<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
BMC SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7274 74-21226120
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
M. BRINKLEY MORSE
SENIOR VICE PRESIDENT/GENERAL COUNSEL
BMC SOFTWARE, INC.
2101 CITY WEST BOULEVARD 2102 CITY WEST BOULEVARD
HOUSTON, TEXAS 77042-2427 HOUSTON, TEXAS 77042-2427
(713) 918-8800 (713) 918-8800
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of registrant's telephone number, including area code, of
principal executive offices) agent for service)
Copies to:
JOHN S. WATSON STANLEY KELLER
VINSON & ELKINS L.L.P. PALMER & DODGE LLP
1001 FANNIN, SUITE 2300 ONE BEACON STREET
HOUSTON, TEXAS 77002-6760 BOSTON, MASSACHUSETTS 02108-3190
(713) 758-2222 (617) 573-0100
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
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========================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value(2)........................... $311,999,355 $92,040
========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(2) This Registration Statement also pertains to rights to purchase shares of
Series A Junior Participating Preferred Stock of the Registrant. One right
is attached to and trades with each share of BMC Common Stock. Until the
occurrence of certain events, the rights are not exercisable and will not be
evidenced or transferred apart from the BMC Common Stock. Any value
attributable to such rights is reflected in the market price of the BMC
Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
BGS SYSTEMS, INC.
ONE FIRST AVENUE
WALTHAM, MASSACHUSETTS 02254-9111
(781) 891-0000
, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of BGS Systems, Inc. ("BGS") to be held on ,
, 1998 at 10:00 a.m. local time at , Waltham,
Massachusetts to consider and vote upon a proposal to approve an Agreement and
Plan of Reorganization and the related Plan and Agreement of Merger, each dated
as of January 31, 1998 (together, the "Merger Agreement"). The Merger Agreement
provides for the merger (the "Merger") of Ranger Acquisition Corp., a wholly
owned subsidiary ("Merger Sub") of BMC Software, Inc. ("BMC"), with and into
BGS, pursuant to which (a) each share of BGS Common Stock outstanding
immediately prior to the consummation of the Merger will be converted into a
fraction of a share of BMC Common Stock equal to $45 divided by the average
closing sales prices of BMC Common Stock, as reported on the Nasdaq National
Market, on each of the last ten consecutive trading days in the period ending on
the third trading day prior to the Special Meeting (the "Exchange Ratio"), (b)
all outstanding options to purchase shares of BGS Common Stock will be assumed
by BMC and converted into options to purchase shares of BMC Common Stock and (c)
BGS will become a wholly owned subsidiary of BMC. In the materials accompanying
this letter, you will find a Notice of Special Meeting of Stockholders, a Proxy
Statement/Prospectus relating to the actions to be taken by BGS stockholders at
the Special Meeting and a proxy card. The Proxy Statement/Prospectus more fully
describes the proposed Merger and includes information about BGS and BMC. I urge
you to review these materials carefully.
The BGS Board of Directors believes that the Merger is in the best
interests of the stockholders of BGS and has unanimously approved the Merger
Agreement and the Merger.
We appreciate the loyalty and support our stockholders have demonstrated
over the years. We hope that you will continue this support by voting FOR the
Merger proposal now. Approval of the Merger Agreement requires the affirmative
vote of two-thirds of the outstanding BGS shares. Therefore, regardless of the
number of shares you may own, it is important that your shares be represented at
the meeting. Accordingly, please promptly sign and return your proxy card in the
envelope provided, whether or not you plan to attend the Special Meeting.
Sincerely,
HAROLD S. SCHWENK, JR.
Chairman and Chief Executive Officer
NOTE: PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES NOW.
<PAGE> 3
BGS SYSTEMS, INC.
ONE FIRST AVENUE
WALTHAM, MASSACHUSETTS 02254-9111
(781) 891-0000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
To the Stockholders of BGS Systems, Inc.:
A Special Meeting of Stockholders (the "Special Meeting") of BGS Systems,
Inc., a Massachusetts corporation ("BGS"), will be held on ,
, 1998 at 10:00 a.m., local time, at , Waltham,
Massachusetts, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Reorganization, and the related Plan and Agreement of Merger, each
dated as of January 31, 1998 (together, the "Merger Agreement"), among BMC
Software, Inc., a Delaware corporation ("BMC"), Ranger Acquisition Corp., a
Massachusetts corporation and a wholly owned subsidiary of BMC ("Merger
Sub"), and BGS. Pursuant to the Merger Agreement, Merger Sub would be
merged with and into BGS (the "Merger") and, among other things, each share
of common stock, par value $.10 per share, of BGS ("BGS Common Stock")
outstanding at the effective time of the Merger would be converted into a
fraction of a share of common stock, par value $.01 per share, of BMC ("BMC
Common Stock") equal to $45 divided by the average closing sales prices of
BMC Common Stock, as reported on the Nasdaq National Market, on each of the
last ten consecutive trading days in the period ending on the third trading
day prior to the Special Meeting, all as more fully set forth in the
accompanying Proxy Statement/Prospectus and in the Merger Agreement, a copy
of which is included as Appendix A thereto; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
If the proposal described in paragraph (1) above is approved by the
stockholders at the Special Meeting and effected by BGS, any stockholder of BGS
(i) who files with BGS, before the taking of the vote on the approval of such
action, written objection to the proposed action stating that he or she intends
to demand payment for his or her shares if the action is taken and (ii) whose
shares are not voted in favor of such action, has or may have the right to
demand in writing from BGS within twenty (20) days after the date of the mailing
to him or her of notice in writing that the corporate action has become
effective, payment of his or her shares and an appraisal of the value thereof.
BGS and any such stockholder shall in such cases have the rights and duties and
shall be required to follow the procedures set forth in Sections 86 to 98,
inclusive, of Chapter 156B of the General Laws of Massachusetts. See "The
Merger -- BGS Stockholder Appraisal Rights" in the accompanying Prospectus/Proxy
Statement.
The Board of Directors of BGS has fixed the close of business on February
18, 1998 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Special Meeting and any adjournment thereof. Only
holders of record of shares of BGS Common Stock at the close of business on the
record date are entitled to notice of, and to vote at, the Special Meeting.
YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF THE HOLDERS OF TWO-THIRDS
OF THE OUTSTANDING SHARES OF BGS COMMON STOCK IS REQUIRED FOR APPROVAL OF THE
MERGER AGREEMENT. EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE
REQUEST THAT YOU SIGN AND RETURN THE ENCLOSED PROXY CARD AND THUS ENSURE THAT
YOUR SHARES WILL BE REPRESENTED AT THE SPECIAL MEETING IF YOU ARE UNABLE TO
ATTEND. IF YOU DO ATTEND THE SPECIAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors,
JEFFREY P. BUZEN
Clerk
Waltham, Massachusetts
, 1998
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1998
PROXY STATEMENT/PROSPECTUS
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BGS SYSTEMS, INC. BMC SOFTWARE, INC.
ONE FIRST AVENUE 2101 CITY WEST BOULEVARD
WALTHAM, MA 02254-9111 HOUSTON, TX 77042-2427
(781) 891-0000 (713) 918-8800
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF COMMON STOCK, $.01 PAR VALUE
STOCKHOLDERS TO BE HELD ON
, 1998
</TABLE>
This Proxy Statement/Prospectus relates to the proposed merger of Ranger
Acquisition Corp., a Massachusetts corporation and a wholly owned subsidiary
("Merger Sub") of BMC Software, Inc., a Delaware corporation ("BMC"), with and
into BGS Systems, Inc., a Massachusetts corporation ("BGS"), pursuant to the
Agreement and Plan of Reorganization among BMC, Merger Sub and BGS, and the
related Plan and Agreement of Merger, each dated as of January 31, 1998
(together, the "Merger Agreement"). The merger contemplated by the Merger
Agreement is referred to herein as the "Merger."
As a result of the Merger, (i) each share of common stock, par value $.10
per share, of BGS ("BGS Common Stock") outstanding immediately prior to the
effective time of the Merger (the "Effective Time") will be converted into a
fraction of a share of common stock, par value $.01 per share, of BMC ("BMC
Common Stock") equal to $45 divided by the average closing sales prices of BMC
Common Stock, as reported on the Nasdaq National Market, on each of the last ten
consecutive trading days in the period ending on the third trading day prior to
the Special Meeting, and (ii) BGS will become a wholly owned subsidiary of BMC.
This Proxy Statement/Prospectus is being furnished to holders of BGS Common
Stock in connection with the solicitation of proxies by the Board of Directors
of BGS for use at the special meeting of stockholders of BGS to be held on
, 1998 (the "Special Meeting"). At the Special Meeting, holders of
BGS Common Stock will be asked to approve the Merger Agreement. This Proxy
Statement/Prospectus and the accompanying form of proxy are first being mailed
to stockholders of BGS on or about , 1998.
This Proxy Statement/Prospectus also constitutes a prospectus of BMC with
respect to shares of BMC Common Stock to be issued pursuant to the Merger
Agreement in exchange for currently outstanding shares of BGS Common Stock and
additional shares of BGS Common Stock that may become outstanding prior to the
Merger upon the exercise of options to purchase BGS Common Stock outstanding on
the date of the Merger Agreement ("BGS Options"). The shares of BMC Common Stock
issued pursuant to the Merger will be listed on the Nasdaq National Market.
On February 12, 1998, the closing prices of BMC Common Stock and BGS Common
Stock, as reported on the Nasdaq National Market, were $75.00 and $44.25,
respectively.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY BGS STOCKHOLDERS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY OTHER STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1998.
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY BMC OR BGS. NEITHER THE DELIVERY OF
THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED
HEREBY SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF BMC OR BGS SINCE THE DATE HEREOF OR THAT THE
INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR
THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY
SOLICITATION.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. BMC AND BGS EACH UNDERTAKE
TO PROVIDE COPIES OF SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE), WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO, IN THE CASE
OF DOCUMENTS RELATING TO BMC, M. BRINKLEY MORSE, 2101 CITY WEST BOULEVARD,
HOUSTON, TEXAS 77042-2427 (TELEPHONE (713) 918-8800) AND, IN THE CASE OF
DOCUMENTS RELATING TO BGS, NORMAND BILODEAU, BGS SYSTEMS, INC., ONE FIRST
AVENUE, WALTHAM, MASSACHUSETTS 02254-9111 (TELEPHONE (781) 891-0000). IN ORDER
TO ENSURE DELIVERY OF THE DOCUMENTS, SUCH REQUESTS SHOULD BE MADE BY
, 1998.
AVAILABLE INFORMATION
BMC and BGS are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, file reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by BMC and BGS can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and CitiCorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60621-2511. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 West Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, BMC and BGS are required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains a
World Wide Web site at http://www.sec.gov that contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission. BMC Common Stock and BGS Common Stock are each quoted on
the Nasdaq National Market. Reports, proxy statements and other information
concerning BMC and BGS may be inspected at the offices of the National
Association of Securities Dealers, Inc., Listing Section, 1735 K Street,
Washington, D.C. 20006.
BMC has filed with the Commission a Registration Statement on Form S-4
(together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the BMC Common Stock to be issued pursuant to
the Merger Agreement. The information contained herein with respect to BMC and
its affiliates, including Merger Sub, has been provided by BMC, and the
information contained herein with respect to BGS and its affiliates has been
provided by BGS. This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which were
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement. Any
statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission
are not necessarily complete, and in each instance reference is made to the copy
of such document so filed. Each such statement is qualified in its entirety by
such reference.
i
<PAGE> 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
1. For BMC, its:
(a) Annual Report on Form 10-K for the fiscal year ended March 31,
1997;
(b) Quarterly Reports on Form 10-Q for the quarters ended June 30,
1997; September 30, 1997; and December 31, 1997;
(c) Current Report on Form 8-K filed on February 4, 1998;
(d) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal period covered by the annual
report referred to in (a) above; and
(e) The description of BMC Common Stock contained in its Registration
Statement filed under Section 12 of the Exchange Act, including any
amendment or reports filed for the purposes of updating such description.
2. For BGS, its:
(a) Annual Report on Form 10-K for the fiscal year ended January 31,
1997;
(b) Quarterly Reports on Form 10-Q for the quarters ended April 30,
1997; July 31, 1997; and October 31, 1997;
(c) Current Report on Form 8-K filed on February 3, 1998; and
(d) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal period covered by the annual
report referred to in (a) above.
All documents filed by BMC or BGS pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the special meeting of the
stockholders of BGS shall be deemed to be incorporated by reference herein and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/Prospectus.
Certain product and trade names used in this Proxy Statement/Prospectus are
registered trademarks or trademarks of BMC and BGS in the USA and in other
select countries. (R) and (TM) indicate USA registration or USA trademark. Other
third party logos and product/trade names are registered trademarks or
trademarks of their respective companies.
ii
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. ii
SUMMARY..................................................... 1
The Companies............................................. 1
The Special Meeting....................................... 1
Opinion of BGS Financial Advisor.......................... 2
The Merger and the Merger Agreement....................... 2
Stockholder Agreements.................................... 5
Certain Federal Income Tax Consequences................... 6
Accounting Treatment...................................... 6
Appraisal Rights.......................................... 6
Exchange of BGS Common Stock Certificates................. 6
Interests of Certain Persons in the Merger................ 6
Management and Other Information.......................... 6
Comparative Rights of BGS and BMC Stockholders............ 7
Risk Factors.............................................. 7
Market Price and Dividend Data............................ 7
BMC
Selected Historical Consolidated Financial
Information........................................... 9
BGS
Selected Historical Consolidated Financial
Information........................................... 10
Comparative Per Share Data................................ 11
RISK FACTORS................................................ 12
THE COMPANIES............................................... 17
BMC....................................................... 17
Merger Sub................................................ 17
BGS....................................................... 17
THE SPECIAL MEETING......................................... 18
Date, Time and Place...................................... 18
Purpose of the Special Meeting............................ 18
Record Date; Shares Entitled to Vote...................... 18
Voting and Revocation of Proxies.......................... 18
Vote Required............................................. 18
Solicitation of Proxies................................... 19
Other Matters............................................. 19
THE MERGER.................................................. 19
General Description of the Merger......................... 19
Background................................................ 19
BMC's Reasons for the Merger.............................. 21
BGS's Reasons for the Merger; Recommendation of Board of
Directors of BGS....................................... 22
Opinion of BGS Financial Advisor.......................... 25
Interests of Certain Persons in the Merger................ 29
Certain Federal Income Tax Consequences................... 29
Accounting Treatment...................................... 30
Governmental and Regulatory Approvals..................... 30
Restrictions on Resales by Affiliates..................... 31
BGS Stockholder Appraisal Rights.......................... 31
</TABLE>
iii
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CERTAIN TERMS OF THE MERGER AGREEMENT....................... 33
Effective Time of the Merger.............................. 33
Manner and Basis of Converting Shares..................... 33
BGS Options............................................... 34
Conditions to the Merger.................................. 34
Representations and Warranties............................ 36
Certain Covenants; Conduct of Business Prior to the
Merger................................................. 36
No Solicitation........................................... 38
Certain Post-Merger Matters............................... 39
Termination of the Merger Agreement....................... 39
Expenses and Termination Fee.............................. 40
Indemnification........................................... 41
STOCKHOLDER AGREEMENTS...................................... 41
MANAGEMENT AND OTHER INFORMATION............................ 42
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS............. 43
DESCRIPTION OF BMC CAPITAL STOCK............................ 46
General................................................... 46
BMC Common Stock.......................................... 46
Rights to Purchase Preferred Stock........................ 46
BMC Preferred Stock....................................... 47
Transfer Agent and Registrar.............................. 48
COMPARATIVE RIGHTS OF BMC AND BGS STOCKHOLDERS.............. 48
Meetings of Stockholders.................................. 48
Inspection Rights......................................... 49
Action by Consent of Stockholders......................... 49
Cumulative Voting......................................... 49
Issuance of Stock; Preferred Stock........................ 49
Dividends and Repurchases of Stock........................ 49
Classification of the Board of Directors.................. 50
Removal of Directors...................................... 50
Vacancies on the Board of Directors....................... 50
Exculpation of Directors.................................. 50
Indemnification of Directors, Officers and Others......... 50
Interested Director Transactions.......................... 51
Sale, Lease or Exchange of Assets and Mergers............. 51
Amendments to Charter..................................... 51
Appraisal Rights.......................................... 51
"Anti-Takeover" Provisions................................ 52
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 52
LEGAL MATTERS............................................... 52
EXPERTS..................................................... 52
STOCKHOLDER PROPOSALS....................................... 53
</TABLE>
Appendices:
A -- Merger Agreement
B -- Form of Stockholder Agreement
C -- Opinion of Broadview Associates L.L.C.
iv
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in or
incorporated by reference in this Proxy Statement/Prospectus and the Appendices
hereto. Stockholders are urged to read carefully this Proxy Statement/Prospectus
and the Appendices hereto in their entirety. As used in this Proxy
Statement/Prospectus, unless otherwise required by the context, the term "BMC"
means BMC Software, Inc. and its consolidated subsidiaries and the term "BGS"
means BGS Systems, Inc. and its consolidated subsidiaries. Capitalized terms
used herein without definition are, unless otherwise indicated, defined in the
Merger Agreement and used herein with such meanings.
THE COMPANIES
BMC and Merger Sub. BMC is a leading worldwide provider of high-performance
applications and systems management software products for mainframe and
client/server based information systems. BMC also sells and provides
maintenance, enhancement and support services for its products. BMC's principal
customers are transaction and information intensive enterprises that rely
heavily on their computing systems and are typically Fortune 1000 industrial and
service corporations and similarly sized organizations worldwide. From
inception, BMC has focused on addressing these customers' critical operational
problems associated with their computers, databases and networks. BMC's products
are organized into three groups: Data Management, Application Management and
Performance Optimization. BMC distributes its products through its
well-established direct sales force, sales agents, and through its network of
indirect channels including value-added resellers, enterprise hardware and
software vendors and systems integrators.
Merger Sub is a wholly owned subsidiary of BMC incorporated in
Massachusetts on January 30, 1998. The principal executive offices of BMC are
located at 2101 City West Boulevard, Houston, Texas 77042-2427, and its
telephone number at such offices is (713) 918-8800.
BGS. BGS designs, develops, markets and supports the BEST/1(R) Performance
Assurance(R) line of performance management and capacity planning software
products which can measure, analyze, report or predict the performance of a
customer's computer system or network. These software products enable customers
to make more efficient use of their existing hardware, software and computer
personnel resources, and plan for the cost-effective expansion of their computer
operations to meet growing demands. BGS focuses on a single specialty:
performance and capacity management software products. Many of BGS's products
make use of proprietary performance modeling technology as well as intellectual
data display technology, developed by BGS's research staff. BGS's principal
executive offices are located at One First Avenue, Waltham, Massachusetts
02254-9111, and its telephone number at such offices is (781) 891-0000.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting of stockholders of BGS (the "Special Meeting") will be
held on , , 1998, at the , Waltham,
Massachusetts commencing at 10:00 a.m. local time.
PURPOSES
The purposes of the Special Meeting are (i) to consider and vote upon a
proposal to approve the Merger Agreement; and (ii) to transact such other
business as may properly come before the Special Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE
The Board of Directors of BGS has fixed the close of business on February
18, 1998 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Special
1
<PAGE> 10
Meeting and any adjournment thereof. Only holders of record of shares of BGS
Common Stock at the close of business on the Record Date are entitled to notice
of and to vote at the Special Meeting. On such date, there were shares of
BGS Common Stock outstanding, each of which will be entitled to one vote on each
matter to be acted upon at the Special Meeting.
QUORUM; VOTE REQUIRED
The presence, in person or by proxy, at the Special Meeting of the holders
of a majority of the shares of BGS Common Stock outstanding and entitled to vote
at the Special Meeting is necessary to constitute a quorum at the meeting. The
affirmative vote of the holders of two-thirds of the shares of BGS Common Stock
outstanding and entitled to vote thereon at the Special Meeting is required
under the Massachusetts Business Corporation Law (the "MBCL") to approve the
Merger Agreement. In determining whether the Merger Agreement has received the
requisite number of affirmative votes, abstentions and broker non-votes will
have the same effect as a vote against the Merger Agreement.
SECURITY OWNERSHIP OF BGS MANAGEMENT
At the Record Date for the Special Meeting, the directors and executive
officers of BGS owned approximately 59% of the outstanding shares of BGS Common
Stock entitled to vote at such meeting. Harold S. Schwenk, Jr., Jeffrey P. Buzen
and Judith N. Goldberg, directors of BGS, and their affiliates have entered into
Stockholder Agreements with BMC dated January 31, 1998 (the "Stockholder
Agreements") whereby they have agreed to vote all shares of BGS Common Stock
owned by them in favor of the Merger Agreement and granted BMC an option (the
"Options") to purchase all of such shares of BGS Common Stock under certain
circumstances. The Options expire upon consummation of the Merger. At the Record
Date, an aggregate of 3,357,908 shares of BGS Common Stock (representing
approximately 52.2% of the outstanding shares of BGS Common Stock) were subject
to the Stockholder Agreements. See "Stockholder Agreements."
OPINION OF BGS FINANCIAL ADVISOR
Broadview Associates L.L.C. ("Broadview") has delivered its written opinion
dated January 31, 1998 to the Board of Directors of BGS that as of such date,
based upon and subject to the various factors and assumptions set forth in its
opinion, the consideration to be received by the BGS stockholders in the Merger
is fair from a financial point of view to the holders of BGS Common Stock.
For information regarding the opinion of Broadview, including the
assumptions made, matters considered and limits of such opinion, see "The
Merger -- Opinion of BGS Financial Advisor." Stockholders of BGS are urged to
read in its entirety the opinion of Broadview, a copy of which is attached as
Appendix C to this Proxy Statement/Prospectus.
THE MERGER AND THE MERGER AGREEMENT
Terms of the Merger. At the Effective Time, Merger Sub will be merged with
and into BGS, with BGS being the surviving corporation and continuing as a
wholly owned subsidiary of BMC (the "Surviving Corporation"). In the Merger,
each share of BGS Common Stock outstanding at the Effective Time (other than
shares held directly or indirectly by BMC or BGS) will be converted into a
fraction of a share of BMC Common Stock equal to $45 divided by the average
closing sales prices of BMC Common Stock, as reported on the Nasdaq National
Market, on each of the last ten consecutive trading days in the period ending on
the third trading day prior to the Special Meeting (the "Exchange Ratio").
Based on the closing price of BMC Common Stock of $72.625 on February 11,
1998 and the number of shares of BMC Common Stock and BGS Common Stock
outstanding as of the Record Date, 3,922,242 shares of BMC Common Stock will be
issuable pursuant to the Merger Agreement (assuming no exercise prior to the
Effective Time of BGS Options), representing approximately 4% of the total BMC
Common Stock to be outstanding after such issuance.
2
<PAGE> 11
Recommendation of the Board of Directors of BGS. The Board of Directors of
BGS has determined that the Merger is fair to, and in the best interests of, the
stockholders of BGS and recommends that the stockholders of BGS approve the
Merger Agreement. For a discussion of the factors considered by the BGS Board of
Directors in reaching its decision to approve the Merger Agreement and the
Merger, see "The Merger -- Background" and "BGS's Reasons for the Merger;
Recommendation of the Board of Directors of BGS." In considering the
recommendation of the BGS Board with respect to the Merger, BGS stockholders
should be aware that certain officers and directors of BGS have certain
interests respecting the Merger, apart from their interests as stockholders of
BGS. See "The Merger -- Interests of Certain Persons in the Merger."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of articles of merger with
the Secretary of the Commonwealth of Massachusetts which will be the Effective
Time, unless the articles of merger specify a later Effective Time. Assuming all
conditions to the Merger contained in the Merger Agreement are satisfied or, if
permissible, waived prior thereto, it is anticipated that the Effective Time of
the Merger will occur as soon as practicable following the Special Meeting.
CERTAIN CONDITIONS TO THE CONSUMMATION OF THE MERGER
The respective obligations of BMC and BGS to consummate the Merger are
subject to the satisfaction of certain conditions, including the following: (i)
approval of the Merger Agreement and the Merger by the stockholders of BGS; (ii)
the absence of any action or proceeding prohibiting consummation of the Merger;
(iii) expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (iv) the accuracy in all respects of the representations and warranties
material to each party and compliance in all material respects with all
agreements and covenants by each party; (v) the eligibility for trading on the
Nasdaq National Market of the BMC Common Stock to be issued in the Merger; (vi)
the receipt of certain legal opinions with respect to tax matters; and (vii) the
qualification of the Merger as a pooling of interests transaction.
BMC and BGS anticipate that all of the conditions to the consummation of
the Merger (other than obtaining the required approvals of the stockholders of
BGS) will be satisfied prior to or at the time of the Special Meeting. Either
BMC or BGS may extend the time for performance of any of the obligations of the
other party or, in certain instances, may waive compliance with those
obligations at its discretion. See "Certain Terms of the Merger
Agreement -- Conditions to the Merger."
CONDUCT OF BGS'S BUSINESS PENDING THE MERGER
BGS has made certain covenants and agreements in the Merger Agreement
relating to, among other things, the conduct of its business pending the
consummation of the Merger, including actions taken by BGS in relation to
issuing shares of stock, employment and compensation, payment of dividends on
BGS Common Stock and other matters. See "Certain Terms of the Merger
Agreement -- Certain Covenants; Conduct of Business Prior to the Merger."
GOVERNMENTAL APPROVALS
On February 13, 1998 BMC and BGS each filed a notification and report,
together with requests for early termination of the waiting period, under the
HSR Act with the Federal Trade Commission and the Antitrust Division of the
Department of Justice in respect of the Merger. Expiration or early termination
of the applicable waiting period under the HSR Act is a condition to the
obligations of BMC and BGS to consummate the Merger. The waiting period will
expire on March 15, 1998 unless a request for additional information is received
before such date. See "The Merger -- Governmental and Regulatory Approvals."
Neither BMC nor BGS is aware of any other governmental or regulatory approval
required for consummation of the Merger, other than compliance with applicable
securities laws.
3
<PAGE> 12
NO SOLICITATION
The Merger Agreement provides that BGS, directly or indirectly, will not
authorize or permit any of its agents to: (i) solicit, initiate, encourage
(including by way of furnishing information) or take any other action to
facilitate, any inquiry or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any acquisition or purchase of a substantial
amount of assets of, or any equity interest in, BGS or any merger,
consolidation, business combination, sale of substantially all assets, sale of
securities, recapitalization, liquidation, dissolution or similar transaction
involving BGS (other than the transactions contemplated by the Merger Agreement)
or any other material corporate transactions the consummation of which would, or
could reasonably be expected to, impede, interfere with, prevent or materially
delay the Merger (collectively, "BGS Transaction Proposals") or agree to or
endorse any BGS Transaction Proposal or (ii) propose, enter into or participate
in any discussions or negotiations regarding any of the foregoing, or furnish to
another person any information with respect to its business, properties or
assets or any of the foregoing, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, an effort or attempt by any
other person to do or seek any of the foregoing, provided, however, that the
foregoing clauses (i) and (ii) do not prohibit BGS from (A) furnishing
information pursuant to an appropriate confidentiality letter concerning BGS and
its businesses, properties or assets to a third party who has made a Superior
BGS Transaction Proposal (as defined below), (B) engaging in discussions or
negotiations with a third party who has made a Superior BGS Transaction Proposal
or (C) following receipt of a Superior BGS Transaction Proposal, taking and
disclosing to its stockholders a position with respect thereto or changing the
recommendation by BGS's Board of Directors, but in each case referred to in the
foregoing clauses (A) through (C) only after the Board of Directors of BGS
concludes in good faith following advice of its outside counsel, represented by
a written opinion, that such action is reasonably necessary in order for the
Board of Directors of BGS to comply with its fiduciary obligations to BGS's
stockholders under applicable law. If the Board of Directors of BGS receives a
BGS Transaction Proposal, then BGS will immediately inform BMC of the terms and
conditions of such proposal and the identity of the person making it and shall
keep BMC fully informed of the status and details of any such BGS Transaction
Proposal and of all steps it is taking in response to such BGS Transaction
Proposal. A "Superior BGS Transaction Proposal" means a bona fide BGS
Transaction Proposal that the Board of Directors of BGS determines in good faith
after consultation with (and based in part on the advice of) its independent
financial advisors to be more favorable to BGS and BGS's stockholders than the
Merger, is reasonably capable of being financed and is not subject to any
material contingencies relating to financing.
TERMINATION OF THE MERGER AGREEMENT
By Either Party. The Merger Agreement may be terminated at any time prior
to the Effective Time (i) by mutual consent of BMC and BGS or (ii) by either
party if (a) BGS's Board of Directors withdraws or modifies in a manner adverse
to BMC its approval of the Merger Agreement or the Merger in favor of a Superior
BGS Transaction Proposal and pays BMC $9 million, (b) a regulation or order is
enacted, entered or promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated by the Merger Agreement or permanently
restraining or otherwise prohibiting the consummation of the Merger, (c) the
Merger cannot for financial reporting purposes be accounted for as a "pooling of
interests" or (d) the Merger has not been consummated before September 30, 1998.
By BMC. BMC may terminate the Merger Agreement if (i) there has been a
breach by BGS of its representations and warranties set forth in the Merger
Agreement if such breach could reasonably be expected to result in a Material
Adverse Effect (as defined in the Merger Agreement) on BGS or BGS fails to
perform and comply, in all material respects, with all covenants required by the
Merger Agreement, and BGS fails to cure such breach within 15 business days
after written notice thereof from BMC or (ii) there has been since October 31,
1997, a Material Adverse Change (as defined in the Merger Agreement) with
respect to BGS which condition or event shall not have been ameliorated such
that it no longer constitutes a Material Adverse Change within 10 business days
following receipt by BGS of notice from BMC.
By BGS. BGS may terminate the Merger Agreement if (i) there has been a
breach by BMC of its representations and warranties set forth in the Merger
Agreement if such breach could reasonably be expected to result in a Material
Adverse Effect on BMC or BMC fails to perform and comply, in all material
respects,
4
<PAGE> 13
with all covenants required by the Merger Agreement, and BMC fails to cure such
breach within 15 business days after written notice thereof from BMC or (ii)
there has been since September 30, 1997, a Material Adverse Change with respect
to BMC which condition or event shall not have been ameliorated such that it no
longer constitutes a Material Adverse Change within 10 business days following
receipt by BMC of notice from BGS.
TERMINATION FEE
Upon termination of the Merger Agreement under certain specific
circumstances, BGS will be required to reimburse BMC for all fees and expenses
incurred by BMC or Merger Sub (the "Reimbursement Amount") or to pay to BMC a
termination fee of $9 million, which amount includes the Reimbursement Amount.
For a specific list of such circumstances, see "Certain Terms of the Merger
Agreement -- Expenses and Termination Fee." Moreover, some of those events will
also cause the Options to become exercisable. For information regarding these
events, see "Stockholder Agreements."
ASSUMPTION OF BGS OPTIONS
As of the Effective Time, each BGS Option that remains unexercised in whole
or in part will be assumed by BMC and will become an option to purchase, in lieu
of the shares of BGS Common Stock previously subject thereto, that number of
shares of BMC Common Stock equal to the product of the number of shares of BGS
Common Stock subject to the BGS Option multiplied by the Exchange Ratio. The
exercise price per share of BMC Common Stock subject to each option so assumed
will be equal to the previous exercise price per share under the BGS Option
divided by the Exchange Ratio. Assuming that no shares of BGS Common Stock are
issued subsequent to the Record Date and prior to the Effective Time on exercise
of any BGS Options and assuming an exchange ratio of 0.620 (based on a $72.625
BMC share price), BMC will be required to reserve for issuance an aggregate of
430,776 shares of BMC Common Stock for such purpose. See "Certain Terms of the
Merger Agreement -- BGS Options."
INDEMNIFICATION
The Merger Agreement also provides that (i) BMC will indemnify the present
or former directors and officers of BGS to the fullest extent that BGS is
permitted under applicable law, indemnification agreements and BGS articles and
bylaws and (ii) for a period of six years after the Effective Time, BMC will,
subject to certain limitations, cause to be maintained in effect BGS's current
directors' and officers' liability insurance, or policies that are substantially
equivalent thereto. See "Certain Terms of the Merger Agreement --
Indemnification."
STOCKHOLDER AGREEMENTS
BMC and Harold S. Schwenk, Jr., Jeffrey P. Buzen and Judith N. Goldberg,
directors of BGS, and their affiliates, owning an aggregate of 3,357,908 shares
of BGS Common Stock (representing approximately 52.2% of the outstanding BGS
Common Stock), have entered into Stockholder Agreements in connection with, and
as an inducement for, the execution and delivery of the Merger Agreement by BMC
and Merger Sub. Under the Stockholder Agreements, these stockholders have
granted to BMC an irrevocable option to purchase all of their shares of BGS
Common Stock for an exercise price of $45 per share, which option is exercisable
only after the occurrence of certain specific events. These events, in general,
involve the withdrawal or modification of the favorable recommendation of the
Merger by the BGS Board of Directors or the failure of the stockholders of BGS
to approve the Merger Agreement after the public announcement of, or the
disclosure to the BGS Board of Directors of, a Superior BGS Transaction
Proposal. For a specific list of such events, see "Certain Terms of the Merger
Agreement -- Termination of the Merger Agreement" and "Stockholder Agreements."
The Options expire upon consummation of the Merger. In addition, such
stockholders have agreed to vote, and have granted a proxy to BMC to vote, all
of the shares of BGS Common Stock owned by them in favor of the Merger
Agreement.
5
<PAGE> 14
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and should,
therefore, constitute a non-taxable transaction for holders of BGS Common Stock,
except to the extent of cash received, if any, in lieu of fractional shares of
BMC Common Stock or pursuant to the exercise of dissenters' appraisal rights.
For a discussion of these and other federal income tax considerations in
connection with the Merger, see "The Merger -- Certain Federal Income Tax
Consequences."
ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a "pooling of interests" for
financial accounting purposes. See "The Merger -- Accounting Treatment."
APPRAISAL RIGHTS
Under Massachusetts law, BGS stockholders who file written notice of their
intention to exercise dissenters' rights before the taking of the vote and who
do not vote to approve the Merger Agreement may elect to have the "fair value"
of their shares (determined in accordance with Massachusetts law) judicially
appraised and paid to them if the Merger is completed and if they further comply
with Sections 86 to 98, inclusive, of the MBCL. Failure to comply strictly with
such requirements may result in the loss of dissenters' rights. BMC's obligation
to complete the Merger is subject to the condition, waivable at the discretion
of BMC, that the holders of not more than 5% of the outstanding shares of BGS
Common Stock shall have validly exercised such rights. See "The Merger -- BGS
Stockholder Appraisal Rights."
EXCHANGE OF BGS COMMON STOCK CERTIFICATES
Promptly after consummation of the Merger, BMC will mail a letter of
transmittal with instructions to each holder of record of BGS Common Stock
immediately before the Effective Time for use in exchanging certificates
formerly representing shares of BGS Common Stock for certificates representing
shares of BMC Common Stock and cash in lieu of any fractional shares.
Certificates should not be surrendered by the holders of BGS Common Stock until
they have received the letter of transmittal from BMC. For more detailed
information in this regard, see "Certain Terms of the Merger Agreement -- Manner
and Basis of Converting Shares."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Board of Directors and management of BGS have
certain interests in the Merger that are in addition to the interests of
stockholders of BGS generally, including salary continuation arrangements in the
event the employment of such members of management is terminated involuntarily
without cause. See "The Merger -- Interests of Certain Persons in the Merger."
In addition, pursuant to the Merger Agreement, BMC has agreed to indemnify each
present and former director and officer of BGS against liabilities or expenses
incurred in connection with claims relating to matters at or prior to the
Effective Time to the fullest extent BGS would have been permitted to indemnify
such persons, and to maintain in effect directors' and officers' liability
insurance for their benefit. See "Certain Terms of the Merger
Agreement -- Indemnification." The Board of Directors of BGS was aware of these
interests and considered them, among other matters, in approving and adopting
the Merger Agreement and the transactions contemplated thereby.
MANAGEMENT AND OTHER INFORMATION
After the consummation of the Merger, BGS will be a wholly owned subsidiary
of BMC, and all of BGS's subsidiaries will be indirect wholly owned subsidiaries
of BMC. After the consummation of the Merger, BMC
6
<PAGE> 15
will be managed by its same Board of Directors and executive officers as existed
prior to the Merger. See "Management and Other Information."
COMPARATIVE RIGHTS OF BGS AND BMC STOCKHOLDERS
Rights of stockholders of BGS are currently governed by the MBCL, the
Articles of Organization, as amended, of BGS (the "BGS Charter") and BGS's
By-Laws, as amended (the "BGS Bylaws"). Upon consummation of the Merger, BGS
stockholders will become stockholders of BMC and their rights as stockholders of
BMC will be governed by the Delaware General Corporation Law ("DGCL"), the
Restated Certificate of Incorporation of BMC (the "BMC Charter") and BMC's
By-Laws, as amended (the "BMC Bylaws"). There are various differences between
the rights of BGS stockholders and the rights of BMC stockholders. See
"Comparative Rights of BMC and BGS Stockholders" and "Description of BMC Capital
Stock."
RISK FACTORS
For a discussion of certain considerations with respect to the Merger and
the business and operations of BMC and BGS that should be considered by a
stockholder before determining how to vote at the Special Meeting, see "Risk
Factors."
MARKET PRICE AND DIVIDEND DATA
Market Prices. BMC Common Stock and BGS Common Stock are included in the
National Association of Securities Dealers Automated Quotations System
("Nasdaq") and designated on the Nasdaq National Market under the symbols "BMCS"
and "BGSS," respectively. The following table sets forth, for the periods
indicated, the range of high and low per share sales prices for BMC Common Stock
and BGS Common Stock as reported on Nasdaq.
<TABLE>
<CAPTION>
BMC BGS
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1995*
Second Quarter........................................ $20.25 $13.81 $16.38 $14.00
Third Quarter......................................... 25.75 17.25 18.25 16.00
Fourth Quarter........................................ 23.13 16.25 21.00 17.38
1996*
First Quarter......................................... 30.69 18.63 18.63 17.25
Second Quarter........................................ 33.88 26.63 25.00 14.88
Third Quarter......................................... 43.13 25.38 23.50 19.50
Fourth Quarter........................................ 46.75 39.25 27.38 21.00
1997*
First Quarter......................................... 51.00 39.75 32.50 23.75
Second Quarter........................................ 58.63 39.63 32.25 27.50
Third Quarter......................................... 69.50 53.13 30.25 27.50
Fourth Quarter........................................ 71.25 54.75 38.00 28.00
1998*
First Quarter (through February 12)................... 75.25 58.50 45.50 31.50
</TABLE>
- ---------------
* Calendar quarters. BMC's fiscal year ends on March 31, and BGS's fiscal year
ends on January 31.
7
<PAGE> 16
On January 30, 1998, the last trading day prior to the date of the
announcement that BMC and BGS had entered into the Merger Agreement, the closing
per share sales prices of BMC Common Stock and BGS Common Stock, as reported on
Nasdaq, were $67.75 and $36.50, respectively. See the cover page of this Proxy
Statement/Prospectus for recent closing prices of BMC Common Stock and BGS
Common Stock.
Following the Merger, BMC Common Stock will continue to be traded on the
Nasdaq National Market, and there will be no further market for the BGS Common
Stock.
Dividends. No cash dividends were declared or paid on BMC Common Stock
during any of the calendar quarters indicated in the table above.
In each of the calendar quarters indicated in the table above, BGS declared
and paid a cash dividend ranging from $.13 to $.30 per share of BGS Common Stock
for the immediately preceding calendar quarter. In addition to the regular
quarterly dividend, the BGS Board of Directors authorized the payment of special
dividends of $.70 and $.63 per share in the fourth quarters of fiscal years 1995
and 1996, respectively. On November 24, 1997 the Board of Directors of BGS
declared a cash dividend of $.30 per share of BGS Common Stock payable to
stockholders of record at the close of business on December 22, 1997. The Merger
Agreement provides that BGS may continue to declare and pay dividends in
accordance with past practice not to exceed $.30 per share per quarter. On
February 12, 1998, the Board of Directors of BGS declared a cash dividend of
$.30 per share of BGS Common Stock payable to stockholders of record at the
close of business on February 26, 1998. The Board of Directors of BMC does not
intend to pay any dividends on the outstanding shares of BMC Common Stock.
8
<PAGE> 17
BMC
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical financial information for each of the
years ended March 31, 1993 through 1997 have been derived from BMC's
Consolidated Financial Statements, which have been audited by Arthur Andersen
LLP, independent public accountants. The selected consolidated financial data as
of December 31, 1996 and December 31, 1997 and for the nine months ended
December 31, 1996 and 1997 have been derived from the unaudited consolidated
financial statements of BMC, have been prepared on the same basis as the other
financial statements of BMC and, in the opinion of BMC, reflect and include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations of BMC for
such periods. This historical information should not be considered to be
indicative of future results for a variety of reasons, including without
limitation, those set forth under the heading "Risk Factors." For additional
information regarding plans and objectives of management for future operations
and financial condition and results of operations, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in BMC's
Annual Report on Form 10-K for the year ended March 31, 1997 and its Quarterly
Report on Form 10-Q for the quarter ended December 31, 1997 incorporated by
reference herein. The information set forth below is qualified by reference to
and should be read in conjunction with the consolidated financial statements and
related notes included in BMC's Annual Report on Form 10-K for the year ended
March 31, 1997 and its Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997 incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED MARCH 31,(1) ENDED DECEMBER 31,(1)
-------------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- -------- -------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues....... $238,500 $288,500 $345,000 $428,850 $563,210 $402,610 $517,125
Operating income..... $ 86,085 $ 79,904 $108,628 $147,589 $217,024 $145,434 $140,901
Net earnings......... $ 65,386 $ 56,489 $ 77,517 $105,571 $163,872 $110,459 $ 99,136
======== ======== ======== ======== ======== ======== ========
Basic earnings per
share(2)........... $ 0.63 $ 0.54 $ 0.77 $ 1.05 $ 1.63 $ 1.10 $ 0.98
Shares used in
computing basic
EPS(2)............. 103,377 104,226 101,024 100,329 100,508 100,582 101,432
======== ======== ======== ======== ======== ======== ========
Diluted earnings per
share(2)........... $ 0.62 $ 0.54 $ 0.76 $ 1.01 $ 1.53 $ 1.03 $ 0.92
Shares used in
computing diluted
EPS(2)............. 104,708 104,608 101,952 104,572 107,155 106,921 108,155
======== ======== ======== ======== ======== ======== ========
Dividends declared(3).. -- -- -- -- -- -- --
Dividends declared
per share(3)....... -- -- -- -- -- -- --
Working capital...... $ 74,449 $ 29,429 $ 35,166 $ 43,775 $ 43,719 $ 51,733 $ 32,144
Total assets......... $378,652 $417,527 $502,649 $608,218 $844,159 $788,567 $956,004
</TABLE>
- ---------------
(1) Includes the impact of charges related to technology acquisitions.
(2) Earnings per share and share amounts have been calculated in conformity with
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." SFAS No. 128 requires dual presentation of earnings per share; basic
and diluted.
(3) BMC has not declared any dividends in the last five years and currently
intends to retain earnings for use in its business.
9
<PAGE> 18
BGS
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information as of
and for each of the years ended January 31, 1993 through 1997 have been derived
from BGS's consolidated financial statements, which have been audited by Ernst &
Young LLP, independent auditors. The selected historical consolidated financial
information as of October 31, 1996 and 1997 and for the nine months ended
October 31, 1996 and 1997 have been derived from the unaudited consolidated
financial statements of BGS. The unaudited historical consolidated financial
statements include all adjustments, consisting of normal recurring adjustments
which BGS considers necessary for a fair presentation of the financial position
and results of operations for these periods. This historical information should
not be considered to be indicative of future results for a variety of reasons,
including without limitation, those set forth under the heading "Risk Factors."
The information below should be read in conjunction with the consolidated
financial statements, related notes and other financial information incorporated
by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JANUARY 31,(1) OCTOBER 31,(1)
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $30,322 $32,052 $35,381 $41,056 $48,578 $33,847 $40,308
Operating income.......... $ 8,866 $ 9,463 $10,583 $11,429 $12,981 $ 9,072 $11,311
Net income................ $ 6,727 $ 7,195 $ 7,405 $ 7,982 $ 9,113 $ 6,491 $ 7,376
======= ======= ======= ======= ======= ======= =======
Basic earnings per
share(2)................ $ 1.07 $ 1.13 $ 1.19 $ 1.28 $ 1.46 $ 1.04 $ 1.17
Shares used in computing
basic EPS(2)............ 6,258 6,347 6,202 6,223 6,256 6,254 6,285
======= ======= ======= ======= ======= ======= =======
Diluted earnings per
share(2)................ $ 1.05 $ 1.12 $ 1.19 $ 1.27 $ 1.44 $ 1.03 $ 1.14
Shares used in computing
diluted EPS(2).......... 6,413 6,447 6,233 6,264 6,344 6,326 6,447
======= ======= ======= ======= ======= ======= =======
Dividends declared........ $ 8,210 $ 6,289 $ 6,809 $ 7,009 $ 5,785 $ 3,908 $ 5,660
Dividends declared per
share................... $ 1.30 $ 1.00 $ 1.10 $ 1.13 $ 0.93 $ 0.63 $ 0.90
Working capital........... $13,567 $12,301 $11,934 $ 7,220 $ 7,056 $ 9,303 $ 9,498
Total assets.............. $27,984 $28,192 $31,093 $35,381 $40,934 $33,502 $43,762
</TABLE>
- ---------------
(1) Reflects the effect of a two-for-one stock split declared in the year ended
January 31, 1997 for all periods presented.
(2) Earnings per share and share amounts have been calculated in conformity with
SFAS No. 128. SFAS No. 128 requires dual presentation of earnings per share;
basic and diluted.
10
<PAGE> 19
COMPARATIVE PER SHARE DATA
Set forth below are the net income and book value per common share data for
BMC and BGS on an historical basis and on a pro forma basis for BMC. The BMC pro
forma data was derived by combining historical consolidated financial
information of BMC and BGS using the pooling of interests method of accounting
for business combinations. The equivalent pro forma data for BGS was calculated
by multiplying the BMC pro forma per common share data by the calculated
Exchange Ratio of 0.620 (based on a $72.625 BMC share price). While BGS paid
regular cash dividends ranging from $.075 to $.30 per share of BGS Common Stock
during each calendar quarter of each period presented and special cash dividends
of $.70 and $.63 per share in the fourth quarters of fiscal years 1995 and 1996,
respectively, BMC paid no dividends during such periods.
The information set forth below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related
notes of BMC and BGS incorporated by reference in this Proxy
Statement/Prospectus and the unaudited pro forma condensed financial information
and notes thereto included elsewhere in this Proxy Statement/Prospectus.
BMC
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED MARCH 31, ENDED
--------------------------- DECEMBER 31,
1995 1996 1997 1997
------- ------- ------- ------------
<S> <C> <C> <C> <C>
HISTORICAL PER COMMON SHARE DATA:
Income from continuing operations:
Basic.......................................... $ 0.77 $ 1.05 $ 1.63 $ 0.98
Diluted........................................ $ 0.76 $ 1.01 $ 1.53 $ 0.92
Cash dividends.................................... $ -- $ -- $ -- $ --
Book value........................................ $ 3.03 $ 3.84 $ 5.45 $ 6.18
PRO FORMA PER COMMON SHARE DATA:
Income from continuing operations:
Basic.......................................... $ 0.81 $ 1.09 $ 1.66 $ 1.01
Diluted........................................ $ 0.81 $ 1.05 $ 1.56 $ 0.95
Cash dividends.................................... $ -- $ -- $ -- $ --
Book value........................................ $ 3.05 $ 3.84 $ 5.43 $ 6.13
</TABLE>
BGS
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED JANUARY 31, ENDED
--------------------------- OCTOBER 31,
1995 1996 1997 1997
------- ------- ------- -----------
<S> <C> <C> <C> <C>
HISTORICAL PER COMMON SHARE DATA:
Income from continuing operations:
Basic.......................................... $ 1.19 $ 1.28 $ 1.46 $ 1.17
Diluted........................................ $ 1.19 $ 1.27 $ 1.44 $ 1.14
Cash dividends.................................... $ 1.10 $ 1.13 $ 0.93 $ 0.90
Book value........................................ $ 2.21 $ 2.39 $ 2.91 $ 3.36
PRO FORMA PER COMMON SHARE DATA:
Income from continuing operations:
Basic.......................................... $ 0.50 $ 0.68 $ 1.03 $ 0.63
Diluted........................................ $ 0.50 $ 0.65 $ 0.97 $ 0.59
Cash dividends.................................... $ -- $ -- $ -- $ --
Book value........................................ $ 1.89 $ 2.38 $ 3.37 $ 3.80
</TABLE>
11
<PAGE> 20
RISK FACTORS
The following risk factors should be considered by BGS stockholders in
evaluating whether to approve the Merger Agreement. These risk factors should be
considered in conjunction with the other information included in this Proxy
Statement/Prospectus.
FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus includes forward looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical facts included or
incorporated by reference in this Proxy Statement/Prospectus, including, without
limitation, statements regarding BMC's, BGS's or the Surviving Corporation's
future financial position, business or product strategies, budgets, projected
costs and plans and objectives of management for future operations, are forward
looking statements. Although BMC and BGS believe their expectations reflected in
such forward looking statements are based on reasonable assumptions, no
assurance can be given that such expectations will prove to have been correct.
There are a number of important factors that could cause actual results to
differ materially from those indicated by such forward looking statements. Such
factors include, but are not limited to, those set forth below. All subsequent
written or oral forward looking statements attributable to BMC or BGS, or
persons acting on their behalf, are expressly qualified in their entirety by the
foregoing cautionary statements.
RISKS RELATING TO THE MERGER
Integration of Operations; Retention of Key BGS Personnel. The integration
of BGS's operations following the Merger will require the dedication of
management resources, which will temporarily detract from attention to the
day-to-day business of the combined company. The difficulties of integration may
be increased by the necessity of integrating personnel with disparate business
backgrounds and combining two different corporate cultures. The retention of key
BGS employees is critical to ensure continued advancement, development and
support of BGS's technology as well as on-going sales and marketing efforts. BMC
intends to implement a retention program for key BGS employees; however, no
assurance can be given that such program will be successful and that key BGS
employees will remain employed by BMC. In addition, the two companies have
differences in operating policies and practices which may cause attrition of
other employees. There can be no assurance that the combined company will be
able to retain technical, sales or marketing personnel after the Merger. There
also can be no assurance that the combined company's ability to increase or
maintain revenues will not be diminished by product transitions, loss of
personnel or other factors resulting from the Merger. Moreover, since BMC plans
to keep substantially all of BGS's employees at BGS's principal office in
Massachusetts, BMC will be required to manage for the first time a significant
fully staffed business unit at a location distant from BMC's headquarters. As a
result, BMC may experience additional difficulties in integrating its management
policies into BGS's operations.
Integration of Products. BGS's strategic benefit to BMC will depend in part
on the successful integration of BMC's PATROLH product suite with BGS's BEST/1
products. The successful integration of complex software products having
different origins is difficult to predict and to achieve. There can be no
assurance that these product integration efforts will meet expectations.
Merger Related Expenses. In connection with the Merger, BMC and BGS expect
to incur Merger related expenses, currently estimated to be in the range of $8
million to $10 million, consisting primarily of fees paid to investment bankers
hired by both BMC and BGS and legal and accounting fees and expenses, and other
related charges. These expenses will be charged to operations in the fiscal
quarter in which the Merger is consummated. This amount is a preliminary
estimate only and is therefore subject to change. In addition, there can be no
assurance that BMC will not incur additional charges associated with the Merger
in subsequent quarters.
Floating Exchange Ratio. As a result of the Merger, each outstanding share
of BGS Common Stock will be converted into the right to receive a fraction of a
share of BMC Common Stock, with the numerator of such fraction being $45 and the
denominator being the average of the closing sales prices of BMC Common
12
<PAGE> 21
Stock on each of the ten trading days in the period ending on the third trading
day proceeding the Special Meeting. The closing price for BMC Common Stock on
the Nasdaq National Market on January 30, 1998, the last trading day prior to
public announcement of the Merger, was $67.75. At that price, the Exchange Ratio
would be 0.664. The Merger Agreement places no maximum or minimum limits on the
Exchange Ratio or the number of shares of BMC Common Stock that BMC will issue
in the Merger. This arrangement protects the BGS stockholders from a decline in
the price per share of BMC Common Stock between the signing of the Merger
Agreement and the Effective Time. Nonetheless, if the price per share of BMC
Common Stock were to decline significantly from present levels, BMC would be
required to issue a greater number of shares in the Merger than anticipated,
which would reduce future earnings per share of the combined company. If the
price per share of BMC Common Stock were to increase from present levels, BGS
stockholders would receive fewer shares of BMC Common Stock.
Customers. There can be no assurance that customers of BMC and BGS will
continue their current buying patterns during the pendency of, and following,
the Merger. Any significant delay or reduction in orders for BMC's or BGS's
products could have a material adverse effect on the combined company's
business, financial condition and results of operations.
Possibility of Short-term Dilution of Interest. At an assumed Exchange
Ratio of 0.620 (which would be the case at a $72.625 BMC share price), a number
of shares equal to approximately 4% of BMC's outstanding Common Stock would be
issued to the BGS stockholders and reserved for issuance to holders of BGS
Options upon consummation of the Merger. Depending on the number of BMC shares
actually issued, there could be a dilution of BMC earnings per share, which may
negatively impact BMC's stock price in the near term. However, there can be no
assurance that BMC's stock price would not continue to be negatively impacted
from any such dilution of BMC earnings per share, or that the pro forma
financial presentation will be indicative of actual results. See
"Summary -- Comparative Per Share Data."
RISKS AFFECTING BMC
Variability of Operating Results. BMC's future operating results may vary
substantially from period to period. The results of BMC's operating results for
the quarter ended December 31, 1997, are not necessarily indicative of results
for following periods, including the fiscal year ended March 31, 1998.
Expectations of, and forecasts and projections by BMC and others are by their
nature forward looking statements. Numerous important factors, risks and
uncertainties affect BMC's operating results and could cause BMC's actual
results to differ materially from the results implied by such forward looking
statements made by, or on behalf of, BMC. These important factors, risks and
uncertainties include, but are not limited to, those described in the following
paragraphs and BMC's Annual Report on Form 10-K for the fiscal year ended March
31, 1997.
Volatility of Stock Price. BMC's stock price has been and is highly
volatile. Future revenues, earnings and stock prices may be subject to wide
swings, particularly on a quarterly basis, in response to variations in
operating and financial results, anticipated revenue and/or earnings growth
rates, competitive pressures and other factors. The stock price of software
companies in general, and BMC in particular, is based on expectations of
sustained future revenue and earnings growth. Any failure to meet anticipated
revenue and earnings levels in a period or any negative change in BMC's
perceived long-term growth prospects would likely have a significant adverse
effect on BMC's stock price. The growth rates of BMC's license revenues, total
revenues, net earnings and earnings per share have accelerated over the last 24
months. BMC's current valuation reflects expectations based in part on these
higher rates of growth. BMC may not achieve, in future periods, these relatively
higher rates of growth.
Unpredictability of License Revenues. The timing and amount of BMC's
license revenues are subject to a number of factors that make estimation of
operating results prior to the end of a quarter extremely uncertain. BMC
generally operates with little or no sales backlog and, as a result, license
revenues in any quarter are dependent upon contracts entered into or orders
booked and shipped in that quarter. Most of BMC's sales are closed at the end of
each quarter, and there has been and continues to be a trend toward larger
enterprise license transactions, which can have sales cycles of up to a year or
more and require approval by a customer's upper management. These transactions
are typically difficult to manage and predict. Failure to close an
13
<PAGE> 22
expected individually significant transaction could cause BMC's revenues and
earnings in a period to fall short of expectations. Other factors that may cause
significant fluctuations in BMC's quarterly revenues include competition,
industry or technological trends, customer budgetary decisions, mainframe
processing capacity growth, general economic conditions or uncertainties,
mainframe industry pricing and other trends, announcements of new hardware or
software products and the timing of price increases. BMC generally does not know
whether revenues and earnings will meet expected results until the final days or
day of a quarter.
Risks of Revenue Shortfalls. BMC's operating expenses are to a large extent
fixed in the short term so that BMC has very limited ability to adjust its
planned expenses if revenues fail to meet expectations; therefore, if near-term
demand for BMC's products weakens in a given quarter, there could be an
immediate, material adverse effect on net revenues and operating results, which
would likely result in a precipitous drop in its stock price.
Seasonality of Results. BMC has historically realized greater revenues and
net earnings in the latter half of its fiscal year; the quarter ending December
31 coincides with the end of customers' annual budgetary periods and the quarter
ending March 31 coincides with the end of BMC's annual sales plans and fiscal
year. For the same reasons, BMC has typically reported lower or flat revenues in
the first two quarters of a fiscal year than in the last two quarters of the
previous year, resulting in lower operating margins in the first two quarters.
BMC historically has generated greater revenues in the third and fourth quarters
while maintaining lower rates of expense growth and expanded operating margins.
Past financial performance is not a reliable indicator of future performance,
and there can be no assurance that this pattern will be maintained.
Management Changes. In the nine months ended December 31, 1997, BMC
announced several executive management and organizational changes, including its
Chief Operating Officer, Senior Vice President, Research and Development, and
Senior Vice President, European Sales. BMC may make other management and
organizational changes in the future. Organizational and management changes are
intended to enhance competitiveness, productivity and execution; however, there
can be no assurance that they will produce the desired results.
Margin Risks. BMC's operating margins (exclusive of charges for acquired
research and development costs) have ranged from 37% to 45% in recent quarters,
which is at the high-end of the range for peer companies. BMC does not expect
future margin expansion. Further, since research and development, sales, support
and distribution costs for client/server software products are generally higher
than for mainframe products, operating margins will experience more pressure as
the mix of BMC's business continues its shift to client/server revenues. The
Company is continuing to develop indirect channel relationships to increase its
coverage and presence in a cost effective manner. There can be no assurance,
however, that this strategy will be successful. If BMC's direct sales force
remains the primary channel for its client/server products, its selling and
marketing expenses could increase and operating margins could be reduced.
Risks of International Operations. Future operating results are also
dependent on sustained performance improvement by BMC's international offices,
particularly its European operations. Revenue growth by BMC's European
operations has been slower than revenue growth in North America, and in an
effort to improve its European performance, BMC has recently replaced the head
of its European operations. There can be no assurance that BMC will be
successful in accelerating the revenue growth of its European operations. BMC's
operations and financial results internationally could be significantly
adversely affected by several risks such as changes in foreign currency exchange
rates, sluggish regional economic conditions and difficulties in staffing and
managing international operations. Many systems and applications software
vendors are experiencing difficulties internationally. In particular, the recent
Asian economic crisis has resulted in customer budget cuts and financial
uncertainty. Approximately 5% of BMC's revenues are generated in the Pacific Rim
region.
IBM Competition. BMC derived approximately 69% of its revenues in the third
quarter of fiscal 1998 from software products for IBM and IBM-compatible
mainframe computers; approximately 53% of total revenues and a higher percentage
of earnings were contributed by BMC's high speed utilities for IMS and DB2
administration products. IBM continues to focus on reducing the overall software
costs associated with the OS/390 mainframe platform. Further, IBM continues,
directly and through third parties, to enhance its
14
<PAGE> 23
utilities for IMS and DB2 to provide lower cost alternatives to those provided
by BMC and other independent software vendors. IBM has significantly increased
its level of activity in the IMS and DB2 high speed utility markets over the
last twelve months. BMC has traditionally maintained sufficient performance and
functional advantages over IBM's base utilities to justify its pricing
differential although there can be no assurance that it will continue to
maintain such advantages.
Risk of Reduced Enterprise License Fees. Fees from enterprise license
transactions remain fundamental components of BMC's revenues. In the third
quarter of fiscal 1998, enterprise license fees for future additional processing
capacity and license restructurings comprised approximately 25% of total
revenues. These revenues are dependent upon BMC's customers' continuing to
perceive an increasing need to use BMC's existing software products on
substantially greater mainframe processing capacity in future periods. BMC
believes that the demand for enterprise licenses has been driven by customers'
re-commitment over the last 24 to 36 months to the OS/390 mainframe platform for
large scale, transaction intensive information systems. Whether this trend will
continue is difficult to predict. If BMC's customers' processing capacity growth
were to slow and/or if such customers were to perceive alternatives to relying
upon BMC's current mainframe products, BMC's revenues would be adversely
impacted.
Risks of Price Competition. Capacity-based upgrade fees associated with
both current and future processing capacity contributed 29% of total revenues in
the third quarter of fiscal 1998. The charging of upgrade fees based on CPU tier
classifications is standard among mainframe systems software vendors, including
IBM. While BMC believes its current pricing policies properly reflect the value
provided by its products, the pricing of mainframe systems software is under
constant pressure from customers and competitive vendors, including IBM. IBM
continues to reduce the costs of its mainframe systems software to increase the
overall cost competitiveness of its mainframe hardware and software products.
IBM also generally charges significantly less for its software products. These
actions continue to increase pricing pressures within the mainframe systems
software markets.
Competition in Systems Management Market. BMC's growth prospects depend
heavily on the continued success of its existing client/server products,
including PATROL, and those anticipated to be introduced in the future. The
client-server systems and application management markets in which BMC operates
are far more crowded and competitive than its traditional mainframe systems
management markets. BMC has experienced long development cycles and product
delays in the past, particularly with some of its client/server products, and
expects to have delays in the future. Delays in new mainframe or client/server
product introductions or less-than-anticipated market acceptance of these new
products are possible and would have an adverse affect on BMC's revenues and
earnings. New products or new versions of existing products may, despite
testing, contain undetected errors or bugs that will delay the introduction or
adversely affect commercial acceptance of such products. The enterprise systems
management market that BMC's client/server products address is characterized by
rapid change and intense competition that continues to increase as vendors
within the broader markets converge. Certain of BMC's competitors and potential
competitors have significantly greater financial, technical, sales and marketing
resources than the Company and greater experience in client/server development
and sales. A key factor in determining the success of BMC's products,
particularly its client/server offerings, will be their ability to interoperate
and perform well with existing and future leading database management systems
and other systems software products supported by BMC's products. Maintaining
this interoperability has greatly increased the complexity of BMC's product
development and support activities. While BMC believes its products that address
this market, including those under development, will compete effectively, this
market will be relatively unpredictable over the next few years and there can be
no assurance that anticipated results will be achieved.
Reliance on Microsoft. Microsoft Corporation has significantly increased
its focus on developing operating systems, systems management products and
databases that will provide "business-critical" class functionality.
Specifically, Microsoft is aggressively promoting its BackOffice(TM) family of
software products, including its Window NT Server operating system and its SQL
Server relational database management system, as lower cost alternatives to the
UNIX operating systems coupled with relational database management systems from
Oracle Corporation, Sybase, Inc., Informix Corporation and other vendors.
Microsoft could significantly lower software price points in some of BMC's
markets, which could place
15
<PAGE> 24
additional pricing pressure on BMC. Further, Microsoft could choose to develop
competing products for use within Microsoft environments. BMC has invested and
intends to continue to invest in the development of systems management products
for Windows NT and BackOffice environments, but there are numerous uncertainties
associated with BMC's ability to successfully execute this strategy.
Litigation. Litigation seeking to enforce patents, copyrights and trade
secrets is increasing in the software industry. There can be no assurance that
third parties will not assert that their patent or other proprietary rights are
violated by products offered by BMC. Any such claims, with or without merit, can
be time consuming and expensive to defend and could have an adverse effect on
BMC's business, results of operations, financial position and cash flows.
Year 2000 Compliance. BMC is designing and testing the most current
versions of its products to process Year 2000 data without interruption or
errors and believes that these versions are substantially Year 2000 compliant.
BMC may experience migration costs for customers who are not running current
levels of its products. BMC is continually testing its products to assure Year
2000 support and compliance; there can be no assurance, however, that despite
such testing, undetected errors or defects will not exist that could cause a
product to fail to process Year 2000 data correctly. BMC's products are
typically used in high volume information systems that are critical to a
customer's operations, so that business interruptions, loss or corruption of
data or other major problems could have significant adverse consequences to the
customer. At this time, BMC is not aware of any material operational issues or
costs associated with Year 2000 compliance of its own products. BMC is also
unaware of any potential material liabilities or operational difficulties
associated with Year 2000 compliance of its own internal information systems.
RISKS RELATING TO BGS
As a stand-alone company, BGS's business is subject to numerous risks and
uncertainties, including those described below. BGS stockholders should
understand that these and other risks continue to apply to BGS's business if the
Merger is not consummated.
Intense Competition. BGS is engaged in an aggressive plan for product
development, including the addition of products in the Distributed Systems and
Network areas and the extension and renovation of certain of its older products.
These new products expose BGS to new competitive forces and uncertainties. In
addition, the environment of rapid technological change and intense competition
in the software development industry results in frequent new products and
evolving industry standards. BGS's future success is dependent on its ability to
enhance its current products and develop new products on a timely basis that
keep pace with the changes in technology, evolving industry standards and
sophisticated customer needs.
Uncertain Results of Strategic Alliances. BGS has entered into a number of
alliances with other software vendors to use their products in conjunction with
BGS's internally developed products. Not all of these alliances have met with
BGS's expectations, and any future unexpected changes in its strategic alliances
may delay future product introductions and result in added expense.
Dependence on Particular Products. BGS currently derives a significant
portion of its revenue from licenses and related maintenance fees of its
Datacenter and UNIX product lines. Any factor adversely impacting sales of
Datacenter or UNIX products would have a material adverse effect on BGS's
results of operations.
Risks Relating to Foreign Operations. BGS has significant foreign
operations, which are subject to certain economic or regulatory risks and
uncertainties, including foreign exchange fluctuations, unexpected changes in
tariffs and other tax laws, difficulties in staffing and managing foreign
operations, longer collection cycles in certain areas and general economic and
political conditions. Any of these factors may disrupt BGS's foreign operations
and have a material adverse effect on BGS's results of operations.
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<PAGE> 25
Year 2000 Compliance. BGS has committed to have all of its products Year
2000 compliant by the end of April 1998. BGS's mainframe and Visualizer products
are not currently Year 2000 compliant and may not be so compliant by April 1998.
If such compliance is delayed, BGS may be required, under agreements with
certain of its customers, to provide free maintenance during the period in which
the products are not so compliant, which will adversely effect BGS's results of
operations.
THE COMPANIES
BMC
BMC is a leading worldwide provider of high-performance applications and
systems management software products for mainframe and client/server based
information systems. BMC also sells and provides maintenance, enhancement and
support services for its products. BMC's principal customers are transaction and
information intensive enterprises that rely heavily on their computing systems
and are typically Fortune 1000 industrial and service corporations and similarly
sized organizations worldwide. From inception, BMC has focused on addressing
these customers' critical operational problems associated with their computers,
databases and networks. BMC's products are organized into three groups: Data
Management, Application Management and Performance Optimization. BMC distributes
its products through its well-established direct sales force, sales agents, and
through its network of indirect channels including value-added resellers,
enterprise hardware and software vendors and systems integrators.
Historically, BMC developed and sold products that enhanced and improved
the operations of IBM's OS/390 (formerly known as "MVS") mainframe operating
system and IMS and DB2 mainframe database management systems ("DBMSs"). This
remains BMC's principal business. BMC's most important product lines by revenue
and earnings contribution are its high performance utilities for IMS and DB2 and
its database administration products for DB2. The high performance utilities
maximize the availability of large IMS and DB2 databases by providing core
services, such as copying, loading, unloading and reorganizing a database, far
more quickly and efficiently than the utilities native to these databases. The
administrative products for DB2 include a DB2 performance monitor and the change
management products for DB2, which automate routine and repetitive tasks
necessary to the operation of large DB2 databases. The high speed utilities for
IMS and DB2 and the administrative products for DB2 generated approximately 63%
of total revenues in fiscal 1997 and a higher percentage of net earnings.
Beginning in 1994, BMC concentrated its efforts on diversifying into the
client/server systems management market and has invested significantly in its
client/server product strategies to date. Led by the PATROL family of products,
which monitor and manage all of the leading client/server operating systems,
DBMSs and applications, BMC's client/server products generated approximately 19%
of total revenues in fiscal 1997. A key component of BMC's strategy is to
provide superior heterogeneous support for the myriad hardware and software
platforms that comprise large and complex information systems and often span
legacy mainframe and client-server systems. BMC believes that it is well
positioned to meet customers' requirements for broad-based platform support
based on its leadership position as a vendor of systems management tools and
utilities for mainframe computers and since PATROL is architecturally designed
to support multiple platforms with minimal additional development efforts.
MERGER SUB
Merger Sub is a wholly owned subsidiary of BMC incorporated in
Massachusetts on January 30, 1998. Merger Sub has not engaged in any operating
activity.
BGS
BGS designs, develops, markets and supports the BEST/1 Performance
Assurance line of performance management and capacity planning software products
which can measure, analyze, report or predict the performance of a customer's
computer system or network. These software products enable customers to make
more efficient use of their existing hardware, software and computer personnel
resources, and plan for the cost-effective expansion of their computer
operations to meet growing demands. BGS focuses on a single specialty:
performance and capacity management software products. Many of BGS' products
make use of
17
<PAGE> 26
proprietary performance modeling technology as well as intellectual data display
technology, developed by BGS' research staff.
BGS and its BEST/1 Performance Assurance product family are widely known
and recognized as industry leaders in the performance field. The BEST/1
Performance Assurance tools cover a broad range of computing environments
including all major mainframe, midrange and workstation platforms. BGS
performance products support hardware platforms from leading vendors including
IBM System/390 architecture MVS and VM mainframes, IBM AS/400 and OS/2
workstations, UNIX systems including versions from IBM, Hewlett-Packard and Sun,
OpenVMS systems and IBM SNA networks, Microsoft Windows NT, Novell and some
network environments.
BGS also offers custom consulting services to those customers who request
them. These consulting services are generally provided in those cases where the
customer has an unusual business problem to solve which demands special
expertise.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting of stockholders of BGS will be held on
, , 1998, at the , Waltham, Massachusetts
commencing at 10:00 a.m. local time.
PURPOSE OF THE SPECIAL MEETING
The purposes of the Special Meeting are to consider and vote upon (i) a
proposal to approve the Merger Agreement; and (ii) to transact such other
business as may properly come before the Special Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE
Only holders of record of BGS Common Stock at the close of business on the
Record Date (February 18, 1998) are entitled to notice of, and to vote at, the
Special Meeting. There were approximately holders of record of BGS Common
Stock on the Record Date, with shares of BGS Common Stock issued and
outstanding. Each share of BGS Common Stock entitles the holder thereof to one
vote on each matter submitted for stockholder approval. See "Security Ownership
by Certain Beneficial Owners" for information regarding persons known to the
management of BGS to be the beneficial owners of more than 5% of the outstanding
BGS Common Stock.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the
Special Meeting and at any adjournments or postponements thereof in accordance
with the instructions contained therein. If a holder of BGS Common Stock
executes and returns a proxy and does not specify otherwise, the shares
represented by such proxy will be voted "for" approval of the Merger Agreement
in accordance with the recommendation of the Board of Directors of BGS. A
stockholder of BGS who has executed and returned a proxy may revoke it at any
time before it is voted at the Special Meeting by (i) executing and returning a
proxy bearing a later date, (ii) filing written notice of such revocation with
the Clerk of BGS, stating that the proxy is revoked or (iii) attending the
Special Meeting and voting in person.
VOTE REQUIRED
The presence, in person or by proxy, at the Special Meeting of the holders
of a majority of the shares of BGS Common Stock outstanding and entitled to vote
at the Special Meeting is necessary to constitute a quorum at the meeting. The
affirmative vote of the holders of two-thirds of the shares of BGS Common Stock
outstanding and entitled to vote thereon at the Special Meeting is required
under the MBCL to approve the Merger Agreement. In determining whether the
Merger Agreement has received the requisite number of affirmative votes,
abstentions and broker non-votes will have the same effect as a vote against the
Merger Agreement.
At the Record Date for the Special Meeting, the directors and executive
officers of BGS owned approximately 59% of the outstanding shares of BGS Common
Stock entitled to vote at such meeting.
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<PAGE> 27
Harold S. Schwenk, Jr., Jeffrey P. Buzen and Judith N. Goldberg, directors of
BGS, and their affiliates have entered into Stockholder Agreements with BMC
dated January 31, 1998 (the "Stockholder Agreements") whereby they have agreed
to vote all shares of BGS Common Stock owned by them in favor of the Merger
Agreement and granted BMC an option (the "Options") to purchase all of such
shares of BGS Common Stock under certain circumstances. At the Record Date, an
aggregate of 3,357,908 shares of BGS Common Stock (representing approximately
52.2% of the outstanding shares of BGS Common Stock) were subject to the
Stockholder Agreements. See "Stockholder Agreements."
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of BGS may solicit proxies from its stockholders by personal interview,
telephone, telegram or otherwise. BGS will bear the costs of the solicitation of
proxies from its stockholders, except that BMC and BGS will each pay one-half of
the cost of printing this Proxy Statement/Prospectus. Arrangements will also be
made with brokerage firms and other custodians, nominees and fiduciaries who
hold of record voting securities of BGS for the forwarding of solicitation
materials to the beneficial owners thereof. BGS will reimburse such brokers,
custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses
incurred by them in connection therewith. BGS has engaged the services of Boston
EquiServe to distribute proxy solicitation materials to brokers, banks and other
nominees and to assist in the solicitation of proxies from BGS stockholders for
a fee of $5,000 plus reasonable out-of-pocket expenses.
OTHER MATTERS
At the date of this Proxy Statement/Prospectus, the Board of Directors of
BGS does not know of any business to be presented at the Special Meeting other
than as set forth in the notice accompanying this Proxy Statement/Prospectus. If
any other matters should properly come before the Special Meeting, it is
intended that the shares represented by proxies will be voted with respect to
such matters in accordance with the judgment of the persons voting such proxies.
THE MERGER
GENERAL DESCRIPTION OF THE MERGER
At the Effective Time, Merger Sub will be merged with and into BGS, with
BGS being the surviving corporation and continuing as a wholly owned subsidiary
of BMC under the name "BGS Systems, Inc." (the "Surviving Corporation"). In the
Merger, each share of BGS Common Stock outstanding at the Effective Time will be
converted into a fraction of a share of BMC Common Stock equal to $45 divided by
the average closing sales prices of BMC Common Stock, as reported on the Nasdaq
National Market, on each of the last ten consecutive trading days in the period
ending on the third trading day prior to the Special Meeting (the "Exchange
Ratio").
Based on the closing price of BMC Common Stock of $72.625 on February 11,
1998 and the number of shares of BMC Common Stock and BGS Common Stock
outstanding as of the Record Date, 3,922,242 shares of BMC Common Stock will be
issuable pursuant to the Merger Agreement (assuming no exercise prior to the
Effective Time of BGS Options), representing approximately 4% of the total BMC
Common Stock to be outstanding after such issuance.
BACKGROUND
In August 1997, BMC embarked on a strategic review of its business and
began to evaluate a variety of options, one of which was the acceleration of its
application management product strategy through acquisitions. BMC identified
several candidates with the market leadership, sufficient critical mass and
product portfolios that would fit naturally with BMC's existing products. One of
the companies identified was BGS.
Independently of BMC's activities, on September 25, 1997, BGS retained
Broadview as its financial advisor to assist BGS in pursuing and evaluating
strategic alternatives, including a possible acquisition of BGS. BGS and
Broadview identified a group of prospective acquirers, including BMC, based upon
strategic
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rationale, likelihood that they would be willing to pursue a transaction, access
to the necessary financial resources and the need to maintain confidentiality
throughout the process. The potential acquirers were also reviewed in light of
their respective market positions and future opportunities realizable through a
combination.
During the period of October 13 through October 17, 1997, Broadview
contacted a number of potential acquirers to determine their interest in
pursuing an acquisition of BGS. During the same period, BMC contacted BGS to
arrange for preliminary discussions about a potential business combination or
other strategic relationship.
From October 16 through October 23, 1997, several other potential acquirers
entered into confidentiality agreements with respect to evaluating an
acquisition of BGS. From October 28 to December 12, 1997, BGS, together with
Broadview, continued discussions with certain of these potential acquirers, some
of whom, for strategic and other reasons, decided not to pursue a business
combination with BGS. On October 27, 1997, BGS and BMC met to discuss the
possibility of a business combination, with an emphasis on the potential for
integrating the companies' respective product lines. Following this meeting, the
parties agreed to proceed with their evaluations and further discussions. On
November 3, 1997, BMC, BGS and their respective financial advisors met at BMC's
headquarters in Houston, Texas to review BGS's business model and prospects,
potential cultural and technical integration issues and to outline due diligence
requirements. Various due diligence processes then commenced and discussions
continued among the parties and their financial advisors through November and
December 1997. In parallel, BMC proceeded with its internal financial, technical
and operational assessment of a business combination with BGS.
In early January 1998, having determined that a combination of the two
companies fit the strategic objectives of each, BMC and BGS began to discuss the
possibility of the acquisition of BGS by BMC in a stock-for-stock transaction
accounted for as a pooling of interests. BMC, BGS, their respective financial
advisors and BMC's outside counsel met on January 8, 1998, and BMC presented for
the first time its proposed transaction terms. On January 9, 1998, the BGS Board
of Directors confirmed that it was not prepared to accept BMC's proposed pricing
or conditions, particularly the requirements for the stockholder voting
agreement and option and employment and non-competition agreements from a number
of employees of BGS. On the same day, BGS received a proposal to acquire BGS
from another company with which it had held previous discussions. That company
was informed that its proposal would be reviewed by the BGS Board of Directors
at a meeting that had been previously scheduled for January 13, 1998.
On January 13, 1998, the BGS Board of Directors met with representatives of
Broadview to review its alternatives. At this meeting, Broadview delivered a
presentation to the BGS Board of Directors with respect to the financial
considerations regarding various alternatives, including the alternative of
remaining an independent entity. The BGS Board of Directors reviewed the terms
and conditions of the various proposed transactions and concluded that the BMC
proposal was not acceptable based on both price and conditions stipulated by
BMC, including the requirement for employment and non-competition agreements,
that could make a transaction difficult to complete. At the conclusion of this
meeting, the BGS Board of Directors determined that the proposal from BMC was
not acceptable and directed Broadview to so notify BMC and to pursue an
alternative to BMC.
On January 16, 1998, BMC revised its proposal to increase the pricing and
to eliminate the closing conditions for employment and non-competition
agreements for specific employees to reduce the risk to BGS that the transaction
would not close. BMC insisted, however, that to assure BMC that the transaction
would be completed, the primary BGS stockholders must show their commitment by
entering into the stockholder voting and option agreements.
On January 17, 1998, the BGS Board of Directors met to discuss the revised
BMC offer as well as the competing proposal. The BGS Board of Directors and its
financial and legal advisors discussed, among other issues, the issues related
to employee retention and certainty of closure, as well as matters relating to
valuation, structure and terms and conditions of the proposals. In addition, the
BGS Board of Directors discussed the risks to BGS' operations in the future if a
transaction were not consummated, particularly as related to employee morale and
retention and customer perceptions. The BGS Board of Directors determined that,
in
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addition to price, certainty of closure was a primary consideration among the
various alternatives. The BGS Board of Directors directed its financial adviser
and legal counsel to have BMC and the other prospective acquirer each submit for
consideration draft agreements setting forth the terms and conditions to closing
of the respective transactions. Over the period of January 20 to January 26,
1998, BGS representatives reviewed and exchanged draft agreements with BMC and
the other prospective acquirer.
On January 26, 1998, the BGS Board of Directors, together with its
financial and legal advisors, met to review the alternative proposals, including
the agreement provisions. At that meeting, the BGS Board of Directors determined
to proceed with BMC based on the increased pricing and reduced conditions
proposed by BMC, subject to completion of mutual due diligence and the prompt
resolution of certain terms of the proposed Merger Agreement and related
agreements. BGS informed the other potential acquirer that BGS had decided to
pursue a transaction with another party. From January 27 to January 30, 1998,
representatives of BMC and BGS, together with their financial and legal
advisors, met to complete mutual due diligence, the Merger Agreement and all
related agreements.
On January 31, 1998, each of the BMC Board of Directors and the BGS Board
of Directors met separately to consider the proposed Merger Agreement and other
agreements related to the transaction. At the BMC Board of Directors meeting,
BMC's Chief Financial Officer presented a financial and product review of the
proposed combination and the results of the due diligence review of BGS. BMC's
financial advisors presented a review of the pricing of the transaction with BGS
related to other similar transactions, and BMC's general counsel reviewed the
terms of the Merger Agreement and the related agreements.
At the BGS Board of Directors meeting, BGS's management discussed various
aspects of the proposed transaction, including a review of BMC's business
operations and financial condition and the potential marketing and operating
benefits resulting from the Merger. The BGS Board of Directors discussed at
length the nature of the proposal as a strategic combination of complementary
businesses. At the meeting Broadview delivered its opinion that as of such date,
based upon and subject to the various factors and assumptions set forth in its
opinion, the consideration to be received by the BGS stockholders in the Merger
was fair from a financial point of view to the stockholders of BGS and reviewed
in detail the factors it considered in rendering the opinion. In addition,
outside counsel to BGS reviewed the terms of the Merger Agreement and the
related agreements, specifically the stockholder voting agreement and option and
the "break-up fee" payable by BGS should the BGS Board of Directors elect to
pursue a superior offer from a third party, and advised the BGS Board of
Directors as to matters related to the exercise of the Board's fiduciary duties.
Both the BMC Board of Directors and the BGS Board of Directors voted
unanimously to approve the Merger Agreement, the related agreements and the
transactions contemplated thereby. The Merger Agreement and related agreements
were then executed and delivered by the parties.
Prior to the opening of the market on February 2, 1998, BMC issued a news
release announcing the Merger.
BMC'S REASONS FOR THE MERGER
BMC's Board of Directors and management believe the Merger should
strategically benefit BMC by complementing and broadening its PATROL
applications management product line. The success of these PATROL monitoring and
event management products is important to BMC's efforts to diversify its product
line. BGS's software products that model and predict the performance of an
information system as different variables change should complement PATROL's
collection of systems performance statistics. BMC's management further believes
that the BGS BEST/1 products for MVS mainframe systems should fit well into
BMC's mainframe product portfolio and distribution channel.
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BMC's Board of Directors has determined the Merger to be in the best
interests of BMC and its stockholders. In reaching its determination, the Board
of Directors considered a number of factors, including the matters discussed
above and the following:
- the judgment, advice and analyses of BMC's management with respect to the
strategic, financial and potential operational benefits of the Merger,
including its favorable recommendation of the Merger, based in part on
the business, technical, financial, accounting and legal due diligence
investigations performed with respect to BGS;
- the strategic benefits of the Merger to BMC, including the advancement of
its applications management product strategy centered around the PATROL
product line;
- the financial and operational prospects of the combined company;
- the potential for enhanced growth opportunities for the BGS BEST/1
mainframe and open systems products through the supplementation of the
BGS sales channel with BMC's sales and distribution network, particularly
in international markets;
- BGS's significant expertise and established reputation in the domain of
analysis and predictive modeling of systems performance;
- the similarities between BMC's and BGS's cultures, market segments and
distribution channels, which should facilitate integration of the two
companies;
- the results of operations and financial condition of BMC and BGS;
- the historical market prices and trading information with respect to BMC
Common Stock and BGS Common Stock;
- the terms of the Merger Agreement and related agreements, including price
and structure, which were considered by both the Board of Directors and
management of BMC to provide a fair and equitable basis for the Merger;
and
- the ability to effect the Merger as a pooling of interests for financial
accounting purposes.
The BMC Board of Directors considered these benefits as well as the
potentially negative factors that may result from the Merger, including: the
potential dilutive affect on BMC's Common Stock price if revenue and earnings
expectations for BGS are not met; the potential loss of key BGS employees
critical to the ongoing success of the BGS products and to the successful
integration of the PATROL and BEST/1 product lines; the lower rates of BGS's
revenue and earnings growth relative to BMC's over the last two fiscal years;
the general difficulties of integrating software products, technologies and
companies; the possibility of cultural conflicts; and the other risks and
uncertainties discussed above under "Risk Factors."
In analyzing the proposed Merger, the Board of Directors of BMC did not
view any single factor as determinative and did not quantify or assign weight to
any of the factors. Rather, the Board of Directors of BMC made its determination
based upon the total mix of information available to it. In addition, individual
members of the BMC Board of Directors may have given different weight to
different factors.
BGS'S REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS OF BGS
The BGS Board of Directors has determined that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to, and in the best
interests of, BGS and its stockholders. Accordingly, the BGS Board of Directors
has unanimously approved the Merger Agreement and the Merger and unanimously
recommends that the stockholders of BGS vote for approval of the Merger
Agreement.
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The BGS Board of Directors identified a number of reasons for the Merger
and determined that the Merger will meet BGS's strategic objectives. For these
reasons, it believes that the stockholders of BGS should vote for the approval
of the Merger Agreement and the Merger:
- Strong Competition and Lack of Critical Mass. The markets for BGS's
systems management products are highly competitive, consolidating and
characterized by continual technological developments, evolving standards
and rapid changes in customer requirements. Systems administrators are
increasingly faced with the dilemma of purchasing software licenses from
relatively small vendors such as BGS or larger vendors with a greater
breadth of product offerings, larger research and development budgets and
extensive customer support organizations. Many of BGS's competitors have
substantially greater resources, as well as broader name recognition and
deeper customer penetration. While BGS's capacity planning software
modules are relatively unique in the market, BGS competes aggressively
for revenue from limited customer budgets. As BGS continues to penetrate
the high-growth, highly competitive distributed systems and network
management markets, BGS is experiencing the need for critical mass.
Moreover, strong competition and the possible entry of larger competitors
with greater resources continue to drive BGS's need for additional
investment in sales, marketing and product development. The BGS Board of
Directors believes that the combined company, with greater financial
resources, complementary products, a larger customer base and expanded
sales and distribution networks, should enable BGS not only to support
its development efforts and enhance its service to its principal
customers but also to expand its customer base.
- Dependence on New Products and Markets. BGS has recently introduced a
number of performance management software products for use in
client/server computing environments. Management expects these products
to generate a significant portion of BGS's future revenue growth although
the market for performance management software in the client/server
computing environment is relatively new. There can be no assurance that
the market for performance management products in the client/server
computing environment will continue to grow or that BGS will be able to
respond effectively to the evolving requirements of this market. The BGS
Board of Directors believes that the combination of BGS with an entity
with substantial financial resources will enable BGS to appropriately
support these products and engage in further development with respect to
such products.
- Significant Portion of Revenue from Legacy Products. BGS generated 52% of
revenue for the nine month period ended October 31, 1997 from mainframe
and other legacy products. Although the legacy business continues to be a
significant source of revenue generation, new mainframe license sales
have declined at a rate of approximately 10% in each of the past three
years. BGS's future success will increasingly depend on management's
ability to diversify its new license revenue away from the mainframe
products. The BGS Board of Directors believes that the combination of BGS
and BMC will enable BGS to pursue the development of new products and to
capture new customers for such products.
- Dependence on Key Personnel. While BGS has experienced relatively low
employee turnover, its future success and ability to expand the business
is dependent upon hiring and retaining key employees, particularly those
with distributed systems management development and sales experience.
Located in Waltham, Massachusetts, BGS's development, sales and marketing
staff are vulnerable to being recruited by more established information
technology companies and potentially more lucrative start-up
opportunities. Further, the high demand for experienced software
professionals has inflated compensation levels making it more difficult
and expensive to hire skilled software developers. The loss of key
personnel or the inability to hire in this highly competitive employment
market could significantly hamper management's ability to expand the
business quickly enough to remain competitive. The BGS Board of Directors
believes that the consummation of the Merger with BMC will improve
employee morale and stability and give BGS the financial resources it
needs to hire and retain qualified personnel.
- Benefits of Combined Company. The Board of Directors of BGS believes that
the Merger will provide BGS with the opportunity, combined with BMC, to
compete more effectively in its primary markets,
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serve its customers more effectively and develop new products, resulting
in a combination that would be in the best interests of its employees,
customers and stockholders.
In making this determination, the BGS Board of Directors consulted with
management of BGS, as well as its financial advisors and legal counsel, and
considered a number of factors, including without limitation the following:
1. The following terms of the Merger Agreement and the Stockholder
Agreement:
a. The Exchange Ratio based on a fixed dollar value, which reduces the
exposure of holders of BGS Common Stock to the risks of market volatility
prior to completion of the Merger, and the fact that the Merger would
provide holders of BGS Common Stock with the opportunity to receive merger
consideration that represents a premium over the price at which BGS Common
Stock was trading prior to execution of the Merger Agreement.
b. The fact that the Merger would provide holders of BGS Common Stock
with the opportunity to retain an equity interest in the combined entity
having a much larger market float and greater liquidity.
c. The likelihood of consummation of the Merger, despite certain
conditions to the consummation of the Merger and circumstances under which
BMC can terminate the Merger Agreement. See "Certain Terms of the Merger
Agreement -- Conditions to the Merger," "-- Termination of the Merger
Agreement" and "-- Expenses and Termination Fee."
d. The fact that the Merger Agreement prohibits BGS directly or
indirectly from soliciting or knowingly encouraging submission of any
proposals or offers in connection with a BGS Transaction Proposal (as
defined herein under "Certain Terms of the Merger Agreement -- No
Solicitation") or participating in any discussions or negotiations with any
person regarding a BGS Transaction Proposal or agreeing with any person in
connection with a BGS Transaction Proposal. However, the Merger Agreement
does permit BGS (conditioned upon the execution of a confidentiality
agreement), based on the receipt of advice from its financial and legal
advisors, as set forth in the Merger Agreement, to furnish non-public
information to, and to enter into discussions or negotiations with, any
person that makes a Superior BGS Transaction Proposal (as defined herein
under "Certain Terms of the Merger Agreement -- No Solicitation") if such
actions are reasonably necessary in order for the BGS Board to comply with
its fiduciary obligations.
e. The provisions of the Merger Agreement that require BGS to pay BMC
a termination fee of $9 million under certain circumstances as described
under "Certain Terms of the Merger Agreement -- Termination of the Merger
Agreement" and "-- Expenses and Termination Fee," and the provisions of the
Stockholder Agreements that permit BMC, under certain circumstances as
described under "Stockholder Agreements", to purchase shares of BGS Common
Stock from certain stockholders at a cash purchase price of $45.00 per
share. Although BGS and the affected BGS stockholders attempted to
negotiate away certain aspects of the Stockholder Agreements, BMC required
the Stockholder Agreements as part of its proposal and the BGS Board of
Directors determined that the negative features of the Stockholder
Agreements and the termination fees were outweighed by the benefits derived
from the Merger Agreement described herein.
f. The treatment of the Merger as a "tax-free reorganization" for
federal income tax purposes and as a "pooling of interests" for accounting
purposes. See "The Merger -- Certain Federal Income Tax Consequences," and
"-- Accounting Treatment."
2. Information concerning BMC's business, historical financial performance,
operations, products and future plans.
3. The opinion of Broadview to the effect that, as of the date of its
opinion, based upon and subject to the various factors and assumptions set forth
therein, the consideration to be received by the BGS stockholders in the Merger
was fair, from a financial point of view, to the BGS stockholders. The text of
Broadview's written opinion, which sets forth the assumptions made, matters
considered and limitations on review undertaken by
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Broadview, is attached hereto as Appendix C and is incorporated herein by
reference. BGS stockholders are urged to read the opinion of Broadview in its
entirety.
4. The opportunity for BGS stockholders to vote on whether to approve the
Merger Agreement and the availability to them of dissenters' appraisal rights.
See "The Merger -- BGS Stockholder Appraisal Rights."
The BGS Board of Directors also considered negative factors relating to the
Merger, including (i) the risk that the benefits sought in the Merger would not
be fully achieved; (ii) the risk that the Merger would not be consummated; (iii)
the effect of the announcement of the Merger on BGS's sales and operating
results and its ability to attract and retain key development and sales
personnel; and (iv) other risks described above under "Risk Factors." The BGS
Board of Directors concluded, however, that the benefits of the Merger to BGS
and its stockholders outweighed the risks associated with these factors.
In view of the wide variety of factors, both positive and negative,
considered by the BGS Board of Directors, the Board did not find it practical
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered.
OPINION OF BGS FINANCIAL ADVISOR
BGS engaged Broadview to act as its financial advisor in connection with
the Merger and to render an opinion regarding the fairness from a financial
point of view of the consideration to be received by BGS stockholders in the
Merger to the BGS stockholders. The BGS Board of Directors selected Broadview as
its financial advisor on the basis of Broadview's reputation and experience in
the Information Technology ("IT") industry, including the computer software
segment in particular, and Broadview's historical relationship and familiarity
with BGS. At the meeting of the BGS Board of Directors on January 31, 1998,
Broadview rendered its written opinion that, as of such date, based upon and
subject to the various factors and assumptions set forth in its opinion, the
consideration to be received by BGS stockholders in the Merger is fair from a
financial point of view to the BGS stockholders. The consideration was
determined pursuant to negotiations between BGS and BMC and not pursuant to
recommendations of Broadview.
A copy of the Broadview opinion, which sets forth assumptions made, matters
considered, and limitations on the review undertaken, is attached as Appendix C
to this Proxy Statement/Prospectus. BGS stockholders are urged to read the
Broadview opinion carefully in its entirety. The Broadview opinion addresses
only the fairness of the consideration to be received by BGS stockholders in the
Merger from a financial point of view and does not constitute a recommendation
to any stockholder of BGS as to how such stockholder should vote at the Special
Meeting. The summary of the Broadview opinion set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion.
In rendering its opinion, Broadview, among other actions: (i) reviewed the
terms of the Merger Agreement and the associated exhibits thereto in the form of
the draft dated January 29, 1998, which draft contained no material differences
from the Merger Agreement; (ii) reviewed the BGS annual report and Form 10-K for
the fiscal years ended January 31, 1997 and 1996, including the audited
financial statements included therein, and the BGS Form 10-Q for the nine months
ended October 31, 1997, including the unaudited financial statements included
therein; (iii) reviewed certain internal financial and operating information
relating to BGS prepared by BGS management; (iv) participated in discussions
with BGS management concerning the operations, business strategy, financial
performance and prospects for BGS; (v) reviewed the recent reported closing
prices and trading activity for BGS Common Stock; (vi) compared certain aspects
of the financial performance of BGS with comparable public companies; (vii)
analyzed available information, both public and private, concerning other
mergers and acquisitions comparable in whole or in part to the Merger; (viii)
reviewed the BMC annual report and Form 10-K for the fiscal year ended March 31,
1997, including the audited financial statements included therein, the BMC Form
10-Q for the six months ended September 30, 1997, including the unaudited
financial statements included therein, and BMC's unaudited financial information
for the nine month period ended December 31, 1997, included in a BMC press
release dated January 22, 1998; (ix) participated in discussions with BMC
management concerning the operations, business strategy, financial performance
and prospects for BMC and its strategic rationale for the Merger; (x) reviewed
the recent reported closing prices and trading activity for BMC Common Stock;
(xi)
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considered the total number of shares of BMC Common Stock outstanding and the
average weekly trading volume of BMC Common Stock; (xii) reviewed recent equity
analyst reports covering BMC; (xiii) analyzed the anticipated effect of the
Merger on the future financial performance of the consolidated entity; (xiv)
assisted in negotiations and discussions related to the Merger among BMC, BGS
and their financial and legal advisors; and (xv) conducted other financial
studies, analyses and investigations as Broadview deemed appropriate for
purposes of its opinion.
In rendering its opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all financial and other
information (including without limitation the representations and warranties
contained in the Agreement) that was publicly available or furnished by BGS, BMC
or BMC's financial advisor. Broadview assumed that the financial and other
information prepared and provided by BGS were reasonably prepared and reflected
the best available information and good faith judgments of the management of BGS
as to the performance of BGS. Broadview did not make or obtain an independent
appraisal or valuation of any of the assets of BGS. With regard to any analyses
relating to valuations of comparable public companies, the share prices used
were for the close of trading on January 30, 1998, the last trading day before
the BGS Board met to give final consideration to the proposed Merger.
The following is a summary explanation of the various sources of
information and valuation methodologies employed by Broadview in conjunction
with rendering its opinion to the BGS Board:
Public Company Comparables Analysis. Total Market Capitalization/Revenue
("TMC/R") and Price/Earnings ("P/E") multiples indicate the value public markets
place on companies in a particular market segment. Several companies are
comparable to BGS based on revenue size, products offered, business model,
management structure and market position. Broadview reviewed seven public
company comparables in the enterprise systems management software market from a
financial point of view including each company's: Trailing Twelve Month ("TTM")
Revenue; TTM Revenue Growth; TTM Operating Margin; 5-year Earnings per Share
("EPS") Compound Annual Growth Rate; Calendar 1998 Projected Revenue; Equity
Market Capitalization; TTM P/E ratio; Price/Forward 1998 Calendar EPS ratio
("Forward P/E"); Growth Adjusted Price/Forward 1998 Calendar EPS ratio ("Growth
Adjusted P/E"); TTM TMC/R ratio; and TMC/Forward 1998 Calendar Revenue ratio
("Forward TMC/R"). The comparable public companies were selected from the
Broadview Barometer, a proprietary database of publicly-traded companies in the
IT industry maintained by Broadview and broken down by industry segment. The
comparable public companies consist of: (i) VERITAS Software Corp.; (ii) BMC
Software, Inc.; (iii) Legato Systems, Inc.; (iv) Network Associates, Inc.; (v)
New Dimension Software Ltd.; (vi) Boole & Babbage, Inc; and (vii) Landmark
Systems Corp.
The comparable companies have a TTM P/E ratio range of 23.0 to 55.1 with a
median of 34.2; Forward P/E ratio range of 19.9 to 55.2 with a median of 22.2;
Growth Adjusted P/E ratio range of 13.9 to 30.6 with a median of 23.4; TTM TMC/R
ratio range of 2.03 to 10.86 with a median of 5.50; and Forward TMC/R ratio
range of 1.65 to 7.99 with a median of 4.13.
The equity value per share range implied by the TTM P/E multiples is $35.66
to $85.56 with a median implied value of $53.20. The equity value per share
range implied by the Forward P/E multiples is $39.83 to $110.42 with a median
implied value of $44.45. The equity value per share range implied by the Growth
Adjusted P/E multiples is $27.78 to $61.15 with a median implied value of
$46.74. The equity value per share range implied by the TTM TMC/R multiples is
$18.46 to $89.54 with a median implied value of $46.36. The equity value per
share range implied by the Forward TMC/R multiples is $18.05 to $79.59 with a
median implied value of $42.09.
Transaction Comparables Analysis. Valuation statistics from comparable
transactions indicate the Price/Revenue multiples and Equity Price/Pretax Income
multiples acquirers have paid for comparable companies in a particular market
segment. Broadview reviewed eleven comparable merger and acquisition
transactions from 1996 through the present which involve sellers sharing many
characteristics with BGS including revenue size, products offered and business
model. Transactions were selected from Broadview's proprietary database of
published and confidential merger and acquisition transactions in the IT
industry (the "Broadview Database"). These transactions represent eleven sellers
with at least $20 million in Trailing
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Twelve Month Revenue in the systems management segment of the software market.
The comparable transactions used were the acquisition of: (i) Tivoli Systems,
Inc. by IBM Corp.; (ii) OpenVision Technologies, Inc. by VERITAS Software Corp.;
(iii) Cheyenne Software, Inc. by Computer Associates International, Inc.; (iv)
Software Artistry, Inc. by IBM Corp. (Tivoli Systems, Inc.); (v) Network General
Corp. by McAfee Associates, Inc.; (vi) Unison Software, Inc. by IBM Corp.
(Tivoli Systems, Inc.); (vii) Datatools, Inc. by BMC Software, Inc.; (viii) TGV
Software, Inc. by Cisco Systems, Inc.; (ix) Datastorm Technologies, Inc. by
Quarterdeck Corp.; (x) MAXM Systems Corp. by Boole & Babbage, Inc.; and (xi)
NetSoft by NetManage, Inc.
The Price/Revenue multiples of the eleven transactions range from 0.71 to
14.15 with a median of 3.46. The Equity Price/Pretax Income multiples of the
eleven transactions range from 7.3 to 151.4 with a median of 32.6.
The equity value per share range implied by the P/R multiples is $7.76 to
$116.08 with a median implied value of $29.94. The equity value per share range
implied by the Equity Price/Pretax multiples is $16.37 to $341.30 with a median
implied value of $73.49.
Transaction Premiums Paid Analysis. Premiums paid in comparable
transactions by public sellers indicate the amount of consideration acquirers
generally are willing to pay above the seller's equity market capitalization. In
this analysis, the value of consideration paid in stock transactions is computed
using the buyer's stock price immediately prior to announcement of the
transaction (the "Announcement Date") and the seller's equity market
capitalization is measured one day prior and thirty days prior to the
Announcement Date. Broadview reviewed 43 comparable merger and acquisition
transactions involving software vendors from January 1, 1996 to the present with
total consideration greater than $50 million. Transactions were selected from
the Broadview Database. The comparable software transactions used were the
acquisition of: (i) Sierra On-Line, Inc. by CUC International Inc.; (ii) High
Level Design Systems, Inc. by Cadence Design Systems, Inc.; (iii) GMIS Inc. by
HBO & Company, Inc.; (iv) Softdesk Inc. by Autodesk Inc.; (v) Triad Systems
Corp. by Cooperative Computing, Inc.; (vi) National Health Enhancement Systems,
Inc. by HBO & Company, Inc.; (vii) Visigenic Software, Inc. by Borland
International, Inc. (pending); (viii) Interactive Group Inc. by Dataworks Corp.;
(ix) Landmark Graphics Corp. by Halliburton Co.; (x) Computer Language Research,
Inc. by Thomson Corp.; (xi) TGV Software, Inc. by Cisco Systems, Inc.; (xii)
Open Environment Corp. by Borland International Inc.; (xiii) Cheyenne Software,
Inc. by Computer Associates International, Inc.; (xiv) Davidson & Associates,
Inc. by CUC International Inc.; (xv) Technology Modeling Associates, Inc. by
Avant! Corp.; (xvi) CyCare Systems, Inc. by HBO & Company, Inc.; (xvii) MDL
Information Systems, Inc. by Reed Elsevier plc (Elsevier Science Inc.); (xviii)
Software Artistry, Inc. by IBM Corp. (Tivoli Systems); (xix) Aurum Software,
Inc. by Baan International BV; (xx) Datalogix International, Inc. by Oracle
Corp.; (xxi) SQA, Inc. by Rational Software Corp.; (xxii) The Continuum Company,
Inc. by Computer Sciences Corp.; (xxiii) AMISYS Managed Care Systems, Inc. by
HBO & Company, Inc.; (xxiv) OpenVision Technologies, Inc. by VERITAS Software
Corp.; (xxv) Tivoli Systems, Inc. by IBM Corp.; (xxvi) Maxis, Inc. by Electronic
Arts, Inc.; (xxvii) Viewlogic Systems, Inc. by Synopsys, Inc.; (xxviii) CIS
Technologies, Inc. by National Data Corp.; (xxix) HPR Inc. by HBO & Company,
Inc.; (xxx) Medic Computer Systems Inc. by Misys plc.; (xxxi) Edmark Corp. by
IBM Corp.; (xxxii) Cooper & Chyan Technology, Inc. by Cadence Design Systems,
Inc.; (xxxiii) EPIC Design Technology, Inc. by Synopsys, Inc.; (xxxiv) Learmonth
and Burchett Management Systems plc by PLATINUM technology, inc. (pending);
(xxxv) PHAMIS Inc. by IDX Systems Corp.; (xxxvi) Infinity Financial Technology,
Inc. by Sungard Data Systems, Inc.; (xxxvii) Unison Software Inc. by IBM Corp.
(Tivoli Systems); (xxxviii) Pure Atria Corp. by Rational Software Corp.; (xxxix)
Raptor Systems, Inc. by AXENT Technologies, Inc. (pending); (xxxx) Atria
Software Inc. by Pure Software Inc.; (xxxxi) Meta-Software, Inc. by Avant!
Corp.; (xxxxii) Enterprise Systems, Inc. by HBO & Company, Inc.; and (xxxxiii)
Fractal Design Corp. by MetaTools Inc.
Based upon Broadview's analysis of premiums paid in comparable software
transactions, Broadview found that premiums/(discounts) paid to sellers' equity
market capitalizations (using the buyer's share price on the day prior to the
Announcement Date to calculate consideration in stock transactions) 30 days
prior to the Announcement Date ranged from (2.3%) to 137.1% with a median of
48.3%. The premiums/(discounts) paid
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to each sellers' equity market capitalization one day prior to the Announcement
Date ranged from (8.8%) to 87.4% with a median of 28.0%. Due to the limited
trading volume of BGS Common Stock, and the susceptibility of BGS's daily
closing price to a wide bid-ask spread, Broadview also compared the five trading
day average of BGS Common Stock ending both the day before the Announcement Date
and thirty days before the Announcement Date to the premiums/(discounts) paid to
sellers' equity market capitalizations one day prior to the Announcement Date
and 30 days prior to the Announcement Date.
The equity value per share range implied by the premiums paid to the share
price 30 days prior to is $34.19 to $82.98 with a median implied value of
$51.90. The equity value per share range implied by the premiums paid to the
share price one day prior to the Announcement Date is $33.28 to $68.40 with a
median implied value of $46.72. The equity value per share range implied by the
premiums paid to the 5-day average share price 30 days prior to the Announcement
Date is $31.78 to $77.12 with a median implied value of $48.23. The equity value
per share range implied by the premiums paid to the 5-day average share price
one day prior to the Announcement Date is $31.30 to $64.35 with a median implied
value of $43.95.
Stock Performance Analysis. For comparative purposes, Broadview examined
the weekly historical volume and trading prices for both BGS and BMC Common
Stock. Broadview examined the following: (i) BGS and BMC actual share prices and
trading volumes from January 24, 1997 to January 30, 1998; (ii) BGS, BMC and the
set of Public Company Comparables Indexed share prices from January 31, 1997 to
January 30, 1998; and (iii) relative ratio of BGS to BMC actual share prices
from January 31, 1997 to January 30, 1998.
Pro Forma Pooling Model Analysis. A pro forma merger analysis calculates
the EPS accretion/ (dilution) of the pro forma combined entity taking into
consideration various financial effects which will result from consummation of
the Merger. This analysis relies upon certain financial and operating
assumptions provided by equity research analysts, publicly available data about
BGS and BMC, and financial information for BGS prepared by BGS management. Based
on analyst forecasts for BMC and financial and operating information for BGS,
the pro forma pooling analysis indicates EPS accretion without acquisition
expenses for the combined company.
Consideration of the Discounted Cash Flows Valuation Methodology. Although
discounted cash flows analysis is a commonly used valuation methodology,
Broadview did not employ such an analysis for the purposes of its opinion
because discounted cash flows analysis is most appropriate for companies which
exhibit relatively steady or somewhat predictable streams of future cash flows.
Given the uncertainty in estimating both future cash flows and sustainable
long-term growth rate of BGS, Broadview considered a discounted cash flows
analysis inappropriate for valuing BGS.
The above summary of the analyses performed by Broadview does not purport
to be a complete description of such analyses or of all the advice rendered by
Broadview to the BGS Board. Broadview believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, could create an incomplete view of
the process underlying the analyses set forth in Broadview's presentations to
the BGS Board and in its opinion. The Broadview opinion is necessarily based
upon market, economic, financial and other conditions as they existed and could
be evaluated as of the date of its opinion. The opinion expresses no opinion as
to the price at which BMC Common Stock will trade at any time. In performing its
analyses, Broadview made numerous assumptions with respect to software industry
performance and general economic conditions, many of which are beyond the
control of BGS or BMC. The analyses performed by Broadview are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses.
Pursuant to the terms of the engagement letter between BGS and Broadview,
the fees payable by BGS to Broadview upon completion of the Merger are based
upon the consideration to be received by BGS in the Merger. Broadview will be
reimbursed by BGS for certain of its expenses incurred in connection with its
engagement. The terms of the fee arrangement with Broadview, which BGS and
Broadview believe are customary in transactions of this nature, were negotiated
at arms' length between BGS and Broadview, and the BGS Board was aware of the
nature of the fee arrangement, including the fact that a significant portion of
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the fees payable to Broadview is contingent upon completion of the Merger, at
the time Broadview rendered its opinion to the Board.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of BGS's Board of Directors with respect
to the Merger, stockholders should be aware that certain members of the Board of
Directors and management of BGS have certain interests in the Merger that are in
addition to the interests of stockholders of BGS generally. The Board of
Directors of BGS was aware of these interests and considered them, among other
matters, in approving and adopting the Merger Agreement and the transactions
contemplated thereby.
BGS has entered into part-time employment agreements with each of Harold S.
Schwenk, Jr., its President and Chief Executive Officer, and Jeffrey P. Buzen,
its Senior Vice President and Chief Scientist, effective upon the Merger. Each
of the agreements has a three year term and provides that if the employee is
terminated involuntarily without cause, the employee will be entitled to have
his salary continued for the full term of the agreement. The agreements provide
that each of Dr. Schwenk and Dr. Buzen is entitled to a salary prorated at the
annual rate of $275,000.
In addition to the agreements with Drs. Schwenk and Buzen, certain other
BGS officers have salary continuation benefits. In the case of Normand Bilodeau,
BGS's Chief Financial Officer, if his employment is terminated involuntarily
without cause (or he leaves BGS because his job responsibilities and/or pay are
substantially reduced) prior to August 1, 1999 (the "Payment Period"), his
salary would be continued for 12 months; provided that if Mr. Bilodeau finds new
employment prior to the end of the Payment Period, he will receive a lump sum
equal to 1/2 of the remaining payments. For each month Mr. Bilodeau remains
employed following August 1, 1998, the Payment Period will be reduced by one
month. In the case of James S. McGuire, BGS's Chief Operating Officer, if his
employment is terminated without cause, BGS has agreed under his employment
agreement to make decreasing salary continuation payments over a 36 month period
ranging from 100% of base monthly salary in the first 6 months to 33 1/3% in the
last 24 months or until Mr. McGuire finds other employment (which he has agreed
to make reasonable efforts to do), whichever first occurs.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the Merger to the holders of BGS Common Stock and is based upon
current provisions of the Code, existing regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
No attempt has been made to comment on all federal income tax consequences of
the Merger that may be relevant to particular holders, including holders that
are subject to special tax rules such as dealers in securities, foreign persons,
mutual funds, insurance companies, tax-exempt entities and holders who acquired
BGS Common Stock pursuant to an employee stock option or otherwise as
compensation or who do not hold their shares as capital assets. Holders of BGS
Common Stock are advised and expected to consult their own tax advisers
regarding the federal income tax consequences of the Merger in light of their
personal circumstances and the consequences under state, local and foreign tax
laws.
No ruling from the Internal Revenue Service ("IRS") has been or will be
requested in connection with the Merger. BMC has received from its counsel,
Vinson & Elkins L.L.P., an opinion to the effect that the Merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, that BMC, Merger Sub and BGS will each be a party to
the reorganization within the meaning of Section 368(b) of the Code, and that
BMC, Merger Sub and BGS will not recognize any gain or loss as a result of the
Merger. BGS has received from its counsel, Palmer & Dodge LLP, an opinion to the
effect that the Merger, if consummated on the terms described in this Proxy
Statement/Prospectus, will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, that BMC,
Merger Sub and BGS will each be a party to the reorganization within the meaning
of Section 368(b) of the Code, and that stockholders of BGS will not recognize
any gain or loss upon the receipt of BMC Common Stock for their BGS Common
Stock, other than with respect to
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cash received in lieu of fractional shares of BMC Common Stock. Such opinions
are subject to certain assumptions and based on certain representations of BMC,
Merger Sub and BGS. Stockholders of BGS should be aware that such opinions are
not binding on the IRS and no assurance can be given that the IRS will not adopt
a contrary position or that a contrary IRS position would not be sustained by a
court.
The following federal income tax consequences will result from the Merger
qualifying as a reorganization under Section 368(a) of the Code:
(a) no gain or loss will be recognized by BMC, Merger Sub or BGS by
reason of the Merger;
(b) no gain or loss will be recognized by a holder of BGS Common Stock
upon the receipt of shares of BMC Common Stock in exchange for such
holder's shares of BGS Common Stock in the Merger, except with respect to
any cash received in lieu of a fractional share of BGS Common Stock;
(c) the aggregate basis of the shares of BMC Common Stock received by
a BGS stockholder in the Merger (including any fractional share deemed
received) will be the same as the aggregate basis of the shares of BGS
Common Stock surrendered in exchange therefor;
(d) the holding period of the shares of BMC Common Stock received by a
BGS stockholder in the Merger will include the holding period of the shares
of BGS Common Stock surrendered in exchange therefor, provided that such
shares of BGS Common Stock are held as capital assets at the Effective
Time; and
(e) a stockholder of BGS who receives cash in lieu of a fractional
share will recognize gain or loss equal to the difference, if any, between
such stockholder's basis in the fractional share (as described in paragraph
(c) above) and the amount of cash received. Such gain or loss will be a
capital gain or loss if the BGS Common Stock is held by such stockholder as
a capital asset at the Effective Time.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for using the "pooling of interests"
method of accounting pursuant to Opinion No. 16 of the Accounting Principles
Board. Upon consummation of the Merger, the assets and liabilities of BMC and
BSG will be combined at their current carrying amounts. Operating results will
be combined from the consummation of the Merger and thereafter. BMC does not
intend to restate its historical consolidated financial statements to include
the assets, liabilities and operating results of BGS because the acquisition of
BGS will not be material to its total assets, net assets, revenues, net income
or earnings per share in any of the most recent three fiscal years.
BMC has been preliminarily advised by its independent public accountants,
Arthur Andersen LLP, that the Merger should be treated as a pooling of interests
in accordance with generally accepted accounting principles, and consummation of
the Merger is conditioned on the transaction qualifying as a pooling of
interests.
GOVERNMENTAL AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Department of Justice
and the FTC to determine whether they comply with applicable antitrust laws.
Under the provisions of the HSR Act, the Merger may not be consummated until
such time as the specified waiting period requirements of the HSR Act have been
satisfied. BMC and BGS filed notification reports, together with requests for
early termination of the waiting period, with the Department of Justice and the
FTC under the HSR Act on February 13, 1998. Unless earlier terminated or a
request for additional information is made, the applicable waiting period will
expire on March 15, 1998.
At any time before or after the Effective Time, the Department of Justice,
the FTC or a private person or entity could seek under the antitrust laws, among
other things, to enjoin the Merger or to cause BMC to divest itself, in whole or
in part, of BGS or of other businesses conducted by BMC. There can be no
assurance that a challenge to the Merger will not be made or that, if such a
challenge is made, BMC and BGS will prevail.
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BMC and BGS are aware of no other governmental or regulatory approvals
required for consummation of the Merger, other than compliance with applicable
federal and state securities laws.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of BMC Common Stock to be received by BGS stockholders in
connection with the Merger have been registered under the Securities Act and,
except as set forth in this paragraph, may be traded without restriction. The
shares of BMC Common Stock to be issued in connection with the Merger and
received by persons who are deemed to be "affiliates" (as that term is defined
in Rule 144 under the Securities Act) of BGS prior to the Merger may be resold
by them only in transactions permitted by the resale provisions of Rule 145
under the Securities Act (or, in case any such person should become an affiliate
of BMC, Rule 144 under the Securities Act) or as otherwise permitted under the
Securities Act. Under guidelines published by the Commission, the sale or other
disposition of BMC Common Stock or BGS Common Stock by an affiliate of either
BMC or BGS, as the case may be, within 30 days prior to the Effective Time or
the sale or other disposition of BMC Common Stock thereafter prior to the
publication of financial results that include at least 30 days of post-Merger
combined operations of BMC and BGS (the "Pooling Period") could preclude pooling
of interests accounting treatment of the Merger. Accordingly, the Merger
Agreement provides that each of BGS and BMC will cause its affiliates to execute
an agreement (an "Affiliates' Agreement"), in the form thereof attached to the
Merger Agreement as Exhibits C and D, respectively, to the effect that such
persons will not sell, transfer or otherwise dispose of any shares of BGS Common
Stock or BMC Common Stock, as the case may be, during the Pooling Period and,
with respect to affiliates of BGS, that such persons will not sell, transfer or
otherwise dispose of BMC Common Stock at any time in violation of the Securities
Act or the rules and regulations promulgated thereunder, including Rule 145. As
indicated under "-- Accounting Treatment," BMC and BGS have heretofore obtained
executed Affiliates' Agreements from all persons known to the managements of BMC
or BGS to be affiliates of such corporations, respectively.
BGS STOCKHOLDER APPRAISAL RIGHTS
Pursuant to Sections 86 through 98, inclusive (the "Dissenters' Rights
Law") of the MBCL, holders of shares of BGS Common Stock are entitled to assert
dissenters' rights in connection with the Merger and obtain payment of the "fair
value" of their shares, provided that such stockholders comply with the
requirements of the Dissenters' Rights Law. Failure to comply with the
procedures set forth in the Dissenters' Rights Law may result in the loss of
such dissenters' rights.
A BGS stockholder who elects to exercise dissenters' rights must satisfy
each of the following conditions: (i) such holder must deliver to BGS, before
the taking of the stockholder vote with respect to the Merger, written notice of
his or her objection to the Merger and intention to demand payment of the fair
value of his or her shares (this written notice must be in addition to and
separate from any proxy or vote against the Merger; neither voting against
adoption nor a failure to vote for the Merger will constitute such a notice);
and (ii) such holders must not vote in favor of adoption of the Merger (a
failure to vote will satisfy this requirement, but a vote in favor of adoption
of the Merger, by proxy or in person, will constitute a waiver of such holder's
dissenters' rights and will nullify any previously filed written notice of
intent to demand payment). Any BGS stockholder who fails to comply with either
of these conditions will have no dissenters' rights with respect to his or her
shares.
BGS will furnish a copy of the full text of the Dissenters' Rights Law to
any BGS stockholder upon written request and without charge. Any BGS stockholder
who wishes to assert his or her dissenters' rights or who wishes to preserve the
right to do so should review carefully the full text of the Dissenters' Rights
Law.
All written notices of a BGS stockholder's intention to exercise his or her
dissenters' rights should be addressed to: BGS Systems, Inc., One First Avenue,
Waltham, Massachusetts 02254, Attention: Clerk, and must be executed by, or with
the consent of, the holder of record. If shares are held in "street name," the
beneficial owner may be able to give the notice, but in such case the beneficial
owner should indicate proof of his or her beneficial ownership. The notice must
identify the BGS stockholder submitting the notice and indicate the intention of
such stockholder to demand payment of the fair value of his or her shares. In
the
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notice, the stockholder's name should be stated as it appears on his or her
stock certificate(s). If the shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, such demand must be executed by or
for the fiduciary. If the shares are owned of record by or for more than one
person, as in a joint tenancy or tenancy in common, such demand must be executed
by or for all joint owners. An authorized agent, including an agent for two or
more joint owners, may execute the demand for appraisal for a stockholder of
record; however, the agent must identify the record owner(s) and expressly
disclose the fact that, in exercising the demand, he is acting as agent for the
record owners.
A record owner, such as a broker, who holds shares as a nominee for others
may exercise his or her right of appraisal with respect to the shares for all or
less than all beneficial owners of shares as to which he or she is the record
owner. In such case, the written demand must set forth the number of shares
covered by such demand. Where the number of shares is not expressly mentioned,
the demand will be presumed to cover all shares outstanding in the name of such
record owner.
After the BGS stockholder vote approving the Merger, and assuming the
Merger is completed, BGS will give written notice within ten days after the
Effective Time that the Merger has been approved to each BGS stockholder who
filed a written notice of intent to demand payment for such stockholder's shares
and who did not vote in favor of the Merger (a "Dissenting Stockholder"). Under
the Dissenters' Rights Law, a shareholder who wishes to exercise his or her
dissenters' rights must demand in writing from BGS, within 20 days after the
date of mailing of BGS's notice that the Merger was approved, payment for his or
her shares. Within 30 days after the expiration of such 20-day period, assuming
such Dissenting Stockholder and BGS can agree on the fair market value of each
Dissenting Stockholder's shares, BGS is required to make payment for such
Dissenting Stockholder's shares. If BGS and any Dissenting Stockholder cannot
agree on the fair market value of such Dissenting Stockholder's shares during
the 30-day period, either BGS or any Dissenting Stockholder may, within four
months after the expiration of such 30-day period, file a petition in the
Superior Court for Middlesex County, Massachusetts (the "Court") demanding a
determination of the value of the shares of Dissenting Stockholders.
BGS stockholders considering seeking appraisal for their shares should note
that the fair value of their shares determined under the Dissenters' Rights Law
could be more, the same or less than the consideration they would receive by
selling their shares of BGS Common Stock in the open market or exchange them for
shares of BMC Common Stock in the Merger. The costs of the appraisal proceeding
may be determined by the Court and allocated among the parties as the Court
deems equitable under the circumstances. Upon application of a stockholder, the
Massachusetts Court may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorney's fees and the fees and expenses of experts, to
be charged pro rata against the value of all shares entitled to appraisal. In
the absence of such a determination or assessment, each stockholder bears his or
her own expenses.
BMC's obligation to complete the Merger is subject to the condition,
waivable at the discretion of BMC, that the holders of not more than 5% of the
outstanding shares of BGS Common Stock shall have properly exercised appraisal
rights under the MBCL.
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CERTAIN TERMS OF THE MERGER AGREEMENT
The following description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is
attached as Appendix A to this Proxy Statement/Prospectus and is incorporated
herein by reference.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of articles of merger with
the Secretary of the Commonwealth of Massachusetts which will be the Effective
Time, unless the articles of merger specify a later Effective Time. Assuming all
conditions to the Merger contained in the Merger Agreement are satisfied or, if
permissible, waived prior thereto, it is anticipated that the Effective Time of
the Merger will occur as soon as practicable following the Special Meeting.
MANNER AND BASIS OF CONVERTING SHARES
On the Effective Time, each share of BGS Common Stock then issued and
outstanding, without any action on the part of the holders thereof, will
automatically become and be converted into the right to receive certificates
evidencing a fraction of a fully paid and nonassessable share of issued and
outstanding BMC Common Stock (the "BMC Shares") equal to the quotient of $45.00
divided by the average of the closing sales prices of BMC Common Stock (or, if
BMC Common Stock should not trade on any trading day, the average of the bid and
the asked prices therefor on such day), rounded to the nearest thousandth (.0005
being rounded to .001), as reported by the Nasdaq National Market on each of the
last ten consecutive trading days in the period ending on the third trading day
prior to the Special Meeting (the "Exchange Ratio").
As soon as practicable following the Effective Time, BMC will cause Boston
EquiServe, which has been selected by BMC to act as exchange agent pursuant to
the Merger Agreement (the "Exchange Agent"), to mail to each record holder of
BGS Common Stock immediately prior to the Effective Time, information advising
such holder of the consummation of the Merger and a letter of transmittal for
use in exchanging BGS Common Stock certificates for BMC Common Stock
certificates and cash in lieu of fractional shares. Letters of transmittal will
also be available following the Effective Time at the offices of the Exchange
Agent at BankBoston, N.A., c/o Boston EquiServe, 150 Royall Street, Corporate
Reorganization, Canton, MA 02021, and holders of certificates that previously
evidenced BGS Common Stock may, at their option after the Effective Time,
surrender such certificates for certificates evidencing BMC Common Stock at the
offices of the Exchange Agent in person. After the Effective Time, there will be
no further registration of transfers on the stock transfer books of BGS of
shares of BGS Common Stock that were outstanding immediately prior to the
Effective Time. Share certificates should not be surrendered for exchange by
stockholders of BGS prior to the Effective Time.
No fractional shares of BMC Common Stock will be issued in the Merger. Each
stockholder of BGS entitled to a fractional share will receive an amount in
cash, without interest thereon, on the basis of the closing price for BMC Common
Stock on the Nasdaq National Market on the last trading day before the Effective
Time.
Until so surrendered and exchanged, each certificate previously evidencing
BGS Common Stock shall be deemed, for all purposes other than the payment of
dividends and other distributions, to evidence whole shares of BMC Common Stock
and the right to receive cash in lieu of fractional shares of BMC Common Stock.
Unless and until any such certificates that previously evidenced BGS Common
Stock shall be so surrendered and exchanged, no dividends or other distributions
payable to the holders of record of BMC Common Stock as of any time on or after
the Effective Time shall be paid to the holders of such certificates previously
evidencing BGS Common Stock; provided, however, that, upon any such surrender
and exchange of such certificates, there shall be paid to the record holders of
the certificates issued and exchanged therefor (i) the amount, without interest
thereon, of dividends and other distributions, if any, with a record date on or
after the Effective Time theretofore paid with respect to such whole shares of
BMC Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions, if any, with a record date on or after
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the Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of BMC Common Stock.
BGS OPTIONS
The Merger Agreement provides that at the Effective Time, automatically and
without any action on the part of the holder thereof, each BGS Option (which
includes all outstanding options granted under BGS's stock option plans (the
"BGS Option Plans")) will, and without any further action on the part of any
holder thereof (herein, an "optionholder"), be exchanged for an option to
purchase that number of shares of BMC Common Stock determined by multiplying the
number of shares of BGS Common Stock subject to such BGS Option at the Effective
Time by the Exchange Ratio, at an exercise price per share of BMC Common Stock
equal to the exercise price per share of such BGS Option divided by the Exchange
Ratio; provided, however, that with respect to BGS's 1997 Employee Stock
Purchase Plan, the exercise price per share of BMC Common Stock will be
determined pursuant to the provisions of paragraphs 7(b), 17 and 20 of such
plan. If the foregoing calculation results in an exchanged BGS Option being
exercisable for a fraction of a share of BMC Common Stock, then the number of
shares of BMC Common Stock subject to such option will be rounded down to the
nearest whole number of shares, and the total exercise price for the option will
be reduced by the exercise price of the fractional share. The term,
exercisability, vesting schedule, and all other terms and conditions of the BGS
Options will otherwise be unchanged by these provisions and will operate in
accordance with their terms. All shares of BMC Common Stock issued upon exercise
of the exchanged BGS Options will be registered under an effective Form S-8
Registration Statement (or other comparable form) filed with the Commission.
Based on the BGS Options outstanding at the Record Date and assuming none
of such BGS Options is exercised prior to the Effective Time and assuming an
exchange ratio of 0.620 (based on a $72.625 BMC share price), BMC will be
required at the Effective Time to reserve an aggregate of 430,776 shares of BMC
Common Stock for issuance upon exercise of BGS Options assumed by the Surviving
Corporation pursuant to the Merger.
CONDITIONS TO THE MERGER
The respective obligations of BMC and BGS to consummate the Merger are
subject to the satisfaction of certain conditions, including the following: (i)
approval of the Merger Agreement and the Merger by the stockholders of BGS; (ii)
the absence of any action or proceeding prohibiting consummation of the Merger;
(iii) expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and any competition laws of governmental authorities; (iv) the accuracy in all
respects of the representations and warranties material to each party and
compliance in all material respects with all agreements and covenants by each
party; and (v) the eligibility for trading on the Nasdaq National Market of the
BMC Common Stock to be issued in the Merger.
The obligations of BGS to consummate and effect the Merger are further
subject to the receipt of certain closing certificates and a legal opinion and
fulfillment of the following conditions, or to the waiver thereof by BGS before
the Effective Time: (a) the representations and warranties of BMC contained in
the Merger Agreement shall be, in all respects, true as of and at the Effective
Time with the same effect as though made at such date, except as affected by
transactions permitted or contemplated by the Merger Agreement and except for
those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such particular
date), provided that any inaccuracies in such representations and warranties
will be disregarded if the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and are not reasonably expected to
result in, a Material Adverse Effect (as defined below) (it being understood
that any materiality qualifications contained in such representations and
warranties shall be disregarded for this purpose); BMC shall have performed and
complied, in all material respects, with all covenants required by the Merger
Agreement to be performed or complied with by BMC before the Effective Time; and
BMC shall have delivered to BGS a certificate, dated the Effective Time and
signed by its chairman of the board and by its chief financial or accounting
officer to both such effects; (b) no suit, action, or other proceeding shall be
pending, or to BMC's knowledge, threatened, before any court or
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governmental agency in which it will be, or it is, sought to restrain or
prohibit or to obtain damages or other relief in connection with the Merger
Agreement or the consummation of the Merger or which could reasonably be
expected to have a Material Adverse Effect on BMC; (c) the Proxy Statement shall
have become effective under the Securities Act, and the shares of BMC Common
Stock issuable at the Effective Time shall have become eligible for trading on
the Nasdaq National Market; (d) BMC shall have made effective provision for the
assumption or substitution at the Effective Time of all stock options
outstanding under plans maintained by BGS; (e) BGS shall have received the
opinion of Broadview as to the fairness, from a financial point of view, to the
BGS stockholders of the Merger Consideration, which opinion shall not have been
withdrawn; and (f) Palmer & Dodge LLP shall have delivered to BGS its written
opinion substantially to the effect that (x) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, (y) BMC, Merger
Sub and BGS will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, and (z) no gain or loss for U.S. federal income tax
purposes will be recognized by the holders of BGS Common Stock upon receipt of
shares of BMC Common Stock in the Merger, except with respect to any cash
received in lieu of a fractional share interest in BMC Common Stock, and such
opinion shall not have been withdrawn or modified in any material respect.
The obligations of BMC to consummate and effect the Merger are further
subject to the receipt of certain closing certificates and a legal opinion and
fulfillment of the following conditions, or to the waiver thereof by BMC before
the Effective Time: (a) the representations and warranties of BGS contained in
the Merger Agreement shall be, in all respects, true as of and at the Effective
Time with the same effect as though made at such date, except as affected by
transactions permitted or contemplated by the Merger Agreement and except for
those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such particular
date), provided that any inaccuracies in such representations and warranties
will be disregarded if the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and are not reasonably expected to
result in, a Material Adverse Effect (as defined below) (it being understood
that any materiality qualifications contained in such representations and
warranties shall be disregarded for this purpose); (b) BGS shall have performed
and complied, in all material respects, with all covenants required by the
Merger Agreement to be performed or complied with by BGS before the Effective
Time; (c) no suit, action, or other proceeding shall be pending, or to BGS's
knowledge, threatened, before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit or to obtain damages or other
relief in connection with the Merger Agreement or the consummation of the Merger
or which could reasonably be expected to have a Material Adverse Effect on BGS;
(d) the holders of any material indebtedness of BGS, the lessors of any material
property leased by BGS, and the other parties to any other material agreements
to which BGS is a party, whose consent to the Merger is required as set forth in
the BGS Disclosure Schedule, shall, when and to the extent necessary in the
reasonable opinion of BMC, have consented to the Merger; (e) holders of not more
than 5 percent of the outstanding shares of BGS Common Stock on the date of the
Merger Agreement shall have received or be entitled to receive consideration
pursuant to the provisions of Sections 86 through 98 of the MBCL; and (f) Vinson
& Elkins L.L.P. shall have delivered to BMC its written opinion that (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, (ii) BMC, Merger Sub and BGS will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (iii) BMC,
Merger Sub and BGS will not recognize any gain or loss for U.S. federal income
tax purposes as a result of the Merger, and such opinion shall not have been
withdrawn or modified in any material respect.
"Material Adverse Effect" or "Material Adverse Change" means any effect,
change, event, circumstance or condition which when considered with all other
effects, changes, events, circumstances or conditions could reasonably be
expected to materially adversely affect the business, results of operations,
financial condition or prospects of BMC or BGS, in each case including its
respective subsidiaries together with it taken as a whole, as the case may be.
In no event shall any of the following constitute a Material Adverse Effect or a
Material Adverse Change: (i) a change in the trading prices of either of BMC's
or BGS's equity securities between the date of the Merger Agreement and the
Effective Time, in and of itself; (ii) effects, changes, events, circumstances
or conditions generally affecting the industry in which either BMC or BGS
operate or arising from changes in general business or economic conditions;
(iii) effects, changes, events, circumstances or conditions directly
attributable to (a) out-of-pocket fees and expenses (including without
limitation legal,
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accounting, investigatory, investment banking, and other fees and expenses)
incurred in connection with the transactions contemplated by this Agreement, or
(b) the payment by BMC or BGS of all amounts due to any officers or employees of
BGS under employment contracts, non-competition agreements, employee benefit
plans or severance arrangements; (iv) any effects, changes, events,
circumstances or conditions resulting from any change in law or generally
accepted accounting principles, which affect generally entities such as BMC and
BGS; (v) any effect resulting from compliance by BMC or BGS with the terms of
the Merger Agreement; and (vi) the loss of any single employee.
There can be no assurance that all of the conditions to the Merger will be
satisfied.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
each of BGS and BMC relating to, among other things, (i) its organization and
similar corporate matters, (ii) the authorization, execution, delivery,
performance and enforceability of the Merger Agreement and the absence of
conflicts, violations and defaults under its charter and bylaws and certain
other agreements and documents, (iii) its capitalization, (iv) the documents and
reports filed by it with the Commission and its financial statements and the
accuracy of the information contained therein, (v) the absence of any
undisclosed contracts or defaults, (vi) the absence of certain changes and
events since a certain date, (vii) its brokers or investment bankers involved in
the transaction, (viii) its employee benefit plans, (ix) the absence of
investigations and litigation, (x) the information provided by it for inclusion
in the Proxy Statement/Prospectus, and (xi) certain matters relating to pooling
of interests accounting and taxes. In addition, the Merger Agreement contains
representations and warranties by BGS relating to (i) its subsidiaries, (ii)
certain additional information provided by BGS, (iii) taxes, (iv) its
intellectual property, (v) the adequacy of its technical documentation, (vi) its
software contracts, (vii) third-party components in its software programs,
(viii) title to its properties, (ix) its litigation, (x) its compliance with
environmental laws, (xi) its compliance with other laws, and (xii) warranties on
its products. In addition, the Merger Agreement contains a representation and
warranty by BMC that BMC has not taken any action preventing the Merger from
being treated as a tax-free reorganization. The representations and warranties
of BGS and BMC also extend in many respects to their respective subsidiaries. In
the case of BMC, Merger Sub joins in certain of the representations and
warranties. The representations and warranties expire at the Effective Time.
CERTAIN COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE MERGER
Business Maintenance. BGS has agreed that prior to the Effective Time, it
will: (a) other than as contemplated by the Merger Agreement, operate its
business only in the usual, regular, and ordinary manner so as to maintain its
goodwill and, to the extent consistent with such operation, use all reasonable
efforts to preserve intact its present business organization, keep available the
services of its present officers and employees, and preserve its relationships
with customers, suppliers, jobbers, distributors, and others having business
dealings with it, and in connection therewith it will not substantially deviate
from its licensing and pricing practices; (b) at its expense, maintain all of
its property and assets in customary repair, order, and condition, reasonable
wear and use and damage by fire or unavoidable casualty excepted; (c) maintain
its books of accounts and records in the usual, regular, and ordinary manner, in
accordance with generally accepted accounting principles applied on a consistent
basis; (d) duly comply in all material respects with all laws applicable to it
and to the conduct of its business; (e) at its expense, take all commercially
reasonable actions as may be necessary (i) to insure that the representations
and warranties made by it in the Merger Agreement are true and correct at the
Effective Time, (ii) to fully perform all covenants made by it in the Merger
Agreement and (iii) to satisfy timely all other obligations imposed upon it by
the Merger Agreement; (f) permit BMC and its officers and authorized
representatives, during normal business hours, to inspect its records and to
consult with its officers, employees, attorneys, and agents for the purpose of
determining the accuracy of the representations and warranties in the Merger
Agreement made and the compliance with covenants contained in the Merger
Agreement; and (g) maintain insurance (or self insurance reserves) upon all its
properties and with respect to the conduct of its business of such kinds and in
such amounts as is customary in the type of business in which it is engaged, but
not less than that presently carried by it, which
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insurance (or self insurance reserves) may be added to from time to time in its
discretion; provided, that if during the period prior to and including the
Effective Time any of its property or assets are damaged or destroyed by fire or
other casualty, the obligations of BMC and BGS under the Merger Agreement will
not be affected thereby (subject, however, to the provision that the coverage
limits of such policies are adequate in amount to cover the replacement value of
such property or assets and loss of profits during replacement, less
commercially reasonable deductibles, if of material significance to the assets
or operations of BGS) but it shall promptly notify BMC in writing thereof and
proceed with the repair or restoration of such property or assets in such manner
and to such extent as may be approved by BMC, and upon the Effective Time all
proceeds of insurance and claims of every kind arising as a result of any such
damage or destruction shall remain the property of BGS.
Negative Covenants. BGS has agreed that prior to the Effective Time, it
will not: (a) take any action that would, or fail to take any action the failure
of which would, cause directly or indirectly any of its Intellectual Property to
enter the public domain or that could otherwise adversely affect its
Intellectual Property; (b) enter into any contracts of employment which (i)
cannot be terminated on notice of 14 days or less or (ii) provide for any
increase in compensation outside the ordinary course of business consistent with
past practice, severance payments or benefits covering a period beyond the
termination date (other than those which BMC has previously approved) except as
contemplated by the Merger Agreement or as may be required by law; (c) incur any
borrowings except (i) the prepayment by customers of amounts due or to become
due for goods sold or services rendered or to be rendered in the future, (ii)
trade payables incurred in the ordinary course of business, (iii) other
borrowings incurred in the ordinary course of business to finance normal
operations or (iv) as is otherwise agreed to in writing by BMC; (d) enter into
commitments of a capital expenditure nature or incur any contingent liability
which would exceed $1,000,000, in the aggregate, except (i) as may be necessary
for the maintenance of existing facilities and equipment in good operating
condition and repair in the ordinary course of business, (ii) as may be required
by law or (iii) as is otherwise agreed to in writing by BMC; (e) sell, dispose
of, or encumber, any property or assets, except (i) in the ordinary course of
business or (ii) as is otherwise agreed to in writing by BMC; (f) without the
consent of BMC, amend its articles of organization or bylaws or other
organizational documents or merge or consolidate with or into any other
corporation or change in any manner the rights of its capital stock or the
character of its business; (g) without the consent of BMC, issue or sell, or
issue options or rights to subscribe to, or enter into any contract or
commitment to issue or sell (upon conversion or otherwise), any shares of its
capital stock or subdivide or in any way reclassify any shares of its capital
stock, or acquire, or agree to acquire, any shares of its capital stock;
provided, that BGS may issue shares of BGS Common Stock upon exercise of options
previously granted under existing benefit plans; (h) without the consent of BMC,
declare or pay any dividend on shares of its capital stock (other than ordinary
quarterly cash dividends in accordance with past practice not to exceed $.30 per
quarter) or make any other distribution of assets to the holders thereof; or (i)
except as required by law, without the written consent of BMC, directly or
indirectly (i) enter into or modify any collective bargaining agreement with any
labor union or other representative of employees, (ii) increase the compensation
or benefits of any employee of BGS or any of its subsidiaries, (iii) amend or
terminate any BGS Plan (as defined in the Merger Agreement), or (iv) enter into
or adopt any new employee benefit plan, policy or arrangement.
BMC has agreed that prior to the Effective Time, it will not (a) except as
otherwise provided in the Merger Agreement, amend its certificate of
incorporation or bylaws or other organizational documents or merge into any
other corporation or change in any manner the rights of its Common Stock; (b)
issue or sell, or issue options (other than (i) options previously authorized by
the compensation committee of BMC's board of directors or (ii) options granted
to new personnel upon commencement of employment) or rights to subscribe to, or
enter into any contract or commitment to issue or sell (upon conversion or
otherwise), any shares of its capital stock or subdivide or in any way
reclassify any shares of its capital stock, or acquire, or agree to acquire, any
shares of its capital stock; provided, that BMC may issue shares of BMC Common
Stock upon exercise of options previously granted under existing employee
benefit plans, the issuance of shares of BMC Common Stock upon exercise of
outstanding warrants, or issue up to 2,000,000 shares of BMC Common Stock in the
acquisition of other businesses in "non-dilutive" (for financial reporting
purposes) transactions if such acquired businesses would not individually or
collectively constitute a "significant subsidiary" of BMC; or
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(c) declare or pay any dividend on shares of its capital stock or make any other
distribution of assets to the holders thereof.
Additional Agreements. BMC has agreed that prior to the Effective Time, it
will (a) take all action it deems reasonably necessary to register the
"issuance" of BMC Common Stock to the stockholders of BGS in connection with the
Merger under the Securities Act and take any action reasonably required to be
taken under state blue sky or securities laws in connection with the issuance of
the BMC Common Stock pursuant to the Merger; (b) take such steps as are required
to accomplish, as of the Effective Time, the Notification of Additional Listing
of the shares of BMC Common Stock to be issued pursuant to the Merger Agreement
on the Nasdaq National Market; (c) promptly furnish to BGS copies of all
communications from BMC to its stockholders and all BMC Reports (as defined in
the Merger Agreement); and (d) at its expense, take all commercially reasonable
actions as may be necessary (i) to insure that the representations and
warranties made by it in the Merger Agreement are true and correct at the
Effective Time, (ii) to fully perform all covenants made by it in the Merger
Agreement and (iii) to satisfy timely all other obligations imposed upon it by
the Merger Agreement.
BGS has agreed to (a) deliver to BMC (i) within 90 days after the end of
the fiscal year ended January 31, 1998 the audited consolidated financial
statements of BGS included in its report on Form 10-K and (ii) within 45 days
after the end of each fiscal quarter of BGS beginning April 30, 1998 and through
the Effective Time, unaudited consolidated balance sheets and related unaudited
statements of income, retained earnings and cash flows as of the end of each
fiscal quarter of BGS, and as of the corresponding fiscal quarter of the
previous fiscal year; (b) promptly furnish to BMC copies of all communications
from BGS to its stockholders and all BGS Reports (as defined in the Merger
Agreement) and give prompt notice to BMC of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would cause any BGS
representation or warranty contained in the Merger Agreement to be untrue or
inaccurate at or prior to the Effective Time and (ii) any material failure of
BGS to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it; (c) call and hold a meeting of stockholders
within 45 days after the Commission has indicated that it has no further
comments on the Proxy Statement for the purpose of considering and acting upon a
proposal to approve the Merger Agreement and the Merger; and (d) use its best
efforts to obtain on or prior to the Effective Time, employment agreements with
such employees of BGS as reasonably requested by BMC.
NO SOLICITATION
As an inducement to BMC to enter into the Merger Agreement, BGS has agreed
not to directly or indirectly authorize or permit any of its respective agents
to: (i) solicit, initiate, encourage (including by way of furnishing
information) or take any other action to facilitate, any inquiry or the making
of any proposal which constitutes, or may reasonably be expected to lead to, any
acquisition or purchase of a substantial amount of assets of, or any equity
interest in, BGS or any merger, consolidation, business combination, sale of
substantially all assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving BGS (other than the transactions
contemplated by the Merger Agreement) or any other material corporate
transactions the consummation of which would, or could reasonably be expected
to, impede, interfere with, prevent or materially delay the Merger
(collectively, "BGS Transaction Proposals") or agree to or endorse any BGS
Transaction Proposal or (ii) propose, enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to
another person any information with respect to its business, properties or
assets or any of the foregoing, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, an effort or attempt by any
other person to do or seek any of the foregoing, provided, however, that the
foregoing clauses (i) and (ii) will not prohibit BGS from (A) furnishing
information pursuant to an appropriate confidentiality letter concerning BGS and
its businesses, properties or assets to a third party who has made a Superior
BGS Transaction Proposal (as defined below), (B) engaging in discussions or
negotiations with a third party who has made a Superior BGS Transaction Proposal
or (C) following receipt of a Superior BGS Transaction Proposal, taking and
disclosing to its stockholders a position with respect thereto or changing the
recommendation by BGS's board of directors, but in each case referred to in the
foregoing clauses (A) through (C) only after the board of
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directors of BGS concludes in good faith following advice of its outside
counsel, represented by a written opinion, that such action is reasonably
necessary in order for the board of directors of BGS to comply with its
fiduciary obligations to BGS's stockholders under applicable law. If the board
of directors of BGS receives a BGS Transaction Proposal, then BGS will
immediately inform BMC of the terms and conditions of such proposal and the
identity of the person making it and shall keep BMC fully informed of the status
and details of any such BGS Transaction Proposal and of all steps it is taking
in response to such BGS Transaction Proposal; provided that nothing contained in
this provision will prohibit BGS or its board of directors from making such
disclosure to BGS's stockholders or taking any action which, in the good faith
judgment of BGS's board of directors based on a written opinion of its outside
counsel, may be required under applicable law, including Rules 14d-9 and 14e-2
promulgated under the Exchange Act. For purposes of the Merger Agreement, the
term "Superior BGS Transaction Proposal" means a bona fide BGS Transaction
Proposal that the board of directors of BGS determines in good faith after
consultation with (and based in part on the advice of) its independent financial
advisors to be more favorable to BGS and BGS's stockholders than the Merger, is
reasonably capable of being financed and is not subject to any material
contingencies relating to financing.
CERTAIN POST-MERGER MATTERS
Once the Merger is consummated, Merger Sub will cease to exist as a
corporation, and BGS, as the Surviving Corporation, will succeed to all of the
assets, rights and obligations of BGS.
Pursuant to the Merger Agreement, the articles of organization and the
bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will
be the articles of organization and bylaws of the Surviving Corporation until
amended as provided therein and pursuant to the MBCL, except that from and after
the Effective Time, the articles of organization of Merger Sub will be amended
to provide that its corporate name will be "BGS Systems, Inc."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after the approval and adoption of the Merger Agreement
and the Merger by the stockholders of BGS: (a) by mutual consent of BMC and BGS;
(b) by BMC, if there has been a breach by BGS of its representations,
warranties, covenants, or agreements set forth in the Merger Agreement if, as a
result of such breach, the conditions to BMC effecting the Merger would not be
satisfied, and BGS fails to cure such breach within 15 business days after
written notice thereof from BMC (except that no cure period shall be provided
for any breach by BGS which by its nature cannot be cured); (c) by BMC, if there
has been since October 31, 1997, a Material Adverse Change with respect to BGS
which condition or event shall not have been ameliorated such that it no longer
constitutes a Material Adverse Change within ten (10) business days following
receipt by BGS of notice from BMC (except that no cure period shall be provided
for any Material Adverse Change which by its nature cannot be cured); (d) by
BGS, if there has been a breach by BMC of any of its representations,
warranties, covenants or agreements set forth in the Merger Agreement if, as a
result of such breach, the conditions to BGS effecting the Merger would not be
satisfied, and BMC fails to cure such breach within 15 business days after
written notice thereof from BGS (except that no cure period shall be provided
for any breach by BMC which by its nature cannot be cured); (e) by BGS or BMC
if, before the Effective Time, BGS's board of directors shall have withdrawn or
modified in a manner adverse to BMC its approval of the Merger Agreement or the
Merger under the terms, conditions and procedures set forth in the no
solicitation clause of the Merger Agreement; (f) by BGS, if there has been since
September 30, 1997, a Material Adverse Change with respect to BMC which
condition or event shall not have been ameliorated such that it no longer
constitutes a Material Adverse Change within ten (10) business days following
receipt by BMC of notice from BGS (except that no cure period shall be provided
for any Material Adverse Change which by its nature cannot be cured); (g) by BMC
or BGS if (i) a statute, rule, regulation or executive order shall have been
enacted, entered or promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated by the Merger Agreement or (ii) an
order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the consummation of the Merger
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substantially on the terms contemplated hereby and such order, decree, ruling or
injunction shall have become final and non-appealable; provided, that the party
seeking to terminate the Merger Agreement pursuant to this provision shall have
used its reasonable best efforts to remove such injunction, order or decree; (h)
by either BMC or BGS, if all conditions to consummation of the Merger have not
been satisfied or waived on or before September 30, 1998, other than as a result
of a breach of the Merger Agreement by the terminating party; or (i) by BMC or
BGS if the Merger cannot for financial reporting purposes be accounted for as a
"pooling of interests"; provided, however, this provision shall not be available
to a party which has taken any action or failed to take any action, that either
alone or in combination with actions previously taken disqualifies the Merger
from such accounting treatment.
Subject to limited exceptions, including the survival of BGS's agreement to
pay a termination fee to BMC under certain circumstances, as discussed below, in
the event of the termination of the Merger Agreement, the Merger Agreement shall
become void, there shall be no liability on the part of BMC, Merger Sub or BGS
to the other, and all rights and obligations of the parties thereto shall cease,
except that (i) the provisions of the no solicitation clause shall survive such
termination and (ii) no party will be relieved from its obligations with respect
to any willful breach of the Merger Agreement.
EXPENSES AND TERMINATION FEE
The Merger Agreement provides that if the Merger is abandoned because the
Merger Agreement is terminated, all expenses will be paid by the party incurring
them; provided, however, that in the event the Merger Agreement is terminated by
BMC because of a breach by BGS of its representations, warranties, covenants or
agreements or by BMC or BGS because the Board of Directors of BGS shall have
withdrawn or modified in a manner adverse to BMC its approval of the Merger
Agreement or the Merger under the terms, conditions and procedures set forth in
the no solicitation clause, BGS shall assume and pay, or reimburse BMC for, all
reasonable fees and expenses incurred by BMC or Merger Sub (including the fees
and expenses of its counsel, accountants and financial advisors) through the
date of termination and which are specifically related to the Merger, the Merger
Agreement and the matters contemplated by the Merger Agreement, but in no event
later than two business days after the submission of a request for payment of
the same; and provided, further, that in the event the Merger Agreement is
terminated by BGS because of a breach by BMC of its representations, warranties,
covenants or agreements, BMC shall assume and pay, or reimburse BGS for, all
reasonable fees and expenses incurred by BGS (including the fees and expenses of
its counsel, accountants and financial advisors) through the date of termination
and which are specifically related to the Merger, the Merger Agreement and the
matters contemplated by the Merger Agreement, but in no event later than two
business days after the submission of a request for payment of the same. The
Merger Agreement provides that any amount payable by BGS pursuant to this
paragraph will be credited against any termination fee payable by it.
The Merger Agreement provides that BGS will pay to BMC a Termination Fee
equal to $9 million if: (a) the Merger Agreement is terminated by BGS because
the Board of Directors of BGS shall have withdrawn or modified in a manner
adverse to BMC its approval of the Merger Agreement or the Merger under the
terms, conditions and procedures set forth in the no solicitation clause, or (b)
BGS enters into an agreement which provides for Another BGS Transaction (as
defined below) or Another BGS Transaction is consummated (in each case with any
third party which prior to termination of the Merger Agreement has communicated
to it a BGS Transaction Proposal), in either case within twelve months after the
date of termination of the Merger Agreement, then, in any such event unless the
Merger Agreement has been terminated by BGS because BMC has breached any of its
representations, warranties, covenants or agreements, there has been a Material
Adverse Change with respect to BMC, all conditions to consummation of the Merger
shall have not been satisfied or waived on or before September 30,1998, or the
Merger cannot be accounted for as a "pooling of interests." "Another BGS
Transaction" means any transaction pursuant to which (1) any person, entity or
group (within the meaning of Section 13(d)(3) of the Exchange Act) (each, a
"Third Party") acquires 50% or more of the outstanding BGS Common Stock, (ii) a
Third Party acquires 25% or more of the total assets of BGS taken as a whole,
(iii) a Third Party merges, consolidates or combines in any other way with BGS
other than in a transaction in which holders of BGS Common Stock continue to
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<PAGE> 49
own at least 75% of the equity of the surviving corporation, or (iv) BGS
distributes or transfers to its stockholders, by dividend or otherwise, assets
constituting 25% or more of the market value or earning power of BGS on a
consolidated basis (stock of subsidiaries constitute assets of BGS for purposes
of this provision).
INDEMNIFICATION
The Merger Agreement provides that BMC will indemnify and hold harmless
each present and former director and officer of BGS, determined as of the
Effective Time, against any claims, losses, liabilities, damages, judgments,
fines, fees, costs or expenses, including without limitation attorneys' fees and
disbursements incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time (including, without limitation, the Merger, the preparation,
filing and mailing of the Proxy Statement and the other transactions and actions
contemplated by the Merger Agreement), whether asserted or claimed prior to, at
or after the Effective Time, to the fullest extent that BGS would have been
permitted, under applicable law, indemnification agreements existing on the date
hereof, the Articles of Organization or Bylaws of BGS in effect on the date
hereof, to indemnify such person (and BMC shall also advance expenses as
incurred to the fullest extent permitted under applicable law provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification). In addition, for a period of six (6) years after the Effective
Time, BMC will maintain (to the extent available in the market) in effect a
directors' and officers' liability insurance policy covering those persons who
are currently covered by BGS's directors' and officers' liability insurance
policy with coverage in amount and scope at least as favorable as BGS's existing
coverage (which coverage may be an endorsement extending the period in which
claims may be made under such existing policy); provided that in no event shall
BMC be required to expend per year for such coverage more than an aggregate of
200% of the current annual premium expended by BGS to provide such coverage.
STOCKHOLDER AGREEMENTS
The following description does not purport to be complete and is qualified
in its entirety by reference to the form of Stockholder Agreement, a copy of
which is attached as Appendix B to this Proxy Statement/Prospectus and is
incorporated herein by reference.
Pursuant to the Stockholder Agreements, Harold S. Schwenk, Jr., Jeffrey P.
Buzen and Judith N. Goldberg, directors of BGS, and their affiliates
(collectively, the "Stockholders") have granted to BMC options (the "Options")
to acquire up to 3,357,908 shares, subject to certain adjustments (the "Option
Shares"), of BGS Common Stock for $45.00 per share in cash, subject to certain
adjustments (the "Exercise Price"). The number of Option Shares represents
approximately 52.2% of the shares of BGS Common Stock outstanding on the date of
the Merger Agreement. The Options were granted by the Stockholders as a
condition of and as an inducement for BMC's entering into the Merger Agreement.
The Options will remain in full force and effect from the date of the
Stockholder Agreements until the earliest to occur of (i) the Effective Time;
(ii) 45 days after the occurrence of a Triggering Event, as defined below; or
(iii) the date the Merger Agreement is terminated without giving rise to a
Triggering Event (such period being herein called the "Option Term").
BMC may exercise the Option, in whole or in part, at any time during the
Option Term following the occurrence of any of the following Triggering Events:
(A) the termination of the Merger Agreement by BMC because there has
been a breach by BGS of its representations, warranties, covenants, or
agreements in the Merger Agreement such that BMC's conditions to
consummation of the Merger will not be satisfied because of the breach by
BGS of (i) its obligations with respect to the HSR Act, (ii) its
obligations with respect to the Proxy Statement, (iii) its obligations with
respect to the accounting treatment of the transaction, (iv) its agreement
not to dispose of assets, (v) the no solicitation clause, (vi) its
agreement not to amend its articles of organization or other organizational
documents, (vii) its agreement not to issue, sell or purchase its capital
stock,
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<PAGE> 50
(viii) the prohibition on dividends or (ix) its obligation to call and hold
the Special Meeting, the effect of which in each case would reasonably
jeopardize the Merger;
(B) the termination of the Merger Agreement by BMC because BGS's board
of directors shall have withdrawn or modified in a manner adverse to BMC
its approval of the Merger Agreement or the Merger under the terms,
conditions and procedures set forth in the no solicitation clause; or
(C) the stockholders of BGS shall have failed to approve the Merger
after the public announcement of, or the disclosure to the Board of
Directors of BGS of, a BGS Transaction Proposal.
The Stockholder Agreements contain provisions governing the procedure for
exercise of the Options and payment for the Option Shares purchased upon such
exercise and other provisions that adjust the number of Option Shares and the
Exercise Price therefor upon the occurrence of certain events, such as stock
dividends, divisions, combinations and recapitalizations, as well as certain
mergers, consolidations, share exchanges and sales of assets involving BGS.
Pursuant to the Stockholder Agreements, the Stockholders have also agreed
to vote all shares of BGS Common Stock beneficially owned by them in favor of
the Merger Agreement and the Merger and have granted BMC an irrevocable proxy to
vote their shares of BGS Common Stock in favor of the Merger Agreement and the
Merger.
The Stockholders have also agreed not to, and not to authorize or permit
any of their representatives to, directly or indirectly, solicit or encourage
(including by way of providing information) any prospective acquiror or the
invitation or submission of any inquiries, proposals or offers or any other
efforts or attempts that constitute, or may reasonably be expected to lead to, a
BGS Transaction Proposal.
The Stockholders have also agreed that, prior to the termination of the
Stockholder Agreements, no Stockholder will, (i) subject any of the Option
Shares to, or suffer to exist on any of the Option Shares, any lien, pledge,
security interest, charge or other encumbrance or restriction, other than
pursuant to the Stockholder Agreement, or (ii) sell, transfer, assign, convey or
otherwise dispose of any of the Option Shares, other than a disposition by
operation of law pursuant to the Merger.
MANAGEMENT AND OTHER INFORMATION
After the consummation of the Merger, BGS will be a wholly owned subsidiary
of BMC, and all of BGS's subsidiaries will be indirect wholly owned subsidiaries
of BMC. After the consummation of the Merger, BMC will be managed by the same
Board of Directors and executive officers as existed prior to the Merger.
Certain information relating to the management, executive compensation, certain
relationships and related transactions and other related matters pertaining to
BMC and BGS is set forth in or incorporated by reference in their respective
Annual Reports on Form 10-K which are incorporated in this Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."
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<PAGE> 51
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
BMC
The following table sets forth information with respect to stockholders of
BMC who were believed by management of BMC to own more than 5% of the
outstanding BMC Common Stock. The information set forth below is based solely
upon information furnished by such stockholders or contained in filings made by
such persons with the Commission, and is as of January 31, 1998.
<TABLE>
<CAPTION>
SHARES OF BMC
COMMON STOCK PERCENTAGE OF BMC
BENEFICIALLY COMMON STOCK
NAME OWNED OUTSTANDING
---- ------------- -----------------
<S> <C> <C>
Massachusetts Financial Services..................... 9,487,000 9.3%
500 Bolyston Street, Boston, MA 02116
FMR Corp............................................. 8,850,000 8.7%
82 Devonshire Street, Boston, MA 02109
Putnam Investment Management......................... 8,378,000 8.2%
One Post Office Square, Boston, MA 02109
Max P. Watson Jr.(1)................................. 1,399,590 1.4%
Douglas J. Erwin(2).................................. 244,660 *
Richard P. Gardner(3)................................ 176,010 *
James E. Juracek(4).................................. 76,268 *
Gerd A. Ordelheide(5)................................ 65,152 *
John W. Barter(6).................................... 89,500 *
B. Garland Cupp(7)................................... 87,500 *
Meldon K. Gafner(8).................................. 67,000 *
L. W. Gray(9)........................................ 68,750 *
George F. Raymond(10)................................ 74,304 *
Tom C. Tinsley(11)................................... 5,000 *
Directors and executive officers as a group (20
persons)(12)....................................... 3,209,579 3.2%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Includes 1,006,620 shares subject to employee stock options exercisable
within 60 days after January 31, 1998 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 160,000 shares subject to employee stock options exercisable
within 60 days after January 31, 1998.
(3) Includes 141,900 shares subject to employee stock options exercisable
within 60 days after January 31, 1998.
(4) Includes 7,500 shares subject to employee stock options exercisable within
60 days after January 31, 1998.
(5) Includes 65,152 shares subject to employee stock options exercisable within
60 days after January 31, 1998.
(6) Includes 77,500 shares subject to employee stock options exercisable within
60 days after January 31, 1998.
(7) Includes 87,500 shares subject to nonemployee director stock options
exercisable within 60 days after January 31, 1998.
(8) Includes 67,500 shares subject to nonemployee director stock options
exercisable within 60 days after January 31, 1998.
(9) Includes 68,500 shares subject to nonemployee director stock options
exercisable within 60 days after July 11, 1997.
(10) Includes 64,500 shares subject to nonemployee director stock options
exercisable within 60 days after January 31, 1998.
(11) Includes 5,000 shares subject to nonemployee director stock options
exercisable within 60 days after January 31, 1998.
(12) Includes 2,252,347 shares subject to stock options exercisable within 60
days after January 31, 1998 and 57,000 shares of restricted stock.
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<PAGE> 52
BGS
The following table and the notes thereto set forth certain information
with respect to the beneficial ownership of shares of BGS Common Stock, as of
January 31, 1998 (except as noted in the footnotes to such table), by each
person or group within the meaning of Section 13(d)(3) of the Exchange Act who
is known to the management of the Company to be the beneficial owner of more
than five percent of the Common Stock outstanding as of January 31, 1998:
<TABLE>
<CAPTION>
SHARES OF
BGS COMMON STOCK PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIALLY BGS COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING
------------------- ---------------- ----------------
<S> <C> <C>
Jeffrey P. Buzen................................. 1,309,514(2) 20.7%
One First Avenue, Waltham, MA 02254
Paul R. Duncan................................... 40,000(3) *
Judith N. Goldberg............................... 919,710(4) 14.5%
One First Avenue, Waltham, MA 02254
Harold S. Schwenk, Jr............................ 1,228,800(5) 19.4%
One First Avenue, Waltham, MA 02254
James S. McGuire................................. 88,335(6) 1.4%
C. Russel Hansen, Jr............................. 821,801(7) 13.0%
One First Avenue, Waltham, MA 02254
Normand Bilodeau................................. 810(8) *
John P. Pryor.................................... 4,000(9) *
Wellington Management Company.................... 749,020(11) 11.8%
75 State Street, Boston, MA 02109
Fleet Financial Group............................ 330,650(12) 5.2%
One Federal Street, Boston, MA 02110
Directors and executive officers as a group (8
persons)....................................... 3,735,696(13) 59.1%
</TABLE>
- ---------------
* Represents less than 1% of the Common Stock outstanding.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes shares as to which an
individual exercises voting or investment power. Stock subject to options
currently exercisable or exercisable within 60 days following January 31,
1998 are deemed outstanding for the purpose of computing the share
ownership and percentage of the person holding such options, but are not
deemed outstanding for the purpose of computing the percentage of any other
person.
(2) Includes 100,000 shares of Common Stock subject to options which are
presently exercisable.
(3) Includes: 36,000 shares of Common Stock subject to options which are
presently exercisable.
(4) Includes: (a) 677,274 shares of Common Stock owned by the Variations Trust,
with respect to which shares Mrs. Goldberg as co-trustee, has shared power
to vote and control the disposition and (b) 16,000 shares of Common Stock
subject to options which are presently exercisable. The shares also include
(a) 45,000 shares of Common Stock held by the Robert P. Goldberg Generating
Skipping Trust for the benefit of the Reporting Person's children, (b)
175,000 shares of Common Stock held indirectly by Smiley Partners L.P., and
(c) 6,436 shares of Common Stock held by Mrs. Goldberg as custodian for her
children. Mrs. Goldberg disclaims beneficial ownership of 51,436 shares.
(5) Includes: (a) 18,360 shares of Common Stock held of record by Dr. Schwenk
as custodian for the benefit of his daughters (b) 400 shares held of record
by Dr. Schwenk as custodian for the benefit of his minor son, (c) 5,100
shares held of record by Dr. Schwenk's wife as custodian for the benefit of
their son, (d) 6,470 shares of Common Stock held of record by Dr. Schwenk's
wife, and (e) 182,503 shares of Common Stock held in the Schwenk Family
Remainder Trust -- 1995 with respect to which shares
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<PAGE> 53
Dr. Schwenk's wife and an unrelated trustee serve as trustees and have
shared power to vote and control the disposition. Dr. Schwenk disclaims
beneficial ownership of all of such 194,073 shares. Also includes: 100,000
shares of Common Stock subject to options which are presently exercisable.
(6) Includes 88,000 shares of Common Stock subject to options which are
presently exercisable.
(7) Includes: (a) 677,274 shares of Common Stock owned by the Variations Trust,
with respect to which shares Mr. Hansen as co-trustee, has shared power to
vote and control the disposition and (b) 122,320 shares of Common Stock
held of record by four irrevocable trusts of which Mr. Hansen is a
co-trustee for the benefit of children who are not related to Mr. Hansen.
Mr. Hansen disclaims beneficial ownership of all 799,594 shares. Also
includes 16,000 shares of Common Stock subject to options which are
presently exercisable.
(8) Includes 10 shares of Common Stock held of record by Mr. Bilodeau's wife.
Mr. Bilodeau disclaims beneficial ownership of all 10 shares.
(9) Includes 4,000 shares of Common Stock subject to options which are
presently exercisable.
(10) Mr. Hansen and Mrs. Goldberg as trustees with equal voting rights, have
shared power (by majority vote) to vote and control the disposition of all
of the 677,274 shares of Common Stock owned by the Trust.
(11) Wellington Management Company LLP's beneficial ownership of Common Stock of
the Company as set forth in its most recent statement, filed on January 24,
1997, pursuant to Section 13G of the Act, consists of no shares over which
it has sole voting power, 291,420 shares over which it has shared voting
power, no shares over which it has sole dispositive power and 749,020
shares over which it has shared dispositive power.
(12) Fleet Financial Group's beneficial ownership of Common Stock of the Company
as set forth in its most recent statement, filed on February 13, 1997,
pursuant to Section 13G of the Act, consists of 265,650 shares over which
it has sole voting power, no shares over which it has shared voting power,
329,650 shares over which it has sole dispositive power and 1,000 shares
over which it has shared dispositive power.
(13) Includes 360,000 shares subject to options which are presently exercisable
and no shares that may be acquired within 60 days of the record date
through the exercise of stock options.
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<PAGE> 54
DESCRIPTION OF BMC CAPITAL STOCK
GENERAL
The following descriptions of certain of the provisions of the certificate
of incorporation and bylaws of BMC are necessarily general and do not purport to
be complete and are qualified in their entirety by reference to such documents,
which are included as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part.
BMC COMMON STOCK
BMC is authorized to issue 300,000,000 shares of BMC Common Stock, par
value $.01 per share. As of December 31, 1997, there were 101,689,583 shares of
BMC Common Stock issued and outstanding (exclusive of 3,350,417 shares held in
treasury) and approximately 678 holders of record of BMC Common Stock. The
holders of BMC Common Stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. The holders of BMC Common Stock do
not have cumulative voting rights in the election of directors. Subject to the
rights of the holders of BMC Preferred Stock (as defined below), the holders of
BMC Common Stock are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors of BMC out of legally available funds. In
the event of liquidation, dissolution or winding up of BMC, the holders of BMC
Common Stock are entitled to share ratably in all assets of BMC remaining after
the full amounts, if any, to which the holders of outstanding BMC Preferred
Stock are entitled. The holders of BMC Common Stock have no preemptive,
subscription, redemptive or conversion rights. The outstanding shares are fully
paid and nonassessable. The rights, preferences and privileges of holders of BMC
Common Stock are subject to those of holders of BMC Preferred Stock.
RIGHTS TO PURCHASE PREFERRED STOCK
On May 2, 1995, the Board of Directors of BMC declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of BMC
Common Stock held of record on May 12, 1995 and approved the further issuance of
Rights with respect to all shares of BMC Common Stock that are subsequently
issued. The Rights were issued subject to a Rights Agreement that is the Rights
Agreement dated as of May 8, 1995, as amended as of April 21, 1997, between BMC
and BankBoston N.A., as Rights Agent (the "Rights Agreement"). Each Right now
entitles the registered holder to purchase from BMC one-thousandth of a share of
Series A Junior Participating Preferred Stock, par value $.01 ("BMC Series A
Preferred Stock"), of BMC, at a price of $310 per one-thousandth of a share (the
"Purchase Price"), subject to adjustment. See "-- BMC Preferred Stock -- BMC
Series A Preferred Stock." Until the occurrence of certain events described
below, the Rights are not exercisable, will be evidenced by the certificates for
BMC Common Stock and will not be transferable apart from the BMC Common Stock.
Detachment of Rights; Exercise. The Rights are currently attached to all
certificates representing outstanding shares of BMC Common Stock and no separate
Right Certificates have been distributed. The Rights will separate from the BMC
Common Stock and a distribution date ("Distribution Date") will occur upon the
earlier of (i) ten business days following a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired beneficial ownership of 20% or more of the outstanding Voting Shares
(as defined in the Rights Agreement) of BMC, or (ii) ten business days following
the commencement or announcement of an intention to commence a tender offer or
exchange offer, the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of such outstanding Voting Shares.
The Rights are not exercisable until the Distribution Date. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights (the "Right Certificates") will be mailed to holders of record of BMC
Common Stock as of the close of business on the Distribution Date and such
separate Right Certificates alone will thereafter evidence the Rights.
If a person or group were to acquire 20% or more of the Voting Shares of
BMC, each Right then outstanding (other than Rights beneficially owned by the
Acquiring Person which would become null and void) would become a right to buy
that number of shares of BMC Common Stock (or under certain
46
<PAGE> 55
circumstances, the equivalent number of one-thousandths of a share of BMC Series
A Preferred Stock) that at the time of such acquisition would have a market
value of two times the Purchase Price of the Right.
If BMC were acquired in a merger or other business combination transaction
or more than 50% of its consolidated assets or earning power were sold, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value of two times the
Purchase Price of the Right.
Antidilution and Other Adjustments. The number of shares (or fractions
thereof) of BMC Series A Preferred Stock or other securities or property
issuable upon exercise of the Rights, and the Purchase Price payable, are
subject to customary adjustments from time to time to prevent dilution. The
number of outstanding Rights and the number of shares (or fractions thereof) of
BMC Series A Preferred Stock issuable upon exercise of each Right are also
subject to adjustment in the event of a stock split of the BMC Common Stock or a
stock dividend on the BMC Common Stock payable in BMC Common Stock or
subdivisions, consolidations or combinations of the BMC Common Stock occurring,
in any such case, prior to the Distribution Date.
Exchange Option. At any time after the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 20% or more of the
outstanding Voting Shares of BMC and before the acquisition by a person or group
of 50% or more of the outstanding Voting Shares of BMC, the BMC Board of
Directors may, at its option, issue BMC Common Stock in mandatory redemption of,
and in exchange for, all or part of the then outstanding and exercisable Rights
(other than Rights owned by such person or group which would become null and
void) at an exchange ratio of one share of BMC Common Stock (or one-thousandth
of a share of BMC Series A Preferred Stock) for each two shares of BMC Common
Stock for which each right is then exercisable, subject to adjustment.
Redemption of Rights. At any time prior to the first public announcement
that a person or group has become the beneficial owner of 20% or more of the
outstanding Voting Shares, the BMC Board of Directors may redeem all but not
less than all the then outstanding Rights at a price of $.01 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the BMC Board of Directors in
its sole discretion may establish. Immediately upon the action of the BMC Board
of Directors ordering redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
Expiration; Amendment of Rights. The Rights will expire on May 12, 2005,
unless earlier redeemed or exchanged. The terms of the Rights may be amended by
the BMC Board of Directors without the consent of the holders of the Rights,
including an amendment to extend the expiration date of the Rights, and,
provided a Distribution Date has not occurred, to extend the period during which
the Rights may be redeemed, except that after the first public announcement that
a person or group has become the beneficial owner of 20% or more of the
outstanding Voting Shares, no such amendment may materially and adversely affect
the interests of the holders of the Rights.
The Rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire BMC without
the approval of the BMC Board of Directors. The Rights should not, however,
interfere with any merger or other business combination that is approved by the
BMC Board of Directors.
The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference and is available free of charge from BMC.
BMC PREFERRED STOCK
General. BMC is authorized to issue 1,000,000 shares of Preferred Stock,
par value $.01 (the "BMC Preferred Stock"). No shares of BMC Preferred Stock
were outstanding at January 31, 1998. The BMC Board of Directors has authority,
without stockholder approval, to issue shares of BMC Preferred Stock in one
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<PAGE> 56
or more series and to determine the number of shares, designations, dividend
rights, conversion rights, voting power, redemption rights, liquidation
preferences and other terms of such series. The issuance of BMC Preferred Stock,
while providing desired flexibility in connection with possible acquisitions and
other corporate purposes, could adversely affect the voting power of holders of
BMC Common Stock and the likelihood that such holders will receive dividend
payments and payments upon liquidation and could have the effect of delaying,
deferring or preventing a change in control of BMC. BMC has no present plans to
issue any BMC Preferred Stock.
Series A Junior Participating Preferred Stock. The terms of the BMC Series
A Preferred Stock are designed so that the value of one one-thousandth of a
share purchasable upon exercise of a Right will approximate the value of one
share of BMC Common Stock. The BMC Series A Preferred Stock is nonredeemable and
will rank junior to all other series of BMC Preferred Stock. Each whole share of
BMC Series A Preferred Stock is entitled to receive a quarterly preferential
dividend in an amount per share equal to the greater of (i) $1.00 in cash or
(ii), in the aggregate, 1,000 times the dividend declared on the BMC Common
Stock. In the event of liquidation, the holders of the BMC Series A Preferred
Stock are entitled to receive a preferential liquidation payment equal to the
greater of (i) $1,000 per share or (ii), in the aggregate, 1,000 times the
payment made on the BMC Common Stock. In the event of any merger, consolidation
or other transaction in which the BMC Common Stock is exchanged for or changed
into other stock or securities, cash or property, each whole share of BMC Series
A Preferred Stock is entitled to receive 1,000 times the amount received per
share of BMC Common Stock. Each whole share of BMC Series A Preferred Stock is
entitled to 1,000 votes on all matters submitted to a vote of the stockholders
of BMC, and holders of BMC Series A Preferred Stock will generally vote together
as one class with the holders of BMC Common Stock and any other capital stock on
all matters submitted to a vote of stockholders of BMC.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the BMC Common Stock is Boston
EquiServe.
COMPARATIVE RIGHTS OF BMC AND BGS STOCKHOLDERS
At the Effective Time of the Merger, the stockholders of BGS, whose rights
are governed by Massachusetts law and articles of organization and by-laws
adopted thereunder, will become stockholders of BMC, a corporation governed by
Delaware law and a certificate of incorporation and by-laws adopted thereunder.
The following discussion summarizes the material differences between the rights
of holders of BGS Common Stock and holders of BMC Common Stock, based on a
comparison of the Massachusetts and Delaware corporation laws and differences
between the charters and by-laws of BGS and BMC. This summary does not purport
to be complete and is qualified in its entirety by reference to the BGS Articles
of Organization (the "BGS Articles") and By-Laws, the BMC Certificate of
Incorporation (the "BMC Certificate") and By-Laws and the relevant provisions of
the Delaware General Corporation Law (the "DGCL") and the Massachusetts Business
Corporation Law (the "MBCL").
MEETINGS OF STOCKHOLDERS
Massachusetts law permits a special meeting of stockholders to be called by
the president or the board of directors and, in the case of public companies
like BGS, unless otherwise provided in the articles of organization or bylaws,
upon written application by holders of not less than 40% of shares of stock
entitled to vote thereat. The BGS By-Laws provide for the call of a special
meeting of stockholders upon written application of the holders of not less than
10% of the shares of BGS Common Stock. Delaware law permits a special meeting of
stockholders to be called by the board of directors or such other person as may
be authorized by the corporation's charter or bylaws. The BMC By-Laws provide
that special meetings of stockholders may be called at any time by the Chairman
of the Board, the President or a majority of the Board of Directors, or the
holders of at least ten percent of the issued and outstanding stock entitled to
vote at such meeting.
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<PAGE> 57
INSPECTION RIGHTS
Under the MBCL, a corporation's stockholders have the right for a proper
purpose to inspect the corporation's articles of organization, by-laws, records
of all meetings of incorporators and stockholders, and stock and transfer
records, including the stockholder list. In addition, stockholders of a
Massachusetts business corporation have a qualified common law right under
certain circumstances to inspect other books and records of the corporation.
Under Delaware law, stockholders demonstrating a proper purpose have the right
to inspect a corporation's stock ledger, stockholder list, and other books and
records.
ACTION BY CONSENT OF STOCKHOLDERS
Under the MBCL, any action to be taken by stockholders may be taken without
a meeting only by unanimous written consent, and a corporation may not provide
otherwise in its articles of organization or by-laws. Under Delaware law, unless
otherwise provided in the certificate of incorporation, stockholders may take
action without a meeting, without prior notice and without a vote, upon the
written consent of stockholders having not less than the minimum number of votes
that would be necessary to authorize the proposed action at a meeting at which
all shares entitled to vote were present and voted. The BMC Certificate and
By-Laws specifically provide for actions to be taken by written consent in
accordance with the DGCL.
CUMULATIVE VOTING
The MBCL does not authorize or provide for cumulative voting rights. Under
the DGCL, a corporation may provide in its certificate of incorporation for
cumulative voting by stockholders in elections of directors (i.e., each
stockholder casts as many votes for directors as he has shares of stock
multiplied by the number of directors to be elected). The BMC Certificate,
however, expressly prohibits cumulative voting.
ISSUANCE OF STOCK; PREFERRED STOCK
Shares of BGS Common Stock may be issued from time to time, in such amounts
and for such consideration, as may be determined by the BGS Board of Directors.
No holder of BGS Common Stock has any preemptive or preferential rights to
purchase or to subscribe for any shares of capital stock or other securities
that may be issued by BGS. BGS is not authorized to issue preferred stock.
Shares of BMC Common Stock may be issued by BMC from time to time as
approved by the BMC Board without stockholder approval. Holders of the capital
stock of BMC are not entitled to preemptive or preferential rights to purchase
or to subscribe for any shares of capital stock or other securities that may be
issued by BMC. The BMC Certificate authorizes the issuance of up to 1,000,000
shares of Preferred Stock, par value $.01 per share. None of such shares is
outstanding. The Preferred Stock is issuable in one or more series. The BMC
Board of Directors can authorize, without stockholder approval, the issuance of
each series of Preferred Stock and can fix the voting rights, if any, dividend
rate, liquidation preferences, optional and sinking fund redemption provisions,
if any, conversion rights, if any, and other rights of each such series, any of
which rights could adversely affect the voting and other rights of the holders
of BMC Common Stock.
DIVIDENDS AND REPURCHASES OF STOCK
Under the MBCL, the payment of dividends and the repurchase of the
corporation's stock are generally permissible if such actions are not taken when
the corporation is insolvent, do not render the corporation insolvent, and do
not violate the corporation's articles of organization. The directors of a
Massachusetts corporation may be jointly and severally liable to the corporation
to the extent that a dividend authorized by the directors exceeds such
permissible amounts and is not repaid to the corporation. Under Delaware law, a
corporation generally is permitted to declare and pay dividends out of surplus
or out of net profits for the current and/or immediately preceding fiscal year,
provided that such dividends will not reduce capital below the amount of capital
represented by all classes of stock having a preference upon the distribution of
assets. Also under the DGCL, a corporation may generally redeem or repurchase
shares of its stock if such redemption or repurchase will not impair the capital
of the corporation. The directors of a Delaware
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corporation may be jointly and severally liable to the corporation for a willful
or negligent violation of such provisions of Delaware law.
CLASSIFICATION OF THE BOARD OF DIRECTORS
In the case of a public company incorporated in Massachusetts, Section 50A
of the MBCL provides that the number of directors may only be fixed by the board
of directors and requires that the board be divided into three classes with
staggered three-year terms. A public company may exempt itself from the
provisions of Section 50A by vote of the board of directors or of the holders of
two-thirds of the voting stock. BGS is subject to Section 50A. The BMC By-Laws
provide that the number of directors of BMC shall be set by resolution of the
BMC Board of Directors and may be increased or decreased from time to time by
resolution. BMC currently has seven directors. Although Delaware law allows
directors to be divided into three separate classes with staggered terms of
office, neither the BMC Certificate nor the BMC By-Laws provide for the
classification of directors.
REMOVAL OF DIRECTORS
Under Section 50A of the MBCL, directors of a public company subject to
that section may be removed from office only by the holders of a majority of the
shares outstanding and entitled to vote in the election of directors or a
majority of the directors then in office, in each case only for certain causes
specified in the law. Under the DGCL, stockholders may remove directors with or
without cause by a majority vote unless otherwise provided in the certificate of
incorporation. The BMC By-Laws provides that directors may be removed with or
without cause by the holders of at least a majority of the shares then entitled
to vote at an election of directors. Unlike Massachusetts law, Delaware law does
not permit directors to remove other directors.
VACANCIES ON THE BOARD OF DIRECTORS
Under Section 50A of the MBCL, vacancies and newly created directorships of
a Massachusetts public company subject to that section may be filled only by the
vote of a majority of the remaining directors in office. Under the DGCL, unless
otherwise provided in the charter or by-laws, vacancies on the board of
directors and newly created directorships resulting from any increase in the
authorized number of directors may be filled by the remaining directors, even
though less than a quorum. The BMC Certificate and By-Laws do not provide
otherwise.
EXCULPATION OF DIRECTORS
Massachusetts law and Delaware law have substantially similar provisions
relating to exculpation of directors. Each state's law permits, and the BGS
By-Laws and the BMC Certificate provide, that no director shall be personally
liable to the company or its stockholders for monetary damages for breaches of
fiduciary duty except where such exculpation is expressly prohibited. The
circumstances under which such exculpation is prohibited are substantially
similar, except that in Massachusetts, a director is not exculpated from
liability under provisions of the MBCL relating to unauthorized distributions
and loans to insiders, while in Delaware, a director is not exculpated from
liability under provisions of the DGCL relating to unlawful payments of
dividends and unlawful stock purchases or redemptions. Under both states' laws,
a director may be personally liable for monetary damages for breaches of the
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law and for any
transactions for which the director has derived an improper personal benefit.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Both the MBCL and the DGCL generally permit indemnification, or
reimbursement, of directors and officers for expenses, judgments, fines and
amounts paid in settlement of claims incurred by them by reason of their
position with the corporation. The MBCL provides that no such indemnification
may be provided with respect to any matter in which the director or officer
shall have been adjudicated not to have acted in good
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faith in the reasonable belief that his or her action was in the best interests
of the corporation, while the DGCL permits indemnification only where there has
been a determination by a majority vote of disinterested directors, independent
legal counsel or the stockholders that the person seeking indemnification acted
in good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation. In addition, the DGCL, unlike
the MBCL, expressly does not permit a corporation to indemnify persons against
judgments in actions brought by or in the right of the corporation (although it
does permit indemnification in such situations if approved by the Delaware Court
of Chancery and for expenses of such actions). The BGS Articles and By-Laws
provide for the indemnification of officers and directors to the maximum extent
legally permissible, with substantially the same effect as the BMC Certificate
as supplemented by Delaware statutory provisions.
INTERESTED DIRECTOR TRANSACTIONS
The DGCL provides that no transaction between a corporation and one or more
of its directors or officers or an entity in which one or more of its directors
or officers are directors or officers or have a financial interest, shall be
void or voidable solely for that reason. In addition, no such transaction shall
be void or voidable solely because the director or officer is present at,
participates in, or votes at the meeting of the board of directors, or committee
thereof, which authorizes the transaction. In order that such a transaction not
be found void or voidable, it must, after disclosure of material facts, be
approved by the disinterested directors, a committee of disinterested directors,
or the stockholders, or the transaction must be fair as to the corporation. The
MBCL has no comparable provision.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS
The MBCL provides that a vote of two-thirds of the shares of each class of
stock outstanding and entitled to vote thereon is required to authorize the
sale, lease, or exchange of all or substantially all of a corporation's property
and assets or a merger or consolidation of the corporation into any other
corporation, except that the articles of organization may provide that the vote
of a greater or lesser proportion, but not less than a majority of the
outstanding shares of each class, is required. The BGS Articles does not alter
the statutory provision. The DGCL requires the approval of the directors and the
vote of the holders of a majority of the outstanding stock entitled to vote
thereon for the sale, lease, or exchange of all or substantially all of a
corporation's property and assets or a merger or consolidation of the
corporation into any other corporation, although the certificate of
incorporation may require a higher stockholder vote. The BMC Certificate does
not require a higher vote.
AMENDMENTS TO CHARTER
Under the MBCL, amendments to a corporation's articles of organization
relating to certain changes in capital or in the corporate name require the vote
of at least a majority of each class of stock outstanding and entitled to vote
thereon. Amendments relating to other matters require a vote of at least
two-thirds of each class outstanding and entitled to vote thereon or, if the
articles of organization so provide, a greater or lesser proportion but not less
than a majority of the outstanding shares of each class. The BGS Articles does
not alter the statutory provision. Under the DGCL, charter amendments require
the approval of the directors and the vote of the holders of a majority of the
outstanding stock and a majority of each class of stock outstanding and entitled
to vote thereon as a class, unless the certificate of incorporation requires a
greater proportion. The BMC Certificate does not require a greater proportion.
In addition, Delaware law requires a class vote when, among other things, an
amendment will adversely affect the powers, preferences or special rights of a
class of stock.
APPRAISAL RIGHTS
Dissenting stockholders have the right to obtain the fair value of their
shares (so-called "appraisal rights") in more circumstances under Massachusetts
law than under Delaware law. Under the MBCL, a properly dissenting stockholder
is entitled to receive the appraised value of his shares when the corporation
votes (i) to sell, lease, or exchange all or substantially all of its property
and assets, (ii) to adopt an
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amendment to its articles of organization which adversely affects the rights of
the stockholder or (iii) to merge or consolidate with another corporation. Under
the DGCL, a stockholder is entitled to appraisal rights in the event of certain
mergers or consolidations, but not in the event of the sale, lease, or exchange
of all or substantially all of a corporation's assets or the adoption of an
amendment to its certificate of incorporation, unless such rights are granted in
the corporation's certificate of incorporation. The BMC Certificate does not
grant such rights.
"ANTI-TAKEOVER" PROVISIONS
The BMC Charter and By-Laws contain provisions that could discourage
potential takeover attempts and prevent stockholders from changing the company's
management, including provisions authorizing the Board of Directors to issue
shares of preferred stock in series. The BGS Charter and By-Laws do not contain
comparable provisions. In addition, BMC has a shareholder rights plan. See
"Description of BMC Capital Stock -- Rights to Purchase Preferred Stock." BGS
does not have a shareholder rights plan.
The Massachusetts Business Combination Statute is substantially similar to
the Delaware Business Combination statute. However, while the Delaware statute
provides that, if a person acquires 15% or more of the stock of a Delaware
corporation without the approval of its board of directors (an "interested
stockholder"), such person may not engage in certain transactions with the
corporation for a period of three years, the Massachusetts statute lowers the
15% threshold to 5% (except in the case of certain stockholders eligible to file
Schedule 13G under the Exchange Act). Both the Massachusetts and Delaware
statutes include certain exceptions to this prohibition; for example, if the
board of directors approves the acquisition of stock or the transaction prior to
the time that the person became an interested stockholder, or if the interested
stockholder acquires 90% (in the Massachusetts statute) or 85% (in the Delaware
statute) of the voting stock of the corporation (excluding voting stock owned by
directors who are also officers and certain employee stock plans) in one
transaction, or if the transaction is approved by the board of directors and by
the affirmative vote of two-thirds of the outstanding voting stock which is not
owned by the interested stockholder, the prohibition does not apply. The BGS
Board has approved the Merger pursuant to the Massachusetts Business Combination
Statute, and BMC is currently subject to the Delaware Business Combination
Statute.
INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of Ernst & Young LLP will be present at
the Special Meeting to respond to appropriate questions of stockholders and to
make a statement if they so desire.
LEGAL MATTERS
The validity of the BMC Common Stock to be issued in the Merger has been
passed upon for BMC by Vinson & Elkins L.L.P., Houston, Texas. Certain tax
consequences of the Merger have been passed upon for BMC by Vinson & Elkins
L.L.P., Houston, Texas, and for BGS by Palmer & Dodge LLP, Boston,
Massachusetts.
EXPERTS
The consolidated financial statements and financial statement schedules
included in the BMC 1997 Form 10-K, to the extent and for the periods indicated
in their reports, have been audited by Arthur Andersen LLP, independent public
accountants, and have been incorporated by reference herein and in the
Registration Statement in reliance upon the authority of said firm as experts in
giving said reports.
The consolidated financial statements and financial statement schedule
included in the BGS 1997 Form 10-K, incorporated by reference herein and in the
Registration Statement, have been audited by Ernst & Young LLP, and have been
included in reliance on their report given on their authority as experts in
accounting and auditing.
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STOCKHOLDER PROPOSALS
Any proposals of holders of BMC Common Stock intended to be presented at
the Annual Meeting of Stockholders of BMC to be held in 1998 must be received by
BMC, addressed to the Secretary of BMC at 2101 CityWest Blvd., Houston, Texas
77042, no later than March 23, 1998, to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
If the Merger is not consummated, any proposals of stockholders of BGS
intended to be presented at the Annual Meeting of Stockholders of BGS to be held
in 1998 must have been received by BGS, addressed to the Clerk of BGS at One
First Avenue, Waltham, Massachusetts 02254-9111, no later than January 6, 1998,
to be considered for inclusion in the proxy statement and form of proxy relating
to that meeting.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
BMC SOFTWARE, INC.,
RANGER ACQUISITION CORP.
AND
BGS SYSTEMS, INC.
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of January 31,
1998, by and among BMC Software, Inc., a Delaware corporation ("BMC"), Ranger
Acquisition Corp., a Massachusetts corporation and a wholly owned subsidiary of
BMC ("Merger Sub"), and BGS Systems, Inc., a Massachusetts corporation ("BGS").
W I T N E S S E T H:
WHEREAS, the respective boards of directors of BMC and BGS deem it
desirable and in the best interests of their respective corporations and their
respective stockholders that Merger Sub be merged with and into BGS, pursuant to
the provisions of Section 78 of the Massachusetts Business Corporation Law
("MBCL"), in exchange for the consideration provided for in the Plan and
Agreement of Merger attached hereto as Exhibit A ("Plan of Merger"), and have
proposed, declared advisable, and approved such merger pursuant to this
Agreement and the Plan of Merger, which have been duly approved by resolutions
of the respective boards of directors of BMC and BGS; and
WHEREAS, for federal income tax purposes, it is intended that the merger
qualify as a reorganization under the provisions of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and in order to set forth the terms
and conditions of the merger, the mode of carrying the same into effect, the
manner and basis of converting the presently outstanding shares of common stock,
par value $.10 per share ("BGS Common Stock"), of BGS into shares of common
stock, par value $.01 per share ("BMC Common Stock"), of BMC, and such other
details and provisions as are deemed necessary or proper, the parties hereto
agree as follows:
ARTICLE I
MERGER
1.1. The Merger. Subject to and in accordance with the terms and conditions
of this Agreement and pursuant to the Plan of Merger between Merger Sub and BGS,
at the Effective Time (as hereinafter defined) Merger Sub shall be merged with
and into BGS (the "Merger"), the separate existence of Merger Sub shall cease,
and BGS (i) shall continue as the surviving corporation (sometimes referred to
herein as the "Surviving Corporation") under the corporate name "BGS Systems,
Inc.", (ii) shall be governed by the laws of The Commonwealth of Massachusetts,
(iii) shall maintain a registered office in The Commonwealth of Massachusetts at
2 Oliver Street, Boston, Massachusetts 02109, and shall (iv) succeed to and
assume all of the rights, properties and obligations of Merger Sub and BGS in
accordance with the MBCL. Subject to the terms and conditions of this Agreement
and the Plan of Merger, BMC agrees, at or prior to the Closing, to cause Merger
Sub to execute and deliver the Plan of Merger in form and substance
substantially similar to the form attached hereto as Exhibit A. Subject to the
terms and conditions of this Agreement and the Plan of Merger, BGS agrees, at or
prior to the Closing, to execute and deliver the Plan of Merger in form and
substance substantially similar to the form attached hereto as Exhibit A.
1.2. Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Palmer & Dodge LLP,
One Beacon Street, Boston, Massachusetts 02108, as soon as reasonably
practicable after the satisfaction or waiver of the conditions set forth in
Article V or at such other time and place and on such other date as BMC and BGS
shall agree; provided, that the conditions set forth in Article V shall have
been satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date."
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1.3. Effective Time. As soon as practicable on the Closing Date, the
parties hereto will cause the Merger to be consummated by filing with the State
Secretary of The Commonwealth of Massachusetts, articles of merger in such form
as required by, and executed in accordance with, the relevant provisions of the
MBCL (the time of filing the agreement of merger with the State Secretary of The
Commonwealth of Massachusetts being the "Effective Time").
1.4. Material Adverse Effect. "Material Adverse Effect" or "Material
Adverse Change" means any effect, change, event, circumstance or condition which
when considered with all other effects, changes, events, circumstances or
conditions could reasonably be expected to materially adversely affect the
business, results of operations, financial condition or prospects of BMC or BGS,
in each case including its respective subsidiaries together with it taken as a
whole, as the case may be. In no event shall any of the following constitute a
Material Adverse Effect or a Material Adverse Change: (i) a change in the
trading prices of either of BMC's or BGS's equity securities between the date
hereof and the Effective Time, in and of itself; (ii) effects, changes, events,
circumstances or conditions generally affecting the industry in which either BMC
or BGS operate or arising from changes in general business or economic
conditions; (iii) effects, changes, events, circumstances or conditions directly
attributable to (a) out-of-pocket fees and expenses (including without
limitation legal, accounting, investigatory, investment banking, and other fees
and expenses) incurred in connection with the transactions contemplated by this
Agreement, or (b) the payment by BMC or BGS of all amounts due to any officers
or employees of BGS under employment contracts, non-competition agreements,
employee benefit plans or severance arrangements; (iv) any effects, changes,
events, circumstances or conditions resulting from any change in law or
generally accepted accounting principles, which affect generally entities such
as BMC and BGS; (v) any effect resulting from compliance by BMC or BGS with the
terms of this Agreement; and (vi) the loss of any single employee.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BGS
BGS represents and warrants subject to the exceptions specifically
described in writing in the disclosure schedule delivered by BGS to BMC and
dated the date hereof (the "BGS Disclosure Schedule") as follows:
2.1. Organization and Standing. BGS is a corporation duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
could not reasonably be expected to have a Material Adverse Effect on BGS.
2.2. Agreement Authorized and its Effect on Other Obligations. Upon
approval of this Agreement by the stockholders of BGS, the consummation of the
transactions contemplated hereby will have been duly and validly authorized by
all necessary corporate action on the part of BGS, and this Agreement will be a
valid and binding obligation of BGS enforceable against BGS (subject to normal
equitable principles) in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, debtor relief or similar
laws affecting the rights of creditors generally. At the Effective Time, the
consummation of the Merger will not conflict with or result in a violation or
breach of any term or provision of, nor constitute a default under, (i) the
articles of organization or bylaws of BGS or (ii) any obligations, indenture,
mortgage, deed of trust, lease, contract or other agreement to which BGS or any
of its subsidiaries is a party or by which any of them or their properties are
bound, other than such violations, breaches or defaults as could not reasonably
be expected to have a Material Adverse Effect on BGS. For purposes of Chapter
110F of the MBCL, the Board of Directors of BGS has approved the stockholder
agreement attached hereto as Exhibit B (the "Stockholder Agreement"), the
execution and delivery of the Stockholder Agreement by the stockholders named
therein and the transactions contemplated thereby. Section 2.2 of the BGS
Disclosure Schedule lists all holders of any material indebtedness of BGS, the
lessors of any material property leased by BGS
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and the other parties to any material agreements to which BGS is a party in each
case whose consent to the Merger is required.
2.3. Capitalization. The authorized capitalization of BGS consists of
10,000,000 shares of common stock, par value $.10 per share (the "BGS Common
Stock"), of which at December 31, 1997, 6,429,698 shares were issued and
outstanding, and an additional 1,146,379 shares were reserved for issuance in
conjunction with various employee benefit plans; at the same date, 103,501
shares of BGS Common Stock were held in BGS's treasury. All of such outstanding
shares are validly issued, fully paid and nonassessable, and were not issued in
violation of any preemptive rights of any stockholder. Other than as set forth
above with respect to employee benefit plans, BGS has no outstanding options,
warrants or obligations of any kind to issue any shares of its capital stock.
2.4. Subsidiaries. Section 2.4 of the BGS Disclosure Schedule lists the
subsidiary corporations of BGS existing at December 31, 1997, and shows as to
each of such subsidiary corporations the percentage of the total outstanding
stock thereof which is owned by BGS. Except as specified in Section 2.4 of the
BGS Disclosure Schedule, all outstanding shares of stock of the subsidiary
corporations owned by BGS are validly issued, fully paid, and nonassessable, and
BGS has good and valid title thereto free and clear of any mortgage, pledge,
lien, charge, security interest, option, right of first refusal, preferential
purchase right, defect, encumbrance or other right or interest of any other
person (collectively, an "Encumbrance"). Each such subsidiary is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction under which it is incorporated and has full requisite corporate
power and authority to own its property and carry on its business as presently
conducted by it and is, or on the Effective Time will be, duly qualified or
licensed to do business and is, or on the Effective Time will be, in good
standing as a foreign corporation authorized to do business in all jurisdictions
in which the character of the properties owned or the nature of the business
conducted makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed could not reasonably be expected to have
a Material Adverse Effect on BGS. As hereinafter used in this Article II, the
term "BGS" also includes any and all of its directly and indirectly held
subsidiaries, except where the context indicates to the contrary; provided,
however, that for purposes of Sections 2.7.1 and 2.20, the term "BGS" further
includes any corporation, trade, business or entity under common control with
BGS within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section
4001 of ERISA.
2.5. Reports and Financial Statements. BGS has previously furnished to BMC
true and complete copies of (a) all annual reports filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), since January 1, 1995, (b) BGS's
quarterly and other reports filed with the Commission since January 1, 1995, (c)
all definitive proxy solicitation materials filed with the Commission since
January 1, 1995, and (d) any registration statements declared effective by the
Commission since January 1, 1995. The consolidated financial statements of BGS
and its subsidiaries included in BGS's most recent report on Form 10-K and most
recent report on Form 10-Q, and any other reports filed with the Commission by
BGS under the Exchange Act subsequent thereto (collectively, the "BGS Reports")
were, or (if filed after the date hereof) will be, prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved and fairly present, or will present, the consolidated
financial position for BGS and its subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended (except with respect to interim period financial
statements, for normal year-end adjustments which are not material); and the BGS
Reports did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under whey they were made,
not misleading. Since January 1, 1995, BGS has filed with the Commission all
reports required to be filed by BGS under the Exchange Act and the rules and
regulations of the Commission.
2.6. Liabilities. BGS does not have any liabilities or obligations, either
accrued, absolute, contingent, or otherwise, or have any knowledge of any
potential liabilities or obligations, which could reasonably be expected to have
a Material Adverse Effect on BGS, other than those (i) disclosed in the BGS
Reports or (ii) set forth in Section 2.6 of the BGS Disclosure Schedule.
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2.7. Additional BGS Information. Set forth in Section 2.7 of the BGS
Disclosure Schedule are true, complete and correct lists of the following items
(which will be periodically updated by BGS and delivered to BMC through the
Effective Time), and BGS agrees that upon the request of BMC, it will furnish to
BMC true, complete and correct copies of any documents referred to in such
lists:
2.7.1. Employee Compensation Plans. All bonus, incentive compensation,
stock option, deferred compensation, profit-sharing, retirement, pension,
welfare, severance pay, supplemental income, group insurance, death
benefit, or other fringe benefit plans, arrangements or trust agreements
covering active, former or retired employees of BGS (collectively, "BGS
Plans"), together with copies of the most recent reports with respect to
such plans, arrangements, or trust agreements filed with any governmental
agency and all Internal Revenue Service determination letters that have
been received with respect to such plans;
2.7.2. Certain Salaries. The names and salary rates of all present
officers and employees of BGS whose current regular annual salary rate is
$100,000 or more, together with any bonuses paid or payable to such persons
for the fiscal year ended January 31, 1997, or since that date, and, to the
extent existing on the date of this Agreement, all arrangements with
respect to any bonuses to be paid to them from and after the date of this
Agreement;
2.7.3. Employee Agreements. Any collective bargaining agreements of
BGS with any labor union or other representative of employees, including
amendments, supplements, and understandings, and all employment and
consulting agreements of BGS;
2.7.4. Guaranties. All third party indebtedness, liabilities and
commitments of others as to which BGS is a guarantor, endorser, co-maker,
surety, or accommodation maker, or is contingently liable therefor
(excluding liabilities as an endorser of checks and the like in the
ordinary course of business) and all letters of credit, whether stand-by or
documentary, issued by any third party;
2.7.5. Environmental. All environmental orders and decrees material to
current operations conducted by BGS and all environmental audits,
assessments, investigations and reviews conducted within the last five
years on any property owned or used by BGS.
2.8. No Undisclosed Contracts or Defaults. Except as may be specified in
the BGS Reports or Section 2.8 of the BGS Disclosure Schedule, BGS, in its
reasonable belief, is not a party to, or bound by, any material contract or
arrangement of any kind to be performed after the Effective Time, nor is BGS in
default in any material obligation or covenant on its part to be performed under
any material obligation, lease, contract, order, plan or other arrangement.
2.9. Absence of Certain Changes and Events. Except as set forth in the BGS
Reports or in Section 2.9 of the BGS Disclosure Schedule, other than as a result
of the transactions contemplated by this Agreement, since October 31, 1997,
there has not been:
2.9.1. Financial Change. Any adverse change in the financial
condition, backlog, operations, assets, liabilities or business of BGS
which could reasonably be expected to have a Material Adverse Effect on
BGS;
2.9.2. Property Damage. Any damage, destruction, or loss to the
business or properties of BGS (whether or not covered by insurance) that
could reasonably be expected to have a Material Adverse Effect on BGS;
2.9.3. Dividends. Any declaration, setting aside, or payment of any
dividend or other distribution in respect of the BGS Common Stock, or any
direct or indirect redemption, purchase or any other acquisition by BGS of
any such stock;
2.9.4. Capitalization Change. Any change in the capital stock or in
the number of shares or classes of BGS's authorized or outstanding capital
stock as described in Paragraph 2.3 (other than the issuance of BGS Common
Stock upon the exercise of outstanding options to purchase BGS Common
Stock);
2.9.5. Labor Disputes. Any labor dispute (other than routine
grievances);
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2.9.6. Employment Arrangements. Any increase in compensation, bonus,
deferred compensation, stock options or other consideration of any employee
or director other than in the ordinary course of business consistent with
past practice; or
2.9.7. Other Material Changes. Any other event or condition known to
BGS particularly pertaining to and adversely affecting the operations,
assets or business of BGS which could reasonably be expected to have a
Material Adverse Effect on BGS.
2.10. Taxes.
2.10.1. Tax Returns Filed; Taxes Paid. Except as set forth in Section
2.10 of the BGS Disclosure Schedule, and except with respect to failures
which, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on BGS, (i) all returns and reports ("Tax Returns")
of or with respect to any and all taxes, charges, fees, levies,
assessments, duties or other amounts payable to any federal, state, local
or foreign taxing authority or agency, including, without limitation, (x)
income, franchise, profits, gross receipts, minimum, alternative minimum,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment
compensation, utility, severance, excise, stamp, windfall profits, transfer
and gains taxes, (y) customs, duties, imposts, charges, levies or other
similar assessments of any kind, and (z) interest, penalties and additions
to tax imposed with respect thereto ("Tax" or "Taxes") which are required
to be filed on or before the Closing by or with respect to BGS have been or
will be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each such
Tax Return have been or will be so included and all information provided in
each such Tax Return is true, correct and complete, (iii) all Taxes which
have become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, (iv) all
withholding Tax requirements imposed on or with respect to BGS have been or
will be satisfied in full in all respects, and (v) no penalty, interest or
other charge is or will become due with respect to the late filing of any
such Tax Return or late payment of any such Tax.
2.10.2. Open Returns Disclosed. All Tax Returns of or with respect to
BGS with unexpired or extended statutes of limitations which have been
audited by the applicable governmental authority are set forth in Section
2.10 of the BGS Disclosure Schedule.
2.10.3. Extensions Disclosed. Except as set forth in Section 2.10 of
the BGS Disclosure Schedule, there is not in force any extension of time
with respect to the due date for the filing of any Tax Return of or with
respect to BGS or any waiver or agreement for any extension of time for the
assessment or payment of any Tax of or with respect to BGS.
2.10.4. Claims Disclosed. There is no claim against BGS for any Taxes,
and no assessment, deficiency or adjustment has been asserted or proposed
with respect to any Tax Return of or with respect to BGS other than those
disclosed (and to which are attached true and complete copies of all audit
or similar reports) in Section 2.10 of the BGS Disclosure Schedule or which
could not reasonably be expected to have a Material Adverse Effect on BGS.
2.10.5. Scheduled Tax Liabilities Sufficient. The total amounts set up
as liabilities for current and deferred Taxes in the financial statements
referred to in Section 2.5. of this Agreement are sufficient to cover in
all material respects the payment of all Taxes, whether or not assessed or
disputed, which are, or are hereafter found to be, or to have been, due by
or with respect to BGS up to and through the periods covered thereby.
2.10.6. Tax Allocation Agreements. BGS has previously delivered to BMC
true and complete copies of each written Tax allocation or sharing
agreement and a true and complete description of each unwritten Tax
allocation or sharing arrangement affecting BGS.
2.10.7. No Tax Liens. Except for statutory liens for current Taxes not
yet due, no material liens for Taxes exist upon the assets of BGS.
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2.10.8. Change of Accounting Method. BGS will not be required to
include any amount in income for any taxable period beginning after
December 31, 1996 as a result of a change in accounting method for any
taxable period or pursuant to any agreement with any Tax authority with
respect to any such taxable period.
2.10.9. Partnerships; Foreign Corporations. Except as set forth in
Section 2.10 of the BGS Disclosure Schedule, none of the property of BGS is
held in an arrangement for which partnership Tax Returns are being filed,
and BGS does not own any interest in any controlled foreign corporation (as
defined in section 957 of the Code), passive foreign investment company (as
defined in section 1296 of the Code) or other entity the income of which is
required to be included in the income of BGS.
2.10.10. Safe Harbor Leases; Tax-Exempt Use Property. Except as set
forth in Section 2.10 of the BGS Disclosure Schedule, none of the property
of BGS is subject to a safe-harbor lease (pursuant to section 168(f)(8) of
the Internal Revenue Code of 1954 as in effect after the Economic Recovery
Tax Act of 1981 and before the Tax Reform Act of 1986) or is "tax-exempt
use property" (within the meaning of section 168(h) of the Code) or
"tax-exempt bond financed property" (within the meaning of section
168(g)(5) of the Code).
2.10.11. Section 341(f) Election. BGS has not made an election under
section 341(f) of the Code.
2.10.12. Actions Preventing Treatment as a Reorganization. Neither BGS
nor, to the knowledge of BGS, any of its affiliates has taken or agreed to
take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the
Code.
2.11. Intellectual Property.
2.11.1. Ownership. Section 2.11 of the BGS Disclosure Schedule
accurately identifies all software programs currently being marketed by BGS
and all software products or programs under development by BGS but not
currently marketed, which are or could reasonably be expected to be
material to the business of BGS (collectively, the "Software Programs").
BGS owns full and unencumbered right and good and valid title to the
Software Programs listed in Section 2.11 of the BGS Disclosure Schedule,
all material patents, trademarks, service marks, trade names and copyrights
(including registrations, licenses and applications pertaining thereto) and
all other material intellectual property rights, trade secrets and other
confidential or proprietary information, processes and formulae used in its
businesses or otherwise necessary for the conduct of its businesses (the
"Intellectual Property"), free and clear of all mortgages, pledges, liens,
security interests, conditional sales agreements, encumbrances or charges
of any kind. Section 2.11 of the BGS Disclosure Schedule contains a
complete list of all registered trademarks and service marks, all reserved
trade names, all registered copyrights and all filed patent applications
and issued patents used in, or otherwise necessary for the conduct of, the
business of BGS as heretofore conducted.
2.11.2. Notices. Section 2.11 of the BGS Disclosure Schedule sets
forth the form and placement of the proprietary legends and copyright
notices displayed in or on the Software Programs. To the knowledge of BGS,
in no instance has the eligibility of the Software Programs for protection
under applicable copyright law been forfeited to the public domain by
omission of any required notice or any other action.
2.11.3. Protection. BGS has in force the trade secret protection
program set forth in Section 2.11 of the BGS Disclosure Schedule. To the
knowledge of BGS, there has been no violation of such program by any person
or entity. The source code and related technical system documentation for
the Software Programs (i) have at all times been maintained in strict
confidence, (ii) have been disclosed by BGS only to employees and
contractors who have had a "need to know" the contents thereof in
connection with the performance of their duties to BGS and who have
executed written agreements requiring the recipient to keep the information
in strict confidence.
2.11.4. Personnel. All personnel who now, or during the past five
years have been employees, agents, consultants and contractors of BGS, who
have contributed to or participated in the conception and development of
the Software Programs, technical documentations, or Intellectual Property
on behalf of
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BGS have executed nondisclosure agreements in form provided by BGS to BMC
and either (1) have been a party to a "work-for-hire" arrangement or
agreements with BGS in accordance with applicable national and state law
that has accorded BGS full, effective, exclusive and original ownership of
all tangible and intangible property thereby arising, or (2) have executed
appropriate instruments of assignment in favor or BGS as assignee that have
conveyed to BGS, effective, and exclusive ownership of all tangible and
intangible property thereby arising.
2.11.5. Third-Party Software. Section 2.11 of the BGS Disclosure
Schedule contains a complete list of material software libraries, compilers
and other third-party software used in the development of the Software
Programs. Section 2.11 of the BGS Disclosure Schedule lists all license
agreements for the use of all such software and, if any such software is
not licensed, the basis of the use of such software by BGS. To BGS's
knowledge, all use of each of such Software Program by BGS has been in full
compliance with the respective license agreement or other right of use
listed in Section 2.11 of the BGS Disclosure Schedule.
2.11.6. Software Performance. To the knowledge of BGS, the Software
Programs will perform in accordance with the warranties set forth in the
standard end-user agreements listed in Section 2.13 of the BGS Disclosure
Schedule.
2.11.7. No Infringement. The Software Programs do not infringe and
will not infringe any copyright or trade secret of any person or entity,
and, to the knowledge of BGS, no part of the Software Programs nor the use
thereof for their intended purposes infringes or will infringe any valid
and subsisting patent or other exclusionary right of any third party. No
claims have been asserted against BGS by any person or entity as to the use
of any of the Intellectual Property.
2.11.8. Integrity. Except with respect to demonstration or trial
copies, to the knowledge of BGS, no portion of the Software Products
contains or will contain any "back door," "time bomb," "Trojan horse,"
"worm," "drop dead device," "virus" or other software routines or hardware
components designed to permit unauthorized access; to disable or erase
software, hardware, or data; or to perform any other such actions.
2.11.9. Contract Performance. BGS has observed all material provisions
of, and performed all of their material obligations under, the Licenses,
including, but not limited to, the performance of its product maintenance
obligations. BGS has not taken any action that could cause, or failed to
take any action, the failure of which could cause, (i) any material source
code, trade secret or other Intellectual Property relating to the Software
Programs to be released from an escrow or otherwise made available to any
person or entity other than those persons described in Section 2.11.3,
dedicated to the public or otherwise placed in the public domain or (ii)
any other material adverse affect to the protection of the Software
Programs under trade secret, copyright, patent or other intellectual
property laws.
2.11.10. Year 2000. The Software Programs (i) have been designed to
ensure year 2000 compatibility, which shall include, but is not limited to,
date data century recognition, and calculations that accommodate same
century and multi-century formulas and date values; (ii) operate or will
operate in accordance with their specifications prior to, during and after
the calendar year 2000 A.D.; and (iii) shall not end abnormally or provide
invalid or incorrect results as a result of date data, specifically
including date data which represents or references different centuries or
more than one century.
2.12. Adequacy of Technical Documentation. The technical documentation of
the Software Programs (the "Technical Documentation") includes the source code
(with comments) for all Software Programs, as well as any pertinent comments by
or explanation that may be necessary to render such materials understandable and
usable. The Technical Documentation also includes any programs (including
compilers), "workbenches," tools and higher level (or "proprietary") languages
necessary for the development, maintenance and implementation of the Software
Programs.
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2.13. Software Contracts.
2.13.1. End-User Agreements. Section 2.13.1 of the BGS Disclosure
Schedule sets forth a complete list of all material licenses and
sublicenses of the Software Programs and of all customer trial agreements
for the Software Programs granted by BGS to other parties (the "Licenses").
All contracts identified in Section 2.13.1 of the BGS Disclosure Schedule
constitute only end-user agreements, each of which grants the end user
thereunder principally the nonexclusive right and license to use an
identified Software Program and related user documentation, for internal
purposes only, at the sites specified in each agreement. Section 2.13.1 of
the BGS Disclosure Schedule accurately identifies each customer which
generated 10% or more of BGS's revenues during the preceding four fiscal
quarters.
2.13.2. Marketing Agreements. Section 2.13.2 of the BGS Disclosure
Schedule sets forth a complete list of all contracts, agreements, licenses,
or other commitments or arrangements in effect with respect to the
marketing, remarketing, distribution, licensing or promotion of (i) the
Software Programs or any other Technical Documentation or the Intellectual
Property by any independent salesperson, distributor, sublicensor or other
remarketer or sales organization or (ii) any third party's software
products by BGS (the "Marketing Agreements"). Section 2.13.2 of the BGS
Disclosure Schedule accurately identifies each marketing arrangement which
generated 10% or more of BGS's revenues during the preceding four fiscal
quarters.
2.13.3. No Assignment. Other than the Licenses and the Marketing
Agreements, BGS has not granted, transferred or assigned any right or
interest in the Software Programs, the Technical Documentation or the
Intellectual Property to any person or entity.
2.14. Third-Party Components in Software Programs. Except as set forth in
Section 2.14 of the BGS Disclosure Schedule, the Software Programs and Technical
Documentation contain no programming or materials in which any third party may
claim superior, joint or common ownership, including any right or license.
Except as set forth in Section 2.14 of the BGS Disclosure Schedule, the Software
Programs and Technical Documentation do not contain derivative works of any
programming or materials not owned in their entirety by BGS.
2.15. Title to Properties. With minor exceptions which in the aggregate are
not material, and except for merchandise and other property sold, used or
otherwise disposed of in the ordinary course of business for fair value, BGS has
good and valid title to all its properties, interests in properties and assets,
real and personal, reflected in the most recent balance sheet of BGS included in
the BGS Reports, free and clear of any Encumbrance of any nature whatsoever,
except (i) liens and Encumbrances reflected in the most recent balance sheet of
BGS included in the BGS Reports, (ii) liens for current taxes not yet due and
payable, and (iii) such imperfections of title, easements and Encumbrances, if
any, as are not substantial in character, amount, or extent and do not and will
not materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby, or otherwise materially impair
business operations. All leases pursuant to which BGS leases (whether as lessee
or lessor) any substantial amount of real or personal property are in good
standing, valid and effective; and there is not, under any such leases, any
existing or prospective default or event of default or event which with notice
or lapse of time, or both, would constitute a default by BGS and in respect to
which BGS has not taken adequate steps to prevent a default from occurring. The
buildings and premises of BGS that are used in its business are in good and
sufficient operating condition and repair for the continued conduct of BGS's
business on a basis consistent with past practice, subject to ordinary wear and
tear. All major items of equipment of BGS are in good and sufficient operating
condition and in a state of reasonable maintenance and repair for the continued
conduct of BGS's business on a basis consistent with past practice, ordinary
wear and tear excepted, and are free from any known defects except as may be
repaired by routine maintenance and such minor defects as do not substantially
interfere with the continued use thereof in the conduct of normal operations.
2.16. Litigation. Except to the extent set forth in the BGS Reports or in
Section 2.16 of the BGS Disclosure Schedule, there is no suit, action, or legal,
administrative, arbitration, or other proceeding or governmental investigation
pending to which BGS is a party or, to the knowledge of BGS, might become a
party or which particularly affects BGS, which would involve a liability in
excess of $100,000, nor is any
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change in the zoning or building ordinances directly affecting the real property
or leasehold interests of BGS, pending or, to the knowledge of BGS, threatened,
2.17. Environmental Compliance. Except as set forth in Section 2.17 of the
BGS Disclosure Schedule;
2.17.1. Environmental Conditions. There are no environmental
conditions or circumstances, such as the presence or release of any
hazardous substance, on any real property owned by BGS as a result of the
actions of BGS or, to its knowledge, of any third party or otherwise, that
could reasonably be expected to have a Material Adverse Effect on BGS.
2.17.2. Permits, etc. BGS has in full force and effect all
environmental permits, licenses, approvals and other authorizations
required to conduct its operations and is operating in material compliance
thereunder.
2.17.3. Compliance. BGS's operations and use of its assets do not
violate any applicable federal, state or local law, statute, ordinance,
rule, regulation, order or notice requirement pertaining to (a) the
condition or protection of air, groundwater, surface water, soil, or other
environmental media, (b) the environment, including natural resources or
any activity which affects the environment, or (c) the regulation of any
pollutants, contaminants, waste, substances (whether or not hazardous or
toxic), including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act (49 U.S.C. sec. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. sec. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. sec. 1609 et seq.), the
Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C.
sec. 7401 et seq.), the Toxic Substances Control Act (17 U.S.C. sec. 2601
et seq.), the Safe Drinking Water Act (42 U.S.C. sec. 201 and sec. 300f et
seq.), the Rivers and Harbors Act (33 U.S.C. sec. 401 et seq.), the Oil
Pollution Act (33 U.S.C. sec. 2701 et seq.) and analogous state and local
provisions, as any of the foregoing may have been amended or supplemented
from time to time (collectively the "Applicable Environmental Laws"),
except for violations which, either singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on BGS.
2.17.4 Environmental Claims. No notice has been served on BGS from any
entity, governmental agency or individual regarding any existing, pending
or threatened investigation or inquiry related to alleged violations under
any Applicable Environmental Laws, or regarding any claims for remedial
obligations or contribution under any Applicable Environmental Laws, other
than any of the foregoing which, either singly or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on BGS.
2.17.5. Renewals. BGS does not know of any reason it would not be able
to renew any of the permits, licenses, or other authorizations required
pursuant to any Applicable Environmental Laws to operate and use any of
BGS's assets for their current purposes and uses.
2.18. Compliance with Other Laws. Except as set forth in the BGS Reports or
in Section 2.18 of the BGS Disclosure Schedule, BGS is not in violation of or in
default with respect to, or in alleged violation of or alleged default with
respect to, the Occupational Safety and Health Act (29 U.S.C. sec. 651 et seq.)
as amended ("OSHA"), or any other applicable law or any applicable rule,
regulation, or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality, except for violations which, either singly or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
BGS.
2.19. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by BGS and its counsel
directly with BMC and its counsel, without the intervention of any other person
as the result of any act of BGS, and so far as is known to BGS, without the
intervention of any other person in such manner as to give rise to any valid
claim against any of the parties hereto for a brokerage commission, finder's fee
or any similar payments, other than financial advisory fees to be paid (i) by
BMC to Goldman, Sachs & Co. ("GS") in connection with the transaction and (ii)
by BGS to Broadview
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Associates L.L.C. ("Broadview") in connection with the transaction under
financial arrangements disclosed to BMC.
2.20. Compliance with ERISA. BGS has made available to BMC a copy of each
BGS Plan, any related summary plan description, trust agreement and annuity or
insurance contract, if any, and each plan's most recent annual report filed with
the Internal Revenue Service, if any, and: (i) each BGS Plan has been maintained
and administered in material compliance with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations,
and is, to the extent required by applicable law or contract, fully funded
without having any deficit or unfunded actuarial liability; (ii) all required
contributions under any such plans have been made and the applicable funds have
been funded in accordance with the terms thereof and no past service funding
liabilities exist thereunder; (iii) each BGS Plan that is required or intended
to be qualified under applicable law or registered or approved by a governmental
agency or authority has been so qualified, registered or approved by the
appropriate governmental agency or authority, and, to the knowledge of BGS,
nothing has occurred since the date of the last qualification, registration or
approval to materially and adversely affect, or cause, the appropriate
governmental agency or authority to revoke such qualification, registration or
approval; (iv) to the extent applicable, the BGS Plans comply, in all material
respects, with the requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and the Code, and any BGS Plan intended to be
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and, to the knowledge of BGS, nothing has
occurred to cause the loss of such qualified status; (v) no BGS Plan is covered
by Title IV of ERISA or Section 412 of the Code; (vi) there are no pending or,
to the knowledge of BGS, anticipated material claims against or otherwise
involving any of the BGS Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of BGS Plan
activities) has been brought against or with respect to any BGS Plan; (vii) all
material contributions, reserves or premium payments, required to be made as of
the date hereof to the BGS Plans have been made or provided for; (viii) BGS has
not incurred any liability under subtitle C or D of Title IV of ERISA with
respect to any "single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by BGS; (ix) BGS has not incurred any
withdrawal liability under Subtitle E of Title IV of ERISA with respect to any
"multiemployer plan," within the meaning of Section 4001(a)(3) of ERISA; (x) BGS
has substantially performed all obligations, whether arising by law or by
contract, required to be performed by it in connection with the BGS Plans; (xi)
to the knowledge of BGS, no act, omission or transaction has occurred which
would result in imposition on BGS of (a) a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA, (b) breach of fiduciary
duty liability damages under Section 409 of ERISA or (c) a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code; (xii) in connection with the
consummation of the transactions contemplated by this Agreement, no payments
have or will be made hereunder, under the BGS Plans or otherwise by BGS which,
in the aggregate, would result in imposition of the sanctions imposed under
Sections 280G and 4999 of the Code; and (xiii) BGS has no obligations for
retiree health and life benefits under any BGS Plan, except as set forth on
Section 2.20 of the BGS Disclosure Schedule, and there are no restrictions on
the rights of BGS to amend or terminate any such BGS Plan without incurring any
liability thereunder.
2.21. Investigations; Litigation. Except as required pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (collectively, "HSR") and any applicable
comparable foreign laws and regulations, (i) no investigation or review by any
governmental entity with respect to BGS or any of the transactions contemplated
by this Agreement is pending or, to BGS's knowledge, threatened, nor has any
governmental entity indicated to BGS an intention to conduct the same, and (ii)
there is no action, suit or proceeding pending or, to BGS's knowledge,
threatened against or affecting BGS at law or in equity, or before any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, which either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on BGS.
2.22. Product Warranty. There are no existing liabilities or, to the
knowledge of BGS, potential liabilities, arising from claims regarding the
performance or design of the products and services sold by BGS either in the
past or at present for which adequate reserves have not been established on the
most recent balance sheet in
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the BGS Reports that in the aggregate could reasonably be expected to have a
Material Adverse Effect on BGS.
2.23. Information for Proxy Statement. All information and data (including
financial statements) concerning BGS which is or will be included in the
registration statement and proxy statement (collectively, the "Proxy Statement")
issued in connection with the transactions contemplated by this Agreement will
be furnished by BGS for inclusion therein and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading.
2.24. Investment Company. BGS is not an "investment company," or an
"affiliated person of" or "promoter" or "principal underwriter" of an investment
company, as those terms are defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act").
2.25. Pooling. Neither BGS, nor to the knowledge of BGS, any of its
affiliates has taken or agreed to take any action that would prevent the Merger
from being treated as a "pooling of interests" in accordance with generally
accepted accounting principles and the Regulations of the Securities and
Exchange Commission (a "Pooling Transaction").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BMC AND MERGER SUB
BMC and Merger Sub represent and warrant subject to the exceptions
specifically described in writing in the disclosure schedule delivered by BMC to
BGS and dated the date hereof (the "BMC Disclosure Schedule") as follows:
3.1. Organization and Standing. Each of BMC and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, has full requisite corporate power and authority to
carry on its business as it is currently conducted, and to own and operate the
properties currently owned and operated by it and is duly qualified or licensed
to do business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
could not reasonably be expected to have a Material Adverse Effect on BMC. As
hereinafter used in this Article III, the term "BMC" also includes any and all
of its directly and indirectly held subsidiaries, except where the context
indicates to the contrary; provided, however, that for purposes of Section 3.9,
the term "BMC" further includes any corporation, trade, business or entity under
common control with BMC within the meaning of Section 414(b), (c), (m) or (o) of
the Code or Section 4001 of ERISA.
3.2. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of BMC and Merger Sub,
and this Agreement is a valid and binding obligation of BMC and Merger Sub
enforceable against BMC and Merger Sub (subject to normal equitable principles)
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting
the rights of creditors generally. At the Effective Time and except as specified
in Section 3.2 of the BMC Disclosure Schedule, the consummation of the merger
contemplated by this Agreement will not conflict with or result in a violation
or breach of any term or provision of, nor constitute a default under (i) the
certificate of incorporation or bylaws of BMC, (ii) the articles of organization
or bylaws of Merger Sub or (iii) any obligation, indenture, mortgage, deed of
trust, lease, contract or other agreement to which BMC or any of its
subsidiaries is a party or by which any of them or their properties are bound,
other than such violations, breaches or defaults as could not reasonably be
expected to have a Material Adverse Effect on BMC.
3.3. Capitalization. (a) The capitalization of BMC consists of 1,000,000
shares of preferred stock, par value $.01 per share, of which at December 31,
1997 no shares were issued or outstanding; and 300,000,000 shares of BMC Common
Stock, par value $.01 per share, of which at December 31, 1997, 105,040,000
shares
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were issued and outstanding, an additional 28,507,026 shares were reserved for
issuance in connection with various BMC benefit plans and an additional
3,023,050 shares were reserved for issuance upon exercise of outstanding
warrants; at the same date, 3,350,417 shares of BMC Common Stock were held in
BMC's treasury. Other than as set forth above, BMC has no outstanding options,
warrants or obligations of any kind to issue shares of its capital stock.
(b) The capitalization of Merger Sub consists of 1,000 shares of common
stock, par value $.01 per share ("Merger Sub Common Stock"), of which as of the
date hereof, 100 were issued and outstanding and none were reserved for
issuance. As of the date hereof, all of the outstanding shares of Merger Sub
Common Stock are owned free and clear of any liens, claims or encumbrances by
BMC.
3.4. Reports and Financial Statements. BMC has previously furnished to BGS
true and complete copies of (a) all annual reports filed with the Commission
pursuant to the Exchange Act, since January 1, 1995, (b) BMC's quarterly and
other reports filed with the Commission since January 1, 1995, (c) all
definitive proxy solicitation materials filed with the Commission since January
1, 1995, and (d) any registration statements declared effective by the
Commission since January 1, 1995. The consolidated financial statements of BMC
and its subsidiaries included in BMC's most recent report on Form 10-K and most
recent report on Form 10-Q, and any other reports filed with the Commission by
BMC under the Exchange Act subsequent thereto (the "BMC Reports") were, or (if
filed after the date hereof) will be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved and fairly present, or will present, the consolidated financial
position for BMC and its subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended (except with respect to interim period financial
statements, for normal year-end adjustments which are not material); and the BMC
Reports did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Since January 1, 1995, BMC has filed with the Commission
all reports required to be filed by BMC under the Exchange Act and the rules and
regulations of the Commission.
3.5. Liabilities. BMC does not have any liabilities or obligations, either
accrued, absolute, contingent, or otherwise, or have any knowledge of any
potential liabilities or obligations, which would have a Material Adverse Effect
on BMC, other than those (i) disclosed in the BMC Reports or (ii) set forth in
Section 3.5 of the BMC Disclosure Schedule hereto.
3.6. No Undisclosed Defaults. Except as may be specified in the BMC Reports
or in Section 3.6 of the BMC Disclosure Schedule, BMC is not in default in any
material obligation or covenant on its part to be performed under any material
obligation, lease, contract, order, plan or other arrangement.
3.7. Absence of Certain Changes and Events in BMC. Except as set forth in
the BMC Reports or in Section 3.7 of the BMC Disclosure Schedule hereto, other
than as a result of the transactions contemplated by this Agreement, since
September 30, 1997, there has not been:
3.7.1. Financial Change. Any adverse change in the financial
condition, operations, assets or business of BMC which could reasonably be
expected to have a Material Adverse Effect on BMC;
3.7.2. Property Damage. Any material damage, destruction, or loss to
the business or properties of BMC (whether or not covered by insurance);
3.7.3. Dividends. Any declaration, setting aside, or payment of any
dividend or other distribution in respect of BMC's capital stock, or any
direct or indirect redemption, purchase or any other acquisition of such
stock;
3.7.4. Capitalization Change. Any change in the capital stock or in
the number of shares or classes of BMC's authorized or outstanding capital
stock as described in Paragraph 3.3;
3.7.5. Labor Disputes. Any labor dispute (other than routine
grievances); or
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3.7.6. Other Material Changes. Any other event or condition known to
BMC particularly pertaining to and adversely affecting the operations,
assets or business of BMC which could reasonably be expected to have a
Material Adverse Effect on BMC.
3.8. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by BMC and its counsel,
directly with BGS or its counsel, without the intervention of any other person
as the result of an act of BMC and, so far as known to BMC, without the
intervention of any other person in such manner as to give rise to any valid
claim against any of the parties hereto for a brokerage commission, finder's
fee, or any similar payments, other than financial advisory fees to be paid by
(i) BMC to GS and (ii) BGS to Broadview in connection with the merger
contemplated by this Agreement.
3.9. Compliance With ERISA. BMC will make available to BGS a copy of all
bonus, incentive compensation, stock option, deferred compensation,
profit-sharing, retirement, pension, welfare, severance pay, supplemental
income, group insurance, death benefit, or other fringe benefit plans,
arrangements or trust agreements covering active, former or retired employees of
BMC (collectively, the "BMC Plans"), any related summary plan description, trust
agreement and annuity or insurance contract, if any, and each plan's most recent
annual report filed with the Internal Revenue Service, if any, the most recent
reports with respect to such plans, trust agreements and annuity or insurance
contracts filed with any governmental agency, all Internal Revenue Service
determination letters that have been received with respect to such plans and:
(i) each BMC Plan has been maintained and administered in material compliance
with its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, and is, to the extent required by
applicable law or contract, fully funded without having any deficit or unfunded
actuarial liability; (ii) all required contributions under any such plans have
been made and the applicable funds have been funded in accordance with the terms
thereof and no past service funding liabilities exist thereunder; (iii) each BMC
Plan that is required or intended to be qualified under applicable law or
registered or approved by a governmental agency or authority has been so
qualified, registered or approved by the appropriate governmental agency or
authority, and nothing has occurred since the date of the last qualification,
registration or approval to adversely affect, or cause, the appropriate
governmental agency or authority to revoke such qualification, registration or
approval; (iv) to the extent applicable, the BMC Plans comply, in all material
respects, with the requirements of ERISA and the Code, and any BMC Plan intended
to be qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified and nothing has occurred to cause
the loss of such qualified status; (v) no BMC Plan is covered by Title IV of
ERISA or Section 412 of the Code; (vi) there are no pending or anticipated
material claims against or otherwise involving any of the BMC Plans and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of BMC Plan activities) has been brought against or with respect
to any BMC Plan; (vii) all material contributions, reserves or premium payments,
required to be made as of the date hereof to the BMC Plans have been made or
provided for; (viii) BMC has not incurred any liability under subtitle C or D of
Title IV of ERISA with respect to any "single-employer plan," within the meaning
of Section 4001(a) of ERISA, currently or formerly maintained by BMC; (ix) BMC
has not incurred any withdrawal liability under Subtitle E of Title IV of ERISA
with respect to any "multiemployer plan," within the meaning of Section
4001(a)(3) of ERISA; (x) BMC has substantially performed all obligations,
whether arising by law or by contract, required to be performed by it in
connection with the BMC Plans; (xi) no act, omission or transaction has occurred
which would result in imposition on BMC of (a) a civil penalty assessed pursuant
to subsections (c), (i) or (l) of Section 502 of ERISA, (b) breach of fiduciary
duty liability damages under Section 409 of ERISA or (c) a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code; (xii) in connection with the
consummation of the transactions contemplated by this Agreement, no payments
have or will be made hereunder, under the BMC Plans or otherwise by BMC which,
in the aggregate, would result in imposition of the sanctions imposed under
Sections 280G and 4999 of the Code; and (xiii) BMC does not have any obligations
for retiree health and life benefits under any BMC Plan, except as set forth on
Section 3.9 of the BMC Disclosure Schedule, and there are no restrictions on the
rights of BMC to amend or terminate any such BMC Plan without incurring any
liability thereunder.
3.10. Investigations; Litigation. Except as required pursuant to HSR and
any applicable comparable foreign laws and regulations, (i) no investigation or
review by any governmental entity with respect to BMC in
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connection with any of the transactions contemplated by this Agreement is
pending or, to the best of BMC's knowledge, threatened, nor has any governmental
entity indicated to BMC an intention to conduct the same and (ii) there is no
action, suit or proceeding pending or, to the best of BMC's knowledge,
threatened against or affecting BMC or its subsidiaries at law or in equity, or
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, which either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on BMC.
3.11. Information for Proxy Statement. All information and data (including
financial statements) concerning BMC which is or will be included in the Proxy
Statement to be issued in connection with the transactions contemplated by this
Agreement will be furnished by BMC for inclusion therein and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading.
3.12 Actions Preventing Treatment as a Reorganization. Neither BMC nor, to
the knowledge of BMC, any of its affiliates has taken or agreed to take any
action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
3.13 Pooling. Neither BMC, nor to the knowledge of BMC, any of its
affiliates has taken or agreed to take any action that would prevent the Merger
from being treated as a Pooling Transaction.
ARTICLE IV
OBLIGATIONS PENDING EFFECTIVE TIME
4.1. Agreements of BGS. BGS agrees that from the date hereof to the
Effective Time, it will:
4.1.1. Maintenance of Present Business. Other than as contemplated by
this Agreement, operate its business only in the usual, regular, and
ordinary manner so as to maintain the goodwill it now enjoys and, to the
extent consistent with such operation, use all reasonable efforts to
preserve intact its present business organization, keep available the
services of its present officers and employees, and preserve its
relationships with customers, suppliers, jobbers, distributors, and others
having business dealings with it, and in connection therewith it shall not
substantially deviate from its licensing and pricing practices;
4.1.2. Maintenance of Properties. At its expense, maintain all of its
property and assets in customary repair, order, and condition, reasonable
wear and use and damage by fire or unavoidable casualty excepted;
4.1.3. Maintenance of Books and Records. Maintain its books of
accounts and records in the usual, regular, and ordinary manner, in
accordance with generally accepted accounting principles applied on a
consistent basis;
4.1.4. Compliance with Law. Duly comply in all material respects with
all laws applicable to it and to the conduct of its business;
4.1.5. Compliance with Agreement. At its expense, take all
commercially reasonable actions as may be necessary (i) to insure that the
representations and warranties made by it herein are true and correct at
the Effective Time, (ii) to fully perform all covenants made by it herein
and (iii) to satisfy timely all other obligations imposed upon it by this
Agreement; and
4.1.6. Inspection. Permit BMC and its officers and authorized
representatives, during normal business hours, to inspect its records and
to consult with its officers, employees, attorneys, and agents for the
purpose of determining the accuracy of the representations and warranties
hereinabove made and the compliance with covenants contained in this
Agreement; and
4.1.7. Maintenance of Intellectual Property. Not take any action that
would, or fail to take any action the failure of which would, cause
directly or indirectly any of its Intellectual Property to enter the public
domain or that could otherwise adversely affect its Intellectual Property.
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4.2. Agreements of BMC and BGS. BMC and BGS agree to take the following
actions after the date hereof:
4.2.1. Hart-Scott-Rodino. Each party shall file such materials as are
required under the HSR Act with respect to the transactions contemplated
hereby and shall cooperate with the other party to the extent necessary to
assist the other party in the preparation of such filings.
4.2.2. Proxy Statement. BMC and BGS shall cooperate in the preparation
and prompt filing of the Proxy Statement with the Commission with respect
to the meeting of BGS's stockholders called for the purpose of, among other
things, securing stockholder approval of the Merger and the consummation of
the transactions herein contemplated. Each of BMC and BGS shall use all
reasonable efforts to have the Proxy Statement cleared by the Commission.
4.2.3. Notice of Material Development. Each of BMC and BGS will
promptly notify the other party in writing of (i) any event occurring
subsequent to the date of this Agreement which would render any
representation or warranty of such party contained in this Agreement untrue
or inaccurate in any material respect, (ii) any Material Adverse Effect on
such party and (iii) breach by such party of any covenant or agreement
contained in this Agreement.
4.2.4. Pooling. Each party hereto shall use all reasonable efforts to
cause the Merger to be treated for financial accounting purposes as a
Pooling Transaction, and shall not take, and shall use all reasonable
efforts to prevent any affiliate of such party from taking, any actions
which could prevent the Merger from being treated for financial accounting
purposes as a Pooling Transaction.
4.3. Additional Agreements of BGS. BGS agrees that from the date hereof to
the Effective Time, it will:
4.3.1. Prohibition of Certain Employment Contracts. Not enter into any
contracts of employment which (i) cannot be terminated on notice of 14 days
or less or (ii) provide for any increase in compensation outside the
ordinary course of business consistent with past practice, severance
payments or benefits covering a period beyond the termination date (other
than those which BMC has previously approved) except as contemplated by
this Agreement or as may be required by law;
4.3.2. Prohibition of Certain Loans. Not incur any borrowings except
(i) the prepayment by customers of amounts due or to become due for goods
sold or services rendered or to be rendered in the future, (ii) trade
payables incurred in the ordinary course of business, (iii) other
borrowings incurred in the ordinary course of business to finance normal
operations or (iv) as is otherwise agreed to in writing by BMC;
4.3.3. Prohibition of Certain Commitments. Not enter into commitments
of a capital expenditure nature or incur any contingent liability which
would exceed $1,000,000, in the aggregate, except (i) as may be necessary
for the maintenance of existing facilities and equipment in good operating
condition and repair in the ordinary course of business, (ii) as may be
required by law or (iii) as is otherwise agreed to in writing by BMC;
4.3.4. Disposal of Assets. Not sell, dispose of, or encumber, any
property or assets, except (i) in the ordinary course of business or (ii)
as is otherwise agreed to in writing by BMC;
4.3.5. Maintenance of Insurance. Maintain insurance (or self insurance
reserves) upon all its properties and with respect to the conduct of its
business of such kinds and in such amounts as is customary in the type of
business in which it is engaged, but not less than that presently carried
by it, which insurance (or self insurance reserves) may be added to from
time to time in its discretion; provided, that if during the period from
the date hereof to and including the Effective Time any of its property or
assets are damaged or destroyed by fire or other casualty, the obligations
of BMC and BGS under this Agreement shall not be affected thereby (subject,
however, to the provision that the coverage limits of such policies are
adequate in amount to cover the replacement value of such property or
assets and loss of profits during replacement, less commercially reasonable
deductibles, if of material significance to the assets or operations of
BGS) but it shall promptly notify BMC in writing thereof and proceed with
the repair or restoration of such property or assets in such manner and to
such extent as may
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be approved by BMC, and upon the Effective Time all proceeds of insurance
and claims of every kind arising as a result of any such damage or
destruction shall remain the property of BGS;
4.3.6. BGS Acquisition Proposals. Not directly or indirectly:
4.3.6.1. No Solicitation. Authorize or permit any of its respective
agents to: (i) solicit, initiate, encourage (including by way of
furnishing information) or take any other action to facilitate, any
inquiry or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any acquisition or purchase of a
substantial amount of assets of, or any equity interest in, BGS or any
merger, consolidation, business combination, sale of substantially all
assets, sale of securities, recapitalization, liquidation, dissolution
or similar transaction involving BGS (other than the transactions
contemplated by this Agreement) or any other material corporate
transactions the consummation of which would, or could reasonably be
expected to, impede, interfere with, prevent or materially delay the
Merger (collectively, "BGS Transaction Proposals") or agree to or
endorse any BGS Transaction Proposal or (ii) propose, enter into or
participate in any discussions or negotiations regarding any of the
foregoing, or furnish to another person any information with respect to
its business, properties or assets or any of the foregoing, or otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, an effort or attempt by any other person to do or seek any of
the foregoing, provided, however, that the foregoing clauses (i) and
(ii) shall not prohibit BGS from (A) furnishing information pursuant to
an appropriate confidentiality letter concerning BGS and its businesses,
properties or assets to a third party who has made a Superior BGS
Transaction Proposal (as defined below), (B) engaging in discussions or
negotiations with a third party who has made a Superior BGS Transaction
Proposal or (C) following receipt of a Superior BGS Transaction
Proposal, taking and disclosing to its stockholders a position with
respect thereto or changing the recommendation by BGS's board of
directors, but in each case referred to in the foregoing clauses (A)
through (C) only after the board of directors of BGS concludes in good
faith following advice of its outside counsel, represented by a written
opinion, that such action is reasonably necessary in order for the board
of directors of BGS to comply with its fiduciary obligations to BGS's
stockholders under applicable law. If the board of directors of BGS
receives a BGS Transaction Proposal, then BGS shall immediately inform
BMC of the terms and conditions of such proposal and the identity of the
person making it and shall keep BMC fully informed of the status and
details of any such BGS Transaction Proposal and of all steps it is
taking in response to such BGS Transaction Proposal; provided that
nothing contained in this Paragraph 4.3.6.1 shall prohibit BGS or its
board of directors from making such disclosure to BGS's stockholders or
taking any action which, in the good faith judgment of BGS's board of
directors based on a written opinion of its outside counsel, may be
required under applicable law, including Rules 14d-9 and 14e-2
promulgated under the Exchange Act. For purposes of this Agreement, the
term "Superior BGS Transaction Proposal" shall mean a bona fide BGS
Transaction Proposal that the board of directors of BGS determines in
good faith after consultation with (and based in part on the advice of)
its independent financial advisors to be more favorable to BGS and BGS's
stockholders than the Merger, is reasonably capable of being financed
and is not subject to any material contingencies relating to financing.
4.3.6.2. Acceptance of Superior BGS Transaction Proposals. If (i)
this Agreement is terminated by BGS pursuant to Paragraph 6.1.5 hereof,
or (ii) BGS enters into an agreement which provides for Another BGS
Transaction (as defined below) or Another BGS Transaction is consummated
(in each case with any third party which after the date of this
Agreement and before termination of this Agreement has communicated to
it a BGS Transaction Proposal), in either case within twelve months
after the date of termination of this Agreement, then, in any such event
unless this Agreement has been terminated by BGS pursuant to Section
6.1.4, Section 6.1.6, Section 6.1.8 or Section 6.1.9, BGS shall pay to
BMC simultaneously with termination by BGS in the case of the occurrence
of any of the events specified in clause (i) above, and immediately upon
the first to occur of the entering into an agreement providing for, or
the consummation of, Another BGS Transaction in the case of clause (ii)
above (by wire transfer of immediately available funds to an account
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designated by BMC for such purpose), a fee (the "Break-Up Fee") in an
amount equal to $9,000,000. BGS agrees that the Break-Up Fee is a
reasonable determination, in light of the uncertainty and difficulty of
ascertaining the exact amount thereof, of the loss that BMC would
actually sustain in respect of one of the events described in this
Paragraph 4.3.6.2. For purposes of this Paragraph 4.3.6.2, the term
"Another BGS Transaction" shall mean any transaction pursuant to which
(1) any person, entity or group (within the meaning of Section 13(d)(3)
of the Exchange Act) (each, a "Third Party") acquires 50% or more of the
outstanding BGS Common Stock, (ii) a Third Party acquires 25% or more of
the total assets of BGS taken as a whole, (iii) a Third Party merges,
consolidates or combines in any other way with BGS other than in a
transaction in which holders of BGS Common Stock continue to own at
least 75% of the equity of the surviving corporation, or (iv) BGS
distributes or transfers to its stockholders, by dividend or otherwise,
assets constituting 25% or more of the market value or earning power of
BGS on a consolidated basis (it being understood that stock of
subsidiaries constitute assets of BGS for purposes of this Paragraph
4.3.6.2).
4.3.7. No Amendment to Articles of Organization, etc. Without the
consent of BMC, not amend its articles of organization or bylaws or other
organizational documents or merge or consolidate with or into any other
corporation or change in any manner the rights of its capital stock or the
character of its business;
4.3.8. No Issuance, Sale, or Purchase of Securities. Without the
consent of BMC, not issue or sell, or issue options or rights to subscribe
to, or enter into any contract or commitment to issue or sell (upon
conversion or otherwise), any shares of its capital stock or subdivide or
in any way reclassify any shares of its capital stock, or acquire, or agree
to acquire, any shares of its capital stock; provided, that nothing in this
Section shall restrict or prohibit the issuance by BGS of shares of BGS
Common Stock upon exercise of options previously granted under existing
benefit plans;
4.3.9. Prohibition on Dividends. Without the consent of BMC, not
declare or pay any dividend on shares of its capital stock (other than
ordinary quarterly cash dividends in accordance with past practice not to
exceed $.30 per quarter) or make any other distribution of assets to the
holders thereof;
4.3.10. Supplemental Financial Statements. Deliver to BMC, within 90
days after the end of the fiscal year ended January 31, 1998 the audited
consolidated financial statements of BGS included in its report on Form
10-K. Deliver to BMC, within 45 days after the end of each fiscal quarter
of BGS beginning April 30, 1998 and through the Effective Time, unaudited
consolidated balance sheets and related unaudited statements of income,
retained earnings and cash flows as of the end of each fiscal quarter of
BGS, and as of the corresponding fiscal quarter of the previous fiscal
year. BGS hereby represents and warrants that such unaudited consolidated
financial statements shall (i) be complete in all material respects except
for the omission of notes and schedules contained in audited financial
statements, (ii) present fairly the financial condition of BGS as at the
dates indicated and the results of operations for the respective periods
indicated (except for normal year-end adjustments which are not material),
(iii) shall have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as noted
therein and (iv) shall contain all adjustments which BGS considers
necessary for a fair presentation of its results for each respective fiscal
period;
4.3.11. Notice of Material Developments. Promptly furnish to BMC
copies of all communications from BGS to its stockholders and all BGS
Reports. BGS shall give prompt notice to BMC of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any BGS representation or warranty contained in this Agreement to be
untrue or inaccurate at or prior to the Effective Time and (ii) any
material failure of BGS to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 4.3.11
shall not limit or otherwise affect the remedies available hereunder to
BMC.
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4.3.12. Stockholders' Meeting. Call and hold a meeting of stockholders
within 45 days after the Commission has indicated that it has no further
comments on the Proxy Statement for the purpose of considering and acting
upon a proposal to approve this Agreement and the Merger.
4.3.13. Employment Agreements. BGS shall use its best efforts to
obtain on or prior to the Effective Time, employment agreements with such
employees of BGS as reasonably requested by BMC.
4.3.14. Union Contracts and BGS Plans. Except as required by law,
without the written consent of BMC, not directly or indirectly (i) enter
into or modify any collective bargaining agreement with any labor union or
other representative of employees, (ii) increase the compensation or
benefits of any employee of BGS or any of its subsidiaries, (iii) amend or
terminate any BGS Plan, or (iv) enter into or adopt any new employee
benefit plan, policy or arrangement.
4.4. Additional Agreements of BMC. BMC agrees that from the date hereof to
the Effective Time, it will:
4.4.1. No Amendment to Certificate of Incorporation, etc. Except as
otherwise provided herein, not amend its certificate of incorporation or
bylaws or other organizational documents or merge into any other
corporation or change in any manner the rights of its Common Stock;
4.4.2. No Issuance, Sale, or Purchase of Securities. Not issue or
sell, or issue options (other than (i) options previously authorized by the
compensation committee of BMC's board of directors or (ii) options granted
to new personnel upon commencement of employment) or rights to subscribe
to, or enter into any contract or commitment to issue or sell (upon
conversion or otherwise), any shares of its capital stock or subdivide or
in any way reclassify any shares of its capital stock, or acquire, or agree
to acquire, any shares of its capital stock; provided, that nothing in this
Section 4.4.2 shall restrict or prohibit the issuance by BMC of shares of
BMC Common Stock upon exercise of options previously granted under existing
employee benefit plans, the issuance of shares of BMC Common Stock upon
exercise of outstanding warrants, or the issuance of up to 2,000,000 shares
of BMC Common Stock in the acquisition of other businesses in
"non-dilutive" (for financial reporting purposes) transactions if such
acquired businesses would not individually or collectively constitute a
"significant subsidiary" of BMC;
4.4.3. Prohibition on Dividends. Not declare or pay any dividend on
shares of its capital stock or make any other distribution of assets to the
holders thereof;
4.4.4. Issuance of BMC Common Stock. Take all action it deems
reasonably necessary to register the "issuance" of BMC Common Stock to the
stockholders of BGS in connection with the merger contemplated by this
Agreement under the Securities Act of 1933, as amended (the "Securities
Act"). BMC also shall take any action reasonably required to be taken under
state blue sky or securities laws in connection with the issuance of the
BMC Common Stock pursuant to the Merger;
4.4.5. Listing of BMC Stock. Take such steps as are required to
accomplish, as of the Effective Time, the Notification of Additional
Listing of the shares of BMC Common Stock to be issued pursuant to this
Agreement on the Nasdaq National Market; and
4.4.6. Notice of Material Developments. Promptly furnish to BGS copies
of all communications from BMC to its stockholders and all BMC Reports. BMC
shall give prompt notice to BGS of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would cause any BMC
representation or warranty contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time and (ii) any material failure
of BMC to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 4.4.6 shall not limit or
otherwise affect the remedies available hereunder to BGS.
4.4.7. Compliance with Agreement. At its expense, take all
commercially reasonable actions as may be necessary (i) to insure that the
representations and warranties made by it herein are true and correct at
the Effective Time, (ii) to fully perform all covenants made by it herein
and (iii) to satisfy timely all other obligations imposed upon it by this
Agreement.
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ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1. Conditions Precedent to Obligations of BGS. The obligations of BGS to
consummate and effect the Merger shall be subject to the satisfaction of the
following conditions, or to the waiver thereof by BGS in the manner contemplated
by Section 6.4 before the Effective Time:
5.1.1. Representations and Warranties of BMC True at Effective
Time. The representations and warranties of BMC herein contained shall be,
in all respects, true as of and at the Effective Time with the same effect
as though made at such date, except as affected by transactions permitted
or contemplated by this Agreement and except for those representations and
warranties that address matters only as of a particular date (which shall
remain true and correct as of such particular date), provided that any
inaccuracies in such representations and warranties will be disregarded if
the circumstances giving rise to all such inaccuracies (considered
collectively) do not constitute, and are not reasonably expected to result
in, a Material Adverse Effect (it being understood that any materiality
qualifications contained in such representations and warranties shall be
disregarded for this purpose); BMC shall have performed and complied, in
all material respects, with all covenants required by this Agreement to be
performed or complied with by BMC before the Effective Time; and BMC shall
have delivered to BGS a certificate, dated the Effective Time and signed by
its chairman of the board and by its chief financial or accounting officer
to both such effects.
5.1.2. No Material Litigation. No suit, action, or other proceeding
shall be pending, or to BMC's knowledge, threatened, before any court or
governmental agency in which it will be, or it is, sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the Merger or which could reasonably be
expected to have a Material Adverse Effect on BMC.
5.1.3. Opinion of BMC Counsel. BGS shall have received a favorable
opinion, dated as of the Effective Time from Vinson & Elkins L.L.P.,
counsel for BMC, to the effect that (i) BMC has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Delaware; (ii) all corporate proceedings required to be taken by
or on the part of BMC to authorize the execution of this Agreement and the
implementation of the Merger have been taken; (iii) the shares of BMC
Common Stock which are to be delivered in accordance with this Agreement
will, when issued, be validly issued, fully paid and nonassessable
outstanding securities of BMC; (iv) this Agreement has been duly executed
and delivered by BMC; (v) the Registration Statement on Form S-4 (which
contains the Proxy Statement relating to the merger contemplated hereby)
has become effective and no stop order has been issued by the Commission;
(vi) this Agreement has been duly executed and delivered by BMC and the
Stockholder Agreements have been duly executed by BMC; (vii) this Agreement
constitutes the legal, valid and binding obligation of BMC and the
Stockholder Agreements constitute the legal, valid and binding obligations
of BMC, each enforceable in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity and public policy; and (viii) except as
specified by such counsel (such exceptions to be acceptable to BGS) such
counsel does not know of any material litigation, proceedings, or
governmental investigation pending or threatened against or relating to
BMC, any of its subsidiaries, or their respective properties or businesses
in which it is sought to restrain, prohibit or otherwise affect the
consummation of the transactions contemplated by this Agreement. Such
opinion also shall cover such other matters incident to the transactions
herein contemplated as BGS and its counsel may reasonably request. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of BMC as to matters of fact and (ii) the
opinion or opinions of other counsel, which opinions shall be reasonably
satisfactory to BGS, as to matters other than federal or Texas law.
5.1.4. Stockholder Approval. At the meeting of stockholders of BGS to
be held before the Effective Time, the holders of two-thirds of the
outstanding shares of BGS Common Stock shall have approved the Merger and
this Agreement.
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5.1.5. Hart-Scott-Rodino, etc. All waiting periods required by HSR
shall have expired with respect to the transactions contemplated by this
Agreement, or early termination with respect thereto shall have been
obtained without the imposition of any governmental request or order
requiring the sale or disposition or holding separate (through a trust or
otherwise) of particular assets or businesses of BMC, its affiliates or any
component of BGS or other actions as a precondition to the expiration of
any waiting period or the receipt of any necessary governmental approval or
consent. In addition, any approvals required under any state or foreign
laws comparable to HSR shall have been obtained.
5.1.6. Registration; Listing of BMC Common Stock. On the Effective
Time (i) the Proxy Statement shall have become effective under the
Securities Act, and (ii) the shares of BMC Common Stock issuable at the
Effective Time of the Merger shall have become eligible for trading on the
Nasdaq National Market.
5.1.7. Stock Options. BMC shall have made effective provision for the
assumption or substitution at the Effective Time of all stock options
outstanding under plans maintained by BGS.
5.1.8. Ancillary Matters. BGS shall have received a favorable opinion
from Broadview for inclusion in the Proxy Statement as to the fairness,
from a financial point of view, to the BGS stockholders of the Merger
Consideration, which opinion shall not have been withdrawn at the Effective
Time.
5.1.9. Tax Opinion. Palmer & Dodge LLP shall have delivered to BGS its
written opinion as of the date that the Proxy Statement is first mailed to
BGS stockholders substantially to the effect that (x) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code, (y) BMC, Merger Sub and BGS will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (z) no
gain or loss for U.S. federal income tax purposes will be recognized by the
holders of BGS Common Stock upon receipt of shares of BMC Common Stock in
the merger, except with respect to any cash received in lieu of a
fractional share interest in BMC Common Stock, and such opinion shall not
have been withdrawn or modified in any material respect.
5.2. Conditions Precedent to Obligations of BMC. The obligations of BMC to
consummate and effect the Merger shall be subject to the satisfaction of the
following conditions, or to the waiver thereof by BMC in the manner contemplated
by Section 6.4 before the Effective Time.
5.2.1. Representations and Warranties of BGS True at Effective
Time. The representations and warranties of BGS herein contained shall be,
in all respects, true as of and at the Effective Time with the same effect
as though made at such date, except as affected by transactions permitted
or contemplated by this Agreement and except for those representations and
warranties that address matters only as of a particular date (which shall
remain true and correct as of such particular date), provided that any
inaccuracies in such representations and warranties will be disregarded if
the circumstances giving rise to all such inaccuracies (considered
collectively) do not constitute, and are not reasonably expected to result
in, a Material Adverse Effect (it being understood that any materiality
qualifications contained in such representations and warranties shall be
disregarded for this purpose); BGS shall have performed and complied, in
all material respects, with all covenants required by this Agreement to be
performed or complied with by BGS before the Effective Time; and BGS shall
have delivered to BMC a certificate, dated the Effective Time and signed by
its chairman of the board and by its chief financial or accounting officer
to both such effects.
5.2.2. No Material Litigation. No suit, action, or other proceeding
shall be pending, or to BGS's knowledge, threatened, before any court or
governmental agency in which it will be, or it is, sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the Merger or which could reasonably be
expected to have a Material Adverse Effect on BGS.
5.2.3. Opinion of BGS's Counsel. BMC shall have received a favorable
opinion, dated the Effective Time, from Palmer & Dodge LLP, counsel to BGS
to the effect that (i) BGS has been duly incorporated and is validly
existing as a corporation in corporate good standing under the laws of The
Commonwealth of Massachusetts; (ii) all outstanding shares of the BGS
Common Stock have been validly issued and are
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fully paid and nonassessable; (iii) all corporate or other proceedings
required to be taken by or on the part of BGS to authorize the execution of
this Agreement and the implementation of the Merger have been taken; (iv)
this Agreement has been duly executed and delivered by BGS and the
Stockholder Agreements have been duly executed and delivered by the
stockholders party thereto; (v) this Agreement constitutes the legal, valid
and binding obligation of BGS and the Stockholder Agreements constitute the
legal, valid and binding obligations of the stockholders party thereto,
each enforceable in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity and public policy; and (vi) except as
specified by such counsel (such exceptions to be acceptable to BMC) such
counsel does not know of any material litigation, proceedings or
governmental investigation, pending or threatened against or relating to
BGS or its properties or businesses in which it is sought to restrain,
prohibit or otherwise affect consummation of the transactions contemplated
by this Agreement. Such opinion shall also cover such other matters
incident to the transactions herein contemplated as BMC and its counsel may
reasonably request. In rendering such opinion, such counsel may rely upon
(i) certificates of public officials and of officers of BGS as to matters
of fact and (ii) on the opinion or opinions of other counsel, which
opinions shall be reasonably satisfactory to BMC, as to matters other than
federal or Massachusetts law.
5.2.4. Hart-Scott-Rodino, etc. All waiting periods required by HSR
shall have expired with respect to the transactions contemplated by this
Agreement, or early termination with respect thereto shall have been
obtained without the imposition of any governmental request or order
requiring the sale or disposition or holding separate (through a trust or
otherwise) of particular assets of business of BMC, its affiliates or any
component of BGS or other actions as a precondition to the expiration of
any waiting period or the receipt of any necessary governmental approval or
consent. In addition, any approvals required under any state or foreign
laws comparable to HSR shall have been obtained.
5.2.5. Consent of Certain Parties in Privity with BGS. The holders of
any material indebtedness of BGS, the lessors of any material property
leased by BGS, and the other parties to any other material agreements to
which BGS is a party, whose consent to the Merger is required as set forth
in the BGS Disclosure Schedule, shall, when and to the extent necessary in
the reasonable opinion of BMC, have consented to the Merger.
5.2.6. Dissenters. Holders of not more than 5 percent of the
outstanding shares of BGS Common Stock on the date of this Agreement shall
have received or be entitled to receive consideration pursuant to the
provisions of Sections 86 through 98 of the MBCL.
5.2.7. Tax Opinion. Vinson & Elkins L.L.P. shall have delivered to BMC
its written opinion as of the date that the Proxy Statement is first mailed
to BGS stockholders substantially to the effect that (x) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code, (y) BMC, Merger Sub and BGS will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (z)
BMC, Merger Sub and BGS will not recognize any gain or loss for U.S.
federal income tax purposes as a result of the Merger, and such opinion
shall not have been withdrawn or modified in any material respect.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1. Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Merger abandoned at
any time (whether before or after the approval and adoption thereof by the
stockholders of BGS) before the Effective Time:
6.1.1. By Mutual Consent. By mutual consent of BMC and BGS.
6.1.2. By BMC Because of Conditions Precedent. By BMC, if there has
been a breach by BGS of its representations, warranties, covenants, or
agreements set forth in this Agreement if, as a result of such
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breach, the conditions set forth in Section 5.2.1 would not be satisfied,
and BGS fails to cure such breach within 15 business days after written
notice thereof from BMC (except that no cure period shall be provided for
any breach by BGS which by its nature cannot be cured).
6.1.3. By BMC Because of Material Adverse Change. By BMC, if there has
been since October 31, 1997, a Material Adverse Change with respect to BGS
which condition or event shall not have been ameliorated such that it no
longer constitutes a Material Adverse Change within ten (10) business days
following receipt by BGS of notice from BMC (except that no cure period
shall be provided for any Material Adverse Change which by its nature
cannot be cured).
6.1.4. By BGS Because of Conditions Precedent. By BGS, if there has
been a breach by BMC of any of its representations, warranties, covenants
or agreements set forth in this Agreement if, as a result of such breach,
the conditions set forth in Section 5.1.1 would not be satisfied, and BMC
fails to cure such breach within 15 business days after written notice
thereof from BGS (except that no cure period shall be provided for any
breach by BMC which by its nature cannot be cured).
6.1.5. By BGS or BMC Due to a Superior BGS Transaction Proposal. By
BGS or BMC if, before the Effective Time, BGS's board of directors shall
have withdrawn or modified in a manner adverse to BMC its approval of this
Agreement or the Merger under the terms, conditions and procedures set
forth in Paragraph 4.3.6.1.
6.1.6. By BGS Because of Material Adverse Change. By BGS, if there has
been since September 30, 1997, a Material Adverse Change with respect to
BMC which condition or event shall not have been ameliorated such that it
no longer constitutes a Material Adverse Change within ten (10) business
days following receipt by BMC of notice from BGS (except that no cure
period shall be provided for any Material Adverse Change which by its
nature cannot be cured).
6.1.7. By BMC or BGS Because of Legal Proceedings. By BMC or BGS if
(i) a statute, rule, regulation or executive order shall have been enacted,
entered or promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated hereby or (ii) an order, decree,
ruling or injunction shall have been entered permanently restraining,
enjoining or otherwise prohibiting the consummation of the Merger
substantially on the terms contemplated hereby and such order, decree,
ruling or injunction shall have become final and non-appealable; provided,
that the party seeking to terminate this Agreement pursuant to this Section
6.1.7 shall have used its reasonable best efforts to remove such
injunction, order or decree.
6.1.8. By BMC or BGS if Merger not Effective by September 30, 1998. By
either BMC or BGS, if all conditions to consummation of the Merger shall
not have been satisfied or waived on or before September 30, 1998, other
than as a result of a breach of this Agreement by the terminating party.
6.1.9. By BMC or BGS if Merger Cannot be Accounted for as a Pooling.
By BMC or BGS if the Merger cannot for financial reporting purposes be
accounted for as a "pooling of interests"; provided, however, this
provision shall not be available to a party which has taken any action or
failed to take any action, that either alone or in combination with actions
previously taken disqualifies the Merger from such accounting treatment.
6.2. Termination by Board of Directors. An election of BMC to terminate
this Agreement and abandon the Merger as provided in Section 6.1 shall be
exercised on behalf of BMC by its board of directors. An election of BGS to
terminate this Agreement and abandon the Merger as provided in Section 6.1 shall
be exercised on behalf of BGS by its board of directors.
6.3. Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to and in accordance with the provisions of Section
6.1 hereof, this Agreement shall become void and have no effect, without any
liability on the part of any party hereto (or its stockholders or controlling
persons or directors or officers), except (i) the provisions of Section 4.3.6.2
shall survive such termination and abandonment and (ii) neither party shall be
released or relieved from any liability arising from the willful
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breach by such party of any of its representations, warranties, covenants or
agreements as set forth in this Agreement.
6.4. Waiver of Conditions. Subject to the requirements of any applicable
law, any of the terms or conditions of this Agreement may be waived at any time
by the party which is entitled to the benefit thereof, by action taken by its
board of directors.
6.5. Expense on Termination. If the Merger is abandoned pursuant to and in
accordance with the provisions of Section 6.1 hereof, all expenses will be paid
by the party incurring them; provided, however, that in the event this Agreement
is terminated by BMC pursuant to Section 6.1.2 or by BMC or BGS pursuant to
Section 6.1.5, BGS shall assume and pay, or reimburse BMC for, all reasonable
fees and expenses incurred by BMC or Merger Sub (including the fees and expenses
of its counsel, accountants and financial advisors) through the date of
termination and which are specifically related to the Merger, this Agreement and
the matters contemplated by this Agreement, but in no event later than two
business days after the submission of a request for payment of the same; and
provided, further, that in the event this Agreement is terminated by BGS
pursuant to Section 6.1.4, BMC shall assume and pay, or reimburse BGS for, all
reasonable fees and expenses incurred by BGS (including the fees and expenses of
its counsel, accountants and financial advisors) through the date of termination
and which are specifically related to the Merger, this Agreement and the matters
contemplated by this Agreement, but in no event later than two business days
after the submission of a request for payment of the same. Any amount payable by
BGS under this Section 6.5 shall be credited against any amount payable by it
under Section 4.3.6.2.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Exchange of Options. Promptly after the Effective Time, BMC will
notify in writing each holder of a BGS Option of the exchange of the BGS Option
for an option to purchase BMC Common Stock in accordance with Section 1.10 of
the Plan of Merger. BMC shall cause all shares of BMC Common Stock issued upon
exercise of the exchanged BGS Options to be registered under an effective Form
S-8 Registration Statement (or other comparable form) filed with the Commission.
7.2. Indemnification of Directors and Officers. (a) BMC shall indemnify and
hold harmless each present and former director and officer of BGS, determined as
of the Effective Time, against any claims, losses, liabilities, damages,
judgments, fines, fees, costs or expenses, including without limitation
attorneys' fees and disbursements incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time (including, without limitation, the Merger, the
preparation, filing and mailing of the Proxy Statement and the other
transactions and actions contemplated by this Agreement), whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that BGS
would have been permitted, under applicable law, indemnification agreements
existing on the date hereof, the Articles of Organization or Bylaws of BGS in
effect on the date hereof, to indemnify such person (and BMC shall also advance
expenses as incurred to the fullest extent permitted under applicable law
provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification).
(b) For a period of six (6) years after the Effective Time, BMC shall
maintain (to the extent available in the market) in effect a directors' and
officers' liability insurance policy covering those persons who are currently
covered by BGS's directors' and officers' liability insurance policy (a copy of
which has been heretofore delivered to BMC) with coverage in amount and scope at
least as favorable as BGS's existing coverage (which coverage may be an
endorsement extending the period in which claims may be made under such existing
policy); provided that in no event shall BMC be required to expend per year for
such coverage more than an aggregate of 200% of the current annual premium
expended by BGS to provide such coverage.
(c) The provisions of this Section 7.2 are intended to be for the benefit
of, and shall be enforceable by, each indemnified party and his or her heirs and
representatives, and nothing herein shall affect any
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indemnification rights that any indemnified party and his or her heirs and
representatives may have under the bylaws of BGS or any of its subsidiaries, any
contract or applicable law.
7.3. Affiliate Agreements.
7.3.1. BGS Affiliates. To insure that the Merger will be treated as a
"pooling of interests" and to insure compliance with Rule 145 of the rules
and regulations promulgated by the Commission and the Securities Act, each
of BGS's directors, executive officers and beneficial owners of 5% or more
of BGS's Common Stock identified as "affiliates" has concurrently signed
and delivered to BMC the BGS affiliate agreements in the form attached as
Exhibit C.
7.3.2. BMC Affiliates. To insure that the Merger will be treated as a
"pooling of interests," each of BMC's directors, executive officers and
beneficial owners of 5% or more of BMC's Common Stock identified as
"affiliates" has concurrently signed and delivered to BMC the BMC affiliate
agreements in the form attached as Exhibit D.
7.4. Publication of Combined Results. BMC agrees to publicly release a
report in the form of a quarterly earnings report, registration statement filed
with the Commission, a report filed with the Commission on Form 10-K, 10-Q, or
8-K or any other public filing, statement or announcement which includes the
combined financial results (including combined sales and net income) of BMC and
BGS for a period of at least 30 days of combined operations of BMC and BGS
following the Effective Time within 45 days after the end of the first calendar
quarter which includes at least 30 days of combined operations.
7.5 Employee Benefit Plans of BGS. (a) BMC shall take all actions necessary
or appropriate to permit the employees of BGS and its subsidiaries ("BGS
Employees") to continue to participate from and after the Closing Date in the
BGS Plans maintained by BGS and its subsidiaries immediately prior to the
Closing Date. Notwithstanding the foregoing, BMC may permit or cause any such
BGS Plan to be terminated or discontinued on or after the Closing Date, provided
that BMC shall take all actions necessary or appropriate to permit the BGS
Employees participating in such BGS Plan to immediately thereafter participate
in the comparable BMC Plan maintained by BMC or any of its subsidiaries for
their similarly situated employees. If the BGS Plan that is terminated or
discontinued by BMC is a group health plan, then BMC shall permit each BGS
Employee participating in such group health plan to be covered under a BMC Plan
that (i) provides medical and dental benefits to each such BGS Employee
effective immediately upon the cessation of coverage of such individuals under
such group health plan, (ii) credits such BGS Employee, for the year during
which such coverage under such BMC Plan begins, with any deductibles and
copayments already incurred during such year under such group health plan, and
(iii) waives any preexisting condition restrictions to the extent necessary to
provide immediate coverage and to the extent such restrictions were not
applicable under such group health plan. BMC and the BMC Plans shall recognize
each BGS Employee's years of service and level of seniority with BGS and its
subsidiaries for purposes of terms of employment and eligibility, vesting and
benefit determination under the BMC Plans (other than benefit accruals under any
defined benefit pension plan).
(b) BMC agrees that during the six-month period beginning as of the
Effective Time, it will provide severance pay benefits to BGS's employees who
continue in employment with BMC or the Surviving Corporation after the Effective
Time at least as favorable as the severance pay benefits which would have been
provided to such employees under BGS's severance policy described in Section 2.7
of the BGS Disclosure Schedule in effect at the date of this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1. Entirety. This Agreement, the attachments and Schedules thereto and
the Plan of Merger embody the entire agreement between the parties with respect
to the subject matter hereof, and all prior agreements between the parties with
respect thereto are hereby superseded in their entirety.
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8.2. Counterparts. Any number of counterparts of this Agreement may be
executed and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one instrument.
8.3. Notices and Waivers. Any notice or waiver to be given to any party
hereof shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid.
IF TO BMC
<TABLE>
<S> <C>
Addressed to: With a copy to:
BMC Software, Inc. Vinson & Elkins L.L.P.
2101 Citywest Blvd. 1001 Fannin, Suite 2300
Houston, Texas 77042-2827 Houston, Texas 77002-6760
Attention: M. Brinkley Morse Attention: John S. Watson
Facsimile: (713) 918-8000 Facsimile: (713) 615-5236
</TABLE>
IF TO BGS
<TABLE>
<S> <C>
Addressed to: With a copy to:
BGS Systems, Inc. Palmer & Dodge LLP
One First Avenue One Beacon Street
Waltham, Massachusetts 02254-9111 Boston, Massachusetts 02108
Attention: Harold Schwenk Attention: Steven N. Farber
Facsimile: (781) 890-0000 Facsimile: (617) 227-4420
</TABLE>
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, shall be deemed to be received on the fifth
business day after so mailed, and if delivered by courier or facsimile to such
address, upon delivery during normal business hours on any business day.
8.4. Termination of Representations, Warranties, etc. The respective
representations and warranties contained in Articles II and III shall expire
with, and be terminated and extinguished by, the Merger at the time of the
consummation thereof on the Effective Time. This Section 8.4 shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Effective Time or after termination of this Agreement.
8.5. Table of Contents and Captions. The table of contents and captions
contained in this Agreement are solely for convenient reference and shall not be
deemed to affect the meaning or interpretation of any article, section, or
paragraph hereof.
8.6. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
8.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
8.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas (except to the extent
that the form and content of the Plan of Merger and the consequences of the
filing thereof shall be governed by the MBCL).
8.9. Public Announcements. The parties agree that before the Effective Time
that they shall consult with each other before the making of any public
announcement regarding the existence of this Agreement, the
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contents hereof or the transactions contemplated hereby, and to obtain the prior
approval of the other party as to the content of such announcement, which
approval shall not be unreasonably withheld. However, the foregoing shall not
apply to any announcement or written statement which, upon the written advice of
counsel, is required by law to be made, except that the party required to make
such announcement shall, whenever practicable, consult with and solicit prior
approval from such other party concerning the timing and content of such legally
required announcement or statement before it is made.
8.10. Definitions. The following terms are defined in the indicated place:
<TABLE>
<CAPTION>
SECTION OR
TERM PARAGRAPH
---- ----------
<S> <C>
Agreement Premises
BGS Common Stock Premises
BGS Employee 5.1.8
BGS Options 1.10 of the Plan of Merger
BGS Option Plans 1.10 of the Plan of Merger
BGS Plans 2.7.1
BGS Reports 2.5
BGS Transaction Proposals 4.3.6.1
Another BGS Transaction 4.3.6.2
Applicable Environmental Laws 2.14.3
Break-Up Fee 4.3.6.2
Claims 7.3.6
Code Premises
Commission 2.5
DGCL Premises
Effective Time 1.3
Encumbrance 2.4
ERISA 2.20
Exchange Act 2.5
Heirs 7.3.5
HSR 2.21
Intellectual Property 2.11
Investment Company Act 2.21
BMC Common Stock Premises
BMC Plans 3.9
BMC Reports 3.5
BMC Shares 1.9.2 of the Plan of Merger
Material Adverse Effect 1.4
Merger Consideration 1.9.2 of the Plan of Merger
Merging Corporations Premises
OSHA 2.15
Proxy Statement 2.20
Registration Statement 7.3.1
Securities Act 4.4.10
Stock 7.3.1
Stockholders 7.3.1
Superior BGS Transaction Proposal 4.3.6.1
</TABLE>
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Reorganization to be duly executed as of the date first above written.
BMC SOFTWARE, INC.
By: /s/ MAX P. WATSON JR.
----------------------------------
Name: Max P. Watson Jr.
Title: President
RANGER ACQUISITION CORP.
By: /s/ MAX P. WATSON JR.
----------------------------------
Name: Max P. Watson Jr.
Title: President
BGS SYSTEMS, INC.
By: /s/ HAROLD S. SCHWENK, JR.
----------------------------------
Name: Harold S. Schwenk, Jr.
Title: President
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<PAGE> 90
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
Merging Merger Sub into BGS
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 31, 1998 (this "Plan
of Merger"), is by and between Ranger Acquisition Corp., a Massachusetts
corporation ("Merger Sub") and a wholly owned subsidiary of BMC Software, Inc.,
a Delaware corporation ("BMC") and BGS Systems, Inc., a Massachusetts
corporation "BGS"). Merger Sub and BGS are hereinafter sometimes referred to as
the "Merging Corporations."
PRELIMINARY STATEMENT
This Plan of Merger is being entered into pursuant to an Agreement and Plan
of Reorganization dated as of January 31, 1998 (the "Agreement") among BMC,
Merger Sub and BGS.
The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $.01 per share ("Merger Sub Common Stock"), of which 100
shares are outstanding, all of which are owned by BMC. The authorized capital
stock of BGS consists of 10,000,000 shares of common stock, par value $.10 per
share ("BGS Common Stock"), of which 6,429,698 shares are outstanding and an
additional 1,156,000 shares are reserved for issuance in conjunction with
various employee benefit plans, and 103,501 shares are held in BGS's treasury.
The Boards of Directors of each of the Merging Corporations, respectively,
have approved the Agreement and the Plan of Merger.
Accordingly, in consideration of the premises, and the mutual covenants and
agreements herein contained, the parties hereto hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
ARTICLE I
THE MERGER
1.1. Surviving Corporation. Subject to the adoption and approval of this
Agreement by the requisite vote of the stockholders of each of the Merging
Corporations and to the other conditions hereinafter set forth, Merger Sub and
BGS shall be, upon the Effective Time of the merger (as defined in Section 1.3
hereof), merged into a single surviving corporation, which shall be BGS (the
"Surviving Corporation"), one of the Merging Corporations, which shall continue
its corporate existence and remain a Massachusetts corporation governed by and
subject to the laws of that state.
1.2. Stockholder Approval. This Agreement shall be submitted for adoption
and approval by the stockholders of each of the Merging Corporations in
accordance with their respective articles of organization and the applicable
laws of The Commonwealth of Massachusetts.
1.3. Effective Time. The merger shall become effective upon the filing by
BGS of Articles of Merger with the State Secretary of The Commonwealth of
Massachusetts in accordance with Section 78 of the Massachusetts Business
Corporation Law. The date upon which the merger shall become effective is
referred to in this Agreement as the "Effective Time."
1.4. Name and Continued Corporate Existence of Surviving Corporation. On
the Effective Time, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of BGS, the Surviving Corporation of the
merger, shall continue unaffected and unimpaired by the merger, and the
corporate identity, existence, purposes, powers, objects, franchises, rights,
and immunities of Merger Sub shall be wholly merged into BGS, the Surviving
Corporation, and BGS shall be fully vested therewith. Accordingly, on the
Effective Time, the separate existence of Merger Sub, except insofar as
continued by statute, shall cease.
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1.5. Governing Law and Articles of Organization of Surviving
Corporation. The laws of The Commonwealth of Massachusetts shall continue to
govern the Surviving Corporation. On the Effective Time, the Articles of
Organization of Merger Sub shall be the articles of organization of the
Surviving Corporation until further amended in the manner provided by law,
provided that at the Effective Time the articles of organization of the
Surviving Corporation shall be amended so that the name of the Surviving
Corporation shall be "BGS Systems, Inc."
1.6. Bylaws of Surviving Corporation. Effective as of the Effective Time,
the bylaws of Merger Sub shall be the bylaws of the Surviving Corporation until
altered, amended, or repealed, or until new bylaws shall be adopted in
accordance with the provisions of law, the articles of organization and the
bylaws.
1.7. Directors of Surviving Corporation
1.7.1. Directors of Surviving Corporation. The names and addresses of
the persons who, upon the Effective Time, shall constitute the board of
directors of the Surviving Corporation, and who shall hold office until the
first annual meeting of stockholders of the Surviving Corporation next
following the Effective Time, are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------------------
<S> <C>
Max P. Watson Jr. 2101 Citywest Blvd.
Houston, TX 77042
William M. Austin 2101 Citywest Blvd.
Houston, TX 77042
M. Brinkley Morse 2101 Citywest Blvd.
Houston, TX 77042
</TABLE>
1.7.2. Vacancies. On or after the Effective Time, if a vacancy shall
exist for any reason in the board of directors of the Surviving
Corporation, such vacancy shall be filled in the manner provided in the
articles of organization and/or bylaws of the Surviving Corporation.
1.8. Capital Stock of Surviving Corporation. The authorized number of
shares of capital stock of the Surviving Corporation, and the par value,
designations, preferences, rights, and limitations thereof, and the express
terms thereof, shall be as set forth in the articles of organization.
1.9. Conversion of Securities upon Merger
1.9.1. General. The manner and basis of converting the issued and
outstanding shares of the capital stock of BGS into shares of the capital
stock of BMC shall be as hereinafter set forth in this Section 1.9.
1.9.2. Conversion of BGS Common Stock. On the Effective Time, each
share of BGS Common Stock then issued and outstanding, without any action
on the part of the holders thereof, shall automatically become and be
converted into the right to receive certificates evidencing a fraction of a
fully paid and nonassessable share of issued and outstanding BMC Common
Stock (the "BMC Shares") equal to the Exchange Ratio (as defined and
determined below) upon surrender, in accordance with Paragraph 1.9.3
hereof, of certificates theretofore evidencing shares of BGS Common Stock.
The BMC Shares are hereinafter referred to collectively as the "Merger
Consideration." The "Exchange Ratio" shall be equal to the quotient of
$45.00 divided by the average of the closing sales prices of BMC Common
Stock (or, if BMC Common Stock should not trade on any trading day, the
average of the bid and the asked prices therefor on such day), rounded to
the nearest thousandth (.0005 being rounded to .001), as reported by the
Nasdaq National Market on each of the last ten consecutive trading days in
the period ending on the third trading day prior to the meeting of BGS
stockholders held for the purpose of approving the Merger.
1.9.3. Exchange of BGS Common Stock Certificates. Commencing on the
Effective Time, each holder of an outstanding certificate or certificates
theretofore representing shares of BGS Common Stock may surrender the same
to an exchange agent designated by BMC, and such holder shall be entitled
upon such surrender to receive in exchange therefor a certificate or
certificates representing the number of
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whole BMC Shares into which the shares of BGS Common Stock theretofore
represented by the certificate or certificates so surrendered shall have
been converted as aforesaid. However, before surrender, each outstanding
certificate representing issued and outstanding BGS Common Stock shall be
deemed, for all purposes, only to evidence ownership of the number of whole
BMC Shares into which such shares have been so converted. Unless and until
such outstanding certificates formerly representing BGS Common Stock are so
surrendered, no dividend payable to holders of record of BMC Common Stock
as of any date after the Effective Time shall be paid to the holders of
such outstanding certificates in respect thereof. Upon surrender of such
outstanding certificates, however, there shall be paid to the holders of
the certificates of BMC Shares issued in partial exchange therefor the
amount of dividends, if any, which theretofore (but after the Effective
Time) became payable with respect to such full BMC Shares. No interest
shall be payable with respect to the payment of such dividends on surrender
of outstanding certificates. The holder of fractional share interests, as
such, shall not be entitled to any dividends or to any distribution in the
event of liquidation or to any voting or other privileges of a stockholder
of BMC.
1.9.4. BMC Fractional Shares. No certificates for fractional share
interests of BMC Common Stock will be issued, but, in lieu thereof, BMC
will settle all such fractional share interests in cash on the basis of the
closing price for BMC Common Stock on the Nasdaq National Market (as
reported in The Wall Street Journal) on the last trading day before the
Effective Time.
1.9.5. BGS's Transfer Books Closed. Upon the Effective Time, the stock
transfer books of BGS shall be deemed closed, and no transfer of any
certificates theretofore representing the shares of BGS shall thereafter be
made or consummated.
1.9.6. Conversion of Merger Sub Common Stock. On the Effective Time,
each share of Merger Sub Common Stock then issued and outstanding, without
any action on the part of the holder thereof, shall automatically become
and be converted into one share of BGS Common Stock.
1.10. Treatment of Stock Options. On the Effective Time, each of the then
outstanding options to purchase BGS Common Stock (collectively, the "BGS
Options") (which includes all outstanding options granted under BGS's stock
option plans (the "BGS Option Plans")) will and without any further action on
the part of any holder thereof (herein, an "optionholder"), be exchanged for an
option to purchase that number of shares of BMC Common Stock determined by
multiplying the number of shares of BGS Common Stock subject to such BGS Option
at the Effective Time by the Exchange Ratio, at an exercise price per share of
BMC Common Stock equal to the exercise price per share of such BGS Option
divided by the Exchange Ratio; provided, however, that with respect to BGS's
1997 Employee Stock Purchase Plan, the exercise price per share of BMC Common
Stock shall be determined pursuant to the provisions of paragraphs 7(b), 17 and
20 of such plan. If the foregoing calculation results in an exchanged BGS Option
being exercisable for a fraction of a share of BMC Common Stock, then the number
of shares of BMC Common Stock subject to such option will be rounded down to the
nearest whole number of shares, and the total exercise price for the option will
be reduced by the exercise price of the fractional share. The term,
exercisability, vesting schedule, and all other terms and conditions of the BGS
Options will otherwise be unchanged by the provisions of this Section 1.10 and
shall operate in accordance with their terms. All shares of BMC Common Stock
issued upon exercise of the exchanged BGS Options shall be registered under an
effective Form S-8 Registration Statement (or other comparable form) filed with
the Securities and Exchange Commission (the "Commission").
1.11. Assets and Liabilities
1.11.1. Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation. On the Effective Time, all rights, privileges,
powers, immunities, and franchises of each of the Merging Corporations,
both of a public and private nature, and all property, real, personal, and
mixed, and all debts due on whatever account, as well as stock
subscriptions and all other choses or things in action, and all and every
other interest of or belonging to or due to either of the Merging
Corporations, shall be taken by and shall be vested in the Surviving
Corporation without further act or deed, and all such rights, privileges,
powers, immunities, and franchises, property, debts, choses or things in
action, and all and
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every other interest of each of the Merging Corporations shall be
thereafter as effectually the property of the Surviving Corporation as they
were of the respective Merging Corporations, and the title to any real or
other property, or any interest therein, whether vested by deed or
otherwise, in either of the Merging Corporations, shall not revert or be in
any way impaired by reason of the merger, provided, however, that all
rights of creditors and all liens upon any properties of each of the
Merging Corporations shall be preserved unimpaired, and all debts,
liabilities, restrictions, obligations, and duties of the respective
Merging Corporations, including without limitation all obligations,
liabilities and duties as lessee under any existing lease, shall
thenceforth attach to the Surviving Corporation and may be enforced against
and by it to the same extent as if such debts, liabilities, duties,
restrictions and obligations had been incurred or contracted by it. Any
action or proceeding pending by or against either of the Merging
Corporations may be prosecuted to judgment as if the merger had not taken
place, or the Surviving Corporation may be substituted in place of either
of the Merging Corporations.
1.11.2. Conveyances to Surviving Corporation. The Merging Corporations
hereby agree, respectively, that from time to time, as and when requested
by the Surviving Corporation, or by its successors and assigns, they will
execute and deliver or cause to be executed and delivered, all such deeds,
conveyances, assignments, permits, licenses and other instruments, and will
take or cause to be taken such further or other action as the Surviving
Corporation, its successors or assigns, may deem necessary or desirable to
vest or perfect in or confirm to the Surviving Corporation, its successors
and assigns, title to and possession of all the property, rights,
privileges, powers, immunities, franchises, and interests referred to in
this Paragraph 1.11.2 and otherwise carry out the intent and purposes of
this Agreement.
1.11.3. Accounting Treatment. The assets and liabilities of the
Merging Corporations shall be taken up on the books of the Surviving
Corporation in accordance with generally accepted accounting principles,
and the capital surplus and retained earnings accounts of the Surviving
Corporation shall be determined, in accordance with generally accepted
accounting principles, by the board of directors of the Surviving
Corporation. Nothing herein shall prevent the board of directors of the
Surviving Corporation from making any future changes in its accounts in
accordance with law.
1.11.4. Unclaimed Merger Consideration; No Escheat. Subject to any
contrary provision of governing law, all consideration deposited with the
exchange agent or held by BMC for the payment of the consideration into
which the outstanding shares of BGS Common Stock shall have been converted,
and remaining unclaimed for one year after the Effective Time, shall be
paid or delivered to BMC; and the holder of any unexchanged certificate or
certificates which before the Effective Time represented shares of BGS
Common Stock shall thereafter look only to BMC for exchange or payment
thereof upon surrender of such certificate or certificates to BMC.
1.11.5. Dissenting Stockholders of BGS. BGS agrees that, if the merger
contemplated hereby becomes effective, it will promptly pay to any
dissenting stockholder of BGS the amount, if any, to which such holder is
entitled under the provisions of Sections 86 through 98 of the MBCL
provided such dissenter acts in strict compliance with such provisions.
1.12. Taking of Necessary Action; Further Action. Merger Sub and BGS shall
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of BGS or Merger Sub, such corporations shall direct their
respective officers and directors to take all such lawful and necessary action.
ARTICLE II
MISCELLANEOUS
2.1. Counterparts. This Plan of Merger may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to each of the other parties.
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2.2. Governing Law. This Plan of Merger shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.
2.3. Waiver and Amendment. Any provision of this Plan of Merger may be
waived at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. This Plan of Merger may not be amended or supplemented at
any time, except by an instrument in writing signed on behalf of each party
hereto. The waiver by any party hereto of any condition or of a breach of
another provision of this Plan of Merger shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this Plan of
Merger shall not preclude it from seeking redress for breach of this Plan of
Merger other than with respect to the condition so waived.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed as of the date first above written.
RANGER ACQUISITION CORP.
By: /s/ MAX P. WATSON JR.
----------------------------------
Name: Max P. Watson Jr.
Title: President
By: /s/ M. BRINKLEY MORSE
----------------------------------
Name: M. Brinkley Morse
Title: Treasurer
BGS SYSTEMS, INC.
By: /s/ HAROLD S. SCHWENK, JR.
----------------------------------
Name: Harold S. Schwenk, Jr.
Title: President
By: /s/ JEFFREY P. BUZEN
----------------------------------
Name: Jeffrey P. Buzen
Title: Treasurer
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APPENDIX B
FORM OF STOCKHOLDER AGREEMENT
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STOCKHOLDER AGREEMENT
This Stockholder Agreement dated as of January 31, 1998 is between BMC
Software, Inc., a Delaware corporation ("BMC"), and (the
"Stockholder").
WHEREAS, BMC, Ranger Acquisition Corp., a Massachusetts corporation and
wholly owned subsidiary of BMC ("Merger Sub"), and BGS Systems, Inc., a
Massachusetts corporation ("BGS"), are entering into an Agreement and Plan of
Reorganization dated as of the date hereof (as amended from time to time
pursuant thereto, the "Reorganization Agreement");
WHEREAS, the Stockholder is the record and/or beneficial owner of
shares of Common Stock, par value $0.10 per share, of BGS (the "BGS
Common Stock") (such shares of BGS Common Stock, together with any shares of
capital stock of BGS acquired by the Stockholder after the date hereof and
during the term of this Agreement, being collectively referred to herein as the
"Stockholder Shares");
WHEREAS, as a condition to the willingness of BMC to enter into the
Reorganization Agreement, and as an inducement to it to do so, the Stockholder
has agreed for the benefit of BMC as set forth in this Agreement; and
WHEREAS, the Board of Directors of BGS has approved the Stockholder's
entering into this Agreement, the form of this Agreement and the transactions
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereby agree as follows (terms defined in the Reorganization Agreement and used
but not defined herein having the meanings assigned to such terms in the
Reorganization Agreement):
ARTICLE I
THE OPTION
Section 1.01. Grant of the Option. The Stockholder hereby grants to BMC an
irrevocable option (the "Option") to purchase, on the terms and subject to the
conditions set forth herein, at a per share exercise price of $45.00 (the
"Exercise Price"), all Stockholder Shares, together with (i) any additional
shares of capital stock of BGS or any securities or other property that the
Stockholder is or becomes entitled to receive from BGS by reason of being a
record holder of such number of Stockholder Shares, (ii) any capital stock,
securities or other property into which any such number of Stockholder Shares
shall have been or shall be converted or changed, whether by amendment to the
Articles of Organization of BGS, merger, consolidation, reorganization, capital
change or otherwise, (iii) any additional BGS Common Stock acquired by the
Stockholder as the result of the Stockholder's exercising an option, warrant or
other right to acquire shares of capital stock from BGS issued with respect to
such number of Stockholder Shares (all of the foregoing hereinafter collectively
referred to as the "Additional Stockholder Shares"), and (iv) any shares of
capital stock, securities or property referred to in clauses (i), (ii), and
(iii) above that are issued or issuable in respect of Additional Stockholder
Shares (such Stockholder Shares, the Additional Stockholder Shares and any
shares, securities or property referred to in clause (iv) above being
collectively referred to herein as the "Option Shares").
Section 1.02. Exercise of the Option.
(a) Subject to the conditions set forth in Section 1.03, the Option may be
exercised in whole at any time, and in part from time to time, after the
occurrence of a Triggering Event but prior to the Termination Date.
(b) For purposes hereof, a "Triggering Event" means (A) the termination of
the Reorganization Agreement pursuant to Section 6.1.2, because of the breach by
BGS of Sections 4.2.1., 4.2.2., 4.2.4., 4.3.4., 4.3.6.1., 4.3.6.2., 4.3.7.,
4.3.8., 4.3.9 or 4.3.12., the effect of which in each case would reasonably
jeopardize the Merger, or pursuant to Section 6.1.5 thereof, or (B) the failure
of the holders of two-thirds of the outstanding shares of BGS Common Stock to
approve the Merger after the public announcement of, or the disclosure to the
Board of Directors of BGS of, a BGS Transaction Proposal.
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For purposes hereof, the "Termination Date" means the first to occur of (1)
the Effective Time of the Merger, (2) forty-five (45) days after the occurrence
of a Triggering Event and (3) the date the Reorganization Agreement is
terminated without giving rise to a Triggering Event.
(c) In the event BMC wishes to exercise the Option, BMC will send a written
notice to the Stockholder specifying a place, date (not less than two business
days nor more than 10 calendar days after the date such notice is given) and
time for the closing of the purchase of such Option Shares (the "Closing").
(d) The purchase price payable to the Stockholder with respect to any
exercise of the Option will be the product of (i) the Exercise Price and (ii)
the number of Option Shares to be purchased upon such exercise.
(e) In the event of any change in the number of issued and outstanding
shares of BGS Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, conversion, exchange of shares or other change in
the corporate or capital structure of BGS, the number and kind of shares subject
to the Option and the Exercise Price shall be adjusted appropriately. If, on or
after the date hereof, BGS should declare or pay any cash or stock dividend
(other than ordinary quarterly cash dividends as provided in the Reorganization
Agreement) or other distribution or issue any rights with respect to the BGS
Common Stock, payable or distributable to stockholders of record on a date prior
to the transfer to the name of BMC or its nominee on BGS's stock transfer books
of the Option Shares, and the Option is exercised, then (a) the exercise price
per Option Share will be reduced by the amount of any such cash dividend or cash
distribution, and (b) the whole of any such non-cash dividends, distribution or
right which would have been payable with respect to each Option Share purchased
by BMC if such shares were outstanding on the record date for such distribution
will be promptly remitted and transferred by the Stockholder to BMC. Upon
exercise of the Option, to the extent consistent with law, pending such
remittance, BMC will be entitled to all rights and privileges as owner of any
such non-cash dividend, distribution or right with respect to each Option Share
purchased.
Section 1.03. Closing.
(a) At the Closing, the Stockholder will deliver to BMC a certificate or
certificates representing the Option Shares being purchased, duly endorsed for
transfer or accompanied by appropriate stock powers duly executed in blank, and
BMC will pay the purchase price in immediately available funds by wire transfer
to an account designated by the Stockholder. Transfer taxes, if any, imposed as
a result of the exercise of the Option and the transfer of any Option Shares
will be paid by the Stockholder.
(b) The obligations of BMC and the Stockholder to consummate the purchase
and sale of the Option Shares pursuant to this Article I will be subject to the
fulfillment of the following conditions:
(i) The expiration or termination of the waiting period applicable to
the consummation of such transactions under the HSR Act; and
(ii) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the
consummation of such transactions.
Each of the parties will promptly make and will use all reasonable efforts to
cause each of their respective affiliates to make, all such filings and take all
such actions as may be reasonably required in order to permit the lawful
exercise of the Option, as promptly as possible. The date of any Closing may be
extended, if required, to the next business day following (1) the date that any
applicable waiting period under the HSR Act shall have expired or been earlier
terminated (but not beyond sixty (60) days after such date of Closing unless BGS
shall not have complied with its obligations under the Reorganization Agreement
with respect thereto), (2) the date that all other necessary governmental
approvals for the sale of the Option Shares for which the Option shall have been
exercised shall have been obtained, and (3) the satisfaction of any other
condition to the Closing; provided that any delay pursuant to clauses (2) or (3)
shall not exceed 10 business days.
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ARTICLE II
COVENANTS OF THE STOCKHOLDER
Section 2.01. Agreement to Vote. At any meeting of the stockholders of BGS
held prior to the Termination Date, however called, and at every adjournment or
postponement thereof prior to the Termination Date, or in connection with any
written consent of the stockholders of BGS given prior to the Termination Date,
the Stockholder shall vote or cause to be voted the Stockholder Shares in favor
of the approval of the Merger and each of the other transactions contemplated by
the Reorganization Agreement and in favor of the approval and adoption of the
Reorganization Agreement, and any actions required in furtherance hereof and
thereof. The Stockholder hereby grants BMC an irrevocable proxy coupled with an
interest to vote the Stockholder Shares in favor of the Merger and each of the
other transactions contemplated by the Reorganization Agreement and in favor of
the approval and adoption of the Reorganization Agreement, and any actions
required in furtherance hereof and thereof. The Stockholder shall not enter into
any agreement or understanding with any person other than BMC prior to the
Termination Date, directly or indirectly, to vote, grant any proxy or give
instructions with respect to the voting of the Stockholder Shares in any manner
inconsistent with the preceding two sentences.
Section 2.02. Proxies and Voting Agreements. Except as described in Section
2.01, the Stockholder hereby revokes any and all previous proxies granted with
respect to matters set forth in Section 2.01. Prior to the Termination Date, the
Stockholder shall not, directly or indirectly, except as contemplated hereby,
grant any proxies or powers of attorney with respect to matters set forth in
Section 2.01, deposit any of the Stockholder Shares or enter into a voting
agreement with respect to any of the Stockholder Shares.
Section 2.03. No Solicitation.
(a) From and after the date hereof until the Termination Date, the
Stockholder will not, and will not authorize or permit any of its officers,
directors, employees, partners, agents, affiliates or other representatives
(collectively, "Stockholder Representatives") to, directly or indirectly,
solicit or encourage (including by way of providing information) any prospective
acquiror or the invitation or submission of any inquiries, proposals or offers
or any other efforts or attempts that constitute, or may reasonably be expected
to lead to, a BGS Transaction Proposal.
(b) The Stockholder shall immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by the Stockholder or any
Stockholder Representatives with respect to any BGS Transaction Proposal
existing on the date hereof.
(c) Prior to the Termination Date, the Stockholder will promptly notify BMC
of any requests for information made to the Stockholder or any Stockholder
Representative or the receipt of any BGS Transaction Proposal made to the
Stockholder or any Stockholder Representative, including the identity of the
person or group engaging in such discussions or negotiations, requesting such
information or making such BGS Transaction Proposal, and the material terms and
conditions of any BGS Transaction Proposal.
(d) Prior to the Termination Date, the Stockholder shall not enter into any
agreement with any person that provides for, or in any way facilitates, a BGS
Transaction Proposal.
(e) The provisions of this Section 2.03 do not prohibit any Stockholder
Representative who is also a BGS director from taking actions permitted by
Section 4.3.6.1 of the Reorganization Agreement.
Section 2.04. Transfer of Option Shares by the Stockholder. Prior to the
Termination Date, the Stockholder shall not (a) subject any of the Option Shares
to, or suffer to exist on any of the Option Shares, any lien, pledge, security
interest, charge or other encumbrance or restriction, other than pursuant to
this Agreement, or (b) sell, transfer, assign, convey or otherwise dispose of
any of the Option Shares (including any such action by operation of law), other
than a disposition by operation of law pursuant to the Merger. Prior to the
record date for the BGS stockholder meeting to vote on the Reorganization
Agreement, the Stockholder will not sell, transfer, assign, convey or otherwise
dispose of any of the Stockholder Shares (including any such action by operation
of law).
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Section 2.05. Other Actions. Prior to the Termination Date, the Stockholder
shall not take any action that would in any way restrict, limit, impede or
interfere with the performance of its obligations hereunder or the transactions
contemplated hereby or by the Reorganization Agreement.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
OF THE STOCKHOLDER
The Stockholder represents, warrants and covenants to BMC that:
Section 3.01. Ownership. The Stockholder is as of the date hereof the
beneficial and record owner of the Stockholder Shares, the Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other lien, pledge, security interest, charge or other
encumbrance or restriction pertaining to the Stockholder Shares, none of the
Stockholder Shares is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting of the Stockholder Shares,
and no proxy, power of attorney or other authorization has been granted with
respect to any of the Stockholder Shares. Upon delivery of any Option Shares
upon exercise of the Option, BMC will acquire good title to such shares, free
and clear of all liens, pledges, security interests, charges or other
encumbrances or restrictions.
Section 3.02. Authority and Non-Contravention. The Stockholder is a
. The Stockholder has the right, power and authority, and the
Stockholder has been duly authorized by all necessary action (including
consultation, approval or other action by or with any other person), to execute,
deliver and perform this Agreement and consummate the transactions contemplated
hereby.
Such actions by the Stockholder (a) require no action by or in respect of,
or filing with, any governmental entity with respect to the Stockholder, other
than any required filings under the Exchange Act or under the HSR Act, and (b)
do not and will not contravene or constitute a default under any provisions of
applicable law or regulation or any agreement, judgment, injunction, order,
decree or other instrument binding on the Stockholder result in the imposition
of any lien, pledge, security interest, charge or other encumbrance or
restriction on any of the Stockholder Shares (other than as provided in this
Agreement with respect to Stockholder Shares).
Section 3.03. Binding Effect. This Agreement has been duly executed and
delivered by the Stockholder and is the valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally and by equitable
principles to which the remedies of specific performance and injunctive and
similar forms of relief are subject.
Section 3.04. Total Shares. The Stockholder Shares are the only shares of
capital stock of BGS owned beneficially or of record as of the date hereof by
the Stockholder, and the Stockholder does not have any option to purchase or
right to subscribe for or otherwise acquire any securities of BGS and has no
other interest in or voting rights with respect to any other securities of BGS.
Section 3.05. Finder's Fees. No investment banker, broker or finder is
entitled to a commission or fee from BGS, BMC or Merger Sub in respect of this
Agreement based upon any arrangement or agreement made by or on behalf of the
Stockholder, except as otherwise provided in the Reorganization Agreement.
Section 3.06. Reasonable Efforts. Prior to the Termination Date, the
Stockholder shall use reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with BMC in
doing, all things necessary, proper or advisable to consummate and make
effective the Merger and the other transactions contemplated by the
Reorganization Agreement and this Agreement.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BMC
BMC represents, warrants and covenants to the Stockholder that:
Section 4.01. Corporate Power and Authority. BMC has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance by BMC to this
Agreement and the consummation by BMC of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of BMC.
Section 4.02. Binding Effect. This Agreement has been duly executed and
delivered by BMC and is a valid and binding agreement of BMC, enforceable
against BMC in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally and by equitable principles to which the remedies of
specific performance and injunctive and similar forms of relief are subject.
ARTICLE V
MISCELLANEOUS
Section 5.01. Expenses. Each party hereto shall pay its own expenses
incident to preparing for entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
Section 5.02. Further Assurances. From time to time, at the request of the
other party, each party shall execute and deliver or cause to be executed and
delivered such additional documents and instruments and take all such further
action as may be necessary or desirable to consummate the transactions
contemplated by this Agreement.
Section 5.03. Specific Performance. The Stockholder agrees that BMC would
be irreparably damaged if for any reason the Stockholder fails to perform any of
the Stockholder's obligations under this Agreement, and that BMC would not have
an adequate remedy at law for money damages in such event. Accordingly, BMC
shall be entitled to seek specific performance and injunctive and other
equitable relief to enforce the performance of this agreement by the Stockholder
without any requirement for the securing or posting of any bond. This provision
is without prejudice to any other rights that BMC may have against the
Stockholder for any failure to perform its obligations under this Agreement.
Section 5.04. Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder.
(a) if to BMC or Merger Sub, to:
BMC
2101 Citywest Blvd.
Houston, Texas 77042-2627
Attention: M. Brinkley Morse
Facsimile: 713/918-8000
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002
Attention: John S. Watson
Facsimile: 713/615-5236
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<PAGE> 101
(b) if to Stockholder, to:
---------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attention: Steven N. Farber
Facsimile: 617/227-4420
Section 5.05. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the work "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." Unless the context otherwise requires, "or" is disjunctive but not
necessarily exclusive, and words in the singular include the plural and in the
plural include the singular. The term "person" is to be interpreted broadly to
include any corporation, partnership, trust, limited liability company,
government or other entity and any group (as used with respect to Section 13(d)
of the Exchange Act).
Section 5.06. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
Section 5.07. Entire Agreement; No Third Party Beneficiaries. This
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereto and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 5.08. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of The Commonwealth of Massachusetts, without giving
effect to the principles of conflicts of law thereof.
Section 5.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) except to the partners of the
Stockholder as permitted herein without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.
Section 5.10. Amendments; Terminations. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
Section 5.11. Certain Events. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Stockholder Shares
beneficially owned by such Stockholder and shall be binding upon any person to
which legal or beneficial ownership of such shares shall pass, whether by
operation of law or otherwise.
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<PAGE> 102
IN WITNESS WHEREOF, BMC and the Stockholder have caused this Agreement to
be duly executed as of the day and year first above written.
STOCKHOLDER:
------------------------------------
By:
------------------------------------
Name:
Title:
BMC:
BMC SOFTWARE, INC.
By:
------------------------------------
Name:
Title:
B-8
<PAGE> 103
APPENDIX C
OPINION OF BROADVIEW ASSOCIATES L.L.C.
C-1
<PAGE> 104
JANUARY 31, 1998
CONFIDENTIAL
Board of Directors
BGS Systems, Inc.
One First Avenue
Waltham, MA 02254
Dear Members of the Board:
We understand that BGS Systems, Inc. ("BGS"), BMC Software, Inc. ("BMC")
and BMC Acquisition Corp., a wholly owned subsidiary of BMC, (the "Merger Sub")
propose to enter into an Agreement and Plan of Reorganization (the "Agreement")
pursuant to which, through the merger of the Merger Sub with and into BGS (the
"Merger"), each share of BGS common stock, $0.10 par value per share ("BGS
Common Stock"), shall be converted into the right to receive that number of
shares of BMC common stock, $0.01 par value per share ("BMC Common Stock") equal
to the Exchange Ratio (as defined below) (the "Consideration"). The Exchange
Ratio is equal to the quotient of $45.00 divided by the average of the closing
sale prices of BMC Common Stock, rounded to the nearest thousandth, as reported
by the Nasdaq National Market on each of the last ten consecutive trading days
ending on the third trading day prior to the meeting of BGS stockholders held
for the purpose of approving the Merger. The transaction is intended to be a
tax-free reorganization within the meaning of section 368(a) of the United
States Internal Revenue Code of 1986, as amended, and to be accounted for as a
pooling of interests pursuant to Opinion No. 16 of the Accounting Principles
Board. The terms and conditions of the above described Merger are more fully
detailed in the Agreement.
You have requested our opinion as to whether the Consideration to be
received by BGS stockholders in the Merger is fair, from a financial point of
view, to BGS stockholders.
Broadview Associates focuses on providing merger and acquisition advisory
services to information technology ("IT") companies. In this capacity, we are
continually engaged in valuing such businesses, and we maintain an extensive
database of IT mergers and acquisitions for comparative purposes. We are
currently acting as financial advisor to BGS' Board of Directors and will
receive a fee from BGS upon the successful conclusion of the Merger.
IN RENDERING OUR OPINION, WE HAVE, AMONG OTHER THINGS:
1.) reviewed the terms of the Agreement and the associated exhibits
thereto in the form of the draft dated January 29, 1998 furnished to us by
Palmer & Dodge on January 30, 1998 (which, for the purposes of this
opinion, we have assumed, with your permission, to be identical in all
material respects to the agreement to be executed);
2.) reviewed BGS' annual report and Form 10-K for the fiscal years
ended January 31, 1997 and 1996, including the audited financial statements
included therein, and BGS' Form 10-Q for the nine months ended October 31,
1997, including the unaudited financial statements included therein;
3.) reviewed certain internal financial and operating information
relating to BGS prepared by BGS management;
4.) participated in discussions with BGS management concerning the
operations, business strategy, financial performance and prospects for BGS;
5.) reviewed the recent reported closing prices and trading activity
for BGS Common Stock;
6.) compared certain aspects of the financial performance of BGS with
public companies we deemed comparable;
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<PAGE> 105
7.) analyzed available information, both public and private,
concerning other mergers and acquisitions we believe to be comparable in
whole or in part to the Merger;
8.) reviewed BMC's annual report and Form 10-K for the fiscal year
ended March 31, 1997, including the audited financial statements included
therein, BMC's Form 10-Q for the six months ended September 30, 1997,
including the unaudited financial statements included therein, and BMC's
unaudited financial information for the nine month period ended December
31, 1997 included in a BMC press release dated January 22, 1998;
9.) participated in discussions with BMC management concerning the
operations, business strategy, financial performance and prospects for BMC;
10.) reviewed the recent reported closing prices and trading activity
for BMC Common Stock;
11.) discussed with BMC management its view of the strategic rationale
for the Merger;
12.) considered the total number of shares of BMC Common Stock
outstanding and the average weekly trading volume of BMC Common Stock;
13.) reviewed recent equity analyst reports covering BMC;
14.) analyzed the anticipated effect of the Merger on the future
financial performance of the consolidated entity;
15.) assisted in negotiations and discussions related to the Merger
among BMC, BGS and their financial and legal advisors; and
16.) conducted other financial studies, analyses and investigations as
we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by BGS, BMC or
BMC's financial advisor. With respect to the financial information examined by
us, we have assumed that it was reasonably prepared and reflected the best
available information and good faith judgments of the management of BGS as to
the performance of BGS. We have neither made nor obtained an independent
appraisal or valuation of any of BGS' assets.
Based upon and subject to the foregoing, we are of the opinion that the
Consideration to be received by BGS stockholders in the Merger is fair, from a
financial point of view, to BGS stockholders.
Our opinion is necessarily based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date of this opinion,
and any change in such conditions may impact this opinion. We express no opinion
as to the price at which BMC Common Stock will trade at any time.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of BGS in connection
with its consideration of the Merger and does not constitute a recommendation to
any BGS stockholder as to how such stockholder should vote on the Merger. This
opinion may not be published or referred to, in whole or part, without our prior
written permission, which shall not be unreasonably withheld. Broadview
Associates hereby consents to references to and the inclusion of this opinion in
its entirety in the Proxy Statement/Prospectus to be distributed to BGS
stockholders in connection with the Merger.
Sincerely,
Broadview Associates LLC
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<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, Article SEVENTH of
BMC's Restated Certificate of Incorporation, Sections 1 and 2 or Article VI of
BMC's bylaws, as amended, and indemnification agreements entered into by BMC
with its directors provide for the indemnification of officers, directors,
employees and agents under certain circumstances.
Set forth below is Article SEVENTH of BMC's Restated Certificate of
Incorporation pertaining to indemnification of officers, directors, employees
and agents and insurance:
SEVENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for such liability as is expressly not
subject to limitation under the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended to further limit
or eliminate such liability. Moreover, the Corporation shall, to the
fullest extent permitted by law, indemnify any and all officers and
directors of the Corporation, and may, to the fullest extent permitted by
law, indemnify any and all officers and directors of the Corporation, and
may, to the fullest extent permitted by law or to such lesser extent as is
determined in the discretion of the Board of Directors, indemnify any and
all other persons whom it shall have power to indemnify, from and against
all expenses, liabilities or other matters arising out of their status as
such or their acts, omissions or services rendered in such capacities. The
Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability.
Set forth below are Sections 1 and 2 of Article VI of BMC's bylaws, as
amended:
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she or a person of whom he or she is the legal representative, is or was
or has agreed to become a director or officer of the Corporation or is or
was serving or has agreed to serve at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director or
officer or in any other capacity while serving or having agreed to serve as
a director or officer, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said
law permitted the corporation to provide prior to such amendment), against
all expense, liability and loss (including, without limitation, attorneys
fees, judgements, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a
person who has ceased to serve in the capacity which initially entitled
such person to indemnify hereunder and shall inure to the benefit of his or
her heirs, executors, and administrators; provided, however, that the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person if
such proceeding (or part thereof) was authorized by the board of directors
of the Corporation. The right to indemnification conferred in this Article
VI shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that if the Delaware
General Corporation Law requires, the payment of
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<PAGE> 107
such expenses incurred by a current, former or proposed director or officer
in his or her capacity as a director or officer or proposed director or
officer (and not in any other capacity in which service was or is or has
been agreed to be rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
indemnified person, to repay all amounts so advanced if it shall ultimately
be determined that such indemnified person is not entitled to be
indemnified under this Section or otherwise.
SECTION 2. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation, individually or as a group, with
the same scope and effect as the indemnification of directors and officers
provided for in this Article.
In addition, BMC has entered into indemnification agreements with its
directors, pursuant to which BMC has agreed to indemnify such directors in
accordance with, and to the fullest extent permitted by, the Delaware General
Corporation Law, against any and all expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the indemnitee in connection
with any proceeding in which the indemnitee was or is made a party or was or is
involved by reason of the fact that the indemnitee is or was a director.
BMC has also purchased liability insurance policies covering directors and
officers of BMC.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 -- Agreement and Plan of Reorganization dated as of January
31, 1998 by and among BMC Software, Inc., Ranger
Acquisition Corp. and BGS Systems, Inc. (included as
Appendix A to the Proxy Statement/Prospectus).
2.2 -- Form of Stockholder Agreement between BMC and certain
stockholders of BGS (included as Appendix B to the Proxy
Statement/Prospectus).
3.1 -- Restated Certificate of Incorporation of BMC
(incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-22892)).
3.2 -- Certificate of Amendment of Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year
ended March 31, 1997).
3.3 -- BMC By-Laws, as amended (incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-22892)).
4.1 -- Rights Agreement dated as of May 8, 1995 between the
Registrant and Bank Boston N.A. (incorporated by
reference to Exhibit 1 to the Registrant's Registration
Statement on Form 8-A dated May 10, 1995).
4.2 -- Amendment to Rights Agreement dated as of April 27, 1997
(incorporated by reference to Exhibit 4.3 to the
Registrant's Annual Report on Form 10-K for the year
ended March 31, 1997).
5.1 -- Opinion of Vinson & Elkins L.L.P. regarding the legality
of the securities.
8.1 -- Opinion of Vinson & Elkins L.L.P. regarding tax matters.
8.2 -- Opinion of Palmer & Dodge LLP regarding tax matters.
23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit
5.1).
23.2 -- Consent of Palmer & Dodge LLP (set forth in Exhibit 8.2).
23.3 -- Consent of Arthur Andersen LLP (BMC).
</TABLE>
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<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
23.4 -- Consent of Ernst & Young LLP (BGS).
23.5 -- Consent of Broadview Associates L.L.C.
24.1 -- Powers of Attorney (set forth on signature page).
99.1 -- Form of BGS Proxy.
</TABLE>
Financial Statement Schedules:
The Financial Statement Schedules have previously been filed as part of
BMC's Form 10-K for the fiscal year ended March 31, 1997.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request;
(6) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the
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<PAGE> 109
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form;
(7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and BMC being acquired involved therein, that was not
the subject of and included in the Registration Statement when it became
effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Houston, Texas, on the
13th day of February, 1998.
BMC SOFTWARE, INC.
By: /s/ M. BRINKLEY MORSE
----------------------------------
M. Brinkley Morse
Vice President, General Counsel
and Secretary
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
immediately below constitutes and appoints Max P. Watson, Jr. and M. Brinkley
Morse, or either or them, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MAX P. WATSON, JR. Chairman of the Board, February 13, 1998
- ----------------------------------------------------- President and Chief
Max P. Watson, Jr. Executive Officer (Principal
Executive Officer
/s/ WILLIAM M. AUSTIN (Principal Financial February 13, 1998
- ----------------------------------------------------- Officer)
William M. Austin
/s/ KEVIN M. KLAUSMEYER (Principal Accounting February 13, 1998
- ----------------------------------------------------- Officer)
Kevin M. Klausmeyer
/s/ JOHN W. BARTER Director February 13, 1998
- -----------------------------------------------------
John W. Barter
/s/ B. GARLAND CUPP Director February 13, 1998
- -----------------------------------------------------
B. Garland Cupp
/s/ MELDON K. GAFNER Director February 13, 1998
- -----------------------------------------------------
Meldon K. Gafner
/s/ LEW W. GRAY Director February 13, 1998
- -----------------------------------------------------
Lew W. Gray
</TABLE>
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<PAGE> 111
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ----------------------------------- --------------------
<C> <S> <C>
/s/ GEORGE F. RAYMOND Director February 13, 1998
- ------------------------------------------------------
George F. Raymond
/s/ TOM C. TINSLEY Director February 13, 1998
- ------------------------------------------------------
Tom C. Tinsley
</TABLE>
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<PAGE> 112
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NUMBER
------- ----------------------- ------
<C> <S> <C>
2.1 -- Agreement and Plan of Reorganization dated as of January
31, 1998 by and among BMC Software, Inc., Ranger
Acquisition Corp. and BGS Systems, Inc. (included as
Appendix A to the Proxy Statement/Prospectus)
2.2 -- Form of Stockholder Agreement between BMC and certain
stockholders of BGS (included as Appendix B to the Proxy
Statement/Prospectus)
3.1 -- Restated Certificate of Incorporation of BMC
(incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-22892))
3.2 -- Certificate of Amendment of Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year
ended March 31, 1997)
3.3 -- BMC By-Laws, as amended (incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-22892))
4.1 -- Rights Agreement dated as of May 8, 1995 between the
Registrant and Bank Boston N.A. (incorporated by
reference to Exhibit 1 to the Registrant's Registration
Statement on Form 8-A dated May 10, 1995)
4.2 -- Amendment to Rights Agreement dated as of April 27, 1997
(incorporated by reference to Exhibit 4.3 to the
Registrant's Annual Report on Form 10-K for the year
ended March 31, 1997)
5.1 -- Opinion of Vinson & Elkins L.L.P. regarding the legality
of the securities
8.1 -- Opinion of Vinson & Elkins L.L.P. regarding tax matters
8.2 -- Opinion of Palmer & Dodge LLP regarding tax matters
23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit
5.1)
23.2 -- Consent of Palmer & Dodge LLP (set forth in Exhibit 8.2)
23.3 -- Consent of Arthur Andersen LLP (BMC)
23.4 -- Consent of Ernst & Young LLP (BGS)
23.5 -- Consent of Broadview Associates L.L.C.
24.1 -- Powers of Attorney (set forth on signature page)
99.1 -- Form of BGS Proxy
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[VINSON & ELKINS LETTERHEAD]
February 13, 1998
BMC Software, Inc.
2101 City West Blvd.
Houston, TX 77042
Ladies and Gentlemen:
We acted as counsel for BMC Software, Inc., a Delaware corporation
("BMC"), in connection with BMC's Form S-4 registration statement (the
"Registration Statement") relating to the offering, issuance and sale of shares
(the "Shares") of BMC's common stock, par value $.01 per share, pursuant to the
proposed merger of Ranger Acquisition Corp., a Massachusetts corporation and
wholly owned subsidiary of BMC, with and into BGS Systems, Inc., a
Massachusetts corporation.
Before rendering our opinion, we examined certain of the corporate
records of BMC, including its Restated Certificate of Incorporation (as
amended), certain resolutions of the Board of Directors of BMC, the
Registration Statement and the exhibits thereto and such certificates of
corporate officers of BMC and governmental officials as we deemed necessary for
the purposes of this opinion. As to matters of fact relevant to the opinions
expressed herein, and as to factual matters arising in connection with our
examination of the above described documents, we relied upon certificates and
other communications of corporate officers of BMC and governmental officials
without further investigation as to the facts set forth therein. We are
rendering this opinion as of the effective date of the Registration Statement.
Based upon the foregoing, we are of the opinion that the Shares have
been validly authorized for issuance and, upon issuance as described in the
Registration Statement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement. By giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission issued thereunder. For purposes of the
foregoing opinions, we assumed that the Shares will be offered, issued and sold
in compliance with all applicable state securities or Blue Sky laws.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE> 1
[VINSON & ELKINS L.L.P. LETTERHEAD]
EXHIBIT 8.1
(713) 758-1050 (713) 615-5774
February 13, 1998
BMC Software, Inc.
2101 City West Blvd.
Houston, Texas 77042-2427
Gentlemen:
You have requested our opinion regarding certain income tax
consequences under the Internal Revenue Code of 1986, as amended (the "Code")
of the proposed merger (the "Merger") of Ranger Acquisition Corp. ("Merger
Sub"), a direct, wholly owned subsidiary of BMC Software, Inc. ("BMC"), with
and into BGS Systems, Inc. ("BGS") pursuant to the Agreement and Plan of
Reorganization, and the related Plan and Agreement of Merger, each dated as of
January 31, 1998 (together, the "Merger Agreement").--1
Our opinion is based upon (i) the Merger Agreement, (ii) the facts set
forth in the Registration Statement filed with the Securities and Exchange
Commission with respect to the Merger (the "Registration Statement"), (iii) the
representations as to the existence of certain facts set forth in Officer's
Certificates of BMC dated February 13, 1998 (the "Representations"), and (iv)
current provisions of the Code, existing regulations thereunder, current
administrative rulings of the Internal Revenue Service and court decisions.
Based thereupon, and conditioned upon our understanding that the transactions
contemplated by the Merger Agreement will be carried out strictly in accordance
with the terms of the Merger Agreement and that there are no other relevant
agreements, arrangements, or understandings among any of BMC, Merger Sub, BGS
or the stockholders of BGS other than those described or referenced in the
Merger Agreement or the Registration Statement, it is our opinion that:
(i) the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of section 368(a) of
the Code;
(ii) each of BMC, Merger Sub and BGS will be a party to
the reorganization within the meaning of section 368(b) of the Code;
and
__________________________________
1--Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement.
<PAGE> 2
BMC Software, Inc.
Page 2
February 13, 1998
(iii) no gain or loss will be recognized by BMC, Merger Sub
or BGS by reason of the Merger.
In addition, in our opinion the description of the material federal
income tax consequences of the Merger set forth under the heading "The Merger
- -- Certain Federal Income Tax Consequences" in the Registration Statement is
accurate and complete in all material respects and such discussion represents
our opinion.
We express no opinion as to the tax treatment of the Merger under the
provisions of any other sections of the Code which also may be applicable
thereto or to the tax treatment of any conditions existing at the time of, or
effects resulting from, any transactions that are not specifically addressed in
the foregoing opinion.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our Firm under the headings "The Merger -- Certain Federal Income
Tax Consequences" and "Legal Matters" in the Registration Statement. In giving
such consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 8.2
PALMER & DODGE LLP
ONE BEACON STREET, BOSTON, MA 02108-3190
Telephone: (617) 573-0100 Facsimile: (617) 227-4420
February 13, 1998
BGS Systems, Inc.
One First Avenue
Waltham, Massachusetts 02254-9111
Re: Merger pursuant to Plan and Agreement of Merger by and between
Ranger Acquisition Corp., BMC Software, Inc. and
BGS Systems, Inc.
Ladies and Gentlemen:
This opinion is being rendered in connection with the filing this date
of a registration statement on Form S-4 (the "Registration Statement")
containing the Proxy Statement/Prospectus (the "Proxy Statement") relating to
the Agreement and Plan of Reorganization (the "Agreement"), dated as of January
31, 1998, by and among BMC Software, Inc. ("BMC"), a Delaware corporation,
Ranger Acquisition Corp. ("Merger Sub"), a Massachusetts corporation and a
wholly owned subsidiary of BMC, and BGS Systems, Inc. ("BGS"), a Massachusetts
corporation. Pursuant to the Agreement, Merger Sub will merge with and into
BGS in a transaction (the "Merger") in which BGS will continue as the surviving
corporation and a wholly owned subsidiary of BMC, and the separate corporate
existence of Merger Sub will cease. Capitalized terms not defined herein have
the meanings set forth in the Agreement.
In our capacity as counsel for BGS in the Merger and for purposes of
rendering this opinion, we have examined and relied upon (i) the Registration
Statement, (ii) the Agreement and the exhibits thereto and (iii) such other
documents as we have deemed necessary or appropriate in order to enable us to
render this opinion. In our examination of documents, we have assumed the
authenticity of original documents, the accuracy of copies, the genuineness of
signatures, and the legal capacity of signatories.
In rendering this opinion, we have assumed that all parties to the
Agreement and to any other documents examined by us have acted, and will act,
in accordance with the terms of such Agreement and documents and that the
Merger will be consummated at the Effective Time pursuant to the terms and
conditions set forth in the Agreement without the waiver or modification of any
such terms and conditions. In addition, we have assumed that BMC, Merger Sub
and BGS will deliver to us, prior to the date that the Proxy Statement is first
mailed to BGS stockholders, letters (the "Representation Letters") containing
such representations as we determine are necessary for our opinion, which
representations will be
<PAGE> 2
substantially similar to the representations that the Internal Revenue Service
customarily requires for advance rulings regarding reorganizations under
section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
We have further assumed that all representations contained in the Agreement and
to be made in the Representation Letters are, at the time they are made, and
will remain at all times through the Effective Time, true and complete in all
material respects and that we may rely on such representations at the time they
are made and at all times through the Effective Time. We have also assumed
that any representation in any of the documents referred to herein that is made
"to the best of the knowledge and belief" (or similar qualification) of any
person or party will be correct without such qualification and that, as to all
matters for which a person or entity has represented that such person or entity
is not a party to, does not have, or is not aware of, any plan, intention,
understanding, or agreement, there is no such plan, intention, understanding,
or agreement. We have not attempted to verify independently such
representations, but in the course of our due diligence with respect to the
delivery of this opinion, nothing has come to our attention that would cause us
to question the accuracy thereof.
Our opinion is based on existing provisions of the Code, Treasury
Regulations, judicial decisions, and rulings and other pronouncements of the
Internal Revenue Service (the "IRS") as in effect on the date of this opinion,
all of which are subject to change. No assurances can be given that a change
in the law on which our opinion is based will not occur prior to or after the
Effective Time or that such change will not affect the conclusions expressed
herein. We undertake no responsibility to advise you of developments in the
law after the Effective Time.
Our opinion is not binding upon either the IRS or any court. Thus, no
assurances can be given that a position taken in reliance on our opinion will
not be challenged by the IRS or rejected by a court.
This opinion addresses only the specific United States federal income
tax consequences of the Merger set forth below, and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use,
or other tax consequences that may result from the Merger or any other
transaction (including any transaction undertaken in connection with the
Merger). We express no opinion regarding the tax consequences of the Merger to
shareholders of BGS that are subject to special tax rules, and we express no
opinion regarding the tax consequences of the Merger to holders of options or
warrants to acquire BGS stock.
On the basis of, and subject to, the foregoing, and in reliance upon
the representations and assumptions described above, we are of the opinion
that:
1. The Merger will constitute a reorganization within the meaning
of section 368(a) of the Code.
2. BMC, Merger Sub and BGS will each be a party to the
reorganization within the meaning of section 368(b) of the Code.
<PAGE> 3
3. No gain or loss for U.S. federal income tax purposes will be
recognized by the holders of BGS Common Stock upon receipt of shares of BMC
Common Stock in the merger, except with respect to any cash received in lieu of
a fractional share interest in BMC Common Stock.
No opinion is expressed as to any federal income tax consequence of
the Merger except as specifically set forth herein, and this opinion may not be
relied upon except with respect to the consequences specifically discussed
herein.
This opinion is intended solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the use of our name under the
caption "Certain Federal Income Tax Consequences" in the Registration
Statement.
Very truly yours,
/s/ Palmer & Dodge LLP
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated May 2, 1997
included in BMC Software, Inc.'s Form 10-K for the year ended March 31, 1997 and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Houston, Texas
February 12, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) of BMC Software, Inc. and related Proxy
Statement/Prospectus of BGS Systems, Inc. and BMC Software, Inc. for the
registration of BMC Software, Inc.'s common stock and to the incorporation by
reference therein of our report dated March 20, 1997, with respect to the
consolidated financial statements and schedule of BGS Systems, Inc. included in
its Annual Report (Form 10-K) for the year ended January 31, 1997, filed with
the Securities and Exchange Commission.
/s/Ernst & Young LLP
Boston, Massachusetts
February 12, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF BROADVIEW ASSOCIATES L.L.C.
We hereby consent to the inclusion of our opinion letter dated January 31,
1998 to the Board of Directors of BGS Systems, Inc. as Appendix C to the Proxy
Statement/Prospectus which forms a part of the Registration Statement on Form
S-4 relating to the proposed merger of Ranger Acquisition Corp., a wholly owned
subsidiary of BMC Software, Inc., with and into BGS Systems, Inc. and to the
references to us and to such opinion in the Proxy Statement/Prospectus.
Broadview Associates L.L.C.
By: /s/ STEPHEN J. O'LEARY
----------------------------------
Name: Stephen J. O'Leary
Title: Managing Director
<PAGE> 1
EXHIBIT 99.1
[Front Side of Proxy Card]
BGS SYSTEMS, INC.
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ______, _______, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Harold S. Schwenk, Jr.
and Jeffrey P. Buzen, and each of them, attorneys and proxies, with full power
of substitution, to act and vote in the name of the undersigned, with all
powers that the undersigned would possess if personally present, on all matters
which may come before the Special Meeting of Stockholders of BGS Systems, Inc.
("BGS") to be held at __________________________________________, at __:00
A.M., local time, on ___________________, 1998, and at any adjournment or
postponement thereof.
The proxies are hereby authorized and instructed upon the matters
specified in the Notice of Special Meeting as set forth on the reverse side
hereof. THE PROXIES MAY VOTE IN THEIR DISCRETION ON ANY OTHER MATTER WHICH MAY
PROPERLY COME BEFORE THE SPECIAL MEETING.
Receipt of the notice of meeting and Proxy Statement/Prospectus dated
_________________, 1998 related to the Special Meeting, is hereby acknowledged.
The undersigned hereby revokes any proxies heretofore given and directs
said attorneys to act or vote as follows:
(PLEASE DATE AND SIGN ON REVERSE SIDE)
<PAGE> 2
[Reverse Side of Proxy]
1. To approve the Agreement and Plan of Reorganization, and the
related Plan and Agreement of Merger, each dated as of January 31, 1998
(together, the "Merger Agreement") among BMC Software, Inc., Ranger Acquisition
Corp. and BGS Systems, Inc., as set forth in Appendix A attached to the proxy
statement/prospectus.
_____ FOR _____ AGAINST _____ ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon
such other business as may properly be brought before the meeting or any
adjournment or postponement thereof.
This proxy is solicited by the Board of Directors and will be voted in
accordance with the stockholder's specifications hereon. In the absence of
such specifications, the proxy will be voted FOR approval of the Merger
Agreement dated as of January 31, 1998.
Dated , 1998
-------------------
-----------------------------------------
-----------------------------------------
Signature of Stockholder(s)*
*Please sign exactly as name appears on
this proxy. Joint owners each should
sign. If held by a corporation or
partnership, please sign in the full
corporate or partnership name, by an
authorized corporate officer or, if a
partnership, by an authorized person.
When signing as an authorized officer or
person, attorney, trustee, administrator,
executor, etc., please indicate your
full title as such.
PLEASE MARK, DATE, SIGN AND RETURN YOUR PROXY PROMPTLY.
PLEASE DO NOT FOLD THIS PROXY.
