costs of $0.1 million. As of December 31, 2001, there were no
actions remaining under the plan.

During 2000, the Company merged with Entevo Corporation in a
stock-for-stock transaction accounted for as a pooling of interests. Transaction
costs of $3.8 million and restructuring costs of $1.8 million were incurred as a
result of the merger. The transaction costs consisted of investment banking fees
of $2.5 million and professional fees and other miscellaneous expenses totaling
$1.3 million. At the time of the merger, management approved restructuring plans
to eliminate duplicate positions and integrate Entevo's and the Company's
operations. These restructuring costs consisted of employee severance and
relocation costs of $1.5 million and other miscellaneous integration and
restructuring costs of $0.3 million. As of December 31, 2000, there were no
actions remaining under the plan.

41

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS

The Company had no investments at December 31, 2002 and short-term
investments considered held to maturity at December 31, 2001 of $3.3 million.

RESTRICTED CASH

Under terms of the Company's lease agreement covering its corporate office
that was amended in May 2001, the Company was required to post a $4.5 million
irrevocable letter of credit to the lessor. The Company posted this letter of
credit in July 2001 and placed on deposit with the issuing financial institution
$4.5 million to secure that instrument. The letter of credit requirement will be
reduced to $2.25 million on November 1, 2004 and will expire on November 1,
2005. The deposit of $4.5 million to secure the letter of credit is included in
investments and other in the accompanying consolidated balance sheets.

5. PROPERTY AND EQUIPMENT

Property and equipment balances are summarized as follows:

Depreciation expense totaled $4.1 million in 2002, $5.2 million in 2001,
and $5.1 million in 2000.

6. INCOME TAXES

The components of income (loss) before income taxes are summarized as
follows (in thousands):

42

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision (benefit) for income taxes consisted of the following:

The differences between income taxes computed at the federal statutory
income tax rate and the provision (benefit) for income taxes follow:

43

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of deferred tax assets and liabilities at December 31, 2002
and 2001 are comprised of the following:

At December 31, 2002, the Company has a domestic NOL carryforward of
approximately $48 million, of which $8 million expires in 2012, $19 million
expires from 2018 through 2020, $16 million expires in 2021 and $5 million
expires in 2022. The Company also has a foreign NOL carryforward of
approximately $15 million and a research and development credit carryforward of
$3 million expiring between 2018 and 2022.

During 2002, the Company made an assessment of realization of its deferred
tax assets and concluded that a valuation allowance of $19.6 million for its net
deferred tax assets was appropriate. As of December 31, 2002, the Company has a
full valuation allowance of $34.2 million against its deferred tax assets. As in
its prior assessments, the Company considered its current and previous
performance and other relevant factors in determining the sufficiency of its
valuation allowance. Objective factors, such as current and previous operating
losses, were given substantially more weight than management's outlook for
future profitability. Management remains optimistic about the future prospects
of the Company's business and the industry and continues to believe that over
time, as the market improves, the Company should generate sufficient taxable
income to utilize a substantial portion of its net operating loss carryforwards.
Until such time as a consistent pattern of sufficient profitability is
established, no tax benefit will be recognized associated with the Company's
pre-tax accounting losses and a full income tax provision will not be provided
on any future pre-tax accounting income.

United States income taxes have not been provided on the cumulative
undistributed earnings, which totaled approximately $2.3 million at December 31,
2002, of the Company's foreign subsidiaries as it is the Company's intention to
reinvest such earnings indefinitely.

7. NET LOSS PER SHARE

The Company's earnings per share data are presented in accordance with SFAS
No. 128, "Earnings Per Share". Basic earnings per share data are computed using
the weighted average number of shares outstanding. Diluted earnings per share is
computed using the weighted average number of shares outstanding adjusted for

44

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the incremental shares attributed to outstanding securities with a right to
purchase or convert into common stock. The following table sets forth the
computation of basic and diluted loss per share (in thousands, except per share
amounts):

Options and warrants to purchase 7.5 million, 8.2 million and 12.0 million
shares of common stock for the years ended December 31, 2002, 2001 and 2000,
respectively, were outstanding, but were not included in the computation of
diluted loss per share as their inclusion would have been anti-dilutive.

8. SHAREHOLDERS' EQUITY

COMMON STOCK

In 1998, the Company issued 0.5 million shares of common stock to the two
founders of Entevo pursuant to the terms of restricted stock purchase
agreements. The common stock was issued at $.05 per share in consideration of
full recourse promissory notes bearing interest at 6 percent from the founders.
The promissory notes are due in 2003. During 2000, one promissory note was paid
in full. As of December 31, 2002, the Company has a remaining note receivable of
$0.2 million outstanding, which is classified as note receivable from
shareholders in the accompanying consolidated balance sheet.

In May of 2001, the Company, under terms of a restricted stock agreement,
issued 0.4 million shares of restricted common stock to an executive officer at
$2.61 per share in exchange for a full recourse promissory note of approximately
$1.0 million. The restricted common stock vests over a four-year period from the
date of issuance. At December 31, 2001, the May agreements were rescinded and a
new restricted stock agreement and promissory note were entered into reflecting
issuance of 0.4 million shares to the executive at $1.97 per share.
Additionally, the executive's employment agreement was amended to lower his
guaranteed signing bonus in proportion to the reduction in proceeds to the
Company from the stock issuance.

SHAREHOLDER RIGHTS PLAN

On September 17, 2001 the Board of Directors adopted a Shareholder Rights
Plan (the "Rights Plan"). Pursuant to the Rights Plan, the Company distributed
Preferred Stock Purchase Rights ("Rights") as a dividend at the rate of one
Right for each share of the Company's common stock held by stockholders of
record as of September 21, 2001 (the "Record Date"). The Board of Directors also
authorized the issuance of Rights for each share of common stock issued after
Record Date, until the occurrence of certain specified events. The Rights Plan
was adopted to provide protection to stockholders in the event of an unsolicited
attempt to acquire the Company. The Rights are not exercisable until the earlier
of (i) ten days following an announcement that a person or group has acquired
beneficial ownership of 15 percent of the Company's common stock or (ii) ten
days following the announcement of a tender offer which would result in a person
or group obtaining beneficial ownership of 15 percent or more of the Company's
outstanding common stock,

45

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

subject to certain exceptions (the earlier of such dates being called the
("Distribution Date")). The Rights are initially exercisable for one
one-hundredth of a share of the Company's preferred stock at a price of $11 per
share, subject to adjustment. However, if (i) after the Distribution Date the
Company is acquired in certain types of transactions, or (ii) any person or
group, with certain exceptions, acquires beneficial ownership of 15 percent of
the Company's common stock, then holders of Rights (other than the 15 percent
holder) will be entitled to receive upon exercise of the Right, common stock of
the Company (or in the case of acquisition of the Company, common stock of the
acquirer) having a market value of two times the exercise price of the Right.
The Company is entitled to redeem the Rights, for $0.001 per Right, at the
discretion of the Board of Directors, until certain specified times. The Company
may also require the exchange of Rights, at a rate of one share of common stock,
for each Right, under certain circumstances. The Company also has the ability to
amend the Rights, subject to certain limitations.

STOCK PURCHASE WARRANTS

In 1997, the Company issued a warrant to purchase 0.1 million shares of
common stock at $8.07 per share. The warrant was exercised in 2000 by payment of
the exercise price of $1.0 million.

TREASURY STOCK TRANSACTIONS

Under terms of a share repurchase program approved by the Board of
Directors during 2002, the Company purchased approximately 5.7 million shares of
common stock during the year ended December 31, 2002, at an average price per
share of $0.94. The Company retired these shares in November 2002.

Under terms of a share repurchase program approved by the Board of
Directors during 2000, the Company purchased approximately 2.4 million and 0.6
million shares of common stock at an average price per share of $3.14 and $8.38
during the years ended December 31, 2001 and 2000, respectively. In February
2002, the Company retired all of the 3.0 million shares of common stock held in
treasury as of December 31, 2001.

9. STOCK OPTION PLANS

INCENTIVE STOCK OPTION PLAN

In 1996, the Company's Board of Directors adopted the Incentive Stock
Option Plan under which 3.7 million shares of common stock have been reserved
for issuance of options. At December 31, 2002, 0.6 million and 1.1 million
options were outstanding and available for issuance under this plan,
respectively. Options on 0.5 million, 0.6 million and 0.8 million shares were
exercisable at December 31, 2002, 2001 and 2000, respectively, with a weighted
average exercise price per share of $1.38, $1.63 and $4.69, respectively.

NONQUALIFIED STOCK OPTION PLAN

In 1996, the Company's Board of Directors adopted the Nonqualified Stock
Option Plan under which 3.5 million shares of common stock have been reserved
for issuance of options. At December 31, 2002 and 2001, there were no options
outstanding and 0.3 million options available for issuance under this plan,
respectively. Options on 0.8 million shares were exercisable at December 31,
2000 with a weighted average exercise price per share of $1.60.

1997 EMPLOYEE STOCK OPTION PLAN

In 1997, the Company's Board of Directors adopted the 1997 Employee Stock
Option Plan under which 2.6 million shares of common stock have been reserved
for issuance of options. At December 31, 2002, 0.5 million and 0.4 million
options were outstanding and available for issuance under this plan,
respectively. Options on 0.5 million, 0.4 million and 1.1 million shares were
exercisable at December 31, 2002, 2001 and 2000, respectively, with a weighted
average exercise price per share of $2.91, $2.53 and $2.67, respectively.
46

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1998 OMNIBUS INCENTIVE PLAN

In 1998, the Company's Board of Directors adopted the 1998 Omnibus
Incentive Plan under which 8.0 million shares of common stock have been reserved
for issuance of options. At December 31, 2002, 2.1 million and 5.0 million
options were outstanding and available for issuance under this plan,
respectively. Options on 1.2 million, 1.5 million and 0.9 million were
exercisable at December 31, 2002, 2001 and 2000, respectively, with a weighted
average exercise price per share of $7.16, $8.13 and $9.11, respectively.

NON-EMPLOYEE DIRECTOR PLAN

In 1998, the Company's Board of Directors adopted the Non-Employee Director
Plan under which 0.5 million shares of common stock have been reserved for
issuance of options. At December 31, 2002, 0.4 million and 0.1 million options
were outstanding and available for issuance under this plan, respectively.
Options on 0.1 million shares were exercisable at December 31, 2002, 2001 and
2000, with a weighted average exercise price per share of $1.73, $1.92 and
$2.93, respectively.

2000 INDIAN STOCK OPTION PLAN

In 2000, the Company's Board of Directors adopted the 2000 Indian Stock
Option Plan under which 0.5 million shares of common stock have been reserved
for issuance of options. At December 31, 2002, 0.3 million and 0.2 million
options were outstanding and available for issuance under this plan,
respectively. Options on 0.1 million shares were exercisable at December 31,
2002 and 2001 at a weighted average exercise price per share of $5.70 and $6.63,
respectively. There were no options exercisable at December 31, 2000 under this
plan.

2000 EMPLOYEE INCENTIVE PLAN

In 2000, the Company's Board of Directors adopted the BindView 2000
Employee Incentive Plan under which 4.4 million shares of common stock have been
reserved for issuance of options. At December 31, 2002, 3.7 million and 0.7
million options were outstanding and available for issuance under this plan,
respectively. Options on 0.8 million and 0.4 million shares were exercisable at
December 31, 2002 and 2001, respectively, at a weighted average exercise price
per share of $3.01 and $4.74, respectively. There were no options exercisable at
December 31, 2000 under this plan.

INTERNATIONAL EMPLOYEE STOCK OPTION PLAN AND SECTION 102 SHARE OPTION PLAN

In 1998, Netect's Board of Directors adopted the International Employee
Stock Option and Section 102 Share Option Plans under which 0.4 million shares
of common stock have been reserved for issuance of options. At December 31,
2002, 0.1 million options were outstanding and available for issuance under this
plan. Options on 0.1 million shares were exercisable at December 31, 2002, 2001
and 2000, respectively, with a weighted average exercise price per share of
$4.59, $3.50 and $3.25, respectively. In connection with the merger of Netect
and the Company, these options were exchanged for options to purchase the
Company's common stock using the exchange ratio, which is reflected in the
amounts listed herein.

1997 ENTEVO STOCK PLAN AND 1998 INDIAN STOCK OPTION PLAN

In 1997, Entevo's Board of Directors adopted the 1997 Entevo Stock Plan and
in 1998 the 1998 Indian Stock Option Plan under which 0.4 million shares of
common stock have been reserved for issuance of options. At December 31, 2002,
0.1 million and 0.3 million options were outstanding and available for issuance
under this plan, respectively. Options on 0.1 million shares were exercisable at
December 31, 2002, 2001 and 2000, respectively, with a weighted average exercise
price per share of $1.65, $0.94 and $1.11, respectively. Certain local
regulatory restrictions apply to the Indian Stock Option Plan. In connection
with the merger of Entevo

47

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

into the Company, these options were exchanged for options to purchase the
Company's common stock using the exchange ratio, which is reflected in the
amounts listed herein.

ALL STOCK-BASED COMPENSATION PLANS

Options granted under the Incentive Stock Option Plan, Nonqualified Stock
Option Plan and Non-Employee Director Plan generally vest 20 percent per year
over five years. Options granted under the International Employee Stock Option
Plan, the Section 102 Share Option Plan, 1997 Entevo Stock Plan, 1998 Indian
Stock Option Plan, 2000 Indian Stock Option Plan and 2000 Employee Incentive
Plan generally vest 25 percent per year over four years. Options granted under
the 1997 Employee Stock Option Plan and 1998 Omnibus Incentive Plan vest at
varying rates. Options expire between one year and ten years from the date of
grant. Stock options have been granted at the fair market value of the Company's
stock at the date of grant.

The following table summarizes combined activity under the stock option
plans for each of the three years ended December 31, 2002:

48

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes significant ranges of outstanding and
exercisable options at December 31, 2002:

EMPLOYEE STOCK PURCHASE PLAN

During 1999, the Company's Board of Directors adopted the 1999 Employee
Stock Purchase Plan ("ESPP") whereby eligible employees may purchase shares of
the Company's common stock at a price equal to 85 percent of the lower of the
closing market price on the first or last trading day of a six-month period. A
total of 1.0 million shares were initially reserved for issuance under this
plan, and subsequent to December 31, 2002, the Board of Directors authorized an
additional 1.0 million shares for the ESPP. Employees purchased 0.5 million and
0.2 million shares during 2002 and 2001, respectively. Aggregate proceeds to the
Company totaled $0.5 million and $0.6 million in 2002 and 2001, respectively.

OPTION EXCHANGE PROGRAM

In November 2002 the Company's Board of Directors approved a voluntary
option exchange program whereby employees (except senior management) with
options having existing exercise prices of $3.00 and above could surrender those
options for a lesser number of new options to be issued by the Company at least
six months and one day from the date of surrender. The exercise price of the new
options will be at the market price of the Company's common stock on the date of
issuance. Approximately 1.0 million options were surrendered under the program,
which will result in approximately 0.4 million new options being issued in June
2003. The Company is in the process of making its filings with the Securities
and Exchange Commission to comply with the position of the Division of
Corporation Finance of the Securities and Exchange Commission that compensatory
exchange offers such as the exchange offering are subject to the issuer tender
offer rules of the Securities and Exchange Commission. The Company expects the
new options to be issued will be accounted for as a variable plan.

10. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company conducts its operations in leased facilities under operating
leases expiring at various dates through 2011. Total lease expense amounted to
approximately $4.1 million in 2002, $4.4 million in 2001, and $4.4 million in
2000.

The minimum rental commitments under operating leases at December 31, 2002
are: $2.9 million in 2003, $2.8 million in 2004, $4.5 million in 2005, $4.4
million in 2006, $4.4 million in 2007 and $16.1 million in 2008 and beyond. A
portion of the Company's leased facilities under operating leases have been
sub-leased.

49

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Anticipated cash receipts from these executed sub-lease arrangements are: $1.1
million in 2003 and $0.6 million in 2004.

Under terms of the Company's lease agreement covering its corporate office
that was amended in May 2001, the Company was required to post a $4.5 million
irrevocable letter of credit to the lessor. The Company posted this letter of
credit in July 2001 and placed on deposit with the issuing financial institution
$4.5 million to secure that instrument. The letter of credit requirement will be
reduced to $2.25 million on November 1, 2004 and will expire on November 1,
2005.

The Company's amended lease agreement for its corporate office includes 10
months rental abatement which will be utilized from September 2003 to June 2004.
Deferred rent expense associated with this rental abatement was $1.5 million and
$0.7 million at December 31, 2002 and 2001, respectively, and is included in
other current liabilities in the accompanying consolidated balance sheets.

EMPLOYMENT AGREEMENTS

Certain of the Company's executives are covered by employment agreements
covering, among other things, base compensation, incentive-bonus determinations
and payments in the event of termination or a change in control of the Company.

LEGAL MATTERS

From time to time the Company is a plaintiff or defendant in various
lawsuits and claims arising in the normal course of business. There are no such
pending or threatened lawsuits or claims whose outcomes, individually or in the
aggregate, are likely to have a material adverse effect on the Company.

11. EMPLOYEE BENEFIT PLANS

Effective January 1, 1995, the Company adopted a 401(k) plan which is
available to all full-time employees. Employees contribute to the plan through
payroll deductions. The Company matches 50 percent of the participant's
contribution up to a maximum of 6 percent. Additionally, the Company may make a
discretionary contribution as determined by the Board of Directors. Total
Company contributions were $0.3 million in 2002, $1.1 million in 2001 and $0.9
million in 2000.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has determined, based on available market information and
appropriate valuation methodologies, that the fair value of its financial
instruments approximates carrying value. The carrying value of cash and cash
equivalents, short-term investments, accounts receivable, accounts payable and
deferred revenues approximate their carrying value due to the short-term
maturity of the instruments.

13. CONCENTRATION OF CREDIT RISK

Financial instruments that subject the Company to concentrations of credit
risk consist primarily of cash equivalents, short-term and long-term
investments, and accounts receivable. The Company maintains its cash equivalent
balance in money market funds invested in U.S. Treasury Certificates or in U.S.
dollar-linked instruments with major banks. These funds are not FDIC insured.
The Company has not experienced any losses in such funds and believes it is not
exposed to any significant credit risk on cash equivalents. The Company's
investment policies restrict its investments to low risk, highly liquid
securities. The Company also performs periodic evaluations of its investment
policies to reduce its investment credit risk.

Management believes that concentrations of credit risk with respect to
accounts receivable are limited due to the large number of customers comprising
the Company's customer base and their dispersion across

50

BINDVIEW DEVELOPMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

many different industries and geographic regions. No single customer accounted
for more than 10 percent of revenue in 2002, 2001, or 2000. The Company performs
ongoing credit evaluations of its customers to reduce credit risk. During the
second quarter of 2001, the Company recognized a charge of $2.8 million for
anticipated bad debts after a comprehensive evaluation of its collections
efforts and experience with specific customers and its overall customer base in
light of the weaker economy as well as the decision to reposition the Company in
its market and to reposition various sales force deployments. Approximately 11
percent, 13 percent, and 11 percent of the Company's sales were made to
customers in foreign countries, primarily to customers in Europe, during 2002,
2001, and 2000, respectively.

14. SEGMENT DATA

The Company believes it operated in one reportable segment as defined by
SFAS 131 for the years ended December 31, 2002, 2001, and 2000. The Company
manages its business primarily on an overall products and services basis.
Revenues related to operations in the United States totaled $59.8 million, $62.0
million, and $76.6 million for the years ended December 31, 2002, 2001, and
2000, respectively. Revenues related to customers located in foreign countries,
primarily in Europe, totaled $7.2 million, $8.9 million, and $9.4 million for
the years ended December 31, 2002, 2001, and 2000, respectively. Long-lived
assets within the United States totaled $6.9 million and $8.5 million at
December 31, 2002 and 2001, respectively. Long-lived assets in foreign countries
totaled $0.9 million and $0.7 million at December 31, 2002 and 2001,
respectively.

15. OTHER INCOME (EXPENSE)

Other income (expense) for the Company is primarily comprised of earnings
on the Company's cash, cash equivalents and investments. Other income (expense)
in 2002 includes a receipt of $1.3 million for settlement of a business
interruption claim during 2002 related to flooding that occurred in June 2001.
Other income (expense) in 2001 includes a write-off of a $5.0 million equity
investment in a UK-based software distribution and consulting firm.

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial information for 2002 and 2001 is summarized as follows:

51

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

52

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

BINDVIEW DEVELOPMENT CORPORATION

/s/ ERIC J. PULASKI
--------------------------------------
Eric J. Pulaski
Chairman of the Board, Chief Executive
Officer and President (Principal
Executive Officer)

March 31, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated below.

53

CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Eric J. Pulaski, certify that:

1. I have reviewed this annual report on Form 10-K of BindView Development
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

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

Date: March 31, 2003

54

CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Edward L. Pierce, certify that:

1. I have reviewed this annual report on Form 10-K of BindView Development
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ EDWARD L. PIERCE
--------------------------------------
Edward L. Pierce
Director, Senior Vice President
and Chief Financial Officer

Date: March 31, 2003

55

EXHIBIT INDEX

Exhibits designated by the symbol * are filed with this Annual Report on
Form 10-K. All exhibits not so designated are incorporated by reference to a
prior filing as indicated.

Exhibits designated by the symbol + are management contracts or
compensatory plans or arrangements that are required to be filed with this
report pursuant to this Item 15.

We undertake to furnish to any stockholder so requesting a copy of any of
the following exhibits upon payment to us of the reasonable costs incurred by us
in furnishing any such exhibit.