<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 sec. 240.14a-11(c) or sec. 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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> 2
BMC SOFTWARE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 25, 1997
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 August 25, 1997 at 10:00 a.m., Central Daylight Savings Time, for the
following purposes:
1. To elect seven directors of the Company, each to serve until the
next annual meeting or until his respective successor has been duly elected
and qualified;
2. To approve and ratify the 1994 Employee Incentive Plan as amended
and restated;
3. To ratify the Board of Directors' appointment of Arthur Andersen
LLP as the Company's independent accountants; and
4. 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
11, 1997, 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 13, 1997 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
LOGO
M. Brinkley Morse
Secretary
Houston, Texas
July 21, 1997
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> 3
BMC SOFTWARE, INC.
2101 CITYWEST BOULEVARD
HOUSTON, TEXAS 77042-2827
JULY 21, 1997
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 1997 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 25, 1997, 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 21, 1997.
RECORD DATE AND VOTING RIGHTS
As of July 11, 1997, 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 101,375,622 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 ratification of the
appointment of Arthur Andersen LLP as the Company's independent accountants, and
FOR the approval and ratification of the BMC Software Inc. 1994 Employee
Incentive Plan, as amended and restated, which is being amended to increase the
number of shares that may be granted thereunder from 12,000,000 to 22,000,000
and to make the other changes described under Item II below. 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, 1997, 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> 4
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 1998 Annual Meeting of Stockholders or until
his successor has been duly elected and qualified. Each of the nominees listed
below other than Mr. Tinsley was elected by the stockholders at the last annual
meeting and is currently a director. Mr. Tinsley was elected to the Board in
April 1997 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.................... 51 Chairman of the Board, President and Chief
Executive Officer 1990
John W. Barter...................... 50 Director 1988
B. Garland Cupp..................... 56 Director 1989
Meldon K. Gafner.................... 49 Director 1987
L. W. Gray.......................... 60 Director 1991
George F. Raymond................... 60 Director 1987
Tom C. Tinsley...................... 44 Director 1997
</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.
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> 5
Mr. Tinsley is the Managing Director, President and Chief Operating Officer
of The Baan Company, a leading provider of client/server enterprise resource
planning software applications, and has held that position since his joining The
Baan Company in November 1995. Prior to joining The Baan Company, he was a
managing director at McKinsey & Co., a management consulting firm, where he had
been employed for eighteen years and most recently headed the firm's global
information technology practice.
BOARD ORGANIZATION AND MEETINGS
The Board met eight times in fiscal 1997. 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 1997.
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 1997.
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"). As
adopted, the 1994 Directors' Plan provided for automatic grants of
"nonqualified" stock options to nonemployee directors, with a one-time 20,000
share grant to a newly elected director and annual 5,000 share grants to each
existing director upon his or her annual re-election. These amounts
automatically increased to 80,000 and 20,000, respectively, because of the
Company's two-for-one stock split in August 1995 and two-for-one stock split in
November 1996. Following the second stock split, the Board assessed the increase
in the implicit value of these stock option grants following the appreciation in
the Company's stock price since adoption of the 1994 Directors' Plan and the two
stock splits. Based on this assessment and an analysis of comparable nonemployee
director stock option plans, the Board amended the 1994 Directors' Plan in April
1997 to reduce the number of shares subject to the options granted to new
directors to 20,000 and the number of shares subject to options annually granted
to existing directors to 10,000. The 1994 Directors' Plan has 400,000 shares
reserved for issuance. All options granted under the 1994 Directors' Plan have
an exercise price equal to fair market value on the grant date and vest
quarterly in 6.25% increments over four years from the grant date.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE PROPOSED NOMINEES.
3
<PAGE> 6
ITEM TWO: PROPOSAL TO APPROVE THE AMENDED AND RESTATED
BMC SOFTWARE, INC. 1994 EMPLOYEE INCENTIVE PLAN
(THE "1994 EMPLOYEE INCENTIVE PLAN")
Since October 1995, the Company has granted long-term incentives of stock
options and shares of restricted stock to its employees under its 1994 Employee
Incentive Plan, which was approved by its stockholders on August 29, 1994. The
purpose of the 1994 Employee Incentive Plan is to enable the Company to recruit,
retain and motivate its executives, software developers and other key employees
with equity-based incentives, primarily employee stock options. The software
industry has experienced high growth rates over the last five years and demand
for experienced and talented employees is very high. The use of employee stock
options has become an expected component of compensation packages for key
employees of public and private software companies, and the Board believes that
the continued use of employee stock options and other types of equity-based
compensation will be important to the Company's success. The Board is therefore
recommending that the stockholders approve the amendment and restatement (the
"Restatement") of the 1994 Employee Incentive Plan that is being submitted in
this proxy statement. The primary purposes of the Restatement are to (i)
eliminate certain restrictions and limitations that were originally included
because of requirements of Rule 16b-3 under the Securities Exchange Act of 1934,
as amended ("Rule 16b-3"), that are no longer applicable, (ii) increase the
number of shares that are reserved for awards from 12,000,000 to 22,000,000, and
(iii) extend the term of the 1994 Employee Incentive Plan to August 25, 2007.
The 1994 Employee Incentive Plan originally was approved by the Company's
Board of Directors on July 11, 1994 and by the Company's stockholders on August
29, 1994. The Restatement was unanimously approved by the Board of Directors on
July 12, 1997, subject to stockholder approval at the Annual Meeting. If the
Restatement is not approved by the stockholders of the Company at the Annual
Meeting, then the Restatement will not become effective and the 1994 Employee
Incentive Plan will continue to operate based upon its terms in effect prior to
the Restatement.
As of June 30, 1997, the Company had granted options to purchase an
aggregate of 10,715,093 shares of Common Stock under the 1994 Employee Incentive
Plan, which had been exercised as to 1,314,791 shares and remained outstanding
as to 9,076,538 shares. Also as of June 30, 1997, the Company had granted 50,000
shares of restricted stock to a senior executive in connection with his
recruitment to the Company and 55,299 shares of restricted stock to senior
software developers in lieu of accrued cash incentive payments. Without taking
into account the Restatement, 1,503,372 shares remained available for grants of
stock options or restricted stock under the 1994 Employee Incentive Plan as of
June 30, 1997.
SUMMARY OF THE 1994 EMPLOYEE INCENTIVE PLAN
The following general description of certain features of the 1994 Employee
Incentive Plan, as amended and restated by the Restatement, is qualified in its
entirety by reference to Exhibit A. Exhibit A is marked to reflect the proposed
changes to the 1994 Employee Incentive Plan as originally adopted.
Eligibility. All persons who at the time of grant are employees of the
Company or of any parent or subsidiary of the Company are eligible to receive
grants under the 1994 Employee Incentive Plan. The Compensation Committee of the
Board of Directors administers the 1994 Employee Incentive Plan and the granting
of awards thereunder. As amended and restated, no employee may receive more than
2,000,000 shares (subject to adjustment upon a reorganization, stock split,
recapitalization, or other change in the Company's capital structure) of Common
Stock through grants made under the 1994 Employee Incentive Plan, whether
through the exercise of employee stock options or as restricted stock. The
2,000,000 share limit is the 500,000 share limit in the 1994 Employee Incentive
Plan as originally approved by the Company's stockholders, which has been
increased automatically under the 1994 Employee Incentive Plan to 2,000,000
shares by the Company's two-for-one stock split in November 1996 and two-for-one
stock split in August 1995.
Shares Subject to 1994 Employee Incentive Plan. An aggregate of 3,000,000
shares of the Common Stock, subject to adjustments upon a reorganization, stock
split, recapitalization or other change in the Company's capital structure, were
reserved for awards under the 1994 Employee Incentive Plan as originally
4
<PAGE> 7
adopted. The 3,000,000 share authorization increased automatically to 12,000,000
as the result of the Company's two-for-one stock split in August 1995 and
two-for-one stock split in November 1996. The Restatement increases the number
of shares that are reserved for awards under the 1994 Employee Incentive Plan to
22,000,000 (subject to adjustment as described above), which represents
approximately 22% of the Company's issued and outstanding shares of Common Stock
as of July 11, 1997.
Amendment. The Board may amend the 1994 Employee Incentive Plan at any
time, except that it may not make any change in a previous grant that would
impair the grantee's rights without his or her consent, and the stockholders
must approve any amendment that would increase the total number of shares
reserved for issuance (except for adjustment necessary to reflect changes in
capitalization) or modify eligibility requirements.
Options. The Compensation Committee will designate the optionees, the
number of shares of Common Stock subject to options, and the terms and
conditions of each option under the 1994 Employee Incentive Plan. The exercise
price per share of Common Stock of options granted under the plan shall be
determined by the Compensation Committee; provided, that such exercise price
shall not be less than the fair market value of shares of Common Stock at the
date such option is granted. The "fair market value" of a share of Common Stock
shall mean, on any given date, the mean of the high and low sales prices of the
Common Stock on the Nasdaq National Market System or, if the Common Stock is
listed on a national stock exchange, the mean of the high and low sales prices
on the exchange on such date. The exercise price of options granted under the
plan will be paid in full in the manner prescribed by the Compensation
Committee, which may provide for the payment in whole or in part by the delivery
of shares of Common Stock having a fair market value equal to the exercise
price. Options granted under the 1994 Employee Incentive Plan may be either
incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code) or nonqualified stock options (options that do not constitute
incentive stock options).
Restricted Stock Awards. Pursuant to a restricted stock award, shares of
Common Stock will be issued or delivered to the employee at the time the award
is made without any cash payments to the Company (other than the possible
requirement that the par value per share be paid in cash), but such shares will
be subject to certain restrictions on the disposition thereof and certain
obligations to forfeit such shares to the Company as may be determined in the
discretion of the Compensation Committee. The restrictions on disposition may
lapse based on (a) the Company's attainment of targets established by the
Compensation Committee that are based on the price per share of Common Stock,
the Company's earnings per share, the Company's or one of its business unit's
market share or sales, or the Company's return on stockholders' equity, (b) the
grantee's tenure with the Company, (c) the occurrence of any event or the
satisfaction of any other condition specified by the Compensation Committee in
its sole discretion, or (d) a combination of any of the foregoing. All grants of
restricted stock awards to date have provided for the lapsing of the transfer
restrictions if the Company achieves minimum earnings per share growth targets,
with the restrictions lapsing on any remaining shares in ten years if the
employee's employment has not terminated. Upon the issuance to an employee of
shares of Common Stock pursuant to a restricted stock award, except for the
foregoing restrictions, such employee will have all the rights of a stockholder
of the Company with respect to such shares, including the right to vote such
shares and to receive all dividends and other distributions paid with respect to
such shares.
Capital Changes. If the number of outstanding shares of Common Stock is
changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without consideration, the number of shares of Common Stock available for grants
under the 1994 Employee Stock Plan, the number of outstanding shares of Common
Stock, the number of shares of restricted stock, the number of shares and the
exercise price per share for each outstanding option and the exercise price per
share for each outstanding option and the annual limitation noted above will be
proportionately adjusted, subject to any required action by the Board or
stockholders of the Company.
In general, in the event of a merger or consolidation in which the Company
is not the surviving corporation, the sale of sale of substantially all of the
Company's assets, the Company's liquidation, the acquisition by a person or
entity, including a "group" (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934) or, as the result of a contested election of directors,
the persons who were directors of
5
<PAGE> 8
the Company prior to the election no longer comprise a majority (a "Change of
Control"), the Compensation Committee shall take one of the four actions
specified in Section IX. (c) of the 1994 Employee Incentive Plan, which includes
the acceleration of vesting of all outstanding and unexercised options. In the
Stock Option Agreements between the Company and certain of its executive
officers, including the five Named Executive Officers, for stock options granted
under the 1994 Employee Incentive Plan, the vesting of the option as to all
unvested shares would be accelerated upon a Change of Control.
Transfer Restrictions. No award under the 1994 Employee Incentive Plan is
transferable by the recipient other than by will or the laws of descent or
distribution or, in the case of a nonqualified stock option or restricted stock
award, with the consent of the Compensation Committee or pursuant to a qualified
domestic relations order.
The closing bid quotation of the Common Stock as reported by NASDAQ was
$57.625 on July 11, 1997.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1994 EMPLOYEE INCENTIVE PLAN
Incentive Stock Options. An employee who has been granted an incentive
stock option will not realize taxable income at the time of the grant or
exercise (but in some circumstances may be subject to an alternative minimum tax
as a result of the exercise) of such option and the Company will not be entitled
to a deduction at either such time. If the employee makes no disposition of
shares acquired pursuant to an incentive stock option within two years from the
date of the grant of such option, or within one year of the transfer of such
shares to him or her, any gain or loss realized on a subsequent disposition of
such shares will be treated as a long-term capital gain or loss. Under such
circumstances, the Company will not be entitled to any deduction for federal
income tax purposes. If the foregoing holding period requirements are not
satisfied, a portion of any gain in the year of disposition will be taxable to
the employee as ordinary income, and the Company will be entitled to a
corresponding deduction. The Company will not be entitled to any deduction in
connection with any loss to the employee or the portion of any gain that is
taxable to the employee as short-term or long-term capital gain.
Nonqualified Stock Options. Nonqualified stock options (options that are
not incentive stock options) will not qualify for special federal income tax
treatment. No tax is imposed on the optionee upon the grant of a nonqualified
stock option. Upon exercise of a nonqualified stock option, the employee will
realize ordinary income in an amount measured by the excess, if any, of the fair
market value of the shares on the date of exercise over the option exercise and
the Company will be entitled to a corresponding deduction, provided the Company
withholds income tax with respect to such amount. However, if the shares
received upon the exercise of a nonqualified stock option are transferred to the
optionee subject to certain restrictions then the taxable income realized by the
optionee, unless the optionee elects otherwise, and the Company's tax deduction
(assuming any federal income tax withholding requirements are satisfied) should
be deferred and should be measured based upon the fair market value of the
shares at the time the restrictions lapse. The restrictions imposed on officers,
directors, and 10% stockholders by Section 16(b) of the Securities Exchange Act
of 1934, as amended, is such a restriction during the period prescribed thereby
if other shares have been purchased by such an individual within six months of
the exercise of a nonqualified stock option. Ordinary income realized upon the
exercise of a nonqualified stock option is not an adjustment for alternative
minimum tax purposes.
Restricted Stock Awards. An employee who has been granted a restricted
stock award will not realize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time, assuming that the
restrictions constitute a substantial risk of forfeiture for federal income tax
purposes. Upon expiration of the restriction period (as shares become vested),
the holder will realize ordinary income in an amount equal to the fair market
value of the shares at such time, and subject to Section 162(m) of the Internal
Revenue Code, the Company will be entitled to a corresponding deduction.
Dividends paid to the holder during the restriction period will also be
compensation income to the employee and deductible as such by the Company. The
holder of a restricted stock award may elect to be taxed at the time of grant of
the restricted stock award on the market value of the shares, in which case (1)
subject to Section 162(m) of the Internal Revenue Code, the Company will be
entitled to a deduction at the same time and in the same
6
<PAGE> 9
amount, (2) dividends paid to him during the restriction period will be taxable
as dividends to him and not deductible by the Company and (3) there will be no
further federal income tax consequences when the restrictions lapse.
Withholding. The Company has the right to deduct from any or all awards any
taxes required by law to be withheld and to require any payments necessary to
enable it to satisfy its withholding obligations.
Deductibility. As discussed in the Compensation Committee Report, the 1994
Employee Incentive Plan has been designed to meet the requirements in Section
162(m) of the Internal Revenue Code for stock options, including the
requirements that all options have an exercise price that is no less than the
fair market value of the Common Stock on the grant date and that the plan state
the maximum number of shares that can be issued during a specified period to an
individual employee under the Plan. Thus, the provisions of Section 162(m)
should not limit the Company's ability to deduct all of the compensation income
generated in connection with the exercise of stock options granted under the
1994 Employee Incentive Plan. The 1994 Employee Incentive Plan is further
designed to provide flexibility that allows the Company to structure any awards
of restricted stock made under the 1994 Employee Incentive Plan to preserve the
deductibility of any compensation expense over $1,000,000; however, in some
cases the Compensation Committee may determine it to be in the Company's best
interests to make a restricted stock grant that does not meet the Section 162(m)
requirements.
BOARD RECOMMENDATION
The affirmative vote of a majority of the shares represented at the 1997
Annual Meeting of Stockholders in person or by proxy will be needed to approve
the Restatement. The Board believes that such approval is essential to enable
the Company to continue to attract and retain employees in an extremely
competitive computer software industry.
THE BOARD RECOMMENDS A VOTE FOR ADOPTION AND RATIFICATION OF THE AMENDED
AND RESTATED BMC SOFTWARE, INC. 1994 EMPLOYEE INCENTIVE PLAN.
ITEM THREE: 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, 1998, 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, 1997 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 1997 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 FOUR: OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the 1997 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.
7
<PAGE> 10
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The following table sets forth as of July 18, 1997 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>
Putnam Investment Management................................ 7,493,000 7.4%
One Post Office Square
Boston, MA 02109
T. Rowe Price Associates.................................... 7,190,000 7.1%
100 East Pratt Street
Baltimore, MD 21202
Massachusetts Financial Services............................ 6,800,000 6.8%
500 Bolyston Street
Boston, MA 02116
Morgan Stanley Group........................................ 5,947,000 5.9%
1585 Broadway
14th Floor
New York, NY
Max P. Watson Jr.(1)........................................ 1,293,546 1.2%
Douglas J. Erwin(2)......................................... 424,660 *
Richard P. Gardner(3)....................................... 110,010 *
James E. Juracek(4)......................................... 326,768 *
Gerd A. Ordelheide(5)....................................... 98,640 *
John W. Barter(6)........................................... 94,000 *
B. Garland Cupp(7).......................................... 80,000 *
Meldon K. Gafner(8)......................................... 60,000 *
L. W. Gray(9)............................................... 68,750 *
George F. Raymond(10)....................................... 69,804 *
Tom C. Tinsley(11).......................................... 1,250 *
All directors and officers as a group (18 persons)(12)...... 3,308,913 3%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Includes 980,620 shares subject to employee stock options exercisable
within 60 days after July 11, 1997 and 80,000 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 340,000 shares subject to employee stock options exercisable
within 60 days after July 11, 1997.
(3) Includes 75,900 shares subject to employee stock options exercisable within
60 days after July 11, 1997.
(4) Includes 198,000 shares subject to employee stock options exercisable
within 60 days after July 11, 1997.
(5) Includes 98,640 shares subject to employee stock options exercisable within
60 days after July 11, 1997.
(6) Includes 82,000 shares subject to employee stock options exercisable within
60 days after July 11, 1997.
8
<PAGE> 11
(7) Includes 80,000 shares subject to nonemployee director stock options
exercisable within 60 days after July 11, 1997.
(8) Includes 60,000 shares subject to nonemployee director stock options
exercisable within 60 days after July 11, 1997.
(9) Includes 68,500 shares subject to nonemployee director stock options
exercisable within 60 days after July 11, 1997.
(10) Includes 60,000 shares subject to nonemployee director stock options
exercisable within 60 days after July 11, 1997.
(11) Includes 1,250 shares subject to nonemployee director stock options
exercisable within 60 days after July 11, 1997.
(12) Includes 2,387,110 shares subject to stock options exercisable within 60
days after July 11, 1997 and 110,000 shares of restricted stock.
EXECUTIVE OFFICERS
The executive officers are elected to serve annual terms. Certain
information concerning the Company's executive officers as of July 11, 1997 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............... 44 Executive Vice President and Chief Operating Officer
William M. Austin.............. 51 Senior Vice President and Chief Financial Officer
Richard P. Gardner............. 43 Senior Vice President, North American Sales
James E. Juracek............... 51 Senior Vice President, Research and Development
Gerd A. Ordelheide............. 54 Senior Vice President, European Operations
Theodore W. Van Duyn........... 48 Chief Technology Officer
Robert E. Beauchamp............ 37 Vice President, Business Strategy
M. Brinkley Morse.............. 39 Vice President, General Counsel and Secretary
Leland D. Putterman............ 37 Vice President, Worldwide Marketing
Kevin M. Klausmeyer............ 38 Controller and Chief Accounting Officer
Stephen B. Solcher............. 36 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. Austin joined the Company as Senior Vice President and Chief Financial
Officer in January 1997. Prior to joining the Company, Mr. Austin was employed
since 1991 with McDonnell Douglas Corporation in various senior financial
positions, lastly as Vice President and Chief Financial Officer of McDonnell
Douglas Aerospace, a division of McDonnell Douglas Corporation. From 1973 to
1991, Mr. Austin was employed with Bankers Trust Company in various positions,
serving as Managing Director -- Acquisition and Structured Finance from 1989 to
1991.
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
9
<PAGE> 12
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. Beauchamp has been Vice President, Business Strategy since October
1996. He has been employed by the Company since 1988, when he joined the Company
as a senior sales representative. During his employment with the Company, he has
served in various senior sales and marketing positions, and was Director,
Strategic Marketing prior to his appointment to his current position.
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, Database & Tools Product 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.
10
<PAGE> 13
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
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 ($) ($) ($)(1) ($)(2)
------ ------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Max P. Watson Jr (4).................... 1997 240,000 868,294 5,000 0
Chairman of the Board, 1996 240,000 722,671(3) 5,000 0
President and Chief Executive Officer 1995 240,000 560,050 5,000 0
Douglas A. Erwin........................ 1997 180,000 637,548 5,000 0
Senior Vice President and 1996 180,000 585,610(3) 5,000 0
Chief Operating Officer 1995 180,000 420,000 5,000 1,886,250
Richard P. Gardner...................... 1997 139,992 516,246 5,000 0
Senior Vice President 1996 139,992 420,062(3) 5,000 0
N. American Sales 1995 124,108 288,001 5,000 725,625
James E. Juracek........................ 1997 140,004 477,018 5,000 0
Senior Vice President 1996 140,004 418,599(3) 5,000 0
Research and Development 1995 140,004 290,936 5,000 0
Gerd A. Ordelheide...................... 1997 141,005 399,876 5,000 0
Senior Vice President, 1996 124,441 388,630(3) 4,425 0
European Operations 1995 34,011 247,260(3) 4,000 0
</TABLE>
- ---------------
(1) Represents nondiscriminatory Board authorized matching contributions under
the Company's 401(k) plan.
(2) As of March 31, 1997, 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 $46.125 on March 31, 1997:
Mr. Erwin, 40,000 shares, $1,845,000; Mr. Gardner, 20,000 shares, $922,500;
Mr. Juracek, 100,000 shares, $4,612,500. 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 transfer restrictions on all of Mr. Erwin's and Mr.
Gardner's shares and on 40% of Mr. Juracek's shares lapsed in April 1997
because the Company's earnings per share met the stipulated target for
fiscal 1997. The transfer restrictions on the remainder of Mr. Juracek's
shares will lapse if the Company's earnings per share in fiscal 1998 meet
the stipulated target for that fiscal year. The restricted shares of Mr.
Erwin, Mr. Gardner and Mr. Juracek 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.
(3) Revised numbers to correct compensation amounts reported in the fiscal 1996
proxy statement on a cash rather than an accrual basis.
(4) Two employees received incentive-based compensation in fiscal 1997 that,
together with their base salaries, exceeded Mr. Watson's compensation
indicated above. Five additional employees received total compensation in
fiscal 1997 in amounts that fell between the indicated compensation of Mr.
Watson and Mr. Erwin.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1997
by the Named Executive Officers and the value of such officers' unexercised
options at March 31, 1997 using the closing market price of $46.125.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END(#) FISCAL YEAR-END($)
ON VALUE --------------------------- ---------------------------
EXERCISE # REALIZED $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Max P. Watson Jr. ........ 80,000 $3,340,830 980,620 792,000 $38,364,208 $27,769,500
Douglas J. Erwin.......... 20,000 $ 638,750 340,000 540,000 $11,921,250 $18,933,750
Richard P. Gardner........ 94,700 $2,658,569 103,300 396,000 $ 3,621,956 $13,884,750
James J. Juracek.......... 0 $ 0 198,000 396,000 $ 6,942,375 $13,884,750
Gerd A. Ordelheide........ 74,700 $1,843,017 123,300 396,000 $ 4,145,963 $13,315,500
</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 Towers, Perrin, Foster & Crosby, 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
12
<PAGE> 15
minor variations. The Company has extended participation in this annual
incentive program for fiscal 1998 to four additional key employees who are not
executive officers.
Long Term Incentives. The Company has granted no equity-based incentives to
any of the Named Executive Officers in the last two fiscal years.
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 six 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 other participants in the annual incentive
program. The Chief Executive Officer has not received any equity based
incentives in the last two fiscal years.
DEDUCTIBILITY. Internal Revenue Code Section 162(m) precludes a public
corporation from taking a deduction 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 Company's long-term incentive
grants to the Named Executive Officers have all been designed to qualify as
exempt performance-based compensation. The Company has not taken actions
necessary to qualify its annual cash incentive plan for the exclusion to Section
162(m), because no Named Executive Officer's annual cash compensation exceeded
the Section 162(m) limit in fiscal years prior to fiscal 1997 or was anticipated
to exceed the limit in fiscal 1997. The Company's increase in pretax earnings in
fiscal 1997 exceeded its internal plans and this performance generated total
annual compensation to the Chief Executive Officer that exceeded the Section
162(m) limit by $108,294. As noted in the Summary Compensation table above, the
Company's financial performance in fiscal 1997 also generated annual
compensation for two nonexecutive employees in excess of the Chief Executive
Officer's. While the Company intends to pursue a strategy of maximizing the
deductibility of compensation paid to executive officers in fiscal 1998, it also
intends to maintain the flexibility to take actions that it considers to be in
the Company's best interests and to take into consideration factors other than
tax deductibility.
Respectfully submitted by the Compensation Committee of the Board of
Directors of the Company:
John W. Barter
B. Garland Cupp
Meldon K. Gafner
13
<PAGE> 16
PERFORMANCE GRAPH
The following indexed graph indicates the Company's total return to its
stockholders for the five year period ended March 31, 1997, 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.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD BMC SOFTWARE S & P COMPUTER
(FISCAL YEAR COVERED) INC. S & P 500 SOFTWARE/SERVICES
<S> <C> <C> <C>
1992 100 100 100
1993 81 115 132
1994 102 117 148
1995 106 135 200
1996 182 179 283
1997 306 214 397
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that, during the fiscal year ended March 31, 1998, 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 Theodore Van Duyn has reported late his exercise for cash of
employee stock options to purchase 136,000 shares in January 1997 and his
transfer to a charitable trust of 22,856 shares of Common Stock in March 1997.
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 $429,915.58 in legal fees to Vinson & Elkins for legal services
rendered in fiscal 1997.
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 20, 1998.
14
<PAGE> 17
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, 1997 (the "1997
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 1997 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, 1997
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. The Company has engaged Rissel & Blake to act as its proxy
solicitor and anticipates that its fees will be approximately $10,000 in
connection therewith. 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
LOGO
M. Brinkley Morse
Secretary
Houston, Texas
July 18, 1997
15
<PAGE> 18
EXHIBIT A
BMC SOFTWARE, INC.
1994 EMPLOYEE INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF AUGUST 25, 1997)
I. PURPOSE
The purpose of the BMC SOFTWARE, INC. 1994 EMPLOYEE INCENTIVE PLAN (the
"Plan") is to provide a means through which BMC SOFTWARE, INC., a Delaware
corporation (the "Company"), and its subsidiaries may attract able persons to
enter the employ of the Company and to provide a means whereby those employees
upon whom the responsibilities of the successful administration and management
of the Company rest, and whose present and potential contributions to the
welfare of the Company are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the welfare of the Company
and their desire to remain in its employ. A further purpose of the Plan is to
provide such employees with additional incentive and reward opportunities
designed to enhance the profitable growth of the Company. Accordingly, the Plan
provides for granting Incentive Stock Options, options which do not constitute
Incentive Stock Options, Restricted Stock Awards, or any combination of the
foregoing, as is best suited to the circumstances of the particular employee as
provided herein. The Plan as set forth herein constitutes an amendment and
restatement of the Plan as previously adopted by the Company, and shall
supersede and replace in its entirety such previously adopted plan. This
amendment and restatement of the Plan shall be effective as of August 25, 1997,
provided this amendment and restatement of the Plan is approved by the
stockholders of the Company on such date at the Company's 1997 Annual Meeting of
Stockholders. If this amendment and restatement of the Plan is not so approved
by the stockholders, then this amendment and restatement will not be effective.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Award" means, individually or collectively, any Option or
Restricted Stock Award.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
(d) "Committee" means not less than two members of the Board who are
selected by the Board as provided in Paragraph IV(a).
(e) "Common Stock" means the common stock, par value $.01 per share,
of the Company.
(f) "Company" means BMC Software, Inc.
(g) "Director" means an individual elected to the Board by the
stockholders of the Company or by the Board under applicable corporate law
who is serving on the Board on the date the Plan is adopted by the Board or
is elected to the Board after such date.
(h) An "employee" means any person (including a Director) in an
employment relationship with the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code).
(i) "Fair Market Value" means, as of any specified date, the mean of
the high and low sales prices of the Common Stock (i) reported by the
NASDAQ-National Market System on that date or (ii) if the Common Stock is
listed on a national stock exchange, reported on the stock exchange
composite tape on that date; or, in either case, if no prices are reported
on that date, on the last preceding date on which such prices of the Common
Stock are so reported. If the Common Stock is traded over the counter at
the
A-1
<PAGE> 19
time a determination of its fair market value is required to be made
hereunder, its fair market value shall be deemed to be equal to the average
between the reported high and low or closing bid and asked prices of Common
Stock on the most recent date on which Common Stock was publicly traded. In
the event Common Stock is not publicly traded at the time a determination
of its value is required to be made hereunder, the determination of its
fair market value shall be made by the Board in such manner as it deems
appropriate.
(j) "Holder" means an employee who has been granted an Award.
(k) "Incentive Stock Option" means an incentive stock option within
the meaning of section 422 of the Code.
(l) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(m) "Option" means an Award granted under Paragraph VII of the Plan
and includes both Incentive Stock Options to purchase Common Stock and
Options which do not constitute Incentive Stock Options to purchase Common
Stock.
(n) "Option Agreement" means a written agreement between the Company
and a Holder with respect to an Option.
(o) "Plan" means the BMC Software, Inc. 1994 Employee Incentive Plan
as set forth herein and, as amended from time to time.
(p) "Restricted Stock Agreement" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
(q) "Restricted Stock Award" means an Award granted under Paragraph
VIII of the Plan.
(r) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act,
as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a similar function.
(s) "Stock Appreciation Right" shall have the meaning assigned to such
term in Paragraph VII(d) of the Plan.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan originally became effective on July 11, 1994. This amendment and
restatement of the Plan shall be effective as provided in Section I. No further
Awards may be granted under the Plan after August 25, 2007. The Plan shall
remain in effect until all Awards granted under the Plan have been satisfied or
expired.
IV. ADMINISTRATION
(a) Composition of Committee. The Plan shall be administered by a committee
which shall be (i) appointed by the Board, (ii) solely of "nonemployee
directors," within the meaning of Rule 16b-3, and (iii) constituted solely by
two or more "outside directors," within the meaning of section 162(m) of the
Code and applicable interpretive authority thereunder.
(b) Powers. Subject to the express provisions of the Plan, the Committee
shall have authority, in its discretion, to determine which employees shall
receive an Award, the time or times when such Award shall be made, whether an
Incentive Stock Option or nonqualified Option shall be granted, and the number
of shares to be subject to each Option or Restricted Stock Award. In making such
determinations the Committee shall take into account the nature of the services
rendered by the respective employees, their present and potential contribution
to the Company's success and such other factors as the Committee in its
discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, this shall include the power to
A-2
<PAGE> 20
construe the Plan and the respective agreements executed hereunder, to prescribe
rules and regulations relating to the Plan, and to determine the terms,
restrictions and provisions of the agreement relating to each Award, including
such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any agreement relating to an Award
in the manner and to the extent it shall deem expedient to carry it into effect.
The determinations of the Committee on the matters referred to in this Paragraph
IV shall be conclusive.
V. GRANT OF OPTIONS AND RESTRICTED STOCK AWARDS;
SHARES SUBJECT TO THE PLAN
(a) Stock Grant and Award Limits. The Committee may from time to time grant
Awards to one or more employees determined by it to be eligible for
participation in the Plan in accordance with the provisions of Paragraph VI.
Subject to adjustment in the same manner as provided in Paragraph IX with
respect to shares of Common Stock subject to Options then outstanding, the
aggregate number of shares of Common Stock that may be issued under the Plan
shall not exceed 22,000,000 shares. Shares shall be deemed to have been issued
under the Plan only (i) to the extent actually issued and delivered pursuant to
an Award, or (ii) to the extent an Award is settled in cash. To the extent that
an Award lapses or the rights of the Holder terminate, any shares of Common
Stock subject to such Award shall again be available for the grant of an Award .
Notwithstanding any provision in the Plan to the contrary, the maximum number of
shares of Common Stock that may be subject to Awards granted to any one
individual during the term of the Plan as provided in Paragraph III hereof may
not exceed 2,000,000 (subject to adjustment in the same manner as provided in
Paragraph IX hereof with respect to shares of Common Stock subject to Options
then outstanding). The limitation set forth in the preceding sentence shall be
applied in a manner which will permit compensation generated under the Plan to
constitute "performance-based" compensation for purposes of section 162(m) of
the Code, including, without limitation, counting against such maximum number of
shares, to the extent required under section 162(m) of the Code and applicable
interpretive authority thereunder, any shares subject to Options or Stock
Appreciation Rights that are cancelled or repriced.
(b) Stock Offered. The stock to be offered pursuant to the grant of an
Award may be authorized but unissued Common Stock or Common Stock previously
issued and outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are
employees. Awards may not be granted to any Director who is not an employee. An
Award may be granted on more than one occasion to the same person, and, subject
to the limitations set forth in the Plan, such Award may include an Incentive
Stock Option, an Option which is not an Incentive Stock Option, a Restricted
Stock Award, or any combination thereof.
VII. STOCK OPTIONS
(a) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant.
(b) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.
(c) Special Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time the respective Incentive
Stock Option is granted) of Common Stock with respect to which Incentive Stock
Options granted after 1986 are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its parent and subsidiary corporations exceeds $100,000, such Incentive
Stock Options shall be treated as options which do not constitute Incentive
A-3
<PAGE> 21
Stock Options. The Committee shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other administrative
pronouncements, which of a Holder's Incentive Stock Options will not constitute
Incentive Stock Options because of such limitation and shall notify the Holder
of such determination as soon as practicable after such determination. No
Incentive Stock Option shall be granted to an individual if, at the time the
Option is granted, such individual owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation, within the meaning of section 422(b)(6) of the
Code, unless (i) at the time such Option is granted the option price is at least
110% of the Fair Market Value of the Common Stock subject to the Option and (ii)
such Option by its terms is not exercisable after the expiration of five years
from the date of grant. An Incentive Stock Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and shall be
exercisable during the Holders lifetime only by such Holder or the Holder's
guardian or legal representative.
(d) Option Agreement. Each Option shall be evidenced by an Option Agreement
in such form and containing such provisions not inconsistent with the provisions
of the Plan as the Committee from time to time shall approve, including, without
limitation, provisions to qualify an Incentive Stock Option under section 422 of
the Code. Each Option Agreement shall specify the effect of termination of
employment on the exercisability of the Option. An Option Agreement may provide
for the payment of the option price, in whole or in part, by the delivery of a
number of shares of Common Stock (plus cash if necessary) having a Fair Market
Value equal to such option price. Moreover, an Option Agreement may provide for
a "cashless exercise" of the Option by establishing procedures whereby the
Holder, by a properly-executed written notice, directs (I) an immediate market
sale or margin loan respecting all or a part of the shares of Common Stock to
which he is entitled upon exercise pursuant to an extension of credit by the
Company to the Holder of the option price, (ii) the delivery of the shares of
Common Stock from the Company directly to a brokerage firm, and (iii) the
delivery of the option price from sale or margin loan proceeds from the
brokerage firm directly to the Company. Further, an Option Agreement may provide
for the surrender of the right to purchase shares under the Option in return for
a payment in cash or shares of Common Stock or a combination of cash and shares
of Common Stock equal in value to the excess of the Fair Market Value of the
shares with respect to which the right to purchase is surrendered over the
option price therefor ("Stock Appreciation Rights"), on such terms and
conditions as the Committee in its sole discretion may prescribe; provided, that
with respect to Stock Appreciation Rights granted to employees who are subject
to Section 16 of the 1934 Act, except as provided in Subparagraph IX(c) hereof,
the Committee shall retain final authority (i) to determine whether a Holder
shall be permitted, or (ii) to approve an election by a Holder, to receive cash
in full or partial settlement of Stock Appreciation Rights. In the case of any
such Stock Appreciation Right that is granted in connection with an Incentive
Stock Option, such right shall be exercisable only when the Fair Market Value of
the Common Stock exceeds the price specified therefor in the Option or the
portion thereof to be surrendered. The terms and conditions of the respective
Option Agreements need not be identical.
(e) Option Price and Payment. The price at which a share of Common Stock
may be purchased upon exercise of an Option shall be determined by the Committee
but, subject to adjustment as provided in Paragraph IX, shall not be less than
the Fair Market Value of a share of Common Stock on the date such Option is
granted. The option or portion thereof may be exercised by delivery of an
irrevocable notice of exercise to the Company. The purchase price of the Option
or portion thereof shall be paid in full in the manner prescribed by the
Committee. Separate stock certificates shall be issued by the Company for those
shares acquired pursuant to the exercise of an Incentive Stock Option and for
those shares acquired pursuant to the exercise of any Option which does not
constitute an Incentive Stock Option.
(f) Shareholder Rights and Privileges. The Holder shall be entitled to all
the privileges and rights of a shareholder only with respect to such shares of
Common Stock as have been purchased under the Option and for which certificates
of stock have been registered in the Holder's name.
(g) Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by individuals
employed by corporations who become employees as a result of a merger or
consolidation of the employing corporation with the Company or any subsidiary,
or the acquisition by the Company or a
A-4
<PAGE> 22
subsidiary of the assets of the employing corporation, or the acquisition by the
Company or a subsidiary of stock of the employing corporation with the result
that such employing corporation becomes a subsidiary.
VIII. RESTRICTED STOCK AWARDS
(a) Restrictions To Be Established by the Committee. Shares of Common Stock
that are the subject of a Restricted Stock Award shall be subject to
restrictions on disposition by the Holder and an obligation of the Holder to
forfeit and surrender the shares to the Company under certain circumstances (the
"Forfeiture Restrictions"). The Forfeiture Restrictions shall be determined by
the Committee in its sole discretion, and the Committee may provide that the
Forfeiture Restrictions shall lapse upon (i) the attainment of one or more
performance targets established by the Committee that are based on (1) the price
of a share of Common Stock, (2) the Company's earnings per share, (3) the
Company's market share, (4) the market share of a business unit of the Company
designated by the Committee, (5) the Company's sales, (6) the sales of a
business unit of the Company designated by the Committee, or (7) the return on
stockholders' equity achieved by the Company, (ii) the Holder's continued
employment with the Company for a specified period of time, (iii) the occurrence
of any event or the satisfaction of any other condition specified by the
Committee in its sole discretion or (iv) a combination of any of the foregoing.
Each Restricted Stock Award may have different Forfeiture Restrictions, in the
discretion of the Committee. The Forfeiture Restrictions applicable to a
particular Restricted Stock Award shall not be changed except as permitted by
Paragraph VIII(b) or Paragraph IX.
(b) Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
the name of the Holder of such Restricted Stock Award. The Holder shall have the
right to receive dividends with respect to Common Stock subject to a Restricted
Stock Award, to vote Common Stock subject thereto and to enjoy all other
shareholder rights, except that (i) the Holder shall not be entitled to delivery
of the stock certificate until the Forfeiture Restrictions have expired, (ii)
the Company shall retain custody of the stock until the Forfeiture Restrictions
have expired (iii) the Holder may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the stock until the Forfeiture Restrictions
have expired, and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Agreement, shall cause a forfeiture
of the Restricted Stock Award. At the time of such Award, the Committee may, in
its sole discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the termination of employment (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Forfeiture Restrictions. Such
additional terms, conditions or restrictions shall be set forth in a Restricted
Stock Agreement made in conjunction with the Award.
(c) Payment for Restricted Stock. The Committee shall determine the amount
and form of any payment for Common Stock received pursuant to a Restricted Stock
Award, provided that in the absence of such a determination, a Holder shall not
be required to make any payment for Common Stock received pursuant to a
Restricted Stock Award, except to the extent otherwise required by law.
(d) Agreements. At the time any Award is made under this Paragraph VIII,
the Company and the Holder shall enter into a Restricted Stock Agreement setting
forth each of the matters contemplated hereby and such other matters as the
Committee may determine to be appropriate. The terms and provisions of the
respective Restricted Stock Agreements need not be identical.
IX. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any sale, lease, exchange or other disposition of all or any part
of its assets or business or any other corporate act or proceeding.
A-5
<PAGE> 23
(b) The shares with respect to which Options may be granted are shares of
Common Stock as presently constituted, but if, and whenever, prior to the
expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a stock
dividend on Common Stock without receipt of consideration by the Company, the
number of shares of Common Stock with respect to which such Option may
thereafter be exercised (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the purchase price
per share shall be proportionately reduced, and (ii) in the event of a reduction
in the number of outstanding shares shall be proportionately reduced, and the
purchase price per share shall be proportionately increased. Any fractional
share resulting from such adjustment shall be rounded up to the next whole
share.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Common Stock covered by an Option theretofore granted shall
be adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the Holder would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Holder had been the holder of record of the number of
shares of Common Stock then covered by such Option. If (i) the Company shall not
be the surviving entity in any merger or consolidation (or survives only as a
subsidiary of an entity, (ii) the Company sells, leases or exchanges or agrees
to sell, lease or exchange all or substantially all of its assets to any other
person or entity, (iii) the Company is to be dissolved and liquidated, (iv) any
person or entity, including a "group" as contemplated by Section 13(d)(3) of the
1934 Act, acquires or gains ownership or control (including, without limitation,
power to vote) of more than 50% of the outstanding shares of the Company's
voting stock (based upon voting power), or (v) as a result of or in connection
with a contested election of directors, the persons who were directors of the
Company before such election shall cease to constitute a majority of the Board
(each such event is referred to herein as a "Corporate Change"), no later than
(x) ten days after the approval by the shareholders of the Company of such
merger, consolidation, reorganization, sale, lease or exchange of assets or
dissolution of such election of directors or (y) thirty days after a Corporate
Change of the type described in clause (iv), the Committee, acting in its sole
discretion without the consent or approval of any Holder, shall effect one or
more of the following alternatives, which may vary among individual Holders and
which may vary among Options held by any individual Holder: (1) accelerate the
time at which Options then outstanding may be exercised so that Options may be
exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of Holders thereunder
shall terminate, (2) require the mandatory surrender to the Company by selected
Holders of some or all of the outstanding Options held by such Holders
(irrespective of whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such Options
and pay to each Holder an amount of cash per share equal to the excess, if any,
of the amount calculated in Subparagraph (d) below (the "Change of Control
Value") of the shares subject to such Option over the exercise price(s) under
such Options for such shares, (3) make such adjustments to Options then
outstanding as the Committee deems appropriate to reflect such Corporate Change
(provided, however, that the Committee may determine in its sole discretion that
no adjustment is necessary to Options then outstanding) or (4) provide that the
number and class of shares of Common Stock covered by an Option theretofore
granted shall be adjusted so that such Option shall thereafter cover the number
and class of shares of stock or other securities or property (including, without
limitation, cash) to which the Holder would have been entitled pursuant to the
terms of the agreement of merger, consolidation or sale of assets and
dissolution if, immediately prior to such merger, consolidation or sale of
assets and dissolution, the Holder had been the holder of record of the number
of shares of Common Stock then covered by such Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the "Change
of Control Value" shall equal the amount determined in clause (i), (ii) or
(iii), whichever is applicable, as follows: (i) the per share price offered to
shareholders of the Company in any such merger, consolidation, sale of assets or
dissolution transaction, (ii) the price per share offered to shareholders of the
Company in any tender offer or exchange offer whereby a Corporate Change takes
place, or (iii) if such Corporate Change occurs other than pursuant to a tender
or exchange offer, the fair market value per share of the shares into which such
Options being surrendered are exercisable, as determined by the Committee as of
the date determined by the Committee to
A-6
<PAGE> 24
be the date of cancellation and surrender of such Options. In the event that the
consideration offered to shareholders of the Company in any transaction
described in this Subparagraph (d) or Subparagraph (c) above consists of
anything other than cash, the Committee shall determine the fair cash equivalent
of the portion of the consideration offered which is other than cash.
(e) In the event of changes in the outstanding Common Stock by reason of
recapitalization, reorganizations, mergers, consolidations, combinations,
split-offs, spin-offs, split-ups, exchanges or other relevant changes in
capitalization occurring after the date of the grant of any Award and not
otherwise provided for by this Paragraph IX, any outstanding Awards and any
agreements evidencing such Awards shall be subject to adjustment by the
Committee at its discretion as to the number and price of shares of Common Stock
or other consideration subject to such Awards. In the event of any such change
in the outstanding Common Stock, the aggregate number of shares available under
the Plan (and the aggregate number of shares that may be granted to any one
individual) may be appropriately adjusted by the Committee, whose determination
shall be conclusive.
(f) Any adjustment provided for in the above Subparagraphs shall be subject
to any required shareholder action.
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to Awards theretofore granted or the purchase
price per share, if applicable.
(h) Plan provisions to the contrary notwithstanding, with respect to any
Restricted Stock Awards outstanding at the time a Corporate Change as described
in Subparagraph (c) above occurs, the Committee may, in its discretion and as of
a date determined by the Committee, fully vest any or all Common Stock awarded
to the Holder pursuant to such Restricted Stock Award and then outstanding and,
upon such vesting, all restrictions applicable to such Restricted Stock Award
shall terminate as of such date. Any action by the Committee pursuant to this
Subparagraph may vary among individual Holders and may vary among the Restricted
Stock Awards held by any individual Holder.
X. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares of Common Stock for which Awards have not theretofore been
granted. The Board shall have the right to alter or amend the Plan or any part
thereof from time to time; provided that no change in any Award theretofore
granted may be made which would impair the rights of the Holder without the
consent of the Holder, and provided, further, that the Board may not, without
approval of the shareholders, amend the Plan:
(a) to increase the maximum number of shares of Common Stock which may
be issued on exercise or surrender of Options or pursuant to Restricted
Stock Awards, except as provided in Paragraph IX; or
(b) to change the class of individuals eligible to receive Awards
under the Plan.
XI. MISCELLANEOUS
(a) No Right To An Award. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give an employee any right
to be granted an Option, a right to a Restricted Stock Award, or any other
rights hereunder except as maybe evidenced by an Option Agreement or a
Restricted Stock Agreement duly executed on behalf of the Company, and then only
to the extent and on the terms and conditions expressly set forth therein. The
Plan shall be unfunded. The Company shall be not be required to establish any
special or separate fund or to make any other segregation of funds or assets to
assure the payment of any Award.
A-7
<PAGE> 25
(b) No Employment Rights Conferred. Nothing contained in the Plan shall (i)
confer upon any employee any right with respect to continuation of employment
with the Company or any subsidiary or (ii) interfere in any way with the right
of the Company or any subsidiary to terminate his or her employment at any time.
(c) Other Laws; Withholding. The Company shall not be obligated to issue
any Common Stock pursuant to any Award granted under the Plan at any time when
the shares covered by such Award have not been registered under the Securities
Act of 1933 and such other state and federal laws, rules or regulations as the
Company or the Committee deems applicable and, in the opinion of legal counsel
for the Company, there is no exemption from the registration requirements of
such laws, rules or regulations available for the issuance and sale of such
shares. No fractional shares of Common Stock shall be delivered, nor shall any
cash in lieu of fractional shares be paid. The Company shall have the right to
deduct in connection with all Awards any taxes required by law to be withheld
and to require any payments required to enable it to satisfy its withholding
obligations.
(d) No Restriction on Corporate Action. Nothing contained in the Plan shall
be construed to prevent the Company or any subsidiary from taking any corporate
action which is deemed by the Company or such subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company or any subsidiary as a result of
any such action.
(e) Restrictions on Transfer. An Award (other than an Incentive Stock
Option, which shall be subject to the transfer restrictions set forth in
Paragraph VII(c)) shall not be transferable otherwise than (i) by will or the
laws of descent and distribution , (ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder, or (iii) with
the consent of the Committee.
(f) Rule 16b-3. It is intended that the Plan and any grant of an Award made
to a person subject to Section 16 of the 1934 Act meet the requirements of Rule
16b-3 so that any transaction under the Plan involving a grant, award, or other
acquisition from the Company or disposition to the Company is exempt from
Section 16(b) of the 1934 Act. If any provision of the Plan or any such Award
would result in any such transaction not being exempt from Section 16(b) of the
1934 Act, such provision or Award shall be construed or deemed amended so that
such transaction will be exempt from Section 16(b) of the 1934 Act.
(g) Governing Law. This Plan shall be construed in accordance with the laws
of the State of Texas, except to the extent that it implicates matters which are
the subject of the General Corporation Law of the State of Delaware which
matters shall be governed by the latter law.
A-8
<PAGE> 26
BMC SOFTWARE, INC.
P 2101 City West Boulevard
Houston, TX 77042
R This Proxy is Solicited on Behalf of the Board of Directors
O 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
X 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
Y by the undersigned on July 11, 1997, at the annual meeting of stockholders
to be held on August 25, 1997 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 PROPOSALS 2 AND 3.
-----------
SEE REVERSE
(Continued and to be signed on the other side) SIDE
-----------
<PAGE> 27
Please mark
[X] votes as in
this example.
------
|
|
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS 2. Proposal to approve the [ ] [ ] [ ]
Nominees: J. Barter, G. Cupp, adoption and ratification
M. Gainer, L. Gray, of the amended and
G. Raymond, T. Tinsley restated BMC Software,
and M. Watson Inc. 1994 Employee
Incentive Plan.
FOR AGAINST ABSTAIN
3. Proposal to ratify the [ ] [ ] [ ]
appointment of Arthur
Andersen LLP as the
independent public
accountants of the
Company.
FOR all nominees [ ] [ ] WITHHOLD AUTHORITY
listed (except to vote for
as marked to all nominees
the contrary) listed
- -----------------------------------------------
(INSTRUCTION: To withhold authority for any
individual nominee, write the nominee's name on
the line above.)
MARK HERE FOR ADDRESS CHANGE AND NOTE [ ]
AT LEFT
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY.
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.
Signature:___________________Date:________Signature:________________Date:______
