<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BMC SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7274 74-21226120
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
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M. BRINKLEY MORSE
SENIOR VICE PRESIDENT
BMC SOFTWARE, INC.
2101 CITYWEST BLVD. 2101 CITYWEST BLVD.
HOUSTON, TEXAS 77042-2827 HOUSTON, TX 77042-2827
(713) 918-8800 (713) 918-8800
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of telephone number, including area
registrant's principal executive offices) code, of agent for service)
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Copies to:
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JOHN S. WATSON KEITH A. FLAUM
VINSON & ELKINS L.L.P. COOLEY GODWARD LLP
2300 FIRST CITY TOWER FIVE PALO ALTO SQUARE
1001 FANNIN 3000 EL CAMINO REAL
HOUSTON, TEXAS 77002-6760 PALO ALTO, CA 94306-2155
(713) 758-2222 (650) 843-5000
</TABLE>
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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. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED(1) OFFERING PRICE(2) AMOUNT OF REGISTRATION FEE(3)
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Common stock, $0.01 par value............... $938,000,000 $260,764
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(1) Includes an equal number of rights under the Registrant's Rights Agreement.
(2) Represents the number of shares of common stock of the Registrant, which may
be issued to former stockholders of Boole & Babbage, Inc. ("Boole") pursuant
to the merger described herein.
(3) Each share of common stock of Boole will be converted into 0.675 of a share
of common stock of the Registrant pursuant to the merger described herein.
Pursuant to Rule 457(f)(1) under the Securities Act, the registration fee
has been calculated based on the average of the high and low prices per
share of the Boole common stock to be cancelled in the exchange as reported
on the Nasdaq National Market on November 11, 1998.
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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.
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<PAGE> 2
BOOLE & BABBAGE, INC.
SPECIAL MEETING OF STOCKHOLDERS
A MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
The Board of Directors of Boole & Babbage, Inc. has unanimously approved a
merger combining Boole and BMC Software, Inc. The two companies develop,
distribute and maintain software products that solve different types of
information systems problems of large organizations worldwide. Although the two
companies' product lines address distinctly different systems management
disciplines, these different disciplines are closely related and the companies'
product lines are complementary. Combining these products will provide the
foundation for the next generation of systems management tools for the IBM
mainframe and distributed systems platforms we both address today. The combined
company will also benefit from a broader direct sales and support network
worldwide and an increased reservoir of technical, support, sales and managerial
talent. As a result, we believe the combined company should be better positioned
to grow and to compete more effectively in the rapidly consolidating systems
management software industry.
You will be asked to adopt the merger agreement approved by the Board of
Directors at a special meeting of the stockholders to be held on December ,
1998 at a.m. at the principal executive offices of Boole located at 3131
Zanker Road, San Jose, California. The vote of a majority of the outstanding
shares of Boole common stock is required to adopt the merger agreement and
approve the merger.
If the merger is completed, holders of Boole common stock will receive
0.675 of a share of BMC common stock for each share of Boole common stock they
own. The value of BMC common stock to be received in the merger will be the
market value of BMC common stock when the merger occurs.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO
STOCKHOLDERS AND IS IN YOUR BEST INTERESTS. THE BOARD OF DIRECTORS THEREFORE
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO ADOPT THE MERGER AGREEMENT AND
APPROVE THE MERGER.
This Proxy Statement/Prospectus provides you with detailed information
about the proposed merger. In addition, you may obtain other information about
Boole and BMC from documents filed with the Securities and Exchange Commission.
We encourage you to read this entire document carefully.
Whether or not you plan to attend the special meeting, if you are a holder
of Boole common stock please take the time to vote by completing and mailing the
enclosed proxy card to us. If you sign, date and mail your proxy card without
indicating how you wish to vote, your proxy will be counted as a vote in favor
of the adoption of the merger agreement and approval of the merger. If you fail
to return your card, the effect will be a vote against adoption of the merger
agreement and approval of the merger. YOUR VOTE IS VERY IMPORTANT.
ON BEHALF OF THE BOARD OF DIRECTORS OF BOOLE, WE URGE YOU TO VOTE "FOR"
ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
[Signature]
FRANKLIN P. JOHNSON, JR.
Chairman of the Board
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE BMC COMMON STOCK TO BE ISSUED IN THE MERGER OR
DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proxy Statement/Prospectus dated , 1998, and first mailed to
stockholders on , 1998.
<PAGE> 3
BOOLE & BABBAGE, INC.
3131 ZANKER ROAD
SAN JOSE, CALIFORNIA 95134-1933
(408) 526-3000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER , 1998
To the stockholders of Boole & Babbage, Inc.:
A special meeting of stockholders of Boole & Babbage, Inc., a Delaware
corporation ("Boole"), will be held on December , 1998 at :00 a.m., local
time, at the principal executive offices of Boole located at 3131 Zanker Road,
San Jose, California, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Reorganization, and the related Plan and Agreement of Merger, each
dated as of October 31, 1998, among BMC Software, Inc., a Delaware
corporation ("BMC"), Ranger Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of BMC ("Merger Sub"), and Boole. Pursuant to the
merger agreement, Merger Sub will be merged with and into Boole, Boole will
become a wholly owned subsidiary of BMC and, among other things, each share
of common stock, par value $.001 per share, of Boole outstanding
immediately prior to the effective time of the merger will be converted
into 0.675 of a share of common stock, par value $.01 per share, of BMC,
all as more fully described in the materials that follow this notice; and
2. To transact such other business as may properly come before the
special meeting or any adjournment thereof.
The Board of Directors of Boole has fixed the close of business on November
23, 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 Boole common stock at the close of business on
the record date are entitled to notice of, and to vote at, the special meeting.
Because the Boole common stock is quoted for trading on the Nasdaq National
Market, holders of Boole common stock are not entitled to any appraisal or
dissenters' rights under the Delaware General Corporation Law (the "DGCL") in
respect of the merger.
YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY
OF THE OUTSTANDING SHARES OF BOOLE COMMON STOCK IS REQUIRED FOR ADOPTION OF THE
MERGER AGREEMENT AND APPROVAL OF THE MERGER. EVEN IF YOU PLAN TO ATTEND THE
SPECIAL MEETING IN PERSON, WE REQUEST THAT YOU SIGN AND RETURN THE ENCLOSED
PROXY OR VOTING INSTRUCTION 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,
Arthur F. Knapp, Jr.
Secretary
San Jose, California
, 1998
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TABLE OF CONTENTS
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PAGE
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SUMMARY................................... 1
The Companies........................... 3
The Special Meeting..................... 3
Required Vote........................... 3
Record Date and Voting Power............ 3
Share Ownership of Management........... 3
Comparative Per Common Share Market
Price Information..................... 3
No Appraisal Rights..................... 4
Boole's Recommendation to You........... 4
Reasons for the Merger.................. 4
Opinion of Boole's Financial Advisor.... 4
Interests of Boole's Officers and
Directors in the Merger............... 4
Risk Factors............................ 5
Conditions to the Merger................ 5
No Solicitation......................... 5
Termination of the Merger Agreement..... 5
Termination Fee......................... 5
Stock Option Agreement.................. 6
Anticipated Accounting Treatment........ 6
Forward-Looking Statements.............. 6
Market Price and Dividend Data.......... 7
BMC Selected Historical Consolidated
Financial Information................. 8
Boole Selected Historical Consolidated
Financial Information................. 9
Selected Unaudited Pro Forma Combined
Financial Information................. 10
Comparative Per Share Data.............. 11
RISK FACTORS.............................. 12
Risks Relating to the Merger............ 12
Risks Relating to BMC................... 14
Risks Relating to Boole................. 17
THE COMPANIES............................. 18
BMC..................................... 18
Merger Sub.............................. 20
Boole................................... 20
THE SPECIAL MEETING....................... 20
Date, Time and Place.................... 20
Purpose of the Special Meeting.......... 20
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<TABLE>
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Record Date and Voting Power............ 20
Voting and Revocation of Proxies........ 20
Required Vote........................... 21
Solicitation of Proxies................. 21
Other Matters........................... 22
THE MERGER................................ 22
General Description of the Merger....... 22
Background.............................. 22
Reasons for the Merger.................. 25
BMC's Reasons for the Merger............ 26
Boole's Reasons for the Merger.......... 27
Opinion of Boole's Financial Adviser.... 29
Interests of Boole's Officers and
Directors in the Merger............... 34
Material Federal Income Tax
Consequences.......................... 36
Anticipated Accounting Treatment........ 37
Governmental Approvals.................. 37
Restrictions on Resales by Affiliates... 38
CERTAIN TERMS OF THE MERGER AGREEMENT..... 38
Effective Time of the Merger............ 38
Manner and Basis of Converting Shares... 39
Boole Options........................... 39
Employee Stock Purchase Plan............ 40
Conditions to the Merger................ 40
Representations and Warranties.......... 43
Certain Covenants; Conduct of Business
Prior to the Merger................... 44
No Solicitation......................... 48
Termination of the Merger Agreement..... 49
Expenses and Termination Fee............ 50
STOCK OPTION AGREEMENT.................... 51
Terms of the Option..................... 51
Exercise Events......................... 52
Repurchase at the Option of BMC......... 52
Repurchase at the Option of Boole....... 53
Other................................... 53
VOTING AGREEMENTS......................... 54
MANAGEMENT AND OTHER INFORMATION.......... 54
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SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS.................................. 55
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS.................... 57
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET.................. 58
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF INCOME........... 63
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS........... 64
DESCRIPTION OF BMC CAPITAL STOCK.......... 66
General................................. 66
BMC Common Stock........................ 66
Rights to Purchase Preferred Stock...... 66
</TABLE>
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PAGE
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BMC Preferred Stock..................... 68
Transfer Agent and Registrar............ 69
COMPARATIVE RIGHTS OF BMC AND BOOLE
STOCKHOLDERS............................ 70
INDEPENDENT AUDITORS...................... 72
LEGAL MATTERS............................. 72
EXPERTS................................... 72
STOCKHOLDER PROPOSALS..................... 72
WHERE YOU CAN FIND MORE INFORMATION....... 73
Appendices:
A -- Agreement and Plan of Reorganization
B -- Stock Option Agreement
C -- Form of Voting Agreement
D -- Opinion of Morgan Stanley & Co.
Incorporated
</TABLE>
ii
<PAGE> 6
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the other available
information referred to in "Where You Can Find More Information" on page 73. The
merger agreement is attached as Appendix A to this Proxy Statement/Prospectus.
We encourage you to read the merger agreement. It is the legal document that
governs the merger. We have included page references parenthetically to direct
you to a more complete description of the topics presented in this summary.
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: The two companies develop, distribute and maintain software products that
solve different types of information systems problems of large
organizations worldwide. BMC has historically concentrated on high
performance tools and utilities for large databases and operating systems
and has more recently extended into the management of pre-packaged
enterprise resource planning applications as well. Boole has historically
concentrated on performance monitors and automated management systems for
large scale information systems. Both BMC and Boole began as independent
vendors of point products for IBM mainframe computers and now cover the
other primary enterprise operating platforms, UNIX and Microsoft NT.
Although the two companies' product lines address distinctly different
systems management disciplines, these different disciplines are closely
related and the companies' product lines are complementary. Combining these
products will provide the foundation for the next generation of systems
management tools for the IBM mainframe and distributed systems platforms we
both address today. The combined company will also benefit from a broader
direct sales and support network worldwide and an increased reservoir of
technical, support, sales and managerial talent. As a result, we believe
the combined company should be better positioned to grow and to compete
more effectively in the rapidly consolidating systems management software
industry.
Q: WHAT WILL I RECEIVE FOR MY BOOLE SHARES?
A: You will receive 0.675 of a share of BMC common stock in exchange for each
of your shares of Boole common stock. This exchange ratio will not change,
even if the market price of BMC's common stock or Boole's common stock
increases or decreases between now and the date that the merger is
completed. You will receive cash for any fractional share.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares can be voted at the December , 1998 special
meeting of Boole stockholders.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares, following the
procedure provided by your broker.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy card is voted
at the stockholder meeting. You can do this in one of three ways. First,
you can send a written notice stating that you would like to revoke your
proxy. Second, you can complete and submit a new proxy card. Third, you can
attend the meeting and vote in person. Your attendance alone will not
revoke your proxy. If you have instructed a broker to vote your
1
<PAGE> 7
shares, you must follow directions received from your broker to change
those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed you will receive written instructions for
exchanging your shares of Boole common stock for shares of BMC common stock
(and your cash payment for any fractional share).
Q: WILL THE COMBINED COMPANY PAY ANY FUTURE DIVIDENDS?
A: BMC currently does not pay and does not expect to pay in the future
dividends on its common stock.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A: The exchange of shares of Boole common stock for shares of BMC common stock
in the merger will be tax-free to you for federal income tax purposes. You
will, however, have to pay taxes with respect to any cash received for any
fractional share. Your tax basis in the shares of BMC common stock that you
will receive in the merger will equal your current tax basis in your Boole
common stock (reduced by the cash you receive for any fractional share).
TAX MATTERS CAN BE COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER
TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT
YOUR OWN TAX ADVISORS TO FULLY UNDERSTAND THE TAX CONSEQUENCES OF THE
MERGER TO YOU.
Q: ARE ANY REGULATORY APPROVALS NEEDED TO COMPLETE THE MERGER?
A: Yes. The merger is conditioned upon receipt of appropriate federal and
state regulatory approvals. The principal approvals required relate to
antitrust laws. BMC and Boole have filed premerger notifications pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The waiting
periods prescribed under this act must expire or be terminated before the
merger may be completed. Certain other foreign notifications may be
required, but we believe that, if any are necessary, they will not be
required prior to completing the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger by December 31, 1998. We are working toward
completing the merger as quickly as possible. The timing and likelihood of
obtaining the regulatory approvals described above are uncertain.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Both of our companies file periodic reports and other information with the
Securities and Exchange Commission. You may read and copy this information
at the SEC's public reference facilities. Please call the SEC at
1-800-SEC-0330 for information about these facilities. This information is
also available through the Internet at the Edgar database site maintained
by the SEC at http://www.sec.gov and at the offices of the National
Association of Securities Dealers, Inc. For a more detailed description of
the information available, please see pages and .
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: You should contact:
BOOLE & BABBAGE, INC.
Attn: Arthur Knapp, Jr.
3131 Zanker Road
San Jose, California 95134-1933
Telephone: (408) 526-3333
E-mail: [email protected]
or
Corporate Investor Communications,
the proxy solicitor, who
may be called toll-free
at 1-888-296-4253
2
<PAGE> 8
THE COMPANIES (SEE PAGE 18)
BMC SOFTWARE, INC. (SEE PAGE 18)
2101 CityWest Boulevard
Houston, Texas 77042-2827
BMC develops, markets and supports high-performance systems management
software products that address customers' critical information technology
operations. These products are designed to ensure that a customer's software
applications and the databases and other software systems on which they run are
available, have optimal performance and can be recovered and restarted
predictably after failure. BMC has historically concentrated on specialized high
performance tools and utilities for large databases and operating systems and
has more recently extended into the management of pre-packaged enterprise
resource planning applications as well. BMC's products primarily address the IBM
mainframe, UNIX and Microsoft NT platforms. BMC also sells and provides
maintenance, enhancement and support services for its products. BMC's principal
customers are large organizations that rely heavily on their computing systems.
They are typically Fortune 1000 industrial and service corporations and similar
organizations worldwide.
BOOLE & BABBAGE, INC. (SEE PAGE 20)
3131 Zanker Road
San Jose, California 95134-1933
Boole develops, markets and supports software solutions that help maximize
information systems' service levels. Boole's products concentrate on monitoring
and automating the operations of key system components. The products address the
entire range of different technologies that typically make up a large
information system. These technologies typically come from numerous computer
software and hardware vendors and include operating systems, databases,
middleware, networking systems, Internet technologies and applications.
Representative customers are large manufacturers, governmental agencies, most of
the world's largest financial institutions, airlines, information technology
service providers and utilities.
THE SPECIAL MEETING (SEE PAGE 20)
A special meeting of the stockholders of Boole will be held on December ,
1998, at the principal executive offices of Boole located at 3131 Zanker Road,
San Jose, California at :00 a.m. local time to adopt the merger agreement and
approve the merger.
REQUIRED VOTE (SEE PAGE 21)
The adoption of the merger agreement and approval of the merger requires
the affirmative vote of a majority of the shares of Boole common stock
outstanding on the record date.
RECORD DATE AND VOTING POWER (SEE PAGE 20)
You are entitled to vote at the special meeting if you owned shares of
Boole common stock on the close of business on November 23, 1998, the record
date for the special meeting. You will have one vote at the special meeting for
each share of Boole common stock you owned on the record date. There are
shares of Boole common stock entitled to be voted at the special
meeting.
SHARE OWNERSHIP OF MANAGEMENT (SEE PAGE 54)
The directors and executive officers of Boole own approximately 9.9% of the
shares entitled to vote at the special meeting. All of them have agreed to vote
their shares for the adoption of the merger agreement and approval of the
merger.
COMPARATIVE PER COMMON SHARE MARKET PRICE INFORMATION (SEE PAGE 7)
Boole and BMC common stock are both quoted on the Nasdaq National Market.
On October 30, 1998, the last full trading day prior to the public announcement
of the proposed merger, Boole common stock closed at $26.63, and BMC common
stock closed at $48.06. On November , 1998, Boole common stock closed at
3
<PAGE> 9
$ , and BMC common stock closed at
$ .
NO APPRAISAL RIGHTS
You are not entitled to any appraisal or dissenters' rights in connection
with the merger.
BOOLE'S RECOMMENDATIONS TO YOU
The Boole Board of Directors believes that the merger is fair to you and in
your best interests. The Boole Board of Directors unanimously recommends that
you vote "FOR" adoption of the merger agreement and approval of the merger.
REASONS FOR THE MERGER (SEE PAGE 25)
BMC. The BMC Board of Directors approved the merger based on a number of
factors, including the following:
- the strategic benefits of combining two complementary and
well-established product lines;
- the combined company's increased sales and distribution capacity,
particularly in Europe and Asia;
- Boole's significant technical, engineering, management and sales
expertise, which is in high demand and short supply; and
- the expectation that earnings per share of the combined company will
exceed anticipated earnings per share of BMC independently.
Boole. The Boole Board of Directors believes that the merger should result
in a number of benefits to Boole and its stockholders, including, among other
benefits, the following:
- the combined company's ability to provide its customers more complete
software solutions for large- and medium-scale information systems
through the combination of BMC's and Boole's complementary product lines
in both the IBM mainframe and distributed systems markets;
- the ability of the combined company to utilize BMC's financial strength
to commit greater resources to both current and emerging product
development efforts and fund the future growth of its business;
- the ability to leverage BMC's extensive sales network to increase sales
of Boole's products;
- the opportunity for Boole, as part of the combined company, to compete
more effectively in the increasingly competitive and rapidly
consolidating systems management software industry;
- the merger consideration to be received by Boole stockholders, which at
the time the parties signed the merger agreement represented a premium
over the recent price range of Boole common stock; and
- the opportunity for Boole stockholders to have greater liquidity through
an investment in BMC common stock.
OPINION OF BOOLE'S FINANCIAL ADVISOR (SEE PAGE 29)
In deciding to approve the merger, one of the factors that the Boole Board
of Directors considered was the opinion of its financial advisor, Morgan
Stanley, that, as of October 30, 1998, the exchange ratio pursuant to the merger
agreement was fair to the Boole stockholders from a financial point of view. The
full text of the Morgan Stanley opinion describes the basis for its opinion and
is attached as Appendix D to this Proxy Statement/Prospectus. BOOLE URGES YOU TO
READ THE ENTIRE OPINION CAREFULLY.
INTERESTS OF BOOLE'S OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 34)
You should be aware that a number of Boole's officers and directors have
employment contracts, stock options and severance packages that give them
interests in the merger that are different from other Boole stockholders. In
addition, BMC will maintain indemnification and
4
<PAGE> 10
insurance arrangements for the Boole officers and directors.
RISK FACTORS (SEE PAGE 12)
The merger and an investment in BMC common stock involve risks and
uncertainties, including those risks and uncertainties discussed under "Risk
Factors" and elsewhere in this Proxy Statement/Prospectus and in the documents
incorporated by reference in this Proxy Statement/Prospectus.
CONDITIONS TO THE MERGER (SEE PAGE 40)
BMC and Boole will not complete the merger unless the following conditions
are satisfied or, in some cases, waived:
- the continued accuracy of each party's representations and warranties and
the fulfillment of each party's promises contained in the merger
agreement;
- the adoption of the merger agreement and approval of the merger by the
Boole stockholders;
- the absence of any legal proceeding by any U.S. or European governmental
entity with respect to the merger that materially affects BMC or Boole;
- the receipt of necessary approvals from U.S. governmental authorities;
- the receipt of an opinion from the other party's tax attorneys that the
merger will constitute a tax-free reorganization; and
- the fairness opinion of Morgan Stanley shall not have been withdrawn.
NO SOLICITATION (SEE PAGE 48)
Boole has agreed not to pursue a business combination or other significant
transaction with another party while the merger is pending unless such party has
made a proposal to the Boole Board of Directors for a superior transaction with
Boole.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 49)
BMC and Boole can agree by mutual written consent to terminate the merger
agreement at any time, whether before or after the receipt of stockholder
approval. In addition, either company can terminate the merger agreement if:
- the merger is not completed on or before June 30, 1999;
- a law or final court order prohibits the merger;
- the merger cannot for financial reporting purposes be accounted for as a
"pooling of interests;"
- since September 30, 1998, a material adverse change (as discussed on page
) has occurred with respect to the other party which has not been cured
within 10 business days;
- the stockholders of Boole do not adopt the merger agreement and approve
the merger;
- the other party materially breaches its representations, warranties,
covenants or agreements set forth in the merger agreement and fails to
cure such breach within 30 business days; or
- the Boole Board of Directors withdraws or modifies its recommendation to
its stockholders to adopt the merger agreement and approve the merger
(which the Boole Board of Directors can only do in connection with a
proposal for a superior transaction).
TERMINATION FEE (SEE PAGE 50)
The merger agreement requires Boole to pay BMC $30.0 million if (i) Boole
or BMC terminates the merger agreement because the Boole Board of Directors
withdraws or modifies its recommendation in favor of the merger (which the Boole
Board of Directors can only do in connection with a proposal for a superior
transaction) or (ii) prior to the special meeting, a third party publicly
announces its desire to enter into certain
5
<PAGE> 11
transactions with Boole, and Boole enters into an
acquisition agreement with another party or completes another significant
transaction within twelve months after the date of the termination of the merger
agreement.
STOCK OPTION AGREEMENT (SEE PAGE 51)
In order for BMC to proceed with the merger, BMC required Boole to grant
BMC an option to purchase up to 19% of Boole's outstanding common stock. The
option is exercisable only under limited circumstances if:
- another party makes a tender or exchange offer for 20% or more of Boole's
common stock;
- another party acquires 20% or more of Boole's common stock;
- Boole fails to hold the stockholders meeting in breach of the merger
agreement;
- the Boole Board of Directors withdraws or modifies its recommendation in
favor of the merger; or
- the Boole stockholders do not approve the merger after the public
announcement of a third party proposal relating to an acquisition or
other significant transaction involving Boole.
The option's per share exercise price is the lesser of (i) $32.44 and (ii)
the product of 0.675 and the average closing price of BMC common stock on the
three trading days before exercise. BMC has the right to require Boole to
repurchase all or any of the shares BMC can buy under the option. Boole has the
right under certain circumstances to repurchase all (but not less than all) of
the shares, if any, purchased by BMC, in each case at prices set forth in the
option agreement.
ANTICIPATED ACCOUNTING TREATMENT (SEE PAGE 37)
The merger is expected to be accounted for as a "pooling of interests" for
financial accounting purposes.
FORWARD-LOOKING STATEMENTS (SEE PAGE 12)
This document and the documents that are incorporated by reference include
various forward-looking statements about BMC, Boole and the combined company,
such as statements about future financial results, operating results, market
positions, product successes, strategies and competitive positions. Any
expectations based on these forward-looking statements are subject to risks and
uncertainties and other important factors, including those discussed in this
document beginning on page 12 and in the documents that BMC and Boole
incorporate by reference. These and many other factors could affect the future
financial and operating results of BMC, Boole or the combined company. These
factors could cause actual results to differ materially from expectations based
on forward-looking statements made in this document or elsewhere by or on behalf
of BMC, Boole or the combined company. We encourage you to read carefully our
discussion of these factors.
6
<PAGE> 12
MARKET PRICE AND DIVIDEND DATA
Market Prices. BMC common stock and Boole 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 "BOOL," respectively. This table sets forth, for the periods indicated, the
range of high and low per share sales prices for BMC common stock and Boole
common stock as reported on Nasdaq.
<TABLE>
<CAPTION>
BMC BOOLE
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1996*
First Quarter.......................................... $15.34 $ 9.31 $11.44 $ 8.78
Second Quarter......................................... 16.94 13.31 11.89 10.33
Third Quarter.......................................... 21.56 12.69 11.67 9.28
Fourth Quarter......................................... 23.38 19.63 16.67 10.89
1997*
First Quarter.......................................... $25.50 $19.88 $18.33 $14.17
Second Quarter......................................... 29.31 19.81 16.00 13.08
Third Quarter.......................................... 34.75 26.56 23.50 14.00
Fourth Quarter......................................... 35.63 27.38 21.83 17.00
1998*
First Quarter.......................................... $42.13 $29.25 $25.67 $18.58
Second Quarter......................................... 53.88 40.19 26.00 21.25
Third Quarter.......................................... 60.25 39.50 25.50 19.75
Fourth Quarter (through November 12, 1998)............. 59.88 34.88 32.25 16.00
</TABLE>
- -------------------------
* Calendar quarters. BMC's fiscal year ends on March 31, and Boole's fiscal year
ends on September 30. All prices have been restated to reflect splits in the
number of shares of common stock and stock dividends by the companies.
The following table sets forth the closing per share sales price of BMC
common stock and Boole common stock, as reported on Nasdaq, and the estimated
equivalent per share price (as explained below) of Boole common stock on October
30, 1998, the last trading day before the public announcement of the proposed
merger, and on November , 1998:
<TABLE>
<CAPTION>
BMC BOOLE ESTIMATED EQUIVALENT BOOLE
COMMON STOCK COMMON STOCK PER SHARE PRICE
------------ ------------ --------------------------
<S> <C> <C> <C>
October 30, 1998................... $48.06 $26.63 $32.44
November , 1998..................
</TABLE>
The estimated equivalent per share price of a share of Boole common stock
represents 0.675 of the price of a share of BMC common stock.
Following the merger, BMC common stock will continue to be quoted on the
Nasdaq National Market, and there will be no further market for the Boole common
stock.
Dividends. No cash dividends were declared or paid on BMC or Boole common
stock during any of the calendar quarters indicated in the table above. The
policies of BMC and Boole are to retain earnings for use in their respective
businesses.
7
<PAGE> 13
BMC
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
each of the years ended March 31, 1994 through 1998 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 September 30, 1997 and 1998 and for the six months ended September 30, 1997
and 1998 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. 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, 1998 and its Quarterly Reports on Form 10-Q for the quarters ended
June 30, 1998 and September 30, 1998 incorporated by reference in this Proxy
Statement/Prospectus. 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, 1998 and its Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1998 and September 30, 1998 incorporated by reference in this
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------ ---------------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- -------- ---------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues................... $288,500 $345,000 $428,850 $563,210 $ 730,634 $321,123 $ 461,503
Operating income................. $ 79,904 $108,628 $147,589 $217,024 $ 226,157 $ 57,919 $ 161,616
Net earnings..................... $ 56,489 $ 77,517 $105,571 $163,872 $ 165,854 $ 34,359 $ 133,361
Basic earnings per share......... $ .27 $ .38 $ .53 $ .82 $ .82 $ .17 $ .62
Shares used in computing basic
earnings per share............. 208,452 202,048 200,658 201,016 203,488 202,446 214,534
Diluted earnings per share....... $ .27 $ .38 $ .50 $ .76 $ .77 $ .16 $ .59
Shares used in computing diluted
earnings per share............. 209,216 203,904 209,144 214,310 216,590 216,384 227,951
Dividends paid(1)................ -- -- -- -- -- -- --
Dividends paid per share(1)...... -- -- -- -- -- -- --
Working capital.................. $ 29,429 $ 35,166 $ 43,775 $ 58,512 $ 38,344 $(10,238) $ (8,208)
Total assets............. $417,527 $502,649 $608,218 $848,752 $1,248,495 $898,809 $1,558,195
</TABLE>
- -------------------------
(1) BMC has not paid any dividends in the last five years and currently intends
to retain earnings for use in its business.
8
<PAGE> 14
BOOLE
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
each of the years ended September 30, 1993 through 1997 have been derived from
Boole's Consolidated Financial Statements, which have been audited by Ernst &
Young LLP, independent auditors. The selected consolidated financial data as of
June 30, 1997 and 1998 and for the nine months ended June 30, 1997 and 1998 have
been derived from the unaudited consolidated financial statements of Boole. The
unaudited consolidated financial statements have been prepared on the same basis
as the audited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments of a normal recurring nature. In
the opinion of management, these adjustments are necessary for a fair statement
of the interim results for the periods presented. The interim results are not
necessarily indicative of the results for the full year. 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 Boole's
Annual Report on Form 10-K for the year ended September 30, 1997 and its
Quarterly Reports on Form 10-Q for the quarters ended December 31, 1997, March
31, 1998, and June 30, 1998 incorporated by reference in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ $121,015 $141,600 $169,027 $180,151 $197,097 $144,968 $160,200
Operating income.................... $ 4,181 $ 4,366 $ 12,785 $ 12,829 $ 11,814 $ 4,857 $ 25,241
Net earnings........................ $ 2,073 $ 2,102 $ 13,123(2) $ 11,457 $ 13,469 $ 6,206 $ 26,394
Basic earnings per share............ $ .09 $ .09 $ .51 $ .43 $ .49 $ .23 $ .94
Shares used in computing basic
earnings per share................ 23,395 24,285 25,535 26,565 27,715 27,430 28,200
Diluted earnings per share.......... $ .08 $ .08 $ .47 $ .40 $ .45 $ .21 $ .86
Shares used in computing diluted
earnings per share................ 25,470 25,725 27,700 28,815 30,145 29,910 30,775
Dividends paid(1)................... -- -- -- -- -- -- --
Dividends paid per share(1)......... -- -- -- -- -- -- --
Total assets........................ $106,450 $145,621 $182,827 $224,540 $260,144 $235,953 $291,723
</TABLE>
- -------------------------
(1) Boole has not paid any dividends in the last five years and currently
intends to retain earnings for use in its business.
(2) Includes $1.507 million ($0.06 basic earnings per share and $0.05 diluted
earnings per share) of extraordinary gain on forgiveness of debt in fiscal
1995.
9
<PAGE> 15
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
has been derived from and should be read in conjunction with the unaudited pro
forma condensed combined financial information and notes thereto included
elsewhere in this Proxy Statement/Prospectus on pages 57-65. The following
unaudited selected pro forma combined financial information is based on
adjustments to the historical consolidated balance sheets and related
consolidated statements of income of BMC and Boole to give effect to the merger
using the pooling of interests method of accounting for business combinations.
The following selected unaudited pro forma combined financial information may
not necessarily reflect the financial condition or results of operations of BMC
that would have actually resulted had the merger occurred as of the date and for
the periods indicated or reflect the future earnings of BMC.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------ ---------------------
1996 1997 1998 1997 1998
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
COMBINED INCOME STATEMENT DATA:
Total revenues....................... $594,943 $745,587 $929,701 $412,927 $ 564,693
======== ======== ======== ======== ==========
Operating income..................... $159,538 $221,898 $256,667 $ 59,847 $ 178,617
======== ======== ======== ======== ==========
Net earnings......................... $116,929 $169,552 $197,531 $ 38,648 $ 151,387
======== ======== ======== ======== ==========
Basic earnings per share............. $ .54 $ .77 $ .89 $ .17 $ .65
Shares used in computing basic
earnings per share................ 218,256 219,330 222,429 221,182 233,557
Diluted earnings per share........... $ .51 $ .72 $ .83 $ .16 $ .61
Shares used in computing diluted
earnings per share................ 228,266 234,178 237,199 236,744 248,719
Dividends declared................... -- -- -- -- --
Dividends declared per share......... -- -- -- -- --
COMBINED BALANCE SHEET DATA:
Working capital...................... $ 62,172
Total assets......................... $1,849,918
Long-term debt (including current
maturities)....................... --
Stockholders' equity................. $1,073,628
</TABLE>
10
<PAGE> 16
COMPARATIVE PER SHARE DATA
Set forth below are the net income and book value per common share data for
BMC and Boole on an historical basis and for BMC on a combined pro forma basis,
and certain equivalent pro forma per share data for Boole. The BMC combined pro
forma data was derived by combining historical consolidated financial
information of BMC and Boole using the pooling of interests method of accounting
for business combinations. The equivalent pro forma per share data for Boole was
calculated by multiplying the BMC combined pro forma per common share data by
0.675.
The information in the table below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related
notes of BMC and Boole incorporated by reference in this Proxy
Statement/Prospectus and the unaudited pro forma condensed financial information
and notes related to such consolidated financial statements included elsewhere
in this Proxy Statement/Prospectus. No cash dividends were declared or paid on
BMC or Boole common stock during any of the calendar years indicated in the
table below. The policies of BMC and Boole are to retain earnings for use in
their respective businesses.
BMC
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED MARCH 31, ENDED
--------------------- SEPTEMBER 30,
1996 1997 1998 1998
----- ----- ----- -------------
<S> <C> <C> <C> <C>
HISTORICAL PER COMMON SHARE DATA:
Income from continuing operations
Basic................................................... $0.53 $0.82 $0.82 $0.62
Diluted................................................. $0.50 $0.76 $0.77 $0.59
Book value................................................ $3.68 $4.38
COMBINED PRO FORMA PER COMMON SHARE DATA:
Income from continuing operations
Basic................................................... $0.54 $0.77 $0.89 $0.65
Diluted................................................. $0.51 $0.72 $0.83 $0.61
Book value................................................ $4.57
</TABLE>
BOOLE
<TABLE>
<CAPTION>
ADJUSTED TO YEARS SIX MONTHS
ENDED MARCH 31, ENDED
--------------------- JUNE 30,
1996 1997 1998 1998
----- ----- ----- ----------
<S> <C> <C> <C> <C>
HISTORICAL PER COMMON SHARE DATA:
Income from continuing operations
Basic................................................. $0.65 $0.31 $1.67 $0.95
Diluted............................................... $0.59 $0.29 $1.54 $0.87
Book value............................................... $4.61 $5.02
EQUIVALENT COMBINED PRO FORMA PER COMMON SHARE DATA:
Income from continuing operations
Basic................................................. $0.36 $0.52 $0.60 $0.44
Diluted............................................... $0.34 $0.49 $0.56 $0.41
Book value............................................... $3.08
</TABLE>
11
<PAGE> 17
RISK FACTORS
You should consider the following factors in evaluating whether to adopt
the merger agreement and approve the merger. These factors should be considered
in conjunction with the other information included or incorporated by reference
in this Proxy Statement/Prospectus. Certain of the information relating to BMC,
Boole and the combined company contained or incorporated by reference in this
Proxy Statement/Prospectus is forward-looking in nature. All statements included
or incorporated by reference in this Proxy Statement/Prospectus or made by
management of BMC or Boole other than statements of historical fact regarding
BMC, Boole or the combined company are forward-looking statements. Examples of
forward-looking statements include statements regarding BMC's, Boole's or the
combined company's future financial results, operating results, market
positions, product successes, business strategies, projected costs, future
products, competitive positions and plans and objectives of management for
future operations. In some cases, you can identify forward-looking statements by
terminology, such as "may," "will," "should," "would," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue"
or the negative of such terms or other comparable terminology. Any expectations
based on these forward-looking statements are subject to risks and uncertainties
and other important factors, including those discussed in this document in this
Risk Factors section and in the documents that BMC and Boole incorporate by
reference. These and many other factors could affect the future financial and
operating results of BMC, Boole or the combined company. These factors could
cause actual results to differ materially from expectations based on
forward-looking statements made in this document or elsewhere by or on behalf of
BMC, Boole or the combined company. We encourage you to read carefully our
discussion of these factors, as described in the following paragraphs, in BMC's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998, in Boole's
Annual Report on Form 10-K for the fiscal year ended September 30, 1997 and in
BMC's and Boole's Quarterly Reports on Form 10-Q for the fiscal quarters ended
after their respective fiscal year ends.
RISKS RELATING TO THE MERGER
Uncertainty Relating to Integration of Software Products and Development
Organizations. We anticipate that the merger will allow us to provide enhanced
and more valuable products to our customers. We expect to achieve this for our
distributed systems customers by integrating Boole's COMMAND/POST(R) product
line with BMC's PATROL(R) product line and for BMC's IBM mainframe customers by
integrating Boole's MainView(R) product line with BMC's IBM mainframe product
lines. The successful integration of independently developed, highly complex
software products such as these that were designed with no regard to such
integration will be a difficult and unpredictable task. These difficulties are
compounded when the products involved are well established, as these are,
because compatibility with the existing base of installed products must be
preserved. Successful integration of these product lines also requires
coordination of different development and engineering teams. This too will be
difficult and unpredictable because of possible cultural conflicts and different
opinions on technical decisions and product roadmaps. In March 1998, BMC
acquired BGS Systems, Inc. and is in the process of integrating BGS's Best/1(R)
mainframe and distributed systems products with PATROL and other BMC products.
The Best/1 products will also be integrated with Boole's COMMAND/POST and
MainView products, adding to the complexity of the task of integration. There
can be no assurance that BMC will be successful in these product integration
efforts or that BMC will realize the expected benefits.
12
<PAGE> 18
Uncertainty Relating to Integration of Direct Sales Organizations.
Consummation of the merger will result in a significantly larger sales
organization. Boole has 130 direct sales representatives and 246 technical sales
consultants. Integration of BMC's and Boole's large, well established sales
organizations will be difficult. Many overlapping sales territories must be
reallocated to preserve sales force morale and established customer
relationships. We believe that sales force integration will be facilitated by
the small overlap between the BMC and Boole product lines. However, there can be
no assurance that such integration efforts will be successful or that the
combined company will realize the expected benefits.
Uncertainty Relating to Integration of Operations; Uncertainty Relating to
Retention of Key Boole Personnel. The integration of Boole's operations
following the merger will require the dedication of management resources, which
will detract attention from the day-to-day business of the combined company. The
difficulties of integration will be increased by the necessity of combining two
different corporate cultures and integrating personnel with disparate business
backgrounds. BMC's retention of key Boole employees is critical to ensure
continued advancement, development and support of Boole's technology as well as
on-going sales and marketing efforts. BMC will implement a retention program for
key Boole employees; however, we can not assure that such program will be
successful or that key Boole employees will remain employed by BMC. In addition,
the two companies have different operating policies and practices which may
cause attrition of other employees, including technical, sales or marketing
personnel. Further, the combined company's ability to increase or maintain
revenues may be diminished by product transitions, loss of personnel or other
factors resulting from the merger. Moreover, since BMC initially plans to keep
substantially all of Boole's employees at their current location, BMC will be
required to manage a significant business unit from a distance. As a result, BMC
may experience additional difficulties in integrating its management policies
into Boole's operations.
Possible Termination of Third-Party Distribution and Supplier
Relationships. Boole, through certain of its foreign subsidiaries, distributes
software products for third-party software vendors in Europe and the Pacific Rim
regions. For the fiscal year 1997, Boole distributed software products for New
Dimension Software Ltd., which accounted for 13.5% of Boole's revenues. The
merger will give New Dimension the right to terminate its distribution agreement
with Boole. Termination of the distribution agreement would result in the
immediate loss of those revenues and associated earnings Boole derives from New
Dimension and would significantly decrease the expected future accretive
financial results that BMC expects to result from the merger. Termination could
also result in the loss of certain key Boole employees and customers in its
international operations. If the distribution agreement with New Dimension is
terminated, the combined company would no longer distribute New Dimension's
products and would rely primarily on the distribution of BMC and Boole products
to support its international operations.
Possible Disruption of Customer Relationships. There can be no assurance
that customers of BMC and Boole will continue their current buying patterns
during the pendency of, and following, the merger. Customers may defer
purchasing decisions as they evaluate the combined company's future product
strategy and consider purchasing offerings of competitors. Any significant delay
or reduction in orders for BMC's or Boole's products could have a material
adverse effect on the combined company's business, financial condition and
results of operations. In addition, by increasing the breadth of BMC's and
Boole's business, the merger may make it more difficult for the combined company
to enter into relationships, including
13
<PAGE> 19
customer relationships, with strategic partners, some of whom may view the
combined company as a more direct competitor than either BMC or Boole as an
independent company.
Risks Associated with Fixed Exchange Ratio. Under the terms of the merger,
each share of Boole common stock issued and outstanding immediately prior to the
effective time of the merger will be converted into 0.675 of a share of BMC
common stock. The merger agreement does not contain any provisions for
adjustment of the exchange ratio or termination of the merger based solely on
fluctuations in the price of BMC common stock. In recent years, and particularly
in recent months, the stock market, in general, and the securities of technology
companies, in particular, have experienced extreme price and volume
fluctuations. These market fluctuations may adversely affect the market price of
BMC common stock. There can be no assurance that the market price of BMC common
stock upon and after the consummation of the merger will not be lower than the
market price of such stock on the date of the execution of the merger agreement
or the current market price. Boole stockholders should obtain recent market
quotations of BMC common stock prior to voting on the merger.
Financial Expectations of the Combined Company. The future financial
results of the combined company are expected to be "accretive," meaning that
earnings per share of the combined company are expected to exceed anticipated
earnings per share of BMC independently. These expectations are based on
numerous assumptions, including the assumption that both BMC and Boole will
achieve their operating plans for fiscal 1999 and beyond. Many factors could
prevent the combined company from meeting these financial objectives, including
those described in this Risk Factors section.
Transaction and Restructuring Charges. BMC expects to incur charges to
operations of approximately $20.5 million for transaction fees, costs incident
to the merger and certain identified restructuring charges. BMC also expects to
incur significant additional restructuring charges, but the amount of such
charges cannot be reasonably estimated until an analysis of the newly combined
operations is completed and a restructuring plan developed. Additional
unanticipated expenses may be incurred relating to the integration of the
businesses of BMC and Boole, including the integration of product lines and
distribution and administrative functions, which could be significant. See
"Selected Historical and Unaudited Pro Forma Combined Financial Data."
RISKS RELATING TO BMC
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. BMC's stock price is based
almost completely on current expectations of sustained future revenue and
earnings growth rates. Any failure to meet anticipated revenue and earnings
levels in a period or any negative change in perceived long-term growth
prospects of the combined company would likely have a significant adverse effect
on the combined company's stock price. The growth rates of BMC's license
revenues, total revenues, net earnings and earnings per share, excluding
one-time charges, have accelerated over the last seven quarters. BMC, as a part
of the combined company, may not achieve, in future periods, these relatively
higher rates of growth.
Risks of Fluctuating Earnings. 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
14
<PAGE> 20
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 expected individually significant transaction could cause BMC's
revenues and earnings in a period to fall short of expectations.
Additionally, BMC generally does not know whether revenues and earnings
will meet expected results until the final days or day of a quarter. 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 would likely be an immediate, material adverse effect on
net revenues and operating results, which would likely result in a precipitous
drop in BMC's stock price.
Operating Margin Risks. BMC's operating margins, excluding one-time
charges, have ranged from 37% to 45% in recent quarters, which is at the
high-end of the range for peer companies. Since BMC's mix of business continues
to shift to distributed systems revenues and since research and development,
sales, support and distribution costs for distributed systems software products
are generally higher than for mainframe products, operating margins will
experience more pressure.
Seasonality of Results. BMC historically realizes greater revenues and net
earnings in the latter half of its fiscal year because the quarter ending
December 31 coincides with the end of its customers' annual budgetary periods
and the quarter ending March 31 coincides with the end of its annual sales plans
and fiscal year. For the same reasons, BMC typically reports lower or flat
revenues in the first two quarters of a fiscal year than in the last two
quarters of the previous fiscal year, resulting in lower operating margins in
the first two quarters. BMC historically generates greater revenues in the third
and fourth quarters of its fiscal year while maintaining lower rates of expense
growth, resulting in higher operating margins during such quarters.
BMC's financial projections for fiscal 1999 and analysts' expectations are
based on significantly higher distributed systems products revenues in the
quarters ending December 31, 1998 and March 31, 1999. Although this was the
pattern experienced in fiscal 1998, there can be no assurance that this pattern
will be maintained. Past financial performance is not a reliable indicator of
future performance.
Risks of International Operations. BMC's future operating results depend on
sustained performance improvement by its international offices. In this regard,
the economies in Europe and the Pacific Rim regions have been depressed in the
past year. BMC's operations and financial results could be significantly
adversely affected by changes in foreign currency exchange rates, sluggish
regional economic conditions and difficulties in staffing and managing
international operations.
Risks Associated with IBM. BMC derived approximately 74% of its total
revenues in fiscal 1998 from software products for IBM and IBM-compatible
mainframe computers. IBM continues to focus on reducing the overall software
costs associated with the OS/390 mainframe platform. IBM continues, directly and
through third parties, to aggressively enhance its utilities for IMS and DB2 to
provide lower cost alternatives to the products provided by BMC, Boole 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
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<PAGE> 21
twelve months. If IBM is successful in achieving performance and functional
equivalence with BMC's products at a lower cost, BMC's business will be
materially adversely affected.
Risk of Reduced Enterprise Licenses. Fees from enterprise license
transactions remain a fundamental component of BMC's revenues. Such fees
continue to represent an increasingly greater percentage of total mainframe
license revenues. In fiscal 1998, enterprise license fees for future additional
processing capacity and license restructurings comprised approximately 24% 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. 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.
Risk of Reduced Mainframe Product Pricing. BMC's capacity-based upgrade
fees associated with both current and future processing capacity contributed 33%
of total revenues in fiscal 1998. The charging of upgrade fees based on running
previously licensed software on more powerful computers is standard among
mainframe systems software vendors, including IBM. The pricing of these
processing capacity-based fees is under constant pressure from customers. IBM is
aggressively seeking to reduce the costs of its mainframe systems software.
These pricing pressures within the mainframe systems software markets could have
an adverse effect on BMC's revenues and earnings.
Rapid Technological Change and Highly Competitive Industry. BMC operates in
a highly competitive industry characterized by rapid technological change. BMC's
ability to compete effectively and its growth prospects depend upon many
factors, including:
- the success of its existing distributed systems products;
- the timely introduction of new products into the marketplace;
- the success of distributed systems products anticipated to be introduced
in the future; and
- the ability of BMC's products to interoperate and perform well with
existing and future leading databases and other platforms supported by
its products.
The distributed systems and application management markets in which BMC
operates are far more crowded and competitive than its traditional mainframe
systems management markets. Certain of BMC's competitors and potential
competitors have significantly greater financial, technical, sales and marketing
resources than BMC and greater experience in distributed systems development and
sales. BMC has experienced long development cycles and product delays in the
past, particularly with some of its distributed systems products, and expects to
have delays in the future. Delays in new mainframe or distributed systems
product introductions or less-than-anticipated market acceptance of these new
products are possible and would have an adverse effect 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.
Uncertainty Relating to Development of Products for Microsoft
Platforms. 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 family of software products, including its
Windows NT 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
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some of BMC's markets, which could place additional pricing pressure on BMC. 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.
Risks Associated with Possible 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.
Risks Related to Year 2000 Compliance. BMC believes the current versions of
its products are Year 2000 compliant. BMC does not intend to make all prior
versions of its products Year 2000 compliant and has notified its customers as
to which versions will and will not be Year 2000 compliant. BMC has developed
transition plans for customers who expect to be using noncompliant versions of
BMC's products on or after January 1, 2000 and does not expect to incur
significant costs in accommodating them.
BMC is unaware of any potential material liabilities or operational
difficulties associated with Year 2000 compliance of its own internal
information systems, which are based on Oracle Corporation's enterprise resource
planning system.
Efforts by customers to address Year 2000 issues may absorb a substantial
part of their information technology budgets in the near term. There is much
speculation that the cost of Year 2000 compliance efforts will significantly
reduce spending on non-Year 2000 products through January 1, 2000. BMC believes
that its core customers are well into their Year 2000 compliance programs and
that this trend has not materially adversely affected demand for its products to
date. The impact of Year 2000 issues on future BMC revenue is difficult to
assess, but is a risk to be considered in evaluating BMC's future growth.
RISKS RELATING TO BOOLE
Boole's business is subject to risks that are substantially similar to
those described in the paragraphs above relating to BMC. For a discussion of
other risks associated with Boole's business we encourage you to read Boole's
Annual Report on Form 10-K for the fiscal year ended September 30, 1997 and
Boole's Quarterly Reports on Form 10-Q for the quarters ended December 31, 1997,
March 31, 1998 and June 30, 1998.
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THE COMPANIES
BMC
BMC develops, markets and supports high-performance system management
software products that address customers' critical information technology ("IT")
operations. These products are designed to ensure that a customer's software
applications and the software systems on which they run are available, have
optimal performance and can be recovered and restarted quickly and predictably
after failure. BMC also sells and provides maintenance, enhancement and support
services for its products. Founded in 1980, BMC first earned a position of
leadership in providing high performance software tools and utilities for the
IBM mainframe computers on which large enterprises depend. BMC is now a major
provider of systems management solutions for mainframe IT systems as well and
has established its PATROL application availability and monitoring product suite
as a market leader. By providing solutions that address both mainframe and all
of the prevalent distributed environments, BMC enables customers to use the
latest technologies while preserving their substantial investments in legacy
hardware, applications and data. In executing its product strategies, BMC
emphasizes internal product development and innovation supplemented by
acquisitions of both emerging technologies and established software companies.
BMC's customers are transaction and information intensive enterprises that
rely heavily on their computing systems. They are typically Fortune 1000
industrial and service corporations and similarly sized organizations worldwide.
As BMC extends its distributed systems management product lines, the number of
potential customers for its products has greatly increased. BMC markets and
distributes its products primarily through its well-established direct sales
organization and also sells its distributed systems products through an indirect
sales network of value-added resellers and systems integrators.
BMC's software products address the three predominant operating
environments of enterprise computing: (1) the International Business Machine
("IBM") OS/390 mainframe operating system; (2) the various UNIX operating
systems employed by leading hardware manufacturers such as Hewlett Packard
Company ("HP"), Sun Microsystems, Inc. ("Sun"), IBM and Digital Equipment
Corporation and (3) Microsoft Corporation's ("Microsoft" or "MS") rapidly
emerging MS Windows NT operating system. BMC's core products address the
performance, availability and recovery of these operating systems and the most
prevalent database management systems ("DBMSs") used with them. DBMSs, when
loaded with data, comprise the databases that store all of the information an
application generates and requires. In addition to storing and organizing the
data, the DBMSs allow an application to access, retrieve, manipulate and analyze
it. The primary DBMSs employed in the three enterprise operating environments
are: IBM's IMS and DB2 for the OS/390 platform; Oracle Corporation ("Oracle"),
Informix Software, Inc. ("Informix"), Sybase, Inc. ("Sybase") and DB2/2 for the
UNIX platform; and MS SQL Server and Oracle for the Windows NT platform. The
operating systems and DBMSs form the backbone of the transaction intensive IT
systems that are critical to both the day-to-day operations and the long-term
strategies of BMC's customers. These IT systems are continuously growing in size
and complexity. Since BMC's inception, one of its key focuses and competencies
has been improving the performance, availability, reliability, recoverability
and ease of use of these DBMSs.
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Over the past four years, BMC has devoted significant resources to building
its distributed systems software products and sales channels. To date, these
efforts have centered around the PATROL application availability and monitoring
products. In fiscal 1998, PATROL and other distributed systems management
products generated $192 million in revenues, representing an increase of 87%
over the prior fiscal year and 26% of total revenues. While building its
distributed systems management business, BMC has continued to invest in and
enhance its many products for the OS/390 mainframe platform. Of these, the most
important are the high performance utilities for the IMS and DB2 DBMSs and the
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, at
very high levels of performance and reliability. 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 performance utilities for IMS and DB2 and the
administrative products for DB2 generated approximately 58% of total revenues in
fiscal 1998.
BMC's focus is now evolving to the applications that are the ultimate
purpose of all IT systems. Organizations are requiring that their IT systems
deliver guaranteed levels of service to the end-user. IT systems must maximize
an application's availability by minimizing or eliminating the amount of time
the application is unavailable to users because of scheduled maintenance
operations or necessary changes and upgrades to the system. They must also
deliver high performance levels measured by minimized and consistent response
times. Finally, they must guarantee that an application and all of its
underlying components can be recovered quickly and with confidence and integrity
from a system failure. BMC's products can be critical to delivering targeted
service levels because of their orientation towards the highest levels of
performance and reliability for the DBMS and other critical software components
that support the application. This applications centric approach is the object
of BMC's Application Service Assurance (ASA(TM)) product strategy, which is
designed to allow enterprises to achieve the desired states of key applications
by maximizing their availability, performance and recoverability.
The ASA strategy also encompasses BMC's early commitment to delivering
third party software tools for packaged enterprise resource planning
applications ("ERPs"), which represent one of the most significant recent trends
in enterprise computing. ERP applications address the core business processes of
any business or other organization, such as accounting and financial reporting,
manufacturing and inventory management, human resources and payroll, and order
entry and tracking. The packaged ERP applications from vendors such as SAP
Corporation ("SAP"), Baan Company N.V. ("BAAN"), PeopleSoft, Inc. ("PeopleSoft")
and Oracle save an enterprise from the highly difficult and unpredictable task
of writing an application from scratch and, equally important, allow for the
standardization and integration of these business processes throughout an
organization. BMC's PATROL product family supports all of the leading ERP
applications as well as their key underlying components such as the UNIX and
Windows NT operating systems and the leading DBMSs. BMC is actively developing
ERP modules for its other distributed systems management products.
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MERGER SUB
Merger Sub is a wholly owned subsidiary of BMC incorporated on October 28,
1998 in the State of Delaware. Merger Sub does not engage in any operations and
exists solely to facilitate the merger.
BOOLE
Boole develops and markets enterprise automation software solutions for
managing service levels, in multi-vendor, distributed computer environments.
Boole's products provide a management solution for the entire information
technology enterprise that encompasses systems, applications, middleware,
databases and Web technologies. Boole's products are used by large manufacturing
companies, domestic and international governmental agencies, the majority of the
world's largest financial institutions, airlines, information technology
outsourcers and utilities to improve services and reduce information technology
management costs. Boole distributes its products domestically through its own
distribution division and internationally through foreign subsidiaries of Boole
and independent marketing agents. Boole offers support for its products,
including maintenance and updating product capabilities to accommodate changes
in a customer's hardware and software.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The special meeting of stockholders of Boole will be held on December ,
1998, at the principal executive offices of Boole located at 3131 Zanker Road,
San Jose, California commencing at :00 a.m. local time.
PURPOSE OF THE SPECIAL MEETING
The purposes of the special meeting are (i) to consider and vote upon a
proposal to adopt the merger agreement and approve the merger; and (ii) to
transact such other business as may properly come before the special meeting.
RECORD DATE AND VOTING POWER
Only holders of record of Boole common stock at the close of business on
the record date, November 23, 1998, are entitled to notice of, and to vote at,
the special meeting. There were approximately holders of
record of Boole common stock on the record date, with
shares of Boole common stock issued and outstanding. Each share of Boole 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 Boole to be the
beneficial owners of more than 5% of the outstanding Boole 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
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contained therein. If a holder of Boole common stock executes and returns a
proxy and does not specify otherwise, the shares represented by such proxy will
be voted "for" adoption of the merger agreement and approval of the merger in
accordance with the recommendation of the Board of Directors of Boole. A
stockholder of Boole 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 Secretary of Boole, stating that the proxy is revoked or (iii) attending the
special meeting and voting in person.
REQUIRED VOTE
The presence, in person or by proxy, at the special meeting of the holders
of a majority of the shares of Boole 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 a majority of the shares of Boole common
stock outstanding as of the record date is required to adopt the merger
agreement and approve the merger. In determining whether the merger agreement
and the merger have received the requisite number of affirmative votes,
abstentions and broker non-votes will have the same effect as a vote against the
merger agreement and the merger.
At the record date for the special meeting, the directors and executive
officers of Boole owned approximately % of the outstanding shares of
Boole common stock entitled to vote at such meeting. Johannes S. Bruggeling,
Raymond E. Cairns, Franklin P. Johnson, Jr., Terry R. McGowan, Paul E. Newton,
and David B. Wright, directors of Boole, and James E.C. Black, Richard A.
Harritt, Arthur F. Knapp, Jr., and Saverio Merlo, executives of Boole, have each
entered into a Voting Agreement with BMC dated October 31, 1998 (the "Voting
Agreements"), whereby they have agreed to vote all shares of Boole common stock
owned by them as of the record date in favor of adoption of the merger agreement
and approval of the merger and granted BMC an irrevocable proxy to vote such
shares of Boole common stock in favor of adoption of the merger agreement and
approval of the merger. Additionally, Catherine H. Johnson, the wife of Franklin
P. Johnson, Jr., and Asset Management Partners, of which Franklin P. Johnson,
Jr. is the General Partner, have also executed Voting Agreements with BMC dated
October 31, 1998. Approximately 2,747,935 shares of Boole common stock
(representing approximately 9.9% of the outstanding shares of Boole common stock
as of the record date) are subject to the Voting Agreements. See "Voting
Agreements."
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of Boole may solicit proxies from Boole's stockholders by personal
interview, telephone, telegram or otherwise. Boole will bear the costs of the
solicitation of proxies from its stockholders, except that BMC and Boole 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 Boole for the
forwarding of solicitation materials to the beneficial owners thereof. Boole
will reimburse such brokers, custodians, nominees and fiduciaries for the
reasonable out-of-pocket expenses incurred by them in connection therewith.
Boole has engaged the services of Corporate Investor Communications to
distribute proxy solicitation materials to brokers, banks and other nominees and
to
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assist in the solicitation of proxies from Boole stockholders for a fee of
approximately $6,500 plus reasonable out-of-pocket expenses.
OTHER MATTERS
At the date of this Proxy Statement/Prospectus, the Board of Directors of
Boole 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 of the merger, Merger Sub will be merged with and
into Boole, with Boole being the surviving corporation and continuing as a
wholly owned subsidiary of BMC under the name "Boole & Babbage, Inc." In the
merger, each share of Boole common stock outstanding at the effective time of
the merger will automatically be converted into 0.675 of a share of BMC common
stock.
Based on the closing price of BMC common stock of $ on November
, 1998 and the number of shares of BMC common stock and Boole common stock
outstanding as of the record date, shares of BMC common stock will be
issuable pursuant to the merger agreement (assuming no exercise prior to the
effective time of the merger of Boole stock options), representing approximately
% of the total BMC common stock to be outstanding after such issuance
(assuming that no Boole or BMC stock options are exercised).
BACKGROUND
Boole and BMC have been familiar with each other's businesses for many
years. Over the past several years casual conversations on a variety of topics
have been held between Paul E. Newton, President and Chief Executive Officer of
Boole, and Max P. Watson, Jr., Chairman of the Board of Directors, President and
Chief Executive Officer of BMC.
Over the last several years, BMC has considered complementary acquisitions
of companies that would fit with its application management product strategy and
distribution infrastructure. BMC identified Boole as a natural fit based upon
its market leadership, sufficient critical mass and product portfolios.
Over the last several years, Boole has also identified strategic
objectives, including business combinations with third parties. On October 30,
1997, at a regularly scheduled board meeting, the Boole Board of Directors
reviewed a strategic plan for Boole that included the goal of completing one or
more acquisitions during the following year in order to gain critical mass and
market presence. At this meeting, the Boole Board of Directors also considered
the prospect that failing to achieve sufficient critical mass, Boole should also
consider the alternative of being acquired by another company.
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Boole subsequently investigated and pursued several acquisitions of other
companies in its industry, although none of such acquisitions were completed. On
May 28, 1998, Boole executed an engagement letter with Morgan Stanley covering
potential acquisitions or strategic business combinations involving Boole,
including the potential sale of Boole.
On June 22, 1998, Arthur Knapp, Boole's Chief Financial Officer, received a
telephone call from an investment banking firm inquiring if Boole would have any
interest in being acquired by a specified company. On July 17, 1998 and July 20,
1998, Mr. Knapp received telephone messages directly from that company's
management expressing that company's interest in an acquisition of Boole. On
July 22, 1998, Boole management met with Morgan Stanley and outlined potential
synergies associated with potential merger partners. Morgan Stanley was
authorized to contact these potential merger partners. As a result of contacts
with certain potential merger partners, face-to-face meetings were held with
three different companies on August 17-18, 1998, September 3, 1998 and October
9, 1998.
On August 19, 1998, Mr. Watson called Mr. Newton, indicating that BMC might
be interested in acquiring Boole. On August 31, 1998, three executives from BMC
met with Boole management at Boole's offices in San Jose. Both parties made
general presentations covering strategic directions, products and organizational
structure.
On September 4, 1998, M. Brinkley Morse, Senior Vice President of Corporate
Development for BMC, and William M. Austin, BMC's Chief Financial Officer,
called Mr. Newton to indicate BMC's interest in pursuing a business combination
with Boole.
On September 10, 1998, at a regularly scheduled meeting of the Boole Board
of Directors, Mr. Newton led a discussion of strategic alternatives available to
Boole. At that meeting, the Boole Board of Directors discussed a number of
matters relating to these strategic alternatives, including the trend within the
industry toward consolidation, and Boole's desire to achieve increased size to
meet customer needs and for financial market visibility. The Boole Board of
Directors discussed the role of BMC and Boole in the industry's consolidation
and the benefits and risks associated with various acquisition strategies.
From September 8, 1998 through September 17, 1998, the chief financial
officers of both companies and their legal counsel and financial advisors
exchanged various telephone calls and due diligence request lists with a view
toward preparing for a subsequent due diligence meeting. On September 16, 1998,
Mr. Austin telephoned Mr. Knapp to indicate that BMC continued to have a strong
interest in a strategic combination, and the parties engaged in discussions
concerning valuation issues. On September 18, 1998, BMC and Boole negotiated and
executed nondisclosure agreements. BMC and Boole then began their due diligence
investigation of each other.
On September 22-23, 1998 executives from BMC and Boole met in San Jose. At
those meetings, product plans, organizational structure, sales trends, financial
results and potential cultural and technical integration issues were reviewed.
On October 1, 1998, Mr. Newton and Richard Harritt, Boole's Senior Vice
President of North American sales, had a teleconference with Mr. Austin and Rick
Gardner, BMC's Senior Vice President of Worldwide Sales and Marketing, during
which they discussed the sales organizations of each company and how they might
be combined. Various due diligence processes then commenced and discussions
continued among the parties and their financial advisors through September and
October 1998. In parallel, BMC proceeded with its internal financial, technical
and operational assessment of a business combination with Boole.
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In early October, Mr. Austin called Mr. Newton to discuss valuation issues.
Subsequently, Morgan Stanley and Goldman Sachs, BMC's financial advisor,
discussed general ranges of exchange ratios in connection with a potential
transaction.
On October 7, 1998, Mr. Newton and Saverio Merlo, Boole's Senior Vice
President of Marketing, visited BMC at its Houston headquarters. Several BMC
executives attended and presented their views as to the benefits of a
combination of the two companies.
On October 9, 1998, the BMC Board of Directors met and was advised by BMC
management of the strategic rationale for the possible transaction with Boole.
Also, on October 9, 1998, Mr. Newton and Mr. Austin again discussed valuation
issues. Following this discussion, Boole made available to BMC additional
operational, financial and technical due diligence materials.
In mid-October 1998, having determined that a combination of the two
companies fit the strategic objectives of each company, BMC and Boole discussed
with greater specificity the possibility of the acquisition of Boole by BMC in a
stock-for-stock transaction accounted for as a pooling of interests. BMC, Boole,
and their financial advisors met on October 14, 1998, and BMC presented for the
first time its proposed outline of the principal terms of a transaction other
than the exchange ratio. From time to time throughout the discussions with BMC,
the members of the Boole Board of Directors were advised of and discussed the
progress of the discussions with BMC.
On October 14-16, 1998, BMC performed technical and engineering due
diligence at Boole's headquarters and performed legal and financial due
diligence at the offices of Boole's legal counsel.
On October 16, 1998, after considerable volatility in each company's stock
prices, Mr. Austin and Mr. Newton again spoke concerning valuation, and agreed
to delay further discussion on this topic until this market volatility subsided.
On October 22, 1998, Mr. Newton and Mr. Knapp visited BMC's headquarters
together with representatives of Morgan Stanley to review BMC's strategic plans,
financial performance and organizational structure in more detail. During this
meeting, Mr. Newton and Mr. Knapp met with Mr. Watson and Mr. Austin to discuss
the exchange ratio. A range of exchange ratios was discussed but the parties
could not agree upon an exact exchange ratio.
On October 24, 1998, the Boole Board of Directors met to discuss the
proposed merger with BMC. The Boole Board of Directors and its financial advisor
and legal counsel discussed, among other issues, the issues related to
valuation, structure and terms and conditions of a potential combination.
On October 24, 1998, the BMC Board of Directors also met to discuss the
proposed merger with Boole. The BMC Board of Directors and members of management
of BMC discussed the proposed merger including the provisions contained in the
draft merger agreement and a range of proposed exchange ratios, the status of
due diligence efforts and the results of BMC's internal financial, technical and
operational assessment of Boole.
On October 26, 1998, the Boole Board of Directors met again to discuss the
proposed merger with BMC. At this meeting Morgan Stanley presented its financial
review of the proposed merger. The Boole Board of Directors discussed at length
the merits and risks associated with the proposed merger, together with other
related issues, including the
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proposed range of exchange ratios, the proposed terms and structure of the
transaction and the proposed timing thereof. The Boole Board of Directors
indicated to BMC that it was not prepared to accept certain of BMC's proposed
conditions, including the requirements for the stock option agreement.
On October 28, 1998, BMC insisted that the proposed structural terms were
critical to protect the strategic commitment by BMC and Boole and for BMC to
move forward with the transaction. BMC also informed Morgan Stanley that it
would propose a 0.675 exchange ratio. Boole's management agreed to support this
proposal.
From October 26 to October 30, 1998, representatives of BMC and Boole,
together with their financial advisors and legal counsel, discussed pricing
issues, completed their mutual due diligence investigation and negotiated the
final terms of the merger agreement and all related agreements.
On October 30, 1998, the BMC Board of Directors and the Boole Board of
Directors each met to consider the proposed merger agreement and other
agreements related to the transaction. At the BMC Board of Directors meeting,
Mr. Austin and other senior management of BMC presented a financial and product
review of the proposed combination and the final results of the due diligence
review of Boole. Goldman Sachs presented a financial analysis of the proposed
transaction, including a review of the pricing of the transaction with Boole as
compared to other similar transactions, and the BMC Board of Directors reviewed
the terms of the merger agreement and the related agreements. The BMC Board of
Directors voted unanimously to approve the merger agreement, the related
agreements and the transactions contemplated thereby. At the Boole Board
meeting, the Boole Board of Directors discussed the status of continuing
negotiations with BMC. Following the discussion of such negotiations, and a
review and discussion of the terms of the merger agreement with Boole's legal
counsel, Morgan Stanley updated its financial review with respect to the merger.
At the conclusion of such presentation, Morgan Stanley provided the Boole Board
of Directors with an oral opinion (subsequently confirmed in writing) that,
based upon certain assumptions and qualifications, the proposed exchange ratio
pursuant to the merger agreement was fair to Boole's stockholders from a
financial point of view. After this presentation, and a review and discussion of
the terms of the merger agreement and other matters relating to the proposed
merger, the Boole Board of Directors unanimously approved the merger agreement,
the merger, the related agreements and the transactions contemplated thereby and
authorized the officers of Boole to finalize and execute the merger agreement.
The merger agreement and related agreements were then executed and
delivered by the parties on October 31, 1998.
Prior to the opening of the market on November 2, 1998, BMC and Boole
issued a joint press release announcing the merger.
REASONS FOR THE MERGER
The following discussion of the parties' reasons for the merger contains a
number of forward-looking statements that reflect the current views of BMC
and/or Boole with respect to future events that may have an effect on their
future financial performance. See "Risk Factors."
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BMC'S REASONS FOR THE MERGER
The two companies develop, distribute and maintain software products that
solve different types of information systems problems of large organizations
worldwide. BMC has historically concentrated on high performance tools and
utilities for large databases and operating systems and has more recently
extended into the management of pre-packaged enterprise resource planning
applications. Boole has historically concentrated on performance monitors and
automated management systems for large scale information systems. Both BMC and
Boole began as independent vendors of point products for IBM mainframe computers
and now cover the other primary enterprise operating platforms, UNIX and
Microsoft NT. Although the two companies' product lines address distinctly
different systems management disciplines, these different disciplines are
closely related and the product lines are complementary. Combining these
products will provide the foundation for the next generation of systems
management tools for the IBM mainframe and distributed systems platforms we both
address today. The combined company would also benefit from a broader direct
sales and support network worldwide and an increased reservoir of technical,
support, sales and managerial talent. These talents are all in short supply. As
a result, BMC believes the combined company should be better positioned to grow
and to compete more effectively in the rapidly consolidating systems management
software industry.
Specifically, the merger should strategically benefit BMC by accelerating
execution of its Applications Service Assurance strategy. Boole's products fit
well into the availability, performance and recovery solutions that ASA
encompasses. Boole's software products COMMAND/POST and MainView will complement
PATROL's broad range of application management solutions and supplement PATROL's
mainframe platform coverage. BMC further believes that the MainView mainframe
performance monitors and automation products will fit well with BMC's mainframe
product lines.
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 BMC
Board of Directors considered a number of factors, including the matters
discussed above and the following:
- the strategic benefits of the merger to BMC associated with the
utilization of complementary distributed and mainframe system products
with little or no overlap in functionality, including the advancement of
BMC's Applications Service Assurance product strategy;
- the combination of the Boole direct sales organization with BMC's sales
and distribution network, particularly in international markets;
- Boole's significant technical, engineering, management and sales
expertise, which is in high demand and short supply;
- the judgment, advice and analyses of BMC's management with respect to the
potential strategic, financial and operational benefits of the merger,
including BMC management's favorable recommendation of the merger, based
in part on the business, technical, financial, accounting and legal due
diligence investigations performed with respect to Boole;
- the results of operations and financial condition of BMC and Boole and
the anticipated accretive effect of the combination on BMC common stock;
- the complementary fit between BMC's and Boole's cultures, market segments
and distribution channels, which should facilitate integration of the two
companies;
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- the historical market prices and trading information with respect to BMC
common stock and Boole's earnings;
- 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 certain
potentially negative factors that may result from the merger, including:
- the potential dilutive effect on BMC's common stock price if revenue and
earnings expectations of the combined company are not met;
- the potential loss of key Boole employees critical to the ongoing success
of the Boole products and to the successful integration of the BMC and
Boole product lines;
- the lower rates of Boole's revenue and earnings growth relative to BMC's
revenues and earnings growth 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 BMC Board of Directors did not view
any single factor as determinative and did not quantify or assign weight to any
of the factors. Rather, the BMC Board of Directors 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.
BOOLE'S REASONS FOR THE MERGER
The Boole Board of Directors believes that, despite Boole's success to
date, increasing competition and industry consolidation would make it
increasingly important for Boole to grow and gain critical mass in order to
compete with larger companies with substantially greater resources and broader,
integrated product offerings. Boole's management has considered a number of
alternatives for enhancing its competitive position, including by growing
through the acquisition of smaller companies that could extend Boole's product
offering and enhance the distribution of Boole products and services, or merging
with a larger company. In the industry environment referred to above, the Boole
Board of Directors identified several potential benefits for the Boole
stockholders, employees and customers that it believes would result from the
merger. These potential benefits include:
- the potential synergy and compatibility between Boole and BMC, based on
the compatibility of the companies' product lines;
- the financial strength of BMC that would enable the combined company to
commit greater resources to both current and emerging product development
efforts and to fund the future growth of the combined company's business;
- the ability to leverage BMC's extensive sales network to increase sales
of Boole's products;
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- the opportunity for Boole, as part of the combined company, to compete
more effectively in the increasingly competitive and rapidly changing
systems management software industry;
- the merger consideration to be received by Boole stockholders which at
the time the parties signed the merger represented a premium over the
recent price range of Boole common stock; and
- the greater liquidity to Boole stockholders of an investment in BMC
common stock instead of Boole common stock.
In the course of its deliberations during the Boole Board of Directors
meetings, the Boole Board of Directors reviewed with Boole's management a number
of additional factors relevant to the merger, including the strategic overview
and prospects for Boole. The Boole Board of Directors also considered, among
other matters:
- the financial condition, results of operations, prospects and competitive
position of BMC and Boole before and after giving effect to the merger;
- current financial market conditions and historical market prices and
trading information with respect to BMC common stock and Boole common
stock;
- the current industry and economic conditions;
- the consideration that Boole stockholders will receive in the merger and
the fact that, at the time the parties signed the merger agreement, the
market value of the BMC common stock to be issued in exchange for the
Boole common stock represented a premium over the recent price range of
the Boole common stock;
- the implications for continued independent operation of Boole in light of
competitive market conditions;
- the complementary products and services, sales channels, partners,
technology and critical skills of BMC and Boole;
- the belief that the terms of the merger agreement are reasonable;
- a comparison of selected recent acquisition and merger transactions in
the industry;
- the expected tax and accounting treatment of the merger;
- the opinion of Morgan Stanley rendered at the October 30, 1998 meeting of
the Boole Board of Directors that, based upon and subject to the various
conditions set forth in the opinion of Morgan Stanley, the exchange ratio
was fair to holders of Boole common stock from a financial point of view
as of October 30, 1998;
- the impact of the merger upon Boole's customers and employees; and
- reports from management, financial advisors and legal counsel as to the
results of their investigation of BMC.
The Boole Board of Directors also considered a number of potentially
negative factors in its deliberations concerning the merger, including:
- the loss of control over the future operations of Boole following the
merger;
- the risk that the benefits sought to be achieved in the merger will not
be achieved;
- the fixed nature of the exchange ratio and the resulting risk that it
will not adjust for subsequent price fluctuations;
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- the effect of the public announcement of the merger on Boole's sales,
customer relations and operating results and Boole's ability to attract
and retain key management, marketing and technical personnel; and
- the other risks described above under "Risk Factors."
The Boole Board of Directors discussed with Boole management the prospects
for combinations with companies other than BMC and the possibility that the
benefits described above could be achieved through any such combinations, as
well as the risks and benefits of a stand-alone strategy. The Boole Board of
Directors believed that certain of the above risks were unlikely to occur or
unlikely to have a material impact on the combined company, while others could
be avoided or mitigated by Boole or BMC, and that, overall, the risks associated
with the merger were outweighed by the potential benefits of the merger.
The foregoing discussion of information and factors considered by the Boole
Board of Directors is not intended to be exhaustive but is believed to include
all material factors considered by the Boole Board of Directors. In view of the
wide variety of factors considered by the Boole Board of Directors, the Boole
Board of Directors did not find it practicable to quantify or otherwise assign
relative weight to the specific factors considered. However, after taking into
account all of the factors set forth above, the Boole Board of Directors
unanimously agreed that the merger agreement and the consummation of the merger
were fair to, and in the best interests of, Boole and its stockholders and that
Boole should proceed with the merger.
OPINION OF BOOLE'S FINANCIAL ADVISOR
Pursuant to a letter agreement dated as of May 28, 1998, Morgan Stanley was
engaged to provide financial advisory services and a financial fairness opinion
in connection with the merger. Morgan Stanley was selected by the Boole Board to
act as Boole's financial advisor based on Morgan Stanley's qualifications,
expertise and reputation and its knowledge of the business and affairs of Boole.
At the meeting of the Boole Board on October 30, 1998, Morgan Stanley rendered
its oral opinion, subsequently confirmed in writing, that as of October 30,
1998, based upon and subject to the various considerations set forth in the
opinion, the exchange ratio pursuant to the merger agreement was fair from a
financial point of view to the holders of shares of Boole common stock.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY DATED OCTOBER 30,
1998, WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX D TO
THIS PROXY STATEMENT/PROSPECTUS. BOOLE STOCKHOLDERS ARE URGED TO, AND SHOULD,
READ THE OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS
DIRECTED TO THE BOOLE BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS OF THE
EXCHANGE RATIO PURSUANT TO THE MERGER AGREEMENT FROM A FINANCIAL POINT OF VIEW
TO THE HOLDERS OF SHARES OF BOOLE COMMON STOCK AS OF THE DATE OF THE OPINION,
AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF BOOLE COMMON STOCK AS TO HOW TO VOTE AT THE
SPECIAL MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things: (i) reviewed certain publicly available financial statements and other
information of Boole
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and BMC, respectively; (ii) reviewed certain internal financial statements and
other financial and operating data concerning Boole and BMC prepared by the
managements of Boole and BMC, respectively; (iii) discussed the past and current
operations and financial condition and the prospects of Boole, including
information relating to certain strategic, financial and operational benefits
anticipated from the merger, with senior executives of Boole; (iv) discussed the
past and current operations and financial condition and the prospects of BMC,
including information relating to certain strategic, financial and operational
benefits anticipated from the merger, with senior executives of BMC; (v)
reviewed the pro forma impact of the merger on the earnings per share of BMC;
(vi) reviewed the reported prices and trading activity for the Boole common
stock and the BMC common stock; (vii) compared the financial performance of
Boole and BMC and the prices and trading activity of the Boole common stock and
the BMC common stock with that of certain other publicly-traded companies and
their securities; (viii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions; (ix) reviewed and
discussed with the senior managements of Boole and BMC their strategic
rationales for the merger; (x) participated in discussions and negotiations
among representatives of Boole and BMC and their financial and legal advisors;
(xi) reviewed the draft merger agreement and certain related agreements; and
(xiii) performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the internal
financial statements and other financial and operating data and discussions
relating to strategic, financial and operational benefits anticipated from the
merger provided by Boole and BMC, Morgan Stanley assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the prospects of Boole and BMC, respectively. Morgan Stanley
relied upon the assessment by the managements of Boole and BMC of their ability
to retain key employees of Boole and BMC. Morgan Stanley also relied upon,
without independent verification, the assessment by the managements of Boole and
BMC of the strategic and other benefits expected to result from the merger.
Morgan Stanley also relied upon, without independent verification, the
assessment by the managements of Boole and BMC of Boole's and BMC's technologies
and products, the timing and risks associated with the integration of Boole with
BMC and the validity of, and risks associated with, Boole's and BMC's existing
and future products and technologies. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities or technology of
Boole or BMC, nor was Morgan Stanley furnished with any such appraisals. In
addition, Morgan Stanley assumed that the merger will be accounted for as a
"pooling-of-interests" business combination in accordance with U.S. Generally
Accepted Accounting Principles and the merger will be treated as a tax-free
reorganization and/or exchange pursuant to the Internal Revenue Code of 1986 and
will be consummated in accordance with the terms set forth in the draft merger
agreement. Morgan Stanley's opinion is necessarily based on financial, economic,
market and other conditions as in effect on, and the information made available
to it as of, October 30, 1998.
The following is a brief summary of certain analyses performed by Morgan
Stanley in connection with its oral opinion and the preparation of its opinion
letter dated October 30, 1998.
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Comparative Stock Price Performance. Morgan Stanley reviewed the recent
stock price performance of Boole and BMC and compared such performance with that
of a group of enterprise software companies comprising Computer Associates
International, Inc., Compuware Corporation, Networks Associates, Inc., Platinum
Technology, Inc., Sterling Software, Inc., Legato Systems, Inc. and New
Dimension Software, Ltd. (collectively, the "Enterprise Software Index"). Morgan
Stanley observed that over the period from October 29, 1997 to October 30, 1998,
the market price of Boole common stock increased 40%, compared with an increase
of 66% for BMC common stock and a decrease of 2% for the Enterprise Software
Index.
Peer Group Comparison. Morgan Stanley compared certain financial
information of Boole and BMC with publicly available information of a group of
software companies including Computer Associates International, Inc., Compuware
Corporation, Networks Associates, Inc., Platinum Technology, Inc., Sterling
Software, Inc., Legato Systems, Inc., New Dimension Software, Ltd., Objective
Systems Integrators, Inc. and Landmark Systems Corporation (collectively, the
"Enterprise Software Companies"). Morgan Stanley also compared certain financial
information of BMC with publicly available information of a group of companies
including IBM, Compaq Corporation and EMC Corporation (collectively, the "Large
Capitalization Technology Companies"). Such analysis showed that as of October
30, 1998, the Boole common stock and the BMC common stock prices to projected
calendar year 1998 earnings, based on median estimates from securities research
analysts, were 21.5 and 35.3 times, respectively, compared to a median of 22.3
and 44.7 times for the Enterprise Software Companies and the Large
Capitalization Technology Companies, respectively. The Boole common stock and
the BMC common stock prices to projected calendar year 1999 earnings, based on
median estimates from securities research analysts, were 18.1 and 27.9 times,
respectively, compared to a median of 17.5 and 19.8 times for the Enterprise
Software Companies and the Large Capitalization Technology Companies,
respectively. In addition, Boole's and BMC's aggregate values were 3.2 and 12.0
times, respectively, last twelve months of revenue, compared to a median of 4.2
and 2.1 times for the Enterprise Software Companies and the Large Capitalization
Technology Companies, respectively. The analysis also showed that as of October
30, 1998, the Boole common stock and the BMC common stock prices to calendar
year 1999 earnings ratios, based on median estimates of securities research
analysts, divided by the estimated long term growth rates, based on median
estimates of securities research analysts, were 1.0 and 1.1 times, respectively,
compared to 0.6 and 1.3 times for the Enterprise Software Companies and the
Large Capitalization Technology Companies, respectively.
No company utilized in the peer group comparison analysis as a comparison
is identical to Boole or BMC. In evaluating the peer groups, Morgan Stanley made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond control of Boole or BMC, such as the impact of competition on the
business of Boole or BMC and the industry generally, industry growth and the
absence of any material adverse change in the financial condition and prospects
of Boole or BMC or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using peer group data.
Analysis of Selected Precedent Transactions. Morgan Stanley reviewed a
number of enterprise software transactions (collectively, the "Enterprise
Software Transactions") and
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compared certain statistics for the Enterprise Software Transactions to the
relevant financial statistics for Boole based on the value of Boole implied by
the exchange ratio and the closing price for Boole common stock and BMC common
stock as of October 30, 1998. The analysis of the Enterprise Software
Transactions showed a low, median and high multiple of last twelve months'
earnings of 6.3, 43.0 and 178.4 times, respectively, a low, median and high
multiple of next twelve months' earnings of 8.4, 35.0 and 101.1 times,
respectively, and a low, median and high multiple of last twelve months' revenue
of 0.4, 5.3 and 57.7 times, respectively. These statistics compared to a
multiple of 27.1 times latest twelve months' earnings, 23.0 times next twelve
months' earnings and 4.2 times latest twelve months' revenue based on the value
of Boole implied by the merger. In addition, the analysis of Enterprise Software
Transactions showed a low, median and high offer price premia of 5.4%, 25.8% and
59.9%, respectively, to one day prior to transaction announcement and a low,
median and high offer price premia of -26.6%, 38.6% and 100.1%, respectively, to
one month prior to transaction announcement. These compared in the case of the
consideration to be received by holders of the shares of Boole common stock to
an implied offer price premia for one day and one month prior to the transaction
announcement of 21.8% and 40.3%, respectively.
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. In evaluating the precedent transactions,
Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Boole or BMC, such as the
impact of competition on Boole or BMC and the industry generally, industry
growth and the absence of any material adverse change in the financial condition
and prospects of Boole or BMC or the industry or in the financial markets in
general. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using comparable transaction data.
Exchange Ratio Analysis. Morgan Stanley reviewed the ratios of the closing
prices of Boole common stock divided by the corresponding prices of BMC over
various periods during the twelve month period ending October 30, 1998 and
computed the premia represented by the exchange ratio over the averages of these
daily ratios over various periods. The averages of these ratios of the closing
prices of Boole and BMC were 0.546 for the previous 10 calendar days prior to
October 30, 1998, 0.489 for the 20 prior calendar days, 0.465 for the 30 prior
calendar days, 0.452 for the 60 prior calendar days and 0.468 for the 120 prior
calendar days. The exchange ratio represented premia of 24%, 38%, 45%, 49% and
44%, respectively, over the aforementioned average exchange ratios of the Boole
and BMC stock prices. The exchange ratio represented a 22% premium to the
exchange ratio based on closing prices of Boole and BMC on October 30, 1998.
Pro Forma Merger Analysis. Morgan Stanley analyzed the pro forma impact of
the merger on BMC's projected earnings per share for calendar years 1998 and
1999. Such analysis was based on earnings projections by securities research
analysts for both companies. Morgan Stanley observed that, assuming that the
merger was treated as a pooling transaction, the merger would result in earnings
per share accretion for BMC shareholders of 3.0% and 2.3% for calendar years
1998 and 1999, respectively, before taking into account any one-time charges or
synergies.
Discounted Equity Value. Morgan Stanley performed an analysis of the
present value per share of Boole on a standalone basis based on Boole's future
trading price. Morgan Stanley observed that, based on a range of earnings per
share estimates based on securities
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research analysts for the calendar years 2000 and 2001, illustrative multiples
of earnings per share ranging from 12.0 times to 18.0 times and illustrative
discount rates ranging from 10.3% to 15.0%, the present value per share of Boole
common stock on a standalone basis ranged from $18.72 to $31.30. Morgan Stanley
compared the results of the standalone analysis to an analysis of the present
value per share of the implied value of Boole based on BMC's future trading
price assuming consummation of the merger and based on a range of earnings per
share estimates based on securities research analysts for both companies for
calendar years 2000 and 2001 prior to any synergies resulting from the merger,
multiples of earnings per share ranging from 22.0 times to 30.0 times and
discount rates of 13.5% and 15.0%. Based on this analysis, Morgan Stanley
estimated a present value per equivalent share of Boole common stock ranging
from $28.92 to $43.92. Morgan Stanley also performed an analysis of the present
value per share of BMC on a standalone basis. Morgan Stanley observed that,
based on a range of earnings per share estimates based on securities research
analysts for the calendar years 2000 and 2001, illustrative multiples of
earnings per share ranging from 24.0 times to 32.0 times and illustrative
discount rates ranging from 13.5% to 15.0%, the present value per share of BMC
common stock on a standalone basis ranged from $45.96 to $68.64. Morgan Stanley
observed that the price of BMC common stock on October 30, 1998 was $48.06.
In connection with the review of the merger by the Boole Board of
Directors, Morgan Stanley performed a variety of financial and comparative
analyses for purposes of its opinion given in connection therewith. The summary
set forth above does not purport to be a complete description of the analyses
performed by Morgan Stanley in connection with the merger.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Morgan Stanley believes that selecting any
portion of its analyses, without considering all analyses, would create an
incomplete view of the process underlying its opinion. In addition, Morgan
Stanley may have given various analyses and factors more or less weight than
other analyses and factors, and may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Boole or BMC.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Boole or BMC. Any
estimates contained in Morgan Stanley's analysis are not necessarily indicative
of future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses performed were
prepared solely as part of Morgan Stanley's analysis of the fairness of the
exchange ratio pursuant to the merger agreement from a financial point of view
to the holders of Boole common stock and were conducted in connection with the
delivery of the Morgan Stanley opinion to the Board of Directors of Boole. The
analyses do not purport to be appraisals or to reflect the prices at which Boole
common stock or BMC common stock might actually trade. The exchange ratio
pursuant to the merger agreement and other terms of the merger agreement were
determined through arm's-length negotiations between Boole and BMC and were
approved by the Boole Board of Directors. Morgan Stanley provided advice to
Boole during such negotiations; however, Morgan Stanley did not recommend any
specific
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consideration to Boole or that any specific consideration constituted the only
appropriate consideration for the merger. In addition, as described above,
Morgan Stanley's opinion and presentation to the Boole Board of Directors was
one of many factors taken into consideration by Boole's Board of Directors in
making its decision to approve the merger. Consequently, the Morgan Stanley
analyses as described above should not be viewed as determinative of the opinion
of the Boole Board of Directors with respect to the value of Boole or of whether
the Boole Board of Directors would have been willing to agree to a different
consideration.
The Boole Board of Directors retained Morgan Stanley based upon Morgan
Stanley's qualifications, experience and expertise. Morgan Stanley is an
internationally recognized investment banking and advisory firm. Morgan Stanley,
as part of its investment banking and financial advisory business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the ordinary course of
Morgan Stanley's trading and brokerage activities, Morgan Stanley or its
affiliates may at any time hold long or short positions, may trade or otherwise
effect transactions, for its own account or for the account of customers in the
equity or debt securities or senior loans of BMC or Boole.
Pursuant to an engagement letter dated May 28, 1998, Morgan Stanley
provided financial advisory services and a financial opinion in connection with
the merger, and Boole agreed to pay Morgan Stanley a customary fee in connection
therewith. Boole has also agreed to reimburse Morgan Stanley for travel and
other out-of-pocket expenses incurred by Morgan Stanley in performing its
services. In addition, Boole has also agreed to indemnify Morgan Stanley and its
affiliates, their respective directors, officers, agents and employees and each
person, if any, controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities under the
federal securities laws, related to Morgan Stanley's engagement and any related
transactions. In the past, Morgan Stanley and its affiliates have provided
financial advisory services for Boole and BMC and has received fees for the
rendering of these services.
INTERESTS OF BOOLE'S OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendations of Boole's Board of Directors with
respect to the merger, stockholders should be aware that certain members of the
Board of Directors and management of Boole have interests in the merger that are
in addition to the interests of stockholders of Boole generally. The Board of
Directors of Boole was aware of these interests and considered them, among other
matters, in approving the merger agreement and the transactions contemplated
thereby.
Indemnification and Insurance. The merger agreement provides that from and
after the effective time of the merger, BMC shall (and BMC shall cause the
surviving corporation of the merger to) indemnify and hold harmless each present
and former director and officer of Boole, determined as of the effective time of
the merger, 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 of the merger (including, without limitation, the merger, the
preparation, filing and mailing of this Proxy Statement/Prospectus and the other
transactions and actions contemplated by the merger
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agreement), whether asserted or claimed prior to, at or after the effective time
of the merger, and BMC shall (and BMC shall cause the surviving corporation of
the merger to) fulfill and honor in all respects the obligations of Boole
pursuant to all indemnification agreements existing on the date of the merger
agreement and the certificate of incorporation and bylaws of Boole in effect on
the date of the merger agreement (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 years after the effective
time of the merger, 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 Boole's directors' and officers' liability
insurance policy with coverage in amount and scope at least as favorable as
Boole's existing coverage (which coverage may be an endorsement extending the
period in which claims may be made under such existing policy); provided that
(i) 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 Boole to
provide such coverage, (ii) if the annual premiums of such insurance coverage
exceed such amount, BMC will be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount, and (iii) if a policy
of the type described above is not available in the market, BMC will obtain a
policy that is as close as possible to being as favorable as Boole's existing
coverage.
Employment Agreements. To facilitate the integration of BMC and Boole after
the closing of the merger, BMC has agreed to employ certain Boole executives for
a term of eight months. Each Boole executive who executes an employment
agreement with BMC will receive compensation equal to such employee's base
salary as an employee of Boole prior to the closing of the merger. Upon
termination of employment, each Boole executive employed by BMC shall be
entitled to receive (i) the remainder of (a) all amounts payable in connection
with such termination under Boole's 1999 Executive Incentive Plan, less (b) all
amounts paid as compensation to such employee by BMC under the employment
agreement, (ii) accrued vacation, (iii) sabbatical payments, and (iv) vested
benefits under Boole's employee benefit plans.
Automatic Acceleration of Stock Options; Severance Payments. Pursuant to
Boole's Executive Incentive Plan (in effect since 1994), certain Boole
executives (the "Executive Plan Participants"), including all of Boole's
executive officers, will be entitled to certain benefits in connection with the
merger. The Executive Incentive Plan provides that 100% of the options to
purchase Boole common stock held by each Executive Plan Participant will vest in
the event that the Executive Plan Participant leaves the employment of Boole
within one year of a change of control. As of October 31, 1998, Boole executive
officers held an aggregate of 1,087,269 unvested options to purchase Boole
common stock. In addition, the Executive Incentive Plan provides that in the
event of a change of control, each Executive Plan Participant will be entitled
to receive his or her prorated bonus for the number of fiscal year quarters
completed (including the entire quarter in which the change of control takes
place) based on Boole's year-to-date results prior to the announcement of the
change of control. In addition, should the Executive Plan Participant leave
Boole's employment within one year of a change of control, an extra full year of
salary and targeted bonus will be paid to the Executive Plan Participant. The
merger constitutes a change of control under the terms of the Executive
Incentive Plan.
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Pursuant to Boole's 1993 Non-Employee Directors' Stock Option Plan, stock
options granted to non-employee directors of Boole will automatically vest
immediately prior to the consummation of the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the merger to the holders of Boole common stock and is based
upon current provisions of the Internal Revenue Code, existing regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. Any such change, which may or may not be retroactive,
could alter the tax consequences to BMC, Boole or the stockholders of Boole as
described herein. 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 who are subject to special tax rules such as dealers in securities,
foreign persons, mutual funds, insurance companies, tax-exempt entities, holders
who are subject to the alternative minimum tax provisions of the Internal
Revenue Code, holders who acquired their shares in connection with stock option
or stock purchase plans or in other compensatory transactions, holders who hold
their shares as a hedge or as part of a hedging, straddle or other risk
reduction strategy, and holders who do not hold their shares as capital assets.
In addition, the following discussion does not address the tax consequences of
the merger under state, local and foreign tax laws or the tax consequences of
transactions effectuated prior to or after the merger, (whether or not such
transactions are in connection with the merger). Accordingly, holders of Boole
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 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 Internal Revenue Code (a "Reorganization"), that BMC, Merger Sub
and Boole will each be a party to the Reorganization, and that BMC, Merger Sub
and Boole will not recognize any gain or loss as a result of the merger. Boole
has received from its counsel, Cooley Godward LLP, an opinion to the effect that
the merger will be treated for federal income tax purposes as a Reorganization,
that BMC, Merger Sub and Boole will each be a party to the Reorganization, and
that stockholders of Boole will not recognize any gain or loss upon the receipt
of BMC common stock for their Boole common stock, other than with respect to
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 Boole. Stockholders of Boole 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:
(a) no gain or loss will be recognized by BMC, Merger Sub or Boole
solely as a result of the merger;
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(b) no gain or loss will be recognized by a holder of Boole common
stock upon the exchange of all of such holder's shares of Boole common
stock solely for shares of BMC common stock in the merger;
(c) the aggregate basis of the shares of BMC common stock received by
a Boole stockholder in the merger (including any fractional share deemed
received) will be the same as the aggregate basis of the shares of Boole
common stock surrendered in exchange therefor;
(d) the holding period of the shares of BMC common stock received by a
Boole stockholder in the merger will include the holding period of the
shares of Boole common stock surrendered in exchange therefor, provided
that such shares of Boole common stock are held as capital assets at the
effective time of the merger; and
(e) a stockholder of Boole 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 Boole common stock is held by such stockholder
as a capital asset at the effective time of the merger.
ANTICIPATED 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. The pooling of interests method of accounting assumes that the combining
companies have been merged from inception, and the historical consolidated
financial statements for periods prior to consummation of the merger are
restated as though the companies had been combined from inception.
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. Consummation of the
merger is conditioned upon the availability of "pooling of interests" accounting
treatment for the merger. Arthur Andersen LLP's advice contemplates that each
person who may be deemed an affiliate of Boole or BMC will enter into an
agreement with BMC not to sell or otherwise transfer any shares of Boole common
stock or BMC common stock, as the case may be, within 30 days prior to the
effective time of the merger or any 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 Boole. In accordance with the provisions of the
merger agreement, BMC and Boole have heretofore obtained executed affiliate
agreements from all persons known to the managements of BMC or Boole to be
persons who may be deemed to be affiliates of such corporations, respectively.
GOVERNMENTAL APPROVALS
Transactions such as the merger are subject to review 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 Boole filed notification reports, together with requests
for early termination of the waiting period,
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with the Department of Justice and the FTC under the HSR Act on November ,
1998. Unless earlier terminated or a request for additional information is made,
the applicable waiting period will expire on , 1998.
At any time before or after the effective time of the merger, 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 Boole 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 Boole will prevail.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of BMC common stock to be received by Boole 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 may be deemed to be "affiliates" (as that term is
defined in Rule 144 under the Securities Act) of Boole 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 SEC, the sale or
other disposition of BMC common stock or Boole common stock by an affiliate of
either BMC or Boole, as the case may be, within 30 days prior to the effective
time of the merger 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 Boole could preclude
pooling of interests accounting treatment of the merger. Accordingly, the merger
agreement provides that each of Boole and BMC will cause persons who may be
deemed to be its affiliates to execute an affiliate agreement to the effect that
such persons will not sell, transfer or otherwise dispose of any shares of Boole
common stock or BMC common stock, as the case may be, during the pooling period
referred to above and, with respect to affiliates of Boole, 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 "-- Anticipated Accounting
Treatment," BMC and Boole have heretofore obtained executed affiliate agreements
from all persons known to the managements of BMC or Boole to be affiliates of
such corporations, respectively.
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 a Certificate of Merger
with the Secretary of State of the State of Delaware. 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.
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MANNER AND BASIS OF CONVERTING SHARES
At the effective time of the merger, each share of Boole common stock then
issued and outstanding, without any action on the part of the holders thereof,
will automatically become and be converted into a fraction of a fully paid and
nonassessable share of issued and outstanding BMC common stock equal to 0.675.
The fraction of a share of BMC common stock into which each share of Boole
common stock will be converted is referred to in this Proxy Statement/Prospectus
as the exchange ratio.
Promptly following the effective time of the merger, BMC will cause Boston
EquiServe, which has been selected by BMC to act as exchange agent pursuant to
the merger agreement, to mail to each record holder of Boole common stock
immediately prior to the effective time of the merger, information advising such
holder of the consummation of the merger and a letter of transmittal for use in
exchanging Boole 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 of the merger 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 Boole common stock may, at their option after the effective time of
the merger, surrender such certificates for certificates evidencing BMC common
stock at the offices of the exchange agent in person. After the effective time
of the merger, there will be no further registration of transfers on the stock
transfer books of Boole of shares of Boole common stock that were outstanding
immediately prior to the effective time of the merger. Share certificates should
not be surrendered for exchange by stockholders of Boole prior to the effective
time of the merger.
No fractional shares of BMC common stock will be issued in the merger. Each
stockholder of Boole 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 of the merger.
After the effective time of the merger, until so surrendered and exchanged,
each certificate previously evidencing Boole common stock shall be deemed, for
all purposes, to evidence 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 Boole 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 of the merger shall be paid to the holders of such certificates previously
evidencing Boole 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 of the merger 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 the effective time of the merger but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of BMC
common stock.
BOOLE OPTIONS
The merger agreement provides that at the effective time of the merger,
automatically and without any action on the part of the holder thereof, each
Boole stock option (which
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includes all outstanding options granted under Boole's stock option plans will
become an option to purchase that number of shares of BMC common stock
determined by multiplying the number of shares of Boole common stock subject to
such Boole stock option immediately prior to the effective time of the merger by
the exchange ratio, at an exercise price per share of BMC common stock equal to
the exercise price per share of such Boole stock option divided by the exchange
ratio. If the foregoing calculation results in an exchanged Boole stock 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
Boole stock 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 Boole stock options will be registered under an
effective Form S-8 Registration Statement (or other comparable form) filed with
the SEC.
Based on the Boole stock options outstanding at the record date and
assuming none of such Boole stock options is exercised prior to the effective
time of the merger, BMC will be required at the effective time of the merger to
reserve an aggregate of shares of BMC common stock for issuance upon
exercise of Boole stock options assumed by BMC pursuant to the merger.
EMPLOYEE STOCK PURCHASE PLAN
As of the effective time of the merger, Boole's Employee Stock Purchase
Plan shall be terminated. The rights of participants in the Employee Stock
Purchase Plan with respect to any offering period then underway under the
Employee Stock Purchase Plan shall be determined by treating the last business
day prior to the effective time of the merger as the last day of such offering
period and by making such other pro-rata adjustments as may be required pursuant
to the Employee Stock Purchase Plan to reflect the reduced offering period but
otherwise treating such offering period as a fully effective and completed
offering period for all purposes of such plan. Prior to the effective time of
the merger, Boole shall take all actions that are necessary to give effect to
the transactions contemplated by the merger agreement; provided, however, that
the change in the offering period referred to in the merger agreement shall be
conditioned upon the consummation of the merger.
CONDITIONS TO THE MERGER
Boole's and BMC's Conditions. The respective obligations of BMC and Boole
to consummate the merger are subject to the satisfaction of certain conditions,
including the following:
- adoption of the merger agreement and approval of the merger by the
stockholders of Boole;
- the absence of any action or legal proceeding by a U.S. federal or state,
or European country, governmental entity with respect to the merger which
would reasonably be expected to have a Material Adverse Effect (as
defined below) on BMC or Boole; and
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- expiration or termination of the applicable waiting period under the HSR
Act and any comparable competition laws or regulations in Europe or
Japan.
Boole's Conditions. The obligations of Boole to consummate and effect the
merger are further subject to the receipt of certain closing certificates and
fulfillment of the following conditions, or to the waiver thereof by Boole
before the effective time of the merger:
- the representations and warranties of BMC contained in the merger
agreement shall be, in all respects, true as of and at the effective time
of the merger 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 on BMC (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 of the merger; and BMC shall have delivered to
Boole a certificate, dated as of the effective time of the merger and
signed on behalf of BMC by its chairman of the board and by its chief
financial or accounting officer to both such effects;
- this Proxy Statement/Prospectus shall have become effective under the
Securities Act;
- BMC shall have made effective provision for the assumption or
substitution at the effective time of the merger of all stock options
outstanding under plans maintained by Boole;
- Boole shall have received a favorable opinion from Morgan Stanley for
inclusion in this Proxy Statement/Prospectus as to the fairness, from a
financial point of view, to the Boole stockholders of the exchange ratio,
which opinion shall not have been withdrawn; and
- Cooley Godward LLP shall have delivered to Boole its written opinion
substantially to the effect that: (x) the merger will constitute a
Reorganization; (y) BMC, Merger Sub and Boole will each be a party to
that Reorganization; and (z) no gain or loss for U.S. federal income tax
purposes will be recognized by the holders of Boole 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; provided, however, that if Cooley Godward LLP does not
render such opinion or withdraws or modifies such opinion, this condition
shall nonetheless be deemed to be satisfied if counsel to BMC renders
such opinion to Boole.
BMC's Conditions. The obligations of BMC to consummate and effect the
merger are further subject to the receipt of certain closing certificates and
fulfillment of the following conditions, or to the waiver thereof by BMC before
the effective time of the merger:
- the representations and warranties of Boole contained in the merger
agreement shall be, in all respects, true as of and at the effective time
of the merger with the same
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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 on
Boole (it being understood that any materiality qualifications contained
in such representations and warranties shall be disregarded for this
purpose); Boole shall have performed and complied, in all material
respects, with all covenants required by the merger agreement to be
performed or complied with by Boole before the effective time of the
merger; and Boole shall have delivered to BMC a certificate, dated as of
the effective time of the merger and signed on behalf of Boole by its
chief executive officer and by its chief financial or accounting officer
to both such effects; and
- Vinson & Elkins L.L.P. shall have delivered to BMC its written opinion
substantially to the effect that (x) the merger will constitute a
Reorganization, (y) BMC, Merger Sub and Boole will each be a party to
that Reorganization, and (z) BMC, Merger Sub and Boole 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; provided, however, that if Vinson & Elkins L.L.P. does
not render such opinion or withdraws or modifies such opinion, this
condition shall nonetheless be deemed to be satisfied if counsel to Boole
renders such opinion to BMC.
"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 would reasonably be
expected to materially adversely affect the business, results of operations or
financial condition of BMC or Boole, 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 Boole's
equity securities between the date of the merger agreement and the effective
time of the merger, in and of itself; (ii) effects, changes, events,
circumstances or conditions generally affecting the industry in which either BMC
or Boole 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 the
merger agreement, or (b) the payment by BMC or Boole of all amounts due to any
officers or employees of Boole 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 Boole; (v) any effects, changes, events, circumstances or conditions
(including, without limitation, non-governmental litigation, delays in customer
orders, a reduction in sales, a disruption in supplier, distributor or similar
relationships or a loss of employees) resulting from the announcement or
pendency of any of the transactions contemplated by the merger agreement; and
(vi) any effects, changes, events, circumstances or conditions, resulting from
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compliance by BMC or Boole with the terms of, or the taking of any action
contemplated or permitted by, the merger agreement.
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 made
by Boole and BMC relating to, among other things:
- its organization and similar corporate matters;
- 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;
- its capitalization;
- the documents and reports filed by it with the SEC and its financial
statements and the accuracy of the information contained therein;
- the absence of any undisclosed liabilities, contracts or defaults;
- the absence of certain changes and events since a certain date;
- its brokers or investment bankers involved in the transaction;
- its employee benefit plans;
- the absence of investigations and litigation;
- the information provided by it for inclusion in this Proxy
Statement/Prospectus;
- certain matters relating to pooling of interests accounting and taxes;
and
- Year 2000 compliance.
In addition, the merger agreement contains representations and warranties
made by Boole relating to:
- its subsidiaries;
- certain additional information provided by Boole respecting employee
compensation plans, salaries and other arrangements, employment
agreements and guaranty arrangements to which Boole is a party;
- taxes;
- its intellectual property;
- its software contracts;
- title to its properties;
- its compliance with environmental laws,;
- its compliance with other laws;
- warranties on its products;
- the Investment Company Act of 1940;
- certain provisions of its certificate of incorporation and Section 203 of
the DGCL; and
- the inapplicability of certain anti-takeover statutes.
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In addition, the merger agreement contains a representation and warranty by
BMC relating to the authorization of the BMC common stock to be issued in
connection with the merger. The representations and warranties of Boole 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 of the merger.
CERTAIN COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE MERGER
Affirmative Covenants of Boole. Boole has agreed that prior to the
effective time of the merger, except to the extent BMC shall otherwise consent
in writing (which consent shall not be unreasonably withheld or delayed), it
will:
- other than as contemplated by the merger agreement, operate its business
only in the usual, regular, and ordinary manner in an effort 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 and adversely deviate from
its licensing and pricing practices;
- 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;
- duly comply with all laws applicable to it and to the conduct of its
business, except where the failure to comply with such laws would not
have a Material Adverse Effect on Boole;
- at its expense, take all commercially reasonable actions as may be
necessary, advisable or proper (i) to consummate and make effective in
the most expeditious manner practicable, the merger and the other
transactions contemplated by the merger agreement, (ii) to insure that
the representations and warranties made by it in the merger agreement are
true and correct at the effective time of the merger such that the
closing condition regarding the accuracy of such representations and
warranties is satisfied, (iii) to fully perform all covenants made by it
in the merger agreement, and (iv) to satisfy timely all other obligations
imposed upon it by the merger agreement;
- upon reasonable advance notice and subject to certain exceptions, to
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 made by Boole in the
merger agreement and the compliance with covenants contained in the
merger agreement; and
- to maintain insurance (or self insurance reserves) on its properties and
with respect to the conduct of its business of such kinds and in such
substantially similar amounts as is 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 prior to and
including the effective time of the merger any of its property or assets
are damaged or destroyed by fire or other casualty, the obligations of
BMC and Boole 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
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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 Boole), 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 of the merger all proceeds of
insurance and claims of every kind arising as a result of any such damage
or destruction shall remain the property of Boole.
In addition, Boole has agreed that prior to the effective time of the
merger it will:
- deliver to BMC (i) within 90 days after the end of the fiscal year ended
September 30, 1998, the audited consolidated financial statements of
Boole included in its report on Form 10-K and (ii) within 45 days after
the end of each fiscal quarter of Boole beginning December 31, 1998 and
through the effective time of the merger, unaudited consolidated balance
sheets and related unaudited statements of income, retained earnings and
cash flows as of the end of each fiscal quarter of Boole, and as of the
corresponding fiscal quarter of the previous fiscal year; and
- call and hold a meeting of stockholders as soon as practicable, but in
any event no later than 60 days after the SEC has indicated that it has
no further comments on this Proxy Statement/Prospectus for the purpose of
considering and acting upon a proposal to adopt the merger agreement and
approve the merger, provided that if Boole shall fail to hold a meeting
of stockholders by the 60-day deadline solely because of a delay directly
caused by BMC or because of an event outside of the control of Boole,
such 60-day deadline shall be extended by the number of days by which BMC
or the event outside of the control of Boole shall have been responsible
for delaying the Boole stockholders' meeting.
Negative Covenants of Boole. Boole has agreed that prior to the effective
time, except to the extent otherwise agreed to in writing by BMC (which consent
shall not be unreasonably withheld or delayed), or as previously disclosed to
BMC, it will not:
- take any action or enter into any transaction which would materially
affect or materially delay its ability to complete the transactions
contemplated by the merger agreement;
- take any action that would, or fail to take any action the failure of
which would, materially and adversely affect its intellectual property;
- enter into any contracts of employment which (i) cannot be terminated on
notice of 14 days or less without the payment of severance compensation
or (ii) provide for any increase in compensation, including, without
limitation, any modification of any stock option agreements, outside the
ordinary course of business consistent with past practice, or 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;
- incur any indebtedness for borrowed money except for borrowings incurred
in the ordinary course of business consistent with past practices;
- enter into commitments of a capital expenditure nature 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 or (ii) as may be
required by law;
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- amend its certificate of incorporation 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;
- 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 (i) Boole may
issue shares of Boole common stock upon exercise of options previously
granted under existing benefit plans or the issuance of Boole common
stock under the Boole Employee Stock Purchase Plan, (ii) Boole may issue
options to purchase up to 100,000 shares of Boole common stock per
calendar quarter so long as such options are granted at fair market value
on the date of the grant and vest over four years in accordance with
Boole's normal vesting schedule, (iii) Boole may issue shares of Boole
common stock upon the exercise of the options referred to in clause
"(ii)" of this sentence, and (iv) Boole may issue option agreements in
connection with option grants approved by Boole's Board of Directors or a
committee thereof prior to the date of the merger agreement;
- declare or pay any dividend on shares of its capital stock or make any
other distribution of assets to the holders thereof;
- enter into or modify any collective bargaining agreement with any labor
union or other representative of employees;
- increase the compensation or benefits of any employee of Boole or any of
its subsidiaries other than in the ordinary course of business;
- amend or terminate any Boole Plan (as defined in the merger agreement)
except as contemplated by the merger agreement; or
- enter into or adopt any new employee benefit plan, policy or arrangement.
Affirmative Covenants of BMC. BMC has agreed that prior to the effective
time of the merger, it will:
- other than as contemplated by the merger agreement, operate its business
in the usual, regular and ordinary manner;
- upon reasonable advance notice and subject to certain exceptions, permit
Boole and its officers and authorized representatives, during normal
business hours, to inspect its records and to consult with BMC's
officers, employees, attorneys and agents for the purpose of determining
the accuracy of the representations and warranties made by BMC in the
merger agreement and the compliance with the covenants contained in the
merger agreement;
- take all action reasonably necessary to register the issuance of BMC
common stock to the stockholders of Boole 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 and pursuant to
all assumed Boole stock options;
- take such steps as are required to accomplish, as of the effective time
of the merger, the Notification of Additional Listing of the shares of
BMC common stock to be issued pursuant to the merger agreement and
pursuant to all assumed Boole stock options on the Nasdaq National
Market; and
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- at its expense, take all commercially reasonable actions as may be
necessary, advisable or proper (i) to consummate and make effective, in
the most expeditious manner practicable, the merger and the other
transactions contemplated by the merger agreement; (ii) to insure that
the representations and warranties made by it in the merger agreement are
true and correct at the effective time of the merger, (iii) to fully
perform all covenants made by it in the merger agreement and (iv) to
satisfy timely all other obligations imposed upon it by the merger
agreement.
Negative Covenants of BMC. BMC has agreed that prior to the effective time
of the merger, it will not:
- take any action or enter into any transaction which would materially
affect or materially delay its ability to complete the transactions
contemplated by the merger agreement;
- 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
the BMC common stock;
- issue or sell, or issue options other than (i) options previously
authorized by the compensation committee of BMC's Board of Directors,
(ii) options granted to new personnel upon commencement of employment or
(iii) options granted in the ordinary course of business as to three
percent (3%) of the outstanding BMC common stock 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, issue 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
- declare or pay any dividend on shares of its capital stock or make any
other distribution of assets to the holders thereof.
BMC and Boole have each agreed that prior to the effective time of the
merger, they will:
- notify the other party in writing of (i) any event occurring subsequent
to the date of the merger agreement which would render any representation
or warranty of such party contained in the merger agreement untrue or
inaccurate and which would reasonably be expected to result in a Material
Adverse Effect, (ii) any Material Adverse Effect on such party, and (iii)
any material breach by such party of any covenant or agreement contained
in the merger agreement;
- use all reasonable efforts to cause the merger to be treated for
financial accounting purposes as a pooling of interests, and shall not
take, and shall use all reasonable efforts to prevent any affiliate of
such party from taking, any action which could prevent the merger from
being treated for financial accounting purposes as a pooling of
interests; and
- not take any action or fail to take any action which action or failure to
act would prevent, or would reasonably be likely to prevent, the merger
from qualifying as a
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<PAGE> 53
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986 and will use all reasonable efforts to obtain the
opinion of counsel to such effect.
NO SOLICITATION
As an inducement to BMC to enter into the merger agreement, Boole has
agreed not to directly or indirectly, or authorize or permit any of its
respective agents to:
- solicit, initiate, facilitate or knowingly encourage (including by way of
furnishing information) any inquiry or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any acquisition or
purchase by a third party (other than BMC or an affiliate of BMC) of a
substantial amount of assets of, or any equity interest in, Boole or any
merger, consolidation, business combination, sale of securities,
recapitalization, liquidation, dissolution or similar transaction
involving Boole (other than the transactions contemplated by the merger
agreement) (collectively, "Boole Transaction Proposals") or agree to or
endorse any Boole Transaction Proposal; or
- propose, enter into or participate in any discussions or negotiations
regarding any Boole Transaction Proposal, or furnish to another person
(other than BMC or a representative of BMC) any information with respect
to its business, properties or assets for the purpose of facilitating any
Boole Transaction Proposal.
However, the foregoing clauses and the other provisions of the merger
agreement will not prohibit Boole from:
- furnishing information pursuant to an appropriate confidentiality letter
concerning Boole and its businesses, properties or assets to a third
party who has made a Superior Boole Transaction Proposal (as defined
below);
- engaging in discussions or negotiations with a third party who has made a
Superior Boole Transaction Proposal; or
- following receipt of a Superior Boole Transaction Proposal, taking and
disclosing to its stockholders a position (including a positive
recommendation) with respect thereto or changing, withdrawing or
withholding the approval or recommendation by Boole's Board of Directors
of the merger agreement or the merger, but in each case referred to in
the foregoing clauses only after the Board of Directors of Boole
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 Boole to comply with its
fiduciary obligations to Boole's stockholders under applicable law.
If the Board of Directors of Boole receives a Boole Transaction Proposal,
then Boole must immediately inform BMC of the terms and conditions of such
proposal and the identity of the person making it and must keep BMC fully
informed of the status and details of any such Boole Transaction Proposal and of
all steps it is taking in response to such Boole Transaction Proposal; provided
that nothing contained in the paragraph of the merger agreement that contains
the covenants in this sentence will prohibit Boole or its Board of Directors
from making such disclosure to Boole's stockholders or taking any action which,
in the good faith judgment of Boole'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, or filing with the SEC
a report on Form 8-K with respect to the merger agreement and, only in the event
BMC shall have previously filed a copy of the merger
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<PAGE> 54
agreement with the SEC, filing a copy of the merger agreement and any related
agreements as an exhibit to such report.
For purposes of the merger agreement, the term "Superior Boole Transaction
Proposal" means a bona fide Boole Transaction Proposal that the Board of
Directors of Boole determines in good faith after consultation with (and based
in part on the advice of) its independent financial advisors to be more
favorable to Boole and Boole'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
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after the approval and adoption of the
merger agreement and approval of the merger by the stockholders of Boole:
- by mutual written consent of BMC and Boole;
- by BMC, if there has been a breach by Boole 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 Boole fails to cure such breach within
30 business days after written notice thereof from BMC (except that no
cure period shall be provided for any breach by Boole which by its nature
cannot be cured);
- by BMC, if there has been since September 30, 1998, a Material Adverse
Change with respect to Boole 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 Boole of notice from
BMC (except that no cure period shall be provided for any Material
Adverse Change which by its nature cannot be cured);
- by Boole, 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 Boole
effecting the merger would not be satisfied, and BMC fails to cure such
breach within 30 business days after written notice thereof from Boole
(except that no cure period shall be provided for any breach by BMC which
by its nature cannot be cured);
- by Boole or BMC if, before the effective time of the merger, Boole's
Board of Directors shall have withdrawn, withheld 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;
- by Boole, if there has been since September 30, 1998, 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
Boole (except that no cure period shall be provided for any Material
Adverse Change which by its nature cannot be cured);
- by BMC or Boole if (i) a statute, rule, regulation or executive order
shall have been enacted, entered or promulgated after the date of the
merger agreement (and shall remain in effect) 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 by a court of competent jurisdiction after the date of
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<PAGE> 55
the merger agreement (and shall not have been vacated, withdrawn or
overturned) permanently restraining, enjoining or otherwise prohibiting
the consummation of the merger substantially on the terms contemplated by
the merger agreement 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;
- by either BMC or Boole, if all conditions to consummation of the merger
have not been satisfied or waived on or before June 30, 1999, other than
as a result of a breach of the merger agreement by the terminating party;
- by BMC or Boole 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 or has
permitted any of its affiliates to take any action or which has failed to
take or has permitted any of its affiliates to fail to take any action,
that either alone or in combination with actions previously taken,
disqualifies the merger from such accounting treatment; or
- by BMC or Boole if (i) a meeting of the stockholders of Boole (including
any adjournments thereof) shall have been held and completed and Boole's
stockholders shall have taken a final vote on a proposal to approve and
adopt the merger agreement and to approve the merger, and (ii) the
adoption of the merger agreement and approval of the merger by the
holders of a majority of the shares of Boole common stock outstanding as
of the record date for such meeting of stockholders shall not have been
obtained.
Subject to limited exceptions, including the survival of Boole'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
Boole to the other, and all rights and obligations of the parties thereto shall
cease, except that 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.
The merger agreement provides that Boole will pay to BMC a Termination Fee
equal to $30.0 million if:
- the merger agreement is terminated by BMC or Boole because the Board of
Directors of Boole 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
and there shall not have occurred a Material Adverse Effect on BMC; or
- (i) prior to the time of the meeting of Boole's stockholders at which a
final vote is taken by such stockholders on a proposal to approve and
adopt the merger agreement and to approve the merger, there is publicly
announced by a third party (other than BMC or an affiliate of BMC) a
proposal for Another Boole Transaction (as defined below), (ii) the
adoption of the merger agreement and the approval of the merger by
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<PAGE> 56
the holders of a majority of the shares of Boole common stock outstanding
as of the record date for such meeting of stockholders shall not have
been obtained at such meeting, (iii) at or prior to the time of such
meeting of Boole's stockholders, there shall not have occurred a Material
Adverse Effect on BMC, and (iv) Boole enters into an acquisition
agreement which provides for Another Boole Transaction or Another Boole
Transaction is consummated (in each case with any third party which prior
to termination of the merger agreement has publicly announced a proposal
for Another Boole Transaction), 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 Boole 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 June 30, 1999, or the merger cannot be accounted for
as a "pooling of interests."
"Another Boole Transaction" means any transaction pursuant to which (i) any
person, entity or group (within the meaning of Section 13(d)(3) of the Exchange
Act) other than BMC or an affiliate of BMC (each, a "Third Party") acquires 50%
or more of the outstanding Boole common stock, (ii) a Third Party acquires 25%
or more of the total assets of Boole taken as a whole, (iii) a Third Party
merges, consolidates or combines in any other way with Boole other than in a
transaction in which holders of Boole common stock continue to own at least 75%
of the equity of the surviving corporation, or (iv) Boole distributes or
transfers to its stockholders, by dividend or otherwise, assets constituting 25%
or more of the market value or earning power of Boole on a consolidated basis
(stock of subsidiaries constitute assets of Boole for purposes of this
provision).
STOCK OPTION AGREEMENT
The following description does not purport to be complete and is qualified
in its entirety by reference to the Stock Option Agreement by and between BMC
and Boole, dated as of October 31, 1998 (the "Stock Option Agreement"), a copy
of which is attached as Appendix B to this Proxy Statement/Prospectus and is
incorporated herein by reference.
In connection with, and as an inducement for, the execution and delivery of
the merger agreement by BMC, Boole granted to BMC an irrevocable option (the
"Option") to purchase up to 19% of Boole's common stock outstanding as of
October 31, 1998 (the "Option Shares"), at a purchase price per Option Share
equal to the lesser of (i) $32.44 and (ii) the product of (x) 0.675 and (y) the
average of the closing sales price per share of BMC common stock, rounded to the
nearest thousandth, as reported by the Nasdaq National Market on each of the
three trading days immediately preceding the exercise of the Option by BMC (the
"Exercise Price").
TERMS OF THE OPTION
The Option is exercisable at any time following the occurrence of an
Exercise Event (as defined below) and will remain in full force and effect from
the date of the Stock Option Agreement until the earliest to occur of (i) the
effective time of the merger; (ii) the first anniversary of the receipt by BMC
of written notice from Boole of the occurrence of an Exercise Event; or (iii)
termination of the merger agreement prior to the occurrence of an
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<PAGE> 57
Exercise Event (the "Option Term"). BMC may exercise the Option on one occasion
only, in whole or in part, at any time during the Option Term following the
occurrence of an Exercise Event; provided, however, that (i) BMC may exercise
the Option following the occurrence of the Exercise Events set forth in
paragraphs (A) and (B) below only if (a) a meeting of Boole's stockholders at
which a final vote is taken by such stockholders on a proposal to adopt the
merger agreement and approve the merger has been held and (b) the adoption of
the merger agreement and the approval of the merger by the holders of a majority
of the shares of Boole common stock outstanding as of the record date for such
meeting of stockholders shall not have been obtained at such meeting; and (ii)
notwithstanding the provisions set forth in clause (a) above, BMC may also
exercise the Option following the occurrence of the Exercise Event set forth in
paragraph (A) below if Boole fails to recommend rejection of any tender offer or
exchange offer of the type referred to in paragraph (A) below within the time
prescribed by Rule 14e-2 under the Exchange Act.
EXERCISE EVENTS
Each of the following events constitutes an "Exercise Event" pursuant to
the Stock Option Agreement:
(A) any person (other than BMC or any affiliate of BMC) shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange Act) a
tender offer or exchange offer to purchase any shares of Boole common stock
such that, upon consummation of such offer, such person would own or
control 20% or more of the then outstanding Boole common stock;
(B) any person (other than BMC, Boole or any of their subsidiaries)
shall have, subsequent to the date of the Stock Option Agreement, acquired
beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) or the right to acquire beneficial ownership of, or any group
(as such term is defined in Rule 13d-3 under the Exchange Act) shall have
been formed that beneficially owns, or has the right to acquire beneficial
ownership of, 20% or more of the then outstanding Boole common stock; or
(C) any event giving rise to a right of termination under the merger
agreement (i) because of a breach by Boole relating to its obligation to
call and hold a meeting of its stockholders for the purpose of considering
and acting upon a proposal to adopt the merger agreement and approve the
merger, (ii) because Boole's Board of Directors has withdrawn, withheld or
modified in a manner adverse to BMC its approval of the merger agreement or
the merger, or (iii) because of a failure to obtain approval of the merger
agreement and the merger by Boole's stockholders if prior to the time of
the meeting of Boole's stockholders at which a final vote is taken on a
proposal to adopt the merger agreement and to approve the merger, there is
publicly announced by a third party (other than the BMC or an affiliate of
BMC) a proposal for Another Boole Transaction.
REPURCHASE AT THE OPTION OF BMC
At any time during the Option Term, at the request of BMC made at any time
after the first Repurchase Event (as defined below) and ending on the first
anniversary thereof (the "Put Period"), Boole (or any successor thereto) will
repurchase from BMC (i) that portion of the Option that then remains unexercised
and (ii) all (but not less than all) the shares of Boole common stock purchased
by BMC pursuant to the Option that BMC then owns (the
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<PAGE> 58
"Put Right"). Subject to the maximum cash payment described below, such
repurchase shall be at an aggregate price (the "Put Consideration") equal to the
sum of:
(a) the aggregate exercise price paid (or, in the case of Option
Shares with respect to which the Option has been exercised but the closing
date has not occurred, payable) by BMC for any Option Shares as to which
the Option has been exercised and with respect to which BMC has beneficial
ownership;
(b) the excess, if any, of the Applicable Price (as defined below)
over the Exercise Price paid by BMC for each Option Share as to which the
Option has been exercised and with respect to which BMC then has beneficial
ownership, multiplied by the number of such shares; and
(c) the excess, if any, of (x) the Applicable Price for each share of
Boole common stock over (y) the Exercise Price, multiplied by the number of
Option Shares as to which the Option has not been exercised.
"Applicable Price" means the highest of (i) the highest price per share
paid pursuant to a tender or exchange offer made for shares of Boole common
stock subsequent to the date of the Stock Option Agreement and on or prior to
the date on which BMC exercises the Put Right (the "BMC Request Date"); (ii) the
price per share to be paid by any third person for shares of Boole common stock
pursuant to an agreement for a merger or other business combination with Boole
entered into on or prior to the BMC Request Date; or (iii) the highest bid price
per share of Boole common stock as quoted on the Nasdaq National Market during
the 60 business days preceding the BMC Request Date. "Repurchase Event" means
the occurrence of any Exercise Event specified in paragraph (B) or (C) above, in
each case only if the $30.0 million Termination Fee has been paid or would be
payable under the merger agreement.
The Stock Option Agreement limits the cash payment which may be received by
BMC pursuant to the exercise of its Put Right to $30.0 million, including the
amount, if any, paid to BMC as a Termination Fee under the merger agreement.
REPURCHASE AT THE OPTION OF BOOLE
To the extent BMC shall not have exercised its repurchase rights, Boole may
demand, within six months following the expiration of the Put Period (or, if no
Repurchase Event shall have occurred, at the expiration of one year from the
date the Option was first exercised) (the "Call Period"), that BMC sell to Boole
all (but not less than all) the shares of Boole common stock acquired by BMC
pursuant to the Option and with respect to which BMC has beneficial ownership at
the time of such repurchase at a price per share equal to the Exercise Price per
share.
The Stock Option Agreement also contains provisions granting Boole, under
certain circumstances, a right of first refusal to purchase shares acquired by
BMC upon exercise of the Option.
OTHER
The Stock Option Agreement contains provisions governing the procedure for
exercise of the Option and payment for the shares purchased upon such exercise
and other provisions that
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adjust the number of shares and the Exercise Price therefor upon the occurrence
of certain events, such as stock dividends, divisions, combinations and
recapitalizations, exchange of shares or other similar transactions.
Finally, the Stock Option Agreement contains provisions (a) obligating
Boole to register under the Securities Act, under the circumstances therein
specified, the offering, sale and delivery by BMC of shares of Boole common
stock acquired by it pursuant to the exercise of the Option, and (b) prohibiting
BMC from acquiring or making a proposal to acquire shares of Boole common stock
under certain circumstances.
VOTING AGREEMENTS
The following description does not purport to be complete and is qualified
in its entirety by reference to the form of Voting Agreement, a copy of which is
attached as Appendix C to this Proxy Statement/Prospectus and is incorporated
herein by reference.
Johannes S. Bruggeling, Raymond E. Cairns, Franklin P. Johnson, Jr., Terry
R. McGowan, Paul E. Newton, and David B. Wright, each a director of Boole, and
James E.C. Black, Richard A. Harritt, Arthur F. Knapp, Jr., and Saverio Merlo,
each an executive of Boole, and Catherine H. Johnson and Asset Management
Partners, (collectively, the "Voting Agreement Stockholders"), have each entered
into Voting Agreements with BMC dated October 31, 1998 (the "Voting
Agreements"), whereby they have agreed to vote all shares of Boole common stock
owned by them as of the record date in favor of the merger agreement and the
merger. Pursuant to the Voting Agreements, the Voting Agreement Stockholders
granted BMC an irrevocable proxy to vote such shares of Boole common stock in
favor of the merger agreement and the merger. Approximately 2,747,935 shares, or
9.9% of the Boole common stock outstanding on the date of the merger agreement,
is subject to Voting Agreements.
The Voting Agreement Stockholders have also agreed that, prior to the
termination of the Voting Agreements, no Voting Agreement Stockholder will cause
or permit any transfer, assignment, conveyance or other disposition of any of
the shares of Boole common stock owned by them as of the record date to be
effected unless each person to which any such shares, or any interest in any of
such shares, is or may be transferred has executed a Voting Agreement and agreed
to hold such shares subject to all of the terms and provisions of the Voting
Agreement.
MANAGEMENT AND OTHER INFORMATION
After the consummation of the merger, Boole will be a wholly owned
subsidiary of BMC, and all of Boole'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 Boole 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 "Where You Can Find More Information."
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SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table and the notes thereto set forth certain information
with respect to the beneficial ownership of shares of Boole Common Stock, as of
October 31, 1998 (except as noted in the footnotes to such table), by each
director, executive officer of Boole and 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 Boole
Common Stock outstanding as of October 31,1998:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL(%)
- ---------------- ---------- ----------
<S> <C> <C>
Wellington Management Company, LLP(2).................... 2,208,126 8.03
75 State Street
Boston, MA 02109
Franklin P. Johnson, Jr.(3)(7)........................... 2,076,844 7.54
c/o Asset Management Partners
2275 East Bayshore, Suite 150
Palo Alto, CA 94303
FMR Corp.(4)............................................. 2,206,967 8.03
82 Devonshire Street
Boston, MA 02106
Private Capital Management, Inc. and related
entities(5)............................................ 1,682,927 6.12
3003 Tamiami Trail North
Naples, FL 33940
Winston Partners, L.P. and related entities(6)........... 1,637,085 5.95
888 Seventh Avenue
New York, New York 10106
Paul Newton(7)........................................... 1,348,321 4.69
Johannes Bruggeling(7)................................... 843,465 3.04
Arthur Knapp(7).......................................... 352,387 1.27
James Black(7)........................................... 282,795 1.02
Saverio Merlo(7)......................................... 241,762 *
Raymond Cairns(7)........................................ 57,693 *
Richard Harrit........................................... 42,769 *
Terry McGowan(7)......................................... 12,356 *
David Wright(7).......................................... 1,000 *
All executive officers and directors as a group (10
persons)(8)............................................ 5,259,392 17.52
</TABLE>
- -------------------------
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the SEC. Where
information regarding stockholders is based on Schedules 13D and 13G, the
number of shares owned is as of the date for which information was provided
in such schedules, as noted. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable and the
Voting Agreements entered into between the executive officers and directors
of Boole and BMC, Boole believes that each of the stockholders named in this
table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
27,500,992 shares outstanding on October 31, 1998, adjusted as required by
rules promulgated by the SEC.
(2) Wellington Management Company LLP ("Wellington"), is an investment advisor
registered with the SEC under the Investment Advisors Act of 1940, as
amended, and in its capacity as investment advisor, may be deemed to have
beneficial ownership of these
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shares, which are owned by numerous investment advisory clients, none of
which is known to have such interest with respect to more than five percent
of the class. Wellington has shared voting power over 634,614 of these
shares, and shared dispositive power over all 2,208,126 of these shares. The
reported stated number of shares beneficially owned is as of June 30, 1998.
(3) Includes 177,574 shares held by Mr. Johnson's wife. Mr. Johnson may be
deemed to beneficially own these shares but disclaims beneficial ownership
of such shares. Also includes 369,562 shares held by Asset Management
partners, a limited partnership, of which Mr. Johnson is a general partner.
Mr. Johnson disclaims beneficial ownership of two-thirds of such shares.
(4) FMR Corp. ("FMR"), in its capacity as a parent holding company, may be
deemed to be the beneficial owner of these shares, 1,614,955 of which are
beneficially owned by a wholly-owned subsidiary, Fidelity Management &
Research Company, a registered investment advisor which acts as an
investment advisor to various investment companies ("Funds"), which holds
such shares, and 592,012 of which are beneficially owned by a wholly-owned
subsidiary, Fidelity Management Trust Company, a bank which serves as
investment manager of certain institutional accounts ("Accounts") which
holds these shares. FMR, Edward C. Johnson 3d, Chairman of FMR, and the
Funds each has sole power to dispose of 1,614,955 shares. Neither FMR nor
Mr. Johnson have sole power to vote or direct the voting of the shares owned
by the Funds which power resides with the Funds' Board of Trustees who carry
out the voting under written guidelines established by the Funds' Board of
Trustees. FMR and Mr. Johnson, through its control of Fidelity Management
Trust Company, has sole voting disposition power over 592,012 shares owned
by the Accounts. Members of Mr. Johnson's family and trusts for their
benefit own shares of common stock of FMR representing approximately 49% of
the voting stock of FMR. Mr. Johnson owns 12% and Abigail P. Johnson, a
director of FMR, owns 24.5% of the aggregate outstanding voting stock of
FMR. The reported stated number of shares beneficially owned is as of
February 9, 1998.
(5) Private Capital Management, Inc. ("PCM"), in its capacity as investment
advisor, and Bruce Sherman, PCM's President, may each be deemed beneficial
owners of 1,677,927 of these shares, which are held by PCM on behalf of its
clients. PCM and Bruce Sherman have shared dispositive power over these
1,677,927 shares. Michael Seaman, who has sole power to vote or direct the
vote of, and sole power to dispose of 5,000 shares, is an employee of PCM or
affiliates thereof and (i) does not exercise sole or shared dispositive or
voting power with respect to the shares held by PCM or SPS, (ii) disclaims
beneficial ownership of shares held by Mr. Sherman, PCM and SPS, and (iii)
disclaims, along with Mr. Sherman, the existence of a group.
(6) The shares are held by Winston Partners, L.P. Chatterjee Fund Management
L.P. is the sole general partner of Winston Partners, L.P., and Purnendu
Chatterjee is the sole general partner of Chatterjee Fund Management, L.P.
(7) Includes shares which certain executive officers and directors of the
Company have the right to acquire within 60 days after October 31, 1998
pursuant to outstanding options as follows: James E. C. Black, 282,750
shares; Johannes S. Bruggeling, 265,783 shares; Raymond E. Cairns, 52,631
shares; Richard Harrit, 42,187 shares; Franklin P. Johnson, 50,625 shares;
Arthur F. Knapp, Jr., 328,750 shares; Terry R. McGowan, 12,356 shares;
Saverio Merlo, 229,499 shares; Paul E. Newton, 1,246,876 shares; and all
executive officers and directors as a group, 2,511,457 shares.
(8) Includes shares described in notes (3) and (7).
56
<PAGE> 62
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
reflect adjustments to the historical consolidated balance sheets and statements
of income of BMC and Boole to give effect to the merger, using the pooling of
interests method of accounting for a business combination.
The unaudited pro forma condensed combined statements of income for the six
months ended September 30, 1997 and 1998 and for the years ended March 31, 1996,
1997 and 1998 assume the merger was effected as of April 1, 1995.
The unaudited pro forma condensed combined balance sheet as of September
30, 1998 assumes the merger was effected as of September 30, 1998.
The fiscal year ends for BMC and Boole occur at different dates. BMC's
fiscal year end is March 31 while Boole's fiscal year end is September 30. In
order to present the pro forma combined results on a comparable basis, certain
adjustments were made to Boole's results of operations to conform to those of
BMC. See "Notes to Unaudited Pro Forma Condensed Combined Financial Statements"
in this section for an explanation of the pro forma adjustments.
The following unaudited pro forma condensed combined financial statements
have been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of BMC and Boole,
incorporated by reference into this Proxy Statement/Prospectus. The following
unaudited pro forma condensed combined statements of income are not necessarily
indicative of the results of operations that would have occurred had the merger
occurred on April 1, 1995, nor are they necessarily indicative of the future
operating results of the combined company.
57
<PAGE> 63
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------------------
SEPTEMBER 30, JUNE 30,
1998 1998 PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
------------- -------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 100,982 $ 39,904 $ 140,886
Investments.................. 65,855 54,033 119,888
Trade receivables............ 186,911 81,434 268,345
Other current assets......... 50,010 12,100 62,110
---------- -------- ----------
Total current
assets............ 403,758 187,471 591,229
Property and equipment, net.... 197,813 10,075 207,888
Purchased and internally
developed software, net...... 107,648 12,646 120,294
Investment securities.......... 795,762 -- 795,762
Other long-term assets......... 53,214 81,531 134,745
---------- -------- ----------
Total assets......... $1,558,195 $291,723 $1,849,918
========== ======== ==========
Current liabilities:
Current portion of deferred
revenue................... $ 293,290 $ 59,575 $ 352,865
Other current liabilities.... 118,676 44,191 13,325(A) 176,192
---------- -------- ------- ----------
Total current
liabilities....... 411,966 103,766 13,325 529,057
Deferred revenue............... 152,156 44,439 196,595
Other long-term liabilities.... 48,817 1,821 50,638
---------- -------- ------- ----------
Total liabilities.... 612,939 150,026 13,325 776,290
Stockholders' Equity:
Common stock................. 2,173 30 161(B) 2,364
Additional paid-in capital... 137,592 97,442 (20,774)(B) 214,260
Retained earnings............ 863,286 59,194 (13,325)(B) 909,155
Other stockholders' equity... (57,795) (14,969) 20,613(B) (52,151)
---------- -------- ------- ----------
Total stockholders'
equity............ 945,256 141,697 (13,325) 1,073,628
========== ======== ======= ==========
Total liabilities and
stockholders'
equity............ $1,558,195 $291,723 $1,849,918
========== ======== ==========
</TABLE>
58
<PAGE> 64
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1996
-------------------------------------------------------
MARCH 31, MARCH 31,
1996 1996 PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
-------------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Licenses.................. $269,022 $ 90,886 $ (6,378)(C) $353,530
Maintenance............... 159,828 81,585 241,413
-------- -------- -------- --------
Total revenues.... 428,850 172,471 (6,378) 594,943
Selling and marketing
expenses.................. 116,724 89,204 (6,378)(C) 199,550
Research and development
expenses and related
charges................... 82,600 21,668 104,268
Cost of maintenance services
and product licenses...... 44,854 32,512 77,366
General and administrative
expenses.................. 37,083 17,138 54,221
-------- -------- -------- --------
Operating income.......... 147,589 11,949 159,538
Interest and other income... 15,446 4,750 20,196
-------- -------- --------
Income before taxes....... 163,035 16,699 179,734
Provision for income
taxes..................... 57,464 5,341 62,805
-------- -------- --------
Net earnings.............. $105,571 $ 11,358 $116,929
======== ======== ========
Basic earnings per share.... $ .53 $ .65 $ .54
======== ======== ========
Shares used in computing
basic earnings per
share..................... 200,658 17,598 218,256
Diluted earnings per
share..................... $ .50 $ .59 $ .51
======== ======== ========
Shares used in computing
diluted earnings per
share..................... 209,144 19,122 228,266
</TABLE>
59
<PAGE> 65
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1997
------------------------------------------------
MARCH 31, MARCH 31,
1997 1997 PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Licenses........................ $380,894 $101,447 $ (7,284)(C) $475,057
Maintenance..................... 182,316 88,214 270,530
-------- -------- -------- --------
Total revenues.......... 563,210 189,661 (7,284) 745,587
Selling and marketing expenses.... 154,829 94,135 (7,284)(C) 241,680
Research and development expenses
and related charges............. 88,718 24,228 112,946
Cost of maintenance services and
product licenses................ 56,569 36,162 92,731
General and administrative
expenses........................ 46,070 18,953 65,023
Merger costs...................... -- 11,309 11,309
-------- -------- -------- --------
Operating income................ 217,024 4,874 221,898
Interest and other income......... 20,050 6,871 26,921
-------- -------- -------- --------
Income before taxes............. 237,074 11,745 248,819
Provision for income taxes........ 73,202 6,065 79,267
-------- -------- -------- --------
Net earnings.................... $163,872 $ 5,680 $169,552
======== ======== ========
Basic earnings per share.......... $ .82 $ .31 $ .77
======== ======== ========
Shares used in computing basic
earnings per share.............. 201,016 18,314 219,330
Diluted earnings per share........ $ .76 $ .29 $ .72
======== ======== ========
Shares used in computing diluted
earnings per share.............. 214,310 19,868 234,178
</TABLE>
60
<PAGE> 66
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1998
------------------------------------------------
MARCH 31, MARCH 31,
1998 1998 PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Licenses......................... $513,947 $117,759 $ (8,338)(C) $623,368
Maintenance...................... 216,687 89,646 306,333
-------- -------- -------- --------
Total revenues........... 730,634 207,405 (8,338) 929,701
Selling and marketing expenses..... 205,219 97,716 (8,338)(C) 294,597
Research and development expenses
and related charges.............. 160,396 25,489 185,885
Cost of maintenance services and
product licenses................. 77,095 35,435 112,530
General and administrative
expenses......................... 54,462 18,255 72,717
Merger costs....................... 7,305 -- 7,305
-------- -------- -------- --------
Operating income................. 226,157 30,510 256,667
Interest and other income.......... 30,402 13,222 43,624
-------- -------- --------
Income before taxes.............. 256,559 43,732 300,291
Provision for income taxes......... 90,705 12,055 102,760
-------- -------- --------
Net earnings..................... $165,854 $ 31,677 $197,531
======== ======== ========
Basic earnings per share........... $ .82 $ 1.67 $ .89
======== ======== ========
Shares used in computing basic
earnings per share............... 203,488 18,941 222,429
Diluted earnings per share......... $ .77 $ 1.54 $ .83
======== ======== ========
Shares used in computing diluted
earnings per share............... 216,590 20,609 237,199
</TABLE>
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<PAGE> 67
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------
SEPTEMBER 30, JUNE 30,
1997 1997 PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
------------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Licenses...................... $217,947 $ 51,841 $ (3,403)(C) $266,385
Maintenance................... 103,176 43,366 146,542
-------- -------- -------- --------
Total revenues........ 321,123 95,207 (3,403) 412,927
Selling and marketing
expenses...................... 94,138 45,409 (3,403)(C) 136,144
Research and development
expenses and related
charges....................... 109,523 12,186 121,709
Cost of maintenance services and
product licenses.............. 35,719 15,683 51,402
General and administrative
expenses...................... 23,824 8,692 32,516
Merger costs.................... -- 11,309 11,309
-------- -------- -------- --------
Operating income.............. 57,919 1,928 59,847
Interest and other income....... 13,296 4,986 18,282
-------- -------- --------
Income before taxes........... 71,215 6,914 78,129
Provision for income taxes...... 36,856 2,625 39,481
-------- -------- --------
Net earnings.................. $ 34,359 $ 4,289 $ 38,648
======== ======== ========
Basic earnings per share........ $ .17 $ .23 $ .17
======== ======== ========
Shares used in computing basic
earnings per share............ 202,446 18,736 221,182
Diluted earnings per share...... $ .16 $ .21 $ .16
======== ======== ========
Shares used in computing diluted
earnings per share............ 216,384 20,360 236,744
</TABLE>
62
<PAGE> 68
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------------------------
SEPTEMBER 30, JUNE 30,
1998 1998 PRO FORMA PRO FORMA
BMC BOOLE ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Licenses................... $327,005 $ 60,898 $(4,077)(C) $383,826
Maintenance................ 134,498 46,369 180,867
-------- -------- ------- --------
Total revenues..... 461,503 107,267 (4,077) 564,693
Selling and marketing
expenses................... 134,546 49,705 (4,077)(C) 180,174
Research and development
expenses and related
charges.................... 84,958 12,740 97,698
Cost of maintenance services
and product licenses....... 48,792 18,343 67,135
General and administrative
expenses................... 31,591 9,478 41,069
-------- -------- ------- --------
Operating income........... 161,616 17,001 178,617
Interest and other income.... 22,629 8,045 30,674
-------- -------- --------
Income before taxes........ 184,245 25,046 209,291
Provision for income taxes... 50,884 7,020 57,904
-------- -------- --------
Net earnings............... $133,361 $ 18,026 $151,387
======== ======== ========
Basic earnings per share..... $ .62 $ .95 $ .65
======== ======== ========
Shares used in computing
basic earnings per share... 214,534 19,023 233,557
Diluted earnings per share... $ .59 $ .87 $ .61
======== ======== ========
Shares used in computing
diluted earnings per
share...................... 227,951 20,768 248,719
</TABLE>
63
<PAGE> 69
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined statements of income for the six
months ended September 30, 1997 and 1998 are based on the unaudited consolidated
financial statements of BMC for the six months ended September 30, 1997 and 1998
and the unaudited consolidated financial statements of Boole for the nine months
ended June 30, 1997 and 1998 reduced by the unaudited consolidated statements of
income of Boole for the three months ended December 31, 1996 and 1997,
respectively. The unaudited pro forma condensed combined statements of income
for the years ended March 31, 1996, 1997 and 1998 are based on the consolidated
financial statements of BMC for the years ended March 31, 1996, 1997 and 1998
and Boole for the years ended September 30, 1995, 1996 and 1997 reduced by
Boole's unaudited consolidated statements of income for the six months ended
March 31, 1995, 1996 and 1997, respectively, and increased by Boole's unaudited
consolidated statements of income for the six months ended March 31, 1996, 1997
and 1998, respectively.
The unaudited pro forma condensed combined balance sheet is based on the
balance sheets of BMC and Boole at September 30, 1998 and June 30, 1998,
respectively, after giving effect to the adjustments and assumptions described
below.
The unaudited pro forma condensed combined balance sheet reflects expenses
expected to be incurred by BMC and Boole in connection with the merger; however,
the unaudited pro forma condensed combined statements of income do not reflect
such expenses. The unaudited pro forma condensed combined financial statements
do not reflect the effect of cost savings and revenue enhancements, if any,
which may be realized after consummation of the merger.
BMC and Boole employ accounting policies that are in accordance with
generally accepted accounting principles in the United States. The preparation
of financial statements in conformity with generally accepted accounting
principles requires BMC and Boole management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Ultimate results could differ from those estimates. In the opinion of BMC and
Boole, the unaudited pro forma condensed combined financial statements include
all adjustments necessary to present fairly the financial position of BMC and
Boole and the results of operations of BMC and Boole.
NOTE 2. PRO FORMA ADJUSTMENTS
BMC and Boole expect to incur charges to operations of approximately $20.5
million (or $13.33 million net of income taxes) for transaction fees, costs
incident to the merger and certain identified restructuring charges. These
expenses are reflected in the unaudited pro forma condensed combined balance
sheet as of September 30, 1998, consistent with SEC reporting rules. These
expenses are not reflected in the unaudited pro forma condensed combined
statements of income. No adjustments have been reflected in the unaudited pro
forma condensed combined financial statements for the benefits that BMC
management anticipates to result from the merger as described under "The
Merger -- Reasons for the Merger -- BMC's Reasons for the Merger." BMC expects
to restructure the combined
64
<PAGE> 70
operations, resulting in additional nonrecurring charges, which could be
significant. The amount of such charges cannot be reasonably estimated until an
analysis of the newly combined operations is completed and a restructuring plan
developed.
The unaudited pro forma condensed combined financial statements reflect the
following pro forma adjustments:
(A) Other current liabilities -- reflects the accrual of the estimated
transaction fees, costs incident to the merger and certain identified
restructuring charges.
(B) Stockholders' equity -- Stockholders' equity reflects the issuance of
0.675 of a share of BMC Common Stock for each share of Boole common stock
outstanding at June 30, 1998. Therefore, the historical combined common
stock, paid-in capital and retained earnings balances have been adjusted to
reflect the number of shares assumed to be issued, the differences in par
value per common share of BMC and Boole and the cancellation of Boole
treasury stock. Retained earnings has also been adjusted to reflect the
accrual of the estimated transaction fees, costs incident to the merger and
certain identified restructuring charges.
(C) Software license fees -- adjustment to conform Boole's income statement
to BMC's presentation related to certain distributor/agent transactions.
65
<PAGE> 71
DESCRIPTION OF BMC CAPITAL STOCK
GENERAL
The following description 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 600,000,000 shares of BMC common stock, par
value $.01 per share. As of September 30, 1998, there were 217,259,162 shares of
BMC common stock issued and outstanding and approximately [ ] holders
of record of BMC common stock. The holders of BMC common stock are entitled to
one vote for each share of common stock held 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, 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 Bank Boston 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
BMC Series A Preferred Stock at a price of $310 per one-thousandth of a share
(the "Purchase Price"), subject to adjustment. See " -- BMC Preferred Stock --
Series A Junior Participating 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
66
<PAGE> 72
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 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
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<PAGE> 73
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. No shares of BMC preferred stock were outstanding at September
30, 1998. The BMC Board of Directors has authority, without stockholder
approval, to issue shares of BMC preferred stock in one 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 Junior Participating Preferred Stock, par value $.01 ("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
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<PAGE> 74
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.
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<PAGE> 75
COMPARATIVE RIGHTS OF BMC AND BOOLE STOCKHOLDERS
If the merger is consummated, the stockholders of Boole will become
stockholders of BMC. The rights of the stockholders of both BMC and Boole are
governed by and subject to the provisions of the DGCL. The rights of current
Boole stockholders following the merger will be governed by the BMC charter and
bylaws rather than the provisions of the Boole charter and bylaws. The following
is a brief summary of certain differences between the rights of BMC stockholders
and the rights of Boole stockholders, and is qualified in its entirety by
reference to the relevant provisions of the DGCL, the BMC restated certificate
of incorporation and bylaws and the Boole restated certificate of incorporation
and bylaws.
NUMBER, CLASSIFICATION AND REMOVAL OF DIRECTORS
Under the BMC bylaws, the number of directors, which is presently set at
seven, is determined by resolution of the BMC Board of Directors. Newly created
directorships resulting from any increase in the authorized number of directors
and any vacant directorships may be filled by a majority of the directors then
in office. Subject to certain exceptions, any director (or the entire BMC Board
of Directors) may be removed, with or without cause, by the holders of a
majority of the shares entitled to vote at an election of directors.
The Boole bylaws authorize the Boole Board of Directors to fix the number
of directors. The number of directors presently authorized is seven. Newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Boole Board of Directors resulting from death, resignation,
disqualification, removal or the failure of stockholders to elect the entire
Boole Board of Directors at a meeting called for such purpose, shall by filled
by the affirmative vote of a majority of the remaining directors then in office.
A director may be removed without cause only by the affirmative vote of
two-thirds of the outstanding shares of Boole common stock entitled to vote. The
provisions relating to the number, classification and removal of directors
contained in Boole's bylaws may not be altered, amended or repealed without the
affirmative vote of holders of at least 80% of the outstanding shares of Boole
common stock entitled to vote.
VOTING RIGHTS
Neither BMC's nor Boole's charter provides for cumulative voting rights for
the election of directors or otherwise.
POWER TO CALL SPECIAL MEETING
The BMC bylaws provide that a special meeting of stockholders may be called
at any time by the Chairman of the Board, the President, a majority of the BMC
Board of Directors or holders of at least ten percent of the issued and
outstanding stock entitled to vote.
The Boole bylaws provide that a special meeting of the stockholders may be
called by the President or the Boole Board of Directors at any time. Upon
written request of any stockholder or stockholders holding in the aggregate ten
percent of the voting power, the Secretary shall call a special meeting to be
held not less than thirty-five nor more than sixty days after the receipt of
such request.
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STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
The BMC charter and bylaws contain no provision that would require greater
than a majority of stockholders to approve mergers, consolidations, sales of a
substantial amount of asset or other similar transactions.
The Boole charter provides that in order to effect certain specified
transactions ("Business Combinations") involving a Related Person (as defined
below) or any person affiliated with a Related Person the affirmative vote of at
least two-thirds of the then outstanding shares of stock voting as a class is
required. This provision does not apply if the Business Combination shall have
been (i) approved by a majority of the directors (or their successors) not
affiliated with the Related Person or (ii) certain price and procedure
requirements are met.
The specified "Business Combinations" to which the provisions of the Boole
charter apply include (i) any merger or consolidation with a Related Person or
its affiliate, (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement, in one transaction or a series of
transactions, for the benefit of a Related Person or its affiliate involving
assets, securities or commitments of Boole, any subsidiary or any Related Person
or its affiliate having a fair market value of $3 million or more, (iii) the
adoption of any plan or proposal for the liquidation or dissolution of Boole,
(iv) any reclassification of securities or recapitalization of Boole that has
the effect, directly or indirectly, of increasing the proportionate share of
capital stock beneficially owned by any Related Person or its affiliate, or (v)
any agreement, contract or other arrangement providing for any of the foregoing.
A "Related Person" is defined as any person who (a) has announced or
publicly disclosed a plan or intention to become the beneficial owner of twenty
percent or more of the voting stock then outstanding or (b) is an affiliate of
Boole and who at any time within the two-year period immediately prior to the
date in question was the beneficial owner of twenty percent or more of the votes
entitled to be cast by holders of all then outstanding voting stock.
ACTION BY WRITTEN CONSENT
The BMC and Boole bylaws both provide that any action permitted or required
by law may be taken without a meeting, without prior notice and without a vote,
if a consent in writing, setting forth the action taken is signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a stockholder meeting. Prompt
notice of the taking of any corporate action without a meeting by less than
unanimous consent shall be given to those stockholders who have not consented in
writing.
AMENDMENTS TO BYLAWS
The BMC bylaws provide that the BMC Board of Directors shall have the power
to adopt, amend and repeal the bylaws, subject to the right of the stockholders
in certain instances to vote with respect to any such amendments.
The Boole bylaws permit the stockholders the right to repeal, alter or
amend the bylaws or adopt new bylaws. The bylaws also authorize the Boole Board
of Directors to repeal, alter
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or amend the bylaws or adopt new bylaws, provided that the directors do not make
or alter any bylaw fixing the qualifications, classifications, term of office or
compensation of the directors. The bylaws further provide that the affirmative
vote of eighty percent of the holders of shares entitled to vote for the
election of directors is required to amend certain provisions contained in the
bylaws relating to directors.
INDEPENDENT AUDITORS
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 Boole by Cooley Godward LLP.
EXPERTS
The consolidated financial statements and financial statement schedule
included in the BMC 1998 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 of Boole incorporated by reference in
Boole's Annual Report (Form 10-K) for the year ended September 30, 1997 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated by reference
in the Proxy Statement of Boole, which is referred to and made part of this
Proxy Statement/Prospectus and registration statement. Such report, as to the
years 1996 and 1995, is based in part on the report of PricewaterhouseCoopers
LLP, independent auditors. Such financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firms as
experts in accounting and auditing.
STOCKHOLDER PROPOSALS
If the merger is not consummated, any proposals of stockholders of Boole
intended to be presented at the Annual Meeting of Stockholders of Boole to be
held in 1999 must have been received by Boole, addressed to the Secretary of
Boole at 3131 Zanker Road, San Jose, California 95134-1933, no later than
September 17, 1998, to be considered for inclusion in the proxy statement and
form of proxy relating to that meeting.
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WHERE YOU CAN FIND MORE INFORMATION
BMC and Boole each file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. BMC's and Boole's public filings are also available to
the public from commercial document retrieval services and at the Internet web
site maintained by the SEC at http://www.sec.gov. Reports, proxy statements and
other information concerning BMC and Boole also 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 a Form S-4 Registration Statement to register with the SEC
the offering and sale of the shares of BMC common stock to be issued to Boole
stockholders in the merger. This Proxy Statement/Prospectus is a part of such
registration statement and constitutes a prospectus of BMC and a proxy statement
of Boole for the special meeting.
As allowed by SEC rules, this Proxy Statement/Prospectus does not contain
all the information that stockholders can find in the registration statement or
the exhibits to the registration statement.
The SEC allows BMC and Boole to incorporate information into this Proxy
Statement/ Prospectus "by reference," which means that the companies can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this Proxy Statement/ Prospectus, except for any information
superseded by information contained directly in this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates by reference the documents set
forth below that BMC and Boole have previously filed with the SEC. These
documents contain important information about the companies and their financial
condition.
<TABLE>
<CAPTION>
BMC FILINGS (FILE NO. 0-17136) PERIOD
------------------------------ ------
<S> <C>
Annual Report on Form 10-K............. Year ended March 31, 1998
Quarterly Report on Form 10-Q.......... Quarters ended June 30, 1998 and
September 30, 1988
Current Report on Form 8-K............. Filed November 6, 1998;
BOOLE FILINGS (FILE NO. 0-13258) PERIOD
- --------------------------------------- ---------------------------------------
Annual Report on Form 10-K............. Year ended September 30, 1997
Quarterly Reports on Form 10-Q......... Quarters ended December 31, 1997, March
31, 1998 and June 30, 1998
Current Reports on Form 8-K............ Filed October 23, 1998 and November 10,
1998
</TABLE>
BMC and Boole hereby incorporate by reference additional documents that BMC
or Boole may file with the SEC between the date of this Proxy
Statement/Prospectus and the date of the special meeting. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
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BMC has supplied all information contained or incorporated by reference in
this Proxy Statement/Prospectus relating to BMC or Merger Sub, and Boole has
supplied all such information relating to Boole.
If you are a stockholder, you may have received some of the documents
incorporated by reference. You may also obtain any of such documents from the
appropriate company or the SEC or the SEC's Internet web site described above.
Documents incorporated by reference are available from the appropriate company
without charge, excluding all exhibits unless specifically incorporated by
reference as an exhibit in this Proxy Statement/Prospectus. Stockholders may
obtain documents incorporated by reference in this Proxy Statement/ Prospectus
by requesting them in writing or by telephone from the appropriate company at
the following addresses:
BMC SOFTWARE, INC.
2101 CityWest Blvd.
Houston, Texas 77042
Tel: (713) 918-8800
BOOLE & BABBAGE, INC.
3131 Zanker Road
San Jose, California 95134-1933
Attention: Arthur Knapp
Tel: (408) 526-3333
Email: [email protected]
If you would like to request documents, please do so by , 1998 to
receive them before the special meeting. If you request any incorporated
documents, the appropriate company will mail them to you by first-class mail, or
other equally prompt means, within one business day of receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
DIFFERS FROM THAT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED , 1998. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF SHARES OF BMC COMMON
STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
BMC Software, the BMC Software logos and all other BMC product and service
names are registered trademarks or trademarks of BMC Software, Inc. in the USA
and in other select countries. COMMAND/POST, MainView and MAX/Enterprise are
registered trademarks of Boole & Babbage, Inc. "(R)" and "(TM)" indicate USA
registration and USA trademark, respectively. IBM, IMS and DB2 are registered
trademarks of International Business Machines Corporation. Microsoft and
Microsoft BackOffice are registered trademarks of Microsoft Corp. Other third
party logos and product/trade names are registered trademarks or trade names of
their respective companies.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
BMC SOFTWARE, INC.,
RANGER ACQUISITION CORP.
AND
BOOLE & BABBAGE, INC.
<PAGE> 81
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of October 31,
1998, by and among BMC Software, Inc., a Delaware corporation ("BMC"), Ranger
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of BMC
("Merger Sub"), and Boole & Babbage, Inc., a Delaware corporation ("Boole").
WITNESSETH:
WHEREAS, the respective boards of directors of BMC and Boole deem it
desirable and in the best interests of their respective corporations and their
respective stockholders that Merger Sub be merged with and into Boole, pursuant
to the provisions of Section 251 of the Delaware General Corporation Law
("DGCL"), 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 Boole;
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"); and
WHEREAS, the parties hereto acknowledge the execution and delivery of that
certain Stock Option Agreement of even date herewith between Boole (as grantor)
and BMC (as grantee) (the "Stock Option Agreement") concurrently with the
execution and delivery of this Agreement;
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 (as hereinafter defined), the mode of carrying the
same into effect, the manner and basis of converting the presently outstanding
shares of common stock, par value $.001 per share ("Boole Common Stock"), of
Boole 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, at the Effective Time (as
hereinafter defined) Merger Sub shall be merged with and into Boole (the
"Merger"), the separate existence of Merger Sub shall cease, and Boole (i) shall
continue as the surviving corporation (sometimes referred to herein as the
"Surviving Corporation") under the corporate name "Boole & Babbage, Inc.", (ii)
shall be governed by the laws of the State of Delaware, (iii) shall maintain a
registered office in the State of Delaware at 1209 Orange Street, Wilmington,
Delaware 19801 and shall (iv) succeed to and assume all of the rights,
properties and obligations of Merger Sub and Boole in accordance with the DGCL.
Subject to the terms and conditions of this Agreement and the Plan of Merger,
BMC agrees, at or prior to the Closing
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(as hereinafter defined), 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, Boole 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 Vinson & Elkins
L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas 77002, on a date to
be specified by the parties, which shall be no later than the second business
day 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 Boole 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."
1.3. Effective Time. As soon as practicable on the Closing Date, the
parties hereto will cause the Merger to become effective by filing with the
Secretary of State of the State of Delaware, a certificate of merger in such
form as required by, and executed in accordance with, the relevant provisions of
the DGCL (the time of filing the certificate of merger with the Secretary of
State of the State of Delaware 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 would reasonably be expected to materially adversely affect the
business, results of operations or financial condition of BMC or Boole, 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 Boole'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 Boole
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 Boole of all amounts due to any officers
or employees of Boole 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 Boole; (v) any effects, changes, events, circumstances or conditions
(including, without limitation, non-governmental litigation, delays in customer
orders, a reduction in sales, a disruption in supplier, distributor or similar
relationships or a loss of employees) resulting from the announcement or
pendency of any of the transactions contemplated by this Agreement; and (vi) any
effects, changes, events, circumstances or conditions resulting from compliance
by BMC or Boole with the terms of, or the taking of any action contemplated or
permitted by, this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BOOLE
Boole represents and warrants subject to the exceptions specifically
described in writing in the respective sections of the disclosure schedule
delivered by Boole to BMC and dated the date hereof (the "Boole Disclosure
Schedule") as follows:
2.1. Organization and Standing. Boole is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
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 Boole.
2.2. Agreement Authorized and its Effect on Other Obligations. Upon
approval and adoption of this Agreement and approval of the Merger by the
stockholders of Boole, the consummation of the transactions contemplated hereby
will have been duly and validly authorized by all necessary corporate action on
the part of Boole, and this Agreement will be a valid and binding obligation of
Boole enforceable against Boole in accordance with its terms, except as
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
debtor relief or similar laws affecting the rights of creditors generally, and
(ii) general principles of equity. The Stock Option Agreement and the
consummation of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action on the part of Boole, and the Stock
Option Agreement is a valid and binding obligation of Boole enforceable against
Boole in accordance with its terms, except as enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally, and (ii) general principles of
equity. The Stock Option Agreement and the consummation of the transactions
contemplated thereby do not conflict with or cause a violation, breach or
default of any term or provision of (i) the certificate of incorporation or
bylaws of Boole or (ii) any indenture, mortgage, deed of trust, lease, contract
or other agreement to which Boole 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 Boole. 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 certificate of
incorporation or bylaws of Boole or (ii) any indenture, mortgage, deed of trust,
lease, contract or other agreement to which Boole 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 Boole. Section 2.2 of the Boole Disclosure Schedule
lists all holders of any material indebtedness for borrowed money of Boole as of
the date of this Agreement, the lessors of any material property leased by Boole
and the other parties to any Material Contract (as defined in Section 2.9) to
which Boole is a party as of the date of this Agreement in each case whose
consent to the Merger is required.
2.3. Capitalization. The authorized capitalization of Boole consists of
2,000,000 shares of preferred stock, par value $.001 per share, of which as of
the date hereof no shares were issued
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and outstanding and 45,000,000 shares of common stock, par value $.001 per share
(the "Boole Common Stock"), of which at September 30, 1998, 27,667,249 shares
were issued and outstanding, and an additional 8,453,000 shares were reserved
for issuance in conjunction with various employee benefit plans; at September
30, 1998, 3,065,930 shares of Boole Common Stock were held in Boole'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.
Section 2.3 of the Boole Disclosure Schedule sets forth a complete list as of
the date of this Agreement of all outstanding options, warrants or obligations
of any kind to issue any shares of capital stock of Boole, the owners thereof
and the amounts owned.
2.4. Subsidiaries. Section 2.4 of the Boole Disclosure Schedule lists the
subsidiary corporations of Boole existing at September 30, 1998, and shows as to
each of such subsidiary corporations the percentage of the total outstanding
stock thereof which is owned by Boole at such date. All outstanding shares of
stock of the subsidiary corporations owned by Boole are validly issued, fully
paid, and nonassessable, and Boole 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"), except for
shares of capital stock or other similar ownership interests of certain
subsidiaries of Boole that are owned by certain nominee equity holders as
required by the applicable law of the jurisdiction of organization of such
subsidiaries. Each such subsidiary is a corporation duly organized, validly
existing, and in good standing (or equivalent concept with respect to
jurisdictions that do not recognize such concept) 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 (or equivalent concept with respect to jurisdictions that do not
recognize such concept) 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 Boole. As hereinafter used in this
Article II, the term "Boole" 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 "Boole" further includes any corporation, trade, business or entity under
common control with Boole 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. Boole has previously furnished or
made available (including through the SEC EDGAR system) to BMC true and complete
copies of (a) all annual reports filed by Boole with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), since September 30, 1995, (b) Boole's quarterly
and other reports filed with the Commission since September 30, 1995, (c) all
definitive proxy solicitation materials filed by Boole with the Commission since
September 30, 1995, and (d) any registration statements of Boole declared
effective by the Commission since September 30, 1995. The consolidated financial
statements of Boole and its subsidiaries included in Boole'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 Boole under the Exchange Act subsequent thereto
(collectively, the "Boole Reports") were, or (if filed after the date hereof)
will be, prepared in accordance with
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generally accepted accounting principles applied on a consistent basis during
the periods involved and fairly present, or will fairly present, the
consolidated financial position for Boole 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 for the absence of footnotes). The Boole Reports did not at the
time each of the Boole Reports was filed with the Commission (or, if amended or
superseded by a subsequent filing, then on the date of such filing), and (if
filed after the date hereof) 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 September 30, 1995, Boole has filed with the
Commission all reports required to be filed by Boole under the Exchange Act and
the rules and regulations of the Commission.
2.6. Liabilities. Boole has no liabilities of the type required to be
disclosed in the consolidated financial statements of Boole prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except for: (i) liabilities disclosed in the financial statements
(including any related notes) contained in the Boole Reports and (ii)
liabilities incurred in the ordinary course of business consistent with past
practices.
2.7. Additional Boole Information. Set forth in Section 2.7 of the Boole
Disclosure Schedule are true, complete and correct lists of the following items,
and Boole 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
that are in effect as of the date of this Agreement covering active, former
or retired employees of Boole (collectively, "Boole Plans"), together with
copies of the most recent Internal Revenue Service determination letters
that have been received, if any, with respect to such plans;
2.7.2. Certain Salaries. The names and salary rates as of the date of
this Agreement of all officers and employees of Boole as of the date of
this Agreement whose regular annual base salary rate as of the date of this
Agreement is $125,000 or more, together with any bonuses paid or payable to
such persons for the fiscal year ended September 30, 1998, 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 such employees from
and after the date of this Agreement;
2.7.3. Employee Agreements. Any collective bargaining agreements of
Boole as of the date of this Agreement with any labor union or other
similar representative of employees, including amendments, supplements, and
understandings, and all employment and consulting agreements of Boole as of
the date of this Agreement with employees whose regular annual base salary
exceeds $125,000 and with consultants whose annual compensation from Boole
exceeds $125,000; and
2.7.4. Guaranties. All material third party indebtedness, liabilities
and commitments of others as to which Boole is a guarantor, endorser,
co-maker, surety, or accommodation maker (excluding liabilities as an
endorser of checks and the like in the
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ordinary course of business) and all letters of credit, whether stand-by or
documentary, issued by any third party.
2.8. Certain Agreements. The consummation of the transactions contemplated
by this Agreement will not cause or result in the acceleration or vesting of any
benefits, payments or rights covering active, former or retired employees of
Boole under (i) any Boole Plans or (ii) any other agreements to which Boole is a
party.
2.9. No Undisclosed Contracts or Defaults. Except as may be specified in
the Boole Reports, Boole is not a party as of the date of this Agreement, to, or
bound as of the date of this Agreement by, any material contract or arrangement
of a nature required to be filed as an exhibit to an annual report filed by
Boole under the Exchange Act which is to be performed after the Effective Time
(a "Material Contract"), nor is Boole in default in any material obligation or
covenant on its part to be performed under any lease or other contract that is
material to the business of Boole and its subsidiaries taken as a whole.
2.10. Absence of Certain Changes and Events. Except as set forth in the
Boole Reports, other than as a result of the transactions contemplated by this
Agreement, between June 30, 1998 and the date of this Agreement, there has not
been:
2.10.1. Financial Change. Any adverse change in the financial
condition, backlog, operations or business of Boole which could reasonably
be expected to have a Material Adverse Effect on Boole;
2.10.2. Property Damage. Any damage, destruction, or loss to the
business or properties of Boole (whether or not covered by insurance) that
could reasonably be expected to have a Material Adverse Effect on Boole;
2.10.3. Dividends. Any declaration, setting aside, or payment of any
dividend or other distribution in respect of the Boole Common Stock, or any
direct or indirect redemption, purchase or any other acquisition by Boole
of any such stock, except pursuant to Boole's publicly announced stock
repurchase program;
2.10.4. Labor Disputes. Any labor dispute (other than routine
grievances); or
2.10.5. 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.
2.11. Taxes.
2.11.1. Tax Returns Filed; Taxes Paid. Except with respect to failures
which, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Boole, (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
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("Tax" or "Taxes") which are required to be filed on or before the Closing
by or with respect to Boole have been or will be duly and timely filed,
(ii) 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, (iii) all withholding Tax requirements imposed on or with respect to
Boole have been or will be satisfied in full in all respects, and (iv) 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.
2.11.2 Open Returns Disclosed. All federal and state income and
franchise Tax Returns of or with respect to Boole with unexpired or
extended statutes of limitations which have been audited by the applicable
governmental authority are set forth in Section 2.11 of the Boole
Disclosure Schedule.
2.11.3. Extensions Disclosed. As of the date of this Agreement, there
is not in force any extension of time with respect to the due date for the
filing of any federal or state income or franchise Tax Return of or with
respect to Boole or any waiver or agreement for any extension of time for
the assessment or payment of any federal or state income or franchise Tax
of or with respect to Boole.
2.11.4. Claims Disclosed. There is no claim against Boole for any
Taxes, and no assessment, deficiency or adjustment has been asserted or
proposed in writing with respect to any Tax Return of or with respect to
Boole other than those which could not reasonably be expected to have a
Material Adverse Effect on Boole.
2.11.5. 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 Boole up to and through the periods covered thereby.
2.11.6. Tax Allocation Agreements. There are no Tax allocation or
sharing agreements other than between or among Boole and its wholly owned
subsidiaries.
2.11.7. No Tax Liens. Except for statutory liens for current Taxes not
yet due, no material liens for Taxes exist upon the assets of Boole.
2.11.8. Change of Accounting Method. Boole will not be required to
include any amount in income for any taxable period beginning after
September 30, 1997 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.
2.11.9. Partnerships; Foreign Corporations. As of the date of this
Agreement, none of the property of Boole is held in an arrangement for
which partnership Tax Returns are being filed, and as of the date of this
Agreement, Boole 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 Boole.
2.11.10. Safe Harbor Leases; Tax-Exempt Use Property. As of the date
of this Agreement, none of the property of Boole 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
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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).
2.11.11. Section 341(f) Election. Boole has not made an election under
section 341(f) of the Code.
2.11.12. Actions Preventing Treatment as a Reorganization. Neither
Boole nor, to the knowledge of Boole, 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.
2.12. Intellectual Property. For purposes of this Section 2.12 and Section
2.14, "Third Party Distributed Software" means the third party software programs
currently being distributed by Boole, whether as integrated or bundled with any
of Boole's software products or as a separate stand-alone product, and
"Internally Developed Software" means all software programs developed for or on
behalf of Boole and currently being distributed by Boole and all software
products or programs under development by Boole but not currently distributed,
other than Third Party Distributed Software. Third Party Distributed Software
and Internally Developed Software shall collectively be referred to as the
"Software Programs."
2.12.1. Ownership. Boole exclusively owns all Internally Developed
Software, including without limitation those Software Programs listed on
Section 2.12.1 of the Boole Disclosure Schedule, free and clear of all
mortgages, pledges, liens, security interests, conditional sales
agreements, encumbrances or charges of any kind (other than object code
end-user licenses in the ordinary course of business and Marketing
Agreements). Boole exclusively owns 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 embodied in the Internally
Developed Software (the "Intellectual Property"), free and clear of all
mortgages, pledges, liens, security interests, conditional sales
agreements, encumbrances or charges of any kind (other than object code
end-user licenses in the ordinary course of business and Marketing
Agreements). Section 2.12 of the Boole 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 relating to the Internally Developed Software.
2.12.2. Notices. In no instance has the eligibility of the Internally
Developed Software for protection under applicable copyright law been
forfeited to the public domain by omission of any required notice or any
other action.
2.12.3. Protection. The source code and related technical system
documentation for the Internally Developed Software are protected by Boole
as trade secrets in accordance with trade secret protections sufficient to
maintain trade secret status under applicable law. The source code and
related technical system documentation for the Internally Developed
Software have been disclosed by Boole only to (i) employees and contractors
who have had a "need to know" the contents thereof in connection with the
performance of their duties to Boole and who have executed nondisclosure
agreements substantially in the form provided by Boole to BMC, and (ii)
third parties under source code escrow agreements.
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2.12.4. Personnel. All personnel who during the three years prior to
the date hereof have been employees, agents, consultants and contractors of
Boole and who (on behalf of Boole) have contributed to or participated in
the conception and development of Internally Developed Software and related
technical documentation that is material to the operation of Boole's
business have executed nondisclosure agreements substantially in the form
provided by Boole to BMC and have executed appropriate instruments of
assignment in favor of Boole as assignee that have conveyed to Boole,
effective, and exclusive ownership of all tangible and intangible property
thereby arising.
2.12.5. Third-Party Software. Section 2.12.5 of the Boole Disclosure
Schedule contains a complete list of material Third Party Distributed
Software. Section 2.12.5 of the Boole Disclosure Schedule lists all license
agreements for the use of all such material Third Party Software and, if
any such software is not licensed, the basis of the use of such software by
Boole. Boole has not taken any action that could, or failed to take any
action, the failure of which could, reasonably be expected to (i) give rise
to the termination by a licensor of Boole's license to distribute any
material Third Party Distributed Software or (ii) materially restrict
Boole's right of use of any material Third Party Distributed Software under
any license agreement or other right of use, in each case subject to any
right Boole may have to receive notice of and/or cure or remedy such action
or failure to act.
2.12.6. No Infringement. The Internally Developed Software and, to
Boole's knowledge as of the date of this Agreement, the Third Party
Distributed Software do not infringe and will not infringe any copyright or
trade secret of any person or entity, and, to Boole's knowledge, no part of
the Internally Developed Software nor the use thereof for their intended
purposes (and to Boole's knowledge as of the date of this Agreement, no
part of the Third Party Distributed Software 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. As of the date of
this Agreement, no written claims have been asserted against Boole by any
person or entity as to the use of any of the Intellectual Property.
2.12.7. Integrity. Except with respect to demonstration or trial
copies, no portion of the Internally Developed Software or, to Boole's
knowledge as of the date of this Agreement, the Third Party Distributed
Software contains any "back door," "time bomb," "Trojan horse," "worm,"
"drop dead device," "virus" or other software routines or hardware
components designed to permit unauthorized access or to disable or erase
software, hardware, or data without the consent of the user.
2.12.8. Year 2000. The Software Programs are Year 2000 Compliant. As
used in this Section 2.12.8 and Section 3.15, "Year 2000 Compliant" means
that (a) the performance of the software will not be adversely affected by
any date change involving dates in the 20th and 21st century and (b) use of
the software will 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,
provided that such date data is in the correct format for such software as
specified in the applicable documentation for such software.
2.13. Intentionally omitted.
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2.14. Software Contracts.
2.14.1. End-User Agreements. Section 2.14.1 of the Boole Disclosure
Schedule sets forth a complete example of each of Boole's current standard
end user license agreements with respect to the Internally Developed
Software (the "Standard Licenses"). Section 2.14.1 of the Boole Disclosure
Schedule accurately identifies each license transaction (with customer name
redacted if desired) which generated $200,000 or more of revenues during
the fiscal year ended September 30, 1998.
2.14.2. Marketing Agreements. Section 2.14.2 of the Boole 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 the
Software Programs or any other Technical Documentation or the Intellectual
Property by any independent salesperson, distributor, sublicensor or other
remarketer or sales organization (the "Marketing Agreements"), which
generated 5% or more of Boole's revenues during the preceding four fiscal
quarters.
2.15. Title to Properties. With minor exceptions which in the aggregate are
not material, and except for merchandise and other property and assets sold,
used or otherwise disposed of in the ordinary course of business for fair value
or no longer necessary for the operation of Boole's business, Boole has good and
valid title to or valid leasehold interests in all its properties, interests in
properties and assets, real and personal, reflected in the most recent balance
sheet of Boole included in the Boole Reports, free and clear of any Encumbrance
of any nature whatsoever, except (i) liens and Encumbrances reflected in the
most recent balance sheet of Boole included in the Boole Reports, (ii) liens for
current taxes or other governmental charges or levies not yet due and payable,
(iii) Encumbrances that are created, arise or exist under or in connection with
any leases or other contracts or other matters referred to in the Boole
Disclosure Schedule, (iv) Encumbrances that relate to or are created, arise or
exist in connection with, any legal proceeding that is being contested in good
faith, and (v) such imperfections of title, easements and Encumbrances, if any,
as do not and will not materially detract from the value of the property subject
thereto or affected thereby, or otherwise materially impair business operations.
All leases pursuant to which Boole leases (whether as lessee or lessor) any
substantial amount of real or personal property are in good standing, valid and
effective, except as validity or effectiveness may be limited by (i) bankruptcy,
insolvency, reorganization, debtor relief or similar laws affecting the rights
of creditors generally, and (ii) general principles of equity; 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 Boole and in respect to which Boole has not taken reasonable steps to prevent
a default from occurring. The buildings and premises of Boole that are used in
its business are in good and sufficient operating condition and repair for the
continued conduct of Boole's business on a basis consistent with past practice,
subject to ordinary wear and tear. All major items of equipment of Boole are in
good and sufficient operating condition and in a state of reasonable maintenance
and repair for the continued conduct of Boole'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. Intentionally omitted.
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2.17. Environmental Compliance.
2.17.1. Environmental Conditions. There are no materials or substances
that are regulated by Applicable Environmental Laws (as defined in Section
2.17.3) on any real property owned by Boole as a result of the actions of
Boole or, to its knowledge, of any third party or otherwise, that could
reasonably be expected to have a Material Adverse Effect on Boole.
2.17.2. Permits, etc. Boole has in full force and effect all
environmental permits, licenses, approvals and other authorizations
required under Applicable Environmental Laws to conduct its operations and
is operating in material compliance thereunder.
2.17.3. Compliance. Boole'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. Section 9601 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 1609
et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air Act
(42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (17
U.S.C. Section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C.
Section 201 and Section 300f et seq.), the Rivers and Harbors Act (33
U.S.C. Section 401 et seq.), the Oil Pollution Act (33 U.S.C. Section 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 Boole.
2.17.4. Environmental Claims. No written notice has been served on
Boole 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 Boole or which have been cured or corrected in all material
respects.
2.17.5. Renewals. Boole 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 Boole's assets for their current purposes and uses.
2.17.6. Environmental Documents. There are no environmental orders or
decrees material to current operations conducted by Boole and there have
not been any environmental audits, assessments, investigations or reviews
conducted within the last five years on any property owned or used by
Boole.
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2.18. Compliance with Other Laws. Except as set forth in the Boole Reports,
Boole is not in violation of or in default with respect to the Occupational
Safety and Health Act (29 U.S.C. Section 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 or defaults which, either singly or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on Boole.
2.19. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Boole and its counsel
directly with BMC and its counsel, without the intervention on behalf of Boole
of any other person as the result of any act of Boole, and so far as is known to
Boole, without the intervention on behalf of Boole 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 Boole to Morgan Stanley & Co. in
connection with the transaction under financial arrangements disclosed to BMC.
2.20. Compliance with ERISA. Boole has made available to BMC a copy of each
Boole 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 Boole 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 Boole 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
Boole, 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 Boole 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 Boole
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 Boole, nothing has occurred to cause the loss of such qualified
status; (v) no Boole Plan is covered by Title IV of ERISA or Section 412 of the
Code; (vi) there are no pending or, to the knowledge of Boole, anticipated
material claims against or otherwise involving any of the Boole Plans and no
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Boole Plan activities) has been brought against or with
respect to any Boole Plan; (vii) all material contributions, reserves or premium
payments, required to be made as of the date hereof to the Boole Plans have been
made or provided for; (viii) Boole 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
Boole; (ix) Boole 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) Boole has substantially performed all
obligations,
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whether arising by law or by contract, required to be performed by it in
connection with the Boole Plans; (xi) to the knowledge of Boole, no act,
omission or transaction has occurred which would result in imposition on Boole
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 Boole Plans or otherwise by Boole which, in the aggregate, would
result in imposition of the sanctions imposed under Sections 280G and 4999 of
the Code; and (xiii) Boole has no obligations for retiree health and life
benefits under any Boole Plan, except as set forth on Section 2.20 of the Boole
Disclosure Schedule, and there are no restrictions on the rights of Boole to
amend or terminate any such Boole 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 Boole or any of the transactions
contemplated by this Agreement is pending or, to Boole's knowledge is, as of the
date of this Agreement, threatened, nor, as of the date of this Agreement, has
any governmental entity indicated to Boole an intention to conduct the same, and
(ii) except as set forth in the Boole Reports, as of the date of this Agreement,
there is no action, suit or proceeding pending or, to Boole's knowledge,
threatened against or affecting Boole 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
Boole.
2.22. Product Warranty. There are no existing liabilities or, to the
knowledge of Boole, likely liabilities, arising from claims regarding the
performance or design of the products and services sold by Boole either in the
past or at present for which adequate reserves have not been established on the
most recent balance sheet in the Boole Reports that in the aggregate could
reasonably be expected to have a Material Adverse Effect on Boole.
2.23. Information for Proxy Statement. All information and data (including
financial statements) concerning Boole which is or will be furnished by Boole
and included in the registration statement and proxy statement (collectively,
the "Proxy Statement") issued in connection with the transactions contemplated
by this Agreement 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, in light of the circumstances in which they were made, not
misleading.
2.24. Investment Company. Boole 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 Boole, nor to the knowledge of Boole, any of its
affiliates has taken or agreed to take any action that would prevent Boole from
being a "poolable entity" in accordance with generally accepted accounting
principles and the Regulations of the Securities and Exchange Commission.
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2.26. Article IX of Boole's Certificate of Incorporation and Section 203 of
the Delaware General Corporation Law. As of the date hereof and at all times on
or prior to the Effective Time, neither the provisions of Section A of Article
IX of Boole's Certificate of Incorporation nor Section 203 of the DGCL are or
will apply to this Agreement, the Stock Option Agreement, the Merger or the
transactions contemplated hereby and thereby, including the purchase of shares
of Boole by BMC under the Stock Option Agreement, and the Board of Directors of
Boole, has unanimously approved such transactions.
2.27. Inapplicability of Certain Statutes. Boole is not subject to any
state takeover law that might apply to the Merger or any of the other
transactions contemplated by this Agreement. Boole is not subject to Section
2115 of the California Corporations Code.
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 respective sections of the disclosure
schedule delivered by BMC to Boole 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 the
State of Delaware, 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 in accordance with its terms, except as
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
debtor relief or similar laws affecting the rights of creditors generally, and
(ii) general principles of equity. At the Effective Time and except as specified
in Section 3.2 of the BMC Disclosure Schedule, 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 certificate of
incorporation or bylaws of BMC or Merger Sub or (ii) any 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.
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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 September 30,
1998 no shares were issued or outstanding; and 600,000,000 shares of BMC Common
Stock, par value $.01 per share, of which at September 30, 1998, 217,259,162
shares were issued and outstanding, an additional 36,756,693 shares were
reserved for issuance in connection with various BMC benefit plans and an
additional 5,966,100 shares were reserved for issuance upon exercise of
outstanding warrants; at September 30, 1998, 1,531,279 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 or made
available (including through the SEC EDGAR system) to Boole true and complete
copies of (a) all annual reports filed by BMC with the Commission pursuant to
the Exchange Act, since September 30, 1995, (b) BMC's quarterly and other
reports filed with the Commission since September 30, 1995, (c) all definitive
proxy solicitation materials filed by BMC with the Commission since September
30, 1995, and (d) any registration statements of BMC declared effective by the
Commission since September 30, 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 fairly 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 for the
absence of footnotes). The BMC Reports did not at the time each of the BMC
Reports was filed with the Commission (or, if amended or superseded by a
subsequent filing, then on the date of such filing), and (if filed after the
date hereof) 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 September 30, 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 has no liabilities of the type required to be
disclosed in the consolidated financial statements of BMC prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
except for: (i) liabilities disclosed in the financial statements (including any
related notes) contained in the BMC Reports and (ii) liabilities incurred in the
ordinary course of business consistent with past practices.
3.6. No Undisclosed Defaults. Except as may be specified in the BMC
Reports, BMC is not in default in any material obligation or covenant on its
part to be performed under any lease or other contract that is material to the
business of BMC and its subsidiaries taken as a whole.
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3.7. Absence of Certain Changes and Events in BMC. Except as set forth in
the BMC Reports, other than as a result of the transactions contemplated by this
Agreement, between June 30, 1998 and the date of this Agreement, there has not
been:
3.7.1. Financial Change. Any adverse change in the financial
condition, operations, or business of BMC which could reasonably be
expected to have a Material Adverse Effect on BMC;
3.7.2. Property Damage. Any damage, destruction, or loss to the
business or properties of BMC (whether or not covered by insurance) that
could reasonably be expected to have a Material Adverse Effect on BMC;
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; or
3.7.4. Labor Disputes. Any labor dispute (other than routine
grievances).
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 Boole or its counsel, without the intervention on behalf of BMC of
any other person as the result of an act of BMC and, so far as known to BMC,
without the intervention on behalf of BMC 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 BMC to Goldman, Sachs & Co. in connection
with the merger contemplated by this Agreement.
3.9. Compliance With ERISA. BMC will make available to Boole 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
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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 connection with any of
the transactions contemplated by this Agreement is pending or, to BMC's
knowledge is, as of the date of this Agreement, threatened, nor, as of the date
of this Agreement, has any governmental entity indicated to BMC an intention to
conduct the same and (ii) except as set forth in the BMC Reports, as of the date
of this Agreement, there is no action, suit or proceeding pending or, to 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 furnished by BMC and
included in the Proxy Statement to be issued in connection with the transactions
contemplated by this Agreement 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, in light of the circumstances in which they were
made, 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. Merger Sub was
formed solely for the purpose of engaging in the
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transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
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 of interests" in accordance with generally
accepted accounting principles and the Regulations of the Commission (a "Pooling
Transaction").
3.14. BMC Common Stock. The BMC Common Stock to be issued in connection
with the Merger has been duly authorized by all necessary corporate action, and
when issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable and not subject to preemptive rights.
3.15. Year 2000. All software programs currently being marketed by BMC are
Year 2000 Compliant.
ARTICLE IV
OBLIGATIONS PENDING EFFECTIVE TIME
4.1. Agreements of Boole. Boole agrees that from the date hereof to the
Effective Time, except (i) to the extent BMC shall otherwise consent in writing
(which consent shall not be unreasonably withheld or delayed) or (ii) as set
forth or referred to in the section of the Boole Disclosure Schedule
corresponding to the respective section of this Article IV, 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 in an effort 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 and adversely deviate from its licensing and pricing
practices;
4.1.2. No Delay. Not take any action or enter into any transaction
which would materially affect the ability of Boole to, or materially delay
Boole's ability to, complete the transactions contemplated by this
Agreement;
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 with all laws applicable to it
and to the conduct of its business, except where the failure to comply with
such laws would not have a Material Adverse Effect on Boole;
4.1.5. Compliance with Agreement. At its expense, take all
commercially reasonable actions as may be necessary, advisable or proper
(i) to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, (ii) to insure that the representations and warranties made by
it herein are true and correct at the Effective Time such that the
condition
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contained in Section 5.2.1 would be satisfied, (iii) to fully perform all
covenants made by it herein and (iv) to satisfy timely all other
obligations imposed upon it by this Agreement;
4.1.6. Inspection. Upon reasonable advance notice, 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; provided, however, that Boole shall
not be required to permit any inspection, or to disclose any information,
that in the reasonable judgment of Boole would (i) result in the disclosure
of any trade secrets of third parties, (ii) violate any obligation of Boole
with respect to confidentiality, (iii) jeopardize protections afforded
Boole under the attorney-client privilege or the attorney work product
doctrine, or (iv) materially interfere with the conduct of Boole's
business; and
4.1.7. Maintenance of Intellectual Property. Not take any action that
would, or not fail to take any action the failure of which would,
materially and adversely affect its Intellectual Property.
4.2. Agreements of BMC and Boole. Each party agrees to take (or not to
take, as the case may be) the following actions after the date hereof:
4.2.1. Hart-Scott-Rodino. Each party shall promptly file such
materials as are required under HSR 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.
Each party shall promptly make and effect all other registrations, filings
and submissions required to be made or effected by it pursuant to the
Securities Act, the Exchange Act and any other applicable legal
requirements with respect to the Merger. Without limiting the generality of
the foregoing, each party agrees to (i) promptly provide all information
requested by any governmental entity in connection with the Merger or any
of the other transactions contemplated by this Agreement; (ii) promptly
take, and cause its affiliates to take, all actions and steps necessary to
obtain any antitrust clearance or similar clearance required to be obtained
from the Federal Trade Commission, the Department of Justice, any state
attorney general, any foreign competition authority or any other
governmental entity in connection with the transactions contemplated by
this Agreement; (iii) give the other party prompt notice of the
commencement of any investigation, action or legal proceeding by or before
any governmental entity with respect to the Merger or any of the other
transactions contemplated by this Agreement; (iv) keep the other party
informed as to the status of any such investigation, action or legal
proceeding, and (v) promptly inform the other party of any communication to
or from the Federal Trade Commission, the Department of Justice or any
other governmental entity regarding the Merger. Each party will consult and
cooperate with the other parties and will consider in good faith the views
of the other parties in connection with any analysis, appearance,
presentation, memorandum, brief, argument, opinion or proposal made or
submitted in connection with any investigation, action or legal proceeding
under or relating to HSR or any other federal or state or foreign
antitrust, competition or fair trade law. In addition, except as may be
prohibited by any governmental entity or by any law, rule or regulation, in
connection with any investigation, action or legal proceeding under or
relating to HSR or any other federal or
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state or foreign antitrust, competition or fair trade law or any other
similar investigation, action or legal proceeding, each party hereto will
permit authorized representatives of the other party to be present at each
meeting or conference relating to any such investigation, action or legal
proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any governmental entity
in connection with any such investigation, action or legal proceeding;
4.2.2. Proxy Statement. Each party shall cooperate in the preparation
and prompt filing of the Proxy Statement with the Commission with respect
to the meeting of Boole's stockholders called for the purpose of, among
other things, securing stockholder approval of the Merger. Each party shall
use all reasonable efforts to have the Proxy Statement declared effective
by the Commission as promptly as practicable after it is filed with the
Commission;
4.2.3. Notice of Material Development. Each party 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 and which would
reasonably be expected to result in a Material Adverse Effect, (ii) any
Material Adverse Effect on such party and (iii) any material breach by such
party of any covenant or agreement contained in this Agreement;
4.2.4. Pooling. Each party 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; and
4.2.5. Tax Treatment. Neither party shall (before or after the
Effective Time) take any action or fail to take any action which action or
failure to act would prevent, or would reasonably be likely to prevent, the
Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code. Each party shall use all reasonable efforts to obtain
the opinions of counsel referred to in Sections 5.1.8 and 5.2.4,
respectively.
4.3. Additional Agreements of Boole. Boole agrees that from the date hereof
to the Effective Time, except (i) to the extent BMC shall otherwise consent in
writing (which consent shall not be unreasonably withheld or delayed) or (ii) as
set forth or referred to in the section of the Boole Disclosure Schedule
corresponding to the respective section of this Article IV, 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 without the payment of severance compensation or (ii) provide for
any increase in compensation, including, without limitation, any
modification of any stock option agreements, outside the ordinary course of
business consistent with past practice, or 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;
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4.3.2. Prohibition of Certain Loans. Not incur any indebtedness for
borrowed money except for borrowings incurred in the ordinary course of
business consistent with past practices;
4.3.3. Prohibition of Certain Commitments. Not enter into commitments
of a capital expenditure nature which would exceed $1,000,000, in the
aggregate, except as may be necessary for the maintenance of existing
facilities and equipment in good operating condition and repair in the
ordinary course of business and except as may be required by law;
4.3.4. Intentionally Omitted;
4.3.5. Maintenance of Insurance. Maintain insurance (or self insurance
reserves) on its properties and with respect to the conduct of its business
of such kinds and in such substantially similar amounts as 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 Boole 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 Boole) 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 Boole;
4.3.6. Boole Acquisition Proposals.
4.3.6.1. No Solicitation. Not directly or indirectly, or authorize
or permit any of its respective agents to: (i) solicit, initiate,
facilitate or knowingly encourage (including by way of furnishing
information) any inquiry or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any acquisition
or purchase by a third party (other than BMC or an affiliate of BMC) of
a substantial amount of assets of, or any equity interest in, Boole or
any merger, consolidation, business combination, sale of securities,
recapitalization, liquidation, dissolution or similar transaction
involving Boole (in each case, other than as permitted by Section 4.1.1,
Section 4.3.8 or any other provision of this Agreement) (collectively,
"Boole Transaction Proposals") or agree to or endorse any Boole
Transaction Proposal or (ii) propose, enter into or participate in any
discussions or negotiations regarding any Boole Transaction Proposal, or
furnish to another person (other than BMC or a representative of BMC)
any information with respect to its business, properties or assets for
the purpose of facilitating any Boole Transaction Proposal, provided,
however, that nothing contained in this Section 4.3.6.1 or elsewhere in
this Agreement shall prohibit Boole from (A) furnishing information
pursuant to an appropriate confidentiality letter concerning Boole and
its businesses, properties or assets to a third party who has made a
Superior Boole Transaction Proposal (as defined below), (B) engaging in
discussions or negotiations with a third party who has made a Superior
Boole Transaction Proposal or (C) following
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receipt of a Superior Boole Transaction Proposal, taking and disclosing
to its stockholders a position (including a positive recommendation)
with respect thereto or changing, withdrawing or withholding the
approval or recommendation by Boole's board of directors of this
Agreement or the Merger, but in each case referred to in the foregoing
clauses (A) through (C) only after the board of directors of Boole
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 Boole to comply with
its fiduciary obligations to Boole's stockholders under applicable law.
If the board of directors of Boole receives a Boole Transaction
Proposal, then Boole 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
Boole Transaction Proposal and of all steps it is taking in response to
such Boole Transaction Proposal; provided that nothing contained in this
Section 4.3.6.1 or elsewhere in this Agreement shall prohibit Boole or
its board of directors from (i) making such disclosure to Boole's
stockholders or taking any action which, in the good faith judgment of
Boole'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, or (ii) filing with the
Commission a report on Form 8-K with respect to this Agreement and, only
in the event BMC shall have previously filed a copy of this Agreement
with the Commission, filing a copy of this Agreement and any related
agreements as an exhibit to such report. For purposes of this Agreement,
the term "Superior Boole Transaction Proposal" shall mean a bona fide
Boole Transaction Proposal that the board of directors of Boole
determines in good faith after consultation with (and based in part on
the advice of) its independent financial advisors to be more favorable
to Boole and Boole'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 Boole Transaction Proposals. If (i)
this Agreement is terminated by BMC or Boole pursuant to Section 6.1.5
hereof and there shall not have occurred a Material Adverse Effect on
BMC, or (ii) (A) prior to the time of the meeting of Boole's
stockholders at which a final vote is taken by such stockholders on a
proposal to approve and adopt this Agreement and to approve the Merger,
there is publicly announced by a third party (other than BMC or an
affiliate of BMC) a proposal for Another Boole Transaction (as defined
below); (B) the adoption and approval of this Agreement and the approval
of the Merger by the holders of a majority of the shares of Boole Common
Stock outstanding as of the record date for such meeting of stockholders
shall not have been obtained at such meeting; (C) at or prior to the
time of such meeting of Boole's stockholders, there shall not have
occurred a Material Adverse Effect on BMC; and (D) Boole enters into an
acquisition agreement which provides for Another Boole Transaction or
Another Boole Transaction is consummated (in each case with any third
party which after the date of this Agreement and before termination of
this Agreement has publicly announced a proposal for Another Boole
Transaction), 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 Boole pursuant to Section 6.1.4,
Section 6.1.6, Section 6.1.8 or Section 6.1.9, Boole shall pay to BMC
simultaneously with termination by Boole in the case of the
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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 Boole Transaction in the
case of clause (ii) above (by wire transfer of immediately available
funds to an account designated by BMC for such purpose), a fee (the
"Break-Up Fee") in an amount equal to $30.0 million. For purposes of
this Paragraph 4.3.6.2, the term "Another Boole 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) (other than
BMC or any affiliate of BMC) (each, a "Third Party") acquires 50% or
more of the outstanding Boole Common Stock, (ii) a Third Party acquires
25% or more of the total assets of Boole taken as a whole, (iii) a Third
Party merges, consolidates or combines in any other way with Boole other
than in a transaction in which holders of Boole Common Stock continue to
own at least 75% of the equity of the surviving corporation, or (iv)
Boole distributes or transfers to its stockholders, by dividend or
otherwise, assets constituting 25% or more of the market value or
earning power of Boole on a consolidated basis (it being understood that
stock of subsidiaries constitute assets of Boole for purposes of this
Paragraph 4.3.6.2).
4.3.7. No Amendment to Certificate of Incorporation, etc. Not amend
its certificate of incorporation 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;
4.3.8. No Issuance, Sale, or Purchase of Securities. 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 4.3.8 or
elsewhere in this Agreement shall restrict or prohibit (a) the issuance by
Boole of shares of Boole Common Stock upon exercise of options previously
granted under existing benefit plans or the issuance of Boole Common Stock
under the Boole Employee Stock Purchase Plan ("ESPP"), (b) the issuance of
options to purchase up to 100,000 shares of Boole Common Stock per calendar
quarter so long as such options (i) are granted at fair market value on the
date of grant, and (ii) vest over four years in accordance with Boole's
normal vesting schedule, (c) the issuance of shares of Boole Common Stock
upon the exercise of the options referred to in clause "(b)" of this
sentence, or (d) Boole from formally issuing option agreements in
connection with option grants approved by Boole's board of directors or a
committee thereof prior to the date of this Agreement;
4.3.9. 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;
4.3.10. Supplemental Financial Statements. Deliver to BMC, within 90
days after the end of the fiscal year ended September 30, 1998 the audited
consolidated financial statements of Boole included in its report on Form
10-K. Deliver to BMC, within 45 days after the end of each fiscal quarter
of Boole beginning December 31, 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 Boole, and as of the corresponding fiscal quarter of the
previous fiscal year;
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4.3.11. Stockholders' Meeting. Call and hold a meeting of stockholders
as soon as practicable, but in any event no later than 60 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; provided, however, that if Boole
shall fail to hold a meeting of stockholders by the 60-day deadline solely
because of a delay directly caused by BMC or because of an event outside of
the control of Boole, such 60-day deadline shall be extended by the number
of days by which BMC or the event outside of the control of Boole shall
have been responsible for delaying the Boole stockholders' meeting; and
4.3.12. Union Contracts and Boole Plans. Not (i) enter into or modify
any collective bargaining agreement with any labor union or other similar
representative of employees, (ii) increase the compensation or benefits of
any employee of Boole or any of its subsidiaries other than in the ordinary
course of business, (iii) except as contemplated by this Agreement, amend
or terminate any Boole 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. Maintenance of Present Business. Other than as contemplated by
this Agreement, operate its business in the usual, regular, and ordinary
manner;
4.4.2. No Delay. Not take any action or enter into any transaction
which would materially affect the ability of BMC to, or materially delay
BMC's ability to, complete the transactions contemplated by this Agreement;
4.4.3. 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;
4.4.4. Inspection. Upon reasonable advance notice, permit Boole 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; provided, however, that BMC shall
not be required to permit any inspection, or to disclose any information,
that in the reasonable judgment of BMC would (i) result in the disclosure
of any trade secrets of third parties, (ii) violate any obligation of BMC
with respect to confidentiality, (iii) jeopardize protections afforded BMC
under the attorney-client privilege or the attorney work product doctrine,
or (iv) materially interfere with the conduct of BMC's business;
4.4.5. 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, (ii) options granted to
new personnel upon commencement of employment or (iii) options granted in
the ordinary course of business as to three percent (3%) of the outstanding
BMC Common Stock) or rights to subscribe to, or enter into any contract or
commitment to issue or sell (upon conversion or otherwise), any shares
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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 4.4.5 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;
4.4.6. 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;
4.4.7. Issuance of BMC Common Stock. Take all action reasonably
necessary to register the "issuance" of BMC Common Stock to the
stockholders of Boole in connection with the Merger 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 and under other applicable laws, rules and regulations in connection
with the issuance of the BMC Common Stock pursuant to the Merger and
pursuant to all assumed Boole Options;
4.4.8. 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 and pursuant to all assumed Boole Options on the Nasdaq National
Market; and
4.4.9. Compliance with Agreement. At its expense, take all
commercially reasonable actions as may be necessary, advisable or proper
(i) to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, (ii) to insure that the representations and warranties made by
it herein are true and correct at the Effective Time such that the
condition contained in Section 5.1.1 would be satisfied, (iii) to fully
perform all covenants made by it herein and (iv) to satisfy timely all
other obligations imposed upon it by this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1. Conditions Precedent to Obligations of Boole. The obligations of Boole
to consummate and effect the Merger shall be subject to the satisfaction of the
following conditions, or to the waiver thereof by Boole 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
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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 on BMC (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 Boole a certificate, dated the
Effective Time and signed on behalf of BMC 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 legal
proceeding shall have been commenced by any United States federal or state,
or any European country, governmental entity with respect to the Merger and
shall be pending, before any court or governmental agency of competent
jurisdiction which would reasonably be expected to have a Material Adverse
Effect on BMC.
5.1.3. Stockholder Approval. At the meeting of stockholders of Boole
to be held before the Effective Time, the holders of a majority of the
shares of Boole Common Stock outstanding as of the record date for such
meeting of stockholders shall have approved the Merger and this Agreement.
5.1.4. Hart-Scott-Rodino, etc. All waiting periods required by HSR and
any applicable comparable European and Japanese laws and regulations 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 Boole or other actions as a precondition to the expiration of
any waiting period or the receipt of any necessary governmental approval or
consent.
5.1.5. Registration of BMC Common Stock. At or prior to the Effective
Time the Proxy Statement shall have become effective under the Securities
Act.
5.1.6. 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 or agreements entered into by Boole.
5.1.7. Ancillary Matters. Boole shall have received a favorable
opinion from Morgan Stanley & Co. for inclusion in the Proxy Statement as
to the fairness, from a financial point of view, to the Boole stockholders
of the Merger Consideration, which opinion shall not have been withdrawn at
the Effective Time.
5.1.8. Tax Opinion. Cooley Godward LLP shall have delivered to Boole
its written opinion (which may be based upon such representations,
warranties and certificates it deems reasonable and appropriate under the
circumstances) as of the date that the Proxy Statement is first mailed to
Boole 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 Boole 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 Boole Common Stock upon
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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; provided, however, that if Cooley Godward LLP does not
render such opinion or withdraws or modifies such opinion, this condition
shall nonetheless be deemed to be satisfied if counsel to BMC renders such
opinion to Boole.
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 Boole True at Effective
Time. The representations and warranties of Boole 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 on Boole (it being
understood that any materiality qualifications contained in such
representations and warranties shall be disregarded for this purpose);
Boole shall have performed and complied, in all material respects, with all
covenants required by this Agreement to be performed or complied with by
Boole before the Effective Time; and Boole shall have delivered to BMC a
certificate, dated the Effective Time and signed on behalf of Boole by its
chief executive officer and by its chief financial or accounting officer to
both such effects.
5.2.2. No Material Litigation. No suit, action or other legal
proceeding shall have been commenced by any United States federal or state,
or any European country, governmental entity with respect to the Merger and
shall be pending before any court or governmental agency of competent
jurisdiction which would reasonably be expected to have a Material Adverse
Effect on Boole.
5.2.3. Hart-Scott-Rodino, etc. All waiting periods required by HSR and
any applicable comparable European and Japanese laws and regulations 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 business of BMC, its affiliates or any
component of Boole or other actions as a precondition to the expiration of
any waiting period or the receipt of any necessary governmental approval or
consent.
5.2.4. Tax Opinion. Vinson & Elkins L.L.P. shall have delivered to BMC
its written opinion (which may be based upon such representations,
warranties and certificates it deems reasonable and appropriate under the
circumstances) as of the date that the Proxy Statement is first mailed to
Boole 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 Boole will each be a party to that
reorganization
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within the meaning of Section 368(b) of the Code, and (z) BMC, Merger Sub
and Boole 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; provided, however, that if
Vinson & Elkins L.L.P. does not render such opinion or withdraws or
modifies such opinion, this condition shall nonetheless be deemed to be
satisfied if counsel to Boole renders such opinion to BMC.
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 Boole) before the Effective Time:
6.1.1. By Mutual Consent. By mutual written consent of BMC and Boole.
6.1.2. By BMC Because of Conditions Precedent. By BMC, if (i) there
has been a breach by Boole 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 5.2.1 would not be satisfied, and (ii)
Boole fails to cure such breach within 30 business days after written
notice thereof from BMC (except that no cure period shall be provided for
any breach by Boole which by its nature cannot be cured).
6.1.3. By BMC Because of Material Adverse Change. By BMC, if there has
been since September 30, 1998, a Material Adverse Change with respect to
Boole 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 Boole 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 Boole Because of Conditions Precedent. By Boole, if (i)
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 (ii) BMC fails to cure such breach within 30 business days after
written notice thereof from Boole (except that no cure period shall be
provided for any breach by BMC which by its nature cannot be cured).
6.1.5. By Boole or BMC Due to a Superior Boole Transaction
Proposal. By Boole or BMC if, before the Effective Time, Boole's board of
directors shall have withdrawn, withheld or modified in a manner adverse to
BMC its approval of this Agreement or the Merger solely to the extent
permitted by the terms, conditions and procedures set forth in Section
4.3.6.1.
6.1.6. By Boole Because of Material Adverse Change. By Boole, if there
has been since September 30, 1998, 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 Boole (except that no cure
period shall be provided for any Material Adverse Change which by its
nature cannot be cured).
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6.1.7. By BMC or Boole Because of Statute or Order. By BMC or Boole if
(i) a statute, rule, regulation or executive order shall have been enacted,
entered or promulgated after the date of this Agreement (and shall remain
in effect) prohibiting the consummation of the Merger substantially on the
terms contemplated hereby or (ii) an order, decree, ruling or injunction
shall have been entered by a court of competent jurisdiction after the date
of this Agreement (and shall not have been vacated, withdrawn or
overturned) 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 order, decree, ruling or injunction.
6.1.8. By BMC or Boole if Merger not Effective by June 30, 1999. By
either BMC or Boole, if all conditions to consummation of the Merger shall
not have been satisfied or waived on or before June 30, 1999, other than as
a result of a breach of this Agreement by the terminating party.
6.1.9. By BMC or Boole if Merger Cannot be Accounted for as a
Pooling. By BMC or Boole 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 or has
permitted any of its affiliates to take any action or which has failed to
take or has permitted any of its affiliates to fail to take any action,
that either alone or in combination with actions previously taken,
disqualifies the Merger from such accounting treatment.
6.1.10. By BMC or Boole if Merger Not Approved by Boole
Stockholders. By either BMC or Boole if (i) a meeting of the stockholders
of Boole (including any adjournments thereof) shall have been held and
completed and Boole's stockholders shall have taken a final vote on a
proposal to approve and adopt this Agreement and to approve the Merger, and
(ii) the adoption and approval of this Agreement and the approval of the
Merger by the holders of a majority of the shares of Boole Common Stock
outstanding as of the record date for such meeting of stockholders shall
not have been obtained.
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 Boole to
terminate this Agreement and abandon the Merger as provided in Section 6.1 shall
be exercised on behalf of Boole 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 any willful breach by such
party of any of its representations, warranties, covenants or agreements as set
forth in this Agreement.
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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.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Assumption of Options. Promptly after the Effective Time, BMC will
notify in writing each holder of a Boole Option of the assumption of the Boole
Option and that such option will become an option to purchase BMC Common Stock
in accordance with Section 1.10 of the Plan of Merger. Promptly after the
Effective Time, BMC shall cause all shares of BMC Common Stock issuable upon
exercise of the assumed Boole 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) From and after the
Effective Time, BMC shall (and BMC shall cause the Surviving Corporation to)
indemnify and hold harmless each present and former director and officer of
Boole, 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, and BMC shall (and BMC shall cause the Surviving Corporation to) fulfill
and honor in all respects the obligations of Boole pursuant to all
indemnification agreements existing on the date hereof and the certificate of
incorporation and bylaws of Boole in effect on the date hereof (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 Boole'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 Boole's existing coverage (which coverage may be an
endorsement extending the period in which claims may be made under such existing
policy); provided that (i) 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 Boole to provide such coverage; (ii) if the annual premiums of such
insurance coverage exceed such amount, BMC shall be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding such amount; and
(iii) if a policy of the type described in this
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Section 7.2(b) is not available in the market, BMC shall obtain a policy that is
as close as possible to being as favorable as Boole's existing coverage.
(c) The provisions of this Section 7.2 are intended to be for the benefit
of, and shall be enforceable by, each person who is entitled to indemnification
under this Section 7.2 and his or her heirs and representatives, and nothing
herein shall affect any indemnification rights that any such indemnified party
and his or her heirs and representatives may have under the bylaws of Boole or
any of its subsidiaries, any contract or applicable law. BMC and the Surviving
Corporation jointly and severally agree to pay all expenses, including
attorneys' fees, that may be incurred by any person entitled to indemnification
under this Section 7.2 who is the prevailing party in an action seeking to
reinforce the indemnity and other obligations provided for in this Section 7.2.
7.3. Affiliate Agreements.
7.3.1. Boole 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 Boole's directors, executive officers and beneficial owners of 10%
or more of Boole's Common Stock identified as possible "affiliates" (as
such term is used in Rule 145 under the Securities Act) has concurrently
signed and delivered to BMC the Boole 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 10% or more of BMC's Common Stock identified as
possible "affiliates" (as such term is used in Rule 145 under the
Securities Act) has concurrently signed and delivered to BMC the BMC
affiliate agreements in the form attached as Exhibit D.
7.4. Employee Benefit Plans of Boole. BMC shall take all actions necessary
or appropriate to permit the employees of Boole and its subsidiaries ("Boole
Employees") to continue to participate from and after the Closing Date in the
Boole Plans maintained by Boole and its subsidiaries immediately prior to the
Closing Date. Notwithstanding the foregoing, BMC may permit or cause any such
Boole 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
Boole Employees participating in such Boole 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 Boole Plan that is
terminated or discontinued by BMC is a group health plan, then BMC shall permit
each Boole Employee participating in such group health plan to be covered under
a BMC Plan that (i) provides medical and dental benefits to each such Boole
Employee effective immediately upon the cessation of coverage of such
individuals under such group health plan, (ii) credits such Boole 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 Boole Employee's years of service and level of
seniority with Boole 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).
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7.5. Boole ESPP. As of the Effective Time, the ESPP shall be terminated.
The rights of participants in the ESPP with respect to any offering period
underway under the ESPP immediately prior to the Effective Time shall be
determined by treating the last business day prior to the Effective Time as the
last day of such offering period and by making such other pro-rata adjustments
as may be necessary to reflect the reduced offering period but otherwise
treating such offering period as a fully effective and completed offering period
for all purposes of such Plan. Prior to the Effective Time, Boole may take all
actions (including, if appropriate, amending the terms of the ESPP) that are
necessary to give effect to the transactions contemplated by this Section 7.5.
ARTICLE VIII
MISCELLANEOUS
8.1. Entirety. This Agreement, the attachments and Schedules thereto, the
Plan of Merger, those certain confidentiality letter agreements dated September
18, 1998, that certain confidentiality letter agreement dated October 14, 1998
and the Stock Option Agreement embody the entire agreement among the parties
with respect to the subject matter hereof, and all prior agreements among the
parties with respect thereto are hereby superseded in their entirety.
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
hereto shall be in writing and shall be delivered by overnight courier, sent by
facsimile transmission or first class registered or certified mail, postage
prepaid.
IF TO BMC
With a copy to:
Addressed to: Vinson & Elkins L.L.P.
BMC Software, Inc 2300 First City Tower
2101 Citywest Blvd 1001 Fannin
Houston, TX 77042-2827 Houston, TX 77002-6760
Attention: Tim Shen Attention: John S. Watson
Facsimile: (713) 918-8000 Facsimile: (713) 615-5236
IF TO BOOLE
With a copy to:
Addressed to: Cooley Godward LLP
Boole & Babbage, Inc 3000 El Camino Real
3131 Zanker Road Palo Alto, CA 94306
San Jose, CA 95134-1933 Attention: Alan Mendelson and
Attention: Paul Newton Keith Flaum
Facsimile: (408) 526-3056 Facsimile: (650) 857-0663
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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 any communication so addressed and if
delivered by overnight courier or facsimile to such address shall be deemed to
be received (i) in the case of delivery by overnight courier, on the second
business day after such communication is delivered to the overnight courier
service, and (ii) in the case of delivery by facsimile, upon delivery during
normal business hours on any business day.
8.4. Termination of Representations, Warranties, etc. The respective
representations, warranties, covenants and agreements contained in this
Agreement shall expire with, and be terminated and extinguished by, the Merger
at the time of the consummation thereof on the Effective Time; provided,
however, that this Section 8.4 shall not limit or otherwise effect 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 Delaware without regard to
applicable principles of conflicts of law.
8.9. Public Announcements. The parties agree that before the Effective Time
they shall consult with each other before the making of any public announcement
regarding the existence of this Agreement, the 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, rule or regulation 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.
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8.10. Definitions. The following terms are defined in the indicated place:
<TABLE>
<CAPTION>
TERM SECTION OR PARAGRAPH
- ---- --------------------
<S> <C>
Agreement................................... Premises
Boole Common Stock.......................... Premises
Boole Employees............................. 7.4
Boole Options............................... 1.10 of the Plan of Merger
Boole Option Plans.......................... 1.10 of the Plan of Merger
Boole Plans................................. 2.7.1
Boole Reports............................... 2.5
Boole Transaction Proposals................. 4.3.6.1
Another Boole Transaction................... 4.3.6.2
Applicable Environmental Laws............... 2.17.3
Break-Up Fee................................ 4.3.6.2
Code........................................ Premises
Commission.................................. 2.5
DGCL........................................ Premises
Effective Time.............................. 1.3
Encumbrance................................. 2.4
ERISA....................................... 2.20
Exchange Act................................ 2.5
HSR......................................... 2.21
Intellectual Property....................... 2.12
Investment Company Act...................... 2.24
BMC Common Stock............................ Premises
BMC Plans................................... 3.9
BMC Reports................................. 3.4
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........................................ 2.18
Proxy Statement............................. 2.23
Securities Act.............................. 4.4.4
Superior Boole Transaction.................. 4.3.6.1
Proposal....................................
</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: Chairman, President and Chief
Executive Officer
RANGER ACQUISITION CORP.
By: /s/ MAX P. WATSON JR.
-----------------------------------
Name: Max P. Watson Jr.
Title: President
BOOLE & BABBAGE, INC.
By: /s/ PAUL E. NEWTON
-----------------------------------
Name: Paul E. Newton
Title: President and Chief Executive
Officer
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EXHIBIT A
PLAN AND AGREEMENT OF MERGER
MERGING MERGER SUB INTO BOOLE
THIS PLAN AND AGREEMENT OF MERGER, dated as of October 31, 1998 (this "Plan
of Merger"), is by and between Ranger Acquisition Corp., a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of BMC, Inc., a Delaware
corporation ("BMC"), and Boole, Inc., a Delaware corporation ("Boole"). Merger
Sub and Boole 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 October 31, 1998 (the "Agreement") among BMC,
Merger Sub and Boole.
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 Boole consists of 2,000,000 shares of preferred stock, par value $.001
per share, of which no shares are issued and outstanding and 45,000,000 shares
of common stock, par value $.001 per share ("Boole Common Stock"), of which
27,667,249 shares are issued and outstanding and an additional 8,453,000 shares
are reserved for issuance in conjunction with various employee benefit plans,
and 3,065,930 shares are held in Boole's treasury.
The Boards of Directors of each of the Merging Corporations, respectively,
have approved the Agreement and this 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
Plan of Merger by the requisite vote of the stockholders of each of the Merging
Corporations and to the other conditions hereinafter set forth, Merger Sub and
Boole shall be, upon the Effective Time (as defined in Section 1.3 hereof),
merged into a single surviving corporation, which shall be Boole (the "Surviving
Corporation"), one of the Merging Corporations, which shall continue its
corporate existence and remain a Delaware 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 certificates of incorporation and the
applicable laws of the State of Delaware.
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1.3. Effective Time. The merger of Merger Sub with and into Boole (the
"Merger") shall become effective upon the filing of a Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with Section 251
of the Delaware General Corporation Law. The time at 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. At
the Effective Time, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of Boole 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 Boole and Boole shall be fully vested therewith. Accordingly,
at the Effective Time, the separate existence of Merger Sub shall cease.
1.5. Governing Law and Certificate of Incorporation of Surviving
Corporation. The laws of the State of Delaware shall continue to govern the
Surviving Corporation. At the Effective Time, the Certificate of Incorporation
of Merger Sub shall be the certificate of incorporation of the Surviving
Corporation until further amended in the manner provided by law, provided that
at the Effective Time the certificate of incorporation of the Surviving
Corporation shall be amended so that the name of the Surviving Corporation shall
be "Boole & Babbage, 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 certificate of incorporation 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. At 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
certificate of incorporation 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 certificate of incorporation.
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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 Boole into shares of the capital
stock of BMC shall be as hereinafter set forth in this Section 1.9.
1.9.2. Conversion of Boole Common Stock. At the Effective Time, each
share of Boole Common Stock issued and outstanding immediately prior to the
Effective Time, without any action on the part of the holders thereof,
shall automatically become and be converted into a fraction of a fully paid
and nonassessable share of issued and outstanding BMC Common Stock equal to
0.675 (the "Exchange Ratio"). The shares of BMC Common Stock to be issued
in connection with the Merger (the "BMC Shares") are hereinafter referred
to collectively as the "Merger Consideration."
1.9.3. Exchange of Boole Common Stock Certificates. Prior to the
Effective Time, BMC (after consultation with and approval of Boole) shall
select a reputable bank or trust company to act as the exchange agent under
the Agreement and this Plan of Merger. As of the Effective Time, BMC shall
deposit with the exchange agent, for the benefit of holders of shares of
Boole Common Stock, for exchange in accordance with the Agreement and this
Plan of Merger, certificates representing shares of BMC Common Stock
issuable pursuant to the Agreement and this Plan of Merger and cash
sufficient to make payments in lieu of fractional share interests. Promptly
after the Effective Time, BMC shall cause the exchange agent to mail to
each person who was, immediately prior to the Effective Time, a holder of
record of Boole Common Stock a form of letter of transmittal (mutually
agreed to by BMC and Boole) and instructions for use in effecting the
surrender of stock certificates that, prior to the Effective Time,
represented shares of Boole Common Stock, in exchange for certificates
representing shares of BMC Common Stock and a cash payment in lieu of
fractional share interests. Commencing at the Effective Time, each holder
of an outstanding certificate or certificates theretofore representing
shares of Boole Common Stock may surrender the same to the exchange agent,
and such holder shall be entitled upon such surrender to receive in
exchange therefor a certificate or certificates representing the number of
whole BMC Shares into which the shares of Boole Common Stock theretofore
represented by the certificate or certificates so surrendered shall have
been converted as aforesaid, cash in lieu of fractional share interests and
any unpaid dividends payable in accordance with the Agreement or this Plan
of Merger. However, before surrender, each outstanding certificate
representing issued and outstanding Boole Common Stock shall after the
Effective Time be deemed, for all purposes, only to evidence ownership of
the number of whole BMC Shares into which such shares have been so
converted. In the event of a transfer of ownership of Boole Common Stock
which is not registered in the transfer records of Boole, a certificate
representing the appropriate number of shares of BMC Common Stock may be
issued to a person other than the person in whose name the certificate so
surrendered is registered, if, upon presentation to the exchange agent,
such certificate shall be properly endorsed or otherwise be in proper form
for transfer and the person requesting such issuance shall pay any transfer
or other taxes required by reason of the issuance of shares of BMC Common
Stock to a person other than the registered holder of such certificate or
establish to the reasonable satisfaction of BMC that such tax has been paid
or is not applicable. Unless and until such outstanding certificates
formerly representing Boole Common Stock are so surrendered, no dividend
payable to holders of
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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 BMC Shares represented thereby the amount of
dividends, if any, which theretofore (but after the Effective Time) became
payable with respect to such 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 in respect thereof or to any distribution in
respect thereof in the event of liquidation or to any voting or other
privileges in respect thereof of a stockholder of BMC.
If any stock certificate that, prior to the Effective Time,
represented shares of Boole Common Stock shall have been lost, stolen or
destroyed, then, upon the making of an affidavit of that fact by the person
claiming such stock certificate to be lost, stolen or destroyed (and, if
required by BMC, the posting by such person of a bond in such reasonable
amount as BMC may direct as indemnity against any claim that may be made
against it with respect to such stock certificate), BMC shall cause the
exchange agent to issue in exchange for such lost, stolen or destroyed
stock certificate a certificate representing the appropriate number of
shares of BMC Common Stock, cash in lieu of any fractional share interests
and any unpaid dividends, issuable or payable in accordance with the
Agreement and this Plan of Merger.
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. Boole's Transfer Books Closed. Upon the Effective Time, the
stock transfer books of Boole shall be deemed closed, and no transfer of
any certificates theretofore representing the shares of Boole shall
thereafter be made or consummated.
1.9.6. Conversion of Merger Sub Common Stock. At 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 Boole Common Stock.
1.10. Treatment of Stock Options. At the Effective Time, each option to
purchase Boole Common Stock outstanding immediately prior to the Effective Time
(collectively, the "Boole Options") (which includes all outstanding options
granted under Boole's stock option plans other than the ESPP (the "Boole Option
Plans")) will and without any further action on the part of any holder thereof
(herein, an "optionholder"), be assumed by BMC and become an option to purchase
that number of shares of BMC Common Stock determined by multiplying the number
of shares of Boole Common Stock subject to such Boole Option immediately prior
to 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 Boole Option
divided by the Exchange Ratio. If the foregoing calculation results in an
assumed Boole 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
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price of the fractional share. The term, exercisability, vesting schedule, and
all other terms and conditions of the Boole 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 assumed
Boole 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") in accordance with Section 7.1 of the Agreement.
Except as provided in the Agreement or this Plan of Merger or as otherwise
agreed to by the parties, each of the Boole Option Plans providing for the
issuance or grant of Boole Options shall be assumed as of the Effective Time by
BMC with such amendments thereto as may be required to reflect the Merger.
1.11. Assets and Liabilities
1.11.1. Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation. At 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 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
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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 Boole 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 Boole Common Stock shall thereafter look only to BMC for exchange
or payment thereof upon surrender of such certificate or certificates to
BMC.
1.12. Taking of Necessary Action; Further Action. Merger Sub and Boole
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 Boole 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.
2.2. Governing Law. This Plan of Merger shall be governed by and construed
in accordance with the laws of the State of Delaware.
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.
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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
BOOLE & BABBAGE, INC.
By: /s/ PAUL E. NEWTON
-----------------------------------
Name: Paul E. Newton
Title: President and Chief Executive
Officer
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APPENDIX B
STOCK OPTION AGREEMENT
BY AND AMONG
BMC SOFTWARE, INC.
AND
BOOLE & BABBAGE, INC.
<PAGE> 124
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of October 31, 1998, by
and between Boole & Babbage, Inc., a Delaware corporation (the "Company"), and
BMC Software, Inc., a Delaware corporation (the "Grantee").
RECITALS
The Grantee, the Company and Ranger Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Grantee ("Merger Sub"), propose to
enter into an Agreement and Plan of Reorganization providing, among other
things, for the merger of Merger Sub with and into the Company (the "Merger")
with the Company as the surviving corporation.
The Board of Directors of the Grantee has approved the Agreement and Plan
of Reorganization, the Merger and this Agreement.
The Board of Directors of the Company has approved the Agreement and Plan
of Reorganization, the Merger and this Agreement and has recommended approval of
the Agreement and Plan of Reorganization and the transactions contemplated
thereby, including the Merger, by holders of common stock, par value $.001 per
share, of the Company (the "Company Common Stock").
As a condition and inducement to the Grantee's willingness to enter into
the Agreement and Plan of Reorganization, the Grantee has requested that the
Company agree, and the Company has agreed, to grant the Grantee the Option (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Agreement and Plan of Reorganization, the Company and the Grantee agree as
follows:
1. Capitalized Terms. Capitalized terms used but not defined herein
are defined in the Agreement and Plan of Reorganization and are used herein
with the same meanings as ascribed to them therein; provided, however,
that, as used in this Agreement, "Person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
2. Grant of Option. Subject to the terms and conditions set forth
herein, the Company hereby grants to the Grantee an irrevocable option (the
"Option") to purchase, out of the authorized but unissued Company Common
Stock, a number of shares equal to up to 19.0% of the shares of Company
Common Stock outstanding as of the date hereof (as adjusted as set forth
herein) (the "Option Shares"), at a purchase price per Option Share equal
to the lesser of (i) $32.44 and (ii) the product of (x) 0.675 times (y) the
average of the closing sales prices per share of BMC Common Stock, rounded
to the nearest thousandth (.0005 being rounded to .001), as reported by the
Nasdaq National Market on each of the three (3) trading days immediately
preceding the exercise of the Option by the Grantee (the "Exercise Price").
3. Term. The Option shall become exercisable following the occurrence
of an Exercise Event (as hereinafter defined) and shall remain in full
force and effect until the earliest to occur of (i) the Effective Time,
(ii) the first anniversary of the receipt by the Grantee of written notice
from the Company of the occurrence of an Exercise Event or
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(iii) termination of the Agreement and Plan of Reorganization prior to the
occurrence of an Exercise Event (the "Option Term"). The rights and
obligations set forth in Sections 7, 8, 9, 10 and 13 shall not terminate at
the expiration of the Option Term, but shall extend to such time as is
provided in those Sections.
4. Exercise of Option.
a. The Grantee may exercise the Option on one occasion only, in
whole or in part, at any time during the Option Term following the
occurrence of an Exercise Event; provided, however, that (i) the Grantee
may exercise the Option following the occurrence of the Exercise Events
set forth in Section 4(b)(i) and 4(b)(ii) below only if (A) a meeting of
the Company's stockholders at which a final vote is taken by such
stockholders on a proposal to approve and adopt the Agreement and Plan
of Reorganization and to approve the Merger shall have been held, and
(B) the adoption and approval of the Agreement and Plan of
Reorganization and the approval of the Merger by the holders of a
majority of the shares of Company Common Stock outstanding as of the
record date for such meeting of stockholders shall not have been
obtained at such meeting; and (ii) notwithstanding the provisions set
forth in (A) above, the Grantee may also exercise the Option following
the occurrence of the Exercise Event set forth in Section 4(b)(i) below
if the Company fails to recommend rejection of any tender offer or
exchange offer of the type referred to in Section 4(b)(i) within the
time period prescribed by Rule 14e-2 under the Exchange Act.
Notwithstanding the expiration of the Option Term, the Grantee shall be
entitled to purchase those Option Shares with respect to which it has
exercised the Option in accordance with the terms hereof prior to the
expiration of the Option Term.
b. As used herein, an "Exercise Event" shall mean any of the
following events:
(i) any Person (other than the Grantee or any affiliate of the
Grantee) shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act) a tender offer or exchange offer to
purchase any shares of Company Common Stock such that, upon
consummation of such offer, such Person would own or control 20% or
more of the then outstanding Company Common Stock;
(ii) any Person (other than the Grantee, the Company or any of
their subsidiaries) shall have, subsequent to the date of this
Agreement, acquired beneficial ownership (as such term is defined
in Rule 13d-3 under the Exchange Act) or the right to acquire
beneficial ownership of, or any "Group" (as such term is defined in
Rule 13d-3 under the Exchange Act) shall have been formed that
beneficially owns, or has the right to acquire beneficial ownership
of, 20% or more of the then outstanding Company Common Stock; or
(iii) any event giving rise to a right of termination under
the Agreement and Plan of Reorganization under (A) Section 6.1.2
(breach) solely relating to a breach of Section 4.3.11
(Stockholders' Meeting), (B) Section 6.1.5 (change of
recommendation) or (C) Section 6.1.10 (failure to obtain
stockholder approval) if prior to the time of the meeting of the
Company's stockholders at which a final vote is taken by such
stockholders on a proposal to approve and
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adopt the Agreement and Plan of Reorganization and to approve the
Merger, there is publicly announced by a third party (other than
the Grantee or an affiliate of the Grantee) a proposal for Another
Boole Transaction.
c. If the Grantee wishes to exercise the Option, it shall send a
written notice (the date of which being herein referred to as the
"Notice Date") to the Company specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place
and a date not earlier than three business days nor later than 15
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided, however, that, if the closing of the purchase
and sale pursuant to the Option (the "Closing") cannot be consummated by
reason of any applicable law, regulation or order, the period of time
that otherwise would run pursuant to this sentence shall run instead
from the date on which such restriction on consummation has expired or
been terminated; and, provided, further, that, without limiting the
foregoing, if prior notification to, or authorization of, any
governmental authority is required in connection with such purchase, the
Grantee and, if applicable, the Company shall promptly file the required
notice or application for authorization and shall expeditiously process
the same (and the Company shall cooperate with the Grantee in the filing
of any such notice or application and the obtaining of any such
authorization), and the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which, as the case
may be, (i) any required notification period has expired or been
terminated or (ii) such authorization has been obtained and, in either
event, any requisite waiting period has passed.
d. Notwithstanding Section 4(c), in no event shall any Closing Date
be more than 12 months after the related Notice Date, and, if the
Closing Date shall not have occurred within 12 months after the related
Notice Date due to the failure to obtain any required authorization of a
governmental authority, the exercise of the Option effected on the
Notice Date shall be deemed to have expired. If (i) the Grantee receives
official notice that an authorization of any governmental authority
required for the purchase of Option Shares will not be issued or granted
or (ii) a Closing Date shall not have occurred within 12 months after
the related Notice Date due to the failure to obtain any such required
authorization of a governmental authority, (A) the Grantee (to the
extent that a Repurchase Event shall have occurred) shall be entitled to
exercise its right as set forth in Section 7 or (B) to the extent
permitted by applicable law, the Grantee shall be entitled to exercise
the Option in connection with the resale of the Company Common Stock or
other securities pursuant to a registration statement as provided in
Section 9. The provisions of this Section 4 and Section 5 shall apply
with appropriate adjustments to any such exercise in connection with
such a resale.
5. Payment and Delivery of Certificates.
a. On each Closing Date, the Grantee shall pay to the Company in
immediately available funds by wire transfer to a bank account
designated by the Company an amount equal to the Exercise Price
multiplied by the Option Shares to be purchased on such Closing Date.
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b. At each Closing, simultaneously with the delivery of immediately
available funds as provided in Section 5(a), the Company shall deliver
to the Grantee a certificate or certificates representing the Option
Shares to be purchased at such Closing, which Option Shares shall be
duly authorized, validly issued, fully paid and nonassessable and free
and clear of all Encumbrances, and Grantee shall deliver to the Company
its written agreement that the Grantee will not offer to sell or
otherwise dispose of such Option Shares in violation of applicable law
or the provisions of this Agreement.
c. Certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend that shall read
substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF OCTOBER 31, 1998. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR.
A new certificate or certificates evidencing the same number of
shares of the Company Common Stock will be issued to the Grantee in lieu
of the certificate bearing the above legend, and such new certificate
shall not bear such legend, insofar as it applies to the Securities Act,
if the Grantee shall have delivered to the Company a copy of a letter
from the staff of the Commission, or an opinion of counsel in form and
substance reasonably satisfactory to the Company and its counsel, to the
effect that such legend is not required for purposes of the Securities
Act.
6. Adjustment Upon Changes in Capitalization, Etc.
a. In the event of any change in the Company Common Stock by reason
of a stock dividend, split-up, combination, recapitalization, exchange
of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the Exercise Price therefor, shall
be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, so that the Grantee shall receive
upon exercise of the Option the same class and number of outstanding
shares or other securities or property that Grantee would have received
in respect of the Company Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Company Common Stock are issued
after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 6(a)), the number of
shares of Company Common Stock then remaining subject to the Option
shall be adjusted so that, after such issuance of additional shares,
such number of shares then remaining subject to the Option, together
with shares theretofore issued pursuant to the Option, equals 15.9% of
the number of shares of the Company Common Stock then issued and
outstanding; provided, however, that the number of shares of Company
Common Stock subject to the Option shall only be increased to
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the extent the Company then has available authorized but unissued and
unreserved shares of Company Common Stock.
b. If during the Option Term the Company shall enter into an
agreement (i) to consolidate, exchange shares or merge with any Person,
other than the Grantee or one of its affiliates, and, in the case of a
merger, shall not be the continuing or surviving corporation, (ii) to
permit any Person, other than the Grantee or one of its affiliates, to
merge into the Company and the Company shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other
Person or cash or any other property, or the shares of Company Common
stock outstanding immediately before such merger shall after such merger
represent less than 50% of the common shares and common share
equivalents of the Company outstanding immediately after the merger or
(iii) to sell, lease or otherwise transfer all or substantially all of
its assets to any Person, other than the Grantee or one of its
affiliates, then, and in each such case, proper provisions shall be made
in the agreement governing such transaction so that the Option shall,
upon the consummation of any such transaction and upon the terms and
conditions set forth herein, become exercisable for the stock,
securities, cash or other property that would have been received by the
Grantee if the Grantee had exercised this Option immediately prior to
such transaction or the record date for determining stockholders
entitled to participate therein, as appropriate.
c. The provisions of Sections 7, 8, 9, 10, 11 and 13 shall apply
with appropriate adjustments to any securities for which the Option
becomes exercisable pursuant to this Section 6.
7. Repurchase at the Option of Grantee.
a. At any time during the Option Term, at the request of the
Grantee made at any time after the first Repurchase Event (as
hereinafter defined) and ending on the first anniversary thereof (the
"Put Period"), the Company (or any successor thereto) shall repurchase
from the Grantee (i) that portion of the Option that then remains
unexercised and (ii) all (but not less than all) the shares of Company
Common Stock purchased by the Grantee pursuant hereto and with respect
to which the Grantee then has beneficial ownership. The date on which
the Grantee exercises its rights under this Section 7 is referred to as
the "Grantee Request Date." Subject to Section 7(e), such repurchase
shall be at an aggregate price (the "Section 7 Repurchase
Consideration") equal to the sum of:
i. the aggregate exercise price paid (or, in the case of
Option Shares with respect to which the Option has been exercised
but the Closing Date has not occurred, payable) by the Grantee for
any Option Shares as to which the Option has theretofore been
exercised and with respect to which the Grantee then has beneficial
ownership;
ii. the excess, if any, of the Applicable Price (as defined
below), over the Exercise Price (subject to adjustment pursuant to
Section 6) paid (or, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not
occurred, payable) by the Grantee for each Option
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Share as to which the Option has been exercised and with respect to
which the Grantee then has beneficial ownership, multiplied by the
number of such shares; and
iii. the excess, if any, of (x) the Applicable Price for each
share of Company Common Stock over (y) the Exercise Price (subject
to adjustment pursuant to Section 6), multiplied by the number of
Option Shares as to which the Option has not been exercised.
b. If the Grantee exercises its rights under this Section 7, the
Company shall (to the extent permitted by law), within five business
days (or as soon as permitted thereafter under applicable law) after the
Grantee Request Date, pay the Section 7 Repurchase Consideration to the
Grantee in immediately available funds, and the Grantee shall surrender
to the Company the Option and the certificates evidencing the shares of
Company Common Stock purchased thereunder with respect to which the
Grantee then has beneficial ownership, and the Grantee shall warrant to
the Company that, immediately prior to the repurchase thereof pursuant
to this Section 7, the Grantee had sole record and beneficial ownership
of such shares and that such shares were then held free and clear of all
Encumbrances.
c. For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest purchase price per share paid pursuant a
tender or exchange offer made for shares of Company Common Stock after
the date hereof and on or prior to the Grantee Request Date, (ii) the
price per share to be paid by any third Person for shares of Company
Common Stock, in each case pursuant to an agreement for a merger or
other business combination transaction with the Company entered into on
or prior to the Grantee Request Date, or (iii) the highest bid price per
share of Company Common Stock as quoted on The Nasdaq National Market
(or if Company Common Stock is not quoted on The Nasdaq National Market,
the highest bid price per share as quoted on any other market comprising
a part of The Nasdaq Stock Market or, if the shares of Company Common
Stock are not quoted thereon, on the principal trading market (as
defined in Regulation M under the Exchange Act) on which such shares are
traded as reported by a recognized source) during the 60 Business Days
preceding the Grantee Request Date. If the consideration to be offered,
paid or received pursuant to either of the foregoing clauses (i) or (ii)
shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized
investment banking firm selected by the Grantee and reasonably
acceptable to the Company, which determination shall be conclusive for
all purposes of this Agreement.
d. As used herein, a "Repurchase Event" means the occurrence of any
Exercise Event specified in Section 4(b)(iii)(B) or 4(b)(iii)(C), in
each case only if a Break-Up Fee has been paid or would be payable under
Section 4.3.6.2 of the Agreement and Plan of Reorganization.
e. Notwithstanding any provision to the contrary in this Agreement,
the Grantee may not exercise its rights pursuant to this Section 7 in a
manner that would result in the cash payment to the Grantee of an
aggregate amount under this Section 7 of more than $30.0 million,
including the amount, if any, paid to the Grantee pursuant to Section
4.3.6.2 of the Agreement and Plan of Reorganization;
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provided, however, that nothing in this sentence shall limit the
Grantee's ability to exercise the Option in accordance with its terms.
8. Repurchase at the Option of the Company.
a. Unless the Grantee shall have previously exercised its rights
under Section 7, at the request made by the Company at any time during
the six-month period commencing at the expiration of the Put Period (or,
if no Repurchase Event shall have occurred, at the expiration of one
year from the date on which the Option was first exercised) (the "Call
Period"), the Company may repurchase from the Grantee, and the Grantee
shall sell to the Company, all (but not less than all) the shares of
Company Common Stock acquired by the Grantee pursuant hereto and with
respect to which the Grantee has beneficial ownership at the time of
such repurchase at a price per share equal to the Exercise Price per
share in respect of the shares so acquired (such price per share
multiplied by the number of shares of Company Common Stock to be
repurchased pursuant to this Section 8 being herein called the "Section
8 Repurchase Consideration"). The date on which the Company exercises
its rights under this Section 8 is referred to as the "Company Request
Date." Notwithstanding the first sentence of this Section 8(a), the
Grantee, within 30 days following the Company Request Date, may deliver
(i) an Offeror's Notice pursuant to Section 10, in which case the
provisions of Section 10 and not those of this Section 8 shall control
(unless the sale to a third Person contemplated thereby is not
consummated) or (ii) a Registration Notice pursuant to Section 9 and
sell the shares of Company Common Stock acquired or acquirable by the
Grantee pursuant hereto pursuant to Section 9, in which case the
provisions of Section 9 and not those of this Section 8 shall control
(unless the sale under Section 9 is not consummated within 180 days
after the effectiveness of such registration statement, which
effectiveness shall have been continuous during the period) and the
Grantee shall not have been required to discontinue any disposition of
any shares as provided in Section 9. The Company's rights under this
Section 8 shall be suspended (and the Call Period shall be extended
accordingly) during any period when the exercise of such rights would
subject the Grantee to liability pursuant to Section 16(b) of the
Exchange Act by reason of the issuance of the Option, any adjustment
pursuant to Section 6 hereof, the Grantee's purchase of shares of
Company Common Stock hereunder or the Grantee's sale of shares pursuant
to Section 7, 8, 9 or 10.
b. If the Company exercises its rights under this Section 8 and the
Grantee does not deliver an Offeror's Notice or, having delivered an
Offeror's Notice, the Grantee does not sell the shares to a third Person
pursuant thereto, the Company shall, within five business days after the
expiration of the Grantee's right to deliver an Offeror's Notice or to
sell the shares subject to an Offeror's Notice to a third Person, pay
the Section 8 Repurchase Consideration in immediately available funds,
and the Grantee shall surrender to the Company certificates evidencing
the shares of Company Common Stock purchased hereunder, and the Grantee
shall warrant to the Company that, immediately prior to the repurchase
thereof pursuant to this Section 8, the Grantee had sole record and
beneficial ownership of such shares and that such shares were then held
free and clear of all Encumbrances.
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9. Registration Rights.
a. The Company shall, if requested by the Grantee (a "Registration
Notice") at any time and from time to time within two years of the first
exercise of the Option (the "Registration Period"), as expeditiously as
practicable, prepare, file and use reasonable efforts to cause to be
made effective up to two registration statements under the Securities
Act if such registration is necessary or desirable in order to permit
the offering, sale and delivery by Grantee of any or all shares of
Company Common Stock or other securities that have been acquired by or
are issuable to the Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by the
Grantee, including, at the sole discretion of the Company, a "shelf"
registration statement under Rule 415 under the Securities Act or any
successor provision, and the Company shall use all reasonable efforts to
qualify such shares or other securities under any applicable state
securities laws; provided, however, that notwithstanding anything to the
contrary contained in this Agreement, the Company shall in no event be
required to (i) qualify to do business as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify, or
(ii) consent to service of process in any such jurisdiction. Without the
Grantee's prior written consent which will not unreasonably be withheld,
no other securities may be included in any such registration. The
Company shall use all reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of
other parties that are required therefor and to keep such registration
statement effective for such period not in excess of 180 days from the
day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of the Company hereunder to file a registration statement
and to maintain its effectiveness may be suspended for one or more
periods of time not exceeding 90 days in the aggregate in any one year
period if the Board of Directors of the Company shall have determined in
good faith that the filing of such registration or the maintenance of
its effectiveness would require disclosure of nonpublic information that
would materially and adversely affect the Company. Upon receipt of
notice of the happening of any event as a result of which any
registration statement, prospectus, prospectus supplement, or any
document incorporated by reference in any of the foregoing, contains any
untrue statement of material fact or fails or omits to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading, the Grantee shall forthwith discontinue the
disposition of any shares or other securities under such registration
statement, prospectus or prospectus supplement until the Grantee
receives from the Company copies of an amended or supplemented
registration statement, prospectus or supplement so that, as thereafter
delivered to purchasers of such shares or other securities, such
registration statement, prospectus or prospectus supplement shall not
contain any untrue statement of material fact or fail or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading. For purposes of determining whether two requests
have been made under this Section 9, only requests relating to a
registration statement that has become effective under the Securities
Act and pursuant to which the Grantee has disposed of all shares covered
thereby in the manner contemplated therein shall be counted.
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b. The expenses associated with the preparation and filing of any
such registration statement pursuant to this Section 9 and any sale
covered thereby (including any fees related to blue sky qualifications
and filing fees in respect of the National Association of Securities
Dealers, Inc.) ("Registration Expenses") shall be for the account of the
Company except for underwriting discounts or commissions or brokers'
fees in respect to shares to be sold by the Grantee and the fees and
disbursements of the Grantee's counsel; provided, however, that the
Company shall not be required to pay for any Registration Expenses with
respect to such registration if the registration request is subsequently
withdrawn at the request of the Grantee unless the Grantee agrees to
forfeit its right to request one registration; and provided further
that, if at the time of such withdrawal the Grantee has learned of a
material adverse change in the results of operations, condition
(financial or other), business or prospects of the Company from that
known to the Grantee at the time of its request and has withdrawn the
request with reasonable promptness following disclosure by the Company
of such material adverse change, then the Grantee shall not be required
to pay any of such expenses and shall retain all remaining rights to
request registration.
c. The Grantee shall provide all information reasonably requested
by the Company for inclusion in any registration statement to be filed
hereunder. If during the Registration Period the Company shall propose
to register under the Securities Act the offering, sale and delivery of
Company Common Stock for cash for its own account (other than any
registration on Form S-8 or any successor form or in connection with any
offering to employees of the Company or in connection with any employee,
director or consultant benefit or compensation plan) or for any other
stockholder of the Company pursuant to a firm underwriting, it shall, in
addition to the Company's other obligations under this Section 9, allow
the Grantee the right to participate in such registration provided that
the Grantee participates in the underwriting; provided, however, that,
if the managing underwriter of such offering advises the Company in
writing that in its opinion the number of shares of Company Common Stock
requested to be included in such registration exceeds the number that
can be sold in such offering, the Company shall, after fully including
therein all securities to be sold by the Company, include the shares
requested to be included therein by the Grantee pro rata (based on the
number of shares intended to be included therein) with the shares
intended to be included therein by Persons other than the Company. In
connection with any offering, sale and delivery of Company Common Stock
pursuant to a registration statement effected pursuant to this Section
9, the Company and the Grantee shall provide each other and each
underwriter of the offering with customary representations, warranties
and covenants, including covenants of indemnification and contribution.
10. First Refusal. At any time after the first occurrence of an
Exercise Event, if the Grantee shall desire to sell, assign, transfer or
otherwise dispose of all or any of the Option Shares or other securities
acquired by it pursuant to the Option, it shall give the Company written
notice of the proposed transaction (an "Offeror's Notice"), identifying the
proposed transferee, accompanied by a copy of a bona fide binding offer,
which is not subject to financing or other material conditions other than
regulatory approvals, to purchase such shares or other securities signed by
such transferee and setting forth the
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terms of the proposed transaction. An Offeror's Notice shall be deemed an
offer by the Grantee to the Company, which may be accepted, in whole but
not in part, within ten business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which the
Grantee is proposing to transfer such shares or other securities to such
transferee. The purchase of any such shares or other securities by the
Company shall be settled within ten business days of the date of the
acceptance of the offer (or such later date on which any conditions of such
offer would have been reasonably satisfied or waived had the offer not been
accepted by the Company) and the purchase price shall be paid to the
Grantee in immediately available funds. If the Company shall fail or refuse
to purchase all the shares or other securities covered by an Offeror's
Notice, the Grantee may, within sixty days from the date of the Offeror's
Notice, sell all, but not less than all, of such shares or other securities
to the proposed transferee at no less than the price specified and on terms
no more favorable than those set forth in the Offeror's Notice; provided,
however, that the provisions of this sentence shall not limit the rights
the Grantee may otherwise have if the Company has accepted the offer
contained in the Offeror's Notice and wrongfully refuses to purchase the
shares or other securities subject thereto. The requirements of this
Section 10 shall not apply to (a) any disposition as a result of which the
proposed transferee (together with the proposed transferee's affiliates)
would own beneficially not more than 2% of the outstanding voting power of
the Company, (b) any disposition of Company Common Stock or other
securities by a Person to whom the Grantee has assigned its rights under
the Option with the consent of the Company, (c) any sale by means of a
public offering registered under the Securities Act or (d) any transfer to
a wholly owned subsidiary of the Grantee which agrees in writing to be
bound by the terms hereof.
11. Listing. If the Company Common Stock or any other securities then
subject to the Option are then listed on The Nasdaq National Market (or if
Company Common Stock is not quoted on The Nasdaq National Market, on any
other market comprising a part of The Nasdaq Stock Market or, if the shares
of Company Common Stock are not quoted thereon, on another trading market
or exchange), the Company, upon the occurrence of an Exercise Event, shall
promptly file an application to list on The Nasdaq National Market, such
other market comprising a part of The Nasdaq Stock Market or such other
trading market or exchange, as applicable, the shares of the Company Common
Stock or other securities then subject to the Option and will use all
reasonable efforts to cause such listing application to be approved as
promptly as practicable.
12. Replacement of Agreement. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Company will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
shall constitute an additional contractual obligation of the Company,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
13. Standstill. Other than pursuant to the Agreement and Plan of
Reorganization, following the occurrence of an Exercise Event and prior to
the first anniversary of the date on which the Option is first exercised
(the "Standstill Period"), without the prior written consent of the
Company, the Grantee shall not, nor shall the Grantee permit its
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affiliates to, directly or indirectly, along or in concert or conjunction
with any other person or group, in any manner acquire, agree to acquire or
make any proposal to acquire, any Company Common Stock (other than pursuant
to this Agreement or the Agreement and Plan of Reorganization) for a price
per share of Company Common Stock that is less than $32.44; provided,
however, that should any event that would be an Exercise Event under
Section 4(b)(i) or (ii) or otherwise be a proposal for Another Motel
Transaction occur during the Standstill Period, the restrictions on Grantee
pursuant to this Section 13 shall not apply.
14. Miscellaneous.
a. Expenses. Except as otherwise provided in the Agreement and Plan
of Reorganization or in Sections 7, 8 or 9 hereof, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
b. Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. 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.
c. Entire Agreement; No Third Party Beneficiary;
Severability. Except as otherwise set forth in the Agreement and Plan of
Reorganization, this Agreement (including the Agreement and Plan of
Reorganization and the other documents and instruments referred to
herein and therein) (i) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof and (ii) is not
intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder. 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 of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated.
d. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of law; provided, however, that any matter
involving the internal corporate affairs of any party hereto shall be
governed by the provisions of the state of its incorporation.
e. Descriptive Headings. The descriptive headings contained herein
are for convenience or reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
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f. Notices. Any notice to be given to any party hereto shall be in
writing and shall be delivered by overnight courier, sent by facsimile
transmission or first class registered or certified mail, postage
prepaid.
If to the Company to:
Boole & Babbage, Inc.
3131 Zanker Road
San Jose, CA 95134-1933
Attention: Paul Newton
Facsimile: (408) 526-3056
with a copy to:
Cooley Godward LLP
3000 El Camino Real
Palo Alto, CA 94306
Attention: Alan Mendelson and Keith Flaum
Facsimile: (650) 857-0663
If to Grantee to:
BMC Software, Inc.
2101 Citywest Blvd.
Houston, TX 77042-2827
Attention: Tim Shen
Facsimile: (713) 918-8000
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, TX 77002-6760
Attention: John S. Watson
Facsimile: (713) 615-5236
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 any communication so addressed and
if delivered by overnight courier or facsimile to such address shall be
deemed to be received (i) in the case of delivery by overnight courier, on
the second business day after such communication is delivered to the
overnight courier service, and (ii) in the case of delivery by facsimile,
upon delivery during normal business hours on any business day.
g. Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and
the same agreement and shall become effective when both counterparts
have been signed by each of the parties and delivered to the other
party, it being understood that both parties need not execute the same
counterpart.
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h. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned
by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except
that the Grantee may assign this Agreement to a wholly owned subsidiary
of the Grantee; provided, however, that no such assignment shall have
the effect of releasing the Grantee from its obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
i. Further Assurances. In the event of any exercise of the Option
by the Grantee, the Company and the Grantee shall execute and deliver
all other documents and instruments and take all other action that may
be reasonably necessary in order to consummate the transactions provided
for by such exercise.
j. Specific Performance. The parties hereto hereby acknowledge and
agree that the failure of any party to this Agreement to perform its
agreements and covenants hereunder will cause irreparable injury to the
other party to this Agreement for which damages, even if available, will
not be an adequate remedy. Accordingly, each of the parties hereto
hereby consents to the granting of equitable relief (including specific
performance and injunctive relief) by any court of competent
jurisdiction to enforce any party's obligations hereunder. The parties
further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such equitable relief
and that this provision is without prejudice to any other rights that
the parties hereto may have for any failure to perform this Agreement.
IN WITNESS WHEREOF, the Company and the Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
BOOLE & BABBAGE, INC.
By: /s/ PAUL E. NEWTON
-----------------------------------
Name: Paul E. Newton
Title: President and Chief Executive
Officer
BMC SOFTWARE, INC.
By: /s/ MAX P. WATSON JR.
-----------------------------------
Name: Max P. Watson Jr.
Title: President
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APPENDIX C
FORM OF VOTING AGREEMENT
<PAGE> 138
VOTING AGREEMENT
This Voting Agreement dated as of October , 1998 is between BMC Software,
Inc., a Delaware corporation ("BMC"), and (the
"Stockholder").
WHEREAS, BMC, Ranger Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of BMC ("Merger Sub"), and Boole & Babbage, Inc., a Delaware
corporation ("Boole"), 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 owns the number of issued and outstanding shares
of Common Stock, par value $0.001 per share, of Boole (the "Boole Common Stock),
set forth opposite his name on Schedule A attached hereto; and
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;
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual promises set forth below, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, 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 1.
COVENANTS OF THE STOCKHOLDER
Section 1.01. Agreement to Vote. At any meeting of the stockholders of
Boole held after the date of this Agreement and prior to the Termination Date
(as defined hereinafter), however called, and at every adjournment or
postponement thereof after the date of this Agreement and prior to the
Termination Date, or in connection with any written consent of the stockholders
of Boole given after the date of this Agreement and prior to the Termination
Date, the Stockholder shall vote or cause to be voted all Subject Shares (as
defined below) 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. For purposes of this Agreement, "Subject
Shares" shall mean all issued and outstanding shares of Boole Common Stock owned
(i) of record by the Stockholder or (ii) beneficially by the Stockholder, where
such Stockholder has sole voting power of such stock without consideration of
any duty (fiduciary or otherwise) to another person, in either case, as of the
record date fixed for such meeting or consent. Notwithstanding anything to the
contrary contained in this Agreement, the "Subject Shares" shall not include,
and the Stockholder shall not be deemed to be the beneficial owner of, any
shares of Boole Common Stock that the Stockholder may acquire upon exercise of
any stock options (unless such option has been exercised and such shares have
been issued to the Stockholder and are held by the Stockholder as of such record
date). From the date of this Agreement through the Termination Date, the
Stockholder hereby grants BMC an irrevocable proxy coupled with an interest to
vote the Subject Shares in favor of the Merger and each of the other
transactions contemplated by the Reorganization
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Agreement and in favor of the approval and adoption of the Reorganization
Agreement, and any actions required in furtherance hereof and thereof.
Section 1.02. Proxies and Voting Agreements. Except as described in Section
1.01, the Stockholder hereby revokes any and all previous proxies granted with
respect to matters set forth in Section 1.01. Prior to the Termination Date, 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 any Subject
Shares in any manner inconsistent with this Agreement. This Agreement is
intended to bind Stockholder only with respect to the specific matters set forth
herein. Stockholder will retain at all times the right to vote the Stockholder's
Subject Shares, in Stockholder's sole discretion, on all matters other than
those set forth in this Section 1.02 which are at any time or from time to time
presented to Boole's stockholders generally.
Section 1.03. Transferee of Subject Shares to be Bound by this Agreement.
The Stockholder agrees that, during the period from the date of this Agreement
through the Termination Date, Stockholder shall not cause or permit any
transfer, assignment, conveyance or other disposition of any of the Subject
Shares to be effected unless each person to which any Subject Shares, or any
interest in any of such Subject Shares, is or may be transferred shall have: (a)
executed a counterpart of this Agreement; and (b) agreed to hold such Subject
Shares (or interest in such Subject Shares) subject to all of the terms and
provisions of this Agreement.
For purposes hereof, the "Termination Date" means the first to occur of (i)
the Effective Time of the Merger and (ii) the date the Reorganization Agreement
is terminated pursuant to the provisions thereof.
ARTICLE 2.
REPRESENTATIONS, WARRANTIES AND ADDITIONAL
COVENANTS OF THE STOCKHOLDER
The Stockholder represents, warrants and covenants as of the date hereof to
BMC that:
Section 2.01. Ownership. The Stockholder is as of the date hereof the
beneficial owner of the shares of Boole Common Stock set forth opposite his name
on Schedule A attached hereto. The Stockholder has the sole right to vote such
shares, none of such shares are subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting of such shares, and no
proxy, power of attorney or other authorization has been granted with respect to
any of such shares other than as set forth herein.
Section 2.02. Authority and Non-Contravention. The Stockholder has the
right, and capacity, 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 by the Stockholder on or before the
Termination Date, 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 or result in the imposition of any lien, pledge, security interest,
charge or other
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encumbrance or restriction on any of the Subject Shares (other than as provided
in this Agreement with respect to Subject Shares).
Section 2.03. 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.
ARTICLE III
MISCELLANEOUS
Section 3.01. 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 3.02. 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
reasonable action as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
Section 3.03. Specific Performance. The Stockholder on the one hand, and
BMC, on the other, acknowledge and agree that irreparable damage would occur 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.
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Section 3.04. Notices. Any notice or communication required or permitted
hereunder shall be in writing and shall be delivered by overnight courier, sent
by facsimile transmission or first class registered or certified mail, postage
prepaid. 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 any communication so addressed and if
delivered by overnight courier or facsimile to such address shall be deemed to
be received (i) in the case of delivery by overnight courier, on the second
business day after such communication is delivered to the overnight courier
service, and (ii) in the case of delivery by facsimile, upon delivery during
normal business hours on any business day.
(a) if to BMC or Merger Sub, to:
BMC Software, Inc.
2101 City West Blvd.
Houston, TX 77042
Attention: Tim Shen
Facsimile: 713/918-1110
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002
Attention: John S. Watson
Facsimile: 713/615-5236
(b) if to Stockholder, to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
with a copy to:
Cooley Godward L.L.P.
3000 El Camino Real
Palo Alto, California 94306
Attention: Alan Mendelson and Keith Flaum
Facsimile: 650/857-0663
Section 3.05. 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.
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Section 3.06. 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 3.07. 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 3.08. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
Section 3.09. 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 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 3.10. 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 3.11. No Effect on Acting as a Director. Nothing in this Agreement
shall, and nothing in this Agreement shall be deemed to, prevent the Stockholder
from taking actions permitted by Section 4.3.6.1 of the Reorganization
Agreement.
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:
--------------------------------------
Name:
BMC:
BMC SOFTWARE, INC.
By:
-----------------------------------
Name: M. Brinkley Morse
Title: Senior Vice President
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APPENDIX D
OPINION OF MORGAN STANLEY & CO.
<PAGE> 144
October 30, 1998
Board of Directors
Boole & Babbage, Inc.
3131 Zanker Road
San Jose, CA 95134
Members of the Board:
We understand that Boole & Babbage, Inc. ("Boole & Babbage"), BMC Software,
Inc. ("BMC") and Ranger Acquisition Corp. ("Merger Sub"), a wholly-owned
subsidiary of BMC, propose to enter into an Agreement and Plan of
Reorganization, substantially in the form of the draft dated as of October 30,
1998 (the "Merger Agreement") which provides, among other things, for the merger
(the "Merger") of Merger Sub with and into Boole & Babbage. Pursuant to the
Merger, Boole & Babbage will become a wholly-owned subsidiary of BMC and each
outstanding share of common stock, par value $0.001 per share (the "Boole &
Babbage Common Stock") of Boole & Babbage, other than shares held in treasury or
held by BMC or any subsidiary of BMC, will be converted into the right to
receive 0.675 shares (the "Exchange Ratio") of common stock, par value $0.01 per
share (the "BMC Common Stock") of BMC. The terms and conditions of the Merger
are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to the holders of
shares of Boole & Babbage Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Boole & Babbage and BMC, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning Boole & Babbage and BMC prepared by
the managements of Boole & Babbage and BMC, respectively;
(iii) discussed the past and current operations and financial
condition and the prospects of Boole & Babbage, including information
relating to certain strategic, financial and operational benefits
anticipated from the Merger, with senior executives of Boole & Babbage;
(iv) discussed the past and current operations and financial condition
and the prospects of BMC, including information relating to certain
strategic, financial and operational benefits anticipated from the Merger,
with senior executives of BMC;
(v) reviewed the pro forma impact of the Merger on the earnings per
share of BMC;
(vi) reviewed the reported prices and trading activity for the Boole &
Babbage Common Stock and the BMC Common Stock;
D-1
<PAGE> 145
(vii) compared the financial performance of Boole & Babbage and BMC
and the prices and trading activity of the Boole & Babbage Common Stock and
the BMC Common Stock with that of certain other publicly-traded companies
and their securities;
(viii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(ix) reviewed and discussed with the senior managements of Boole &
Babbage and BMC their strategic rationales for the Merger;
(x) participated in discussions and negotiations among representatives
of Boole & Babbage and BMC and their financial and legal advisors;
(xi) reviewed the Merger Agreement and certain related agreements; and
(xii) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the internal financial statements and other
financial and operating data and discussions relating to strategic, financial
and operational benefits anticipated from the Merger provided by Boole & Babbage
and BMC, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the prospects
of Boole & Babbage and BMC, respectively. We have relied upon the assessment by
the managements of Boole & Babbage and BMC of their ability to retain key
employees of Boole & Babbage and BMC. We have also relied upon, without
independent verification, the assessment by the managements of Boole & Babbage
and BMC of the strategic and other benefits expected to result from the Merger.
We have also relied upon, without independent verification, the assessment by
the managements of Boole & Babbage and BMC of Boole & Babbage's and BMC's
technologies and products, the timing and risks associated with the integration
of Boole & Babbage with BMC and the validity of, and risks associated with,
Boole & Babbage's and BMC's existing and future products and technologies. We
have not made any independent valuation or appraisal of the assets or
liabilities or technology of Boole & Babbage or BMC, nor have we been furnished
with any such appraisals. In addition, we have assumed that the Merger will be
accounted for as a "pooling-of-interests" business combination in accordance
with U.S. Generally Accepted Accounting Principles and the Merger will be
treated as a tax-free reorganization and/or exchange pursuant to the Internal
Revenue Code of 1986 and will be consummated in accordance with the terms set
forth in the Merger Agreement. Our opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Boole &
Babbage in connection with this transaction and will receive a fee for our
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory services for Boole & Babbage and BMC and have
received fees for the rendering of these services. In the ordinary course of our
business we may actively trade the securities of Boole & Babbage and BMC for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in such securities.
D-2
<PAGE> 146
It is understood that this letter is for the information of the Board of
Directors of Boole & Babbage and may not be used for any other purpose without
our prior written consent, except that this opinion may be included in its
entirety in any filing made by Boole & Babbage with the Securities and Exchange
Commission in respect of the Merger. In addition, this opinion does not in any
manner address the prices at which the BMC Common Stock will actually trade at
any time and we express no recommendation or opinion as to how the holders of
Boole & Babbage Common Stock should vote at the shareholders' meeting held in
connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the holders of Boole & Babbage Common Stock.
Very truly yours,
MORGAN STANLEY & CO.
INCORPORATED
By: /s/ MARK S. MENELL
-----------------------------------
Mark S. Menell
Principal
D-3
<PAGE> 147
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
II-1
<PAGE> 148
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 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 October
31, 1998 by and among BMC Software, Inc., Ranger
Acquisition Corp. and Boole & Babbage, Inc. (included as
Appendix A to the Proxy Statement/Prospectus).
2.2 -- Stock Option Agreement dated as of October 31, 1998 by
and between BMC Software, Inc. and Boole & Babbage, Inc.
(included as Appendix B to the Proxy
Statement/Prospectus).
2.3 -- Form of Voting Agreement between BMC and certain
stockholders of Boole (included as Appendix C to the
Proxy Statement/Prospectus).
</TABLE>
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<PAGE> 149
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
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 Cooley Godward LLP regarding tax matters.
23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit
5.1).
23.2 -- Consent of Cooley Godward LLP (set forth in Exhibit 8.2).
23.3 -- Consent of Arthur Andersen LLP (BMC).
23.4 -- Consent of Ernst & Young LLP (Boole).
23.5 -- Consent of PricewaterhouseCoopers LLP (Boole)
23.6 -- Consent of Morgan Stanley & Co. Incorporated.
24.1 -- Powers of Attorney (set forth on signature page).
99.1 -- Form of Boole 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, 1998.
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;
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<PAGE> 150
(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 tide 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 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
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<PAGE> 151
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> 152
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 November, 1998.
BMC SOFTWARE, INC.
By: /s/ M. BRINKLEY MORSE
----------------------------------
M. Brinkley Morse
Senior Vice President
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, November 13, 1998
- ----------------------------------------------------- President and Chief Executive
Max P. Watson, Jr. Officer
(Principal-Executive-Officer
/s/ WILLIAM M. AUSTIN (Principal-Financial-Officer) November 13, 1998
- -----------------------------------------------------
William M. Austin
/s/ KEVIN M. KLAUSMEYER (Principal-Accounting-Officer) November 13, 1998
- -----------------------------------------------------
Kevin M. Klausmeyer
/s/ JOHN W. BARTER Director November 13, 1998
- -----------------------------------------------------
John W. Barter
/s/ B. GARLAND CUPP Director November 13, 1988
- -----------------------------------------------------
B. Garland Cupp
/s/ MELDON K. GAFNER Director November 13, 1998
- -----------------------------------------------------
Meldon K. Gafner
</TABLE>
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<PAGE> 153
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LEW W. GRAY Director November 13, 1998
- -----------------------------------------------------
Lew W. Gray
/s/ GEORGE F. RAYMOND Director November 13, 1998
- -----------------------------------------------------
George F. Raymond
/s/ TOM C. TINSLEY Director November 13, 1998
- -----------------------------------------------------
Tom C. Tinsley
</TABLE>
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<PAGE> 154
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
2.1 -- Agreement and Plan of Reorganization dated as of October
31, 1998 by and among BMC Software, Inc., Ranger Acquisition
Corp. and Boole & Babbage, Inc. (included as Appendix A
to the Proxy Statement/Prospectus)
2.2 -- Stock Option Agreement dated as of October 31, 1998 by
and among BMC Software, Inc. and Boole & Babbage, Inc.
(included as Appendix B to the Proxy
Statement/Prospectus).
2.3 -- Form of Voting Agreement between BMC and certain
stockholders of Boole (included as Appendix C 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 Cooley Godward LLP regarding tax matters
23.1 -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit
5.1)
23.2 -- Consent of Cooley Godward LLP (set forth in Exhibit 8.2)
23.3 -- Consent of Arthur Andersen LLP (BMC)
23.4 -- Consent of Ernst & Young LLP (Boole)
23.5 -- Consent of PricewaterhouseCoopers LLP (Boole)
23.6 -- Consent of Morgan Stanley & Co. Incorporated
24.1 -- Powers of Attorney (set forth on signature page)
99.1 -- Form of Boole Proxy
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[VINSON & ELKINS LETTERHEAD]
November 11, 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 Delaware corporation and wholly
owned subsidiary of BMC, with and into Boole & Babbage, Inc., a Delaware
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
EXHIBIT 8.1
[VINSON & ELKINS L.L.P. LETTERHEAD]
November 12, 1998
BMC Software, Inc.
2101 City West Blvd.
Houston, Texas 77042-2827
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
Boole & Babbage, Inc. ("Boole") pursuant to the Agreement and Plan of
Reorganization dated as of October 31, 1998 (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 the Tax
Certificates executed by BMC and Boole dated November 12, 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, Boole or the stockholders of Boole
other than those described or referenced in the Merger Agreement, 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 Boole 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
November 12, 1998
(iii) BMC, Merger Sub and Boole will not recognize any gain or loss
for U.S. federal income tax purposes as a result 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 "Material 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 heading "Material Federal Income Tax
Consequences" 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.
VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 8.2
ATTORNEYS AT LAW Palo Alto, CA
650 843-5000
One Maritime Plaza Menlo Park, CA
20th Floor 650 843-5000
San Francisco, CA
94111-3580 San Diego, CA
Main 415 693-2000 619 550-6000
Fax 415 951-3699
Boulder, CO
303 546-4000
Denver, CO
www.cooley.com 303 606-4800
WEBB B. MORROW III
415 693-2170
[email protected]
November 12, 1998
Boole & Babbage, Inc.
3131 Zanker Road
San Jose, CA 95134-1933
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the Form S-4
Registration Statement (the "Registration Statement") filed pursuant to the
Agreement and Plan of Reorganization dated as of October 31, 1998 (the "Merger
Agreement") by and among BMC Software, Inc., a Delaware corporation ("Parent"),
Ranger Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
Parent ("Merger Sub"), and Boole & Babbage, Inc., a Delaware corporation (the
"Company").
Except as otherwise provided, capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
We have acted as counsel to the Company in connection with the Merger. As such,
and for the purpose of rendering this opinion, we have examined, and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in, the following documents (including all exhibits and
schedules attached thereto):
(a) the Merger Agreement;
(b) those certain tax representation letters delivered to us by Parent,
Merger Sub and the Company containing certain representations of Parent, Merger
Sub and the Company (the "Tax Representation Letters"); and
(c) such other instruments and documents related to the formation,
organization and operation of Parent, Merger Sub and the Company and related to
the consummation of the Merger and the other transactions contemplated by the
Merger Agreement as we have deemed necessary or appropriate.
<PAGE> 2
Boole & Babbage, Inc.
Page Two
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that:
(a) Original documents submitted to us (including signatures thereto) are
authentic, documents submitted to us as copies conform to the original
documents, and that all such documents have been (or will be by the Effective
Time) duly and validly executed and delivered where due execution and delivery
are a prerequisite to the effectiveness thereof;
(b) All representations, warranties and statements made or agreed to by
Parent, Merger Sub and the Company, their managements, employees, officers,
directors and stockholders in connection with the Merger, including, but not
limited to, those set forth in the Merger Agreement (including the exhibits
thereto) and the Tax Representation Letters are true and accurate at all
relevant times;
(c) All covenants contained in the Merger Agreement (including exhibits
thereto) and the Tax Representation Letters are performed without waiver or
breach of any material provision thereof;
(d) Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification; and
(e) The opinion dated November 11, 1998 rendered by Vinson & Elkins L.L.P.
to Parent with respect to certain federal income tax consequences of the Merger
has been delivered and has not been withdrawn.
Based on our examination of the foregoing items and subject to the limitations,
qualifications, assumptions and caveats set forth herein, we are of the opinion
that, for federal income tax purposes:
(i) the Merger will be a reorganization within the meaning of Section
368(a)(1) of the Code;
(ii) each of Parent, Merger Sub and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; and
(iii) no gain or loss will be recognized by the holders of the Company
Common Stock upon the receipt of shares of Parent Common Stock in the Merger,
except with respect to any cash received in lieu of a fractional share interest
in Parent Common Stock.
In addition to your request for our opinion on this specific matter of federal
income tax law, you have asked us to review the discussion of federal income tax
issues contained in the Registration Statement. We have reviewed the discussion
entitled "Material Federal Income Tax Consequences" contained in the
Registration Statement and believe that the discussion, insofar
<PAGE> 3
Boole & Babbage, Inc.
Page Three
as it relates to statements of law and legal conclusions, is correct in all
material respects and such discussion represents our opinion.
This opinion does not address the various state, local or foreign tax
consequences that may result from the Merger or the other transactions
contemplated by the Merger Agreement. In addition, no opinion is expressed as to
any federal income tax consequence of the Merger or the other transactions
contemplated by the Merger Agreement except as specifically set forth herein,
and this opinion may not be relied upon except with respect to the consequences
specifically discussed herein. No opinion is expressed as to the federal income
tax treatment that may be relevant to a particular investor in light of personal
circumstances or to certain types of investors subject to special treatment
under the federal income tax laws (for example, life insurance companies,
dealers in securities, taxpayers subject to the alternative minimum tax, banks,
tax-exempt organizations, non-United States persons, and stockholders who
acquired their shares of Company capital stock pursuant to the exercise of
options or otherwise as compensation or who hold their Company capital stock as
part of a straddle or risk reduction transaction).
No opinion is expressed as to any transaction other than the Merger as described
in the Merger Agreement, or as to any other transaction whatsoever, including
the Merger, if all of the transactions described in the Merger Agreement are not
consummated in accordance with the terms of the Merger Agreement and without
waiver of any material provision thereof. To the extent that any of the
representations, warranties, statements and assumptions material to our opinion
and upon which we have relied are not accurate and complete in all material
respects at all relevant times, our opinion would be adversely affected and
should not be relied upon.
This opinion only represents our best judgment as to the federal income tax
consequences of the Merger and is not binding on the Internal Revenue Service or
any court of law, tribunal, administrative agency or other governmental body.
The conclusions are based on the Code, existing judicial decisions,
administration regulations and published rulings. No assurance can be given that
future legislative, judicial or administrative changes or interpretations would
not adversely affect the accuracy of the conclusions stated herein.
Nevertheless, by rendering this opinion, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
This opinion is being delivered solely in connection with the filing of the
Registration Statement. It is intended for the benefit of the Company and the
stockholders of the Company and may not be relied upon or utilized for any other
purpose or by any other person and may not be made available to any other person
without our prior written consent.
<PAGE> 4
Boole & Babbage, Inc.
Page Four
We consent to the reference to our firm under the caption "Material Federal
Income Tax Consequences" in the Proxy Statement included in the Registration
Statement and to the reproduction and filing of this opinion as an exhibit to
the Registration Statement.
Sincerely,
/s/ WEBB B. MORROW III
Webb B. Morrow III
WBM:gb
<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 1, 1998
included in BMC Software, Inc.'s Form 10-K for the year ended March 31, 1998 and
to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
November 11, 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 Proxy
Statement of Boole & Babbage, Inc. that is made a part of the Registration
Statement (Form S-4) and related Prospectus of BMC Software, Inc. for the
registration of shares of its common stock and to the incorporation by reference
therein of our report dated October 24, 1997 with respect to this consolidated
financial statements of Boole & Babbage, Inc. incorporated by reference in its
Annual Report (Form 10-K) for the year ended September 30, 1997 and the related
financial statement schedule included therein, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
San Jose, California
November 11, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-4 of BMC Software, Inc. of our report, dated April 10, 1997, on our audit
of the financial statements of MAXM Systems, Inc. as of September 30, 1996 and
1995 and for the years then ended, as included in the Current Report on Form
8-K/A for Boole & Babbage, Inc. dated April 22, 1997 (File No. 000-13258) as
incorporated by reference in the annual report on Form 10-K of Boole & Babbage,
Inc. for the year ended September 30, 1997, which report is incorporated by
reference in this registration statement on Form S-4. We also consent to the
reference to our firm under the caption "Experts" in the registration statement.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
McLean, Virginia
November 11, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
November 11, 1998
Boole & Babbage, Inc.
3131 Zanker Road
San Jose, CA 95134
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement on Form
S-4 of BMC Software, Inc. ("BMC") relating to the proposed merger of Ranger
Acquisition Corp., a wholly owned subsidiary of BMC with and into Boole &
Babbage, Inc. ("Boole"), of our opinion letter to the Board of Directors of
Boole included as Appendix D to the Proxy Statement/Prospectus which is part of
the Registration Statement, and to the references to such letter and our firm
name in such Proxy Statement/Prospectus. In giving such consent, we do not
thereby admit that we come 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 adopted by the Securities and Exchange Commission
thereunder nor do we admit that we are expects with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ MARK S. MENELL
------------------------------------
Mark S. Menell
Principal
<PAGE> 1
EXHIBIT 99.1
BOOLE & BABBAGE, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul E. Newton and Arthur F. Knapp,
Jr., and each of them, as proxy with the power of substitution to vote and act
on and consent in respect to any and all shares of the stock of Boole &
Babbage, Inc. (the "Company") held or owned by or standing in the name of the
undersigned on the Company's books on November 23, 1998 at the Special Meeting
of Stockholders of the Company to be held at 3131 Zanker Road, San Jose,
California 95134 at ______a.m. local time on [_____________], 1998, and any
continuation or adjournment thereof, with all power the undersigned would
possess if personally present at the meeting.
THE UNDERSIGNED HEREBY DIRECTS AND AUTHORIZES SAID PROXIES, AND EACH
OF THEM, OR THEIR SUBSTITUTES, TO VOTE AS SPECIFIED BELOW WITH RESPECT TO THE
PROPOSAL LISTED IN THE PARAGRAPH BELOW, OR IF NO SPECIFICATION IS MADE, TO VOTE
IN FAVOR THEREOF.
The undersigned hereby further confers upon said proxies, and each of
them, or their substitutes, discretionary authority to vote in respect to all
other matters which may properly come before the meeting or any continuation or
adjournment thereof.
The undersigned hereby acknowledges receipt of: (1) Notice of Special
Meeting of Stockholders of the Company, and (2) accompanying Proxy Statement.
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE
URGED TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR
STOCK MAY BE REPRESENTED AT THE MEETING.
To adopt and approve the Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization dated as of October 31, 1998, among the [ ] [ ] [ ]
Company, BMC Software, Inc., a Delaware corporation and
Ranger Acquisition Corp., a wholly owned subsidiary of BMC
Software, Inc., and to approve the merger of Ranger
Acquisition Corp. with and into the Company pursuant to
which the Company will become a wholly owned subsidiary of
BMC Software, Inc.
SIGN EXACTLY AS YOUR NAME(S) APPEARS ON YOUR STOCK CERTIFICATE. IF
SHARES OF STOCK STAND OF RECORD IN THE NAMES OF TWO OR MORE PERSONS OR IN THE
NAME OF HUSBAND AND WIFE, WHETHER AS JOINT TENANTS OR OTHERWISE, BOTH OR ALL OF
SUCH PERSONS SHOULD SIGN THE ABOVE PROXY. IF SHARES OF STOCK ARE HELD OF
RECORD BY A CORPORATION, THE PROXY SHOULD BE EXECUTED BY THE PRESIDENT OR VICE
PRESIDENT AND THE SECRETARY OR ASSISTANT SECRETARY. EXECUTORS OR
ADMINISTRATOR OR OTHER FIDUCIARIES WHO EXECUTE THE ABOVE PROXY FOR A DECREASED
STOCKHOLDER SHOULD GIVE THEIR FULL TITLE. PLEASE DATE THE PROXY.
Signature: ___________________________________ Date: _______________________
Signature: ___________________________________ Date: _______________________
