<PAGE>
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 Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BMC SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
BMC SOFTWARE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 28, 1995
To the Stockholders of
BMC Software, Inc.:
The annual meeting of stockholders of BMC Software, Inc., a Delaware
corporation (the "Company"), will be held at 2101 CityWest Boulevard., Houston,
Texas, on Monday, August 28, 1995 at 10:00 a.m., Central Daylight Savings Time,
for the following purposes:
1. To elect six directors of the Company, each to serve until the next
annual meeting or until their respective successors have been duly elected
and qualified;
2. To ratify the Board of Directors' appointment of Arthur Andersen &
Co. as the Company's independent accountants; and
3. To consider and act upon such other business as may properly come
before the meeting or any adjournments thereof.
A record of stockholders has been taken as of the close of business on July
5, 1995, and only those stockholders of record on that date will be entitled to
notice of and to vote at the meeting. A stockholders' list will be available
commencing July 10, 1995 and may be inspected during normal business hours prior
to the annual meeting at the offices of the Company, 2101 CityWest Boulevard,
Houston, Texas 77042-2827 and at the time and place of the annual meeting.
By Order of the Board of Directors
[SIGNATURE]
M. Brinkley Morse
SECRETARY
Houston, Texas
July 27, 1995
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD. THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE
MEETING. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING. RETURNING THE PROXY
WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO ATTEND THE ANNUAL MEETING, BUT
WILL ENSURE YOUR REPRESENTATION IF YOU CANNOT ATTEND. THE PROXY IS REVOCABLE AT
ANY TIME PRIOR TO ITS USE.
<PAGE>
BMC SOFTWARE, INC.
2101 CITYWEST BOULEVARD
HOUSTON, TEXAS 77042-2827
JULY 27, 1995
PROXY STATEMENT
GENERAL INFORMATION
PROXY SOLICITATION
This proxy statement is furnished to the stockholders of BMC Software, Inc.,
a Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board"). The proxies are
to be voted at the 1995 Annual Meeting of Stockholders to be held at 2101
CityWest Boulevard., Houston, Texas 77042-2827, at 10:00 a.m., Central Daylight
Savings Time, on August 28, 1995, and any adjournments thereof, for the purposes
set forth in the accompanying notice. The Board is not aware of any other
matters to be presented at the meeting. If any other matter should be presented
at the meeting upon which a vote properly may be taken, shares represented by
all duly executed proxies received by the Company will be voted with respect
thereto in accordance with the best judgment of the persons designated as the
proxies. This proxy statement and the accompanying form of proxy have been
mailed to stockholders on or about July 27, 1995.
RECORD DATE AND VOTING RIGHTS
As of July 5, 1995 the record date for the determination of stockholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote 25,238,290 shares of the common stock, $.01 par value, of the
Company (the "Common Stock"). Each share of Common Stock entitles the holder to
one vote on each matter presented at the meeting. A majority of the outstanding
shares will constitute a quorum at the meeting. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions are counted in tabulations of the votes
cast on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
VOTING OF PROXY; REVOCABILITY
Proxies will be voted in accordance with the directions specified thereon
and otherwise in accordance with the judgment of the persons designated as
proxies. Any proxy on which no direction is specified will be voted FOR the
election of the nominees named herein to the Board and FOR the ratification of
the appointment of Arthur Andersen & Co. as the Company's independent
accountants. Any proxy may be revoked at any time prior to its exercise by
delivery to the Secretary of the Company of written notice of revocation or a
duly executed proxy bearing a later date, or by voting in person at the meeting.
ANNUAL REPORT
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended March 31, 1995, accompanies this Proxy Statement.
Stockholders are referred to that report for financial and other information
about the activities of the Company. The Annual Report is not incorporated by
reference into this Proxy Statement and is not deemed to be a part hereof.
<PAGE>
ITEM ONE: ELECTION OF DIRECTORS
NOMINEES
Each of the persons named below has been nominated for election as a
director of the Company until the 1996 Annual Meeting of Stockholders or until
his successor has been duly elected and qualified. Each of the nominees listed
below was elected by the stockholders at the last annual meeting and is
currently a director. All directors serve one year terms. No proxy may be voted
for more persons than the number of nominees listed below. Shares represented by
all duly executed proxies received by the Company and not marked to withhold
authority to vote for any individual director or for all directors will be voted
FOR the election of all the nominees named below. The Board knows of no reason
why any such nominee should be unable or unwilling to serve, but if such should
be the case, the shares represented by duly executed proxies received by the
Company will be voted for the election of a substitute nominee selected by the
Board. The nominees receiving a majority of the votes cast at the meeting will
be elected as directors. Stockholders may not cumulate their votes in the
election of directors.
Certain information concerning the nominees is set forth below:
<TABLE>
<CAPTION>
POSITION AND OFFICES DIRECTOR
NAME AGE OF THE COMPANY SINCE
- ----------------------------------------- --- ----------------------------------------- -----------
<S> <C> <C> <C>
Max P. Watson Jr. ....................... 49 Chairman of the Board, President and 1990
Chief Executive Officer
John W. Barter........................... 48 Director 1988
B. Garland Cupp.......................... 54 Director 1989
Meldon K. Gafner......................... 47 Director 1987
L. W. Gray............................... 58 Director 1991
George F. Raymond........................ 58 Director 1987
</TABLE>
Mr. Watson joined the Company in October 1985 and has served as President
and Chief Executive Officer since April 1990 and as Chairman of the Board since
January 1992. He served as Executive Vice President and Chief Operating Officer
from January 1989 to April 1990 and as Senior Vice President, North American
Sales and Marketing from February 1987 to December 1988.
Mr. Barter has been employed since 1977 with AlliedSignal, Inc. in various
financial and executive capacities and is currently an Executive Vice President
of AlliedSignal, Inc., and President of AlliedSignal Automotive, Inc.
Mr. Cupp was employed by the American Express Corporation from 1978 to 1995,
when he retired. From 1985 to 1995, he served as Executive Vice President -- TRS
Technologies and Chief Information Officer at the Travel Related Services
subsidiary of American Express Corporation.
Mr. Gafner has been Vice Chairman of the Board of ComStream Corporation, a
manufacturer of high speed satellite earth stations for data distribution, since
December 1992 and was its President from July 1988 to December 1992.
Mr. Gray is a private investor. He was employed from 1961 to 1987 by the
International Business Machines Corporation ("IBM") in various executive
capacities including President, National Marketing Division. He was appointed a
corporate vice president of IBM in 1983.
Mr. Raymond is a private investor and a director of several privately held
software companies. He founded Automatic Business Centers, Inc., a payroll
processing company ("ABC"), in 1972 and sold the company to CIGNA Corporation
("CIGNA") in 1983. Mr. Raymond and other members of ABC's management repurchased
ABC in 1986 from CIGNA and sold ABC to Automatic Data Processing Corporation in
1989.
2
<PAGE>
BOARD ORGANIZATION AND MEETINGS
The Board met 10 times in fiscal 1995. No Board member attended fewer than
75% of the total number of the meetings of the Board and of the committees on
which he served.
The Board has established an Audit Committee and a Compensation Committee to
act on behalf of the Board and to advise the Board with respect to specific
matters. The Board does not have a standing nominating committee or a committee
that performs a similar function. The responsibilities of the Audit Committee
and Compensation Committee are as follows:
AUDIT COMMITTEE. The Audit Committee is comprised entirely of directors who
are not officers of the Company. The Audit Committee has been established to
discuss the scope and plan of the annual audit of the books and records of the
Company; to review, evaluate and advise the Board with respect to the engagement
of independent public accounts; to review the adequacy of internal accounting
procedures, and to review audit results. Messrs. Barter and Raymond are members
of the Audit Committee, which held one meeting in fiscal 1995.
COMPENSATION COMMITTEE. The Compensation Committee is comprised entirely of
directors who are not officers of the Company. The Compensation Committee's
function is to review the compensation levels of the Company's executive
officers, to administer the Company's stock option and incentive stock plans and
to authorize bonuses, awards under such plans and any other form of
remuneration. Messrs. Barter, Gafner and Cupp are members of the Compensation
Committee, which held five meetings in fiscal 1995.
COMPENSATION OF DIRECTORS
Board members other than those employed by the Company receive an annual fee
of $20,000 and receive an additional fee of $1,000 per meeting for each board or
committee meeting attended in excess of five meetings per year, with board and
committee meetings that are held on the same day being counted as one meeting.
Directors are reimbursed for travel and certain other expenses incurred in
connection with their duties as a director of the Company.
In August 1994, the Company's stockholders approved the BMC Software, Inc.
1994 Nonemployee Directors' Stock Option Plan (the "1994 Directors' Plan"),
which authorizes 200,000 shares of Common Stock for issuance pursuant to stock
options granted to nonemployee directors. Under the 1994 Director Plan, each
director who is first appointed subsequently to the adoption of the 1994
Directors' Plan is granted a nontransferable, "nonqualified" option to purchase
20,000 shares of Common Stock, and each director receives a grant of 5,000
shares on each annual re-election to the Board. In every case, the exercise
price is the fair market value on the date of grant and the option vests
quarterly in 6.25% increments over five years from the grant date. The BMC
Software, Inc. 1990 Director Stock Option Plan was terminated upon stockholder
approval of the 1994 Plan.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE PROPOSED NOMINEES.
ITEM TWO: PROPOSAL TO RATIFY THE SELECTION OF
INDEPENDENT AUDITORS
APPOINTMENT OF ARTHUR ANDERSEN & CO.
The Board, upon recommendation of the Audit Committee, has appointed Arthur
Andersen & Co., Certified Public Accountants, as the Company's independent
accountants for the fiscal year ended March 31, 1996, subject to ratification of
this appointment by the stockholders of the Company. Arthur Andersen & Co.
performed audit services in connection with the examination of the financial
statements of the Company and its subsidiaries for the fiscal year ended March
31, 1995 and is considered by management of the Company to be well qualified. If
this proposal does not receive a majority vote at the meeting, the Board will
reconsider the appointment. Representatives of Arthur Andersen & Co. will be
present at the 1995 Annual Meeting of Stockholders. They will have an
opportunity to make a statement if they desire to do so and to answer
appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR ITEM TWO.
3
<PAGE>
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The following table sets forth as of July 5, 1995 certain information
regarding beneficial ownership of the Common Stock by each stockholder known by
the Company to be the beneficial owner of more than 5% of its Common Stock, each
director, the Chief Executive Officer, each of the four other most highly
compensated executive officers and all directors and officers as a group. Unless
otherwise indicated, the stockholders have sole voting and investment power with
respect to shares beneficially owned by them, subject to community property
laws, where applicable. All information with respect to beneficial ownership has
been furnished to the Company by the respective stockholders.
<TABLE>
<CAPTION>
COMMON
STOCK
NAME OWNED PERCENT
- ----------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Max P. Watson Jr.(1)............................................................... 233,019 *
Douglas J. Erwin(2)................................................................ 27,055 *
James E. Juracek(3)................................................................ 45,582 *
Richard P. Gardner(4).............................................................. 10,000 *
M. Brinkley Morse(5)............................................................... 19,837 *
John W. Barter(6).................................................................. 18,375 *
B. Garland Cupp(7)................................................................. 23,750 *
Meldon K. Gafner(8)................................................................ 7,500 *
L. W. Gray(9)...................................................................... 17,500 *
George F. Raymond(10).............................................................. 16,751 *
All directors and officers as a group
(13 persons)(14).................................................................. 498,160 2%
<FN>
- ------------------------
* Represents less than 1%.
(1) Includes 133,155 options exercisable within 60 days after July 5, 1995, and
20,000 shares held by trusts for the benefit of Mr. Watson's children, of
which he is one of two trustees and shares voting and investment power of
which Mr. Watson disclaims beneficial ownership.
(2) Includes 20,000 shares of restricted stock subject to transfer
restrictions.
(3) Includes 35,000 shares of restricted stock subject to transfer
restrictions.
(4) Includes 10,000 shares of restricted stock subject to transfer
restrictions.
(5) Includes 13,500 shares subject to stock options exercisable within 60 days
after July 5, 1995.
(6) Includes 15,375 shares subject to stock options exercisable within 60 days
after July 5, 1995.
(7) Includes 23,750 shares subject to stock options exercisable within 60 days
after July 5, 1995.
(8) Includes 7,500 shares subject to stock options exercisable within 60 days
after July 5, 1995.
(9) Includes 17,500 shares subject to stock options exercisable within 60 days
after July 5, 1995.
(10) Includes 12,689 shares subject to stock options exercisable within 60 days
of July 5, 1995.
(11) Includes 226,189 shares subject to stock options exercisable within 60 days
after July 5, 1995 and 65,000 shares of restricted stock subject to
transfer restrictions.
</TABLE>
4
<PAGE>
EXECUTIVE OFFICERS
The executive officers are elected to serve annual terms. Certain
information concerning the Company's executive officers as of July 5, 1995 is
set forth below, except that information concerning Mr. Watson is set forth
above under Item One: "Election of Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- --------------------------------------------------------------
<S> <C> <C>
Douglas J. Erwin................. 42 Executive Vice President and Chief Operating Officer
Richard P. Gardner............... 41 Senior Vice President, North American Sales
James E. Juracek................. 49 Senior Vice President, Research Development
Gerd A. Ordelheide............... 52 Senior Vice President, European Operations
Theodore W. Van Duyn............. 46 Chief Technology Officer
M. Brinkley Morse................ 37 Vice President, General Counsel and Secretary
Leland D. Putterman.............. 36 Vice President, Worldwide Marketing
Stephen B. Solcher............... 34 Treasurer
</TABLE>
Mr. Erwin joined the Company as Executive Vice President and Chief Operating
Officer in April 1994. Prior to joining the Company, Mr. Erwin was employed
since 1988 with Northern Telecom in various senior operating positions, lastly
Vice President, Network Services and Software Applications. Mr. Erwin was
employed by IBM Corporation in various sales and marketing capacities from 1976
to 1988.
Mr. Gardner joined the Company as Senior Vice President, North American
Sales, in May 1994. He was employed by IBM Corporation from March, 1975 to May,
1994 in various sales and general management capacities, lastly as General
Manager of its Houston, Texas operations.
Mr. Juracek joined the Company as Senior Vice President, Research and
Development in February 1993. From June 1992 to February 1993, he was Vice
President, MIS and Chief Information Officer of Frito-Lay, Inc. From October
1988 to June 1992, he was Vice President, Systems Engineering of SABRE Computer
Services, a division of AMR Corporation. From August 1968 to August 1987, he
served in various information systems capacities for AT&T Corporation, lastly as
Division Manager, Network Design and Data Communications.
Mr. Ordelheide joined the Company as Senior Vice President, European
Operations in January 1995. He was employed by DataSwitch Corporation from 1993
to 1995 and by Seimens Nixdorf USA from 1980 to 1992.
Mr. Van Duyn joined the Company in October 1985 as Director of Research and
served as Senior Vice President, Research and Development from July 1986 to
February 1993, when he became Chief Technology Officer.
Mr. Morse has served as General Counsel and Secretary since November 1988,
when he joined the Company, and as Vice President since January 1991.
Mr. Putterman joined the Company in September 1994 from Oracle Corporation,
where he was employed since July 1985 in various sales and marketing capacities.
His last position was as a Vice President, Marketing.
Mr. Solcher joined the Company as Assistant Treasurer in September 1991 and
has served as Treasurer since April 1992. Prior to joining the Company, Mr.
Solcher was employed as an audit manager by Arthur Andersen & Co., the Company's
independent auditors, from 1983 to 1991.
5
<PAGE>
EXECUTIVE COMPENSATION
The following tables and notes thereto present information concerning the
cash compensation, restricted stock grants, stock option grants and stock option
exercises of Messrs. Watson, Erwin, Juracek, Gardner and Morse. The Company's
compensation policies are discussed in the Report of the Compensation Committee
of the Board.
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
OTHER ANNUAL RESTRICTED
FISCAL SALARY BONUS COMPENSATION STOCK AWARD
YEAR ($) ($) ($)(2) ($)(3)
--------- --------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Max P. Watson Jr..................................... 1995 240,000 512,360 5,000 0
Chairman of the Board, 1994 240,000 560,000 5,000 0
President and Chief 1993 240,000 621,575 5,000 0
Executive Officer
Douglas A. Erwin..................................... 1995 180,000 420,000(1) 5,000 1,886,250
Senior Vice President and Chief 1994 N.A. N.A. N.A. N.A.
Operating Officer 1993 N.A. N.A. N.A. N.A.
James E. Juracek..................................... 1995 140,000 290,936 5,000 0
Senior Vice President 1994 140,000 354,611 5,000 3,087,500
Research and Development 1993 N.A. N.A. N.A. N.A.
Richard P. Gardner................................... 1995 124,108 288,001 5,000 725,625
Vice President 1994 N.A. N.A. N.A. N.A.
N. American Sales and Marketing 1993 N.A. N.A. N.A. N.A.
M. Brinkley Morse.................................... 1995 126,000 194,970 5,000 0
Vice President and 1994 110,400 280,887 5,000 0
General Counsel 1993 110,400 297,844 5,000 0
<FN>
- ------------------------
(1) Includes a payment of $23,699 to Mr. Erwin to fulfill the Company's
agreement to pay him a bonus in the first year of his employment with the
Company of not less than $420,000. There are no ongoing bonus minimums.
(2) Represents nondiscriminatory Board authorized matching contributions under
the Company's 401(k) plan.
(3) As of March 31, 1995, the named individuals held shares of restricted stock
in the following amounts and having the following dollar values based on
the closing price of the Company's common stock of $63.75 on March 31,
1995: Mr. Watson, 50,000 shares, $3,187,500; Mr. Erwin, 30,000 shares,
$1,912,500; Mr. Juracek, 47,791 shares, $3,046,676; Mr. Gardner, 15,000
shares, $956,250; and Mr. Morse, 16,500 shares, $1,051,875. These
restricted shares all represent long-term incentive awards under which the
transfer restrictions on the restricted shares lapse in a fiscal year if
the Company's earnings per share meets or exceeds the targeted earnings per
share amount for the fiscal year. The restricted shares of Mr. Watson and
Mr. Morse are the last installments of long term incentives granted in
October 1990, on which the transfer restrictions lapsed in full if the
Company's earnings per share in fiscal 1995 equaled or exceeded $3.93 per
share. The restricted shares of Mr. Erwin, Mr. Juracek and Mr. Gardner were
granted in connection with their employment with the Company and are valued
in the above table at the closing price on the grant date. The transfer
restrictions on the shares of Mr. Juracek lapse in increments of 18%, 35%
and 47%, respectively, and the transfer restrictions on the shares of Mr.
Erwin and Mr. Gardner lapse in one-third increments, if the Company's
earnings per share meets or exceeds the prescribed targets in fiscal 1995,
1996 and 1997. The Company's earnings per share in fiscal 1995 exceeded the
fiscal 1995 target, excluding the one-time charge of $29,260,000 for
acquired
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
research and development in the fourth quarter of fiscal 1995. The
Compensation Committee excluded the charge in determining that the
objectives were met in fiscal 1995 because of the extraordinary nature of
the charge. The transfer restrictions thus lapsed on the shares of
restricted stock held by the named executive officers for fiscal 1995. If
the Company fails to achieve the target in a fiscal year, the transfer
restrictions on the shares allocated to that year do not lapse and the
shares cannot be sold or otherwise disposed of, except that the transfer
restrictions on all of an employee's restricted shares will lapse on the
tenth anniversary of the grant date if the grantee's employment with the
Company has not terminated.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information on option grants in
fiscal 1995 to the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Max P. Watson Jr........... 330,000 13.4% 44.25 10/21/2004 9,183,434 23,272,624
Douglas J. Erwin........... 225,000 9.1% 44.25 10/21/2004 6,261,432 15,867,698
James J. Juracek........... 165,000 6.7% 44.25 10/21/2004 4,591,717 11,636,312
Richard P. Gardner......... 165,000 6.7% 44.25 10/21/2004 4,591,717 11,636,312
M. Brinkley Morse.......... 125,000 5.0% 44.25 10/21/2004 3,478,573 8,815,388
<FN>
- ------------------------
(1) All options listed were granted pursuant to the 1994 Employee Incentive
Plan. The option exercise price is the market price when granted; the
options have a term of 10 years and vest over 60 months.
(2) Potential realizable values are based on assumed annual rates of return
specified by the Securities and Exchange Commission. By way of comparison,
using the same assumed annual rates of stock price appreciation over the
ten-year term of the stock options set forth above, all BMC stockholders
would realize the following increases in the market value of their stock:
$702,381,611 (5% annual appreciation); and $1,779,882,550 (10% annual
appreciation). Such increases in values are based on speculative
assumptions and should not inflate expectations of the future value of the
Company's market value.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1995
by the named executive officers and the value of such officers' unexercised
options at June 30, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR-END($)
SHARES ACQUIRED VALUE -------------------------- --------------------------
ON EXERCISE # REALIZED $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Max P. Watson Jr.................. 0 0 133,155 330,000 7,669,125 10,890,000
Douglas J. Erwin.................. 0 0 0 225,000 0 7,425,000
James J. Juracek.................. 0 0 0 165,000 0 5,445,000
Richard P. Gardner................ 0 0 0 165,000 0 5,445,000
M. Brinkley Morse................. 0 0 13,500 125,000 960,750 4,125,000
</TABLE>
7
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
The compensation program for executive officers is administered by the
Compensation Committee of the Board (the "Committee"), which is composed only of
independent directors. With the assistance of internal staff and independent
compensation consultants, the Committee, at least annually, reviews and
evaluates the Company's compensation programs to determine its effectiveness in
attracting, motivating and retaining executive officers.
COMPENSATION PHILOSOPHY. The Company's compensation programs for its
executive officers are designed to preserve and enhance stockholder value by
heavily emphasizing performance-based compensation. The programs are directed
towards motivating executives to achieve the Company's business objectives, to
reward them for their achievement and to attract and retain executive officers
who contribute to the Company's long-term success.
COMPENSATION COMPONENTS. The BMC executive compensation program has three
primary components: base salary, annual incentives and long-term incentives. The
tables above entitled "Summary Compensation" and "Stock Option Grants in the
Last Fiscal Year" set forth these components of the compensation program for the
1993, 1994 and 1995 fiscal years for the Company's Chief Executive Officer, Mr.
Watson, and the next four most highly compensated executive officers. The
factors and criteria used for the 1995 fiscal year for Mr. Watson and the named
executive officers for each of the three components are described below.
BASE SALARY. The level of base salary paid to executive officers is
determined on the basis of performance, experience and such other factors as may
be appropriately considered by the Committee. The salaries are set at the low to
middle end of the competitive market based upon compensation surveys of industry
peers by Godwins Booke & Dickenson, Inc., an independent compensation
consultant. As reflected in the Summary Compensation table, none of the named
executive officers has received a salary increase during the three most recent
fiscal years other than Mr. Morse.
ANNUAL INCENTIVES. The objectives of the annual incentive compensation
program are to focus executive officers' efforts on the Company's financial
performance and business objectives by directly tying bonus payments to year
over year growth in pretax earnings. The program is designed to heavily weight
the variable component of an executive's total annual compensation and to
generate 90th percentile or higher awards compared to a peer group if the
Company achieves expected levels of performance. The annual incentive
compensation plan was implemented in mid-fiscal year 1990 and has been in effect
since then, with minor variations.
Awards for the participating executive officers are determined by
allocating, as a percentage of pay, 10% of the amount by which the Company's
pretax income (excluding extraordinary items) in a quarter exceeds its pretax
income in the same quarter one year earlier. These quarterly bonuses are
adjusted at the end of the fiscal year to equal the recipient's allocated share
of 10% of the amount by which the Company's pretax income for the fiscal year
exceeded its pretax income in the preceding year. The individual executive
officer percentage allocations are determined by the relationship of individual
salaries to the total salaries of all executive officer participants. Other than
for the Chief Executive Officer, these percentages are then adjusted quarterly
by the Compensation Committee at the recommendation of the Chief Executive
Officer for various individual contributions. There is no such adjustment for
the Chief Executive Officer.
LONG TERM INCENTIVES. The key purpose of the long-term incentive
compensation program is to focus executive officers' efforts on performance that
increases the value of the Company for its stockholders. It is also intended to
align the interests of executive officers with those of stockholders by
encouraging share ownership while providing a significant retention incentive
for executive officers.
8
<PAGE>
In fiscal 1995, the Company granted the shares of restricted stock to Mr.
Erwin and Mr. Gardner described in the Summary Compensation table in connection
with their recruitment to and initial employment by the Company. The lapsing of
the transfer restrictions on such shares is based upon the Company's achieving
specified earnings per share targets in fiscal 1995, 1996 and 1997.
The Compensation Committee approved in October 1994 new long term incentives
for the Company's executive officers, including the Chief Executive Officer and
the four other executives named in the Summary Compensation table. The long term
incentives are nonstatutory stock options vesting over five years, with an
exercise price equal to the fair market value on the grant date. The stock
option grants are intended to promote success of the Company by aligning
employee financial interests with long-term stockholder value. The number of
shares granted to the Chief Executive Officer and the four named executive
officers is set forth in the table above entitled "Option Grants in the Last
Fiscal Year." The design of the long term incentives was based upon the
recommendation of Godwins, Booke & Dickenson and on factors including the
responsibilities of the individual executive officers, their expected future
contributions and long term incentives granted by competitors and peer companies
within the computer software industry. The Committee intends that these stock
option grants will be the primary grants to the covered executive officers for
the five year vesting period.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. As described above, the
Company determines total compensation for all executives, including the Chief
Executive Officer, considering both a pay-for-performance philosophy and market
rates of compensation. The Chief Executive Officer's base salary has not
increased over the last five fiscal years, reflecting the emphasis on the annual
incentive bonus opportunity in the total mix of annual cash compensation. The
Chief Executive Officer's annual incentive was based on an allocation of the
annual incentive pool described above based on the relative percentage of his
salary to the salaries of the five other participants in the annual incentive
program. The Chief Executive Officer received the stock option grant described
above in fiscal 1995 under the BMC Software, Inc. 1994 Employee Incentive Plan,
which is intended to cover the Chief Executive Officer for the five year vesting
period of such option.
DEDUCTIBILITY. Internal Revenue Code Section 162(m), enacted in 1993,
precludes a public corporation from taking a deduction in 1994 or subsequent
years for compensation in excess of $1 million for its chief executive officer
or any of its four other highest-paid officers. Performance-based compensation
meeting criteria in Section 162(m), however, is specifically exempt from the
deduction limit. The Internal Revenue Service issued proposed regulations
implementing this legislation in December 1993 and amended the proposed
regulations in December 1994. The regulations will not become final until after
a period for public comment and possibly public hearings thereafter.
Based on Section 162(m) and the proposed regulations, any compensation
derived from all grants of stock options and restricted stock prior to the
effective date of Section 162(m) is exempt from the limit on the corporate tax
deduction. The stock option grants to the Company's executive officers described
above have been designed so that compensation expense deductions taken by the
Company in connection with the exercise of such options will be excluded from
the deduction limit. The Company does not currently anticipate taking actions
necessary to qualify the Company's annual cash incentive plan for the exclusion
to Section 162(m), and believes that it is unlikely that any executive officer's
annual cash compensation, including bonuses awarded under the annual incentive
plan described above, will exceed the $1,000,000 limit.
Respectfully submitted by the Compensation Committee of the Board of
Directors of the Company:
John W. Barter
B. Garland Cupp
Meldon K. Gafner
9
<PAGE>
PERFORMANCE GRAPH
The following indexed graph indicates the Company's total return to its
stockholders for the five year period ended March 31, 1995, as compared to the
total return over such period for the Standard & Poor's 500 Composite Index and
the Standard & Poor's Computer Software & Services Composite Index. This graph
assumes a $100 investment at the beginning of such period and the reinvestment
of all dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
BMC Software, Inc. 100 $174.23 $248.45 $201.55 $254.64 $262.89
S&P 500 Composite 100 $114.41 $127.05 $146.39 $148.55 $171.68
S&P Computer Software & Services Composite 100 $91.23 $118.11 $156.05 $175.09 $236.18
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company believes that, during the fiscal year ended March 31, 1993, all
Section 16(a) filing requirements applicable to the Company's directors,
executive officers and greater than ten-percent beneficial owners were complied
with, except that Mr. Morse reported one month late on Form 4 the tax
withholding of shares of restricted stock in connection with the lapsing of
transfer restrictions on such shares in May 1994 and that Gerd A. Ordelheide and
Leland D. Putterman reported on Form 5 their holdings in the Company's
securities upon joining the Company, which were none, that should have been
reported earlier on Form 3.
RELATED TRANSACTIONS
John S. Watson, the brother of Max P. Watson Jr., the Company's Chairman of
the Board, President and Chief Executive Officer, is a partner in the law firm
of Vinson & Elkins, L.L.P., which is the Company's principal outside counsel.
The Company paid $450,508.14 in legal fees to Vinson & Elkins for legal services
rendered in fiscal 1995.
In connection with Douglas J. Erwin's employment by the Company and
relocation to Houston, Texas, the Company has guaranteed a $360,000 portion of
the mortgage loan on Mr. Erwin's Houston residence.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the 1996
Annual Meeting of Stockholders must forward such proposal to the Secretary of
the Company, at the address indicated on page 1 of this proxy statement so that
the Secretary receives it no later than March 29, 1996.
10
<PAGE>
FORM 10-K
The Company will furnish without charge to each person whose proxy is being
solicited, upon written request of any such person, a copy of the Company's
annual report on Form 10-K for the fiscal year ended March 31, 1995 (the "1995
10-K"), as filed with the Securities and Exchange Commission, including the
financial statements and the financial statement schedules thereto. The Company
will furnish to any such person any exhibit described in the list accompanying
the 1995 10-K, upon the payment, in advance, of the specified reasonable fees
related to the Company's furnishing of such exhibit(s). Requests for copies of
such report and/or exhibit(s) should be directed to Mr. M. Brinkley Morse,
Secretary for the Company, at the Company's principal address as shown on page 1
hereof.
OTHER MATTERS
The Annual Report to Stockholders for the fiscal year ended March 31, 1995
has been mailed to each stockholder entitled to vote at the annual meeting.
The cost of soliciting proxies in the accompanying form will be borne by the
Company. In addition to solicitations by mail, a number of officers, directors
and regular employees of the Company may, if necessary to ensure the presence of
a quorum and at no additional expense to the Company, solicit proxies in person
or by telephone or telegraph. The Company also will make arrangements with
brokerage firms, banks and other nominees to forward proxy materials to
beneficial owners of shares and will reimburse such nominees for their
reasonable costs. In addition, the Company has retained Kissel-Blake, Inc. to
assist in soliciting proxies for a fee of approximately $10,000, plus reasonable
out-of-pocket expenses.
The persons designated to vote shares covered by proxies intend to exercise
their judgment in voting such shares on other matters that may come before the
meeting adjourns. Management does not expect, however, that any matters other
than those referred to in this proxy statement will be presented for action at
the Meeting.
By Order of the Board of Directors
[SIGNATURE]
M. Brinkley Morse
SECRETARY
Houston, Texas
July 27, 1995
11
<PAGE>
BMC SOFTWARE, INC.
P 2101 CITY WEST BOULEVARD
R HOUSTON, TX 77042
O
X THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Y
The undersigned hereby appoints Max P. Watson Jr. and M. Brinkley Morse
as Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote as designated on the reverse side,
all the shares of common stock of BMC Software, Inc. held of record by the
undersigned on July 5, 1995, at the annual meeting of stockholders to be held
on August 28, 1995 or any adjournment thereof.
THE UNDERSIGNED ACKNOWLEDGES THAT THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER AND
THAT IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED IN PROPOSAL 1 AND IN FAVOR OF PROPOSAL 2.
(Continued and to be signed on the other side) /SEE REVERSE/
/ SIDE /
<PAGE>
/X/ Please mark
votes as in
this example.
1. ELECTION OF DIRECTORS
NOMINEES: J. BARTER, G. CUPP, M. GAFNER, L. GRAY,
G. RAYMOND AND M. WATSON
FOR ALL NOMINEES | | | | WITHHOLD AUTHORITY
LISTED (EXCEPT | | | | TO VOTE FOR
AS MARKED IN | | | | ALL NOMINEES
THE CONTRARY) | | | | LISTED
_____________________________________________________
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL
NOMINEE, WRITE THE NOMINEE'S NAME ON THE LINE ABOVE.
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY THE | | | | | |
APPOINTMENT OF ARTHUR | | | | | |
ANDERSEN LLP AS THE | | | | | |
INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY.
MARK HERE
FOR ADDRESS | |
CHANGE AND | |
NOTE AT LEFT
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE COMPANY'S STOCK
TRANSFER RECORDS. WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY.
SIGNATURE:______________________________________DATE_______________
SIGNATURE:______________________________________DATE_______________
