SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
BOOLE & BABBAGE, INC.
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(Name of Registrant as Specified In Its Charter)
BOOLE & BABBAGE, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box)
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4. Proposed maximum aggregate value of transaction:
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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BOOLE & BABBAGE, INC.
3131 Zanker Road
San Jose, California 95134
January 15, 1997
Dear Stockholder:
On behalf of Boole & Babbage, Inc. (the "Company"), I cordially invite you
to attend the annual meeting of stockholders at 12:00 p.m. local time on
Thursday, February 20, 1997, at the Company's principal executive offices in San
Jose, California. At the meeting, stockholders will be asked to elect two
directors to the Company's Board of Directors to serve three-year terms expiring
on the date of the Company's 2000 annual meeting of stockholders, to approve an
amendment to the Company's Restated Certificate of Incorporation to increase the
authorized number of shares of Common Stock, to approve an amendment to the
Company's employee stock purchase plan to increase the aggregate number of
shares available for issuance under the plan and to ratify the selection of
Ernst & Young LLP as the Company's independent auditors for the next fiscal
year. The accompanying Notice and Proxy Statement describe these proposals. We
urge you to read this information carefully.
The directors and officers of the Company hope that as many stockholders
as possible will be present at the meeting. Because the vote of each stockholder
is important, we ask that you sign and return the enclosed proxy card in the
envelope provided, whether or not you now plan to attend the meeting. This will
not limit your right to change your vote at the meeting or to attend the
meeting.
We appreciate your cooperation and interest in the Company. To assist us
in preparation for the meeting, please return your proxy card at your earliest
convenience.
Sincerely yours,
Franklin P. Johnson, Jr.
Chairman of the Board
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BOOLE & BABBAGE, INC.
3131 Zanker Road
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 20, 1997
TO THE STOCKHOLDERS OF BOOLE & BABBAGE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Boole &
Babbage, Inc., a Delaware corporation (the "Company"), will be held on Thursday,
February 20, 1997 at 12:00 p.m. local time at the principal executive offices of
the Company, 3131 Zanker Road, San Jose, California, for the following purposes:
1. To elect two directors to hold office until the 2000 Annual Meeting of
Stockholders;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of Common
Stock from 30,000,000 to 45,000,000;
3. To approve amendments to the Company's Employee Stock Purchase Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance from 1,940,625 to 2,500,000, an increase of 559,375 shares;
4. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending September 30, 1997; and
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on January 2, 1997
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
A list of the Company's stockholders will be available for inspection by
any stockholder during normal business hours for the ten days prior to the
Annual Meeting at the Company's principle executive officers set forth above.
By Order of the Board of Directors
Arthur F. Knapp, Jr.
Secretary
San Jose, California
January 15, 1997
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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BOOLE & BABBAGE, INC.
3131 Zanker Road
San Jose, California 95134
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Boole & Babbage, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on February 20, 1997, at 12:00 p.m.
local time (the "Annual Meeting") or at any adjournment or postponement thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting. The Annual Meeting will be held at the principal executive offices of
the Company at 3131 Zanker Road, San Jose, California. The Company intends to
mail this proxy statement and accompanying proxy card on or about January 15,
1997, to all stockholders entitled to vote at the Annual Meeting. All
information provided herein gives effect to the 3-for-2 stock split of the
Company's Common Stock on December 10, 1996.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on January
2, 1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on January 2, 1997 the Company had outstanding and entitled to
vote ____________shares of Common Stock. Each holder of record of Common Stock
on such date will be entitled to one vote for each share held on all matters to
be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulations of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Except for Proposal 2, broker non-votes
are not counted for any purpose in determining whether a matter has been
approved. Broker non-votes cast with respect to Proposal 2 will have the same
effect as negative votes.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive offices, 3131
Zanker Road, San Jose, California 95134, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not,
by itself, revoke a proxy.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1997 Annual Meeting of Stockholders must be received by the Company
not later than September 19, 1997 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and By-laws provide that the
Board of Directors shall be divided into three classes, each class consisting,
as nearly as possible, of one-third of the total number of directors, with each
class having a three-year term. Vacancies on the Board may be filled by persons
elected by a majority of the remaining directors or by the affirmative vote of
the holders of a majority of the Company's outstanding capital stock. A director
elected by the Board to fill a vacancy (including a vacancy created by an
increase in the size of the Board of Directors) shall serve for the remainder of
the full term of the class of directors in which the vacancy occurred and until
such director's successor is elected and qualified.
The Board of Directors is presently composed of six members. There are two
directors in the class whose term of office expires in 1997. Each of the
nominees for election to this class is currently a director of the Company who
was previously elected by the stockholders. If elected at the Annual Meeting,
each of the nominees would serve until the 2000 annual meeting and until his
successor is elected and has qualified, or until such director's earlier death,
resignation or removal. Each nominee has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the two nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
FRANKLIN P. JOHNSON, JR.
Franklin P. Johnson, Jr., age 68, has served as a director of the Company
since 1967 and was elected Chairman of the Board in 1971. He is a general
partner of Asset Management Partners, a venture capital partnership, and other
related venture capital partnerships. He has been a venture capital investor for
more than five years. Mr. Johnson is also a director of Amgen Inc., Tandem
Computers Incorporated and IDEC Pharmaceuticals Corp.
JOHANNES S. BRUGGELING
Johannes S. Bruggeling, age 51, has served as a director of the Company
since July 1988. He was appointed Executive Vice President, International
Operations of the Company and President, Boole & Babbage Europe, in October
1991. He was a co-founder in 1978 of The European Software Company, now the
Company's wholly-owned subsidiary, Boole & Babbage Europe, and was its President
from 1982 until April 1989. He also served as President and Chief Executive
Officer of the Company from July 1988 through October 1991.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
TERRY R. MCGOWAN
Terry R. McGowan, age 49, has served as a director of the Company since
February 1992. Mr. McGowan has been the President and Chief Executive Officer of
Action Technologies, Inc., a software company, since May 24, 1995. Previously,
he served as President and Chief Operating Officer of KnowledgeWare, Inc., a
computer-aided software company, from August 1985 until September 1991. Mr.
McGowan is also a director of Connect, Inc., a software company, and an advisor
to the board of directors of several other software companies.
CARL H. REYNOLDS
Carl H. Reynolds, age 71, has served as a director of the Company since
1975. He has 30 years of experience in the computer software field. In October
1989, he retired from Hughes Aircraft Company where he had been the Staff Vice
President, Communications and Data Processing since 1983.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
PAUL E. NEWTON
Paul E. Newton, age 53, has served as a director of the Company since
April 1988 and was appointed President and Chief Executive Officer of the
Company in October 1991. He served as President and director of Ingres
Corporation, a relational database software company ("Ingres"), from January
1987 to October 1990. Mr. Newton served as Chief Operating Officer of Ingres
from January 1987 until September 1988 and as Chief Executive Officer of Ingres
from September 1988 through October 1990.
RAYMOND E. CAIRNS
Raymond E. Cairns, age 64, has served as a director of the Company since
November 1992. In 1992, Mr. Cairns retired from E.I. Dupont De Nemours, a
chemical company, where he had been employed since 1962, most recently as Senior
Vice President - Information Systems and Member of the Corporate Operating
Committee.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1996, the Board of Directors
held five meetings. The Board has an Audit Committee and a Compensation
Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is composed of four non-employee
directors: Messrs. Cairns, Johnson, McGowan and Reynolds. The Audit Committee
met two times during the fiscal year ended September 30, 1996.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of three non-employee
directors: Messrs. McGowan, Johnson and Reynolds. The Compensation Committee met
one time during the fiscal year ended September 30, 1996.
During the fiscal year ended September 30, 1996, all directors attended at
least 75% of the aggregate of the meetings of the Board and of the committees on
which they served, held during the period for which they were a director or
committee member, respectively.
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PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Restated Certificate of Incorporation to increase the
Company's authorized number of shares of Common Stock from 30,000,000 shares to
45,000,000 shares.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of the
Company. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common Stock
of the Company, except for effects incidental to increasing the number of shares
of the Company's Common Stock outstanding, such as dilution of the earnings per
share and voting rights of current holders of Common Stock. If the amendment is
adopted, it will become effective upon filing of a Certificate of Amendment of
the Company's Restated Certificate of Incorporation with the Secretary of State
of Delaware.
In addition to the ___________shares of Common Stock outstanding at
January 2, 1997, the Board has reserved ______________shares for issuance upon
exercise of options and rights granted under the Company's stock option plans,
stock purchase plan and stock incentive plan
The Board of Directors desires to have such shares available to provide
additional flexibility to use its capital stock for business and financial
purposes in the future. The additional shares may be used, without further
stockholder approval, for various purposes including, without limitation,
raising capital, providing equity incentives to employees, officers or
directors, establishing strategic relationships with other companies and
expanding the company's business or product lines through the acquisition of
other businesses or products. For example, the Board of Directors currently
intends to use up to 1,189,655 million shares of Common Stock to acquire all of
the outstanding shares of MAXM Systems Corporation, a supplier of event
management software for distributed software, an acquisition for which the
Company signed a definitive merger and reorganization agreement on December 10,
1996. Although the shares of Common Stock required for this transaction have
already been authorized by the stockholders, shares authorized by the adoption
of the proposal could be used for similar purposes in the future thus allowing
the Company to make strategic acquisitions while preserving cash for operations
and other corporate purposes.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has been
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (nor is the Board currently aware of any such attempts
directed at the Company), stockholders nevertheless should be aware that
approval of proposal could facilitate future efforts by the Company to deter or
prevent changes in control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices.
The affirmative vote of the holders of a majority of the outstanding
shares of the common stock will be required to approve this amendment to the
Company's Restated Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN RESERVING
559,375 SHARES OF THE COMPANY'S COMMON STOCK
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Company's Employee Stock Purchase Plan (the "Purchase Plan")
reserving an additional 559,375 shares of the Company's Common Stock for
issuance thereunder. Currently there are 1,940,625 shares reserved under the
Purchase Plan, of which 1,857,461 have been purchased and 83,164 are still
available for purchase. If this amendment is approved there will be a total of
2,500,000 shares reserved under the Purchase Plan, of which 1,857,461 have been
purchased and 642,539 will be available for purchase. The amendment to the
Purchase Plan was adopted by the Board of Directors on November 7, 1996, subject
to stockholder approval.
The Board of Directors believes the amendment of the Purchase Plan is an
important feature of the Company's efforts to encourage employee equity
participation in order to increase worker retention and align employee interests
with those of the stockholders. The Board is pleased with the success of the
Purchase Plan in increasing the level of employee interest in the Company's
stock price, and has proposed this amendment to promote continued employee
participation in the Purchase Plan.
Directors who are employees of the Company may benefit from adoption of
this amendment, and to that extent may have a conflict of interest in
recommending the amendment.
DESCRIPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
Purpose
The purpose of the Purchase Plan is to provide a means by which employees
of the Company and its affiliates can be given an opportunity to purchase Common
Stock of the Company through payroll deductions, thereby assisting the Company
in its retention of its employees, and providing incentives for such persons to
exert maximum efforts for the success of the Company.
Administration
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power, which it has not
exercised, to delegate administration of such plan to a committee of not less
than two Board members. The Board may abolish any such committee at any time and
revest in the Board the administration of the Purchase Plan.
Grants of Rights; Offerings
The Board has the power to grant rights to purchase stock of the Company
under the Purchase Plan to eligible employees (an "Offering") on a date or dates
selected by the Board (the "Offering Date(s)"). Each Offering will be in the
form and contain terms and conditions established by the Board, subject to the
required provisions of the Purchase Plan which are described in this proxy
statement. The provisions of separate Offerings need not be identical. The Board
has currently authorized continuous Offerings commencing on October 1st every
year and ending on September 30th of the next calendar year.
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Eligibility
Any person who is customarily employed by the Company or its affiliates
(subject to certain minimum requirements) on an Offering Date is eligible to
participate in the Purchase Plan. No employee is eligible for the Purchase Plan
if, immediately after those rights are granted, the employee would own or be
deemed to own stock of the Company possessing 5% or more of the total combined
voting power or value of stock of the Company or any affiliate of the Company.
No rights may be granted that would permit an employee to purchase stock with a
fair market value in excess of $25,000 (determined at the time the rights are
granted) in any calendar year.
Participation in the Plan
Eligible employees become participants in the Purchase Plan by delivering
to the Company, prior to the date selected by the Board as the Offering Date for
the Offering, an agreement authorizing payroll deductions of up to 10% of such
employees' total compensation during the purchase period.
Purchase Price
The purchase price per share at which shares are sold in an Offering under
the Purchase Plan cannot be less than the lower of (1) 85% of the fair market
value of a share of Common Stock on the date of commencement of the Offering, or
(2) 85% of the fair market value of a share of Common Stock on the last day of
the Offering period, which date shall be no more than 27 months after the
commencement date of the Offering.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions over
the Offering period. Generally, at any time during an Offering period, a
participant may terminate his or her payroll deductions. A participant may
reduce his or her payroll deductions after the commencement of an Offering only
as provided by the Board in implementing the Offering. All payroll deductions
made for a participant are credited to his or her account under the Purchase
Plan and deposited with the general funds of the Company. A participant may not
increase, begin such payroll deductions or make additional payments into an
Offering after the commencement of an Offering.
Purchase of Stock
By executing an agreement to participate in the Purchase Plan, the
employee is entitled to purchase shares under such plan. In connection with
Offerings made under the Purchase Plan, the Board specifies a maximum number of
shares any employee may be granted the right to purchase and the maximum
aggregate number of shares which may be purchased pursuant to an Offering by all
participants. If the aggregate number of shares to be purchased upon exercise of
rights granted in an Offering would exceed the maximum aggregate number, the
Board would make a pro rata allocation of shares available in a uniform and
equitable manner. Unless the employee's participation is discontinued, his or
her right to purchase shares is exercised automatically on each specified
exercise date during an Offering period at the applicable price. See
"Withdrawal" below.
Withdrawal
While each participant in the Purchase Plan is require to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given Offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable Offering period,
unless otherwise provided for pursuant to the terms of the Offering.
Upon any withdrawal from an Offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, and such employee's interest in the Offering automatically will be
terminated. An employee's withdrawal from an Offering will not have any effect
upon such employee's eligibility to participate in subsequent Offerings under
the Purchase Plan.
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Termination of Employment
Rights granted pursuant to any Offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, except
death, and the Company will distribute to such employee all of his or her
accumulated payroll deductions, without interest. In the event of a
participating employee's death, the balance in his or her account will be held
and used to purchase stock on the next exercise date during the Offering,
provided that the estate or representative of the deceased employee does not
withdraw from the Offering.
Restrictions on Transfer
Rights granted under the Purchase Plan are not transferable, except upon
death, and may be exercised only by the person to whom such rights are granted,
or, in the case of death, by the estate of the deceased employee.
Adjustment Provisions
If there is any change in the stock subject to the Purchase Plan (through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure, or
otherwise), the Purchase Plan will be appropriately adjusted as to the class and
the maximum number of shares subject to the Purchase Plan and the class, number
of shares and price per share of stock subject to outstanding rights.
Duration, Amendment and Termination
The Board of Directors may suspend or terminate the Purchase Plan without
stockholder approval or ratification at any time. Unless sooner terminated, the
Purchase Plan will terminate on September 13, 2002.
The Board may also amend the Purchase Plan at any time. However, no
amendment will be effective unless approved by the stockholders of the Company
within 12 months of its adoption by the Board, if the amendment would: (i)
increase the number of shares reserved for rights under the plan, or (ii) modify
the provisions as to eligibility for participation in the Purchase Plan or
modify the Purchase Plan in any other way to the extent such modification
requires stockholder approval in order to obtain employee stock purchase plan
treatment under Section 423 of the Code.
Stock Subject to Purchase Plan
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.
Federal Income Tax Consequences of Rights Under the Purchase Plan
Participation in the Purchase Plan is intended to qualify under the
provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until disposition of the shares
acquired.
If a participant holds stock more than two years after the beginning of
the Offering period and more than one year after the stock is transferred to the
participant, then the lesser of (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a long-term capital gain or loss.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition. The balance of any gain will be treated
as capital gain.
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There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is
generally entitled to a deduction for amounts taxed as ordinary income to a
participant upon disposition by a participant of stock before the expiration of
the holding periods described above.
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Annual Meeting and entitled to vote is
required to approve the proposal.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
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PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP ("Ernst & Young") as
the Company's independent auditors for the fiscal year ending September 30, 1997
and has further directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting. Ernst &
Young has audited the Company's financial statements since its inception in
1967. Representatives of Ernst & Young are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. If the stockholders fail to ratify the selection, the Audit Committee
and the Board will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee and the Board in their discretion may
direct the appointment of a different independent accounting firm at any time
during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
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<TABLE>
ADDITIONAL INFORMATION
Officers are appointed annually by the Board and serve at the discretion
of the Board. Set forth below is information regarding executive officers of the
Company who are not directors of the Company:
<CAPTION>
Name Age Position
- ---------------------- --- -------------------------------------------------------------
<S> <C> <C>
James E.C. Black 48 Senior Vice President, Engineering
Timothy A. Dreisbach 47 Senior Vice President, North American Field Operations
Arthur F. Knapp, Jr. 48 Senior Vice President, Chief Financial Officer and Secretary
Saverio Merlo 45 Senior Vice President, Marketing
</TABLE>
Mr. Black joined the Company in April 1994 as Senior Vice President of
Engineering. From 1991 to March 1994, he was a principal at Diablo Management
Group, an organization specializing in assisting companies with dynamic market
changes. Previously, Mr. Black held technology positions at Ingres Corporation,
UCCEL Corporation, a software company, Texas Instruments, an electronics
company, and CAP Gemini, a computer consulting company.
Mr. Dreisbach joined the Company in April 1992 as Senior Vice President
of North American Field Operations. From March 1989 to 1991, he was employed by
Legent Corp., a worldwide developer and distributor of productivity enhancement
system software, serving as Vice President and General Manager of the Systems
Productivity Division. From 1986 through March 1989, he was employed by Duquesne
Systems, Inc. (a predecessor company to Legent Corp.), where he served as Vice
President of Worldwide Sales.
Mr. Knapp joined the Company in November 1991 as Chief Financial Officer
and Senior Vice President. From March 1989 to October 1991, he was employed by
Legent Corp., serving as Vice President and Chief Financial Officer. From 1984
through March 1989, he was employed by Duquesne Systems, Inc., where he served
as Vice President, Controller and Chief Financial Officer. Mr. Knapp is a
Certified Public Accountant and a Certified Management Accountant.
Mr. Merlo has been employed by the Company for the past 14 years in
various operational, technical and marketing capacities. After a four-year
tenure as director of the MVS product center, Mr. Merlo served as Vice President
of Marketing for Boole & Babbage Europe from 1989 until 1991. During fiscal
1991, Mr. Merlo was appointed Senior Vice President of Marketing.
11
<PAGE>
<TABLE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of November 30, 1996 by: (i) each
director and nominee for director; (ii) each of the executive officers named in
the Summary Compensation Table; (iii) all executive officers and directors of
the Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than five percent (5%) of its Common Stock. Information in the
table reflects the 3-for-2 split in the Company's Common Stock effected on
December 10, 1996.
<CAPTION>
Beneficial Ownership(1)
------------------------------------
Number of Percent of
Beneficial Owner Shares Total
---------------------------------------- ---------- -----------
<S> <C> <C>
Private Capital Management, Inc.
and related entities(2) 1,644,724 9.7%
3003 Tamiami Trail North
Naples, FL 33940
Wellington Management Company(3) 1,354,285 8.0%
75 State Street
Boston, MA 02109
Franklin P. Johnson, Jr.(4) 1,350,813 7.9%
c/o Asset Management Partners
2275 East Bayshore, Suite 150
Palo Alto, CA 94303
John M. Bryan(5) 1,006,172 5.9%
600 Montgomery Street, 35th Floor
San Francisco, CA 94111
FMR Corp.(6) 1,001,887 5.9%
82 Devonshire Street
Boston, MA 02109
Winston Partners, L.P. and related entities(7) 960,891 5.7%
888 Seventh Avenue
New York, NY 10106
Fleet Financial Group(8) 871,977 5.1%
100 Federal Street
Boston, MA 02109
Paul E. Newton(9) 791,380 4.5%
Johannes S. Bruggeling(9) 503,124 2.9%
Arthur F. Knapp, Jr.(9) 222,189 1.3%
Timothy A. Dreisbach(9) 165,320 1.0%
James E. C. Black(9) 116,437 *
Saverio Merlo(9) 111,253 *
12
<PAGE>
Carl H. Reynolds(9)(10) 48,212 *
Raymond E. Cairns(9) 44,887 *
Terry R. McGowan(9) 7,762 *
All executive officers and directors
as a group (10 persons)(11) 3,361,377 18.2%
<FN>
- ----------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the
Securities and Exchange Commission (the "Commission"). Where information
regarding stockholders is based on Schedules 13D and 13G, the number of
shares owned is as of the date for which information was provided in
such Schedules, as noted. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, each
of the stockholders named in this table has sole voting and investment
power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 17,003,856 shares outstanding on
November 30, 1996, adjusted as required by rules promulgated by the
Commission.
(2) Private Capital Management, Inc. ("PCM"), in its capacity as investment
advisor, and Bruce Sherman, PCM's President, may each be deemed
beneficial owners of 1,619,749 of these shares, which are held by PCM on
behalf of its clients. PCM and Bruce Sherman have shared dispositive
power over these 1,619,749 shares. SPS Partners, L.P. ("SPS"), in its
capacity as investment advisor for the Entrepreneurial Value Fund, L.P.,
and Bruce Sherman, SPS's Managing General Partner, may each be deemed
beneficial owners of 24,975 of these shares, and each has shared
dispositive power over these 24,975 shares. Michael Seaman, who has
shared power to vote or direct the vote of, and shared power to dispose
of, 13,500 of these shares, is an employee of PCM or affiliates thereof
and (i) does not exercise sole or shared dispositive or voting power
with respect to the shares held by PCM or SPS, (ii) disclaims beneficial
ownership of shares held by Mr. Sherman, PCM and SPS, and (iii)
disclaims, along with Mr. Sherman, the existence of a group. The
reported stated number of shares beneficially owned is as of November
30, 1996.
(3) Wellington Management Company ("Wellington"), in its capacity as
investment advisor, may be deemed beneficial owner of these shares which
are owned by numerous investment counselling clients. Wellington has
shared voting authority over 272,260 of these shares, and shared
dispositive power over all 1,354,285 of these shares. The stated number
of shares beneficially owned is as of January 27, 1996.
(4) Includes 118,383 shares held by Mr. Johnson's wife. Mr. Johnson may be
deemed to beneficially own these shares but disclaims beneficial
ownership of such shares. Also includes 246,375 shares held by Asset
Management Partners, a limited partnership, of which Mr. Johnson is a
general partner. Mr. Johnson disclaims beneficial ownership of
two-thirds of such shares.
(5) Includes 445,312 shares held by the J.M. Bryan Family Trust of which Mr.
Bryan is a trustee. Also includes 376,377 shares held by JMB/FEB
Partners, Ltd.; 61,749 shares held by AAB Partners, Ltd.; 61,749 shares
held by ALB Partners, Ltd.; 39,811 shares held by SEB Partners, Ltd.;
and 21,174 shares held by KBH Partners, Ltd., for each of which Mr.
Bryan is a general partner. Mr. Bryan may be deemed to beneficially own
all such shares but disclaims beneficial ownership of the 629,795 shares
held in aggregate by the J.M. Bryan Family Trust, the John M. Bryan
Family Fund, AAB Partners, Ltd., ALB Partners, Ltd., SEB Partners, Ltd.
and KBH Partners, Ltd. except to the extent of his partnership interest
therein. The reported number of shares beneficially owned is as of
November 30, 1996.
13
<PAGE>
(6) FMR Corp. ("FMR"), in its capacity as a parent holding company, may be
deemed to be the beneficial owner of these shares, 601,612 of which are
owned by a wholly-owned subsidiary, Fidelity Management & Research
Company, a registered investment advisor which acts as an investment
advisor to various investment companies ("Funds"), which hold those
shares, and 400,275 of which are owned by a wholly-owned subsidiary,
Fidelity Management Trust Company, a bank which serves as investment
manager of certain institutional accounts ("Accounts") which hold these
shares. FMR, Edward P. Johnson 3d, Chairman of FMR, and the Funds each
has sole power to dispose of 1,001,887 shares. Neither FMR nor Mr.
Johnson have sole power to vote or direct the voting of the shares owned
by the Funds which power resides with the Funds' Boards of Trustees who
carry out the voting under written guidelines established by the Funds'
Board of Trustees. FMR and Mr. Johnson, through its control of Fidelity
Management Trust Company has sole voting and disposition power over
400,275 shares owned by the Accounts. Members of Mr. Johnson's family
and trusts for their benefit own shares of common stock of FMR
representing approximately 49% of the voting stock of FMR. Mr. Johnson
owns 12% and Abigail Johnson, a director of FMR, owns 24.5% of the
aggregate outstanding voting stock of FMR. All such shares are subject
to a voting agreement. The reported number of shares owned is as of
November 30, 1996.
(7) The shares are held by Winston Partners, L.P. Chatterjee Fund Management
L.P., is the sole general partner of Winston Partners, L.P. and Purnendu
Chatterjee is the sole general partner of Chatterjee Fund Management,
L.P.
(8) Fleet Financial Group, Inc. ("Fleet"), in its capacity as a parent
holding company, may be deemed the beneficial owner of those shares.
Fleet has shared disposition power over 3,712 of those shares and has
shared power to vote or direct the vote of 15,627 of those shares. The
reported number of shares owned is as of February 15, 1996.
(9) Includes shares which certain executive officers, directors and
principal stockholders of the Company have the right to acquire within
60 days after the date of this table pursuant to outstanding options as
follows: James E.C. Black, 116,437 shares; Johannes S. Bruggeling,
75,938 shares; Raymond E. Cairns, 41,512 shares; Timothy A. Dreisbach,
159,305 shares; Arthur F. Knapp, Jr., 208,125 shares; Terry R. McGowan,
7,762 shares; Saverio Merlo, 105,187 shares; Paul E. Newton, 723,750
shares; Carl H. Reynolds, 7,762 shares and all executive officers and
directors as a group, 1,445,778 shares.
(10) All shares are held by the Carl H. and Carol Jean Reynolds Revocable
Trust U/A/D 8/1/79 over which Mr. Reynolds has shared voting and
investment power.
(11) Includes shares described in notes (4), (9) and (10) above.
</FN>
</TABLE>
14
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Commission initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Offices, directors
and greater than ten percent stockholders are required by Commission regulation
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a quarterly retainer
fee of $2,000 (plus $5,250 for serving as Chairman of the Board) and a per
meeting fee of $400 (except for the Chairman). In the fiscal year ended
September 30, 1996, the total compensation paid to non-employee directors was
$58,600. The members of the Board of Directors are also eligible for
reimbursement for their expenses incurred in connection with attendance at Board
meetings in accordance with Company policy.
Under the terms of the 1993 Non-Employee Directors' Stock Option Plan,
each non-employee director of the Company automatically receives an option to
purchase 6,750 shares of the Company's Common Stock, as an incentive to
encourage maximum efforts for the success of the Company and continued service
on the Board. In the fiscal year ended September 30, 1996, Messrs. Reynolds,
McGowan and Cairns were each granted options to purchase 6,750 shares of Common
Stock pursuant to the Company's 1993 Non-Employee Directors' Stock Option Plan
at an exercise price of $14.83 per share, which was equal to the fair market
value on the date of the grant.
15
<PAGE>
<TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended September 30, 1994,
1995 and 1996, compensation awarded or paid to, or earned by the Company's Chief
Executive Officer and its five other executive officers at September 30, 1996
(the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
- ---------------------------------------------------------------------------- -----------------------------
Securities All Other
Name and Underlying Compen-
Principal Salary Bonus Options(1) sation(2)
Position Year ($) ($) (#) ($)
- ---------------------------------- --------- ----------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Paul E. Newton 1996 315,000 266,805 120,000 683
President and Chief Executive Officer 1995 300,000 268,335 360,000 613
1994 286,136 186,785 -- 875
Mr. Johannes S. Bruggeling 1996 318,613 216,558 75,000 --
Executive Vice President, 1995(3) 313,260 196,471 67,500 --
International Operations and 1994 262,138 161,215 67,500 --
President, Boole & Babbage Europe
Mr. James E.C. Black 1996 182,970 90,721 60,000 427
Senior Vice President 1995 174,252 89,362 56,250 --
Engineering 1994(4) 85,301 35,700 135,000 --
Mr. Timothy A. Dreisbach 1996 171,903 92,358 48,000 683
Senior Vice President, North 1995 166,602 85,442 56,250 613
American Field Operations 1994 162,193 87,219 23,625 11,718
Mr. Arthur F. Knapp, Jr. 1996 179,214 87,085 75,000 683
Senior Vice President and Chief 1995 170,680 85,787 67,500 613
Financial Officer 1994 165,193 68,544 33,750 23,880
Mr. Saverio Merlo 1996 174,300 85,378 60,000 683
Senior Vice President, 1995 166,001 84,105 56,250 613
Marketing 1994 161,181 67,200 27,000 875
<FN>
- ---------------
(1) The Company has no stock appreciation rights (SARs).
(2) Includes the Company's matching payments under its 401(k) plan. Also
includes payments to Mr. Knapp in 1994 of $17,594 and $5,411 for relocation
expenses and related tax gross-up payments, respectively. Includes payments
to Mr. Dreisbach in 1994 of $10,843 for tax gross-up payments related to
payment of relocation expenses. As permitted by rules promulgated by the
Commission, no amounts are shown with respect to certain "perquisites,"
where such amounts do not exceed the lesser of 10% of salary and bonus or
$50,000.
(3) Mr. Bruggeling's compensation was paid in non-U.S. currency and has been
translated to U.S. dollars at the average currency exchange rate for the
indicated year.
16
<PAGE>
(4) Mr. Black joined the Company in April 1994. Excludes $68,400 in payments for
consulting services in 1994 prior to his joining the Company.
</FN>
</TABLE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1986
Incentive Stock Option Plan (the "1986 ISO Plan"), its 1986 Supplemental Stock
Option Plan (the "1986 Supplemental Plan") and the 1995 Stock Option Plan (the
"1995 Option Plan", collectively the "Option Plans"). As of November 30, 1996,
options to purchase a total of 4,274,788 shares had been granted and were
outstanding under the Option Plans and options to purchase 182,700 shares
remained available for grant thereunder. See Proposal 3.
<TABLE>
The following tables show for the fiscal year ended September 30, 1996,
certain information regarding options granted to, exercised by, and held at year
end by the Named Executive Officers.
<CAPTION>
Option Grants in Last Fiscal Year
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term(3)
-------------------------------------------------------------------- ---------------------------
% of
Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base Expira-
Granted in Fiscal Price tion
Name (#)(1) Year(2) ($/Share) Date 5% ($) 10% ($)
---- -------- --------- --------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Mr. Newton 120,000 12.9 16.00 09/10/06 1,207,478 3,059,986
Mr. Bruggeling 75,000 8.1 16.00 09/10/06 754,674 1,912,491
Mr. Black 60,000 6.5 16.00 09/10/06 603,739 1,529,993
Mr. Dreisbach 48,000 5.2 16.00 09/10/06 482,991 1,223,994
Mr. Knapp 75,000 8.1 16.00 09/10/06 754,674 1,912,491
Mr. Merlo 60,000 6.5 16.00 09/10/06 603,739 1,529,993
<FN>
(1) Options vest in cumulative increments over a period of four years.
Option grants to executive officers prior to September 10, 1993
generally include a provision whereby upon the sale, acquisition or
merger of the Company in a transaction or series of transactions, the
vesting of such options shall accelerate such that an additional two
months of vesting shall accrue for each month that such executive
officer shall have been employed by the Company between October 1, 1991
(or the date of commencement of such executive officer's employment with
the Company, if later) and the closing date of any such transaction or
series of transactions. Option grants to executive officers on or after
September 10, 1993 include a provision whereby upon the termination or
resignation of an executive officer within one year following the sale,
acquisition or merger of the Company, such officer's options shall
immediately vest in full. Share amounts presented herein reflect the
3-for-2 split of the Company's Common Stock effected December 10, 1996.
(2) Based on options to purchase 930,488 shares granted to all employees in
fiscal year 1996.
(3) The potential realizable value is based on the term of the option at its
time of grant (10 years). It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the
appreciated stock price. No gain to the optionee is possible unless the
stock price increases over the option term which will benefit all
stockholders.
</FN>
</TABLE>
17
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#)(2) FY-End($)(3)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized(1)($) Unexercisable Unexercisable
- ------ --------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
Mr. Newton 33,750 447,501 731,250/322,500 8,882,548/1,227,511
Mr. Bruggeling -- -- 63,280/146,720 451,087/548,917
Mr. Black -- -- 100,547/150,703 867,895/785,860
Mr. Dreisbach 6,000 65,333 174,284/91,029 1,818,899/321,009
Mr. Knapp 15,000 195,834 230,212/125,101 2,690,741/372,470
Mr. Merlo 4,500 59,667 103,430/102,820 1,104,312/328,130
<FN>
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) Share amounts presented herein reflect the 3-for-2 split of the
Company's Common Stock effected on December 10, 1996.
(3) Fair market value of the Company's Common Stock at September 30, 1996
($16.67) minus the exercise price of the options.
</FN>
</TABLE>
18
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors has provided the
following report with respect to the compensation of executive officers for
fiscal 1996:
Compensation for the Company's executive officers is determined by the
Compensation Committee of the Company's Board of Directors (the "Committee"),
none of whom is an employee of the Company. The Committee establishes base
salary levels and target bonuses for the Chief Executive Officer ("CEO") and
other executive officers of the Company at or about the beginning of each fiscal
year.
The Company and its Board believe that the compensation of all
employees, including executive officers, must be sufficient to attract and
retain highly qualified personnel and must align compensation with the Company's
short-term and long-term business strategies and performance goals. However, the
current compensation philosophy is to minimize the amount of salary increase in
favor of (i) more performance based compensation such as bonuses and (ii) more
incentives linked to stockholder value such as stock options. There are three
basic elements to executive officer compensation:
SALARY. To insure that its compensation practices remain competitive,
the Company regularly compares its executive compensation to the middle of the
range of compensation paid to executives in comparable positions in other
software companies in the industry and also in technology companies of similar
size located in Silicon Valley. Salary increases are granted generally on an
annual basis and are based on both individual performance and the standard
percentage of salary increase granted to other employees. Upon recommendation of
the Committee, the Board approved the Company's fiscal 1996 salary guidelines
applicable to all employees, including executives, pursuant to which salary
increases would be targeted at no more than five percent (5%) of current
salaries.
BONUSES. The Committee awards bonuses to the Company's executive
officers and other key employees pursuant to an employee incentive plan
established and approved in the early part of the Company's fiscal year by the
Committee. The bonus amounts and persons who will receive bonuses can vary from
year to year. The bonus pool is calculated based on a formula tied to the
Company's targeted earnings per share. In 1996, the plan included minimal
payouts based on attainment of 85% of target EPS with no bonus being paid if
results were below the 85% threshold level. As actual results approach targeted
levels, the bonus payout increases at an accelerated level. In fiscal year 1996,
target amounts for individual executive officers represented between 27.5% and
70% of base salary.
STOCK OPTIONS. The Company believes that employee equity ownership
provides significant additional motivation to executive officers to maximize
value for the Company's stockholders. The Committee typically grants stock
options each year to executive officers and other key employees. These grants
are based on a variety of factors, including total options outstanding and total
unvested options outstanding for each officer and key employee, the financial
performance of the Company and assessment of personal performance. Whereas the
bonus plan recognizes specific annual operational achievements, the Company
considers the cumulative stock option grants as a measure of the individual's
long-term potential impact on the Company's results. The Committee feels that
stock options are the best method of providing incentives for executive officers
to maximize the long-term success of the Company.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. The Committee determined that a
5.0% increase in the Chief Executive Officer's base salary represented an
increase in accordance with the Company's policy of increasing salaries by no
more than five percent (5%). The Committee also determined that a cash bonus of
$266,805 (out of a total executive officer bonus pool of $725,643) for fiscal
1996 was appropriate in light of the Company's strong financial performance,
including record revenues, profits and earnings per share.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE. Section
162(m) of the Internal Revenue Code (the "Code") limits the Company to a
deduction for federal income tax purposes of no more than $1 million of
- --------------------
(1) THE MATERIAL IN THIS REPORT IS NOT "SOLICITING MATERIAL," IS NOT DEEMED
FILED WITH THE COMMISSION AND IS NOT TO BE INCORPORATED IN ANY FILING OF THE
COMPANY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, WHETHER MADE BEFORE OR AFTER THE DATE HEREOF AND
IRRESPECTIVE OF ANY GENERAL INCORPORATION LANGUAGE IN ANY FILING.
19
<PAGE>
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code. The Compensation Committee has
determined that stock options granted under the Company's 1995 Option Plan with
an exercise price at least equal to the fair market value of the Company's
common stock on the date of grant shall be treated as "performance-based
compensation."
COMPENSATION COMMITTEE
Franklin P. Johnson, Jr.
Terry R. McGowan
Carl H. Reynolds
20
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG BOOLE & BABBAGE, THE H&Q TECHNOLOGY INDEX,
AND THE NASDAQ STOCK MARKET--US INDEX
9/91 9/92 9/93 9/94 9/95 9/96
----------------------------------------------------------------
Boole & Babbage $100 $200 $261 $332 $488 $608
----------------------------------------------------------------
H&Q Technology $100 $114 $136 $154 $258 $286
----------------------------------------------------------------
NASDAQ - US $100 $112 $147 $148 $204 $242
----------------------------------------------------------------
* $100 invested on 9/30/91 in stock or index,
including reinvestment of dividends.
(1) The material in this performance measurement comparison is not "soliciting
material," is not deemed filed with the Commission and is not to be incorporated
in any filing of the Company under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language in any
filing.
21
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party by
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Arthur F. Knapp, Jr.
Secretary
January 15, 1997
22
<PAGE>
APPENDIX A
BOOLE & BABBAGE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 20, 1997
The undersigned hereby appoints Paul E. Newton and Arthur F. Knapp,
Jr., and each of them, as attorneys and proxies of the undersigned with full
power of substitution, to vote all of the shares of stock of Boole & Babbage,
Inc. (the "Company") which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at the principal executive
offices of the Company, 3131 Zanker Road, San Jose, California on Thursday,
February 20, 1997 at 12:00 p.m., and at any and all postponements, continuations
and adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
<PAGE>
- ------
X Please mark
votes as in
this example
- ------
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR NAMED BELOW.
1. To elect two directors of the Company to serve for the ensuing three years
until the Company's 2000 Annual Meeting of Stockholders and until their
successors are elected.
Nominees: Franklin P. Johnson, Jr., Johannes S. Bruggeling
FOR WITH-
HELD
-------- ---------- -------
Mark Here
For Address
Change and
Note at Left
-------- ---------- -------
- --------
- -------- -----------------------------------------------
For all nominees except as noted above
MANAGEMENT RECOMMENDS A VOTE FOR
PROPOSALS 2, 3 AND 4.
For Against Abstain
--------- -------- -------
2. To approve an amendment to
the Company's Restated
Certificate of
Incorporation to increase
the authorized number of
shares of Common Stock
from 30,000,000 to
45,000,000.
--------- -------- -------
--------- -------- -------
3. To approve amendments to
the Company's Employee
Stock Purchase Plan to
increase the aggregate
number of shares of Common
Stock authorized for
issuance from 1,940,625 to
2,500,000, an increase of
559,375 shares.
--------- -------- -------
--------- --------- -------
4. To ratify the selection of
Ernst & Young LLP as the
Company's independent
auditors for the fiscal
year ending September 30,
1997.
--------- --------- -------
Please vote, date and promptly return this proxy in the enclosed envelope which
is postage prepaid if mailed in the United States.
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their title. If the signer
is a partnership, please sign in partnership name by authorized person.
Signature_______________________________________Date_________
Signature_______________________________________Date_________
