<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / 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 19, 1996
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 19, 1996 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 consider and vote on a proposal to approve the BMC Software, Inc.
1996 Employee Stock Purchase Plan;
3. To consider and vote on a proposal to approve an amendment to the
Company's Restated Certificate of Incorporation to increase the authorized
number of shares of common stock, par value $.01 per share from 90,000,000
shares to 300,000,000 shares;
4. To ratify the Board of Directors' appointment of Arthur Andersen LLP
as the Company's independent accountants; and
5. 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, 1996, and only those stockholders of record on that date will be entitled to
notice of and to vote at the meeting. A list of stockholders will be available
commencing July 9, 1996 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
/s/ M. Brinkley Morse
M. Brinkley Morse
SECRETARY
Houston, Texas
July , 1996
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 , 1996
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 1996 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 19, 1996, 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 , 1996.
RECORD DATE AND VOTING RIGHTS
As of July 5, 1996, 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 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, FOR the approval of the BMC
Software, Inc. 1996 Employee Stock Purchase Plan, FOR the approval of an
amendment to the Company's Restated Certificate of Incorporation to increase the
authorized shares of Common Stock from 90,000,000 shares to 300,000,000 and FOR
the ratification of the appointment of Arthur Andersen LLP 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, 1996, 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 1997 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. ....................... 50 Chairman of the Board, President and 1990
Chief Executive Officer
John W. Barter........................... 49 Director 1988
B. Garland Cupp.......................... 55 Director 1989
Meldon K. Gafner......................... 48 Director 1987
L. W. Gray............................... 59 Director 1991
George F. Raymond........................ 59 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 seven times in fiscal 1996. 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 two meetings in fiscal 1996.
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 four meetings in fiscal 1996.
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
40,000 shares of Common Stock, and each director receives a grant of 10,000
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 APPROVE THE BMC SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors adopted the BMC Software, Inc. 1996 Employee Stock
Purchase Plan (the "Purchase Plan") on June 3, 1996, subject to approval by the
Company's shareholders. The purpose of the Purchase Plan is to furnish eligible
employees an incentive to advance the Company's interest by providing a method
whereby they may acquire a proprietary interest in the Company on favorable
terms. The complete text of the Purchase Plan is attached hereto as Exhibit A.
In the event that shareholders do not approve the Purchase Plan, it will be
terminated.
GENERAL
The Purchase Plan authorizes the issuance of up to 250,000 shares of Common
Stock (subject to adjustment in the event of stock dividends, stock splits and
certain other events) and provides that no options may be granted under the
Purchase Plan after June 3, 2006. The Purchase Plan is available to
3
<PAGE>
all employees of the Company and its participating subsidiaries who have
completed six months of employment and who are scheduled to work more than
twenty hours per week. However, an employee may not be granted an option under
the Purchase Plan if after the granting of the option such employee would be
deemed to own 5% or more of the combined voting power or value of all classes of
stock of the Company. Further, an employee who is both highly compensated
(within the meaning of the Internal Revenue Code provisions applicable to
employee benefit plans) and an officer of the Company or a participating
subsidiary at or above the level of Vice President is not eligible to
participate in the Purchase Plan. The committee charged with the general
administration of the Purchase Plan has the authority to designate any preset or
future subsidiary of the Company as a participating subsidiary. As of June 24,
1996, approximately 183 employees were eligible to participate in the Purchase
Plan.
Under the Purchase Plan, an eligible employee must authorize payroll
deductions to be made during a 6-month period (the "Option Period")(the first of
which commenced on July 1, 1996 and ends on December 31, 1996), which amounts
are used at the end of the Option Period to acquire shares of Common Stock at
85% of the fair market value of the Common Stock on the first or the last day of
the Option Period, whichever is lower. Employees have discretion to determine
the amount of their payroll deduction under the Purchase Plan, subject to the
limits that not more than 10% of compensation or $21,250 may be deducted in any
Option Period or calendar year, respectively. On the first day of each Option
Period, the Company grants options to purchase shares of Common Stock to each
participant. On the last day of the Option Period, the participant is deemed to
have exercised the option to the extent of the participant's accumulated payroll
deductions. A committee appointed from time to time by the Board of Directors
makes all determinations necessary or advisable for the administration of the
Purchase Plan.
An employee may withdraw from the Purchase Plan, in whole but not in part,
at any time prior to the beginning of the last payroll period in an Option
Period, by delivering a withdrawal notice to the Company, in which event the
Company will refund the entire amount of the payroll deductions during the
Option Period, without interest.
An employee's rights under the Purchase Plan terminate upon termination of
employment for any reason other than by retirement or death. Upon termination
for reasons other than retirement or death, the Company will return the
employee's payroll deductions, without interest. A participant under the
Purchase Plan who retires at or after the age of 65 may elect either to exercise
his or her options to purchase Common Stock on the date of his retirement or to
receive a refund of his or her accumulated payroll deductions. If the employment
of a participant under the Purchase Plan is terminated by the participant's
death, the executor of his will or the administrator of his estate may elect
either to exercise such participant's options to purchase Common Stock as of the
date of such participant's death or to receive a refund of such participant's
accumulated payroll deductions. An employee's rights under the Purchase Plan may
not be transferred except by will or the laws of descent and distribution.
Option holders are protected against dilution in the event of a stock
dividend, stock split, subdivision, combination, recapitalization or similar
event. If the Company is not the surviving corporation in any merger or
consolidation (or survives only as a subsidiary) or if the Company is dissolved
or liquidated, then unless the surviving corporation assumes or substitutes new
options for all options then outstanding, the date of exercise for all options
then outstanding will be accelerated to a date fixed by the Board of Directors
prior to the effective date of such merger, consolidation, dissolution or
liquidation.
For a period of 12 months (or such other period as the Committee may from
time to time specify with respect to a particular grant of options) after the
date of exercise of an option pursuant to the Purchase Plan (the "Restriction
Period"), the shares of Common Stock issued in connection with such exercise may
not be sold or disposed of by the paricipant who has purchased such shares.
During the
4
<PAGE>
Restriction Period, a custodian selected by the committee that is appointed to
administer the Purchase Plan will hold such shares of Common Stock. If a
participant's employment with the Company and its parent or subsidiary
corporations is terminated for any reason whatsoever, such transfer restrictions
will cease to apply.
The Board of Directors may at any time amend or terminate the Purchase Plan
except that no amendment shall be made without the approval of the holders of a
majority of the Company's outstanding Common Stock, if such amendment would (a)
materially increase the benefits accruing to participants under the Purchase
Plan, (b) increase the number of shares which may be issued under the Purchase
Plan, (c) change the class of individuals eligible to receive options under the
Purchase Plan, (d) cause options issued under the Purchase Plan to fail to meet
the requirements of Section 423 of the Code or (e) otherwise modify the
requirements as to eligibility for participation.
FEDERAL INCOME TAX ASPECTS
The following discussion summarizes certain United States federal income tax
considerations for employees participating in the Purchase Plan and certain tax
effects to the Company. However, the summary does not address every situation
that may result in taxation. The Purchase Plan is not subject to the provisions
of the Employee Retirement Income Security Act of 1974, and the provisions of
Section 401(a) of the Internal Revenue Code are not applicable to the Purchase
Plan.
Amounts deducted from an employee's pay under the Purchase Plan are included
in the employee's compensation subject to federal income and social security
taxes. The Company will withhold taxes on these amounts. An employee will not
recognize any additional income at the time he or she elects to participate in
the Purchase Plan or purchases Common Stock under the Purchase Plan.
If an employee disposes of Common Stock purchased pursuant to the Purchase
Plan within two years after the first day of the Option Period with respect to
which such stock was purchased, the employee will recognize ordinary
compensation income at the time of disposition in an amount equal to the excess
of the fair market value of the stock on the day the option was exercised over
the purchase price the employee paid for the stock. This amount may be subject
to withholding taxes, including social security taxes. In addition, the employee
generally will recognize a capital gain or loss in an amount equal to the
difference between the amount realized upon the sale of the stock and his or her
basis in the stock (that is, his or her purchase price plus the amount taxed as
compensation income). If the shares have been held for more than one year, such
gain or loss will be long-term capital gain or loss.
If an employee disposes of Common Stock purchased pursuant to the Purchase
Plan more than two years after the first day of the Option Period with respect
to which such stock was purchased, the employee will recognize as ordinary
compensation income at the time of such disposition an amount equal to the
lesser of (a) the excess of the fair market value of the stock measured at the
time of such disposition over the amount paid for the stock, or (b) 15% of the
fair market value of the stock measured as of the first day of the Option Period
with respect to which the stock was purchased. This amount, however, is not
subject to social security taxes or withholding. In addition, the employee
generally will recognize a long-term capital gain or loss in an amount equal to
the difference between the amount realized upon the disposition of the stock and
his or her basis in the stock (that is, his or her purchase price plus the
amount, if any, taxed as compensation income).
Although the amounts deducted from an employee's pay under the Purchase Plan
generally are tax-deductible business expenses of the Company, the Company
generally will not be allowed any additional deduction by reason of any
employee's purchase of Common Stock under the Purchase Plan. However, if an
employee disposes of Common Stock purchased pursuant to the Purchase Plan within
two years after the first day of the Option Period with respect to which such
stock was purchased, the Company should be entitled to a deduction in an amount
equal to the compensation income recognized by the employee. If an employee
disposes of Common Stock purchased under the Purchase Plan more than two years
after the first day of the Option Period with respect to which such
5
<PAGE>
stock was purchased, the Company will not receive any deduction for federal
income tax purposes with respect to such stock. Except when an employee disposes
of Common Stock after the two-year period described above, the Company may be
required to withhold taxes upon, and to pay employment taxes with respect to,
compensation income recognized by its employees in connection with the Purchase
Plan.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock represented in person or by proxy and entitled to vote at the Annual
Meeting is required for approval of the Purchase Plan, which approval is a
condition to the effectiveness of the Purchase Plan. Accordingly, under Delaware
law, the Company's Restated Certificate of Incorporation and bylaws, abstentions
have the same legal effect as a vote against this proposal, but a broker
non-vote is not counted. The persons named in the proxy intend to vote FOR the
approval of the Purchase Plan, unless otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PURCHASE
PLAN.
ITEM THREE: PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Subject to stockholder approval, the Board of Directors has approved an
amendment to the Restated Certificate of Incorporation of the Company to
increase the number of authorized shares of Common Stock from 90,000,000 shares
to 300,000,000 shares. If the Amendment is approved, Article FOURTH of the
Restated Certificate of Incorporation, which sets forth the Company's presently
authorized capital stock, will be deleted and the following will be subtituted
therefor:
"The aggregate number of shares which the Corporation shall have the
authority to issue is Three Hundred One Million (301,000,000) shares, of which
One Million (1,000,000) shall be shares of Preferred Stock, of the par value of
One Cent ($.01) per share (the "Preferred Stock"), and Three Hundred Million
(300,000,000) shall be shares of Common Stock, of the par value of One Cent
($.01) per share ("Common Stock")."
The Board of Directors believes that the authorized number of shares of
Common Stock should be increased to provide sufficient shares for such corporate
purposes as may be determined by the Board of Directors including, without
limitation: raising additional capital; issuing additional stock options or
awards in order to attract and retain valuable employees and directors;
effecting a stock split or issuing a stock dividend in order to facilitate
broader ownership of the Company's Common Stock and acquiring other businesses
in exchange for shares of the Company's Common Stock. The Company at present has
no commitments, agreements or undertakings to issue any such additional shares,
other than pursuant to employee incentive compensation, stock option or stock
purchase plans. The Board of Directors considers the authorization of additional
shares of Common Stock advisable to ensure prompt availability of shares for
issuance should the occasion arise. If required by law or regulation, the
Company will seek stockholder approval prior to any issuance of shares.
The Company intends to apply to the NASDAQ National Market System, on which
the shares of Common Stock are currently listed, for the listing thereon of the
additional shares to be issued and reserved for future issuance as a result of
the Amendment. Shares of Common Stock, including the additional shares proposed
for authorization, do not have preemptive or similar rights. The issuance of
additional shares of Common Stock could have the effect of diluting existing
stockholder earnings per share, book value per share and voting power. Adoption
of this proposal requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the 1996 Annual
Meeting. Shares not voted (whether by abstention, broker non-votes or otherwise)
have the effect of a vote against the proposal.
6
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES
OF COMMON STOCK FROM 90,000,000 SHARES TO 300,000,000 SHARES.
ITEM FOUR: PROPOSAL TO RATIFY THE SELECTION OF
INDEPENDENT AUDITORS
APPOINTMENT OF ARTHUR ANDERSEN LLP
The Board, upon recommendation of the Audit Committee, has appointed Arthur
Andersen LLP, Certified Public Accountants, as the Company's independent
accountants for the fiscal year ended March 31, 1997, subject to ratification of
this appointment by the stockholders of the Company. Arthur Andersen LLP
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, 1996 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 LLP will be
present at the 1996 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 RATIFICATION OF THE SELECTION OF INDEPENDENT
AUDITORS.
ITEM FIVE: OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the 1996 Annual Meeting of Stockholders. However, 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.
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The following table sets forth as of June 24, 1996 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
7
<PAGE>
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
NAME STOCK OWNED PERCENT
- --------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Max P. Watson Jr.(1)............................................................. 566,038 1.1%
Douglas J. Erwin(2).............................................................. 138,220 *
Richard P. Gardner(3)............................................................ 42,055 *
James E. Juracek(4).............................................................. 108,274 *
Gerd A. Ordelheide(5)............................................................ 17,000 *
John W. Barter(6)................................................................ 41,000 *
B. Garland Cupp(7)............................................................... 30,625 *
Meldon K. Gafner(8).............................................................. 21,250 *
L. W. Gray(9).................................................................... 25,000 *
George F. Raymond(10)............................................................ 36,551 *
All directors and officers as a group
(15 persons)(11)................................................................ 1,261,341 2.4%
</TABLE>
- ------------------------
* Represents less than 1%.
(1) Includes 398,310 shares subject to stock options exercisable within 60 days
after June 24, 1996, and 40,000 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 90,000 shares subject to stock options exercisable within 60 days
of June 24, 1996 and 20,000 shares of restricted stock subject to transfer
restrictions.
(3) Includes 25,000 shares subject to stock options exercisable within 60 days
of June 24, 1996 and 10,000 shares of restricted stock subject to transfer
restrictions.
(4) Includes 33,000 shares subject to stock options exercisable within 60 days
of June 24, 1996 and 50,000 shares of restricted stock subject to transfer
restrictions.
(5) Includes 17,000 shares subject to stock options exercisable within 60 days
after June 24, 1996.
(6) Includes 35,000 shares subject to stock options exercisable within 60 days
after June 24, 1996.
(7) Includes 30,624 shares subject to stock options exercisable within 60 days
after June 24, 1996.
(8) Includes 21,250 shares subject to stock options exercisable within 60 days
after June 24, 1996.
(9) Includes 25,000 shares subject to stock options exercisable within 60 days
after June 24, 1996.
(10) Includes 31,627 shares subject to stock options exercisable within 60 days
of June 24, 1996.
(11) Includes 837,312 shares subject to stock options exercisable within 60 days
after June 24, 1996 and 80,000 shares of restricted stock subject to
transfer restrictions.
8
<PAGE>
EXECUTIVE OFFICERS
The executive officers are elected to serve annual terms. Certain
information concerning the Company's executive officers as of June 24, 1996 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................. 43 Executive Vice President and Chief Operating Officer
Richard P. Gardner............... 42 Senior Vice President, North American Sales
James E. Juracek................. 50 Senior Vice President, Research Development
Gerd A. Ordelheide............... 53 Senior Vice President, European Operations
Theodore W. Van Duyn............. 47 Chief Technology Officer
M. Brinkley Morse................ 38 Vice President, General Counsel and Secretary
Leland D. Putterman.............. 37 Vice President, Worldwide Marketing
Kevin M. Klausmeyer.............. 37 Chief Accounting Officer and Corporate Controller
Stephen B. Solcher............... 35 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.
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. Klausmeyer joined the Company in August 1993 as Corporate Controller and
has served as Chief Accounting Officer since October 1994. From December 1979
through July 1993, he was employed by Arthur Andersen LLP in various capacities,
the last of which was Principal -- High Technology/Enterprise Group.
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 LLP, the Company's
independent auditors, from 1983 to 1991.
9
<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, Gardner, Juracek and Ordelheide (the "Named
Executive Officers"). 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 COMPENSATION STOCK AWARD
YEAR ($) BONUS ($) ($)(1) ($)(2)
--------- --------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Max P. Watson Jr..................................... 1996 240,000 600,970 5,000 0
Chairman of the Board, 1995 240,000 512,360 5,000 0
President and Chief Executive Officer 1994 240,000 560,000 5,000 0
Douglas A. Erwin..................................... 1996 180,000 490,857 5,000 0
Senior Vice President and 1995 180,000 420,000 5,000 1,886,250
Chief Operating Officer 1994 N.A. N.A. N.A. N.A.
Richard P. Gardner................................... 1996 139,992 349,393 5,000 0
Vice President 1995 124,108 288,001 5,000 725,625
N. American Sales and Marketing 1994 NA. N.A. N.A. N.A.
James E. Juracek..................................... 1996 140,004 342,026 5,000 0
Senior Vice President 1995 140,000 290,936 5,000 0
Research and Development 1994 140,000 354,611 5,000 3,087,500
Gerd A. Ordelheide................................... 1996 124,441 347,930 4,425 0
Senior Vice President, 1995 34,011 157,500 4,000 0
European Operations 1994 N.A. N.A. N.A. N.A.
</TABLE>
- ------------------------
(1) Represents nondiscriminatory Board authorized matching contributions under
the Company's 401(k) plan.
(2) As of March 31, 1996, the Named Executive Officers 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 $54.75 on March 31,
1996: Mr. Erwin, 40,000 shares, $2,190,000; Mr. Gardner, 20,000 shares,
$1,095,000; Mr. Juracek, 70,000 shares, $3,833,500. 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 were granted in
connection with the grantees' 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 29% and
71%, 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 1996 and 1997. The
Company's earnings per share in fiscal 1996 exceeded the fiscal 1996 target,
excluding the one-time charge of $23,589,000 for acquired research and
development in the third quarter of fiscal 1996. The Compensation Committee
excluded the charge in determining that the objectives were met in fiscal
1996 because of the extraordinary nature of the charge. The transfer
restrictions thus lapsed on the shares of restricted stock held by the Named
Executive Officers for fiscal 1996. If the Company fails to achieve the
target in a fiscal year, the transfer restrictions on the shares allocated
to that year do not lapse and the shares cannot be sold or otherwise
disposed of, except that the transfer restrictions on all of an employee's
restricted shares will lapse on the tenth anniversary of the grant date if
the grantee's employment with the Company has not terminated.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1996
by the Named Executive Officers and the value of such officers' unexercised
options at March 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED ON REALIZED -------------------------- ----------------------------
EXERCISE # $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- --------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Max P. Watson Jr............... 0 0 398,310 528,000 17,739,437 17,226,000
Douglas J. Erwin............... 0 0 90,000 360,000 2,936,250 11,745,000
Richard P. Gardner............. 33,000 915,188 33,000 264,000 1,076,625 8,613,000
James J. Juracek............... 33,000 917,907 33,000 264,000 1,076,625 8,613,000
Gerd A. Ordelheide............. 33,000 821,563 33,000 264,000 981,750 7,854,000
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
The Compensation Committee, which is composed only of independent directors,
administers the compensation program for executive officers of the Company. The
Compensation Committee, with the aid of internal staff and independent
compensation consultants, at least annually reviews and evaluates the Company's
compensation program to determine their effectiveness in attracting, motivating
and retaining highly skilled executive officers.
COMPENSATION PHILOSOPHY. The Company's compensation program for its
executive officers is designed to preserve and enhance stockholder value by
heavily emphasizing performance-based compensation. The program is 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 Company's executive compensation program has
three primary components: base salary, annual incentives and long-term
incentives. Each of these three components is 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 Compensation Committee. The salaries are set
at the low to middle end of the competitive market based upon compensation
surveys of industry peers by an independent compensation consultant.
ANNUAL INCENTIVES. Annual incentive compensation awards for 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. These percentages are then adjusted quarterly by the
Compensation Committee at the recommendation of the Chief Executive Officer for
various individual contributions.
Annual bonuses are directly tied to year over year growth in the Company's
pretax earnings in order to focus executive officers' efforts on the Company's
financial performance. The program is designed to heavily weigh 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.
11
<PAGE>
LONG TERM INCENTIVES. The Compensation Committee approved in fiscal 1995
long term incentives for the Company's executive officers, including the Named
Executive Officers. 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 design of the long term incentives granted in fiscal 1995
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 Compensation
Committee intends that the stock option grants made in fiscal 1995 will be the
primary grants to the covered executive officers for the five year vesting
period. No long term incentives were granted in fiscal 1996.
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.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. As described above, the
Company determines 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 did not receive any stock options or other
long-term compensation in fiscal 1996.
DEDUCTIBILITY. Internal Revenue Code Section 162(m) 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.
Based on Section 162(m) and the regulations issued thereunder, 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
12
<PAGE>
PERFORMANCE GRAPH
The following indexed graph indicates the Company's total return to its
stockholders for the five year period ended March 31, 1996, 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>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
BMC Software, Inc. 100 $142.60 $115.68 $146.15 $150.89 $259.17
S&P 500 Composite 100 $111.04 $127.95 $129.84 $150.05 $198.22
S&P Computer Software & Services Composite 100 $164.14 $204.03 $203.95 $312.15 $421.99
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company believes that, during the fiscal year ended March 31, 1996, all
Section 16(a) filing requirements applicable to the Company's directors,
executive officers and greater than ten-percent beneficial owners were complied
with.
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 $904,786 in legal fees to Vinson & Elkins for legal services
rendered in fiscal 1996.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the 1997
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 9, 1997.
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, 1996 (the "1996
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 1996 10-K, upon the
13
<PAGE>
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, 1996
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.
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
/s/ M. Brinkley Morse
M. Brinkley Morse
SECRETARY
Houston, Texas
July , 1996
14
<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, 1996, at the annual meeting of stockholders to be held
on August 19, 1996 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, 3 AND 4.
(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.
2. PROPOSAL TO APPROVE THE FOR AGAINST ABSTAIN
BMC SOFTWARE, INC. 1996 | | | | | |
EMPLOYEE STOCK PURCHASE | | | | | |
PLAN. | | | | | |
3. PROPOSAL TO APPROVE AN FOR AGAINST ABSTAIN
AMENDMENT TO THE COMPANY'S | | | | | |
RESTATED CERTIFICATE OF | | | | | |
INCORPORATION TO INCREASE | | | | | |
THE AUTHORIZED NUMBER OF
SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
FROM 90,000,000 SHARES TO
300,000,000 SHARES.
FOR AGAINST ABSTAIN
4. PROPOSAL TO RATIFY THE | | | | | |
APPOINTMENT OF ARTHUR | | | | | |
ANDERSEN LLP AS THE | | | | | |
INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY.
5. IN THEIR DISCRETION, UPON ANY OTHER BUSINESS WHICH MAY PROPERLY COME
BEFORE SAID MEETING.
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_______________
