<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 24, 1998
To the Stockholders of
BMC Software, Inc.:
The annual meeting of stockholders of BMC Software, Inc., a Delaware
corporation (the "Company"), will be held at 2101 CityWest Boulevard, Houston,
Texas, on August 24, 1998 at 10:00 a.m., Central Daylight Savings Time, for the
following purposes:
1. To elect seven directors of the Company, each to serve until the
next annual meeting or until his respective successor has been duly elected
and qualified;
2. To amend Article Fourth of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 300,000,000 to 600,000,000.
3. To ratify the Board of Directors' appointment of Arthur Andersen
LLP as the Company's independent accountants; and
4. To consider and act upon such other business as may properly come
before the meeting or any adjournments thereof.
A record of stockholders has been taken as of the close of business on July
1, 1998, and only those stockholders of record on that date will be entitled to
notice of and to vote at the meeting. A list of stockholders will be available
commencing July 6, 1998 and may be inspected during normal business hours prior
to the annual meeting at the offices of the Company, 2101 CityWest Boulevard,
Houston, Texas 77042-2827 and at the time and place of the annual meeting.
By Order of the Board of Directors
M. Brinkley Morse
Secretary
Houston, Texas
July 14, 1998
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD. THIS WILL ENSURE THE PRESENCE OF A QUORUM AT THE
MEETING. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING. RETURNING THE PROXY
WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO ATTEND THE ANNUAL MEETING, BUT
WILL ENSURE YOUR REPRESENTATION IF YOU CANNOT ATTEND. THE PROXY IS REVOCABLE AT
ANY TIME PRIOR TO ITS USE.
<PAGE> 3
BMC SOFTWARE, INC.
2101 CITYWEST BOULEVARD
HOUSTON, TEXAS 77042-2827
JULY 14, 1998
PROXY STATEMENT
GENERAL INFORMATION
PROXY SOLICITATION
This proxy statement is furnished to the stockholders of BMC Software,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board").
The proxies are to be voted at the 1998 Annual Meeting of Stockholders to be
held at 2101 CityWest Boulevard, Houston, Texas 77042-2827, at 10:00 a.m.,
Central Daylight Savings Time, on August 24, 1998, and any adjournments thereof,
for the purposes set forth in the accompanying notice. The Board is not aware of
any other matters to be presented at the meeting. If any other matter should be
presented at the meeting upon which a vote properly may be taken, shares
represented by all duly executed proxies received by the Company will be voted
with respect thereto in accordance with the best judgment of the persons
designated as the proxies. This proxy statement and the accompanying form of
proxy have been mailed to stockholders on or about July 10, 1998.
RECORD DATE AND VOTING RIGHTS
As of July 1, 1998, the record date for the determination of stockholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote 214,532,061 shares of the common stock, $.01 par value, of the
Company (the "Common Stock"). Each share of Common Stock entitles the holder to
one vote on each matter presented at the meeting. A majority of the outstanding
shares will constitute a quorum at the meeting. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions are counted in tabulations of the votes
cast on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
VOTING OF PROXY; REVOCABILITY
Proxies will be voted in accordance with the directions specified thereon
and otherwise in accordance with the judgment of the persons designated as
proxies. Any proxy on which no direction is specified will be voted FOR the
election of the nominees named herein to the Board, FOR the ratification of the
appointment of Arthur Andersen LLP as the Company's independent accountants, and
FOR the proposal to amend the Company's Certificate of Incorporation. Any proxy
may be revoked at any time prior to its exercise by delivery to the Secretary of
the Company of written notice of revocation or a duly executed proxy bearing a
later date, or by voting in person at the meeting.
ANNUAL REPORT
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended March 31, 1998, accompanies this Proxy Statement.
Stockholders are referred to that report for financial and other
information about the activities of the Company. The Annual Report is not
incorporated by reference into this Proxy Statement and is not deemed to be a
part hereof.
2
<PAGE> 4
ITEM ONE: ELECTION OF DIRECTORS
NOMINEES
Each of the persons named below has been nominated for election as a
director of the Company until the 1999 Annual Meeting of Stockholders or until
his successor has been duly elected and qualified. Each of the nominees listed
below was elected by the stockholders at the last annual meeting and is
currently a director. All directors serve one year terms. No proxy may be voted
for more persons than the number of nominees listed below. Shares represented by
all duly executed proxies received by the Company and not marked to withhold
authority to vote for any individual director or for all directors will be voted
FOR the election of all the nominees named below. The Board knows of no reason
why any such nominee should be unable or unwilling to serve, but if such should
be the case, the shares represented by duly executed proxies received by the
Company will be voted for the election of a substitute nominee selected by the
Board. The nominees receiving a majority of the votes cast at the meeting will
be elected as directors. Stockholders may not cumulate their votes in the
election of directors.
Certain information concerning the nominees is set forth below:
<TABLE>
<CAPTION>
POSITION AND OFFICES DIRECTOR
NAME AGE OF THE COMPANY SINCE
---- --- -------------------- --------
<S> <C> <C> <C>
Max P. Watson Jr.................. 52 Chairman of the Board, President 1990
and Chief Executive Officer
John W. Barter.................... 51 Director 1988
B. Garland Cupp................... 57 Director 1989
Meldon K. Gafner.................. 50 Director 1987
L. W. Gray........................ 61 Director 1991
George F. Raymond................. 61 Director 1987
Tom C. Tinsley.................... 45 Director 1997
</TABLE>
Mr. Watson joined the Company in October 1985 and has served as President
and Chief Executive Officer since April 1990 and as Chairman of the Board since
January 1992. He served as Executive Vice President and Chief Operating Officer
from January 1989 to April 1990 and as Senior Vice President, North American
Sales and Marketing from February 1987 to December 1988.
Mr. Barter was been employed from 1977 through 1998 with
AlliedSignal, Inc. in various financial and executive capacities. From July 1988
to September 1994 he served as Senior Vice President and Chief Financial
Officer, and from October 1994 to he served as Executive Vice
President of AlliedSignal, Inc., and President of AlliedSignal Automotive. Mr.
Barter is also a director of Iomega Corp.
Mr. Cupp was employed by the American Express Corporation from 1978 to
1995, when he retired. From 1985 to 1995, he served as Executive Vice
President -- TRS Technologies and Chief Information Officer at the Travel
Related Services subsidiary of American Express Corporation.
Mr. Gafner has been Vice Chairman of the Board of ComStream Corporation, a
manufacturer of high speed satellite earth stations for data distribution, since
December 1992 and was its President from July 1988 to December 1992.
Mr. Gray is a private investor. He was employed from 1961 to 1987 by the
International Business Machines Corporation ("IBM") in various executive
capacities including President, National Marketing Division. He was a corporate
vice president of IBM from 1983 to 1987.
Mr. Raymond is a private investor and a director of several privately held
software companies. He founded Automatic Business Centers, Inc., a payroll
processing company ("ABC"), in 1972 and sold the company to CIGNA Corporation
("CIGNA") in 1983. Mr. Raymond and other members of ABC's management repurchased
ABC in 1986 from CIGNA and sold ABC to Automatic Data Processing Corporation in
1989.
3
<PAGE> 5
Mr. Tinsley is the Chairman of The Baan Company, a leading provider of
client/server enterprise resource planning software applications, and has held
that position since his joining The Baan Company in November 1995. Prior to
joining The Baan Company, he was a managing director at McKinsey & Co., a
management consulting firm, where he had been employed for eighteen years and
most recently headed the firm's global information technology practice.
BOARD ORGANIZATION AND MEETINGS
The Board met 12 times in fiscal 1998. No Board member attended fewer than
75% of the total number of the meetings of the Board and of the committees on
which he served.
The Board has established an Audit Committee and a Compensation Committee
to act on behalf of the Board and to advise the Board with respect to specific
matters. The Board does not have a standing nominating committee or a committee
that performs a similar function. The responsibilities of the Audit Committee
and Compensation Committee are as follows:
Audit Committee. The Audit Committee is comprised entirely of directors who
are not officers of the Company. The Audit Committee has been established to
discuss the scope and plan of the annual audit of the books and records of the
Company; to review, evaluate and advise the Board with respect to the engagement
of independent public accounts; to review the adequacy of internal accounting
procedures, and to review audit results. Messrs. Barter and Raymond are members
of the Audit Committee, which held one meeting in fiscal 1998.
Compensation Committee. The Compensation Committee is comprised entirely of
directors who are not officers of the Company. The Compensation Committee's
function is to review the compensation levels of the Company's executive
officers, to administer the Company's stock option and incentive stock plans and
to authorize bonuses, awards under such plans and any other form of
remuneration. Messrs. Barter, Gafner and Cupp are members of the Compensation
Committee, which held seven meetings in fiscal 1998.
COMPENSATION OF DIRECTORS
Board members other than those employed by the Company receive an annual
fee of $20,000 and receive an additional fee of $1,000 per meeting for each
board or committee meeting attended in excess of five meetings per year, with
board and committee meetings that are held on the same day being counted as one
meeting. Directors are reimbursed for travel and certain other expenses incurred
in connection with their duties as a director of the Company. Effective for the
fiscal year ended March 31, 1999, the Company has modified this arrangement to
provide for a fixed fee of $25,000 per annum with no additional meeting fees.
In August 1994, the Company's stockholders approved the BMC Software, Inc.
1994 Nonemployee Directors' Stock Option Plan (the "1994 Directors' Plan"). As
adopted, the 1994 Directors' Plan provided for automatic grants of
"nonqualified" stock options to nonemployee directors, with a one-time 20,000
share grant to a newly elected director and annual 5,000 share grants to each
existing director upon his or her annual re-election. These amounts
automatically increased to 80,000 and 20,000, respectively, because of the
Company's two-for-one stock split in August 1995 and two-for-one stock split in
November 1996. Following the second stock split, the Board assessed the increase
in the implicit value of these stock option grants following the appreciation in
the Company's stock price since adoption of the 1994 Directors' Plan and the two
stock splits. Based on this assessment and an analysis of comparable nonemployee
director stock option plans, the Board amended the 1994 Directors' Plan in April
1997 to reduce the number of shares subject to the options granted to new
directors to 20,000 and the number of shares subject to options annually granted
to existing directors to 10,000. In May 1998, the Company effected another
two-for-one stock split, which increased these amounts to 40,000 and 20,000,
respectively. The Board is currently reviewing the amounts of these grants
relative to peer company board compensation practices. The 1994 Directors' Plan
has 800,000 shares reserved for issuance. All options granted under the 1994
Directors' Plan have an exercise price equal to fair market value on the grant
date and vest quarterly in 6.25% increments over four years from the grant date.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE PROPOSED NOMINEES.
4
<PAGE> 6
ITEM TWO: PROPOSAL TO APPROVE AN AMENDMENT TO ARTICLE FOURTH
OF THE RESTATED CERTIFICATE OF INCORPORATION TO
CHANGE THE AUTHORIZED SHARES OF CAPITAL STOCK
THE PROPOSAL
The Board of Directors is seeking stockholder approval to amend Article
Fourth of the Company's Restated Certificate of Incorporation to increase the
authorized shares of Common Stock from 300,000,000 to 600,000,000 shares. This
proposal has been unanimously approved by the Board of Directors subject to
approval by the stockholders of the Company. If the proposed amendment is
authorized, the text of the first paragraph of Article Fourth of the Restated
Certificate of Incorporation would be amended to read as follows:
"FOURTH: The aggregate number of shares which the Company shall have
the authority to issue is Six Hundred One Million (601,000,000) shares, of
which One Million (1,000,000) shall be shares of Preferred Stock, of the
par value of One Cent ($.01) per share (the "Preferred Stock"), and Three
Hundred Million (300,000,000) shall be shares of Common Stock, of the par
value of One Cent ($.01) per share ("Common Stock").
As of the record date of July 1, 1998, there were 300,000,000 shares of
Common Stock authorized, 214,532,061 shares outstanding, 31,863,388 shares
reserved for issuance, 2,605,758 shares held in treasury and 50,998,793 shares
available for issuance.
REASONS FOR THE PROPOSED AMENDMENT
The proposed increase in the number of authorized shares of Common Stock
has been recommended by the Board to assure that an adequate supply of
authorized and unissued shares of Common Stock is available for general
corporate needs, such as financing acquisitions with capital stock, declaring
stock splits or stock dividends, raising additional equity capital or using for
future employee benefit plans. Given the number of shares of Common Stock
currently available for issuance, the Company believes it needs the ability to
quickly effect these types of transactions without the delay involved to obtain
stockholder approval. Otherwise, the cost, prior notice requirements and delay
involved in obtaining stockholder approval when such corporate action may be
desirable could eliminate the opportunity to effect the transaction or reduce
the expected benefits.
POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT
If approved by the stockholders, the additional authorized shares of Common
stock would be available for issuance at the discretion of the Board of
Directors without further stockholder approval (subject to applicable rules of
the National Association of Securities Dealers, Inc. or any stock exchange on
which the Company's securities may then be listed), without the delay and
expense incident to holding a special meeting of stockholders to consider any
specific issuance. However, the rules of the National Association of Securities
Dealers, Inc. (applicable to Nasdaq National Market issuers) require stockholder
approval in the following general situations: (i) in connection with
establishing a stock option or purchase plan under which stock may be acquired
by offices or directors, (ii) when the issuance would result in a change of
control of the Company, (iii) in connection with the acquisition of stock or
assets of another company if a director, officer or substantial stockholder has
a 5% or greater interest (or such persons collectively have a 10% or greater
interest) in the company or assets to be acquired, and the stock issuable in
such transaction could result in an increase in the number of outstanding shares
of Common stock or voting power of the outstanding capital stock by 5% or more,
or (iv) in connection with the acquisition of stock or assets of another company
or such other transaction (except for a public offering of Common Stock for
cash) that would result in an increase in the number of outstanding shares of
Common Stock or the voting power of the outstanding capital stock by 20% or
more.
The additional shares of Common Stock for which authorization is sought
will have the same rights and privileges as the other shares of Common Stock
presently outstanding. Current holders of Common Stock
5
<PAGE> 7
have no pre-emptive rights, which means that current stockholders do not have a
prior right to purchase any new issue of capital stock of the Company in order
to maintain their proportionate ownership thereof. Therefore, the effects of the
authorization of additional shares of Common Stock and Preferred Stock may also
include dilution of the voting power of currently outstanding shares of capital
stock and reduction of the portion of dividends and of liquidation proceeds
payable to the holders of currently outstanding shares of capital stock.
In addition, the Board of Directors could use the additional authorized but
unissued shares of Common Stock to create impediments to a takeover or a change
of control of the Company. Under certain circumstances, such shares could be
used to create voting impediments or to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company. For example, the Company
might seek to frustrate a takeover attempt by making a private sale of a large
block of shares to a third party who was opposed to such an attempt. The
increase in authorized stock could also have the effect of discouraging an
attempt by a third party to acquire control of the Company, through the
acquisition of a substantial number of shares, since the issuance of any shares
could be used to dilute the stock ownership of shares of the Company's voting
stock held by such third party. The Board also could use a portion of the
additional shares of Common Stock for a shareholder rights plan that could make
a change in control of the Company more difficult or costly and therefore less
likely. Accordingly, an effect of the increase in the number of authorized
shares of Common Stock may be to deter a future takeover attempt. The proposed
amendment to the Certificate of Incorporation, however, is not the result of any
specific effort to obtain control of the Company, and the Company has no present
intention to use the increased shares of authorized Common Stock for a
shareholder rights plan or other anti-takeover purposes.
The affirmative vote of holders of a majority of the voting power of the
outstanding shares of Common Stock is required to approve this proposal. THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO AMEND
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
ITEM THREE: PROPOSAL TO RATIFY THE SELECTION OF
INDEPENDENT AUDITORS
APPOINTMENT OF ARTHUR ANDERSEN LLP
The Board, upon recommendation of the Audit Committee, has appointed Arthur
Andersen LLP, Certified Public Accountants, as the Company's independent
accountants for the fiscal year ended March 31, 1999, subject to ratification of
this appointment by the stockholders of the Company. Arthur Andersen LLP
performed audit services in connection with the examination of the financial
statements of the Company and its subsidiaries for the fiscal year ended March
31, 1998 and is considered by management of the Company to be well qualified. If
this proposal does not receive a majority vote at the meeting, the Board will
reconsider the appointment. Representatives of Arthur Andersen LLP will be
present at the 1998 Annual Meeting of Stockholders. They will have an
opportunity to make a statement if they desire to do so and to answer
appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF
INDEPENDENT AUDITORS.
ITEM FOUR: OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the 1998 Annual Meeting of Stockholders. However, if any
other matter should be presented at the meeting upon which a vote properly may
be taken, shares represented by all duly executed proxies received by the
Company will be voted with respect thereto in accordance with the best judgment
of the persons designated as the proxies.
6
<PAGE> 8
OTHER INFORMATION
CERTAIN STOCKHOLDERS
The following table sets forth as of June 25, 1998 certain information
regarding beneficial ownership of the Common Stock by each stockholder known by
the Company to be the beneficial owner of more than 5% of its Common Stock, each
director, the Chief Executive Officer, each of the four other most highly
compensated executive officers and all directors and officers as a group. Unless
otherwise indicated, the stockholders have sole voting and investment power with
respect to shares beneficially owned by them, subject to community property
laws, where applicable. All information with respect to beneficial ownership has
been furnished to the Company by the respective stockholders.
<TABLE>
<CAPTION>
COMMON
STOCK
NAME OWNED PERCENT
---- ---------- -------
<S> <C> <C>
Massachusetts Financial Services Company(1)................. 17,578,580 8%
500 Boylston Street
Boston, MA 02116
FMR Corp(2)................................................. 16,536,118 7.7%
82 Devonshire Street
Boston, MA 02109
Putnam Investments, Inc.(3)................................. 13,897,000 6.5%
One Post Office Square
Boston, MA 12109
Max P. Watson, Jr........................................... 2,209,940 1%
Richard P. Gardner(5)....................................... 267,800 *
Robert Beauchamp(6)......................................... 44,000 *
William M. Austin(7)........................................ 94,400 *
M. Brinkley Morse(8)........................................ 574,228 *
John W. Barter(9)........................................... 130,250 *
B. Garland Cupp(10)......................................... 186,250 *
Meldon K. Gafner(11)........................................ 86,250 *
L. W. Gray(12).............................................. 136,250 *
George F. Raymond(13)....................................... 79,858 *
Tom C. Tinsley(14).......................................... 16,250 *
All directors and officers as a group (17 persons)(15)...... 4,565,160 2.1%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Massachusetts Financial Services Company's beneficial ownership of BMC
Common Stock as set forth in its most recent statement, filed on February
11, 1998, pursuant to Schedule 13G of the Securities Act, consists of
8,770,990 shares over which it has sole voting power, no shares over which
it has shared voting power, 8,789,290 shares over which it has sole
dispositive power and no shares over which it has shared dispositive power.
(2) FMR Corp.'s beneficial ownership of BMC Common Stock as set forth in its
most recent statement, filed on February 9, 1998, pursuant to Schedule 13G
of the Securities Act, consists of 571,200 shares over which it has sole
voting power, no shares over which it has shared voting power, 6,948,500
over which it has sole dispositive power and no shares over which it has
shared dispositive power.
(3) Putnam Investments, Inc.'s beneficial ownership of BMC Common Stock as set
forth in its most recent statement, filed on January 20, 1998, pursuant to
Schedule 13G of the Securities Act, consists of no shares over which it has
sole voting power, 1,364,963 shares over which it has shared voting power,
no shares over which it has sole dispositive power and 8,268,059 shares
over which it has shared dispositive power.
7
<PAGE> 9
(4) Includes 1,584,000 shares subject to employee stock options exercisable
within 60 days after June 22, 1998 and 160,000 shares held by trusts for
the benefit of Mr. Watson's children, of which he is one of two trustees
and shares voting and investment power of which Mr. Watson disclaims
beneficial ownership.
(5) Includes 241,800 shares subject to employee stock options exercisable
within 60 days after June 22, 1998.
(6) Includes 44,000 shares subject to employee stock options exercisable
within 60 days after June 22, 1998.
(7) Includes 80,000 shares subject to employee stock options exercisable
within 60 days after June 22, 1998 and 174,400 shares of restricted stock.
(8) Includes 560,000 shares subject to employee stock options exercisable
within 60 days after June 22 , 1998.
(9) Includes 106,250 shares subject to employee stock options exercisable
within 60 days after June 22, 1998.
(10) Includes 186,250 shares subject to nonemployee director stock options
exercisable within 60 days after June 22, 1998.
(11) Includes 86,250 shares subject to nonemployee director stock options
exercisable within 60 days after June 22, 1998.
(12) Includes 136,250 shares subject to nonemployee director stock options
exercisable within 60 days after June 22, 1998.
(13) Includes 60,250 shares subject to nonemployee director stock options
exercisable within 60 days after June 22, 1998.
(14) Includes 16,250 shares subject to nonemployee director stock options
exercisable within 60 days after June 22, 1998.
(15) Includes 3,388,300 shares subject to stock options exercisable within 60
days after June 22, 1998 and 208,400 shares of restricted stock.
EXECUTIVE OFFICERS
The executive officers are elected to serve annual terms. Certain
information concerning the Company's executive officers as of June 22, 1998 is
set forth below, except that information concerning Mr. Watson is set forth
above under Item One: "Election of Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William M. Austin......................... 52 Senior Vice President and Chief Financial
Officer
Robert E. Beauchamp....................... 38 Senior Vice President, Research and
Development
Richard P. Gardner........................ 44 Senior Vice President, Worldwide Sales and
Marketing(a)
Marco Landi............................... 54 Senior Vice President, European Operations
M. Brinkley Morse......................... 40 Senior Vice President, General Counsel and
Secretary
Theodore W. Van Duyn...................... 49 Chief Technology Officer
Roy Wilson................................ 43 Senior Vice President, Human Resources
Leland D. Putterman....................... 38 Vice President, Worldwide Marketing
Kevin Klausmeyer.......................... 39 Vice President, Controller and Chief
Accounting Officer
Stephen B. Solcher........................ 37 Vice President and Treasurer
</TABLE>
8
<PAGE> 10
Mr. Austin joined the Company as Senior Vice President and Chief Financial
Officer in January 1997. Prior to joining the Company, Mr. Austin was employed
since 1991 with McDonnell Douglas Corporation in various senior financial
positions, lastly as Vice President and Chief Financial Officer of McDonnell
Douglas Aerospace, a division of McDonnell Douglas Corporation. From 1973 to
1991, Mr. Austin was employed with Bankers Trust Company in various positions,
serving as Managing Director -- Acquisition and Structured Finance from 1989 to
1991.
Mr. Beauchamp has been Senior Vice President, Research and Development
since August 1997. He has been employed by the Company since 1988, when he
joined the Company as a senior sales representative. During his employment with
the Company, he has served in various senior sales, marketing and strategic
planning positions, and was Vice President, Business Strategy, prior to his
appointment to his current position.
Mr. Gardner joined the Company as Senior Vice President, North American
Sales, in May 1994. He was employed by IBM Corporation from March, 1975 to May,
1994 in various sales and general management capacities, lastly as General
Manager of its Houston, Texas operations.
Mr. Landi joined the Company as Senior Vice President, European Operations
in January 1998. He was employed by Apple Computer Corporation ("Apple") from
to , and served as Chief Operating Officer of
Apple from to . Mr. Landi was employed by Texas
Instruments, Inc. from to , where he served in
various senior sales and general management positions, including President,
Asian Operations.
Mr. Morse has served as General Counsel and Secretary since November 1988,
when he joined the Company, as Vice President since January 1991 and as Senior
Vice President since January 1998.
Mr. Van Duyn joined the Company in October 1985 as Director of Research and
served as Senior Vice President, Research and Development from July 1986 to
February 1993, when he became Chief Technology Officer.
Mr. Wilson joined the Company in September 1997 as Senior Vice President.
[add prior employment history]
Mr. Putterman joined the Company in September 1994 from Oracle Corporation,
where he was employed since July 1985 in various sales and marketing capacities.
His last position was as a Vice President, Database & Tools Product Marketing.
Mr. Klausmeyer joined the Company in August 1993 as Corporate Controller
and has served as Chief Accounting Officer since October 1994 and as Vice
President since April 1, 1998. From December 1979 through July 1993, he was
employed by Arthur Andersen LLP in various capacities, the last of which was
Principal -- High Technology/Enterprise Group.
Mr. Solcher joined the Company as Assistant Treasurer in September 1991 and
has served as Treasurer since April 1992 and as Vice President since April 1,
1998. Prior to joining the Company, Mr. Solcher was employed as an audit manager
by Arthur Andersen LLP, the Company's independent auditors, from 1983 to 1991.
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<PAGE> 11
EXECUTIVE COMPENSATION
The following tables and notes thereto present information concerning the
cash compensation, restricted stock grants, stock option grants and stock option
exercises of Messrs. Watson, Gardner, Beauchamp, Austin and Morse, as well as
Messrs. Erwin, Juracek and Ordelheide, all of whom left the Company during
fiscal 1998. The Company's compensation policies are discussed in the Report of
the Compensation Committee of the Board.
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
OTHER ANNUAL
FISCAL SALARY BONUS COMPENSATION RESTRICTED
YEAR ($) ($) ($)(1) STOCK GRANT
------ ------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Max P. Watson Jr 1998 240,000 848,191 5,000 --
Chairman of the Board, 1997 240,000 868,294 5,000 --
President and Chief Executive Officer... 1996 240,000 722,671 5,000 --
Richard P. Gardner 1998 140,000 473,984 5,000 --
Senior Vice President, Worldwide 1997 140,000 516,246 5,000 --
Sales and Marketing..................... 1996 140,000 420,062 5,000 --
Robert E. Beauchamp 1998 120,000 394,522 5,000 --
Senior Vice President, 1997 120,000 200,731 5,000 --
Research & Development.................. 1996 120,000 137,319 5,000 --
William M. Austin 1998 140,000 368,409 5,000 --
Senior Vice President and 1997 26,025 450,000 -- $2,156,250(2)
Chief Financial Officer................. 1996 N/A N/A N/A N/A
M. Brinkley Morse 1998 126,000 342,130 5,000 --
Senior Vice President and 1997 126,000 319,330 5,000 --
General Counsel......................... 1996 126,000 266,563 5,000 --
</TABLE>
- ---------------
(1) Represents nondiscriminatory Board authorized matching contributions under
the Company's 401(k) plan.
(2) The Company granted 100,000 shares of restricted stock to Mr. Austin in
January 1997 in connection with Mr. Austin's recruitment to the Company. The
transfer restrictions on these shares lapse in 20% increments on January 1
of each year succeeding the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1998
by the Named Executive Officers and the value of such officers' unexercised
options at March 31, 1998 using the closing market price of $41.91.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END(#) FISCAL YEAR-END($)
ON VALUE --------------------------- ---------------------------
EXERCISE # REALIZED $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Max P. Watson Jr...... 556,000 16,646,534 1,933,240 1,065,000 71,857,185 38,413,320
Richard P. Gardner.... 228,000 5,292,737 241,800 528,000 8,795,777 19,206,660
Robert Beauchamp...... 84,000 1,759,739 0 636,800 0 12,257,612
William Austin........ 0 0 80,000 320,000 1,627,700 6,510,800
Brinkley Morse........ 78,000 2,317,858 560,000 400,000 20,370,700 14,550,500
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
The Compensation Committee, which is composed only of independent
directors, administers the compensation program for executive officers of the
Company. The Compensation Committee, with the aid of
10
<PAGE> 12
internal staff and independent compensation consultants, at least annually
reviews and evaluates the Company's compensation program to determine their
effectiveness in attracting, motivating and retaining highly skilled executive
officers.
COMPENSATION PHILOSOPHY. The Company's compensation program for its
executive officers is designed to preserve and enhance stockholder value by
heavily emphasizing performance-based compensation. The program is directed
towards motivating executives to achieve the Company's business objectives, to
reward them for their achievement and to attract and retain executive officers
who contribute to the Company's long-term success.
COMPENSATION COMPONENTS. The Company's executive compensation program has
three primary components: base salary, annual incentives and long-term
incentives. Each of these three components is described below.
Base Salary. The level of base salary paid to executive officers is
determined on the basis of performance, experience and such other factors as may
be appropriately considered by the Compensation Committee. The salaries are set
at the low to middle end of the competitive market based upon compensation
surveys of industry peers by Towers, Perrin, Foster & Crosby and Hewitt &
Associates, independent compensation consultant.
Annual Incentives. Annual incentive compensation awards for participating
executive officers are determined by allocating, as a percentage of pay, 6% of
the amount by which the Company's pretax income (excluding extraordinary items)
in a quarter exceeds its pretax income in the same quarter one year earlier.
These quarterly bonuses are adjusted at the end of the fiscal year to equal the
recipient's allocated share of 6% of the amount by which the Company's pretax
income for the fiscal year exceeded its pretax income in the preceding year. The
individual executive officer percentage allocations are determined by the
relationship of individual salaries to the total salaries of all executive
officer participants, these percentages are then adjusted quarterly by the
Compensation Committee at the recommendation of the Chief Executive Officer for
various individual contributions.
Annual bonuses are directly tied to year over year growth in the Company's
pretax earnings in order to focus executive officers' efforts on the Company's
financial performance. The program is designed to heavily weigh the variable
component of an executive's total annual compensation and to generate 90th
percentile or higher awards compared to a peer group if the Company achieves
expected levels of performance. The annual incentive compensation plan was
implemented in mid-fiscal year 1990 and has been in effect since then, with
minor variations. The Company has extended participation in this annual
incentive program for fiscal 1998 to additional key employees who are not
executive officers.
Long Term Incentives. The Company has granted no equity-based incentives to
any of the Named Executive Officers in the last two fiscal years, other than the
grants of restricted stock and employee stock options to William Austin in
January 1997 in connection with his recruitment to the Company and grants to
Robert Beauchamp of stock options in connection with his promotion to Vice
President, Strategic Marketing in fiscal 1997 and to Senior Vice President,
Research and Development in fiscal 1998.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. As described above, the
Company determines compensation for all executives, including the Chief
Executive Officer, considering both a pay-for-performance philosophy and market
rates of compensation. The Chief Executive Officer's base salary has not
increased over the last six fiscal years, reflecting the emphasis on the annual
incentive bonus opportunity in the total mix of annual cash compensation. The
Chief Executive Officer's annual incentive was based on an allocation of the
annual incentive pool described above based on the relative percentage of his
salary to the salaries of the other participants in the annual incentive
program. The Chief Executive Officer has not received any equity based
incentives in the last three fiscal years.
DEDUCTIBILITY. Internal Revenue Code Section 162(m) precludes a public
corporation from taking a deduction in excess of $1 million for its chief
executive officer or any of its four other highest paid officers.
Performance-based compensation meeting criteria in Section 162(m), however, is
specifically exempt from the deduction limit. The Company's long-term incentive
grants to the Named Executive Officers have all been
11
<PAGE> 13
designed to qualify as exempt performance-based compensation. The Company has
not taken actions necessary to qualify its annual cash incentive plan for the
exclusion to Section 162(m), because no Named Executive Officer's annual cash
compensation exceeded the Section 162(m) limit in fiscal years prior to fiscal
1997 or has been expected to exceed $1,000,000 in fiscal 1997 or 1998. The
Company's increase in pretax earnings in fiscal 1997 and fiscal 1998 exceeded
its internal plans and this performance generated total annual compensation to
the Chief Executive Officer that exceeded the Section 162(m) limit by $108,294
and $88,191, respectively. As noted in the Summary Compensation table above, the
Company's financial performance in fiscal 1997 also generated annual
compensation for two nonexecutive employees in excess of the Chief Executive
Officer's. While the Company intends to pursue a strategy of maximizing the
deductibility of compensation paid to executive officers in fiscal 1999, it also
intends to maintain the flexibility to take actions that it considers to be in
the Company's best interests and to take into consideration factors other than
tax deductibility.
Respectfully submitted by the Compensation Committee of the Board of
Directors of the Company:
John W. Barter
B. Garland Cupp
Meldon K. Gafner
PERFORMANCE GRAPH
The following indexed graph indicates the Company's total return to its
stockholders for the five year period ended March 31, 1998, as compared to the
total return over such period for the Standard & Poor's 500 Composite Index and
the Standard & Poor's Computer Software & Services Composite Index. This graph
assumes a $100 investment at the beginning of such period and the reinvestment
of all dividends.
<TABLE>
<CAPTION>
S&P
Measurement Period BMC Computer
(Fiscal Year Covered) Software S&P 500 Software/Services
<S> <C> <C> <C>
1993 100 100 100
1994 126.36 101.47 112.20
1995 130.45 117.27 151.35
1996 224.06 154.92 213.96
1997 377.53 185.63 300.29
1998 685.98 274.73 548.87
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that, during the fiscal year ended March 31, 1998, all
Section 16(a) filing requirements applicable to the Company's directors,
executive officers and greater than ten-percent beneficial owners were complied
with.
12
<PAGE> 14
RELATED TRANSACTIONS
John S. Watson, the brother of Max P. Watson Jr., the Company's Chairman of
the Board, President and Chief Executive Officer, is a partner in the law firm
of Vinson & Elkins L.L.P., which is the Company's principal outside counsel. The
Company paid $1,031,346.98 in legal fees to Vinson & Elkins for legal services
rendered in fiscal 1998.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the
1999 Annual Meeting of Stockholders must forward such proposal to the Secretary
of the Company, at the address indicated on page 1 of this proxy statement so
that the Secretary receives it no later than March 23, 1999.
FORM 10-K
The Company will furnish without charge to each person whose proxy is being
solicited, upon written request of any such person, a copy of the Company's
annual report on Form 10-K for the fiscal year ended March 31, 1998 (the "1998
10-K"), as filed with the Securities and Exchange Commission, including the
financial statements and the financial statement schedules thereto. The Company
will furnish to any such person any exhibit described in the list accompanying
the 1998 10-K, upon the payment, in advance, of the specified reasonable fees
related to the Company's furnishing of such exhibit(s). Requests for copies of
such report and/or exhibit(s) should be directed to Mr. M. Brinkley Morse,
Secretary for the Company, at the Company's principal address as shown on page 1
hereof.
OTHER MATTERS
The Annual Report to Stockholders for the fiscal year ended March 31, 1998
has been mailed to each stockholder entitled to vote at the annual meeting.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. The Company has engaged Kissel & Blake to act as its proxy
solicitor and anticipates that its fees will be approximately $10,000 in
connection therewith. In addition to solicitations by mail, a number of
officers, directors and regular employees of the Company may, if necessary to
ensure the presence of a quorum and at no additional expense to the Company,
solicit proxies in person or by telephone or telegraph. The Company also will
make arrangements with brokerage firms, banks and other nominees to forward
proxy materials to beneficial owners of shares and will reimburse such nominees
for their reasonable costs.
The persons designated to vote shares covered by proxies intend to exercise
their judgment in voting such shares on other matters that may come before the
meeting adjourns. Management does not expect, however, that any matters other
than those referred to in this proxy statement will be presented for action at
the meeting.
By Order of the Board of Directors
M. Brinkley Morse
Secretary
Houston, Texas
July 14, 1998
13
<PAGE> 15
- --------------------------------------------------------------------------------
8MO021 DETACH HERE
PROXY
BMC SOFTWARE, INC.
2101 City West Boulevard
Houston, TX 77042
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Max P. Watson Jr. and M. Brinkley Morse as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote as designated on the reverse side, all
the shares of common stock of BMC Software, Inc. held of record by the
undersigned on July 1, 1998, at the annual meeting of stockholders to be held
on August 24, 1998 or any adjournment thereof.
THE UNDERSIGNED ACKNOWLEDGES THAT THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER AND THAT
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN
PROPOSAL 1 AND IN FAVOR OF PROPOSALS 2 AND 3.
- ------------- -------------
SEE REVERSE (CONTINUED AND TO BE SIGNED ON THE OTHER SIDE) SEE REVERSE
SIDE SIDE
- ------------- -------------
- --------------------------------------------------------------------------------
<PAGE> 16
DETACH HERE
<TABLE>
<S> <C> <C>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS
NOMINEES: J. Barler, G. Cupp, M. Gafner, L. Gray,
G. Raymond, T. Tinsley and M. Watson
2. Proposal to amend Article Fourth of the
Company's Restated Certificate of Incorporation
FOR all nominees WITHHOLD to Increase the number of authorized shares of
(listed except AUTHORITY common stock form 300,000,000 to 600,000,000.
as marked to the to vote for all nominees
contrary) listed FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
[ ]
------------------------------------------------ MARK HERE [ ] 3. Proposal to ratify the appointment of Arthur
(INSTRUCTIONS: To withhold authority for any FOR ADDRESS Andersen LLP as the independent public
individual nominee, write that nominee's name CHANGE AND accountants of the Company.
on the line above.) NOTE BELOW
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY.
Please sign exactly as your name appears on the Company's
stock transfer records. When shares are held by joint tenants,
both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature: Date: Signature: Date:
------------------------------------------ --------------- ---------------------------------- -------
</TABLE>
