SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. ________)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
BOOLE & BABBAGE, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BOOLE & BABBAGE, INC.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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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<PAGE>
BOOLE & BABBAGE, INC.
3131 Zanker Road
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 18, 1998
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
Wednesday, February 18, 1998 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 2001 Annual Meeting of
Stockholders;
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending September 30, 1998; and
3. 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 December 31,
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./
Arthur F. Knapp, Jr.
Secretary
San Jose, California
January 15, 1998
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
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 18, 1998, 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,
1998, to all stockholders entitled to vote at the Annual Meeting.
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, telecopy 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
December 31, 1997 will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on December 31, 1997 the Company had
outstanding and entitled to vote 18,832,096 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. Broker non-votes are not counted for any
purpose in determining whether a matter has been approved.
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.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than September 17, 1998 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
<PAGE>
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 1998. One of the nominees
for election to this class is currently a director of the Company who was
previously elected by the stockholders. The other has not previously served. If
elected at the Annual Meeting, each of the nominees would serve until the 2001
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 2001 ANNUAL MEETING
TERRY R. MCGOWAN
Terry R. McGowan, age 50, has served as a director of the Company since
February 1992. Mr. McGowan has been the Chairman of the Board of Action
Technologies, Inc., a software company, since June 1997. He was President and
Chief Executive Officer from May 1995 until June 1997. 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 an
advisor to the board of directors of several other software companies.
DAVID B. WRIGHT
David B. Wright, age 48, has not previously served as a director of the
Company. Mr. Wright is President and CEO of Amdahl Corporation, a hardware and
software company. He joined Amdahl Corporation in 1987 as a regional Vice
President of Sales. After being named Vice President of Commercial U.S. Sales in
1989 and Vice President and General Manager of European Operations in 1992, he
was appointed Vice President and General Manager of Worldwide Field Operations
in 1993. In January 1996 he became Executive Vice President of the Enterprise
Computing Group. From 1976 to 1987, Mr. Wright was employed in various staff and
management positions at IBM Corporation.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
PAUL E. NEWTON
Paul E. Newton, age 54, 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 65, 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.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
FRANKLIN P. JOHNSON, JR.
Franklin P. Johnson, Jr., age 69, 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., Applied
Microcircuits Corporation and IDEC Pharmaceuticals Corp.
JOHANNES S. BRUGGELING
Johannes S. Bruggeling, age 52, 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.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1997, the Board of Directors
held seven 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 Carl H. Reynolds, who is not
standing for reelection as a director. The Audit Committee met one time during
the fiscal year ended September 30, 1997.
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, 1997.
During the fiscal year ended September 30, 1997, all directors except Mr.
Bruggeling 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. Mr. Bruggeling attended
five of seven meetings.
3
<PAGE>
PROPOSAL 2
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, 1998
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 2.
4
<PAGE>
ADDITIONAL INFORMATION
<TABLE>
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 49 Senior Vice President, Engineering
Richard A. Harrit 46 Senior Vice President, North American Operations
Arthur F. Knapp, Jr. 49 Senior Vice President, Chief Financial Officer and Secretary
Saverio Merlo 46 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. Harrit joined the Company in July 1997 as Senior Vice President,
North American Operations. Prior to joining the Company, Mr. Harrit was
President of AmeriData Computer Rentals, a Division of AmeriData/GE. From June
1990 until October 1994, Mr. Harrit served as President of Genstar Rental
Electronics, Inc. Both of these companies were in the business of renting and
leasing high technology equipment to industry and government.
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., a worldwide developer and distributor of productivity enhancement
system software, serving as Vice President and Chief Financial Officer. From
1984 through March 1989, he was employed by Duquesne Systems, Inc. (a
predecessor company to Legent Corp.), 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.
5
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of November 30, 1997 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.
<CAPTION>
Beneficial Ownership(1)
-----------------------
Number of Percent of
Beneficial Owner Shares Total
-------------------------------- --------- ----------
<S> <C> <C>
Private Capital Management, Inc.
and related entities(2) 1,544,635 8.2%
3003 Tamiami Trail North
Naples, FL 33940
Wellington Management Company LLP(3) 1,506,543 8.0%
75 State Street
Boston, MA 02109
Franklin P. Johnson, Jr.(4) (5) 1,350,813 7.2%
c/o Asset Management Partners
2275 East Bayshore, Suite 150
Palo Alto, CA 94303
John M. Bryan(6) 1,006,247 5.3%
600 Montgomery Street, 35th Floor
San Francisco, CA 94111
FMR Corp.(7) 989,387 5.3%
82 Devonshire Street
Boston, MA 02109
Winston Partners, L.P. and related entities(8) 960,891 5.1%
888 Seventh Avenue
New York, NY 10106
Paul E. Newton(5) 879,880 4.5%
Johannes S. Bruggeling(5) 533,412 2.8%
Arthur F. Knapp, Jr.(5) 227,990 1.2%
James E. C. Black(5) 167,029 *
Saverio Merlo(5) 141,145 *
Carl H. Reynolds(5)(9) 50,491 *
Raymond E. Cairns(5) 50,287 *
Terry R. McGowan(5) 3,062 *
6
<PAGE>
All executive officers and directors
as a group (9 persons)(10) 3,404,109 16.7%
<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 18,820,822 shares outstanding on
November 30, 1997, 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 1,544,635 of these shares, which are held by PCM on
behalf of its clients. PCM and Bruce Sherman have shared dispositive
power over these 1,544,635 shares. Michael Seaman, who has sole power to
vote or direct the vote of, and sole power to dispose of 8,000 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 October 10, 1997.
(3) Wellington Management Company LLP ("Wellington"), is an investment
adviser registered with the Securities and Exchange Commission under the
Investment Advisors Act of 1940, as amended, and in its capacity as
investment advisor, may be deemed to have beneficial ownership of these
shares, which are owned by numerous investment advisory clients, none of
which is known to have such interest with respect to more than five
percent of the class. Wellington has shared voting power over 395,443 of
these shares, and shared dispositive power over all 1,506,543 of these
shares. The reported number of shares beneficially owned is as of
September 30, 1997.
(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 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, 166,999 shares; Johannes S. Bruggeling,
133,124 shares; Raymond E. Cairns, 46,912 shares; Arthur F. Knapp, Jr.,
212,874 shares; Terry R. McGowan, 3,062 shares; Saverio Merlo, 133,749
shares; Paul E. Newton, 812,250 shares; Carl H. Reynolds, 13,162 shares
and all executive officers and directors as a group, 1,522,132 shares.
In the fiscal year ended September 30, 1997, Mr. Johnson as Chairman was
granted an option to purchase 67,500 shares of Common Stock at an
exercise price of 26.88 per share, which was equal to the fair market
value of the Company's Common Stock on the date of the grant. No portion
of that option is exercisable within 60 days after the date of this
table.
(6) 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 21,249 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 629,870 shares
held in aggregate by the J.M. Bryan Family Trust, 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, 1997.
7
<PAGE>
(7) FMR Corp. ("FMR"), in its capacity as a parent holding company, may be
deemed to be the beneficial owner of these shares, 609,112 of which are
beneficially 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 380,275 of which are beneficially 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 C. Johnson 3d,
Chairman of FMR, and the Funds each has sole power to dispose of 989,387
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 380,275 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 P. 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 February 10, 1997.
(8) 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.
(9) 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.
(10) Includes shares described in notes (4), (5) and (9) above.
</FN>
</TABLE>
8
<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, 1997, 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, 1997, 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 (except the Chairman) automatically
receives an option to purchase 5,000 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. (Prior to an October 30, 1997 amendment to this
plan, non-employee directors received options to purchase 6,750 shares
annually.) Non-employee directors joining the Board for the first time receive
an option to purchase 20,000 shares. In the fiscal year ended September 30,
1997, 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 $25.50 per share, which was
equal to the fair market value of the Company's Common Stock on the date of the
grant.
In the fiscal year ended September 30, 1997, Mr. Johnson as Chairman was
granted an option to purchase 67,500 shares of Common Stock at an exercise price
of 26.88 per share, which was equal to the fair market value on the date of the
grant.
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
<TABLE>
The following table shows for the fiscal years ended September 30, 1995,
1996 and 1997, compensation awarded or paid to, or earned by the Company's Chief
Executive Officer and its five other executive officers at September 30, 1997
(the "Named Executive Officers"):
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
- ---------------------------------------------------------------------- ---------------------------
Securities All Other
Name and Underlying Compen-
Principal Salary Bonus Options(1) sation(2)
Position Year ($) ($) (#) ($)
- ---------------------------------- --------- ------- ------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Mr. Paul E. Newton 1997 330,768 358,222 -- 1125
President and Chief Executive Officer 1996 315,000 266,805 120,000 683
1995 300,000 268,335 360,000 613
Mr. Johannes S. Bruggeling 1997(3) 298,259 246,004 -- --
Executive Vice President, 1996 318,613 216,558 75,000 --
International Operations and 1995 313,260 196,471 67,500 --
President, Boole & Babbage
Europe
Mr. James E. C. Black 1997 192,120 127,880 -- 1125
Senior Vice President 1996 182,970 90,721 60,000 427
Engineering 1995 174,252 89,362 56,250 --
Mr. Richard A. Harrit 1997 32,769 36,100 90,000 --
Senior Vice President, North 1996 -- -- -- --
American Operations 1995 -- -- -- --
Mr. Arthur F. Knapp, Jr. 1997 188,244 122,812 -- 1125
Senior Vice President and Chief 1996 179,214 87,085 75,000 683
Financial Officer 1995 170,680 85,787 67,500 613
Mr. Saverio Merlo 1997 183,015 120,356 -- 1125
Senior Vice President, 1996 174,300 85,378 60,000 683
Marketing 1995 166,001 84,105 56,250 613
<FN>
- --------------------------
(1) The Company has no stock appreciation rights (SARs).
(2) Includes the Company's matching payments under its 401(k) plan. 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 $50,000.
(3) Mr. Bruggeling's compensation was paid in non-U.S. currency and has been
translated to U.S. dollars at the average currency exchange rate for each
indicated year.
</FN>
</TABLE>
10
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1986
Incentive Stock Option Plan (the "1986 ISO Plan"), its 1986 Supplemental Stock
Option Plan (the "1986 Supplemental Plan") and the 1995 Stock Option Plan (the
"1995 Option Plan", collectively the "Option Plans"). As of November 30, 1997,
options to purchase a total of 4,050,443 shares had been granted and were
outstanding under the Option Plans and options to purchase 535,899 shares
remained available for grant thereunder.
<TABLE>
The following tables show for the fiscal year ended September 30, 1997,
certain information regarding options granted to, exercised by, and held at year
end by the Named Executive Officers.
<CAPTION>
Option Grants in Last Fiscal Year
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term(3)
----------------------------------------------------------------- --------------------
% of
Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base Expira-
Granted in Fiscal Price tion
Name (#)(1) Year(2) ($/Share) Date 5% ($) 10% ($)
---- -------- --------- --------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Mr. Newton -- -- -- -- -- --
Mr. Bruggeling -- -- -- -- -- --
Mr. Black -- -- -- -- -- --
Mr. Harrit 90,000 15.2 23.75 07/17/07 1,344,262 3,406,625
Mr. Knapp -- -- -- -- -- --
Mr. Merlo -- -- -- -- -- --
<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.
(2) Based on options to purchase 592,500 shares granted to all employees in
fiscal year 1997.
(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>
11
<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 (#) FY-End($)(2)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized(1)($) Unexercisable Unexercisable
- ---- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Mr. Newton 60,000 1,224,843 791,250/202,500 18,137,903/3,144,375
Mr. Bruggeling -- -- 115,781/94,219 2,100,111/1,437,387
Mr. Black 11,500 167,302 151,858/87,892 3,005,952/1,434,459
Mr. Harrit -- -- 0/90,000 0/450,000
Mr. Knapp 65,000 1,292,064 210,859/79,454 4,554,647/1,135,389
Mr. Merlo 10,500 204,811 129,796/65,954 2,692,216/959,308
- ------------------------------------------
<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) Fair market value of the Company's Common Stock at September 30, 1997
($28.75) minus the exercise price of the options.
</FN>
</TABLE>
12
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION1
The Compensation Committee of the Board of Directors has provided the
following report with respect to the compensation of executive officers for
fiscal 1997:
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 1997 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 1997, 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 1997,
target amounts for individual executive officers represented between 45% and 75%
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
$358,222 (out of a total executive officer bonus pool of $1,011,374) for fiscal
1997 was appropriate in light of the Company's strong financial performance.
- ---------------------------------
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.
13
<PAGE>
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
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
14
<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
* $100 invested on 9/30/92 in stock or index,
including reinvestment of dividends.
9/92 9/93 9/94 9/95 9/96 9/97
----------------------------------------------------------------
Boole & Babbage $100 $130 $166 $244 $304 $524
----------------------------------------------------------------
H&Q Technology $100 $132 $151 $264 $290 $432
----------------------------------------------------------------
NASDAQ - US $100 $131 $132 $182 $216 $297
----------------------------------------------------------------
(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.
15
<PAGE>
CERTAIN TRANSACTIONS
The Company entered into a loan agreement on October 15, 1997 with James
E.C. Black, Senior Vice President, Engineering, under which Mr. Black received a
loan of $85,000, to be repaid with interest at a rate of 8.5% per annum.
The loan and interest were paid in full on December 2, 1997.
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./
Arthur F. Knapp, Jr.
Secretary
January 15, 1998
16
<PAGE>
AMENDMENT A
BOOLE & BABBAGE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 18, 1998
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 Wednesday,
February 18, 1998 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 PROPOSAL 2, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
[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 2001 Annual Meeting of Stockholders and until their
successors are elected.
Nominees: Terry R. McGowan; David B. Wright
FOR WITH-HELD
[ ] [ ] Mark Here [ ]
For Address
Change and
Note at Left
[ ]
--------------------------------------------------
For all nominees except as noted above
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL2.
For Against Abstain
2. To ratify the selection of [ ] [ ] [ ]
Ernst & Young LLP as the
Company's independent
auditors for the fiscal
year ending September 30,
1998.
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_________
